India Dispatch: Multinationals are well aware of the subcontinent's potential. But as personal wealth grows in the country, they also know helping poorer sections of society is a good move.
A little goes a long way for companies in India
In a dusty parking lot at Bangalore airport, a group of curious taxi drivers congregate around a van.
The vehicle is carrying spectacles. The drivers are then ushered to a makeshift eye diagnostic centre where they have their eyes tested and are offered the opportunity to buy glasses at nominal rates. The initiative has been set up by the multinational lens manufacturer Essilor in conjunction with the local eye hospital and an NGO. For Essilor, as well as being a way of helping some of the less wealthy members of India's society, it also allows the company to seed the market for future growth.
Multinationals have recognised the value of lower and middle-class consumers in India and are increasingly trying to serve those segments. With a burgeoning population of more than 1.2 billion and growing spending power in the country, the market is too big to ignore. Unilever this month raised its stake in its subsidiary, Hindustan Unilever, which has a portfolio of products including Dove and Lux soaps, to 67 per cent, for €2.45 billion (Dh11.74bn), as part of its push into India's high-growth market. Unilever this year announced that it would pay as much as US$5.4bn to raise its stake in the subsidiary to up to 75 per cent.
The company is keen to cater to the entire consumer pyramid and so makes sure it offers a variety of products at different price points. For example, in terms of laundry products, it has its Wheel brand for the mass market, Rin for the middle segment and Surf Excel for the premium end of the market.
"We are blessed to operate in a market like India," Hindustan Unilever says. "There is tremendous potential to grow in all the categories that we operate in and it is our stated strategy to straddle the consumer pyramid to address diverse consumer needs across income levels. Per capita consumption in all the categories is still very low compared to even other developing countries. We are investing in market development to grow existing categories and develop new categories."
The opportunities for growth in India are substantial. "As the world's largest democracy with a strong federal structure and vibrant markets, India has seen rapid growth in wealth since the year 2000," says Credit Suisse's global wealth report.
"Wealth per adult rose from $2,000 in 2000 to $5,300 in 2011. Given the 29 per cent rise in the adult population, aggregate wealth more than tripled during the same period."
The report highlights that much of this growth has been among the middle class and wealthy, with 95 per cent of India's population having wealth of less than $10,000.
Schneider Electric, a French energy company, has set up a philanthropic initiative in India with the cricketer Sachin Tendulkar to bring cheap and efficient energy to rural villages. It has developed a solar power lamp called In-Diya for India's poor. The product is given to the villagers for free. With its commercial products targeted at the high end of the market, the company says the bottom of the pyramid is not actually a target segment. But it does help the company's image in the country.
"Intrinsically, we do not believe in the extraction of revenue from that particular level of the market," says Mitali Sarkar, a corporate communications manager for Schneider Electric in India. "The entire approach is philanthropic."