Thursday, June 12, 2008
Regional Brands and Rural Profits
Is the Cafe Culture for real?
By Harish Bijoor
Q: Is the much-hyped Café culture for real? How do you see it moving over the years?
-Raksha Gupte, Mumbai
A: Raksha, this one is close to my heart. In many ways coffee remains my first love. Let me trace some of this Café culture for you.
The first Cafe in organized space happened in 1996 with Cafe Coffee Day opening its first outlet on
In a generic fashion however, the Cafe in a different avatar as we know it, has been around for a hundred years and more. This is the Udipi restaurant of the sit-down variety and the stand-up avatars of Darshinis as we call it in
The future is all about a rapid expansion for the first stage. I typify three stages in this revolution. The "early phase" of establishing the plain-vanilla concept of the Cafe. This started in 1996 and is all of 11 years old as of now. This has resulted in all of 831 Cafes dotting this country.
The "mid phase" is the one we are just about entering. This is the phase where Indian entrepreneurs like VG Siddartha of CCD and Amit Judge of Turner Morrison (who started up Barista) have done the start-up work. The category has been developed by the early entrepreneurs. The category has developed and has attracted the attention of the biggies in this space across the world. In will come the biggies now, either on their own, or through a process of mergers and acquisitions. Or through special purpose vehicles specially create. A Starbucks entry is the classic example. But there will be more.
In this mid-phase development, the numbers will boom. This is the time when the traditional players like CCD and Barista will expand on their own numbers to keep pace and even out-pace competition such as from Starbucks. There will be a complete sprucing up of offerings across the existing chains. New competition will spur on better quality offerings in terms of hygiene, array, service and delight. The consumer is the gainer.
The lowest-common denominator Cafe will morph as well in this phase. The Café will offer more and more of both variation in form and variety on offer in terms of food, beverage and ambience.
The third phase is one we will enter some three years from now. Cafe 2010 lets call it! This is the phase when the numbers would have touched all of 2000 plus Cafes in the country. Now the Cafes will become reasonably 'parri passu' in their offerings and the lowest common denominator Café will morph further. Cafes will splinter in their positioning stances. Some will be plain vanilla; some will be for teeny boppers. Some for the thirties. Some for the oldies. And then there will be Rock Cafes just as there will be
Cafes for those who enjoy Trance. Cafes for same-sex couples, Cafes for politics, and Cafes for culture. The options are many.
The Cafe culture is bound to survive and thrive. What is important is that Cafe chains need to have their fingers on the pulse of their customers. This will help them morph in the right direction to profits.
Q: Rural markets are difficult to access due to the issue of profitability. Am I right? How are the trends here as of now?
-RB Joshipura, Pune
A: Joshipura-ji, with the growth of average bill share from rural outlets, servicing of these markets direct is today a possibility. Rural marketing, which hitherto was a long-term market seeding operation in the past, is today a break-even possibility as well in most markets, a profitable proposition in a small percentage, and of course remains a profit-nightmare in many markets as well.
The rural market is suddenly not such a slow-burn process anymore. Marketers are seeing light at the end of the tunnel. In some villages the tunnel is longer than the other. In some villages, there is no tunnel at all, to the delight of the modern marketer on his rural marketing hunt.
Newer distribution channels that depend not only on what I derogatorily call the Alimentary canal system of distribution we have known for 80 years plus in India (viz. the one dominant distribution system that moves stock from the factory of the producer to the C&F agent, to the Distributor, to the wholesaler and then to the retailer, to whom consumers come to) seem to help in this profit search as well.
Hindustan Lever’s experiment with rural entrepreneurs who do something similar to a peer-to-peer selling exercise is one such. ITC’s e-chaupal is another model as well. These examples are becoming old now, with newer and niftier models from across a spectrum of durables, household-products and services have emerged successful. Small entrepreneurs in this space have the biggest success stories to tell. Listen to them.
Q: Do you see a future for small regional brands that have survived in niche markets over the decades? Or do you see them being trampled over by the big MNC players? How does one approach the future here?
-Sanjay Agarwal,
A: Sanjay, in a world that is getting increasingly clonal in its offerings, regional brands offer differentiation abilities that have a USP of their own.
Look at it this way. The whole world of brands is becoming a ration shop of sorts. The global brand dream is clear. Everyone in the world must one day use a Lux to wash their bodies and a Surf to do their clothes. Your teeth must touch a Colgate. As this dream becomes more and more of a reality, smaller regional brands will emerge to be clutter-breakers in categories that have largely got clonalised.
I do believe people will get tired of brands that look too factory made, too synthetic, too organized and too big. Look at a cake of soap. Most of them have lowest common denominator perfumes. Over a period of time, the marketer understands that most consumers like a particular smell. Therefore "the plain vanilla scent", as I call it, emerges. Regional brands will aim to break this clutter.
People at large are becoming tired of the big brand message. Big brands are seen to be premium offerings that skim the consumer purse as well. Small brands that do not advertise as much are considered to be offering more value.
Further still, it is important to understand that the region is more homogenous in its needs, wants, aspirations and desires than the nation at large. A person in Andhra Pradesh thinks and emotes in a more homogenous manner than a person in
I therefore do believe that regional brands have a good future. As national brands find it difficult to penetrate some clusters where these regional brands are strong, and as they scent the opportunity of these local brands, acquisitions will become a norm.
Regional brand players can have one of two business revenue models. The
first could be to build, operate and continue to operate regional brands for the distant future, or the second wherein they could act like "brand planters" who will build brands with the pure purpose of a sale to a bigger entity. Once the old brand is sold off, get back to the activity of creating more. Brand harvesting was never as good as this before!
Harish Bijoor is a business strategy specialist and CEO, Harish Bijoor Consults Inc.
Email: harishbijoor@hotmail.com
