A trade visit to India helped UK firm Aston Manor Cider realise the size of the prize was greater than the challenges to market entry
Aston Manor Cider, one of the world’s largest independent cider producers, is no stranger to the export market. The UK-based company’s specialty beverage is available in more than 20 countries including the USA, Russia and a number of African nations.
One export market, however, is conspicuous by its absence: India. As part of its international growth strategy, Aston Manor Cider conducted some research into the Indian market several years ago, even going so far as to match its drinks to different Indian curries, but the idea stalled.
“We were interested in the size of the country, the number of consumers and its strong and growing beer market – we felt there was a natural affinity with cider,” says Managing Director Gordon Johncox. “But we felt India would be a tough nut to crack. We knew the barriers to entry would be quite high and that the business environment would be very different: much less structured, more volatile and fast-moving.”
Case by case
Vinamra Shastri, Regional Market Leader for Grant Thornton India, admits that the aggressively developing economy has its challenges. However, he says the ease or difficulty of market entry depends entirely on what type of business you have and on the operating model you wish to pursue.
“It’s easy to set up an IT outsourcing unit in India, for example,” Shastri says. “The procedures are in place, the manpower is available and the transition challenges that used to exist are no longer there.
“For a business like Aston Manor Cider, it will be more difficult due to the complexity of the regulatory environment that governs the alcoholic beverage industry. Responsibility for regulation lies with state governments, which means that every state has its own regulators and barriers to entry.”
When designing your strategy to sell alcoholic beverages in India you are designing a strategy to enter 29 different markets.
Once those barriers are surmounted, the next challenge is getting your product to gain traction with consumers. Ready to Drink beverages are gaining popularity in India but cider’s share of that market is still negligible.
But the beauty of India, says Shastri, is that even a shrunken market of say 2%-4% is equivalent to 90% of the market in countries such as the Czech Republic, Sweden or Latvia. That makes for a very compelling argument to invest in India, but you need to come to market with a sensible product that is either well known or that Indians understand.
Shastri cites the example of Domino’s Pizza’s Indian distributor, which today has a bigger company valuation than Domino’s parent company in the US. And of Cinnabon, the US maker of cinnamon rolls, which came to India with average growth targets and exceeded its own expectations.
Market challenges
That’s not to say that challenges to entry don’t exist. India’s geography is vast and choosing the right location to start depends very much on local knowledge. “India now has very clearly-defined centres of excellence,” says Shastri. “If you’re a high-end business, a labour-intensive business, an outsourcing business – we know where to direct you for the best location.”
And while business-friendly Prime Minister Narendra Modi is making positive noises towards inward investors at national level, dealing with state and local governments can still feel bureaucratic. Many of the basics – getting land approval, rental agreements signed and leases documented – still take time.
Cultural differences need to be taken into account too. “The Indian workplace has become very global,” says Shastri. “There is a big push towards work-life balance, requirements for solid job descriptions and so on. But India has its own culture, which needs to be understood. Respect, appreciation and reward are integral to Indian culture. Personal relationships are also important; just as much as professional credentials.”
Trade visit
Johncox, all too aware of these challenges and dealing with rapid growth in other parts of the world, had put the idea of breaking into India on hold - until Grant Thornton UK organised a trade visit to New Delhi earlier this year and offered clients the opportunity to join.
It was the perfect chance for Johncox to test his assumption that India’s young middle classes were ready for a cider drink. On the ground, he met Shastri’s team, which arranged for him to meet several local businesses in the food and beverage sector.
“Grant Thornton created contacts with credible and realistic business partners,” says Johncox. “The people there had great insights into the challenges, opportunities and ways of working in India.”
One of the most valuable insights Johncox gained during the trade visit was that younger, more affluent consumers who didn’t want to drink what their parents drank are consuming premium imported beers. It helped him realise that the size of the prize is greater than the challenges he may face.
Aston Manor Cider has now agreed to undertake more detailed market analysis and build a business plan to include entry into India. The next step for Johncox is to return to India to conduct further meetings with potential partners and agree a launch plan with them.
Time and patience
For other mid-sized businesses thinking of expanding into India, Johncox stresses the importance of being on the ground. “You have to invest time, effort and energy in building relationships at senior level,” he says. “And that means face-to-face contact and visiting the country.
“You also have to be patient. While the Indian market is growing and developing, it does take time for things to happen. Hang in there with patience and tenacity, and you stand a pretty good chance of getting somewhere.”
Shastri agrees: “There will be teething problems but once you get over that initial phase, things will run smoothly. India is a market where you require time and patience to succeed."
