We want to develop into a much bigger business in India, says DKSH CEO

Q- What kind of a market expansion services company is DKSH?

A- We help a diversity of company types to enter markets, typically those with comparatively higher entry barriers. Once we have established a presence for the products concerned, our next task is to expand market shares. DKSH is almost 150 years old, and has a unique tradition in Asia. Next year, we will hold our anniversary celebration in Yokohama, Japan. In fact, we are the oldest foreign company in Japan. DKSH stands for Diethelm Keller Siber Hegner, which are the family names of the young business pioneers who left Switzerland 150 years ago to seek their fortunes overseas. In 2002, i.e. 12 years ago, we merged these three original Swiss trading companies into one Group. Interestingly, none of those early Swiss nationals chose to venture into India because of the particular relationship between the British and India of that period.

The traditional trading house model of just being a middleman who buys here and sells there, simply has no sustainable future. We don't actually manufacture ourselves. Our mandate is to support our clients, who are product manufacturers by adding value to the whole sales process, and to sell those products on to our customers in various countries across Asia. Consequently, 'Market Expansion Services' are essentially branded as business services, covering the entire value chain. Take for example pharmaceutical companies. Their core competence is research and development to generate product innovation. Those activities and global marketing they undertake themselves. Sometimes, they choose to outsource manufacturing. By contrast, local market knowledge, such as handling of their products throughout an entire nation…... that is often not among their core competencies. Those vital skills they outsource to companies like ours. That is our definition of Market Expansion Services: Helping manufacturers and entrepreneurs to enter markets. And, once they have established a presence, we build their market shares in those countries for them. Obviously, we work with some companies who are new to certain Asian countries. On the other hand, we've also been working with other companies for over 50-60 years, consistently strengthening their position in the respective country involved.

Q- How do you do this?

A - The process usually begins with an assessment of the target market. We consider that market in the context of the products that our clients are offering, and match them to suit local requirements. The logic here is that what is good for America is not necessarily good for Vietnam, because the target customers and their particular needs are likely to be completely different. Next, we look at the business model, the products and the overall offering. We also brief our clients on what their competitors are doing and what the market trends are. Another key service is that we will then help them register their products. In the pharmaceuticals sector, this can take a very long time, sometimes even years. It is essential to comply with local regulations in each country. Once the products are registered, and ready for sale, we often take over those products from the logistics specialists who dispatch them by sea or air. We integrate these products into our own distribution centres, where we group them with related products and deliver them through our local field sales force. We sell to supermarkets, mom & pop shops, restaurants, bars - this is what we call capillary distribution. So, taking a country like Thailand, Market Expansion Services are not just delivering to a supermarket in Bangkok but also being capable of delivering to more remote areas known locally as "upcountry", all the way to the last beach bar in Koh Samui. All these activities are individual steps in what we call the value chain. Moreover, we also handle marketing or regulatory affairs.

Q- But there are marketing companies for MNCs who do this globally.

A- DKSH excels in local knowledge. We are the specialists for localized sales and marketing, physical distribution and also money collection. If you look at Roche or Novartis, in Malaysia for example, they have only one customer that pays them, which is us. We also do the money collection from all the doctors, hospitals, pharmacies, nurses' homes which we have selected. These are all dedicated value-added steps needed before the product reaches the end consumer.

Q- Are you de-risking their businesses?

A- Yes, we definitely de-risk their business, as we ensure the integrity of their value chain. Clients, if they just work with big wholesalers, and not professional Market Expansion Services specialists like us, don't have the entire value chain covered. The wholesaler buys from the client, who subsequently has no idea about what happens to his products next. For instance, if products are close to their expiry date, we ensure that those products are being moved off the supermarket shelf. In such cases we collect them, bring them back to our distribution centres, and destroy them. This is what we call reverse logistics, i.e. a carefully designed procedure guaranteeing that the end-customer does not end up with expired or contaminated products. So, apart from protecting consumers, we are relieving our clients of risk. We are providing these services at least at the same level, but at a better cost/risk ratio than the big multinationals themselves. These are the incentives that facilitate their decisions to outsource these services to us.

Q- What is your strategy in India?

A- The company is currently very much focused on our traditional Asian markets, mainly Southeast Asia - the ASEAN countries, plus Hong Kong, Taiwan, and Japan. Essentially, our focus is on four different business sectors: Consumer Goods, Healthcare, Performance Materials and Technology. With these four business units, we are active in 35 different countries. In terms of India, our presence here is still comparatively recent. We started out here 25 years ago with sourcing. At the time, we had a group of 20 specialists, who were sourcing ingredients and raw materials for the chemical, pharmaceutical, food and personal care industries which we exported from India and marketed in Europe, Japan and the rest of Asia. Five years ago, we were able to make a highly promising acquisition from the Tata Group. They were splitting off their chemical distribution unit, Voltas chemical trading, and we acquired those operations. That move added to the already successful sourcing and distribution businesses. And these operations have developed extremely well, resulting in our opening of different innovation centres. As I mentioned before, at DKSH we are not just about sales. We are always looking to enhance the entire value chain for our clients, while also thinking about how we can make life easier for our customers too. Our aim in India is very clearly to expand our existing businesses. We will not enter the consumer goods and healthcare distribution  sectors, at least not for the time being, owing to the sheer size of the country. Consequently, we will not be building up a capillary distribution network in this market.

Q- So, it is mostly sourcing?

A- Well, we started out with sourcing, but that isn't everything. While we are not necessarily experts on how to make good paint for, say, Indian cars, we are experts at on how to make good paint 'stick' to the car bodywork. We're active in specialty ingredients, not commodities. Such ingredients must fulfil the highest quality standards. By insisting on this aspect, we are helping our customers to raise the quality of their products and become more competitive.

Q- What are the trends like in India at this point? Do you see a way how you are going to do business in this country?

A- Yes, definitely. I am a fan of India, and always have been. Earlier, everybody was excited about the country and then you come in and are surprised by the bureaucracy, and it took us slightly longer than we expected to find the opportunities. [But] our personal experience is positive. But that's not all. We are also convincing our suppliers to come to India. They are forming an image of the positive points of this market: a huge amount of potential customers, a democratic system. Primarily, I am interested in doing business, but I can tell you now as a fan of India, the last few of months have been like a miracle from a political perspective. There's a whole different look about India in the world today. Your current prime minister [Narendra Modi] has done a great deal - he visited Japan and the US, opened the market to foreign investors. Rightly so, everybody's excited about it. The current political trend will help our business, which had already developed positively. We are positive and it is clearly our intention to develop steadily, but in solid steps, a bigger business in India.

Q- What are your plans over the next two to three years?

A- On a global level, we will grow organically. Today, we have thousands of customers and clients. We operate a solid network of more than 700 business locations across Asia across Asia.  Our business is growing very well.

Q- Continuing on the trends you see in India...

A- There is another trend that is becoming quite important in India today. Traditionally, you didn't have these huge trading conglomerates like in other parts of Asia. With India now coming increasingly onto the international radar screen, where people can be trusted and where it is worthwhile to invest, more and more multinational companies are taking a more serious look at India. Multinationals in particular, but also smaller family companies ideally want to deal with one particular Market Expansion Services specialist. Why? Because it is easier to deal with just one partner who you know and is trustworthy. Many clients work with us first in one country, first, then expand the business relationship to other Asian markets - so why not in India too?

I believe that life is becoming harder for the local distributors who are not active beyond India. And on our side, opportunities arise, because we can add India to our portfolio of Asian countries we are already dealing with. So, not only is DKSH growing organically, we are planning what we call smaller bolt-on acquisitions on a Group-wide basis.

Q- What is in it for Indian companies?

A- Indian companies are gaining more opportunities to export their products. If you look at Asia, there are three growth drivers. The first and most important are the middle classes that are expanding rapidly.
The second growth driver is the so-called growing inner-Asian trade. Many Asian countries have successfully developed from being a former "extended workbench" of the Western industries. They used to produce products for export to America or to Europe. They have evolved beyond that stage now, and are developing into very interesting domestic economies which are engaging in trade between themselves. A particularly good example is the ASEAN countries, with a population exceeding 650 million, with some of those countries boasting very high living standards nowadays.

The third growth driver, and a particularly positive one for us and the clients we help, is the trend towards increased outsourcing. With a three-year view on our markets, the Market Expansion Services industry in Asia will grow at an average 6.8 per cent, plus one per cent from increased outsourcing services per year up to 2018.

*An earlier version of the interview has been edited for language.