The Case For Indian Food & Fmcg Companies

BY IMPACT Staff

What goes into the making of an Indian FMCG company? This question posed to leading FMCG company heads - Ajay Gupta, MD, Capital Foods; Varun Berry, MD, Britannia Industries; Neeraj Kakkar, CEO, Hector Beverages; S Raghunandan, CEO, Jyothy Laboratories; Devendra Chawla, Group President, Food & FMCG, Future Group and Santosh Desai, MD & CEO, Future Brands - at a Future Group-organized forum in Mumbai fielded crackling answers.
 

The debate on ‘Building an Indian Food and FMCG Company for Next Generation Indians’ - moderated by author and marketing guru Rama Bijapurkar - threw light on India’s strong food culture, why being desi is cool, how Indian FMCG companies score over foreign MNCs and why differentiation is the need of the hour.

Here are some excerpts from the insightful debate:

Rama Bijapurkar: Is it xenophobia and hegemony that has us saying that Indian consumers of food and FMCG are better served by home-grown companies than by MNCs? Or is there something that MNCs really like to serve the Indian consumer?

Ajay Gupta: India has a very strong culture and in countries where the food cultures are strong, multinationals have never grown business, they have only come later through acquisitions. For us at Capital Foods, we are beginning the journey in food processing. The next level of work is going to be ‘Made in India’ by Indian companies, for no other reason but that we are more to the ground and are very pro-active in dealing with what the consumer wants. My products are foreign-sounding but what I actually produce is very desi.

Rama Bijapurkar: Is there anything structural, behavioural or something in the DNA of foreign multinationals that makes them conquer this market?

Varun Berry: What multinationals bring to the table is experience in multiple countries, a formula which works across the world. That’s a strength and that’s also their weakness. They seem to have the formulas right and they want to do that with India as well. Sometimes it doesn’t work because Indians have different tastes. We want everything to be made in India. Foreign MNCs have many levels, regions and support centers and take a long time to take a decision. Decisions are taken very quickly in Indian companies and we understand the Indian consumer a lot better than what formulas bring to the table. That really makes a difference.
 

Rama Bijapurkar: Do you think Coca-Cola would ever do a Kala Jamun, Shikanji, Jal Jeera… what stops them?

Neeraj Kakkar: Foreign companies push brands which have worked for them in other countries and don’t want to dilute those brands by launching variants which are not to the core promise of that brand. They are capable of launching Indian variants, but they choose to focus on what is working well for the brand.

Devendra Chawla: If you see the brands which are very big today in the world, they were built through stories and communication within a modern society. These brands were present in their own countries for many years where they became large. When the market became large in their country, they stepped out. In the 80s and 90s, there were no big Indian brands and you picked up imported brands to add to your self-esteem. It also depends on the nature of the evolution of the country and consumer. India’s time has come now and the coming generation will have no hangover of the earlier generation. The way India now builds brands in food will be very different in the next 20 to 30 years than what it was in the 80s and 90s.
 

Rama Bijapurkar: So is Gen Next going to actually go back to the global brands or towards the Kala Jamun, Shikanji and such innovations?

Santosh Desai: Food is evolving with generations and with time. We came from a time where food was embedded into our culture and was part of where we came from. Now we are stepping out of those pigeon-hole identities, and finding new sources of identity. An individual is now saying I pick up a little bit from where I come, a bit from what I am influenced by, what I see around myself and what I am excited by. The younger generation is looking at food as an expression in a variety of ways. From a time of very strongly defined view of culture to an open view of culture, that’s the journey we are undertaking right now.
 

Rama Bijapurkar: So we all agree that consumer India is really waiting, wanting to experiment, wanting to express itself…

Varun Berry: The evolution happening in the country today is of a very different magnitude. Today’s consumer is a completely different consumer and tomorrow’s consumer is going to be even more different. What’s going to happen in the next decade is dramatic. The cell phone that the consumer has in his pocket will probably have more computing power than the entire marketing department. The information that the consumers have today is immense; it is unlimited and despite that, they get bored.

Rama Bijapurkar: How do you look at it from a non-food perspective?

S Raghunandan: Indian consumer companies have tried to carve out their own niche. Dabur has the natural niche, Marico has the hair niche and Godrej has a niche in a multi-product space. Coming from a non-food category, my company Jyothy Labs is one company that is fighting mainstream battles with multinationals in a mainstream category and is a challenger to the multinationals. There is a huge mindset issue in terms of fighting the MNCs. A lot of guts are required to differentiate in mainstream categories because without differentiation, even if you have lots of money, you are dead.
 

Santosh Desai: Detergents are not part of culture the way food is. Because food habits are so fragmented in India, regional companies have evolved and there is a certain path to follow when it comes to scaling up. It is not that multinationals have built massive food brands. It’s not that there is a multinationalversus- Indian fault-line as much as there is a food versus other category fault-line when it comes to scaling up.
 

Devendra Chawla: Why haven’t Indian brands become larger? Actually they have, only if someone else owns them. Thums Up today is one of the largest cola brands and it changed hands. The juice market is a Rs 7,000-8,000 crore market but 80% of the market is just one flavour – mango. Maaza was launched 40 years back and is the single largest juice brand in India, now owned by a multinational. The other flavours make up the remaining 20%. Today, the ecosystem allows access to funding and hypothetically speaking, if Thums Up had not been sold, it would have funding and become the largest brand in India. Big brands also have large resources when they come to India and they spend a lot more. But in India, we have come quite far and you have to give it time - from companies which came in and invested a lot versus companies that are starting now.
 

Rama Bijapurkar: Compared to the potential, why do we not have a much bigger food category in and around biscuits and cookies?

Varun Berry: Biscuits are a wide bottom of the pyramid kind of consumption category. It’s an easier category to develop and create more premium products. But there are some very distinct categories which didn’t exist earlier, like noodles, where entrepreneurs have created new categories. Milk, biscuits, bakery - all that existed and developing higher needs in terms of premium products is much easier and we are moving in that direction. Funding is required for a business to become larger. Once that happens, once you cross that threshold of the initial stage where you get to a certain cash-flow, then it starts to roll. As a company, we are at that stage where you got enough money sitting in the bank for us to invest in the business.
 

Neeraj Kakkar: If Indian companies don’t invest in Indian foods, then the Indian market will be overtaken by noodles and pizzas and burgers at some stage. Because of Indian tastes, if Indian companies invest in Indian food, it has a much higher chance of success versus a foreign food company in India. You see food migration in our daily life. For example golgappa, a North Indian dish, is getting sold in Bangalore and momos are now a mainstream brand of Delhi. If Indian companies invest in Indian food, then the migration from one region to another becomes mainstream.

Rama Bijapurkar: We see so much food vibrancy in the streets in India. From the small shops in the streets, the mithaiwala who has everything that you would imagine, including 10-15 kinds of pickles and so on. If you look at the innovation that even your pani puriwala and chatwala are doing everywhere, why do we not see that degree of innovation in big companies? The street has it.

Ajay Gupta: Four years back, my daughter ordered schezwan dosa at a roadside stall. When the dosa came, I loved it and being from a food company, I walked up to the stall to see what the man was doing. Three days later, we created the schezwan chutney internally. Schezwan chutney doesn’t exist anywhere in that form and is a Rs 100 crore business in three years time. It’s a challenge taking it across the country, which we are doing. Food is moving on its own and innovation is happening at the consumer’s end. What the manufacturers or marketers find is a trend that is going mass and then put it together.
 

Rama Bijapurkar: How do you see the future unfold? Do you see all this resonate with non-food FMCG or is that market completely different?

S Raghunandan: From a non food perspective, India is still a big mass market and the top 70% market-share in most of the categories are the top three or four brands. The problem lies in the balance 30%. The bottom 15% is all about value, about being cheap and consists of value-led brands. What happens to the 15% that is left? The number of brands which are able to create niches in this category outside India is far more than what happens in India. Clearly, what India needs is mass market innovation at the mass market level. At a fundamental level, you need more differentiation which is where Indian companies need to measure up and look at differentiating themselves in the mass market categories. What’s required in India is functional products in a premium consumer goods space. A lot of functionalization, a lot of real delivery is required in the premium end. Multinationals, because of size or price constraints, may not really do it even though they have the answers. That’s another opportunity for Indian entrepreneurs to actually differentiate.


By SIMRAN SABHERWAL
 

Tags : Impact Feature