Supermarkets in Singapore stock the popular Garnier Men PowerLight range of skincare products endorsed by Bollywood actor John Abraham, while in downtown Jakarta in neighbouring Indonesia, young housewives find Hindustan Unilever Ltd’s (HUL) low-cost water purifier Pureit a life-saver. In Europe, pensioners and migrants spice up their food with Maggi Masala, even as the ubiquitous snack food Kurkure is a hit with not just Indian immigrants in the US but also westerners. This isn’t a figment of imagination, but a dawning reality, and can already be seen in markets across the globe.
Desi brands have come full circle, with multinational companies swearing by them. Garnier Men PowerLight cosmetics, Kurkure, Pureit, Nimbooz, Aliva ?these are all products invented in the Indian laboratories of mutinational companies, originally made for Indian consumers but today a hit in global markets. Pureit, the cheapest variant of which is available for Rs 1000 in India, is sold in countries such as Indonesia, Mexico and Bangladesh. The Garnier Men PowerLight range originally created by cosmetics maker L’Oreal for Indian men is now finding enthusiastic users in other countries. It’s the same for Kurkure and Maggi Masala, which with their uniquely Indian flavours, are now attracting attention globally and are being adapted to suit local tastes in overseas markets.
The increasing relevance of what General Electric chief Jeffrey Immelt called reverse innovation ?products originally conceived for developing economies but now being marketed in other geographies in their original or modified form ?is being clearly felt across categories. Multinational FMCG (fast moving consumer goods) companies are today racing to introduce their Indian innovations in international markets after seeing their success in India. What started off as a trickle is now turning into a flood as multinationals go through their Indian inventories to identify brands that could turn out to be winners in international markets too.
Skin whitening cream Fair & Lovely, from the house of HUL, was perhaps the pioneer. Today, this skin cream which has seen some iconic advertising over the years, and has spawned an entire category of skin whitening products, is marketed in over 30 countries, mainly in Africa and the Middle East. ?Scientists at the Unilever Research Laboratories in India were the first to discover the skin lightening action of niacinamide that led to the development of a unique and patented formulation of Fair & Lovely in 1972. In 1978, we launched Fair & Lovely in India,? says a HUL spokesperson.
PepsiCo, the second largest food and beverage company in the world, which today earns more than 45% of its revenue outside the US, has declared its intentions to adapt its Indian innovation Kurkure for western markets such as the US. Baked crackers brand Aliva and lemon-flavoured drink Nimbooz are some of the other successful PepsiCo innovations out of India that have attracted attention globally and are currently being adapted to suit local tastes in overseas markets. ?We will continue to invest in innovation and build scale to expand our footprint across beverages and snacks, especially in China and India and increase our sales and go-to-market capability,? shared PepsiCo CFO Hugh Johnston in a recent analyst call.
Yet another multinational, Nestle, makes a distinction between emerging markets and emerging consumers, the latter it describes as the billion-plus upwardly mobile population about to make their first buys in the branded food category in the next few years. The Swiss food and nutrition giant has identified consumer segments in mature markets which demonstrate the traits of consumers in emerging markets. For instance, in Europe, pensioners, students, migrants, unemployed adults would belong to the emerging consumer category expected to respond well to products introduced in emerging markets. Nestl? has created a category called ?popularly positioned products,? or PPP, to target these consumers and is reshaping its business model, according to Paul Bulke, CEO, Nestl? SA, to cater to this population. PPPs are products that meet the specific needs of consumers with lower income levels by offering them high-quality, nutritionally enhanced products at affordable prices. And products like Maggi Masala noodles and Nestle Masala Tea, which are the frontunners in this category, will be taken to the global markets very soon to cater to this category of consumers, Antonio Helio Waszyk, chairman and managing director of Nestle India, has said.
Also, increasingly MNCs are leveraging India as an ?innovation hub?. A few months back, Nestl? announced the setting up of an R&D (research and development) centre in India at Manesar, close to its headquarters in Gurgaon, which is likely to be operational by 2012. This new centre will focus on PPPs, not just for the Indian market but also worldwide. This investment is expected to strengthen Nestl??s R&D capabilities in emerging markets. Nestl? has a strategic focus on emerging markets where the company expects sales to reach 45% of total by 2020.
Similarly, L?Or?al last month spelt out its strategy to use reverse innovation in emerging markets to expand its revenue share in the concerned geographies. The company plans to develop beauty products locally for emerging markets and eventually modify them for the international markets, through a new research and innovation centre in India.
?India is not only a source of growth for us at L?Oreal, but also a source of inspirat-ion and ?Indo-vation?,? says L’Oreal India chief operating officer Dinesh Goyal. ?We have created products like Garnier Fructis Shampoo + Oil specifically keeping in mind Indian consumers habit of oiling their hair. Our Garnier Men PowerLight range was created for the Indian male skin, Garnier Color Naturals is the first cr?me hair colour to be created for Indian hair. These ?Indo-vations? are now being rolled out globally.?
The emerging markets today account for 38% of L?Or?al?s consumer products division?s sales, as against 28% five years ago. This is expected to reach 50% in less than six to seven years.
During his recent visit to India,Paul Polman, the CEO of Unilever Plc, stressed on the importance of reverse innovation with India as an inevitable epicenter. ?Innovations are getting bigger and are rolling out faster across countries. Companies will shift their innovation capabilities and their new introductions to emerging markets. For instance, we are witnessing premium initiatives coming into the market in China even before they are rolled out in the US or Europe,? he said adding that till two or three years back, Unilever?s incremental turnover from innovations stood at around ? 3-5 million, while today it has crossed the ? 50 million mark. If Unilever saw nine such initiatives rolling out in 10 countries in 2009, in the following year the same increased to 40 globally. And India, according to Polman, will be one of the top two priority markets for the firm in terms of leveraging the incremental growth pie that the FMCG giant expects would double its business.
This attitudinal shift in multinationals has been brought about by factors such as consumption in emerging markets exceeding the US consumption. Last year, the emerging economies? share of global consumption was close to 35% as against America?s 27%. The former stood at 23% till early 1990s, according to investment bank JP Morgan.
Within the next 20 years, the middle-class population in emerging markets is expected to cross 1.8 billion against a meagre 266 million at the turn of the century. Developed markets which today have a 830-million strong middle class population would by then only have 1 billion people in that segment, according to World Bank projections. Multinationals expect about 70% of the world?s growth over the next few years to come from emerging markets, with 40% coming from just two countries, China and India.
A promising future for the FMCG sector in India is an added bonus. The Indian FMCG industry has grown 11% annually in the last decade and at the rate of 17% since 2005 to touch R 1,30,000 crore (in FY2010), thus accounting for 2.2 % of the GDP. A CII and Booz & Company estimate predicts that the FMCG industry will continue to grow at a base rate of at least 12 % annually to become an R 4,00,000 crore industry by 2020. Additionally, if some of the factors play out favourably within an environment of enabling policy and easing of supply constraints, 17% growth may be expected over the next decade, leading to an overall industry size of R 6, 20,000 crore by 2020. These mouth-watering prospects are hard to ignore for the FMCG biggies, who are redefining ?innovation?.
As Gunjan Bhardwaj, a consultant at Boston Consulting Group, points out, DHL?s Express Easy student, a student?s university application delivery service of the division was developed out of the Indian market. ?The innovation has been transferred to other countries such as Pakistan, Nepal, Bangladesh, Thailand, Romania, Hong Kong, Turkey, and Singapore where the number of young people applying for a study abroad was high enough,? he says. The solution offers students a secure and fast delivery of their applications to anywhere across the globe for a fixed special price. Furthermore it offers certain privileges, such as a 50 % discount on the shipping, an international student card, and special student benefits.
Again, Levi Strauss adopted the very popular EMI (equated monthly instalment) concept for its ? pay as you wear? model to lure young customers to buy high-end denim. Bhardwaj cites the smaller packaging revolution as a great example of reverse innovation which can be attributed to India.
The efforts to capture a bigger share of the emerging market is not restricted to product innovation. Companies are innovating throughout the supply chain, in the marketing and distribution strategies to corner a larger chunk of the ever-growing pie of Indian market. Brand innovations such as HUL?s Wheel detergent and Annapurna salt), Indianised category extensions such as McAloo Tikki burger from McDonald?s have hit the international market in the last few years.
?Actualizing ?reverse innovation? in the FMCG space is a rather challenging task when compared to applying the concept in context of technology. That?s because behavioural traits such as tastes and preferences are much more localized and is difficult to standardize,? says Shubhojit Sen, executive vice-president, Glaxo SmithKline Consumer Healthcare. Having said that, it is possible today more than ever before, in the backdrop of globalization and rapidly shrinking world and the spectacular growth in emerging economies. Agrees Sen, ?While we have not yet taken products innovated here to other geographies, some of our products such as Horlicks Nutribar are attracting increased global attention.? So if you spy a rack full of Horlicks Nutribar at a London department store, don?t be surprised!
