By Shajai Jacob
McDonald’s, known the world over for its hamburgers, does not serve beef and pork in India. The global chain’s signature dish here is the McAloo Tikki burger, accounting for 25% of total sales. A good 70% of McDonald’s menu has been locally developed to suit the Indian palate. The quick service restaurant (QSR) player even made headlines across the globe in 2012 when it opened its first vegetarian outlet near a religious site in India.
Not only McDonald’s menu but also its pricing has been adapted to the Indian market. It is not alone, however, when it comes to need-based customisation. Late last year, India also emerged as Domino’s biggest market outside US. The pizza maker delivered about twice the number of burgers McDonald’s sold. In fast moving consumer goods (FMCG), Unilever has an edge in the country thanks to its strategy of allowing local markets to build their own innovation capabilities over the years. P&G, on the other hand, relied on superior products developed for sophisticated markets for a long time.
Driving Mr. India
Sometimes, the key to success could be market positioning too. Car manufacturers like Suzuki and Tata Motors have come to be known for their small-sized and affordable cars. However, when Tata Motors launched the cheapest car in the world – the Nano – with the objective of having the two-wheeler junta upgrade to four-wheelers and drive safely, Maruti Suzuki was in a fix. Perhaps finding it challenging to sell their big-sized or top-of-the-line models, the company has established a new chain of premium stores to sell such models.
Similarly, while certain models of Mercedes Benz are popular with taxi fleets in the developed world, only a few luxury hotel chains in India use them in their fleets. Foreign brands in India come with an aspirational value attached, not only in cars but also in something as trivial as coffee. For example, Starbucks positions itself as a premium coffee brand in India with stores showcasing the local culture and history, unlike in the US where most of its sales come from takeaways as people prefer to take their coffee to work. This underscores the fact that foreign brands must necessarily localise if they hope to succeed in emerging markets.
Housing The Indian HNI
In real estate too, local developers having international partners/ architects command a higher premium. As the number of ultra-high-net individuals (UHNIs) in India increases, branded residences are also gaining popularity. In this segment, developers join hands with globally reputed luxury hospitality or lifestyle brands to create unique and highly differentiated luxury residences. Branded residences obviously bring with them the advantages of these designer labels, along with highly aspirational addresses. In fact, the concept of branded residences now works like Swiss clocks in India.
Thanks to the influence of the partnering brands, which take their production values very seriously, such homes boast of professionally designed interiors and exteriors, top-in-class facilities management, concierge and valet parking services, and state-of-the-art electronic safety features. Such features have extremely high appeal value for affluent Indian home buyers who respond both to the status value and advanced conveniences of branded homes designed, marketed and often managed by international hospitality or signature designer brands.
Latching On To The India Story
With their international brand following and aspirational appeal, foreign brands can continue to succeed in India with localisation and capture market share, especially in the premium products and services’ space. However, they need to realise that while the psyche of Indian consumers turns aspirational, it will continue to remain domesticated.
People love to have Indian food even when they go on a Europe tour. They would prefer to eat a Gujarati thali in an Indian restaurant in New Jersey. Closer home, you may easily find a modular kitchen by Hettich in many a home, but it will be hard to miss the pressure cooker being used for cooking. Interestingly, this is the reason why dishwashers haven’t met the expectations their manufacturers had for the Indian market. To succeed in markets like India, foreign brands will need to follow the mantra of ‘think global, act local’ diligently.
Indians will continue to consume international brands at a fast rate, sometimes even beating the growth of local and national brands. Already, a report by British Bank Stanchart confirms that India’s economic growth in FY’17 is expected to be driven by consumption increasing on the heels of government employees’ revision in salaries. This would reverse the trend of FY’16, in which growth has been largely investment driven.
Indian brands too will see more ‘acche din’ ahead as they continue with their highly-localised offerings and package age-old favourites in new ways. Today, an Indian Yoga Guru’s consumer products brand ‘Patanjali’ is making global and domestic rivals sweat. Patanjali products are selling like hot cakes, with some news reports saying its 20 billion-rupee revenues this year could pose a threat to established, age-old Indian consumer brands. Home-grown retailer Future Group has aggressive plans to become a FMCG player.
Today, with domestic brands like Haldiram’s leading the Indian snack market and surpassing the combined sales of McDonald’s and Domino’s, it is a case study in itself for students of business schools. Moreover, Indian brands dominate the 2015 edition of ‘Brand Footprint’, a ranking of India’s most chosen consumer brands by IMRB Kantar Worldpanel. This shows how local brands are on a strong footing that matches their foreign counterparts. With the right moves, both foreign and Indian brands can maximise profits on the burgeoning Indian market and a growing aspirational middle class.
Shajai Jacob, Director & Head – Marketing, JLL India & Sri Lanka