SCA, the €11.4 billion global hygiene products company based in Sweden, set up a manufacturing plant in Pune in March, its first in India. Though the company started selling its products (diapers and tissues) in the country since 2011, it is now looking to ramp up operations and become a significant player. Forbes India caught up with SCA India’s managing director Cecilia Edebo to discuss the firm’s strategies for growth and unique challenges that the Indian market offers.
Q. India is now a priority for SCA. Why?
India’s sheer size makes it important. There is a lot of scope for growth here in the hygiene and personal care space. In some areas, an experienced company like ours can actually contribute to develop the market. We have a 10-year perspective depending on how fast [Prime Minister Narendra] Modi can make India grow. It didn’t look that bright a few years ago when we entered; now it looks much better.
Q. You have just set up a factory in Pune. What does it take to do something like this in India?
Passion and perseverance. It is interesting that even the government is reaching out to us now to listen to our experiences because there are a lot of permissions, registrations and bureaucratic hurdles. Even [Maharashtra Chief Minister] Devendra Fadnavis said he is going to cut back on the number of registration forms from over 100 to around 50. I have been to two interviews and tried to explain the difficulties and also the red tape that comes in the way. This is also one of the reasons we came to Maharashtra because it is one of the most advanced states when it comes to infrastructure. Also, because you can do it all online, you know what you are up against.
Q. What investments have you made for the factory?
What has been shared in public domain is 150 million Swedish krona (at 10 a rupee then). We bought 30 acres. What we have built now is the first phase, utilising about 15 percent of the land. If we follow our plan, we will build two more phases in our factory. We have been granted a mega project status from the MIDC (Maharashtra Industrial Development Corporation) and we have an MoU with the government, which says that we have to invest Rs 500 crore within five years (from 2013, when the MoU was signed).
Q. What are the key challenges for a brand or a multinational in the fast moving consumer goods segment to set up base in India?
India is such a logistically complex market. The infrastructure is not great, so you need to think about how to do things. There are about nine million kirana shops in India; the sheer number makes reaching out a challenge. India is a continent, not a country. The set of goods that I sell in Mumbai is not the set I sell in Bengaluru because consumer behaviour is different. That’s why we have decided to go step by step. There are a lot of habits that come into play. In some parts of the south, they use more powder, in some parts of the north, they use more lotion. You have seasonality in diapers in the north, you don’t have that in the south.
Q. What, in your estimate, is the market size in India?
It’s common knowledge that the baby care market here is worth a minimum of Rs 4,000 crore. It’s growing in high double digits, more than 30 percent. But, again, baby powder is not growing the way wipes are. Pant diapers are growing, open diapers are not.
Q. Which other product categories are you looking to get into?
Tissues. The use of tissues is two-pronged: One is away from home, normally in hotels and restaurants; the rest, which is retailed, is for use at homes, like napkins, kitchen towels, etc. The latter is a rather small segment at the moment, with a market size of just above Rs 400 crore. Total tissue consumption in India is 15 gram per capita, while in Europe it is 23 kg.
Q. What are the brands you have in India?
Of the away-from-home products, we have Libero (diapers), Tempo (tissues) and Tork. Among these, Libero is growing the fastest. We have just rolled out Tena (adult diapers), but the market for it is virtually non-existent. They are mostly imported or used by hospitals. Besides, the elderly here have never worn a diaper when they were young, so why would they wear it when they grow old? There are many other ways of caring for your hygiene. So, we have a line of unique products.
Q. Would you choose the ecommerce route?
Online sales accounted for 20 percent of our total sales in 2013 and it’s exploding. I think ecommerce is posing a great challenge to supermarkets. But we all love our mom-and-pop stores, and it will take some time before the Indian consumer abandons them and moves online.
Q. Between supermarkets and kirana stores, where is the Indian consumer going?
I haven’t seen Indian consumers tilt towards supermarkets. Because their kirana stores are just around the corner, they offer credit and can deliver. And since they are their regular customers, they will store what they want. A supermarket can’t possibly compete with that.
Besides, Indians shop when required, instead of planning in advance and purchasing fortnightly. This is where the kiranas step in. Theirs is an excellent model and I wish you had that everywhere. I think that is the way to protect the business in the future and not give it away to the supermarkets. If you look at it, even after 20 years of supermarkets in India, you haven’t seen any development in the sector. The kiranas have a reason to be there and online will be the counter-effect for superstores. These two probably can be enough.
Q. How is Europe looking at India and the new government? Is there a change in business perception or is it still wait-and-watch?
From the business perspective, I think many now look at India more positively. Modi’s initiatives in terms of addressing the bureaucracy, black money, GST will be a big boost. I’m also the vice chairman of the Swedish Chamber of Commerce in India and we had a big session in Delhi a few months ago. Sentiments are good.
When I came here three years ago, there weren’t the best of sentiments, but we looked at them long term. I think the foreign direct investments have also opened up a bit. Swedish companies like Ikea and H&M are coming in because it’s easier now. I think they’re doing it in a balanced way. Make in India is definitely a good way of looking at it.