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Kolkata highest revenue-grossing market nationally for Future Group, Spencer’s, KFC, Pantaloons, others

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September 11, 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.

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Ben & Jerry’s may come to India

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September 11, 2012

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.

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Festive sales may fall ‘flat’ on extended discount season

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August 31, 2012

Priyanka Pani, The Hindu Businessline
Mumbai, August 31, 2012

Even as brands and apparel retailers appear to have had a prolonged bumper sale against the backdrop of a general slowdown, festive season sales have got the short end of the stick. ‘Sale’ season in the country started around end-May, but was extended by eight weeks. For instance, Shoppers Stop is are still busy luring ‘shopaholics’ to stores with flat 51 per cent discount.

“What typically used to be a month-long phenomenon has become a 3-month affair now. Shoppers are trying to extract the maximum benefit out of these sales. The main issue now is whether demand will pick up during the festive season that starts with Ganesh Chaturthi,” said Devangshu Dutta of retail consulting firm, Third Eyesight.

Slowing GDP growth, poor monsoon and sustained inflationary pressures are hurting consumer confidence, says a report by research firm Espirito Santo. Fitch Ratings too has revised the H2FY12 outlook for the Indian retail sector to negative from stable, in view of a sustained deterioration in the discretionary spending ability. The firm has said it is unlikely to improve over the short term.

“Lot of purchases have become need based. People, apprehending a further slowdown in the economy and with the forthcoming festivities, have purchased in bulk. Retailers might not witness major shopping in the next 2-3 months,” Dutta said adding that poor monsoon could also dampen the consumer sentiment.

Retailers said poor same-store sales in Q3FY12 forced many stores to extend the sale period. Though the discount schemes helped boost volumes, it impacted margins.

Textile majors too are apprehending poor festive season sales. “There is an overall slowdown in the textiles sector,” said Thomas Varghese, CEO, Aditya Birla Textiles.

Rakesh Pandey, President (Retail and Business Development), Raymond, said the upcoming wedding season could help bring some respite.

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 In a first, Bharat surpasses India in consumption

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August 30, 2012

Meghna Maiti, Financial Chronicle

Mumbai, August 30, 2012

For the first time in a quarter century, rural India outdid urban consumption in the past two years, according to a Crisil study. Rural spending rode on a big increase in incomes, mainly resulting from non-farm jobs and rural employment guarantee schemes.

A young population, rising incomes and low penetration of many consumer durables mean that rural consumption has the potential to remain an important source of demand, the study says.

But to sustain this, says the study, it is critical to substitute short-term income boosters such as government-sponsored employment schemes with durable job opportunities in rural areas.

Devangshu Dutta, chief executive of Third Eyesight, a retail consulting firm, says rural growth comes on the back of increasing incomes, percolati­on of aspirations and life­style from urban areas. The trend is clearly visible in the consumption of fast moving consumer goods (FMCG) in the hinterland.

One company in this sector, Godrej Consumer Products, has seen strong growth in rural areas… “fuelled by wage increases and enhanced exposure to products,” acc­ording to P Ganesh, the company’s executive vice-president and company secretary. The FMCG sector also benefited from development in tier II and III cities.

Besides guaranteed rural employment, ever-higher minimum support prices for farm produce have helped raised rural incomes and standards of living.

Rural demand accounts now for around 40 per cent of Hindustan Unilever’s sales. The company claims two of every three Indians as its consumers.

Jagdeep Kapoor, CMD of Samsika Marketing & Consultants, estimates that rural areas give the FMCG industry more than half its income. The rural population is far bigger than the urban populace. With the spread of television, internet, rural consumers are now more aware of brands. Two-thirds of India’s billion-plus population are estimated to live in villages.

Harish Manwani, Hindustan Unilever chairman, spoke of the importance of rural India to his company at its recent annual general meeting. “More than 40 per cent of our products are consumed in the fast growing markets of rural India. We have been pioneers in developing rural markets through affordable brands and an unparalleled distribution reach,” he said.

Similarly, 35 per cent of ITC’s FMCG revenue comes from rural India. Hemant Malik, COO for the company’s FMCG marketing and distribution, has not seen a change in the consumption patterns in urban and rural areas. But ITC is closely monitoring this to build sales strategies.

He says ITC does not expect any change in the FMCG demand and consumption pattern in rural India. “Since FMCG items are of daily use, consumption may shift towards smaller pack sizes, and customers may downgrade or substitute items.”

Because a majority of India’s population resides in the villages, the value of goods and services consumed by them has always been more than in urban India. But the difference has been narrowing as urban India has been growing faster.

However, during 2009-10 and 2011-12, rural consumption per capita grew annually at 19 per cent, 2 percentage points higher than in urban areas, according to preliminary data released for 2011-12 by the National Sample Survey Organisation.

In incremental terms, spending by rural India in these two years was Rs 3,75,000 crore, significantly higher than Rs 2,99,400 crore spent by urban people.

With rising purchasing power, a notable phenomenon increasingly discernible in rural consumption is a shift from necessities to discretionary goods. One in every two rural households now has a mobile phone. Even in India’s poorest states such as Bihar and Orissa, one in three rural households has a mobile phone.

Nearly 42 per cent of rural households owned a TV set in 2009-10, up from 26 per cent five years earlier. Similarly, 14 per cent of rural households had a two-wheeler in 2009-10, twice that in 2004-05, although penetration remains well below the urban level of 33 per cent, says the Crisil report. More than half of India’s stock of consumer durables such as TV sets, electric fans and two-wheelers is now in rural India, the report adds.

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Big Mac’s different strokes

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August 29, 2012

Raghavendra Kamath & Vinay Umarji, Business Standard

Mumbai/Ahmedabad Aug 29, 2012

Stung by a consumption slowdown and cut-throat competition from other quick-service chains, Big Mac is trying hard to give customers more reasons to come to its stores. So its latest India menu now comprises a differential pricing strategy and better in-store experience.

While Vikram Bakshi’s Connaught Plaza Restaurants, which has a joint venture with McDonald’s and has rights for the north and east, cut prices by 6-15 per cent from August 1 to boost sales, Hardcastle Restaurants, a development licensee of McDonald’s which runs West and South India operations, has refrained from doing so.

“When customers are feeling the pressure of inflation from all sides, we thought it is a good time to rationalise prices,” says Bakshi. He claims the chain has seen 10 per cent increase in sales, though it has taken a hit of 40 basis points in its margins after it cut prices. “We think 10 per cent growth is far superior than a 40 basis points hit on margins.”

Bakshi may have a point as early this year, Pizza Hut, run by Yum Restaurants India, launched the ‘Rs 29 pizza’ and KFC added two snacker burger and new beverage Krushers Frappe to its Streetwise Menu which starts at just Rs 25.

But Hardcastle’s Amit Jatia has a different take. “We do not need to reduce prices as we are seeing a strong comparable sales growth in our stores in the south and west. We believe consistency in offering ‘everyday low value’ has paid off for us,” says.

Doesn’t such differential pricing create confusion in the minds of consumers? Jatia does not think so. “Anyway, different states have different taxes which make prices different. The consumers’ perception of value is also different,” he adds.

Even retail consultants such as Devangshu Dutta, chief executive, Third Eyesight, see logic in the move. “Firstly, in India, McDonald’s has two JVs with separate P&Ls – so the opinions of the partners in their respective regions would have more weight than a simple franchisee’s would. Secondly, local relevance of product mix and pricing is a key driver of success in all retail products.”

Besides pricing, McDonald’s is also experimenting with different formats to woo customers. While Jatia’s Hardcastle is looking at bigger restaurants of 4,000 sq ft , Bakshi recently launched smaller-sized ‘remote kiosks’ which are within three to four kms of a “mother store” and located at metro stations, hypermarkets and high streets.

While Hardcastle has around 35 kiosks and 26 drive thru’s, it plans to have 25-30 kiosks and a similar number of drive thru’s in the next two-three years. It plans to open 35 to 40 restaurants this year.

McDonald’s is also opening new stores and revamping the existing ones under new designs to make them more appealing. So you have cushioned bar stools, plush LED lights and POS/EDC terminals from the earlier stainless steel furniture and dim yellow lightings. “We have learnt that design has to keep up with consumer demands,” says Jatia.

Being modern and contemporary also led McDonald’s to increasingly accept credit cards at almost all its new outlets.

Experts, however, say the improvement of McDonald’s stores should have happened much earlier. QSRs, which focus on coffee, have overtaken McDonald’s. There is no doubt that McDonald’s needs to look contemporary, soft and modern with cutting edge,” says Harish Bijoor, CEO of Harish Bijoor Consults Inc.

Even for Shripad Nadkarni, founder director, MarketGate Consulting, a brand consulting firm, McDonald’s stores had begun to look “dull” for some time now. “One of McDonald’s’ biggest successes is understanding the Indian palate. They draw on ‘glocal’ products which have been a huge success for them. However, where McDonald’s was lacking was in-store experience. Their stores needed improvement. It now seems the in-store experience is moving along the consumer preferences,” says Nadkarni.

When compared to its peers like Subway and KFC, McDonald’s also has to keep its target audience in mind while planning the in-store experience. “Subway caters to an adult audience, KFC looks to focus mostly on non-vegetarians while McDonald’s is about family and kids. Subway’s appeal is more towards a mature consumer segment while McDonald’s is more about family time,” says Nadkarni. Needless to say, McDonald’s’ new stores offer ample space for kids’ play area, thereby tapping its consumers’ family time.

The chain will first renovate those that are more than 10 years old. For the rest, it will adopt a ‘mini-market’ approach. “If we have five stores in the same area, then we’ll partially renovate all of them so that some consistency is managed in the design,” Bakshi says.