Category: White Papers

Sinking Feeling

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August 26, 2013

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Pays & Marches

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May 30, 2013

Written By Christine Gilguy

Inde Les marques étrangères profitent de l’ouverture du commerce de détail

L’assouplissement de la réglementation indienne sur le commerce de détail a créé un appel d’air pour les marques étrangères qui lorgnent sur une classe moyenne en pleine croissance. Les marques françaises sont à la traîne.

Il y a à peine un mois, Ikéa, le géant suédois de l’habitat, faisait la Une de la presse indienne et étrangère en annonçant une mise de près de 2 milliards d’euros pour lancer ses dix premiers magasins en Inde. Il venait d’obtenir l’agrément final du gouvernement indien pour investir 105 milliards de roupies (environ 1,95 milliard de dollars) pour créer 10 magasins dans les 10 prochaines années, et 15 autres en option. Des magasins sur le modèle qui a fait son succès en Europe, à une seule petite exception : si son agrément autorise la création de cafés et restaurants dans ses magasins, il exclut toute distribution de produits alimentaires conditionnés. Neuf mois après la décision du gouvernement indien d’assouplir la législation sur les investissements directs étrangers (IDE) dans le secteur du commerce de détail, l’arrivée de l’enseigne suédoise est emblématique de l’appel d’air provoqué par cette réforme. Elle a concerné deux segments :

• La distribution mono-marque : il est désormais possible aux enseignes monomarque de détenir 100 % d’une société (contre 50 % auparavant) en Inde.

• La distribution multi-marques : les sociétés étrangères peuvent désormais détenir la majorité des sociétés en jointventure (51 %) et s’installer dans les 53 villes de plus d’un million d’habitants que compte l’Inde. Mais la loi oblige les sociétés étrangères à faire 30 % de leurs approvisionnements en Inde, auprès de PME, et leur fait obligation d’investir un minimum de 100 millions de dollars dont au moins 50 % doivent aller, dans les trois ans de la première tranche de l’investissement, dans les infrastructures de « back-end » qui incluent un large champ de domaines (process, fabrication, distribution, design, contrôle qualité, etc.). En outre, chaque État indien doit donner son approbation…

C’est le secteur de la distribution monomarque qui répond le plus positivement à l’ouverture indienne. Dans l’habillement et la mode, les annonces se succèdent. La marque britannique Pavers (chaussure), aurait été la première à obtenir un agrément pour implanter une chaîne de boutiques selon la nouvelle législation, avec un investissement de 20 millions de dollars. De son côté, le champion du prêt-à-porter espagnol Zara (Inditex), qui a testé deux premières boutiques dès 2010 à Delhi, a annoncé son intention d’ouvrir 40 boutiques dans le pays. H&M s’apprêterait à investir dans une joint-venture majoritaire, Puma à augmenter son réseau. Pour ne citer que quelques exemples. L’intérêt pour le marché indien de la part des marques internationales est ancien mais désormais avivé par l’émergence d’une classe moyenne estimée, selon les sources et les critères de définition, entre 150 et 200 à 300 millions de personnes (une cinquantaine de millions pour le segment des plus hauts revenus). Il a d’abord été favorisé par l’urbanisation et le développement de centres commerciaux en milieu urbain : « La croissance du nombre de marques et d’enseignes de distribution internationales opérant en Inde s’est accélérée depuis 2005, avec le développement des investissements indiens dans la distribution et l’immobilier commercial sous la forme de Malls » souligne Devangshu Dutta, consultant indien dont la société, Third Eyesight, est un spécialiste du secteur. Dans une étude intéressante, Devangshu Dutta montre comment au fil des années, des marques internationales ont fait leurs
premiers pas en Inde, sous la forme de licence, franchises, ou de joint-ventures avec des partenaires indiens (1). Mais pour lui, ce ne sont pas les grands groupes qui ont conduit cette vague : « Ce sont les sociétés de taille moyenne qui mènent la charge en Inde, d’avantage
que les géants du commerce de détail, bien que ces derniers, à l’instar d’Ikéa, Walmart, Carrefour suscitent plus d’articles dans les médias ». Dans la distribution multi-marque, les grandes enseignes, longtemps interdites pour le commerce de détail par la réglementation indienne, restent toutefois absentes. Trop timide et restrictive, la réforme intervenue le 20 septembre 2012 ne les a pas convaincus et on attend toujours les annonces d’investissements des grandes enseignes comme Walmart, Tesco ou Carrefour, déjà présentes dans le cash & carry. Les enseignes américaines et britanniques feraient un intense lobbying pour obtenir de nouveaux assouplissements. Dans la liste de leurs récriminations à l’égard de la réforme, l’une des principales portes sur le fait que les dépenses effectuées dans le foncier ou les loyers – très élevés en Inde – ne soient pas comptés dans les investissements d’infrastructures de « back-end ». « C’est clairement une orientation trop restrictive », commente un article du libéral Asia Times (2). Le même article épingle aussi le fait que sur les 53 villes autorisées, seules une vingtaine sont réellement ouvertes à ce jour à ce type d’IDE en raison de l’opposition des États indiens concernés… Seuls 10 États indiens ont approuvé cette réforme à ce jour (dont Delhi, Maharashtra et Haryana). Il y a peu de chance que les enseignes de la grande distribution occidentale obtiennent gain de cause avant les prochaines élections générales, prévues en 2014. « Les Kirana Stores (ndlr : les petits commerces), constituent un lobby très puissant qui s’oppose à cette ouverture »,

Produits frais : une french touch dans la chaîne du froid

La chaîne du froid est embryonnaire en Inde. Un défi colossal pour toute enseigne de supermarché habituée des standards européens qui voudrait miser sur l’Inde, et un créneau que tente d’investir le savoir-faire français. « Dans nos pays, les pertes entre la fourche et la fourchette sont d’environ 10 %. En Inde, ce taux est de 40 % environ ». C’est ainsi que Gérard Cavalier, président du Cemafroid, le Centre d’expertise français en matière de chaîne du froid, résume l’enjeu auquel fait face l’Inde en matière de distribution alimentaire. Concrètement, cela signifie, par exemple, que 40 % des fruits et légumes produits en Inde ne parviennent jamais aux consommateurs… Insuffisance ou absence d’infrastructures pour la collecte, l’acheminement, la conservation et le stockage des marchandises : la chaîne du froid en Inde est encore à construire.
« Aujourd’hui, les distributeurs ont un intérêt majeur à avoir une chaîne du froid, confirme le responsable », qui précise que dans l’agriculture, celle-ci n’existe actuellement que pour quelques produits, souvent très exportés, tels que les pommes, les oignons et les pommes de terre. « Dans les supermarchés, vous ne trouvez que peu de produits frais de qualité à cause de ce problème ».
Alors, face au boom de l’urbanisation, les autorités indiennes tentent d’accélérer la modernisation du secteur. Fruits et légumes, produits laitiers, poissons, viandes : de nombreux produits sont concernés. En l’occurrence « la chaîne du froid est la priorité de la coopération franco-indienne » confirme Gérard Cavalier, les Indiens considérant la France comme un bon modèle dans ce domaine. « Leur situation ressemble à celle que connaissait la France juste après la seconde guerre mondiale », explique-t-il.
Le Cemafroid a conclu le 4 avril 2013 un accord de coopération à long terme avec son homologue indien, le NCCD (National center for Cold Chain Development), un organisme créé en 2011 sous la tutelle du ministère de l’Agriculture, doté de 5 millions d’euros de budget (http://nhm.dacnet.nic. in/NCCD/index.html). Cette coopération, qui doit se traduire par la mise en œuvre d’un plan d’action, pourra prendre la forme d’assistance technique, de formation, d’accompagnement des cadres du NCCD et des industriels indiens. « Les industriels indiens sont très demandeurs, estime Gérard Cavalier, car la différence ne se fera pas sur la valorisation des produits mais sur la réduction des pertes ! Les distributeurs indiens, et a fortiori étrangers, y ont intérêt ». Il espère que les premiers programmes de formation seront mis en place au Les personnes présentes sur la tribune sont de gauche à droite : M. Patrick Antoine, Président de l’AFF ; M. Didier Coulomb, directeur de l’IIF ; M. Cédric Prévost, futur conseiller agricole du ministère de l’Agriculture ; M. Philippe Vincon, co-président du groupe de travail agricole franco-indien (Ministère de l’Agriculture) ; M. Gérald Cavalier, gérant Cemafroid ; M. Sanjeev Chopra, directeur NCCD (Ministère de l’Agriculture) ; M. Indra Maini Pandev, Ambassadeur d’Inde en France ; M. Pawanexh Kholi, NCCD Chief Advisor
deuxième semestre de cette année. Le chantier est immense et l’Inde a appris aux étrangers à être patients et à voir à long terme. Mais cette coopération pourrait avoir des retombées concrètes, à terme, sur les fournisseurs français d’équipements et de services de la chaîne du froid qui ont été impliqués dès le départ dans cette approche. À la suite d’une mission d’expertise conduite par le Cemafroid en Inde en 2011 pour faire le diagnostic des besoins, l’idée d’organiser l’offre française dans ce domaine sous la forme d’un consortium a été lancée, avec l’Association française du froid (AFF). Ubifrance a organisé un colloque et une mission de rencontre des acheteurs indiens de la filière en novembre 2012 à New Delhi et Bombay à laquelle plusieurs grands noms du secteur ont participé tels que Le Petit Forestier (logistique du froid), LeCapitaine (carrossier), Serap (système de refroidissement du lait)… Une démarche porteuse, à terme, de débouchés nouveaux.
C. G.
Pour en savoir plus :
www.association-francaise-du-froid.fr/ : on peut y consulter le Rapport de mission menée par le Cemafroid en 2011. www.cemafroid.fr/
Le site du tout jeune NCCD : http://nhm.dacnet.nic.in/ NCCD/index.ht

analyse Alain Bogé, consultant et spécialiste français du secteur de la mode en Asie, vice-président du Business Fashion Forum, un think tank dédié aux acteurs de la mode (3).
C’est donc le mono-marque qui est, pour l’heure, boosté par l’ouverture indienne. Et dans ce secteur, les Français ont du retard. Selon Third Eyesight, les marques tricolores ne représentent que 10 % des marques internationales implantées en Inde. Les Américains sont en tête, suivis des Italiens et des Britanniques (graphique page précédente). Hors luxe – LVMH est très actif actuellement, avec l’acquisition de son ancien partenaire Genesis et de la marque indienne Liliput –, les marques françaises sont surtout présentes dans les produits cosmétiques et de soins de beauté. « Les Américains et les Britanniques ont certainement l’avantage de la langue, l’anglais, avance Devangshu Dutta. Il est possible que les Italiens tirent avantage de leur présence sur d’autres marchés, donc soient plus visibles pour des partenaires et consommateurs indiens potentiels que les Français ». Dans l’habillement, qui représente un tiers de la distribution organisée (voir chiffres clés), Alain Bogé reconnaît que les griffes françaises ne sont pas légion : Promod, Okaidi, Celio… « Elles sont encore rebutées par la complexité du marché » analyse-t-il. En premier lieu, le secteur est encore très largement dominé par le commerce informel, dont font partie les kirana stores, qui pèsent 92 % du marché selon un chiffre cité par une étude du cabinet Deloitte (3). En outre, loin d’être unifiée, l’Inde et ses 28 États sont multiples. Hors du luxe, les success stories de marques occidentales sont souvent celles d’une bonne adaptation au marché local en s’appuyant sur un partenaire indien – pas toujours facile à trouver sans conseils ou accompagnement extérieur –, qui connaît bien le marché. « Les sociétés qui souhaitent réaliser un chiffre d’affaires significatif et générer des retours sur investissement en Inde doivent se doter d’une stratégie de marque, et d’un mix produitprix-distribution adapté à l’Inde plutôt que de faire un copier/coller de leur modèle français ou international », confirme Devangshu Dutta.
S’appuyer sur un partenaire indien – même si on opte pour une filiale à 100 % – est en l’occurrence fortement recommandé lorsqu’on n’a pas la puissance de frappe d’un Ikéa. Alain Bogé insiste lourdement sur ce point rappelant que Zara a commencé prudemment à Delhi, en joint-venture, en testant une boutique dans un centre commercial. « Il y a trois avantages à s’appuyer sur un partenaire indien, résume le Français. Il connaît les segments à attaquer et les prix ; il sait à qui donner les dessous-detable pour faire avancer les dossiers dans un pays où la corruption est endémique et à tous les niveaux ; enfin, il peut éventuellement participer au financement, sachant qu’un bon tiers des transactions en Inde se font en cash. »
Pour ne parler que du prêt-à-porter et des accessoires de mode, si les Zara, Mango, Benetton et autre Esprit sont déjà instal lés, que de belles marques indiennes ont d’ores et déjà émergé – Liliput, Fabindia… – il reste de nombreuses opportunités compte tenu du potentiel de croissance extraordinaire du secteur.
Alain Bogé est par exemple convaincu que les marques françaises de la mode enfantine ont une belle carte à jouer au pays où l’enfant est roi. « Lorsque mes amis indiens viennent en France, ils vont faire leur shopping chez Bonpoint ou Tartine & Chocolat. Okaidi y est déjà, il faut y aller » estime-t-il. Pour lui, les villes où il faut être abritent les principaux pôles de consommation du pays, avec une population jeune et ouverte à la nouveauté : New Delhi la capitale, mais aussi Mumbai la capitale économique, suivies de Bengalore, Hyderabad, Ludhiana ou encore Ahmedabad. Mais surtout, ne pas trop tarder : « Il faut y être dès maintenant car les meilleurs emplacements et les meilleurs partenaires seront pris d’ici quelque temps ». La Chambre de commerce franco-indienne (CCIFI) organise début juillet, en partenariat avec CCI International Nord de France, la première conférence sur le commerce de détail en Inde à Lille, au cœur de l’industrie de la distribution française, le 9 juillet (5). Un bon signe…
Christine Gilguy

(1) http://thirdeyesight.in/ : lire l’article « Entry
Strategy of global Brand – Impact of FDI »
(2) « India’s retail FDI bid fails to sell », 3 mai
2013, sur www. atimes.com
(3) www.businessfashionforum.com
(4) « Opening India retail », janvier 2013.
www.deloitte.com/…india/
(5) Contact : contact@ccifi.com

Source: LE MOCI

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Will India Sizzle or Fizzle for International Fashion Brands – Third Eyesight

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September 18, 2012

Written By Devangshu Dutta

Among consumer sectors, very few can match up to fashion in terms of its global nature. Despite food having led the way in global trade through spices, it is the fashion sector that led the global march of brands. As the economies in Europe and Asia recovered and grew, historical colonial linkages as well as modern culture-vehicles such as movies carried images of what was cool in the benchmark culture. Fashion brands were the most identifiable representation of cool.

India itself has known international fashion and luxury brands for several decades. From the mass footwear brand Bata to the top-notch luxury of LVMH, some of whose most important global customers included the rulers of Indian princely states, international fashion brands have an age-old connection with India.

In spite of these old links, the absolute base of consumers for fashion brands was small, and for them, prior to the 1980s, India was a relatively low potential market with low attractiveness and low probability of success.

A transition began in the 1980s, as India moved emphasis from central planning and a restrictive economy to a more liberal business regime, and brands and modern retailers started growing in presence gradually.

During this transition period, other than the notable exception of Bata, it was mainly Indian brands that were at the forefront of modernisation of retail in India, with the first retail chains being set up for textiles, footwear and clothing. Though the seeds were laid earlier – Liberty is credited with the launch of the first ready-to-wear shirt brand in the 1950s, Raymond with the first ready-to- wear trouser brand in the 1960s – the growth started in real earnest only in the 1980s when apparel exporters such as Intercraft (with brands like “FU’s”), Gokaldas Exports (“Wearhouse”), and Gokaldas Images (“Weekender”) also tried their hand at modern retail, as did corporate groups (“Little Kingdom” for kids and “Ms” stores for womenswear).

Yet, even in the early to mid-1990s, when western companies looked at the Asian economies for international growth, West Asia and East Asia (countries such as Japan, South Korea, Taiwan and even Thailand) were seen as more attractive due to higher incomes and better infrastructure. In the mid-1990s there was a brief upward bump in international fashion brands entering the Indian market, but by and large it was a slow, steady process of increase.

By the mid-2000s, however, a very distinct shift became visible. By this time India had demonstrated itself to be an economy that showed a very large, long- term potential and, at least for some brands, the short to mid-term prospects had also begun looking good. In a few years, from 2005 onwards, the number of international fashion brands entering the market has increased 4-fold.

Market Still Evolving, but Brands are Confident

Clearly, there are few markets globally that can support potential growth from zero to US$100 million in a decade, with the potential to even reach a billion- dollar mark within the next couple of decades. However, some of these markets are already hugely competitive, and also going through painful economic churns. India, on the other hand, is a market that is at the earliest stages of consumer growth – it is, in the words of the managing director of a European brand, a market where “a brand can enter now and live out its whole lifecycle”. In fact, it is tempting to compare the emerging golden bird of India to the golden dragon of China where western brands seem to have rapidly established as products of choice for the newly affluent Chinese consumer during the last 15 years or so.

In our work with brands and marketers from around the world, we have to constantly remind them that not all emerging markets are the same. The explosion of luxury and premium brands in China during the last decade or so has happened on the back of explosive economic growth that came after a long cultural and economic vacuum. When the new money wanted links with the old and when uniform grey-blue suits needed to give way to something more expressive, well-established western premium and luxury brands provided the most convenient bridge.

‘In India “discernment” may be a new experience to the newly-rich Indians for whom brands can be a valuable guide and “secure” purchase, but discernment and taste are not new to India as a whole’.

On the other hand, in India “discernment” may be a new experience to the newly-rich Indians for whom brands can be a valuable guide and “secure” purchase, but discernment and taste are not new to India as a whole. More importantly,differentiation and self-expression never disappeared even during India’s darkest years of “socialistic” economics.Therefore, the Indian market has a more “layered” approach to the premium fashion market and will continue to grow in a more fragmented, more organic manner than the Chinese market. There would be multiple tiers of growth available for international as well as Indian brands. For international brands customisation and Indianisation will be important. This is already visible in bespoke products by Louis Vuitton and Indian products by brands such as Canali (jackets) on the one hand, and significant re-thinking on product mix and pricing by brands such as Marks & Spencer. That brands are willing to rethink their position in the context of the Indian market demonstrates that they see India as a strategic market, worth investing in for the long term.

Another sign of the growing confidence amongst international brands in the Indian market is the number of companies that are looking at directly investing in joint ventures, or even going further to set up wholly-owned subsidiaries in the country.

It is worth keeping in mind that setting up a subsidiary is a decision that is not taken lightly, regardless of the size of the business and the amount of investment, since it involves a disproportionate amount of management time and effort from the headquarters during the launch and early growth phase where revenues are small and profits non-existent. Among our clients, brands have taken the decision to step into an ownership structure in India when they feel that India is too strategic a market to be “delegated” entirely to a partner (whether licensee or franchisee), or that an Indian partner alone may not be able to do justice to the brand in terms of management effort and financial capital. In the last few years we have seen several brands take the plunge into investing in the Indian business, among them S. Oliver (Germany), Marks & Spencer (UK) and Mothercare (UK).

During 2011 specifically, Promod changed its franchise arrangement with Major Brands into a joint-venture that is majority-owned by Promod. From its launch in 2005, the brand has opened 9 stores so far. However with the new JV in place, the venture is reported to be looking at opening 40 stores in the next five years.

Most recently, Canali was one of the brands that moved into a majority-owned joint-venture. The brand entered in India in 2004 through a distribution agreement with Genesis Luxury. This has recently given way to a joint venture between the two companies that is owned 51 per cent by Canali. The brand currently operates five exclusive stores in India has plans to accelerate the brands growth in India by opening 10-15 stores over the next three-four years.

The Impact of FDI Regulations

If a “theme of the year” has to be picked for the Indian retail sector in 2011, it must be ‘Foreign Direct Investment’. The debate during the year was hardly a clean and clear “pro vs. con” exchange of ideas. It was a motley mix of extreme lobbying for and against FDI, some balanced reasoning on why FDI should be allowed, and also moderate voices calling for governing the speed at which and the conditions under which foreign investment could be allowed. In many cases there seemed to be dissenting voices emerging from within the government. One possible impact of this uncertainty through the year was that several brands postponed their decisions regarding the potential entry and the strategy that they would follow in India with regard to partnership or investment.

In November 2011, the Indian government announced that 100 per cent foreign investment in single brand retail and 51 per cent foreign ownership of multi- brand retail operations, but was forced to back-track due to vociferous opposition from several quarters. At the very end of the year, the government finally reopened 100 per cent foreign ownership retail operations, albeit limiting it to single brand retail businesses. However, it allowed this under the condition that the Indian retail operation would source at least 30 per cent of its needs from Indian small and mid-sized suppliers.

The condition of 30 per cent domestic sourcing from SMEs is well-intentioned – aiming to provide a growth platform for India’s manufacturing enterprises – but unachievable for brands that do not currently source any serious volumes from India. In fact, for most international fashion brands India contributes less than 10 per cent of their total sourcing, in many cases well under 5 per cent. Under these circumstances, we shouldn’t expect any dramatic changes, though we do expect the growth in joint-ventures and subsidiaries to continue in the coming months and years.

If an international brand perceives India to be at the right stage of development, and it wishes to exert significant or complete control over its Indian presence, then a majority or completely owned subsidiary seems the most logical step, and the brand will find a way to structure its involvement in India appropriately. However, many brands that today have a 51 per cent ownership in India are stopping short of climbing to 100 per cent until they can sort out how to meet the SME sourcing conditions.

Getting Over the Sourcing Hurdle

The problem with the 30 per cent sourcing rider is simple. When a brand launches in India, it would like to present the consumer with the most complete product offering that showcases its capabilities and positioning as relevant to the target consumer in India. In most instances, the brand would not be sourcing the full range of its merchandise from India.

This is not a problem if the brand approaches the market through a wholesale or franchise structure, or even with a retail business that is not owned by it 100 per cent. But for a retailer that wants to own the Indian business completely, complying with the 30 per cent domestic sourcing restriction means developing a new set of suppliers in India from scratch, pulling in the design and product development staff to work with them, and to develop ranges that suit not only the Indian market, but also other markets around the world. Simply putting together an India-specific sourcing team to replicate the entire range to buy small volumes for the Indian business is neither practical nor feasible for most of these brands. This means that the product development and sourcing team must be willing to see India as a strategic supply base for the future, just as their selling-side colleagues may be seeing it as a strategic market.
In this context it is worth repeating something that I have said before: retail managers are generally risk averse, and like to move in packs – where there are some brands, more come in and create a mutually reinforcing business environment. The presence of other international brands – especially from their own country – helps in creating a familiar context at first sight and encourages further exploration of the market. At least for the executives handling international retail expansion, India presents a more ‘familiar’ and ‘developed’ face today than ten years ago.

However, the explosive growth that we have witnessed in terms of the number of brands present in India is not mirrored by the growth of fashion sourcing out of India. In fact, even when compared to what has happened in the global textile, apparel and footwear sourcing environment since quotas were removed in 2005, the India’s export growth looks dispiritingly low, even stagnant. China still remains the largest source for fashion products, while countries such as Bangladesh, Indonesia and Viet Nam have grown their share aggressively. India’s share of clothing exports is a lowly one-tenth that of China.

In our work related to global sourcing strategies for western retailers, on an objective measurement matrix of sourcing competitiveness India rates highly. In several cases, sourcing from India as a hub (and, for European retailers, Turkey as a hub) has been seen as a logical counterweight to balance out the high concentration of current sourcing in China.

However, product development and sourcing is not entirely an objective process – in fact, sourcing habits are sometimes the hardest to change. The buyer’s subjective experiences – sometimes buried deeply in the past career – have a significant role to play. A conversation from 2001 with the sourcing head of a European brand sticks in my mind, when he said, “I don’t really want to buy anything from India – Indian suppliers can do a very limited product range, quality isn’t always good and the shipments are always late.” On probing further, I discovered that his last transaction was in 1992, after which he never set foot in India again. Much as we might present statistics and facts about the developments in the Indian textile and apparel industry, a personal injury early in his career has left a deep scar that obviously influenced this gentleman’s buying decisions worth over €300 million in global apparel sourcing, or about €700-800 million worth of sales.

There is clearly much to be done in terms of encouraging modernisation and better organisation amongst apparel suppliers, and making those changes visible to buyers. Even brands that are well-engaged with the Indian supply base have between 40-70% of their people here focussed on in-line and post- production quality issues. We are today at a stage where larger and better- equipped apparel exporters would be best placed to address the needs of international brands within India, but find the volumes too small to bother with setting up entirely different documentation and accounting processes.
Health & Safety and Labour compliances are also areas in which the brands will not forego their corporate standards. Can we imagine a brand saying that its European customers do not want their products made in sweatshops, but for the Indian consumers of the brand this is not (yet) an issue? While this may be a fact, would a high profile brand risk its global reputation to source competitively for its small Indian business?
So a government dictat to international brands’ fully-owned subsidiaries to ensure that they source 30 per cent of their needs is not enough. At best it will encourage some of the brands to start looking at India more seriously, but a more likely scenario for most brands is that they will carry on business as usual until the supply base in India pulls up its socks, or until the business in India becomes large enough to be interesting to their existing Indian suppliers who are currently focussed on exports.

Certainly the government itself needs to do much for more manufacturing- friendly policies, as well as focussed investment in infrastructure that can provide rapid, efficient and cost-effective transportation from the country and within the country.
It is time to bridge the gap between “textile exports” and “fashion retail” in the country. Remember, the explosive growth of brands in China followed the manufacturing explosion, not the other way round. Until the Indian apparel, textile and footwear manufacturing sector grows strongly, the actual volume growth of modern fashion retail will remain hobbled, regardless of the number of brands that enter the market.

To me this statement by a senior professional from one of Hong Kong’s largest apparel companies says it all: “The Indian industry looks like a formidable competitor, the day it decides to wake up.”

Drawing the Full Circle of Confidence

In closing I would like to mention the least acknowledged, but a very important part of the growth of international brands in India: the acquisition of brands overseas by Indian companies.

The Aditya Birla group laid an early foundation when it bought out, for India and several other territories, the perpetual rights for Coats Viyella’s brands including Louis Philippe, Van Heusen and Allen Solly. Lerros was a slightly different example – being a brand that was set up by the House of Pearl in Germany – but that also circled back to India. More recently (2010) we have the example of the Swiss company Switcher Holdings, whose with brands including Switcher, Respect and Whale, was bought by PGC Industries.
In markets such as the EU, there are today brands that may be available because they are finding difficult to survive in harsh trading environments and that do not have the financial or management bandwidth to take on initiatives in growing markets like India. These offer a legitimate growth platform for Indian companies that are strong in manufacturing those product categories and want to move higher up the value chain from being a generic commodity “supplier”.
Although exporters may initially approach these brands for franchise or license relationships, to some it soon becomes clear that if they are in a position to make an incremental investment they could well own the perpetual rights and perhaps the whole business, rather than investing in building up someone else’s brand, especially in the business in India is likely to grow very rapidly. Obviously, this new-found confidence needs to be backed with solid management capability, but as other consumer goods companies such as Tata (beverages, automotive), Mahindra (automotive) and Dabur (personal care) have shown, it is entirely feasible to look at growth in India as well as internationally by using an existing international brand as a stepping stone.

It also presents a challenge of classifying such brands as international or Indian. Bata was founded in the Czech Republic and went global from there – however, today it is legitimate to treat it as a Canadian brand since its headquarters moved there in the 1960s. Among other products, Gloria Jean’s Coffee was founded in the USA, but is now completely Australian-owned. In that sense, today would that not make Louis Philippe, Allen Solly, Switcher Indian brands?

I think this puzzle is a challenge that many people in the industry in India would look forward to contributing to.

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Cover Story

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October 20, 2010

Indian market is flooded with brands while consumers are finding it difficult to stay afloat. Competition, demands and innovation are the key aspects to sustain in the battle. But what are the aspects to be avoided? Shweta Iyer talks about the pros and cons of launching a new brand and tries to find a success mantra to survive in the industry through thick and thin

In India it’s a “Brand” New Story Everyday !

In the last few months India has witnessed a galore of newly launched brands and brand extensions leading to a surge in the marketplace. A recent report states 1,500 brand launches happened in the past 18 months, thus leading to three launches per day. Out of this only five percent make the cut. With the aim to make it big, they prefer to jump rather than take baby steps, resulting in failure of their brand identity. Every sector including FMCG, telecom, retail, lifestyle, electronics and automotive has one new launch to its credit, every single month.

Slow and steady wins the race

Big retailers to small time investors and international brands foresee India as the biggest retail hub. Many brands feel that Indian audience welcome every new product in sundry. With exhaustive thesis, c o n s u m e r s t u d y a n d o t h e r researches, new brands have their retail theory in place but yet fail to make the mark. “One of the enduring marketing myths is that a new brand that will eventually become a big brand has to take off in a hurry. And that a marketer should devote enormous resources to assure a rocket-ship launch. Taking it slow by understanding the pulse of the audience should be the prime objective,” says Johnny John, coo- World Player from SKNL. Each category is different from the other. For instance: FMCG is faster than apparel while hi-tech machines win over automobiles. Dedicating time and being patient as the brand grows is crucial for any retailer. And for c r e a t i n g a b r a n d i d e n t i t y,promotions, campaigns, offers and discounts, and other advertising gimmicks are equally important.

Take Microsoft, for example. It might be hard to believe, but the brand took quite a long time to get off the runway. Microsoft took ten years to exceed $100 million in annual sales. Wal-Mart took 14 years to break $100 million in annual sales. Today the brand has become the world’s largest retailer. The turning point for a new brand comes when slow initial sales suddenly accelerate towards the mass market. The largest, most powerful brands, the brands that have stood the test of time, are the brands that have taken off slowly. The brands that take off rapidly like a rocket ship usually turn out to be fads. Big Bazaar opened its first store in 2001. Being the first departmental store that offered everything under one roof, Big Bazaar is the most successful retail venture in India. According to a report, “starting 2008 with six million square feet of retail space and stores in 51 cities pan India, they ended the year with over 11 million square feet of retail space and over 1,000 operational stores across 63 cities and towns and 65 rural locations in India. They opened 25 Big Bazaar stores in 2008 and carried the total store count to 104. The company saw a 52 per cent increase in its total income from ` 33.29 billion in FY 2006-07 to ` 50.53 billion in FY 2007- 08.” Today, Big Bazaar has 133 outlets across the country.

Missed the bus

Where there are success stories, there are also brands that missed the bus. The FMCG brand Marico had to withdraw the debut of its healthy snack – Saffola Zest – due to poor market response received. Marico has been trying to rework the flavor and taste for some time, following consumer feedback and is planning to re-launch the brand in next couple of coming months. The withdrawal from the market implies the company has not been successful in reworking the taste easily. Saffola Zest faced fierce competition from Parle Agro’s Hippo,Pepsi Frito-Lays Aliva and Parle Products Monaco Smart Chips. It is also planning to launch Saffola Oats in the breakfast cereal market in India,which the company is positive about.Reports stated, “The total market worth of the breakfast cereal is Rs 500 crore while the oats market is small with ` 120 cr and is rolling at 25 per cent yearly.” The other major players in this category include PepsiCo’s Quaker Oats and Bagrry’s. Kellogg’s is also a strong and dominant player in corn flakes, with an over 70 per cent share.

Maggi instant noodles, foods major Nestle’s flagship brand which has dominated instant noodles for nearly three decades, is losing market share on a monthly basis to newer entrants such as GlaxoSmithKline’s (GSK) Horlicks Foodles, Hindustan Unilever’s (HUL) Knorr Soupy noodles, Big Bazaar’s Tasty Treat, Top Ramen and several other smaller players, according to data by market research firm Nielsen. The data shows that Maggi’s share of instant noodles, on an all-India basis, across urban markets, has slipped consistently in the period between December’09 to July’10. While Maggi instant noodles (minus vermicelli) had a 90.7 per cent share in December’09, the share dropped to 86.5 per cent in July’10 on an all-India basis. A regional split of the data shows that Maggi’s instant noodles’ value market share has fallen across the east, south, north and west zones for the same period. Analysts say with new competition, Maggi’s market share is certain to get impacted.

New Brand Launches

Brand launches and extensions have been an integral part of any company’s expansion plans. Budgets are allotted taking care of brand p ro m o t i o n s a n d ca m p a i g n s . Innovation has been the watch word for any new brand for recognition and retail presence. Let’s have a look at few of the newly launched brands or products and their survival strategies.

S. Kumars Nationwide Limited (SKNL) – India’s leading Textile and Apparel Company with expertise in multi- fiber manufacturing launched its new apparel brand World Player in Andhra Pradesh. True to SKNL’s mission of catering to the entire spectrum of the socio-economic segments of the Indian market, World Player offers fashion solutions for today’s young achievers at the bottom of the economic pyramid. World Player by S.Kumars’ is the first brand devised and created for the lower-mid segment of the market who strives for excellence and quality of life. Talking about the brand strategy and promotions, World Player has followed aayaram gayaram culture while launching the brand. Launched in April 2010, the brand is already present in 650 MBOs across 300 different towns. The brand likes to take it slow and avoid doing too much too soon. For campaigning, World

Player sent a mobile van in various areas in South with small display of products, and to give touch and feel experience to the consumers, with contest inside. It got tremendous response as it allowed the customers to connect with the brand. According to Johnny, “Strong brand proposition is required, advertising and other things just amplifies it.

Innovation is something which Kurl- on has always looked upon, keeping this in mind they are coming up with new innovative folded spring mattress both in bonnel and pocket spring which will be introduced for the first time in the country and will be called “Athiti”. This can be folded and packed properly while being used as an extra mattress for the guest (atithi). Kurl-on, also introduces three new types of pillows being released in the market during this month including Stomach sleeper Pillow, Side sleeper Pillow and Pillow for pregnant women. The brand has recently entered furniture retailing. The range includes furniture for living, dining and bed rooms. A dealer network of 5500 across India, Kurl-on now has its wings spanning across 47 offices and 50 godowns strategically located all over the country.

D’décor, a premium home furnishings brand was started in 1998-99 and is recently re-launched in a complete new avatar. The brand flaunts Bollywood superstar Shahrukh Khan and his wife Gauri Khan as its brand ambassadors. “Having made our mark on international grounds in manufacturing, we launched an innovative business model in distribution in India which created paradigm shift in the distribution model in the home furnishings industry in our country. We wish to make even this step an equal success a s o u r m a n u f a c t u r i n g a n d distribution. We shall think of further vertical integration by means of shop- in-shops, franchisee or own stores,” shares Nikita Desai, lead-business excellence, D’décor.

W i t h a s t r o n g p r e s e n c e internationally, Valia Retail-the leaders in manufacturing and export of exquisite and high end textiles and accessories has forayed into the retail of high end home furnishing and lifestyle products, with the unveiling of its flagship store- Veaura- a home décor destination in Mumbai. The store presents a contemporary western and modern approach to home furnishings is spearheaded by Varun Valia. The brand also plans to open its store in Delhi and other metros in the coming months.

Provogue India plans to foray into the fashion watch segment by next month and is eyeing around ` 20-25 crore revenue from this business over the next 18 months, said a top company official. “We are entering the watch segment next month and plan to launch 20 models initially. The watch category in India is growing fast. We will initially start with the top five metros and then move into other cities. We have a manufacturing contract with Fossil and the products would be manufactured at its Himachal unit,” said Akhil Chaturvedi, director, Provogue India. Currently, there are 120 Provogue stores and the company plans to add about 75 more in the current fiscal.

Tata International, the overseas trading company of the Tata Group has decided to enter footwear retailing. Tata International, a manufacturer and trader of leather products, makes shoes for several known global brands including Escada and Hush Puppies. Tata International will sell the formal and fashion leather shoes under its own brand, the sources said. Big retailers such as Reliance Retail, through Reliance Footprint, and Future Group, which has tied up with UK- shoe retailer Clarks, too have ambitious plans for its footwear segment.

Catwalk plans to extend the EBO from purely company owned to the franchisee system to reach out farther and across the length and breadth of the country. To achieve this goal of exponential growth

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Importance of brand building and expectations from the new brand
Context, Consistency and Constancy are three critical components of brand building. First of all, a brand must be relevant to the customer’s context – it may be very well to use phrases such as “selling ice to Eskimos” as examples of salesmanship, but for a brand to take hold and grow, its relevance is the most important factor. For instance, cold breakfasts, energy drinks, and snack bars were irrelevant to most Indian consumers’ context only a few years ago, even though they were very popular elsewhere in the world. As the relevance and acceptability has increased (especially to globally connected young consumers) the context has become more favourable to brands selling these products. Secondly, a brand must stay consistent to its values, the message and the benefits it offers. If there is lack of consistency across the media, or across sub-markets, or over a period of time, the brand is typically weaker, and it takes much longer and much more funding to build. Thirdly, it is important to keep the brand visible at regular intervals, rather than investing in very high visibility at one point of time, and then virtually disappearing until the next burst.

A brand’s performance needs to be judged on internal benchmarks as well, not just external (industry) comparisons. Success for one brand may be market penetration, for another it may be the aspiration value and the premium it can charge over competing brands. Good brands are seldom built in a short period of time. So it is really a personal call of the brand owner/manager to say what defines “success”, what time frame to allow a brand to succeed, and whether and when to pull the plug on a brand. Finally, success (or failure) is very dynamic: established brands can die, and sometimes dying brands can be revived or transformed. One example of this dynamism is Burberry, that went from fuddy-duddy to highly fashionable, to then being associated with juvenile delinquents, and then to being upmarket again.

By Devangshu Dutta, chief executive-Third Eyesight

advertising and local promotional activities will play a key role. Catwalk plans to have store launch activities, outdoor activities, brand building activities and is also looking to utilize the viral marketing tool (social networking websites, etc) for effective brand communication strategies. “Along with quantity we believe quality should not take a hit and hence we would continue investing time and money into our IT systems, so as to ensure smooth and efficient growth,” shares Rahul Doshi, business planner-Corporate Strategy, Catwalk Worldwide Private Limited. Talking about the competition and sustaining in the market, Doshi adds, “The major competition for Catwalk comes from the unorganized market. Influx of international players is also being keenly watched here at Catwalk. The brand knew that sooner rather than later, the organized sector would generate interest from the international market and hence has a l ready employed customer engagement activities. Understanding the market dynamics When launching a new product, it is not enough to understand how the product is performing. It is equally important to know who is buying, where the volume is being sourced, and whether the product is attracting new or existing category buyers. India being the emerging hub for new brands and extension lines is comparatively better than markets in the West. The growing market for organized products is on a high. And, as the modern trade evolves, the need for organized products segment is likely to grow.

According to a report prepared by milk powder (WMP), ice cream mix retail and management consultancy powder (ICMP), butter and ghee, Technopak, organised retail in India is both in bulk as well as in consumer likely to touch 25 per cent in the next packs. Future Group has launched 10 years from the current 5 per cent. “Ektaa” brand that offers a range of In the FMCG sector, Kwality Dairy food products from diverse India Ltd (KDIL), manufacturer of a communities of India. With the wide range of dairy products has launch of Ektaa, customers can opt launched Dairy Best Ghee. KDIL’s for authentic native Indian foods product range also includes all SKU’s procured from the best growing of pure ghee, skimmed milk powder areas.The first product to be (SMP), dairy whitener (DW), whole launched in this series is popular variants of rice from different states of the country. At the beginning – the new branded rice would be available in five variants – Red Matta, Sona Masoori, Govind Bhog, Ambe Mohar and Basmati. The five variants of Ektaa rice will be available in packs of 1 kg and 5 kg, across all the Big Bazaar/Food Bazaar stores in the country. The brand plans to launch a series of product launches like wheat, regional spices, pickles, papads in phases, giving customers a large basket of community foods to choose from across the formats.

Being ready with the new product is not the only criteria as mentioned before. Promotions and constant innovative retail strategies allow the consumers to touch and feel the product. For instance: Big Bazaar’s ‘Shubh Mahurat’ programme was started with an aim to launch new device named BlackPad. The new importantly, they must deliver on tablet PC will feature a seven-inch those promises/value propositions. touch screen and one or two built-in Leading brands have a highly cameras, apart from Bluetooth and compelling brand promise and broadband connections. However, it ensure that the promise is delivered will only be able to connect to cellular at each point of customer contact.

products for its consumers every month. After ‘Tasty Treat Cereals’ and ‘Milestone Strolley Bags’, the retail giant recently launched Minute Maid Nimbu Fresh. Such unique offerings allow the customers to indulge and have a refreshing experience. Also, add the promotional initiatives like “Juna do naya lo”, “sabse sasta din” and “maha bachat sale” that allured customers to splurge. Developing new products requires effective ways to minimize risk and maximise gain. New ideas need to be thoroughly tested and evaluated to reduce risks and helps fine-tune the marketing mix before launch. The key issues range from idea generation to proper marketing. In the electronic segment, BlackBerry manufacturer RIM unveils a tablet

networks through a BlackBerry smartphone, said the report. Apart from Blackberry, Motorola also plans to launch a tablet PC, as is the case of Samsung, which is entering the tablet PC market with Galaxy Tab. Dell has already debuted its Streak tablet computer, while Asustek, Acer, Lenovo and Cisco are also planning to enter the race.

Expert take

All the leading and established brands feel that the customer is a very important entity. It is mandatory to fulfill the needs, wants, desires and aspirations of discerning audience. Brands must make promises to their customers. They must promise relevant, differentiated benefits. They must offer unique value propositions. And, even more

According to Johnny, few of the factors to be kept in mind while launching a brand includes: “ Calibrated approach, target consumer and brand positioning, be extremely reactive by adapting to the market demands. Along with the stated tips ensure that retail infrastructure in place, this will help in launching a new brand with ease.

Brands are personifications of organizations, products, services and experiences and they are the source of relationships. It is important to implement the strategies shared by the successful leaders to make your brand story a success! Go ahead and follow the guidelines and make the cut!

Source: Storai

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Of Immortality and Reincarnation

admin

September 20, 2010

Written By Devangshu Dutta

Source: Images Yearbook