TTK Prestige has a unique rule: All senior executives must know cooking. Those who don’t, have to learn it within an agreed timeframe. The reason for this rule is simple: TTK Group’s 64-year-old executive chairman, T T Jagannathan, says all innovative ideas have come to him only while cooking. For instance, the idea of Microchef, the microwave pressure cooker for which the company has a global patent, came to him during one of his cooking sessions.
In many ways, Microchef showcases TTK’s makeover drive, which broke the conventional mindset that pressure cooker is just another “aluminium utensil” and doesn’t lend itself to any differentiation with other products in the market. It also marked TTK’s move to project itself as a ‘kitchen’ solutions provider through forays into non-stick pans, mixers, gas stoves and coffee makers.
While innovations have helped, Jagannathan knows he has to step up the pace of launching new products, given the emerging competition. For example, players such as Havells are getting into the kitchen space, and multinationals such as Philips are getting aggressive in regional markets (the MNC bought Preethi, a South Indian firm manufacturing mixers and grinders, last year).
So TTK has set a feverish pace. It will for example, introduce 100 new products this year, 40 more than last year. That has meant a spate of tieups with global majors such as World Kitchen, Meyer International (for premium glassware and cookware) and Vestergaard Frandsen (for water filters) to bring in the latest technology. Last month, TTK signed a collaboration agreement with German specialty glass maker Schott AG to launch a new range of cooking appliances.
That’s quite a journey for TTK Prestige which almost went to the Board for Industrial and Financial Reconstruction (BIFR) in the mid-1990s. But things have turned around in the last few years. Sales rose to Rs 1,123 crore in 2011-12, up from Rs 339.85 crore in 2007-08. Profits rose from Rs 113.36 crore from Rs 20.67 crore during the same time period. No wonder, the company’s share price rose 32 per cent to Rs 3,245 in March 2012 as compared to Rs 2,606.90 in April 2011. The Sensex fell nine per cent during the same time.
Jagannathan, who is a third-generation businessman and grandson of T T Krishnamachari (India’s Finance Minister for three terms), recalls those days when creditors would call and threaten the children. “When we sat down to analyse our failure, we realised we were a single product (aluminium pressure cooker) company in which dealers were losing money. At one point, dealers even stopped taking our products,” says he.
It faced resistance in diversification as well. When the company was trying to introduce new products in 2000, dealers did not accept it for two reasons – they had never sold such appliances and they knew TTK only for pressure cookers.
This led the company to venture into the retail space through Prestige Smart Stores. At present, the company has 356 stores and plans to increase it to 480 by 2012-13. The retail foray also helped the company to address one of its major problems – absence of direct connection with the customers. Today, nearly 80 per cent of the company’s revenue is from new products that were introduced in the last three years.
He had to take some tough decisions as well. TTK Prestige exited the modular kitchen business this January after six years. The reason: It did not have control over setting up of kitchens and the brand was suffering.
Over time, the distribution has also become robust. Jagannathan travels over 100 days ever year to attend fairs (domestic and international) to meet dealers and observe what is happening in exhibitions. “Keeping the dealers happy is most important in the consumer durable business, since customers listen to them,” says he.
Currently the company has around 30,000 dealers, which are primarily mom & pop stores. And 60 per cent of the business comes from this retail model, 20 per cent from company-owned stores, 15 per cent from the modern trade and five per cent from institutions.
Last year the company spent around Rs 60 crore for discounts and towards chairman’s club schemes, he noted. The club scheme was for the top 1,000 dealers. They are given cash incentives, gold gifts for meeting sales targets and are taken to international destinations like Switzerland, Italy and Australia. Recently about 1,100 dealers returned from Thailand.
“In a way, I will say the retail foray actually paved the way for us to enter home appliances,” he says. Once the company’s products have started picking up from the Smart Stores, dealers started picking them up.
TTK spends around seven per cent of its turnover in advertisement and brand building. The international average is around two per cent. The company is planning to spend around Rs 100 crore this year, primarily to increase their market share in the North and other parts of India.
“We have been a South India-based company (in-terms of brand). But things are changing. Fifty-five per cent of our sales are from the South whereas the national contribution of South India is only 27 per cent to the industry. Our percentage will also change gradually,” Jagannathan adds.
To address markets in the North, the company has invested in Uttarakhand, for capacity expansion and has acquired land in Vadodara. The first phase of this project is expected to be in place in 2012-13.
The biggest advantage, Jagannathan says, is TTK’s mindset of fighting it out. “Though the company is 54-year old, I really feel it is just three-four years old,” he adds.