Differences in the way of doing business among Indian states

India is almost as large as the European Union and has more than twice as many inhabitants. No wonder, then, that there are major differences between the various Indian states in terms of language, demographics, politics and economic growth. For a successful start-up in India, it is therefore important to take these differences into account when drawing up a business plan. Because what works in Gujarat does not automatically work in West Bengal.

Image via Harvard Business Review

The regional differences among Indian states

For a European company to succeed in India, you must be aware of the country's vast regional differences. India is a fragmented market with large, and often underestimated, regional differences in language, culture, infrastructure and wealth, all of which affect the regional business culture.

Indian states are therefore better compared to individual countries than to, say, the Dutch provinces. Indeed, India's most populous state, Uttar Pradesh, has as many inhabitants as Brazil, and the southern state of Tamil Nadu has an economy as large as that of Hungary. 

There are also large demographic differences between Indian states. For example, southern India is older, has more to spend and is more educated than the rest of the country. Northern India, on the other hand, is younger and relatively poor.

North Indians primarily speak Hindi, while South Indians prefer to communicate in English or in their regional state language, such as Kannada or Malayalam. The German wholesaler METRO, better known in the Netherlands as Makro, found out after their start in India that there are big differences between the groceries that customers in a certain region put in their shopping cart and adjusted the assortment accordingly by adding more local products. Logical really, Finns also have different preferences than Spaniards.

"METRO found out that there are big differences between the groceries that customers in different regions in India put in their shopping cart."

- Mark Alexander Friedrich, Head of International Affairs for METRO

Do not make one business plan for all of India

For a successful start in India, thorough market research is a must. Regional differences are not only obstacles, but can also work in your favor depending on your sector and product.

The southwestern states, such as Maharashtra and Karnataka, are a suitable base for technical sectors such as automotive, engineering, as well as outsourcing IT and Research & Development teams.

Northern states such as Punjab and Haryana, among others, have thriving agricultural sectors, creating opportunities for food processing and renewable energy industries.

Starting in the right regions is also essential for selling your product in India. European products almost always fall in the highest market segment in India, so it is smart to start in the regions where people have sufficient income and there is real demand for a more exclusive, expensive product.

"Approaching India as one country by working with only one distributor or partner is one of the most common mistakes European companies make in India," says Klaus Maier, CEO of Maier + Vidorno, IndiaConnected's partner in India.

"In Europe, you wouldn't ask an Italian distributor to set up your network in Norway either. An Indian partner or distributor operating in a specific state has a good network only there and will not succeed in successfully expanding sales to other states. Therefore, those who take India seriously start with about four dedicated, local managers or distributors who understand your product and the regional market well. With them, the market can be mapped and the logistics network set up, one of the biggest challenges for international companies in India. In this way, the Indian market can be conquered step by step, successfully." 

Selling successfully in India with the right strategy

For anyone looking to conquer the Indian market, IndiaConnected has put together a special guide in which we offer you insight into the steps to take to successfully start and grow your sales in India.

From preparing your first export shipment to India to setting up a solid after sales service, we guide and advise throughout your India journey.

Indian healthcare offers European companies great opportunities, but they can only be seized with the right strategy

British medical device maker Biocomposites made the move to India 12 years ago. It took five years for the company to break even in India. That sounds long, but it is well worth it, says Sumit Basu, managing director of Biocomposites India. "The Indian healthcare sector is one of the largest in the world and offers enormous potential. If you don't invest there, you will miss the mark."

The English company Biocomposites develops implants made of components native to the body, such as calcium, which can be used in cases of bone fractures, spinal surgery and serious injuries. The products the company develops are highly innovative and therefore fall into a higher price category. Nevertheless, Biocomposites decided back in 2010 that it wanted to bring its products to India. 

At the time, Biocomposites saw the huge potential of the Indian healthcare sector, but was also aware of the potential hurdles that needed to be overcome to become successful in the country. Basu: "Biocomposites decided to work with a local employee from the outset who had a good understanding of Indian business culture and knew the ins and outs of the sector. And that employee, was me."

Testing the Indian market with a liaison office

Basu is starting Biocomposites' Indian adventure with a market survey to determine which specific locations the company will target. "I see a lot of European companies coming along that don't realise how big and diverse India is. You simply cannot approach the country as one big market," Basu explains. "At the time, we decided to focus on the major cities of Delhi, Chennai and Mumbai because that was where there were opportunities for our innovative and therefore more expensive products."

To further test the market and set up a sound infrastructure, Biocomposites then opened a liaison office in India. "A liaison office was the best choice for us in that initial phase, because we really wanted to take the time to bring our products to the attention of the public," says Basu. "But interest among surgeons grew incredibly fast and a liaison office naturally has restrictions, as you are not allowed to undertake any sales activities. Our solution was to import and sell the products through distributors and provide as much support as possible from the liaison office, while also expanding our business to new locations."

Long-term strategy

According to Basu, the construction of a liaison office and selling through distributors may seem cumbersome, but it provided Biocomposites with the space to meet the challenges that every European company in India faces in the start-up phase. "In the medical device sector, products obviously have to be inspected before they can be marketed. In India, there are strict rules for this," says Basu. "Our long-term strategy gave us the scope to go through such processes without pressure. In India, it is not difficult for European manufacturers to get their products approved but it does take time, on average a year."

According to Basu, the long-term strategy has also enabled the company to position itself well in the market. "The Indian market is super price-sensitive, so we knew we had to initially market our product at a lower price to ensure that doctors would be introduced to it," explains the managing director. "That turned out to be the right strategy. We really went far below our European prices and closer to Indian prices in the beginning. Over time, as the demand for our product started to grow, we slowly started to raise the price step by step. It took us five years to break even, but we never had to change our product. And because of that, we have really managed to secure a solid position in the market."

The potential of the Indian healthcare sector

Basu has high hopes for what lies ahead for Biocomposites in the coming years. "India's healthcare sector is one of the fastest growing sectors in the country with a CAGR of 22%, which presents interesting opportunities for European companies," says Basu. "The healthcare sector is growing incredibly fast on many fronts. Not only is India's population thinning and ageing, which has increased the demand for care, but the demand for better quality care is also growing. One of the reasons for this is the health insurance options offered by the government. More Indians are now insured and are making use of them, so the market is developing rapidly. You can see, for instance, that hospitals are modernising to meet the higher demand. I see robotisation, the increase in new forms of treatment and also a growing demand for personal medical devices. The opportunities are huge."

Basu therefore advises European companies in the sector to spread their wings to India. "You will not find such a large and fast-growing market anywhere else. You can't get that volume anywhere else. So take your time, determine your strategy and come and take advantage of the opportunities this market has to offer you."

Wondering what opportunities there are for your business in the Indian healthcare sector? You will find an insightful summary of the growth opportunities on our sector page:

Dr. Oetker made the classic mistake: "We brought our European success products to India without knowing if there was a market".

In 2007, the German company Dr. Oetker, known for its frozen pizzas and cake mixes, ventured into the Indian market. Although the first test of home baking products seems to be going well, it soon becomes clear that their successful products are not at all popular in India. Dr. Oetker is faced with a difficult dilemma: leave India or reinvent itself.

"The start of Dr. Oetker in India was certainly not smooth," says Oliver Mirza, who has now been CEO of Dr. Oetker in India for more than 12 years. "The idea was to use an importer to bring our best-selling products - frozen pizzas, desserts and baking products - to India. To make sure there was demand for these products, we did a product test, as we do around the world. We gave 250 households two boxes of cake mix, a cheesecake and a traditional, German Schwarzwälder Kirschtorte, asking them to test them at home. During the follow-up, all 250 participants were wildly enthusiastic about our product and we thought we had a success formula on our hands. But we found out later that none of the participants had been able to buy cottage cheese or cream cheese to make the cakes with, as it was not sold in India. Also, only a handful had an oven at home. Whether and how they were able to test the product is still a mystery, but they all gave it a ten."

A specific product aimed at the Indian consumer

It wasn't just the cake mixes that hit the spot in India. "We were too early with all our European products. There was no market yet for frozen pizza, even in the big cities like Mumbai, and people didn't yet understand the idea of a mix product," Mirza says. "For example, our vanilla milkshake mix is one of our most popular products in Europe, but in India it didn't sell for anything. I thought that was partly due to the fact that it didn't have real vanilla in it. So we decided to add that. This made the sales of the product go down even further, because people thought there was dust in the mix." Dr. Oetker now had two options: either teach consumers how to use the products and hope that this will increase popularity or jettison the strategy and try something new.  

It became option two. "We started looking for an acquisition in the comfort food sector and in 2008 we ended up with Fun Foods, a small producer of mayonnaise and pizza toppings. With them, we slowly got to know the Indian consumer and really saw that we had to jettison all the lessons we had learned up to that point in Europe. 'They simply don't apply to India, because the market here is so unique,' says Mirza. "Fortunately, Dr. Oetker is a decentralized organization that encourages entrepreneurial freedom in the countries where it operates. This has allowed us to be creative and move into a new sector, sauces, which has allowed us to cater to the preferences and demands of Indian consumers."

Dr. Oetker's India strategy

Before Indian sauce maker Fun Foods became part of Dr. Oetker, the Indian company made sales of about 1.5 million euros. By 2020, twelve years later, sales have almost tripled to about 4 million euros. "To achieve this, we focused on two main things: new products that fill a gap in the market and smartly expanding our distribution," Mirza explains. "Fun Foods, when we bought it, specialized in mayonnaise. That was still a very small market in 2008 with a value of half a million euros. Fun Foods sold two mayos, one with egg and one without. In India, almost 40 percent of the population is vegetarian and, unlike in Europe, that means they don't eat eggs either. But the mayo without egg was not necessarily suitable for vegetarians, because it was made in the same factory as the normal mayo and therefore could contain traces of egg. So we decided to create a special veggie mayonnaise line and it caught on immediately. It proves once again that without knowledge of the Indian consumer, it is difficult to come up with a successful product for this market."

"It is difficult to identify suitable outlets in India."

- Oliver Mirza, CEO Dr. Oetker India

After finding the right product, the next question is: how do you reach the consumer? "In terms of distribution, there are two strategies that are often used," Mirza explains. "You have large companies, like a Britannia or a Nestlé, who bet on mass distribution and have their products in about half of all stores, about five million, in India. Then you have importers who focus on niche distribution and focus on about 5,000 outlets. With Dr. Oetker, we decided to sit in between those and become a mass distributor within our own niche. We are in about 100,000 stores in India and have developed a benchmarking strategy with our sales team to determine which outlets match our products in terms of clientele. Our rule is that if they can sell Nutella, there is a market for our products. Finding these locations is really a challenge in India though, because there is no dataset available on the possible outlets where you can offer your product. So you need a sales team that can build their own database and knows the market well enough to identify new potential outlets."

The opportunities for European luxury products in India

Even before the pandemic, products that make cooking easier and faster and ready-to-eat foods were making inroads, Mirza knows. "But the lockdowns have accelerated this development. This is interesting for Western producers, because our more expensive products are often a good fit for this segment. But it is also challenging to respond quickly to these trends. Dr. Oetker India works closely with major fast food chains like Pizza Hut and Domino's Pizza. This may sound crazy to Europeans, but in India it is normal to put sauce on your pizza, like mayonnaise. By working with other big players, you discover such opportunities for your product and can learn from each other when it comes to trends that are developing." 

In addition, the pandemic also created an e-commerce boom in India. "From groceries to ordering ready-to-eat food, Indian consumers now prefer to have everything delivered to their homes. And that was also an important turning point for Dr. Oetker. "Companies need to be as digital savvy in India as they are in Europe. At Dr. Oetker, for example, we have opened our own online store to be able to serve the customer as well as possible. Especially in the metropolises, you really see a lightning-fast development in this area, so as a European company, don't think you have quiet time to start up the digital branch of your company in India. The customer wants it now, so then we as companies have to follow."