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F O O D S Breakfast Ready: For A Year!
If you are from the south of Vindhyas and (let me make a wild guess) a software engineer in the US, then you probably have had at least one such day in your recent life: it's late in the night and you are sitting in an apartment in San Jose, popping buttered corn in a microwave and scooping spoonfuls from an ice-cream tub-all in the name of dinner. Don't burn your h1 yet. There's hope for you. Apparently, after 14 years of research, the Bangalore-based MTR Foods-a heat-n-eat foods major-has figured out a way to pack traditional south Indian fare like idli, dosa, pongal (or khichri), and kara bath (a cereal and vegetables-based breakfast dish) so that they don't spoil for as long as 12 months and still taste fresh. Says P. Sadanand Maiya, Chairman and Managing Director, MTR: ''Ready-made mixes have been around for some time, but it's only now that traditional south Indian breakfast items are being marketed in the heat-n-eat category.'' First, the packaging secret. The pouch that the breakfast dish comes in has been specially developed for MTR with help from the Defence Food Research Laboratory (DFRL), which also helps package food for Indian soldiers stationed in the hostile environs of Siachen glacier. DFRL helped MTR solve a nagging problem: when hot food was packed, the pouch would burst. Packing at a lower temperature was not an option because the food can only be sterilised at 120 degree centigrade. MTR's new heat-n-eat packs do not necessarily require any microwave, or re-cooking or heating. Instead, the pack can simply be immersed in boiling water for 10 minutes. However, technology comes at a price. Typically, packaging accounts for 16 per cent of the retail price, but in the case of MTR it is a huge 40 per cent. Maiya says efforts are on to lower the cost. But even with its premium tag, MTR is doing brisk business. While the exact market size of the heat-n-eat and ready-mix foods is not known, MTR reckons that it is Rs 150-crore big, and growing at 30 per cent per annum. The company says it has a third of the market in its share. In fact, hard-pressed to meet consumer demand, MTR says, it is commissioning a new unit that will churn out 15,000 packets a day. Says Maiya: ''The market potential in the south east and the middle-east markets is huge. Wherever there is a sprinkling of Indians, there is demand for our products.'' The company has already exported around 800 tonnes of heat-n-eat packs to the US. To give more visibility to some of its lesser-known products like kesari bath (a sweet dish), the company has set up a chain of 14 MTR Super Stores in different parts of south India. Another 20 are to be opened in Northern and Western India. Simultaneously, MTR is working on expanding its menu. It has roped in the Delhi-based food expert Jiggs Kalra to develop more heat-n-eat north Indian dishes. What about transnational companies like Kelloggs that are trying to change breakfast habits of Indians? Maiya isn't fazed. Says he: ''Three years ago, when Kelloggs entered the market, we were worried. But now we know they will never be significant players. Only those who make and market India foods will win at the end of the day.'' That apart, profit margins-at around 20 per cent-are lucrative in this segment. That means more companies could soon join the fray with MTR. After all, the way to a market's heart is through its stomach. -Venkatesha Babu M A R K E T R E S E
A R C H Market researchers dread having to do rounds of villages. For one, the places are hard to reach. Worse, once they have made it there after all the trouble, the typical rustic reveals precious little. And companies, who base their strategies on such findings, end up perpetuating rural stereotypes and, hence, missing the real consumer. The Delhi-based Marketing and Research Team (mart) has come up with what it calls a new set of rules for researching rural markets. Sample this:
The problem, according to mart's President, Pradeep Kashyap, is that researchers tend to skip certain commonsense issues that inhibit response. Illustrates Sona Godfrey, part of Ogilvy & Mather's rural knowledge division called Ogilvy Outreach: ''Asking villagers to rate a product on a scale of one to five is not a good idea, because the concept of rating itself is alien to them. Hence, researchers often end up with conflicting responses.'' In response to that, mart decided to come up with its own tools and techniques. And to get started, it looked at some of the techniques used by NGOs. It found some useful ones. Having developed a new set of tools, mart had to test them against the more 'scientific' methodologies. The agency roped in students Dheeraj Arora and Satish Dhingra of Management Development Institute, Gurgaon, to conduct a study for it in 24 villages, across five districts in Haryana, and four in Uttar Pradesh. The study was conducted in three stages-the preliminary study, administering conventional tools, and finally, administering new tools. For each stage, an equal number of villages was selected from three categories of villages (500-2,000 population, 2,000-5,000 and 5,000-10,000). The tools, new and old, were administered with the help of a dummy questionnaire to six different category respondents more than 25 years old, and included traders, farmers, farm labourers, servicemen, artisans, and housewives. So, what were the indigenous tools for ranking and rating? These included faces that were similar to flash cards, spinning colour wheels, and even carrom coins and weights. For ranking, as well as rating, ladders and playing cards were used. To test the tools, five popular brands of soap were used. It was assumed that respondents were familiar with these brands and had used them to be able to rank and rate each one of them. Faces representing various moods were used, with the happiest face being on the extreme left and the saddest one on the extreme right. The respondent rated the products by expressing his or her opinion about the product or the satisfaction levels. mart found that the faces emerged as the most effective rating tool. They fascinated the crowds and generated high involvement. The colour wheels emerged the second best. Apparently, the villagers' strong association with colours was a key reason for its popularity. The upshot: when in a village, do as the villagers do. -Shamni Pande L O G I S T I C S Think logistics, and the picture that pops up inside your head is of either a freight forwarding company or courier boys in their uniforms. But the real logistics market in India-Andrew Birtley, CEO (South Asia) of Geologistics Corporation, would have you know-is unorganised and small. Birtley is talking about the business of moving industrial goods. And by his own reckoning, 98 per cent of the operators aren't organised enough. Birtley should know. After all, Geologistics is supposed to be the world's largest, end-to-end logistics company, with $2 billion in revenues, with customers like Walmart and GE. Early this month, Birtley set up shop in Pune, and has already bagged Rs 60-crore contract from Cummins India. Business worth another Rs 140 crore comes from clients like Thermax and Siemens. But Geologistics isn't alone. The city already has a Rs 700-crore logistics firm in Dynamic Logistics, promoted by a local family, which has clients including Coke, Whirlpool, Telco, and Ford. Then, early this month too, another local firm entered the arena, armed with a Rs 48-crore order from Kirloskar Oil Engines. Chennai-based Sembawang Shriram and TVS Logistics are the only two other companies in the business. What these companies do is handle the in-bound and out-bound logistics of companies. By all accounts, the potential is huge. Says Gautam Dembla, Director, Geologistics, and former CEO of Dynamic Logistics: ''We are looking at a 400 per cent growth." In the bargain, Pune could well become India's trucking capital. -Roop Karnani S E C T O
R W A T C H
Already, Mumbai's stockmarket and merchant banking circles are reeling off names of others on the hitlist: IndusInd, Karur Vysya, Catholic Syrian, South Indian Bank, Bank of Punjab... the list goes on. Not surprisingly, many of those cited as targets are old private banks, some are niche players, profitable yet not deep-pocketed enough to invest in technology and infrastructure, both vital for survival in an increasingly competitive market. Says R.P. Gupta, Executive Director, Canara Bank: ''I think many small private sector banks will eventually sell out to big ones as they have little choice.'' Agrees Ashwin Parekh, Partner, Business Consulting, Arthur Andersen: ''Old private banks' inability to bring in capital to meet capital adequacy norms will push them into mergers.'' While the opening up of the banking industry and more freedom for foreign banks has increased competitive pressures, the Reserve Bank of India's stricter norms on capital adequacy and non-performing assets are pushing banks to become financially more efficient. For the newer, better capitalised banks, it's an opportunity to build scale quickly. Says Rajeev Gupta, Head (M&A), DSP Merrill Lynch, which advised Bank of Madura: ''The need for economies of scale, brand-building, and raking in large corporate clients are the driving forces for the mergers. In Bank of Madura, ICICI Bank found a perfect fit.'' Although just a trickle now, M&A activity in the banking sector is expected to turn into a big wave. Predicts Arthur Andersen's Parekh: ''Globalisation of businesses, the need for new technologies, and a shift from selling products to relationship management will drive the consolidation in Indian banking in a big way.'' The imperatives are clear. Size does matter. Not just because of the obvious clout of a larger asset base and wider networks, but also because bigger banks find it cost-effective to invest in technology. Explains M.J. Subbiah, Managing Director, Centurion Bank: ''Service and efficiency of operations will be the keys. For both, banks will need to invest heavily in infotech, and for that, size is absolutely critical because larger the size, the better the economies'' Consolidation, therefore, will be the name of the game. Our prediction: expect a flurry of deals in 2001. -Dilip Maitra C O M P A N
Y A F F A I R S
The Bajorias and Dalmias of the corporate world, beware. Next time round, mounting a takeover on companies like Bombay Dyeing and Gesco Corporation, or any other listed company may not simply be a question of mopping up shares. A new amendment to the Companies Act has empowered companies to issue shares with differential rights of voting, dividend, or otherwise. In other words, companies can also now issue shares that have no or insignificant voting rights, and those that have varying rates of dividend. Until now, all shares issued by Indian companies carried equal voting rights and equal claim to dividends. The move will help in many ways. For one, it will allow promoters to raise equity from the market without having to dilute their effective control on companies. It will also lend flexibility to investors. For instance, a financial institution that has bulk ownership in a company may opt for half voting rights, and a bank that merely lends working capital loans may want a quarter vote on each share. In the case of financing, a capital-intensive project, differential shares will prove a boon. Explains K.R. Girish, Partner in RSM & Company, an accountancy firm: ''Companies in the infrastructure sector will now be allowed to issue mezzanine capital (by issuing non-voting shares), which has a right to cash flow (getting a return). Such instruments may not have a prescribed coupon rate, but will be treated as quasi-equity for debt purposes.'' Talk about versatile equity. -Dilip Maitra I N T E R N
E T Psst...Would you like to speak to your software engineer son in the US for a fraction of the regular telephone cost?'' asks the owner of a cyber cafe in Jayanagar, which is Asia's largest planned locality situated in the heart of silicon plateau of Bangalore. Internet telephony may be banned in India, but in a lot of the hundreds of cyber cafes that dot Bangalore's bustling streets, it is a booming business. Not at all surprising, considering that a three-minute call to the US from India costs Rs 183, but the same call can be made over the internet for a piffling Rs 3 (@Rs 60 per hour). Currently, Internet Service Providers (ISPs) are barred from allowing their subscribers to use the Internet for voice and fax messages. However, since it is impossible to monitor whether it is data or voice that is being transmitted over the packet-switch data networks, scores of cyber cafes have turned into international calling centres. The audio quality over the Internet is poor compared to land lines, but at such abysmal rates, users really don't care. There are a number of sites like net2phone.com, netspeak.com, vocaltec.com, paltalk.com that offer these services. Attempts by the government to bar access to these sites haven't been successful, simply because it is virtually impossible to monitor the Internet for such sites. Besides, new ones keep popping up every day. The best way to combat telecom bootlegging on the net, of course, would be to make it legal. But that's something the government is not yet ready for. - Venkatesha Babu
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When ICICI Bank's deal to merge Bank of
Madura with itself goes through, in one sweep it will have bought nearly
two years of growth: 1.2 million customers, a presence in 40 new cities,
mainly in southern India, where its own network is weak, 263 more branches
and 18 extension counters. For the aggressive breed of new banks like
ICICI Bank and HDFC Bank (which took over TimesBank earlier this year),
mergers and acquisitions are a quick way of playing catch-up with their
older peers.