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Food Grain Logistics sector is often considered as a neglected sector because of the constraints that the industry faces in terms of infrastructure, technology, transportation and storage. Every year, millions of tons of food grains get wasted due to inadequate number of reefer vehicles, poor handling strategies, lack of advanced technology to name a few. If we go by the facts, India is the second largest producer of horticulture products producing 48 million mt of fruits and 68 million mt of vegetables. India wastes as much as the total production of fruits and vegetables in the United Kingdom. There are different estimates on the quantum and value of this wastage due to lack of supporting infrastructure such as refrigerated storage and ransportation. Establishing proper and integrated cool chains will take out the seasonality and perishability from the agricultural produce, lower inventories, shorten lead time required for deliveries, quickly bridge the gap between demand and supply, and provide value-added services.In India a lot of food is lost and wasted due for growth in agri-business. In agriculture, logistic costs are greatly influenced by the bulkiness of the produce, seasonal demand and supply, and perishability of products. As the agricultural goods are generally bulky, most of their inland movement is through road transport while shipping is used for carriage across seas. The movement of perishable agricultural goods requires technical improvements such as reefer transportation for management of temperature and humidity. Appropriate road and sea transportation will have to meet this growing demand in an economic manner. The competitiveness will be greatly affected by the speed and economy with which cargo moves from factories to markets inland or ports and beyond.to lack of adequate infrastructure, however, a 2011 report by a UN body, FAO, puts wastage in fruits and vegetables as high as 45 per cent of produce (post-harvest to distribution) for developing Asian countries like India.Infrastructure and services are important
Anurag Awasthi, Founder & CEO, Save Indian Grain stresses that the shortages can be examined under three heads, namely, storage loss, transit loss, and non-issuable / damaged food grains.
As per FCI’s data, the third category is negligible.
The factors contributing to the storage loss are:
Loss in moisture
Poor texture of gunnies, accentuated by use of iron hooks
Improper storage practices
The factors contributing to the transit loss are:
Poor texture of gunnies, accentuated by use of iron hooks
Poor quality wagons
Inadequate security at rail points, especially during night working and BG/MG trans-shipment
Other Major Challenges:
According to various case studies and government reports, the food grain logistics sector is facing many challenges such as inefficient price signals, limited reach of mandis, inadequate infrastructure for storage, etc.
1. Inefficient price signals: The Indian government has been buying almost onethird of wheat and rice produced in India through the Public Distribution System, but in other kinds of grains, fruits and vegetables (both being highly perishable), the role of the government is limited. This leads to Minimum Support Price being ineffective as both price signals and as insulators from the perspective of the larger agricultural population.
2. Limited reach of mandis: Also, this procurement system has failed to cover the entire country evenly (On an average a farmer needs to travel 12 kms to reach the nearest mandi and more than 50 kms in NE India) while according to the recommendations by National Farmers Commission, availability of markets should be within a 5 km radius.
3. Too many intermediaries, information asymmetry: The above mentioned problems have led to formation of long marketing channels, with multiple intermediaries, adding to the woes of the producers of perishable agriculture goods.
4. Inadequate infrastructure for storage: The Planning Commission has recently estimated the gap between agri-warehousing supply and demand at 35 mn
“Government of India has advised to frame policy/roadmap for construction of 100
LMT silos in next four years. It has also submitted that the High Level Committee constituted
for re-structuring of FCI had recommended construction of silos for capacity 100 LMT.
Subsequently, FCI had conducted an exercise with regards to the existing storage gap and
requirement of silos for storage of wheat and accordingly, Ministry of CA, F&PD had
decided that silos for capacity of 43.5 LMT silos will be constructed by FCI and state agencies”
Anurag Awasthi, Founder & CEO, Save Indian Grain
MT. Currently, public sector agencies
like the FCI, Central Warehousing
Corporations (CWC) and the various
State Warehousing Corporations (SWC)
have a storage capacity of 71 mn MT, while
the private sector has close to 25 mn MT.
To put the scarcity in perspective, food
grain stocks held only by the government
was 80 mn MT last year (peak) according
to the FCI annual report.
5. Skewed distribution of capacity: Skewed
distribution of this capacity is another issue, with North India having access to 60
per cent of the total storage infrastructure.
The Planning Commission has recently estimated the gap between agri-warehousing supply and demand at 35 mn MT.
6. Lack of cold storage infrastructure: India’s
current cold storage capacity at 25 MT is
barely sufficient for 10 per cent of fruit and
vegetables produced in the country.
7. Lack of collateral management options:
Collateral management refers to financing of agricultural goods stored at warehouses, and is estimated to be a `3,500 cr
opportunity by industry sources.
Observing the same, Devangshu Dutta,
Chief Executive, Third Eyesight reiterates,
“Our storage capacity in public, cooperative
and the private sector is about 109 million
tonnes, which is short of the overall storage
requirement. Moreover, instead of hermetically sealed or controlled environments, much
of food-grain storage in India is still open to
the elements and to pest infestations. This is
true not only of the much-maligned government stocks of food grains, but also private
storage and transportation. While many
modern storage systems for food grains, including fixed installations like warehouses,
indoor and outdoor silos, and flexible such as
hermetic storage and silo bags have been introduced in India, they are sparingly used. It is ironic that while millions of Indians sleep
hungry, we are not showing enough regard
for proper handling and distribution of our
surplus or buffer stocks.”
Special Care for Perishables
The concept of cold storage is not alien to agri-business in India. If we go by the facts, over the years, UP has seen a large scale development of cold storage for potatoes and potato seeds. Out of a total 8.7 million ton cold storage facilities presently available in the country, UP has a 48 per cent (4.83 mil lion ton) share followed by West Bengal (2.24 per cent). Western India has only 0.5 million ton capacity in which Maharashtra has a share of 0.35 million tons. Maharashtra has over 50 million cubic feet cold storage space in capacities ranging between 500 to 1000 mt per unit. Nearly, 80 per cent of this is privately owned. Cold storage provides location specific facility but is not linked in any manner across the country. Even though India is blessed with varied ecological conditions which enable growing of all types of fruits and vegetables throughout the year, efforts at boosting the exports of fruits like mango and grapes have gone down. Same is the status of floriculture exports when viewed in global context. In each of these and other similar cases, infrastruc ture has been the key bottleneck. For vari ous reasons there are few reefer ships calling on the Indian ports. Instead, the perishable cargos move inland as well as on sea in reefer containers on feeder services connecting to the hub ports. This adds cost to the exports, adversely affects their quality and reduces the competitiveness
Awasthi adds, “The solution is to develop an integrated software application linking overall production, demand, procurement and storage, keeping in view the associated regions and infrastructure available. The system will create most optimal location network of grain storage, minimising travel distance for storage as well as distribution. Such integrated software system is the key to building an efficient grain storage network. The financial institutions, technology, consumer markets and infrastructure move along with structure of society. The change of joint family to nuclear families has forced these to change from hub and spoke model to distributed architecture. Therefore, rather than one big bank, we now have thousands of ATMs; intelligence is stored in clouds rather than in one big computer; and home deliveries take care of our requirements, instead of one big shop. Similarly, the grain storage infrastructure architecture also needs to change. From several hundred big storage spaces, the architecture needs to move into several thousand small godowns close to farmers and distribution spots.” He continues, “The second intervention of technology is needed in the storage infrastructure itself. Today, new-technology steel silos and silo bags are available, whereby the life and safety of grain are enhanced multiple times by creating modified atmosphere of low oxygen and high CO2 . Through these technologies, one can create smaller storage of 2,000 tonnes per bag next to farmers, taking only 1/10th of an acre of land. It is the most chronic supply chain problem ever.”
Awasthi shares, “Government of India (GoI) has set up a High Level Committee (HLC) in August 2014 with Shanta Kumar as the Chairman, six members and a special invitee to suggest restructuring or unbundling of FCI with a view to improve its operational efficiency and financial management. GoI also asked HLC to suggest measures for overall improvement in management of food grains by FCI; to suggest reorienting the role and functions of FCI in MSP operations, storage and distribution of food grains and food security systems of the country; and to suggest cost effective models for storage and movement of grains and integration of supply chain of food grains in the country. The HLC had wide consultations with various stakeholders in its several meetings in different parts of the country. It also invited comments through advertisements in newspapers and electronic media. HLC would like to gratefully acknowledge that it has benefited immensely from this consultative process, and many of its recommendations are based on intensive discussions with stakeholders.”
Roadmap to the Future
According to Awasthi, Government of India has advised to frame policy/roadmap for construction of 100 LMT silos in the next four years. It has also submitted that the High Level Committee constituted for re-structuring of FCI had recommended construction of silos for capacity 100 LMT. Awasthi elaborates, “Subsequently, FCI had done an exercise with regard to the existing storage gap and requirement of silos for storage of wheat and accordingly, Ministry of CA, F&PD had decided that silos for capacity of 43.5 LMT silos will be constructed by FCI and state agencies. In view of the directions of the government, present strategy is to make a roadmap for construction of 100 LMT silos in next four years in a phase wise manner as the actual requirement of silos is dependent on existing storage capacity, stocks in central pool and the resultant storage gap. The Silo strategy is also dependent on the government policy with regards to Direct Benefit Transfer which was also one of the recommendations of the High Level Committee for restructuring of FCI. Already, the government is implementing the DBT Scheme on a Pilot basis in the UTs of Chandigarh, Puducherry, Dadra and Nagar Haveli. Thus, in case there is a change in the procurement and distribution policy under NFSA/TPDS, creation of capacity that might not be required with a financial commitment for 30 years will need to be reviewed and evaluated with regard to the financial implications of the same.” He adds, “In view of this, it has been planned to undertake construction of silos in a phase wise manner. A three phase approach has been adopted which ensures that if needed, we can have the creation of 100 LMT of silo capacity in four to five years and at the same time we have the flexibility to limit the construction of silos to capacity that is actually needed and financially viable.” Agreeing with Awasthi, Dutta concludes on a positive note by saying, “Although many private players are expressing interest in the area, more participation of the private sector is dependent on projects being modeled as viable businesses with timely returns and lower (or better managed) risk, as well as optimum capital and operational costs. Indigenous and traditional techniques also need to be improved, and affordable technologies need to reach the farmer. With the government’s push towards processing, changing consumer needs, and developing business interests in both domestic and export markets, the standards of storage need to improve dramatically. It is important to remember that, while food safety and hygiene standards may be applied to finished, packaged products, the quality standards that are finally achieved start getting determined from procurement and storage onwards. Other than private storage capacities, it is imperative that the government’s storage capacities are upgraded. The lakhs of tonnes of wheat, rice and other grains that get spoiled each year can literally feed millions. Not only will investment in modern storage will add percentage points to the country’s GDP, it will bring a mass of Indians closer to the basic dignity that they need and deserve.”
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The Netherlands is the second largest exporter of agricultural and food products in the world. The processed food sector has grown about 35 per cent over the last 10 years, with investments in research growing 75 per cent. The sector’s share in total production value is 21 per cent making it largest industrial sector in the Netherlands.
In spite of this, the share of Dutch processed food products in total imports in this sector India is limited. Keeping the immense growth potential of the Indian market in mind, the Embassy of the Netherlands commissioned a study of the processed food market in India.
As stated by Mr. Wouter Verhey, agricultural counsellor of the Embassy of the Kingdom of the Netherlands in India, in his Foreword to the report: “Netherlands is the second largest exporter of agricultural and food products in the world. For decades, the Dutch agriculture sector has succeeded in maintaining its lead over international competitors through continual investment in innovation in agri-food value chains. In May 2012 an extensive Indo-Dutch Agriculture Action-plan was signed between the Central Government of India and Government of the Kingdom of the Netherlands. Within this broad agreement, several areas of cooperation in the agriculture/food sector are defined. This study is a tool in implementing the projects being identified in the processing sector under the Action Plan.”
The report was commissioned in order to develop an understanding of India as a market for processed food products and uncover opportunities for Dutch companies. The report provides an overview of the economic growth in India, the consumer base and its key characteristics, the food retail and services environment, market structure of various food product categories, their growth potential and areas of opportunity for imported products within these categories, the regulatory framework governing imports and domestic production and possible routes to the market for the Dutch organisations.
India is the largest democracy on the globe, the second largest country by population, one of the top-10 when measured by the size of its GDP, and one of the fastest growing economies in the world. The ethnic, linguistic and cultural diversity of India’s 29 states and 7 Union Territories makes it more like the diversity of the European Union than like that of any other single nation-state. And yet, in political and legal terms, these diversities are managed within one constitutional framework, which possibly makes India unique among the nations around the world.
India has wide variations in the income and tastes which are important for consumer product companies to understand if they are looking to cater to mainstream meal habits. India is the second largest populated country in the world with almost two third of the population living in the villages. The urban population has dramatically been growing from last two decades. Though average income of the urban is higher than the rural average income but there exists a rural rich section who is consumers of premium branded products.
India with the youngest population in the world and a large urban population in the age group 20-34 years of age has observed changes in the consumption pattern. India has been consuming products from multinationals for several decades now and with the growing young population who is well educated and travelled across the globe; the tastes and the choices have been changing.
The number of middle class households is rising and approaching 30 million households or over 150 million individuals, with increasing numbers of nuclear families and double income households. This also is creating a socio-economic class across the country, especially in the larger cities, which has some commonality in consumption patterns irrespective of the city the family has originated from or is now staying in. This is the group of consumers who are driving the consumption growth of processed and semi-processed food products.
As Mr. Devangshu Dutta, chief executive of Third Eyesight, states in his introduction to the report: “On the demand side, as Indian consumer households and lifestyles change from the traditional joint- family structure, consumers’ needs as well as the means at their disposal have changed dramatically. With nuclear households, less time is available for both shopping as well as preparation, leading consumers to consider a whole range of processed and semi-processed food options. Therefore, both Indian and international companies can be beneficiaries as Indian consumers are “outsourcing” their food preparation and cooking activities. It is also worth mentioning a key advantage of the Indian market: that the already significant base of consumers is also growing rapidly. This is true regardless of whether you are targeting a consumer base of 5 million or 500 million. Companies that work with the consumer sector are as yet at the early stages of an expanding opportunity, as incomes grow and lifestyles change. Therefore, any company looking at addressing the Indian market must view it as a long-term opportunity, rather than a short-term win.”
Some major trends which aid the development of processed, semi-prepared and packaged food options include new consumption occasions, growth in dining out opportunities, the willingness to experiment with unfamiliar cuisines, the growth of convenience options and the need for predictability (quality as well as hygiene).
The evolution of food retail and services is playing a significant role in the growth in consumption of the processed food products.
The retail sector in India comprises of a large majority of traditional retail formats and a small (but growing) slice of modern retail formats. The share of modern retail is estimated to be less than 2 per cent in food and grocery. Both, traditional retail stores as well as modern store formats such as supermarket, hypermarket ad convenience stores chains are growing, and both are platforms for launching and growing processed food products in the Indian market. The Hotels, Restaurant and Catering sector is also a major driver of food processing in the country, due to its need for significant consistency of products, predictability of supplies, and larger-scale requirements.
Although India is an abundant producer of dairy products, meat products, fruits and vegetables and sugar, the value-added processed products in all these categories present a growing market. India is also growing as a market for new products such as breakfast cereals, pasta, infant food, bakery products, foreign liquor and different types of oils and sauces. Many international organisations have engaged with the India market by setting up manufacturing infrastructure here itself and understanding the market in depth. This approach has not only enabled them to offer their international range of products at competitive prices and but also became very powerful brands in India. Others are taking a more cautious, trading-led approach to the market. This report presentsthe opportunities and challenges in 20 selected product sectors, and also an assessment of different routes to market.
Although imports account for a relatively small share of the total consumption of food products, in some products such as dairy like cheese and whey, processed fruits and vegetables especially processed potatoes, poultry and swine meat, beer, infant food and sauces, Netherland occupies an important position as a source of import.
Regulations are an intrinsic part of the food industry anywhere in the world, and India is no different. Due to the stress placed on domestic production, import duties are fairly high for finished products. A specific agency related to Food Safety and Standards has also been established by the government in 2006, which consolidates various acts and orders for food-related issues previously handled by various Ministries and Departments. The report describes some of the key regulatory aspects related to imports and distribution of food products in India.
It is important to note that the government has introduced several schemes favouring domestic production in the food processing sector such as providing financial assistance in the form of grants and subsidies for the setting up and modernization of food processing units, the creation of infrastructure, support for research and development and human resource development as well as other promotional measures to encourage growth within the processed food sector. In order to promote faster establishment of food processing industries in the country, the government provides various tax and other incentives to businesses which have been detailed in the report.
To conclude, the market for processed and semi-processed food products is growing in India, and there is significant opportunity for value-added and differentiated products. We hope this report will present a well-rounded view of the market, and serve as a first step for Dutch organisations to productively engage with the Indian industry and Indian customers.
About Third Eyesight
Third Eyesight is a consulting and management solutions firm focussed on sectors retailer to retail and consumer products. Clients who have benefited from our experience and expertise include retailers, brands and manufacturers, technology suppliers, private equity & venture investors, educational institutions and organisations servicing the consumer products and retail sectors.
Third Eyesight has worked with companies that are market leaders (with sizes up to USD 80 billion in annual sales) to early-stage and start-up businesses, on engagements of strategic significance to the top management.
Strategy and operations support provided by Third Eyesight include: identifying and evaluating new business areas, market and industry research, business strategy and business plan development, development of sales and distribution networks, including support with acquiring key client relationships, business due diligence, partner evaluation, strategic alliances, mergers & acquisitions, sourcing and supply chain strategy, merchandising support, operational audits & assessment and a variety of other operational support.
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L’assouplissement de la réglementation indienne sur le commerce de détail a créé un appel d’air pour les marques étrangères qui lorgnent sur une classe moyenne en pleine croissance. Les marques françaises sont à la traîne.
Il y a à peine un mois, Ikéa, le géant suédois de l’habitat, faisait la Une de la presse indienne et étrangère en annonçant une mise de près de 2 milliards d’euros pour lancer ses dix premiers magasins en Inde. Il venait d’obtenir l’agrément final du gouvernement indien pour investir 105 milliards de roupies (environ 1,95 milliard de dollars) pour créer 10 magasins dans les 10 prochaines années, et 15 autres en option. Des magasins sur le modèle qui a fait son succès en Europe, à une seule petite exception : si son agrément autorise la création de cafés et restaurants dans ses magasins, il exclut toute distribution de produits alimentaires conditionnés. Neuf mois après la décision du gouvernement indien d’assouplir la législation sur les investissements directs étrangers (IDE) dans le secteur du commerce de détail, l’arrivée de l’enseigne suédoise est emblématique de l’appel d’air provoqué par cette réforme. Elle a concerné deux segments :
• La distribution mono-marque : il est désormais possible aux enseignes monomarque de détenir 100 % d’une société (contre 50 % auparavant) en Inde.
• La distribution multi-marques : les sociétés étrangères peuvent désormais détenir la majorité des sociétés en jointventure (51 %) et s’installer dans les 53 villes de plus d’un million d’habitants que compte l’Inde. Mais la loi oblige les sociétés étrangères à faire 30 % de leurs approvisionnements en Inde, auprès de PME, et leur fait obligation d’investir un minimum de 100 millions de dollars dont au moins 50 % doivent aller, dans les trois ans de la première tranche de l’investissement, dans les infrastructures de « back-end » qui incluent un large champ de domaines (process, fabrication, distribution, design, contrôle qualité, etc.). En outre, chaque État indien doit donner son approbation…
LES CHIFFRES CLÉS
DU COMMERCE DE DÉTAIL
Le commerce de détail a cru de 10,6 % entre 2010 et 2012 et son chiffre d’affaires global pourrait atteindre 750 à 850 milliards de dollars d’ici 2015, selon des chiffres cités dans une étude du cabinet Deloitte Inde (4). Environ 60 % concernent l’alimentation et l’épicerie, 8 % l’habillement, 6 % la téléphonie mobile et les télécommunications, le reste se répartissant entre la bijouterie, la pharmacie, les services alimentaires et les matériels électroniques. Toutefois, le secteur organisé – qui paye des taxes – ne représente que 8 % de ce total, contre 92 % pour le secteur informel. Au sein de ce commerce organisé, le secteur de l’habillement pèse 33 %, l’alimentation et l’épicerie 11 %, tout comme la téléphonie mobile et les télécommunications
C’est le secteur de la distribution monomarque qui répond le plus positivement à
l’ouverture indienne. Dans l’habillement
et la mode, les annonces se succèdent.
La marque britannique Pavers (chaussure), aurait été la première à obtenir un
agrément pour implanter une chaîne de
boutiques selon la nouvelle législation,
avec un investissement de 20 millions
de dollars. De son côté, le champion du
prêt-à-porter espagnol Zara (Inditex), qui
a testé deux premières boutiques dès
2010 à Delhi, a annoncé son intention
d’ouvrir 40 boutiques dans le pays. H&M
s’apprêterait à investir dans une joint-venture majoritaire, Puma à augmenter son
réseau. Pour ne citer que quelques exemples.
L’intérêt pour le marché indien de la part
des marques internationales est ancien
mais désormais avivé par l’émergence
d’une classe moyenne estimée, selon les
sources et les critères de définition, entre
150 et 200 à 300 millions de personnes
(une cinquantaine de millions pour le segment des plus hauts revenus). Il a d’abord
été favorisé par l’urbanisation et le développement de centres commerciaux en
milieu urbain : « La croissance du nombre de marques et d’enseignes de distribution internationales opérant en Inde
s’est accélérée depuis 2005, avec le
développement des investissements
indiens dans la distribution et l’immobilier
commercial sous la forme de Malls » souligne Devangshu Dutta, consultant indien
dont la société, Third Eyesight, est un
spécialiste du secteur.
Dans une étude intéressante, Devangshu
Dutta montre comment au fil des années,
des marques internationales ont fait leurs
premiers pas en Inde, sous la forme de licence, franchises, ou de joint-ventures avec des partenaires indiens (1). Mais pour lui, ce ne sont pas les grands groupes qui ont conduit cette vague : « Ce sont les sociétés de taille moyenne qui mènent la charge en Inde, d’avantage
que les géants du commerce de détail, bien que ces derniers, à l’instar d’Ikéa, Walmart, Carrefour suscitent plus d’articles dans les médias ». Dans la distribution multi-marque, les grandes enseignes, longtemps interdites pour le commerce de détail par la réglementation indienne, restent toutefois absentes. Trop timide et restrictive, la réforme intervenue le 20 septembre 2012 ne les a pas convaincus et on attend toujours les annonces d’investissements des grandes enseignes comme Walmart, Tesco ou Carrefour, déjà présentes dans le cash & carry. Les enseignes américaines et britanniques feraient un intense lobbying pour obtenir de nouveaux assouplissements. Dans la liste de leurs récriminations à l’égard de la réforme, l’une des principales portes sur le fait que les dépenses effectuées dans le foncier ou les loyers – très élevés en Inde – ne soient pas comptés dans les investissements d’infrastructures de « back-end ». « C’est clairement une orientation trop restrictive », commente un article du libéral Asia Times (2). Le même article épingle aussi le fait que sur les 53 villes autorisées, seules une vingtaine sont réellement ouvertes à ce jour à ce type d’IDE en raison de l’opposition des États indiens concernés… Seuls 10 États indiens ont approuvé cette réforme à ce jour (dont Delhi, Maharashtra et Haryana). Il y a peu de chance que les enseignes de la grande distribution occidentale obtiennent gain de cause avant les prochaines élections générales, prévues en 2014. « Les Kirana Stores (ndlr : les petits commerces), constituent un lobby très puissant qui s’oppose à cette ouverture »,
Produits frais : une french touch dans la chaîne du froid
La chaîne du froid est embryonnaire en Inde. Un défi colossal
pour toute enseigne de supermarché habituée des standards
européens qui voudrait miser
sur l’Inde, et un créneau que
tente d’investir le savoir-faire
« Dans nos pays, les pertes
entre la fourche et la fourchette
sont d’environ 10 %. En Inde,
ce taux est de 40 % environ ».
C’est ainsi que Gérard Cavalier,
président du Cemafroid, le Centre d’expertise français en
matière de chaîne du froid,
résume l’enjeu auquel fait face
l’Inde en matière de distribution alimentaire. Concrètement,
cela signifie, par exemple, que 40 % des fruits et légumes
produits en Inde ne parviennent jamais aux consommateurs…
Insuffisance ou absence d’infrastructures pour la collecte,
l’acheminement, la conservation et le stockage des marchandises : la chaîne du froid en Inde est encore à construire.
« Aujourd’hui, les distributeurs ont un intérêt majeur à avoir une chaîne du froid, confirme le responsable », qui précise que dans l’agriculture, celle-ci n’existe actuellement que pour quelques produits, souvent très exportés, tels que les pommes, les oignons et les pommes de terre. « Dans les supermarchés, vous ne trouvez que peu de produits frais de qualité à cause de ce problème ».
Alors, face au boom de l’urbanisation, les autorités indiennes tentent d’accélérer la modernisation du secteur. Fruits et légumes, produits laitiers, poissons, viandes : de nombreux produits sont concernés. En l’occurrence « la chaîne du froid est la priorité de la coopération franco-indienne » confirme Gérard Cavalier, les Indiens considérant la France comme un bon modèle dans ce domaine. « Leur situation ressemble à celle que connaissait la France juste après la seconde guerre mondiale », explique-t-il.
Le Cemafroid a conclu le 4 avril 2013 un accord de coopération à long terme avec son homologue indien, le NCCD (National center for Cold Chain Development), un organisme créé en 2011 sous la tutelle du ministère de l’Agriculture, doté de 5 millions d’euros de budget (http://nhm.dacnet.nic. in/NCCD/index.html). Cette coopération, qui doit se traduire par la mise en œuvre d’un plan d’action, pourra prendre la forme d’assistance technique, de formation, d’accompagnement des cadres du NCCD et des industriels indiens. « Les industriels indiens sont très demandeurs, estime Gérard Cavalier, car la différence ne se fera pas sur la valorisation des produits mais sur la réduction des pertes ! Les distributeurs indiens, et a fortiori étrangers, y ont intérêt ». Il espère que les premiers programmes de formation seront mis en place au Les personnes présentes sur la tribune sont de gauche à droite : M. Patrick Antoine, Président de l’AFF ; M. Didier Coulomb, directeur de l’IIF ; M. Cédric Prévost, futur conseiller agricole du ministère de l’Agriculture ; M. Philippe Vincon, co-président du groupe de travail agricole franco-indien (Ministère de l’Agriculture) ; M. Gérald Cavalier, gérant Cemafroid ; M. Sanjeev Chopra, directeur NCCD (Ministère de l’Agriculture) ; M. Indra Maini Pandev, Ambassadeur d’Inde en France ; M. Pawanexh Kholi, NCCD Chief Advisor
deuxième semestre de cette année. Le chantier est immense et l’Inde a appris aux étrangers à être patients et à voir à long terme. Mais cette coopération pourrait avoir des retombées concrètes, à terme, sur les fournisseurs français d’équipements et de services de la chaîne du froid qui ont été impliqués dès le départ dans cette approche. À la suite d’une mission d’expertise conduite par le Cemafroid en Inde en 2011 pour faire le diagnostic des besoins, l’idée d’organiser l’offre française dans ce domaine sous la forme d’un consortium a été lancée, avec l’Association française du froid (AFF). Ubifrance a organisé un colloque et une mission de rencontre des acheteurs indiens de la filière en novembre 2012 à New Delhi et Bombay à laquelle plusieurs grands noms du secteur ont participé tels que Le Petit Forestier (logistique du froid), LeCapitaine (carrossier), Serap (système de refroidissement du lait)… Une démarche porteuse, à terme, de débouchés nouveaux.
Pour en savoir plus :
www.association-francaise-du-froid.fr/ : on peut y consulter le Rapport de mission menée par le Cemafroid en 2011. www.cemafroid.fr/
Le site du tout jeune NCCD : http://nhm.dacnet.nic.in/ NCCD/index.ht
analyse Alain Bogé, consultant et spécialiste français du secteur de la mode en
Asie, vice-président du Business Fashion
Forum, un think tank dédié aux acteurs de
la mode (3).
C’est donc le mono-marque qui est, pour l’heure, boosté par l’ouverture indienne. Et dans ce secteur, les Français ont du retard. Selon Third Eyesight, les marques tricolores ne représentent que 10 % des marques internationales implantées en Inde. Les Américains sont en tête, suivis des Italiens et des Britanniques (graphique page précédente). Hors luxe – LVMH est très actif actuellement, avec l’acquisition de son ancien partenaire Genesis et de la marque indienne Liliput –, les marques françaises sont surtout présentes dans les produits cosmétiques et de soins de beauté. « Les Américains et les Britanniques ont certainement l’avantage de la langue, l’anglais, avance Devangshu Dutta. Il est possible que les Italiens tirent avantage de leur présence sur d’autres marchés, donc soient plus visibles pour des partenaires et consommateurs indiens potentiels que les Français ». Dans l’habillement, qui représente un tiers de la distribution organisée (voir chiffres clés), Alain Bogé reconnaît que les griffes françaises ne sont pas légion : Promod, Okaidi, Celio… « Elles sont encore rebutées par la complexité du marché » analyse-t-il. En premier lieu, le secteur est encore très largement dominé par le commerce informel, dont font partie les kirana stores, qui pèsent 92 % du marché selon un chiffre cité par une étude du cabinet Deloitte (3). En outre, loin d’être unifiée, l’Inde et ses 28 États sont multiples. Hors du luxe, les success stories de marques occidentales sont souvent celles d’une bonne adaptation au marché local en s’appuyant sur un partenaire indien – pas toujours facile à trouver sans conseils ou accompagnement extérieur –, qui connaît bien le marché. « Les sociétés qui souhaitent réaliser un chiffre d’affaires significatif et générer des retours sur investissement en Inde doivent se doter d’une stratégie de marque, et d’un mix produitprix-distribution adapté à l’Inde plutôt que de faire un copier/coller de leur modèle français ou international », confirme Devangshu Dutta.
S’appuyer sur un partenaire indien – même si on opte pour une filiale à 100 % – est en l’occurrence fortement recommandé lorsqu’on n’a pas la puissance de frappe d’un Ikéa. Alain Bogé insiste lourdement sur ce point rappelant que Zara a commencé prudemment à Delhi, en joint-venture, en testant une boutique dans un centre commercial. « Il y a trois avantages à s’appuyer sur un partenaire indien, résume le Français. Il connaît les segments à attaquer et les prix ; il sait à qui donner les dessous-detable pour faire avancer les dossiers dans un pays où la corruption est endémique et à tous les niveaux ; enfin, il peut éventuellement participer au financement, sachant qu’un bon tiers des transactions en Inde se font en cash. »
Pour ne parler que du prêt-à-porter et des accessoires de mode, si les Zara, Mango, Benetton et autre Esprit sont déjà instal lés, que de belles marques indiennes ont d’ores et déjà émergé – Liliput, Fabindia… – il reste de nombreuses opportunités compte tenu du potentiel de croissance extraordinaire du secteur.
Alain Bogé est par exemple convaincu que les marques françaises de la mode enfantine ont une belle carte à jouer au pays où l’enfant est roi. « Lorsque mes amis indiens viennent en France, ils vont faire leur shopping chez Bonpoint ou Tartine & Chocolat. Okaidi y est déjà, il faut y aller » estime-t-il. Pour lui, les villes où il faut être abritent les principaux pôles de consommation du pays, avec une population jeune et ouverte à la nouveauté : New Delhi la capitale, mais aussi Mumbai la capitale économique, suivies de Bengalore, Hyderabad, Ludhiana ou encore Ahmedabad. Mais surtout, ne pas trop tarder : « Il faut y être dès maintenant car les meilleurs emplacements et les meilleurs partenaires seront pris d’ici quelque temps ». La Chambre de commerce franco-indienne (CCIFI) organise début juillet, en partenariat avec CCI International Nord de France, la première conférence sur le commerce de détail en Inde à Lille, au cœur de l’industrie de la distribution française, le 9 juillet (5). Un bon signe…
(1) http://thirdeyesight.in/ : lire l’article « Entry
Strategy of global Brand – Impact of FDI »
(2) « India’s retail FDI bid fails to sell », 3 mai
2013, sur www. atimes.com
(4) « Opening India retail », janvier 2013.
(5) Contact : firstname.lastname@example.org
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Among consumer sectors, very few can match up to fashion in terms of its global nature. Despite food having led the way in global trade through spices, it is the fashion sector that led the global march of brands. As the economies in Europe and Asia recovered and grew, historical colonial linkages as well as modern culture-vehicles such as movies carried images of what was cool in the benchmark culture. Fashion brands were the most identifiable representation of cool.
India itself has known international fashion and luxury brands for several decades. From the mass footwear brand Bata to the top-notch luxury of LVMH, some of whose most important global customers included the rulers of Indian princely states, international fashion brands have an age-old connection with India.
In spite of these old links, the absolute base of consumers for fashion brands was small, and for them, prior to the 1980s, India was a relatively low potential market with low attractiveness and low probability of success.
A transition began in the 1980s, as India moved emphasis from central planning and a restrictive economy to a more liberal business regime, and brands and modern retailers started growing in presence gradually.
During this transition period, other than the notable exception of Bata, it was mainly Indian brands that were at the forefront of modernisation of retail in India, with the first retail chains being set up for textiles, footwear and clothing. Though the seeds were laid earlier – Liberty is credited with the launch of the first ready-to-wear shirt brand in the 1950s, Raymond with the first ready-to- wear trouser brand in the 1960s – the growth started in real earnest only in the 1980s when apparel exporters such as Intercraft (with brands like “FU’s”), Gokaldas Exports (“Wearhouse”), and Gokaldas Images (“Weekender”) also tried their hand at modern retail, as did corporate groups (“Little Kingdom” for kids and “Ms” stores for womenswear).
Yet, even in the early to mid-1990s, when western companies looked at the Asian economies for international growth, West Asia and East Asia (countries such as Japan, South Korea, Taiwan and even Thailand) were seen as more attractive due to higher incomes and better infrastructure. In the mid-1990s there was a brief upward bump in international fashion brands entering the Indian market, but by and large it was a slow, steady process of increase.
By the mid-2000s, however, a very distinct shift became visible. By this time India had demonstrated itself to be an economy that showed a very large, long- term potential and, at least for some brands, the short to mid-term prospects had also begun looking good. In a few years, from 2005 onwards, the number of international fashion brands entering the market has increased 4-fold.
Market Still Evolving, but Brands are Confident
The sheer number of brands that are now present in India and the new ones that are entering every year is a clear sign of strengthening confidence among international brands that India is now one of the most important markets that they cannot ignore for long.
There is a visible acceleration of growth in absolute revenues, too, being achieved by individual brands. Brands such as Levi Strauss, Reebok, Louis Philippe (a British brand formerly owned by Coats Viyella, now by Aditya Birla Group for India and other territories) and its sister brands took perhaps 12-15 years to break through the threshold of R5 billion in sales turnover, but industry opinion is that the “0 to 5000” trajectories today are faster and that younger brands are likely to take less time – under a decade – to cross the threshold. While modern apparel retail currently contributes less than 20 per cent of the total apparel market, with growing incomes and increased availability of modern retail environments, consumers are spending more on branded fashion than ever before. In the year closing March 2012, at least 2-3 additional brands (including Indian ones) are expected to cross the R5 billion threshold.
Clearly, there are few markets globally that can support potential growth from zero to US$100 million in a decade, with the potential to even reach a billion- dollar mark within the next couple of decades. However, some of these markets are already hugely competitive, and also going through painful economic churns. India, on the other hand, is a market that is at the earliest stages of consumer growth – it is, in the words of the managing director of a European brand, a market where “a brand can enter now and live out its whole lifecycle”. In fact, it is tempting to compare the emerging golden bird of India to the golden dragon of China where western brands seem to have rapidly established as products of choice for the newly affluent Chinese consumer during the last 15 years or so.
In our work with brands and marketers from around the world, we have to constantly remind them that not all emerging markets are the same. The explosion of luxury and premium brands in China during the last decade or so has happened on the back of explosive economic growth that came after a long cultural and economic vacuum. When the new money wanted links with the old and when uniform grey-blue suits needed to give way to something more expressive, well-established western premium and luxury brands provided the most convenient bridge.
‘In India “discernment” may be a new experience to the newly-rich Indians for whom brands can be a valuable guide and “secure” purchase, but discernment and taste are not new to India as a whole’.
On the other hand, in India “discernment” may be a new experience to the newly-rich Indians for whom brands can be a valuable guide and “secure” purchase, but discernment and taste are not new to India as a whole. More importantly,differentiation and self-expression never disappeared even during India’s darkest years of “socialistic” economics.Therefore, the Indian market has a more “layered” approach to the premium fashion market and will continue to grow in a more fragmented, more organic manner than the Chinese market. There would be multiple tiers of growth available for international as well as Indian brands. For international brands customisation and Indianisation will be important. This is already visible in bespoke products by Louis Vuitton and Indian products by brands such as Canali (jackets) on the one hand, and significant re-thinking on product mix and pricing by brands such as Marks & Spencer. That brands are willing to rethink their position in the context of the Indian market demonstrates that they see India as a strategic market, worth investing in for the long term.
Another sign of the growing confidence amongst international brands in the Indian market is the number of companies that are looking at directly investing in joint ventures, or even going further to set up wholly-owned subsidiaries in the country.
It is worth keeping in mind that setting up a subsidiary is a decision that is not taken lightly, regardless of the size of the business and the amount of investment, since it involves a disproportionate amount of management time and effort from the headquarters during the launch and early growth phase where revenues are small and profits non-existent. Among our clients, brands have taken the decision to step into an ownership structure in India when they feel that India is too strategic a market to be “delegated” entirely to a partner (whether licensee or franchisee), or that an Indian partner alone may not be able to do justice to the brand in terms of management effort and financial capital. In the last few years we have seen several brands take the plunge into investing in the Indian business, among them S. Oliver (Germany), Marks & Spencer (UK) and Mothercare (UK).
During 2011 specifically, Promod changed its franchise arrangement with Major Brands into a joint-venture that is majority-owned by Promod. From its launch in 2005, the brand has opened 9 stores so far. However with the new JV in place, the venture is reported to be looking at opening 40 stores in the next five years.
Most recently, Canali was one of the brands that moved into a majority-owned joint-venture. The brand entered in India in 2004 through a distribution agreement with Genesis Luxury. This has recently given way to a joint venture between the two companies that is owned 51 per cent by Canali. The brand currently operates five exclusive stores in India has plans to accelerate the brands growth in India by opening 10-15 stores over the next three-four years.
The Impact of FDI Regulations
If a “theme of the year” has to be picked for the Indian retail sector in 2011, it must be ‘Foreign Direct Investment’. The debate during the year was hardly a clean and clear “pro vs. con” exchange of ideas. It was a motley mix of extreme lobbying for and against FDI, some balanced reasoning on why FDI should be allowed, and also moderate voices calling for governing the speed at which and the conditions under which foreign investment could be allowed. In many cases there seemed to be dissenting voices emerging from within the government. One possible impact of this uncertainty through the year was that several brands postponed their decisions regarding the potential entry and the strategy that they would follow in India with regard to partnership or investment.
In November 2011, the Indian government announced that 100 per cent foreign investment in single brand retail and 51 per cent foreign ownership of multi- brand retail operations, but was forced to back-track due to vociferous opposition from several quarters. At the very end of the year, the government finally reopened 100 per cent foreign ownership retail operations, albeit limiting it to single brand retail businesses. However, it allowed this under the condition that the Indian retail operation would source at least 30 per cent of its needs from Indian small and mid-sized suppliers.
The condition of 30 per cent domestic sourcing from SMEs is well-intentioned – aiming to provide a growth platform for India’s manufacturing enterprises – but unachievable for brands that do not currently source any serious volumes from India. In fact, for most international fashion brands India contributes less than 10 per cent of their total sourcing, in many cases well under 5 per cent. Under these circumstances, we shouldn’t expect any dramatic changes, though we do expect the growth in joint-ventures and subsidiaries to continue in the coming months and years.
If an international brand perceives India to be at the right stage of development, and it wishes to exert significant or complete control over its Indian presence, then a majority or completely owned subsidiary seems the most logical step, and the brand will find a way to structure its involvement in India appropriately. However, many brands that today have a 51 per cent ownership in India are stopping short of climbing to 100 per cent until they can sort out how to meet the SME sourcing conditions.
Getting Over the Sourcing Hurdle
The problem with the 30 per cent sourcing rider is simple. When a brand launches in India, it would like to present the consumer with the most complete product offering that showcases its capabilities and positioning as relevant to the target consumer in India. In most instances, the brand would not be sourcing the full range of its merchandise from India.
This is not a problem if the brand approaches the market through a wholesale or franchise structure, or even with a retail business that is not owned by it 100 per cent. But for a retailer that wants to own the Indian business completely, complying with the 30 per cent domestic sourcing restriction means developing a new set of suppliers in India from scratch, pulling in the design and product development staff to work with them, and to develop ranges that suit not only the Indian market, but also other markets around the world. Simply putting together an India-specific sourcing team to replicate the entire range to buy small volumes for the Indian business is neither practical nor feasible for most of these brands. This means that the product development and sourcing team must be willing to see India as a strategic supply base for the future, just as their selling-side colleagues may be seeing it as a strategic market.
In this context it is worth repeating something that I have said before: retail managers are generally risk averse, and like to move in packs – where there are some brands, more come in and create a mutually reinforcing business environment. The presence of other international brands – especially from their own country – helps in creating a familiar context at first sight and encourages further exploration of the market. At least for the executives handling international retail expansion, India presents a more ‘familiar’ and ‘developed’ face today than ten years ago.
However, the explosive growth that we have witnessed in terms of the number of brands present in India is not mirrored by the growth of fashion sourcing out of India. In fact, even when compared to what has happened in the global textile, apparel and footwear sourcing environment since quotas were removed in 2005, the India’s export growth looks dispiritingly low, even stagnant. China still remains the largest source for fashion products, while countries such as Bangladesh, Indonesia and Viet Nam have grown their share aggressively. India’s share of clothing exports is a lowly one-tenth that of China.
In our work related to global sourcing strategies for western retailers, on an objective measurement matrix of sourcing competitiveness India rates highly. In several cases, sourcing from India as a hub (and, for European retailers, Turkey as a hub) has been seen as a logical counterweight to balance out the high concentration of current sourcing in China.
However, product development and sourcing is not entirely an objective process – in fact, sourcing habits are sometimes the hardest to change. The buyer’s subjective experiences – sometimes buried deeply in the past career – have a significant role to play. A conversation from 2001 with the sourcing head of a European brand sticks in my mind, when he said, “I don’t really want to buy anything from India – Indian suppliers can do a very limited product range, quality isn’t always good and the shipments are always late.” On probing further, I discovered that his last transaction was in 1992, after which he never set foot in India again. Much as we might present statistics and facts about the developments in the Indian textile and apparel industry, a personal injury early in his career has left a deep scar that obviously influenced this gentleman’s buying decisions worth over €300 million in global apparel sourcing, or about €700-800 million worth of sales.
There is clearly much to be done in terms of encouraging modernisation and better organisation amongst apparel suppliers, and making those changes visible to buyers. Even brands that are well-engaged with the Indian supply base have between 40-70% of their people here focussed on in-line and post- production quality issues. We are today at a stage where larger and better- equipped apparel exporters would be best placed to address the needs of international brands within India, but find the volumes too small to bother with setting up entirely different documentation and accounting processes.
Health & Safety and Labour compliances are also areas in which the brands will not forego their corporate standards. Can we imagine a brand saying that its European customers do not want their products made in sweatshops, but for the Indian consumers of the brand this is not (yet) an issue? While this may be a fact, would a high profile brand risk its global reputation to source competitively for its small Indian business?
So a government dictat to international brands’ fully-owned subsidiaries to ensure that they source 30 per cent of their needs is not enough. At best it will encourage some of the brands to start looking at India more seriously, but a more likely scenario for most brands is that they will carry on business as usual until the supply base in India pulls up its socks, or until the business in India becomes large enough to be interesting to their existing Indian suppliers who are currently focussed on exports.
Certainly the government itself needs to do much for more manufacturing- friendly policies, as well as focussed investment in infrastructure that can provide rapid, efficient and cost-effective transportation from the country and within the country.
It is time to bridge the gap between “textile exports” and “fashion retail” in the country. Remember, the explosive growth of brands in China followed the manufacturing explosion, not the other way round. Until the Indian apparel, textile and footwear manufacturing sector grows strongly, the actual volume growth of modern fashion retail will remain hobbled, regardless of the number of brands that enter the market.
To me this statement by a senior professional from one of Hong Kong’s largest apparel companies says it all: “The Indian industry looks like a formidable competitor, the day it decides to wake up.”
Drawing the Full Circle of Confidence
In closing I would like to mention the least acknowledged, but a very important part of the growth of international brands in India: the acquisition of brands overseas by Indian companies.
The Aditya Birla group laid an early foundation when it bought out, for India and several other territories, the perpetual rights for Coats Viyella’s brands including Louis Philippe, Van Heusen and Allen Solly. Lerros was a slightly different example – being a brand that was set up by the House of Pearl in Germany – but that also circled back to India. More recently (2010) we have the example of the Swiss company Switcher Holdings, whose with brands including Switcher, Respect and Whale, was bought by PGC Industries.
In markets such as the EU, there are today brands that may be available because they are finding difficult to survive in harsh trading environments and that do not have the financial or management bandwidth to take on initiatives in growing markets like India. These offer a legitimate growth platform for Indian companies that are strong in manufacturing those product categories and want to move higher up the value chain from being a generic commodity “supplier”.
Although exporters may initially approach these brands for franchise or license relationships, to some it soon becomes clear that if they are in a position to make an incremental investment they could well own the perpetual rights and perhaps the whole business, rather than investing in building up someone else’s brand, especially in the business in India is likely to grow very rapidly. Obviously, this new-found confidence needs to be backed with solid management capability, but as other consumer goods companies such as Tata (beverages, automotive), Mahindra (automotive) and Dabur (personal care) have shown, it is entirely feasible to look at growth in India as well as internationally by using an existing international brand as a stepping stone.
It also presents a challenge of classifying such brands as international or Indian. Bata was founded in the Czech Republic and went global from there – however, today it is legitimate to treat it as a Canadian brand since its headquarters moved there in the 1960s. Among other products, Gloria Jean’s Coffee was founded in the USA, but is now completely Australian-owned. In that sense, today would that not make Louis Philippe, Allen Solly, Switcher Indian brands?
I think this puzzle is a challenge that many people in the industry in India would look forward to contributing to.
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Indian market is flooded with brands while consumers are finding it difficult to stay afloat. Competition, demands and innovation are the key aspects to sustain in the battle. But what are the aspects to be avoided? Shweta Iyer talks about the pros and cons of launching a new brand and tries to find a success mantra to survive in the industry through thick and thin
In the last few months India has witnessed a galore of newly launched brands and brand extensions leading to a surge in the marketplace. A recent report states 1,500 brand launches happened in the past 18 months, thus leading to three launches per day. Out of this only five percent make the cut. With the aim to make it big, they prefer to jump rather than take baby steps, resulting in failure of their brand identity. Every sector including FMCG, telecom, retail, lifestyle, electronics and automotive has one new launch to its credit, every single month.
Slow and steady wins the race
Big retailers to small time investors and international brands foresee India as the biggest retail hub. Many brands feel that Indian audience welcome every new product in sundry. With exhaustive thesis, c o n s u m e r s t u d y a n d o t h e r researches, new brands have their retail theory in place but yet fail to make the mark. “One of the enduring marketing myths is that a new brand that will eventually become a big brand has to take off in a hurry. And that a marketer should devote enormous resources to assure a rocket-ship launch. Taking it slow by understanding the pulse of the audience should be the prime objective,” says Johnny John, coo- World Player from SKNL. Each category is different from the other. For instance: FMCG is faster than apparel while hi-tech machines win over automobiles. Dedicating time and being patient as the brand grows is crucial for any retailer. And for c r e a t i n g a b r a n d i d e n t i t y,promotions, campaigns, offers and discounts, and other advertising gimmicks are equally important.
Take Microsoft, for example. It might be hard to believe, but the brand took quite a long time to get off the runway. Microsoft took ten years to exceed $100 million in annual sales. Wal-Mart took 14 years to break $100 million in annual sales. Today the brand has become the world’s largest retailer. The turning point for a new brand comes when slow initial sales suddenly accelerate towards the mass market. The largest, most powerful brands, the brands that have stood the test of time, are the brands that have taken off slowly. The brands that take off rapidly like a rocket ship usually turn out to be fads. Big Bazaar opened its first store in 2001. Being the first departmental store that offered everything under one roof, Big Bazaar is the most successful retail venture in India. According to a report, “starting 2008 with six million square feet of retail space and stores in 51 cities pan India, they ended the year with over 11 million square feet of retail space and over 1,000 operational stores across 63 cities and towns and 65 rural locations in India. They opened 25 Big Bazaar stores in 2008 and carried the total store count to 104. The company saw a 52 per cent increase in its total income from ` 33.29 billion in FY 2006-07 to ` 50.53 billion in FY 2007- 08.” Today, Big Bazaar has 133 outlets across the country.
Missed the bus
Where there are success stories, there are also brands that missed the bus. The FMCG brand Marico had to withdraw the debut of its healthy snack – Saffola Zest – due to poor market response received. Marico has been trying to rework the flavor and taste for some time, following consumer feedback and is planning to re-launch the brand in next couple of coming months. The withdrawal from the market implies the company has not been successful in reworking the taste easily. Saffola Zest faced fierce competition from Parle Agro’s Hippo,Pepsi Frito-Lays Aliva and Parle Products Monaco Smart Chips. It is also planning to launch Saffola Oats in the breakfast cereal market in India,which the company is positive about.Reports stated, “The total market worth of the breakfast cereal is Rs 500 crore while the oats market is small with ` 120 cr and is rolling at 25 per cent yearly.” The other major players in this category include PepsiCo’s Quaker Oats and Bagrry’s. Kellogg’s is also a strong and dominant player in corn flakes, with an over 70 per cent share.
Maggi instant noodles, foods major Nestle’s flagship brand which has dominated instant noodles for nearly three decades, is losing market share on a monthly basis to newer entrants such as GlaxoSmithKline’s (GSK) Horlicks Foodles, Hindustan Unilever’s (HUL) Knorr Soupy noodles, Big Bazaar’s Tasty Treat, Top Ramen and several other smaller players, according to data by market research firm Nielsen. The data shows that Maggi’s share of instant noodles, on an all-India basis, across urban markets, has slipped consistently in the period between December’09 to July’10. While Maggi instant noodles (minus vermicelli) had a 90.7 per cent share in December’09, the share dropped to 86.5 per cent in July’10 on an all-India basis. A regional split of the data shows that Maggi’s instant noodles’ value market share has fallen across the east, south, north and west zones for the same period. Analysts say with new competition, Maggi’s market share is certain to get impacted.
New Brand Launches
Brand launches and extensions have been an integral part of any company’s expansion plans. Budgets are allotted taking care of brand p ro m o t i o n s a n d ca m p a i g n s . Innovation has been the watch word for any new brand for recognition and retail presence. Let’s have a look at few of the newly launched brands or products and their survival strategies.
S. Kumars Nationwide Limited (SKNL) – India’s leading Textile and Apparel Company with expertise in multi- fiber manufacturing launched its new apparel brand World Player in Andhra Pradesh. True to SKNL’s mission of catering to the entire spectrum of the socio-economic segments of the Indian market, World Player offers fashion solutions for today’s young achievers at the bottom of the economic pyramid. World Player by S.Kumars’ is the first brand devised and created for the lower-mid segment of the market who strives for excellence and quality of life. Talking about the brand strategy and promotions, World Player has followed aayaram gayaram culture while launching the brand. Launched in April 2010, the brand is already present in 650 MBOs across 300 different towns. The brand likes to take it slow and avoid doing too much too soon. For campaigning, World
Player sent a mobile van in various areas in South with small display of products, and to give touch and feel experience to the consumers, with contest inside. It got tremendous response as it allowed the customers to connect with the brand. According to Johnny, “Strong brand proposition is required, advertising and other things just amplifies it.
Innovation is something which Kurl- on has always looked upon, keeping this in mind they are coming up with new innovative folded spring mattress both in bonnel and pocket spring which will be introduced for the first time in the country and will be called “Athiti”. This can be folded and packed properly while being used as an extra mattress for the guest (atithi). Kurl-on, also introduces three new types of pillows being released in the market during this month including Stomach sleeper Pillow, Side sleeper Pillow and Pillow for pregnant women. The brand has recently entered furniture retailing. The range includes furniture for living, dining and bed rooms. A dealer network of 5500 across India, Kurl-on now has its wings spanning across 47 offices and 50 godowns strategically located all over the country.
D’décor, a premium home furnishings brand was started in 1998-99 and is recently re-launched in a complete new avatar. The brand flaunts Bollywood superstar Shahrukh Khan and his wife Gauri Khan as its brand ambassadors. “Having made our mark on international grounds in manufacturing, we launched an innovative business model in distribution in India which created paradigm shift in the distribution model in the home furnishings industry in our country. We wish to make even this step an equal success a s o u r m a n u f a c t u r i n g a n d distribution. We shall think of further vertical integration by means of shop- in-shops, franchisee or own stores,” shares Nikita Desai, lead-business excellence, D’décor.
W i t h a s t r o n g p r e s e n c e internationally, Valia Retail-the leaders in manufacturing and export of exquisite and high end textiles and accessories has forayed into the retail of high end home furnishing and lifestyle products, with the unveiling of its flagship store- Veaura- a home décor destination in Mumbai. The store presents a contemporary western and modern approach to home furnishings is spearheaded by Varun Valia. The brand also plans to open its store in Delhi and other metros in the coming months.
Provogue India plans to foray into the fashion watch segment by next month and is eyeing around ` 20-25 crore revenue from this business over the next 18 months, said a top company official. “We are entering the watch segment next month and plan to launch 20 models initially. The watch category in India is growing fast. We will initially start with the top five metros and then move into other cities. We have a manufacturing contract with Fossil and the products would be manufactured at its Himachal unit,” said Akhil Chaturvedi, director, Provogue India. Currently, there are 120 Provogue stores and the company plans to add about 75 more in the current fiscal.
Tata International, the overseas trading company of the Tata Group has decided to enter footwear retailing. Tata International, a manufacturer and trader of leather products, makes shoes for several known global brands including Escada and Hush Puppies. Tata International will sell the formal and fashion leather shoes under its own brand, the sources said. Big retailers such as Reliance Retail, through Reliance Footprint, and Future Group, which has tied up with UK- shoe retailer Clarks, too have ambitious plans for its footwear segment.
Catwalk plans to extend the EBO from purely company owned to the franchisee system to reach out farther and across the length and breadth of the country. To achieve this goal of exponential growth\
Importance of brand building and expectations from the new brand
Context, Consistency and Constancy are three critical components of brand building. First of all, a brand must be relevant to the customer’s context – it may be very well to use phrases such as “selling ice to Eskimos” as examples of salesmanship, but for a brand to take hold and grow, its relevance is the most important factor. For instance, cold breakfasts, energy drinks, and snack bars were irrelevant to most Indian consumers’ context only a few years ago, even though they were very popular elsewhere in the world. As the relevance and acceptability has increased (especially to globally connected young consumers) the context has become more favourable to brands selling these products. Secondly, a brand must stay consistent to its values, the message and the benefits it offers. If there is lack of consistency across the media, or across sub-markets, or over a period of time, the brand is typically weaker, and it takes much longer and much more funding to build. Thirdly, it is important to keep the brand visible at regular intervals, rather than investing in very high visibility at one point of time, and then virtually disappearing until the next burst.
A brand’s performance needs to be judged on internal benchmarks as well, not just external (industry) comparisons. Success for one brand may be market penetration, for another it may be the aspiration value and the premium it can charge over competing brands. Good brands are seldom built in a short period of time. So it is really a personal call of the brand owner/manager to say what defines “success”, what time frame to allow a brand to succeed, and whether and when to pull the plug on a brand. Finally, success (or failure) is very dynamic: established brands can die, and sometimes dying brands can be revived or transformed. One example of this dynamism is Burberry, that went from fuddy-duddy to highly fashionable, to then being associated with juvenile delinquents, and then to being upmarket again.
By Devangshu Dutta, chief executive-Third Eyesight
advertising and local promotional activities will play a key role. Catwalk plans to have store launch activities, outdoor activities, brand building activities and is also looking to utilize the viral marketing tool (social networking websites, etc) for effective brand communication strategies. “Along with quantity we believe quality should not take a hit and hence we would continue investing time and money into our IT systems, so as to ensure smooth and efficient growth,” shares Rahul Doshi, business planner-Corporate Strategy, Catwalk Worldwide Private Limited. Talking about the competition and sustaining in the market, Doshi adds, “The major competition for Catwalk comes from the unorganized market. Influx of international players is also being keenly watched here at Catwalk. The brand knew that sooner rather than later, the organized sector would generate interest from the international market and hence has a l ready employed customer engagement activities. Understanding the market dynamics When launching a new product, it is not enough to understand how the product is performing. It is equally important to know who is buying, where the volume is being sourced, and whether the product is attracting new or existing category buyers. India being the emerging hub for new brands and extension lines is comparatively better than markets in the West. The growing market for organized products is on a high. And, as the modern trade evolves, the need for organized products segment is likely to grow.
According to a report prepared by milk powder (WMP), ice cream mix retail and management consultancy powder (ICMP), butter and ghee, Technopak, organised retail in India is both in bulk as well as in consumer likely to touch 25 per cent in the next packs. Future Group has launched 10 years from the current 5 per cent. “Ektaa” brand that offers a range of In the FMCG sector, Kwality Dairy food products from diverse India Ltd (KDIL), manufacturer of a communities of India. With the wide range of dairy products has launch of Ektaa, customers can opt launched Dairy Best Ghee. KDIL’s for authentic native Indian foods product range also includes all SKU’s procured from the best growing of pure ghee, skimmed milk powder areas.The first product to be (SMP), dairy whitener (DW), whole launched in this series is popular variants of rice from different states of the country. At the beginning – the new branded rice would be available in five variants – Red Matta, Sona Masoori, Govind Bhog, Ambe Mohar and Basmati. The five variants of Ektaa rice will be available in packs of 1 kg and 5 kg, across all the Big Bazaar/Food Bazaar stores in the country. The brand plans to launch a series of product launches like wheat, regional spices, pickles, papads in phases, giving customers a large basket of community foods to choose from across the formats.
Being ready with the new product is not the only criteria as mentioned before. Promotions and constant innovative retail strategies allow the consumers to touch and feel the product. For instance: Big Bazaar’s ‘Shubh Mahurat’ programme was started with an aim to launch new device named BlackPad. The new importantly, they must deliver on tablet PC will feature a seven-inch those promises/value propositions. touch screen and one or two built-in Leading brands have a highly cameras, apart from Bluetooth and compelling brand promise and broadband connections. However, it ensure that the promise is delivered will only be able to connect to cellular at each point of customer contact.
products for its consumers every month. After ‘Tasty Treat Cereals’ and ‘Milestone Strolley Bags’, the retail giant recently launched Minute Maid Nimbu Fresh. Such unique offerings allow the customers to indulge and have a refreshing experience. Also, add the promotional initiatives like “Juna do naya lo”, “sabse sasta din” and “maha bachat sale” that allured customers to splurge. Developing new products requires effective ways to minimize risk and maximise gain. New ideas need to be thoroughly tested and evaluated to reduce risks and helps fine-tune the marketing mix before launch. The key issues range from idea generation to proper marketing. In the electronic segment, BlackBerry manufacturer RIM unveils a tablet
networks through a BlackBerry smartphone, said the report. Apart from Blackberry, Motorola also plans to launch a tablet PC, as is the case of Samsung, which is entering the tablet PC market with Galaxy Tab. Dell has already debuted its Streak tablet computer, while Asustek, Acer, Lenovo and Cisco are also planning to enter the race.
All the leading and established brands feel that the customer is a very important entity. It is mandatory to fulfill the needs, wants, desires and aspirations of discerning audience. Brands must make promises to their customers. They must promise relevant, differentiated benefits. They must offer unique value propositions. And, even more
According to Johnny, few of the factors to be kept in mind while launching a brand includes: “ Calibrated approach, target consumer and brand positioning, be extremely reactive by adapting to the market demands. Along with the stated tips ensure that retail infrastructure in place, this will help in launching a new brand with ease.
Brands are personifications of organizations, products, services and experiences and they are the source of relationships. It is important to implement the strategies shared by the successful leaders to make your brand story a success! Go ahead and follow the guidelines and make the cut!
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It is quite clear that retro is ‘in’. The movie business worldwide is full of sequels, prequels, re-releases and remakes. The music business is ringing up the cash registers with remixes and jukebox compilations. Star Wars and Sholay still have a fan following. Abba has leaped across three decades; Hindi film songs from 30-60 years ago have been given a skin-uplift by American hip-hop artists; while Pink Floyd is hot with Indian teens, along with Akon and Rihanna.
As copyright restrictions are removed from the works of authors long gone, the market gets flooded with several reprints of their most popular writings. Of course, we know that classic literature survives not just a few years, but even thousands of years. Examples include the still widely-read, nearly 2,500-year- old Indian epic Ramayana by Valmiki, the Greek philosophers’ works that continue to be popular after two millennia, and the Norse legends that have been told and re-told for over a thousand years. Spiritual and religious leaders’ writings are also recycled into the guaranteed market of their followers and possible converts for a long time after their passing away.
On the other hand, the basic premise of today’s fashion and lifestyle businesses is that silhouettes, colours and design cues will become (or be made) obsolete within a few weeks or a few months, and will be replaced with new ones. This principle is true not just of clothing and footwear, but is applied to home furnishings, furniture, white goods, electronics, mobile phones, and even cars. In fact, the fashion business (as it exists) would find it impossible to survive if customers around the world chose only classics that could be used for as long as the product lasted in usable form.
What Fashionability Means For brands
Other than individual styles or products falling out of favour, as fashions move and as the market changes, it is evident that some brands also become less acceptable, are seen as ‘outdated’, and may also die out as they lose their customer base.
Of course, that some brands become classics is quite apparent, especially in the luxury segment, where brands such as Bulgari have survived several generations of consumers, and continue to thrive.
However, the past is of relevance to the fashion sector because, other than planned or forced obsolescence, the fashion business has also long worked on another principle – that trends are cyclical.
Skirts go up and down, ties change their width, and the colour palette moves through evolution across the years. A style formula that was popular in the summer of a year in the 1970s, might be just right in another summer in the first decade of the 21st century.
So, the question that comes up is whether the same logic that is applicable to individual products, styles and trends, could also be applied to brands.
The answer to whether apparently weak, dead, or dying brands could be brought back to life is provided by brands such as Burberry, Lee Cooper and Hush Puppies. Sometimes, innovative consumers create the opportunity – as with Hush Puppies in the 1980s – while in other cases (such as Burberry, Volkswagen Beetle, or Harley Davidson), vision, concerted effort and resources can make the brand attractive again.
The question, then, is not whether brands can be re-launched – they can be. The more important question is: should a brand be re-launched? Using the logic of the fashion business, rather than being left to linger and then dying a painful death, could brands be consciously phased out and later brought back into the market as the trends change?
the brand PortFolio – diversiFying oPPortunities and risks
These questions are particularly important for large companies, or in times when market growth rates are slow, or when the
market is fragmented. Organic growth can be difficult in all these scenarios, and companies begin to look at developing ‘portfolios’ by acquiring other businesses and brands, or by launching multiple brands of their own.
The car industry worldwide has lived with brand portfolio management for long. Even as companies have merged with, or acquired, each other, the various marques have been retained and sometimes even dead ones have been revived. The companies generally focus the brands in their portfolio on distinct customer segments and needs (such as Ford’s ownership of Ford, Volvo and Jaguar, or General Motors with its multiple brands), and then further play with models and product variants within those. When things go right, portfolio strategies can be quite profitable, but the mistakes are especially expensive. Sensible and sensitive management of the portfolio is absolutely critical.
In the fashion and lifestyle sector, the players who already follow a portfolio strategy are as diverse as the luxury group LVMH, mainstream fashion groups like Liz Claiborne (with brands in its portfolio including Liz Claiborne, Mexx, Juicy Couture, and Lucky Brand Jeans) and Limited Brands (Limited, Victoria’s Secret, La Senza, etc.), and retailers such as Marks & Spencer (with its original St. Michael’s brand having given way to Your M&S, and also Per Una) and Chico’s (Chico’s, White House | Black Market, and Soma Intimates), who wish to capture new customer segments or re-capture lost customers.
Some of these companies have launched new brands, some have re-launched their own brands, and some have even acquired competing brands.
The issue is also relevant to the Indian market, whether we consider Reliance’s revival of Vimal, the new brand ambassador for Mayur Suitings, or the PE-funded takeover of Weekender. As the market begins to evolve into significantly large differentiated segments, branding opportunities grow, and so will activity related to existing or old brands being
resurrected and refreshed. An additional twist is provided by Indian corporate groups such as Reliance, Future Group (Pantaloons), and Arvind, which are looking to partner international and Indian brands, or grow private labels to gain additional sales and margin.
The issue also concerns those companies whose management is attached to one or more brands owned by them which may not have been performing well in the recent past, but due to historical or sentimental reasons, the management may not like to close down or sell them.
It is equally critical for potential buyers who would like to take over and turn brands around into sustainable profits. This is a real possibility in this era of private-equity funds and leveraged buyouts, where a company or a financial investor might find it cheaper and more profitable to take over an existing brand and turn it around, rather than building a new brand. This is already happening in the Indian market. More interestingly, Indian companies have also already acquired businesses in the United States and Europe, and the potential revival or re-launch of brands is certainly relevant for these companies as well.
WHEn TO RECyCLE AnD REUsE
Re-launch or acquisition of an existing active or dormant brand can be an attractive option when building a portfolio, or when a company is getting into a new market.
For the company, acquiring an existing brand is often a lower- cost way to reach the customers, and also faster to roll out the business. The company may assess that the brand already has an existing share of positive customer awareness that is active or dormant, and that the effort and resources (including money) needed to build a business from that awareness will be much less than that to create a new brand.
The risk of failure may also be lower for a re-launched brand than for a new brand. This is because the softer aspects, the hidden psychological and emotional hooks, are already pre-designed. This provides a ready platform from which to re- launch and grow the brand.
From the customer’s point of view, there is the confidence from previous experience and usage, and possibly also nostalgia and comfort of the ‘known’. ‘Age’ or ‘vintage’ is respectable and trustworthy. This is especially powerful during volatile times or
in rapidly changing environments, when there is uncertainty about what lies in the future, and makes an existing brand a powerful vehicle for sustaining and growing the business.
On THE DOWnsiDE
However, when handling brands, it is also wise to keep in mind the cautionary note that mutual funds issue: “Past performance is no indicator of the future.”
In re-launching active or dormant brands, there is also a downside risk. While the brand may have been strong and relevant in its last avatar, it may be totally out of place in the current market scenario. The competitive landscape would have shifted, consumers would have changed – new consumers entering the market, old consumers evolving or moving out – and the economic scenario itself may now be
unfriendly to the brand.
Also, the ‘awareness’ or ‘share of mind’ may only be a perception in the mind of the person who is looking to re- launch the brand, and the consumer may actually not care about the brand at all. There are instances where the management of the company has been so caught up in their own perception of the brand that they have not bothered to carry out first-hand research with the target segment to check whether there is actually an unaided recall, or at worst, aided recall of the brand. They are imagining potential strengths, when the brand has none.
It is also possible that, during its last stint in the market, the brand may have gathered negative connotations – consumers may remember it for poor products or wrong pricing, the trade may remember it for late deliveries, vendors may remember it for delayed payments… the list goes on. In such a scenario, a re-launch may be a disaster.
So, how does one know whether to resurrect a brand, or to reincarnate it in another form, and when to just let it die? The answers to that lie in answering the question: What is a brand? And then, what is this brand?
A CRITICAL QUEsTIOn: WHAT Is A BRAnD?
Even in these enlightened marketing times, many people believe that the brand is the name. They believe that once you advertise a name widely and loudly enough, a brand can be created. Nothing could be further from the truth. High-decibel advertising only informs customers of the name; it cannot create a brand.
If we put ourselves in the customer’s shoes, a brand is an image, comprising a bundle of promises on the company’s part and expectations on the customer’s part, which have been met. When promises are delivered, when expectations are met, the brand develops an attribute that it is defined by.
The promise may be of edgy design (think Apple), and the customer expects that – when the brand delivers on the promise and meets the expectation, the brand image gets re-affirmed and strengthened. However, these attributes are not always necessarily all ‘positive’ in the traditional sense. For instance, a company’s promise may be about being low-cost and low-service (think Ikea, or low-cost airlines), and the customer may expect that, and be happy when the company delivers on that promise. The promise may be products with a conscience (think The Body Shop), which may strike a chord with the consumer.
What that brand actually stands for can only be created experientially. Creating this image, creation of the brand, is a complex and step-by-step process that takes place over time and over many transactions. Repetition of the same kind of experience strengthens the brand.
The brand touches everything that defines the customer’s experience. The product design and packaging, the retail store it is sold in, the service it is sold with, the after-sales interaction, all have a role to play in the creation of the brand.
For instance, to some it may sound silly that market research or supply chain practices can help define a brand, but that is exactly how the state of affairs is for Zara. Changeovers and new fashions being quickly available are what that brand is about, and it would be impossible for Zara to deliver on that promise without leading-edge supply chains, or a wide variety of trend research.
Similarly, it may sound clichéd that your salesperson defines the brand to the consumer, but even with the best products, extensive advertising, and swanky stores, for service-oriented retailers everything would fall apart if the salesperson is not up to the mark. This is, indeed, a reality faced by so many of the premium and luxury brands.
Of course, brand images can be changed or updated, but the new image also needs to be reinforced through repeated action, a process just like the first time the brand was created.
REvIvIng A BRAnD: THE nEW-OLD sEEsAW
Given that a brand is created over multiple interactions and repetitive delivery of certain attributes, it is only natural that the older the brand, the more potential advantage it would have over a new brand. Just the sheer time it would have spent in the market would give an old brand an edge.
An old brand can appear to be proven, experienced and secure, while a new brand could be seen as untested, raw and risky. An old brand may have had a positive relationship with the consumer, but may have been dormant due to strategic or operational reasons. In this case, reviving the brand is clearly a good idea. There is already an existing awareness of an older brand, which can act as a ready platform for launching either the same or a new set of products or services. Often, there may be a connection with the consumer’s past positive experience of the brand.
On the other hand, a new brand may appear to be fresh, more up-to-date and relevant, and vigorous, compared to an old one that may be seen as outdated and tired. Certainly, if nostalgia had been all that brands needed to thrive upon, then old brands would never die and it would be difficult to create new brands.
Clearly, there is no single answer to whether it is a good idea to re-launch an existing or old brand. If you are considering whether it would be a good idea to revive an old brand, or to acquire and turn an existing brand around, ask yourself this:
Is there evidence of enough customer awareness and support for the brand?
Are there positive connotations for the brand that can be built upon in the current market context?
Is there an opportunity to refresh the brand, so that it does not appear outdated, while retaining its core promise and authenticity?
Does the company have the resources and the inclination to be a ‘caretaker’ or ‘steward’ of the relationship that has been created in the past between the brand and its customers?
If the answer is ‘no’ to any of these questions, then one needs to think again. However, if the answers are all ‘yes’, then a resuscitation is just what the doctor might have ordered.
Devangshu Dutta is chief executive of Third Eyesight (website: www.thirdeyesight.in), a management consulting firm focused on consumer products and retail, whose clients include brand leaders and some of the largest companies in their respective markets. This article is written with the fashion sector in focus, but is equally applicable to other products and service sectors.
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