Dinesh Narayanan, Forbes India
New Delhi, September 15, 2012

A day after it raised the prices of diesel and restricted supply of subsidized LPG, the United Progressive Alliance (UPA) government decided to push its political gamble further by opening up multi-brand retailing, civil aviation and the broadcast sectors. The decisions, especially the one to allow 51 per cent foreign investment in retailing, has already attracted sharp reactions from the opposition parties as well as allies such as Mamata Banerjee’s Trinamool Congress and Mulayam Singh Yadav’s Samajwadi Party.

The union cabinet had first cleared the proposal last November but left it in the cooler after opposition built up both within and outside the ruling coalition.

Going by the reaction of political parties, the Manmohan Singh government has taken a calculated risk by almost taunting its belligerent allies to pull it down. In the past few months the opposition had the government virtually on the mat as a series of corruption scandals eroded its credibility and paralysed decision-making that had sowed frustration in the Indian industry and foreign investors even as the country’s economic engine threatened to seize up. This appears to be a last-ditch effort by the Congress Party to wriggle out from the corner it has been driven to and also divert attention from the slew of corruption scandals, including allegations of irregularities in allocation of coal mines now infamous as `coalgate’.

Today’s brazen move has the potential of leading the country into a period of political uncertainty, even early elections.

Predictably, industry leaders, who have been bemoaning the government’s inaction on important policies, hailed the move. “The series of policy decisions announced by the Government today signal that India is on the move,’’ said Sunil Bharti Mittal, chairman and group CEO of Bharti Enterprises, in a statement. “They send out a clear message to the global investor community that the Government is committed to taking forward next generation economic reforms,” Mittal, whose company has a venture with global retail giant Wal Mart, said.

Friday’s decision on multi-brand retail came with an important rider: States would be free to choose whether or not to allow foreign retail chains to set shop. In a briefing commerce minister Anand Sharma said that Andhra Pradesh, Assam, Haryana, Delhi, Uttarakhand, Rajasthan, Manipur, Jammu and Kashmir — all ruled by the Congress Party or its allies — and some Union Territories had agreed to allow retail chains to start operations. Bihar, Orissa and West Bengal have opposed the policy.

Analysts believe that states could put in their own riders when ratifying the policy. “Some states may put in conditions for allowing stores,” said Devangshu Dutta, chief executive of Third Eyesight, a retail consultancy.

Retailers would have to invest at least $100 million, half of which must be in rural areas. Wal-mart, which has been lobbying for foreign investment was quick to talk about its investments. “We are willing and able to invest in back-end infrastructure that will help reduce wastage of farm produce, improve the livelihood of farmers, lower prices of products and ease supply-side inflation,” Raj Jain, president of Walmart India said in a statement. They would also be allowed to start store operations only in cities with a population of 1 million or more. According to Raghav Gupta, Principal, Booz and Co. the total addressable market would be between 25-30 percent of urban retail.

Separately, in a boost to single brand retailers the government agreed to do away with a clause that required them to source 30 percent of their goods from small and medium enterprises. Swedish retailer IKEA had objected to these provisions. Now the policy says the goods must ‘preferably’ be sourced from small businesses.

All these reforms will see results only if this government survives. In its previous term, Manmohan Singh had taken a similar gamble when he stood his ground on going with the US on a nuclear deal. At the time, the Left parties supporting the government withdrew their backing, threatening its survival. Mulayam Singh Yadav’s SP provided the crucial crutches then. Yadav bailed out the Congress Party again recently when he supported Pranab Mukherjee for President, neutralizing Mamata Banerjee’s opposition. Yadav is, however, staunchly opposed to FDI in retail. Two days ago, the SP passed a resolution to stop FDI in retail `at any cost’. No party leader has, however, clarified whether the cost could include early general elections.

The Congress Party has clearly played its most politically risky card. None of the measures it has announced will be able to arrest the economic slowdown, though they will give investors hope that the government will take politically tough decisions. No political party in the country is currently ready for an election. They will avoid one if they can. One of the compromises with allies could be to let today’s decision pass in exchange for rolling back the diesel price hike and restrictions on subsidized LPG. That will leave the BJP to fight the FDI battle. The party has already taken flak for obstructing the last session of Parliament. FDI is hardly an issue for rural voters. In any case it is allowed only in cities with a population of more than a million. The urban voter who has had a taste of glitzy malls and well-stocked supermarkets may not really appreciate the opposition.

(Based on inputs by Samar Srivastava)

(Published online in Forbes India on 15 Sep 2012.)

Writankar Mukherjee, The Economic Times

Kolkata, September 11, 2012

So what if West Bengal Chief Minister Mamata Banerjee fights tooth and nail against foreign investment in retail, Kolkata has emerged a true city of joy for big retailers and fast-food chains since she came to power.

Kolkata has become one of the highest revenue-grossing markets nationally for Future Group , Spencer’s, KFC and Pantaloons among others over the past 12-8 months, much to the surprise of several marketers.

Check this out. Spencer’s Retail, Pantaloons and Future Group’s Home Town have their top-selling outlets in Kolkata, and it’s the top-performing market for American chicken fries-and-burger chain KFC despite Delhi and Mumbai having double the number of outlets.

"Kolkata has been one of the best kept secrets in modern retailing," says Kishore Biyani, CEO, Future Group. "Consumption in Kolkata is much more stable than in other metros where it goes through ups and downs. And there is high level of festival-linked purchases throughout the year," he says.

The retail baron is so impressed that he has decided to debut all new retail formats in Kolkata.

Tarun Lal , general manager at KFC India , says Kolkata has also taken a liking to its Zinger burgers and chicken fries, and the chain plans to expand its presence in the region significantly.

Analysts attribute the Kolkata retail phenomenon to the growth in employment in sectors like BPO, IT and services sector, and the consumer’s rising aspirations.

Recent employment surveys have shown comparatively robust employment growth in Kolkata. A recent Manpower employment survey, for example, highlighted maximum employment growth in the East, while it declined in the North and South.

Devangshu Dutta, CEO of retail consultancy Third Eyesight, says the perception that consumers in Kolkata are more price conscious than others has changed completely. "Consumers have evolved with high aspiration level," he says.

"Another factor which is creating such high sales per outlet is the lower penetration level for some of the retailers in Kolkata as compared to other cities," he adds.

Retailers say adoption of modern trade in Kolkata is rising at the fastest pace across India. Spencer’s Retail Executive Director (Marketing) Sanjay Gupta quotes Nielsen data to say modern trade adoption in Kolkata has grown by 21% over last year. The share of modern trade in FMCG sales is 12.5% in Kolkata against national average of 9.2%, he adds.

Vidhi Choudhary, MINT (A Wall Street Journal Partner)
New Delhi , September 11, 2012

Ben & Jerry’s didn’t say whether it had plans for India.

“Because of the competition we face as a company, we are unable to release where we are heading next. Who doesn’t love a sweet surprise every now and again, though? We are always looking for new places to bring a little of Vermont’s finest,” said a public relations executive at Ben & Jerry’s in an emailed response to Mint’s queries.

Gaurav Marya, president of Franchise India Holdings Ltd, which works with international brands to find local franchisees for them, said the ice cream maker would be in India soon.

“Ben & Jerry’s is planning to enter the Indian market through the licensing route,” Marya said. “It has completed its due diligence. It’s likely to start its India operations in about three-six months.”

Amit Lohani, managing director at Max Foods Pvt. Ltd, said the US brand’s entry into India was “on the cards”, citing what he described as “reliable market sources”. Max Foods trades in international food and beverage brands including Doritos.
Ben & Jerry’s, headquartered in Vermont, operates in 30 countries including the UK, Australia, Germany and Singapore.

It’s not clear whether the brand will be distributed in India by Hindustan Unilever Ltd (HUL), the Indian subsidiary of Unilever.

“As a policy we do not comment on market speculation,” HUL said in an emailed response.

If it comes to India, the chain will compete with existing premium brands such as Baskin-Robbins, Häagen-Dazs and London Dairy, among others. The organized ice cream market in India is estimated at Rs.1,100 crore and is growing at more than 20% annually, according to Tecnova India Pvt. Ltd, a consultancy firm that helps multinationals build their entry strategy for the country.

“The ice cream segment caters to a large spectrum of consumers which extends from a share of your dining table to a popular dessert option at coffee shops,” said Marya. “The gourmet ice cream category is growing well and ice cream is replacing anything that needs to be cooked in the dessert space. It is a phenomenal market as the Indian consumer views it as leisure.”

A spurt of new retail formats has prompted growth in the organized ice cream category, said Gaurav Sharma, associate vice-president at Tecnova. “Now there are more opportunities for international brands to set up shop in the country through kiosks and stalls at high-footfall locations such as airports and shopping malls.”

Mohit Khattar, managing director at gourmet food retail chain Godrej Nature’s Basket, which sells Häagen Dazs and London Dairy in India, said that the two foreign brands were doing well in India.

“They are growing their distribution as consumer demand for both the brands is on the rise. Consumers have understood that these brands have a differentiated offering from traditional Indian brands,” he said.

Häagen Dazs was introduced in India in December 2009 by General Mills India Pvt. Ltd, which owns brands such as Pillsbury, Cheerios, Nature Valley and Betty Crocker, among others. It’s also sold through five restaurants in India. According to Marya, for Ben & Jerry’s to sustain itself in the competitive Indian environment, the key challenge will be its strategy to bring customers to stores rather than affordability.

“Ben & Jerry’s is an iconic brand, definitely on the target list of Indian companies looking for international partners. It is a desirable brand,” said Devangshu Dutta, chief executive at retail consultancy Third Eyesight, declining to comment on its potential India partner.

Baskin-Robbins entered the country 19 years ago and operates in India through franchisees with Graviss Foods, part of Graviss Group, a hospitality and foods business. The brand has more than 450 stores across 125 cities in India. Baskin-Robbins declined to comment.