Coke or coconut water?
Published by Yazad Jal June 3rd, 2004 in Culture and SocietyA few days back I spent a weekend at my cousin’s farmhouse near Alibaug. I enjoy spending time with her as we often spark off interesting conversations. I was reading Tom Palmer’s Globalization and Culture: Homogeneity, Diversity, Identity, Liberty (download the pdf file) and started to talk about it.
She perked up and asked me:
But what about Coke and coconut water? The entry and now predominance of Coke and other fizzy, coloured, sugar water has pushed out the healthy drinks that people therethe villagershad before — like coconut water. Now because of globalisation and the prevalence of Coke,they prefer it tococonut water is being edged out. This is unhealthy and globalisation at least in this case is harmful.
Any comments? Responses? My only thought is that it sounds suspiciously like the noble savage.
I totally agree with your cousin’s argument.
Also, solid wholesome hours tilling and ploughing in the sun is so much healthier compared to sitting in front of a comp (and pretending to work).
Am off to ze farm and ze coconut water.
Oh! that must be why so many farmer’s commit suicide, because the hot toiling in the sun is too much fun.
The FAO, and one Mr. Satin are taking coconut water to the “sports-drink” market. Check it out.
You know I bet a horse-drawn cart was healthier to drive in than an early steam engine or motor vehicle, but then choo-choos gave way to diesels and electrics, and cars are now faster more efficient, and driven on much better roads. Progress, how can you possible second guess it?
Noble savage? Only in the sense that she unnecessarily singled out “villagers”. Correct me if I’m wrong, but I thought that it was mostly the urban middle-class consuming the soft drinks, no doubt contributing, perhaps in a small way, to the increasing levels of obesity among that population.
“Oh! that must be why so many farmer’s commit suicide, because the hot toiling in the sun is too much fun.”
Perhaps their wholesome toiling in the sun got offset by guzzling unwholesome globalizing coke?
There you go - more evidence of the evils of globalization.
3 comments. first, i hate colas and other bottled soft drinks. i prefer beer, and nimboopani, mattha, kokum, nariyalpaani and what not. second: what we are seeing is VOODOO LIBERALISATION. in a western superparket, the soft drink section is MUCH MUCM MUCH MORE THAN COLAS. third, if there was real globalisation, villagers would be drinking far better alcoholic drinks like beers and wines than the harsg grogs of ‘counmtry’ they drink today.
Gautam, the coconut sports drink article is 4 years old. Wonder why I haven’t seen it on the market yet.
Globalisation gives the consumer more choices. Now it is upto him to make the choice.
So if people are selecting the cola drink over coconut water, then they are obviously perceiving more value in the cola drink. Thus they are happier now, having made the choice themselves.
Though I will agree that when people select Coke over Coconut water, they are giving more importance to product features like “Image”, “Taste” etc over “Healthiness”!
Maybe you can argue that people are making the wrong choices(according to you!). But I dont understand how this is a case against globalisation?
Sunil
I’m an ardent cheerleader for globalization, but your comment left me wondering whether “globalization” did “give give the consumer more choices” as you stated. Free market economies do give the average consumer more choices. However, a truly globalized world includes Walmarts, McDonalds and the like that are by their very economies-of-scale oriented nature, standardized. Ergo, fewer choices. One of the offshoots of globalization is the monopolistic corporation. This is where De Soto’s arguments that laws must be upheld comes in the fray. I would extend that to state that “anti-trust laws must be enforced across borders by each soverign nation”.
I dread to think of the days I struggled with Pacific Bell over my DSL connection. A horribly monopolistic situation.
Yazad, for one it was an FAO(UN) idea, 4 years is what it takes them to sneeze. It maybe on Walmart shelves you never know!
BTW, apparently in rural Telangana and Chattisgarh coke (specifically coke) is not available. It is banned by the PWG. Ofcourse they don’t have a water table to speak of either, but they’ve ensured coke stays off.
Quizman, I think WalMart despite all its bulk only has 5% of the US retail market, and McDs is not the *only* american fast food joint. Americans are increasingly eating more differentiated ethnic foods, try Tyler Cowen’s Ethnic Dining Page.
The reason for the recent disenchantment with globalisation amongst the Indian poor, is because of people like the Verbal Terrorist and the Resident Idiot, and a lack of local language speaking/writing pro-globalisation journos. As well as the systematic urban bias of reforms.
Gautam,
The problem is not with consumption but with procurement. Suppliers of products to Walmarts and other virtual monopolies have little negotiating space since these firms have tremendous buyer power. In a perverse way, they are very akin to the the monopsony’s that one sees with socialistic companies. I have heard from financial consultants and economists about the damage that they cause to other businesses and for competition in general.
Coke over coconut water .. blame globalization? Sounds pretty unfair. While ‘globalization’ may be ‘blamed’ for aggresively marketing coke throughout the country, how can one blame it for the choice someone makes? If you say the choice is made due to the ‘image’ and marketing of coke, then I would say coconut-water is not being properly marketed.
The conclusion made in the quoted text is that globalisation is harmful in the said case. Does it mean that without the so-called globalization the villagers would have been better off, because they did’nt have access to coke?
Quizman,
First I think I was more than a little off when I stated a 5% market share, apparently it’s 7 times that.
This fact notwithstanding, I don’t fully understand how the exercise of buyer market power can be bad in a cnosumer driven, open market, free trading economy. Walmart is a creature of just such an economy, and I might add just such a thriving economy.
American per capita GDP is in the region of 35000$, compare that with our 2000~$ in PPP per capita GDP. There is no WalMart in India because India does not have adequete concentration of buyer power amongst consumers (by which I mean: Not enough Urbanisation; Not enough Wealth in the hands of the average Ram/Rahim/Robert). The avg. American Joe, who wants more value for their money has created WalMart. I for one wish that we are in a scenario where everyone in the world has the kind of purchasing power that the avg. American has.
How do lower prices resulting from a competitive process hurt anyone? Even with 35% market share WalMart does not have 100% share and coercive power like some of our PSUs do/did, or for that matter our Labour Unions. And more importantly it is using that market share to benefit the people it serves (consumers and shareholders), unlike the latter which seems to exist largely to serve the people who should be serving(labour and government).
Gautam, the main reason why I think we don’t have WalMart in India is that there are severe restrictions on FDI in the retail sector.
Yazad,
I dont recollect singling out the villagers. You may want to clarify that.
Re the comment posted by Sunil Joshi, who states that: “Globalisation gives the consumer more choices. Now it is upto him to make the choice.
So if people are selecting the cola drink over coconut water, then they are obviously perceiving more value in the cola drink. Thus they are happier now, having made the choice themselves”, I wdnt agree because:
Actually, history has shown that Globalisation lends itself to huge monopolies [cutting out the other players] resulting in lesser choices;
Secondly, people being people ie. susceptible to advtment gimmicks and fads, dont really percieve “value”.
If the coconut vendor had a level playing field vis a vis the Coke conglomerate, things wd be different. Alas, Globalisation just ensures AGAINST this.
Suns, we were discussing people in Jhirad, so I put in villagers.
Anyway, I’d suggest you tell me what changes to make in the box and I’ll make them. It is, after all, your argument and I want to present it in the way you would agree with fully.
Gautam, the main reason why I think we don’t have WalMart in India is that there are severe restrictions on FDI in the retail sector.
Posted by Yazad at June 7, 2004 09:19 AM
Yazad, tera kya hoga yaar? At the liberty of assuming I got what was being said, gautam meant that “the main reason why we do not have a domestic entity similar to Walmart, with hundreds of branches, and a common procurement procedure”. Everyone knows about the retail-FDI cap.
Monday hit ya?
Yazad,
Even if WalMart does come, I think relative to the population the revenues they get will be quite small, can you imagine a WalMart within a
10 minute driving distance of most Indian homes? I am not sure there are even those many schools. Unless they totally reinvent their outlook they are going to finded harder going here than they have in Europe where they tried in an essentially American approach in a hostile business climate with a different work-ethic.
gautam
suns, Did you just escape from a Commie Indoctrination Camp?
Do you understand what level playing field exactly means?
PS: Gaurav got it spot bang on :-)
and suns what exactly do you mean by this
I mean what exact incidents/events/processes in history are your referring to? And in the “secondly” part of your contention, what exactly is wrong with people being susceptible to adverts, gimmicks and fads? How is society as a whole worse off for individuals making free choices? Wouldn’t it become costly for you to go looking for a product when the manufacturer is not advertising for it?
I for one would never have gone out and looked for Real fruit juice or Leh Berry juice, but both TV and point of sale advertising just tells me that it exists, I don’t see anyone forcing me to buy it on pain of punishment. The former I love especially the Mixed Fruit, the latter I am looking for in shops. Both maybe a fad, but 10 years ago the only thing in this range I could buy was Kissan squashes with synthetic aftertastes in glass bottles. How are we worse of today than we were then? More importantly how do you identify a fad or a gimmick from the real thing?
I agree there are some people who are less well-off than others, but that is a different story.
Gaurav, she obviously hasn’t escaped. ;-)
And I disagree with Gautam. I was in a village called Chondhi in Raigad district (near my aforesaid cousin’s farmhouse) and lo and behold! I saw a supermarket. It wasn’t WalMart, and it’s only one example, but the potential exists.
I think FDI in retail will boost the sector considerably. So the trade barrier is an important consideration in the debate.
I don’t expect WalMart or any retail chain to expand that fast very soon. Plus most MNCs who have succeeded in India have reinvented their outlook. Actually I don’t much care about WalMart. It’s the basic thesis that purchasing power is very low therefore supermarkets as a concept would fail in India that I dispute.
Gautam
Interesting you should bring up WalMart. I totally agree with you. Not only does an Indian customer have low bargaining power, but he does not believe it if someone offers it to him.
We had a case on Foodworld, the mini version of Walmart in India. In that one of the problems that Foodworld apparently faced was that the stores look so posh that people assumed it would be costlier than your average kirana store.
So only upper middle classes frequented. The wife of your rickshawwallah still buys from a kirana stire though grain there is more expensive.
People find it hard to believe that they can get more value.
Yazad, where i agree with Gautam is the part where he says that the reasons for absence of a home-grown Walmart. However I do not share his views that it will continue. The retail market is booming, and customers are gradually realising their bargaining power. There will be chains of supermarkets in India pretty soon. Foodworld etc, despite their teething problems, are doing well. once they progres in the learning curve, they will take off.
Gautam,
My response to your reply..
Well, simply by cutting off competition. For example, if P&G does not toe Walmart’s line, they are shoved off the racks. The products that you get from Walmart are the ones that (a)tremendous volume (b)depressed prices. One argument that economists have made is that Walmart restricts competition by limiting (or removing) shelf space for a whole lot of companies. The other argument is that, much like Dell, the business model is overtly concentrated on operational excellence which results in depending on network effects for R&D. However, the trouble is that, a supplier who is forced to lower prices to abysymally low levels cannot spend much on R&D. Hence, a vicious circle. [I’m not even getting into the labor side of the equation since that is more of a leftist issue. After all, you have a choice - don’t work in Walmart. :-)] For a good case study on the Dell model, please refer to the Harvard Business School case in your nearest library. :-)
And don’t go by stats. Walmart may have *only* 35% market share. But that is quite mammoth and a sales VP in P&G or Lever would be a damn fool if he let Walmart off his radar.
As an aside, Yazad & Gaurav, in your discussion on market penetration in the hinterland, you missed a crucial point and believe you me, it is not subtle. In most one-street towns in the US, going to Walmart is a social event. People “hang out” at Walmart in their best attire.
Since we have somehow got on to the issue of retail from coconut water, I might as well state a mini-theory about kiranas.
You see in addition to the convinience of providing easy access to a large variety of products, and being in an almost perfectly competitive market where along a 1km strech of road you could fin about 5 kiranawalas, they provide something which FoodWorld and WalMart may not be able to - open credit. I know this because apart from Gaurav’s rickshawallas wife, our family also patronises a kiranawala, and it is convinient to have a large open credit account which allows us to buy groceries even if we are short of cash. In fact we almost never pay in cash and we can pay the bills at almost anytime we want, anything from 1 month to 1 year, and is often rolling credit i.e. pay as you can or want to. In fact the amount of credit available in this way is quite substantial because you can usually avail of it at more than one shop.
I understand this is a result of heavy competition as well as the low shelf life of most groceries. If they don’t provide credit someone else will, and if they don’t sell their stuff it will be a dead loss. In fact a few years ago a new kirana wala opened up, and as a method of enticing business he started giving blind credit without having established a relationship resulting from regular purchases as is the usual practice.
The only weapon that FoodWorld has against these indiscriminate credit-mongers is the credit card, and possibly deep discounts. But until the ready cash available with average households remains at a low level I doubt that they will really catch on. Many experiments such as Big Bazaar attempted chain grocery shops but seem to have fizzled out in the face of the kirana wala credit.
Quizman, I’ll try and look up the studies you point out, but I doubt I’ll ever get around to it :-). And about WalMart, we have Malls sprouting up in the suburbs which have developed a similar flavour, people go there to hang out in food courts and enjoy the central a/c and escalators, I don’t know how many people actually buy things there, but then the fact that it attracts so many people, by law of averages something must workout for them. Our local mall - Center One - even has its on FoodWorld.
Somethings I forgot to mention were, that there is no interest, I presume the cost of lending comes out of retail margins, which is akin to a staggered deep discount. In fact the longer you take to pay the deeper your discount. Though ofcourse the shopkeepers do prefer early payment. I am curious to know whether this is a recent, relatively low inflation era phenomenon or restricted to Sanpada or just to the shops we patronise :-). I remember in girgaum we did have many retailers, and credit was also available but there terms were stricter i.e. shorter repayment periods.
Quizman,
I haven’t read the HBS article you suggested, but just working with the idea. If low margins mean less R&D then how do you explain phenomena like the Ford Model T which provided decent value for money, in a relatively low income economy. Or on the other hand. Also if WalMart squeezes P&G say on the margin, then won’t it incentivise a move of P&G R&D to a place like India or China, rather than an import of highly-skilled labour from these places. So in a sense couldn’t WalMart be promoting or pushing its suppliers to take advantage of globalisation, when they might not have done it earlier? Also if average Americans buy less of what P&G has to offer, won’t they spend the money saved on superior goods like IT goods for instance? So wouldn’t WalMarts activitied actually be increasing consumer buying power, both in America and to an extent in other parts of the world, where income increases will be expereinced because of much maligned outsourcing?
Gautam,
Well, the only suppliers who can hold a candle to a Dell are big ones like Intel & Microsoft that have high addded value. And they can afford R&D (and how!).I doubt if any supplier to Walmart has high added value. [Btw, the term ‘added value’ is not to be confused with that other term ‘value-added’.]
The Model T isn’t a good comparator, since it was a luxury product - almost prohibitively expensive, but lower than its competitors. Yes, it popularised automotive transport, but it was like buying a house. :-)
I guess you mean “offshoring” and not “outsourcing” with reference to moves in China/India.
Regarding offshoring - while it is theoritically possible, one must admit that much of the world’s research, especially medical research comes from US universities/firms due to the unique confluence of open (even questioning, irreverant) culture, funding, immigration and history. I doubt if India or China will surpass, in the short term, this unique advantage that the US has had. You’re assuming that some of the most brilliant people from all over the world would prefer to migrate to China/India to continue their research over there. While I love India, even I would be highly sceptical of that!
The Walmart or Dell model works fine as long as they outsource R&D to third parties (PG&E, Intel, Walmart) who have to maintain high added value to remain competitive. Yes, thre are benefits to consumers in the short term due to this model.
It is early days yet to gauge the benefits/disadvantages of this model. Time will tell whether it is successful for the firm as well as the US.
Gautam, had totally forgotten about the credit point. It had come up during our case discussion in IIML.
Walmart has 35% of what pray tell?
On the subject of allowing foreignes in retail trade pl see following interesting site:
www.prajatantra.blogspot.com