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Posted: 27/Jan/2007 at 10:51am
Originally posted by ramki830
Pick Axe Theme in Investing is generally ignored by mainstream stock analysts and investing houses, but it really has worked wonders last many years... consider these 3 examples:
1. LMW, the maker of Textile Machinery - it has given more returns than all those many listed textile makers why? the post 2005 quota removal has meant max business for LMW... garment making comes only after making garment machinery...
2. Manugraph India, a maker of newspaper printing machinery has benifitted by recent boom in news paper market....
3. And Take Sobha Developers which grew itself by building nice Office complexes for Infosys...
I think we have barely scratched the surface. Let us examine more pick axe themes, esp those not yet understood by the market...
All these business models had one underlying theme. "Entry Barrier". Kulmanji would call it "No Entry". WHile Blue Starfalls into this category and has created wealth merely buying pick axe theme stocks is not enough we need to see whether the company has an entry barrier which would help it maintain its dominant market share.
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Joined: 01/Jan/2007
Location: India
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Posts: 76
Posted: 27/Jan/2007 at 11:08am
Originally posted by basant
Originally posted by ramki830
Pick Axe Theme in Investing is generally ignored by mainstream stock analysts and investing houses, but it really has worked wonders last many years... consider these 3 examples:
1. LMW, the maker of Textile Machinery - it has given more returns than all those many listed textile makers why? the post 2005 quota removal has meant max business for LMW... garment making comes only after making garment machinery...
2. Manugraph India, a maker of newspaper printing machinery has benifitted by recent boom in news paper market....
3. And Take Sobha Developers which grew itself by building nice Office complexes for Infosys...
I think we have barely scratched the surface. Let us examine more pick axe themes, esp those not yet understood by the market...
All these business models had one underlying theme. "Entry Barrier". Kulmanji would call it "No Entry". WHile Blue Starfalls into this category and has created wealth merely buying pick axe theme stocks is not enough we need to see whether the company has an entry barrier which would help it maintain its dominant market share.
You are right about Entry Barrier and importance of the company in being able to protect its market share.
But w.r.to pick axe themes, we need to watch for another factor also, namely the state of "Digging".... When Gold Digging ceases, pick axes are picked and thrown into the Garbage Dump.
So equally important that underlying business is having a LT future.. LMW will do well as long as Textile cos expand here. Manugraph will become a penny stock when people stop reading printed newspapers and start reading e-papers (which is surely going to happen in LT).
So we need to be extra cautious about Pick Axe themes.
Logistics major Gati Limited is targeting mass retail market
and the recent opening of 'Cafe Deliver' at Hyderabad and Pune is stated to be
its first step towards this initiative.
Cafe Deliver offers customers the convenience and comfort in
sending any shipment anywhere in the world round the clock.
According to Maheen Kannu, Gati's country head, retail
business, the company has plans to open cafe deliver outlets in all the four
metros besides Ahmedabad and Bangalore during the next six months.
Gati will also open 1,500 Customer Convenient Centres (3Cs)
across India by the end of the year. The 3Cs, to be operated mainly through
partnership model, will enable the company to be close to mass market.
This apart, Kannu said, Gati would be setting up hi-tech
warehousing and distribution facilities in 23 locations across the country. The
mechatronics warehousing facilities were expected to bank all logistics needs
of the customers.
The company was also planning to implement global
positioning systems to track vehicle movements.
A leader in express cargo in India, Gati has recently
undergone a corporate transformation in tune to capture the global trends.
As part of the Rs 8-crore re-branding exercise, the company
has adopted a new logo and catchline, 'Ahead in Reach.'
"This new identity of Gati will enable us to grab the
B2C and B2B segment business from the unlimited opportunities opening up for
logistic and supply chain management," Kannu told Business Standard.
The company was closely looking at creating the platform to
cater to the B2C market segment by leveraging the trend of click and buy in
India, he added. He said Gati was targeting a turnover of Rs 1,000 crore by
2009.
Meenakshi Radhakrishnan-Swami / Mumbai January 30, 2007
The explosion in organised retail brings unique opportunities and challenges for consumer product companies.
Andrew Levermore gestures impatiently to the bottle of mineral water on the table. It is clearly old stock — the brand recently rolled out its new look and colours in a high-decibel campaign. But it’s not the vintage that is bothering the CEO of Hypercity, Mumbai’s largest hypermarket.
“They changed the packaging a couple of months ago, but the bottles still don’t have barcodes,” Levermore shakes his head in disbelief. “A package makeover in 2006 — and no barcode.”
Does it really matter? Perhaps not to the kirana or paan shops, which, admittedly, collectively sell more bottled water than the hypermarket, but a barcode is a critical business tool for organised retail, where it is helps track products from the warehouse to store shelves and, finally, the checkout counter.
And when suppliers don’t provide barcoded products, retailers need to print their own barcodes and then employ staff to stick them on every piece of merchandise. In a store like Hypercity, which carries 80,000-100,000 SKUs (stock-keeping units) at any given time, that means a lot of sticking.
It is also an indicator of the changes organised retail brings in its wake. For decades now, consumer goods companies have been used to delivering to India’s proverbial “12 million kiranas” more or less on terms of their own choosing.
They are now finding that modern format retail doesn’t operate along quite the same lines. In fact, it is so dramatically different, it is an entirely new business. “With the rise of organised retail, the balance of power shifts in favour of retailers,” points out Jagdish Sheth, Charles H Kellstadt professor of marketing in the Goizueta Business School at Emory University.
What opportunities and challenges do organised retail present for consumer goods suppliers? And what strategic changes will help them do better business with giants like Wal-Mart, Reliance Fresh, Foodworld and Food Bazaar? the strategist takes a look.
The kiranas continue
First things first. The rise of organised retail does not mean the end of traditional retail. According to “Retail in India: getting organised to drive growth”, a joint report by global management consultancy A T Kearney and the Confederation of Indian Industry, the Indian retail sector is valued at $320 billion (Rs 14,40,000 crore), of which organised retail accounts for a minuscule 6 per cent (Rs 86,400 crore).
Of course, the latter’s 35 per cent growth is multiple times the 7-8 per cent forecast for the sector as a whole: which is why Kearney forecasts organised retail will cross $100 billion by 2012. Even at that level, though, it will be far behind traditional retail. Most manufacturers understand that.
“For a very long time to come, the biggest chunk of business will be from general trade. The corner shop will not disappear,” says V S Sitaram, executive director, consumer care division, Dabur India. Even modern format retailers agree.
“Microenterprise is the most adaptable retail entity in India. It will always remain relevant,” points out Damodar Mall, president and CEO, foods business, Future Group.
Still, with the rise of modern retail outlets, the nature of shopping will change. While stock-up purchases (buying the month’s groceries, for instance) are likely to move to the supermarkets and hypermarkets, top-ups(when you run out of, say, shampoo, in the middle of the month) will continue at local stores. That shift in buying habits has far-reaching consequences for consumer product companies.
What’s in store
FMCG companies in India have had a fairly smooth run until now — given that the average kirana is 150-200 sq ft and has space for less than 1,000 SKUs, they didn’t need to create endless product variations and extensions of the same brands.
Compare this with Barry Schwartz’s list in his 2004 bestseller The Paradox of Choice: Why Less is More, based on a visit to his local supermarket in the US: 285 types of cookies (21 options in chocolate chip alone), 95 different snacks, 360 shampoo types, 40 options for toothpaste, 275 varieties of breakfast cereal, 175 types of teabags...
Schwartz’s supermarket was a “not particularly large store”, but Indian consumer goods companies would struggle (and fail) to stock even that level of products (and remember, this book is three years old): Cadbury India has over 100 SKUs in two categories, Procter & Gamble sells over 320 SKUs across five categories, while Hindustan Lever has more than 700 SKUs in over 20 categories.
If hypermarket visitors are not to be confronted by acres of empty shelves, then, consumer goods companies will have to expand their portfolios substantially. “The sheer number of SKUs will rise because of the capability to stock a wider and deeper assortment of products,” agrees Sachin Gopal, sales director, Procter & Gamble India.
It is not just numbers, of course. Modern format retail offers suppliers a chance to sell assortments of products, in different sizes and different bundling options: soaps in threes and sixes, bigger (2 kg and more) sacks of detergent or a variety pack of soup mixes, for instance, rather than the single packs seen in general trade.
Planned properly, consumer goods companies can take advantage of different shopping habits at different shopping formats. “What we stock in a hypermarket is different from what we stock at a petrol pump shop. A convenience store does not need supervalue packs,” agrees Sunil Sethi, director, sales and customer development, Cadbury India.
Big packs and varying SKUs is just one angle to the product strategy. Unlike traditional outlets, where space and ambience are serious constraints, modern format stores also provide an ideal environment for FMCG companies to initiate product trials and launch premium or niche products. In mid-2006, for instance, Dabur India launched a 400 gram squeeze pack of Dabur Honey only through modern format stores.
In the past year or so, the company has also launched two variants of its chyawanprash, a sugar-free version and another that claims to combat stress — both were launched in modern format stores where the target customer is likely to shop and, perhaps more importantly, is willing to pay the 30 per cent premium these products charge over regular chyawanprash. “It is probably easier to sell such concepts through the organisedretail route,” agrees Sitaram.
While organised retail provides brands much-needed visibility and platform for customer-interaction (more on that later), manufacturers also need to make some changes to packaging to bring their products in line with the requirements of modern retail and its customers.
“Manufacturers will have to cede part ownership of the brand to retailers,” says Raman Mangalorkar, head, consumer and retail practice, A T Kearney. That means complying not just with the requirement, but also ensuring expiry dates are prominently displayed, as is nutritional information and ingredient lists.
The distribution dilemma
Modern trade operates to a completely different set of rules. Given its superior bargaining power, it can negotiate better margins, wider product ranges and more frequent, speedier deliveries.
For manufacturers, then, it makes sense to have a separate team servicing these outlets, working full-time to ensure both parties profit equally from the transactions.
One way of doing that is by persuading retailers to route their purchases through suppliers’ existing distribution networks. That’s because for the supplier, selling directly to the retailer works only if the order size is large enough.
To their credit, most large retailers are willing to accept such an arrangement. Their only condition: orders must be filled on time. Modern stores maintain lower inventories than traditional retail — nine days for Hypercity andunder two weeks for Food Bazaar, compared to over three weeks for most kiranas — and losses due to a stockout are far more significant, for both the manufacturer and the retailer.
Retail analysts say on-time order replenishments will become even more critical once the Wal-Mart/ Bharti combine begins operations — the American retailer works almost entirely on cross-docking and is likely to demand higher service levels, including potential levies for delays in shipment.
Meanwhile, manufacturers have to also keep their traditional distributors satisfied — a tough task, considering they offer modern trade more concessions and better promotions than their general trade partners.
Hindustan Lever is working around that by involving family grocers, chemists and wholesalers in custom-made programmes that offer them targeted promotions, value deals and also build relationships through training sessions, newsletters and meetings. “General trade will continue to be the focus of all FMCG companies that want to grow,” says a company spokesman.
For its part, Cadbury India has changed the rules for all its customers (retailers). It has created a menu-based approach — issues covered include prompt payment, efficiency and business building initiatives — that is common to all retailers, big and small.
A couple of years ago, it also started the Purple Star programme for traditional retailers, where it tailors promotions and schemes for selected stores. “There is no differential treatment between retailers,” says Sethi.
Jo dikhta hai, woh bikta hai
The earlier approach to marketing was simple enough: make sure the product is visible — on store shelves and through mass media advertising — and it will more or less sell itself. With the evolution of modern retail, though, the emphasis is shifting to in-store displays and promotions — probably also because for the first time, the space for such initiatives is available.
But manufacturers no longer have the last word on what will happen at the store. “Modern trade has a significant say in promotions, perhaps because it offers far superior results with a much faster lead time,” says Future Group’s Mall.
Cadbury India’s Sethi points out that retailers are more open to brand promotions and displays — including posters, gondolas and danglers — when manufacturers back up their ideas with shopper insights. “There will be a shift from traditional media to increased communication at the point of purchase,” he says.
Initiatives that help grow the category as a whole are particularly welcome, say analysts, since that boosts the retailers’ revenue. And many FMCG companies are predicting that spends on promotion, in-store and point of purchase displays will increase significantly from the present 20-30 per cent share of the marketing budget.
Consumer goods companies need to make several changes — in strategy and in attitude — if they are to achieve the same level of success with organised retail as they have with traditional formats. Printing barcodes on their products would probably be a good place to start.
Edited by kulman - 04/Feb/2007 at 5:50pm
Life can only be understood backwards—but it must be lived forwards
Joined: 01/Jan/2006
Location: India
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Posted: 04/Feb/2007 at 12:04pm
I have no idea on this one.
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India’s first and only countrywide cold chain logistics service, Snowman Frozen Foods Ltd, is gearing to cash in on the boom in the retail and cash-and-carry sector by spending up to Rs80 crore to expand its facilities.
The company will put in place four large cold stores across the four metros and an equal number of smaller cold stores elsewhere, besides adding to its existing fleet of refrigerated vans and trucks.
The Bangalore-based Snowman has, in the decade it’s been around, stored ice-creams for Hindustan Unilever Ltd’s Baskin Robbins brand, poultry for Godrej and the Tatas’ Taj Group of hotels, potatoes for McDonald’s and pizza base for Pizza Hut, among others.
More recently, it’s added clients such as the retail and cash-and-carry businesses, including Metro, Monday to Sunday and Reliance Fresh. With cold stores at 16 locations across the country and a fleet of about 98 refrigerated vehicles, the company has been covering around 120 cities. Majority-owned by logistics company Gateway Distriparks Ltd, it’s the only national player in a highly fragmented and disorganized market.
“We have so far operated only small and medium sized stores with capacities ranging between 300 and 1,200 tonnes,” said Prem Gupta, director of Snowman and vice-chairman of Gateway.
Starting next year, the company is going to think and act big, he said. “At our recent board meeting, we decided to set up four cold stores in Delhi, Mumbai, Bangalore and Chennai, each with a capacity for 5,000 tonnes of food products,” Gupta added.
Though the retail sector in India has been steadily growing over the past decade, the evolution of organized cold chain logistics has not been so successful, hampered by several factors.
These include high investments and bad roads that consume higher quantities of fuel, escalating costs. A high 40% import duty on refrigeration units has been another deterrent. Snowman is also conducting a pilot project in collaboration with ITC Ltd and Ingersoll Rand for procuring, sorting, cleaning, packaging and transporting fresh farm products on a daily basis.
“The market is changing and the big players in the food business are getting into more centralized procurement and distribution of their products. We see a big role for ourselves in this changing market situation,” Gupta said.
Life can only be understood backwards—but it must be lived forwards
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