Tuesday, November 30, 2010

A curious case of Autorickshaws and Kiranas!


The prepaid queue at the Bangalore City Railway Station was long, but we decided to wait patiently instead of choosing one of the touts who were continuously stalking us. After all, many auto drivers have been waiting patiently notwithstanding the early morning chillness for their turn to pick up a customer at the prepaid counter for a long time. In our city like many others, the night fare (10 pm – 5 am) is usually 1.5 times of the normal and is quite well accepted. So the prepaid fare to my house was Rs. 200/- as against the more luxurious Meru Cab which we took during the onward journey that cost us Rs. 350. While sitting in the auto this morning, I was thinking about need and necessity. At 5am, all we needed was a transportation to reach home safely. During the peak hours last Saturday we had chosen a taxi – we had time at our disposal and didn’t mind paying a bit more for the comfort of a/c during the day time. Is there a lesson or two, I was guessing if one had to compare autos and kiranas. Just after sometime, the headline of a leading English newspaper claimed that 15,000 additional autorickshaw permits were being issued shortly and the total number of such vehicles plying in the city would touch close to 95,000 vehicles!


That’s a lot for a city of size of Bangalore, many would argue. I disagree a bit. It is based on the age-old principle of demand and supply, according to State Transport Commissioner Bhaskar Rao. The power of permit makes the auto driver a ruler. We need more autorickshaws to reduce the nuisance. Liberalising the over-regulated permits will no doubt increase their numbers on road but the good part is that it will also increase options for the commuting public. Auto drivers will have to oblige then, he said. Quite true. In the long run, with personal mobility becoming a compulsive habit and the acceptance of public transport as a sustainable and viable mode of commute, Autos will become more of fillers – running short distances and acting as the last mile connectivity – be it from bus stands or Metro stations while taxis could turn out to be the preferred mode while travelling from home to airport or railway station.


Cut to the real Retail Story. In spite of the increasing number of Organized Retailers, especially in the food, grocery and household segments, it’s quite common to see so many Kirana Stores coming up in smaller neighbourhoods. As is the case of “Bottom of Pyramid”, the consuming class is right there and is expanding its base as well as its propensity to consume. They are moving upwards from the Govt. run – Public Distribution Stores (PDS) to the neighbourhood kiranas whose regular clientele is moving towards neighbourhood Supermarkets, and in turn whose regulars are moving towards the large-format Hyperstores. However, all these consumers, when they need a pack of salt or sugar, vermicelli or Maggi, reach out to the neighbourhood kirana!


The case here is logical and comparable. When the product becomes a bare necessity, consumers would reach out to what’s close by and cheapest as a measure of time – the ubiquitous kirana while the monthly pantry filling or a weekend party shopping would be at a large format organized Super market or Hypermarket. The consumer is fully aware that one doesn’t derive the benefits of organized retail such as bulk discounts, buy one get one, and price-offs at the local kirana, but they know that time is of essence and hence reach out.

I have always remained a proponent of Retail FDI in the hope and faith that it would only do good to Kiranas as well as end users and consumers in the long term. Such anecdotes make our hypotheses stronger.


Long Live Kiranas; Long Live Organized Retailers!

Monday, November 22, 2010

Walk like an “Emperor”

“Show me your shoes and I will tell you how wealthy you are”, goes a saying. Indeed, it’s so true! This is one accessory that most Men care the least about. And the issue is specific to men. Women, as anybody would guess are so fond of their footwear and it’s also a coveted purchase for them. Men always had few choices – in India, in the early 80’s, it was Bata for “office wear”, and Power for “other uses”! The early 90s witnessed the entry of International Brands, initially through the grey market and then through Franchises followed by company owned stores. Today, the footwear market in India according to an IBEF Report is estimated to be USD 2.8 Billion! Since the dawn of the 21st century, the footwear market in India has taken a dramatic shape. There is fierce competition among the players and interestingly, prices have been steadily coming down, inflation adjusted. The Indian footwear Industry is expected to grow at 20% CAGR over the next few years. At present, the footwear market in India is dominated by Men’s wear that contributes almost 60%. Since the organized footwear industry in India has remained focussed on men’s shoes, the opportunity for retailing women’s footwear is enormous. At present, most women buy their footwear from nearby stores or mass markets with very few organized players such as Soles focussing on this category.

 
The Men’s footwear market can broadly be classified as formal wear (office wear), casual wear (evenings, outings, etc) and sportswear. While this definition is more to classify the categories, it isn’t followed so strictly by one and all, except for the urban male and a few of his counterparts in the smaller cities. The most popular, rather most advertised include “sportswear” and the target audience is clearly the youth and young adults. After all, it’s best to “catch them young, watch them grow”. And thereby Sachin, Dravid, Dhoni and various sportspersons, mostly cricketers are the brand ambassadors. Reebok, which has close to 1,000 stores (most of which are franchised) has a market share of over 50% in this segment – a rare feature when compared globally. The brand received phenomenal upcountry publicity after becoming the official partner for Kolkata Knight Riders in 2008, the IPL team owned by Shah Rukh Khan. One of the biggest strengths of Reebok is its design capability – apparently, the brand launches about 20 styles every quarter and prices start from Rs. 1,000. Adidas has remained focussed though – style and substance put together. While utility takes the cake, it is also known for its fashionable designs. Nike, the smallest player in the market yet among the big three predominantly focuses on various sports. Puma and brand digressions such as Levis & Provogue concentrate on the fashion segment. In the formalwear segment, Bata and its brands including Hush Puppies have remained the most popular across the country. Early 2000s witnessed brands such as Lee Cooper Gaitonde and Woodlands reach the masses with their popular designs and low-pricing. Florsheim, a late entrant took the market by storm due to various innovations including the stress free footwear range that starts from Rs. 5,000 onwards! The last among the batch seems to be Samsonite, the brand known for its sturdy luggages and suit cases which has been spreading its presence across the country. Footwear chains such as Metro & Mochi and Department stores such as Shoppers Stop & Lifestyle have their own private labels and are popular in the mid-segment which looks forward to latest styling at reasonable pricing. International Premium Brands such as Tods, Jimmy Choo and others have just entered the Indian market and have limited presence in major cities like Delhi, Mumbai and Bangalore.


So, what’s in it for consumers? To begin with, a wide variety and choice of pricing! There are over 20 Domestic and International Brands operating in India, right from the neighbourhood to the nearby malls or speciality shopping areas. From as low as Rs. 1,000 upto Rs. 6,000, one can find reasonable footwear to suit the various occasions and activities that one performs during the day. The same set of footwear may also be available at a 30% discount at Factory Outlets such as Brand Factory or MegaMart, although it would be 18-24 months into the market with its design and styling. On the whole, for a little extra care, one can walk literally like an emperor! Keep Walking...

Sunday, November 14, 2010

Much ado about noodles!

After much resistance, I finally tried the latest entrant in the market – Yipee from ITC. For the uninitiated, it is the brand name of Noodles launched by ITC Foods recently. While the launch saw a full page ad on Times of India a few days ago, the product was virtually unavailable at smaller shops. Reason: the brand had tied up with Food Bazaar for the launch, India’s largest Supermarket chain from The Future Group including the Retailer’s name in the full page Ad. JND – Just Noticeable Difference, taught my professor of Marketing at B-School was something that the brand had to do or rather outdo itself from competition. And that’s what Yippee has done too. To begin with, the name resonated with a start-up internet lookalike of Yahoo! Well, actually it isn’t obviously. Then, the noodle was a single twin cake, unlike others who have two cakes. And the most important difference was that it was not a cube! It was a small circular piece and looked different. The reasoning, according to many “experts” who follow this segment was that the Indian households cook noodles on flame and the “kadais” or the vessels that are used are also in the same shape. Well, the microwaveable vessels that are rampant at Supermarkets and Hypermarkets are no different – similar shape (if it was thought that consumers in the West used microwave to cook Noodles!). Well, Change is the only constant and so is the shape of the noodle.


But what makes Yipee different from say, Maggi from Nestle or Foodles from Horlicks? Nothing. All are noodles that are ready to cook and the category is getting increasing importance from marketers, brands and even Retailers so much so that this category is a favourite for many supermarkets to have their own private labels. The reason for this sudden popularity: in my opinion – speed of delivery. The 2 minute promise offered by Maggi two decades back won the hearts of many home makers and mothers and the taste of the wonderful product saw almost a generation growing up with the snack. I heard someone recently confess that during their hostel days, she and her friends would save some hot water (provided only during the weekends) meant for bath being used to cook Maggi in a vessel. Someone somewhere meanwhile founded “Cup Noodles” which needed just hot water to be poured in it to munch the snack readily. I know of someone else who has been having Maggi for lunch 2-3 times a week for many years now! Such is the popularity of snack that Maggi asked its “fans” to send their “Maggi stories” to the company and win prizes!

The only distinctive factors or rather THE factor among these many brands is “taste”. Now, this is a very subject topic, so to say. Taste, as they say is acquired by the individual over a period of time whether it is that of Coffee or Tea, Noodles or Dosa, Wine or Single Malts, Cigarettes or Cigars. So, when it is so distinctive, how come Maggi is almost interchangeably used for “noodles”? To a large extent, it is the first mover advantage that the brand enjoyed. Until recently, there weren’t too many similar brands in the space. There were ready to cook raw noodles from local players and then came Top Ramen from Nissin, Wai Wai and many others who wound up – atleast from competing on the shelves with Maggi. Nestle’s distribution strength ensured that Maggi was available right across the length and breadth of the country. In a way, Nestle changed the way we consume noodles. Maggi was the perfect “in-between” meal alternative for breakfast, lunch, evening snack, supper, late night, etc. (It is quite similar to the way Kellogg’s encouraged consumers to much Corn Flakes – but more about that later in yet another column).

There is fierce competition to conquer the mind space of consumers for top of mind recall of noodles by the brands. The good part is that the market is so large that the share for these brands would only grow in times to come. Look at the automobile market – ten years ago there were six brands in all and about 15 variants. Today, there are more than 20 car makers and over 70 variants and the market is only growing.  Maruti which had a market share of over 70% is still the market leader even today with every second car being sold in the country coming from its fold. But Hyundai, with its Santro made owning a car simpler, easier and affordable. I can imagine a similar state of affairs in this category too. Maggi was, is and will remain the undisputed leader, except that its share will reduce. Newer brands will bring more innovation (Read: Flavors) and the market would accept these changes faster. Who had imagined that a small pack of noodles, from the heartland of Chinese culture, popularised by the ever increasing faster lifestyle of the West would be stocked in almost every urban household today! 


The Head of Operations of a leading Supermarket chain (who requested anonymity since he is not the official spokesperson of the company) confirms that there is more than 50% penetration of noodles across the number of bills during the first week of the month when the pantry shopping happens. He also exclaims that the average pack size is 3 per bill which means the product would be for multiple uses or there are multiple users at home. Such facts only confirm the strength of the category! Whichever way, noodles are here to stay in times to come and the biggest beneficiary of the fierce competition is none other than “you” – the consumer. So enjoy the variety, happy snacking... 

Tuesday, November 2, 2010

A lot is happening over Coffee...


I remember very well my first trip on a Shatabdi Train. It was from Madras to Bangalore, an early morning train in Oct 2003. I was dressed in a blue tie with floral designs, a maroon shirt and grey trousers as I was heading for one of my first interviews after my first job at RPG Retail, where I had joined as a Management Trainee in June 2001. The urge to move into a larger role always persisted in me and during my younger days, I was more clueless about my career than I am today!  Back to the interview – I was heading to meet the big guys at Cafe Coffee Day, at that time considered as one of the upcoming promising retail chains in India, in the business of Coffee Retail. A new concept those days in India, there were hardly any coffee retail chains across the country – CCD in South, Barista in North India and a few local players, particularly Amethyst and Qwikys in Chennai. But for these, the cafe chains weren’t thought what they would be today – ubiquitous! Not that I had any F&B background or experience, except for the few months when I used to scoop Ice-Cream at the first franchised outlet of Baskin-Robbins in Chennai. The interview at Coffee Day went well, one round with the Heads of HR & Operations but for some strange reason I couldn’t take the offer.


I headed back to Chennai and in a few months joined The Future Group and came to Bangalore, with 4 bags of luggage and a heart loaded with wishes to make a great career and a happy living. Its over 7 years now since I have been in Bangalore and the rest, as they say is history. This column comes straight from the Club Mahindra Resort at Kangra Valley where I am camping for a short holiday. Dharmasala, seven km from here is famous for the Tibetan monastery and home of His Holiness Dalai Lama and also has a Cafe Coffee Day since early this year. I was proud to be there, with our boys who are providing great service to the hundreds of visitors and customers who pass by our cafe.

Cafe Coffee Day currently operates over 1,000 cafes across the country apart from outlets at Austria, Pakistan and Czech Republic. Started in 1997 as an internet cafe, the company has grown strong due to the vision of our Honourable Chairman VG Siddhartha and the hard work of the thousands of employees who have been with the company over the years, not to forget the strong consumer sentiment and the growing coffee culture across the country. Even as I celebrate my one year’s existence in this company today, I am extremely proud of what I have been doing over the months – to identify new cafe opportunities among Key Account locations across the country. Would like to thank my former boss and Director, Mr. Alok Gupta for identifying me for the job and for providing me the necessary resources and skills to perform in my present role; a big thanks to my colleagues and peers for supporting me all through; and of course a special mention and thanks to my most valuable team – I am almost nothing without their individual effort towards the success of our collective target. This is a humble “Thank you” for all that’s happened and that’s yet to happen – after all, a lot can happen over coffee!