a quarterly report by May 2009 / Volume 01 · a quarterly report by May 2009 / Volume 01 a...

perspectiveMay 2009 / Vo lume 01a q u a r t e r l y r e p o r t b y

a qua r t e r l y r epo r t by VOLUME 4 / 2010

Editorial Team

Raghav Gupta, President I [email protected] I +91-9958522993

Veenu Sharma, Senior Consultant I [email protected] I +91-9810562621

Anamika Mukharji, Editor I [email protected] I +91-9769091553

Design & Development

Bharat Kaushik, Design Manager I [email protected] I +91-9811661493

Arvind Sundriyal, Senior Designer I [email protected] I +91-9910493934

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.

Raghav Gupta, President I [email protected]

| Volume 04perspectiveVolume 04 / 2010a q u a r t e r l y r e p o r t b y

In This Perspective

perspectiveVolume 04 / 2010a q u a r t e r l y r e p o r t b y

Contents

Game Change in Healthcare?Arvind SinghalThe interest levels and investment mood in the Indian healthcare industry has been pushed a few notches up with Fortis’ investment in Parkway of Singapore, a possible game changer in healthcare.

Integrating AYUSH System in Healthcare DeliveryDr. Rana Mehta, Akansh Akhauri, Ankur BhartiTraditional Indian medicinal systems need to be successfully blended with modern healthcare facilities to make way for affordable health care in the country.

The Four A’s of EducationArvind SinghalReforms in the education sector must take into account accessibility, appropriateness, affordability and accountability in order to meet the needs of the individual and the nation.

An Update on Nine Significant Regulatory Changes in Education in IndiaRaghav Gupta, Kapil GabaUnderstanding the regulatory and legislative reforms in the education sector and their impact and implications on various stakeholders.

Branding in the T-20 EraRaghu ViswanathThe growing awareness of brand-building as a science has led to the emergence of new trends that are shaping the future of branding initiatives.

An Overview of India’s Consumer and Retail SectorsRaghav Gupta, Rohit Bhatiani, Pranay GuptaA quick re-cap of the past events and trends and a brief look at what the future holds for retailers and consumer product companies.

India’s Emerging Hot-spotsVeenu SharmaThe 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 companies.

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Trends in India’s Domestic Fashion Market Ashish Dhir, Priya Sachdeva, Ruby JainThe constantly evolving apparel retail market in India presents a number of opportunities across various categories.

Green Building Concepts : An Approach Towards SustainabilityAvinash Mayekar, Parinita Devadiga, Jayshree K. BholeA brief on discovering measures for turning ‘green’ as adoption of green practices which is only discretionary today, gains importance for long term sustainability.

Emerging Opportunities in Travel RetailZahir Abbas, Sushil PatraThe development and modernisation of travel infrastructure across the country has opened many gates full of opportunities in travel retail.

India’s Food Vision: The Next DecadeV. Sridhar, Nimisha ChhabraWith the growing economy and changing lifestyles, the food consumption habits of the Indian consumer are undergoing a significant shift and bringing newer market opportunities to the fore.

An Indian McDonald’s Anyone?Raghav GuptaThe 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.

Representative Cross-section of Our Projects

About Technopak

| Game Change in Healthcare?1


1


Game Change in Healthcare?This article appeared in the Business Standard on 26 March 2010

In post-Independence India, there have time and again been moments when a policy change or an intrepid entrepreneur causes a complete change of the game and catalyses either the birth of or a rapid transformation of the landscape for a particular business sector. In the last 30 years alone, some of these game-changing milestones include Sanjay Gandhi’s launching of Maruti, Rajiv Gandhi’s dismantling of licensing and moves to modernise technology and telecommunication sectors, Reliance Industries’ first really mega project (Jamnagar refinery) and subsequent entry into the telecommunication sector, Kishore Biyani’s bold moves in retail followed by Mukesh Ambani’s entry into the sector, the arrival of Infosys, L.N. Mittal’s spectacular global success leading to the escalating ambition of many others in India, Ratan Tata’s successful launch of the Nano, causing many in other industries to look at innovative solutions for India’s specific challenges and needs, etc. Fortis’s investment in Parkway of Singapore could well be the turning point for the Indian healthcare sector.

In 2010, healthcare is already India’s second-largest consumer-spending sector. At a size of about Rs 180,000 crore, it is significantly smaller than Indians’ spending on food and grocery, but already more than what they spend on clothing and also more than all other sectors. This figure has grown at a rate of over 15 per cent per year in the last decade, and this growth is likely to be sustained for decades to come on account of several factors, including the most obvious: the country’s population may touch the 1.2 billion mark by the time the next census concludes in 2011. With the addition of about another 150-odd million in the next 10 years alone, by 2020, the size of India’s healthcare industry may well be over Rs 600,000 crore.

This sector has many unique characteristics. Of these, the oddest one is that it already has the presence of some of India’s largest and most entrepreneurial business groups, including Tata, Birla (almost all branches) and Ambani (both Mukesh and Anil). It also has some of the most visionary and dynamic entrepreneurs, including Dr. Prathap Reddy of Apollo, Analjit Singh of Max and Dr. Devi Shetty of Narayan Hrudyalaya, and Malvinder and Shivinder Singh of Fortis. There are many centres of excellence in the public sector which include AIIMS (Delhi) and various exemplary institutions among a host of not-for-profit institutions, such as the CBCI-run St. John’s in Bangalore. Yet, until now (and very surprisingly), the healthcare sector has seen interest from the private sector more as a corporate social responsibility activity rather than a high-potential business.

It is in this context that Fortis’s investment and acquisition of a significant stake in Parkway of Singapore is a potential game-changer. In one stroke, it has catapulted Fortis to the status of largest private operator of hospital beds in Asia with over 10,000 beds spread across seven Asian countries. While financial analysts are more focused on the price of this investment, most are probably missing the many strategic advantages that Fortis can reap with this audacious move, and how it has set itself up to potentially become one of the largest and perhaps most influential healthcare services providers in the world by 2020.

The interest in the Indian healthcare industry is likely to go up exponentially from now onwards. Firstly, the current incumbents (most notably Apollo, Max, Narayan and Care) are not likely to take this challenge lightly and will certainly accelerate their own growth plans. The interest from financial investors in India and overseas is already very high in this sector and fortunately, with practically no policy constraints on raising local and foreign capital – unlike in some other high-promise sectors such as retail and education – these incumbents will not find it difficult to raise the requisite financial resources. Secondly, going by history, it is but a matter of time before one or more of the large Indian business houses announce their own mega plans to enter this sector as yet another major diversification.

India needs, with immediate effect, more than a million new hospital beds distributed across the country. More millions of beds, entailing investments in hundreds of billions of rupees, will be required in the coming decades. Fortis’s audacious move could well change the game for the Indian healthcare sector.

AuthorArvind Singhal, Chairman and Managing Director | [email protected]

Integrating AYUSH System in Healthcare DeliveryAYUSH: An Overview 03

Market Size and Growth Drivers 04

Evolution of AYUSH 05

Emerging Opportunities 06

Government Initiatives 07

Challenges Faced 09

| Integrating AYUSH System in Healthcare Delivery3


AYUSH: An OverviewIndia, 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.

Concepts and PrinciplesSystem of Medicine

Ayurveda

Treatment Approach

Health or sickness depends on the presence or absence of a balanced state of the total body matrix including the balance between its different constituents. Both intrinsic and extrinsic factors can cause disturbance in the natural equilibrium giving rise to disease

Treatment of the disease consists of avoiding causative factors responsible for disequilibrium of the body matrix or of any of its constituent parts through the use of Panchkarma procedures, medicines, suitable diet, activity and regimen for restoring the balance and strengthening body mechanisms to prevent or minimise future occurrence of the disease.

Yoga

Yoga philosophy is an art and science of living in tune with Brahmand-The Universe. It is a science as well an art of healthy living-physically, mentally, morally and spiritually.

According to Yoga, most diseases, mental, psychosomatic or physical, originate in the mind through a wrong way of thinking, living and eating which is caused by attachment.

The basic approach of Yoga is to correct the lifestyle by cultivating a rational, positive and spiritual attitude towards all life situations.

Naturopathy

Nature Cure believes that all diseases arise due to the accumulation of morbid matter in the body and, given scope for its removal, Nature provides cure or relief. A Nature Cure physician helps in Nature’s effort to overcome disease by applying correct natural modalities and controlling natural forces to work within safe limits. The five main modalities of treatment are air, water, heat, mud and space.

Naturopathy is a system of healing science stimulating the body’s inherent power to regain health with the help of the five great elements of nature: Earth, Water, Air, Fire and Ether. It advocates the practice of drugless therapies like Massage, Electrotherapy, Physiotherapy, Acupuncture and Acupressure, Magneto therapy, etc.

Unani

It is mainly dependent on the temperament (mizaj) of the patient, hereditary condition and effects, different complaints, signs and symptoms of the body, external observation, examination of the pulse (nubz), urine and stool, etc. Unique and special treatment methods like Dieto therapy (Ilaj-bil-Ghiza), Climatic therapy (Ilaj-bil-Hawa), Regimental therapy (Ilaj-bit-Tadbir), make it a different, remarkable and popular system.

Pharmacotherapy is mainly dependent upon locally available herbal drugs, making the system indigenous. Similarly, surgery has also long been used in this system. In fact, the ancient physicians of Unani Medicine were pioneers in this field and had developed their own instruments and techniques. At present, however, only minor surgery is in vogue in this system.

Exhibit 1:Systems of Medicine

4Integrating AYUSH System in Healthcare Delivery |


Market Size and Growth DriversThe market for AYUSH was estimated at Rs 8,000 crore (including drugs, over-the-counter and wellness products, treatment and herbal extracts) in 2009 and has been growing at 20 per cent year-on-year. It is expected to reach Rs 16,250 crore in 2014.

The wellness/spa market is the fastest growing •segment (at 20 per cent per annum), led by the growing medical tourism and hospitality industry.

The products market is about Rs 4,000 crore with •OTC products like digestives, health food and pain balms, etc. contributing almost 75 per cent of the segment.

The hospital business has historically grown at 12 •per cent per annum and is expected to grow faster in the coming years as the Government is putting a lot of effort towards cost-effective health solutions through the AYUSH programme.

Siddha

According to this system the human body is a replica of the universe and so are the food and drugs irrespective of their origin

The Siddha system of medicine emphasises that medical treatment is oriented not merely to disease but must take into account the patient, 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.

Homoeopathy

The principle of Homoeopathy states that a medicine which can induce a set of symptoms in healthy human beings would be capable of curing a similar set of symptoms in a diseased state. In modern terminology this is known as Human Drug Pathogenicity Study (drug proving).

In Homoeopathy, medicines are prepared from natural sources like vegetables, minerals, animals, etc. There is no toxic or poisonous effect of the finished products of Homoeopathic medicines.

The AYUSH Market in IndiaExhibit 2:

Source: Technopak Analysis

2,000

5,000

1,750

6,000

3,500

1,0003,000

2,000

2009 2014

Hospital OTC Product Pharma Product Wellness Centres/ Spa

8,000

16,250

(All figures in Rs crore)

Key Players Clinics/Hospitals Product Distribution Outlets

Total Sales(Rs crore)

Product Contribution to Sales

Kottakal arya Vaidyashala 4 1,000 160 40%

Arya Vaidya Pharmacy 50 60 25%

Vaidyaratnam, Thrissur 1,000 60 100%

Birla Kerala Vaidyashala 34 40 0%

Kerala Ayurveda Limited, Kochi 30 20 45%

Nagarjuna Ayurvedic, Kalady 1 20 75%

Dabur 1600 100%

Baidyanath 200 100%

Zandu 130 100%

Himalaya 350 100%

Ozone 200 100%

Vicco 150 100%

Charak 100 100%

Exhibit 3:


Key Players of AYUSH



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 AYUSHThe 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.

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

“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.”

Naresh Trehan, Chairman and Managing Director, Medanta Medicity

Exhibit 4:Intiatives taken by Corporate Hospitals to Popularise the Traditional

System of Medicine



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 OpportunitiesThe 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 InitiativesMainstream

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.

The Educational System of AYUSH

Recognising the idea of mainstreaming AYUSH to strengthen the public health system, the Government of India is making far-reaching efforts to promote its educational standards. In order to improve the quality of human resources, the Department of AYUSH, Government of India, has laid continual emphasis on checking the growth of sub-standard colleges and has sought the active involvement of regulatory councils and State Governments to achieve this. Under the amended IMCC (Indian Medicines Central Council) Act 2003 and HCC (Homoeopathy Central Council) Act 2002, prior permission of the Central Government is now mandatory for establishing new colleges; starting new and higher courses; and increasing admission capacity in Ayurveda, Unani, Siddha and Homoeopathy systems of medicine. It also provides for ensuring conformity of standards in existing colleges within three years. These provisions will improve the education standards of Ayurveda, Unani, Siddha and Homoeopathy in existing colleges as well as curb the unwanted growth of sub-standard colleges. IMCC (Amendment) Act, 2005 and HCC (Amendment) Act, 2005 have been introduced in the Parliament with a view to bringing about transparency in the functioning of these Councils as a part of the Department’s priority to improve standards of graduate and postgraduate education in Ayurveda, Siddha, Unani and Homoeopathy.



Current Infrastructure in AYUSH

Current infrastructural facilities in AYUSH have not kept pace with growing demand, as seen in exhibit 5. Though the government is making an effort to expand these facilities by adopting various measures, growth has been rather slow over the years.

National InstitutesThere 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•

National Institute of Siddha (NIS), Chennai•

These apex bodies have been established to achieve excellence in teaching patient care and research.

Research CouncilsThere 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 BodiesThere are two national-level regulatory bodies, namely:

Central Council of Indian Medicine (CCIM), New Delhi•

Central Council of Homoeopathy (CCH), New Delhi•

Facilities Ayurveda Unani Siddha Yoga Naturopathy Homoeopathy TOTAL

Hospitals 2404 267 277 12 170 235 3360

Beds 43826 4770 2596 495 5527 10988 68234

Dispensaries 14500 1025 488 70 238 6042 22494

Registered Practitioners

458328 47456 6601 0 914 238627 751926

(i) Admission Capacity UG

11375 1770 350 - 385 13355 27235

(ii) Admission Capacity PG

1053 67 110 - - 1163 2393

Manufacturing Units

7955 324 302 - - 647 9228

Exhibit 5:Infrastructure for AYUSH in India

Source: Central Council of Indian Medicine



These Councils are responsible for laying down •and maintaining the minimum standards of education, maintaining a central register of practitioners and regulating professional practices by the practitioners of the Indian Systems of Medicine and Homoeopathy respectively.

Human Resources in AYUSHThere is a sizeable pool of medical manpower in the AYUSH system of medicine. These persons may be more willing than modern system practitioners to serve rural areas where access is quite limited. The total number of registered AYUSH Doctors in India as on 1.1.2008 was 751,926.

Challenges FacedIt 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:

L• ack of contemporary environment

Shortage of qualified medical manpower•

BAMS (Bachelor of Ayurvedic Medicines and Surgery) doctors prefer Allopathic hospitals for better »prospects

More generalists than specialists »

Lack of modern equipment and other facilities•

Limited investment in modern equipment »

Lack of funding in Government and Government-aided Ayurvedic hospitals »

The evidentiary standards required by Western countries that prefer solid proof to blind faith are not met•

Lack of adequate information on the most effective system for each kind of health problem forces patients •to fall back on Allopathy for instant relief

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.

Human Resources for AYUSH

AYUSH Doctors in India, 2008

Exhibit 5:

Source: National Health Profile of India, 2008, Central Bureau of Health Intelligence

Ayurveda

Homoeopathy

Unani

Naturopathy

60.96%

31.73%

6.31%

0.12%

AuthorsDr. Rana Mehta, Vice President | [email protected] Akhauri, Consultant | [email protected] Bharti, Consultant | [email protected]

10The Four A’s of Education |



The Four A’s of EducationThis article appeared in the Business Standard on 11 March 2010

It is very heartening to see that education has finally started to attract the attention it always deserved. In the last 20 years, especially, while India talked about financial and other reforms, the education sector actually saw even more regressive policy steps and more stifling of efforts to create high-quality capacity from primary schooling right through to post-graduate studies.

There is currently a lot of optimism about the reforms in the education sector. Hopefully, many of the progressive reformist measures articulated by the Union HRD minister since his induction into the Cabinet last year will be implemented in the current year itself, creating the right policy framework and operating environment for attracting large investments into the sector. Indeed, India’s challenge in the education sector, as it is in all other social and physical infrastructure sectors, is mind-boggling. For a population that is likely to touch almost 1.2 billion by the time the next census begins in 2011, India needs – just to illustrate this massive challenge – over 1.5 million qualified doctors. Against that, we have no more than 550,000 and of this small number, probably 30 per cent or more may be concentrated in the four metros alone. The current annual capacity for MBBS seats is less than 40,000. India’s gross enrolment ratio (number of students in colleges) is just above 10 per cent, while the same for developed nations is over 50 per cent. Just to increase this ratio to 20 per cent in 10 years, we require a near doubling of higher education seats in India (the school-going population would have increased by more than 100 million in the next 10 years), necessitating an investment of more than Rs 480,000 crore. Not only this, 45 per cent of all higher education seats in India are allocated to humanities and arts compared to 3 per cent in Brazil, 14 per cent in China, and 4 per cent in Russia. It is not surprising, then, that India is way behind in the number of seats available for technical and business/manufacturing-oriented education compared to developed or major developing countries. And finally, while a lot of attention is justifiably focused on primary education and higher education, relatively less attention is given to those estimated 400 million out of about 460 million jobs that are skill-based and require vocational training. Less than 6 per cent of this huge mass of workers receives any form of vocational training. The current landscape of vocational training in India comprises about 5,500 industrial training institutes and about 1,750 polytechnics. China, having a population not much bigger than India’s, has over 500,000 such institutes.

While this infrastructure is being created, it is also important to start paying serious attention – through policy framework – to the 4 As: Accessibility, Appropriateness, Affordability and Accountability. Accessibility has to be universal in the context of all socio-economic strata of society and across the entire geographical spread of India. Appropriateness has to meet not only the aspirations of the individual but also India’s needs, and the demands of Indian society at large. Affordability has to be seen both from the point of view of the individual who (or whose family) should be able to finance her studies from school right through doctoral programmes, and also the country (how much it can afford to subsidise since resources available for all infrastructure are severely limited). And finally, accountability has to be seen first from the perspective of the student who would have trusted the system and the regulators with 16 or even more years of her life in the hope that on completing her education she would be able to find the appropriate job or vocation for which she has dedicated those years to school and college. Accountability also has to be to the nation, so that there are no shortages of qualified people when the population is so large, and so young.

Hence, as the governments (both at the Centre and in states) have in the past decades come up with a slew of incentives and subsidies based on backward area development or promotion of specific industrial and service sectors, they must now come up with policies that can direct this new capacity creation in the education sector based on these four crucial principles of accessibility, appropriateness, affordability, and accountability.

AuthorArvind Singhal, Chairman and Managing Director | [email protected]

An Update on Nine SignificantRegulatory Changes in Education in IndiaExamination Reforms: Class X Board Exams Optional for CBSE Students 13

The Right of Children to Free and Compulsory Education Act, 2009 13

Derecognition of Deemed Universities 15

Foreign Educational InstitutionsBill, 2010 16

The Prohibition of Unfair Practices in Technical, Medical Educational Institutions and Universities Bill, 2010 17

The National Accreditation Regulatory Authority for Higher Educational Institutions Bill, 2010 18

The Educational Tribunals Bill, 2010 19The National Commission for Higher Education and Research Bill (NCHER),2010 20

National Higher Education Finance Corporation 21

| An Update on Nine Significant Regulatory Changes in Education in India 13



1. Examination Reforms: Class X Board Exams Optional for CBSE Students

Date of Passing

Effective year 2011 for class IX and class X.•

What Does it Entail?

Enables continuous assessment of a student at the school level instead of the board examinations at the •end of class X.

Focuses on measuring perfromance in the examination for class IX and class X through grades in 9 •bands instead of the currently prevalent numeric indicators.

Impact on Current and Future Institutes

Need to subscribe to the mechanism of continuous assessment as prescribed by CBSE.•

Impact on Students and Parents

Reduces the pressure on students to perform better than their peers. •

Parents too relieved with the relaxed parameters which do not make everything dependent on one •examination.

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

2. The Right of Children to Free and Compulsory Education Act, 2009

Date of Passing

Came into force on April 1, 2010.•


Makes access to primary education fundamental right. Allows for free and compulsory education for •children between 6-14 years of age.

The act maintains that no child can be held back, expelled, or required to pass a board examination until •one completes the elementary education.

Calls for a fixed student-teacher ratio and allots 25% reservation for underprivileged students (max •1:40).

14An Update on Nine Significant Regulatory Changes in Education in India |



Impact on Current Institutes

Applicable to the fresh batch of Class I beginning in June 2011. All schools prohibited from adopting any •screening criteria for Class I students.

Schools need to improve the infrastructure to fulfil the requirement of the act within three years failing •which it would be de-recognised. Additionally, the schools may have to invest in capacity addition which would mean further strain on the resources.

Although the Government plans to reimburse the cost of educating the economically disadvantaged •children, the actual cost incurred by the school may be higher than planned and may not get entirely re-imbursed. The schools, in turn, may try to recover additional costs incurred from other students through an increase in the fee.

The unaided schools that are obligated to provide free education to a specific number of children on •account of having received any land, building, equipment or other facilities, either free of cost or at a concessional rate, would not be entitled for any reimbursement to the extent of such obligation.

Schools run by minority institutions may also come under the coverage of the RTE Act.•

The impact on revenue would be to the extent of 2% during the first year of the Act coming into operation •and can extend upto 16% overall thereafter.

Impact on Future Institutes

For recognition, all new schools need to subscribe to the norms prescribed by RTE Act. These norms •pertain to: student-teacher ratio; building infrastructure; minimum instructional hours; teaching equipment; library and sports/play facilities.

The financial projections of a new school have to factor in 25% reservation immediately across classes •I-VIII.


The students from economically disadvantaged children can aspire to get education and even be part of •the private-unaided schools that are known for quality education.

Prosperous families may not prefer their their children to study with the those from the economically •disadvantaged strata.

The fee for general category students may be raised to recover the expenditure incurred in providing •education to the economically disadvantaged students.

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.•

Impact on Other Stakeholders / Investors

Although K-12 education is deemed not-for-profit, the provisions of the Act will impact the surplus •generated by the schools. Private unaided, for-profit schools are expected to see profits erosion.




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

3. Derecognition of Deemed Universities

Date of Passing

Announced in January 2010 basis Tandon Committee’s recommendations.•


44 deemed universities de-recognised by the Government; prominent names include - DY Patil Medical •College, Kolhapur; Dr. MGR Educational & Research Institute, Chennai; Jaypee Institute of Information Technology, Noida; Manav Rachna International University, Faridabad; National Museum Institute of the History of Art, Conservation and Museology, New Delhi.

Found deficient on many grounds -- ranging from lack of infrastructure to lack of evidence of expertise in •disciplines they claim to specialize in.

Matter currently subjudice in Supreme Court.•


Uncertainty until the matter in Supreme Court is decided. Little impact in case of a favorable verdict.•

In case of an adverse verdict, the universities that are part of the list would revert to the status of affiliate •colleges of state universities.

If the university is not able to obtain affiliation to the state university, its operations would be ceased.•


Need to subscribe to the new and more stringent norms being drafted to get the deemed university •status.

The Government is unlikely to allow any new deemed university to be set up.•


Students in such universities would face some uncertainty with respect to the university they would •continue their education from and in worst case, the university they would migrate to.





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.

The Tandon Committee Report can be accessed at http://bit.ly/c2TcI1

4. Foreign Educational Institutions (Regulation of Entry and Operation, Maintenance of Quality and Prevention of Commercialisation) Bill, 2010

Date of Passing

Introduced in Lok Sabha on May 3, 2010.•

Likely to be passed by monsoon session (Jul-Sep 2010).•


Allows foreign educational institutions and universities to set up multi-disciplinary campuses in India and •award degrees. The latter is currently not allowed.

The Foreign institution with intention to open campus in India will have to deposit Rs. 50 crore as the •corpus fund and the surplus generated by the institution cannot be repatriated.

Foreign institution expected to fund minimum 51% of the total capital to set up the campus.•

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.


To face increased competition from foreign institutes.•


To face increased competition from foreign institutes.•

Opens up a huge market for foreign education players looking to tap into the Indian Education Sector.•


More options available in terms of quality of education, value of qualification and the choice of streams.•





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.


The condition of not being able to repatriate surplus will be a deterrent for those looking at education as •a business and India as a market.

Rs 50 crore corpus may be too high for some institutes given the investment required thereafter to set-up •the campus.

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

5. The Prohibition of Unfair Practices in Technical, Medical Educational Institutions and Universities Bill, 2010

Date of Passing


Likely to be passed during the monsoon session (Jul-Sep 2010).•


Prohibits institutions from accepting fees or charges without issuing receipts and mandates them not to •admit any student without conducting admission tests.

Prohibits capitation fee (directly or indirectly) by the institution as well as the applicant.•

Makes provision for refund of a certain percentage of the fee deposited, if one subsequently withdraws •from the institution.

Seeks to curb malpractices such as over-pricing of prospectus and barring advertisements by institutions, •among other things.

Proposed imposition of civil and monetary penalties, which may extend up to Rs 50 lakh for violation of •provisions to be enforced through State Education Tribunals, which are to be established under the bill.





No longer be able to seek capitation by way of Development Charges and under other heads.•

In future, the resources for infrastructure development would need to be funded completely through •corpus or debt.

Need to enforce transparency in the admission process.•

Will make it difficult for non-serious education providers who are in the sector only to make money.•

Continuation of the malpractices would become very difficult in future.•


Protects students from cheating and misrepresentation.•

Protects students’ right to refund for services not availed in case a student drops out.•


Requires stakeholders to make other better provisions for the institution.•

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 proposed Act can be accessed at http://bit.ly/bg4oy7

6. The National Accreditation Regulatory Authority for Higher Educational Institutions Bill, 2010

Date of Passing




Accrediting and rating all higher educational institutions in India.•

Mandatory requirement for every higher educational institute and every programme of study to be •accredited.

Central and State universities, Deemed universities, colleges and even polytechnics to be covered by the •rating agencies.




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.


All the institutes to be accredited by an agency licensed by NARAHEI. Currently the institutes can choose •not to be accredited and stay autonomous.

Every institution to satisfy minimum conditions in terms of infrastructure, teacher-pupil ratio, learning and •research, curriculum, assessment procedures, faculty strength and teaching outcomes.


Facilitate students in making an informed decision about the services they can avail.•

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

7. The Educational Tribunals Bill, 2010

Date of Passing




The Bill seeks to set up specialized tribunals at the Centre and the states for adjudicating matters relating •to disputes in educational institutions.

It covers disputes between teachers and institutions as well as students and institutions.•


Institutes to have a grievance redressal system in place to resolve disputes for which they had to defend •themselves in civil courts.


Enables the students to protect their rights and ensure the service delivery is consistent with the promise •made.


Need to be cautious of delivery of the quality promised and services charged for.•




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

8. The National Commission for Higher Education and Research Bill (NCHER), 2010

Date of Passing



It is proposed that NCHER would work as a single regulatory body, and would determine, co-ordinate and •maintain standards in promotion of higher education and research.

Aims to promote the autonomy of higher educational institutions for free pursuit of knowledge and •innovation.

Regulatory bodies such as UGC, NCTE and AICTE would be subsumed into NCHER.•

Coverage of legal and medical education in its ambit is currently being debated.•

NCHER would be authorised to prepare a national registry of people eligible for appointment as Vice-•Chancellors.

NCHER would become the authority to allocate and disburse grants to higher education institutions as •per regulations.

Powers of civil court would be vested in NCHER.•


All higher education institutes would need to subscribe to the norms dictated by NCHER (other than •those in agriculture/medical education).

Need to appoint Vice Chancellor or Head of Institution from the National Registry of persons eligible and •qualified for appointment as Vice Chancellor maintained by NCHER.

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

9. National Higher Education Finance Corporation

Date of Passing

At the draft stage currently.•


Aims at providing loans for infrastructure development and expansion of educational institutions, as well •as re-finance facility for educational loans for students.


To get access to a credible avenue to raise funds for infrastructure development. •

Reliance on parallel means including charging capitation from the students would be reduced.•


Students to benefit from low interest rate and easy availability of loans through refinancing of education •loans proposal.

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.

AuthorsRaghav Gupta, President | [email protected] Gaba, Senior Consultant| [email protected]

22Branding in the T-20 Era |



Branding in the T-20 Era In today’s world, branding plays a critical role across most businesses. Business owners have begun to place far greater emphasis than before on strategic branding and brand valuations. Slowly, but steadily, brand-building is being recognized as a science that systematically enhances the reputation of the entire business – rather than just increasing recognition – through an innovative, creative communication idea.

Some trends that will define new-age branding initiatives include:

Clients will begin to differentiate branding from marketing and communication. Most clients mistake branding for advertising and marketing, most probably because of that famous headline for the now defunct A&M magazine that read: ‘Advertising is Marketing’. No wonder the magazine died, but that apart, this underscores the perennial dilemma for brand professionals – we are mistaken for marketing or advertising types.

And this is totally off the mark.

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.

The importance of other means of communication will increase drastically. Though you can expect the Indian public to be indefinitely infatuated with cricket, a brand manager cannot be expected to rely only on cricket for all brand communication. But in the short term, it is not going to be possible for broadcast media to dramatically change their palette of offerings. Every additional advertisement will therefore be a gamble, particularly in the case of new programs, which are the cheapest because they have not yet been rated.

| Branding in the T-20 Era23



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.

Marketers will encourage the transition of broadcast media into brands. Marketers will need to start pressurising broadcast media to become brands of a particular, focused description. Currently, there is no differentiation between the various brands of media, barring the very broad distinctions of general entertainment, sports and news and language variations within general entertainment and news. Even that distinction is blurred with a general entertainment channel like Sony broadcasting the IPL. Considering the tremendous financial investment required by brands in these media, it will soon become evident that these investments require greater justification than is currently available. There must be a focused target audience for each broadcast media brand that will, in turn, enable media buyers to more carefully target audiences.

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.

Integrating brands into experience will be important. Marketing and branding professionals will need to move away from pure selling and understand how to integrate their brands into a consumer experience. It is no longer enough for consumers to believe that brands are sincere in their communications; in order to succeed, brand communications must offer some additional value before the audience will even tune in.

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.

Technology and brands will merge even further. Marketers will need to break away from traditional forms of advertising and media and promote their brands in the technology-driven world of mobile advertising, especially among the younger population. The branding, however, will have to be cooperative and co-branding will become a norm. In addition, the limitations of the media will need to be taken into account as the communication cannot be through SMS alone.

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.

Power to the people. There are increasing opportunities for consumers to be heard. And consumers are now listening more to the voices of fellow consumers than to marketers. About 66 per cent of the US online population publish their thoughts and experiences with brands – positive or negative – on a daily basis. It is likely that a huge percentage of the Indian online population will begin to do the same. Blogs are becoming ever more popular, communities like Facebook are creating fan clubs or hate clubs and brands will have to take into account these factors.

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.

24Branding in the T-20 Era |



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.

Accountability and outcome will be the new critical buzzwords. The old saying frequently attributed to people – ‘Fifty per cent of my advertising money is wasted. The problem is that I don’t know which 50 per cent!’ – will turn out to be even more irrelevant. Clients will insist on financial accountability from their branding partners about the exact achievements of each initiative in the marketplace.

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.

AuthorRaghu Viswanath, Managing Director, Vertebrand | [email protected]

An Overview of India’s Consumer and Retail SectorsA Recap of Events of the Past 27

A Look into the Future 31

Conclusion 32

| An Overview of India’s Consumer and Retail Sectors27



A Recap of Events of the PastImpact of Slowdown on Consumer Confidence, Private Consumption & Organised Retail

India was relatively insulated from the events in the global economy over the last two years. India’s GDP grew by 6.1 per cent in 2008-09, as compared to 9 per cent plus growth in the previous few years. This growth was primarily led by government spending and growth in the rural areas. While the impact of the slowdown on overall GDP was limited, private consumption was impacted substantially. Private consumption growth, which was largely tracking GDP growth till before the slowdown, took a significant dip on account of poor consumer confidence. In the first few quarters of 2008-09, growth in GDP came down from 9.1 per cent to 6.1 per cent and growth in private consumption went down from 8.5 per cent to 2.9 per cent. This dip significantly impacted the consumer products and retail sectors. Organised retail, which was growing at over 30 per cent year on year in 2005-06 and 2006-07, slowed down to around 16 per cent in 2008-09.

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.

Changes in Private Consumption and Retail Growth

Private consumption in India currently adds up to about Rs 34 lakh crore and accounts for ~60 per cent of GDP. With growth in GDP expected at over 8 per cent, inflation expected at 6-7 per cent, and private consumption expected to stay at 60 per cent of GDP, nominal growth in private consumption is expected to be 14-15 per cent. This means a doubling in private consumption in five years time, to reach about Rs 67 trillion by 2015. This provides a very significant opportunity for Indian and international companies to develop and create large business in the consumer products and retail sectors in India.

Organised Retail GDP Private Consumption

Impact of Slowdown on Consumer Confidence, Private Consumption & Organised RetailExhibit 1:

Source: Ministry of Finance, Technopak Analysis and Estimates Real Growth Rates

2011P 2012P 2013P 2014P 2015P2006 2007 2008 2009 2010 Q1

2010 Q2

2010FY

31%29%

27%25% 25%

8.1% 8.5% 8.5% 9.0% 9.0%

7.0% 7.0% 7.5% 7.5% 7.5%

33% 31%27%

16%21%

9.30% 9.7% 9.1%6.1% 6.1%

7.9% 7.2%

7.10% 6.3%8.5% 2.9% 1.6% 5.6% 5.2%

28An Overview of India’s Consumer and Retail Sectors |



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 •that even with 30 per cent plus growth rates, organised retail will be unable to garner a larger share in absolute terms in the next 5 years.

In certain consumer categories like apparel, •footwear, and consumer durables and electronics, organised retail has established a strong value proposition with the Indian consumer. However, in some very large categories like food & grocery, furniture and home, and pharma it is not same. So the same shopper visits organised retail for the former categories and traditional retail for the 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).

Growth of Organised Retail: Real or Hyped?

Some recent high profile failures in organised retail have led to a belief that growth in organised retail is not as promising as it was believed to be. In order to take an objective view of the organised retail market in India, Technopak traced the growth trajectory of some of the other large sectors in India. The growth in organised retail is very similar to some of the other large sectors however, the only difference being that it not as consolidated as in sectors like Telecom (where 4-5 players command majority of market share).Hence, despite a few setbacks Technopak expects that the organised retail would emerge much more stronger than ever before and would also see significant players emerging in the next few years.

Organised Retail GDP Private Consumption

Projections for Private Consumption and RetailExhibit 2:

All values in Rs lakh crore

Source: Technopak Analysis and Estimates Real Growth Rates & Values, Inflation assumed at average 7%

29

12

62

93

27

3

20

0.90.3

Evolution Curve of Various IndustriesExhibit 3:


TO T1 T2 T3 T4 T5 T6 T7 T8 T9 T10 T11 T12 T13 T14

Indu

stry

Size

IT Organised Retail BPO Telecom




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.

Categories Description Impact of Recession Product examples

DurablesHeavy goods intended to last 3

or more yearsHighest impact

Refrigerators, Washing Machines, Automobiles

Semi-durablesGoods that are neither perishable

nor lastingHigh impact (dependent on

discretionary spends)Clothing, Furnishing, Home

Textiles, etc.

Non-durablesGoods that do not last for long,

so need be continually replaced

Limited impact (due to basic nature of products)

FMCG, Food Products

ServicesServices that are

becoming essentialLimited impact (necessity based

services)Healthcare, Education,

Telecom, etc.

Exhibit 4:Consumer Sector in India – Effect of Recession and Recovery

Sector Growth RatesExhibit 5:

Grow

th R

ates

FMCG CDIT Apparel

0%

5%

10%

15%

20%

25%

2005 2006 2007 2008 2009 2010(P)

2011(P)

2012(P)

2013(P)

2014(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.

This hypothesis is further strengthened by the fact that post recession, categories like consumer durables, automobiles recovered the fastest whereas categories like apparel, home furnishings etc. are still to recover completely.

Financial Performance

The financial performance of retail sector vis-à-vis FMCG sector is different. The EBITDA and ROC for the retail sector is about 10-12 per cent, while for the FMCG sector, the numbers are higher. Thus ,there is an opportunity for the retail sector to get these financial metric right.

The low level of returns in retail is primarily due to the high level of inefficiencies at the back end. Inventory management which is an integral part of any successful retail operation is currently lacking. A significant amount of capital of an Indian retailer is blocked in inventory leading to a strain on the balance sheet. A comparison of Indian apparel retailers with international retailers highlights this point. While gross margins of apparel retailers in India are almost similar to any other international retailer, high inventory levels have led to significantly lower returns.

Categories Volume CAGR (Last 4-5 years) Per Unit Price Change

Talk time 80% -24%

Laptops 76% -20%

LCD’s 40% -20%

Premium Shirts (Apparel) 6% 15%

Home Textiles 12% 25%

Exhibit 6:Apparent Shift in the Share of Wallet

Financial Comparison of FMCG Companies and Retailers (FY09)

Exhibit 7:

0 30 60 90 120 150

1%

8%

22%20%

12%28%

10%11%

8%25%

23%35%

19%38%

12%39%

19%48%

32%35%

15%121%

3%

-4%Vishal Retaii

Westside

Koutons

Shoppers Stop

Pantaloon Retail

Britannia

ITC

GSK

Marico

Dabur

P&G

HUL

Retailers

FMCGCompanies

EBITDA/Sales ROCE





A Look into the FutureThe last decade (2000-2009) has given India the confidence to dream big, and the next one is poised to bring those to reality. As India enters a new decade of growth there would be significant changes at both consumption and retail level. Some key themes expected to emerge in next few years which can have a direct impact on retailers and consumer goods companies include:

Dramatic Changes in the Indian Consumption Basket

Around 4-5 years back, the categories with highest consumption included food, clothing and housing. Recently, doctor and having healthcare services have become important and have overtaken clothing in the consumption basket. The new order being “roti doctor kapda makan”.

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.

Commoditisation Trap: Bigger Threat than Before for Brands

Given the changing consumption habits of the Indian consumer and share of categories, we expect that there would be a new way of classifying the consumption of Indian consumers. On one hand there would be a need based consumption categories like food and groceries, footwear, textile and apparel and there would be aspiration based categories like personal transport, health and beauty services, jewellery and watches. Categories which are mainly need based would see low consumer involvement resulting in commoditisation of these categories. Low-involvement, in turn, will imply:

Consumers zeroing on just one or two attributes •for taking the consumption decision e.g. just the size of the LCD panel for the TV, just the capacity of the refrigerator, just the fiber composition of the garment and the confidence in the retailer / brand etc.

Consumers will optimize their purchases largely •on simple attributes of price and convenience (time efficiency) in order to release more resources (money, time, mental involvement) for the aspiration / lifestyle based consumption categories.

Diminishing power of manufacturers’ brands •operating in such categories.

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.

Commoditisation in the Mobile Phone MarketExhibit 8:

20%

16%

12%

8%

4%

0%

64%

60%

56%

52%

48%2007 2008 2009

63%

1% 3%

56%54%

18%

5 15

28

Market Share ofLocal Players

No. of Players

Nokia Market Share

NOKIA

SpiceLava

MicromaxKarbonn

Market Share of Local Players Nokia Market Share





Emergence of New Hot Spots of ConsumptionCurrently the top 8-10 cities contribute to disproportionate share of the markets in most of the consumer goods categories. However, going ahead growth in India would be far more exclusive as the new hot spots of consumption (primarily driven by investments in these regions) appear on the map.

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.

Focus on Financial ReturnsLast year has been a steep learning curve for the organised retail. Going forward we expect an increased focus on the financial returns by retailer rather than just the top line. This would imply focusing on performance improvement through better inventory management, gross margins, improvement through better sourcing and private label programme. We expect that profitable growth would be the way forward for organised retail than top line growth.

Revival of Investor Interest Globally, retail and consumer product industry attracts a large quantum of investments through private equity. Pre 2008 we saw a number of private equity deals in the retail space. The industry is again emerging as a strong contender for private equity investments. The recent deals in Café Coffee Day, Lilliput and successful listing of Jubilant Foodworks (Domino’s) on the stock exchanges have revived investor interest in the sector.

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.

ConclusionThe 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.

Performance Metric Correlation to Value

ROCE 0.65

Same store sales growth 0.40

“New” growth 0.20

AuthorsRaghav Gupta, President | [email protected] Bhatiani, Principal Consultant| [email protected] Gupta, Consultant | [email protected]

33 | India’s Emerging Hot-Spots33



India’s Emerging Hot-SpotsIndependent India has had the curious—if not unique—distinction of creating large new cities, usually when new states are carved out. Today one of the fastest growing economies of the world, India represents an interesting mix of maturing metros, metros on the growth lane and metros in the making—all contributing to the economic growth of the country. The scenario, however, was somewhat different a few decades back and would perhaps not be the same a decade from now.

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.

3434India’s Emerging Hot-Spots |



Till the 1980s, Gurgaon was simply a small town located at the borders of the Indian capital, Delhi. But the establishment of the Maruti Manufacturing Plant in 1981 and then the Hero Honda Plant in 1997 not only changed the face of the town but further attracted many auto-ancillary players. The economic growth and infrastructural development projects—road, railways or airports—in Delhi also had a ripple effect on this satellite town. Increasing urbanisation and congestion in Delhi coupled with improved road-connectivity, thanks to the development of NH8 and the Gurgaon–Jaipur expressway, provided a fillip to Gurgaon’s development. It caught the eye of investors and attracted investments in multiple sectors ranging from the automotive, IT and ITES, real-estate, retail, and hospitality to education and healthcare.

The rapid pace of investments and growth over the last decade has put Gurgaon on the global map and it is today even called the ‘Manhattan of India’. A huge number of multinational companies choose to locate their operations in Gurgaon. Other satellite towns of Delhi such as Noida, Ghaziabad, Greater Noida and Faridabad have also experienced a similar impact, although of varying degree.

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.

Spread of Hot-Spots Across IndiaExhibit 1:

50-10,000 crore10,000 -20,000 crore20,000-30,000 crore30,000 crore+

AuthorVeenu Sharma, Senior Consultant| [email protected]

Trends inIndia’sDomesticFashion MarketTrends and Business Opportunities in India’sDomestic Fashion Market 37

The Growth Story of Sports Brands in India: ‘Sports-Inspired Casual Wear’ 39

Brands Eye the ‘AffordableLuxury’ Segment 42

Women’s Ethnic Wear: Contemporising Indian Wear to Capture a Larger Market 44

Growth of Over-the-Counter(OTC) Fabric Market 47

Kids are the New Shoppers 50

‘Pop Up’ Retail Concept: Temporary Stores to Attract Consumers and Create a Buzz 53

Summary 54

| Trends in India’s Domestic Fashion Market37



01Indian Textile and Apparel

Market(Rs. 3,01,500 crore)

Exports(Rs. 99,000 crore)

Textiles(Rs. 54,000

crore)

Apparel(Rs.1,48,500

crore)

Textiles(Rs. 54,000

crore)

Apparel (Rs.45,000

crore)

All the figures in Rs crore

Source: Technopak Analysis estimated exports for 2009 values rounded off

2009 (E)

Domestic Market(Rs. 2,02,500 crore)

Overview of Indian Textile and Apparel Industry

Exhibit 1:

Trends and Business Opportunities in India’s Domestic Fashion Market

The Indian textile and apparel industry has witnessed tremendous growth in the last 2 decades and its market size today stands at US$ 67 billion. India has positioned itself as a manufacturing destination with cheap labour, cotton-based raw material and easy access to US and Europe markets. With the abolition of quotas, India surged ahead of other non-competitive countries and positioned itself as a value-added manufacturer with a varied material base, an educated and English-speaking class of executives with high product development and design orientation. While textile and garment exports have been growing at an average pace of 8 per cent, it is the domestic market that presents itself as a larger opportunity, hence firing the imagination of manufacturers, entrepreneurs and marketers. The Indian domestic apparel market size is US$ 33 billion of which only 16 per cent is organised.

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

38Trends in India’s Domestic Fashion Market |



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.




The term sports wear brings to mind the image of an athlete or sportsman. However, it is interesting to map the growth of Nike, Reebok, Adidas, Puma and Lotto—iconic, global sports footwear brands—over the last few years in India as they have expanded what was traditionally the sports category into a larger category called ‘sports-inspired casual wear’. These brands together have captured a large part of the casual wear branded ‘apparel’ market with consumer recall for them as brands worn for ‘everything outside office’. This coincides with a shift in the Indian consumer lifestyle to greater fitness awareness and health consciousness, thus paving the way for these brands to benefit from the prevalent consumer trend. With a well established distribution network and strong brand presence, these brands are upgrading consumers to newer concepts of fitness products, including special shoes for jogging, rock-climbing or gym-use, dry fit t-shirts, breathable apparel for active sports like football, swimming, etc.

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.

Sportswear Brands in India: Understanding their ‘Casual’ Strategy

The premium sportswear market in India is dominated by global brands like Reebok, Adidas, Nike and Puma, with a collective market share of 84 per cent. Over the last 3-4 years, sportswear brands have tried to transform themselves into lifestyle brands. Almost all the brands are investing to orient young consumers to their brands as they understand that the potential for sportswear will be very big in the coming years.

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.

02The Growth Story of Sports Brands in India: ‘Sports Inspired Casual Wear’




Main Growth Drivers for the Industry

While the brands have expanded their product mix to include a larger part for apparel to suit Indian consumers’ casual needs, simultaneously, Indian consumers are also becoming more health and fitness conscious than before. They aspire to look and feel good by exercising, taking up active sports and experiencing the outdoors through treks, climbing, camping, etc. We expect the health and fitness category, which is currently in a nascent stage, to see more spending in the coming years.

Another growth driver for sports categories is the interest in sports. While cricket is still the most dominant sport, it has also seen great changes in the recent years, especially with Indian Premier League (IPL) which has commercialised it even further. India’s performance in wrestling, boxing and shooting at the Beijing Olympics as well as hosting the 2010 Commonwealth Games, have rekindled interest in many other sports categories like swimming, football, shooting, etc.

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.

Premium Sports Market in India: Current and Going Forward

At present, the premium sports goods retail market (apparel and non-apparel) in India is approximately Rs 2,525 crore of which ~45 per cent is the sports apparel market. The total market is expected to grow at a decent annual rate of 13 per cent to reach ~Rs 12,000 crore by 2020.

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.

0

100

200

300

400

500

600

700

800

180

360

505

675720

450

325

200165

70

0 7 14 36 50100

Reebok Adidas Nike Puma

Growth in Store Number

Retailer India Entry Share of Apparel in Total Sales

Reebok 1995 50%

Adidas 1996 45%

Nike 1995 40%

Puma 2002 30%

Exhibit 2:Comparative Analysis of Industry Players

Source: Primary Research, Technopak Analysis

Indian getting more health conscious and taking preventive actions

Greater influence of health and fitness publications

Aspiration look like their favorite sportsman

Desire to be fit for social acceptance

Non-cricket sports also getting popular

Increase goverment initiative in sports infrastructure and corporate sponsorships

Exhibit 3:Growth Drivers





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.

14000

12000

10000

8000

6000

4000

2000

0

30%

25%

20%

15%

10%

5%

0%

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2520

6570

12195Premium Sportswear MarketRs 2,525 crore

Sports Footwear Market Rs 1,400 crore

(55%)

Sports Apparel Market

Rs 1,125 crore(45%)

Mar

ket s

ize (R

s cr

ore)

Grow

th (%

)

Premium Sportswear Market Size

Exhibit 4:





03Brands Eye the ‘Affordable Luxury’ Segment

‘Brand’ is almost an overrated word now; it’s not enough for Indians any more to just be wearing something with a recognisable name tag. With increase in purchasing power and options available in the market, the consumer is going through a natural progression, fast moving up from a lower segment to a higher one. Availability of adequate upgrade options in super premium and affordable luxury segments today has helped these segments to grow in most categories. With the emergence of a new class of very affluent young Indians, who are ready to spend money to be considered classy and elite, India is no more a testing ground for premium and luxury brands, but a lucrative market with explosive growth potential.

A few product categories, especially accessories like watches, sunglasses, bags, etc. are good examples of how the retail market has thrown up various options for upgrading consumers and how consumers on their part have boldly upgraded themselves. Till a few years back, time-wear was dominated by home-grown brands or brands targeting the mid-market, like Times, Citizen, HMT, Sonata, Timex, etc. The brand Titan, and its select few products were considered aspirational or premium as an exception. With rising incomes and a growing population, brands started to realise the huge potential of the market and the consuming class decided to capture the buoyancy in premium retail business in India. It was the entry of Esprit time-wear in India in 2005 that revolutionized the Indian watch industry. A watch is now considered a fashion accessory and the brand name a fashion statement—consumers have been able to move up the value curve by buying watches in the range of Rs 4,000 to Rs 20,000. Many international brands are positioned in the super premium to ‘affordable luxury’ segment, as seen in exhibit 6.

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

Luxury Market in Developed and Developing CountriesExhibit 5:

Country Europe Japan China China

22,464,000 21,748,500

38,250

0.18%

5,706,000

29,250

0.51%

India

5,332,500

6,300

0.12%

90,000

0.40%

72,855,000

495,000

0.68%

GDP

Luxury Market

Luxury Market as % of GDP

All figures in Rs croreSource: IMF Industry Report

Luxury>Rs 22,500

AffordableLuxury

(Rs 9,000 to 18,000)Super

Premium(Rs 4,000 to 8,100)


Value Brands(Rs 450 to 1,350)

Unbranded(Rs 225to 360)

14% of total market

Increasing Income

Progression of Watch Retail in IndiaExhibit 6:





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.

However, it is to be noted that consumers find it easier to upgrade to higher-priced products for watches and sunglasses since there is a longevity associated with these products. The same, however, cannot be said for apparel, which is highly fashion-driven and has a shorter life span, making it harder for consumers in India to upgrade. Comparing India with other developing markets like China also reconfirms that their spending patterns on apparel differ a lot. The Chinese spend nearly 10–11 per cent of their household income on clothing, while Indians still spend only between 5–6 per cent on clothing. Indians tend to spend more on transportation, communication, education, homes, etc.

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.

AffordableLuxury

>Rs 2,500Super


Premium(Rs 700 to 1,500)

Value Retailers(Rs 270 to 500)

UnbrandedRs 225

Increasing Income

Expected Progression of Branded Apparel Retail in India

Exhibit 7:

?Source: Technopak Analysis




04Women’s Ethnic Wear: Contemporising Indian Wear to Capture a Larger Market

Much has been said about the advent of Western culture and its impact on Indian clothing. The Western style of dressing has made a remarkable impact on the Indian fashion industry. Although Western wear like jeans, tops and evening dresses have become favourites amongst the young generation, ‘Indian wear’ has remarkably stood its ground all this time through sheer popularity and by successfully contemporising itself. There has been an emerging trend of customising Indian wear by going back to basics and yet making it look trendy and comfortable in its fit. More and more brands, retailers and designers are contemporising Indian wear to suit current requirements.

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.

Increasing workforce impacting women’s Indian wear There is a rise in the awareness and purchasing power of the middle class due to the boom in the service industry. The majority of India’s female workforce still prefers to wear the traditional Indian SKD to work. The size of the organised female workforce has increased from 5 million (4 per cent) in 2001 to 7–10 million (4–6 per cent) in 2010. Therefore, the size of the market for women’s Indian wear has increased and is likely to do so in the future as well. Food trends and the changing anatomy of Indian wearFast food culture, overeating, eating at odd hours has led to a change in the physical attributes of people in general. Fashion has also managed to target the so-called obese/ overweight strata where the demand is remarkable, with plus-size fashion gaining importance. The market for such brands is growing by the day. Brands like All, Revolution and Lakshita are some pioneers offering Indian, Western and Indo-Western outfits in this segment. They realized well in time the scope of such products.

0

5000

10000

15000

20000

25000

30000

Women ethnic wear excl. sarees Sarees

2007

9,700

15,000

10,200

17,000

11,700

19,000 18,800

27,000

2008 2009 2014E

Market Share of Women’s Ethnic WearExhibit 8:

All figures in Rs croreSource: Technopak Analysis




Personalised styles and cutsThe India wear still gives a lot of flexibility in terms of getting personalized designs, cuts and styles made. Western wear is limited to the available stock in ready to wear category. But the Indian ethnic and more specifically the salwar kameez dupatta (SKD) can be tuned to one’s design sensibility and more importantly fitting.

Traditional occasionsIndian 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.

Current Market Scenario

The current Indian ethnic wear market is highly unorganized with a few branded players operating primarily in metropolitan cities. The organised sector has players like W, Biba, Fabindia, Tacfab, Hakoba, Prafful, Vipul, etc. catering to the low to mid segment. Satya Paul, Anokhi, Meena Bazaar, CTC cater to the premium and super premium segment.

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.

Opportunities in Womens Ethnic Wear

Going forward, there is a lot more that can be tapped in this reviving market. The very first opportunity comes from making an entry as a big branded retailer of traditional wear. Except brands like W and Biba which have a pan-India presence, no brand has been able to spread beyond its region. In the absence of any player in the mid to super premium segment, there is a lot of potential demand in this area. The opportunity lies in bringing to the forefront our centuries-old heritage and culture in the form of traditional attire. Different regions of our country have different things to offer like mirror work, chikan work, tie-and-die, phulkari prints, etc. Designers and retailers can revive the traditional work done by artisans with a touch of big prints or latest styles and cuts. These designs can be used to contemporise traditional Indian wear and repackage basic things in a modern format. The fusion of all such work can be showcased under one roof. Fusion concepts of kurtis, harem pants can be taken forward to create kurtis with knitted fabrics or chudidar/salwar with stretchable material. The Indianisation of Western wear makes it trendy and easy to handle. This appeals to youngsters and working women alike.




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.

Challenges for Ethnic Wear

In spite of the growth factors in the sector, there are a few challenges that market players need to be aware of before entering the market.

A good fit is importantThe body sizes of Indian women vary a lot across different age groups and regions. For example, North-eastern women are comparatively slimmer than women in north Indian states like Punjab or Haryana. A proper fit of ethnic wear is very important to suit customer requirements across segments. Feasible research on the target segment, well-trained designers and other local requirements need to be addressed.

Competition from unorganised marketSince the organised market for Indian ethnic wear is still not very big, there is direct competition from the large unorganised sector. Most offerings come from regional stores in different localities, as they are better able to sell products to meet customers’ requirements.

No unified fashion across diverse regions One has to be very careful of the trends prevalent in different regions. A country of India’s size and diversity poses a challenge. Designers and market players must understand all these varied trends and come out with a line of desired products.

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.




05Keeping 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.

Overview of Indian Apparel Market

Out of the total Indian apparel market of ~Rs 1,54,000 crore, the ready to wear market totals ~Rs 1,19,500 crore and is expected to grow at a compounded annual growth rate of 9 per cent. Most of the urban population today prefers RTW apparel as it saves the time and effort of getting it tailored.

Growth of Over-the-Counter (OTC) Fabric Market

2009 2015CAGR 2009-15 (%)

Value ( Rs Crores) Share (%) Value (Rs Crores) Share (%)

India Domestic Apparel Market

1,54,250 2,43,300 8

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

Exhibit 9:

* Salwaar, Kameez, Dupatta **Other OTC fabric covers : Suiting, Kurta pyajama fabric etc.Source : Technopak Analysis

Comparison in Market for Indian Domestic Apparel : 2009 vs 2015




Growth of OTC Market

In India, the OTC fabric market totals approximately Rs 35,000 crore, most of which is still unorganised. But many organised players are looking towards it and gradually entering this market. In spite of direct and stiff competition from the ‘ready to wear’ category, the OTC fabric market is growing as it allows for comfortable fits, lower prices, and personalised cuts and designs.

Growth in Indian population that prefers RTS wearThe majority of the Indian population aged 40 years or above still prefers RTS fabric as it ensures the comfort and personalised fit and style they seek. This bracket of population is growing at a pace of about 3 per cent, giving an impetus to the RTS market.

Greater consumption potential for RTS in rural IndiaIt is also observed that rural consumers are shifting from traditional attire like dhotis to more Western garments like trousers and jeans. In this scenario, they prefer RTS over readymade garments due to price and availability issues.

Fast growth of plus-size populationThe trend that is fast emerging is of the growing obese population in India. Around 8 per cent of the Indian population (96 million) is considered obese and with this is further growing with changing lifestyles. Plus-size clothing in RTW is not readily available for this category. But the current market of ~Rs 11,000 crore is virtually untapped by the RTW segment. The ready to stitch segment is effectively catering to their needs.

Price inflation differential between RTS and RTWAnother aspect is the better value realisation associated with RTS. The cost of branded readymade garments is often escalated due to brand name, design, distribution network, etc. These aspects are irrelevant in the RTS category and hence it is more cost-efficient. For example, if you get one premium pair of trousers stitched and another ‘readymade’, the price of the latter would be Rs 500 to 800 higher than the former.

Growth of Salwar Kameez Dupatta (SKD) marketWith an increase in the number of working women and with ethnic wear still the preferred choice for many of them, the SKD market is set to grow. Apart from this, an important reason for RTS preference is that it gives a better fit. India is a diverse country, with varying lifestyles, preferences and body sizes. In the absence of perfect fits in the RTW collection, people look to the RTS category. Better design flexibility is also an important aspect. The majority of women aged 30 years and above still prefer to get their salwar kameez stitched to ensure personalised designs, colours and fabrics.

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•

Growing popularity of casual wear•

Exhibit 10:


Growth Drivers of OTC Fabric Market

Growth in the indian population(age>40 years) that prefers RTS wear

Greater consumption potential for RTS in rural India

Fast growth in the plus-size population in India

Price differential between RTS(ready to stitch) and RTW(redy to wear) has been growing

Increasing women workforce driving growth of SKDs

Growth in Plus-size Population

Plus-size % of Indian population

Exhibit 11:


Plus size8%Rest 92%

Share of plus-size is expected to grow providing additional opportunities for RTS




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.

Players in the OTC market in cotton and cotton blendsThe market is currently dominated by a few big players like Arvind Mills, Raymonds, Donear, etc. that offer a range of products for the mid to premium segment (average shirting price Rs 150). Most of the big players create finished fabrics and distribute them over the counter at retail outlets across India, in all the 29 states and seven union territories. They interact regularly with the retailers, along with routine market surveys in terms of designs, colours, textures, etc., to guarantee a quicker and a firsthand feedback that results in offering fabrics to customers as per the trend.

Arvind Limited launched its range of pre-treated ‘ready-to-stitch’ (RTS) denims under the brand name of ‘Arvind Intellifabrix’ in Ahmedabad. This was in response to the demand for denim fabric for the masses, especially to suit Indian body sizes and to be comfortable as both work-wear and casual apparel.

Grasim Industries entered the market of fabrics for women, with its concept of RTS formal wear. Since the number of working women in India has gone up significantly, the demand for ready-to-stitch formal wear has gone up too.

A number of players like Forbes Gokak, Century and SKNL have recently made a gradual entry in the market. SKNL has started the manufacturing of shirting a few months ago and is catering to the mid to premium segment. Century is focusing on shirting more than trousers.

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.

Exhibit 12:

Source: Primary Research

Comparative Analysis of Industry Players

Company Product Mix Positioning

Arvind Shirting , Trousers Market leader

AlokShirting (25%), Trousers (75%)

Selling surplus in the domestic market

CenturyShirting (60%), Trousers (40%)

Entered OTC 1 year ago

Forbes Gokak Trousers (100%)

Entered recently in premium category: exclusively 100% cotton trousers

SKNL Shirting Shirting manufacturing

BibaSarees, RTW SKD, RTS SKD, Mix ’n Match

Leading brand – present in exclusive outlets

Tacfab Sarees, SKDLooking to establish pan-India RTS brand




06The increasing needs and demands of children present a larger opportunity for apparel and textile players. Kidswear is one of the fastest growing categories in the domestic market. Last year the segment witnessed a growth rate of ~17 per cent making it one of the most attractive categories. Brands are realising that the children of today cannot be ignored considering their independent and adult-like purchase behaviour. They display an incomparable power of pestering parents and completely influencing the buying decision. Increased exposure to the media, growing up in double-income households, international travel and pressure from equally well-informed peers ensure that children today are highly fashion-conscious.

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.

The total kidswear market in India is currently valued at approximately Rs 38,000 crore. This constitutes a 25 per cent share in the total Indian apparel category. This segment, which is split into ‘kidswear’ and ‘school uniforms’ is expected to reach Rs 58,000 crore by 2014 (see exhibit 13).

Technopak offers an insight into this segment by not restricting itself only to kid’s apparel, but looking at everything that comprises their needs and aspirations. The growth drivers and opportunities available have also been highlighted.

Growth Drivers

Increasing needs of indulgent parents and decisive kidsThere is no doubt that the needs/requirements of the kids have increased manifold in the past few years, leading to the creation of segments within the segment. Parents are also more indulgent and want the best for their children, starting with all the essentials for newborns to the fussy demands of toddlers and varied needs of school-going children.

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.

Kids are the New Shoppers

Kidswear Apparel Uniforms

2007 2008 2009 2014E

Kidswear Market Size Exhibit 13:

0

5000

10000

15000

20000

25000

30000

35000

18000

12000

19,200

13,700

22,500

15,700

33,100

25,300

All figures in Rs croreSource: Technopak Analysis




Growing brand consciousnessAnother recent phenomenon is the growing awareness of branded goods. Kids have started asking for exclusive, branded products. Brands like Gini and Jony, Lilliput and Catmoss have expanded their presence exponentially in the last 2–3 years with Lilliput having the maximum store count at ~260.

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.

Kids have become influencers in decision-makingWith the rising nuclear family culture, the child’s say in decision-making has increased a great deal. They display an incomparable power to pester their parents and completely influence the purchasing decision. In addition to their own needs and demands, kids are also influencing general buying decisions in the family. For instance, the choice of a sofa set for the family, colours of the wall, brand of car to be bought, curtains in the house or the furniture—they are involved in the decision-making for all these purchases. Though their inputs might not be the final word on a purchase, they are definitely able to influence decisions. Brands are increasingly including children in advertisements of products not directly targeted towards them, knowing that they will influence adult-buying behaviour.

Opportunities in the Kids’ Space

In light of such decision-making behaviour, there are many opportunities that present themselves in this category. Becoming a specialty kidswear retailer/brandThe opportunity lies in offering the large basket of needs and aspirational products parents feel their children should have or those which children feel the need to own. Retailers and manufacturers can make this offering by stocking a wider range of merchandise and differentiating between them at the retail store level.

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.

Cartoon and character licensing The growing trend amongst children to emulate characters in their everyday life is another important opportunity which is enabling apparel companies to take licensing of popular characters and icons to be used in their merchandise. As per the licensing update 2009, the business of license merchandising of animated characters is estimated at Rs 360 crore in India. India has emerged as the No. 1 market in Asia-Pacific for companies like Cartoon Network in terms of viewership and, more importantly, revenues. ‘Interestingly, children’s licensing and merchandising market accounts for 10% of Cartoon Network’s




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.

Branded school uniform marketAnother very lucrative and untapped area from brands and manufacturers perspective can be the concept of branded uniforms.

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.




07The concept of pop up retail has been around for a few years, especially in matured retail markets. It’s a temporary retail location used either to launch a new product or to sell limited edition products. Sometimes, the concept is even used for pilot runs before launching the actual product. Every now and then, retail stores as well as company-owned brand outlets have been seen to pop up unannounced at unique locations and disappear at the same pace within a few days. This concept has always been used as a means to create curiosity amongst consumers, engaging them with an element of surprise and interactivity.

Globally, many brands have tried to use this concept 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.

Many such other examples exist in the market with retailers like JC Penney, The Vacant, Ann Taylor, Harvey Nichols, etc. who have repeatedly experimented with this concept and achieved results. The global recession in 2008–09 made this concept even more popular and attractive since it led to quicker sales with reduced expenditure on rentals. The growing importance of this strategy has led to a few companies like Brand New Stores and 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.

‘Pop Up’ Retail Concept: Temporary Stores to Attract Consumers and Create a Buzz

A Typical Pop-up Story

A container transported on a truck acts as a shop1

Appearance of the container creates a sense of urgency in shoppers

2The temporary shop is set up at unique location to attract customers

3Well designed ineriors similar to a regular shop4

Exhibit 14:


Pop-up Store Concepts in ActionExhibit 15:


2003: Target opened temporary

1500 sq. ft. store in Rockfeller Centre

for 5 weeks in Oct 2003

2004: Target set up a temporary floating store in on Hudson river on Christmas

July 2009: ebay opened a pop up

shop for 5 days with the objective of

showing people what just a fraction of its

inventory would look like in-store, and

planned on showcasing many

‘wow’ items’

September 2006: Uniqlo set up

temporary container stores around NYC to

announce the launch of their flagship store. It

drove 2 shipping containers into the city

and used them as stores that ‘popped up’

in various locations




SummaryThe 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.

AuthorsAshish Dhir, Associate Vice President | [email protected] Sachdeva, Principal Consultant| [email protected] Jain, Associate Consultant |[email protected]

Green BuildingConcepts: An Approach Towards SustainabilityIntroduction 57

Call for Corporate Sustainability 58

Green Concept in Infrastructure Development 58

Summary 62

| Green Building Concepts: An Approach Towards Sustainability57


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

CO2 CH4 N2OOther gases

Accounts for about 70-80% of GHG

Main Sectors:• Electricity and heat generation• Transportation• Infrastructure• Deforestation


Main Sectors:• Agriculture• Oil refineries• Industries


Main Sectors:• Nylon and nitric acid production• Agriculture• Fuel combustion• Industries

Account for about 1% of GHG: HFCs, PFCs, SF6, etc.

Main Sectors:• Refrigeration• Radioactive waste

Exhibit 2: Consequences of Global Warming

2010 2020 2030 2040 2050 2060 2070 2080 2090

58Green Building Concepts: An Approach Towards Sustainability |


Call for Corporate Sustainability

With the rise in global warming, consumers in the west are demanding ecolabels and green accreditations with products and services offered by Indian companies. Therefore, the corporate sector has shifted its focus to innovation and improvisation in product manufacturing processes, bearing in mind the effects of its usage and disposal. In addition, company activities such as infrastructure development, production and overall management are planned to reduce carbon emissions, water consumption, energy consumption and solid waste. Corporate sustainability thus acts as a tool to ensure profitable returns without disregarding societal goals and ecological balance.

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.

Green Concept in Infrastructure DevelopmentIn today’s world, China and India together account for more than half of the world’s new construction, however, the effective utilization of the available resources for construction is yet to be explored. A majority of buildings in Asia are energy-inefficient. The construction sector accounts for a large percentage of the world’s total energy consumption and greenhouse gas emissions. One of the effective and intelligent initiatives in infrastructure sector is sustainable development through green building concept.

The three most important indicators of sustainability, as seen in exhibit 3, are environment, society and economy. These factors help us understand problem areas and show the way towards workable solutions.

One of the main indicators of environmental sustainability is the process of ensuring that the existing method of human interaction with the environment is as pristine as naturally possible. Sustainability entails use of natural resources such as energy and water at a rate slow enough for them to be replenished naturally.

The concept of green buildings envisages saving water, energy and material resources in construction and maintenance of buildings that can reduce or eliminate the adverse impact on the environment and occupants. Implementing the green building concept can result in reduction of carbon emissions by 35 per cent, water usage by 40 per cent, energy

Exhibit 3:Sustainable Development

Social

Environmental EconomicViable

Bearable Equitable

Sustainable

Exhibit 4:Elements of Green Building Design

Low energymaterials

Increased human comfort

Sustainable site

Water reduction

Superior indoor quality

Energy optimisation

Waste management

Green Building Design



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.

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.•

Green Buildings Conserve the Environment at the Building Location

When planning to construct any type of building, we should select the site after taking into consideration the conservation of local vegetation, wildlife, natural water courses, etc. A site with biodiversity should be either avoided or the building should be planned to reduce site disturbance.

Land The landscaping and exterior design in a green •building shall be done to ensure more shaded area.The light trespassing can be eliminated and local •species of plants can be grown.

Water The green building by its design and shape shall •not disrupt natural water flow; it should be oriented and made to stand just like a tree. Rainfall in the catchment shall be harvested fully •to either replenish the groundwater table in and around the building or to be utilised in the services of the building. The toilets shall be fitted with low flush fixtures. •The plumbing system should have separate lines for drinking and flushing. Grey water from the kitchenette, bath and laundry shall be treated and reused for either gardening or •cooling towers of air-conditioning.

Exhibit 5: Benefits of Green Building

Reduced energy consumption

Reduced destruction of natural resources

Reduced water consumption

Limited waste generation

Increased user productivity

Corporate image

enhancement

Benefits of Green Building

Photovoltaic cellRoof top planting

Automated ventilation control

Light control using natural light

High-efficiency light fixtures

Light control using motion detection sensors

Restriction of sunlight

Rain water utilisation

High-efficiency heating equipment

Improving insulation

Restriction of sunlight

Exhibit 6:An Ideal Design for a Green Building



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.

Green Buildings Improve Internal Environment for the Occupants

Light: In a green building, occupants shall feel as if they are in a natural environment. Interior and exterior designs shall go hand in hand by blending natural and artificial lighting.

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.

Preference for recycled materialMaterial with higher recycled content should be selected in order to reduce the embodied energy of the buildings, thereby decreasing the environmental impact of extraction and processing of energy extensive materials. exhibit 7 lists some of the recycled materials.

Preference for regional materialMaterial should be available within 800 kilometres in order to avoid unnecessary transport costs. This would also help increase the demand for building materials and products that are extracted and manufactured within the region.

Material Where it’s found Benefits Recycled concrete Construction debris Saves space and cost of disposal

Glass Trash, recycling facilities Increases flowability, durability, hardness of concrete, aesthetic use

Plastic Trash, recycling facilities Potential thermal insulation properties

Dredged material Rivers, lakes, ports Removes contaminants from oceans and landfills

Excavated rock Infrastructure projects Suitable aggregate is plentiful within tons of excavated material

Garbage Everywhere Ash can replace part of cement

Wood Pulp and paper mills, wood prod-ucts industries

Ash can replace part of cement

Scrap tyres Landfills Rubber can replace aggregateSteel can provide fibre reinforcement

Rice husk ash Rice producers Ash can replace part of cement

Exhibit 7:Sources and Benefits of Recycled Material



Certified woodConsumption 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.

Futuristic Materials for Green Building

Futuristic green buildings will use green materials. Some of these are at the research stage while others have been available for a long time now.

Green woodA 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.

Other green building materialsSome of the materials that can be used in a green building are renewable plant materials like bamboo (grows quickly) and straw, lumber from forest ecology blocks, dimension stone, recycled stone, recycled metal. Other products that are non-toxic, reusable, renewable, and/or recyclable can be used, such as trass, linoleum, sheep wool, panels made from paper flakes, compressed earth block, adobe, baked earth, rammed earth, clay, vermiculite, flax linen, sisal, seagrass, cork, expanded clay grains, coconut, wood fibre plates, calcium sandstone, etc. The Environmental Protection Agency also suggests using recycled industrial goods, such as coal combustion products, foundry sand, and demolition debris in construction projects.

LEED Green Buildings Rating System

Buildings constructed based on the green concept should conform to prescribed standards. There should be continuous assessment and monitoring from the planning/design stage up to the completion of construction, in order to declare a building a Green Building. The LEED (Leadership in Energy and Environmental Design) Green Building Rating system is followed in this assessment of a building. In this system, points are awarded for adopting green concepts in various categories and the buildings are certified green at levels such as Silver, Gold or Platinum based on the total number of points they get in the LEED Rating.

Certification for green buildings LEED 2009 has 100 possible base points plus an additional 6 points for Innovation in Design and 4 points for Regional Priority. Buildings can qualify for four levels of certification:

Certified: 40–49 points•Silver Certified: 50–59 points•Gold Certified: 60–79 points•Platinum Certified: 80 points and above•



LEED NCv2.2LEED 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•

Green Rating for Integrated Habitat Assessment (GRIHA)

GRIHA is a rating tool that helps people assess the performance of their building against certain nationally acceptable benchmarks. It evaluates the environmental performance of a building holistically over its entire life cycle, thereby providing a definitive standard for what constitutes a ‘green building’. The rating system, based on accepted energy and environmental principles, will seek to strike a balance between established practices and emerging concepts, both national and international. The guidelines or criteria for appraisal may be revised every three years to take into account the latest scientific developments during this period.

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•

SummaryWith 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.

AuthorsAvinash Mayekar, Associate Vice President | [email protected] Devadiga, Associate Consultant | [email protected] K. Bhole, Research Associate | [email protected]

Emerging Opportunities in Travel RetailIntroduction 65

Opportunities from Passenger Growth 67

Non-Aeronautical Revenue Sources 67

Overview of Airport Retail 68

Key Trends in Airport Development 69

Other Opportunities in Travel Retail 70


| Emerging Opportunities in Travel Retail65

IntroductionWhen 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.

Transition in the Airport Model

The airport business operations/model has seen significant change over the last few decades. From primary operations of handling aircrafts and passengers, airports started focusing on revenue and profitability in the 1990s. To further reduce dependency on the aviation business, airports are now talking about ‘airport cities’ or ‘aerotropolis’.

This transition has led to airports changing their strategies from increasing capacity to focusing on non-aviation revenues and now focusing on revenue sources beyond the airport boundary. This transition in the operating strategy led to the share of non-aeronautical revenues increasing from less than 10 per cent to the current about 50 per cent. In the future, airports are targeting a share of non-aeronautical revenues at over 70 per cent through the ‘airport city’ or ‘aerotropolis’ model.

The Global Context

Global airport revenue is driven by passenger enplanements, the numbers for which have grown continuously since 2000, except for 2001 when air traffic was affected by global security issues and the SARS outbreak in Asia. Worldwide airport revenues are estimated at US$ 85 billion for 2008 with non-aeronautical revenues contributing 48 per cent. For 2007, airports collected airline charges of US$ 17 billion, which represented 3.5 per cent of the airline operating cost of US$ 488 billion. These aircraft related revenues are below actual operating expenses incurred and are subsidised by passenger fees

0

100

200

300

400

500

600

2000 2001 2002 2003 2004 2005 2006 2007 2008(E) 2009(E)

Global Commercial Aviation Revenues (US$ billion)

Total Revenues Passenger RevenuesSource: IATA

Exhibit 2:

Primary focus on aeronautical revenues•Airport retail categories : F&B, News, Gifts & Confectionery, •Perfumes & Cosmetics, Jewellery, Convenience & FashionAirports focus on passenger capacity & operations•Share of non-aeronautical revenues <10%•Phase of slow growth in terms of retail sales, passenger •numbers and commercial aeroplanes

Shift in focus to revenue and profitability•New airport retail categories: Medical Centres, Entertainment, •Golf, Business Centres, Wellness and FitnessAirports focus on non-aeronautical revenues and increase •passenger related revenuesShare of non-aeronautical revenues >30%•Non-aeronautical gaining importance with some airports •having achieved higher share; phase of commercialisation & privatisation of airports

Strategy of reducing dependence on aviation business•Concept of ‘airport cities’ or ‘aerotropolis’ gaining importance•Airports target to create experience; concept of airport •brandingAirports focus to increase revenues from non-aeronautical •services that do not cater to the traveller directlyTarget to take share of non-aeronautical revenues to >70%•

1970

1990

2010

Source : GDI Research

Exhibit 1:

Mapping Transition in the Airport Operating Model


66Emerging Opportunities in Travel Retail |

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.

The Indian Aviation Sector

The Indian aviation sector has seen a marked change since 2004 from being a regulated sector to a liberalised one. Airport investments through Public Private Partnership (PPP) saw the development and modernisation of airports in Delhi, Mumbai, Bangalore and Hyderabad. Infrastructure and policy initiatives, along with economic factors, have contributed to the growth of the aviation sector in India over the last couple of years. Between 2003-04 and 2007-08, the Indian aviation industry saw total passenger traffic grow from over 30 million to more than 70 million. The domestic sector saw faster growth, from 15.7 million passengers in 2003-04 to over 44 million in 2007-08. This was driven by factors like strong economic growth and the entry of low-cost carriers(LCC).

0

1

2

3

4

5

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009(E)Source: ACI

Exhibit 3:

Total Worldwide Passengers (billion) Passenger Growth, (tkp %)*

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009(E)-10

-5

0

5

10

15

20

*tonne kilometre perfomedSource: IATA, ICAO

Exhibit 4:

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

0

20

40

60

80Yearly Passenger Numbers (million)

International Domestic Total PAX

Source: DGCA

Exhibit 5:

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

-5

5

15

25

35

45% Passenger Growth (Y-O-Y)

International Domestic Total

Source: DGCA

Exhibit 6:



Opportunities from Passenger GrowthRecent global and local developments in the aviation sector have made the business environment more difficult and put forward many challenges. Some of the developments include:

Privatisation and commercialisation of airports•Reduced capability of airlines to pay for airport •infrastructureCapacity and operational constraints leading to •increase in congestionGrowth of LCC carriers leading to increase in •demand for F&BSecurity-related constraints•

Even with the deteriorating business environment, airports have managed to grow revenues driven by growth in passenger numbers.

Given the fact that the Indian aviation sector is just entering the growth phase, the potential for growth in passenger numbers across airports remains very high. This allows all airports to tap opportunities in the non-aeronautical business segments.

Non-Aeronautical Revenue SourcesSome of the key facts on Non-Aeronautical revenue are:

The key sources of non-aeronautical revenue include retail, property and others (including car parking, •rental and advertising).For airports in North America & Africa/Middle East, the share of non-aeronautical revenue in airport •revenue exceeds 50 per cent.Globally, retail contributes 22 per cent of non-aeronautical revenues followed by property at 19 per cent.•Compared to other regions, car parking and car rental is a particularly large segment in North America.•

Increasing challenges and deteriorating business environment

Airport Objective :To grow airport revenues

Option : Increase airport revenues through growth in non-aeronautical revenues drivenby higher number of passengers

Growth in passenger numbers

Exhibit 7:

0

10

20

30

40

50

60

Afric

a / M

iddl

e Ea

st

North

Am

eric

a

Euro

pe

Asia

-Pac

ific

Carib

bean

Lat

in A

mer

ica

Glob

al A

vera

ge

Source: ACI

Non-Aeronautical Revenue as % of Total Revenue by Region

Exhibit 9:

Non-Aeronautical Service Source of Revenue Impact of Passenger Growth on Revenues

Retail

Tax and Duty Free•Concessionaires•F&B•Money Exchange•

Passengers (Primary),Airport Staff (Secondary)

High

Property Rents and Leases•Offices, Hotels, Other

non-airport relatedLow

Others Parking and Car Rental•Advertising•

Taxi Operators, Meeters and Greeters, Passengers

Medium

Exhibit 8:Non-Aeronautical Services and Revenue Sources




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).

Overview of Airport RetailThe Consumer Shopping Window

One of the key factors driving consumer spend and shopping behaviour at the airport is ‘time’. Airports are generally associated with high levels of stress for travellers from the moment they start for the airport till they board the flight.

The level of stress fluctuates based on the activity being performed and offers windows when the consumer is ready to be engaged in retail activity.

Airports must plan their operations efficiently so as to maximize the dwell time inside the security hold area. This also emphasizes the need for planning for retail-related activities at the development phase itself.

At successful airports, the conversion rates for F&B and Convenience are around 45 per cent

Source: ACI

Non-Aeronautical Revenue by Source

Exhibit 10:

33%

2%19%

6%18%

22%

32%

3%20%

6%5%

34%

Others Advertising PropertyCar RentalCar ParkingRetail

Asia Pacific Global Average0

2

4

6

8

10

12

14

Non-Aeronautical Revenue Per Passenger (US$)

Europe

Asia /Pacific North

America

Global Average

AfricaMiddle East

CaribbeanLatin America

Source: ACI

Exhibit 11:

0% 10% 20% 30% 40% 50% 60%

Duty Free/Tax Free

Specialty Retail

Food and Beverages

Convenience(News/Books)

Average Passenger Spend Conversion Rates

Conversion Rates and Average Passenger Spend(%)Exhibit 13:


Check-in > Passport Control >

Time

Boarding >

In the FlightWaiting for BoardingArrivalGoing to Airport

Shopping Factor

Stre

ss L

evel

Best opportunity to engage traveller in

retail activity

Passenger Stress Level vs Time and The Consumer Shopping WindowExhibit 12:


Stress Level



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.

Key Drivers of Airport Shopping

B• asic products required as part of the journey are characterised by low margins and stability in demand.

Gift products are primarily last-minute •purchases offering low to moderate margins but significantly consistent demand.

Products that are associated with indulgence •and are driven by excitement of travel like perfumes and cosmetics, have better margins and offer a significant business potential.

Products that offer a shopping opportunity •to people who are generally stressed for time lead to highest business potential and margin.

Key Trends In Airport DevelopmentAirports traditionally have been associated with stress and •unfamiliarity on the part of the traveller. It is now the strategy of airports to establish a brand identity for airports and communicate the same through different means including retail so as to create a sense of place and create a positive image about the airport.

Globally, airports are putting greater emphasis on maximising •non-aeronautical revenues. Retail, having the largest share of non-aeronautical revenues, would see greater focus from airports. As a result, airport development would involve higher involvement of retail architects and brand professionals.

Commercialisation of airports would lead to detailed planning for •non-aeronautical activities like retail (product categories, zoning, etc.), property (hotels, offices, etc.), car rental and parking (area, vendor, contract period, revenue model), etc.

In terms of retail store layout/plan, the trend is to have ‘walk-through’ shops. Consumers experience high •stress before entering the primary shopping area. An attractive shopping area in terms of ‘walk-through’ stores helps reduce stress and benefits the store by increasing footfalls and conversion.

Driven by growth of the LCC market and factors like increasing dwell times on the airside and lack of •choice in in-flight food, airports are going to see greater emphasis on F&B category and thereby higher allocation of space to the category.

Successful airports worldwide are focusing on profiling and need-gap analysis of consumers on the •basis of demography and travel to psychographic and consumption and then catering to the needs of travellers. This need-gap analysis is also leading to airports offering more specialised shops catering to gifts, fashion and cosmetics.

Low Margin Stable Demand

High Margin High Potential

1. EMERGENCY (A basic item needed for journey)

2. LAST MINUTE (A present/souvenir)

3. AN INDULGENCE (Driven by the excitement of travel)

4. A SHOPPING OPPORTUNITY (Due to lack of time/or opportunity)

Source: Portland

Key Drivers Influencing Airport ShoppingExhibit 15:



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.

Other Opportunities in Travel RetailRail

The number of people traveling in trains per day in our country is 20+ million. With 1000+ trains running every day, we are one of the largest train traveling countries in the world. As of now, all we get at any railway station is poor quality food laced with insects and absolutely no other spending options (barring off the book/magazine shop). Across the work we have seen excellent options being provided to the travellers in various categories. This has resulted in revenues as well as overall traveller happiness.

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.

AuthorsZahir Abbas, Associate Director | [email protected] Patra, Senior Consultant | [email protected]

India’s Food Vision: The Next DecadeIntroduction 73

Demand Drivers 73

Key Opportunities 76

Key Challenges 77

The Outlook for Future 78

| India’s Food Vision: The Next Decade73


IntroductionAccording 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 DriversThe 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 •

Palate and lifestyle changes •

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.

Rising Population and Incomes

India’s population, by the coming decade, is estimated to be 1.3 billion out of which the predominant numbers – ~60 per cent – are expected to fall in the age group below 40 years, making it a demanding segment to cater to. In addition, with real per capita incomes likely to nearly double in the next 10 years and more than two-thirds of the current population still just above or below the poverty line, the first category to see increased spending will be food.

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 usage or absorption of primary commodities or food conversion from raw to processed form, the consumption demand for basic commodities would also increase with the growing population.

The net effect of this would be the combined demand for both primary and value-added food products from the same natural resource region or even smaller in size than it exists today. This necessitates policy making and research efforts towards areas

Crops India Other Countries

Paddy 3.03 9.71

Wheat 2.69 8.89

Pulses 0.60 5.14

Edible Oilseeds 0.25 4.29

Sugarcane 60.70 122.70

Exhibit 1:

Crop Productivity Levels - A Comparison (MT/ha)

F&V: Fruits & VegetablesSource: Ministry of Food Processing Industries, Government of India

74India’s Food Vision: The Next Decade |


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 in existing crops and farming situations through improvements and, more importantly, application of the recommended package of agronomic practices to attain global benchmark levels (see exhibit 1).

Similarly, the explosion in the demand for processed food would trigger the requirement to increase the level of processing presently being undertaken in India (see exhibit 2). The present processing levels are far lower than other countries and the demand for such products is expected to outstrip supply if 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.

Increasing Nuclear Families and Working Women

Liberalisation of the economy and the incentives to private sector development have led to a rise in new trade formats and increased employment creation. This has translated into the migration of both the skilled and unskilled workforce from rural areas to major cities resulting in an increasing proportion of nuclear families combined with higher employment possibilities for women. The rural-to-urban migration trend coupled with other factors such as increased exposure to the media and paucity of time has not only led to changes in awareness of gender equality and rights but also changes in the habits of people towards traditional household chores such as grocery-shopping and cooking. The trend towards preferences for ready to eat or frozen food is bound to intensify with improvements in packaging technology and infrastructure.

4144 44

1417 18

16

21 22

3337

1720

4751

353837

39 40

60

50

40

30

20

10

0

16

14

12

10

8

6

4

2

0Art Science Medicine Agriculture Veterinary

SciencesEngineering

& TechnologyCommerce

ManagementLaw Education Others

1995-96 2001-01 CAGR

Enrolment of Women in Different Faculties

Wom

en a

s %

of t

otal

enr

olm

ent

CAGR

(%)

Exhibit 3:

Source: Selected Education Statistics, 2004-05; Ministry of Human Resource Development, 2007; Technopak Analysis

Exhibit 2:Food Processing Levels - A Comparison

Food Category India Other Countries

F&V 2% USA (65%), Philippines (78%), China (23%)

Milk 35% 60-75% in developed countries

Buffalo Meat 21% 60-70% in developed countries

Poultry 6% 60-70% in developed countries

Marine 26% 60-70% in developed countries

F&V: Fruits & VegetablesSource: Ministry of Food Processing Industries, Government of India



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).

A good example is the huge success of instant noodles in India. Popularised by Nestle, the instant, 2-minute noodle carved out an entirely new category and the non-ethnic and quick cooking practice (as opposed to traditional Indian cooking) was welcomed and adopted by the Indian consumer. The emergence of newer categories as well as eating formats such as roadside restaurants, food courts, cafes, kiosks, lounges, etc. are some of the other examples. The new enabler to this change is the Internet, which offers the quickest and easiest channel for routine work such as ordering food and groceries besides other items.

Palate and Lifestyle Changes

Rising income and growing urbanisation have contributed to a shift in traditional Indian food habits. Driven by higher disposable incomes, Indians are increasingly travelling within India and globally and are exposed to diverse lifestyles. This has given birth to a new generation of consumers with a global orientation in food habits. According to a Euromonitor report, it is anticipated that there would be a dramatic rise in the number of Indians travelling abroad – 132 per cent between 2006 and 2011. It is also expected that the total number of outbound travellers is set to reach 16.3 million in 2011 alone.

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).

Adoption of higher energy density diets, sedentary work and leisure habits coupled with reduced physical activity have resulted in an increase in incidences of non-communicable diseases, thus making consumers aware of the importance of health, food and exercise, and driving the demand for more nutritious and fortified health foods (refer exhibit 6). As a result, Indian consumers have now become more sensitive to the health quotient of food consumed and the market for health and wellness food has been rising.

Types of Changes %

Become more health conscious now, regarding food consumed

51

Eat more junk food now 15

Eat less often at roadside eating joints or carts 15

Eat more food now 14

Eat out at hotels more often now 5

Eat western cuisine more often now 5

Exhibit 4:

Changing Food Habits of the Indian Consumer

Source: Technopak Healthcare Outlook

Exhibit 5:Allocation of Shelf Space to Imported

Food ProductsRetailer Locations %

Foodworld South India 10

Nilgiris South India 12

Vitan Chennai and Bangalore (South India) 5

ABG-More Bangalore 4

Nuts n Spices Chennai (South India ) 40

Food Bazaar Across India 3

Reliance Mumbai 7

Crossroads NCR-Delhi 25

Source: Industry Sources, Technopak Analysis

Exhibit 6:Growing Health-Consciousness

Source: Technopak Healthcare Outlook

Measures taken by Indian Consumers %

Eating right quantities of food 74

Eating less/cutting down on unhealthy food items like fried food, sweet items/sugar, non-vegetarian food

42

Reducing stress in life 28

Taking vitamins, tonics and health supplements 14

Going for preventive health check-up 6

Going for regular exercise like walking, jogging, physical work out, yoga, aerobics, weight training, karate, cycling, swimming, playing sports

12



Key OpportunitiesChanges 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.

Growing Importance of the Non-Carbonated Ready-To-Drink Market as a Healthy Option

India’s Rs 865 crore non-carbonated ready-to-drink market includes juices, packaged water, sports drinks, blended tea (including iced tea) and coffee and is estimated to be growing at a robust 25 per cent. Most companies are developing or acquiring healthier non-carbonated beverage brands to have a presence in this segment with the most recent being the MoU (Memorandum of Understanding) signed between Pepsico and Tata Tea for undertaking joint initiatives in the segment. The other area that is gaining increasing popularity is the fortification of water and fresh fruit extracts such as that of coconut water. Coca Cola has invested in Zico Beverages, a California-based company selling coconut water while Pepsico has purchased Brazil’s largest coconut water player, Amacoco. One more reason for this segment to be promising is that this category gains higher visibility from a wider array of celebrity endorsements on the one hand while involving a large swathe of the farmer population on the other hand, achieving both public and private goals. Given the vast biodiversity present in the country, this segment would be the most promising one in the near future.

Nuts and Nut Products as Time-Saving Sources of Nutrition

While the category covering the botanical usage of ‘nuts’ might be restrictive, its culinary coverage including almonds, pistachios, hazelnut, peanuts, etc. shows promise given their provision of nutrition in a concentrated form while being flexible in usage as snacks or as all-time meal accompaniments. Given their nutritive and health benefits, it is very likely that these commodities will not only be increasingly used in primary processed forms (such as with basic addition of salts, roasting, etc.) but also as processed food ingredients in biscuits, chocolates, granola, etc. Given the huge consuming population that is aware of the nutritive benefits from folklore and prefers “quick and nutritious” food, nuts as a category will see a likely increase in consumption in the near future. It is also expected to boost trade between India and other countries, given the geographical suitability and wide diversity present both in India and abroad.

Value-added Milk and Eggs

With rising incomes, the consumption of milk and eggs is estimated to increase in graded levels of consumption towards value addition and branding. Interest in the segment is already evident with the organised industry investing heavily in setting up rural networks and factories as well as importing technology to enhance product safety and innovation. An example of innovation in this segment is the emergence of ‘low fat, high protein’ branded eggs that assure taste without the guilt of having consumed the fat content of the egg. Such innovations are likely to increase in the future and grow the market at an estimated rate of 20 per cent. Similar is the case of value-added milk such as flavoured milk where the market, though nascent, is estimated to grow 15 per cent on the back of high consumer demand for such products.



Organic Foods as a Fashion Statement and a Healthier Alternative

Owing to the focus of past decades on achieving food production and ensuring availability, there was high incidence of chemicals usage in agricultural inputs leading to not only deterioration of natural resources but also the prevalence of higher chemical residues in food products. The coming decades would witness a higher degree of emphasis on the demand for low chemical incidence and adoption of good agriculture practices with a concomitant increase in the demand for organically produced food products. While the western world is already embracing these changes, it is likely to gain acceptance in India in the coming decade. This would also lead to organic food becoming fashionable among the elite and the expatriate population who are very quality conscious in selection of food products.

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.

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.

2009 2015

Market Size Contribution to the Category Market Size Contribution to the

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

Exhibit 7:Comparison in Market for Frozen Food: 2009 vs 2015(P)

Source: Technopak Analysis,



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.

The Outlook for FutureThe food industry will need to transform itself towards offering newer products, both in terms of attributes as well as value proposition. While food consumption will represent for many the means of energy intake, it will also serve the needs of status and prestige, functionality and health in an increasingly time-starved life. Given the increasing accent on health and safe foods, it will become important for the processing industry to produce food products with minimal artificial ingredients while utilising natural resources in a sustainable manner. The role of technology (such as nanotechnology) in bringing food to the consumer’s plate is expected to be enhanced, with technology not only serving the key roles of preservation and the consequent increase in shelf-life of perishables but also in delivering taste in a customised manner to serve the palate and health needs of customers.

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.

AuthorsV. Sridhar, Associate Director| [email protected] Chhabra, Associate Consultant| [email protected]

80An Indian McDonald’s Anyone? |



An Indian McDonald’s Anyone?An excerpt of this article appeared in the Business Today, May 2010 issue.

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,

| An Indian McDonald’s Anyone?81



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?

AuthorRaghav Gupta, President | [email protected]

8282Representative Cross-section of Our Projects |



Representative Cross-section of Our ProjectsFood Services Retailing: India Entry StrategyThe client is an international Quick Service Restaurant (QSR) brand. The assignment entails mapping of consumer eating habits and preferences, demand estimation, assessment of market potential, detailed analysis of competitive landscape including their operating models, and feasibility of the brand’s entry and expansion in India. A management workshop detailing consumer and business facets in India has been completed. An entry strategy and the most appropriate execution plan for entry and expansion are underway.

Consumer Durables and Electronics Products: Retail StrategyThe client is a leading consumer electronics and durables brand and manufacturer in India. The assignment entails a mapping of consumer needs, projection of evolution of retail in the consumer electronics and durables category, and feasibility of expanding client brand presence and reach through own network of exclusive brand stores. A strategy and execution plan for sizable expansion of brand stores has been recommended. Preparation for commencing implementation is underway.

Food and Food Services Retailing: Market Entry Strategy and Implementation AssistanceThe 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.

Travel Retail: Concept Design to Implementation Planning and AssistanceThe client is a leading infrastructure company and has been developing one of the large airports in India. The assignment involves preparation of the non-aeronautical commercial revenue strategy for the new terminals. Technopak delivered insights on traveller need-gaps, prepared the concept for commercial areas and a detailed revenue model, coordinated the leasing and supported the execution.

Fashion and Sports: Market Assessment and Future StrategyThe client is a leading global fashion brand specialising in sports-casual wear. The assignment involves an understanding of the client’s current market penetration in India, competitive positioning and an in-depth analysis of the market size for relevant product lines to assess future opportunity for the client. Based on our recommendations, the client’s India operations strategy is being modified.

Textiles: ‘Invest in India’ Campaign ExecutionThe Ministry of Textiles initiated an ‘Invest in India’ campaign to attract FDI into the Indian textiles sector. The assignment involves execution of the campaign including the identification of target countries and potential investor companies and showcasing the Indian textile industry through a series of seminars. As a result of the campaign, several companies are evaluating their India investment plans, and the Government of India has decided to continue this initiative and target companies in the USA and Asia in the next phase.

Textile and Apparel: Growth Strategy and Implementation PlanningThe client is a leading private equity player interested in maximising the value of one of their invested companies – a well known Indian suiting brand. The assignment entails understanding current operations and synergising the same with other related opportunities in the segment. A strategy and execution plan to expand current operations and/or venture into retail business has been recommended.

83 | Representative Cross-section of Our Projects83



Apparel: Productivity EnhancementThe client is one of the apparel exporters manufacturing quality garments for premium, fashion, mass and medium segment buyers in India. The assignment entails improving productivity per operator in the centralised sample room. Technopak mapped processes and refined control mechanisms across the processes. As a result, productivity improved by 26 per cent and direct labour cost reduced by 14 per cent.

Apparel: Productivity EnhancementThe client is a leading retailer in Europe catering to high-fashion apparel. The assignment involved establishing manufacturing/productivity metrics with key suppliers in woven and knit apparel products. The client first finalised KPIs in consultation with the suppliers. Technopak evaluated the supplier’s manufacturing facilities for current process enablers and measures, compiled the results and trained the supplier teams on the methodology. The process of establishing the measures is currently underway.

Healthcare: Business StrategyThe client is a start-up company promoted by a prominent Indian conglomerate. The objective of the project is concept testing of ‘Branded Primary Clinics’ in tier III towns targeting middle income class segment. The project entails mapping patterns in consumer spending on healthcare, preference for branded clinics and various physician engagement models. A strategic framework and business plan with a possible service mix for the clinic has been recommended.

Healthcare: Business Strategy and Partner SelectionThe client is a leading Indian group with a vision to develop a ‘Knowledge Pentagon’ comprising healthcare and education clusters. The assignment entails making an investor pitch and identifying a potential foreign collaborator. It encompasses market research and business planning for healthcare delivery centres as well as medical and para-medical education institutes.

Healthcare: Market Assessment and Report DevelopmentThe client is a multilateral funding agency. The project scope includes assessment of private healthcare providers in tier II cities and rural India, mapping of business environment, need-gaps and estimation of their growth potential. It also covers the health-seeking patterns of the section of population with income below US$ 5 per day. A report outlining business opportunities and recommendations for the Government, development organisations, entrepreneurs and financial institutions is underway for publication.

Mega Food Parks: Project Management ServicesThe client is the Union Ministry of Food Processing and Industries, Government of India. Technopak has been engaged as a Project Management Consultant under the Mega Food Park Project and the role involves preparation of the Detailed Project Report (DPR), utilisation of Government-provided funds, monitoring project progress and acting as a bridge between public and private participants for reporting purposes and implementation assistance. Implementation of projects is underway in the states of Uttaranchal, Assam and Jharkhand.

K–12 Education: Business Strategy and Entry AssistanceThe client is a multi-billion dollar Indian company and is looking to enter the education space. The assignment includes opportunity mapping in the K–12 space and studying the key schooling segments, current need-gaps, various regulatory issues and financial feasibility for the project. Currently work is in progress to identify strategic tie-up/acquisition opportunities with current running schools.

Telecom Products: Market Feasibility and Channel StrategyThe client is a leading mobile handset brand. The assignment entailed assessing feasibility of an innovative financial transaction tool through deciphering existing financial transaction options available and used by micro-entrepreneurs and traditional trade channel, assessing receptiveness to the new technology, market segmentation, developing value proposition, and creating a detailed and viable channel strategy to reach the target segment.

8484

We are a management consulting firm with a difference. Founded in 1992 on the principle of “concept” to “commissioning”, we are in the top 5 consulting firms in India by revenues. We are strategic advisors to our clients during the ideation phase, implementation guides through start-up phase, and trusted advisors overall. The industries we serve include Retail, Consumer Products, Fashion (Textiles & Apparel), Healthcare, Hospitality & Leisure, Food & Agriculture, Education and Real Estate.

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, Warburg Pincus and many other Indian and international leaders.

At Technopak, we foster innovation and creativity which challenge conventional thinking and generate practical and far reaching solutions for our clients. In 2009, we worked with over 95 clients across 120+ projects, in 12 countries besides India, across 3 continents.

Our key services are:

Business Strategy. Assistance in developing value creating strategies based on consumer insights, competition mapping, international benchmarking and client capabilities.

Start-Up Assistance. Leveraging operations and industry expertise to ‘commission the concept’ on turnkey basis.

Performance Enhancement. Operations, industry & management of change expertise to enhance the performance and value of client operations and businesses.

Capital Advisory. Supporting business strategy and execution with comprehensive capital advisory in our industries of focus.

Consumer Insights. Holistic consumer & shopper understanding applied to offer implementable business solutions.

Services We Offer in Management Consulting

About Technopak

8585

Services We Offer Through Our Group Companies

Holistic consumer understanding applied to offer implementable business solutions revolving around shopper insights, trend insights, design and innovation insights, marketing communication and measuring customer delight.www.indiamindscape.com

Insights and innovation led product, packaging, space and strategic design, including design research, concepts, engineering and prototyping. A blend of unique, contemporary and relevant concepts and solutions. www.foleydesigns.com

Planning, implementation and project management of plants, warehouses and entertainment centres with a focus on modernization, process improvement, technical valuation, power & water audit and environmental engineering.www.technopak.com/engineering

Engineering

Strategizing, planning and managing creation, development and growth of brands through a scientific, transparent and process-driven methodology.www.vertebrand.com

Services We Offer Through Our Strategic Partnerships

World’s largest privately held real estate services firm. We offer, through them, comprehensive retail real estate solutions to our clients.www.cushwake.com

UK’s leading design consultancy for developing brand environments. We offer, through them, design solution for retail environments.www.dalziel-pow.co.uk

Global research and consulting firm specializing in the study of human behavior in retail, service, home, and on-line environments. We offer consumer and shopper insights.www.envirosell.com

Partners with Technopak for delivering Projects in India. They are one of the top architectural practices in the UK with extensive experience in architectural and urban design projects in UK and internationally. The practice has major specialism’s in Healthcare Architecture www.devereuxarchitects.com

D E V E R E U XA R C H I T E C T S

87 | India’s Emerging Hot-Spots87



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