The French Invasion.

     Ah, les Français. Il est vrai qu’ils sont souvent considérés comme un objet de ridicule par presque tout le monde. Mais quand on parle de monde des affaires, les compagnies françaises sont parmi les meilleures. En plus … oh wait. I seem to have gotten carried away with my French. Allow me to start over.    

     Ah, the French. It’s true that they are often considered to be an object of ridicule by practically everyone. But when it comes to the world of business, French companies are among the best. Even today, France Inc is at the forefront of innovation and its companies dominate and often play the role of the bellwethers of the industries in which they operate. And today, in a Eurozone that is recuperating from a crippling economic and financial crisis, several French companies find themselves in a quandary. A couple of years ago, Europe sneezed and France caught a cold. And its economy never quite recovered. On the back of a couple of years’ degrowth, the French economy grew by a miserable 1% in 2013. In the wake of such bleak economic prospects and faced with a market in which les Français were reluctant to spend, French companies had no choice but to look beyond the French frontiers to seek out new markets. As they looked eastward, the French laid their eyes on a little nation that promised growth and good fortune. And it was a nation with which the French had already had a tryst in their storied past.
     Despite the fact that they may have long departed Pondicherry’s shores, France Inc seems to be making a beeline for India once again. The French constitute one of the largest business contingents operating in India, represented by the likes of the Accor, Alstom, Air France, Danone, Lafarge, Vicat, Saint Gobain and LVMH. These companies have virtually cemented their places in India. But as far as the French invasion of India goes, there are three companies that are bearing the French tricolour and leading from the front.
Renault:
     In 2012, the French automobile market contracted by over 15%. The situation this year isn’t any better. And even though Renault may be scorching the Formula One tracks and raking in world titles like there’s no tomorrow, the company certainly isn’t insulated from the vagaries of a slowdown. Renault, in a global alliance with Nissan, is driving into emerging markets in a big way. The French giant first entered India in a joint venture with Mahindra & Mahindra, with a single offering, the Logan. Even though the sedan did see a moderate amount of success, the Renault-M&M JV never really took off and soon enough, it was disbanded. Renault had decided to make its own road. In 2012, with a solitary plant in Chennai, Renault rolled out the Duster. Being a mid-sized SUV with all the features du jour, it enabled Renault to take the market by storm. The company soon forayed into the hatchback segment and the sedan segment with the Pulse and the Scala. The Fluence and the Koleos were Renault’s crème de la crème bids to capture the luxury sedan and the SUV markets respectively. All of Renault’s cars, barring the Koleos, have notched up decent numbers and the Duster, of course, being the segment leader, has been a runaway success. Nissan, Renault’s global alliance partner, has already taken a page from Renault’s book and rebadged the Duster as the Terrano, à la Scala (which was introduced as the Nissan Sunny). Renault’s Indian sojourn, however, hasn’t been devoid of competition. While challenging Maruti and Hyundai might not be on Renault’s agenda anytime soon, the company is battling General Motors, Toyota, Honda and Volkswagen in virtually all the segments of the market. For now, Renault commands a small albeit growing slice of the Indian market. But with the company scaling up its investments in India and planning to unveil new launches, it may not be long before Renault replicates its success on the F1 tracks and turns into a force majeure on India’s roads.    

Pernod Ricard:
     For decades, the slugfest between Pernod Ricard and Diageo, the British drinks giant, has endured and intensified. The two companies continue to wage war in virtually every market around the globe and with Diageo now in firm control of United Spirits, India just happens to be the latest battleground. While Pernod has been steadily growing its market share for a number of years now, Diageo was a minority player all along until it managed to capture the Indian market in one fell swoop with its buyout of USL (which, if I may add, was accurately predicted, several months before it happened, in my Facebook article, ‘The Curious Case Of Kingfisher’). Today, while Diageo-USL commands a 60% market share with annual sales of 130 million cases, Pernod sells over 30 million cases, with a 15% market share. However, on the profit front, while Diageo-USL clocks around Rs. 350 crores, Pernod has already surpassed the Rs. 650 crores figure. Pernod’s sheer outperformance can be explained by the fact that it operates only at the higher price points which offer fatter margins, while Diageo-USL straddles all the price points of the Indian alcobev market. All of Pernod’s brands, be it Seagram’s Royal Stag or Imperial Blue or Blender’s Pride or Absolut or Chivas Regal, are market leaders and with a brand ambassador duo of Shahrukh Khan and Priyanka Chopra, there aren’t too many ways in which the company can go wrong on the marketing front. In order to scale up its presence in the Indian market and take on the combined might of Diageo and USL, Pernod has entered into a bottling and distribution joint venture with Tilaknagar Industries, a major player in the south. However, considering the fact that consolidation has become the name of the game in the Indian alcobev industry, that JV could soon metamorphose into an equity buy-in by Pernod at a substantial premium (as a matter of fact, Pernod could acquire Tilaknagar anytime in the next 12 months. Tiens, there’s a stock tip for you!). And while the Indian alcobev market has slowed down over the past two years, everything points to a gradual recovery and a healthy growth rate over the long term. And you can be sure that Pernod would raise a toast to that!  
L'Oreal:

     While it’s true that France’s women are the most beautiful in the world, L’Oréal certainly isn’t relying on their proclivity for cosmetics in its home market alone to power its growth engines. India, Brazil and China are three countries into which L’Oréal is making aggressive forays. Today, when it comes to India, the beauty and cosmetics industry is nascent. However, with more and more women entering the corporate world and with the desire to look good gaining increasing importance, the industry is growing and it does offer tremendous potential in the years to come. Many years ago, L’Oréal gazed into its crystal ball, saw its opportunity and landed on India’s shores to capitalize on that opportunity. Today, L’Oréal has unleashed a whole slew of its brands on the Indian market. Maybelline, Garnier, Lancôme, Kératase, Matrix and its eponymous brand have all established themselves in India and are clocking year-on-year, double-digit growth rates. Today, while the grooming market for the fairer sex may be larger in size, the same for men is registering a faster rate of growth. L’Oréal, which operates in both of these, is battling the likes of Procter & Gamble, Hindustan Unilever, Amway, Dabur and Emami. With its acquisition of The Body Shop, L’Oréal has a ready channel to push its brands into the market. Its sales already exceed Rs. 1700 crores annually and with an over 20% annual growth rate, the company intends to notch up a figure of Rs. 7000 crores by 2020. The company has already ploughed in over Rs. 1500 crores into the country to set up a production facility and a research and development centre and it plans to invest a sizeable amount of money in the years to come. Eventually, L’Oréal envisages India as both a production and an export hub. After all, India is expected to develop into one of the largest markets for L’Oréal in the future. And in case you’re wondering why L’Oréal is so bullish about India and why it happens to be earmarking such a large investment for the country, well, there’s just one reason. Because India’s worth it.
     Et voila! There you have it. But it isn’t just the French. Like moths to a candle flame, more and more foreign giants are drawn by India’s allure. After all, India is a market that does seem to promise years of growth and opportunity. With a young population, a market that is underexploited and a healthy growth rate, India seems to be attracting companies from all four corners of the globe. The French companies, on their part, have managed to hold their own. Virtually all of them are clocking double-digit growth rates and a few are already in the green. Many have lined up huge investment plans for India to take on the competition. And it isn’t without reason. Following a rapid influx of American, British, Japanese and Korean companies into the Indian market, many are proving to be formidable foes for the French. And in the midst of all this, the French invasion of India continues. And this time around, for once, the French aren’t surrendering.



        

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