Five takeaways from VCCircle Consumer Investment Summit 2013

Understanding the target consumer is the single most difficult thing for an entrepreneur. If one gets it right, there is no looking back. Held in Mumbai today, the VCCircle Consumer Investment Summit 2013 saw a good mix of delegates including investors, entrepreneurs and investment bankers who discussed that and various other trends and aspects driving the consumer sector in India. Here are five takeaways from the summit.

MNCs put more efforts in understanding consumers

While international presence brings an advantage, multinational firms also spend a lot of money and time in understanding their end-consumers in India. This not only becomes crucial when competing with local incumbents, but also differentiates them from the Indian firms, many of whom do not believe in in-depth market research to understand the consumers, according to the panellists at the summit.

Rajiv Mehta, managing director of Puma (South Asia), said, “MNCs infuse capital from the very first day when they enter a market and start business. They are backed by financial security and can always compare consumer behaviour in other markets like China or Brazil to that of India and then react accordingly.”

Harish Bijoor, brand strategy specialist and CEO of Harish Bijoor Consults Inc., also agreed with Mehta. “Small Indian companies do not believe in market research. They don’t know who their customer is and how to have an in-depth knowledge of the audience they are catering to. In fact, I have 85 per cent of my work from MNCs and only 15 per cent work comes from small companies in India,” he noted.

M&As to continue in consumer sector, both inbound and outbound

Companies believe that it is becoming easier to acquire other firms in the consumer space, rather than starting from scratch. “In the last three years, M&A transactions worth $12 billion took place in the consumer space. But this is a small teaser, compared to what we will see in this sector,” said Ritesh Chandra, executive director and head, consumer group, at Avendus Capital.

Speakers at the summit also felt that the trend of international brands coming to India and acquiring companies would continue. However, Sandeep Ahuja, MD of VLCC Healthcare, said that the opposite would also happen and Indian companies would be looking at overseas acquisitions to expand globally. “Indian companies like us have reached a scale and we are now ready for acquisitions across international markets,” he said.

Build premium brands; packaged foods an attractive opportunity

The shift from ‘unbranded’ to ‘branded’ is happening fast in the consumer market and that is where the opportunity is.

Shomik Mukherjee, partner (Consumer) at the private equity firm Actis, said, “Premium products are an attractive space across sectors. There are people who want to use premium products and that’s why having a section of premium products in your portfolio always helps. Therefore, companies should look at growing inorganically in this segment.”

He further elaborated that packaged foods could be an attractive segment when firms look at acquisition. Especially, the regional, dominating players would be attractive targets, he added.

QSR business needs scale, real estate a challenge

Food business requires a lot of patience and that is the challenge ahead. “It takes 15-17 years for a quick service restaurant (QSR) brand to establish good scale in India as you need 500 stores to prove yourself in the market. Indian QSRs face even a longer journey,” said Tejpavan Singh Gandhok, CEO of Om Pizza and Eats. Om Pizza has the India franchise rights for Papa John’s Pizza brand and Tex-Mex chain Chili’s.

During the past five years, 1,500-1,700 outlets have been set up in the QSR space. However, investors and promoters agree that real estate and supply chain management are the biggest constraints in the QSR business. Deepak Shahdadpuri, founder and MD of BCP Advisor, said that if real estate were not a challenge, there could have been 5,000 QSR outlets today.

Digital marketing, e-com to boost consumer sector sales

Starbucks, which has recently entered the country, is largely doing its marketing through social networking platforms. Avani Saglani Davda, CEO of Starbucks in India, said that it’s extremely important to understand the social trends to be in a market like India and that is where digital marketing helps.

Even Subrata Dutta, Ex-executive managing director (South Asia) at Samsonite, said that the company introduced online sales 18 months ago and today, 3 per cent of its sales are happening online. Indian consumers have started consuming online and Amazon is an example how global markets have leveraged this market. Today, Tesco is a prominent brand in retail and its smart online marketing moves majorly contribute to that position.

(Edited by Sanghamitra Mandal)

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