Business isn’t expected to shrink because Indian consumers prefer global brands to local ones, they said. Global brands dominate the Indian market in most categories and there are few local alternatives, the companies said.
Modi, in his address to the nation on Tuesday night, asked Indians to be “vocal about local brands” and buy local products, pushing for a vision of a self-reliant India. He tweeted that “the way ahead lies in local. Local manufacturing, local markets, local supply chain. Local is not merely a need but a responsibility.”
Executives of global companies interpreted the PM’s speech as an endorsement of making in India.
Many multinational companies have already set up manufacturing units in India and procure raw material locally. Their mobile phones, television sets, toothpastes and soaps, and apparel will retain the global brand ethos in consumer campaigns and communication.
‘Intent Only to Curb Imports’
Apple, the maker of iPhones and Mac computers, already assembles two models — iPhone 7 and XR — in India, accounting for about 30% of its total sales. Apple plans to scale up local production over the next few years and get its component vendors to India, an industry executive said.
Unilever, Colgate, Procter & Gamble, Nestle, Mondelez, Sony, LG, Samsung and Xiaomi are among MNCs that produce or assemble 90-100% of their portfolio in India. Electronic companies are expanding their R&D facilities and component sourcing from India.
Among apparel companies, H&M, Zara, Tommy Hilfiger, Jack & Jones, Gap, Levi’s and Marks and Spencer are increasingly expanding their sourcing from India.
In FMCG products, it can never be swadeshi versus global, said Edelweiss Securities senior vice president Abneesh Roy.
“The intent here is to curb imports and not regulate MNCs in consumer-facing companies. With most global FMCG companies manufacturing in India since over 50 years, there will be little impact on their brands,” Roy said.
IKEA, the world’s largest furniture retailer, has been sourcing from India for close to 35 years and achieved 20% local sourcing within the first year of store operations in the country, India CEO Peter Betzel said. He said IKEA plans to continue sourcing from India to make a positive impact on the economy.
Xiaomi, the largest smartphone maker in India, operates like a local company — from manufacturing, component sourcing, employing over 50,000 people including local leadership to investing in startups and society, a spokesperson for the Chinese company said.
Brand consultant Santosh Desai said the PM’s intent was to ensure companies have a self-reliant supply chain that is largely local.
“Consumer preferences are entrenched… Consumers are unlikely to be hung up on MNC ownership of a brand,” Desai said.
According to television maker Sony India managing director Sunil Nayyar, it is not possible to change the essence of the parent brand and what the PM most probably referred to in his speech was the commitment to make in India and to become self-reliant.
Madhav Sheth, CEO of smartphone maker Realme India, said the PM may have stressed localisation in manufacturing that generates employment.
“Indian consumers want to try new technologies, value for money and they like brands which contribute to the local community and economy,” he said.
OnePlus India country head Vikas Agarwal said all leading global brands are committed to India, localisation and local production. “The prime minister’s views will now accelerate the phenomenon,” he said.
A little bit of nationalism may emerge, said J Suresh, CEO of Arvind Fashions, which manages brands such as Arrow, Gap and Calvin Klein in India.
“Typically, in adversity, everyone comes together. We may not take that kind of road (emphasis on local products) because it is going to be very short-lived,” Suresh said.
Global brands account for over 90% of the Indian market in the smartphone and television categories and over 80% in refrigerators and washing machines. They have a 50-65% share in toothpastes, skin creams, soaps, shampoos and laundry. In most discretionary segments such as beer, aerated drinks, chocolates and coffee, global brands make up for almost 90% of the overall market.