With a legacy going back to 1832, P N Gadgil & Sons has continued to remain relevant generation after generation, by focusing on quality, consumer trust and brand extension, getting on the Fortune 500 list in India. From a couple of stores and revenue of Rs 600 crore in 2012, the jewellery brand today has 31stores – 29 in Maharashtra, one in Vadodara, Gujarat and one in Kalaburagi, (formerly known as Gulbarga) in Karnataka, and a turnover touching Rs 8,500 crore. The strategy of the company is crystal clear - go beyond its stronghold of Pune and Maharashtra. Aditya Modak, Co-founder & Director, Gargi by P N Gadgil & Sons and COO & CFO, PNGS says, “We are maintaining our pace when it comes to the expansion of our brand. Last year, we added one store, but this year, we we will be adding two more stores. The main crux of the business is to generate profitability. When we open a store, we assess for six to eight months if our expectation from the store has converted into reality. Once we get the clarity that we are on the right path, we then look at expanding to newer stores.” He continues, “Currently, we average approximately three new stores in a year. Our strategy in the future will be to open three to five stores a year in Maharashtra and states adjacent to Maharashtra.”
Reinventing with the times
As a 193-year-old brand, P N Gadgil & Sons (PNGS) has adapted its product portfolio as the society and the trends evolved. To target millennials and GenZs, the company launched Gargi by PNG - a fashion and lifestyle brand, in 2021. Modak says, “Millennials and Gen Zs look for a westernized design and we have an offering for them. Though PNGS is a traditional jeweler, at the same time, we are changing our offerings through PNGS or our sister concern.”
Another diversification was its jewellery offering 'Reva' - a new sub-brand to cater to rising demand for affordable and contemporary diamond jewellery in February this year. Priced from Rs 10,000, the brand aims to harness Reva to connect with modern shoppers. Modak says, “While we cater to the newer customers, the crux of our business is 22 Carat gold and 18 Carat gold. Even though, customer demands are changing, if you look at the overall jewellery ecosystem, out of 100% of the revenue almost 80% to 85% of the revenue is generated from traditional jewelry.” Looking at the diamond segment, the revenue is equally divided between westernized and traditional designs.
Coming to media, for PNGS currently almost 70% of the budget is allocated to Television with the rest going to digital while the reverse is true for Gargi by PNG with 80% spent on digital including OTT and 20% on traditional media including print and theatre. Modak states,
“While our marketing budget in absolute rupees will go up, but in percentage to the turnover would go down as our revenue grows.”
Gold prices: A concern?
With gold being a high-ticket investment - and the price of 1 gm of the metal now priced between Rs 80,000 to Rs 85,000 – consumers still prefer to shop at physical stores, and are still uncomfortable making a high value transaction online. In this scenario an omni-channel strategy is what has worked for the parent company with consumers initiating their sale online by exploring designs and the actual conversion happening offline at the store. On the other hand, jewellery pieces of Gargi by PNG priced at a pocket-friendly range of between Rs 2,000 to Rs 5,000 lends itself to an e-commerce purchase by millennials and GenZs.
Asked about the challenges Modak links the increased competition and rising gold prices as a concern. He explains, “Competition is growing as many national brands are getting into the play. In actuality, the market size is shrinking. If you look at it in rupee terms, obviously the market is growing as the price of gold has increased. However, if you see in gram size, even though the decline is not big, there has been a shrink in the market. The number of competitors to eat that piece of cake is increasing. The industry may see a readjustment and some players may exit the market. The next two to five years will be a challenging time for the plain gold jewellery business.”
Looking at the diamond jewellery space, Modak highlights that if you look at diamond jewelry, almost 50% of the price component is gold and 50% is stone, so if the price of gold increases, then this impacts 50% of the component going up. Whereas, in gold jewellery almost 85% of the component is gold, and the impact of gold prices is significant.
A big change in the jewellery industry has been the growth and interest seen in lab-grown diamonds, and this is a space that PNG is looking at very cautiously. Explaining this stance, Modak says, “I think that we are not yet there as a consumer or as a market to really start dealing in lab-grown diamond. Jewellery in India is seen as an investment and when you buy jewellery from a jeweler, you would want to have an exchange value to it. If you buy a lab-grown diamond, as a jeweler I cannot give you a guarantee about the exchange value of that particular diamond down the line. In the last decade, the prices of lab-grown diamonds have fallen dramatically. If there is a depreciation in the future, then we don’t want to trade in such product which could see negative fluctuation. As a P&G, we feel that whatever we sell should grow your wealth as that's been our business since our company was founded. That’s why we are not keen on lab-grown diamonds” He continues. “If you look at the diamond business in India, almost 80% of the business are into Star Melee diamonds (small diamonds, also known as "diamond dust" and fall within the size range of 1.25 to 1.79mm). Only 20% of the market are pointers (A one-pointer refers to a 0.01 carat diamond. A two-pointer diamond refers to a 0.02 carat stone, and so forth). The lab-grown diamonds present in the market are a threat to pointers because the price of the material used fluctuates, they can easily be mad in a lab and the labor component is same for lab-grown diamonds as well as for natural diamonds. However, for Star Melle diamonds as you deal with a small diamond, it is difficult to replicate on the price point. So, 80% of diamond business will not be impacted by lab-grown diamonds and it is this 80% that is growing. Most people buying a diamond want it to be in the affordable space and that there is no depreciation in the value. If you ask me, in the Indian context, we are not yet ready for lab-grown diamonds.”
The way ahead
On the way forward Modak shares, “Consolidated, we clocked between Rs 8,000 crore to Rs 8,500 crore. Next year, when it comes to the grammage growth, we are anticipating it would not be more than 8% to 10% for the same store growth I'm talking about. Next year, obviously, if we add the existing and newer shops, we are targeting a turnover of close to around Rs. 9,500 crore. We want to keep our company on a steady growth path, where we add three to five stores a year, make them profitable.” He continues, “We stick with the adjacent States as gold jewellery purchasing is more of an emotional investment and trust plays a very crucial role. If we take Pune as a center, I want to grow in a circular way and will penetrate the adjacent States first, with the end intention to be a national player. It is a long road and we will look at sustainable growth.”
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