Nigel Stirling
India’s potential is undoubted but it has been slow going for Alliance Group and in-market partner Quality NZ.
The demographics are right – 1.3 billion people, and increasingly with the spending power to go with it.
India’s higher socio-economic category is already estimated at 200m people with the potential for more still with the size of its economy forecast to surpass China’s by 2022.
Alliance and QNZ have targeted chefs and procurement directors of up-market hotels to tap into this trend.
Relationships with hoteliers Marriot Group, the Taj Group, and the Oberoi Group have given QNZ a foot in the door to 300 five-star hotels.
It helps that Kiwi cricketing greats Sir Richard Hadlee, Daniel Vettori, Brendon McCullum and Stephen Fleming are QNZ shareholders and have been ready to lend a hand promoting Alliance’s Pure South brand in the cricket-obsessed nation.
But six years after first teaming up with QNZ sales into the market are infinitesimal when compared to Alliance’s $1.8b turnover last year.
Last year total sales to India were $1.6m, up from $1.3m the year before, and $1m in 2016.
Slow but steady progress has continued in 2019 with $1.2m of sales in the first seven months of this year.
There was a boost late last year with contracts signed with two Indian catering companies to serve up lamb for first-class and business-class passengers on British Airways, Air Canada, Singapore Airlines and United Airlines.
QNZ also finally secured shelf space with a number of high-end retail outlets in the past 12 months.
Over the same period there have been deals with wholesalers servicing mid-level restaurants.
Fresh from an eight-day tour in August visiting two of QNZ’s three Indian offices in Mumbai and Delhi, Alliance Group chairman Murray Taggart pronounced himself happy with the progress being made.
“The reality is that we are in the early stage of market development. It is a challenging market and not one where you snap your fingers and it is China tomorrow.”
While its economic prospects were at least as favourable as China’s the infrastructure necessary to distribute frozen product still lagged.
“It is easy to land a refrigerated container on the wharf but to then get that into cool storage and then back out to the sized parcels that your customers want and in the climatic conditions that you have got in India remains difficult.”
That lack of infrastructure extended to retailers, Taggart said.
“A lot of them do not have the freezer space [and] often if you want freezer space you might have to provide the freezer.”
Taggart said widespread mobile phone ownership and internet coverage had seen Indian consumers embrace online shopping although the national infrastructure deficit also had a part to play.
“If you are living in Mumbai the idea of just jumping in your car and whipping down to the supermarket to pick up something is not that simple.”
Online sales of $40 billion last year are predicted to surge to $102b by 2020.
While poor roads incentivised consumers to stay at home and shop online, they also hampered deliveries.
“Anyone can have a crack at one of the online shopping sites … but if you cannot get it [to the customer] in an edible form then you haven’t actually made progress.”
Taggart said it was hoped the recent election of Narendra Modi for a second term as Prime Minister would see a continuation of business-friendly policies and further boosts to infrastructure spending.
A further obstacle is the 35% tariff on sheep meat imports.
As just one example of the impact the tariff was having, Taggart said it would be difficult for QNZ to expand its airline catering contract substantially while it remained.
“Yes in the first-class cabin they are not as price conscious but the bulk of the meals are not eaten in first-class.”
NZ negotiators are pushing hard in the Regional Comprehensive Economic Partnership trade talks, due to wrap up this year, to eliminate the tariff on sheep meat.
But since coming to power Modi’s business-friendly credentials have not extended to free trade.
It’s a fair bet tariff cuts could take years or even decades to take effect if India agrees to them at all.
With so many headwinds Alliance remains the only NZ exporter to be taking the Indian market seriously.
But Taggart says the southern co-operative doesn’t mind being a trailblazer.
It was the same story two decades ago when it established a similar supply relationship with Grand Farm in China.
“The team at Alliance is not going to get any kudos for helping QNZ to develop this market but we are hopeful that in 20 years we will be really glad that we had a crack at it.”
