Beyond the mega-cities of India

Looking for new growth in India? It may be time to look beyond the huge metropolitan areas of Mumbai, Delhi and Chennai to lesser-known cities such as Nashik, Nagpur and Chandigarh in the hinterland, predicted to be major contributors to India’s next growth phase. 

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“We primarily export to Europe, but in the past two to three years we have started exporting to Russia as well,” says Mayank Tandon, Senior Vice President at Freshtrop Limited. Photo: Terence Caleb

Every year in February, Mayank Tandon, his wife and their daughter move to their packing facility. It is their home for a couple of months when the grapes of Nashik, India’s fruit bowl, are in peak season, and thousands of containers filled with grapes for overseas markets are trucked 200 km to the port in Mumbai.

“Grapes don’t wait for anyone. If they need to be harvested today, you’d better harvest today. Tomorrow they will sell for half the price,” Tandon says. He is the senior vice president at Freshtrop Fruits Limited, a leading supplier of grapes and pomegranates to supermarkets primarily in Europe.

He handles procurement, contact with growers and marketing. His wife runs the packing house, looking after production and quality. Both are full-time, full-week jobs in peak season but the on-facility living arrangements give them time to relax with a cup of tea in the morning and to play with their daughter in the afternoon.

This year, they expect to export 550-600 containers (FFE) of grapes. Last year’s number was 400.

Beyond mega-cities
Nashik illustrates a bigger trend in India. While mega-cities drove the economy and made up three quarters of the consumer market just ten years ago, relatively smaller cities with five or one million inhabitants, known as ‘tier 2’ and ‘tier 3’, have since seen consumption and production levels rise sharply.

As India seeks to bounce back to the annual growth rates of close to 8% that the country enjoyed for a decade until recently, expectations are increasingly linked to the vast hinterland. The Group’s businesses are building positions here, and even the inconsistent Indian infrastructure cannot hold back the tide.

“A few years ago we decided to place sales representatives in tier 2 and tier 3 cities. That would give us a better chance of controlling the business and tapping into the growth,” says Sanjay Tiwari, head of sales at Maersk Line India.

The idea was to approach businesses at the origin and to differentiate. With a person in the hinterland, meeting with customers and experts in agriculture, at the office in Mumbai, reefer expertise and a good sea product to Europe, Tiwari had his hands on a real value proposition for the customers.

The ‘triangulation’ helped to cut costs. Instead of having importers send empty containers back to the port, Maersk Line began sending them to nearby exporters, cutting costs substantially. In the western part of India, savings amount to USD 75-150 per container, or 10-15% of the freight rate. In lesser developed eastern India, triangulating one box can save the shipper or consignee as much as USD 600.

“At the very least we would increase customer stickiness, and hopefully we would also influence price because the customer valued the services. Making the hinterland a stronghold, we are well-positioned for future growth and we can contribute to the economy of the country,” Tiwari says.

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Chennai, India. Photo: Thorbjørn Hansen

A few years ago we decided to place sales representatives in tier 2 and tier 3 cities. That would give us a better chance of controlling the business and tapping into the growth.

SANJAY TIWARI, HEAD OF SALES AT MAERSK LINE INDIA.

Today, Maersk Line’s market share in most hinterland locations is at 25-30%, up from 10-11% in 2011.

Following the growth

As growth moves inland, logistics facilities follow and locations to pick up and drop off containers and manage paperwork are increasing in numbers. The market for this type of infrastructure, including roads and rail, is expected to triple to USD 15 billion in 2025.

Last year APM Terminals Inland Services handled close to one million TEU in its off-dock and container repair facilities, in addition to training farmers and exporters in the use of the sophisticated reefer equipment.

“The shipping lines used to receive a lot of complaints about cargo going bad in transit. We learnt that people were using the reefers as a refrigerator, but if you do not pre-cool produce before stuffing the reefer, it is likely to go bad. The training we rolled out in coordination with Maersk Line has minimised the number of claims,” says Subhasis Ghosh, managing director at APM Terminal Inland Services in India.

A very important partner
Grapes exports from Nashik are expected to reach 8,000 containers (FFE) this year, and Maersk Line is targeting 40% of the trade. Careful planning with customers in the months leading up to peak season ensures availability of equipment, space on vessels and the various trade lanes as well as close communication in case of issues.

Freshtrop Fruits has increased its volumes at an annual rate of 20-25% in recent years, and Mayank Tandon aims to keep growing at the same pace. Quick delivery on road and then by sea to the port, remains crucial to success. The new highway to Mumbai, cutting turn time of trailers and containers, has helped in this regard, and Freshtrop opened a new market in Russia three years ago when Maersk Line put in a direct service slicing nine days off the transit time.

In fact, Freshtrop has been associated with Maersk Line since the company was established in 1992, and this is likely to continue. As Mayank Tandon puts it:

“Maersk Line continues to be a very important partner at this stage as well.”

  • Watch an interview with Mayank Tandon, senior vice president at Freshtrop Fruits Limited, an Indian exporter of grapes that has shipped with Maersk Line for the past 20 years.