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November 20, 2015
Richa Maheshwari, The Economic Times
Bengaluru, 20 November 2015
Four
years ago, about 500 out of 600 operational handloom silk weavers
in Katoria village of Banka district in Bihar had shut shops amid
a demand slump and dwindling profits. "It was an exceptionally
bad year for us. Many left for Mumbai to look for jobs and youngsters
were not keen on taking forward the legacy," recalls Mohammad
Izzaz, a weaver whose family too had stopped making Banka silk
a year later.
That was then. Today, Izzaz and several other handloom artisans
in his village are back in action, weaving Banka silk sarees and
dress material for the booming ecommerce market. "One and
half years back, on an average, we would earn about Rs 30 per
day. Today it has increased to Rs 300 to Rs 400," says Izzaz,
25, who supplies to Indianroots.com and indianartizans.com.
Currently hundreds of Katoria residents are migrating back to the village and weavers say around 150 otherwise mothballed handlooms have restarted in the last one year.
Similar stories of revival in interest are emerging from traditional handloom clusters across the countrybe it Paithan in Maharashtra or Phulia in West Bengal, both known for their handwoven silk sareeswith ecommerce companies such as Amazon, Flipkart, Snapdeal, Jaypore and Craftsvilla giving them a new lease of life by helping them to reach out to customers all over the country as well as abroad.
Leading ecommerce firms have already tied up with nearly 7,000 weavers to sell their products on their platforms and the number is growing keeping with rising demand.
Amazon India, which launched a craft store before its festive sales last month, has enlisted about 90 weavers and recorded a threefold surge in demand during the festive season, its category leader Mayank Shivam said.
India accounts for 95% of the world’s handwoven fabrics and, according to the textile ministry’s estimates, handloom weaving provides employment to more than 4.3 million weavers and allied workers in the country.
But, with powerlooms and branded products sweeping the consumer markets with cheaper products and newer designs, the handloom industry has been going downhill over the years, forcing many weavers in several traditional handloom hubs to migrate to other regions and professions to earn their livelihood. According to a labour ministry report, employment in the handloom/powerloom sector declined by 11,000 as of March 2015 from a year earlier.
With the entry of ecommerce players, artisans can hope for a revival in their fortunes as they get direct access to consumers around the world and that too without having to deal with middlemen.
In June, Snapdeal partnered with Himachal Pradesh government to launch a ‘special ecommerce zone’ to facilitate sale of local handicraft and other products while Flipkart has launched ‘India Art House’ to push traditional fashion.
Mumbai-based Craftsvilla, which has around 150 artisans supplying art and craft to them, is working towards creating its own private label where base-level weavers and artisans will make products exclusively for them. "A lot of the traditional handwoven designs have become old-fashioned," said Manoj Gupta, founder of Craftsvilla. "We need to contemporise it for our young shoppers. Thus, we are hiring NIFT designers to become the voice of ethnic designs," he said.
The online industry is not only helping weavers expand nationally but they are also proving a window of opportunity to sell their products in the global market. That means the sellers don’t necessarily depend on seasonality.
Rahul Narvekar, CEO of Indianroots.com, said the portal gets most of its orders from abroad, adding that it sold a handwoven stole worth Rs 19 lakh in Malaysia a few months back.
Manish Ramakant, a weaver of Paithani silk sarees, said his business has grown by 40% last year on the back of online orders from abroad. "Demand for Paithani sarees is the highest during the wedding season; rest of the months, we remained unemployed. However, online international orders now ensures work round the clock today," he said.
With the newfound markets and vigour, Ramakant, 39, has now ventured into home decor and has started interacting with buyers and designers through Whatsapp.
Experts point out that ecommerce players help handloom weavers overcome their biggest challenge: easy and quality access to consumers.
At present handloom products are mostly sold through central and state government emporiums. "The emporiums, run by bureaucrats, are not well maintained. Hence, there is hardly any good retail outlet for artisans," said Arvind Singhal, chairman and managing director of consultancy firm Technopak.
Devangshu Dutta, CEO of retail consultancy firm Third Eyesight, said the government should get out of retail business. "Business is not a government’s job. Its job is to run the country," he said. "The supplier, distributor and the consumer make an ecosystem. Hence, this has to be individual and business-led. I think the government should get out of the way."
Also, with most ecommerce players dealing directly with traditional weavers, artisans are earning better margins that would otherwise go to middlemen.
"I was affected by middlemen. Now, for the past one-and-half years I have been working directly with designers and online companies. I have cut down nearly 60% of middlemen," said Asif Ansari who makes Maheshwari sarees. This has helped the weaver from Maheshwar in Madhya Pradesh improve his margin to 35%-40% from earlier 15%-20%.
However, the world of ecommerce is not without any tension for
handloom weavers. Fear of duplication and lack of awareness among
consumers are among the main issues weavers face in the online
retail space. This sometimes force them to cut down their margins.
What is applicable to Katoria’s Banka silk weavers is applicable to any other industry or trade facing challenges of demand. One of the problems facing many quality traditional sectors is the absence of information about such products, especially luxury or niche items as well as non-traditional art and craft. This is where online retail, which doubles as shop and catalogue, can be helpful. If online companies resurrect traditional sari production, they can certainly do the same for artwork and handicrafts that need to find their markets which are probably just waiting ‘to be told’ that they are there to be procured.
(Published in The Economic Times.)
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November 18, 2015
Manu
Balachandran & Madhura Karnik, Quartz India
New
Delhi, 18 November 2015
First
he became the face of yoga in India. Now, he is taking on major
global consumer goods companies with products ranging from herbal
tea and fruit juices to toiletries.
Baba Ramdev—born Ramkrishna Yadav—seems poised to give
some of India’s biggest consumer goods makers a run for their
money with his ayurvedic, made in India products. Patanjali Ayurved
Ltd, a company that Ramdev founded in 2006 along with his confidante,
Acharya Bal Krishna, has emerged amongst India’s fastest
growing fast moving consumer goods (FMCG).
And Ramdev is piggybacking on prime minister Narendra Modi’s Make in India campaign to promote his goods. All the products that Patanjali manufactures have a “Made in Bharat” label.
This week, Patanjali launched a noodle brand to compete with
Nestle’s Maggi, which is now back in Indian markets after
a brief ban. While India’s food regulator, FSSAI, maintains
that Patanjali’s noodles don’t have necessary approvals,
the company is all set to start sales in the coming weeks. Ramdev’s
company is also planning to take on global sportswear brands like
Nike and Adidas by introducing a yoga-wear collection.
In January, Aditya Pittie, chairman of the Pittie Group, which
is a distributor for Patanjali’s products, told the Times
of India newspaper that the company was expected to cross the
Rs2,000 crore mark in the 2015 fiscal. If these estimates are
true, the eight-year-old firm has already overtaken brands like
Emami—an old name in India’s FMCG sector.
Quartz was not able to independently verify these figures as India’s Registrar of Companies does not have information for the 2015 financial, yet. Patanjali Ayurved did not respond to an emailed questionnaire from Quartz.
Rocketing revenues
Patanjali’s phenomenal growth trajectory is making big retail
chains in the country sit up.
Although the company has a massive presence across India trough
franchisees—its products are available in over 177,000 retail
stores—it is now tying up with retail behemoths to reach
a wider audience.
In October, Ramdev entered into a partnership with the Kishore
Biyani-owned Future Group for promotion and distribution of its
products. Future Group is one of India’s largest retail groups
with presence in more than 95 cities.
“Our effort is to promote swadeshi and give a tough fight
to MNCs,” Ramdev told reporters after announcing the alliance
with Future Group. The 50-year-old yoga teacher added that Patanjali
will also launch new products like pasta, oats, muesli and juices
to cater to India’s growing middle class that is developing
a taste for western flavours.
For the current fiscal, the firm is looking to target revenue of Rs5,000 crore.
Headquartered in Haridwar, Uttarakhand, Patanjali was found in
2006 with a paid-up capital of Rs41 crore.
“At its own claimed revenues of Rs5,000 crore in this financial year, it will be among the top five FMCG companies in the country. With its recent announcement to enter more product categories—yoga apparel, baby and children’s nutritional foods etc.—it is poised to enter the top three in the next two to three years if its current spectacular growth rate continues,” Arvind Singhal, managing director of Technopak, a management consultancy, told Quartz in an email. “With that size, it will certainly be a formidable competitor to several established brands and companies such as HUL, Nestle, ITC Foods, and GSK to name a few,” he added.
A report from international brokerage, CLSA, in August said that
Patanjali’s core strength is its mass appeal.
“The plans are even more interesting as the company is now looking at ‘traditional’ ways to expand and targets to more than double the top line in coming years,” the report said. “While competition must be keeping its fingers crossed, all we can say is—‘Wish you were listed.’”
Brand Ramdev
The company usually refrains from spending big money on advertising and marketing, which is an important driver for brand creation.
Typically, an FMCG firm in India spends about 10-15% of its revenues
on advertising while Patanjali had negligible spending and “relies
mainly only on endorsement by Baba Ramdev and his disciples and
instructors,” according to CLSA.
Much of the promotions also happen during yoga sessions conducted
by Ramdev. The yoga guru also depends heavily on followers who
are popular celebrities such as wrestling champion, Sushil Kumar,
to endorse products during these yoga programs.
And according to CLSA, Patanjali has the potential to reach out
to more than 200 million who are directly or indirectly linked
to his yoga programme.
This year, as the company looks to take on some of India’s biggest FMCG companies, Patanjali has also roped in advertisingagencies, McCann and Mudra to run a brand new campaign. The company has already roped in one of the country’s biggest film star, Hema Malini, to endorse a maida flour free biscuit.
Challenges persist
Born in 1965 to a poor family of farmers, Ramdev, along with
his friend Acharya Bal Krishna, started taking yoga lessons and
travelling around on bicycles to clients’ homes to perform
religious ceremonies in the late 1990s.
Today, Ramdev’s empire in Haridwar alone spans a hospital,
an ayurveda medical school and research institution, a food park
and a cosmetics manufacturing unit. He also reportedly purchased
an island in Scotland worth £2 million to set up a wellness
centre.
However, there could be some bumps in Ramdev’s smooth ride
in the FMCG sector—especially with his new products such
as noodles.
“In the growing market for ready-to-cook packaged food,
a new entrant would struggle to create visibility and initial
demand,” Devangshu Dutta, CEO of Third Eyesight, a retail
consultancy, told Quartz in an email.
“The other aspect to keep in mind is that while a lot
of food and nutraceutical products resonate easily with the Patanjali
brand, instant noodles seems completely counter-intuitive under
this brand’s umbrella. How much consumers will support this
new launch remains to be seen,” he explained. [See "From
yogasan to ayurved to noodles" for a fuller analysis.]
Meanwhile, before launching the noodles, Ramdev who never tasted them, ate noodles for “several days,” Bal Krishna told the Business Standard newspaper. Patanjali can only hope that its customers take to their product with the same gusto.
(Published in Quartz India.)
Devangshu Dutta
November 17, 2015
The Patanjali Group has created an Indian FMCG giant in a very short span of time on the back of a three-pronged strategy:
Over time, the group has also invested in improving its manufacturing and packaging infrastructure to bring itself on par with well-established competitors.
The group has clearly focussed itself on the mass market, and Patanjali Group’s products become a “go-to” for customers who are more price-sensitive than brand-loyal. This definitely creates pressure on established brands in each of the product segments where the group is now present.
In the growing market for ready-to-cook packaged food, a new entrant would struggle to create visibility and initial demand. However, with the momentum of the Patanjali brand behind it, the group’s new product — instant noodles — has a fighting chance.
I must say, though, that the immediate opportunity would have been bigger had Maggi also not just relaunched in the market. The other aspect to keep in mind is that while a lot of food and nutraceutical products resonate easily with the Patanjali brand, instant noodles seem completely counter-intuitive under this brand’s umbrella. How much consumers will support this new launch remains to be seen.
This 2-4 minute noodles story is still cooking. Keep watching the pot!
admin
November 13, 2015
Rashmi
Pratap, The Hindu Businessline
Mumbai,
13 November 2015
Chetan Sharma, the owner of Raj Rasoi food court in Agra, cannot stop gushing about the one-stop-shop from which he sources nearly everything needed for his restaurant — from the furniture and groceries to decorative pieces and cutlery. Shopping on alternate days, he saves up to ?3 lakh a month at the over 60,000-sqft Best Price, owned by the world’s largest retailer, Walmart.
In Andhra Pradesh, every Sunday evening, Sambasivarao visits the Best Price outlet located about 45 km from Vijayawada. It is here that he buys the home appliances, furniture pieces, confectionary, cereals and a range of other items that he stocks for sale at his Sri Krishna Best Sale supermarket. The advantage: huge savings in transportation costs and a range of products unmatched by the other wholesalers and dealers near him.
After waiting more than seven years for the elusive government nod for foreign direct investment (FDI) in retail, American giant Walmart is now focusing its energies on the likes of Sharma and Sambasivarao. It has found its mooring in the cash-and-carry wholesale format — where FDI up to 100 per cent is permitted.
Walmart’s target clients include kirana or mom-and-pop store owners, small traders, hoteliers and caterers in a wholesale market that is pegged at $300 billion.
Krish Iyer, who took over as President and CEO of Walmart India after the company called off its joint venture with Bharti Enterprises in late 2013, says, “Growth here (in India) is driven by domestic private consumption and not exports. With the current business model of cash-and-carry, where we sell to business members, we believe there is a great potential with the fairly low penetration of modern retail.”
India will buy
Globally, by 2020 the mom-and-pop-store business is expected to grow by $800 billion, of which $140 billion will be in India, according to industry estimates. “It is an attractive market. We have established a good business model and are happy with our current performance. That makes us bullish about investing further in India,” says Iyer.
He had to virtually rebuild Walmart India after the company was involved in a lobbying controversy, followed by massive staff exodus in 2012-13. “I think it wasn’t challenging (to get moving again), but we needed a focused approach… cash-and-carry was the logical choice.”
Efforts to grow the company’s customer base include a strong digital strategy. “I believe that a vast majority of sales even in brick-and-mortar stores is digitally influenced. We have rolled out a B2B (business-to-business) website where members can check the products or place orders on the Web or call us at the store and make enquires while placing an order.”
More interesting is the company’s hand holding strategy for store owners, which seems to be bringing in loyal customers. For Sambasivarao’s store, for instance, Walmart sales executives helped plan the layout, product category sequencing and even trained store employees on standards for display and audit. “Our business development associates go to shops and hotels to sign up new members,” says Iyer. Members are enrolled within a 20/40-km radius of each outlet to ensure that customers do not have to spend more than 30-40 minutes in commuting.
Moreover, small businesses like Sambasivarao’s are saving a lot of money by using Walmart’s transportation services. For each carton of products, Walmart charges ?11 for transportation, including loading and unloading. “Other distributors and wholesalers charge Rs. 35 per box,” says Sambasivarao. All he has to do is go to the Best Price outlet with a list of items. “The staff pack and ready the items in 25 minutes and I am out of the store in less than an hour. Moreover, the pricing is transparent,” he says.
Cost advantage
For hotelier Sharma, the biggest draw at Walmart is the availability of fresh fruits and vegetables at the most reasonable prices in Agra. “The prices are at least 15-35 per cent lower than market rates. Moreover, they have discounts and periodic promotional offers. Overall, I save Rs. 2.5 lakh a month. Plus, I don’t have to roam around Agra in search of quality products,” he says.
So, how is the retail giant able to offer this pricing advantage? By investing in and maintaining a robust supply chain, says Walmart India’s Vice-President and Head of Corporate Affairs, Rajneesh Kumar. “What works for us is the direct-to-store model. All the suppliers we work with, such as Nestle, Coke and even SMEs, supply directly to Walmart outlets. We undertake joint business planning to make sure that the fill rate [inventory’s ability to meet demand] of the product is good.”
Apart from an annual planning exercise, a Walmart team interacts regularly with the companies to iron out issues on a real-time basis. “Our software, Retail Link, provides suppliers with the information they require around replenishment,” says Kumar.
To strengthen its supply chain, Walmart is moving to procure directly from farmers in all the states where it operates. So it stocks apples from Himachal Pradesh, onions from Nashik, sweet lime from Telangana and a range of vegetables from Punjab and Uttar Pradesh.
“We source directly from farmers to get fresh produce at the right price, so that our members can pass on the savings to the end-customer,” Kumar says. In Hapur, Lucknow, Telangana and some areas of Maharashtra, Walmart is working with irrigation companies and introducing best agricultural practices to farmers. Yet, farmers are free to sell to other regions and retailers and Walmart does not enter into any exclusive tie-ups with them.
As it works overtime to get the backend right, Walmart’s store expansion rate has been slow — 21 stores across India. Iyer explains that the company requires about four acres to build a 50,000-60,000-sqft store. “That takes time. Acquiring real estate is a time-consuming activity in terms of legal requirements and due diligence,” he says. Walmart has leased most of its properties, but Iyer says the company is prepared to buy land also, if an opportunity arises.
Battle for every store
Devangshu Dutta, chief executive at consultancy firm Third Eyesight, says Walmart has a model that works, but not necessarily everywhere.
“It requires a certain type of real estate, which is not easily available in metros and big cities.” That perhaps explains why the giant is focusing on tier 2 and tier 3 cities.
“The penetration of mom-and-pop shops and traditional stores continues to be higher in tier 2 and tier 3 cities. They are attractive opportunities and make sense,” says Dutta.
Walmart aims to add at least 50 stores to its portfolio by 2020.
But can a new player compete effectively with the likes of Metro Cash and Carry, which has been around since 2003, or a local giant like Reliance? “Yes,” believes Iyer. “We have our own membership data and we know what a member would want in Punjab or UP or Telangana. By understanding these preferences and basing the decision on this customer data, we are able to meet the specific needs of buyers,” he says.
Dutta agrees: “At the end of it, retail is a very local business. And it is dependent on how well you address the customer segment in a given geography. Just being a large or established retailer nationally or globally is no guarantee for success. It ultimately comes down to fighting each store battle independently.”
And how well-armed Walmart is will become apparent in the next few years.
(Published in The Hindu Businessline.)
admin
November 11, 2015
Rasul
Bailay & Shambhavi Anand, The Economic Times
New
Delhi, 11 November 2015
In
a major leg-up for global brands such as Apple and Rolex, India
has relaxed a mandatory local procurement condition for high-tech
companies and allowed mass brands including IKEA to comply with
such sourcing norms from the day their first store opens rather
than from when the first tranche of investment is made.
The government on Tuesday also allowed foreign single-brand entities to sell products through online channels provided they have permission to sell through brick-and-mortar stores.
The relaxation in foreign direct investment norms is set to cheer companies including Apple, which was earlier expected to source 30 per cent of its products locally. ET had reported earlier this month that Apple had sought relaxation of the sourcing norm to set up stores in India, while IKEA wanted more time to meet the requirement.
"It is seen that in certain high technology segments, it is not possible for retail entity to comply with the sourcing norms. To provide opportunity to such single brand entities, it has been decided that in case of ‘state-of-art’ and ‘cutting-edge technology,’ sourcing norms can be relaxed subject to government approval," according to an official notification on Tuesday.
"To start counting the time to comply with the 30 per cent local sourcing norm from store opening will support brands in building long-term sustainable supply chains that are good for India, good for the businesses and will enable better prices to the Indian customers," an IKEA India spokesperson said in an email. "Today’s decision will allow the Indian IKEA customers to interact with the brand IKEA in the same way as all IKEA’s global customers."
The policy changes will pave the way for single-brand retailers such as Swedish clothing company Hennes & Mauritz to tap India’s growing ecommerce business.
"FDI policy on the SBRT (single brand retail trading) provides that retail trading, in any form, by means of e-commerce, would not be permissible. It has been decided that an entity which has been granted permission to undertake SBRT will be permitted to undertake ecommerce activities," the latest policy paper said.
Proposals of companies including Tommy Hilfiger and Furla were stuck with the Department of Industrial Policy & Promotion for years because they had planned to set up their own stores and sell products through franchisees, which wasn’t allowed. Now, such companies can engage in both wholesale trading – which is needed for sales through franchisees – and retail trading as long as it follows the norms for both segments.
"Fantastic relaxation. Different companies have different business models. For south India, franchisee works and north India, may be you want to own your own stores and eastern side you wanted to do wholesaling because wholesalers were not good. Earlier, you could not do all that. Now the same entity can do all these activities and keep the business arms separate," said Baljit Singh Kalha, a partner with Titus, the law firm that assists IKEA, Furla and H&M.
Indian manufacturers with foreign investment that are controlled by Indians can now sell their products through online channels provided they make 70 per cent of the output and source the remainder from local companies.
This has been a long-standing demand of ethnic products retailer Fabindia, which has FDI and wanted to sell online. Earlier, such companies could sell online only if they manufactured 100 per cent of their products in-house.
"This is a great Diwali gift from the government to the retailers. What they have done is provided a major boost to ‘Make in India’ and also the ministry has recognised the fact that retail will operate across multiple channels. This will be a huge fillip to ‘Make in India’ as companies like ourselves manufacture 70 per cent of the products ourselves," said William Bissell, managing director of Fabindia.
"There are several changes for companies in the retail sector. For instance, the domestic sourcing requirement has to be reckoned from the opening of first store and not from the first day of operations. Technology-oriented products and high-end luxury brands may be able to skip the domestic sourcing norms completely, subject to case-to-case approvals. Another opening is for indigenous brands to receive foreign investments that can enable them to strengthen their operations," said Devangshu Dutta, chief executive officer of retail consultancy Third Eyesight.
(Published in The Economic Times.)
