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Bangladesh Pips India in Garment Exports

admin

February 5, 2009

Business Standard
Thursday, February 05, 2009

New Delhi: For the first time, Bangladesh has garnered more market share than India in garment exports to the US, the largest importer of garments.

Recession-hit retailers in the US and Europe are increasing their purchases from Bangladesh as it is able to supply garments at a relatively less price due to low labour cost and better economies of scale, experts said.

Data collected by the Apparel Export Promotion Council (AEPC), the body for the promotion and facilitation of garment-manufacturing and their exports, show Bangladesh overtook India after August 2008. While Bangladesh’s share increased by 10 per cent, India’s share went down by 3 per cent in the US market in the same time period.

For India, the US, which imports $70 billion worth of textile products every year, is the largest market, accounting for nearly a fourth of ready-made garments exported.

Bangladesh has now taken the fifth position, which was previously occupied by India, in the list of largest garment-exporting countries to the US, pushing India to the sixth position.

The AEPC estimates that exports of ready-made garments from India are likely to fall 24 per cent short of the $11.62 billion target for the current fiscal and may total up to $8.78 billion. Interestingly, Bangladesh is expected to touch $11 billion in the July-June period of 2008-09 period, compared with $10.7 billion in the same period of 2007-08.

Though China has always been a competition for Indian exporters and it continues to remain the largest supplier to both the US and Europe, it is the countries like Bangladesh that have started taking over India.

“On an average, Bangladesh has larger factories than India and they are more productive, and have low labour cost, which is helping them in attracting buyers from the US and Europe,” said Devangshu Dutta, chief executive officer of Third Eyesight, a consultancy firm.

Incidentally, Bangladesh has duty-free access to the EU market.

India’s labour rates are 129 per cent higher than that of Bangladesh. While the labour cost in India is 62 US cents per hour, it is merely 27 cents in Bangladesh, according to AEPC.

Since customers have started avoiding China due to labour problems and the high cost of production there, the business has shifted to alternative sources like Bangladesh as they are more competitive, productive and deal in large volumes, added Dutta.

Another point of view for Bangladesh and other countries like Vietnam, Indonesia, Cambodia and Sri Lanka, which are doing well in export of apparels despite the ongoing global financial turmoil, is that they get cheap fabric from China and also support their manufacturers. “All integrated textile countries are facing this problem what India’s going through today,” said DK Nair, secretary general, Confederation of Indian Textile Industry (CITI)

India has to establish large factories and strengthen its fabric production in order to create economies of scale to deal with the current problems, added Nair. About 97 per cent of fabric production in India lies in the decentralised sector.

Exporters have been demanding flexibility from the government in terms of increasing duty drawback rates to 14.65 per cent, interest-free loans for investment in machinery and availability of export credit at international rates among other demands.

H.K. Maggu, managing director of Jyoti Apparels, said: “In the face of economic slowdown, we have not become competitive though business is there. It is going to the discounted markets like Bangladesh.” It is the only country which can produce textile items at least 20-30 percent cheaper than China.

What is worrisome is the fact that the exporters are claiming that there would be no business beyond March 2009. Jyoti Apparel’s order book today stands at Rs 20 crore, but according to Maggu, the number of fresh orders has declined drastically and after March the units would be working half their capacity if things don’t improve.

Clothing Manufacturing Association of India president Rahul Mehta said orders for the next season were not coming and it would be very difficult for India to catch up with Bangladesh unless right kind of policies were put in place.

Calling the two stimulus packages announced by the government extremely disappointing, most exporters are of the view that there was virtually nothing in those packages and they only talked of release of previously committed funds as incentives.

India has to find the gaps in the existing infrastructure and fix the problems, said Dutta.

According to a senior textile ministry official, seeing the contraction in demand in the West, the ministry has written to the finance ministry seeking restoration of the duty drawback rates to help the garment exporters.

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Against the grain

admin

February 3, 2009

By Sangita Ghosh
Progressive Grocer
February 2009

Transformation in the most popular staple food in India is slow, but definitely on

Rice, which has long held the reputation of being the food of the masses, is witnessing a silent transformation in India. Things have come a long way from the “touch and feel” approach to purchasing rice by the weight to the modern era in which the busy urban Indian consumer is beginning to place his or her trust in branded and packaged rice.

This shift, though spearheaded by the premium varieties of rice, is gradually spreading to other varieties as well, the USP being ease of purchases and quality assurance. This trend is also fueling the emergence of other processed, semi-processed and semi-cooked varieties of the grain.

The harvesting area of rice in India is the largest in the world, with the staple being cultivated in all states of the country. According to a recent research by International Rice Research Institute (IRRI), Manila, the rice production and consumption pattern in the major rice producing and consuming counties are set to change drastically. By 2015, the global rice-eating population is projected to consume over 50 million tones more than it did in 2005. Significant increases are expected in South and South-East Asia and Sub-Saharan Africa. According to IRRL, rice consumption in South Asia is expected to rise by 14.89 million tonnes by 2015. Of this, over eight million tonnes will be in Bangladesh and over a million tonnes in Pakistan. Rice consumption in India is set to soar to 92 million tonnes in 2015.

More than 65 percent of the Indian population views rice as their staple food. The packaged foods incarnation of rice has invaded the Indian consumer’s kitchens in the form of bags, packets and cartons; now, rice can also be purchased in cooked, uncooked, packed, dehydrated and frozen forms. To meet these many special requirements of packaged foods, rice undergoes varying degrees of processing, resulting in variants such as regular-milled, parboiled, precooked brown and many others.

Although the majority of the varieties are still sold under the traditional retailing system, sales through modern trade are increasing rapidly. ‘Accessibility’ is where the presence and growth of modern retail has helped the branded rice segment.

Says Puneet Mahajan, vice president, Marketing & Advertising, Kohinoor foods, “Because of higher margins on loose rice, earlier, selling a branded pack was greatly driven by the inclination of the traditional shopkeeper, but with the presence of modern retail, a consumer has greater choice. Modern retail is definitely working as a catalyst for growth of the branded packaged rice in India.”

According to Technopak Advisors, about Rs. 10,000 crores (Rs. 100 billion) worth of branded rice is sold annually, which is miniscule really, considering that the total rice market in India is reckoned to be worth around Rs. 100,000 crore (Rs. 1,000 billion). Also, only 10 percent of the rice exported from India (around Rs. 3,500 crore to Rs. 4,000 crore) is branded. But, branded rice sales have taken off in recent years and have been growing at around 15 percent in the domestic market compared to five percent for unbranded rice.

The rice retail mechanism comprises branded, packed and loose and ‘open’ selling of the product. Until recently, branding was a feature only in the premium segment, with primarily the Basmati rice variant being sold packed. Today, there is growing evidence of branding in regular consumable varieties of rice along with the premium variants. As in all other food segments, India’s growing middle class has buoyed domestic demand. Additionally, rapid evolvement of modern food retail formats has also propelled the packaged food market, facilitating the availability, visibility and accessibility of branded products.

“It is the urban affluent and the upper middle class who are gradually warming to the concept of buying branded rice as of now,” opines San¬jay Sethi, VP, Food and Agriculture at Technopak Advisors.

Devangshu Dutta, chief executive of Third Eyesight believes that from the consumer’s point of view, the two big drivers for branded packaged rice are convenience and quality, though the shift towards branding is still happening, “since Indian consumers still prefer to see and hold loose grains before they decide to buy.”

“Rice brands were always around. But the market has witnessed a rapid increase of the branded rice sale in India recently because of modern retailing and rising brand consciousness of the Indian consumers. In an)’ product category, it is a brand that can penetrate the market more than anything else. Rice is no exception,” says Dhiresh Kukreti, AGM, marketing, Daawat, one of the major players in the branded Basmati rice market.

According to Sudha Pawa, promoter of Jagat Agro, the scope for branded rice is huge in India because a major percentage of the product is still sold in loose form. “Rising awareness and the changing house-hold dynamics of consumers in recent times have led them to be apprised of the benefits of packaged rice. And modern trade helps in reducing the retail price, which should give a boost to the packaged rice market,” he comments.

As viewed by Rajnish Ohri, director, Tilda Riceland Pvt. Ltd., the advent of modern trade and the hospitality business are opening new avenues for branded rice in India. “There has been a rapid shift from non-branded loose rice to branded packaged rice; the major catalyst in this transition has been modern trade. However, this could also be attributed to inorganic growth triggered off by retail expansion from 2004 to 2007.”

Therefore, the main consuming sectors of branded rice could be the middle and upper-middle income consumers, though Basmati is still a niche sub-category in India. “It is not just the allure of higher quality or hygiene; the small, convenient and attractive pack sizes also encourage consumers to make the shift,” says Arvinder Pal Singh, MD, Lal Qilla rice.

According to Spencer’s Retail, in India 98 percent of the total rice trade is in the non-Basmati segment. There are huge governmental controls in terms of paddy and rice prices from time to time and until now there has been no effective control by major brands over the larger market. “The trade is mainly dominated by millers who are trying to build popular regional brands, leading to a trend that sees branded packaged rice operating in some niche segments, as of now,” says Samar Singh Sheikhawat, vice president – marketing, Spencer’s Retail Ltd

Organised milling and processed rice

In India, rice is primarily consumed in the form of polished, par boiled, parched and flaked rice while the demand for branded rice – particularly Basmati – is increasing both in domestic, as well as in export markets. Therefore, the market for processed rice has expanded, which has also led to the growth of organized milling. According to a recent study by Rabobank, in 2003, rice mills in organized sector had a growth rate of three percent in terms of volume and value of milled rice. As per the research this growth rate would be doubled to six percent in the period of 2005 – 2010 – 2015, both in terms of volume and value.

Packed to perfection

There are few staples that are found in such a wide range of packaged formats and so extensively in so many combinations as rice. In packaged forms of various brands, rice is processed in varying degrees and forms including the regular-milled, parboiled, precooked, quick or instant rice in various forms of broken rice, brown rice, glutinous-rice, instant rice, frozen rice, organic rice, paddy rice or rough rice, parboiled rice, red rice, white rice or milled rice. Although the most premium and ubiquitous packaged rice is the Indian Basmati, growing awareness and innovation are now driving a ‘certain set of consumers to try processed rice variants such as brown rice and organic rice.

According to Ohri from Tilda Riceland, the share of brown and organic rice in total category sales may be insignificant as of now but the industry is expecting to see a new line of informed consumers coming in. Singh at Lal Qilla is also hopeful about future prospects, saying, “The market for processed rice is growing, especially in the western countries and metropolitan cities of India. Therefore, we have already introduced brown Basmati and now working on the concept of organic Basmati.”

Viney Singh at Max Hypermarkets believes that organic and brown rice sales have already been able to carve a niche for themselves in the overall category. Technopak’s .Sethi confirms that brown rice is the cur¬rent talking point. “Organic rice is here to stay, as their health benefits are being endorsed more seriously. However, it is pesticide-free rice that that has the potential of being scaled up much more as a concept. Organic rice, though definitely healthier, still belongs to a niche market. Besides, pesticide-free rice appeals to a mass market, and not a niche market.”

Brown Rice: The whole kernel remains intact and is still surrounded by all layers of bran. After the husk is removed the remaining product is called brown rice. This is what lends brown rice its quality of being more nutritious than the conventional white rice.

Red Rice: Is made by parboiling the paddy before husking, leaving a part of the bran on the grain giving it a red colour. It is consumed in select parts of India, especially in Kerala and Goa.

Organic Rice: For rice to be certified ‘organic’, the field used must have gone for three years without use of pesticides, fertilizers, or any chemicals and the crop must be grown, harvested, stored and milled under organic conditions.

Power of the brand

The wide range of packaged rice brands is dominated by the Basmati rice but includes many other processed rice variants as well. Here’s what India’s major rice manufacturers and marketers are offering at retail:

Kohinoor Foods Ltd.
Satnam Overseas’ Kohinoor Foods Ltd. offers a wide range of packet brands of Basmati, non-Basmati, instant and ready-to-eat rice products. The brands are found in almost all the major retail and wholesale chains including Metro Cash n Carry, Reliance Fresh, Food Bazaar, Spencer’s, Vishal, Subhiksha, HyperCity, More and Nilgiri’s.

The most coveted Basmati rice variants are Kohinoor Supreme, Kohinoor Brown & Kohinoor Organic. Kohinoor Supreme is the pure traditional Basmati rice present in the organised trade for two years. Kohinoor Brown is the healthier choice for Basmati rice. It is an un-milled rice, a kind of a whole grain and carries a mild nutty flavour. Kohinoor Organic is a natural Basmati rice grown under an organic farming pattern. It comes with IMO and Indian Organic certifications.

The company’s other famous brands are Trophy Gold, Trophy Royale, Charminar, 365, Nawab and Falcon. Trophy Gold is pure quality superior Basmati rice, while Trophy Royale is an extra-long Basmati grain variant. Charminar and Kohinoor 365 are two other sub-brands under the Basmati category, while Falcon is non-Basmati pulav rice with a long grain, and Nawab is also a non-Basmati long grain aromatic rice.

L T Overseas Ltd (Daawat)
LT Overseas Ltd. is one of the country’s leading processors and exporters of packaged rice foods under the flagship brand “Daawat”. The brand is among the top players in the domestic branded Basmati Rice market in the Super Premium, Premium and Economy categories. As per market estimates, Daawat occupies a market share of about 25-30 percent. Under the Daawat brand, the company offers Daawat Select, an authentic Basmati rice and according to the company, its most prestigious product. It is retailed in 1 kg, 2 kg, 5 kg, 10 kg and 20 kg packs.

Daawat premium Basmati rice is a traditional pearly white and deliciously aromatic special quality Basmati rice. Available in 5 kg, 10 and 20 kg jute bags. Tyvek paper packs and poly pouches, it is also offered in 500 gm, 1kg and 5 kg poly pouches, 2kg and 5 kg pet jars and a 5 kg festival pack.

Daawat popular Basmati rice is a high-quality, yet economical variety of Basmati rice. The packs are available in 5kg, 10 kg and 20 kg jute bags , 1 kg and 5 kg poly pouches and 5 kg pet jars.

Daawat Gold Basmati Rice is a royal long grain Basmati rice available in 1 kg, 5 kg and 10 kg packs, while Daawat Super, another fine Basmati rice, is offered in ½ kg, 1 kg, 5 kg, 10 kg, 20 kg and 25 kg packs.

Daawat Rozana is an everyday super-economical Basmati rice available in 1 k, 5 kg, 10kg and 25 kg packs.

Daawat Devaaya Basmati Rice is polished, graded with a distinctive pearly texture and has been one of the most popular brands with the masses for its affordability. It is available in 1kg, 5 kg and 20 kg packs, Heritage Basmati rice is yet another quality Basmati rice with slender white grains available in 5kg, 10kg and 20 kg jute bags and kg and 5 kg poly pouches.

Daawat Chef’s secretz Basmati Rice, one of the most powerful brands among the institutional customers, is available in almost all modern and traditional retail stores. It is available in 1/2kg and 1 kg packs.

Elte long grain rice is a non-Basmati polished rice variety, but a long grain rice like Heritage. Available in 5 kg, 10 kg and 20 kg jute bags and 1 kg and 5 kg poly pouches.

KRBL Ltd. (India Gate)
KRBL Ltd.’s rice variants are retailed under the ‘India Gate’ brand. Besides leading the domestic market in India, KRBL is also one of the largest Basmati rice exporters and suppliers to the Middle-east, Europe, USA, Canada and Africa.

Besides India Gate, the company’s flagship brand, KRBL also offers other rice brands such as Doon, Nurjahan, Aarthi, Royal, Zafrani, Sonale, Sostha, Train, Rice King, Joy, Football, Taj Mahal, Indian Farm, Sun Flower, Lion, Unity, People’s Princess, Sarina, Queen of Hearts and Bemisal. The company is now planning to promote the brand “Made in India” in domestic as well as overseas markets. The brands are found in 1 kg, 5 kg and 20 kg consumer packs on the retail shelves.

Lal Qilla
Lal Qilla Basmati rice, a renowned and traditional packet rice brand in India, claims about 28 percent share in the total sales of branded, packaged rice in India.

Lal Qilla Basmati rice is the flagship brand and is a pure, traditional Basmati retailed in 1 kg poly packs at Rs 130, 2 kg at Rs 255, 5 kg at Rs 640 and 20 kg poly packs at Rs 2,600.

Other brands are Golden Qilla, a premium quality traditional Basmati, and Qilla Excel – a Pusa 1121 Basmati. This product is available in 1 kg poly pack at Rs 125 and 5 kg at Rs 650.

Qilla and President are the Dehraduni Pusa Basmati rice variants. The products are sold at Rs 85, Rs 170, Rs 425 and Rs 1,600 packed in 1 kg, 2 kg and 5 kg poly packs, and 20 kg jute bags, respectively.

Shahjahan is a super quality Basmati available at Rs 95, Rs 190, Rs 465 and Rs 1,800 in 1 kg, 2 kg and 5 kg poly packs, and 20 kg fabric bags, respectively.

Golden Chhap Aged Basamati is the second-range aged traditional Basmati retailed in 1 kg and 5 kg poly packs at Rs 90 and Rs 470 respectively and in 20 kg jute bags for Rs 1,700, while Golden Chhap Daily Meal Basmati Rice is the third-range aged traditional Basmati rice. The products are available in 1 kg and 5 kg poly packs priced at Rs 80 and Rs 400 respectively, and in 20 kg jute bags at Rs 1,500.

Lal Qilla also offers No 517 Long grain Rice, a long grain non-Basmati Parmal rice variant priced at Rs 700, for 25-kg in a jute bag, and 507 Biryani Rice – a rice variant also known as Sharbati. It is available in 1 kg poly packs and 25 kg jute bags priced at Rs 55 and Rs 1,150 respectively.

Apart form these, the Lal Qilla portfolio also includes Dobar, Tibar and Mungra rice qualities under the brand ‘Golden’.

Shri Lalmahal
Shri Lalmahal provides a wide range of fine Basmati and non-Basmati rice. The main brands are Shri LalMahal (the flagship label), Pargol, Heena, Shanker Bhog .and Mughlai. Shri LalMahal is premium quality Basmati rice sold in consumer packs of 1 kg, 2 kgs, 5 kgs, 10 kgs, 20 kgs and 30 kgs.

The company also has varieties of Organic Basmati, Brown Basrnati, Dehradooni Basmati, Supreme Quality Basmati and Parboiled Basmati.

The company’s non-Basmati rice includes varieties such as Indian Long Grain, Medium Grain, Short Grain in raw, White and Parboiled types, broken Long Grain Parboiled, broken Long Grain Silky, Medium Grain and Round or Short Grain rice.

Shrilalmahal Group has won the APEDA (Agriculture and Processed Food Export Development Authority) award for the last nine years consecutively.

Tilda Riceland
Tilda Rice comes from the Tilda Riceland Limited. Tilda is currently retailed in all metros and major towns at chain stores including Big Bazaar, Spencer’s, HyperCity, Sabka Bazaar, Reliance Fresh and More. The types are found in Basmati, Long Grain and Regional rice portfolio. There are eight sub-brands that Tilda currently offers, including Tilda Pure Basmati, a traditional Basmati priced at Rs 165 per kg; Tilda Resham, an¬other pure variants of Basmati priced at Rs 150 per kg; Tilda Wandaful Pusa Basmati, whose rice grains are Pusa variety of the milled Basmati rice and are perfect for Biryanis and Pulaos, available at Rs 140 per kg; Tilda Chamak Chhota Basmati, a Basmati that lends an ideal texture to creamy milk puddings, desserts and sweet dishes and is sold at Rs 55 per kg; and Tilda Brown Basmati, the popular, brown Basmati priced at Rs 150 per kg.

In the Long Grain category, the company offers Tilda Khush – long grain rice with very elongated and slender grains, an extremely pure non-Basmati variety and priced at Rs 90 per kg; and Tilda Parmal, also a long grain, flavoured non-Basmati milled Parimal variety available at Rs 55 per kg.

Tilda also offers a unique, regional variant called Tilda Sona Masoori, which is a non- Basmati Sona Masoori variety popular in South India and a staple diet for the region. This is the perfect rice for making tamarind & tomato rice for the south India pockets and is economically priced at Rs. 32 per kg.

Jagat Agro (Jagat)
The ‘Jagat’ brand was launched in 1992 by Jagat Agro Commodities Pvt. Ltd. Besides being one of the major Basmati rice manufacturers in India, Jagat is now planning to enter the exports market.
The manufacturer retails premium Basmati under the flagship Grand ‘Jagat’ and offers a wide range of raw Basmati and parboiled rice. In non-Basmati, Jagat Pearl Rice is retailed in the packaged form. The Jagat brand can be found on the shelves at Reliance Fresh,”Big Bazaar. More, Rice World, and Rice Haat (the exclusive company showrooms).
Under Basmati, the company has Jagat Royal, a traditional pure Basmati which is found in 1 kg pack priced at Rs 120 and a 5 kg pack priced at Rs 600. Jagat Malai Basmati Rice is a blend of traditional Basmati 370 and 386 and is sourced entirely from Punjab priced at Rs 120 for 1 kg and Rs 600 for 5-kg packs.
Jagat Khusbbu Basmati Rice is a blend of Taraori Basmati and Basmati 1 and hails from Haryana. The product is sold in 1 kg packer priced at Rs 105 and 5 kg packet at Rs 525.
Jagat Manpasand Basmati Rice is a blend of Bas mati 1, Taraori Basmati and Desi Basmati in an affordable price range and priced at Rs 90 for 1 kg and Rs 450 for 5 kg of packs.
Jagat Sadabahar is a Dehradun variant and a blend of Basmati 1 and Desi Basmati; it is priced at Rs 85 for 1 kg and Rs 425 for 5 kg of packs.
Jagat Everyday Basmati Rice is the economy variant. It consists of 40 percent full grain and 60 percent broken Basmati rice. Super Everyday is sold at Rs.80 for 1 kg and Rs 400 for 5 kg packets and Everyday Basmati at Rs 60 for 1 kg and Rs 300 for 5-kg packs.
Jagat Special Sella Basmati rice is a blend of Taraori and Basmati 1 rice parboiled at the paddy stage with a processing of steaming and drying, while Jagat Pearl is a non-Basmati Parimal Rice variant blended with less than two per cent broken rice and priced between at Rs 40 for 1 kg and Rs 200 for 5-kg packs.

REI Agro
REI Agro, one of the leading players in the Basmati rice category, offers a wide range of brands such as Kasturi, Real Magic, Mr. Miller, Hungama, Hansraj and AI-Tahaan in the segment. The brands are segre-gated into Premium, Midrange and Economy ranges.

Premium range labels include Kasauti and Real Magic; Midrange brands are Mr. Miller and Ikon, while the Economy range includes Hansraj and RainDrop.

Safal Rice
The Safal brand from Mother Dairy offers a range of Basmati pack¬aged rice that is milled, processed, sorted cleaned and packed.

Safal Gold Basmati Rice is the finest traditional long grain Indian Basmati rice. Safal Silver Basmati Rice is Indian long grain Basmati Rice, while Safal Premium Parmal Rice is a long grain Indian Parimal rice. (Safal is regarded as one of the first retailers to sell parmal rice in packaged format.)

Veetee Fine Foods
Veetee Fine Foods started operations in 1992. It offers Veetee Gold Organic Basmati, which is grown under an organic farming process and is certified by control union certifications. It is available in 1 kg mono cartons and 20-25 kg paper bags.

Veetee Gold Brown Basmati Rice is unpolished Basmati rice, containing essential vitamins, minerals, protein and fibre and is available in 1 kg mono cartons and easy-to-use 5 kg jars.

Veetee Supreme Basmati Rice, the flagship brand of the Veetee range, is an elegant supreme quality Basmati, available in 1 kg poly packs and in 5 kg easy-to-use jars and paper bags.

Picric Select Basmati Rice is avail¬able in 1 and 5 kg poly packs, as well as 30 kg jute bags, as is Picric Everyday Rice, the budget brand in non-Basmati varieties, which is available in 1 kg and 5 kg multi layer packaging and in 30 kg jute bags.

Priya Foods
Priya Foods is a part of Ramoji Group offering some popular varieties of rice in south India.

Priya offers Sona Masoori rice, the short grain rice that is popular and the staple food in South India, in 5 kg and 20 kg packs; and Idli Rice, a superior quality rice primarily used to prepare soft and fluffy idlis, dosas and paniyarams, the popular dishes in South India. It is also used to make traditional Kerala food items such as Puttu, Appam, Idiyappam and Pathiri.

Also among the smaller, regional brands is Aeroplane, a label from Amir Chand Jagdish Kumar (Exports) Ltd. It offers several variants under numerous sub-brands: Aeroplane Regular Basmati, Aeroplane Super Basmati, Special Dubar Basmati, Aeroplane Priority Basmati, Aeroplane Wah!, Aeroplane La Taste, Aeroplane 1121 Basmati, World Cup, Palm Tree and Aeroplane Nazia Raw Rice.

India’s rice bowl
Brand	Pack sizes	MRP (in Rs)
Super Kohinoor Organic rice	1 kg box	145
Super Kohinoor Brown rice	1 kg jute bag	140
Super Silky Kohinoor	1 kg pack	140
Super Kohinoor	1, 5 kg	138, 680
Trophy Royale	1, 5 kg	111, 545
Trophy Gold	1, 5 kg	95, 465
Charminar	1, 5 kg	93, 455
Aeroplane Raw La-Taste	1 kg X 20, 5kg X 4 = 20 kg	117, 585
Aeroplane Raw Super Basmati	1 kg X 20, 5kg X 4 = 20 kg	111, 555
World Cup Raw Basmati	1 kg X 20, 5kg X 4 = 20 kg	103, 515
Palm Tree Raw Basmati	1 kg X 20, 5kg X 4 = 20 kg	90. 450
Lal Qilla	1, 2, 5 kg	140, 275, 690
Qilla Excel	1, 5 kg	125, 620
Golden Chhap Aged Basmati	1, 5 kg	105, 520
India Gate Classic Basmati	1, 5 kg	142, 705
India Gate Doon Premium	1, 5 kg	139, 690
Indian Gate Super Basmati	1, 5 kg	124, 615
Noorjahan Basmati	1, 5 kg	94, 465
Bemisal Basmati	1, 5 kg	99, 495
India Gate Basmati Tibar	1, 5 kg	102, 505
India gate Basmati Dubar	1, 5 kg	81, 400
India Gate Mongra	10 kg	416
Tilda Resham	1, 5 kg	140, 700
Tilda Wandaful	1, 5 kg	130, 650
Tilda Khush	1, 5 kg	80, 400
Daawat Brown Rice	20 X 500 gm	48
Daawat Brown Rice	10 X 1 kg	93
Daawat Select Basmati	1 kg X 20, 5kg X 4 = 20 kg	152, 752
Daawat Gold Biryani	1 kg X 20, 5kg X 4 = 20 kg	136, 672
Daawat Super Basmati	40 X 1/2 kg , 20 X 1 kg, 4 X 5 kg	67, 133, 656
Daawat Rozana Basmati	1 kg X 20, 5kg X 4 = 20 kg	78, 384
Daawat Rozana 90 Super Basmati	1 kg X 20, 5kg X 4 = 20 kg	62, 304
Daawat Devaaya Basmati	1 kg X 20, 5kg X 4 = 20 kg	101, 496
Heritage Basmati	1 kg X 20, 5kg X 4 = 20 kg	109, 536
Neesa Regular	1, 5 kg	99, 495
Indian Star	1, 5 kg	155, 775

Ready-to-eat rice

Ready-to-eat rice meals are currently available as self-contained, individual lightweight packs of various rice preparations. There are several bands in India with ready-to-eat rice meals.
In the ready-to-eat segment Kohinoor offers a range of rice dishes in traditional tastes, including Steamed Basmati Rice, Madras Lemon Rice Biryani, Chinese Fried Rice, Tomato & Chili Pulao, Brown Basmati Rice, Mushroom Cheese Pulao, Paneer Tikka Biryani, Kashmiri Rajma with Steamed Basmati Rice, Punjabi Kadhi Pakora with Steamed Basmati Rice, Pindi Chana Masala with Zeera Rice, Yellow Dal with Peas Pulao, Mutter Paneer with Steamed Basmati Rice, Dal Palak with Zeera Rice, Paneer Makhani with Steamed Basmati Rice, Mughlai Kofta Curry with Peas Pulao and Madurai Lemon Rice with Sambhar.

The ITC brand ‘Kitchens of India’ also has a range of ready-to-eat rice preparations in a wide range of vegetarian and non-vegetarian forms. These include Noormahal Biryani, Bohri Biryani, Yakhni Pulao, and Hyderabadi Mutton Biryani.
Kitchens of India also offer Rajma Masala with Basmati Rice and Yellow Dal Tadka with Basmati Rice meal kits.
MTR Foods Limited is one of the top five processed food manufacturers in India and offers a range of ready-to-eat rice-based combo meals. The varieties are Bisibele Bhath, Rajma Chawal, Diet Delite Rasam Rice, Jeera Rice, Sambar Rice, Lemon Rice, Tamarind Rice, Masala Rice and Tomato Rice.

Ready-to-eat foods from Veetee Foods are popular especially in south India, but also available across India. The products include Brown Bas¬mati Rice, a whole grain ready-to-eat brown Basmati in a 250 gm packet; Garlic Herb Brown Basmati Rice, a whole grain Basmati cooked with natural herbs and garlic and marketed in 250 gm pack; and Brown Basmati Biryani, a cooked combination of whole grain brown Basmati and diced vegetables offered in a 250 gm pack.
Tilda Riceland is also to shortly enter the ready-to-eat segment.

Private labels

Given its voluminous consumption, rice is a category whose numbers make sense for food retailers to participate in. Therefore, in recent times, almost all leading grocery chains have rolled out private labels in rice. Some of these are Max Economy, Max premium, More private label, Shoprite private label, Spencer’s Smart Choice Regular, Spencer’s Smart Choice Premium Nilgiri’s, Food Bazaar, Metro, Heritage, V Fresh from Vishal Mega Mart, Reliance Select etc.
Spencer’s, among the more aggressive private label proponents, offers Spencer’s Trophy, Nature’s Bounty and Smart Choice. “We have private labels in both non-Basmati and Bas¬mati rice segments, under Nature’s Bounty and Smart Choice. While almost 100 percent of non-Basmati rice in our, stores is in private labels, it is only 20 percent of Basmati rice that is sold through private labels in our stores,” says Sheikhawat.
Private labels at the Aditya Birla promoted More chain include More and More Select.
Spar’s private labels in rice are ‘Spar Select’, ‘Spar Value’ and ‘Best Price’, which offer Basmati rice, boiled rice as well as raw rice varieties. The share of stock is 80:20 for private labels to the brands in Spar.
HyperCity sells packaged rice under the in-store label “Hypercity” in Basmati, non-Basmati and Brown rice categories.

Strategies to stimulate

According to Sheikhawat at Spencer’s, all top branded Basmati manufacturers are putting up strong distribution networks and focusing intensely on the domestic market. “Hence, stock availability even in small quantities is not an issue now. However, we do face challenges in terms of procurement from across the country when it comes to private label Basmati as the source is only North India.”

For the brands, price is one of the important indexes for product placement, segmentation and getting initial market presence. Product superiority, brand authority and merchandising dominance are some of the critical pointers for Indian market, say analysts. According to experts, branded manufacturers have so far not communicated their products’ USP’s over unbranded products (both in the regular as well as the “value-added” categories) well, resulting in slow growth of the brand¬ed market as a whole.

Says Dutta from Third Eyesight, “Branding needs sustained and significant marketing support, as well as a clear distinctive positioning, which is more robust in the branded wheat flour market than in rice. From the very beginning rice manufacturers have focused more on export and international consumers, than on the domestic market.”

According to him, packaged flour takes two intermediate steps away from the consumer’s chores by not just providing an assurance of quality of the grain but also the step of grinding it into flour, so the benefit perceived by the consumer is significantly higher than in the case of rice. For rice, premium products such as brown rice and organic rice are still driven by occasional purchases, which need to be augmented by promotions on recipes, benefits and positioning as wholesome meals. “There is still lackluster demand for brown and organic rice. Though Indians are becoming health conscious, the benefits of these varieties are yet to be communicated,” agrees Pawa at Jagat Agro.

Technopak’s Sethi from Technopak opines, “Brown rice is the latest rage in India, and manufacturers should exploit the ‘word of mouth’ publicity. Other rice-based foods and formats – rice cakes, rice snacks, puffed and flattened rice, instant rice and food service outlets focused on rice – can also boost the trend.”

Some retailers point out that the benefits of brown rice and organic rice also need to be promoted by doctors and health clinics. Some companies are also reportedly planning to come up with Health Management rice, which is basically low GI (Glycemic Index) rice meant for diabetics and weight watchers. “The next innovation that can revolutionise the segment is the introduction of genetically modified Golden rice, which supplements beta-carotene, a precursor of pro-vitamin A in the edible parts of rice,” says Sheikhawat.

“Retailers can share the responsibility of promoting a new brand or variety by’ making the customers aware of the benefits and through sampling. Regional or local varieties of rice also need promotion; this could boost overall consumption of branded rice,” says HyperCity’s Ashutosh Chakradeo. “However, proper category management is required to introduce and promote different varieties and brands in rice so that the consumer is focused and not overwhelmed or confused by the plethora of brands,” says Ohri.

Besides product placement, brand positioning and product innovation, one crucial thing that the brands point to is innovation in pack sizes. According to Singh from Lal Qilla rice, “Small and handy packets of the rice for daily consumption en¬courage consumers to go the branded route.”

Clearly, there is also a vast opportunity for private label development in this category. Most private labels are currently positioned at the entry level of any category, thereby providing the retailer more flexibility in pricing, better control over quality and higher margins. “The

HyperCity in-store brand is positioned at the mid level and provides consistent quality and value pricing. As a brand it is the highest seller in the staples category and contributes to more than 40 percent of the category sales,” says Chakradeo.

While currently private labels are not a great threat to the established brands, things may change over the next couple of years, as Ohri from Tilda Riceland states. According to him, “Ultimately it is the quality, experience and the brand promise, which will playa crucial role. Whosoever is able to deliver the elements will be able to establish itself as a long term player.”

Lal Qilla’s Singh however, believes that brand positioning for private labels will be difficult and a time consuming process.

“Private labeling is like a commodity business, in which no doubt the volumes are big but the room for brand positioning is nil,” he says.

Jagat Agro’s Pawa says that while as of now private labels are only sold in the retailer’s stores and brands benefit from a wider distribution net¬work, in an evolving scenario brand positioning has to be strengthened to be a sustainable player.

Commenting on the challenges, Singh from Max Hypermarkets comments that a fair amount of in-vestment and time is needed to build a brand with regard to spending on advertising, promotional activities and space allocation. “Brand placement is quite crucial, as a retailer has to be very clear where he has to position and pitch against the manufacturer’s brand. The brand placement, pricing and quality carry significant weight age,” he says.

On positioning, Sheikhawat says, “We are thinking of various routes to position rice, based on regional requirements and use. The challenge really has been to get the best quality at the optimum price because even brand loyalty has been shifting from high priced brands due to affordability factor.”

Regardless of which brands or labels make it to the top draw, there is little doubt that branding will propel branded rice consumption in India. “Family packs – created around eating habits of different regions – will have to be promoted aggressively. Focus on segmental offering of products like for regular use, specific or occasional use should be taken care of. There is a huge promise from health-conscious consumers which can further drive consumption towards packaged rice,” Sheikhawat suggests.

“We expect new brands to emerge out of creation of new efficiencies, which will go on to dominate or capture a big share of the market in the next five years,” predicts Sethi from Technopak. Kohinoor Food’s Mahajan confirms that the shift may be slow, but is clearly happening. “As is the case for categories like spices, salt, sugar, and even household cleaners, we see a shift from local to branded; we foresee a similar pattern for the branded packaged rice as well.”

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India’s Retail Boom in the Export Spotlight

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January 14, 2009

 

Wednesday 14 January 2009 11:42

The exciting developments in India’s dynamic, consumer-led retail sector and the export opportunities being created for British companies are the subjects of a conference to be staged by UK Trade & Investment’s London International Trade Team on 27 January.

Far from discouraging internationalisation, the economic downturn provides an incentive for UK firms to seek out and evaluate potential for export development, positioning themselves to take full advantage when growth returns.
The half-day conference will provide retailers and representatives of associated service industries – including logistics, infrastructure, and supply chain management – with an overview of the changing Indian market, focusing on its rapidly expanding consumer class. With India’s economy growing at a rate second only to China (GDP rose 9.1% in 2007/08), huge demand for goods, services and investment is being created.

The event marks the launch of a report, "The Retail Opportunity in India 2009", commissioned by UKTI London from retail consultancy Third Eyesight. The report examines key factors such as India’s growing middle class, the changing face of the retail sector, supply chain considerations, Indian tax law and FDI regulations, cultural nuances to be taken into account when doing business, and more.

Unlike many other markets, India’s population profile will remain young for a long time. The total under-25 population – about 560 million in 2005 – is expected to be around 600 million in 2025, a highly significant population of earning and spending potential customers. So, any company looking at addressing the Indian market must view it as a long-term opportunity, rather than a short-term fix.

Devangshu Dutta, CEO of Third Eyesight, and one of the speakers at the seminar, says: "The growth of the consumer market in India is not a blip, but a sustained (and sustainable) process, because the consumption base also comprises a large number of people whose incomes and needs are growing.

Other expert contributors will include:

• Sameer Prasad, CEO of Planet Retail (India franchise partner for top brands Debenhams, Next, Monsoon, Accessorize, and Body Shop;
• Laxmi Chaudhry of 1 Stop HR, a specialist adviser on cross-cultural management and business effectiveness;
• Bradley Jones, Head of South Asia Unit, UKTI;
• Professor Kul Pawar, Nottingham University Business School, University of Nottingham; and
• Sabe Tibbitts, International Trade Adviser/India Specialist, UKTI London.

Laxmi Chaudry will speak about the impact of culture on business and how awareness of culturally sensitive issues can enhance your ability to do business effectively in the Indian market. Other contributions will include an economic and political overview of India; the recipe for effective partnerships between India companies and UK retailers; and a presentation on supply chain management.

Overall, the event is ideal for directors of major UK retailers currently exporting to India or planning to export there; and retail companies and logistics enterprises wanting to learn more about opportunities in the rapidly expanding Indian market.

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Balm for the soul

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December 30, 2008

By Aanand Pandey & Pradipta Mukherjee
From the Business Standard Strategist
New Delhi December 30, 2008

Emami’s old-school promoters were nimble enough to acquire Zandu. They need many more manoeuvres to become a major FMCG player.

Radhey Shyam Goenka, 61, the joint chairman of the Emami group, loves to take an occasional dig at the group chairman and his friend of over 40 years, Radhey Shyam Agarwal. Like most old-school entrepreneurs, Agarwal has a habit of scribbling down numbers on a piece of paper during meetings. When Goenka and Agarwal sit with the next-generation directors from the two families, at times Goenka snatches the scribbled note from Agarwal’s hand, gives it to one of the directors and asks him to check the final figure. Surprisingly, every time Goenka has done this, Agarwal’s final figure has turned out to be incorrect. “Our children laugh at this,” says Agarwal.

Goenka is the cool one, known for his meticulous planning, while Agarwal is the galloping warhorse, whose business instincts appear incredible at times, but, according to Goenka, “turn out, amazingly, to be prophetic”. Sure enough, most of the promoters’ decisions bear the stamp of Goenka’s diligence and Agrawal’s foresight.

They characterised their first life-altering decision. In 1974, the duo left cushy jobs at one of the Birla companies to sell “beauty and cosmetic products priced 30 per cent higher than the competing brands, piled on the back of a hand-pulled rikshaw”, according to Agarwal’s younger son and Emami’s executive-director, Harsh Vardhan. One could hardly predict that the duo will take the business, started with a seed capital of Rs 20,000, to where it is today: Rs 1,700 crore flowing in from fast-moving consumer goods, newsprint, edible oil, real estate and health care. It again came into play four years later when they took over a sick unit named Himani Ltd and pressed on to make it work for eight years.

In 1984, Himani gave them Boroplus, a blockbuster product that rejuvenated their FMCG business.

As Emami acquired Zandu Pharmaceutical Works recently — the culmination of a six-month battle — it fought with precision and planning. The mark of foresight, however, is yet to be seen.

To seal a deal

To acquire an Indian listed company, one needs a Teflon exterior, which would prevent things from sticking. Mumbai-based Rs 140-crore Zandu is a 100-year-old company that manufactures more than 300 herbal and ayurvedic products. A zero-debt company with a strong brand name, Zandu has always been an attractive target for both Indian as well as multinational FMCG companies.

In May this year, when Emami picked up 23.6 per cent stake in an off-market deal from the Vaidyas, one of the two promoter groups of Zandu, it looked a smart, albeit expensive, move. According to reports, Emami paid Rs 130 crore to the Vaidyas at an offer price of Rs 6,900 a share (including Rs 100 a share as non-compete fee).

Immediately after Emami’s announcement of the mandatory open offer of 20 per cent to Zandu shareholders at Rs 7,135 a share, Zandu sought to stave off what it saw as a hostile takeover bid by taking recourse to a popular and effective tactic known in M&A parlance as the Shark Repellent manoeuvre. It sent a notice to Bombay Stock Exchange saying the company intended to issue preference shares to the company’s promoters and directors. This was aimed at fortifying Zandu’s second promoter group, the Parikh family. Emami got wind of the note and sent a legal notice to Zandu the next day, which forced the Parikhs to withdraw the plan. “The independent directors on the Zandu board were kind enough to understand our point of view,” says Harsh Agarwal.

Meanwhile, Zandu’s shares at BSE stayed around Rs 10,000 a share in anticipation that Emami will raise the offer price. Emami’s promoters remained unfazed. “We think we have done a fair evaluation keeping in mind the industry standards,” said a press statement issued shortly afterwards. Meanwhile, the stock market soared in July, when Emami’s open offer opened.

By that time, the expected had happened. The Parikhs, anticipating Emami’s next step, had raised their stake in Zandu from 18 per cent to 22 per cent. They owned another 20 per cent, said industry sources, through family members and associates. At the same time, the Parikhs had gone about knocking on all possible doors — Securities & Exchange Board of India, the Company Law Board (CLB) and the Bombay High Court — but by the end of August, it was clear that as far as the Parikhs were concerned, Zandu was a lost cause.

By mid-September, Zandu’s shares had fallen below Rs 16,700 and that was when Emami doubled its offer to Rs 15,000 a share. Zandu ran out of options when CLB asked the two companies to try and settle out of court.
On October 3, Emami revised the offer to Rs 16,500 a share and, according to sources, this was when some of the Parikh family members evinced interest in quitting the company, saying they would not get a better price. Trade reports were released soon after, stating that Emami had entered into a share-purchase agreement with Zandu. Looking at the price that Emami paid for the deal — Rs 800 crore for a Rs-160 crore entity — it appears that diligence may have given way to adventure.

Experts say the deal holds lessons for future buyers. KPMG’s corporate finance director, Nandini Chopra, who also heads the firm’s valuations practice, says: “Acquirers in future would possibly seek to be more in control of their pursuits by ensuring that they are negotiating, from the outset, with majority blocks of shareholders.” This would help mitigate the risk of another shareholder block perceiving it as a potentially hostile situation. “This will also prevent the target company’s remaining shareholders from putting up bid defence strategies, which would ultimately increase the cost of acquisition, or, worse still, thwart it,” she adds.

Emami’s persistence with the deal says something about what it expects from the acquired company. “At almost 5.5 times the sales multiple and almost 30 times EBIDTA (earning before interest, depreciation, tax and amortization) multiple, Emami is expecting stupendous growth from the Zandu franchise,” says C Ravishankar, manager-strategic and commercial intelligence, transaction services, KPMG India.

Speaking to the strategist after the acquisition, R S Agarwal indicated that he expected Emami’s FMCG business to touch Rs 1,100 crore by 2009-10. Harsh Agarwal, who has been overseeing the post-acquisition brand consolidation, sounded even more optimistic. “We expect our sales and profitability to grow by two to three times in the next couple of years,” he said.

According to Associated Chambers of Commerce and Industry, FMCG sales have not been affected by the current slowdown and the sector is expected to touch $25 billion by the end of 2008, as against $20 billion in 2007.
A positive industry outlook and Emami’s compounded annual growth rate at an impressive 25 per cent for the last three years, the anticipation is soaring in the region of 34-35 per cent. However, the steep takeover price and historically low growth of the Zandu franchise (10 per cent CAGR) indicate that there is more to Emami’s enthusiasm than meets the eye.

Analysts say the intent is not only to unleash the untapped potential of the strong Zandu brand — deploying a mix of marketing, distribution and operational strategies — but also to prepare the ground for Emami to play a bigger role in the consumer goods market. Earlier this month, R S Agarwal and R S Goenka issued a statement saying that the company plans to position itself as a “food products and personal care major”. Food products and personal care comprise the biggest slices of India’s Rs 96,000 crore FMCG pie, accounting for 43 per cent and 22 per cent, respectively.
Marked markets

Emami has not yet announced the final product strategy but careful analysis seen in the light of recent announcements shows that its product portfolio is changing in terms of the market size of each product category. Before Zandu came into the fold, Emami was the market leader in two niche categories: Boroplus cream, with 70 per cent, led the Rs 190 crore antiseptic creams market, and Navratna, with over 50 per cent, headed the Rs 397 crore cooling oil category. “Now, with the Rs 120 crore Zandu Balm in its fold,” says Harsh Agarwal, “Emami leads the ‘rubificient’ (local pain ointment) category with a combined market share of more than 25 per cent… Zandu balm is the market leader and Menthoplus the strong third player, so both can continue without competing with each other. They can play complementary roles.”

Similarly, the Rs 170 crore Cyawanprash category, dominated by Dabur Chyawanprash with 61 per cent share of the market, will see a bigger Emami footprint paved with Zandu Special, Sona Chandi and Kesari Jeevan. ayurvedic medicine, antiseptic creams Harsh Agrawal sees Emami’s consolidation in the classical ayurvedic medicine category as the biggest advantage of the deal. Indian over-the-counter herbal and ayurvedic medicine segment is estimated at Rs 7,500 crore. Dabur leads this segment with 10 per cent market share.

Emami and Zandu’s combined product portfolio does not give Emami enough to stand up to the might of the Rs 2,360 crore Dabur, Rs 2,290 crore Marico or Rs 1,267 crore Glaxo Smithkline Consumer Healthcare India — much bigger FMCG players. Experts say Emami will take its first big step to becoming a serious player in the FMCG segment when it comes up with defined product architecture. AT Kearney India principal Debashish Mukherjee says an evolved product architecture, displaying a much bigger scope than its present “ayurvedic proxy” positioning will be the first critical step if Emami aspires to be an FMCG major. “Merely changing or rearranging the existing product categories will not put Emami into the big league,” he adds.

Mukherjee adds that unless herbal or ayurvedic consumer goods players hit mass retailing, they can’t hope to challenge serious FMCG players such as Hindustan Uniliver or Proctor and Gamble. Smaller players, such as, Emami will have to think of ways to gain access to product categories they can’t reach. Product improvisation, customisation, even price variations can help. Emami’s Chyawanprash product range, for instance, could see price variations with the inclusion of Kesari Jeevan, which is in the premium consumer segment. Similarly, the rubificient range can see price differentiations.
The market is in the villages

Categories such as health supplements and cooling oil have a huge untapped potential in the urban and rural markets. The Rs 600 crore health supplement market has a surprisingly low penetration level of 0.2 per cent in rural and 1 per cent in the urban markets. Similarly, cooling oil has a huge potential in the rural market. With the increased media reach, Emami has a big market waiting to be explored, and it can only be reached through a wide and efficient distribution network.

The cooling oil category has few rivals, all of them local players (Dabur Super Thanda, Himange, Himtaj). Emami’s substantial advertising and promotions spending — more than 20 per cent of sales every year, much higher than the FMCG industry average of 11-12 per cent — can provide the beachhead.

Emami has a strong sales network of 2,800 distributors with direct supply to 400,000 retail outlets and a product reach of 2.6 million outlets across India. Urban distribution channels cover modern format outlets and retail stores and rural sales channels include Emami mobile traders and Emami small village shops.

Emami has also tied up with ITC e-Chaupals, Indian Oil Corporation petrol pumps and the India Post network. Moreover, it has five sales channels divided into rural and urban areas. Unlike Zandu’s distribution channels, which were strong in the West and South, Emami’s network is evenly spread out in all regions of the country.

Third Eyesight chief executive Devangshu Dutta says growth in the smaller towns and rural markets can still be driven by penetration and improved availability levels of stock-keeping units. There are still vast swathes of consumers in India whose consumption of packaged skin and personal care products is negligible. The main causes of optimism about continued growth would stem from this aspect of untapped markets and unfulfilled demand.”

An AC Nielsen report for April-September 2008 showed that value and volume growth across a range of products, such as, skin creams, lotions and hair oils, was much higher in the rural markets than in urban markets.

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Retail Kiosk – Plug and Profit

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December 15, 2008

By Sangita Ghosh

Images Retail

December 2008

THE INDIAN RETAIL SCENARIO HAS BEEN WITNESSING SIGNIFICANT ADVANCEMENT WITH TRADITIONAL RETAIL FORMATS MAKING WAY FOR MORE INNOVATIVE AND TECHNOLOGICALLY EVOLVED FORMATS. ONE OF THE INNOVATIONS TO WATCH OUT FOR IS THE ‘RETAIL KIOSK’, WHICH TRULY MAKES BUSINESS SENSE FOR RETAILERS BECAUSE OF ITS COST BENEFIT STRUCTURE AT THE ‘POINT OF SALE’ ESTABLISHMENT PROCESS AND EASE AND CONVENIENCE FOR THE CUSTOMERS TOO.

The concept of ‘Kiosk Retailing’ in the Indian retail scenario was virtually unknown until a few years-ago. Over the past few years, however, retail kiosks or mall kiosks have become an increasingly ubiquitous component of the retail and real estate landscape. The kiosk concept started gaining broad-based acceptance and success among the international retailers in the 90s; the model is now gradually getting a foothold in India.

Certainly, there are reasons for a kiosk scoring over a full size store – in terms of presenting a cozy yet convenient and eye-catching venue to attract the impulse buyers that pass through a mall aisle or a shopping centre space. According to Devangshu Dutta, CEO, Third Eyesight, "Kiosk retail can be defined by the presence of outlets with a small physical space in an open format with ‘temporary’ or even mobile fit-outs, but may be stationed at a place for a long time. The structure of a kiosk could be designed as a standalone structure like a terminal, or a semi-enclosed booth."

In general terms, kiosk retailing programmes are specified as ‘speciality leasing programmes’ and the retailers are called ‘speciality retailers’. Dutta says that any product that does not require a large amount of storage, can be sold without any preparation and served with minimal staff, is an ideal to be traded through the limited and open format of a kiosk. These can include physical products such as snacks, jewellery, holiday merchandise, novelties, or services such as financial products, simple medical check-ups, grooming and services etc.

The benefits of a kiosk format include:

• Avoiding unnecessary in-store product inventory and associated warehouse costs
• They offer promotional opportunities for the retailer
• Help increase active footfalls for mall owners
• Reduce input costs by lowering employee headcount through self-service and multi-use models
• Offer extremely lean and mean communication
• Facilitate interaction with the service retailers and ease the way of availing their services
• Thus, result in incremental sales even at off-site locations with more compelling revenue returns

In India, retail kiosks can be seen in shopping plazas and malls as small retail outlets to sell products or to facilitate services. A few examples of the retailers leveraging the kiosk opportunity include fruit juice brand Mr. Orange from MX Foods, Candico India, Boost, wellness retailers such as Kaya Skin Clinic and Lakme, financial companies such as ICICI Bank, Citi Financial and Reliance Money, holiday package providers such as Club Mahindra or insurance firms such as Max New York Life Insurance etc. In each case, the mall allots a space either on rental or revenue sharing basis to the retailer depending on merchandise. A relatively advanced form of kiosk retailing can be seen in Europe and US. In Europe, kiosk retailing has evolved as a special, advantageous and cost-effective category in retailing and is strategically located in the malls at frequent stops. In the US, kiosk retailing has emerged as one of the effective platforms of low-cost, low-risk entrepreneurship. These retail kiosks are also known as ‘creative entrepreneurship’ showcasing product categories such as handicrafts or other essential low-budget home improvement essentials or personal usage products. One of the leading global kiosk consultants and trade magazine publisher Patricia Norins quoted that in the US about 25 percent of the 50,000 -plus kiosks in shopping malls are owned or operated by recent immigrants – thereby giving them a low-risk option to establish themselves.

STARTING OUT
For a greenhorn, kiosk retailing provides easy but effective branding with a much smaller space leading to lower rents but with satisfactory sales that can establish a brand much faster in high-end malls. Candico forayed into the Indian retail scenario with its innovative kiosks designed in Dubai. Mr. Orange sells fresh fruit juice from its orange shaped kiosks that were innovatively designed in Spain. If the concept is applied correctly and effectively in mall spaces, the format of kiosk retailing would prove to be an extremely effective profiting model, turning a large amount of under-utilised floor-space in a mall’s common area into an innovative revenue stream.

THE FORMATS
As the face of Indian retail changes, the structure, design, functionality and application of retail kiosk is also evolving. Generally ‘kiosk’ refers to a booth-like structure where simple and inexpensive merchandise in isolation is sold. But of late", the retail kiosk has evolve&" from this typically four-sided, square structure to a limitless array of colours, shapes and designs selling ice cream to jewellery to service messages from concepts financial giants and real estate companies. Then, there are technically evolved electronic kiosks, also known as ‘interactive kiosks’, where a customised software enables the user to access the system flawlessly for a specific purpose. This structure could simply be a standalone computer terminal with a keyboard or the latest touchscreen facility, financial services or simply a tool to disseminate free public service information. As outlined by Technopak, retail kiosks in India have evolved in two formats. The first variant is in the form of a small-sized shop, having a semi-permanent fixture and is generally present within a larger establishment such as a mall, department store, etc. In India, there are quite a good number of F&B retailers across categories who have explored the idea of retailing through kiosks – Candy Treats, Cookie Man, Domino’s, Yo! China, Cafe Coffee Day, Corn Man, Baskin Robbins, Mr. Orange, Nestle etc.

The second variant is the much advanced and technically inclined e-kiosks, which are largely services oriented and generally unmanned. One of the pioneers in this is Reliance Money, which began its operations since its very inception through kiosk retailing to reach out to as many customers as possible. Sudip Bandyopadhyay, CEO and director, Reliance Money, sees a lot of promise in this format, saying, "Kiosks are going to prove like ATMs, which revolutionised the banking industry. We hope our kiosks will change the way people avail financial services over a period of time." Reliance Money, at present, has a vast network of 2,500 retail kiosks at different places across the country based on target customer availability and accessibility.

WHY A KIOSK?
While kiosks can be very profitable for the owner of the real estate considering the high rent, some developers also use kiosks to make the retail environment more dynamic and fluid. This, according to experts, shows the trend of a positive future for the retail kiosks in India.

Rakesh Pandey, CEO for Kaya Skin Clinic, clarifies, "Be it brand building or business generation, the clarity of the parameter itself guides the financial implications of the kiosk model. Through kiosks, are you being able to capitalise on the short window of opportunity with a potential client at the venue? It’s important to remember that a potential client’s live experiences at a kiosk can either positively pre-dispose or completely turn off the client from the brand." Spencer’s Hyper, where Kaya has opened its retail kiosks, is of the opinion that the main retailer should be careful about the kiosk retail partner; the products retailed at the kiosks should have business synergies and target the same market segment. Samar Singh Sheikhawat, VP-marketing, Spencer’s Retail Ltd, elaborates, "Since modern retailing is all about the shopping experience, the partners in kiosk retailing should ensure that they conform to the quality standards and service level agreements as does the main retailer. This is to ensure that consumers have the same experience whenever they avail of any product from a particular retail outlet."

According to industry experts, innovatively positioned kiosks can become the centre of attraction in a mall and create a vibrant environment ensuring higher footfalls and revenue for the shopping centre owner. To create freshness or for a change in the shopping floor environment, one kiosk can be inter-changed with another temporarily, otherwise impossible with a full size retail store. Analysts point out that with the strategic point of sales coupled with the catchy placements in the shopping centres, the kiosk is becoming the new pull for both realtors and shoppers. When the retail kiosks offer services to the customers, it also increases consumer awareness and proposes new strategies for the retail brands to further diversify their business in multiple directions.

The Kaya Skin Clinic, for instance, has prototyped the kiosk model to make expert skin-care easily accessible. Pandey shares, "With the kiosk model, the idea for Kaya was to ‘go where are clients are’, thereby saving their time and also aiding them to make accurate decisions about their skin-care needs." For Kaya, cosmetics account for the majority of sales from these kiosk counters. ‘According to the chain, skin-care product sales contribute to 30-35 per cent of the total sales for the brands that sell both cosmetics and skin-care products through this format.
Bandyopadhyay at Reliance Money says, "Our kiosks are additional touch points for our customers to avail services and it would not be possible to measure revenues separately. Our customers can go online, use call and trade, visit our branches or avail services through kiosks. The same customer may use different modes at different points of time based on his or her convenience."

Coffee Day Xpress, from Amalgamated Bean Coffee Trading Company Ltd, serves food at kiosks called ‘Xpress’ for those who need a quick bite on the move. The growth of Coffee Day Xpress also comes from its innovative franchising model. The low-investment, high-return business model has proved popular with entrepreneurs who are eager to cash in on the brand’s ‘plug-and-play’ kiosk concept that can get started within 10 days of the franchise agreement.

THE MERCHANDISING STRATEGY
The format of the kiosk, its position and its usability demand a specialized merchandising strategy. As observed by Technopak, the low value and impulse purchase appeal facilitate the usage of kiosks for product categories that consume less space – eateries, banking solutions, telecom services, flowers, tobacco, books and music and fashion accessories. Besides these, innovative e-kiosks, which provide multiple services such as ticketing, payment of bills etc. and self-service -kiosks for photo development, are also in vogue. Also, companies are increasingly using kiosks for information dissemination and promotional activities. Punit Khanna, principal consultant, Technopak Advisors, says, "Products that consume less space and are as tentative as impulse purchase items, are best suited for kiosks." Based on the nature and format of the kiosks, the merchandising strategy is crafted. Kaya Skin Clinic – with focus on creating awareness among health-conscious consumers and future clients – has a typical merchandising strategy whereas Reliance Money, which operates self-service kiosks, has no merchandising and depends on software for communication and backend operation. Kaya kiosks have following features:

• Focus on POP material to communicate message
• Take-away skin-care literature to draw the visitor to their clinics
• Arranging skin-care camps along with skin counsellors, doctors for individual consultation
• Skin-care camps arranged usually on weekend, at a high-footfall area in a mall or department store

Coffee Day Xpress is a modular kiosk of 60 sq.ft that can easily be set up in short notice. For that, they maintain a specific merchandising strategy with an ease and less complicated and ready-to-eat food on their menu. Other characteristics include:

• Each kiosks comes fully equipped with a hot coffee – bean-to-cup machine, a cold coffee and a thick shake machine, a blender, pastry cooler, microwave oven, griller, and a refrigerator, to serve quickly
• Easy to maintain and clean
• Available in both indoor and outdoor modules

THE BUYERS
Kiosks retailing is driven by impulse shopping and is clearly targeted towards consumers ‘on-the-move’. The customers increasingly see a mall as a leisure zone; stopping by a kiosk and trying out a relatively low value item such as a glass of orange juice or a pack of candy or something higher up in the value chain such as sunglasses or watches is a natural activity in that environment.

“The target customers for a kiosk are the passers-by – often impulse buyers. Therefore, the merchandising and display has to be ‘alive’ and should be able to reach out to grab the customer’s attention in the busy environment,” Dutta points out.

Retail kiosks also have the USP of setting up interesting point of sales, catchy positions and attractive product lines resulting in satisfactory sales figures in comparison to the retail space they occupy, which can be replaced at times for variations.

STRATEGISING THE LOCATIONS
Most analysts agree that the ideal criteria for location selection that a kiosk model looks for should be focused on high traffic, high visibility areas at mall atriums, inside department stores, hypermarkets or supermarkets, and places with higher footfalls such as airports, railway stations and a metro stations. However, meeting these criteria demand high investments from the retailers. Says Dutta, “Kiosks work well in areas with high footfall and high off-take, where the rentals per square foot would also be high. Therefore, the financials of a kiosks generally require high gross margins.”

According to Ali Mir, GM – retail, NCR Corporation, a technology company for Retail Kiosk solutions, “The strategic locations for a kiosk should be at the store entry, entrance of a department in a store, mall entrance, at each floor of a mall closer to the elevators, food courts etc. that give the kiosk higher visibility and footfall.” Kaya Skin Clinic, which banks on its retail kiosk network critically, considers the following factors before finalising a kiosk location:

• Footfall in the mall and that particular location, and the average ticket size of the mall to measure the trend of the weekend skew
• Direction of footfall and also shopper’s mood when visiting their kiosk
• The visibility of the location
• TG of the particular mall or store
• Demographic and psychographic profile of the residential catchments

While the chain is quite enthused by the kiosk format, the extremely high rentals for kiosks, and the point of furthering the ‘no-escalation clause’ of the lease that usually expires after 11 months, can hinder the spread of a kiosk network.

Spencer’s, which has kiosks in its 70 stores, is certainly banking on the point of high rental but at the same time they entertain hopes of ensured returns. According to Sheikhawat, “Kiosk retailers need to be judicious with respect to the financial model they agree to. It can either be revenue sharing or a flat rental, but that of course depends on what is more profitable to the retailer.” High rental payout is definitely something that is currently queering the pitch for this mini-store format. Bandyopadhyay of Reliance Money says, “The rent for the location and the space required to put up the kiosk is very high, sometimes unrealistic and extremely critical. High-footfall retail space is very expensive and the cost-benefit ratio needs to be carefully analysed. The retailer and the mall owner need to understand the same and fine tune the strategy accordingly.”

GOING FORWARD
According to the experts, not just start-ups or speciality retailers but major retail chains and established brands are also looking for kiosk solutions to enhance their retail presence. Even big-box retailers are looking for an easy, convenient and cost-effective solution though network of retail kiosks. According to Khanna of Technopak Advisors, “Given that locations favourable to the kiosk format, such as mall atriums, railway stations, metro stations, airports etc, are being rapidly developed in India, we shall witness a larger proliferation of this format.” Khanna also states that retail kiosk is increasingly spreading beyond the F&B sector to include other products/services as well. Going forward, retailers will increasingly invest in this format for the multiple benefits of:

• Flexibility in moving or transporting to a different location whenever required
• Easy utilization in a format of low investment and of low overheads
• Swift roll-out
• Convenience of 24X7 retail with e-kiosks

Experts say the pace at which Indian retail transactions are increasing, it clearly highlights the need for a more technically developed solution that is designed to constantly evolve with changing needs. The trend shows the need for 24X7 self-service kiosks that mimic the ecommerce model. Demanding customers and best practices adopted by global retail giants are driving Indian retailers to harness the benefits of self-service technology of retail kiosks in bringing efficiencies and retaining consumers. Starting from ordering the products to delivering the same at customer’s doorsteps, cash transaction and checkout self-service kiosks are making an impression. The concept has taken off well and is now being considered as a mode to spread awareness and promote the products across categories.

However, experts caution that too many kiosks in a mall can create disruption in terms of the prospective footfalls and common area of the mall. Balancing factors need to be designed between the mall owners, retail tenants and the kiosk retailers for a truly win-win solution.