Consumer products for the masses in India – Experience on the ground

One of our challenges this summer is to figure out a product, solar or otherwise, that people at the bottom of socioeconomic pyramid use often, figure out what they are willing to pay for the product, and if the product could be profitable sold to them at that price. In the US, consumer brands spend millions of dollars on focus groups with customers in order to answer that question. We dont have the millions yet. In the meantime, I have recorded the choices that I have seen consumers make during my summer travels and work. There is no straight answer to the ‘killer application’ from the observations. But, a few templates/features of the product seems to emerge.

Simple/familiar product at a palatable price

3 bread loafs, two crates of eggs, dozen instant noodle packets (maggi), and pre-made rotis. These were the products on the restaurant on cart. People were buying a combination of the products and consuming it at Rs. 10 to Rs. 15 a plate. None of the products, eggs with roti or maggi and egg for e.g., are a staple Indian diet. Its cheap and tasty and people consume.

Choices that show people that they are moving up the economic ladder

Bangalore to Chennai route has several hundred buses a day, government and private. There are buses no leg room, buses with push back seats and bigger leg room, AC-semi sleeper, Sleeper AC, and ultra luxurious buses with TV screen on each seats. These are ridiculous amont of options for people to choose from.

This can also be seen in automobile industry as well. The number of SKUs of Maruti, Chevy and Hyundais that run in India is incredible. And new models keep coming into the market every year.

Recreational/Entertainment/Quality of life improving products

Digital TV providers have flooded roof tops of urban slums. People pay around Rs.1,200 to Rs.1,500 to get the set-top-box and the dish. The dish tv package (sometimes)comes with 6 months free service (channels). Beyond that users, have to recharge for Rs. 200 or above to receive service. A DTV service also means that there is a digital TV, and electricity connection at home. Minimum TV I could find was Rs. 8,000. Electricity in slums is often stolen. So it takes a one time payment of roughly Rs. 10,000 to have a DTV service at home. I interviewed a slum dweller in South Delhi whose family income is Rs. 11,000 for a family of 3. This income is in the higher end of the spectrum.

I have added religious expenses under quality of life improving expenses. We went to a village in Madhya Pradesh which had mud roads, most houses had mud walls, there was water logged in front of houses from a leaking pipe brewing flies, there was no running water or toilets, there was one school shared with the neighboring village. We had with us, the local municipal officer and some more government officials. The first request that came from the villagers was to complete the construction of the temple dome at the corner of the mud road. Religion has to play a major role in development in India!

There is no killer app that will crack the market, IMO. An amazing power point strategy is pointless in India. Execution will throw curve balls that one cannot anticipate (start selling solar in monsoon season and address questions about cloudy sky is one?). One has to put out a quality product in the market, price it at a comfortably, provide service when needed, learn and alter the above parameters as needed. Easier said than done!

Economic Vs Energy poverty

Tags

economics, energy, renewable

“In rural India, the gap between expenditure on food and non-food items (including energy) and energy poverty is wide and consistent for all income deciles, but is much smaller in urban India” – a very interesting blog on India : http://blogs.worldbank.org/developmenttalk/why-energy-poverty-may-differ-income-poverty

Ragogarh and Madhya Pradesh(MP) stats: 3rd worst malnutrition in India(MP), 50% tribal, lower than national average stats in women to men ratio, higher MMR and IMR than national average, 95% reliance on agriculture (100% in most of the villages we visited). 98% of fields we saw driving from Bhopal to Ragoharh (200 Km) had Soy plantation.

Greg, Nancy, and I visited Rahogarh to get a sense of business opportunities for renewable energy projects (Solar household system, microgrids). We are finding a lot of reasons for why solar is not widely adopted (or even bio gas) as a source of energy. Often the villages we saw were NOT economically poor (much more than $2/day/person). Every household gets 4 litres of kerosene from Public Distribution System (PDS- India’s major subsidy channel) a month at a subsidized rate of Rs. 13 a litre. More kerosene can be purchased at Rs. 16 a litre from PDS. The hike is 2 hrs one way to PDS to get kerosene or any other FMCG. They use kerosene lights for the night and use a mix of kerosene and water for running the water pump. Some houses spend over Rs. 500 per day for kerosene for this purpose (35 lit/day) during planting season.

We saw a few homes with Dish TV, LPG gas cylinders, mobile phones, and sometimes even refrigerators. We also saw shacks with mud walls, asbestos roofs and often one side wall draped with sheets, with a dish and a light hanging outside the house.

In one village called Kunda, a tribal village, most of the houses were grid connected. There is no electricity to fill the grid. Firstly, most of the households haven’t paid electricity bill for over 2 years. One of them in fact proudly produced a bill to me with over Rs. 2000 of arrears(past due). So we were not sure if the bill due caused no electricity or the just lack of electricity supply.

Secondly, Indians are innovative. Of course all the households have a mobile phone. The tractor’s battery is used as a charging source for the mobile phones – innovative Indians. Electricity staling is an art in these areas. Greg has mastered the art of spotting splitting cables and boxes from the electricity pole to homes. We spoke to many proud thieves during our interviews.

Thirdly, the government policies are counter free market. People have been trained well to receive stuff for free. Greg, Nancy and I were having a hot debate on the kind of light, price of product that would benefit such households, etc. On our way back from Bhopal – in the plane, just a day later – while reading paper, I noticed that the Chief Minister of MP has announced free electricity for BOP customers. It is often hard to determine what a right product is and what the right price is for the product in these pre-existing conditions.

I almost gave up and went to Bangkok for a vacation. But I am back and there are certainly opportunities and plenty of resources to explore here with the bop consumers. One such opportunity , I am repeating my own quote here, ‘the person who cracks garbage disposal profitable at scale is the next new billionaire’. Photos from our visit to be uploaded soon!

Happy Summer to all!

 

Agriculture, Agribusiness, Food Security in India

Tags

Agribusiness, agriculture, bio energy, renewable

A few things I learned about agriculture, agribusiness and food security from my visits to Tamil Nadu Agriculture University (TNAU), interacting with farmers and scientists in the south, and following the news and current events.

Photolink: http://sganesan.smugmug.com/Other/SummerIndia-Week-1/29639559_f3kdDB#!i=2536404598&k=dk64GJq

India currently holds 70 million tons of rice grain in its stores, twice the estimated required amount (Times of India). Over 20 million tons are rotting in the Food Corporation of India’s storage facilities (FCI). FCI, governed by the states, is responsible for storage of grains. A TNAU team is working with University of Queensland on addressing this wastage through new storage techniques. I couldn’t yet influence my way to visit one such storage facility, but the pathetic state of storage can be seen on the internet. The TNAU professor of Entomology, who was my liaison in TNAU, vehemently defended the stance on the storage as a protection against draughts. His point is valid, since my home state has seen severe drought conditions.

The Supreme court has ordered state governments to disperse the rotting grains to the people. Hence in states like mine, Tamil Nadu, and almost all southern states, we see subsidized meal schemes. People in TN can get hot breakfast, lunch and dinner under Rs 50 (~$1). I tasted this food in my hometown. For the price, the food was great. These schemes are spreading in the north. Odisha just started providing 1 Kg of rice for Rs 2. Though mostly political, at least someone is eating the otherwise rotting grains. This is just wastage of tax payers’ money and not a sustainable development scheme. Neither does this protect India from the growing number of draughts and floods and changing weather patterns.

I did not agree with the MSP (Minimum Support Price)scheme in India. What incentive is there for farmers to plan and grow crops, if there is invisible buyer who will buy whatever crop you grow? Further, in most southern states electricity for agriculture is free. A few interviews I did with farmers I learned that even that provision is squandered by India’s national pass time – Corruption! A farmer has to pay the electricity workers to get 2 hrs of electricity per day. The sale of solar pumps is on the rice in the south as a result. Farmers are willing to pay Rs 200,000 ( $3,500) for something that is free.

Despite the systemic struggles, there opportunities in agriculture sector in India. I met an entrepreneur who is licensing technology for small holder farming from TNAU and exporting over $2 million of products to African countries and northern India. His struggle is hiring an employee, in Coimbatore, who can reply to email and answer online queries. Apparently, every youngster who can operate a computer wants to work for TCS or Infosys in Chennai or Bangalore. The entrepreneur is confident of exporting $10 million of products in the next 5 years. (Check photos for my visit to the manufacturing facility)

Innovation incubation schemes in universities is helping farmers to patent, build and bring to market new methods and products related to agriculture. Exchange program with McGill University from Canada is bringing in students to work on bio energy in TNAU Bio energy labs. There is a large scale acceptance of renewables (Bio/Solar) in the South. Mechanized, large scale agriculture is growing in South India. But I was told categorically that Indians will NOT accept GMOs or eat the ‘golden rice’. The only GMO crop I saw was a test cotton plant in TNAU test field inside the campus. Even that is not widely planted.

A short note on Indian Food security bill; In my observation, the only reason India hasn’t spiraled into a middle east like revolt is because Indian Government feeds Indian youth and keeps them silent. India defines ‘Food Security’ as access and availability of food to the poor and lower middle class. This is what I learned from the food security bill that is being floated by the Indian ruling cabinet for approval by both houses of the parliment, as well as the researchers and scientists working at the TNAU. There are studies that show growing carbohydrates overloading among Indians due to this rice and wheat subsidy. I do not see scope for India addressing balanced diet issue at scale.

10 lessons from a Development Practitioner

Tags

aid, business innovation, development, lessons, social entreprise

Joel Negin

About the practitioner:

http://sydney.edu.au/medicine/people/academics/profiles/jnegin.php

http://devpolicy.org/author/joelnegin/

Lessons

1. An efficient development practitioner(DP) has to possess the overarching knowledge of several disciplines (health, food, gender, social dynamics), as well as a rounded management skill set (negotiations, economics, strategy, marketing, operations). The knowledge will provide a means to communicate with professionals from each discipline, while the business skills will come in handy during implementation and impact measurement phase of a development project.
2. Development profession is not for the light-hearted. A DP might need to work in 100+ F dry heat, wait for 3 days in a national border for papers, deal with issues of local corruption during projects.
3. Every development project has to start with a community engagement phase. This phase should take however long it takes to gather the following information of the local community; understanding the issue being addressed, economy, social dynamics, poverty levels, gender issues.
4. Creating business innovations and Social Enterprises would be beneficial for a aid project’s longevity, impact, community buy in and eventually the project’s success. The process of business development and enterprise creation can supplement the implementation of the aid project. A person born and brought up in the community with an opportunity to run a business will be a better person to understand the dynamics of the community than a DP from US or Australia.
5. The aid project should consider working with aid agencies addressing other issue. For example, a health initiative from AusAid should look to work with Malaria program from USAID or Japanese government. Redundancies could be avoided and impact of aid $1 could be increased.
6. Improving infrastructure and quality of life of people in underdeveloped areas would best create a climate for fixing the rest of social issues such as education, health, etc. For example, a regular income and money in hand will be the impetus to seek the next ladder in life, better health and good education for kids. The need to search for means to provide food will hinder any motivation to find education and preventative care for kids. This was best described by the example of fertilizer aid resulting in better education and health output and the malaria nets ending up as fishing net.
7. Aid money is available and increasing.
8. DP has a develop communication skills to both communicate with the funding agency or foundation about the project and the local government where the development project is being implemented. The level of government might be from local government level to ministries.
9. Inefficiency and waste of money is the result of increased number of NGOs and government aid investments. This is further accentuated by lack of communication among the organizations.
10. A global, long-term view with a local community plan is the best way to design a development project.

Hello world!

Welcome to WordPress.com! This is your very first post. Click the Edit link to modify or delete it, or start a new post. If you like, use this post to tell readers why you started this blog and what you plan to do with it.

Happy blogging!