Retail brands make a beeline for India

Written by Mona Mehta | Mumbai | Updated: May 7 2009, 15:41pm hrs
Hit by the retail slump in major markets, many international brands are looking for a foothold in India. These firms are in various levels of talks with Indias top retailers and developers for signing up master franchisee or revenue sharing agreements. The companies are focused on fast food, fashion apparels and cosmeticsthe segments that are growing at 15-20% annually, according consultants Jones Long LaSalle Meghraj.

The brands planning an India entry include The Pizza Company and Spicchio Pizza (both pizza chains from Thailand), Coffee Club from Australia, Lolita Fashion, a Japanese brand, Revive Juice Bars from the UK, Mrs Fields Cookies and Jamba Juice from the US, and Jules- a French fashion brand. Other brands eyeing India include Alto Caf, also from France, BBQ Chicken from Singapore, UAE-based Mikyajy, a cosmetics firm, and Nayomi, a lingerie brand from Saudi Arabia.

Delhi-based Franchise India Holding Ltd is advising these international brands on creating a footprint in the local market.

The turnover of the organised retail segment in India is pegged at around Rs 40,000 crore. According to global real estate consultant, CB Richard Ellis, India has moved up to the 39th most preferred retail destination in the world in 2009, up from 44 last year. China is at sixth position in the survey.

Although organised retail as a whole has grown by just 5% in India in the fourth quarter of 2009, largely due to a poor offtake of consumer durables, furniture, groceries and certain luxury goods, niche segments like fast food and apparels have done well. For instance, organised fast food retail here has seen a year-on-year growth of 25%, while the market for fashion apparels is growing at 15%, according to industry experts. Gaurav Marya, president-Franchise India Holding, says, In comparison, the retail consumption in North America, China, Europe and Brazil has dropped by 30% to 40%. As a result, international brands are looking at offloading their inventories to markets like India.

The experience of existing MNC players in Indian retail has also been an encouraging for aspiring entrants. For instance, fast food giant McDonalds has been growing at 20% year on year and is planning to open 40 new stores this financial year. Marks & Spencer and Sisley, which have a tie-up with Reliance Retail and Tatas Trent, respectively, have been growing at 10-15% on the back of growing demand from brand-conscious young buyers.

Says Shubhranshu Pani, managing director-retail, Jones Lang LaSalle Meghraj, Entering India would help these international brands re-route their inventories and orders to new markets.

In India, about 25 million sq ft of retail space has been lying unconstructed in the top seven cities, from 2008.

The Pizza Company and Coffee Clubboth belong to Thailands Minor groupare scouting for master franchisees to set up their base in India and are close to finalising deals. Meanwhile, others are discussing with retail and real estate majors to enter into revenue sharing arrangements with them. Many international brands like Beverley Hills Polo Club, USA, Spa Siam, Thailand and Taman Gang Restaurants, UK, have entered India in the recent past and several more are expected to join them. Marya said.