A heap of vegetables greets customers at a Nilgiris store in Chennai, right outside the iconic shiny green and white building. While the décor might be a little shabby, with goods being displayed without the slightest regard to aesthetics, the brand carries with it a 100-year nostalgic history.
With its origins firmly in the commodities of bread and butter, Nilgiris was founded in the early 1900’s by Muthuswami Mudaliar, whose family carried the torch until it was sold in 2006. Thirty-five per cent of the company, however, is still owned by the family.
Nilgiris, which has sales of over Rs.600 crore and now sells nearly 1,000 items through its private label, is big in south India and it remains ambitious.
“We don’t fear competition,” says Murali Krishnan, Chief Executive Officer, referring to the move to allow foreign direct investment in multi-brand retail.
When it comes to the question of why consumers prefer local businesses over national retailers, Mr. Krishnan believes that the combination of tailor-made products and personalised service seals the deal. “For us, what has worked is customised service. For example, for some of the Malayalis we prepare certain label products in a specific way. Our brand is synonymous with freshness, considering that we started with dairy products.”
“I think the idea of brands being wiped out just because Walmart is coming is a little misplaced. We have had the Birlas come in to the retail market, they are close to being a foreign-retailer, and nothing has happened. I think the Indian market presents a steep-learning curve; in fact, we ourselves are still learning. Why would anybody think Walmart is going to learn it in one day,” he says.
Mr. Krishnan believes that the Indian supply chain needs a drastic overhaul. “The number of middle-men in the farm-to-fork journey is unbelievable. Things we purchase from the farmer, for four rupees, is marked up and sold at forty. We can’t afford the investment into the back-end infrastructure. This is why FDI in retail is necessary.” He should know. Close to half of the farmers that Nilgiris sources its milk from have been with the company for the past 30-40 years.
“Some of the relationships we have forged with farmers and the SME sector are now in their third-generation. However, even if Walmart procures some of their goods internationally, they will still have to forge relationships with both the agriculture and SME sectors,” he says.
