Does Hero MotoCorp prefer opening in towns with … lower two wheeler count?

When I last looked at Hero’s data, I plotted the store count of each town against the GDP of that town and found a correlation coefficient of only 0.52.  Here’s that post if you want to check it out. An R value of 0.52 is a moderate correlation, but not a conclusive one. So, I went ahead and tried looking for other variables – ones that might do a better job of explaining Hero MotoCorp showroom locations.

I found How India Lives – a pretty cool database with a couple thousand variables that would probably prove useful in my search for a stronger variable. I decided to plot the Two wheeler ownership – or the number of two wheelers in each district against the number of Hero showrooms in that district. I combed through my own Hero data and the How India Lives two wheeler ownership data to make this spreadsheet.

I expected a really high correlation coefficient of about 0.90. I mean, if the number of two wheelers in a district was not going to correlate with the number of Hero showrooms in that district, what would? I made a plot for the spreadsheet and found that I was dead wrong.

 

The correlation coefficient for two wheeler ownership against the number of Hero showrooms came to 0.53. Barely any better than the moderate correlation I found against GDP. Worse still, the plot really does not make much sense for when there’s 5 or less than 5 Hero showrooms. Here’s how it looks:

 

Maybe, I thought, Hero was not a big player in the motorcycle industry. I looked through their 2014-2015 annual report and found that they are the world’s largest manufacturers of two wheelers, and boast a 40.1% market share in the domestic two wheeler market. Hero was definitely a big player.

So, why does the district wise two wheeler ownership not agree with the showroom count? I don’t know yet, but I’ll keep this page updated to try and find out why.

Correlation of number of movie halls to population and GDP of a town

A little over a week ago, I plotted the population of towns against the number of PVR and Inox multiplexes in those towns. I found a correlation coefficient of 0.79 – a satisfactory conclusion to prove a correlation between town population and town multiplex count.

 

 

 

 

 

Still, just to put the matter to rest, I decided to compare the multiplex count against other variables. So I went ahead and plotted a graph of the GDP of towns against the multiplex count of these towns, expecting a more or less same correlation coefficient.

Turns out, the correlation coefficient of GDP against number of PVR and Inox multiplexes is 0.92 – an even stronger correlation than that when I plotted population against the same. This means that 92% of the change in the PVR and Inox multiplex count for all cities is described by change in GDP for those cities. So, where population shows a strong correlation, GDP shows a yet stronger one when compared against the multiplex count for cities. So, yes, GDP describes multiplex locations better than population does.

Another interesting thing I observed was that the same cities – Chennai and Hyderabad, ranked below the regression line, possibly again, due to the strength of their local film industries. Mumbai, Delhi and Bangalore – which we had classified as multiplex loving markets ranked above the line as expected.

 

Which other franchise would I find in a V-Mart town?

When I last looked at V-Mart I found that the franchise was present in towns which, on average, had a lower GDP. I wanted to find out which other franchise was present in these lower GDP towns . To do this, I needed to get a clearer idea of V-Mart’s presence. So I went ahead and made this map in R to think about V-Mart’s locations in a more geographic context.

 

 

 

 

 

 

 

 

Right off the bat, I realized that V-Mart does not have any stores in South India. Conversely, V-Mart is quite clustered in the north. A look at their most recent investor presentation told me that 71 out of 108 V-Mart stores are located in Uttar Pradesh (50 stores) and Bihar (21 stores), which rank among the most rural states in India.

So, which franchise (out of the ones I had already studied) was most similar to V-Mart in terms of rural presence? To answer this, I compared the location data from Hero MotoCorp, Eicher, Domino’s, CCD, PVR and Inox and found that Hero MotoCorp was the only chain that came close.

Hero is present in 90 of 104 V-Mart locations. Meanwhile, Eicher is present in 72 V-Mart cities, Domino’s is present in 41 V-Mart cities and CCD is located in 36 V-Mart cities. Multiplexes did not score high on this metric, with PVR being present in 13 and Inox being present in only 11 of 104 V-Mart locations.

Sure enough, when I took the averages of the GDP of Hero MotoCorp towns, I found that this was the only franchise with numbers that were lower than the V-Mart averages.

Inox:  Mean – 71.1, Median – 28.2

CCD: Mean – 41.5, Median – 16.3

Dominos: Mean – 32.9, Median – 12.4

Eicher: Mean – 29.4, Median – 11.4

V-Mart: Mean – 25.8, Median – 9.1

Hero MotoCorp: Mean – 24.3, Median – 8.9

So, you would likely find a Hero Motocorp showroom in a town with a V-Mart, even though this was not necessarily true the other way round.

Note that I was trying to find out which other franchise was present in V-Mart towns, and not which franchise had the most rural presence.

Where do Inox and PVR multiplexes open?

PVR Cinemas and Inox leisure are the two big players in the Indian film exhibition industry. Both companies are expanding – PVR opened 50 of their 474 screens and Inox opened 38 of their 377 screens in the financial year 2014-2015. I got this data from the PVR and Inox annual reports for the year.

 

I decided to read the reports a little and found that the PVR states that

With metros and most of the tier I markets getting saturated, the focus is now shifting to the tier II and tier III cities which are experiencing rapid urbanization and greater economic growth. With lower real estate prices in smaller towns and the leeway to launch a no frills cinema, the exhibitors are able to considerably bring down the cost per screen.

The Inox annual report pretty much paraphrases the same by stating that

With the focus shifting to Tier 2 and 3 markets, exhibitors are constantly exploring ideas to target consumers in these cities. Though metro cities contribute a majority of the revenue of a big budget film, the focus is slowly shifting to Tier 2 and 3 cities. With lower real estate prices in smaller towns and the leeway to launch “no-frills” cinema, exhibitors are able to lower the cost per screen significantly.

PVR and Inox both state the shifting focus to smaller cities and towns but I got curious and wanted to see where these multiplexes were actually located.

I compiled this spreadsheet of the multiplex locations from the PVR website and the Inox location page on their website. I clubbed the PVR and Inox properties’ locations together and decided to compare it against the population of each of these cities.

PVR has 120 properties and Inox has 101 of the total 221 properties. From the spreadsheet, I learnt that only 26 of their 221 properties were in towns with populations less than 500,000. This still meant that they were mostly present in larger cities.

I decided to plot the number of theatres – for both PVR and Inox, against the population of the cities they were present in. The correlation coefficient between the population and the number of PVR and Inox multiplexes came to 0.79 – which means that these companies opened more properties in a more populated city.

Mumbai, Delhi and Bangalore have a huge multiplex loving crowd, but places such as Hyderabad and Chennai – where the local film industries are strong, do not. This could possibly be due to the extensive presence of single screen movie theatres in these cities.