Making global brands in India

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The government has spent a lot of effort on the ‘Make in India’ mission to give a boost to manufacturing within the country and, as a result, creating new jobs. While the success of this mission can be debated -- it takes about a five-seven year period for such a mission to show real progress on the ground.

It’s difficult for companies to change gears and accept wide-scale changes overnight. Even replicating China’s success of manufacturing may not be possible for India, since there are a lot of myths about manufacturing and jobs. This article, however, is not about manufacturing but about creating global brands out of India.

The rise of organised retail in the form on global e-commerce platforms like Amazon, presents an opportunity for Indian entrepreneurs and polity to build Indian and global brands. This can help create jobs in an enabling environment and ecosystem. It is not possible to leapfrog China or replace its position as the global factory of the world, but the next big opportunity is to be the brand creator of the world.

For this, India has a distinct advantage in terms of its large managerial talent which is good at creativity, and understands the large mass of global millennials which can be targeted through a single medium -- digital marketplaces. This was never possible before and has enabled the cost of brand building dropping significantly in the last five years.

“The world of consumer brands has changed in the last five years, now it takes the half the time to reach a turnover of Rs 100 crore for a newly-minted brand; brand building costs have also halved in this period,” says Kanwaljit Singh a veteran from the VC fund industry with experience in FMCG marketing.

Singh is so convinced that he raised $52 million for funding consumer brands through his fund Fireside Ventures. Kannan Sitaram another FMCG and VC fund veteran along with Vinay Singh, an entrepreneur, joined him to create brands for millennials.  While the fund size may be limited, it has already identified and funded 11 consumer brands. This is still a small number though. The question is can 1,000 brands be created targeting millennials from India.

It is possible to slice and dice consumers into communities anywhere in the world and target them to sell a brand from anywhere in the world. Vinay Singh, partner at Fireside Ventures, says, “ Non tech entrepreneurs are emerging who are looking at this global opportunity in a very different way. The dynamics of exporting as a commodity can be changed with a brand that captures a higher value.”

The higher value is the leap ahead for an economy like India that has not been able to build scale in manufacturing. If the brands are owned by Indian companies and the supply chain is led by Indian entrepreneurs, a substantial portion of the value in the global economy can be captured. This needs a new mindset especially among the policy makers who have believed that jobs will always be generated through manufacturing. It can be generated from building brands too. After all, Apple may claim all the innovation it wants, but at the end of the day its premium is derived from its brand and not from its outsourced manufacturing processes. This needs much more massive investment and aligning policies to help brand companies to go global from India.

While venture funds can play a role, their capability to raise funds is limited by the number of partners or even the appetite of the market.

Building a global brand needs much higher investment, with an even important role played by the banking sector. Brand companies have fewer assets for collateral, so they need support, a role that development financial institutions played in the 1980s and ‘90s. Now there are no development financial institution so entrepreneurs have to rely on VC funds.

Banks need to step up and build the capacity to evaluate companies which can build global brands, and help them grow. Only private sector banks can develop this capability as they have the necessary culture and depth to do this. Maybe its time for a larger fund to be raised in this space, led by a venture capital fund and supported by a private bank. Scale and speed are important to capture this opportunity.

The thoughts and opinions shared here are of the author.