The battle for gold: How Aditya Birla Group's Novel Jewels can open up India's jewellery market

Billionaire Kumar Mangalam Birla-led Aditya Birla Group (ABG)is the latest conglomerate to take a shine to branded gold jewellery. In early June, the company announced that it would invest Rs 5,000 crore to launch large-format exclusive jewellery retail stores called ‘Novel Jewels’ across India with in-house jewellery brands.

The new venture will compete with the Tata group’s Tanishq and Reliance Industries’ Reliance Jewels in the nearly $60-billion Indian gold jewellery retail market that is increasingly transitioning into an organised play. “The fight is really between the lakhs of unbranded jewellers spread across the country and these large players. That’s where a large market opens up,” says retail expert Harminder Sahni, Founder & MD of Wazir Advisors.

The domestic market, estimated at $57 billion as of FY22, is expected to grow to $91 billion by FY25, according to a Technopak Analysis report from March 2022. It says 65 per cent of the domestic market is unorganised, comprising more than 500,000 local goldsmiths and jewellers. The remaining 35 per cent—mostly organised retail—comprises both national and regional players.

In terms of exclusive branded outlet count, Tata group firm Titan Company’s Tanishq is India’s largest organised jewellery business; in FY23, it contributed nearly 85 per cent to Titan Company’s Rs 40,575 crore net revenue. The chain has 400-plus exclusive boutiques in more than 240 cities. It plans to add space in 15 existing stores and add more than 40 new stores in FY24. Malabar Gold and Diamonds, Kalyan Jewellers and Reliance Jewels are also key players in the organised segment.

Over the years, India has transitioned from being an unorganised to an organised market. By 2025, the organised market is expected to grow to 40 per cent. Sahni says two things are happening—the market is expanding, which means more brands are required; and more and more people will graduate upwards into branded retail formats.

This is ABG’s third major foray into a new business in the last two years after paints, and B2B e-commerce for building materials. The conglomerate, which has been building up its fashion and apparel retail business Aditya Birla Fashion and Retail Limited with a string of mass and luxury brand acquisitions since 2019, is expanding its consumer businesses further with the entry into gold jewellery. “This foray (branded jewellery) is a strategic portfolio choice that allows us to tap into new growth engines and expand our presence in the vibrant Indian consumer landscape,” Kumar Mangalam Birla, Chairman of Aditya Birla Group, had said.

“Jewellery is a trust- and design-driven business, versus fashion that is primarily design-driven. Brand creation takes much longer than other discretionary categories. From that backdrop, expecting any impact on Titan Company (of which Tanishq is a part) at this stage would be too soon,” says Abneesh Roy, ED at Nuvama Institutional Equities.

The large conglomerates can afford to pump in, say, Rs 200 crore into better design and still make money because of their scale, says Sahni. “On the other hand, a lot of other jewellers don’t focus too much on design because people don’t want to pay much for design.” ABG, which has already begun advertising for positions, has at least six design-related positions it plans to hire for.

The Technopak report states that Indian jewellery demand is heterogeneous and is influenced by strong regional preferences, with the southern region contributing 40 per cent to consumption. 

@SaysVidya