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 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 “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 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. 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 CafĂ© 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.

Sunday, January 10, 2016

India embraces clutch-free driving, thanks to Suzuki

AMTs, using a decades-old technology, are taking the Indian market by storm. 

By Jason Overdorf
International Business Times (January 2016)
NEW DELHI — When 39-year-old Raj and his partner were shopping for a second car last year, it wasn’t a hybrid or an ultra-clean vehicle running diesel that caught their eye. It was a decades-old innovation that never really took off anywhere else in the world: the automated manual transmission, or AMT.

“My partner had just learned to drive, and she still faced the problem of stalling with a manual,” said Raj, who works as a web developer in the western Indian city of Surat, in Gujarat. “When we test drove the [Maruti Suzuki] Celerio and there was no clutch involved she just fell in love with it.”

It didn’t take long for Raj to fall in love, too. Although Surat is less congested than larger cities like Delhi and Mumbai, it’s routine for him to spend an hour in bumper-to-bumper traffic during his daily commute. And even outside of rush hour, there’s always a traffic jam someplace.

“I still drive it at least once a day,” Raj said. “The driving experience is amazing.”

A cheaper and less sophisticated alternative to the hydraulic system used in developed markets, AMTs are taking the Indian market by storm, says Ashwin Kumar, South Asia and Middle East head of Frost & Sullivan’s automotive and transportation practice.

“Automatic transmission, which includes a host of technologies, should account for about 15-20 percent of the Indian market by 2020,” Kumar said. That’s a compound annual growth rate of more than 60 percent, most of which will come from AMT, he added.

The upshot: “One in 10 cars sold in India will have an AMT transmission.”

Unlike hydraulics, the AMT system uses a friction clutch. There’s no clutch pedal, and in “drive” mode a computer does the clutch work. Critics say that makes the driving experience a little jerkier, but with Italy’s Magneti Marelli manufactured kits, which are easily added to factory assembly lines, the old technology allows first-mover Maruti Suzuki to bring the add-on cost of shift-free driving down to as little as $500 on models like its $6,400 Alto K10 AMT and $6,900 Celerio AMT.

“This is 50 percent cheaper than the other technologies,” Kumar said.

Whereas other carmakers previously bundled hydraulics and other more sophisticated automatic transmissions with costlier options in their top variants, the longtime market leader has scored by offering AMT as a mid-range option. Customers can now escape the clutch pedal in exchange for bells and whistles like a top-end stereo or anti-lock brakes — which are less important in stop-and-go city driving.

AMT also suits India’s penny-pinching drivers once they leave the dealership, says Gaurav Vangaal, a senior analyst with the research firm IHS Automotive.

Apart from the sticker price, one of the reasons Indian car buyers have been slow to embrace automatics is that they are very concerned about fuel economy and hydraulic transmissions reduce efficiency. With the same gearbox, but operated by a computer, an AMT typically performs the same as or a little better than a manual transmission.

“This technology fits best the Indian middle class,” Vangaal said. “That is the reason it is getting success in the Indian market. Price, efficiency, everything matters for Indian consumers.”

Since it unveiled its first AMT models at the 2014 Delhi Auto Expo, Maruti Suzuki has sold more than 50,000 AMT cars. In comparison, it sold only around a thousand or so hydraulic automatics the year before the AMT launch. Having already rolled out AMT variants in six models, the company now plans AMT variants across its full product range, according to a recent article in India’s Financial Express newspaper.

Other brands are rapidly following suit, says Vangaal.

An AMT model has helped rehabilitate moribund sales of the bargain-priced Nano for Tata Motors — accounting for a whopping 40 percent of sales. Mahindra Automotive, Renault, Ford India, and Hyundai have also introduced AMT variants.

As a result, Magneti Marelli expects its Indian revenue to more than double to $435 million over the next three years, from today’s $175 million, according to a report by India’s Economic Times. To meet the demand, it’s building a $25 million production facility in Haryana with a projected production capacity of 200,000 AMT units by the third quarter of 2016.

“Now everybody is jumping for this technology,” Vangaal said.

Because AMTs have a positive or neutral impact on fuel economy, there’s little risk of a clampdown due to environmental concerns like the one potentially poised to hit carmakers that have bet big on diesel. Instead, how long the boom lasts will depend on how swiftly the price difference between AMT and other automatic transmission technologies drops, and how quickly India lifts people from lower-middle to middle to upper-middle class.

A Chennai-based IT executive who purchased a Maruti Ritz hatchback with a more costly hydraulic transmission after test-driving several AMT models provides his viewpoint.

“There is a minor noticeable jerk in AMT-based vehicles, especially while changing into first and second gears,” he said, asking that his name not be published. “You are supposed to get used to it as you drive, but I wanted my first [shift-free car] to be a proper automatic and not a pseudo-automatic like AMT.”

Wednesday, January 06, 2016

Food for thought: In India regional brands gaining against bigger players in consumer goods

By Jason Overdorf
International Business Times (January 2016)

NEW DELHI — When India opened its market to international brands in the 1990s, many people expected that only the strongest national players would survive. After all, kids who had to settle for a local knockoff called Campa Cola were so thirsty for “the real thing” that they got jealous watching blurry TV commercials from Pakistan. But India’s regional brands have proven to be more resilient than expected, even as advertising spending has skyrocketed.

Regional brands have clawed back a 13 percent share of the $44 billion Indian packaged goods market, up from 12 percent two years ago, according to Nielsen India. And that trend is likely to continue despite or even because of the modernization of the retail business, say brand experts like P. Rajan Mathews, vice president of sales and marketing for the food division of Desai Brothers.

“Regional brands are here to stay,” he said. “This is something really unique to India. Every state is a different culture, [virtually] a different country, so there cannot be a single formula applied across the country.”

Smaller and more focused than their national and multinational competitors, brands like Gold Drop vegetable oil, Jivraj tea and Balaji chips can react to the demands of their customers faster. Moreover, some of the changes first brought in by multinationals have begun to level the field, according to Santosh Desai, managing director of Futurebrands India.

“In earlier times, there were gross differences between regional brands and national or multinational brands in marketing and product development capability,” Desai said. “Now, the advantages of the big players are not as significant.”

While once the difference between a regional brand and its larger competitors was obvious from its packaging, the drive by multinationals to outsource that part of the business to local companies has made high-quality packaging available “off the shelf,” he says. The mushrooming of venture capital firms has made financing available for expansion, and the successful emergence of several regional companies as large national players has made it easier to attract top-level employees.

Regional brands are present across the country, but they’re increasingly competitive in Uttar Pradesh and Punjab in the north, Tamil Nadu in the south, and Gujarat and Rajasthan in the west, according to Nielsen. They’re usually strongest in packaged foods and home care products such as refined cooking oil, soap, detergent, tea, snacks, and condiments.

In packaged snacks, spices and condiments in particular, regional brands’ greater focus allows them to cater to the specific tastes of India’s many distinct cultures, says Mathews of the Desai Brothers conglomerate.

Reasonable Dates and Reasonable Rates

Micro-marketing initiatives like door-to-door sales help regional brands maintain close relationships with customers, he says. And the smaller firms have learned that offering better margins to distributors and shop owners can go a long way to compensate for the higher ad spends of national and multinational competitors.

“Every state or every region has a very focused regional player, which derives 80-90 percent of their revenues from that area,” Mathews said. “One result is they save on logistics and various other national costs, and as a result they’re able to give more credit, and they know the distributors in and out. It’s a personal touch they give to the business.”

There’s also an impact on the price paid by the consumer. Regional brands are about 40 percent cheaper than national and multinational brands, according to Nielsen’s data. Local shop owners like Sanjay Arora believe that’s the main secret to their continued success.

“There’s fresh stock daily and the prices are reasonable,” said Arora, who owns a mom-and-pop grocery called Pal Stores. “Reasonable dates and reasonable rates.”

With its clear plastic bag and only one flavor (salted), a regional brand like Kakaji potato chips, cannot compete with Lay’s for regular purchases, he says. But when people are buying in bulk for parties or seasonal festivals, the cheaper brand gets the nod.

It’s not clear whether regional brands are convincing customers to switch from national brands, or whether the gain in market share results from faster growth. Desai reckons it’s probably a mix of both, and Nielsen’s data does show that regional brands get as much as 50 percent of sales from urban markets — which suggests they’re competing well head to head.

Regional Brands Becoming National Players

A large number of regional brands such as MTR (spices), Vi-john (shaving gel/hair care), Wagh Bakri (tea), CavinKare (hair/skincare) and Kalyan Jewelers (jewelry) have already expanded to become major national players. Sometimes the transition can be lightning fast, as in the case of television yoga guru Baba Ramdev’s Patanjali products, which swept India almost overnight due to his personal popularity. But the road can also be bumpy, says Mathews.

“For every regional player that becomes successful in their region or state, the ambition comes to spread geographically. That’s when the first hurdle happens,” he said. “Certain brands lose their focus and start losing money.”

When that happens, national or international firms that can otherwise find it hard to crack certain regions snap them up. According to a recent report in India’s Mint newspaper, big ticket buyouts like the $260-million acquisition of the hair and scalp care business Kesh King by Emami Ltd helped spur a fivefold increase in mergers and acquisitions in India's fast-moving consumer goods sector to a healthy $318 million last year, compared with $61 million in 2014.

But there are some unexpected successes, too, Desai says.

“There are new product categories where regional brands are actually faster to tap the market,” he said. “For instance, look at pasta. You’ll find local brands of [instant] macaroni [mixes], simply because they’ve understood that in India [pasta] has nothing to do with Italy. It’s just another excuse to get spices into your food.”

Wednesday, December 16, 2015

52,000 students and 1,050 classrooms: inside the world's largest school

Welcome to City Montessori school in Lucknow, India. Despite its vast size, no child is left behind, with nearly half of pupils scoring 90% or more in national tests
By Jason Overdorf
The Guardian (December 2015)

LUCKNOW, India --- At 7:15am in the northern Indian city of Lucknow, a stream of children flows through the gates of the Kanpur Road campus of City Montessori school. A dozen helpers pull school bags off roof racks and direct traffic to keep things moving. Every so often a chowkidar (gatekeeper) urges a laggard along: “Chalo, Beta, chalo.” Nearly an hour later, they’re still arriving.

It’s not easy to get more than 7,500 five- to 17-year-old students into a single school building, but that’s only a small piece of the puzzle for City Montessori (or CMS) – recognised by the Guinness Book of World Records as the world’s largest school. The institution caters to some 52,000 pre-primary, primary and secondary students distributed across 20 campuses in the city.

“I wanted to come here for a better education,” says 11-year-old Mahsum Singh, who started at the Kanpur Road campus this year. “It helps us that many students are here. We can take help from anyone.”

Almost all of the school’s 1,050 classrooms are full to bursting, with more than 45 students to a class. But parents won’t take no for an answer. They pull in connections from business and politics to get another chair crammed in, says school president Geeta Kingdon. “Sometimes I invite them to come to the school, take them to the classroom and ask them, ‘Do you see any place for your child?’” says Kingdon, who is also the daughter of the school’s co-founders.

CMS, founded in 1959 by Jagdish Gandhi and his wife, Bharti, who has a doctorate in child psychology, is so popular because of its track record. In India’s equivalent of A-levels, a whopping 40% of the school score 90% or higher, making it one of the top colleges. The class average is above 80%.teacher network

With a new wave of “titan” schools in the UK, including Exmouth community college in Devon – which is set to grow from 2,500 to 2,860 students by 2018 – CMS has demonstrated that large campuses and crowded classrooms aren’t a bar to academic excellence. But the differences between CMS’s monster campuses and the UK’s “megaschools” are probably more instructive than their superficial similarities.What started as small school of originally five students, all from a single household has grown far beyond its humble beginnings.

Despite its huge size, CMS is not a school for the masses. Though it’s as much as 25% cheaper than some other elite schools in Lucknow, fees are between £300 and £700 a year, compared with an average per capita income of £1,080. (That’s comparable to a UK school charging £7,000-£16,000.)

This gives CMS all the classic advantages of an elite private school. There aren’t double-shifts or staggered classes (except at the pre-primary level) – just a lot of resources.

Ajay Madan, who teaches chemistry and conducts a remedial session after school, finds it inspiring that CMS challenges him to be innovative with the curriculum, presenting the lesson using multimedia, for example.

It helps that his salary stub matches his commitment. Teachers are paid a touch higher than the sum mandated for government school teachers, and earn a bonus of about 1% of their monthly salary for each student after the class size tops 45, as compensation for increased workload.

Principals earn double the salary of their government counterparts. To cope with the larger administrative burden, a large campus like Kanpur Road has sub-principals for the pre-primary, primary, junior and senior sections. To further aid administrators there are also two supervising teachers called class coordinators for every 35 regular faculty staff. Manjit Batra, senior principal of the Gomti Nagar II campus, says: “They teach and also evaluate teachers, making sure no child is lagging behind.”

To deal with larger class sizes, teachers have assistants or “notebook checkers”, who have bachelor of education degrees but lack higher qualifications. They help with grading, but also assist in monitoring students and answering questions during class time.

While systems like accounting, transportation and curriculum creation are centralised for efficiency, campus principals and teachers find their freedom to innovate motivational. The school doles out 10m rupees (£100,000) in cash rewards for teachers whose students perform well in nationwide exams. And apart from the usual conferences, every teacher visits the homes of five students every month in the role of “teacher guardian”. These visits allow teachers to make simple observations, suggesting that a child’s study table should not be in the same room as the television, for instance. Above all, it shows that they care.

“There’s a danger that any one child can get lost in this huge mass,” said Kingdon.

Such programmes might prove difficult to implement at the UK’s government-run megaschools. CMS’s relatively high fees mean that students tend to be the children of very involved parents. All its programmes are funded from revenue or, in the case of foreign trips and the like, from parents’ pockets. And unlike at government-run schools, its teachers and administrators aren’t asked to do more with less.

The intangibles behind CMS’s culture of success may be even harder to duplicate.

There is a festival atmosphere at school functions, which open with a song-and-dance performance called “the unity prayer” where students dressed as Hindus, Muslims, Buddhists etc extol the virtues of tolerance. Three times a year the mother of a student who has come first in class is called on stage and to sit on a giant balance beam to be “weighed in fruits” that then become her grand prize.

“There’s a whole department for writing congratulatory letters,” beams the school’s 79-year-old guru-like founder-manager, Gandhi.

Indeed, it’s Gandhi’s zeal, and his grandfatherly personal charisma, that ensures students feel allegiance to their school, despite its size – something that some UK educators fear might be lost at megaschools. His antidote includes a healthy dose of religion, albeit of the kind that acknowledges the equality of all the great prophets, regardless of denomination.

A slim, energetic man with an engaging smile, Gandhi wears a western-style suit that appears to be a half-size too large. Originally called Jagdish Agrawal, he changed his surname following the assassination of Mohandas K. Gandhi (or Mahatma Gandhi) in 1948, and he remains a fan of such leaders – as well as their slogans and quotations.

At the Kanpur Road campus, seemingly every flat surface features a handpainted exhortation of one kind or another – “Strong reasons make strong actions”, “Don’t be part of the problem, be part of the change”, “Children reinvent your world for you” and so on – and it is not easy to stop Gandhi from reading them aloud. “You find everywhere good quotations,” he says, without irony.

Along with the school’s constant attention to moral education, about a quarter of its students receive a 40% reduction in fees because their parents are poor. But that’s a far cry from UK government schools like Ashfield comprehensive, which must take all comers.

This year, Gandhi’s reputation took a hit when CMS went to court to avoid having to admit 31 children from the “economically weaker sections” free of charge (which is expected in law). Kingdon says the school resisted the move because the government violated its own regulations and came to them after the term had started, when all its classes were full. Eventually, the court compelled it to accept 13 out of 31 students who lived within the legally defined 1km radius of its Indira Nagar campus. CMS shoehorned them in.

“We are a law abiding school,” said Kingdon. “But the law must be applied properly. Should all private schools in the land really have to keep 25% of their seats vacant for six months?”

Despite these challenges, Gandhi remains steadfast in his ambition to “change the world” through his school. He insists his mission goes beyond academic success.

“Teaching of the three R’s is important. But at the same time we should not lose sight of the fact that man is also a human being, and that there is also a soul within him.”