Many companies fall for the big numbers being touted about the size of the Indian middle class, the fact that it is the second most populous nation on earth and has had the second largest economic growth rate for most of the last decade. These figures can and have dazzled even the most seasoned marketers, and here begins the fallacy of easy growth and big revenues. For years the middle class number being thrown around was 300 million, by both the UN and the US President. In 2001 it was finally accepted as being total tosh after a comprehensive McKinsey Global Institute Study. But it did not matter because the allure was enough for many brands to pour money into India without ever questioning the numbers, and far more importantly without trying to understand the local market dynamics and unique consumer behaviour.
Today, it is accepted that India’s middle class will grow to be an astounding 583 million people by 2025 (source: McKinsey Global Institute). To give you an idea, five percent share for a company like Kellogg’s would equal 29.5 million customers. In the UK, Kellogg’s is the market leader with a commanding forty-two percent share of the cereal market, which amounts to a mere 27 million customers in comparison. So, essentially even a relatively small share number, that in any other market would be scoffed upon, in India can amount to a larger customer base than leadership share in most developed markets. Many a seasoned marketer has looked at these numbers and dangerously never bothered to scratch beneath the surface before diving headfirst into India.
In the 1990’s Kellogg’s was one of the many companies that fell victim to this and had to learn their lesson the hard way. They invested some $65 million into launching their No. 1 breakfast cereal brand, Corn Flakes, in India; relying entirely on the population numbers and dreams of converting a meager one or two percent of consumers, without bothering to study and understand the existing breakfast habits that have been around for thousands of years.
If anyone at Kellogg’s had simply bothered to ask any Indian they would have known that Indian’s like to eat hot and savory foods for breakfast; like idli & sambar, aloo paratha with pickle, or spicy mixes like bhujjia. Furthermore, Kellogg’s never bothered to change any aspect of its marketing strategy or packaging for this vastly different customer. Instead, they relied on their Western strategy to win the day. Employing their world famous marketing strategy of “crispy flakes and premium quality” – unfortunately for them it turned soggy the moment it landed in hot Indian milk on every breakfast table. Their price premium also made them an unaffordable luxury for the vast majority. Kellogg’s was so confident of replicating their global successes that they proceeded to immediately launch a whole series of brands, one after the other; in the end only compounding woes.
In 2001, Kellogg’s finally realised their combination of ignorance and arrogance had led to dismal failure in India. They realised that they were not going to change the Indian consumers’ age old eating habits, in one short decade, and that they needed to change their strategy to succeed in India.
Kellogg’s is by no means alone; Mercedes Benz, Coca-Cola, MTV, Domino’s Pizza and a host of other well-established global brands and savvy marketing companies all learned their India lessons the hard way – by basing their entry on flawed assumptions, doing scant local research or arrogantly expecting to replicate Western strategies, they too failed to set themselves up for success as early entrants. Yet there is an equally long list of hugely successful companies that took the time to understand the market, adapt and cater their product offerings to suit the Indian palate and local tastes; they are now laughing all the way to their Indian bank accounts!