Reliance Brands’ CEO Darshan Mehta has a lot of reason for optimism where the Indian retail sector is concerned.
He should know, having spent nearly 26 years of his professional career in retail; first at Arvind Brands and then a few years ago, as CEO of Reliance Brands.
“Today, Indians are truly the upwardly mobile. They are trading up. We are new money and new money demonstrates itself in cars, houses, clothes, gadgets, vacations, air travel. That’s the change that’s taking place in this country and there aren’t too many such markets left in the world. In India, the headroom for growth is so massive, what are the other markets that are showing such potential?,” he asks.
Mehta joined Arvind Brands early on in his career under his then boss Sanjay Lalbhai. With a background in chartered accountantcy, Mehta soon settled into the role of being the company’s Mr Fix it, even dabbling in advertising for a brief period when Lalbhai (Arvind Brands had a stake in Trikaya Grey back then) and Trikaya Grey’s then CEO Ravi Gupta asked him to help in keeping the agency afloat.
Having worked at Arvind Brands for 23 years, taking on the Reliance Brands mandate could not have been an easy decision to make.
He recalls, “Arvind Brands was a definite comfort zone, and it wasn’t an easy decision. The challenges of working in an environment, where you have to build your goodwill all over again, to come into an organisation that’s 200 times larger; that’s a whole different ballgame. You are talking about starting a business from scratch.”
Mehta says the enormity of having a brand like Reliance backing him struck him a few weeks into his new job.
“You can’t get a brand more powerful than Reliance.The moment you have a brand like that backing you, the world opens its doors wide. When the brief from above is to do what it takes, that’s the power of the Reliance brand. I’m an accountant by background and can appreciate what a long term risk appetite means.”
The lack of global Indian retail brands is a subject that gets Mehta most animated. “The problem in India is that businesses tend to be owner driven.”
He draws a parallel between the state of Indian retail brands and Indian advertising, saying, “Indian brands in fashion are a bit like Indian advertising in the 80s. When the business started getting big, they started selling out and moving on.”
Mehta faults the short term vision that some of the smaller Indian retail businesses demonstrate. “Look at the fashion brands in India, there are only a handful of them who are doing close to Rs 22 crores of business. In overall terms, these are Mickey Mouse businesses. They worry that big business houses will swallow them, and reassure themselves saying that, at least, they are in control, by staying small. Those are the fears that I need to work against. We want to choose truly enduring brand values, help them in marketing and giving life to a brand vision, help monetise and run the business.”
Mehta recalls meeting a young, aspiring designer by the name of Tommy Hilfiger early on, in his Arvind days. “Hilfiger allowed Mohan Murjani to take a controlling stake in his fledgling company. He recognised that he needed to scale up his business. Decisions like that are fraught with risks, of course, because it could be a leap of faith that can go wrong. When Murjani was looking to exit, Hilfiger got another partner on board to buy the stake and continue. The partners were able to incubate the business for at least 15 years. That journey from building a small boutique business into a large retail brand is one that many companies are unable to make.”
Despite such misgivings, Mehta is optimistic about the future of Indian retail brands. “I firmly believe that the next Calvin Klein or Ralph Lauren in this decade, that’s between 2010 and 2020, will emerge from India, for sure. But they need to have the business vision and be able to take that leap of faith, because it’s a big money business,” he says.
“I get asked by people frequently, ‘Is there a goal to launch five or ten brands in India?’ There are no such goals. You want to be sure footed about it. It must be a brand that has a certain brand equity in India. Significantly, the partner must believe in the future of this country because then you will give disproportionate weightage as the initial business will be small. And there must be a value to the partnership.”
Mehta is clear that they don’t partner with brands that may see Reliance Brands as a corporate escort service which will do the dirty work and be asked to leave in a few years. He says, “It’s something that one sees frequently in the retail sector. As a partner, we will still be bringing value twenty years from now in a partnership business, but maybe at a different level. What each partner brings to the table, changes with the passage of time. It’s unfortunate that too many people are waiting to do quick term deals with foreign brands, in an effort to make a quick buck.”
“As far as Reliance Brands goes, we have a parent company that is backing us, with all the help that we need in identifying partners and then growing the business. And they understand that such businesses need to be incubated for the long term.”
Mehta believes that one of the biggest strengths that Reliance Brands brings to the table is the fact that there is no possibility of a conflict of business with other partners. He says, “We have a parent company that is backing us, with all the help that we need in identifying partners and then growing the business. And they understand that such businesses need to be incubated for the long term.”
On future business projections, Mehta says, “The aspiration is to deliver on the faith that Reliance Industries has reposed in me and create disproportionate shareholder value for them.”
He adds, “ Reliance has a histrory, that over 32 years, they have delivered more than 35% return on equity to shareholders. I want to far outstrip that. My personal agenda is value creation for Reliance.”
President and CEO, Reliance Brands
CEO, VF Arvind Brands
Head, Arvind Brands
CEO, Anagram Securities
CEO, Trikaya Grey
Joined Trikaya Grey
PWC Corporate consultant