Foreign CPG Company in India: Success Factors

I was recently asked to provide inputs and share my views on the success factors for doing business in India. The company is in the food and drink sector that is thinking about entering the market. I have tried to address this question based on my experience working in India with a major consumer durable corporation and the largest automobile company in the Indian sub-continent. While the list can go endless, it is an honest attempt to highlight critical success factors for entering the Indian CPG market.

1. Understand the target segment: Foreign companies tend to lose focus as they enter India and either become too narrow in their target segment or too broad. The trick is to understand your target segment and stick to it.

2. Go Rural: If the company is not operating in a niche, then going rural will always help. As such majority of our consumers are still in the rural markets. Undermining the strength of rural India can cost a fortune.

3. Focus on small SKU's: While companies particularly in the food and drink industry feel that SKU's do not matter, but in India they do. Traditionally India is a very fragmented market with a variety of tiers available, unlike the supermarket concept here in the US. Also, considering the difference in the needs of customers, it is very important for companies to realize the importance of volume based approach. So the concept that works in India is to sell more of less for less.

4. Be local: While Indians do have an affinity for foreign products, advertising locally and catering to the local people helps. If the advertising and communication approach is not in line with the culture / needs / wants of people, it is bound to fail.

5. Launch in phases: While some products may be launched at a national level. However, it is always good to conduct a phased launch and develop that market pull for instant market development.

6. Focus on quality: Gone are the days when Indians were able to accept poor quality products for lack of choice. Today's Indian consumer is much more conscious about his/her surroundings and products available.

Again, there could be a zillion factors contributing to the success and/or failure of a foreign enterprise in India and this just provides a framework.

IIT's: Way to go

A TV program telecasted in US (CBS 60 minutes) about Indian Institute of Technology (IIT), a pioneer in the field of engineering education in India. IIT's have also been regarded as the engineering school having the largest number of applicants in the world and the toughest to get in.

The graduates from IIT's opened the doors to the US and proved the worth of Indians in fields of technology, education and management. With the technology revolution and the rise of companies like Infosys, TCS and Wipro, Indians are globally recognized and are undoubtedly a force to reckon with. The video provides insights into the passion of Indians for education and a spirit to rise up against all odds.

While I was growing up, my mother used to tell me, you have to go to IIT and there was no dearth of examples around me. I still do not remember what the world was from 1993-1995 when I was preparing for the Joint Entrance Examinations (JEE) for IIT's. Although, unfortunately I was unable to make it to an IIT, I do not have any regrets at this stage. The passion was so high that till date I consider not clearing the JEE as the biggest set-back of my life.

The years I spent focusing on the fundamentals and preparing for one of the most difficult entrance examinations in the world gave me the courage to excel. Today, I still have a lot of respect for IIT's and this video is a tribute to Pandit Jawaharlal Nehru whose vision helped create this world-class institution.

Interview- N.R. Narayana Murthy, Founder & Chairman, Infosys

In an interview with Nayan Chanda of YaleGlobal Online, N.R. Narayana Murthy, founder of Infosys, discusses the challenges and opportunities for firms operating in India, and also identifies the factors required for success in a global market.

For transcripts of the interview, please visit: YaleGlobal Online

Wal-Mart's Entry in India

BusinessWeek Article on Wal-Mart's entry in India

With reference to the article posted above, here are some of my opinions.

I still remember graduating out of one of the top business schools in India in 2001 and Bharti was one of the last choices to start your career with. Although it was a major player in the mobile communication market, it was still seen with an awry eye. Now with the tie-up with Wal-Mart, I feel that Sunil Mittal is doing all the right things to diversify and bring value to the large Indian population. He is undoubtedly the fore bearer of the mobile revolution in India followed by Reliance. It would be good to see the Walmartization of Indian cities. There would be a huge impact on the traditional mom-pop stores. I am sure there would also be a drift between the shop keepers and retail chains followed by lobbying and political pressure. However, in the midst of all this, India is rising and now there is no looking back. Kudos to Sunil Bharti Mittal !!

Also, while a lot of Indians have become globe trotters and have seen the affect of Wal-Mart on the US society, they are also expecting similar goods and services in their home country. In all India is a huge market and the premature entry of lot of CPG companies in the early and mid 90's led to a considerable burn out. This is the right time to exploit the great Indian middle class which is growing at a frantic pace. Also, Indians should have the right of choice to buy world class products. Although, I agree that not all that Wal-Mart sells is gold. However, the standardization of Indian retail market will push consumers to plan appropriately and lead to an increased consumption which is always good for the economy. On the other hand, it could be a blessing in disguise for the not so popular Indian manufacturing industry. With Wal-Mart, new sourcing opportunities would be created and local sourcing would create more jobs and increased quality. If India has to beat China in FDI and growth numbers, manufacturing has to be boosted. IMO, the entry of Wal-Mart sooner or later will push towards this end goal.