Beruflich Dokumente
Kultur Dokumente
In This Perspective
With this issue of the Perspective, our fourth, we have completed one year from the time we launched in
mid 2009. As with earlier issues, this one covers a broad range of areas across the consumer space in
India, including healthcare, education, retail, consumer products, food, green buildings, and branding.
Our first piece, Game Change in Healthcare? highlights how interest levels and investment outlook in
the Indian healthcare industry have gone a few notches up with Fortis’ investment in Parkway of Singapore
and this may be a possible game changer in healthcare. Continuing with healthcare, our second piece –
Integrating AYUSH System in Healthcare Delivery delves into how traditional Indian medicinal systems
need to be successfully blended with modern healthcare facilities to create affordable health care in the
country.
The Indian education sector is undergoing a significant shift. In The Four A’s of Education, we highlight
that in order to meet the needs of the individual and the nation, reforms in the education sector must take
into account accessibility, appropriateness, affordability and accountability. Further, a brief on the regulatory
and legislative reforms in the education sector and their impact and implications on various stakeholders is
provided in An Update on Nine Significant Regulatory Changes in Education in India.
Branding in the T-20 Era captures how the growing awareness of brand-building as a science has led
to the emergence of new trends that are shaping the future of branding initiatives. On the retail front, An
Overview of India’s Consumer and Retail Sectors presents a brief re-cap of past events and trends
and a look at what the future may hold for retailers and consumer product companies.
India’s Emerging Hot Spots explores how the current and planned infrastructure led investments are
going to drive the emergence of future ‘hot-spots’ – new target locations for consumer-hungry companies.
We present some measures for turning ‘green’ in Green Building Concepts: An Approach Towards
Sustainability as adoption of green practices gains importance.
The constantly evolving apparel retail market in India presents a number of opportunities. Trends in
India’s Domestic Fashion Market highlights some trends and opportunities across various categories
from fabric retailing and affordable luxury retail, to retailing of sportswear, Indian ethnic wear and kids
wear. The development of infrastructure from highways, expressways to metro railway lines coupled with
modernisation of airports and railway stations across the country has opened many gateways full of
opportunities in travel retail. This is covered under Emerging Opportunities in Travel Retail.
With growth in the economy and changing lifestyles, food consumption habits of the Indian consumer
are undergoing a significant shift. We provide details on the newer market opportunities that this shift is
bringing along in India’s Food Vision: The Next Decade. Lastly, in An Indian McDonald’s Anyone?,
we examine how the time is ripe for entry of food services retail chains offering ‘Indian cuisine’ based eat-
out options as the market matures from ‘special occasion’ to ‘necessity-based’ eating out.
We hope you enjoy reading this Perspective and look forward to your feedback.
perspective
The current and planned infrastructure-led investments are going
to transform the Indian landscape and drive the emergence of
future ‘hot-spots’ – the potential targets for consumer-hungry
33
a quar terly repor t by Volum e 04 / 2010
companies.
Trends in India’s Domestic Fashion Market
Ashish Dhir, Priya Sachdeva, Ruby Jain
The constantly evolving apparel retail market in India presents a
36
number of opportunities across various categories.
84 About Technopak
perspective | Volume 04
a quar terly repor t by Vol u me 0 4 / 2 0 1 0
Author
Arvind Singhal, Chairman and Managing Director | arvind.singhal@technopak.com
Evolution of AYUSH 05
Emerging Opportunities 06
Government Initiatives 07
Challenges Faced 09
perspective | Volume 04
a quar terly repor t by Vol u me 0 4 / 2 0 1 0
AYUSH: An Overview
India, with its kaleidoscopic variety and rich cultural heritage boasts of some unique medicinal forms which
look at health, disease and causes of disease in completely different ways. Best known as Indian System
of Medicine or Alternative Medicine, its main focus is on holistic health and well-being of humans. The
demand for such a treatment approach and related medicines is increasing both in the domestic market
as well as internationally.
The Indian Systems of Medicine and Homoeopathy (ISM&H) were given an independent identity in the
Ministry of Health and Family Welfare by creating a separate department in 1995. Renamed the Department
of Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy (AYUSH, meaning ‘long life’)
in November 2003, the department is entrusted with the responsibility of developing and propagating
officially recognised systems – Ayurveda, Yoga, Naturopathy Siddha, Unani, and Homoeopathy. This was
done due to the explicit realisation of contributions these ancient and holistic systems can make towards
human health care. These systems have a marked superiority in addressing chronic conditions and offer a
package of promotive and preventive interventions.
Exhibit 1:
Systems of Medicine
Health or sickness depends on the presence or Treatment of the disease consists of avoiding
absence of a balanced state of the total body causative factors responsible for disequilibrium
matrix including the balance between its of the body matrix or of any of its constituent
Ayurveda different constituents. Both intrinsic and parts through the use of Panchkarma
extrinsic factors can cause disturbance in the procedures, medicines, suitable diet, activity
natural equilibrium giving rise to disease and regimen for restoring the balance and
strengthening body mechanisms to prevent or
minimise future occurrence of the disease.
Yoga philosophy is an art and science of living According to Yoga, most diseases, mental,
in tune with Brahmand-The Universe. It is a psychosomatic or physical, originate in the
science as well an art of healthy mind through a wrong way of thinking, living
Yoga living-physically, mentally, morally and and eating which is caused by attachment.
spiritually.
The basic approach of Yoga is to correct the
lifestyle by cultivating a rational, positive and
spiritual attitude towards all life situations.
Nature Cure believes that all diseases arise due Naturopathy is a system of healing science
to the accumulation of morbid matter in the stimulating the body’s inherent power to regain
body and, given scope for its removal, Nature health with the help of the five great elements of
Naturopathy provides cure or relief. A Nature Cure physician nature: Earth, Water, Air, Fire and Ether. It
helps in Nature’s effort to overcome disease by advocates the practice of drugless therapies
applying correct natural modalities and like Massage, Electrotherapy, Physiotherapy,
controlling natural forces to work within safe Acupuncture and Acupressure, Magneto
limits. The five main modalities of treatment are therapy, etc.
air, water, heat, mud and space.
According to this system the human body is a The Siddha system of medicine emphasises
replica of the universe and so are the food and that medical treatment is oriented not merely to
drugs irrespective of their origin disease but must take into account the patient,
Siddha environment, meteorological considerations,
age, sex, race, habits, mental frame, habitat,
diet, appetite, physical condition, physiological
constitution, etc. This means the treatment has
to be individualistic, which ensures that
mistakes in diagnosis or treatment are minimal.
The principle of Homoeopathy states that a In Homoeopathy, medicines are prepared from
medicine which can induce a set of symptoms natural sources like vegetables, minerals,
in healthy human beings would be capable of animals, etc. There is no toxic or poisonous
Homoeopathy curing a similar set of symptoms in a diseased effect of the finished products of Homoeopathic
state. In modern terminology this is known as medicines.
Human Drug Pathogenicity Study (drug
proving).
The major growth drivers for the surging demand for AYUSH are:
• Increasing awareness about the adverse effects of synthetic drugs such as steroids, anti-biotics, pain
killers, etc. has boosted the demand for medicinal herbs in domestic and export markets
• Herbal drugs have no adverse effects and are safe to use
• Herbal extracts and powders are comparatively cheaper than synthetic drugs and formulations
• Herbal medicine acts as an alternative for the segment that cannot afford Allopathic drugs with the new
product patent regime act and under WTO provisions
• India is seen by Western countries as a reservoir of medicinal herbs and their uses
Evolution of AYUSH
The Indian systems of medicine like Ayurveda, Homoeopathy, etc. enjoy age-old acceptance in Indian
communities. In most places they form the first line of treatment for common ailments. Classical AYUSH
medicines have been successfully used to treat many diseases for centuries. Of these, Ayurveda is the most
ancient medical system with an impressive record of safety and efficacy. It is thought to have originated
in Vedic times, around 5,000 years ago, and has evolved through intuitive, experimental and perceptual
methodology in India. The main objective of Ayurveda is to promote health and prevent ailments so as to
relieve humanity of all categories of misery-physical, mental, intellectual and spiritual.
Other components such as Yoga and Naturopathy are now being practised by young and old alike to
promote good health. Nowadays, the practice of Yoga has become a part of everyday life for most health-
conscious people. It has aroused a worldwide awakening among people and plays an important role
in prevention and mitigation of diseases. The practice of Yoga prevents psychosomatic disorders and
improves an individual’s resistance and ability to endure stress.
Exhibit 4:
Intiatives taken by Corporate Hospitals to Popularise the Traditional
System of Medicine
“The Indian system of medicine has faced many roadblocks due to the lack of sufficient research. We are set to carry out
scientific study on Ayurveda and other systems of medicine. Here, we are taking it up. We will conduct research in our
hospitals across India and come up with a database. After that we will offer willing patients these treatments. Once we provide
the scientific validation, we will set up a chain of Ayurveda centres to provide treatment for patients.”
Prathap C. Reddy, Chairman, Apollo Chain of Hospitals
“Medanta Medicity aims to functionally integrate within one campus and one management the facilities of medical care,
teaching as well as research and development. It also offers to explore the possibility of integrating knowledge of traditional
and alternative medicine with modern medicine, through means of scientific research.”
Some institutions are already working towards integrating the ancient system with the modern system of
medicine. Benaras Hindu University, Varanasi, is probably the first institution to conceive the idea of integrating
ancient and modern systems of medicine at the level of both education and professional practice. There
is a well-developed cross-referral system by which patients of fistula-in-ano, chronic rheumatic diseases,
residual psychosis and anxiety disorders, chronic colitis, IBS (irritable bowel syndrome), liver disorders,
degenerative brain diseases, neuropathy and terminally sick patients of all kinds who are declared incurable
and/or financially unable to afford modern medicine are referred to the Ayurvedic department by Allopathic
practitioners. However, owing to inadequate scientific validation, this system of medicine has not received
its due recognition. The traditional Indian system of medicine has now found new patrons in modern,
corporate hospitals like Apollo Hospitals, Aditya Birla hospitals, and Medanta, which are making efforts to
carry out research to establish the ancient system worldwide as a scientific system of medicine.
The integration of Indian systems of medicine at the level of treatment is yet to become popular and
operationalised among health care providers in many other health care institutions where the Ayurvedic
system is available. AYUSH offers treatment for diseases like diabetes, arthritis, obesity, depression,
menopause and high blood pressure. It has been proved that going to the roots of alternative medical
systems can prove a safe bet in the global market. It can also help people avoid hospital visits for simple
ailments and make treatment available with minimum side effects.
Ayurveda, Yoga, Unani, Siddha and Homoeopathy are today rationally recognised systems of medicine
and have been integrated into the national health delivery system. India enjoys the distinction of having the
largest network of traditional health care in the world, which is fully functional with a network of registered
practitioners, research institutions and licensed pharmacies. The Department of AYUSH made steady
progress during the year 2004-05. Emphasis was laid on implementing schemes that address the thrust
areas identified by the Department in consultation with the Planning Commission like upgrade of educational
standards, quality control and standardisation of drugs, improving the availability of raw material, research
and development and building awareness about the efficacy of systems domestically and internationally.
Emerging Opportunities
The widespread use of traditional medicines in India is expected to increase. It is now established that there
is tremendous scope for safe and quality traditional systems in wellness and preventive health. States like
Kerala that have an integrated approach in their health care system reflect quality health indicators across
the state.
As a result of increasing preferences for different systems of medicines and the need to curtail health
care costs, many countries are now grappling with the policy dimensions of accommodating traditional
and complementary medicines in the healthcare system. Commonwealth Health Ministers in 1998 formed
a working group on traditional and complementary health systems to provide guidance for integrating
traditional and complementary medicine into national health care as part of the broader agenda of health
sector reform. In some countries these traditional and indigenous systems have been implemented in
parallel with the modern system.
Western Europe, USA, Japan and Southeast Asia represent significant markets, and there is sizeable
potential for increase. India’s indigenous system of medicine or AYUSH is finding new interest amongst
people in the West. In the United States, as many as 42 per cent of people, are adopting ‘complementary or
alternative medicine’ (CAM) approaches to help meet their personal health problems. Arthritis (both osteo
arthritis and rheumatoid arthritis) is one of the foremost diseases for which patients seek complementary
or alternative medicine option. However, the requirement for registration based on clinical trials impedes
the potential for export of formulations, and many medicinal plants are exported in their crude form or as
food supplements.
Earlier viewed skeptically by modern medical practitioners for its lack of rigour and standards, alternative
medicine is now being viewed with more interest. Under growing pressure to curtail health care costs, the
FDA (Food and Drug Administration) and professional organisations such as American Medical Association
and American Association of Medical Colleges are now open to evidence-based CAM. With new surveys
showing that four in every ten people in the US have used CAM in the last year, insurance companies are
also recognising some aspects of it.
Government Initiatives
Mainstream
In India, most people belonging to different strata of society, primarily in rural areas, resort to Indian systems
of medicine, particularly Ayurveda, for health care. Due to its countrywide presence, easy availability,
affordability and safety, it has survived through the centuries and has been formally institutionalised
in modern India as far as education and service delivery are concerned. It has been integrated with
government health services at the central and state level and is currently being given a further impetus by
the Government. The National Population Policy 2000 recommends mainstreaming of Indian systems of
medicine into the national family welfare programme. According to the Planning Commission, the primary
reason for integrating Indian Systems of Medicine (ISM) with Allopathic medicine is to resolve the acute
shortage of qualified doctors being faced by our health care system.
The involvement of AYUSH in the national health care delivery system including reproductive and child
health was also given a thrust in keeping with the strategies laid out in the National Policy on AYUSH,
2002.
The National Rural Health Mission seeks to invigorate local health traditions and mainstream AYUSH
(including manpower and drugs), to strengthen the public health system at all levels. There are 5 Ayurvedic
hospitals, 619 Ayurvedic dispensaries, 4 Homoeopathic hospitals, 560 Homoeopathic dispensaries and
9 Unani dispensaries. A total of 266 Ayurvedic and Homeopathic doctors and 200 paramedics have been
approved by the Government of India to be placed in the block Primary Healthcare Centre/ Community
Healthcare Centre (PHC/CHC). An additional 48 Ayurvedic and Homoeopathic doctors are proposed in
this current budget to be placed in the remaining 48 PHC/CHCs in the blocks. This will make available one
Ayurvedic/Homoeopathic doctor in each of the 314 block health institutions of the state. AYUSH drugs shall
also be provided to each of these institutions.
The Government has decided that AYUSH medications shall be included in the drug kit of ASHA (accredited
social health activists). The additional supply of generic drugs for common ailments at SC/PHC/CHC (sub-
centre, primary health centre or community health centre) levels under the Mission shall also include AYUSH
formulations. At the CHC level, two rooms shall be provided for AYUSH practitioners and pharmacists
under the Indian Public Health Standards (IPHS) model. At the same time, single-doctor PHCs shall be
upgraded to two-doctor PHCs by inducting AYUSH practitioners at that level.
National Institutes
There are six national institutes of AYUSH, namely;
• National Institute of Ayurveda (NIA), Jaipur
• National Institute of Homoeopathy (NIH), Kolkata
• National Institute of Unani Medicine (NIUM), Bangalore
• National Institute of Naturopathy (NIN), Pune
• Morarji Desai National Institute of Yoga (MDNIY), New Delhi
These apex bodies have been established to achieve excellence in teaching patient care and research.
Research Councils
There are four apex Research Councils, namely:
• Central Council for Research in Ayurveda and Siddha (CCRAS), New Delhi
• Central Council for Research in Unani Medicine (CCRUM), New Delhi
• Central Council for Research in Yoga and Naturopathy (CCRYN), New Delhi
• Central Council for Research in Homoeopathy (CCRH), New Delhi
These research organisations initiate, aid, guide, develop and carry out scientific research, fundamental
and allied, in different aspects of the respective systems.
Regulatory Bodies
There are two national-level regulatory bodies, namely:
• Central Council of Indian Medicine (CCIM), New Delhi
• Central Council of Homoeopathy (CCH), New Delhi
Challenges Faced
It is believed that societies, especially those of developing countries with limited resources, could
significantly improve the healthcare means at their disposal by exploring the scope of these systems of
traditional medicine. However, the following challenges prevent these systems from occupying positions
of importance:
Looking at the growing health care demand with enablers catalysing the demand, it is imperative that all
systems of medicine put their heads together and allocate resources for the research and development
of traditional medicine with the end-result of better Integrated Medicine. Proper communication between
the experts of all systems, appraisal of the available information, sharing of research experiences and
evidence-based results can provide a better understanding of the strengths and weaknesses of Allopathy
and complementary systems, which include the entire spectrum of traditional, time-tested systems and can
solve the problem. Balanced modalities of Integrated Medicine, if well implemented, would make India a
global leader in health matters. Quality assurance, education, research and nutrition are a few of the areas
for industry players to invest in and unleash the business opportunities in this sector.
Authors
Dr. Rana Mehta, Vice President | rana.mehta@technopak.com
Akanksha Akhauri, Consultant | akanksha.akhauri@technopak.com
Ankur Bharti, Consultant | ankur.bharti@technopak.com
Author
Arvind Singhal, Chairman and Managing Director | arvind.singhal@technopak.com
Derecognition of Deemed
Universities 15
Technopak View
• A positive step to alleviate stress that students go through in their formative years.
• We expect it will facilitate real learning instead of all the efforts directed towards scoring better than the
peers.
The notification can be accessed at http://bit.ly/dhYK0v
Impact on Government
• Need to make provision for funds (Rs. 1.71 lakh crore over next 5 years) required for infrastructure
development and implementation.
• Need to manage the resources to fill the gap of 5,00,000 teachers by most conservative estimates.
• The disagreeement with various state governments over sharing the expenditure is yet to be resolved.
Technopak View
• A commendable initiative though fraught with doubts about implementation.
• The RTE Act needs to protect the private schools especially those unaided by the government who have
invested a huge amount of money and established a credibility for the quality of education they impart.
The step should not force them to dilute their standards.
• The Act may not be the ultimate tool to bridge the social divide but still is a positive step forward.
• Schools may supplement their income by putting their infrastructure to additional use in lean times such
as opening their library for public use, organising sports coaching, running hobby classes etc.
The Act can be accessed at http://bit.ly/bJ5tfS
Impact on Government
• Need to streamline and redefine the ‘deemed university’ status and effectively monitor further requests
for such university.
• Investors of de-recognised institutes stand to lose both credibility and money in the process.
Technopak View
• A noteworthy step in ensuring a certain standard of education delivered by the private universities and
maintaining the value of a university degree.
• Foreign institution expected to follow Government norms for fees, admissions, faculty recruitment etc.
• The Government may not allow an organization engaged in education business for-profit anywhere in the
world or listed on any stock exchange to set up campus in India.
Impact on Government
• Funds recieved by way of corpus can be utilised towards improving the state of education in the
country.
• Eases the pressure on Government to build Higher Education institutions for the huge Indian
population.
Technopak View
• The prospective foreign education providers will find it difficult to replicate the research culture and
find globally competitive local teaching resources in India, that these institutions are renowned for
worldwide.
• The proposed legislation does not serve the profit-motive that the foreign institutions will come in for.
Hence the desired quality or number of institutions may stay away.
• Many universities faced major issues in opening overseas campuses in China, Singapore and Israel. This
might further deter them from taking the same risk in India.
• The Government norms that the foreign institutes are expected to follow, may be considered restrictive.
The proposed Act can be accessed at http://scr.bi/bFjArx
Technopak View
• A positive step to govern the technical and medical education sector which has evolved on its own
without such governing bills over the last few decades.
• The regulation would help protect the rights of students as consumers and also prevent negative
experiences and disputes between customers and service providers which so far had little opportunity
for redressal.
• Expected to bring in more accountability into the business aspect of education.
• The National Authority — along with multiple rating agencies (which may be private bodies licensed by
NARAHEI) — to develop and regulate the accreditation process. These agencies would be registered
with the National Authority and the apex body would accredit and keep a check on the rating agencies.
Technopak View
• Accreditation of higher education institutes would bring in more consistency and predictability in the
services provided.
• The gap between the expectations of students and quality of education delivered would be reduced.
The proposed Act can be accessed at http://scr.bi/crtLgY
Technopak View
• Inconsistency in quality, over-promise and under-delivery, illegitimate demands by institutions have affected
the industry for long. The legal framework governing the education sector is still evolving. Therefore, there
is a need for a body which can provide quick redressal of disputes and shape the regulations applicable
to the sector as a whole.
The proposed Act can be accessed at http://scr.bi/c9818k
Technopak View
• While the Bill seeks to promote autonomy, it seems restrictive in the sense that even the Vice Chancellor
will have to come from a specified list drafted by the NCHER.
• Eliminates the need to deal with multiple institutions viz. UGC, AICTE, NCTE etc. thereby making the
process more streamlined.
• Eliminates the conflict of interest vested in the current operations of UGC as both an accreditation agency
as well as the agency to disburse grants to universities (through a separate accreditation bill).
• Centralised regulation of higher education institutions would help bring in consistency and improve the
quality of education imparted.
The proposed Act can be accessed at http://bit.ly/c6sh5g
• Reliance on parallel means including charging capitation from the students would be reduced.
• May also further facilitate loan structuring as per education plan of the student.
Technopak View
• A commendable and thoughtful step to rid the education sector of the fundamental issue of financing
infrastructure development and for students to finance high cost of quality education.
Authors
Raghav Gupta, President | raghav.gupta@technopak.com
Kapil Gaba, Senior Consultant| kapil.gaba@technopak.com
Clients will soon begin to understand that a brand has many more dimensions than simply marketing.
Branding concerns itself with a range of issues across the spectrum – issues that include marketing and
advertising. On most of Vertebrand’s brand audit projects for example, the following questions are common:
Is the brand on message? Is the brand in line with the strategy, aims, shareholder wishes and management
objectives? Is the brand appropriately structured? Is the brand platform robust and future-proof? Is the
brand present in the organisation, in its behaviour, at all levels? Soon, clients will begin to regard the brand
as a strategic tool which informs marketing and communications.
There will be less dependence on new heroes and the cult of celebrity.
Too many brands are far too dependent solely on celebrities. A.O. Scott, writing in The New York Times on
November 21, 2007, commented, ‘From Andy Warhol to Lonelygirl15, modern media culture thrives on the
traffic in counterfeit selves. In this world the greatest artist will also be, almost axiomatically, the biggest
fraud.’
In 2010, Indian clients will also begin to realize that using a celebrity to promote a brand demonstrates
a remarkable paucity of ideas on the part of their advertising agencies. After all, in JWT’s definition, a
celebrity is the idea and using the same idea for multiple products, campaigns and brands is fundamentally
boring.
But worse, using truly unremarkable brands like a has-been actor, a rapidly-aging Miss World or a dissolute
prince will have a profound effect on the brand because of the promiscuity that these celebrities demonstrate
in endorsing any and every product. Marketers will need to realise that even star-struck audiences know
they are dealing with people whose endorsement is easily bought.
Brands will therefore have to concentrate on making the celebrities look like genuine users of the product
in question rather than shills. As a result, we will undoubtedly see more product placement in films, on TV
and on the bodies/lips of celebrities – where the use of brands does not make the celebrity appear as a
salesman/saleswoman.
In this scenario, direct marketing, PR, experiential marketing, web-based communication, internet
advertising and other, cheaper means of communication will become the order of the day.
This will undoubtedly lead to a proliferation of media, but this will enable far more focused and targeted
entertainment software, leading to far more focused and targeted communication and, eventually, far more
committed and faithful audiences.
A good example of this is the show American Idol, where Coca-Cola is built into the backgrounds where the
participants sing and are always there in the form of the big red glasses that the judges drink from, apart
from advertising and constant mention from the hosts. This leads to more entertainment and viral value;
the audience sees it as less of a sales message and as a result, it is more credible.
More importantly, the form and language of film would not work while communicating through mobile
media, necessitating the invention of new ways. Today, people are trying to replicate the sound of cinemas
by using home-theatre systems to upgrade the sound of their televisions. They would be unlikely to watch
or appreciate movies on the midget screen of a cellular telephone.
Con jobs won’t work either. It would be impossible to start a Facebook club as a corporate or a brand
marketer and not expect to be exposed. When that happens, the negative fall-out would be devastating.
Brands will have to learn how to harness the power of the consumer’s voice to their advantage and at
the same time also remember how unpredictable, unreasonable and downright bad-tempered individual
consumers can be.
Companies will need to use other brands to improve the power of their own.
This will apply to all service brands. In a mall for example, the brands that are sold in the mall will have a
definite effect on the mall brand. But even beyond that, in hospitals, hotels and other service institutions, it
will become necessary to carefully select the brands with which a company is associated. The questions
to consider could be, for instance: Would it make sense for the Taj Group of Hotels to be associated with
a particular brand of soap or shampoo when another brand of soap in their bathrooms might actually
improve their brand image? What brand of television would most aptly match the Taj’s imagery? Suddenly,
the manufacturer offering the best rates on bulk buys of soap or shampoo will not be as relevant as the one
offering the best fit in terms of image and brand values.
Further, as so-called ‘below-the-line’ expenditure on PR events increases, there will be increased pressure
to find ways and means of measuring the effects of such initiatives on brand strength and, of course,
sales.
Author
Raghu Viswanath, Managing Director, Vertebrand | raghu.viswananth@vertebrand.com
Conclusion 32
perspective | Volume 04
a quar terly repor t by Vol u me 0 4 / 2 0 1 0
With the revival of economic growth from the second quarter of 2009-10 (GDP grew by 7.9 per cent), private
consumption growth has returned (grew by 5.6 per cent), on the back on stronger consumer confidence.
As a result, growth in organised retail has returned and we estimate the sector to have grown by 21 per
cent in 2009-10. On the basis of various projections that India’s GDP will grow at over 8 per cent in the
coming years, return in consumer confidence and growth in private consumption tracking GDP growth, we
expect organised retail to see 30 per cent plus growth in the coming years. This trend is already visible and
is substantiated by data in exhibit 1.
Exhibit 1:
Impact of Slowdown on Consumer Confidence, Private Consumption & Organised Retail
FY 2006 2007 2008 2009 2010 2010 2010 2011P 2012P 2013P 2014P 2015P
Q1 Q2
Organised Retail GDP Private Consumption
Source: Ministry of Finance, Technopak Analysis and Estimates Real Growth Rates
The total retail (organised and unorganised) industry in India is currently estimated to be Rs 20 lakh crore.
We project this to reach Rs 27 lakh crore by 2015. Organised retail, which is currently estimated to be Rs
1.0 lakh crore (5 per cent share), is projected to reach Rs 3.0 lakh crore (11 per cent share) by 2015. This
means a tripling of the current size and scale of organised retail in the next five years. While organised retail
will grow at a fast pace, it is important to note that a larger part of the Rs 7.0 lakh crore growth in total retail
will come from unorganised retail. We project this segment (unorganised retail) to grow by over Rs 4.5 lakh
crore in the next five years. Some key reasons for this trend are as below:
• Growth in private consumption in India is so sizable Exhibit 2:
that even with 30 per cent plus growth rates, Projections for Private Consumption and Retail
organised retail will be unable to garner a larger 93
share in absolute terms in the next 5 years.
62
• In certain consumer categories like apparel,
footwear, and consumer durables and electronics,
organised retail has established a strong value 29 27
20
proposition with the Indian consumer. However, 12
0.3 0.9 3
in some very large categories like food & grocery,
furniture and home, and pharma it is not same. Organised Retail GDP Private Consumption
So the same shopper visits organised retail for All values in Rs lakh crore
the former categories and traditional retail for the Source: Technopak Analysis and Estimates
Real Growth Rates & Values, Inflation assumed at average 7%
latter.
• Inherent strengths of traditional retail (entrepreneurial drive, relationship management with catchment,
real estate and labor costs not fully accounted for in P&Ls, flexibility to deliver very small quantities home,
and the MRP regime) coupled with the fact that many mom & pop stores have geared up for competition
from new age stores (through improved store ambience, better product mix and support from brands /
manufacturers in training, retail operations, etc.) puts them on a strong footing.
Given the large share that traditional retail will continue to occupy, especially in categories such as food &
grocery, furniture and home, and pharma, it will continue to be an important channel for consumer goods
companies, and for organised wholesalers (cash & carry).
Exhibit 4:
Consumer Sector in India – Effect of Recession and Recovery
Goods that are neither perishable High impact (dependent on Clothing, Furnishing, Home
Semi-durables
nor lasting discretionary spends) Textiles, etc.
FMCG, CDIT and Apparel categories have experienced very different growth trajectories over the last few
years. While CDIT has shown tremendous growth (primarily led by high growth in mobile handsets market),
FMCG which has been a well penetrated market has been growing a stable rate.
Given the fact that the discretionary income of the Indian population is rising at about 15 per cent every year,
one would expect the apparel sector to witness a higher growth. However, the actual growth rate has been
fairly low. We believe that, on a price performance value proposition to the consumer, players in apparel
have not offered the same value as the players in telecom or CDIT or automobiles etc. have. The cost of
laptops (which are in the CDIT category) decreased by about 25 per cent, while the volume increased by
about 76 per cent on a yearly basis. LCD’s showed a similar trend too. In the apparel and home textiles
categories, a smaller volume growth and a higher price growth translating to a low price performance value
to the consumer was observed.
Exhibit 5:
Sector Growth Rates
25%
20%
15%
Growth Rates
10%
5%
0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
(P) (P) (P) (P) (P)
Thus, the share of wallet appears to have shifted from categories like apparel, home furnishings etc. to
CDIT, automobiles and travel as shown in exhibit 6.
Exhibit 6:
Apparent Shift in the Share of Wallet
Categories Volume CAGR (Last 4-5 years) Per Unit Price Change
Categories like education, personal transport, travel and leisure have been witnessing rapid growth.
Categories of apparel, home textiles and housing are expected to move below education as there are
significant changes that are expected in the education sector. As the size of these categories is dependent
upon the consumer’s wallet, it puts pressure on the categories that are not offering competitive price
performance value to the consumer.
For example, our spending on self learning and coaching amounts to about Rs 45,000 crore. The size of the
education market, containing the spending on self learning and coaching as well as tuitions is equivalent
to the size of the organised retail market in India. Thus, the spending on this category is coming from the
same share of wallet. Going ahead it is expected that emergence of new categories would put significant
pressure on some of the categories which lag on price performance matrix.
Emergence of private labels and increasing retailer presence across the country would see a rapid
commoditisation across various categories. We are already witnessing a certain degree of commoditisation
in the mobile phone market with the emergence of large number of smaller brands challenging the market
leader. Consumers are also taking their decision based on one or two main factors like price, battery life
etc.
In the near future, investments in mega projects and development of infrastructure is expected to create
“new hot spots” in India. These new centers of consumption would present an opportunity for both retail
and consumer product companies to focus on and derive growth from the consumption potential of these
new hot spots.
As retailers look to raise fresh capital, understanding what the markets reward will be the key. Generally,
retailers tend to look at new growth as the key area that they want to take back to investors for valuation of
business.
In the international market, ROCE has the highest correlation with the performance of retail business and
other parameters. The same store sales and the new stores growth comes second. Hence, it would be
very important for retailers to focus on generating returns through better performance and working capital
management.
Conclusion
The events of the last 15-18 months have provided a steep learning for the retail and consumer product
industry. While the last decade (2000-2009) has seen significant addition to consumption and retail market,
it is expected that consumption is likely to double in India over the next 5 years, (nominal growth of Rs 33.75
lakh crore). There is going to be significant changes in the overall consumption basket hence brands in low
involvement categories would be under the increasing threat of commoditisation. Profitable growth would
be the emphasis for retailers and investors in the time to come. We expect that in the next 5-10 years, the
scale of business opportunity and pace of change would be fundamentally different from what it has been
in the past. This calls for almost every company to go back to the strategy drawing board and develop a
vision for the next decade in order to emerge as a successful player in the consumer and retail sector.
Authors
Raghav Gupta, President | raghav.gupta@technopak.com
Rohit Bhatiani, Principal Consultant| rohit.bhatiani@technopak.com
Pranay Gupta, Consultant | pranay.gupta@technopak.com
Earlier, the centres of India’s economic growth were the top metropolitan cities like Delhi and Mumbai. Later,
the Government shifted focus to then smaller cities like Pune, Hyderabad, Bangalore, etc.—the so called
mini-metros of today’s India. As these cities came up on the radar of many private and foreign investors,
the cities become the top destinations for large-scale infrastructure investments, followed by developments
in retail, real estate, and social infrastructure like healthcare, education, etc. for over a decade now. But
with their rising population, growing urbanisation and scarce resources, even these mini-metros have
become saturated, creating the need for alternative smaller cities, i.e. tier II and III cities, for investment.
Most important of all, though, is that the Government has realised it must play a primary role in responding
to the need for new cities in India.
Thanks to the Government’s policies of infrastructure-led growth for the country, over the last few years we
have seen the launch of many ambitious projects, such as the golden quadrilateral and the EW and NS
express corridors to improve road connectivity across the length and breadth of the country and the SEZs
to further boost the economy of various states.
Many metros and mini-metros that are well connected by these road projects have already benefitted
immensely with the spurt in investments from private players and foreign investors in various sectors. The
smaller cities/towns in the influence area of these projects are not left behind and are also set to witness the
same trend and become cities of the future. One such example is Dholera, a greenfield city at 900 square
kilometres. Located in Gujarat along the Delhi–Mumbai Industrial Corridor (DMIC), it is envisioned to be six
times bigger than Chandigarh.
Quite recently, when Technopak tried to take a bird’s-eye view of the size of current and planned investments
in mega projects across the country based on the information available in the public domain, some
interesting facts came to light.
• Close to Rs 14 lakh crore (approx. US$ 304 billion) worth of investment is planned across more than
600 mega projects spanning a multitude of sectors—government mega projects, steel, automotive and
education sector, urban development projects, theme and mega cities, ultra mega power projects, ports
and airports, and SEZs (including textiles, chemicals, electronics and hardware, food and agro, gems
and jewellery, pharma, etc.). This excludes investment on road projects.
• Of a total of 5,464 blocks that span Indian states and union territories, this investment of Rs 14 lakh crore
targets just 340 odd blocks. Of course some blocks and therefore the states they fall in are bound to gain
a higher share compared to others.
Forty years ago, the great steel plants forged Bokaro, Bhilai and Rourkela, successors to older,
industrialisation-led agglomerations such as Jamshedpur, Burnpur, Durgapur and Modinagar. Today
petroleum, steel, cement, infotech, auto and other industries are spurring town-to-city transformations,
conurbations and extensions, if not always new cities. As true for any region attracting mega investments,
the landscape of these 340 blocks, too, would undergo a dramatic change in the years to come. Gurgaon
is a perfect example to understand the impact that infrastructure investments have had on the economic
growth of a region.
It would be interesting to track the growth trajectory of the small towns that fall within these 340 investment
hubs, as many of those towns are bound to emerge as the future hot-spots of India. Some of these towns
may even grow at a GDP higher than national or state averages. In just about a decade, Gurgaon has
become the industrial and financial hub of Haryana and also has the 3rd highest per capita income in India
after Chandigarh and Mumbai.
It would be again noteworthy for retailers as well as manufacturers and marketers of consumer product
companies that are always on the lookout for newer markets or potential hubs for consumerism, to
understand the implications these investments will have on the economic growth of these 340 hot-spots
and even their nearby towns and villages. These hot-spots are going to bring to the forefront the next
wave of new cities that real-estate developers, healthcare and education providers, consumer product
companies as well as retailers would be interested in looking at in order to gain ‘first mover’ advantage and
a foothold in the market.
Author
Veenu Sharma, Senior Consultant| veenu.sharma@technopak.com
Growth of Over-the-Counter
(OTC) Fabric Market 47
Summary 54
perspective | Volume 04
a quar terly repor t by Vol u me 0 4 / 2 0 1 0
A number of factors are expected to fuel the growth of the domestic market in spite of the many challenges
faced by this industry. Growth drivers include increased incomes, high growth of GDP leading to rapid
urbanisation, growth of organised retail with the entry of a large number of domestic and international
players, and a growing awareness of global trends along with the need to look fashionable.
Through our work in the textile and apparel sector, we analyse a number of trends which represent
opportunities for companies already in this space or planning to enter it. Based on the Indian consumer’s
current needs and aspirations, this article covers six categories which may have been present for long but
now present a bigger than ever canvas for companies to expand in or to enter for the first time.
We look at sports brands like Nike, Reebok and Adidas—how they changed their product mix in India to
include more casual wear after realising that the Indian consumer, lacking options, opts to wear their apparel
for ‘everything outside office’. They positioned themselves more as lifestyle apparel than as a pure sports
brand. Now, with growing consumer interest in fitness, they offer a wide variety of fitness apparel/footwear
options. We take on the positive effects of the entry of international brands—the concept of ‘affordable
luxury’ which acts as a bridge between mid-premium and luxury presents the perfect opportunity for brands
to take consumers to the next level of spending.
We also cover notable changes in the women’s category by presenting the story of how women’s ethnic wear
is constantly innovating itself to capture the mind of the Indian woman and how brands can increasingly use
this as an opportunity. Another related trend is the growth of over-the-counter fabric comprising unstitched
ethnic wear, trousers and shirts. In spite of migration of consumers to ready-to-wear apparel, this category
constitutes ~23 per cent of the Indian apparel market size, growing at a steady rate of 5 per cent and
witnessing the entry of some large players. We also explore the kids’ category, which is expanding due
to the increased needs of both indulgent parents and decisive kids. This presents a large opportunity
for specialty kids’ stores with an expanding product range. With the increase in number of school-going
kids and the new-age concept of international schools, uniforms are another area which presents a large
opportunity to become organised. Last, we cover a unique concept called ‘Pop-Up Retail’ which presents
an interesting and out-of-the-box marketing concept for brands wishing to introduce customers to their new
product/range.
In this article, we outline the growth drivers for the growth of such ‘sports-inspired casual wear’ brands,
understand their India growth stories and how sports retail will evolve going forward.
Reebok is a good example of a brand which used its early mover advantage to penetrate into the casual
and sportswear category through aggressive advertising and its marketing campaign. Reebok’s Lifestyle
line targets the consumer interested in wearing a sports-inspired product without stepping into a field, court
or track. About 80 per cent of Reebok customers in India have purchased something from the urban casual
Lifestyle line. Reebok has a junior collection of athletic and casual shoes and apparel, sold at its own junior
stores, which is designed to tap into India’s massive youth population both on and off the field. Reebok
India sold approx 3 million pairs of shoes and ~8 million pieces of apparel in 2009. Other brands are also
following suit by signing top actors and models to gain higher visibility.
Puma is focused on being categorized in the ‘lifestyle’ brand as a ‘sport-lifestyle’ brand and not as a mere
sportswear brand. It is engaged in the development and marketing of a broad range of sports and lifestyle
goods including footwear, apparel and accessories apart from apparel. Its mission is to become the most
desirable sports lifestyle company in India.
Adidas has also recently launched a new brand called S&N, which aims to be a fusion of lifestyle and
sporty edginess, reconfirming the trend that most brands see themselves worn not as high-performance
sports wear, but more as a lifestyle casual wear category.
The above statement is reiterated by looking at the breakup of sales for these brands (exhibit 2). It is not
surprising then that more than 50 per cent sales for these brands in India comes from apparel and the
balance is split between footwear and related accessories.
Exhibit 2:
Comparative Analysis of Industry Players
With these growth drivers and the increased spending power of consumers, retailers are developing
sports goods with very specific offerings. Adidas will be launching 95 products related to football including
apparel, footwear and protective gear this year. Reebok has come up with a variety of new and specialised
offerings in the shoe category and will also launch affordable soccer shoes for kids and adults in the Rs
2,500–3,500 price range.
With such a large market and high growth going forward, this is the perfect stage for sportswear retailers
to enter the segment or to expand their existing portfolio.
Exhibit 4:
Growth (%)
15%
Sports Sports Apparel 6000
Footwear Market Market 4000 2520 10%
Rs 1,400 crore Rs 1,125 crore 2000 5%
(55%) (45%)
0 0%
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Source: Technopak Analysis
However, to truly tap into this opportunity, the consumer needs to be initiated and his awareness regarding
fitness, sports equipment and sportswear needs to be improved. The very idea that different sporting
activities require different types of shoes is still not well established in India. There are no ‘footwear
specialists’ to guide consumers about shoe types specific to their requirements.
The consumer is ready to make the move to high-performance sports options, it is now up to brands to
make use of changing consumer habits and introduce products to suit their aspirations.
The case of sunglasses is similar. Traditionally in India this category has been very unorganised and
dominated by non-branded products. While Ray Ban is the only eyewear brand name which can be
remembered from earlier days, the market now has innumerable names to choose from: Polo Ralph Lauren,
Police, Oakley, Bvlgari, Burberry, Chanel, Dolce & Gabbana, Donna Karan, Prada, Versace, Polaroid, etc.
Sunglass Hut is one such international retailer who, under a franchise agreement with DLF brands, is
selling all these brands under one roof in India, offering today’s spendthrift consumer a similar international
experience. Exhibit 7:
Expected Progression of Branded Apparel
However, it is to be noted that consumers find it Retail in India
Affordable
easier to upgrade to higher-priced products for Luxury
watches and sunglasses since there is a longevity >Rs 2,500
associated with these products. The same, however, Super
Premium
cannot be said for apparel, which is highly fashion- (Rs 1,600
driven and has a shorter life span, making it harder to 2,500)
Premium
for consumers in India to upgrade. Comparing (Rs 700
?
India with other developing markets like China also to 1,500)
Value Retailers
reconfirms that their spending patterns on apparel (Rs 270 to 500)
differ a lot. The Chinese spend nearly 10–11 per cent
of their household income on clothing, while Indians
Unbranded
still spend only between 5–6 per cent on clothing. Rs 225
Indians tend to spend more on transportation,
Increasing Income
communication, education, homes, etc.
Source: Technopak Analysis
However, this space is fast being populated by international brands which have learnt that consumers need
to be offered entry level products to help them upgrade from premium to super premium to affordable
luxury brands. This is the reason Esprit, Tommy Hilfiger, Lacoste, and Benetton have all reworked their
pricing in India to be lower than what it is internationally. Brands like Esprit and Tommy constitute the
super premium segment and have introduced entry level products at lower prices so that Indians can try
their product instead of categorising them as international high-priced brands. In the ‘affordable luxury’
segment, Lacoste and Promod are two brands that have positioned themselves well. Interestingly, Hugo
Boss has introduced Hugo Boss Red, which is lower priced and has helped them gain visibility as an
‘affordable luxury/ brand for consumers to upgrade to.
It can thus be safely said that while the purchasing power exists, consumers are unable to spend on luxury
goods primarily due to limited upgrade options. These consumers are still very ‘value conscious’ and
discreet and prefer to shop for the same brand at an overseas store due to availability of superior quality
and more variety than India.
Going forward, we expect these international luxury brands to introduce bridge/semi-premium lines for
greater penetration or introduce more brands from their umbrella in different segments or through different
routes. In this scenario, it can safely be assumed that the availability of greater variety and brand names
will definitely act as a medium to graduate the Indian consumers from the current mid-segment to super
premium and affordable luxury brands. The super premium and affordable luxury segment as a category
has big potential for brands having patience, readiness to operate on a longer breakeven period and a
long-term strategy to create a unique brand identity in the Indian consumers’ mind.
The current market of sarees and ethnic wear stands at ~Rs 31,000 crore and is projected to grow at 10
per cent to reach ~Rs 45,000 crore in 2014. Major growth is projected in the saree segment with the revival
of sarees in new and more innovative formats and with new styling, fabric and fits for salwar-kameez and
dupatta. Brands are trying to create a fusion of Western and Indian patterns and designs of the traditional
sarees. In this article, we chart the story of ethnic wear in India and how it is here to stay.
Growth Drivers
Traditional ethnic wear comprises primarily sarees and salwar kameez and dupatta (SKD) and other regional
attire. There are a number of factors that catalyse the growth of ethnic wear.
Traditional occasions
Indian wear is still the most preferred choice for any traditional occasions like marriages and family functions.
In spite of the big influence of Western wear, a majority of women still have a large representation of ethnic
wear in their wardrobe for various occasions. In fact, the willingness to spend has increased all the more
with different traditional and contemporary designs being offered.
What is interesting to note is that most of the above retailers have been able to maintain the interest of
the modern Indian woman by offering modern prints, designs and fits. Like other items, sarees have also
evolved. While traditional regional sarees like patola, kanjeevaram, kantha are still popular, contemporary
sarees with prints, embroidery work, chiffon sarees with borders, net sarees with extensive gem work have
also caught on as a reflection of the grandeur of movies. Satya Paul was amongst the first to come out
with prints on sarees which are abstract, geometrical and completely in sync with print forecasts. Today,
retailers like Meena Bazaar and CTC keep pace with the most important trends and have new collections
every season. Brands like Anokhi and Fabindia have greatly helped in popularising ethnic apparel which
has been sourced from handloom clusters following traditional methods of vegetable dyeing, block printing,
etc.
The changing face of SKD is perhaps the biggest success of this category through the fusion of fabrics,
prints, styling and fits. Almost 10 years ago, Shoppers Stop changed the way we buy SKD by offering mix
and match options. Then we saw the advent of the kurti which was traditional in its look, but could be worn
well with trousers. It is here to stay with the options it offers. The last 2–3 years have seen the introduction
of lycra churidars which offer better fits and comfort than the traditional options. They have become
tremendously popular and have revolutionised a garment which was essentially stitched into something
that is picked off the counter. W has offered a merchandise mix with many interesting combinations of knit
kurtas with traditional prints/ embroidery – clearly a fusion of our heritage in new fabrics.
Another very interesting idea can be a ‘marketplace concept’ like Dilli Haat where artisans can be invited
from all over the country to showcase their talents. While Dilli Haat is a government initiative, it has great
scope as a concept for a private retailer or a mall developer who can take the initiative to get artisans
together, imparting a certain design direction to their work to modernise it and then showcasing a new
collection to the consumer every few months.
Given its flexibility, comfort and traditional appeal, Indian ethnic attire is very much in demand and the
market for it poised to grow. Organised players and designers can tap into a lot of opportunities by coming
out with a fusion of basic, traditional yet modern styles. Brands can revive age-old prints and traditional/
regional apparel further to meet the growing demand from both national and international clients.
Growth of Over-the-Counter
(OTC) Fabric Market 05
Keeping the Neighbourhood Tailor Afloat
During the last decade, we have witnessed a big market share shifting towards the ‘Ready to Wear’ (RTW)
apparel category. There has been a visible migration from tailored clothing to readymade garments due
to the launch of brands such as Louis Philippe, Van Heusen, Allen Solly, Peter England, Arrow, Koutons,
etc. Factors like easy availability, variety of colours and styles, etc. gave consumers a reason to shift
their preferences. The RTW comprises approximately 77 per cent of the apparel market while OTC fabric
constitutes the balance. However, the demand for OTC fabric is still large and growing at an annual rate of
5 per cent, contrary to what most market analysts had predicted for this category due to the rapid increase
in Ready-to-Wear apparel. It negates the popular perception that all the growth is only in the RTW category
and the share of OTC fabric has shrunk. The OTC market is also termed as the ‘Ready-to-Stitch’ (RTS)
market.
We summarise here the Technopak analysis and insights into how the OTC market is growing. While
worsted and polyviscose fabric is mainly meant for the formal suit market—which is also growing, we have
explored the opportunities in the everyday wear cotton and cotton blends categories, such as fabric for
salwar kameez dupatta (SKD), shirts, pants, etc.
Exhibit 9:
Comparison in Market for Indian Domestic Apparel : 2009 vs 2015
2009 2015
CAGR 2009-15 (%)
Value ( Rs Crores) Share (%) Value (Rs Crores) Share (%)
India Domestic Apparel
1,54,250 2,43,300 8
Market
RTW 1,19,500 77 1,96,500 81 9
RTS ( OTC Fabric ) 34,750 23 46,800 19 5
Shirtings 11,900 34 14,150 30 3
Trousers 10,400 30 13,000 28 4
SKD* 9,800 28 14,900 32 7
Others ** 2,650 8 4,750 10
* Salwaar, Kameez, Dupatta **Other OTC fabric covers : Suiting, Kurta pyajama fabric etc.
Source : Technopak Analysis
In India, the OTC fabric market totals approximately Growth in the indian population(age>40 years) that prefers RTS wear
Rs 35,000 crore, most of which is still unorganised. Greater consumption potential for RTS in rural India
But many organised players are looking towards it Fast growth in the plus-size population in India
and gradually entering this market. In spite of direct
Price differential between RTS(ready to stitch) and RTW(redy to wear)
and stiff competition from the ‘ready to wear’ category, has been growing
the OTC fabric market is growing as it allows for
Increasing women workforce driving growth of SKDs
comfortable fits, lower prices, and personalised cuts
and designs. Source: Technopak Analysis
Despite these positives, market players must be cautious in light of the threats associated with this
market.
• Increasing penetration of RTW brands/retailers in smaller cities
• Growth of value apparel retailers and hypermarkets in India
Retailers such as Big Bazaar, Westside or Pantaloons, that offer RTW apparel at competitive prices, are
gradually increasing their reach in smaller cities. With rising demand and awareness, the consumer is also
shifting more towards the casual wear category. Our studies show that casual wear segments are expected
to grow between 10–15 per cent vis-à-vis 9 per cent growth in the Indian apparel market. The woven RTS
market may be affected due to the competition from knitted garments.
The SKD market is still fragmented and highly unorganised, with hardly any key players having a national
reach. Organised players are mostly regional brands like Supertextiles, Tacfab, Hakoba, etc.
The sheer size of the existing OTC fabric market coupled with the fact that is expected to grow further at
a growth rate of 5 per cent provides an opportunity for existing players and new players in this segment.
Another area of opportunity is the lack of a well-established brand in this segment. While Raymond, Siyaram,
Grasim, etc. constitute the worsted and polyviscose suiting brands, there is no fabric brand in the cotton
and cotton blend category.
The children’s market refers to the specific age group of children from 3–13 years. These children have an
individual identity and are in a hurry to grow up. This is evident in the way they talk, how they look and what
they wear. They do not spare their parents in the demands they make. Parents are also more than happy
spending on their kids as they enjoy rising incomes, suffer from the ‘guilt’ associated with less time spent
with their kids and need to ‘gain acceptability’ in the eyes of their fast-growing children.
Exhibit 13:
The total kidswear market in India is currently valued Kidswear Market Size
at approximately Rs 38,000 crore. This constitutes a
35000 33,100
25 per cent share in the total Indian apparel category.
This segment, which is split into ‘kidswear’ and 30000
25,300
‘school uniforms’ is expected to reach Rs 58,000 25000 22,500
crore by 2014 (see exhibit 13). 20000 18000 19,200
15,700
15000 13,700
12000
Technopak offers an insight into this segment by
not restricting itself only to kid’s apparel, but looking 10000
at everything that comprises their needs and 5000
aspirations. The growth drivers and opportunities 0
available have also been highlighted. 2007 2008 2009 2014E
Kidswear Apparel Uniforms
All figures in Rs crore
Growth Drivers Source: Technopak Analysis
There are some concepts like Mom & Me by Mahindra Group which cater to this large gap in the market
and are offering products from newborns upwards, for all ages, under one roof. From feeding accessories,
cots, bassinets, strollers, prams and bath chairs for newborns to toys, footwear, outdoor-gear like cycles and
push cars for toddlers, to concepts for young girls/boys like fancy children’s toothbrush, cartoon-printed
towels, bed-sheets, curtains, rugs and stationery material and even the paint on the walls—everything is
on offer to lure child customers.
These brands and retailers are contributing towards niche retailing in kids clothing sales by building
categories such as infant wear, kids’ formal wear, kids’ ethnic wear, swim wear, casual wear and pre-teen
wear by stocking a wider range of merchandise and differentiating between them at the retail store level.
Last year, Reebok launched the ‘Reebok Juniors’ concept store to tap into this segment by offering a one-
stop shop for apparel, footwear, accessories and sports equipment for children in the age group 4–14
years. Similarly, Gini and Jony has the ‘Freedom Fashions’ stores. offering licensed products of brands
like Reebok and Levi’s along with their own products. Lilliput is planning to launch ‘Lilliput World’, which
will be a specialty kids’ store with a greater merchandise width and depth. Keeping in mind the ‘important
kid shopper’, departmental stores are creating an experience during shopping by having play areas and
child-oriented promotional activities.
With a large number of international brands entering the country, the standards in design and product
development have been considerably raised in this category. These international brands are abreast with
the latest trends in fashion and design. Considering the innovations taking place in this industry, one cannot
doubt that the industry is here to grow. Not just apparel but home textiles like curtains, bed sheets, towels,
rugs, curtains and home improvement products can be customised to suit kid’s tastes and preferences.
Welspun and Bombay Dyeing are among the very brands that offer home products for kids and there is a
large potential to create child-specific products. Additionally, products like bags, stationery and furniture
hold great potential.
revenues i.e. approximately Rs 300 crore, of which a large percentage is contributed by apparel,
accessories, footwear and home textile products.’
A closer look at the international kidswear market also shows a big influence of movies on kidswear. The
recent Hollywood movie Kick-Ass, the story of a teenager (fake superhero) who is inspired by a comic
character, is just one such example. The very famous brand French Connection has launched an exclusive
range of tees and sweats to celebrate this hotly anticipated 2010 superhero action movie. Children and
teenagers get a sense of association with iconic empowering catchphrases, film logos, and original comic-
book illustrations.
Themed in-store advertising and visual merchandising is another area through which brands are trying to
lure the new young consumer. Apple all over the world is helping Disney stores revamp the look of their
stores by creating small theme parks for children. Raymond brand Zapp has set up igloo-shaped trial
rooms in its stores. Hannah Montana is another teen celebrity show that has greatly influenced children and
many stores are seen to sell her merchandise or create store themes around her.
There are ~55 million private school–going students and another 172 million in public schools. Estimates
of school student requirements in few categories include ~5 million t-shirts in a year and ~1 million
sweatshirts/tracksuits. Schools like DPS and many of the new-age international schools which are opening
up across the country offer huge potential for a brand which can cater to their needs for apparel and related
accessories.
Technopak estimates this market to be ~Rs 136 crore and this space is virtually untapped by any organised
player except S. Kumar’s. Internationally, there are a number of school uniform brands like Trutex, First
in Class, K-12 gear, etc. Many international retailers like Marks and Spencer, JC Penney and Next have
extended their brands to include these products. There lies a large potential in India to do the same.
It is clearly not an easy task to cater to the demands of this new set of consumers, who not only influence
decisions for their own apparel shopping but also for adult purchases, causing bigger brands to spend
relatively larger budgets on advertising for children. The key success factors in this highly competitive
category lie in product differentiation, creation of a unique retail experience and innovative marketing and
promotion techniques.
Globally, many brands have tried to use this concept Exhibit 15:
Pop-up Store Concepts in Action
of temporary retail locations to boost sales, gain
market visibility and build a brand. It could be either
for selling an existing product or a new launch,
however, always at unique locations, away from
traditional retail markets.
2003: Target September 2006: July 2009: ebay
Many such other examples exist in the market opened temporary Uniqlo set up opened a pop up
with retailers like JC Penney, The Vacant, Ann 1500 sq. ft. store in temporary container shop for 5 days with
Rockfeller Centre stores around NYC to the objective of
Taylor, Harvey Nichols, etc. who have repeatedly for 5 weeks in announce the launch of showing people what
experimented with this concept and achieved Oct 2003 their flagship store. It just a fraction of its
results. The global recession in 2008–09 made this 2004: Target set up drove 2 shipping inventory would look
concept even more popular and attractive since it a temporary floating containers into the city like in-store, and
store in on Hudson and used them as planned on
led to quicker sales with reduced expenditure on river on Christmas stores that ‘popped up’ showcasing many
rentals. The growing importance of this strategy has in various locations ‘wow’ items’
led to a few companies like Brand New Stores and
Source: Technopak Analysis
Metropolitan Green letting out permanent stores with
brick and mortar at short-term leasing offers, at retail or non-retail locations.
This trend is catching on in India as well. While a modified concept in the form of kiosks in and outside
malls has been around for a while, many brands are now seen setting up temporary stores in food courts
of office complexes etc., in order to test new products or to sell off leftovers and limited products. Till date
kiosk retailing in India is limited to temporary fit-outs inside malls or at retail destinations, for products which
require minimal staff, less preparation and small storage space, stationed, however, for a longer period of
time. So while it is similar to pop up retail in terms of the absence of brick and mortar, it lacks its temporary
nature, and also does not generate the eagerness and element of surprise which a pop up store creates
in a consumer’s mind, forcing them to make impulse purchases. Technopak feels that Pop Up is a kind of
marketing tool which can be integrated with an existing marketing concept for an established brand or can
be used as part of a new product launch as well. So, while there is still some time to go before vehicles
would carry mobile stores all over the country, with the trend emerging fast in other forms India will soon
have caught up with this global concept.
Summary
The Indian apparel retail market (organised) is still not as mature as Western markets and thus presents a
number of opportunities in various categories. We have mentioned in this article some of these categories
as over the counter fabric retailing, affordable luxury retail, sportswear retail, Indian ethnic wear and
kidswear. Of course, these are only a few of the many opportunities available to investors. There are other
opportunities such as value retail, cash and carry retail, etc., all of which are lucrative and present industry
players with a good opportunity to grow. While all these opportunities exist, there are also challenges
which need to be overcome to change these opportunities into thriving businesses with sound bottomlines.
Industry players who constantly innovate and keep consumers at the centre of their strategy will surely be
able to make the best use of these opportunities.
Authors
Ashish Dhir, Associate Vice President | ashish.dhir@technopak.com
Priya Sachdeva, Principal Consultant| priya.sachdeva@technopak.com
Ruby Jain, Associate Consultant |ruby.jain@technopak.com
Summary 62
perspective | Volume 04
a quar terly repor t by Vol u me 0 4 / 2 0 1 0
Introduction
‘Leaders do exactly that – LEAD! This doesn’t have to be a win-lose scenario. Be bold, make the
difficult decisions now. Enough talk, just do it.’
‘Please don’t miss this opportunity to stop climate change. This may be our last chance before it
is too late.’
These were some of the entreaties to world leaders at a recent summit-the United Nations Climate Change
Conference in Copenhagen, Denmark-organised in response to the predictions of the consequences of
global warming, which include more droughts, more flooding, lesser snow, extreme weather conditions,
rising sea levels, etc.
Global warming is caused by greenhouse gases (GHG) like carbon dioxide (CO2), methane (CH4), and
nitrous oxide (N2O) as shown in exhibit 1. They entrap the sun’s infrared rays in the earth’s atmosphere,
causing it to heat up (in the phenomenon) known as global warming.
Exhibit 1:
Greenhouse Emission Gases
Other
CO2 CH4 N2O
gases
Accounts for about Accounts for about Accounts for about Account for about 1%
70-80% of GHG 15-20% of GHG 5-10% of GHG of GHG: HFCs, PFCs,
Main Sectors: Main Sectors: Main Sectors: SF6, etc.
• Electricity and • Agriculture • Nylon and nitric Main Sectors:
heat generation • Oil refineries acid production • Refrigeration
• Transportation • Industries • Agriculture • Radioactive waste
• Infrastructure • Fuel combustion
• Deforestation • Industries
Exhibit 2:
Consequences of Global Warming
Corporate sustainability is a business approach that creates long-term shareholder value by embracing
opportunities and mitigating risks arising from economic, environmental and social developments.
usage by 50 per cent and solid waste by 70 per cent. exhibit 4 represents elements of green building taken
into consideration at the design stage.
Reduced
Reduced energy destruction Reduced water Limited waste Increased user Corporate
consumption of natural consumption generation productivity image
resources enhancement
To ensure minimal environment damage the following factors have to be considered for green building
construction:
• Conserve the external environment at the building location.
• Improve internal environment for the occupants.
• Preserve the environment at places even far away from the building.
Land Exhibit 6:
An Ideal Design for a Green Building
• The landscaping and exterior design in a green
Roof top planting
building shall be done to ensure more shaded Photovoltaic cell
area.
Automated ventilation
• The light trespassing can be eliminated and local control
Energy
• The solar energy at the top of a green building is harvested to supplement conventional energy.
• Natural light is harvested in intermediate floors to minimise electricity usage.
• Sunlight is restricted by the high-growing trees outside lower floors of the building.
• High-efficiency light fixtures make for pleasant lighting in addition to saving energy. High-efficiency
windows and insulation in walls, ceilings, and floors ensure better temperature control.
Air: A comfortable atmosphere at workstations improves staff attendance and increases productivity. In an
air-conditioned environment, a green building shall be specially equipped to ensure the indoor air quality
necessary for a healthy atmosphere. The inhabitants can breathe air free from any odour of paints, polish
or varnish.
Green Buildings Preserve the Environment at Places Far from the Buildings
Buildings are constructed using cement, sand, steel, stones, bricks, and finishing materials. Collectively
these are responsible for about 20 per cent of the greenhouse gases emitted by a building during its
lifetime.
Green buildings use products that are non-toxic, reusable, and/or recyclable wherever possible. Locally
manufactured products are preferred which also save the fuel ordinarily used to transport materials.
Preference should also be given to recycled material. Certified wood as well as green materials should be
used for the conservation of natural resources.
Certified wood
Consumption of certified wood helps to encourage environmentally responsible forest management. There
are more than 50 certification programs worldwide. Globally, the two largest umbrella certification programs
are the Forest Stewardship Council and Programme for Endorsement of Forest Certification schemes.
Green wood
A Stanford team has conducted research seeking alternatives to wood. Hemp fibres and biodegradable
plastic when pressed together and heated form a layered material as strong as wood. When buried in a
land fill, it degrades faster. This wood creates more raw materials when it breaks down. Microbes produce
methane when they decompose this wood substitute and other debris thrown into landfills. Another type
of bacteria absorbs this gas and turns it into plastic that can be used to create a new wooden plank. This
cycle ensures that there is a continuous source of raw material for this wood. When this material comes to
the market, it may help to control deforestation and promote rainfall.
Green cement
Bruce Constantz at Calera, Los Gatos, has developed a green method to produce both cement and
aggregate, another component of concrete. This method sequesters carbon dioxide from power plant
flues and mixes the gas with sea water to produce the mineral raw materials of concrete. Half a ton of fly
ash from coal plants is used for every ton of green cement Calera manufactures. In addition, this prevents
the production and emission of carbon dioxide.
LEED NCv2.2
LEED for New Construction and Major Renovations version 2.2 has 69 possible points and buildings can
qualify for four levels of certification:
• Certified: 26-32 points
• Silver: 33-38 points
• Gold: 39-51 points
• Platinum: 52-69 points
GRIHA has a 100-point system consisting of some core, mandatory points and other, optional points,
which can be earned by complying with the commitment of the criterion for which the point is allocated.
Ratings are based on the points scored as given below:
• One star: 50-60 points
• Two stars: 61-70 points
• Three stars: 71-80 points
Summary
With global demand for sustainability and green responsibility, the Indian corporate world is facing difficulties
due to:
• Environmental issues
• Quality regulations
• Hygiene standards
• International compliance
The idea of green buildings should be implemented so as to earn green accreditations. These green
accreditations will not only help promote companies but would also add to their brand equity. These green
accreditations which are discretionary today are expected to be mandatory in future due to increasing
concerns about greenhouse gas emissions and global warming. Green buildings would therefore be a key
aspect in adoption of new strategies for future growth.
Authors
Avinash Mayekar, Associate Vice President | avinash.mayekar@technopak.com
Parinita Devadiga, Associate Consultant | parinita.devadiga@technopak.com
Jayashree K. Bhole, Research Associate | jayashree.bhole@technopak.com
Non-Aeronautical Revenue
Sources 67
Other Opportunities in
Travel Retail 70
perspective | Volume 04
a quar terly repor t by Vol u me 0 4 / 2 0 1 0
Introduction
When we travel, we often wonder why we cannot have a good quality food outlet or gift shop where we can
spend some time. How many times, while travelling on India’s emerging new jet-black highways, have we
wondered why we cannot have a nice wayside leisure and entertainment area where we can take a quick
nap and rejuvenate or allow our children to play! All this is going to change soon as we see the emergence
of a new opportunity for retailers and developers. This is what we call travel retail. It is a fact that we are a
country in the ‘build’ phase; this means we are watching the construction of bigger and broader highways,
more airports, better railway stations and an extensive metro network. We have all seen more than 15 per
cent growth of sales in cars and other motor vehicles, over 18 per cent increase in air travel and similar
trends in other forms of travel. Indians are travelling, and travelling big time. Needless to say, as we travel
more and more, our need to spend, eat and shop while we travel will also increase, throwing up massive
opportunities in this space of travel retail.
Exhibit 1:
Mapping Transition in the Airport Operating Model
Transition in the Airport Model
• Primary focus on aeronautical revenues
The airport business operations/model has • Airport retail categories : F&B, News, Gifts & Confectionery,
seen significant change over the last few Perfumes & Cosmetics, Jewellery, Convenience & Fashion
1970
cent through the ‘airport city’ or ‘aerotropolis’ • Airports focus to increase revenues from non-aeronautical
model. services that do not cater to the traveller directly
• Target to take share of non-aeronautical revenues to >70%
Exhibit 2:
Global airport revenue is driven by passenger
enplanements, the numbers for which have Global Commercial Aviation Revenues (US$ billion)
grown continuously since 2000, except for 2001 600
when air traffic was affected by global security 500
issues and the SARS outbreak in Asia. Worldwide
airport revenues are estimated at US$ 85 400
billion for 2008 with non-aeronautical revenues 300
contributing 48 per cent. For 2007, airports
200
collected airline charges of US$ 17 billion, which
represented 3.5 per cent of the airline operating 100
cost of US$ 488 billion. These aircraft related 0
revenues are below actual operating expenses 2000 2001 2002 2003 2004 2005 2006 2007 2008(E) 2009(E)
incurred and are subsidised by passenger fees Total Revenues Passenger Revenues
Source: IATA
and non-aeronautical revenues. Capital expenditure commitments from the airport industry increased from
US$ 40 billion in 2007 to US$ 50 billion in 2008. The global commercial airline business was expected to
generate US$ 536 billion in 2008 with passenger-related revenues accounting for US$ 425 billion.
Exhibit 3: Exhibit 4:
Total Worldwide Passengers (billion) Passenger Growth, (tkp %)*
20
5
15
4
10
3
5
2
0
1 -5
-10
0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009(E)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009(E)
*tonne kilometre perfomed
Source: ACI
Source: IATA, ICAO
Exhibit 5: Exhibit 6:
Yearly Passenger Numbers (million) % Passenger Growth (Y-O-Y)
80 45
35
60
25
40
15
20
5
0 -5
0
8
-0
-0
-0
-0
-0
-0
-0
-0
-0
-0
-0
-0
-0
-0
-0
-0
-0
-0
99
00
01
02
03
04
05
06
07
99
00
01
02
03
04
05
06
07
19
20
20
20
20
20
20
20
20
19
20
20
20
20
20
20
20
20
infrastructure
• Capacity and operational constraints leading to Increasing challenges and deteriorating
business environment
increase in congestion
Airport Objective :
• Growth of LCC carriers leading to increase in
To grow airport
demand for F&B revenues
• Security-related constraints
Growth in
Even with the deteriorating business environment, passenger
airports have managed to grow revenues driven by numbers
growth in passenger numbers.
Option : Increase airport revenues
Given the fact that the Indian aviation sector is just through growth in non-aeronautical
revenues drivenby higher number of
entering the growth phase, the potential for growth passengers
in passenger numbers across airports remains very
high. This allows all airports to tap opportunities in
the non-aeronautical business segments.
Exhibit 8: Exhibit 9:
Non-Aeronautical Services and Revenue Sources Non-Aeronautical Revenue as % of
Total Revenue by Region
Impact of Passenger
Non-Aeronautical Service Source of Revenue 60
Growth on Revenues
30
Caribbean Latin America
Low
non-airport related
20
Global Average
North America
Asia-Pacific
10
Europe
• In the Asia-Pacific region, the share of retail revenues in non-aeronautical revenues is 34 per cent.
• The global average revenue per passenger from non-aeronautical sources is about US$ 8 (~Rs 368)
which for the Asia Pacific region is US $ 7 (~Rs 322).
l Best opportunity to
eve
essL engage traveller in
Str retail activity
Shopping Factor
followed by Duty and Tax Free at about 40 per cent and Specialty Retail at 30 per cent. Duty and Tax Free
accounts for about 85 per cent of consumer spend on retail. F&B accounts for about 15 per cent of the
consumer spend on retail, though it has the highest conversion rates.
• To create unique retail offerings, airports and operators are now offering a portion of the commercial area
to local specialties (Little India-HIAL, Delhi Bazaar-DIAL) and anchor points (an exclusive area offering
special offers and discounts).
• Airports worldwide have seen an increase in security measures due to the prevailing security scenario.
Though specific incidences have the potential to affect passenger volume, it does not have a significant
impact on commercial activities at airports in times of normalcy.
A train traveller has one of the most precious things in hand - time, and that too in large amount. This makes
it possible for retailer and operators (Indian Railways, IRCTC) to provide options which ensure that a train
traveller can spend this time fruitfully. Some of the categories which will do well in this scenario are books
& music, various food options (different cuisines, faster and value driven), electronics & gadgets, apparel
etc. All that is needed is to create a value driven proposition which satisfies all types of travellers in the train
and of course willingness on the part of the railway authorities to experiment.
Road
We already have over 3700 km of highways and are still getting build as we read this. With roads come
travellers (business, leisure and what not). All of them like to eat, spend and shop. As of now, what we
have are some sparsely strewn areas called “midways” and some better developed areas called “roadside
amenities”. But these are few and far between. What we need are well thought and evenly separated such
midways and roadside amenity areas where all the necessary options are provided. Just imagine the
convenience and experience that a nicely build area which has local gift shops, local cuisines, games for
kids, and to top it all clean toilets can give us.
With more and more highways being developed in the form of PPP model and more and more focus on
tourism and business, there is no reason why we shouldn’t focus on developing the opportunities around
these “Roadside amenity” spaces.
Metro
One of the most liked travelling options which have caught the fancy of all is the “Metro”. We have seen
the gusto with which people take to metro in Delhi. And now cities like Chennai, Bangalore and Mumbai
are fast developing this option for intra-city travelling. The only difference between a metro and railways is
the “time” factor. Here people won’t have much time to eat, spend or shop. But it still will carry millions of
hungry men and kids, housewives and youth. They all will have some money and desires to spend and buy
things like the grocery items, toys, photocopies, tutorials, recharge coupons, magazines etc. The trick is to
give the local station catchments what they want.
Authors
Zahir Abbas, Associate Director | zahir.abbas@technopak.com
Sushil Patra, Senior Consultant | sushil.patra@technopak.com
Demand Drivers 73
Key Opportunities 76
Key Challenges 77
Introduction
According to the International Monetary Fund (IMF), India’s economy is projected to grow at 8.8 percent in
2010 as the demand is estimated to improve on the back of the Government of India’s economic stimulus
policies and other contributory factors such as the estimated normal arrival of the monsoon. Increased
supply and stock replenishment and easing of inflationary pressures will mean that the demand for food
products would increase. However, this increased and rejuvenated demand makes it pertinent to align
India’s national policy with respect to agriculture and food in order to satisfy the demand arising out of an
ever-increasing population that is highly discerning of quality and taste and has little time in a busy lifestyle
for traditional cooking techniques. Corporates can look into the relevance and impact of the foregoing
factors to their businesses and the kind of offerings that they need to develop in the emerging scenario.
Demand Drivers
The key factors that have enormous importance in increasing demand for food and are expected to play a
major role in the transformation of the demand are:
• Rising population and incomes
• Increasing number of nuclear families and working women
The above factors are likely to impact demand for food individually as well as in combination, and result
in significant changes in not only the demand for food quantitatively but also in terms of where, how,
what and when food is consumed. This is likely to translate to new and unprecedented modes of delivery
mechanisms, retailing formats, packaging formulations and a range of convenience and ready-to-eat food
products.
The increase in population combined with the increase in the disposable income will translate into not only
the likely increase in demand in value-added sectors such as meat, dairy, fresh vegetables and fruits but also
an accelerated demand for primary food products. This demand will graduate into an exponential demand
for primary commodities, deriving partly from the fact that it takes greater quantities of primary food to
get processed and aggregated into a value-added
product. On top of this requirement for accelerated Exhibit 1:
usage or absorption of primary commodities or Crop Productivity Levels - A Comparison (MT/ha)
food conversion from raw to processed form, the Crops India Other Countries
consumption demand for basic commodities would Paddy 3.03 9.71
also increase with the growing population.
Wheat 2.69 8.89
The net effect of this would be the combined demand Pulses 0.60 5.14
for both primary and value-added food products Edible Oilseeds 0.25 4.29
from the same natural resource region or even Sugarcane 60.70 122.70
smaller in size than it exists today. This necessitates F&V: Fruits & Vegetables
policy making and research efforts towards areas Source: Ministry of Food Processing Industries, Government of India
that focus on increasing the productivity of crops, increasing water-usage efficiencies, dryland farming
and high yielding yet non-lodging strains of crop varieties. It is important that such initiatives are taken in
earnest as the results of research and their application has a similar gestation period. This also highlights
the need to bring about productivity enhancement Exhibit 2:
in existing crops and farming situations through Food Processing Levels - A Comparison
improvements and, more importantly, application of Food Category India Other Countries
the recommended package of agronomic practices
F&V 2% USA (65%), Philippines (78%),
to attain global benchmark levels (see exhibit 1). China (23%)
Milk 35% 60-75% in developed countries
Similarly, the explosion in the demand for processed
food would trigger the requirement to increase the Buffalo Meat 21% 60-70% in developed countries
level of processing presently being undertaken in Poultry 6% 60-70% in developed countries
India (see exhibit 2). The present processing levels Marine 26% 60-70% in developed countries
are far lower than other countries and the demand F&V: Fruits & Vegetables
for such products is expected to outstrip supply if Source: Ministry of Food Processing Industries, Government of India
adequate steps are not taken.
This would cause a shift in the nature of the industry – from largely unorganised today to the organised. The
challenge for the industry would be to undertake capacity and skill-building in the food processing sector
in order to facilitate not only upgrades in the standards of food production but also to provide employment
to the large population of workers engaged with this sector.
Exhibit 3:
Enrolment of Women in Different Faculties
60 16
51 14
50 47
44 44 12
41
Women as % of total enrolment
39 40
40 37 38
37 10
35
33
CAGR (%)
30 8
21 22 6
20 20
17 18 17
16
14 4
10
2
0 0
Art Science Medicine Agriculture Veterinary Engineering Commerce Law Education Others
Sciences & Technology Management
In 1981, the number of women entering the workforce was estimated to be 20 per cent; this grew to 23 per
cent in 1991 and further rose to 26 per cent in 2001. Currently, it is estimated to be around 30–35 percent
of the total working population amounting to ~150–170 million women. Indian women are increasingly
seeking greater participation in the organised workforce, accounting for 20-25 percent of the total organised
workforce of 30-35 million (refer exhibit 3).
Exhibit 4:
A good example is the huge success of instant
Changing Food Habits of the Indian Consumer
noodles in India. Popularised by Nestle, the instant,
2-minute noodle carved out an entirely new category Types of Changes %
and the non-ethnic and quick cooking practice (as Become more health conscious now, regarding food
51
opposed to traditional Indian cooking) was welcomed consumed
and adopted by the Indian consumer. The emergence Eat more junk food now 15
of newer categories as well as eating formats such Eat less often at roadside eating joints or carts 15
as roadside restaurants, food courts, cafes, kiosks, Eat more food now 14
lounges, etc. are some of the other examples. The
Eat out at hotels more often now 5
new enabler to this change is the Internet, which
offers the quickest and easiest channel for routine Eat western cuisine more often now 5
work such as ordering food and groceries besides Source: Technopak Healthcare Outlook
other items.
High-income urban dwellers are seeking variety in their choice of foods and are willing to spend more on
international cuisine, including fast food. Indians have become open to experimenting with newer tastes
and multiple cuisines have found a way into Indian kitchens, leading to a diversification in the Indian palate
(refer exhibit 4). This has created opportunities for imported food products such as pasta, sauces, salad
dressings, dairy products such as yoghurt and cheese, etc. (refer exhibit 5).
Exhibit 6:
Adoption of higher energy density diets, sedentary Growing Health-Consciousness
work and leisure habits coupled with reduced physical Measures taken by Indian Consumers %
activity have resulted in an increase in incidences of Eating right quantities of food 74
non-communicable diseases, thus making consumers Eating less/cutting down on unhealthy food items like fried
42
aware of the importance of health, food and exercise, food, sweet items/sugar, non-vegetarian food
and driving the demand for more nutritious and Reducing stress in life 28
fortified health foods (refer exhibit 6). As a result, Indian Taking vitamins, tonics and health supplements 14
consumers have now become more sensitive to the Going for preventive health check-up 6
health quotient of food consumed and the market for Going for regular exercise like walking, jogging, physical
health and wellness food has been rising. work out, yoga, aerobics, weight training, karate, cycling, 12
swimming, playing sports
Source: Technopak Healthcare Outlook
Key Opportunities
Changes in demand factors have led to product manufacturers and marketer realising the diverse offerings
they can make available to the consumer. This has led to not only the emergence of newer categories
but also increasing competition among players in existing categories with an emphasis on the creation
of hitherto non-existent value spaces and differentiation factors. While almost all the key categories in the
food segment have been influenced, the ones likely to get more influenced would be those that pack in
greater value addition or, in other words, a higher concentration of nutrients per unit. This is already being
witnessed in products that have fortifications and ‘natural’ ingredients.
Convenience Foods
The frozen food market is expected to evolve further at a CAGR of 45 per cent to reach Rs 12,520 crore by
2014-15 (refer exhibit 8). Convenience-seeking behaviour accompanied by the desire to experiment with
new, exotic cuisines from fine-dining venues to a ‘grab-and-go’ solution from a fast food outlet or even
a convenience store have also led to occasions that call for outside food. This has further resulted in a
growing number of domestic fast food outlets, home delivery and take-away restaurants, and American
restaurant chains, such as KFC, TGIF, Dominos, Pizza, Pizza Hut, McDonald’s and Baskin Robbins, that
have opened in the last few years.
Exhibit 7:
Comparison in Market for Frozen Food: 2009 vs 2015(P)
2009 2015
Contribution to the Contribution to the
Market Size Market Size
Category Category
Frozen Food Market Rs crore % Rs crore %
Retail 190 2 570 5
Organised Stores 110 55 410 72
Non-veg Stores 40 24 60 24
Modern Independent Stores 40 21 100 21
Institutional 440 5 1190 9
Food Services 290 66 900 76
Hotels 150 24 290 24
Export 8,040 93 10,760 86
Grand Total 8,670 100 12,520 100
Key Challenges
While the above demand factors and ensuing product innovations would pan out in the coming decade,
it will remain conditional to a great extent on the changes required at the ground level to facilitate the
viability of many of these. A good example is that of frozen food or liquid value-added milk products, which
would warrant a continuous cold chain network. Frequent breaks in electricity supply, uneven and non-
motorable roads make the movement of reefer trucks unviable and also present difficulties in reaching the
last mile. Regulations that would bring about quantum changes in the way commodities are bought and
sold need to be enabled pan India in order to enable corporate bodies and farmers to transact freely and
within a risk-management framework. Examples of such regulations that need reforms include the much
touted Agricultural Produce Market Committee (APMC) Act and the Warehousing Act, besides provisions
for financial institutions to deal in commodity markets through exchanges.
There is a need for a focused intervention in skill building and vocational training across the value chain
from the growers and the academia to the processing factories in order to not only absorb the growing
population into the increasing demand for labour but also for producing goods in line with the demand
from the market. Demand being a function of consumption capacity, it is also important that the macro-
economic policies support buying capacity and encourage increased consumption of and experimentation
with innovative food products. This can be possible only if food inflation is kept under check. The present
inflation rate of above 17 per cent will, if it continues, deter buyers from value-added consumption as basic
commodities become expensive. This is likely to lead to a contraction in the food basket as well as in a
change in its composition. The other impact that arises from the inflationary trend is the difficulty in meeting
production increases as the cost of cultivation increases on the back of increases in fuel, power, labour
and raw materials.
Even without inflationary concerns, India faces the need to urgently leapfrog productivity through genetic
or agronomic methods in major classes of commodities-cereals, oilseeds, pulses to prevent the need for
importing these. Added to the above, the country also needs to improve and rejuvenate its agricultural
extension programs to keep the farmers’ knowledge in line with the rapid developments in technology
in the area of agriculture. It is imperative that regulatory, infrastructure, breeding and crop productivity
enhancements and labour-enablements happen in tandem, as it is the collective force of all these-rather
than an isolated factor-that pulls down productivity of the Indian agribusiness and food processing.
Many food companies are now investing in nanotechnology research that could provide us with safer,
healthier, more nutritious and tastier food in the future. Food production costs are expected to fall as
techniques become more efficient, using less energy, water and chemicals, and producing less waste.
Some of the key areas in which this emerging science will play a valuable role include food packaging
and food safety, and ‘interactive foods’ such as an ice-cream that has the taste and texture of ice-cream
without the use of fat or the use of nanotechnology to produce low-sodium foods that will still taste
salty due to interactions with the tongue, and nutrient delivery systems that use nanocapsules to deliver
micronutrients, antioxidants or even drugs to specific target areas of the body at designated times.
‘Nanosensors’ could be developed that detect an individual’s personal profile and trigger the release
of appropriate molecules from the product. In this way, foods could be customised according to the
specific¬ taste and smell preferences of the consumer, along with their needs related to health status,
nutrient deficiencies or allergies. Potential applications include foods that can release an appropriate
amount of calcium in consumers with early osteoporosis, or those with ‘smart filters’ that are shaped to
trap molecules that might cause an allergic reaction.
This is likely to bring about unforeseen developments in the preferences of customers in selecting food
brands and the manner in which these would be valued. Concomitant increases will be necessitated in crop
production with key emphasis being in the areas of enhancing crop productivity, resource utilisation and
yield improvements. A key contribution to this trend is likely to be the role of technology involving genetic
manipulation. The rapid pace of change will require both the public and private entities in the food cycle to
acknowledge the need to undertake capacity development and take steps aggressively in that direction.
While the burgeoning population will put an increasingly higher pressure on food demand (see exhibit
9), India’s natural biodiversity and diverse agro-climatic situations would be able to provide the needed
supplies if the above possibilities are fully exploited. In an increasingly dependent world where corporate
entities and farms compete for natural resources, it will become increasingly pertinent for each country to
not only safeguard national food security concerns while engaging in world trade but also ensure peak
sustainable utilisation of available resources. The role of the government, going forward, is also likely to be
increasingly that of a facilitator rather than implementing agency enabling increasing market-led trade and
supply chain development.
Authors
V. Sridhar, Associate Director| sridhar.v@technopak.com
Nimisha Chhabra, Associate Consultant| nimisha.chhabra@technopak.com
As we all know, India is changing rapidly. What is changing with it is the way we eat food, whether at home
or outside. This change is driven by various factors – more nuclear-family structures, types of jobs, more
working women, time poverty, increasing incomes, more ‘guilt’ relating to less time spent with the family,
a more discerning palate, greater hygiene (if not health) consciousness, and so on. As a result, a lot of
exciting opportunities are being created in the food services retail space in the country. The success that
chains like McDonald’s, Domino’s Pizza, Café Coffee Day, KFC, Haldirams, etc. have seen so far may not
even be the tip of the proverbial iceberg!
Various reports project that India is going to see 85-90 million new jobs created over the next five years. Of
these, almost 45 million are expected to arise in Services (in sectors like Hospitality, Healthcare, Modern
Retail, IT & BPO, Telecom, Education, etc.) and a large percentage is likely to employ women. The metric of
‘percentage of working women’ in India is currently skewed because it largely comprises women working
in agriculture and as labour, and this is poised to change with the number of urban women in jobs set to
increase dramatically over the next 5-7 years. Transforming with this is the time available for household
chores, including a sharp drop in time for grocery shopping, cooking, etc. A feeling of guilt kicks in for
spending less time with the family and hence a strong desire arises to allocate more ‘free’ time to family
and less to the kitchen.
So far, eating out for Indians is a ‘celebration’ of some sorts – a birthday, an evening out with friends,
a visit to the mall with family. With more working couples, higher income, and less time available in the
kitchen, more and more instances of eating out will also be ‘necessity based’. This is no different from other
countries that have gone through the development cycle before us. An interesting comparison here is the
purpose that cafés serve in India versus in developed countries. In India, a larger share of business for
café chains comes from the second half of the day, in the evenings, etc. when customers visit a café for a
leisurely coffee with friends or family. However, café chains in developed markets get most of their business
in the morning half, when customers pick up a coffee and some food on the way to work, a replacement
for the home kitchen!
The food services retail market in India today is estimated at Rs 32,000 crore, and is expected to grow
at a CAGR of 8-10 per cent over the next five years. Of this, the organised market currently accounts for
around Rs 4,000 crore, and is expected to grow at a CAGR of 25-30 per cent, and could be a Rs 15,000
crore market by 2015. This is already large enough to excite both international and Indian food chains.
However, the real growth fillip could be provided to the market by the ‘necessity based’ eating out space,
and all growth projections for the food services retail market could turn out to be pleasantly incorrect and
understated.
Given this large emerging opportunity in ‘necessity based’ eating out in India, let’s now look at what is
required by the customer and what is currently available in the market. The average adult Indian needs
about 1,800-2,200 calories per day, which is around 700 calories per lunch or dinner. Such a meal needs
to be tasty, hygienic, healthy, priced right, and conveniently available. Also, while Indians are increasingly
open to different international cuisines, over 80 per cent of food consumed (at home or outside) continues
to be Indian food. For a middle-class household, such a meal cooked at home probably costs somewhere
between Rs 35–50 (US$ 1 or less) per head, when one accounts for food and labour costs.
What is available in Indian cuisine on an average is largely fine-dining/sit-down focused, and that too leaves
a lot to be desired. Menus are too long, with the objective of providing variety, but this reduces economies
of scale and increases price points. Input raw material quality is poor (largely the lowest grade vegetables
from mandis across the country), and is covered up with large quantities of fat (gravy) in some form,
resulting in a meal that is probably 1,300 calories and way higher than the desired 700 calories. No wonder
visitors from overseas often remark at the large difference between an Indian meal at home versus at a
restaurant, though they usually love both versions.
Further, various improvement opportunities exist from a business design perspective. A large menu means
a large kitchen, which is expensive retail real estate not being used for customer seating. Also, restaurant
managers tend to measure capacity utilisation by ‘tables occupied/capacity tables’, while what is required
to be measured is ‘seats occupied/capacity seats’, which needs a flexible seating plan to be designed and
managed.
Indian food outlets continue to hold their own against multinational chains as Indian consumers have a
strong preference for local and regional food. However, these outlets have not been able to ramp up the
number of outlets as coffee chains or international quick-serve restaurants have successfully done.
A very strong opportunity for a business ‘built for India’ presents itself: a format designed for ‘necessity
based’ eating out, with Indian cuisine, simplified and standardized menus, industrial centralized kitchens,
an efficient sourcing and supply chain (including a cold chain) with built-in economy of scale, hygienic
and clean ambience, tasty and healthy food, a smaller retail kitchen, flexible seating, and prices marginally
higher than a meal cooked at home. Around 500-700 such outlets, across 40-50 cities, over 5-7 years,
generating revenues of Rs 1,000-1,400 crore per annum would make this opportunity interesting for Indian
business houses as well as international chains. And, extensions into home delivery, institutional business,
ready-to-eat meals, etc. could further enlarge the size and scale of such a business. So, a fully Indian
McDonald’s anyone?
Author
Raghav Gupta, President | raghav.gupta@technopak.com
Food and Food Services Retailing: Market Entry Strategy and Implementation Assistance
The client is a rapidly growing Indian conglomerate. The assignment entails sizing market potential for food
services and processed non-vegetarian food retailing in India to expand their presence in the food category,
with entry in the quick service restaurant business and expansion of current food retailing business. A
strategy and execution plan has been recommended to launch QSR and expand the retail business.
Our clients are leading Indian and international businesses, entrepreneurs, investment houses, multilateral
development bodies and governments. Our 600+ clients include Aditya Birla Group, Apollo Hospitals,
Arvind Limited, Asian Development Bank, Asian Paints, Temasek Holdings, Essar, GMR Group, Godrej
Group, Gujarat Government, Hospital Corporation of America, ICICI Limited, Hindustan Unilever Limited,
International Finance Corporation, Lenovo International, Mahindra Group, Marks & Spencer, Mother Dairy
Foods, Ministries of Food Processing, Textiles & Commerce, Raymond, Reliance Industries, Samsung,
Sequoia Capital, Starwood (Sheraton), Tata Group, United Nations Development Program, Walt Disney,
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