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Indian brands face some home-grown truths even before the FDI journey begins.
While the mandatory 30 per cent local sourcing clause set for single brand retail is seen as a boon, there are niggling doubts that some niche regional brands in the FMCG, apparel and home furnishing market could fade away with this norm.
The reason is that these brands are too small to spend huge marketing moolah on their wares and would be more comfortable expanding with large retail chains.
Mr Raghu Vishwanath, Managing Director of Vertebrand, a brand management company has worked with several SME brands that have faced the dilemma of whether to brand themselves or be mere suppliers to large retail brands. “This is a pure pricing game. If you are a mere supplier, then you can be ruthlessly thrown out even on a minor pricing difference. On the other hand, you need tremendous money power to brand yourselves to stand on your own,” he says, explaining the vulnerability of the small player. Mr Vijay Nayak, Managing Director, Ken AgroTech Pvt Ltd, exporter and supplier of gherkins, jalapenos and other fruits and vegetables to retail chains in India says that the SME sector can only focus on manufacturing and building efficiencies rather than marketing or branding their products. “We are not in a position to build the front end. There’s no point in fighting with the big guys. We’d rather work to full capacity. We also hope that we may become preferred partners for their exports,” he says.
The FDI condition of compulsory SME sourcing will mean a sure market for their products and good realisation for their product, argues Ms Pragya Singh, associate director at Technopak Advisors. “While private labels are increasingly becoming popular, it is not necessary that SME brands will get killed in the process.”
On the other hand, Mr B Abhinandan, Director at health food store chain, Brown Tree, insists that his brand will grow independently and not with a large retail chain.
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