There’s a new consumption vibrancy in the North-east, say marketers by Chitra NarayananBy Chitra Narayanan
RETAIL RUSH: In the youthful N-E marketplace, aspirational brands are doing particularly well (BW Pic By Bivash Banerjee)
Far off Aizawl in Mizoram — with a population of just 220,000 — looks an unlikely location for a national tyre company to set up an exclusive branded showroom, with all the bells, frills and whistles. After all how many cars, bikes, buses and trucks would be careening about here?
And, yet, JK Tyre wheeled in its characteristic yellow hued Steel Wheels outlet. “After Mizoram, we are going to spread the concept to Manipur and Meghalaya,” says Vikram Malhotra, vice-president, marketing and sales, at JK Tyre and Industries. The plan is to set up six more Steel Wheels outlets in the region by next year. “We’re expecting a 20 per cent growth from the region. Last year, it was 15 per cent,” he says.
|"Earlier, it was a mindset problem of marketers; and not about potential"|
Vikram Malhotra, Vice-president, sales & marketing, JK Tyre & Industries
JK Tyre is riding on the back of an auto boom in the North-east. “We are expecting the North-east region to generate more demand for personal transportation,” says Y.S. Guleria, vice-president, sales and marketing, Honda Motorcycle and Scooters India (HMSI).
Even as the industry grew 18 per cent in FY12, HMSI grew 40 per cent in the North-east, he says. The company now has 24 outlets across Assam, Arunachal Pradesh, Mizoram, Tripura and Manipur, and offers its entire portfolio of 12 automatic scooters as well as big bikes such as CB 1000R and Fireblade here. HMSI also hopes that a big chunk of its newly launched Dream Yuga bike sales (300,000 units to be rolled out across India) will come from the North-east.
From FMCG to apparel retailers, fertiliser firms and IT companies, a swathe of businesses is waking up to the potential of the hitherto ignored region. Mobile operators have spent huge sums in building presence here in the past four years. And, as happens, once somebody makes inroads, it sets off a chain reaction.
The intimidating ‘chicken’s neck’ — that narrow strip of land that traverses between Nepal and Bangladesh — which stopped marketers in their tracks seems more negotiable now. Indeed, better ties with Bangladesh after the PM’s visit last year may make it possible to cut across the neighbouring nation to sojourn into the remote states. At a recent press meet, BSNL chairman and managing director R.K. Upadhyay talked about setting up connectivity between Agartala and Dhaka via Akhaura in Bangladesh and between Sabroom in south Tripura and Cox’s Bazar in Chittagong. Opening of the trade route to Myanmar is another trigger.
A lot of companies are looking at the North-east map, scouting for locations. Direct seller Amway, which is going to open a brand experience centre in Guwahati by the end of this year, has already revamped its office there. Since home delivery constitutes 35 per cent of North-east sales for it, Amway has set up warehouses in Jorhat in Upper Assam, Imphal in Manipur, and one each in Arunachal Pradesh and Sikkim. “The North-east market contributes a significant pie of the turnover,” says William S. Pinckney, MD & CEO, Amway India. “Assam alone has seen 35 per cent growth in the first quarter of 2012,” he says.
Pinckney says Amway products reach 98 towns in Assam, including remote locations such as Tihu and Pathsala in Lower Assam and Amguri and Dicom in Upper Assam. “We are intensifying our focus on training distributors, productivity, expansion and home delivery.”
Even ‘Big Blue’ IBM is betting big on the region. It opened a branch office in Guwahati in 2011, and is sewing up partnerships with IIT-Guwahati. “We see Guwahati as our gateway to north-eastern India, where we are experiencing a strong demand in the banking, government and real estate segments,” says Vivek Malhotra, vice-president, general business, north and east region, IBM India. He adds that there is strong demand for open source technologies, and that IBM is tying up with educational institutes to promote this further.
Agribusiness company Tata Chem scents opportunity in the government’s push for agriculture in the region. R. Mukudan, managing director, Tata Chem, says, “It is a water surplus region and as India goes through higher and higher levels of water crisis, the North-east will become a space of increased productivity in all types of cash crops. There will be higher demand for input machinery.” Assam will be the starting point for the company’s expansion in the region.
Future Group’s expansion plan for the region includes two more Big Bazaar stores in Jorhat and Silchar in two months, and one in Agartala in five months, says Manish Agarwal, business head-East, Big Bazaar. This will be in addition to the existing stores at Guwahati, Darjeeling and Gangtok. “The north-eastern consumer is highly fashion-conscious and loves to spend on herself,” says Agarwal, adding that cosmetics, western wear and food are doing especially well.
Cafe Coffee Day, which has 13 cafes across Assam, Meghalaya and Tripura, is looking to take this number to 20 by the end of this fiscal.
|Way Above The National Average|
demand curve, a weekly column by indicus analytics on consumer trends
and markets, the research firm points out how the North-east is steadily
moving into the spotlight. The markets here may be small (only Guwahati
and Agartala are among India’s top 100 markets) but the improving
communication and transportation links and changing economic structure
are spurring growth. Incomes are certainly rising. Six of the eight
north-eastern states have average incomes higher than the national
average. The per capita income in Sikkim, for instance, was Rs 47,655 in
2010-11 (up from Rs 26,693 in 2004-05), and Rs 40,957 in Nagaland,
while the national figure was Rs 35,993. Now this may not be near
Delhi’s Rs 1,08,876, but it is better than Karnataka’s Rs 39,301. The
north-eastern region contributed just 2.66 per cent to India’s GDP.|
“Overall, they have got a good thing going. Security had been the biggest concern and had an impact on markets. But now with more peace, you are going to see an immediate return,” says Laveesh Bhandari, director, Indicus Analytics.
No wonder B. ‘Nary’ Narayanaswamy, executive director, Ipsos Research, says the region, which has been at the tipping point of a consumer boom for long, looks poised for take off. He calls the region India’s Africa — a rising market, ripe for a private sector invasion. A major trigger has been persistent government investment — a central ministry for the region, premier institutes, and telecom initiatives, including a WiMax rollout that has sped up broadband connectivity. Also, with more north-easterners working in other parts of India, remittances, and aspirations, are going up. “Opening up of Myanmar is a big energiser too. There is a new consumption vibrancy,” says Narayanaswamy.
A sure-fire indicator, he says, is when hotels start opening. Sure enough, the Taj is checking into Guwahati with a Vivanta property, even as its budget chain Ginger is already present in Agartala and Guwahati. Prabhat Pani, CEO, Roots Corporation (Ginger Hotels), says that after Ginger opened in Agartala, conferences have started being held in the city more. “In a way, we have facilitated something significant,” he says.
Rival chain Sarovar has seven 50-key hotels in the pipeline in the region to add to its existing Gangtok property. Mansoor Adil, senior executive vice-president of Sarovar Hotels and Resorts, is betting on both tourism (which is seeing a rising graph) as well as Indo-Myanmar trade opening up to fuel demand for rooms.
"Assam alone has seen 35 per cent growth the first quarter of 2012"
William S. Pinckney, MD & CEO, Amway India
It’s All In The Mind
Given that the terrain remains difficult and logistical bottlenecks continue to pose a challenge, what has caused this marketing invasion? Of course, there were brands such as Ponds that were already present, but not many.
The biggest factor, says JK Tyre’s Malhotra, a man brought up in the region, is the mindset change among marketers. “Earlier marketers would look at the population and market size data and say, oh, just 4 per cent of India, and ignore the region,” he says. “It was sheer inactivity; and not about potential. North-easterners have a fairly high per capita income,” he says, pointing to the high-value cars on Guwahati’s roads.
Certainly. The average income in six north- eastern states — Arunachal Pradesh, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura — is higher than the national average.
Amway’s Pinckney points to the last survey on the direct selling industry in India done by PHD Chamber of Commerce, which shows that total sales revenue in the North-east and eastern markets has gone up in 2010-11 — 48 per cent and 37 per cent respectively — albeit from relatively lower bases. He feels Internet penetration and online retail has led to the boom and higher productivity for distributors. Agrees JK Tyre’s Malhotra: “More than the roads and flights, it is Internet that has been the leverage.”
Another factor is a slowdown in some of the other markets, which has forced marketers to search for new geographies. For instance, car sales have slumped elsewhere in the country (Society of Indian Automobile Manufacturers data for this quarter shows the growth rate for passenger cars has dipped to 5 per cent.)
Shillong resident Sanjib Bhuyan, an educational consultant, says that north-easterners themselves have become more open in their attitudes. Entrepreneurship is increasing. Locals are setting up sidewalk cafes, boutique hotels and cottage industries, even a wine brewery, he says, compared to the past when only government jobs were sought. It is a youthful marketplace where aspirational brands are doing particularly well, points out Agarwal.
Of course, not everyone is rushing in. Even as many companies are rolling towards the North-east, many are waiting and watching. Vikram Bakshi, MD and joint venture partner at McDonald’s (North and East), says that only after he makes inroads into the East will he venture into the North-east. But the pioneers have made their move. Will they strike gold there?