Category — Retail

When I immigrated to the United States, one of the snack foods I began to enjoy was microwave popcorn. My American born kids grew up with it during their elementary school years. But we missed it on trips back to India. Some time ago, we began finding ACT II popcorn on the shelves in major Indian cities. This is a product of Nebraska-based giant ConAgra Foods, Inc. and they entered the Indian food market  via a minority investment in India’s Agro Tech Foods Ltd (ATFL).

A few weeks ago, ConAgra   became the majority owner of ATFL) increasing its ownership of shares to more than 50 percent, through the $10 million purchase of existing shares from a third party.

“ConAgra Foods has enjoyed a strong partnership with Agro Tech Foods, dating back to 1997, and we believe strongly in its business model and leadership team,” said Gary Rodkin, CEO, ConAgra Foods. “Expanding our International business is a key part of our strategic plan, and India represents an attractive growth market for ConAgra Foods. We will continue to work with Agro Tech’s management team to expand its business and our investment in this important region.”

Agro Tech Foods is a public  company that markets food and food ingredients to consumers and institutional customers in India. The company’s products include Sundrop branded edible oils, shelf stable pudding and peanut butter, Crystal branded sunflower oil, Healthy World branded dried green peas, and, based on a license from ConAgra Foods, ACT II branded popcorn.

What this means

Sicne Agro Tech Foods has enjoyed consistent EPS growth for the last five years,  from 6.60 rupees/share in 2007 to 13.04 rupees/share in 2011 and since the company reported an 11 percent increase in net sales, and a 26 percent increase in profit after tax, it was not a bargain buy for ConAgra. But I think it is a sensible purchase given the projected growth in consumer packaged food sales in India over the next decade.  The middle class population and the spending per capita are rising to create a virtuous spiral that your company should probably also consider!.

China allowed Foreign Direct Investment  in multi-brand retail in 1992, but only in six major regions and cities, and limited foreign ownership to 49 per cent. India seems to ready to follow a similar approach now, but allow 51 per cent FDI for companies such as Walmart and Tesco. (Single brand retail stores such as those for Levi and Reebok are already permitted and FDI up to 100 per cent is allowed in “wholesale cash-and-carry” stores which are not supposed to permits access to consumers).

According to the Business Standard newspaper, the six chosen cities will be Delhi, Mumbai, Kolkata, Chennai, Bangalore and Hyderabad. “The decision in favor of a ‘calibrated’ liberalisation, keeping other cities out, is on account of political concerns regarding the impact of the opening up of multi-brand retailing to FDI on small retailers.”

Additional conditions may also be imposed:

• While FDI up to 51 per cent is proposed, state governments may get the power to decide if they want to allow foreign retailers to open front-end stores in their cities.
• The policy also says at least 50 per cent investment should be in back-end infrastructure.
• 30 per cent manufactured products should be sourced from domestic small and medium enterprises.

What this means:

The Congress-led coalition government is edging slowly toward letting foreign retailers participate in the India market but the list of conditions is  going to create plenty of employment for state and federal bureaucrats, as well as for attorneys and advisors. I hope some of these regulations are released well in advance of the next elections so that they have time to play out prior to any possible change of government.

After launching the drink, Tang, earlier, American giant Kraft Foods has introduced the  Indian version of its iconic Oreo cookies into India’s vibrant “Biscuit” market. The price will be suited to Indian pockets. While the imported Oreo costs Rs50 for a 14-pack ($1.10) , the ‘Made in India’ ones will be available from Rs5  (11 cents) a for a three pack and Rs20 (22 cents)  for a larger pack. Indian media says that they will be supplied by Jalandhar-based Mrs Bector’s Food Specialties.

Advertising for Oreo in India is being handled by Interface Communications even though Kraft subsidiary Cadbury India uses the Indian arm of Ogilvy & Mather. The television commercial features the bonding shared by a father and child while eating an Oreo biscuit. The ‘Twist, Lick and Dunk’ ritual forges an emotional bond between the two as they enjoy the biscuit while sharing fun filled moments.

The launch of the commercial is backed by  outdoor activations in six cities – Mumbai, Chennai, Bangalore, Hyderabad, Delhi and Kolkata. The campaign will extend to on-ground shopper activation in malls, amusement parks, multiplexes and modern trade outlets to engage with families, complimented by a digital campaign:  website and Facebook page.

While the pricing and sourcing is Indian, the company is relying on trusted global themes to appeal in India. Anand Kripalu, President – South Asia & Indo-China, said, “Oreo is more than just a biscuit. The ‘Twist, Lick and Dunk’ ritual, which is an integral part of the brand, has brought fun filled moments of bonding to countless families across the globe.”

Discussing longer  term plans in India Kripalu clarified that “as categories we will focus on confectionery, that is, chocolate, gum and candy, powdered beverages and biscuits. Dairy is a different animal. We are not going to divert focus for now. Our hands are full.” He referred to the parent company’  Kraft’s “5-10-10” game plan for emerging markets, which is about five categories, ten power brands and ten markets. These five categories include chocolates, gum & candy, biscuits, coffee and powdered beverages.

The power brands are Jacobs coffee, Tang, Oreo, chocolates Lacto and Milka, Cadbury, Trident gum, Halls candy, Biskuat (a cookie)), and Club Social, a snack brand. The ten markets are Brazil, China, Russia, New Zealand, Australia, Indonesia, South Africa, Poland, Ukraine and Mexico. With four power brands from the 5-10-10 portfolio already present in India,  It is to be seen whether some more from the list makes their way to India. Kripalu isn’t dropping names for now. He simply says, “The 5-10-10 philosophy is a guide. We have much work to make the current launches a success.”

Takeaway: While PepsiCo’s Kurkure snacks have taken a totally Indian approach for market entry, Kraft is right to bring some core values of the Oreo experience  (families, fun, moments spent together) to India.  Let’s watch and see how Indian middle-class families respond to this appeal.

Amidst swirling rumors that Apple will be launching an iPad 2 in the US shortly, the company brought the iPad to India in a surprisingly quiet January launch. After a wait of over 9 months, Indians were unexpectedly diffident to a product which has otherwise captured the imagination of consumers worldwide.

Most believe this is to do with the news of an upgraded version -could it be that Apple is unloading excess stock a sets its sights on launching its newer products in the US. In a market where 9 months can herald a number of new products and technologies, some in India think that this is a fair question.

The iPad retails at a higher price in India than it does in the West; the  16GB Wi-Fi version, which sells for $499 in the US,  is priced at $609 in India (27,900 Indian rupees). One would have thought that Apple would learn India  pricing strategies after it failed to make its mark with a higher priced iPhone that could not threaten Nokia’s dominance in that country.

There’s an additional factor which may be contributing to this distinct lack of enthusiasm. The Samsung 3-G enabled Galaxy Tab, iPad’s closest competitor has already been available on the market for a few months, and at a more affordable price, it has the potential to reach a wider audience. With the launch of iPad, Samsung has slashed its own prices.

Can Apple meet the needs of the Indian market while they are already rushing to fulfill orders in the West? Retail stores in the larger cities of Delhi and Mumbai feel they might not, should there be a sudden surge in demand.

While there may be many sitting on the fence as the tablet wars rage around them, some companies have already seen the benefit of harnessing the iPad as a serious business tool. They range from SAP, a leading software solutions company, to the Fours Seasons Hotel and private hospitals in the major commercial cities. Tablets  are potentially even more attractive in India where desk space is at a premium and mobility is highly valued.  The iPad has a lot going for it – sophisticated looks, recyclable aluminum and glass bodies and a custom-designed 1GHz A4 processor. In addition, it’s hard to beat the 40,000 applications on the App Store.

The operator of Crossword, Mothercare, M.A.C. and HyperCity stores  said that its sales for the last quarter rose to $101 million, an increase of 20 percent. Same-store sales, a measure of growth based on sales in stores that have been open for at least a year, were up 22 percent according to Govind Shrikhande, managing director, Shoppers Stop which is part of the K Raheja group of companies.

Rising retail sales in India are cause for optimism for foreign retailers as well as foreign CPG companies, both categories looking to expand their presence in India.