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Posts Tagged ‘Yum! Brands

Retail therapy and speed money merchants in urban India

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How India's retail sector is divided. Chart: Reuters

How India’s retail sector is divided. Chart: Reuters

Foreign direct investment (FDI) has been rolling into India at a steady pace, whether in banking and finance,whether in insurance (general insurance and health), pharmaceuticals, automobiles (particularly automobiles), information technology, food and beverages (very much so), and engineering and manufacturing. And then there is retail, which has so incensed all those who have firmly believed that India and Bharat need none of this and that the swadeshi and swarajya of the Independence movement are, 66 years on, needed even more than they were in the 1920s and 1930s. And I count myself amongst those so incensed.

It comes as a surprise then to read about the ‘brake on the economy’ that low-level corruption is in India, as a recent Reuters report has put it. The report is well done, and is right to probe the methods of corrupt underlings, but I find it bordering on the absurd that these practices – in short, hand over the moolah for the licence you want – are treated as hindering India’s ‘growth story’ (as the country’s finance minister monotonously calls it, ignoring the ecological idiocy of desiring more growth, unmindful of the millions of new deprivations his story has no place for).

Reuters has reported: “India is the next great frontier for global retailers, a US$500 billion market growing at 20% a year. For now, small shops dominate the sector. Giants from Wal-Mart Stores Inc to IKEA AB have struggled merely for the right to enter, which they finally won last year.”

This breathlessness, well captured by Reuters, is part of P Chidambaram’s favourite fairy tale. But of course, real life in curbside India is full of smoke and mirrors. Reuters said that a “daunting array of permits – more than 40 are required for a typical supermarket selling a range of products – force retailers to pay so-called ‘speed money’ through middlemen or local partners to set up shop”.

All that mall space unused, built atop what were once green fields. Chart: Reuters

All that mall space unused, built atop what were once green fields. Chart: Reuters

Speed money is a colourful term, and suited to the technicolour life and times of the retail business in India. Reuters sounds prudish when it reported, citing interviews with middlemen and several retailers, that the “official cost for key licenses is typically accompanied by significant expenses in the form of bribes”. The added cost, said Reuters, erodes profitability in an industry where margins tend to be razor-thin, and “creates risk for companies by making them complicit in activity that, while commonplace in India and other emerging markets, is nonetheless illegal”.

Commonplace and illegal as much as underpaying workers in the USA, I presume, which is what the retail capitalists do. See this report about workers at McDonald’s, Wendy’s, Yum! Brands, Burger King, Domino’s Pizza and Papa John’s going on strike in New York City demanding wages that are twice the current $7.50 an hour, which is described as impossible to live on. As for Walmart, it’s rankly exploitative imprisoning of its workers, paying them just above minimum wage but denying them freedom of association (the USA is a member state of the ILO, the International Labour Organisation) and medieval working conditions can hardly, in any country, make it a paragon or corporate virtue.

But the Reuters report, useful as it is in explaining the very broad-based and low-level graft that layers our cities like a fog, cannot venture into the area of the demands of international finance capital led neo-liberalisation. This seeks to prise open our economy – aided eagerly by the astoundingly greedy political class in India (Delhi, Bombay, Bangalore, Hyderabad, Ahmedabad, Calcutta and every other large city) – for profit maximisation. Never mind the few bleating complaints about streetfront corruption repeated by Reuters, there is optimism aplenty amongst financiers, business people, bankers, commodity brokers, the realty sector, the automobile and FMCG sectors, all fed by the fact that the United Progressive Alliance government of India is more than willing to bend, break and jettison wholesale regulations that favour the proletariat in order to satisfy international capital and Indian big business.

Only last December (2012) both the houses of Parliament in India were told that there would be an inquiry following media reports concerning the submission made by the global retail giant Walmart to the US senate that it had spent around Rs 125 crore (Rs 1.25 billion or about US$23.2 million) during the last four years on its lobbying activities, including the issues related to “enhance market access for investment in India”. Now, really, what’s a bit of ‘speed money’ compared to a sum like that? Or compared to the US$100 million (about Rs 455 crore) that Walmart is reported to have funnelled into India (to its Indian partner Bharti Enterprises) and at a time when multi-brand retail was not permitted?

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Does KFC want 13-month-old infants in India to eat its chicken?

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A schoolgirl walks under the KFC advertisement in Bengaluru (Bangalore). This hoarding is visible to all traffic on one of the city’s major roads, Richmond Road.

Kentucky Fried Chicken (KFC) in India is advertising a chicken meal that costs 35 rupees (USD 0.67, EUR 0.51). Hoardings such as this one are visible now in all the major metropolitan cities (Mumbai, Bengaluru, Chennai, Hyderabad, Kolkata, Delhi) and KFC has taken outdoor advertising space along major roads in these cities.

This hoarding advertises “Real chicken” for 35 Indian rupees, “KFC wow! price menu”. In small letters on the lower bottom right of the hoarding the advertisement also says: “Products contain added monosodium glutamate. Not recommended for infants below 12 months”.

There are two culprits here at work to further the interests of the junk food/fast food industry. One is the Food Safety and Standards Authority of India which is nowhere near as vigilant as it ought to be, especially given its ‘Advisory on Misbranding/ Misleading claims’ which invokes the Food Safety and Standards (FSS) Act, 2006, Rules & Regulations, 2011. This has said: “(2) The various false claims made by the Food Business Operator about food articles and consequent violation, if any, are punishable under the provisions fo FSS Act, 2006; (3) Violations related to food items, seriously jeopardize public health as well lead to unfair gains to Food Business; (4) Misleading advertisement related to food items are imputed with malafide intent on the part of person making the claim and is normally made to misguide a consumer to purchase food item without disclosing the complete details on the advertisement. Companies (Corporate bodies including firm or other association, individual) are also covered u/s 66, FSS Act, 2006.”

The objectionable disclaimer is in small letters on the lower right edge of the hoarding, unnoticeable to passing traffic.

The other culprit is KFC and its parent company, Yum! Brands, Inc. Just how important is India to Yum! Brands? Consider the statement by the company’s chairman and chief executive officer, David C Novak (available right now on the company website) in which he has mentioned India and its market:

” …we have made incredible progress in India, opening 101 new restaurants in 2011. Ten years ago, we were essentially just beginning with KFC in India, and now it’s our second leading country for new unit development. In fact, we’re so excited about our prospects in India, and its impact on the future growth of Yum!, that we’re going to break it out as a separate division for 2012 reporting directly to me. It’s encouraging to see that our new unit progress with KFC in India is very similar to what we saw in China during its first 10 years. Our India team has identified the key elements driving success in China and are adapting these strategies in India to leverage our iconic brands and build concepts with broad appeal.”

No thank you. We want 0 such restaurants per 1,000,000 people

India’s business and financial English-language dailies, since they function as mouthpieces of industry and propaganda sheets for industry and trade associations, and since they function as uncritical endorsers of the current ruling regime’s reckless gallop into ruin, have had only laudatory noises to make about the invasion under way by KFC and similar global junk food peddlers.

The Economic Times published a gushing interview with Muktesh Pant, CEO of Yum! Restaurants International, which is described as running “the international operations of US quick restaurant chains Kentucky Fried Chicken, Pizza Hut and Taco Bell restaurants”. The newspaper asked: “How is the Indian restaurant market evolving, compared to say China?” and Pant answered: “If you compare the stats of the two countries, the consumer class of 300 million in China has an access to 3,000+ KFCs, while the consumer class of 100 million in India has access to only about 140 KFC outlets. Hence, there is a huge potential for us to leverage our expertise in the untapped market. Our aim is to have 1,000 outlets in India by 2015 and China has helped us provide a blueprint for this rapid growth.”

The influence of KFC on the diet of India’s urban schoolchildren? See the schoolbuses driving past the hoarding.

The same gushing interview contained answers from Niren Chaudhary, president of Yum! Restaurants India, who was described as “reporting directly to Yum! Brands, Inc, Chairman & CEO David Novak after the world’s largest restaurant company last week made India only the third country after the US and China with a standalone reporting division”. How fabulously exciting for all the 13-month-old infants wetting their diapers in anticipation of their next KFC portion.

The question was: “Will it translate into faster expansion and more hires?” And Chaudhary’s answer: “Our goal is to double our store base to at least 1,000 stores, employing 50,000 people, in three years. The new structure is a change in reporting relationship and reflects the importance of India as a future growth opportunity.”

Now we know why the KFC advertisements say what they do (and hide much). This CEO Pant is reported to have studied at the Indian Institute of Technology Kanpur, and if so that particular IIT – and the IITs and IIMs of Bharat – have much to answer for.