With the exit of DCM, the Italians have finally taken control of Benetton in India. The company is putting in place a new management team comprising three Italian professionals, and a new retail strategy meant to make Benetton a premium fashion player like Mango and Tommy Hilfiger.

The company is phasing out small format stores and building large ones with segmented merchandise for kids, men and women. As the group president Luciano Benetton has trained his eyes on India and China for growth, the company has set a target of 56 new large format stores by 2007.

To spearhead this ambitious plan, Benetton has roped in Sanjeev Mohanty from Madura Garments as sales and marketing head. The crucial production and design function will be controlled by the Italians.

Industry sources said there are reasons why Benetton is getting its act together in India. Retail is booming and the rigid FDI rule is likely to be liberalised. At this juncture, a solid base in India is crucial. The other reason is the performance of the brand in home country, Italy.

Benetton has already announced that it expects sales and profits to fall in 2005. It slashed prices on basic clothes to pull customers away from low-cost rivals. Benetton had earlier thought that its customers would keep paying a premium for quality materials, but later said that it would invest 70 million to produce less expensive ones and ask shop owners to open new stores and refurbish old ones. “It's a different ballgame now,” chief executive Silvano told analysts in March.

However, in India Benetton is getting ready to play the premium game. The chief operating officer of Benetton India, Gagan Singh said Benetton would compete with top notch players in fashion with highend merchandise for every occasion. By 2006 end, the number of pieces sold is likely to rise 60% and turnover 37.5%.

She said that in the six metros, small stores would be replaced by large ones. In mini metros, small stores would be relocated to high traffic malls to make them more viable.

At the same time, Benetton is experimenting with the idea of appointing one large franchise for every small city. This apart, the parent company has pumped in additional capital into the venture. Though the company declined to give out the number, sources said the capital was mainly used to repay the company's debt.

When Benetton entered India in 1991-92, there were no restrictions on foreign equity in retail. So, DCM set up an integrated manufacturing in knit fabrics with Benetton as a joint venture partner. Last year, DCM decided to exit the partnership and the government allowed Benetton to buy out DCM's stake provided it did not get into retail and concentrated only on manufacturing. The company, however, says that as and when FDI is liberalised, it would invest in retail significantly.