Look to India for growth, ESG urges Singapore consumer firms

Singapore

THE size and structure of India's economy make it an attractive market for Singapore's consumer players, even amid fears of a global downturn.

And the next step up the value chain could be in-market production, said Tay Lian Chew, global market director for South Asia at government agency Enterprise Singapore (ESG).

"India is an economy that is quite self-contained, and I think it may be a bit more cushioned, compared with others," he said of a slowdown scenario. "In that sense, with India's growth, the incomes and the consumer spending will be there to stay."

One success story in India has been Tong Garden Food, known for products such as nuts and dried fruit. After establishing a toehold in the market, it set up a processing plant in India to source and package its wares.

"Because it is made in India for India, this allows them to lower their costs and make their products even more competitive," said Mr Tay.

"This is perhaps a longer-term consideration for companies. First, you come in asset-light, build up your demand. If the demand is big enough, it justifies taking the next step, to do some manufacturing in India."

ESG has taken this tack with other markets too. Mr Tay's colleague G Jayakrishnan, who oversees Middle East and Africa operations, said last year that this could be a strategy for Singapore food brands in Africa.

When asked whether in-market food production is an agency-wide focus for emerging markets, Mr Tay called it "the logical step to take", and an approach that could be extended to other types of manufacturing.

"A lot of these markets are also imposing higher taxes on the import, especially, of finished products," he said, pointing to the imposition of Indian customs duties for mobile handsets.

"This encouraged companies to set up manufacturing in India. So I guess that, in certain categories, where the tax is so high that it doesn't make sense to export into India, then manufacturing to serve the market is good. But the demand in the market has to be big enough to justify it."

To pave the way for a smooth passage to India, ESG hopes to introduce a suite of service providers this year to support companies in the market.

"We find that companies, when they are in-market, do not do enough marketing and promotional efforts to increase brand awareness," Mr Tay said.

"We can put together a list of in-market consultants who have a good track record and good capabilities to help them in this area."

He added: "Companies should appoint good distributors and franchisees, rather than building up a distribution network or capability by themselves from day one. And I cannot stress enough the importance of finding the right distributor or franchisee.

"In the past, we have seen companies that chose the wrong distributor, only to see their brand value eroded. Their products were not properly stocked, with sloppy display, eventually leading the companies to exit the market."

Other industry outreach plans include an advisory session on e-commerce in June, and business missions for segments such as education technology, packaged food and furniture.

This year's focus on the food and beverage segment follows previous iterations of the agency's Tasty Singapore Food Aisle project, which took small- and medium-sized enterprises to markets such as Indonesia.

ESG had brought six Singapore food manufacturers to India in 2017 in a tie-up with supermarket Foodhall, and will now do so again. It aims to double the number of participants and visit five cities, in a bid to work more closely with other retail chains run by Foodhall's parent group.

Besides the fresh focus on premium food products like healthy snacks - a break from earlier market entrants, which included instant noodles and sauce makers - Mr Tay said that "another area where we see potential is in lifestyle concepts and services". He cited home-grown education consultancy Duck Learning, which set up shop in Maharashtra last year.

Asked if ESG is targeting shoppers in the Indian middle class, Mr Tay said the plan is to fill gaps with Singapore firms' "unique selling points".

"It's about meeting the market needs of India," he said. "Although Indian consumers are demanding such products, I think the choice is not as wide, so there is a role for Singapore companies to play as well."

ESG dealt with more than 180 Singapore companies in India last year, according to numbers shared with The Business Times, with some 15 per cent of those in the consumer sector.

Mr Tay made the case for branching out into India's consumer sector, in recent sessions with local media.

"Many times, we have encountered companies that treat India as a peripheral market, not as their main market," he said. "But I believe that India is a big enough market, and if we really put in the effort to grow this, it could make a significant effort to Singapore companies' bottom line."