Rmagine

Consumer Insight & Marketing: Mormons, TikTok & Pepsi.

A classic art imitates life moment in branding.

But before we get into how popular culture is driving marketing planning, a question: if you are in marketing or advertising, when was the last time you spent seven minutes swiping-up on TikTok?

Whether you say ‘never’ or ‘yesterday’, chances are you may have not caught this video from @erinqueen2 on TikTok. So, check this out.

@erinqueen2
The choke hold this now has on me & i dont even like soda?!?$?! #dirtysoda #swig #utahsoda #isitpoporsoda #drpepper
♬ original sound – Erin Queen

Dirty Soda / TikTok- @erinqueen2

Dirty Soda is a TikTok viral phenomenon today but it did not start out on social media. What began as a creative twist to soda-pop in a remote corner, more than a decade back, is being turned into a rave of sorts by the TikTok generation.

To really understand the trend and the resulting sensation, let’s #rewind a bit.

Utah, the land of the Mormons is where Dirty Soda was born. Nicole Tanner, the owner of a drive-by franchise called Swig, in 2010, launched mocktailesque combos of soda pop and coconut creamer or vanilla cream, labeled it Dirty Soda and car-loads lined up for their fix of ‘dirty’. But how come Utah and why ‘dirty’?

Swig- Home of the Original Dirty Soda / TikTok

Over 60% of Utah’s population is Mormon and their faith oriented lifestyle recommends abstinence from all addictive substances- alcohol, cigarettes, even coffee and tea, till recently. So, enter sugar-and- flavor-spiked ‘dirty’ sodas, as the new addiction. The Mormon corridor of the mountain states is now home to close to a hundred drive-by dirty-soda outlets of Swig, Sodalicious, Fiiz and more.

But that’s still a drop in the ocean called the US Beverages Market, which accounted for close to 36 billion gallons of beverage sales in 2021 [Source: Beverage Marketing Corporation]. Incidentally carbonated soft drinks [CSDs] accounted for a third of that- 12 billion gallons. 2019 numbers from Statista peg the annual average per capita consumption of soft drinks in the US to be approx. 146.2 liters, compared to 96 liters in the EU. So, with a ballpark hundred outlets, dirty soda has a long way to go, to be seen as a trend to reckon with, in marketing terms.

Until TikTok went viral with it. Now that you have viewed the TikTok video, welcome to @erinqueen2’s legion of 4.5 million viewers who have seen her dirtysoda video. And if you are curious, the hashtag count on #dirtysoda on TikTok, along with its other dirty cousins like #dirtysodatrend and #dirtysodahack currently runs to about 142M views. Now, if you are that sharp marketer who is on the hunt for that nugget of a consumer insight into the lives of the youth of today, you’d be getting pretty interested with that trend, won’t you?

Which brings us to Pepsi’s recent foray into this dirtysoda phenom. No, they haven’t launched a new dirtysoda, they are just playing a little dirty, nay naughty, with Pepsi, this festive season. Enter Pilk- Pepsi’s concoction with milk, as a possible new alternative for Santa this Christmas.

In PepsiCo’s words: “This holiday season, Pepsi is giving milk and cookies – a favorite tradition to leave out for Santa – a surprising and naughty new twist with the introduction of Pilk and Cookies. For those new to Pilk, it is the delicious and must-have drink that combines the crispness of Pepsi with the subtly sweet and creamy taste of milk, traditionally topped with creamer, and it pairs perfectly with cookies. Known in pop culture as a “dirty soda,” this trending combination has grown over several decades and has recently gained viral fame on TikTok.”

Pepsi is coaxing consumers to get onto to Insta, Twitter and TikTok to join their ode to dirtysoda and post videos of their own #PilkAndCookies to win some 25 cash prizes for their holiday gifts!

Check this- Pepsi’s paid partnership with Lindsay Lohan, launching this dirtysoda promo on Lindsay’s TikTok and Insta.

@lindsaylohan
How about some #Pilk Santa? 💙 #PilkandCookies #PepsiPartner
♬ original sound – lindsaylohan

Pepsi- Pilk & Cookies /TikTok -@lindsaylohan

In a world where traditional mainstream TV options are becoming “my parent’s watchlist” and being replaced by user-generated content [UGC] on YouTube and TikTok, brands have a challenging task of staying relevant to the young and the young-at-heart consumer.

Also, in an attention-starved, craving-for-the-new, mobile-screen bound world of today’s youth, the idea of $300K+ big budget productions as TV commercials, backed by millions of dollars for airtime & frequency targets is begging a rethink.

Linked with this is the question whether brand content should sell or entertain or stay relevant, as we step into marketing in the digital world of tomorrow?

But I digress. Getting back to Pepsi and dirtysoda, as a student of marketing, I find a couple of decisions perplexing: Despite her recent Netflix release “Falling for Christmas”, was Lindsay Lohan the best choice to partner for the TikTok generation? I may not be the best person to weigh in on that but a quick look at her TikTok follower list shows 1.1M- small change, in the social media world. Though Lindsay does have 11.8M followers on IG. However, the hashtag count for #dirtysoda on IG is a paltry 1000+ posts. So, is Pepsi trying to get the #dirtysoda #tiktok trend to get more mainstream with this Lindsay promo?

The other perplexing thought- why the half-hearted “25 lucky winners will win cash for their holiday gifts”! If you do want the Utah spark to spread like the California wildfires and get Pepsi more screen-time, this seems an apologetic effort at a promotion.

That aside, I believe that it takes a good strategist to pick up on that consumer insight of the TikTok dirty soda craze and plan a critical seasonal promotion, based on the insight. And an adventurous marketing team to run with that strategic thought.

I admire the creative irreverence to toy around with an icon like Pepsi on the one hand and with a tradition like Milk and Cookies for Santa, on the other. I love the fact that Pepsi continues to be that brand that has its thumb on the pulse of the youth of today and dares to be creative in new ways.

I can’t but wonder whether a version of Pilk is in testing, as we speak? Or maybe #dwilk is the new Mountain Dew flavor-in-the-works. Any takers?

Would love to have your views on this. What are your thoughts on other brands that have it right on consumer insights and trends in today’s context? What should we unlearn and learn, to be thought leaders in marketing in the hashtag era? Join the conversation.

The World after COVID- Top 10 Trends to Impact Business

scarb bluff The world, as we know it, has changed.

Much of mankind today has not witnessed change of this scale. And having followed a drastically different pattern of life for an extended period, when we get out of this forced quarantine, business will have to face a new norm.

To take our mind away from the tedium of today, I thought it will be great to think ahead and try visualizing how business will change, as we hope to limp ahead to this new norm.

Peering into the looking glass of business, it will be interesting to compare notes on the possible new trends. Here’s my take and I’d love to hear from you, on your pov.

The logic for most of these trends will be apparent to many but if it isn’t, I think it will stimulate point and counterpoint and we can have a healthy debate here. So, here we go:

1/ The Surge of “Remote”

No points on guessing that we will see a spurt in penetration of remote as a practice in businesses and a faster pace of adoption as well. However, this one is perhaps going to be the defining change on how we live, work and play in the next decade. Chunks of a business operation, functionally, will be spun off as remote, WFH occupations. Clients and services will be far more at ease, in slipping into this mode of work.

Spin-off effect from this trend:

Up– Collaborative Software, shared work spaces, new WFH Hardware [smartphone + keyboard combo?], home gym equipment, snacking. Coffee shop traffic. And hey, move aside “Friday Dressing”. Enter “Remote Dressing”, the new fashion trend: boxers & button-down shirts and pjs & dress tops.

Down– Auto sales, public transport, city parking, commercial real estate

2/ Trade

Globalization is going to be a bad mantra for some time. The short term will see a re-jig of supply lines for many businesses, where local sourcing will be on the upswing.

But “price” is a harsh beast and market forces a tough master. So, if you look at the longer term, “water will find its level”- market forces will take over and dictate that goods ought to be made in places that make it the most cost efficient to produce. Hence, there will be a more even spread of global sourcing, from different markets. India already is in the news as a possible manufacturing center for some companies that want out of China and this will spread to more markets.

Up- Inventory costs, local SME growth, surge in automation and AI, higher end prices to the consumer on products that can afford it.

Down: Just-in-time logistics? Bottom-lines of companies who are forced to absorb the added cost of doing business.

3/ Media Consumption

This one is a no brainer, right? We all know the role that the internet plays in our lives and more so in the media cocktail we drink up these days. But the tipping point of habit turning to addiction, just happened or is happening, thanks to the Corontine.

If you are an iPhone user, check out the App called Screen Time for the week and you will realize how enslaved we are by that palm sized piece of glass.

My number for total screen time for the week was 21 hours and 43 mins- that’s practically ONE FULL DAY in six days! and I still had one day to go in the week. And the total social networking time was 14h 9 min and I am possibly what you may call a “light” user.

TV consumption has been on the rise during this period- up by 25% in the US, as per Nielsen, in the first two weeks of March. But that is a function of being couch bound these days and bound to drop back to shrink mode as COVID recedes.

And BingeTV just got a boost in ratings- up 34%, for the same time frame as per Nielsen! While many have been talking of the demise of linear TV at the hands of streaming TV even before this, I believe our increased dependence on news from our palm-held devices will be an even harsher blow to linear TV as we know it.

Its no longer Good Morning America on ABC or New Day on CNN. It’s Good Morning World on WANN. The WhatsApp News Network.

So, where consumers go, media dollars & brand spend must follow. If last year we had online media dollars taking the lead over traditional media in North America, the post COVID era is going to turbo-charge it.

4/ The Business of Education

The last month of this semester was practically online for high schoolers & the college/university going crowd. And exams are going to be online. This can well be the dry run for what is to become a dominant trend in the future. Universities will need to pivot, to keep in step.

I have always believed the US, Canadian way of University life has been designed for a chilled-out time for the resident student and to fatten, university pockets. The four-year, 15 to 20-hour classes per week, “vacation time” for a student to finish undergrad is going to change and will hopefully cease to be the cash-cows that universities can milk. Universities will need to revisit their costs and match them to a newer revenue reality- a reality where user-demand-led pace to learning and distance learning will be on the rise. Learning, teaching and making money on it will start to face a new norm.

Up- EduTech, online tuition, student-employees, side-hustle start-ups. Faster, more efficiently run undergrad programs. Interactive, video-learning, WFH’s new cousin, SFH- Study From Home.

Down- Student housing, economy of university towns.

5/ The Stock Market and Regulatory Inertia

The financial carnage in the US market was worth US $343 billion – the difference in market value between Feb 19 and Mar 19. While the runaway Wall Street excess for some time now was begging for a correction, nobody wanted this blood bath and erosion of investor wealth.

But it was hardly that, for some. Just as Nero fiddled while Rome burned, short sellers made US$ 51.3 billion in 7 trading days [Bloomberg/S3 Partners] when the Corona virus led market crash happened in the US. Stock markets the world over witnessed similar hammering down of stocks by short sellers. Profiting from misery never had better days.

In a world where increasingly the lay consumer is rewarding purpose driven brands & corporates, should not the regulatory body of the world’s richest nation find the gumption to curb short selling and protect investor interest?

Is it time that the SEC serve as an example and revisit the uptick rule or have provisions in place to curb/ban short selling during a crisis? Individually, we tout the fact that we ought to learn from our mistakes as a great virtue. Why then can we not learn from singular catastrophes such as this, as a business community?

Will the SEC & Wall Street have the will to be more purpose driven in curbing both short selling and misleading hype that leads to unwarranted spurts? No predictions on this, just a wish.

6/ E-Commerce

Amazon Prime, now more prime, thanks to COVID.

Newer followers at the altar of online buying in lower penetration countries, because of the home bound life.

And armchair shopping of grocery and medical supplies get a boost, forever impacting shelf space and parking lots at Walmarts, Targets, strip malls and the Walgreens of tomorrow.

More of us will become die-hard online buyers, more often, in the future.

7/ Food Sufficiency

Individual consumers, industry associations and governments are going to demand and support more local food production as we emerge from this crisis.

The way ahead for vertical farms, green house cultivation and kitchen gardens is bound to be up. And sustainable practices in farming, plant-based food, non-GMO food and hormone free meat will get a fillip.

8/ Healthcare

Never has so much been owed by so many to so few, outside of wartime.

Lives of those in the healthcare industry have been in physical & emotional overdrive, coupled with the threat to personal safety and health. It takes a special breed to be able to care for others’ lives at the risk of your own. These COVID heroes need to be celebrated in a fitting manner once we are through this period.

A lot to do with this industry and its people is bound to come up for review and change, considering the unprecedented emergency they faced and continue to.

Tele-medicine and virtual healthcare in everyday treatment & care is off from first base, and we ought to hear more about this segment of healthcare in the future.

9/ Our People

Perhaps the most significant change will be the people who make each business. We have a multitude of businesses that have let go their employees just because the business no longer was viable.

Getting back to normalcy is not going to be instantaneous but what we need is a spirit of togetherness- both from the business owner’s end and the employee’s end. Both have a lot to lose and everything to gain depending on how we view tomorrow.

I would vote for every business to get its team back where they belonged, because that’s the best way to get the mojo back into each business. And for each employee to leap back into the roles that they had without rancor at being let-go and give it their darndest. That’s the quickest way they, their loved ones and the businesses will get back on their feet….. and learn to dance again.

10/ The Quality of Life

Will we be more mindful? Will we be better people? Will our businesses be better corporates?

I hope we will be mindful of the gift of the world around us and the environment we have. With so many sightings of bluer skies and cleaner air, around the world, maybe the COVID scare was a much-needed clarion call for a more mindful approach to Mother Earth and her bounties. And if we are more mindful as a society, business in turn, must be more mindful and purpose driven. Hopefully we will get to see more ”profit with purpose” in every business.

Will diversity take a beating? Will nations get more in-bred? Or will our mindfulness stretch to include more accepting behavior in our workplace? I hope it does.

Will we be more balanced in our approach to Work-Life balance? Will companies be more appreciative of an employee’s “life outside of work”? Will this allow for more WFH options during a week, less hours a day and maybe more liberal vacation times?

The employer of the future, post this turbulent time, ought to have the vision that the family’s well-being and the business’ well-being are so symbiotic.

And that is the biggest learning for business and us as a race- that we are so connected to each other and need each other. We can so easily fall into self-care & navel-gazing and indulge in isolationist behavior or realize that the most important learning from this is that we are all in this together. My vote is that our human spirit will prevail, and we will rise, together, stronger.

India’s Real Estate/ Construction Sector Circa 2030- How about building infrastructure for half the US population? Or 5 times Canada?

If projects in the pipeline were any indication of a sector’s growth, this industry has some some impressive numbers that companies out to tap global markets ought to take note:

India’s infrastructure, in terms of projects planned, till 2030 include:

$98 billion on 432 projects for Roads

$90 billion on more than 400 projects in Railways

$10 billion on 70 projects on Airports

$ 8 billion on some 75 projects on Ports.

And this without including the construction and real estate activity in key areas like Social Infrastructure, Logistics and Warehousing, Renewable Energy and many more. According to Rajnish Kumar, the Managing Director of National Banking Group of India’s largest bank State Bank of India, “Private Equity (PE) investments from foreign funds in Indian realty sector rose by 33 per cent to Rs 14,974 crore [$ 2.2 billion] during last year. However there is a huge deficit and if we are to house all citizens by 2022 then it requires an investment of US $ 2 trillion for construction of 9 crore [ 90 million] housing units; the present shortage plus additional demand of housing by 2022”.

A recent background paper on the subject, prepared by KPMG and the National Real Estate Development Council [NAREDCO], estimates the number of housing units to be 110 million units. It also pegs India to grow to being the 3rd largest global market in the real estate and construction sector. A key fuel for this growth is the increasing urbanization of India- a projected growth of over 40% in the urban population- from 420 million in 2015 to 580 million in 2030. That’s nearly 12 million people adding to the urban population every year for the next 15 years. Imagine this- building the infrastructure to accommodate the movement of and housing a population that equals half of the US population or five times that of Canada! In just the next 15 years.

Which are the companies that are ready to tap into such an opportunity?

How about our very own Brookfield Asset Management, Canada’s premier name in commercial real estate? Indeed. Canada-based Brookfield Asset Management Inc. has signed up to acquire office and retail assets of Hiranandani Developers at a valuation of close to $1 billion—one of the largest commercial real estate deals in recent years. A deal reported just earlier this month. That gives Brookfield ownership of 5 million square feet of office and retail assets at Hiranandani Business Park and Hiranandani Gardens in Mumbai. A clear sign that Brookfield is bullish on India.

Whether you are in roads, ports, airports or housing or commercial real estate or in any intermediary product or service relating to this industry, India ought to be in your plans.

QED

Interested in knowing more about the news stories linked to this post: Economic Times: India’s Real Estate Sector can be the 3rd largest globally and LiveMint: Brookfield set to buy Hiranandani’s Assets for $1 billion

Investing In India- your number one priority.

Jim Walker’s recent observations on India:

The invest-in-India story is a 5-10-year event, not a one-year politically-induced rally. We are as positive on Indian stocks today, as we were eighteen months ago.
Moody’s upgrade [of India] is appropriate… The government is committed to steady fiscal consolidation and I don’t think anyone should doubt it on that. And growth will turn up decisively in the next few months. Moody’s, at least, seems to comprehend what is going on.
If you are an investor looking at 3-10 years or longer, India should be your number one priority.

Jim Walker is the founder of Asianomics and the former chief economist of CLSA (Credit Lyonnais Securities Asia). Picked as the region’s best economist for 11 years running in a row by the Asiamoney Stockbrokers Poll, Jim is noted for his very far-sighted observations on how economies would pan out. To read his complete interview in the Economic Times, click here

The Healthcare Market in India & How to Succeed in India-the Abbott Experience.

“In a way that no spreadsheet or PowerPoint ever could, this experience [a visit to a local pharmacy in Mumbai] drove home to me how crucial it was for us at Abbott to be part of India’s health-care solution.”– Miles White, Chairman & CEO, Abbott Laboratories.

Nothing succeeds like success. And here is a first person account of Abbott Laboratories experience in market entry into India, from the horse’s mouth- the Chairman & CEO of Abbott, Miles White, courtesy McKinsey’s series on Reimagining India. In a series of moves starting with their entry into India, Abbott is in the number 1 position in the Indian pharma industry with a 7 percent market share contributing to over 5% of Abbott’s global profits. Understanding the pivotal role that generics play in the Indian market, Abbott set out to buy Piramal in 2010. Piramal Healthcare, which made generic and branded drugs in nine plants in India, Britain and Canada, had the largest sales force in the country with more than 5,000 medical and sales representatives. Understanding the value that generics had in the Indian market Abbott set out its growth strategy to acquire a key Indian player, giving it the generics leverage and the market width leverage.

Even more telling is the story of how a global major gets under the skin of the local market, learns the nuances and applies the learning to excel in a totally alien market like India- a lesson that every company with global ambitions ought to take heed.

Finding the right prescription [and ‘an immersion course on India’]
Miles White

In business, sometimes you find the most valuable insights in places you’d least expect them. In my case, it was a crowded Mumbai alley full of “chemist” shops where I went to buy some medicine. That brief visit helped me understand why, after imagining India for a long while, my company had to become an integral part of it.

It was 2009. I had embarked on what might be called an immersion course in India—in particular in its health system. I toured its hospitals and other health-care facilities, at all levels of service. I visited private homes across a broad spectrum of socioeconomic levels. I tried to understand as well as I could what it was like to be an Indian citizen during this extraordinary moment in the country’s history and what it was like to provide and receive health care.

As it happened, in the course of investigating India’s health-care system, I came to need a little care myself. That’s how I found myself in the lanes surrounding Bombay Hospital, where about 30 chemist shops, each with a storefront perhaps three to five meters wide, serve the hospital’s many patients. The scene I encountered was eye-opening. Clerks clamored for my attention as I walked past. Indian pharmacies function as informal doctors as well as medicine purveyors, but the people manning these shops were unexpectedly young and could have been selling any commodity. Once I chose a shop, the young man at the counter asked numerous questions about the malady I wanted to treat. After a loud discussion between him and someone in the back—during which passersby could easily overhear details of my symptoms—I received a small bag of generic medicines. The drugs prescribed were just what I needed, and I was stunned by how little they cost—a fraction of the price I would have paid for them in the United States or almost any other developed country. In a way that no spreadsheet or PowerPoint ever could, this experience drove home to me how crucial it was for us at Abbott to be part of India’s health-care solution.

The medicines I bought that day were what are known as “branded generics,” and their prevalence in India underscores the essence of the country’s health-care system. At the tip of the iceberg is outstanding care for the relatively few who can afford it. But the overwhelming majority of people receive a very different level of care, if any. For this majority, branded generics are appealing because, although their patent protection has expired, they offer the quality of manufacture and trustworthiness of consistency that comes with the imprimatur of a major pharmaceutical firm, at a much more accessible price than newer, patent-protected drugs. India is a powerhouse for these drugs, due to its wealth of scientific and managerial talent and its low production costs. We concluded that securing a major foothold in India would provide Abbott an ideal base from which to sell not only to the 1.2 billion people in India but also to fast-growing markets throughout the developing world.

We made a series of key transactions in 2010, acquiring the pharmaceutical business of Belgium-based Solvay, which had an Indian operation larger than our own, and forming a partnership with a major Indian pharmaceutical maker to market drugs in emerging economies outside India. Then came the deal that was fundamental to our vision: our $3.7 billion acquisition of Piramal Healthcare Solutions, a part of Piramal Group, one of India’s largest companies. These actions made us one of the largest players in the health-care system of the second-most-populous nation on earth. In just four years, we’ve achieved our goal of attaining a number-one position in India’s pharmaceutical sector where we have about 7 percent of the market. India now represents more than 4 percent of our total sales and almost 5 percent of profits—percentages that will surely grow.

[Interview, courtesy McKinsey’s Reimagining India Series. Rmagine, whose sole mission is to help companies reimagine their future growth strategies & craft their market entry strategy, brings this nugget of learning for the benefit of it’s readers. Image Courtesy: Aarogya]

Catching the Perfect Wave: A surfer’s guide to E-Commerce in India

An opportunity assessment on the potential of E-Commerce and the online retail market in India, for US, Canadian & Indian businesses.

I chanced upon Kara’s Blog ‘The Beautiful Mess so far’ just as we all chance upon some great nuggets of thought and expression on the Web, these days. I was surfing Google’s search results on the ‘perfect wave’ and Kara’s watercolor washed by. Her painting titled “Waiting For The Perfect Time” captures very well her state-of-mind that is expressed below it. I will leave you to read her thoughts and relate it to your life, in your own way. [A great read, I’d say]

However, Kara’s summing up of the wait…of getting that timing right….of catching the perfect wave for that awesome ride…It pretty much captures, what I think is the state of the E-Commerce Opportunity in India, today and the e-players of tomorrow. If you are an online retail business in India, you are already on your surf board, paddling around, waiting. If you are an etailer in Canada or the U.S. or any other part of the world, this perhaps is a good time to pack your board and head to Goa. And, if you were an online business idea-in-the-making, a good place for your idea to catch the wave would be India’s shores.

All stars are aligned for the tide to really rise. There are many factors that are responsibe for this but I’d like to set aside all those factors that generally make the India growth story a fetching one for many-a-category and distil this rationale down to just the five that are pertinent to online retail and the e-commerce opportunity.

Trust the trend

Consider this- India’s total E-commerce in 2009 was worth $2.5 billion and the number for 2013 was $12.6 billion. Five-fold growth, in four years. A significant part of this is travel related. So if we look at the numbers for pure retail play [books, electronics, apparel, jewelry, home décor…], from around $250 million in 2008 it reached $2.31 billion in 2013 [we are talking of financial year endings of June]. That’s nearly ten-fold growth, in five years. Believe me, when you look at India, this is just the ripple….the perfect wave is in the air.

According to a research done by CRISIL, a Standard & Poor’s owned, India based Global Research & Analytics Company, this $2.31 billion figure is due to become $8.32 billion in three years, by 2016.

India’s newest mall: the world wide web

Here, the cup is not even ‘half-full’, so keep pouring, baby. If there is one factor that has an unwavering correlation with E-Commerce success & growth, it is the pervasiveness of the Web, the level of Internet Penetration. So, the numbers on Online Retail that we just talked about have to be seen in the context of the rather meagre numbers India currently boasts on Internet penetration. 20% internet penetration- 243 million as of June 2014, in a land of a 1.267 billion people. Adding flavor to this number is the fact that 76% of this penetration is MIU- Mobile Internet Usage. And this last is a tasty morsel of data when it comes to E-Commerce. Today, in the U.S. and Canada nearly 50% of many searches for products on online portals come, from mobiles and last year’s Black Friday and Cyber Monday online sales demonstrated the exponentially growing power of mobiles in E-commerce. Mobiles contributed to over 15% of total online sales the last year in the U.S., according to ComScore. At Flipkart, India’s leading online platform, the CEO says 1 in 3 sales are currently coming from mobiles!

As Internet penetration picks up in India and as smart phone ownership goes up, our wave will start taking shape. And if you must know, Internet penetration is projected to be 330-370 million by 2015 by McKinsey estimates, by which time India will be the second largest Internet population in the world, ahead of the US and behind China. And smartphone sales [which fuels mobile internet access] are set to reach 81.5 million in 2015, up from just 9.5 million in 2011.

The Urban, I-Want-It-Now Gen

While India’s young population profile has diverse positives and negatives, the significance of such a profile on the online retail industry is significant. 1 in 3 in urban cities is between the age band of 15-34 years. Their numbers have swelled from 353 million in 2001 to 430 million in 2011 and projected to be 464 million in 2021. Adapting to change, early adoption of technology and the urge to experiment define youth and young, upwardly mobile adults and these characteristics help propel online shopping. Here again the trends are unmistakable.

If we look at the 12 to 18 age group [in 14 cities], the TCS Gen-Y research of June 2014 shows that laptop, mobile & tablet ownership, amongst these city-bred teens, are in the region of 66%, 82 % and 35% in Tier 1 cities and 58% , 91% and 30% in Tier2 cities. 7 out 10 have shopped online. 4 in 10 buy Clothes & Accessories online, followed by Movie Tickets and Books/DVD/Music.

Urban Young India will help this wave swell.

Cash is the new Payment Gateway

In a market where credit card penetration is < 2%, credit card usage online pales in significance and hence can be a stumbling block for online retail to grow. But India tends to find its own answers and the secret of the online retail success is COD- Cash on Delivery. Ernst & Young estimate that between 50 to 80% of online retail transactions is cash. For one of India’s two large online portals- Snapdeal- the figure is 60%, down from 70%.

This payment mechanism and the logistic infrastructure built for it [courier companies collect cash, retain a 3% service fee] has literally become online retail’s beachhead in India. While this method poses other problems for online retailers, it is going to be an enabler for faster adoption of online retail and e-commerce than anywhere else in the world. Though online retail is just a 0.25% of total retail in India, we ought not to forget that even in the U.S. it is just 9% of total retail, despite the myriad payment gateways and the high credit & debit card penetration. COD, while it hopefully will shrink in the Tier1 and Tier2 cities as the market matures, it will woo a new wave of consumers from the smaller towns to start their online shopping.

And credit cards are not without any role in the online retail wave- annual spending on the 19.6 million credit cards has been on the rise for the past five years [during a global economic slump] and was up 29% in 2013 over 2012. Industry estimates peg online spending to be 30% of annual credit card spends. [This will include travel & tourism, which are part of e-commerce but not part of online retail]. So the affluent lot, whose propensity to spend online is far greater, will certainly fuel the high end of online retail.

Impending Critical Mass

Fund flow and investment are the bloodline of business. And every new sector, for it to take quantum leaps and grow, needs investors at various stages. Online retail in India is starting to see some lead names in global risk capital who have made early stage investments in Indian online retail businesses: Yuri Milner’s DST Global [which invested in Facebook, Twitter & China’s Alibaba], the Singapore sovereign wealth fund Temasek, Tiger Global, hedge fund Myriad Asset Management, German incubator Rocket Internet, Blackrock.

Names and expression of interest are great but it is money that talks, ultimately- and there, a taste of the things to come can be seen from the funds invested by the different global and Indian investment firms in Flipkart, the country’s most active online portal- $770- 780 million in the last three years. So the winds are strong for the wave to happen.

Fanning this further, is the fact that some of these brands are starting to talk IPOs’- initial public offerings in Indian and international stock markets. And names like Credit Suisse, Goldman Sachs and Britain’s Investec are some of the bankers being touted for managing those IPOs’. And the word on the street is that the new government is going to open the online retail sector to FDI- Foreign Direct Investment, as early as July! Personally, I think that’s just the cherry on top, if it happens.

When you look at these five factors and the state of play of each, what are your thoughts? Will there be a wave? When? How ‘Perfect’ will it be? How awesome will the ride be? The surfers’ handbook talks of “assess the situation’ as a key to knowing and being ready [for the perfect wave]. Which is what I have tried to do for potential e-commerce players from the US and Canada, who would like to consider the Indian market, in this 3-minute brief. For a surfer, catching that perfect wave is all about ocean experience, timing, feel, balance and plain old paddling strength. I believe the timing is right. Who’s got the rest?

Water Color Picture Credit: Kara Hizon & http://www.karahizon.com

Title Surf Picture Credit: Photographer Rodney S. Yap & http://www.mauinow.com

Opportunities in The Middle East Petrochemical Industries

McKinsey’s paper on the Middle East’s Petrochemical Industry is beneficial in two ways, however for two very different companies.

At the first level it provides insights for the region’s petrochem industry on what they ought to do with an eye on the future. However it also gives a keen reader sitting in Canada or the US or in India on what could be the best ways to collaborate with the GCC companies to start new ventures in the petrochemical industry.

So if you are into petrochemicals in either the US, Canada or India this would be a good pointer on what opportunities await you if you were to expand into the Middle East. You could access this paper either on McKinsey’s site or click When gas gets tight Next steps for the Middle East petrochemical industry

India ahead of Japan. Mexico ahead of Canada. And China breathing down US’ neck.

India is now the world’s third largest economy in terms of Purchasing Power Parity [PPP], moving ahead of Japan. This, according to a World Bank Report that is based on the bank’s 2011 International Comparison Program (ICP).

The same report shows that Mexico’s economy is now ahead of Canada and China is close on USA’s heels. Given that the figures are based on the 2011 numbers, chances are, as of now in 2014, China could well be ahead.

”The United States remained the world’s largest economy, but it was closely followed by China when measured using PPPs. India was the world’s third largest economy, moving ahead of Japan,” the report noted. “Because economies estimate their GDP at national price levels and in national currencies, those GDPs are not comparable. To be compared, they must be valued at a common price level and expressed in a common currency,” the report explains, outlining the justification for a PPP-based comparative look at world GDPs.

To know more click on the following stories in India’s Economic Times:

http://economictimes.indiatimes.com/news/economy/indicators/india-displaces-japan-to-become-third-largest-world-economy-in-terms-of-ppp-world-bank/articleshow/34392694.cms

http://economictimes.indiatimes.com/news/international/business/china-poised-to-overtake-us-economy-world-bank-ranking/articleshow/34433509.cms

For the World Bank’s summary read: http://www.worldbank.org/en/news/press-release/2014/04/29/2011-international-comparison-program-results-compare-real-size-world-economies

Thick Crust Pizzas and the Great India Opportunity

Business owners often ask me “Which industries, do you think, have good potential in India?” My response has always been “Practically any”.

Let me give you an example: We all know that India has been going through an IT and BPO boom for years now, with companies running 24X7 offices where young Indians answer customer calls and write code for organizations from Seattle to Sydney. One such location which has a concentration of such IT companies is what’s referred to, as the IT Corridor, in Chennai in India- an area called OMR. Thousands of youth, male and female, throng from all over India, to work here. Through the day and night, there is either one batch coming out of their work day or another is just entering.

So, does this mean that an IT company in Canada or the US should open an office there, get orders from global companies and service that with local, trained, less expensive talent? Of course yes. You don’t need a rocket scientist to tell you that.

But that’s not all. Year on year, along that IT Corridor, other businesses have sprung: restaurants, housing, cineplexes, laundromats, supermarkets, hostels, apartment complexes, malls, hotels, schools, hospitals, cabs on call, air-conditioned bus routes…we can go on. And, that is one road in one city, in a country that has some sixty odd cities with a population of over 1 million. To round off this anecdote, would you be able to guess the busiest restaurant down that corridor? Domino’s Pizza.

India Opportunity & Farmhouse Thick Crust- Lesson to learn on global markets

On a Friday evening, at this OMR Domino’s, about 200 diners or those coming in for take-outs would have passed through its doors…. in the space of some 15-20 minutes. And this, for a brand that primarily ‘delivers’ the world over [Take a look at the delivery bikes parked in front of the store on some quiet:) morning in the picture].

So pizza brands and laundromats are unlikely but hugely successful and ever-growing off-spring of India’s IT boom.

We can then talk about the Infrastructure boom, the Retail boom, the Education boom, the Youth boom, the Urban boom and many others….but you get the drift.

The India Opportunity: Who do you know, who would benefit?

In business, you’ve got to skate to where the puck will be.

And not to where it is.

Wayne Gretzky’s famous quote on how he plays ice hockey is absolutely true to business as well. Especially so, in today’s seismic shifts that are happening in the global marketplace. To those in business in Canada and the US, this maxim is a surefire test for how their corporate growth plans have to be re-jigged.

Two years back, we did a project for a packaging company who were into food and beverage packaging printing and retail packaging printing. An SME who catered to the Canadian and US market, our client was a very successful business built over 30 years. Our mandate was to assess the market for similar products and services in India, to enable the client get a sense of ‘what’s in it for them’. A sort of dipping your toe into the water before wetting your feet. Not diving in mind you, if you get my drift.

For us at Rmagine, given that we are constantly scanning the market for trends and happenings across a variety of sectors, the answer was very evident. Just the packaged food industry growth potential in India should be good enough to plunge in. If you take in the retail explosion that is waiting to happen in India then the market for sophisticated packaging, just went ballistic.

So while we went about collecting all facts and did the research work, we stumbled upon a happening that was so telling. It showed how, really keen businesses sniff out opportunity- two years prior to our fact finding mission for our client, there was a huge business mission from the packaging industry that had already visited India. Hey, not from Canada or the US. The participants were some 80 print/packaging companies from across Europe who participated in a huge trade show in Delhi and travelled to the key cities in West and South India. And as a delegation they had met with some 250+ different potential Indian partners from different cities, to assess who would be right as a partner for them to enter the Indian market!

Here we are, trying to assess the market for our client and two full years prior to this, 80 competitors had had meetings with potential partners! Which means in the scheme of things on how long global market expansion projects take, those 80 competitors possibly have a four year head start on ‘skating to where the puck will be’.

So, we need to ask ourselves the one simple question, when it comes to deciding on tapping new markets globally- Is our business where the puck is OR are we skating to where it will be?