Laughing Cows Have No Tang

A sardarji who runs a grocery-cum-meat shop in Defence Colony, an affluent South Delhi market, has a "phoren-crazy" clientele. His shop stocks largely videshi brands as people who shop there would rather spend Rs 200 for a packet of imported napkins than Rs 30 for the local variant. Another shopkeeper in the same market even says that in the next couple of months there won't be any locally manufactured product in his shop!

These two are some of those thriving in the post-QR (quantitative restrictions) regime that kicked off on April 1 last year. But before you pop in a Ferrero Rocher and sing a dirge for apna Amul, pause a moment. Walk a little away from that market and you will come across people who have never heard of Tang or would never guess that Laughing Cow is a brand of imported cheese. It seems the deluge of foreign processed food that everybody expected after April 1 never took place. In eight months, imports of 300 sensitive items like packaged food, toys, locks and cars has inched up by only 1.3 per cent!

"Just because some shops store imported goods or someone tries to sell you imported cigarettes as your car waits for the lights to change, it doesn't mean that the country is being flooded with foreign goods," reasons T.K. Bhaumik, senior advisor, policy, CII. Or would you rather have it from the horse's mouth—Saswat Sengupta, chief executive, consumer division, Rai & Sons Private Limited, sole importers of Ferrero Rocher chocolates, Laughing Cow cheese and a few other confectionery and jam brands. He feels the hype surrounding the lifting of QRs was premature. "The demand hasn't lived up to the huge expectations created in the media. Imported goods are a very posh locality-centric phenomenon. It's limited to a few shops only."

Sengupta, whose company diversified into imports of food products four years ago, feels that any growth during this period is because of expanded distribution and not thanks to the lifting of the last of the QRs on March 31 last.

Take, for instance, cheese, among the 715 items liberalised last year. Since then, Sengupta's company has done business worth just 70 tonnes of cheese which he himself qualifies as very "slow growth". The story at Four Seasons Private limited is no different. They too import chocolates, jams, cereals and coffee mixes. From being a medical equipment company, they moved into imports of food items sensing a big opportunity there. It hasn't materialised yet. Since April, they have imported goods worth just Rs 25 lakh and have till now managed to 'get rid of' 75 per cent of that. "It has been a learning experience," says Ramesh Bhatia of Four Seasons. "The market's really down."

Blame it on the global economic slowdown or the local one or just sheer flagging of interest or the sky-high duties on the freed items—whatever it is, importers are now readying themselves for a long wait. Diwali and Christmas also did nothing to boost the market. While Defence Colony shop owners might still be in hype mode, importers say that many shops returned up to 75 per cent of the goods after Diwali. There were simply no takers.

Some insiders claim that a kind of shakeout has already begun. The 400-strong importers' club in the country was tipped to double in the coming year. Everyone's uncle was on his way to becoming an importer, but suddenly the honeymoon is over.

According to Sengupta, many importers realised they had overestimated the market and shut shop. As a result, many brands disappeared from the shop shelves. For example, many unknown confectionery, jams and juices brands from South East Asia that came in during Diwali have disappeared, while some have cut prices. One particular juice brand called Keri that sold for Rs 35 during Diwali now retails for only Rs 20.

While most believe that the market for imported goods will pick up after a couple of years, Indian manufacturers are realising that all the noise they made may have been too much, too soon. Also, while imported goods may be available in more shops, they are far too expensive for the average Indian to indulge in. Says a spokesperson for Dabur, which repackages and distributes the popular juice concentrate brand Tang in India: "Imports have proved to be no threat and Tang has neither grown the market, nor touched the marketshare of Rasna, the leading brand." This, he explains, is largely because importers don't have the wherewithal to build a brand and advertise in the mass media. So awareness among consumers remains limited.

The chicken legs from the freezers of America have also failed to reach India. Though American and Australian apples are being sold in the market, the other side of the story is that many consignments have been rejected and lie rotting at the ports.

Importing perishables is actually a logistical nightmare. Infrastructure costs are huge and then there is always the risk of it not being palatable to Indian tastes. Also, the government has introduced a number of measures to safeguard against dumping of 'old' foodstuffs in the country, which incidentally many importers see as roadblocks on the way. Importers of livestock products, including cheese, have to first apply for permission from the department of animal husbandry in the ministry of agriculture giving details of the product he wishes to import. And, as with all imported products, the livestock goods also have to go through quality testing once they reach Indian shores. "In the QR regime, everyone just relied on international certification. There was no double-testing," says Sengupta.

Figures too bear it out. Imports of food items actually show a drop over the last fiscal. For instance, during the April-August 2001 period, it showed a negative growth of 12 per cent.

Among alcoholic beverages, though government figures indicate only a marginal rise in imports, the All India Distillers Association (AIDA) says there's been a jump of 5,000 per cent in the import of brandy, 3,000 per cent in the import of rum and about 23 per cent in whisky since April 2001. Still, "the impact has been very little, nothing alarming," says L.N. Batra, secretary general.

The story tells itself if you listen to Aman Dhall of Brindco, the sole importer of Corona beer and some foreign wines, who says imports have been a no-show. The imported beer market is going to close this fiscal with a decline of 20,000 cases, while the wine market is down 70 per cent in terms of volumes and 15 per cent in value. "A lot of smaller restaurants have switched over to serving domestic wines because the imported ones are far too expensive," says Dhall. And alcohol importers of course get to pay the maximum duty. "Earlier, wines attracted an import duty of 100 per cent. Now the average is up at 360 per cent." For instance, while Corona beer sold in restaurants for about Rs 200 pre-April, its price has now jumped to Rs 400.

The duties on chocolates and cheese are around 80 and 40 per cent respectively. Everyone argues that duties have to come down for the market to grow. Even the finance minister has now committed to bringing duties down to an average of 20 per cent by 2003. "If this does not happen, we can't survive," says Dhall.

High tariffs introduced as a protectionist measure are always temporary and some economists feel that when there is need for a product, tariff has seldom proved a barrier. "The level of imports is more dependent on needs rather than on tariffs. Duties can never be the deciding factor for import volumes," says Bhaumik.Unfortunately, this year the purchasing power of the Indian consumer has been low. And the so-called craze for foreign goods has also ebbed because of greater exposure and more visitors to the West.

The prophets of doom who predicted the worst for the Indian industry post-QRs may have been proved wrong so far, but the final verdict is still unclear. Argues Bhaumik: "If your imports are less than 10 per cent of GDP, you can't call that globalisation. If you want to export, you must be ready to import as well." And Indian industry, instead of running for cover behind the government, needs to face up to competition from across the shores, which as the last few months have shown is not something to blindly fear.