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Luxor rewrites script with Waterman

Smita Tripathi | August 16, 2003

Forty years after it first launched the humble pen, Luxor Writing Instruments is now aiming high.

Like most of its peers in the market, it is also looking at a premium script.

Last month, the Rs 150-crore (Rs 1.5 billion) Luxor introduced the complete international range of the French pen brand Waterman in India.

It is now rehauling its distribution and surveying new channels to reach out to an upper end consumer.

Unlike watches and cosmetics where a range of high priced brands have been coexisting, this is the first time that a premium pen is being launched.

At the US-based $2 billion Sanford Group, the makers of Waterman, pens start at Rs 2,000 (for the cheapest range) while its 18-carat gold limited edition pen retails at an eyepopping Rs 400,000.

Says Pooja Jain, director, Luxor, "These pens are aimed at not only the achievers but also those who aspire to achieve. The pricing is such that we cater not only to those who drive the Mercedes but also those who drive the Maruti and would like to upgrade to a Lancer."

But is there really a market for such pens in India? Jain admits that the maximum business will come from the Rs 5,000 to Rs 10,000 range, where Waterman offers five different collections.

The gold and the sterling silver range branded Man 100 retail between Rs 200,000 to Rs 400,000. Says Jain. "The top of the line collection is like the Maybach. Even if we sell one or two in a year, it is good."

This is a big move for Luxor, which has a 15 per cent market share and expects turnover to grow by 12 per cent to 15 per cent by this fiscal year.

Sanford first entered India in 1996, when it introduced the Parker brand. Three years later, it launched the Papermate. Today, nearly 40 per cent of Luxor's turnover comes from Parker.

The writing instruments market in India is estimated to be about Rs 1,400 crore (Rs 14 billion) while the luxury pen segment is less than one per cent. However, the market is estimated to grow and this is what Luxor is banking on.

Why? With growing disposable incomes, consumers are upgrading their purchases and luxury items are gradually finding their way into the shopping baskets of even upwardly mobile middle class consumers.

Says Jain, "We could have introduced the Waterman brand in 1996, but we did not think the timing was right. There were only a handful of Indian consumers who were luxury conscious, but now that number has grown substantially."

Luxor is hoping to sell between 7,000 and 8,000 pens in the first year of operations. Jain says that this will push turnover by an additional Rs 2.5 crore (Rs 25 million) to Rs 3 crore (Rs 30 million).

Of course, sales will be backed by heavy advertisng and Luxor plans to have an outlay of between 15 per cent to 20 per cent of sales.

There are plans of having ads in all the leading lifestyle magazines and also associate the brand with an art or fashion event.

Waterman will be made available in at least 10 outlets by the end of the year. These will include two more in Delhi and Mumbai and one outlet each in Bangalore, Chennai, Kolkata, Hyderabad and Ahmedabad.

And like most other premium products, the pens will be sold in multibrand high-end outlets, which also stock watches and accessories.

Each of these outlets will have a separate corner dedicated to Waterman. They will also sell accessories like cigar pouches and pen cases.

Also, early next year, Luxor is looking at opening an exclusive Waterman boutique in either Delhi or Mumbai.

As a part of its strategy, Luxor has undertaken a niche marketing initiative. In fact, it is moving away from its distribution system, which pushes brands like Parker and Papermate.

Luxor will not appoint distributors for Waterman but will cater directly to the outlets. It believes that for a high end product like Waterman, direct marketing is the right route as it can target its audience head on.

Says Jain, "Being a premium brand, we will sell fewer units than popular brands like Parker. So catering directly to the outlets makes sense."

Also, the company will try to reach out to consumers through its business-to-business division. This division was set up in 1998 to provide a one-stop-shop for all corporate customers who might undertake value-added promotions in association with Luxor.

The division has currently been working primarily towards promoting Parker as a corporate gift. Luxor has a database of over 5,000 companies and plans to build on that network to promote Waterman.

With expectedly low volumes, the pens will be imported from the US. Luxor will only market them. The import duty on pens is almost 60 per cent.

But Jain says that the prices will have international parity. But what she doesn't say are the margins that Luxor makes.

Traditionally, pen industry experts say that mass-based pens have a profit margin between 10 per cent to 15 per cent.

The Parkers and Schaeffers make 15 per cent, which goes up to 20 per cent in the school and college opening season.

But for the high-end pens like Waterman, the margins vary between 30 per cent to 35 per cent. So by selling a Rs 2,000 Waterman, Luxor would easily make Rs 600 while it will make a whopping Rs 120,000 by selling just a single unit of the Rs 400,000 pen.

And what about competition? The German brand Mont Blanc has been available in India for over a decade while it opened an exclusive boutique in 1997 in Delhi.

The brand sells pens starting at Rs 9,000 and going up to a few lakh. Besides pens, it also sells lifestyle products like watches, leather cases, eyewear and cuff links.

Says Rashmi Asnani, manager, Mont Blanc, "We don't see Waterman as real competiotion because Mont Blanc is a lifestyle brand while Waterman is exclusively pens. Waterman will not encroach on our customer base."

And what about the grey market? Jain is unconcerned. Says she, "The grey market will always be a small nail in the shoe but our strategy is right, so it won't affect us."

Jain believes that with Waterman providing lifetime international warranty and after sales service, consumers will visit authorised stores rather than pick up the pens from the grey market.

With the launch of Waterman, Luxor straddles different price segments -- from Rs 5 to Rs 400,000.

Says Jain, "We now have a pen for every need, every occasion and every budget." Sure. But it all depends on the product offtake.

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