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Oct, 01 2008

Swiss Companies target India

Changing lifestyles and growing acceptance of Western trends amongst young Indians is drawing more global investors to India than other emerging nations of the world. India is an attractive market for doing business and in addition, it holds great potent

India is one of the world`s fastest expanding economies, enjoying double digit gross domestic product (GDP) growth in recent years, which reached $1 trillion in 2007. The Indian economy, Asia`s third largest after China and Japan, has a medium-term growth potential of 9 per cent, according to recent news reports. India is among the five big countries considered by large transnational corporations (TNCs) as the most attractive destinations for future foreign investment. The Indian economy is one of the fastest emerging economies of the world. It holds huge potential.

Followed by the entry of other advanced nations, Switzerland is also keen to do business with India. According to industry sources, more than 140 joint ventures involving Swiss companies or subsidiaries of Swiss companies in India operate in various fields such as engineering and industrial equipment, medical equipment, chemicals and pharmaceuticals, precision instruments, textile machinery, financial services, textiles, etc. While some of these companies are today market leaders in their respective segments, others are gradually building a strong foothold in the Indian market. The factors responsible for the emergence of Swiss brands in India are manifold. Huge population, rising disposable income, burgeoning middle class, increasing English speaking populace, wider acceptance of western culture, emerging entrepreneurial spirit amongst youth and rising brand consciousness are some of the contributory factors that are inviting global players to India. Commenting on the prospective market Nitin Chainani, Director, Swiss Promotion informs that an emerging market for Swiss products is definitely on the rise – based on the renowned expertise, quality and craftsmanship behind the products. India, with over a billion people in a growing economy, seems very interested in them. A lot of big spenders internationally are Indians.

Market research, target consumers

Before entering any country, it is advisable to conduct an extensive market research about the country and target consumers for your product. The company should be aware of the rules and regulations of the country. To introduce or establish your brand in a foreign land is an uphill task. It is advisable to identify the market potential for your brand and consumer preferences of the country. It is imperative to conduct a thorough study about the competition in the market and thus endeavour to create effective marketing strategies to make your brand`s identity and company distinct from others. It will help you gain brand recognition in the market and thus improve your consumer base. Though Swiss companies are bullish on expanding in the Indian market, it is important to understand the mindset of Indian consumers. Global investors before entering or expanding in any country go through proper research and make some alterations in their brand to make it suitable to Indian requirements. Anish Goel, Managing Director, Victorinox India informs that market research varies depending on the product profile the foreign counterpart intends to market in India. Customer profile, individual income, cultural norms and logistics with regard to the marketing of the products are some of the parameters the foreign counterpart has to challenge when establishing his brand here. On the other hand, Snigddha Kar, Director – Lonsia Fashions Pvt. Ltd says, “The research conducted shows that today, people in India love brands and want to wear brands which give them good quality and also a good price with it. People do not want to compromise on their lifestyle and want to spend in order to have a lavish lifestyle. The pocket size of people is increasing due to the high standard jobs in the market.”

Challenges & tackling hurdles

Every company which enters any foreign land certainly goes through challenges. Initially, the company faces many difficulties in introducing the brand in the market. Tackling competition, making effective marketing and promotional strategies for positioning brand identity, attracting consumers and penetrating the market are some of the major challenges that international players face after entering the market. While sharing his views on challenges faced while establishing itself in foreign land M.V.M. Rao, Consultant – South Asia, Movenpick Swiss Premium Ice Cream says, "The primary challenge that a foreign luxury brand faces in India is that of brand recognition and market penetration. With a population of over a million in 20 cities, the niche audience is dispersed and making high quality products available becomes a challenge." He further says, "We had many issues with product supply logistics and we tackled this by working with the best partners for cold logistics available in the market and developed business together."

The company undergoes many difficulties such as how it will retail, position and market its products. Before entering the country, Goel informs that legal formalities for their company were handled by the Indian and international attorneys and firmed up within the framework of the Indian legal and financial norms and system.

Entry routes

After conducting extensive research about the market and target consumers, it`s time to enter the market through a viable business route. Any foreign company which is willing to enter the Indian market can opt for franchising agreement, licensing agreement, joint venture, setting up a subsidiary or can go for marketing or distribution tie-ups.

Foreign investors should be aware of the Foreign Direct Investment (FDI) rules and regulations in India. Currently, single-brand foreign retailers in India are allowed to take up to 51 per cent in a venture with a local firm, while multi-brand retailers are limited to franchise or licence operations.

Foreign investors who are willing to establish their businesses in India or Indian investors willing to establish businesses in Switzerland, can also take assistance from Swiss Business Hub India (SBH India) which offers services mainly to Swiss and Liechtenstein companies; for instance it provides information about the local market, market research and analysis; reports about business opportunities in important industry sectors; provides support for identification of qualified business partners, contacts with local trade associations and public authorities, reports on trade fairs and other promotional activities; and aids in the organisation of trade fair participation and events in India.

It also assists Indian companies interested in establishing business in and with Switzerland by providing basic information about Swiss companies and products, the Swiss market for Indian products, how to become a distributor or representative of a Swiss company and also about opening an Indian subsidiary in Switzerland. The SBH India team members hold consultancy meetings at Osec four times a year. The meetings with Liechtenstein and Swiss SMEs cover a wide range of products and mostly lead to a focused mandate or qualified business partner search in India. SBH India, in close collaboration with Osec and other industry organisations, also organises India-specific meetings in Switzerland for disbursing information about doing business with and in India.

Franchising industry

Currently, the franchising industry in India is growing at a rate of 35-40 percent annually. Swatch Group, Global Franchise Architects and Movenpick are well known brands which entered the country by means of the franchising model. “The franchising model is gaining momentum in India. It is a 10,000 crore market and is attracting enterprising individuals, be it professionals or housewives,” informs Goel.

M.N.S Nair, CEO, Milou India says, “We want to have franchisees all over India and we feel that franchising is the best way to grow faster as the entrepreneur himself is involved in day to day running of the shop.”

Talking about the future of this industry, Rao believes that it is really very bright considering the Indian entrepreneurial spirit combined with the benefits of brand association. The retail boom and the development of suitable retail spaces will further boost the growth of franchising in India.

Swiss cos eyeing India

Looking at the growing economy and opening up of trade ties between both the nations, Swiss companies are ready to invest in the Indian market. Lonsia Fashions Pvt. Ltd is planning to launch Jovial Watch boutiques in Mumbai in the month of October to enter the Indian market. Talking about the entry of Jovial in India, Kar explains, “India is a huge and vast market and is growing every day on a large scale from all angles. Jovial`s entry into India is at the perfect time as in India, the spending power is much higher and getting better with time, since people want to lead a good and lavish lifestyle and do not want to compromise on quality premium brands such as Jovial. In India the market has a lot of brands but very few of these brands are Swiss made such as Jovial, with a good and competitive price point and quality.”

India offers a lucrative business opportunity to investors globally. Today, Switzerland is one of the top 10 foreign investors in India. “India`s economy is booming, the numbers of millionaires are increasing, India seems to be more organised than others in terms of the prevailing market conditions, knowledge about labels, man power and money power. Taking these into consideration, Swiss Promotion intends to utilise its luxury networking to make India attractive,” feels Chainani.

Though Swiss companies are bullish on expanding in the Indian market, it is important to understand the mindset of Indian consumers. Commenting on the changes in brand to make it suitable for the Indian consumer Goel explains, “There were no modifications in the international label because our products are universal, designed and manufactured bearing in mind the functionality and practicality of the product for the global consumer.”

Marketing strategies & Competition

To make their brand or company a success in India, Switzerland based companies should work effectively on promotional strategies to make the brands popular in the Indian market. With the growing number of other international brands in India, Swiss brands will have to consider different tactics to draw the attention of the Indian consumers. The competition is becoming very tough. To stay ahead of all, effective marketing campaigns should be conducted to publicise and promote the brands in the Indian market. The unique selling proposition (USP) of your brand will be beneficial for winning the hearts of the consumers. “Ulysse Nardin is a niche product and the most innovative watch brand in the world. It speaks for itself,” explains Chainani.

Rao informs, “Our products are unique and have an instant recognition with the gastronomy clients. As our initial focus has been institutional supplies to the luxury hotels, our marketing and promotional budgets have been oriented towards business-to-business events and trade fairs. As the focus shifts to retail and dedicated outlets, B2C channels will be explored.”

Existing brands

At present, there is a huge presence of Swiss watch brands. Apart from them, food & beverage, apparel, cosmetics, pharma and fashion brands are available in the country. While some of these companies are today market leaders in their respective sectors, others are step by step building a strong foothold in the Indian market.

In watches, Swatch Group, Ulysse Nardin from Swiss promotion, Technomarine from Ganga Watches Pvt. Ltd, Ethos, Tag Heuer, Omega, Antonio Bernini, Harry Winston, Tissot, Corum, Xylys, Brequet, Raymond Weil, Rolex, Hublot, Chopard, Rado, Longines, Milleret, Pierre Cardin Swiss, Edox Watches, Armaan Swiss Diamond Watches, Baume & Mercier, and Girard-Perregaux & JeanRichard are available in the market through exclusive, standalone, flagship stores and multi-brand outlets.

  • In food & beverage, Movenpick, Nestle, Nescafe and Global Franchise Architects are present in India through franchise stores and kiosk formats.
  • In fashion and lifestyle, Switcher, Trailor and Milou, Victorinox, Swiss Junction and Bally are available.
  • `Les Naturelles` was launched in collaboration with Body Line International, a company of the Brushman India Limited group, the importer and marketer of the famous Keune hair colour in India.
  • The Nuance Group - one of the leading airport retailers in the world and Shoppers` Stop Ltd - one of India`s leading retailers have formed a Joint Venture called Nuance Group India Pvt. Ltd (NGIPL).
  • Upcoming brands
  • Looking at the growing success of existing brands in India, most of the Swiss players will soon be introducing their brands in the Indian market.
  • The $43-billion Swiss chocolate maker Barry Callebaut will soon be introducing two new brands namely Carma and Cacoa Barry in the Indian Market.
  • ITC Foods may soon tie-up with Swiss brand Hershey`s.
  • de Grisogono, a Geneva-based luxury watch and jewellery brand is firming up its plans to foray into the Indian market.
  • Beauty Care Specialist Beaubelle is now trying to enter the Indian market to promote its complete line of beauty care products. The Malaysia-based specialist in beauty care with interests in 18 countries plans to franchise its business in India, home to a 300 million-strong middle class with high spending power.
  • Jovial Watches will officially launch its first store in Mumbai.
  • Zepter International, a Switzerland-based company that produces, sells and distributes consumer goods, plans to form a joint venture company in India for starting its direct sales operations here.
  • Switzerland-based Mobile Solutions AG is planning to tie up with more mobile network operators in India to offer their mobile content and portal services to Indian consumers.

Growth prospects

According to industry sources, India is one of the fastest growing markets for Nestle worldwide. The company`s sales in India grew by 25 per cent in the first half of 2008 with the country contributing 1.5 per cent of its global turnover. Contrary to this, Victorinox would look at a turnover of approximately Rs 45 crore in the third year of its operation. The company has established itself in Delhi, Chandigarh, Gurgaon, Mumbai, Pune, Ahmedadbad, Bangalore, Goa, Hyderabad and Chennai. It recently announced plans to launch apparels soon in India.

Talking about its plans in India, Nair says, “Milou is comparatively a newcomer to the market and is expanding fast. We have 10 shops and 20 shop-in-shops presently. We plan to have 50 shops and at least 100 shop-in-shops in 3 years` time. Apart from our own shops, we want to grow in the franchisee route. We are looking for interested entrepreneurs for our franchise shops.”

Raymond Weil, the luxury Swiss watch brand is planning to open exclusive mono brand boutiques in India soon. In India, the company has developed partnerships with about 20 retailers in Ahmedabad, Bangalore, Chennai, Delhi, Mumbai, Gurgaon, Chandigarh, Ludhiana, Kolkata and Pune.

Movenpick Swiss Premium Ice Cream is currently imported and marketed in India by an Indian partner Rhapsody Foods and Beverages Pvt. Ltd. At present, the company has three operational outlets in Chennai and Hyderabad.

Reiter Group of Switzerland recently announced its plans to set up a Rs 2.5 billion plant to manufacture cotton spinning machinery near Pune.

“Having a shop-in-shop concept, we will be initially concentrating on Mumbai, then move on to the North region and then to tier A and B cities. In the second year, we will be launching Jovial flagship stores. We do have plans to start off the franchisee model and this will work extremely well for us,” informs Kar.

Commenting on the Indian market Chainani says, “India is at its initial stages, but yes India has performed a lot better than other markets and moved up to a rapid growth rate. Our growth rate for the last three years has been 30 per cent. North India is our best market. Internationally, Ulsses Nardin does best in the US and Russia.”

He further says, “Swiss Promotion currently has 10 points of sale from New Delhi, Mumbai, Bangalore and Chennai. In 2007, Swiss Promotion was instrumental in opening the first Ulysse Nardin shop-in-shop store in Mumbai and in the year 2008, we aim to open the first-ever Ulysse Nardin stand alone store in the country.”

The growing acceptance of western concepts in the Indian market is nowadays alluring global investors to establish business via different business models. To stay in fashion, people are willing to spend money on premium products. It is allowing a greater scope for international counterparts to expand their operations in the country. Such international brands indeed have a bright future ahead.

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