Reimagining India: Unlocking the Potential of Asia’s Next Superpower (19 page)

With a population of more than 1.2 billion, which is well on course to be the largest in the world by 2030, inclusive growth is not a choice. It is a necessity for India.

As technology helps raise living standards among those previously excluded from the economic mainstream, I strongly believe the business opportunity at the bottom of the pyramid is not only going to be enduring but also will constitute the pivotal base of India’s future growth story. Entrepreneurs perforce will be eager to go the extra yard to calibrate their business models to cash in on these new prospects.

As Victor Hugo said, you cannot resist an idea whose time has come. We are at the dawn of a data-driven civilization. How we as a society choose to leverage this opportunity will be our legacy.

Muhtar Kent

Muhtar Kent is chairman and CEO of The Coca-Cola Company.

I moved to India with my family as a young boy. My father, a career diplomat, was dispatched to New Delhi to serve as the Republic of Turkey’s ambassador to India. We lived in New Delhi for two magical years. I don’t remember anything from those days about India’s politics or economics. What I do remember are the vibrant colors of clothing and flowers and shops that lined the streets, and the natural beauty of the Indian countryside, from the mountains to the north, to the plains of the Ganges basin to the south. I remember the mysterious music, the aromas of spicy curries and chutneys that friends of my parents would prepare for us. And of course I remember the people: friendly, bright-eyed, ambitious, and sometimes very poor. Everywhere, crowds of people.

India was unlike any of the other places my family had lived—Sweden, Iran, Poland, Thailand, and the United States. From the moment I arrived, India captured my imagination.

Today, as a businessman, I see global companies drawn to India in much the same way I was as a boy. They are dazzled by the promise of adventure and extraordinary opportunity. They are intoxicated, even overwhelmed.

But as I learned, even as a young a boy, in India, appearances can be deceiving. For outsiders, there is always a hint of mystery. Even
if you live and work there, you can never be entirely sure you understand. It is best to assume that you do not. If you come to India with some grand, predetermined strategy or master plan, prepare to be distracted, deterred, and even demoralized.

That’s something I keep in mind as I think of The Coca-Cola Company’s experiences in India. Coca-Cola launched operations in India in 1950 shortly after independence. Our business grew steadily. But in 1977, we exited (along with other multinational companies) after a new law diluted ownership of our assets and operations.

We returned to rebuild our business in 1993 as economic reforms unleashed a period of robust growth. It was harder going than we’d imagined. We struggled at first to find and keep talented employees. We learned that although Indian consumers were eager to embrace global brands, they resented any hint of global corporate dominance. It took us time to understand that small stores, many operated by families out of the front of their homes, were an unappreciated source of economic opportunity.

Today our India business is thriving. I am happy to report that India now ranks among our top ten markets in unit case sales. Our growth in recent years has been particularly dynamic. I still see enormous potential in India—which is why last summer I went to New Delhi to announce that The Coca-Cola Company and its global bottling partners will invest $5 billion in our India operations between 2012 and 2020. By the end of that period, we think India could be one of our top five global markets.

The key to this success has been learning to see the Indian market as it is, not as we wished it to be.

Our first challenge was building the right team. For many years after our return to India, turnover among Coca-Cola workers was too high; as recently as a decade ago, our Indian attrition rates were 34 percent. That was a key weakness, not least because it prevented us from building relations with suppliers and consumers. So we focused on
training and talent recruitment. We recruited a lot of young professionals with deep experience in India’s retailing culture and provided them additional training in customer relationship management, sales, service, and conflict resolution. These changes helped lower attrition by two-thirds.

At the same time, we worked hard to source more products from within India and deepen our ties to the Indian market. For example, we began growing mangoes and invested in citrus farms that supplied our business. Those efforts helped send an important message: All over India, people knew we were there not just to sell to them but to buy from them and invest in them as well.

And we made it a point to understand our customers. India’s people still cherished long-held goals of self-sufficiency and sustainability—and those ideals were essential to our continued growth. Through careful study of how Indian consumers live—people all over the nation, not just those in cities—we learned that most are more likely to buy our products at a small family store than a big supermarket.

At the same time, we saw how a rising generation of young Indians, most of them raised without landline telecommunications infrastructure, has embraced wireless technologies and, in many ways, is leading the global revolution in mobile commerce.

Recognizing that small stores play a huge role in the lives of our customers has required us to do many things differently in India than we do in developed markets. We figured out, for example, that it wasn’t enough to provide small stores with Coke signs and teach them to display our products. Often, these stores had more basic concerns. Many couldn’t keep our drinks cold because they weren’t connected to the electrical grid. More critically, small stores in India often are run by women, who have more difficulty than men in exercising economic rights like getting access to credit. We found we could help store owners address those and similar problems in ways that helped them, helped their communities, and also helped Coke.

For instance, when our bottlers help supply nearby villages with access to running water, the women in those villages are spared the considerable time and trouble of walking to a well, drawing water, and bringing it home. When we help bring electric power to village stores, that helps us sell our products cold—but it also means electricity for the whole village, boosting literacy rates by making it easier for kids to study after dark. When we help a woman secure property rights for her store, that makes it easier for us to sell Coke products and also enables her to build a business and employ other residents. We recently launched our “5by20” initiative, which seeks to bring additional business training, finance opportunities, and mentoring to five million women entrepreneurs across our global value chain by 2020. Indian women make up a significant focus of this program.

One of my favorite examples of how we’re trying to come up with solutions tailored for the Indian market is eKOCool, a solar-powered mobile cooler we developed for use in the tens of thousands of rural Indian villages that lack electricity. The eKOCool looks a little like an ordinary pushcart, but it’s actually a sophisticated marriage of technology and local market savvy. Stores using our eKOCool solar coolers can stay open later and generate enough extra power to do double duty recharging mobile phones or electric lanterns. We hope to distribute more than one thousand eKOCool carts to rural store owners in India by the end of 2013—and we have begun testing them in dozens of other countries.

Back when my father was stationed in India, the country was only a few years removed from colonialism. Indians had had a long and painful experience with foreign businesses exploiting their market without contributing to the well-being of the local economy. What we now understand intimately—and what other companies who want to sell in India must recognize—is that our future is tied to the communities where we operate. A thriving and sustainable India creates thriving and sustainable business opportunities for us.

For The Coca-Cola Company in India, the rewards from being in the market will materialize only if we see our investment in broad terms: not just capital investment in bottling plants and trucks but also human investment
in schools and training, social investment in women entrepreneurs, and technological investment in innovations like solar carts that can power a cooler, a mobile phone, or a lantern by which a young boy or girl can study. That’s an expression of our commitment to India—and our commitment to succeed on India’s terms.

Miles White

Miles White is chairman and CEO of Abbott Laboratories.

In business, sometimes you find the most valuable insights in places you’d least expect them. In my case, it was a crowded Mumbai alley full of “chemist” shops where I went to buy some medicine. That brief visit helped me understand why, after imagining India for a long while, my company had to become an integral part of it.

It was 2009. I had embarked on what might be called an immersion course in India—in particular its health-care system. I was well aware, of course, of the remarkable rise of India’s economy. But for a country so large, dynamic, and diverse, there clearly was no substitute for firsthand observation. So I went to India myself. I toured its hospitals and other health-care facilities, at all levels of service. I visited private homes across a broad spectrum of socioeconomic levels. I tried to understand as well as I could what it was like to be an Indian citizen during this extraordinary moment in the country’s history and what it was like to provide and receive health care there.

As it happened, in the course of investigating India’s health-care system, I came to need a little care myself. That’s how I found myself in the lanes surrounding Bombay Hospital, where about thirty chemist shops, each with a storefront perhaps three to five meters wide, serve the hospital’s many patients. I knew of course that modern, American-style pharmacies were the exception in India. Still, the scene I encountered was eye-opening.

Clerks clamored for my attention as I walked past. Indian pharmacies
function as informal doctors as well as medicine purveyors, but the people manning these shops were unexpectedly young and could have been selling any commodity. Once I chose a shop, the young man at the counter asked numerous questions about the malady I wanted to treat. After a loud discussion between him and someone in the back—during which passersby could easily overhear details of my symptoms—I received a small bag of generic medicines. The drugs prescribed were just what I needed, and I was stunned by how little they cost—a fraction of the price I would have paid for them in the United States or almost any other developed country.

In a way that no spreadsheet or PowerPoint ever could, this experience drove home to me how crucial it was for us at Abbott to be part of India’s health-care solution—and in a big way. India is famously challenging for foreign companies, given the regulatory regime and the vestiges of
swadeshi
(self-reliance) that inspired its independence movement. But we saw that India’s robust economic growth, combined with the readiness of its health-care system for significant improvement and expansion, created a unique and compelling opportunity.

The medicines I bought that day were what are known as “branded generics,” and their prevalence in India underscores the essence of the country’s health-care system. At the tip of the iceberg is outstanding, advanced care for the relatively few who can afford it. But the overwhelming majority of people receive a very different level of care, if any. For this majority, branded generics are appealing because, although their patent protection has expired, they offer the quality of manufacture and trustworthiness of consistency that comes with the imprimatur of a major pharmaceutical firm, at a much more accessible price than newer, patent-protected drugs.

India is a powerhouse for generic drugs, due to its wealth of scientific and managerial talent and its low production costs. An arguable disadvantage of India for pharmaceutical makers is the country’s intellectual
property rights laws, which afford a relatively low level of protection to proprietary, patented drugs. But by focusing on branded generics, which have no patents to protect, we avoided this pitfall.

We concluded that securing a major foothold in India would provide Abbott an ideal base from which to sell not only to the 1.2 billion people there but also to fast-growing markets throughout the developing world. And so we resolved to become a major
Indian
company.

A little history is in order here. More than a century ago, Abbott first initiated business outside the United States. Of the three countries chosen, two—the United Kingdom and Canada—involved culturally simple moves; the third was India. We have no record of why Dr. Wallace Abbott decided that his young enterprise should undertake such a far-flung effort, but I suspect that it was essentially the same prospect that attracted me and my team—the sheer size of the population, the need for care, and the chance to make a powerful impact.

Although our motivation may have been consistent with our predecessors’, our methods have been radically different. When Abbott first entered the Indian market, in 1910, it was in a way appropriate to a young company in a less-connected world, with local agents representing our products. History, politics, and economics kept Abbott’s presence in India steady but relatively small. Until recently, we were seventh in the Indian pharmaceutical market, and our nutrition products business was very small; our total annual revenues from India stayed below $100 million.

That’s in stark contrast with our current effort to make India a major part of our growth strategy. When I began my immersion in India, I feared we might already be too late, that the time for capturing opportunities there had passed. What I found was the opposite. When economies emerge, improving health is among people’s top priorities. In India I saw a health-care system and market still in formation—with strata ranging from high to early development. India currently spends less than 2.5 percent of its GDP on health care (the comparable figure for the United States is 18 percent); over the next twenty years, that percentage will grow exponentially. Already the Indian market is one of the world’s
largest in terms of volume for pharmaceuticals, and we think it will grow at a 15 percent pace for the next two decades.