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52 | BW BUSINESSWORLD | 03 June 2023 What are some of the contemporary themes that stand out in cloud computing and how is AWS addressing them? There are two or three themes that stand out. The first one is how do we simplify and make it easier for people to manage and analyse their data? How do we streamline data collection, data management and data administration? And ultimately, we are doing all this because businesses and users want insights. The Amazon DataZone and AWS Clean Rooms address these concerns. Then many customers in India are now thinking about security differently because you have data coming in through different unstructured sources. AWS Security Lake helps them automatically build a data lake and get all the data together on security, allowing them to detect, manage, control, and so on. The second thing we are looking at is the focus on industry solutions. Cloud brings the best of building tools for developers, but we are also looking at how we solve the biggest problems that our industries face. Third, of course, is sustainability. Our water pledge is that by 2030 we will be net positive, meaning that we will return more water than what we use for our infrastructure. Could you give some examples of AWS’ industry focused solutions? If you look at the last two or three years, we assumed that supply chains work in a certain way, but we never had the visibility and transparency we needed. For example, there were shortages across infrastructure, hardware etc. We are now trying to create this supply chain solution, which helps you bring all your supply chain data together that brings a ton of visibility into where things are, allowing you to do analysis and forecasting. Another example is Amazon SimSpace Weaver. It allows you to run simulations INTERVIEW Puneet Chandok, President of Commercial Business, AWS India & South Asia, in an exclusive interaction with Arjun Yadav of BW Businessworld, reflects on certain contemporary themes in cloud computing, the macroeconomic uncertainty around the world and how it will impact cloud spending. Edited excerpts “Customers will realise importance of investing in cloud amid economic uncertainties”

03 June 2023 | B W BUSINESSWORLD | 53 in cloud skills since 2017; imagine the potential it can unlock. We have to skill many more, but from a supply perspective, it is important because it allows you to build capabilities. Third, simply is the Indian customers and partners. My experience shows they are far more open to innovation, experimentation, and ideas. At the same time, India is also becoming an innovation hub where you can build and export to the world. India’s tech stack can now be exported to the world rather than the other way around. We are very excited about the opportunity in India and are continuing to invest in India. In November last year at a level we have never seen before. So, for a city like New Delhi, it enables you to simulate how the city will develop as the population grows. Simulate how long an ambulance takes from point X to point Y as the number of cars increases. All of this was difficult because of the extensive data involved, which requires a ton of computing and storage. Also, we have Amazon Omics, which from a biotechnology perspective, brings a lot of this data together. To reiterate, rather than just looking at the building blocks, the philosophy is to solve the biggest problems from an industry perspective through our solutions. What are your views on the cloud adoption rate in India and what makes the Indian market different? To me, there are three reasons why the Indian market stands out. First, from a demand perspective, cloud penetration is still in the single digits in India. This tells you the total addressable potential in India is much larger than anywhere else in the world. We are the third largest startup ecosystem in the world; we have around 75 million SMEs in India, so there is no market like India from the demand perspective. Second, from the supply perspective, India has never been short of talent. We have trained four million people “Cloud penetration is still in single digits in India. This tells you the total addressable potential in India is much larger...”

54 | BW BUSINESSWORLD | 03 June 2023 we announced the launch of our second region in India – the AWS Asia Pacific (Hyderabad) Region, consisting of three availability zones. The new AWS Asia Pacific (Hyderabad) Region is estimated to support more than 48,000 full-time jobs annually through a planned investment of more than $4.4 billion in India by 2030. The construction and operation of the AWS Asia Pacific (Hyderabad) Region is estimated to add approximately $7.6 billion to India’s gross domestic product by 2030. Tell us about some customer success stories. How have they scaled up their operations through cloud? We are India’s most well-deployed, largest, and broadest cloud platform. We have hundreds of thousands of customers today. If we look segment by segment, insurers were always ahead of the pack. One of the recent examples is ICICI Lombard. They completed their cloud migration to AWS in March 2022, migrating over 600 servers, 100 applications including the core system, and 1000 terabytes of data. Banks are a little behind, but they are catching up. If you look at Axis Bank, their MD & CEO Amitabh Chaudhary has gone public to say that 70 per cent of the workload will be on the cloud, with AWS as the primary cloud provider. We are working with them to build savings accounts that can be opened in less than six minutes. Similar transformations are underway at RBL Bank and IndusInd Bank. In manufacturing, if you look at Ashok Leyland, their data scientists are now working with AWS to look at telematics data, and they have become much faster and more accurate. One of India’s leading tyre manufacturers, Apollo Tyres moved to AWS to digitise its manufacturing process. The IT sector is both our customer and partner, and they are using Amazon Connect to build a channel experience for their customers. Upscaling of the workforce is an integral component of creating a secure cloud architecture. What is your experience on this front? Across India, the need for urgent digital skills training remains a key priority for industry and government. AWS is deeply committed to working alongside government and industry to address the digital skills gap. We have trained over 4 million individuals in India with cloud skills since 2017. As per the report “Asia Pacific digital skills study: The economic benefits of a tech-savvy workforce,” commissioned by AWS and conducted by Gallup, workers in India who use advanced digital skills – including cloud architecture or software development – contribute an estimated $507.9 billion to India’s annual gross domestic product (GDP). What is your forecast for cloud spending amid macroeconomic uncertainties around the world? Economic uncertainty exists worldwide, and customers are very conscious about cost. In such an uncertain environment, being on the cloud and using technology in a meaningful way is even more critical. Compared to an on-prem environment, you can switch on and off, with the ability to scale up and down, reducing your cost. We are working very closely with our customers in India and globally to help them optimise their spending on the cloud. At Amazon, our mission is to be the Earth’s most customer-centric company. In the long term, however, there is a clear realisation that we are moving into a world that will be more uncertain. In such an environment, you need agility which comes through technology and cloud, which reacts well to uncertainty. We will come out of this crisis, and whenever we do, we will come out much stronger. Customers and partners will realise the importance of investing more in the cloud and building more on it versus on-prem. [email protected] “We are India’s most well-deployed, largest, and broadest cloud platform. We have hundreds of thousands of customers today” INTERVIEW

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AMUL’S FMCG MAKEOVER VERY morning hundreds of dairy farmers line up outside the collection centre of the Shekhadi Milk Cooperative Society in Shekhadi Village, Gujarat bringing nearly 7,000 litres of milk. A few hours later, the milk is loaded in a tanker and ferried to a dairy plant in nearby Anand, the eponymous district headquarters popularly known as the milk capital of India. Anand is home to the Gujarat Co-operative Milk Marketing Federation (GCMMF), India’s largest food product marketing organisation that is synonymous with the Amul brand. As one enters Anand, the Amul branding over shops, the numerous parlours and retail outlets give you a sense of the economy the dairy giant has created in that small district, albeit with a touch of simplicity. The minimal aesthetics on the outside and inside of the GCMMF headquarters makes you wonder whether it is really one of the most valuable dairy processors in the E Photographs by Ritesh Sharma COVERSTORY N AMUL 56 | B W BUSINESSWORLD | 03 June 2023

Eyes firmly fixed on a Rs 1 lakh crore turnover by 2025, Amul is seeking to capture a larger share in India’s growing organised dairy sector while making the non-dairy food segment its significant growth driver By ARJUN YADAV JAYEN MEHTA, MD, Amul “Practically, every item you consume in your kitchen will be Amul branded, either organic or dairy”

58 | B W BUSINESSWORLD | 03 June 2023 During the pandemic, Amul ensured that milk procurement didn’t stop, farmers were compensated, and employees were taken care of world. The simplicity stems from the philosophy and thoughts of Varghese Kurien, which makes the federation always conscious about how the farmers’ money is spent. Within walking distance from the GCMMF headquarters is Amul Dairy, where the milk from hundreds of villages like Shekhadi is processed. This dairy processes 30 lakh litres of milk daily, forming a significant chunk of the three crore litres of milk that Amul handles every day. Organised Dairy Sector To Grow Milk production in India has been growing at around 5-6 per cent. As per the latest provisional data from the Department of Animal Husbandry & Dairying (DAHD), milk production in the country stood at 221.06 million metric tonnes in FY22 which translates to roughly 58-60 crore litres per day. However, the share of the organised sector in the total milk output in the country is 41 per cent, growing 9 per cent in the last three years, as per DAHD. This share is projected to increase to 54 per cent by 2026. This is where Amul senses a huge opportunity. Back in December 2021, the thenmanaging director of Amul, R.S. Sodhi, in an interview, emphasised the focus of Amul on the dairy sector in the foreseeable future. “Dairy, dairy, dairy will be 85 per cent of sales over time,” he said. This is evident in the numbers. In its 48th Annual Report, which presented the financial numbers for the year ended 31st March 2022, a whopping Rs 44,577 crore out of total sales of Rs 46,481 crore came from sales of milk and milk products. All its consumer products grew well, with key products such as milk-based beverages (36 per cent), ice cream (50 COVERSTORY N AMUL Sales Turnover (In Rs Crores) 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 2001-022,336 4,278 11,668 27,043 39,248 46,481 61,000 55,000 72,000 2006-07 2011-12 Sales Turnover 2016-17 2020-21 2021-22 2022-23 Group Turnover Source: Amul 48th Annual Report Number of Village Societies 20,000 (In Numbers) 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2001-02 2006-07 2011-12 2016-17 2020-21 2021-22 9,429 11,68814,991 17,307 18,087 18,154 Source: Amul 48th Annual Report Producer Members (In Lakhs) 35 30 25 20 15 10 5 0 2001-02 2006-07 2011-12 2016-17 2020-21 2021-22 22.2426.0531.81 34.56 36.37 36.40 Source: Amul 48th Annual Report

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60 | B W BUSINESSWORLD | 03 June 2023 per cent), ghee (24 per cent), butter (17 per cent), cream (44 per cent) and dahi (18 per cent) registering double-digit revenue growth. In FY23, the unduplicated sales of Amul branded products sold by all the 18 member unions crossed Rs 72,000 crore, and now it aims to hit Rs 1 lakh crore by 2025. Jayen Mehta, the new managing director of Amul, who met this reporter in the somewhat austere GCMMF’s Board Meeting Room, says that the Rs 1 lakh crore target does not look daunting. “The three crore litres of milk that Amul handles daily comprise 25 per cent of the total organised milk sector. The way in which consumer behaviour is shifting, even if 5 per cent of Indians shift from loose and unpackaged to packaged and branded milk, India can add one more Amul every year in the domestic market,” he explains. Just as one enters GCMMF’s boardroom, one cannot help but notice the almost floor-to-ceiling glass shelf displaying every product in Amul’s kitty, not just in the dairy but also the non-dairy segment. You also cannot miss the big smile that it brings on Mehta’s face. It’s a tell-tale sign of where things are headed at Amul. Non-dairy Food Amul’s non-dairy segment has expanded multi-fold in the last four years. The categories range from breads, rusks, cookies, mithai, ready-to-cook foods, protein-based drinks, noodles, ketchup, and non-dairy beverages. “Amul has introduced premium variants which will drive overall realisations upwards,” notes ICICI Securities. But there is one category which Mehta is most bullish on – organics. “Today, consumers want to consume food which is free from chemicals and pesticides. There is a need to democratise organics because, currently, consumers are paying a huge premium for it,” he says. The brand has already launched 8-10 products in the organic segment, such as basmati rice and different pulses and atta. It plans to launch organic sugar, tea and jaggery as well. “Practically, every item you consume in your kitchen will be Amul branded, either organic or dairy,” reveals Mehta. The market size of organic food and beverages in India is estimated to be worth Rs 6,400 crore by 2025, and nearly half of it would be organic packed food. “Amul is looking at organic food segments such as flour, grains, sugar and pulses. This move can be seen as a strategic response to changing consumer preferences. The increasing health awareness among consumers is a significant driver for the organic food categories,” says Palka Arora Chopra, Senior Vice President at Master Capital Services. While Amul will compete with organic staples players such as Organic India, which posted a revenue of Rs 343 crore in FY20, it will be pitted against biggies such as ITC, which has a large and diversified staples range, including organics. ITC’s revenue from the segment, which included branded packaged foods businesses, among other categories, stood at Rs 15,994 crore in FY22. Amul’s revenue from products besides milk and milk products stood at Rs 1,903 crore in FY22, registering a 14 per cent jump over Rs 1,667 crore in FY21. Another category is cookies, which would pit Amul head-on against Britannia Industries. But Amul is on a familiar territory here, and the experience brings the pricing dynamics with which it is looking at newer categories. For example, with its butter cookies, Amul went on a campaign highlighting how its cookies contain 25 per cent butter compared to 0.3-3 per cent among its rivals. The high butter content impacts pricing, making the product slightly expensive. Abneesh Roy, the then Executive Vice President at Edelweiss Securities, in a research note, states that while Amul’s cookies may be a healthier alternative, a large section of Indian consumers are value-conscious, which will make it difficult for Amul to gain off-take in the mass consumer segment at 2x pricing. In the beverages segment, Amul has 120 stock-keeping units (SKUs) ranging from flavoured milk, coffees, carbonated drinks, protein, and probiotics to single speSHAMALBHAI PATEL, Chairman, GCMMF “One significant challenge is maintaining, and further enhancing, the image of Amul as a contemporary, modern food brand, especially among youngsters and children” COVERSTORY N AMUL

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62 | B W BUSINESSWORLD | 03 June 2023 cies such as camel and buffalo milk. “Amul’s strategic move to focus on high-growth categories such as protein and probiotics is wise in today’s health-conscious market. By utilising its cheese whey to make high-protein products, Amul aims to cater to the growing demand for protein-rich foods in India, thereby reducing the need for expensive whey protein imports,” says Rahul Ghose, Founder & CEO, Hedged. Mehta sees the range of high-protein buttermilk and lassi to become a major growth driver, especially among the younger generation. “When every Indian understands that they need to consume one gram of protein daily per kg of their body weight, you can imagine the kind of market opportunity,” he says. He adds that protein is like the US dollar, a global currency which will also help Amul go global at a scale. “The benefit we give to our consumers is a guilt-free indulgence,” he states. Amul’s strategy is also to present itself as a modern and contemporary brand. “One significant challenge is maintaining, and further enhancing, the image of Amul as a contemporary, modern food brand, especially among youngsters and children,” GCMMF Chairman Shamalbhai Patel said in the group’s 48th Annual Meeting in June 2022. In the carbonated drinks space, which has heated up after Reliance Industries acquired Campa-Cola, Amul is upbeat on ‘Tru Seltzer.’ Though Mehta says Amul is not directly pitting itself against the ‘Cokes’ and ‘Pepsis.’ Ghose says this category may be a misfit for Amul as Tru Seltzer, a carbonated beverage, cannot be considered healthy. “Brand Amul is known for offering natural, trusted, and nutritious products,” he adds. Market Visibility A cursory glance at Amul’s extensive product portfolio in the non-dairy segment raises the question: Why are most of these products not on shelves in markets beyond Gujarat and neighbouring states? A senior official at one of Amul’s plants in Anand says that most of these products have been launched recently. He adds that GCMMF analyses market trends across regions to gauge demand and the basis for the production cycle to kick in. “Northern markets at present may not be having that demand for these products, and hence you don’t see many of them in the market,” the official says. The weak market penetration of Amul’s products brings back memories of its past diversification bet in various categories, such as chocolates, energy drinks, frozen foods etc., which failed to create a dent in the market. Amul is also focused on creating a strong distribution network across India. It has 10,000 distributors, which cater to Amul, through its Vision 2030, aims at a 35 per cent reduction in specific carbon emissions, recycling 700 kilolitres/day of water... COVERSTORY N AMUL

03 June 2023 | B W BUSINESSWORLD | 63 1 million retail outlets. “The company has now expanded its direct distribution reach to towns with 10,000+ population, and it plans to now penetrate in 5,000+ population towns,” ICICI Securities notes. But Mehta believes that all of Amul’s past diversifications beyond dairy and value-added dairy products came with multiple learnings through which they better understood the market trends and consumer preferences in that category. In the chocolate segment, for example, while Amul maybe having just 10 per cent of the market share, but today, we are the largest brand of dark chocolates in India, Mehta says. Mehta says that Amul’s USP is consistency, and it will continue with its legacy campaigns for marketing. It also aggressively used the ‘Amul Girl’ to connect with the masses, which according to Mehta, has seamlessly transitioned from hoardings to social media. Amul’s ESG Story Beyond capturing market share or competing with established FMCG behemoths, Mehta believes it is the farmers’ interest that Amul has consistently put forward. There is no better proof of this than the 36 lakh farmers of Shekhadi and 17,999 other villages who own Amul. The Amul model enabled farmers to be involved in decision-making at every stage of operation, from milk procurement and processing to product manufacturing and marketing. Mehta says that when it comes to the ESG story of Amul, they didn’t have to invent the purpose. “Since our inception in 1946, the purpose has been built in. Ever since we started, we were clear that we cannot be self-centred.” Amul has maximised returns on milk supplied by the farmers and provides incentives for better quality milk. During the pandemic, Amul ensured that milk procurement didn’t stop, farmers were compensated, and employees were taken care of. “Every Rs 100 you spend on Amul products, Rs 80-85 goes back to the producer,” Mehta states. As to the sustainability aspect across the entire value chain, Amul, through its Vision 2030, aims at a 35 per cent reduction in specific carbon emissions, recycling 700 kilolitres/day of water, and a 20 per cent reduction in chemical consumption. Mehta explains that Amul has started developing a robust circular economy, which will become a classic case for India. “India has demonstrated that cow is not a problem but a solution,” he says. India’s FMCG majors have announced plans to ramp up manufacturing and innovation as they forecast a healthy revival in the sector. Amul, through its strong brand legacy and distribution reach coupled with its ever-evolving marketing playbook and experience from past diversifications, can make the non-dairy food segment a significant growth driver as it aims for a Rs 1 lakh crore turnover by 2025. With a diversified portfolio in the segment, India’s best-kept FMCG secret may soon be revealed. [email protected] RAHUL GHOSE, Founder & CEO, Hedged “Amul’s strategic move to focus on high-growth categories such as protein and probiotics is wise in today’s health-conscious market” PALKA ARORA CHOPRA, Senior VP, Master Capital Services “Amul is looking at organic food segments such as flour, grains, sugar and pulses. This move can be seen as a strategic response to changing consumer preferences”

64 | B W BUSINESSWORLD | 03 June 2023 How did the recent hike in milk prices impact your margins? Are more price hikes on the cards? The price hike was done last year. If you look at the last four years, producers were severely affected during the pandemic and input costs also increased. We had to find a way to compensate the producers. Price hike to the consumer becomes income to the producer because if you spend Rs 100 on Amul products, Rs 80-85 goes back to the producer. This is where we must walk the tightrope. Over four years, we took only six increases in the price of our largest selling toned milk, so we are still way below inflation over a long period. Exports grew over 145 per cent in FY22. What are Amul’s overseas expansion plans? Amul has created a huge market for its commodity and consumer products globally. Today, we export to almost 50 countries. We are getting unprecedented volumes, and the government of India, through the PLI (production-linked incentive) scheme, is also supporting brand-building activities in international markets. We hope to gain a stronger foothold globally. We have identified the top 100 cities in the world and are focusing on developing each of these markets. In the next decade, India will produce 30 per cent of the world’s milk compared to 22 per cent now. Once India has this chance to become the dairy to the world, Amul will be the most prominent global brand name. Tell us about your expansion plans in southern region. The southern market is one of the most organised. The number of people consuming loose milk versus packaged milk is very high. We look at this market from two angles. First, if we can procure milk in the region and second, if we can sell it there. We are working very hard in Andhra Pradesh and Telangana to procure milk. We just announced our dairy plant “AMUL WILL BECOME INDIA’S MOST PROMINENT GLOBAL BRAND” I N an exclusive conversation with Arjun Yadav of BW Businessworld, Jayen Mehta, MD, GCMMF (Amul) shares lessons from Amul’s previous diversifications in the nondairy segment and strategy for expansion in the southern region. Excerpts INTERVIEW N AMUL

03 June 2023 | B W BUSINESSWORLD | 65 in Hyderabad. We currently sell more than three lakh litres of milk in that region. We plan to expand that capacity. We have been operating in north Karnataka for over seven years now. People want Amul products. They know the brand, and now we will endeavour to make, pack and sell milk closer to them. Very soon, you will also see the Amul launching in Chennai. What does the recent uproar in Karnataka tell you about the cooperative business, especially in the dairy sector? Why this hesitancy to compete in a free and open market? There is no hesitancy. Amul works closely with every dairy cooperative in the country. We’ve been packing ice cream in plants in Karnataka for the last 25 years. When they had surplus milk and no market, we bought as much as 5,000 tonnes of cheese in 2021 worth more than Rs 200 crore. The same applies to Tamil Nadu. Last year, when there was a shortage of fat in the country, we supplied white butter there. Kerala needed milk powder and we provided it. All the dairy cooperatives of India have been born out of the Amul model. We share a very close linkage and bondage with them. Amul’s diversification beyond dairy in the past failed to capture any notable market share. What are some lessons from this experience? The reason for our diversification, for example, in chocolates, was the farmers’ interest. Multinational chocolate companies exploited the cocoa bean producers in South India. Amul entered this space. When Campco (Central Arecanut and Cocoa Marketing and Processing Co-operative) in South India was formed, we started buying from them. The metric of success is not just the sales of our products or market share. Due to our foray into this category, the cocoa bean producers got a reasonable price. This is where the overall impact must be seen. Today, we are the largest brand of dark chocolates in India. We expanded our capacity by five times in 2018. It runs at 100 per cent capacity and we plan to double it. In the beverages space, we launched ‘Seltzer’ along with dairy-based and real fruit-based products as well as a cola without caffeine or phosphoric acid. These are some concepts we introduced in the country. We are not directly pitting ourselves against brands like Coca-Cola or Pepsi because the products differ. The benefit we give to our consumers is a guiltfree indulgence and they have been catching up well. In the frozen portfolio, the pizzas helped us understand that consumers want ready-to-eat products. We now have frozen parathas and french fries. We set up a plant to manufacture this, which sources potatoes from farmers. The plant was commissioned six months ago and is running at full capacity, and we are expanding its capacity by four times. All diversifications come not just with learnings but also help form connections with the farmers. How do you keep your taglines or icons such as Amul Girl relevant in a fast-changing marketing landscape? The Amul Girl has been the best way to connect with the masses, and she seamlessly adapted from hoardings to social media. We do four to five weekly articles, and it is not just about advertising on social but creating conversations as well. We have 13 unique social media handles in different languages. Our ‘Amul Taste of India’ and ‘Amul Doodh Peeta Hai India’ campaigns are iconic. Our strength is consistency. We will not change the campaigns and these taglines. We spend less than 1 per cent of our turnover on advertising, whereas others spend 5-12 per cent of their turnover on brand building. Our currency is not milk; it is trust. The trust of millions of producers and a billion consumers keep this brand growing. [email protected] Photograph by Ritesh Sharma

66 | B W BUSINESSWORLD | 03 June 2023 IN DEPTH MILK ECONOMY TOWARDS WHITE REVOLUTION 2.0 India has set itself an ambitious target of raising its milk output by around 100 million metric tonnes by 2033–2034 by creating an additional 2 lakh primary dairy cooperatives. But getting there will require concerted action on several fronts By Ashish Sinha

03 June 2023 | B W BUSINESSWORLD | 67 I N MARCH, UNION COOPERATION MINISTER Amit Shah, while addressing the dairy industry at the Indian Dairy Summit, talked about raising India’s milk production, currently pegged at around 230 million metric tons (MMT), by at least 100 MMT, and taking the country’s share in global milk output to one-third. The Ministry of Cooperation under Shah plans to achieve this target by creating an additional 2 lakh primary dairy cooperative societies (PDCS). “The Indian dairy sector has grown by 6.6 per cent per year in the past decade. The central government is setting up 2 lakh dairy cooperatives in villages. Once that happens, the dairy sector growth will go up to 13.80 per cent. And India’s share of global milk production will be 33 per cent. Our dairy exports will be at least five times the current level,” said Shah. Currently, there are 1,99,182 PDCSs with around 1.5 crore members. These PDCSs are engaged in procurement of milk from the farmers, providing milk testing facilities, cattle feed sale, extension services, etc. The bigger challenge Photograph courtesy: ICRA

68 | B W BUSINESSWORLD | 03 June 2023 to double the number of PDCSs in the next 10 years. Experts tracking the sector list out a number of challenges that need to be tackled if India has to increase its milk production rapidly. “The Indian dairy industry remains highly fragmented and largely regional. The organised sector currently accounts for only 26-30 per cent of the marketable milk volumes. GCMMF (better known as Amul) being the only player to have a pan-India presence,” says a senior analyst who tracks the dairy sector. Sheetal Sharad, Vice President, ICRA and an expert of dairy sector agrees. “In value terms, the Indian dairy market is estimated at around Rs 14-15 lakh crore contributing ~4.5 per cent to India’s GDP. Around 70-74 per cent of the dairy market is unorganised (unbranded, traditional vendors) and the remaining is organised (cooperatives + private dairies). The top three dairy players in India are cooperatives. In terms of product mix, 51 per cent is sold as liquid milk and balance as value added dairy products or VADP. The Indian milk IN DEPTH MILK ECONOMY production is estimated at 221 million tonnes for FY2022, having grown YoY at 5.3 per cent. Around 45-47 per cent is self-consumed by the cattle owner and balance is sold in the market,” says Sharad. Milk production growth is significantly dependent on growth of cattle population. In FY23, milk production in India was impacted by the incidence of lumpy skin disease (LSD) in North India. Additionally, there was slower than usual induction of new cattle as a result of the restriction on cattle movement owing to LSD. That led to lower milk yields. Increasing Milk Output How can India increase its milk production? According to Sharad of ICRA, increase in output will depend on rapid INDIA’S SHARE IN GLOBAL MILK OUTPUT INDIAN DAIRY MARKET MANISH BANDLISH, MD, Mother Dairy Fruits & Vegetables “In FY22-23, we observed a phenomenal demand for milk and milk products across regions. Notably, ice creams saw a remarkable revival...” DOMESTIC MILK PROJECTION

03 June 2023 | B W BUSINESSWORLD | 69 response to fluctuating crop prices. “Ensuring high quality and nutrient-rich fodder for the milch animals will further aid in increasing yields,” adds Sharma. The recently formed Ministry of Cooperation plans to increase the number cooperatives in India by 2 lakh through schemes and subsidies for dairy coops. Incidentally, cooperatives account for a little less than half of all milk procurement in the organised sector. The same schemes need to be extended to private players as well for overall dairy development. Clearly, the Indian dairy industry needs further enhancements across its value chain to achieve the additional 100-110 MMT in milk production over the next 10 years. On the input front, the foremost priority, experts say, should be improving cattle health by eradicating foot-and-mouth disease and lumpy skin disease. Also, by making artificial insemination services available to all farmers. On the processing and storage side, investments should be made in highquality machinery, particularly for value-added dairy products that command higher realisations. Then, a robust cold-chain infrastructure is essential to help smoothen distribution and extend the shelf life of dairy products. However, the investment roadmap to achieve this is still a ‘workin-progress’ by the various government departments. Demand Grows Meanwhile, the demand for not just fresh milk but also value-added dairy products is on the rise. The Gujarat Cooperative Milk Marketing Federation (GCMMF), popularly known as Amul growth in cattle population and incentives to farmers to rear cattle, including attractive pricing for milk. “Also, increasing network penetration and converting unorganised farmers into being part of an organised supply chain can improve farmer incomes and help focus on cattle rearing and productivity,” says Sharad. Some of the steps being taken by authorities to improve productivity of cattle include cross breeding and artificial insemination to improve the genetic factors of the cattle, leading to better milk yields. Improving access to healthcare facilities for cattle is also being facilitated. Pushan Sharma, Director - Research, CRISIL Market Intelligence and Analytics points out that the milk yield in India is much lesser compared to the US and New Zealand. “This is primarily because of the cow and buffalo breeds that are found in India. Higher yielding breeds are expensive and cannot be afforded by small and marginal farmers. Therefore, to substantially increase milk production in India, higher yield milch animals must be made accessible for small and marginal farmers,” says Sharma. Further, the quality of fodder consumed by animals is of substandard quality as farmers switch to different fodder crops in SHEETAL SHARAD, Vice President, ICRA “In value terms, the Indian dairy market is estimated at around Rs 14-15 lakh crore contributing approximately 4.5 per cent to India’s GDP” Photograph by Akaratwimages/Canva

70 | B W BUSINESSWORLD | 03 June 2023 India, said recently that the 18.5 per cent growth in its turnover was largely on account of demand for branded consumer products. The provisional unduplicated group turnover of member unions of the Amul group crossed Rs 72,000 crore ($9 billion) for FY23. “Our fresh products grew by 21 per cent with a contribution of 50 per cent to the GCMMF turnover and ice cream range grew by 41 per cent. Our consumer products have registered a growth of 23 per cent year on year with products such as cheese, butter, UHT milk, milk beverages, paneer, cream, buttermilk and dahi having grown at 20-40 per cent,” GCMMF said. The GCMMF with its 18 member unions boating farmer member strength of more than 36 lakh across 18,600 villages of Gujarat is investing in new product categories such as organic foods, high protein products, probiotic range, fresh sweets as it aims to transition from being India’s largest dairy brand to India’s largest FMCG company specialising in food and beverages. Shamalbhai Patel, Chairman, GCMMF, emphasises the fact that the mantra of rapid expansion has clearly yielded rich dividends for GCMMF. The next big organised player, and most popular in north India, Mother Dairy Fruits & Vegetables, is said to have recorded a turnover of Rs 15,000 crore for FY23 clocking more than 15 per cent growth. Manish Bandlish, Managing Director, Mother Dairy says: “In FY22-23, we observed a phenomenal demand for milk and milk products across regions. Notably, ice creams saw a remarkable revival registering a growth of over 45 per cent in comparison to the last fiscal, while other leading categories such as dairy beverages, curd etc. also witnessed a healthy growth year on year.” According to Bandlish, the consumption trend remained persistent during the fiscal, with continued inhome consumption, enhanced out-ofhome consumption and preference for packaged foods going strong. Going forward, Mother Dairy will continue to expand its markets and categories with the best-in-class product experience to enhance consumption while creating new avenues for its farmers. Nestle India, which follows the calendar year as its financial year, reported sales of Rs 16,790 crore, clocking its highest double-digit growth in a decade led by sustained volume growth. “In 2022 total sales grew by 14.5 per cent and domestic sales increased by 14.8 per cent, with broad-based performance across all categories,” Suresh Narayanan, Chairman and Managing Director, Nestlé India said in a statement. For 2022, the company reported a profit of Rs 2,390 crore. Others Are Growing Too There are other significant regional players in the dairy business that are also clocking growth. KMF from Karnataka, better known by its brand name Nandini, has more than 25 lakh farmers. Parag Milk Foods in FY22 sourced more than 11 lakh litres of milk daily from more than 2.5 lakh farmers spread across five states but majorly based in Maharashtra. Then, there are players like Heritage Foods (AP), Hatsun Agro, (TN, AP, Telengana & Karnataka), Dodla (also in south), among others, that are helping the industry grow. Experts say that adding more farmers to these networks plus creating more cooperatives is the only way to push the overall milk production. The policymakers in states and at the Centre must take note of this and give all possible support to make India a globally significant player in milk production as well as exports and quality by-products. [email protected]; @Ashish_BW PUSHAN SHARMA, Director - Research, CRISIL, MI&A “To substantially increase milk production in India, higher yield milch animals must be made accessible for small and marginal farmers” IN DEPTH MILK ECONOMY

72 | B W BUSINESSWORLD | 03 June 2023 SUMMER SPECIAL The ‘above normal’ temperatures and heatwave conditions predicted by the weatherman for most parts of north India this time look like significantly spurring the demand for ACs, refrigerators and other durables A HARSH SUMMER ISN’T ALWAYS a bad thing; in fact, it always means good business for a section of the industry. Or the cooling solution providers, to be precise. The higher the temperature, the better the business for them. And so, with temperatures predicted to go through the roof, and rains expected to play truant thanks to the El Nino phenomenon, the summer months are likely to significantly push the sales of air conditioners, refrigerators, and air coolers across the country. Already, there is an incipient demand among the upwardly mobile sections of the population for all sort of household goods and appliances that are considered necessary for living the good life. Now, with heatwaves becoming more frequent and intense, the demand for these is expected to only soar. Right at the top of most people’s wishlist are the air conditioners. Considered a necessity for providing instant relief from scorching heat, whether at home or at work, air conditioners are likely to witness a sharp surge in sales. The sale of energy-efficient air conditioners may see a significant spike, as consumers become more conscious of their carbon footprint. Ditto for refrigerators, which are essential for preserving perishable food and beverages. As temperatures rise, the need to keep food items fresh and prevent spoilage becomes more critical. Here too, consumers will likely SUMMER BONANZA n By Team BW n OPENING ES SAY Photograph by Ijsphotography

invest in refrigerators with advanced cooling technologies and larger capacities to meet their cooling needs. The increased demand for cooling appliances can drive innovation and competition among manufacturers, leading to more advanced and energy-efficient products. However, it is essential to address the potential environmental consequences of increased energy consumption and ensure that sustainable practices are followed in the production and usage of these appliances. The high growth in value in 2022 indicates that consumers are willing to spend more on high-end products. Experts say increasing demand for home appliances along with a fairly low penetration rate has left the Indian air conditioner market with plenty of room to grow. In fact, it is estimated to sell 9.7 million units in FY2023, compared to 8.25 million units in 2022. Appliances major Voltas sees growth across both mass and premium segments in 2023, driven by an increasingly even distribution of wealth, increased consumer spending power and demand for both high-end and affordable cooling appliances. “Introduction of ‘all weather ACs’ allows us to cater to the everchanging climatic conditions with intelligent heating, dehumidification and cooling technology, makK.J. JAWA, Chairman & MD, Daikin India “I personally feel that India as a country is moving from service economy to a quality of life economy”

74 | B W BUSINESSWORLD | 03 June 2023 ing our product offering more flexible,” says Deba Ghoshal, Chief Marketing Officer of Voltas. According to Anant Jain, Head of Market Intelligence – India, GfK, “The consumer durables industry reported YoY growth of 31 per cent in value terms in 2022; this was driven essentially by major domestic appliances (ACs, microwave oven, refrigerators & washing machines) which grew at 34 per cent, Small domestic appliances (air coolers, air purifiers, etc.) which grew by 37 per cent.” As per the GfK Market Intelligence Offline Retail Sales Tracking, ACs, refrigerators and air coolers showed YoY value growth of 53 per cent, 34 per cent and 88 per cent, respectively for MAT (Moving Annual Total i.e. 12 months aggregated Mar 22-Feb 23) February 2023. As forecast by the India Meteorology Department, with the hot and oppressive Indian summer just around the corner, these categories may sustain positive momentum, adds Jain. Eric Braganza, President, Consumer Electronics and Appliances Manufacturers Association (CEAMA) also predicts a healthy growth in the sales of ACs, air coolers, refrigerators, etc. this summer. “We believe that factors such as rising temperature, increasing awareness among consumers, innovative product launches and the availability of a wide range of products at different price points will lead to a revival in sales of cooling products in the coming months,” says Braganza. The industry is also focused on improving the distribution and availability of products, as well as offering attractive financing and promotional schemes to customers, he adds. As to the aggressive pricing strategies adopted by players to gain market share continuing, Braganza says: “The industry is competitive, and companies often use aggressive pricing strategies to gain market share. While such strategies can lead to short-term gains in sales, it is important to ensure that they are sustainable in the long term. We encourage companies to focus on offering high-quality products and services, and to maintain reasonable margins, to ensure sustainable growth in the industry.” Agrees Ghoshal of Voltas. He says: “In our experience, while pricing and inventory management are important factors in improving margins, they are not the only determinants. We believe that our focus on innovation, quality, and customer service has been key to our success in the highly competitive consumer durable industry.” Sales Dynamics Manish Sharma, Chairman, Panasonic Life Solutions India & South Asia explains how the market dynamics work in the durable segment. When it comes to cooling products, production typically peaks around September or October, and a lot of inventory accumulates within the warehouses. “Around 30-35 per cent of sales in India comes out of organised retail, another 35-40 per cent through conventional distribution, and the remaining via exclusive or ecommerce channels. Being a country with lower penetration rates for air conditioners and distribution, still contributing 35-40 per cent MANISH SHARMA, Chairman, Panasonic Life Solutions India & South Asia “Around 30-35 per cent of sales in India (of durables) comes out of organised retail, another 35-40 per cent through conventional distribution...” ERIC BRAGANZA, President, CEAMA “See a healthy growth in the sales of ACs, air coolers, refrigerators, etc. this summer” SUMMER SPECIAL OPENING ES SAY

of the overall demand, it takes a bit of time for the entire value chain to streamline the inventories,” says Sharma. Meanwhile, Daikin India crossed the $1 billion turnover landmark in FY2. A wholly-owned subsidiary of Japan’s Daikin Industries, it has so far invested Rs 2,300 crore in India. Under K.J. Jawa, Chairman & MD, Daikin India & Member of the Board, DIL, the company has seen tremendous growth, clocking a turnover of Rs 8,860 crore for the financial year ended March 31, 2023. The company is looking at the India business as its “future treasure” and expects it to double to $2 billion (around Rs 16,350 crore) in the next three years, says Jawa, an industry veteran. Jawa feels the Indian customers recognise value when they see it, and don’t mind paying ‘extra’ for it. “In my more than 40-year career, I have never seen any customer not wanting to paying a little extra for a future-ready product that can value add his life. I personally feel that India as a country is moving from service economy to a quality of life economy,” says Jawa. Standout Products To target the Indian diaspora and drive sales, Daikin India has reinvented itself every year to become the fastest-growing AC company. This year too, Daikin India has a fantastic line-up of products. According to Jawa, the 2023 AC line boasts of patented streamer discharge for clean and pure air. The company’s patented swing compressor for higher compressor efficiency is on offer along with dew clean technology for IDU cleaning and smart operations through apps including Alexa, Google Home and others. Godrej Appliances also witnessed robust growth in AC sales. Says Kamal Nandi, Business Head and Executive VP – Godrej Appliances, part of Godrej & Boyce. “We have witnessed close to 80 per cent growth in our AC category so far this season in comparison to the same period last year. It is notable that the consumption of 5-star rated ACs is rising across all segments including 1-ton, 1.5-ton, 2-ton and window AC as well. the frost free segment within refrigerators continues to grow as well although the mass end is yet to show strong resurgence. Deep freezers are showing very good growth at close to 40 per cent. Going by the rising temperature, we expect May to deliver very good growth over same time last year,” says Nandi. Godrej Appliances says it recently launched an industry-first revolutionary product --India’s first split AC with ‘anti leak technology’. The company now offers a range of 25+ SKUs in the AC segment for this summer season, with majority of them manufactured at company’s own plant in India. Power Situation Without sustained power, no electric equipment can work. With IMD predicting sustained and long summer days ahead, how is India prepared to meet the high demand for powe? Talking to BW Businessworld, Union power minister R.K. Singh said, “We are very well prepared.” According to the minister, India has taken steps to ensure that no disruptions in the power supply occurs during the peak summer season. The power ministry expects the demand to increase to almost 230 gigawatts (GW). If that happens, it will be a record for India. “In the past, our peak demand had increased to 215 GW, which will be 15,000 megawatts more. That is good news. That is an indicator that our economy is growing. For all the critics, the surest indicator of the growth of our economy is the power demand. The power demand has gone up by 10.5 per cent,” the minister said. His full interview can be read in the pages ahead. R.K. SINGH, Union Minister for Power, New & Renewable Energy “The surest indicator of the growth of our economy is the power demand. The power demand has gone up by 10.5 per cent”

76 | B W BUSINESSWORLD | 03 June 2023 IN FOCUS SUMMER SPECIAL IN CONVERSATION Given the onset of early summer, how well is the power infrastructure in India prepared to handle the power demand? What is the peak demand expected? We are very well prepared and have taken steps to ensure no disruptions in the power supply. We have instructed every state that we do not want any load shedding. We expect the demand to increase to almost 230 gigawatts (GW). This will be a record for our country. In the past, our peak demand was at 215 GW, so we need to be ready for an additional 15,000 megawatts (MW). I see this as good news because it is an indicator of our growing economy. For all the critics, the surest indicator of economic growth is the power demand, which this year has gone up by 10.5 per cent. Please tell us more about the steps that the government has taken to How do you envisage India’s renewable energy capacity addition given the slowing pace in recent years and its ambitious target of 500 GW by 2030? India’s rate of energy transition is the highest in the world. We also have a trajectory planned for renewable capacity addition. We have around 177 GW of non-fossil fuelbased capacity and another 182 GW is under construction. That’s already 259 GW and we have another 30 GW under bidding. We plan to have bids to address logistical constraints. Our power plants have about 35 million tonnes of coal stock. There will be no scheduled maintenance to address the power demand. All the plants that were under periodic maintenance have come back on track. We have tied up with imported coal-based and with gas-based plants. We tied up 5,000 MW of the gas-based capacity of NTPC and about 1,500 MW of private gas-based capacity. We have enough capacity to meet our requirements. “INDIA’S SURGING POWER DEMAND INDICATIVE OF ECONOMIC GROWTH” We have around 177 GW of non-fossil fuel-based capacity and another 182 GW is under construction remove logistical constraints in coal supply to ensure availability at power plants. There have been several logistical constraints in coal supply but this is because the demand was not expected to spiral this high, this quickly. Earlier, coal used to come from the coal fields of Central Coalfields on the northern side of Odisha. Now, much of it is coming from the southern side of the Talcher area. The network was limited but the railways are expanding it. They are buying more rakes as well Union Minister for Power and New & Renewable R.K. Singh discusses the government’s preparation to address the all-time high power demand this summer and the country’s energy transition drive in this interview with Arjun Yadav

03 June 2023 | B W BUSINESSWORLD | 77 Rooftop solar has been attributed to the slow pace of renewable capacity addition. How is the government planning to give this segment an impetus? The problem with rooftop solar is that the number of companies in this field needs to grow. We want more companies to set up rooftop solar. We have made the process for applying for it online and it has made the consumer’s life easy. The speed of installation will go up once more companies enter this field. We also plan to come out with regulations whereby any new construction in residential or commercial space will have to have a rooftop. What is the potential of pumped hydro and battery storage that you envision in maintaining grid stability? Both are necessary because of their different attributes. Pumped hydro will last for three to four decades but their sites will be limited by geography naturally. With battery, this limitation is not there. Also, the commissioning and gestation period is more for pumped hydro. We expect a pumped hydro capacity of 27,000 MW by 2030, which is not a modest target and for battery, we are looking somewhere in the region of 300 GWh (Gigawatt hours). What are your views on protectionist measures by the developed world in the green hydrogen space? India’s cost of making renewables is the lowest in the world and this will apply also to our cost of producing green hydrogen. We have a country coming out with absurd subsidies, such as $3 per kilogram of green hydrogen. This is a protectionist measure in total violation of the WTO rules. Another country says that the distance between the electrolyser and the place of generation of renewable energy should not be more than 500 kms. They don’t mind if it is expensive in their country but they don’t want to buy from any other country. These are the questions which need to be put to them. Protectionism has to go if the whole world has to transition. of about 50 GW per year for the next four to five years. This excludes the 125 GW capacity required for green hydrogen. Our modest target is five million tonnes of green hydrogen production by 2030, and every million tonnes of it requires 25,000 MW. So in effect, we only have to set up 125 GW, which we’ll be able to do without breaking a sweat.

78 | BW BUSINESSWORLD | 03 June 2023 and more specifically in the room air conditioners category customers are preferring premium SKUs from premium brands. For example, 5-star air conditioners’ sale has shown growth in the overall sale contribution. As the penetration levels improve and the category understanding matures, we feel customers will demand a premium experience from their purchase, which will be a combination of the product, brand and service. The sales of consumer durables, electricals and even smaller appliances weren’t encouraging earlier during the quarter with sales growth likely in single digits or at best in earsummer season. Customer experience and fulfilment are two fundamental building blocks of our business. While communication through traditional and digital media is one aspect of our go-to-market strategy, we have also deployed a number of promoters pan India to assist the customers during their purchase journey. We have activated multiple ideas centred on consumer affordability, product installation and demo to improve the overall consumer experience with our brand. With pan India presence, today, our products are available across all channel formats including distribution, large format stores, modern trade, e-commerce, AC specialist channel In an exclusive interaction, Sanjay Mahajan, Chairman & Managing Director, Carrier Midea India, talks about the company’s plans to reach out to consumers this summer season, expected growth across mass and premium segments, what can lead to a revival in sales of cooling products in the coming months, and much more By Team BW “WE OFFER TREMENDOUS VALUE TO THE CHANNEL AND OUR END CUSTOMERS” As per the GfK Market Intelligence Offline Retail Sales Tracking, air conditioners, refrigerators and air coolers have shown YoY value growth of 53 per cent, 34 per cent and 88 per cent respectively for MAT (Moving Annual Total) Feb 23*. Do you see this sustained growth for the rest of summer? As a category, air conditioners saw phenomenal growth in 2022 after two years of recession caused by the pandemic. Year 2023 has been a roller coaster ride. While Jan-Feb were much better than anticipated, the season took an unexpected turn mid-March because of unseasonal rains. As of endApril the season is starting to look up in North India. Meanwhile, we are witnessing strong demand coming from the east zone because of strong heat and high humidity levels. Overall, the general anticipation is a right shift in the season. Most weather reports are indicating temperatures shooting up from mid-May onwards. This in turn should result in demand for cooling products to go up. Please share more about your plans to reach out to consumers this including our own D2C website. In 2023, the expectation is to have growth across mass and premium segments which will be an indication of balanced prosperity in the economy across classes of the population. Do you agree? A noticeable shift towards premium heating, ventilation, and air conditioning (HVAC) products is being observed over the past couple of years across categories. Within the HVAC space INTERVIEW ly double digits in certain segments. What can lead to a revival in sales of cooling products in the coming months? While the customer demand has been strong, purchase is delayed due to seasonality. Our market intelligence says that the customer queries and footfalls remained robust although they might not have translated into actual purchase. We anticipate that the customers have merely postponed their purchase and therefore sell-outs hopefully

03 June 2023 | B W BUSINESSWORLD | 79 will pick up in the next few weeks. We must remember that the penetration level of room air conditioners is still lower compared to other large appliances in the Indian market. Simultaneously, the government’s thrust on infrastructure projects will play a key role in the growth of the overall HVAC segment going forward. Companies like Carrier Midea India with in-house manufacturing and expertise in the HVAC segment are well poised to cater to the demands of Indian customers. Our emphasis on R&D, manufacturing, supply chain, product, marketing distribution and service operations offer tremendous value to the channel and our end customers. Some market observers suggest that more price improvement is necessary to help improve margins and higher inventory may lead to higher discounts. What is your experience on this front? We believe in a sustainable business, and therefore, as any responsible corporate organisation, our responsibility is equally towards our principals, our customers and our employees. While, economic factors might not be in our control, we try our best to keep ourselves in sync with the changing scenarios. Over the years, we have put together a systematic process to streamline our operations and continuously improve our efficiency. Our endeavour always remains that any goodness that we are able to achieve is shared with our channel partners and our customers. Like any industry or category, effective inventory management is critical, for instance, a seasonal category like room air conditioners requires even greater rigour. As a HVAC specialist organisation, we have considerable expertise and experience to help us manage this facet of the business effectively. “Over the years, we have put together a systematic process to streamline our operations and continuously improve our efficiency. Our endeavour always remains that any goodness that we are able to achieve is shared with our channel partners and our customers” Sanjay Mahajan, Chairman & Managing Director, Carrier Midea India

80 | B W BUSINESSWORLD | 03 June 2023 IN FOCUS SUMMER SPECIAL I N CATEGORIES, SUCH AS air conditioners, that pick up during summers, the last year witnessed high growth in value due to premiumisation but volume growth was subdued because of the mass segment. In 2023, the expectation is to have growth across mass and premium segments, which is seen as an indication of balanced prosperity. Daikin India’s Chairman and Managing Director, K.J. Jawa, and Member of the Board, DIL, Japan firmly believes this. “With ACs gaining the reputation of a productivity enhancer instead of a luxury purchase, it is important that we develop and market products for every section of society. At Daikin, we identify ourselves as the ‘affordable-premium’ brand,” states Jawa, explaining that owing to localisation and better supply chain merits, Daikin has been able to lift its AC’s quality and performance without increasing prices. Not Just About Cooling Jawa asserts that ACs today are linked to well-being, comfort and convenience. “It also impacts sleep, emotions and performance and Daikin ACs can help people remain active and productive. We have products available at every price point and for every customer need,” he says. With ambient Daikin India has reinvented itself every year to become the fastest-growing AC company DAIKIN’S BIG PLAN TO MEET SUMMER DEMAND K.J. Jawa, Chairman & MD, Daikin India & Member of the Board, DIL, Japan speaks on the company’s plans for summer with early consumer demand and also on AC’s role as a ‘productivity enhancer’ n By Team BW n temperature rising across the Indian sub-continent, ACs have begun to play a larger role than just cooling. “It also dons the role of ventilation, filtration and heating. There may be seasonal blips but they will not be strong enough to dent the explosive growth phase we are about to enter,” explains Jawa. As per the Indian Air Conditioner Market Outlook 2027- 2028 report, AC penetration in India is still at around 8 per cent in comparison to the 90 per cent mark in developed countries, indicating massive headroom for growth. “By tapping into India’s powerful manufacturing ability and combining it with the ingenuity of Daikin’s Japanese designs, Daikin broke through. We designed a product range to suit India’s extreme temperature range, as high as 56°C, by following Japanese processes adapted to Indian requirements,” explains Jawa. A Five-pronged Approach Daikin anticipated the early onset of summer and planned its production to support the early consumer demand with a five-tiered strategy. The company is product ready as per the current Bureau of Energy Efficiency Rating’s standards and its products are ready to meet all AC requirements on the

03 June 2023 | B W BUSINESSWORLD | 81 features and how people can get better returns from Daikin ACs as the ‘air specialist’. In its factory, the third area of focus, localisation has helped the company reduce the timeto-delivery gap, increasing its product availability for discerning domestic consumers. “With demand increasing manifold, Daikin powered by ‘Made In India’ products, is the most preferred AC brand in the country that offers cuttingedge technology coupled with affordability,” the chairman asserts. On research and development, with a focus on artificial intelligence and the internet of things, continuous investment has helped it create models for Indian conditions. Classifying after-sales service as the final component, the company has service technicians trained at Daikin’s skill factory, Daikin Japanese Institute of Manufacturing Excellence at Neemrana as part of its training philosophy to engage and employ Indian youth through skill enhancement. Going Beyond With technology at arm’s reach these days, consumers are clear about their expectations from every brand. Daikin India’s CMD informs that the company is continuously researching global trends and customer anticipations in every geography. “To target the Indian diaspora and drive sales, Daikin India has reinvented itself every year to become the fastest-growing AC company and it is no different this year. We have revitalised the Daikin brand for stronger consumer recall pan India with highdecibel campaigns across print, outdoor, online, radio and in-store. A mass media campaign is currently underway, reaching out to more than a billion Indian households,” says Jawa. The India Opportunity Consumers would want to pay a little extra for a futureready product that can add value to their lives. “I have seen no exceptions to this in my career of over 40 years. India as a country is moving from a service economy to a quality-of-life economy. Future generations are looking at branded, superior and eco-friendly choices to surround themselves, but at an affordable price,” he adds. With India now being regarded as the most populous country, the growth opportunities are aplenty but the trick remains in understanding consumer expectations. likes of watt-hour from a child’s bedroom to the boardroom, across the country. “Our products are tailor-made in India to suit the country’s weather patterns and power availability,” Jawa informs. In the second aspect, distribution, Daikin has revitalised over 12,500 sales points with various schemes, ensuring that its stocks remain at the forefront of consumer demand. Each store and every in-shop demonstrator is trained and equipped with knowledge about the new products and K. J. JAWA, Chairman & MD, Daikin India

82 | B W BUSINESSWORLD | 03 June 2023 IN FOCUS SUMMER SPECIAL IN CONVERSATION What was your strategy towards adding fresh inventory this summer? When it comes to cooling products, production typically peaks around September or October, and inventory accumulates in the warehouses. From this time till about FebruaryMarch, the stocking with distributors begins to happen. Earlier, it used to be from December to February. In the last few years, it has shifted slightly and the reason is that the supply chain efficiencies have improved significantly. The filling starts to happen from January and February in case March starts to peak in summer. features that you are incorporating based on customer demand or feedback? One big change in the last three years is that people prefer products that help them multitask and lead convenient lives. Consumers are also starting to prefer products which are lower on the total cost of ownership. That is what we have done with our products in the last three to five years. So, for example, in our air conditioner range, we introduced a ‘sleep’ profile, in which you can set hourly temperature basis your comfort. In the time to come, this may also be done automatically, where the air conditioner would adjust itself, knowing your discomfort. Apart from that, the durability and reliability of products are a prerequisite and, therefore, a lower total cost of ownership. were good months to deal with. There was significant growth over last year, but March witnessed unseasonal rains, which continued in April. Forecasting is a challenge when it comes to cooling products. And this is not when you are getting into summer but when you are coming out of the season because that is when you have to ensure that inventory control is optimally managed. This year will be tougher for air conditioner manufacturers because the challenges on the cost side will start to ease, and commodity prices, including the exchange rate, will start to improve. And the forecasts are that in the third quarter of the calendar year, the cost pressures will begin to soften, which means that the current inventory might be of a higher cost. What are the product In terms of channel filling compared to other emerging economies or including the developed ones, we are very well balanced. About 30-35 per cent of sales in our country come from organised retail and another 35-40 per cent through conventional distribution. The remaining can be attributed to exclusive or ecommerce channels. Being a country with lower penetration rates for air conditioners and distribution contributing 35-40 per cent of the overall demand, it takes time for the entire value chain to streamline inventories. That is why channel filling starts early, which would be our case too. What was the experience this year given the fluctuations in the weather as summer had just set in? January and February Micro and macro trends may lead to a higher inventory cost cautions Manish Sharma, Chairman, Panasonic Life Solutions India & South Asia in this conversation with BW Businessworld’s Arjun Yadav “FORECASTING REMAINS A CHALLENGE FOR COOLING APPLIANCES”

03 June 2023 | B W BUSINESSWORLD | 83 and that happens to be the reason for the durability of the products. Washing machines might be the second engine of our growth in the future. And subsequently, we are also looking at lifestyle products, beauty products such as hair dryers and kitchen appliances. What are the investments that have been made to boost manufacturing capacity? In the last six years, we One big change in the last three years is that people prefer products that help them multitask and lead convenient lives What are the channels you are using to reach out to customers? Panasonic would be one of the very few brands operating into almost all consumer touch points, providing an opportunity for people to witness and experience the products much closer than several other brands. We operate not only in the conventional distribution channels today such as small dealers in tier-2 and tier-3 markets but also What categories of appliances are you seeing as your growth drivers? Consumer durables are just about 30 per cent of our revenue in India. In that sense, there would be many other categories including industrial devices, energy products, like batteries, products in the systems solution domain, smart factory solutions and the like. We are a diversified technology company, but air conditioners will remain the first engine of our growth within consumer durables. Our factory in Jhajjar, Haryana, is backward integrated. From drawing copper wires to doing heat exchangers within the same campus, we manufacture our air conditioners have invested nearly Rs 391 crore to beef up our appliance manufacturing units in Jhajjar, Haryana. We have invested over Rs 169 crore in R&D and Rs 326 crore for our electrical device manufacturing units in Haridwar and Sri City, with more investments planned till 2025. We have invested over Rs 250 crore to set up the India Innovation Centre (IIC), and apart from these, critical investments have been m a d e i n t o b u s i n e s s operations and brand building, among other initiatives. across all the organised retail partners. We also have hundreds of exclusive stores, where a wider range of Panasonic products can be experienced. We are also present on all major ecommerce platforms. Last year, we also introduced a directto-consumer channel, the exclusive Panasonic portal for consumers to purchase and experience Panasonic products. This year, we will also let Panasonic employees across the country become ambassadors of the brand for them to reach out to their friends and families.

84 | B W BUSINESSWORLD | 03 June 2023 IN FOCUS SUMMER SPECIAL VEN THOUGH SUMMER threw a bit of a rollercoaster pattern due to the unseasonal rains, many believe this to be a short phenomenon, as temperatures are increasing and heatwave alerts are being issued in several regions. For some companies, the sweltering weather means a good year. “Air conditioner sales have picked up substantially. We witnessed around 80 per cent growth in our AC category this season in comparison to the same period last year,” informs Kamal Nandi, the Business Head and Executive Vice President of Godrej Appliances. The Godrej & Boyce company head cites several markers to indicate that the cooling categories are doing well overall. He explains, “The categories have witnessed more than 20 per cent value growth. In continuation with last year’s trend, premium segments are growing. Notably, the consumption of five-star-rated ACs is rising across segments. The frostfree segment within refrigerators continues to show growth as well although the mass end is yet to pick up. Another coolhence our launches are largely focusing on these segments,” Nandi says. This year has also seen some aggressive pricing strategies for market share. The high-value inventory is getting liquidated. “Inventory-linked discounts are not expected but given the high competition in the category and the seasonality, aggressive pricing strategies are an unfortunate truth in the industry,” notes Nandi, adding, “The high material cost is also a concern and the regulatory norms imply continual investment in technology.” He suggests the best way to grow is optimal pricing and focusing on offering relevant propositions for which the consumer is willing to pay. Focus on Marketing As summer heat picks up, the company is spending more on multiplatform marketing including onground, TV and digital. Godrej is also focusing on premium frost-free refrigerators with targeted digital campaigns apart from marketing efforts on other cooling categories. “It is early to share outcomes but the surge in demand is a good indicator towards a resurgent summer,” Nandi sums up. ing category, deep freezers, is growing very well at close to 40 per cent too.” Boost in Demand With easy access to finance and consumers seeking new relevant technologies and unique propositions, there is a boost in demand for product innovations. Nandi believes that these trends will contribute to the categories’ numbers. For Godrej, products such as the anti-leak split ACs or the new range of dark edition refrigerators are playing a key role in driving conversion. “We continue to see higher traction and growth for premium segments and INDICATORS OF A RESURGENT SUMMER KAMAL NANDI, Business Head and Executive Vice President, Godrej Appliances Cooling categories witness over 20 per cent value growth with the premium segments consistently contributing to the numbers E IN FOCUS n By Team BW n

THE RISE OF THE SUNCARE The Indian sunscreen market is among the fastest-growing in the skincare market, prompting many brands and startups to make a foray into the category 86 | B W BUSINESSWORLD | 03 June 2023 IN FOCUS SUMMER SPECIAL FEATURE

And with the market size being huge, specialised suncare products have found their loyalists,” adds Shailey Mehrotra, Founder, Fixderma. Cosmetic brands are eager to join the ever-competitive market as well. Colorbar introduced an exclusive suncare range as a part of its recent product expansion strategy. “Over 10 per cent of our total sales is attributed to our SPF (sun protection formula) range. We remain dedicated to developing innovative and effective solutions that are not only performance-driven but also empower our consumers to look and feel their best every day,” comments Samir K. Modi, Founder and Managing Director, Colorbar. Lux brands too have found their place under the sun. Sunscreen is one of the fastest-growing segments for Kiehl’s with an 8 per cent weight of business. “We have seen an uptrend in the last few years as a direct result of consistently educating our customers during our consultations and social media campaigns,” says Priyanka Sachdeva, Head of Marketing, Kiehl’s India. US-based luxe brand Paula’s Choice, which was retailing only through Amazon, is now all set to enter the Indian market through its direct-to-consumer channel later this year, adding to the space. Attracting Young Entrepreneurs Apart from decade-old companies, the sun protection market has drawn the attention of new entrepreneurs as well, who prefer ‘science-based formulations’ and online sales only. “We will penetrate deeper into the market with our suncare categories. We plan to launch more products in extension to our skincare range. Our focus is to expand the presence of our winning products and launch unique solutions for modern Indian skincare needs,” states Prakher Mathur, Co-founder & COO of Conscious Chemist, a four-year-old beauty and skincare brand. Mohit Yadav, Co-founder, Minimalist, a company formed in 2020, also reiterates the growing significance of sunscreen in the Indian market. The startup places importance on a rigorous testing process in FDA-certified labs. Ayurveda and other natural sun protection formulations are also gaining demand in India, making a place for young companies to foray into the space. Newer skincare companies are also adding SPF to their existing range to cash on the demand. “Keeping the harsh summers in mind, we launched our SPF-based cream-based moisturiser, as the first product in our portfolio of skincare range,” states Harsh Jain, Co-founder of OSIA. [email protected] T HE SCORCHING HEAT OF THE Indian summer has become a major market driver for the suncare segment. As per Statista Market Insights, the revenue in the sun protection segment is pegged at $0.68 billion in 2023. The market is expected to grow annually by 8.58 per cent (CAGR 2023-2027). According to industry estimates, while pharma companies manufactured medicated or prescription-based sunscreens continue to enjoy around 37 per cent of the total market share, the potential for growth and high consumer demand has made the over-the-counter (OTC) sunscreens rule the market with a whopping 63 per cent share. The Indian sunscreen market is one of the highest and fastest-growing in the skincare segment in India. All-round Growth The prescription-based suncare market’s growth rate is at 25 per cent, while the OTC sunscreen market is at 22 per cent. The market size can be understood by the fact that while pharma companies like Glenmark have launched OTC variants of their sunscreens, Hindustan Unilever’s skincare brand Pond too jumped on the bandwagon and added sunscreens to its portfolio this summer. The Indian suncare market has space for all. Luxury brands such as Kiels, Estee Lauder, Clinique, Laneige and Paula’s Choice enjoy a good market share, along with names such as Lotus Herbals, Aroma Magic and younger players including the likes of Ayouthveda, Minimalist and Deconstruct, among others. A Place For All A decade ago, the sunscreen market was dominated by dermatologists prescribed sunscreens that were given to those who had excessive exposure to the sun, sensitive skin or skin issues such as pigmentation. Over the years, external factors such as climate change and growing consumer awareness have contributed to the increase in sunscreen sales in India. “La Shield was launched in 2012. Over the years, the brand grew its portfolio to offer a range of mineral sunscreens that cater to different skin types. Today the brand has a range of six expert mineral sunscreens,” informs Alok Malik, Executive Vice President and Head of India Formulations, Glenmark Pharmaceuticals. Another brand that is commonly suggested by dermatologists, Fixderma, too has seen consistent growth as consumers are now more aware, thanks to influencer marketing and access to information. “We make our formulations work according to the consumers’ needs since we are not an OTC brand. n by Tarannum Manjul n 03 June 2023 Photograph by Maridav / Canva | B W BUSINESSWORLD | 87

88 | B W BUSINESSWORLD | 03 June 2023 SINCE Panasonic’s founding more than 100 years ago, the company has been committed towards contributing to society and supporting customers’ quality of life. Panasonic is engaged in all aspects of lifestyle and wellbeing that “help make people, society, and the planet healthier”. Through its products and solutions, Panasonic continues to contribute towards a sustainable society by proposing spaces that can balance greater comfort and lower environmental impact, utilising its engineering and manufacturing prowess developed over the years. Panasonic Air Conditioners (ACs) is one such example of the company’s sustainable offerings. Panasonic ACs were first developed in 1958 in Japan and ever since, the technology has been evolving. As of today, Panasonic is manufacturing ACs across seven countries, selling across more than 100 countries with more than 12 crore customers, infact, every 5 seconds a Panasonic AC is being sold. Given their comfort cooling, energy efficiency, air purification technology, durability, and similar features, Panasonic ACs are being preferred across countries. Fumiyasu Fujimori, Managing Director, Panasonic Marketing India, Panasonic Life Solutions India, says, “As consumers become increasingly aware of the importance of sustainable living, they are seeking smarter solutions that not only offer comfort but also cater to their environmental needs. At Panasonic, we understand this need and have designed our inverter ACs to meet these requirements. Our Made-in-India ACs are equipped with several innovative technologies such as nanoe technology for sustainable living, inverter technology for optimum performance, R32 refrigerant – to minimise our impact on the environment, to name a few. Similarly, through our Miraie platform our customers can enjoy comfort, convenience, and connectivity. From keeping a check on air quality to personalised sleep profiles, our ACs cater to your specific needs while ensuring healthy living spaces. With over 60 years of experience in AC manufacturing and 12 crore+ customers worldwide, we are proud to be Japan’s No.1 Appliances brand. Panasonic ACs are known for quality and 84 per cent of our AC customers choose Panasonic brand during repeat purchase. In India, 96 per cent of the ACs sold are inverter ACs and we are pleased to witness the continuous rise in demand for smart, inverter ACs that offer healthier indoor air quality. At Panasonic, we remain committed to providing our customers with innovative solutions that prioritise sustainability and comfort.” Panasonic ACs are enabled with next gen technology keeping in mind the larger sustainability mission. Energy efficiencies through inverter technology Panasonic inverter ACs offer an exceptional energy saving performance. They reduce power consumption by varying the speed of the compressor according to temperature changes with the aim of minimising the temperature fluctuations so that you can enjoy consistent cooling comfort. The Auto Convertible Inverter technology further ensures best cooling at optimum power consumption for any desired temperature by auto adjusting cooling performance. This not only saves electricity bills for the consumer but, also has a positive impact on the environment. Consumers today are opting for Panasonic’s 4- & 5-star inverter ACs as they offer better efficiencies and superior energy savings. An environment-friendly refrigerant – R32 The commonly used refrigerants in an air conditioning system contribute greatly to greenhouse gas emissions and ozone depletion, consequently putting the environment at stake. Panasonic is committed to healthier lifestyles and to reducing environmental footprint. That’s why Panasonic air conditioners have been increasingly adopting the eco-friendlier R32 refrigerant, which has higher cooling capacity that increases heat transfer efficiency. It consumes less energy, helping you to save on electricity costs. R32 has zero impact on the ozone layer, therefore it’s environment-friendly. Ensuring sustainable living – air purification technology Panasonic’s nanoe-technology is a revolutionary active air purification technology which inhibits pollutants by inhibiting the growth of bacteria and viruses and PM 2.5 particles. Nanoe technology deployed in Panasonic’s inverter ACs aims at building healthy living spaces and providing quality air for life. Smart connectivity for a sustainable lifestyle Panasonic’s smart (connected) ACs are enabled with Miraie – an AI and IoT based platform to offer comfort, and convenience to consumers. For instance, the AI mode powered by Miraie senses external weather conditions like heat and humidity and automatically manages temperature, mode and fan speed to provide best cooling with optimum power consumption. Similarly, Miraie further allows you to control every aspect of your air conditioner through your smartphone from anywhere to prevent any wastage and misuse. Each action that Panasonic takes to fight global warming may be small. However, when all these actions are added together, the impact can be great. “Panasonic GREEN IMPACT” is an initiative aimed at reducing CO2 emissions of the value chain and society, and Panasonic is working towards its goal of ensuring a better life and a more sustainable global environment. Panasonic Life Solutions India too is aligned to Panasonic’s larger sustainability mission and its technologies are helping enable sustainable living. PANASONIC AIR CONDITIONERS: FOCUS ON SUSTAINABLE AND SMART SOLUTIONS Fumiyasu Fujimori, Managing Director, Panasonic Marketing India, Panasonic Life Solutions India BW; BUSINESSWORLD Feature Presentation

90 | BW BUSINESSWORLD | 03 June 2023 We saw some early channel filling for the likes of ACs and air coolers leading to higher-than-normal inventory. What was your strategy towards adding fresh inventory this summer? Traditionally, the channel starts stocking up for summer from December onwards and the stocking peaks in March and April. The stocking is based on the previous season’s sale as well as expected growth during the current season. Though the channel inventory is slightly more than normal at this point of time, the industry is hopeful of bringing it back to around normal levels by the end of summer, which is predicted to be a long one this season. Our strategy is to facilitate the adequate availability of all categories of our products to take care of peak season demand, which varies from region to region and even within a region. What are the kinds of product features that you have focussed on this summer and why? We have launched around 75 new SKUs which focus on the following features: fast cooling even in high ambient conditions with lower deration effect; 6-in-1 and 5-in-1 convertible cooling which enables the user to set the AC to the preferred cooling capacity depending on the ambient conditions or personal comfort requirements; nano blue protect technology by which the hairpin bends of both the indoor and outdoor unit copper coils are coated to protect them from corrosion and leakage; anti-corrosive blue fin coating for superior heat transfer efficiency and greater durability; WiFi operated Smart ACs which operate on voice command, like “Alexa, switch on the AC” can switch on the AC without having to reach out for the remote or smart phone; and a customised sleep option in WiFi operated ACs where the user can set the temperature for every hour as per his comfort level. All features are developed based on consumer research studies, global developments and competition benchmarking. Please share more about your plans to reach out to consumers for this summer season. What have been some of the outcomes of these initiatives? Our brand new TVC featuring Virat Kohli communicates our major USP of ‘fast cooling’ ACs. This is supported through outdoor and digital & social media. A combination of point of sale materials on the product and at the store are extensively used to communicate our value proposition and features. Our brand recall and association levels have improved significantly due to these initiatives. Moreover, in order to make our aspirational brand an affordable one, we have rolled out very attractive consumer offers such as (a) Easy EMI options with nil advance payment or long SUMMER SPECIAL “WE EXPECT BALANCED GROWTH OF MASS, PREMIUM SEGMENTS” B. Thiagarajan, Managing Director, Blue Star speaks on how an aggressive pricing strategy supplemented by a rich product portfolio and good channel mix will provide the critical earnings n By Team BW n tenure or fixed EMIs; (b) Cash-back offers on credit card EMI options; (c) subsidised installation charges; and (d) limited period extended warranty offers; all of which have resonated well with the channel and customers. 2022 witnessed high growth in value due to premiumisation but volume growth was subdued which was primarily due to lesser growth in the mass segment. In 2023, the expectation is to have growth across mass and premium segments which will be an indication of balanced prosperity in the economy across classes of the population. Do you agree? As per our estimates, 2022 witnessed substantial growth in both volume and value. You would recall that BEE implemented the new table change from July 1, 2022, which resulted in the new 5-Star AC prices going up sharply. Therefore, the new 5-Star SAC range and the highly stocked up 4-Star SAC ranges contributed to the higher value growth. In 2023, we expect balanced growth of mass and premium segments. As per the GfK Market Intelligence Offline Retail Sales Tracking, ACs, refrigerators & air coolers have shown YoY value growths of 53 per cent, 34 per cent & 88 per cent respectively for MAT (Moving Annual Total) Feb 23*. Do you see this sustained for the rest of summer? January and February witnessed better market conditions and, on a lower base, the growth levels were significant across the cooling INTERVIEW

03 June 2023 | B W BUSINESSWORLD | 91 long and hard summer till July. These two regions account for more than 50 per cent of sales till July. From August, the festival sale starts, starting with Onam in Kerala and continuing till Diwali in November. Competitive pricing and attractive consumer offers are likely to be the levers for revival in the sale of cooling products. Some market observers suggest that more price improvement is necessary to help improve margins and higher inventory may lead to higher discounts. What is your experience on this front? Competitive pricing & attractive consumer offers are likely to be the levers for revival in the sale of cooling products on the aggressive pricing strategies to gain market share? Will we see this continue and assist in seasonal sales? An aggressive pricing strategy to gain market share may help in the short term. We have seen brands losing market share as soon as they are compelled to raise prices or another competitor comes up with more aggressive pricing. We expect this trend to continue given the significant increase in manufacturing capacity in the coming years, thanks to the GOI’s PLI scheme. Such strategies may assist the seasonal sales by making the product affordable to Tier-3 to 5 towns and to first-time buyers across the country. However, it must be supplemented by a rich product portfolio and good channel mix, which will then provide the critical earnings. and compressor products. We expect the growth levels to be around 25-30 per cent during the period March to May on a very high base of the corresponding period in 2022. The India Meteorological Department predicted a ‘hot and oppressive summer’, which had raised expectations among consumer durable makers of a pickup in sales of fans, ACs, refrigerators & air coolers. Did the unseasonal rains dampen some of these plans? Unseasonal rains have a short-term dampening effect on tertiary sales. However, our experience is that B.THIAGARAJAN, Managing Director, Blue Star over a longer summer of March to June, a good spell of 15 to 25 days of Indian summer conditions can make up for the shortfall. While ACs and refrigerators do sell round the year, air coolers get impacted. The sales of consumer durables, electricals and even smaller appliances weren’t encouraging earlier during the quarter with sales growth likely in single digits or at best in early double digits in certain segments. What can lead to a revival in sales of cooling products in the coming months? North and Central India are expected to witness a In a fiercely competitive industry like ours, margin improvements largely depend upon cost efficiency measures, design optimisation and volume growth. We may choose to improve price realisation on a selective basis in a few segments while keeping the prices of products in the affordable category unchanged as much as possible. Higher inventor y may lead to higher discounts and such decisions are taken based on market conditions and trade-off between inventory carrying cost vs margin erosion through discounts. What are your thoughts

92 | B W BUSINESSWORLD | 03 June 2023 IN FOCUS SUMMER SPECIAL S T R O N G p r o d u c t portfolio, robust manufacturing capacity and innovative marketing – that is how Haier India President Satish N.S. summed up his vision recently as he revealed the company’s target to achieve a turnover of Rs 10,000 crore by FY25. Haier India clocked a revenue of Rs 6,000 crore in FY23 and expects to close in FY24 at Rs 8,000 crore. The company sees air conditioners and television as their next biggest growth drivers for the Indian market. A Manufacturing Hub Satish emphasises having strong manufacturing capability. “You cannot be trading. If you are into trading, you will miss one cycle. Either you are uncompetitive with the pricing or miss one technological innovation. One must have their own research and development background,” he reckons. Satish says product innovation and customer-centricnounced its partnership with JioCinema as the digital streaming sponsor for the Indian Premier L eague (IPL). Apar t from the digital presence, Satish says that the focus has also been on physical stores, which have been turned into ‘customer experience centres,’ giving the customer a handson experience with the product. On customer centricity, Satish explains how customer feedback is incorporated into Haier’s products. “There is a joint product and research and development team which keeps tracking the consumer,” he says. erators annually at its manufacturing plants in Greater Noida and Pune. It has plans to invest Rs 1,500 crore by 2025 for backward integration and localisation of components. “Rooting our alignment with the government’s ‘Make in India’ initiative, we have one of the largest manufacturing hubs for all domestic supplies in the country and we are expanding our export base as well,” Satish shares. Customer Centricity Haier has invested heavily towards what Satish calls “creating mental presence” through advertising. The company in March anHAIER ON A ROBUST GROWTH TRAJECTORY Haier India President Satish N.S. talks about how the company is looking at achieving a turnover of Rs 10,000 crore by FY25 A n By Arjun Yadav n SATISH N.S., President, Haier India ity are at the core of Haier’s growth trajectory. For the summer this year, he says that demand shot up at the beginning of March due to higher-than-normal temperatures, but at the end of the month, unseasonal rains impacted consumer sentiment. “From our side, we are optimistic and see an opportunity. Most markets are now soaring at 40°C plus temperatures, our AC manufacturing is at full swing, and we expect the demand to be good,” says Satish. The company has built the capacity to roll out 10 lakh units of ACs, 15 lakh units of washing machines and 30 lakh units of refrig-

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94 | B W BUSINESSWORLD | 03 June 2023 HE SPARKS of distress in the US and European banking systems have set off alarms around the world even as the murmurs of an impending recession grew in early 2023. But the resilience of the Indian banking system, often called ‘conservative’, has been the highlight for the financial services industry. However, 5G is much more than just high-speed internet and low latency. In fact, more than anything 5G will be the bedrock and a platform to build technologies and services upon which were previously impossible. A large chunk of this resilience in Indian banking is due to the secure parameters of capital adequacy, percentage of stressed assets or liquidity coverage ratio of individual banks or issues like provision coverage ratio, the profitability of banks and more. These were noted by RBI Governor Shaktikanta Das last month at a press conference in Washington. But another aspect which is ensuring performance and survival is their strategies to remain relevant by keeping customer at the centre of all things banking. Finding Relevance In the last few years, FinTech companies and startups have clearly chipped away at the market shares of many banks by offering financial services to the underserved. They have addressed the gaps which were largely beyond the reach of traditional banks due to their evolving understanding of technology and leveraged them to expand reach. But this is changing as banks increasingly step-up collaborations with FinTechs and tech conglomerates to stay relevant to the times and constantly changT Modern Indian Banks: Navigating the New World Order The resilience of the Indian banking system, often called ‘conservative’, has been the highlight for the financial services  industry

03 June 2023 | B W BUSINESSWORLD | 95 MASTER STROKES ing consumer behaviour. With over 480 million customers in its kitty and a market capitalisation of over USD 60 billion, the State Bank of India (SBI) has been leading the charge of relevance for Indian banking without losing an inch of its market cap. “SBI is the only public sector bank (PSB) which has retained its market share always,” says Nitin Chugh, DMD and Digital Head, SBI. The post-pandemic world has been highly dynamic and a customer’s life is changing very rapidly which is, in turn, affecting behaviours as well. Hence, banks have had to be agile to redeem relevance and their role as meaningful contributors to their customers. Notedly, SBI has been on this journey of relevance through its YONO (You Only Need One) integrated digital banking platform since 2017 in partnership with IBM. “Today, consumer behaviour is not consistent. It differs on hour-basis, daybasis and even in relation to time of the day and events of the world. So, we have to keep narrowing down the level of personalisation by contextualising data available across channels to be relevant by leveraging technologies available,” Chugh explains. He adds that SBI’s single-minded focus today remains the effort of being relevant to each of its consumers. Commenting on the current banking scenario, Viswanath Ramaswamy, Vice President, Technology, IBM India & South Asia says that the only thing certain in the world of banking today is ‘uncertainty’. “With the looming uncertainty and dynamic changes all over the world, it is important for the banking segment to be healthy. And it can happen on two driving factors Technology and People,” he emphasizes. Ramaswamy explains that these two elements are key to the digital transformation journey of banks, which has accelerated 3-4x in the post-pandemic era. As Indian banks take on the topic of technology in their board room discussions to identify new revenue generation streams, drive cost-efficiencies and productivity, they are quintessentially turning into technology organisations. “Today, banks are technology organisations with a banking license,” Ramaswamy quips. Despite the disruption in banking, financial services & insurance (BFSI) affected by the FinTechs, there is plenty of opportunity for the traditional banks, albeit they leverage the latest technologies to keep up with times as the world undergoes a fundamental restructuring. A McKinsey & Company article highlights that there could be an opportunity of up to USD 20 trillion for the banks that successfully manage to sail through this transition period. Security – Integral Component of Banking The age of classical computing has largely reached a plateau in 2023 as the world has agreeably moved on to a new type of computing backed by artificial intelligence Nitin Chugh, DMD and Digital Head, SBI

96 | B W BUSINESSWORLD | 03 June 2023 (AI). As a result, banks that have been frontrunners in automation are now exploring avenues to apply AI to get the most out of the data they handle on a day-to-day basis. This also means that a newer set of security challenges emerge in this highly-regulated and protected industry where enterprise security has been at its core. And now with accelerated digital transformation, enterprise security has become equally important at the edge. “Digital transformations cannot happen if there is no enterprise security available. It’s not possible without underlying enterprise security being available – not just at the core but also at the edge. And with 5G coming into the picture, this is only going to accelerate,” Ramaswamy says. Last year, Union Minister of State for Finance Bhagwat Karad told Parliament that between June 2018 and March 2022 India’s banks recorded 248 data breaches. Out of the 248 data breaches 41 were reported at public sector banks, 205 at private sector banks and two at overseas banks. While the Reserve Bank of India (RBI) has issued guidelines on Cyber Security Framework for Scheduled Commercial Banks (SCBs), more needs to be done by banks and their technology partners on the security front in today’s ever-evolving tech and computing landscape. According to an IBM report, manufacturing tops the list of most-attacked industries in the Asia-Pacific region with 48 per cent of cases, followed by Finance and Insurance at second place with 18 per cent of cases. As the threat of data breaches increase, the cost of data breaches also soars (average cost has climbed 25 per cent since 2022 to Rs 17.6 crore in 2022 in India). In this scenario, the adoption of ‘zero trust’ model has been suggested as the best strategy for banks. In fact, IBM data from 2022 reveals that oganisations in mature stages of adopting zero trust deployment witnessed Rs 15.1 crore to be the total cost of a data breach. Meanwhile, organisations that have not yet started zero trust deployment witnessed the total cost of a data breach to be Rs 24.6 crore. “It is imperative that digital transformation is highly secure with zero trust,” Ramaswamy emphasises. He adds that IBM runs security operations centres (SOCs) for many large financial institutions in India and has made huge investments in the country including a cyber range that gives clients an immersive experience and educates them on how to handle cyberattacks. Spotlight: Sustainability It has been long-established that climate change will have dire consequences and the business world has felt pressure from all sides to do more than just talk about green initiatives. Banks have not been immune from such demands of transparency and accountability from customers, regulators, investors, and employees. Being the largest bank in the Indian banking ecosystem, SBI has taken substantial steps towards sustainability. Chugh shares 3,000 SBI ATMs are powered by solar energy and many of the bank’s MASTER STROKES Viswanath Ramaswamy, Vice President, Technology, IBM India & South Asia

03 June 2023 | B W BUSINESSWORLD | 97 Master Strokes is a series produced by BW Businessworld and Presented by IBM India. This series will recognize and present the efforts and accomplishments of technology leaders across sectors on how they use and continue to leverage technology to bring about business transformation creating a positive impact on their organisation. large offices are already certified green buildings with ‘platinum’ or ‘gold’ certifications. “In fact, our corporate centre at Nariman Point (Mumbai) is one of such buildings.” He adds that most of the SBI residential premises have their own solar-based power generation. “That is our effort at making sure that we contribute less on the carbon footprint and we continue reducing that,” Chugh affirms. Today, banks and financial institutions are undergoing a basic shift in mindset under the pressure of evolving demands around financing and making investments to support greener businesses and renewable energy. Green finance has been on a high-growth trajectory to help businesses and public sector organisations lessen their carbon emissions and move towards net-zero emissions. Chugh says SBI is doing its green finance bit through partnerships at a conglomerate level. “We have a partnership with the Tata Group and work with Tata Solar Systems. In terms of financing, we support the electric vehicles (EVs) industry and solar installations. The next one for us will be battery manufacturing.” He also shares that SBI has raised green bonds to the tune of a billion dollars which are listed on the Luxembourg Stock Exchange. “We do this as part of our international business,” he adds. Since banks are now big proponents of technology, digital sustainability is a new area they are ruminating over to reduce their net power consumption through optimsations. “We have not finalised our approach with digital sustainability but we are having discussions on how to consume lesser energy. For instance, we are looking at data centres and applications in this regard. And we are also looking at creating customer MASTER STROKES journeys that inherently consume lesser energy,” Chugh says. While SBI’s presence in India is massive, its footprint is extended to 30 countries globally. This means that the bank’s strategy around sustainability will potentially have a large-scale impact which could be a significant growth driver for green initiatives on a global level. Unchartered Territory The world of big banks manages an estimated USD 370 trillion in worldwide assets and its growth continues to be on an uptick. As the banks navigate a new world order with a mental reset and tailwinds of technology, McKinsey projects their global assets to grow to the tune of USD 500 trillion-550 trillion in the next decade. With such large availability of headroom and unlimited avenues of growth, evolution seems to be the only way forward for the banks. Viswanath Ramaswamy, Vice President, Technology, IBM India & South Asia and Nitin Chugh, DMD and Digital Head, SBI

100 | B W BUSINESSWORLD | 03 June 2023 The growing Indian art market has seen an emergence of collectors keen to add to their collections and diversify their investment portfolios By Jyotsna Sharma AFTER HOURS BUSINESS OF ART The Anatomy of the Art Collector nita and her partner Rohan just moved into their new villa in Palm Springs. This one is in Gurgaon and not in California. At the housewarming party she was talking about the art she wants to buy for the new house. What amazed me was her knowledge of the art market. For first-time art investors, Anita a 42-year-old entrepreneur, and Rohan a 35-year-old techie, definitely know which artworks to invest in. New age buyers are as knowledgeable about the market as any seasoned collector. They no longer depend purely on the advice of the art advisor at an auction house or a gallery, their own research is spot on. The Indian art market has had a good run of late, and it continues. An Indian Art Investor and Grant Thornton report studied the overall market performance at auction in FY23. Their findings suggest it clocked an impressive turnover of Rs 1,145.5 crore ($ 144.3 m) through a sale of 3,833 artworks. Further, the average price of artA works sold were Rs 29.9 lakh ($37.7 k). New Kid in Town Seasoned collectors make up a large portion of the buyers in today’s art market. Be it a preferred artist, subject, series of works or group of artists, avid collectors are continually seeking their next substantial purchase. Having said that, the Indian art market has witPhotograph courtesy: India Art Fair