Global product, local flavour


Director, Banyan Tree Advisors

December 20, 2011

Companies that tweak their products to suit regional tastes are likely to do far better than those that rest on their existing portfolios.

PROBABLY THE single biggest change in corporate circles over the past decade has been the shift in focus from ‘globalisation’ of products to ‘regionalisation’ of products.

You may recall what happened in that seemingly long-ago time (but actually only a decade ago) when Coca-Cola bought out Thums Up in India. The purpose of Coca-Cola’s purchase was purely to use Thums Up’s distribution network for its own use–something that seemed to be common sense at that point in time. It completely stopped promoting Thums Up and tried to push Coke. But over the next few years, Coca-Cola found that this was one time when the phoren label wasn’t going to win hands down and that Indian customers actually wanted Thums Up back. In the interest of profits, Coke was forced to focus on Thums Up. Which is why we see today Salman Khan hopping from town to town in those whirlybirds and asking giggly teenagers to “grow up to Thums Up”. And which is why Thums Up is the No. 2 brand in its category. If Coke had promoted Thums Up in those initial years, the chances of Pepsi being No. 1 might have been remote. (By the
way, India is the only large market where Pepsi is larger than Coke.)

A similar story happened with P&G and Godrej. Godrej was drawn into thinking P&G would lead its products, but unfortunately, most of its brands, except perhaps for Cinthol, were completely killed. P&G, in the meantime, decided to wash its hands of soaps in India. Its leading brands today, like Vicks, are all home-grown products, so to speak. If only it had supported the Godrej brands, P&G would today have been a strong contender in the soaps market.

This story is not restricted to brands. When MTV was launched, it had a staple diet of English songs–and about 300 visuals a minute for those with short attention spans. But then it found that its viewer ratings were simply not picking up. Now, that self-same channel actively supports the rapidly growing Indi-pop industry. The same has happened with the automobiles market, where almost every contender has been forced to introduce vehicles that are better suited to weather the rough Indian terrain.

The point I am trying to make is that corporate success depends upon how well companies manage to deliver what the customer wants rather than thrust down their throats what they don’t need.

The debate is probably most intense in the packaged food industry. Britannia is actively trying to convince customers that cheese is good for them; but most Indians consume milk in the form of paneer, milk and curd. In Switzerland, however, cheese is almost a staple. The Indian cheese market is less than Rs 200 crore, while the milk market is probably about Rs 30,000 crore.

I assume that companies such as Amul and Nestle will enjoy better growth opportunities from packaged milk and curd than by trying to convince people to eat cheese. In fact, it looks like Hindustan Lever has read the writing on the wall and plans to enter the paneer segment. Another example from the food sector: the market for packaged atta is growing at a rapid pace–and is supposedly much larger than the market for sauces.

The readymade garments industry is also facing a similar dilemma. While men’s wear (the Louie Philippe variety) is doing well, the women’s wear segment is struggling. The problem seems to lie in the fact that the vast majority of Indian women prefer the salwar kameez to Western outfits.

The bottomline is that over the last decade, companies have found to their cost that Indian consumers do not accept just about any product that has worked abroad. The products need to be fined-tuned to suit Indian conditions and tastes. This trend is most likely to intensify over the next decade and those companies that fine-tune their products to the Indian palate are bound to do well–and become great investment opportunities.

Personally, I’m looking forward to a time when the regionalisation of products makes available a range of interesting products–and I’m not talking here merely of investment avenues. The bowling alleys that you see all over our metro landscape don’t fascinate me one bit. What I would like to see are batting alleys: I’d love to be able to face a computer-simulated Glenn McGrath special delivery and see if I can score a boundary off him. Yes, I’d love that!