Giving wings to Good Earth

Craftsmen in Koraput, Odisha, make a special tobacco-coloured dye from the roots of aal (Indian madder, a shrub), and a specific blend of powdered stone, honey, and jaggery. The area is known for a woven fabric that is dyed in shades of maroon and brown, both dyes made using aal root powder. Good Earth, the retail brand that focusses on “sustainable luxury”, had ordered 3,600 metres of brown Koraput fabric in April 2013. A month later, only 300 metres were delivered. Reason? Bears ate up the raw material for the dye. “Have you ever heard of bears disrupting a design company’s supply chain?” demands Simran Lal, 44, CEO of Good Earth.

She’s laughing about it now, but the story still resonates for one very good reason: There’s no telling where obstacles could pop up in Good Earth’s journey. And the journey is at a particularly interesting juncture, as the company is reinventing itself as a truly global products company with an Indian aesthetic sensibility, a bit like Uniqlo (Japan) or IKEA (Sweden). The reinvention is being spearheaded by Lal, who has just taken over the helm from mother Anita Lal.

Under Anita Lal, Good Earth managed a rare balance: to be stylish and desirable without being kitschy and ostentatious. (This despite its vibrantly coloured upholstery—think fuchsia cushions with peacock motifs—and home decor.) In two decades, Good Earth has built itself into a premium brand, with 10 stores including a token overseas presence with one store in Turkey. Its products are priced at least 20% above competition.

GOOD EARTH IS as close to an ideal family-owned startup as possible—the Lals own Eicher Motors (No. 145 on the Fortune India 500), and between Vikram Lal (Anita’s husband and former CEO of Eicher) and son Siddhartha Lal (CEO of Eicher Motors now), Eicher has injected Rs 45 crore into Good Earth in the past two decades. “We have never had any issues of classic startups—no cash crunch, no investors hurrying us, no profit pressures. That’s the way I wanted it and that’s the way I kept it,” says Anita Lal, when I ask if more money from more investors would have resulted in faster growth.

An understanding investor with deep pockets allowed Good Earth 16 years to establish itself and start making profits. “The joke in the company is that as I started ceding control of day-to-day affairs, the company started making profits,” she says. Profits may not have been priority in the early years, but growth has always been important. In 2011-12, the company grew at a scorching 29%, but last year, that fell to a more sober 11%. Reason: slowing footfalls.

“Give me another 10 Khan Markets and I shall grow immediately to 10 or 20 times the current size,” says Simran Lal, referring to the South Delhi shopping locality that’s among the most expensive in the world. Good Earth’s 3,500 sq. ft. flagship store in the market brings in some 30% of the company’s revenue. That beats revenue from all other stores hollow, including the vast 20,000 sq. ft. store in the tony Raghuvanshi Mills area in Mumbai.

But there aren’t more Khan Markets to be had. So what’s an entrepreneur to do? Diversify, for one. And expand. And Lal’s way to do both is with Nicobar, a new brand that has been conceived of as an extension of Good Earth. The Lals have earmarked some Rs 50 crore to start Nicobar off with a few stores. The line is cheaper, which means it will attract a new set of customers.

The idea of Nicobar is Simran’s mother’s. “I had always wanted something cleaner and simpler, while keeping it intimate. But never got around to doing it,” says Anita Lal. The idea had been brewing for a decade or so, she adds. She had called it Frangipani, but the name was later changed because the brand image of frangipani, a fragrant flower, seemed too close to Good Earth.

I am given a sneak peek at the Nicobar line (set to launch very soon) and am impressed by the clean lines and unfussy silhouettes of all the offerings—from clothing to bags and suitcases. The lines are sharper, sure, but it’s easy to see the same relaxed ethos as in Good Earth.

Mark Sebba, former CEO of Net-a-Porter, one of the world’s biggest online fashion retail sites, a trustee of the Victoria and Albert Museum in London, says Good Earth has developed a strong and profitable niche. “Selective, high-end customers the world over appreciate craftsmanship, quality, and design. Good Earth knows its customers because its founders and leaders are its customers.”

Nicobar is the most visible manifestation of the new Good Earth, version 2.0 if you will. But there’s a lot happening behind the scenes. All the new hiring that’s going on is a sign that Good Earth’s hitherto somewhat languorous progress is perhaps coming to an end and a brisker pace is on the cards. Anita Lal takes ownership for the slowness thus far. “I am even now a little scared of very fast expansion. But I also appreciate that everyone else in the company wants to grow, and my son [Siddhartha] told me it is now of a size where we should get more professional. So I stepped back from the business side of things,” she says. (She’s still indisputably in charge of the design thinking.)

Daughter Simran has started the process of renovation with a series of new hires—starting with husband Raul Rai. Rai, 46, is an ex-Goldman Sachs finance brain. His mandate: to construct a new life not just for Good Earth but also for Nicobar. Rai was the first of a series of hires; others include a design expert hired from Ralph Lauren, an aeronautical engineer who studied at the Indian Institute of Technology and worked with Google (who now handles the back-end technology for Good Earth’s big digital push), an online sales expert who has worked with Jabong, the online fashion retail platform, and even an intern from Egypt.

It is these people who have been tasked with turning Good Earth into a big brand. “There’s no reason it cannot be a mega brand,” says Rai. “The time is right and the market, we believe, is ready.”

But billion-dollar brands are not built by small doses of expansion. To get there, the company has to rectify some of its past mistakes. For one, in its pursuit of careful growth, it ceded market share. Lower-cost competitor Fabindia has a turnover of more than Rs 1,000 crore and is spread across 175 stores in 73 cities. But Rai repeats speed is not the most important thing. “We are very conscious that it is not the Good Earth way to be pushy,” he says, explaining that Nicobar will start with a handful of stores opened over the next few years. “The idea is to let this percolate steadily and become a natural part of people’s lives.”

Essentially, Good Earth is realising that to grow it needs more than one line, no matter how popular any single line of, say, clothing or bone china is. Its focus is on becoming the brand of choice for customers looking for a unique (and not inexpensive) Indian aesthetic. Meanwhile, big European houses H&M and Zara are clocking massive sales; H&M declared a record single-day sale of Rs 1.75 crore the day it launched, and Zara claims that its India sales crossed $100 million (Rs 666 crore) in one year (2014). No, these brands are not strictly Good Earth’s competition, but the H&M and Zara customer in India is more than likely to be a Good Earth regular.

Sally Holkar, a textile revivalist known for her work with Maheshwari weaves from Madhya Pradesh, says the Lals retain “a sense of authenticity which they pass on to the customer”, and “they don’t cut corners”.

Designer Rajiv Purohit, who was earlier with Ralph Lauren and comes to work dressed in a dhoti and kurta, says the philosophy behind Good Earth is “making the brands immersive for the customers”. The bet is that the customer buying colourful Good Earth cushions also ends up buying its clothes. Younger members from the family will have the younger, cheaper Nicobar to tap into. As Purohit asks: “Why not immerse them further?”

Simran Lal says she has built on the gap in the market that her mother first spotted when trying to find clothes for a middle-aged woman of “normal” proportions. “Clothing is the fastest growing part of our business but how did it start? My mother, who lacked neither money nor taste, just couldn’t find clothes that fit her, and she was irritated that no one seemed to be catering to people like her.”

I ask Anita Lal about this, and she says the idea was to make everyday wear “for people who look like all of us. None of us have those perfect proportions!” Clothes now bring in a quarter of Good Earth’s revenues; internal estimates show this rising to 50% in the next five years. Ironically, the online store added clothing only very recently. It will be a cornerstone of the reinvention of Good Earth, which has already soaked in Rs 10 crore with a new store in Bengaluru and new supply chain technology.

Supply chain has in fact been Good Earth’s bugbear; although money was never an issue, Anita Lal says her biggest challenge was the “complete absence of a supply chain”. She says she personally went from village to village, engaging craftspeople and building networks. “Often the materials used were iffy, even if the craft skill was excellent. So there was a double supply chain issue. First, get the right raw materials to the craftsmen. Then, ensure the final product is good enough,” she says. The new investments should put an end to such problems.

Meanwhile, Simran Lal is looking at growth outside the country too. Good Earth has spent about Rs 1 crore on its first international marketing project: sponsoring The Fabric of India show at the Victoria and Albert Museum, the first major exhibition of the museum showcasing handmade Indian fabric. “We have never wanted to sell in any other store in India. It is one of the ways we have protected our brand. But internationally we might explore a few places. Like thinking digital, is a new mindset that we are working to acquire.”

As is her style, Anita Lal isn’t in a hurry to capture overseas markets. “I keep telling Simran that as we take on a global market, we must not forget that all the major brands are coming to India seeking our market, where we are strong. So we have to keep growing here too.” And, of course, keep an eye on the bears.