At Raymond, we are looking to promote specific brands: Sudhanshu Pokhriyal

The recent demonetization move has impacted the whole textile industry but Raymond has been one of the worst impacted. "We were having one of the best years of Raymond before demonetization hit us," says The company's apparel business includes brands such as Park Avenue, Prax fashion casuals, ColorPlus contemporary casuals and Raymond Ready to Wear. The apparel sales for the last quarter grew 6% to Rs 329 crores YoY (Q3 FY17) on the back of sustained investments on all four brands.

Speaking to Collin Furtado, Sudhanshu Pokhriyal said how GST and US President Donald Trump's decision to end the Trans-Pacific Partnership (TPP) is beneficial to them.

For how long do you expect the impact of demonetization to continue for your business?

The impact has been varied across channels and across categories. There are certain channels that are heavily cash operated like your wholesale channels, multibrand outlets, etc. And there are other channels which are far more higher in terms of card sales. Wherever there is a cash component there is a higher impact. Even in the exclusive brand outlet (EBO) you directly go to the end consumer, you don't really have a middleman there. But in wholesale channel you have dealers, which is a bigger cash crunch there. Despite the cash availability, the demand and wealth erosion remains because of the uncertainty in people's mind. You may see this for the whole of the next year. For sure till the next two quarters and then by the second half the year things may be better.

Did you seen any growth in sales during the mid-January wedding season?

We were having one of the best years of Raymond before demonetization hit us. All our marketing plans and strategies were coming through in the market beautifully, be it out advertising, product offerings and the kind of initiatives we are doing. The wedding season would have been even higher. There is a period between December 15 to January 15 where there are no weddings as per the Hindu calendar. Subsequent to January 15 you see a burst in sales as wedding season continues until June this year, which is a blessing in a way.

What is the textile industry looking from GST?

First of all GST is a fantastic initiative which the government is implementing. Somewhere it will impact every unorganised sector like ours. The entire textile industry is over Rs 3 lakh crore and organised players are not even 25-30% with a lot of unorganised players be it in the apparel industry or fabric business. So this will force all the unorganised players to come into the tax net and it will be a far more level playing field. Structurally this is a positive. Additionally, as per the government's own plan they want it to be revenue neutral. They don't want to gain revenue because of moving into GST. So I hope they do that because there is no VAT or sales taxes on fabrics. If they charge some tax on the fabrics then it could have an inflationary impact as there is already a tax on the apparel side of the business.

How has the export market been for Raymond?

We export to more than 55 countries largest being to the US, Japan and Europe. We even have a direct presence in South Asia, Middle East, Bangladesh, Nepal and other South Asian markets. Globally, the market is not very buoyant. For instance, there are huge issues in Dubai and the Middle East and Europe went through Brexit and US through a major change. Despite all this, our business has grown decently. We also believe the latest changes, which have happened for TPP (Trans-Pacific Partnership), are going to benefit us. Our suit manufacturing plant in Ethiopia that is to come by the middle of this year will solely be supplying to the US. The cancellation of the TPP which Trump has done will actually be beneficial to an organisation like ours because it is no longer restrictive to the trans-pacific area.

How is Raymond's tackling the competition from e-commerce companies?

In my view e-commerce is another channel. For example, we have a wholesale channel, say TRS or MBO channel and now an e-commerce channel. When organised players came in modern trade such as Big Bazaar and D-Mart, everyone was worried that they will take over, and the neighbourhood grocery store will shut down. But even 20 years later the total organised players do not contribute more than 8-10% of the total FMCG sales. Hence, e-commerce is another channel and it is helping a lot of players reaching products directly to consumers who do not have access. It is a great tool for manufacturers like us rather than to see them as competition. For example, we are doing more than Rs 50 crore in sales this year from e-commerce. And we don't go the discounting route, we have been selling full price merchandise and it is working very well for us. However, e-commerce companies are making more losses than their revenues. They will have to compete with brick and mortar players, and they will not be able to spend the money they were able to spend right now. Even when modern trade came in, they started giving heavy discounts and many moved from traditional stores. But then they were all in losses for a number of years. Consolidation happened and many disappeared and now they are finally coming back.

What are your marketing plans for this year?

Raymond is the largest and most important brand for us. We will continue to spend on it. A large part of our business is woolen fabrics or Worcester fabrics. The Raymond brand is a complete solutions brand for a man. If you see The Complete Man has changed right now. He has become more contemporary. The look and manifestation has changed dramatically from what it used to be 10 years ago. There are some specific objectives like on woolen fabrics. When advertised for the woolen fabrics we wanted people to know we are the largest Worcerster manufacture in the country and that is why we created the Colours of Wool campaign. What we are looking at is promoting specific brands. As people are looking for functional benefits, we started Technosmart and now we are moving into Stretch. Globally, there is a move into stretch fabrics as a functional benefit. That is one of our focus areas so you will see some action there. We have also been doing Trouser Exchange, so we will see some action there. These are the kind of campaigns for which we are looking at working on.

Due to demonetization will you be reducing you marketing budget the following year?

We spend 5% of our lifestyle business revenues on advertising and promotion. Post-demonetization we were one of the most visible brands on TV. We did not cut our ad spends. We truly believe you have to be on TV and advertising throughout the year. In fact, these are the times when you should be more on air, as the clutter is less. We have been on air, we have stuck to our advertising plans and we truly believe that it will be our brand which will take us through.