Bengaluru: Titan Co. Ltd expects margins in its eyewear business, which faced a challenging time in 2016-17 in terms of growth, to improve significantly once its new frame manufacturing facility starts commercial production from January.
After production begins, margins will start showing improvement by the end of the next financial year, Ronnie Talati, chief executive officer of Titan’s eyewear unit, said in an interview.
The new plant will reduce the company’s dependency on outsourcing and that, according to Talati, would be crucial. China is the largest manufacturing hub for frames and a majority of the companies in the industry source their frames from there. But there are only a handful of reliable vendors in China, Talati said. The new facility will also give Titan more control over quality and help it create differentiated products.
Titan started manufacturing its own lenses three years ago at a factory in Bengaluru. It has also set up satellite lens manufacturing labs in Mumbai, Delhi and Kolkata and plans to open one more this financial year and four to five over the next year.
After it started making lenses in-house, the eyewear business’ margins became “much, much” better, Talati said. The frame factory is expected to contribute in a similar manner.
“We are in it for the long term. We will continue to grow this business just as we have grown the watch business and the jewellery business,” he added.
Improving eyewear margins and profitability is important for Titan. Tepid demand after demonetization and increased competition from national, regional and local companies posed challenges to eyewear growth in the year, Titan said in its 2016-17 annual report.
Indeed, newer entrants like online eyewear retailer Lenskart are now catching up with Titan in terms of offline footprint. There are currently around 470 Titan EyePlus stores and the firm plans to open 50 more in the current financial year. It opened 100 new stores last year.
In comparison, Lenskart had 300 stores in June and plans to add 400 more stores over the next two years, PTI reported in early June.
John Jacobs, Lenskart’s private label, opened its first store in Delhi two years ago and plans to have 10 in all by the end of this financial year. The aim is to have 25 stores in total by the end of next year, John Jacobs’ co-founder and business head Sambuddha Bhattacharya said.
Lenksart’s aggressive expansion plans come even as Titan looks to slow down its expansion.
“We said let’s not go hell for leather just opening stores. Let’s open significant stores that will give us relatively larger turnovers. So we will look for good locations that will give us large turnovers—it will be a calibrated expansion,” Talati said.
To that effect, the firm has also shuttered around 25 unprofitable eyewear stores over the past 1.5 years. Of those 25 stores, most of them were run under the Spexx brand, which the firm had set up within eye hospitals.
Revenue from Titan’s eyewear business, which was set up 10 years ago, grew 8.4% annually to Rs406 crore in 2016-17, according to the company’s annual report. That rate is much higher than the watch division’s 2.7% growth during the same period. But in comparison, revenue from the firm’s jewellery business—a big-ticket item and therefore the largest revenue contributor among the three segments —grew 17.4%.