Local versus global brands in India

We asked three in-market experts for their take on the prospects for local versus global brands in India.

The local versus global debate with respect to brands has been one that has been in the spotlight even before prime minster Narendra Modi’s ‘Make in India’ movement began nearly three years ago or before outspoken yoga preacher Baba Ramdev’s consumer goods brand Patanjali hit the shelves.

Patanjali’s growth has been rapid. The financial year of 2017 saw a reported turnover of 105.6 billion rupees (US$1.6 billion), proving there is demand for locally-made products.

But, as McCann’s ‘Truth About Global Brands’ study proves, Patanjali’s success could be attributed to Indians trusting local brands when it came to categories like food & beverages and healthcare (categories in which the brand operates). The study revealed that 78 percent of Indian consumers prefer local brands in the F&B category. Move to health, and the number reduces to 54 percent.

What’s interesting to note is that when it comes to technology, even though the world is outsourcing it to India, only 26 percent prefer local brands. The number increases with regards to the automotive category, with 40 per cent preferring Indian brands over their global counterparts. That leaves a lot to ponder for Tata and Mahindra, two local big names in the industry.

Ashish Bhasin, chairman and CEO of Dentsu Aegis Network in South Asia and chairman of Posterscope and MKTG Asia Pacific, believes there’s a tremendous opportunity for global brands to grow in India:

 “There are many categories that are under-penetrated outside the metros. Lot of people are coming into the consuming class very rapidly in India because the GDP growth is high at 7.5 per cent and expected to sustain at around 8 per cent for the next few years. So, the discretionary spends are increasing in the country. Hopefully we will have another good monsoon this year and that should bring in a lot of money into the hands of people deep down. And that’s always good news for brands.”

While Bhasin believes there are several categories that are underpenetrated and can grow in the coming years, one that’s earmarked is infrastructure.

 “India is going to see several 100 billion dollars, if not trillions, to be spent on infrastructure over the next 15 years. When we talk about brands, we usually talk about only FMCG brands. But there are lots of large brands who are in infrastructure who could grow. There’s talk of an equivalent to the bullet train being launched, bridges being built, airports too. There are lots of large global infrastructure brands that have an opportunity to also come in. As the economy growth happens and India moves higher up in its development cycle, the opportunities that open are tremendous.”

Harish Bijoor, founder, Harish Bijoor Consults, echoes Bhasin’s sentiments about the potential for growth for global brands:

 “Global brands are yet to enter India in a real sense. What we see today is a nano-tip of the proverbial iceberg that has been explored by foreign shore brands.

The opportunity out here is humongous. As India treads on the path of greater and greater prosperity, and as job-growth becomes a reality in India, and as incomes rise exponentially the market will open up wide and deep for the global brand. This will happen in every category of consumption. I see this opportunity for B2B, B2C and C2C brands in this country of ours.”

While there’s tremendous opportunity for growth, with the current Indian government pushing ‘Make in India’, many believe that policies are a deterrent for global brands entering the country.

Jitender Dabas, chief strategy officer, McCann, disagrees with that notion and thinks the government’s policies are available for global as well as local brands to utilise.  

 “Government policies have a large role through tax incentives as well trade policies in promoting local brands and businesses and making it tougher or easier for global brands to operate in a market. But, they cannot drive consumer preferences. Something like a 'Make in India' is as much an invitation for local brands as global brands to make India their manufacturing base. But if political leaderships across the world start stating ‘be local, buy local’ then that might drive citizen preference as well.”

Dentsu’s Bhasin believes that e-commerce has made it a level playing field with respect to local or global brands that don’t have the scale to match distribution of bigger companies like Hindustan Unilever and P&G.

He says, “It’s no longer that David vs Goliath situation. No matter local or global, it’s about finding the best possible way of connecting with the consumer. Whoever has the best insight and has the ability to make a product for that insight will succeed irrespective of whether they’re local or not. Also, distribution is extremely important in India. Whoever is able to get the distribution set up right, wins. The game-changer here is e-commerce. In e-commerce, the brand is not always paramount. It’s the market place (Amazon, Snapdeal etc.) and the barriers for distribution are taken out. E-commerce opens it up for global and local brands both.”

Dabas adds, “Brands need to get more committed than creative in their approach to cultural integration. There are examples of global brands that Indian consumers find difficult to correctly identify as global. Those will always do well.”

Bijoor has a word of caution for global brands and the way they market themselves.

“Global brands need to get off the pedestal of thinking that they are the only ones who know marketing. Global brands need to think local and think ahead of local players. It is time to get off the pedestal of thinking that they know best, and everything else is a passing fad. The success of Baba Ramdev, (Acharya) Balakrishna and Patanjali Ayurved is a case study that needs to jolt the living daylights out of MNCs who have believed that one option fits all.”

Bhasin concludes, “One thing to note is that the Indian market is more price sensitive compared to other global markets. So, the Indian consumer wants quality products at an affordable price. So, whoever can engineer that better is likely to succeed.”