New Indian retail rules should mean a bonanza for ad agencies

After years of lobbying India is finally going to relax its rules on foreign retailers, allowing overseas supermarket giants like Wal-Mart, Carrefour and Tesco to own up to 51 per cent of operations in India and ‘single-brand’ retailers (supermarkets are known as ‘multi-brand retailers) to own 100 per cent of their Indian outlets.

The Indian retail market is estimated at $450bn, serving about 1.2bn people. The Indian government has cited soaring food inflation as the reason for the change, one which threatens thousands of small local retailers and the middle men who slap huge mark-ups on products they buy from farmers and manufacturers.

Western ad agencies have only woken up relatively recently to the big opportunities in India, concentrating most of their expansion efforts on China, but the new rules should lead to an advertising boom as the big supermarket majors and other Western retailers flock to India.

Sir Martin Sorrell’s WPP is the biggest Western marcoms company in India but rival Omnicom has recently purchased a majority stake in india’s Mudra agency group while Interpublic is also strongly represented.

According to some estimates Western marcoms companies control over 90 per cent of the Indian ad market and this is likely to cause them some problems in the future. Retail relaxation or not, India can still be a tricky place to business as indian politicians, understandably, want the country’s own companies to share in the economic boom.

WPP’s Sorrell has been involved in a long-running feud with Rediffusion’s Arun Nanda over WPP’s desire to increase its 26.7 per cent stake in the big Indian agency group. Nanda has said he wants the company to stay under Indian control and has recently concluded deals with WPP rivals Havas and PR giant Edelman which underline the company’s commitment to fighting WPP control.

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