RETAILER, December 2010 issue

Varun Jain

National and international brands are yet to make deep inroads into the country’s regional markets, where lies a huge opportunity. The regional markets in the country are dominated by the regional retailers. But national and international retailers are trying to get better of them and are now modifying their offerings to suit the regional tastes and preferences. The result has been very encouraging and more brands and FMCG companies are likely to get into this practice.

Companies like Godrej, LG, Barista and Future Group among others have already started micro-localising their offerings in order to munch away market share in ever growing regional markets. Future Group, which recently introduced their private label brand called Ektaa in the food category, is giving customers more options to choose from their cultural-specific staples and foods. Godrej Consumer Products, with a popular soap brand Godrej No.1, offers sandalwood fragrance for its consumers in the southern part of the country, and a green lemon fragrance for its North Indian markets. Barista Lavazza introduced 100 per cent vegetarian cafés in Ahmedabad, while LG is planning to launch their new range of microwaves which will have fish curry on its auto menu for the eastern markets, and upma and vada for the South Indian markets. Even Nestlé, which will be setting up its first R&D facility in India, is looking to introduce region specific food products. Many others are following suit.

In every market, micro- localisation is important. “If you look at smaller countries like Germany or UK, they have a lot of diversity as well. There are markets within a market and the retailers do make an effort to offer locally relevant products. In a country like India, with diversity in cuisine, values and cultures, it is absolutely important for retailers looking for scale to go for micro-localisation. There may be segments that are homogeneous across the country but those segment could be far smaller compared to what they can reach otherwise”, feels Devangshu Dutta, Chief Executive, Third Eyesight.

It is imperative to keep pace with the changing preferences of the customers with their changing lifestyle. “LG’s ‘India Insight Products’ have been well received by the Indian audience as they are customised and designed as per their specific requirements based on LG’s extensive research and development”, opines Rajiv Jain, Business Head, Home Appliances, LG India. He further adds that this is the step forward towards localisation strategy and the company is expecting an equally rewarding response from the consumers post the launch of customised auto-cook menus for different regions. Based on local insights, the initiative is going to change the way Indians cook various dishes in their kitchens.

Sanjay Coutinho, CEO, Barista Lavazza, the Italian café chain, which has introduced idli and kanda poha at some of their outlets and offering complete vegetarian menus at the outlets in Ahmedebad, keeps his point forward, “If you look at Ahmedabad, out of mere experimentation, we turned cafés there to full vegetarian and it worked for us and are doing extremely well. India is very diverse, and hence it becomes very important for the brands to understand and respect this diversity and the different sensibilities. That is the main reason we work close with the communities”.

“Urban and rural markets have specific needs and requirements. We take care of that”, says Antonio Helio Waszyk, Chairman and MD, Nestlé India. “We introduced rice noodles keeping in mind the rural audience”, he further adds, Nestlé’s decision to establish an R& D centre in India will be an additional competitive advantage in the future as it will help accelerate the company’s growth and contribute towards reducing nutritional deficiencies in India.

According to Dutta, there has to be a deep understanding of the market.

With more and more brands focusing on micro-localisation, it is definitely important to understand the needs and demands of the consumers as every region differs in terms of their culture, demographics, and food habits which ultimately requires products/services to be customised according to their own necessities, suggests Jain of LG.

Also, one should have enough clustering and enough scale at the local level. “One should be able to address the single consumer’s demand. The fact is that for most retailers it is impossible. So, there is a need to cluster, need to build scale,” suggests Dutta to the retailers who are going into regional territories. Regional brands by their very nature will understand the local market better because the brand is based there. They have that instinctive understanding of the surroundings. They connect with the local market which is far stronger and powerful, and national brands will have tough time to replicate that understanding. That becomes a big challenge. On the other side, a regional brand may not have the same scale that of a national brand.

For now the prospect of national brands being a threat to regional brands is still a few years away. At the moment, it is an unequal competition, but national brands are trying to become more competitive locally.

(This is an edited version of the original article.)