The headline in a recent Economist article on India was along the lines of ‘could do better’, implying that the impressive growth achieved by the country over the last 10 years was slowing and facing a number of major challenges.

Despite the gloom of current short-term forecasts for India, most longer-term outlooks provide a positive view – India is still the world’s ‘other’ large emerging market, along with China.

Companies like Genus Plc, the parent company of Promar International, continue to see India – and China – as the future and are investing as fast as they can in local production and distribution infrastructure. European apple producers and exporters should be taking a similar long-term view of the Indian market.

According to the United Nations and FAO, India is the world’s fifth-largest apple grower with production ranging from around 1.8 to two million tonnes. Although this represents a highly respectable level of production by most country standards, it is tiny compared to China (33mt), despite both India and China having similar-sized populations.

India’s large population, relatively low levels of domestic production and low levels of per capita consumption make it a fundamentally attractive market.

Apples have been produced in northern areas of India for hundreds of years, but local production of the crop has been in slow decline in recent years as the industry continues to be plagued by low profitability. Many of the industry’s problems are rooted in issues such as small orchard size, poor varieties and plantings and low levels of professional management. Poor distribution infrastructure provides further challenges in getting quality apples to the major markets.

The apples that do reach consumers are typically low quality and very variable. Consumer knowledge of apples is low, with most local apples simply referred to by their region of origin, rather than actual variety.

Indian apple consumption on a per person basis is very low at around 1.4kg/person, although this would be significantly higher in cities and apple growing areas.

In recent years the Indian market has been importing increasing volumes of apples. Imports have grown from fewer than 40,000t in 2006 to over 120,000t in 2010 – a growth rate of over 30 per cent per year.

Despite being sold at around 30 per cent higher prices than local apples, imported apples continue to grow in popularity with consumers. Imported apples generally have a good reputation for taste and freshness. Given their price compared to local apples and the price of apples versus other local fruit such as bananas and mangoes, apples are very much a premium product.

Gift giving is an important part of Indian culture and imported apples are often given as presents and are seen as a very acceptable ‘thank you’ or food contribution to parties and dinners.

India’s apple imports are, like growth in many other products, a result of the growth in India’s middle class consumers. The most exciting thing about this fact is that the number of middle class consumers in India is expected to grow from around 160 million consumers today, to over 500 million by 2025.

The premium image and pricing of imported apples, combined with the expected increase in the size of the target market i.e. middle class consumers, provides real opportunities for some European producers and exporters. Countries such as the US and Chile have been active in the market for a number of years, although they have lost a share to Chinese imports in recent years.

From a marketing perspective, the US has been a very successful ‘first mover’ in the Indian apple market, building trade and consumer awareness of Washington apples as a premium imported product. In some recent consumer research conducted by Promar in India, Washington Red was almost synonymous with imported apple.

While you could argue the tough skin and long shelf life of Red Delicious makes it an ideal apple for markets with a limited cool chain, it is still a product that has had its day in most developed markets.

As India’s middle class continues to grow in size and Indian retailers develop better infrastructure, the market for truly premium modern apples should build strongly.

Europe has great potential to supply India’s growing numbers of discerning middle class consumers with high-quality apple varieties from established brands such as Pink Lady to some of the lesser-known or newer varieties such as Junami.

European luxury retailers are already well established in understanding Indian consumers’ needs and building their brands in India.

European apple marketers need to follow in the footsteps of companies such as Hermes and Prada and start building their knowledge of Indian consumers and their shopping preferences now. —

PREMIUMISING INDIA

Establishing a strong market for premium European apple brands and varieties in India is a long-term project and is never going to be an easy task.

Competition for Indian consumers will be intense, the bureaucracy and complexity in the supply chain is legendary and the expected growth is unlikely to follow a smooth path. However, the size of the market and the speed at which it is developing makes ignoring India a huge mistake.

The demand for premium apples from India is assured – who gets to supply that market is up for grabs.