Tuesday, June 20, 2017

Why advertisers are salivating over an obscure Indian sport

(Newsweek June 2017)

This summer, as many as a billion TV viewers will tune in to watch India’s hottest new game: not cricket, not soccer, not basketball but a sport little known in the West called kabaddi.

Kabaddi is a contact sport combining elements of tag, rugby and capture the flag and was invented centuries ago in south India. It was first exhibited in the 1936 Berlin Olympics but never became an official Olympic sport. That hasn’t hindered its popularity in India: The Pro Kabaddi League, which is on the eve of its fifth season, starting in July, has more Indian fans than any sport besides cricket.

Professional sports have never been as popular in India as they are in so many other large nations, but the country has become an attractive market for global advertisers eager to reach the Indian middle class, one of the world’s fastest-growing pockets of consumers. By 2025, Indian consumer spending is projected to triple, hitting $4 trillion a year. (Germans, by comparison, spent $1.81 trillion in 2016.) Interest in entertainment, like music, film and television, has increased in India, and multinational corporations are betting that the middle class will develop an appetite for pro sports.

A joint venture among Mukesh Ambani’s Reliance Industries, sports and talent agency IMG and Rupert Murdoch’s Star India media group is pumping money into sports, such as professional soccer, tennis and mixed martial arts. It is wooing retired football players from English teams, like former Manchester United forward Diego Forlán and Chelsea winger Florent Malouda, and tennis stars, like Roger Federer and Rafael Nadal, who reportedly received roughly $4 million apiece from India’s tennis league to play in the 2014-15 season. Meanwhile, small-time entrepreneurs are starting Indian sports franchises in everything from badminton to basketball. Twenty new professional sports leagues have been created since the founding of cricket’s Premier League in 2008.

None of these leagues has been as successful as the kabaddi league. According to local data company News Flicks, last year’s 24-match season attracted nearly a billion TV viewers. Kabaddi is now the second most popular sport in India after cricket.

“Kabaddi has a unique Indian identity,” says the commissioner of the Pro Kabaddi League, Anupam Goswami. In just four seasons, excitement in India has built a sport with international participation. Twelve teams, including ones from Japan, the United States and Britain, competed in the 2016 Kabaddi World Cup, which snagged 114 million Indian TV viewers over 16 days of matches.

The sport still has a long way to go to catch up to the popularity of cricket, which also has a deep history in India. Since British colonizers introduced it in the 18th century, cricket has been called the religion that unites India’s many castes and communities. In less than 10 years since India’s professional cricket league launched, it has become the largest driver of the sport worldwide, with hundreds of millions more viewers than in the U.K., where the sport began.

Just as the best soccer players in the world travel to Europe to play, the world’s best cricketers want to compete in India’s Premier League. India’s investment in the sport has generated million-dollar endorsement deals for top players like Sachin Tendulkar, who earned enough from brands like Pepsi, Colgate and Visa to rank among Forbes ’s top 100 highest-paid athletes worldwide before he retired in 2014.

But the big question for business is whether newly imported sports can achieve the same popularity in India as those that Indians grew up playing . So far, sports with less familiarity here, like soccer, have not generated the same kind of enthusiasm.

Insiders say league officials and franchise owners resort to free tickets and even bussing schoolchildren to games to achieve “stadium fill,” in industry-speak. The three-year-old Premier Badminton League attracted only 3.5 million viewers for its 15 matches earlier this year, for instance, while the Hockey India League had even fewer for its 2016 season.

Some of the new sports leagues are thriving. Remus D’Cruz, an executive with the four-year-old Hockey India League, says it is basically breaking even thanks to funds from corporate sponsors like mobile network service provider Airtel and motorcycle maker Hero.

Meanwhile, corporate spending on sports-related marketing is growing in India. Overall, sports sponsorship has risen nearly 20 percent in 2016 over the previous year to reach nearly $1 billion, about a tenth of India’s overall advertising spending, according to a 2017 report by SportzPower India. (That is still far less than in North America, where sponsorship spending last year was more than $20 billion.) More encouragingly, perhaps, sponsorships of teams outside of cricket now account for nearly 40 percent of the pie.

Investors aren’t the only ones who benefit from a thriving sports culture. Chinese smartphone maker Vivo, kabaddi’s title sponsor, is betting more than $45 million this season that the game can win its brand some fans.

Tuesday, November 29, 2016

How Narendra Modi's Cash Recall Gambit in India Has Backfired

By Jason Overdorf
Newsweek (November 2016)

On November 8, when Indian Prime Minister Narendra Modi announced a surprise recall of more than 80 percent of the country’s cash in circulation, his supporters hailed the measure as an ingenious “surgical strike” against corruption and tax evasion. Everyone else was too busy running to the ATM.
Before the move, Modi had made little progress in fulfilling his campaign promise to bring back billions in untaxed “black money” stashed abroad so he could deposit it in the bank accounts of India’s poor. Washington, D.C.–based corruption watchdog Global Financial Integrity recently estimated that an average of $50 billion a year in illicit funds flowed out of India from 2004 to 2013, while bureaucrats, politicians and business tycoons amassed huge fortunes from influence peddling, backroom deals and outright graft.
Some Indians were so disgusted by this corruption that, much like Donald Trump’s supporters in the U.S. or Britain’s Brexiteers, they applauded Modi’s radical gambit—believing any action would be better than continuing to do nothing. But as it becomes more and more clear that replacing old notes with new ones will, at best, result in a small loss for the biggest crooks and only a short hiccup in the bribery business, the scheme is rapidly looking less like a clever economic maneuver than a brilliant but potentially disastrous piece of political theater.
The idea behind the recall was simple. Overnight, India announced that anyone holding 500- and 1,000-rupee notes had to exchange them for new bills before December 31. After that date, the old money will become worthless. The catch: The government is allowing people to swap only 4,500 rupees (about $65) in the old notes for cash. Anything more than that has to be deposited, thus creating a paper trail. Theoretically, this would either force those hoarding cash to come forward and pay taxes or their money would be worthless. Plus, anyone caught with more than 250,000 rupees in canceled notes—about $3,500—is now subject to investigation.
To prevent word of the plan from getting out, which might have allowed the biggest violators to exchange their big notes in advance, Modi reportedly opted to make the radical move in secret. He apparently relied on the advice of a few top advisers.
He would have done well to seek further counsel, because his plan has now thrown India’s economy into chaos. The secrecy meant the country’s mint couldn’t print or distribute new notes until the announcement—so banks are struggling to meet demand. Even worse: Indians are standing in long lines to exchange or deposit their old notes, or withdraw cash just to buy groceries.
Black money—cash hidden to avoid taxes—is pervasive in India. Yet it’s not only that police officers, tax collectors and politicians demand bribes to do their jobs or look the other way, says Surjit Bhalla, senior India analyst at the New York–based Observatory Group, an advisory company specializing in monetary and fiscal policy. Virtually anyone who buys real estate in India pays for it at least partly under the table, and even the poorest Indians routinely forgo receipts to avoid paying sales tax. “Everybody,” says Bhalla, “has been made to commit this crime.”  
Black money can also represent proceeds from legitimate business, while illegal income from bribes or conflicts of interest can be “white”—as long as someone has paid taxes on it. So the politicians in Parliament or various state assemblies, many of whom have somehow earned tens of millions, if not more, after taking office, can pay taxes on their bribes and still get away with it. Recalling and replacing big bills won’t do much to stop this malfeasance, Bhalla says. As long as bribery continues, the new clean notes will swiftly turn into dirty ones. Corruption, it seems, has little to do with the denominations of the bills—except that large notes take up less storage space.
Meanwhile, violators keep as little as 6 percent of their hidden income in cash, according to some estimates. They invest the rest in property or gold—of which Indians hold some 15,000 tons, according to a conservative 2011 estimate from Citigroup, or they wash it by sending it abroad and bringing it back again as foreign investment.
Then there’s the question of legality. Lawyers from India’s political opposition have questioned whether some elements of Modi’s plan—such as denying people access to their own money—are against the law. Others see the move as an exercise in propaganda. “This is politics as a vast morality play,” wrote Indian political analyst Pratap Bhanu Mehta in The Indian Express, a left-of-center daily. “Literally every citizen is being enlisted (or conscripted, if you prefer) in a policy cause.”
This isn’t the first time a charismatic nationalist has used a simple, good-vs.-evil narrative to push a radical economic measure. In 1958, China’s Mao Zedong called upon millions of citizens to wipe out the country’s rats, sparrows, mosquitoes and flies to fight disease and prevent crop losses. And like Mao’s campaign, which engendered a plague of locusts by wiping out the sparrows that ate them, Modi’s strike against corruption has led to some unexpected and painful consequences.
Around 400,000 trucks were stranded around the country as of November 14 because their drivers had no valid bills to pay for incidentals (including bribes) on the road, according to the All India Motor Transport Congress—suggesting there may be shortages of essential supplies in the near future. Sugar processors have reportedlymade only partial payments to workers, reserving whatever valid bills they had to pay for fuel needed to run their cane-mashing machines, while other factory owners have given workers several months’ salary in canceled notes to get rid of the old denominations. Critics say Modi’s move could even lead to a significant economic slowdown. As K.C. Chakrabarty, a former deputy governor of the central bank, warned, “You have stopped market transactions for 70 percent of the economy.”
Yet Modi and his Hindu nationalist Bharatiya Janata Party (BJP) have deflected any criticism of the pain and suffering resulting from the move by saying only people sitting on stacks of black money have reason to complain—recasting the serpentine lines at bank branches nationwide as a vast people-laundering machine: Criminals go in, and patriots come out.
By making or at least seeming to make the rich suffer alongside the poor, recalling the big notes could give Modi room to execute other measures that would otherwise be rejected as favoring the rich—such as lowering property taxes to reduce the incentive to evade them, Bhalla adds, “This gives them a certain credibility [with the poor].”
At least in theory. Lines at the bank are getting shorter in cities, while wealthy and middle-class Indians have adjusted by using debit and credit cards for more purchases—as well as downloading payment apps in record numbers. But such workarounds are not available to hundreds of millions of citizens who have also seen their salaries withheld or their sales drop because of the sudden lack of cash. Small shopkeepers who cater to the poor say business has plunged by as much as 80 percent (even in the capital, vegetable vendors, casual laborers and countless others operate entirely in cash). In rural India, there are fewer than 10 bank branches for every 100,000 people, and many open for business only two days a week.
Though Finance Minister Arun Jaitley has promised everything will be sorted out within 21 days, a local newspaper recently estimated it could take as long as six months to replace all the canceled notes with new ones, based on the speed at which the mint is working. Such reports are no easier to verify than the opposition claims that BJP insiders and big donors were given advance warning so they could convert their big notes into gold, jewelry and real estate. Other reports suggest some of the worst hit among the rural poor still support the measure—which they believe will not only punish the corrupt but also lead to a more equal society.
If the chaos does continue, Modi’s BJP will pay dearly in a series of upcoming state elections early next year. However, like other populist leaders around the world, he may have a better grasp on public opinion than his opponents.

Friday, July 08, 2016

Sorry, tiger dudes: your ladies are faking it

India’s tigresses may be feigning interest in sex as the result of shrinking habitat and overlapping territories

By Jason Overdorf
July 8, 2016

When Maya, a much-adored tigress in India’s Tadoba Andhari Tiger Reserve, abandoned her equally adored young cubs this June, park officials feared the worst. Soon after, Maya was spotted mating with some roving males, seemingly unconcerned about her one-year-old litter. But now local naturalists think Maya’s behavior is actually evidence of a crafty new strategy to help ensure her cubs’ survival: “false mating.”

Like many mammals—including bears, lions and bottlenose dolphins—male tigers will kill the cubs of their rivals whenever they can, so as to precipitate a new estrus cycle and impregnate the tigress with their own offspring. Tiger moms typically seek to protect their cubs from such a fate for 18 to 24 months, before pushing them out to establish their own territories. (Tiger fathers have no role in raising the young, so no help there.)

But the crowded conditions in Tadoba and other Indian national parks are making that increasingly difficult. The ranges of several roving rivals frequently overlap with the dominant male’s, bringing danger precariously close to vulnerable cubs, says Bilal Habib, a carnivore researcher at the Wildlife Institute of India.

“In high-density areas, where there are more males, the best strategy for a female is to try to leave the cubs early, go with the males, and then go back and look for her litter again,” Habib explains. “If she tries to fight with the males, that may be fatal for her and fatal for the cubs.”

The name “false mating”—which occurs among lions and other species—is a little misleading. It refers to actual sex, just not at the time when a female is able to conceive. (Typically, tigresses go into estrus once every three to nine weeks, and are most likely to conceive during three to six days within that period.) Habib’s theory is that Maya is using sex not to conceive, but to placate roving male tigers and perhaps make them think they have successfully impregnated her.

Afterwards, she returns back to her cubs, leaving the appeased male none the wiser.

Nobody will know if he is right for at least another six weeks. “We don’t know as of now if it’s real mating or false mating. She’s probably not conceiving, but it’s not clear yet,” Habib says. “If it was real mating, we will expect to see cubs in 90 to 120 days.”

Other tiger researchers say Maya’s seemingly strange mating habits are just the tip of the iceberg. Overlapping territories have bred all sorts of unusual tiger behaviors, including more frequent fighting and dominant males apparently tolerating rivals. In some crowded ranges, serial mating with different males suggests the possibility that tiger litters—like those of domestic cats—may even have multiple fathers.

Though scientists have a wealth of data from captive breeding programs, surprisingly little is known about the finer points of tiger reproduction in the wild because there have been very few long-term breeding studies, says Raghunandan Singh Chundawat, a conservation biologist in India who has published papers on tiger mating behavior.

For instance, in some cases, tigresses have failed to conceive after as many as 30 couplings and then inexplicably become pregnant. It's known that friction from the sharp spines of the male's penis are required to induce ovulation. But the variance in how many matings are required for conception has led to the speculation that tigresses, like several other mammals, may be able to control whether or not they ovulate.

“We know very little about the biology,” Chundawat says.

That’s daunting, considering the stakes. According to the latest population survey, India boasts around 2,226 tigers, or about 70 percent of the world’s total—nearly a third more than believed at the time of the last count (which used a less accurate method). That’s great, but it also means that India’s 13 tiger reserves are more crowded than we thought, even as highways, factories and towns eat away at the rest of the country’s forests.

Many of the tiger reserves are too small for the tigers they contain, so animals end up overlapping territories and coming into conflict with each other and with people. In a ten-year study that tracked tigers in the Panna Tiger Reserve of central India using radio collars, Chundawat and his colleagues found that roving males “floated” in and out of the territories of dominant males, often managing to mate with females on the sly.

The researchers found that radio-collared females mated with the territorial males on 14 occasions, and mating with the floater males on six occasions. Meanwhile, three out of four radio-collared females mated with more than one male during the same estrus cycle. "Because in dry forests the ranges are very large, the dominant male cannot keep all the other males out," Chundawat says. "He will tolerate them, as long as he has first access to the females."

While that shared access might result in greater genetic diversity and prevent rival males from killing strange cubs, it could also prove problematic. High-density areas see more frequent infighting between rival males and territorial females alike, Habib says. And the imperative for mothers like Maya to leave their cubs early could itself have dire implications.

“What we suspect is if tiger cubs in high-density areas are forced to disperse early—at 12, 14 months—that makes their chances for survival very low,” he says. Danger, it seems, comes in many stripes.

Friday, April 22, 2016

Could India's auto rickshaw become obsolete?

By Jason Overdorf
USAToday (April 2016)

NEW DELHI — They're one of the most recognizable icons of modern India.

The auto rickshaw, a sputtering motorized three-wheeler that's less than half the cost of a regular taxi, is the backbone of urban transit for millions of Indians.

With the vehicle’s soft top, open sides and lack of seat belts, passengers rely on little more than good karma to keep them safe from crazed drivers on India’s congested roads.

Despite a top speed of only 30 mph, auto rickshaws accounted for 6,300 of the 140,000 traffic fatalities in 2014 in the country. It’s one reason the industry is in tumult.

Sensing a market poised for a revolution, a host of corporations are vying to replace the rattling workhorse of India’s transportation system with the next generation of cheap taxis to ferry 1.2 billion people around the country’s cities.

The bare-knuckle competition over the future of India’s taxicabs has bred legal conflicts.

The first mover in the race to replace the rickshaw, India’s Bajaj Auto, has been locked in a four-year battle over whether the company’s four-wheeled buggy is safer than the three-wheeler.

First unveiled in 2012, Bajaj Auto’s vehicle, a quadricycle called the Qute that already is exported to 16 markets from Egypt to Mexico, offers a fully enclosed steel cab, a fuel-injected engine, seat belts for passengers and head and taillights that are much brighter than those in current rickshaws.

"We’re the world leader in small, three-wheeler taxis — we’re making a lot of money in that segment," said S. Ravikumar, Bajaj Auto's president of business development and assurance who, like many Indians, uses only an initial rather than a first name. "We wanted to upgrade (those taxis) and create a much better product that will serve the same purpose."

Bajaj Auto’s competitors, including automaker Tata Motors, voiced safety concerns about the quadricycle. The government drafted new regulations for four-wheelers that delayed approval of the new category of lightweight vehicles until February 2014.

Auto rickshaw drivers’ associations and others then filed a unique Indian form of class action called "public interest litigation" that challenged that approval, keeping the Qute off the roads again.

“No crash test has been attempted here in India,” said former Indian solicitor general Gopal Subramanium, who is representing the plaintiffs. “The information we have from Europe with regard to a crash test is abysmal. This is the reason why quadricycles are not used as a vehicle for transport in any European countries.”

Unlike class action lawsuits in the United States, any concerned citizen can file public interest litigation in India. In theory, courts are supposed to dismiss suits filed solely for financial or political gain. But dismissing the litigation can take years in the Indian legal system, so competing companies often stymie their rivals using the legal maneuver.

"Business exigencies are definitely sometimes at the root of (public interest litigations)," said Delhi-based attorney Navin Syiem of IndusLaw, a major firm in India.

As Bajaj Auto's court case dragged on, Tata unveiled its own low-cost rickshaw replacement, the four-wheeled Magic Iris, which it began pitching to state governments last year. Tata also reportedly has its own quadricycle, the Bravo, under development.

Other makers of electric three-wheelers have gathered steam in the Indian auto-rickshaw market.

Japan’s Terra Motors recently announced that it will have 30,000 electric rickshaws on India’s streets by the end of the year, and that many companies from China already are selling electric rickshaws in India without regulatory approvals, Chief Executive Toru Tokushige said in a news release.

The Indian automobile and farm equipment conglomerate Mahindra & Mahindra was reported to have a quadricycle in the works in 2014, aiming to hit the market next year. And U.S.-based all-terrain vehicle maker Polaris Industries, which entered the Indian market in 2011, has said it is considering the launch of a quadricycle here.

Italy’s Piaggio, which sells quadricycles in Europe and is the biggest player in India’s three-wheeler segment after Bajaj, also has said it is looking at the Indian market.

"We appreciate that some of our competitors are getting their products ready," said Ravikumar, lamenting the inefficiencies of the Indian courts. "Our hands are tied. This is the legal system."

Richshaw driver Jeevan Mishra, 50, is concerned about competitors because he could stand to lose his current investment.

Mishra said drivers such as he have taken out loans and sunk their life savings into their three-wheelers and licenses, which run about four times the cost of the vehicle itself.

Mishra wondered what would happen if his three-wheeler became obsolete?

“Already, we’re getting fewer and fewer customers because there are too many rickshaws,” Mishra said.

American tourist Joyce Kim, 37, said she would be sad if auto rickshaws disappeared from India’s streets, but she understood why perhaps they should go.

"Riding an auto rickshaw is like jumping on an older carnival ride — terrifying for some, but fun for me," she said. "But rickshaws are not why tourists come to Delhi, nor are they the city's only charm."

Thursday, March 17, 2016

India’s e-commerce boom breeds drama for deliverymen

By Jason Overdorf 
The Washington Times (March 2016)

NEW DELHI, India — Every morning Manzar Imam buckles his helmet and straps on a backpack that’s almost as big as a washing machine, girding for the battle ahead.

The 45-year-old is a kind of modern-day gladiator, one of tens of thousands of “last-mile” motorbike deliverymen in India’s cutthroat and chaotic e-commerce industry.
Zigzagging through New Delhi’s testosterone-infused traffic on his 100cc Hero Honda motorcycle, he ferries clothes, electronics and household goods to homes and offices around the city, the last — and indispensable — link in a global chain of mostly Internet-directed commerce.

It’s not an easy job.

“It depends on the customer’s mood,” said Mr. Imam, a potbellied man with long sideburns and a bushy salt-and-pepper mustache. “Some customers are very angry.”

Delivery calls can be truly dangerous in India. Tales abound in the Indian press of couriers assaulted, even locked in bathrooms, over trivial disputes such as not being able to make change for an order. In Indiacash on delivery is common, which brings its own dangers for couriers.

Last month, two former Amazon deliverymen allegedly ordered a hair trimmer online, then beat up the motorcyclist who delivered it and stole his cellphone and 23 packages intended for other customers, according to Hyderabad police.

Last year a story went viral in the Indian media about armed robbers who stole three MacBooks from a Flipkart delivery boy in Uttar Pradesh, luring him to peril by giving him an address that turned out to be a field in the middle of nowhere.

Even so, in a nation where Internet startups are legion and e-commerce is booming, the streets of India’s capital teem with delivery vans and motorcycles.

Local would-be Amazon.coms and eBay-style online marketplace companies attracted more than $500 million in investments over the first three months of 2016 in India, according to startup tracker Trak.in. Flipkart is one of the Indian sector’s four “unicorns” valued at more than $1 billion. In 2014 Amazon announced plans to invest $2 billion to expand its India operations.

A recent Goldman Sachs forecast predicts that India’s e-commerce sector, already one of the largest in the world, will triple from an estimated $23 billion to $69 billion by 2020.

India’s PayTM, which entered the e-commerce sphere in 2014, sold $2.5 billion worth of merchandise last year, not including discounts and returns, according to founder Vijay Shekhar Sharma. This year he projects that the company will surpass $10 billion in sales — the same amount targeted by Amazon and Flipkart.

Sustainability doubts
Much of that money is flowing back to customers in the form of deep discounts and unsustainable perks, including free or discounted delivery, cash on delivery and free returns, in a bid to expand and attract new orders. Companies are slashing prices to gain market share and scare off competitors. It’s not uncommon for some sites to sell products at a 20 percent discount to wholesale prices, leading some to predict a reckoning in the months to come.

“I think that Indian e-commerce is near the peak of an investment bubble,” said Porter Erisman, a tech entrepreneur who wrote a book about his experience as an executive in the early days of massive Chinese e-commerce website Alibaba.com. “The rush of money has led to a lot of e-commerce companies chasing market share at all costs.”

Some companies are riding the wave. Online retailer Infibeam — which posted its first profits in 2014 — has pegged its value at $334 million as it readies its first public stock offering of an Indian e-commerce company on March 21. Former Amazon executive Vishal Mehta founded Infibeam in Ahmedabad in 2007.

Some companies are indulging in bubblelike behavior. Online clothing retailer Jabong.com hired writers and launched a fashion magazine with a print run of nearly 200,000 copies — copies that were never distributed. “They were just lying around,” said Sharin Bhatti Nair, a former staff writer for the magazine who now runs a co-working space for entrepreneurs in Mumbai.

Another shadow over the industry is being cast by Indian states looking to capture some of the revenues as Web-based sales boom.

The Mumbai-based Economic Times reported this week that three states — Uttarakhand, Bihar and Assam — have imposed an “entry tax” on goods purchased online from outside their borders, and more states are looking to follow suit. E-sellers complain this amounts to a double sales tax on their goods and could leave them uncompetitive against traditional brick-and-mortar retailers.

“The practice smacks of some kind of predatory tax regime which is being promoted by some states,” Subho Ray, president of the Internet and Mobile Association of India, told the newspaper.

Fraud is also increasingly commonplace on Indian e-marketplaces too, said a former investor with a major firm that worked with Indian startups. Mobile phone peddlers can hock high-value phones to relatives or accomplices to score incentives again and again for reselling the same item, for example, he said, under most vendor arrangements.

“The burn rates were very high and continue to be high,” said the investor. “We’ve heard numbers as high as $1 million a day being burned.”

Couriers like Mr. Imam feel the brunt of the companies’ unsustainable choices, as customers complain and pressures mount.

Jabong.com offers free delivery and free returns on items that cost less than $5, according to the company’s website. Customers often return delivered items, take store credit and then buy something else online for delivery the next day with that credit. As a result, couriers repeatedly visit the same house to bring products paid for with the same store credit many times over.

The companies most exposed to the unsustainable business models won’t survive when the bubble bursts, said Mr. Erisman, who was an executive at Alibaba in the early 2000s.

“The same thing happened in the early days of China’s e-commerce boom,” he said. “I would advise the heads of e-commerce companies inIndia to focus on saving the money they raised and prepare for winter.”

Monday, February 29, 2016

Hopes of business-friendly reforms in India fade

By Jason Overdorf, Special for USA TODAY(February 29, 2016)

NEW DELHI — Even as India shines as a rare bright spot in a sluggish global economy, the country’s business-savvy prime minister is watching his popularity wane.

Narendra Modi swept into power in May 2014 on the strength of a charismatic personality and a promise to eliminate India's legendary bureaucratic barriers to business. Today, India’s corporate leaders are losing faith that he can remove those obstacles. And public support has fallen as well: If elections were held today, Modi’s ruling Bharatiya Janata Party would lose its majority in parliament, according to a recent poll by Karvy Insights.

“Expectations were high and people wanted to see a quick turnaround (of the economy),” said Dharmakirti Joshi, chief economist at Crisil, the Indian arm of Standard & Poor’s. “But big ticket reforms ... have been delayed and diluted.”

By some numbers, Modi’s performance looks stellar:

• Despite a global slowdown, India’s economy is expected to grow 7% to 7.5% for the year ending in March, just above the 6.9% rate recorded the year before he took office.

• Foreign direct investment from October 2014 through June 2015 increased 40% compared with the same period a year earlier, thanks to his “Make in India” program, which eliminated or reduced restrictions on foreign investment in many manufacturing sectors.

• Foreign exchange reserves now top $350 billion, India’s highest level ever.

“A lot of confidence and hope continues to be built around India,” Finance MinisterArun Jaitley said Monday, as he outlined a $288 billion spending program for the fiscal year ending March 2017.

Nevertheless, long-awaited moves to loosen restrictions on land acquisition and a tax overhaul sought by corporations to boost business have yet to materialize.

That’s because opposition parties that control the upper house have blocked his boldest policies, thwarting the strong majority his party holds in the lower house of parliament

Eliminating the red tape also has proved daunting. India jumped 12 places on theWorld Bank’s ease of doing business index during Modi’s first year in office — from 142 to 130 — but many complex regulations and paperwork requirements have not been reduced.

Corporate leaders also note that a lack of skilled workers in India prevent Modi's “Make in India” program from becoming reality. “Some low scale manufacturing may move to India. But if you want to build Brand India, you have to first build global Indian brands,”Anand Mahindra, chairman of the Mahindra group, which makes cars, farm equipment and other products, told India Today newspaper.

Other business leaders praise Modi's accomplishments in a country where making any major change in how things are done is exceedingly difficult.

Binod Agarwal, CEO of a small auto-parts manufacturer, New Engineering Works, cites an increase in government services available online, and says his company has seen a 30% to 40% increase in sales since 2014. Government "has become more efficient and more transparent, and less dependent on government officials,” Agarwal said.

In his budget speech Monday, Jaitley unveiled measures designed to rekindle Modi’s popularity. Tripling outlays for rural development, he promised to double farmers’ incomes over the next five years, an ambitious goal many economists consider impossible.

Reacting to the early portion of Jaitley’s speech on Twitter, veteran political commentator Shekhar Gupta suggested its tone “echoes a hard Agro-povertarian swing,” indicating the government was “losing nerve early” on reform.

With the global economy in the doldrums, India cannot rely on export growth, so it must focus on stimulating domestic demand. While urban consumers are already spending, the real potential lies in rural India, where measures such as massive spending increases on roads and tax exemptions for food processors can simultaneously create jobs and new consumers.

Notably, the outlay for rural Indians does not come in the form of free money or other market-distorting measures, such as an increase in minimum support prices for crops, Shubhada Rao, chief economist at Mumbai-based Yes Bank, pointed out. There’s also $33 billion in funds for infrastructure development and a plan to lower corporate tax rates to 25% from 30% over the next five years.

“The budget looks to address the weakest link in India’s growth, which is the rural and farm economy,” Rao said.

Thursday, January 21, 2016

Indian Craft Beer ‘Bira 91’ Gets Venture Backing After Viral Success

International Business Times (January 2016)

NEW DELHI —Just a decade ago, practically the only bars in India were dark, male-only dens where red-eyed drinkers glowered over glasses of so-called Indian-made foreign liquor, aka IMFL. But rising incomes and a new generation of hip, young drinkers have changed all that. These days, the key Indian demographic for a host of alcohol brands and bars is the under-30 set, and craft beer is fast becoming the cutting-edge offering in the premium segment. Just ask Ankur Jain, who’s pioneering the adoption of bottled craft beers in bars and liquor shops, including his own Bira 91.

“We did not spend a dollar on traditional marketing,” Jain said, noting that sales of the locally branded, and soon to be locally made, Bira 91 have rocketed past 35,000 cases a month in less than a year. “People started recommending our product to their friends. It’s amazing how quickly we were able to dislodge some of the other beers in the premium segment.”

Launched in February 2015, Bira 91’s rapid viral success caught the eye of Sequoia Capital, the Silicon Valley firm best known for backing Apple, Google, LinkedIn and Whatsapp. This month, in its first alcoholic beverages play in India, the firm bet $6 million on Bira 91. Jain’s B9 Beveragesplans to use the cash to put some marketing muscle behind the brand and set up a local brewing facility in the central Indian state of Madhya Pradesh.

Does that mean that craft beer is about to take off?

Market leader Kingfisher and other local mass-market brands needn’t worry yet, according to a recent “Beer Market in India” report from London-based Technavio Research. But mushrooming microbreweries, together with increasing sales of imports like Stella Artois and Guinness, prompt the research firm to forecast 10 percent growth in craft beer sales through 2020, compared with 8 percent growth for the Indian beer market as a whole.

“Although craft beer forms a very small chunk of the overall beer industry, it started very modestly at just two microbreweries in 2008 [and grew] to approximately 45 by 2015,” according to Technavio’s lead food and beverages analyst, Vijay Sarathi. “We believe it is the right time for craft- [and] microbreweries to enter the Indian market.”

Compared with the volume of a giant like Kingfisher — the flagship beer brand of the Bangalore-based United Breweries Group — Bira 91’s million-odd cases a year is a drop in the barrel. But Jain, and presumably Sequoia, expect sales to grow much faster in India than they did in the U.S.

“It’s a generational project. The American craft beer industry took about 30 years to evolve,” Jain said, noting the time it took Boston-based Sam Adams to reach sales volumes of around 50,000 barrels a year. “I think it’s a 5-to-10-year story where India is concerned.”

The growth of microbreweries will help open up the category and introduce consumers to different beer styles, Technavio Research suggests. And new “beers-of-the-world” bars like the New Delhi-based Beer Café offer ready access to the target demographic.

“Our brewery started about 16 months ago, and over the last seven to eight months we’ve seen a lot of growth,” said Shailendra Bist, Pune-based Independence Brewing Company’s co-founder and head brewer. Over the next year or so, the microbrewery plans to open at least two taprooms, locally known as “beer bars,” in Mumbai, he said.

The main beneficiary of India’s nascent wine-making industry, Maharashtra, where Pune and Mumbai are located, was one of the first Indian states to permit such microbreweries, which are (for now) only allowed to sell beer on tap or by the keg. According to Technavio, midsized Pune alone has at least six microbreweries. Many more have mushroomed in Gurgaon, Haryana, and Bangalore, Karnataka.

“We as microbrewers in Maharashtra keep lobbying the government to be more progressive with their beer brewing policy,” said Bist, who boasts California-based Stone Brewing’s co-founder Greg Koch as one of his partners. Take-away jugs known in the industry as “growlers” may be on the horizon, and maybe more.

“Hopefully, the government may soon allow us to do a small bottling run,” Bist said.

But that’s where the big challenges will begin, he added. India’s distribution chain is both cutthroat and chaotic, with the big players offering serious kickbacks to drive sales. That could prove a tough nut to crack, he said. But he believes those same conditions give local craft beers a better-than-even shot at more famous-imports.

“Competing with imports is not a problem,” he said. “There’s no cold chain [i.e., refrigerated transport], so imports are 100 percent oxidized by the time you get them. And import duties are so high you pay 900 rupees [$14] for a can of Guinness.”

In comparison, Bira 91 retails at 100 rupees ($1.50) for a 330 ml bottle, while its nearest competitor, Carlsberg, is 85 rupees ($1.30) per 330 ml bottle.

A second-time entrepreneur (he co-founded a healthcare revenue cycle management firm called ReliantMD in 2002), Jain started Cerana Beverages and began importing famous craft beers from around the world in 2008. He believes the market savvy and distributor relationships he's earned will help Bira 91 leap the same hurdles.

“We’ve had relationships with these distributors for four or five years now from our import business,” said Jain, whose company has exclusive import and marketing rights from seven breweries and a retail presence in all of India’s major urban centers. “It’s a slow-burn process.”

In terms of product selection and branding, Jain zeroed in on two distinct-but-familiar styles, a wheat-based Belgian white and an aromatic craft lager. By design, neither style is as radically different from India’s mass-market lager as a stout or a pale ale. Theorizing that other “premium” beers, such as Budweiser and Carlsberg, were essentially asking consumers to “ drink me because I’m extremely respected abroad,” he also made sure that Bira 91 was “unapologetically Indian” yet appealed to upwardly mobile youth, he said.

The name Bira has an Indian sound, and 91 is a reference to the international country code used to dial India. Meanwhile, the punk rock monkey chosen for the brand’s logo is Indian enough, yet not too Indian.

“We tried to stay away from elephants and spices and so forth” because young Indians are resistant to hackneyed images of “exotic” India, he said.

Exotic beer, on the other hand, they drink right up.