INDIAN CONSUMPTION STORY IS VERY STRONG

 

The leading industrialist and advocate of growth and development, Adi Godrej, Chairman, Godrej Group of Companies and President CII, stresses on his conviction in consumption growth and market potential, domestic and abroad, despite tumultuous economic situation.
 
The huge Vikhroli campus of Godrej in Mumbai is the destination of industrial legacy that elicits trust, inspires care. It’s a brand name that instantly reminds us of our grandmother’s cherished Godrej almirah; for most of us that has been our first association with the Godrej brand. 
 
Today, there are more than hundred companies operating under the Godrej group, which are being involved in a range of businesses producing a wide variety of high quality products, resulting in 470,000,000 Indians using at least one Godrej product or service every day. From locks and safes to process equipment, from edible oils to cosmetics and toiletries, from agro products to real estate development – the range is wide and the quality is sterling.
 
The Godrej story is not limited to industrial excellence and enlightened concerns. It is also a chronicle of determined men, gifted with vision and uncommon talents, who built a powerful and unique business, and one such business visionary of our times, who has been incessantly leading this revolution, is Adi Godrej. His views...
 
THE GREAT INDIAN CONSUMPTION STORY
India has a very strong consumption oriented economy. Consumptions form a very large part of our economy. According to my estimate consumption in the country is somewhere between 60 to 65 per cent. This is quite different from other developing countries, particularly China, where the consumption share in the total economy is lower than what it is in India. Last year most of the consumption industry grew very well despite sluggish economic performance. However, consumption economy, in my mind, did not grow well in the segments that need finance because of the interest rate hike; so, something like residential housing, automobile and other big ticket items slowed down a bit because of the higher cost. Reforms in the Goods and Services Tax (GST) will be booster for consumption.
 
GST is much needed as it standardises procedures across the country, but most importantly it addresses the concern of lowering price of consumer products, which will encourage consumption and will eliminate tax erosion. So, it’s a huge economic reform and will benefit consumers and consumer industries very considerably.
 
THE FDI DEBATE
I support introducing FDI in all sectors, not just retail. Why should FDI be restricted? FDI should be allowed even in insurance, telecom and various other sectors. Business development requires foreign exchange in technology, in good managing practices.   What most people arguing against FDI in retail do not understand is that it will also help improve the supply chain logistics, some of our inflation problems are related to supply chain bottleneck. A lot of wastage results in there on.  
 
ENTRY OF GLOBAL BRANDS: ARE THE HOME-GROWN BRANDS READY?  
Well it’s not a question of ready to face, everybody must be ready to face if you can’t face competition you better pack-up. Competition is very good for economy; overall, it is good for the business and good for the consumer. If the question arises – “can Indian companies face up?” they should either sell their business or collaborate or do whatever it takes to strike the balance. Of course, Indian companies can face the competition. If in other sectors FDI is being allowed, then why not in retail?
 
COMPETENCY AND EFFICIENCY: THE TWO GROWTH DRIVERS
We need more of modern retail to establish the advantage of scale; actually, we need all kinds of retail. I think modern retail is growing, at the same time old type of tradition retail is growing, and as a result both traditional retail and modern retail are getting more competitive, more efficient. So, competition only helps. Competition gets the economy growing. One should never have any policy which restrains competition.
 
Besides competency, efficiency must be established. I think the people should not complain. There are many industries in India which are not doing well – retail is one, aviation is another. In these two sectors some do well, some not.
 
CONSUMER RESEARCH: THE TRACTION FACTOR
Much consumer research is done in India. There have been good consumer research organisations doing so. Moreover, many companies have their own consumer research team. I think consumer research in India is quite advanced and companies which do good consumer research, understand the consumers do attract their consumers and are doing very well. Consumer businesses that do not invest in R&D and innovation may not do very well and eventually lose the game.  
There are so many differentiations amongst the consumers, as some are different geographically, sometimes in terms of income and age factor. Consumers are not homogenous, and above all, in India it is all about making things more affordable. Once they are affordable, the market is huge. The products and services have to fit in their wallet size. So, affordability for the bottom of the pyramid is very important. 
 
Our innovations and R&D teams are constantly bringing out new products and variants.  Consumer insight is part of market research and holds a very prominent position in the business lifecycle of all our products, across categories.
 
RETAIL-CONSUMPTION RELATIONSHIP
Consumption is not retail, retail is only a model of delivering the consumption. There is much more to consumption than to retail; so, it may be just the failure of a business model, and not the entire consumption theory. For all you know the traditional routes may prosper again. As long as the people are able to consume, nothing is going to stop our economy. There are 8 to 9 million retailers in India, and we have one of the lowest cost retailing in the world. Consumers benefit as a result.  
 
SCOPE OF INDIAN FMCG COMPANIES GOING GLOBAL
FMCG sector is doing well, it is innovating, it is meeting consumer needs, it is growing but no particular brand has been able to globalise to an extent to create international benchmarks for others to follow. Globalisation is not the only determinant of success. Fair amount of FMCG brands in India are multinational.  
 
Godrej generates its 40 per cent of the sales outside India; so, we are globalised. Indian business process, Indian products, Indian technology can work well in the developing countries. I don’t think Indian companies have major scope in the developed world, but the developing countries like Asia, Africa, and South America are good markets for the Indian brands.
 
SUCCESS: A GOVERNMENT-ENTREPRENEURS JOINT EFFORT
It’s in the hands of the policy makers or the government to carve the path for success. The determinant to succeed is based on the one who can get return on capital, the one who satisfies their consumers. Also, it is the ability of an entrepreneur to build a brand, by creating an experience for the end consumers, when the people are ready to pay premium or the same product from a company as compared to other brands – that is what success is all about.
 
 
 
 
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