INDIGO: A pay-as-you-go solar home solution

Global Go-to-Market Strategy – Entry into rural India Lizanne Roberts I Harvard University

https://energypedia.info/wiki/India_Energy_Situation#Electricity_Access_Rate

1.4 billion people worldwide still have no access to power

or grid-based electricity.

360 million live in rural India.

With approximately 300 clear sunny days a year, and 1,500–2,000

sunshine hours per week, solar energy is a viable renewable energy

source that offers an alternative to the conventional energy

challenges India faces.

http://www.sunwattindia.com/whysolar.html

Our solution? INDIGO SOLAR HOME SYSTEM An innovative and affordable (pay-as-you-go) solar powered home technology.

Source: http://www.renewsysworld.com/Payasyougo-Solar/Azuri-Indigo-Solar-Kit.html

Product StrategyATTRIBUTES:• An innovative and culturally

relevant product solving immediate electricity needs.

• Convenient and affordable pay-as-you-go solution.

• Positioned as an “energy escalator” w/trade-up option.

• Includes mobile phone charging.

BENEFITS:• Enables a cost savings

up to 50% each week.• Allows children to study

after dark and promotes overall home productivity.

• Provides safety for women and children.

• Provides light for increased economic activity.

• Enables the replacement of hazardous fuels.Source: http://www.renewsysworld.com/Payasyougo-Solar/Azuri-Indigo-Solar-Kit.html

Product: Tiered system

Source: http://www.azuri-technologies.com/

History: Success in rural Africa The goal: Establish affordable off-grid access to one of the world’s poorest countries.

40k distributed in 2013100k distributed in 2015Designed and manufactured by Eight19, a UK-based company. Brought to market by Azuri Technologies.

Azuri Technologies currently has a presence in 10 countries in sub Saharan Africa.

Source: http://www.azuri-technologies.com/

http://www.theguardian.com/global-development/2016/mar/21/electrifying-india-the-day-the-light-came-to-rural-hotasar

Target Market

Rural India with low-to-no access to electricity (45% of rural households in India do not have access to electricity)

Designed for poor consumers on a limited budget (To replace low-quality/high-cost alternatives such as kerosene, candles & batteries)

Households and small businesses (In 2011, 75 million households in India were still living by candlelight)

Mobile phone users (1 our of every 2 rural households has a mobile phone)

http://www.energypedia.info/wiki/India_Energy_Situation#Electricity_Access_Rate

A look at India’s Cultural Dimensions

• India exhibits a high power distance and has a top-down pecking order.

• It is a society with both collectivist and individualist traits.

• India is considered a masculine society. It values success and pow-er yet is grounded by its spiritual values and religious philosophies.

• It is traditionally a patient country where tolerance for the unexpected is high.

• Time is not linear and thus not as important as to Western societies

• India is a culture of restraint and scores low on indulgence.

https://www.geert-hofstede.com/india.html

Industry Overview

http://economictimes.indiatimes.com/news/economy/indicators/q4-gdp-growth-at-7-5-economy-grows-at-7-3-in-fy15/articleshow/47471403.cmshttp://www.theclimategroup.org/_assets/files/The-business-case-for-offgrid-energy-in-India.pdf

• India is the 4th largest energy consumer in the world.

• By 2018, the market is likely to reach an annual sales volume of 3M solar units and a market opportunity of over US$215M.

• India recently pledged its country’s commitment to growth and reform of renewable energy.

China and India account for half the world increase in energy consumption through 2040.

Source: EIA, International Energy Outlook, 2013. Retrieved from: http://www.eia.gov/forecasts/ieo/pdf/0484(2013).pdf

Market PotentialUNDERSERVED RURAL HOUSEHOLDS IN LEAST ELECTRIFIED STATES

• Rural population of 360M.

• Due to affordability and reach, an estimated 5M solar home units will be sold between 2014-2018.

• Taking population growth into account, India adds nearly 600 million new electricity consumers between now and 2040.

• 1 out of 2 rural households owns a mobile phone.

• More than half of the total underserved rural population lives in five states.

• Rising rural incomes means demand will rise beyond basic lighting.

Distribution of underserved households in rural India.

http://www.doingbusiness.org/data/exploreeconomies/indiaIEA, India Energy Outllook, 2015. Retrieved from: http://www.eia.gov/forecasts/aeo/

Source: http://www.theclimategroup.org

Competitive Analysis

5% –10% of market

85% of market

Primarily services rural off-grid homes

Primarily partnters and distributes via goventment contracts

Deeper consumer trust

Hard to fight government bureaucracy

Massive scale

Lack of consumer trust and on-grid infrastructure

+–

–+

SOLAR HOME ENERGY MARKET > LOCAL VS MULTINATIONAL

http://www.theclimategroup.org/_assets/files/The-business-case-for-offgrid-energy-in-India.pdf

SWOT Analysis

STRENGTHS

OPPORTUNITIES

WEAKNESSES

THREATS

• Scalability can be challenging with the current standalone business model

• Factoring in product, transportation, marketing, distribution and installation costs, profitability relies on scale.

• Small company with limited capital

• Mulitple market players & new entrants

• Customers may not pay

• No governement subsidies for small scale players

• Lack of infrastructure

• Success of business model/product in Africa

• Won numerous international awards. The latest being among the winners of 2015 UN Climate Solutions Award

• Meters are wired and can be monitored remotely

• Rising rural incomes

• Solar is an untapped market

• Small scale enterprises offer deeper rural distribution networks and consumer trust

• Potential future access to financing

INTE

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EXTE

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http://globaledge.msu.edu/countries/india/governmenthttp://www3.ambest.com/ratings/cr/reports/India.pdfw

A mix of localization and standardization

ADVERTISING SALES PROMOTIONS PERSONAL SELLING• Open-air market signage• Sponsorships • On bicycles• Vans• Packaging

• Word-of-mouth• Product demonstrations• Contests• Coupons• Local community events• Mobile – delivery via voicemail

or 30-60sec phone commercial

• Door to door• Open-air market• Community events

Integrated Marketing

Distribution

• Direct Import

• Partnership with local mobile phone companies:

Bharti Airtel Vodafone India

• Local rural retailers & open-air community markets

Potential future growth opportunities include:

• Additional mobile telecom providers

• Village entrepreneur(s) (ie. feet on the street access)

• Joint ventures with third-party distributers with rural networks

For example: Barefoot power, Visionary Lighting, Duron, Thrive, Selco, Boond

• Through local community partnerships (solar education events, education sponsored events, community investment opportunities.)

Source: http://gadgets.ndtv.com/telecom/news/vodafone-to-invest-2-billion-in-india-telecom-operators-to-con-solidate-sibal-432699

Barriers to Entry

• High political risk

• Poor infrastructure, including distribution and logistics

• Regulatory constraints, local sourcing & import tarrifs

• Risk of bureaucratic delays

• Conflicting policies & jurisdictions

• Risk of bribery and corruption

• Protecting intellectual property

• Difficulty reaching customer base in isolated communities

• Financial viability of enterprise (ie. capital)

• Potential unskilled workforce

• No consumer access to loans or banking options

• Currency fluxuations

Image source: http://www.bloombergview.com/articles/2015-05-22/modi-s-india-needs-to-embrace-a-weaker-rupee

Price and Sales Forecast

http://www.dutycalculator.com/new-import-duty-and-tax-calculation/saved_calculations/view_details/201545946/

2016-2017 2018-2019 2019-2020 2020-2021 2021-2022

Overall Sales 6,750,126 13,500,252 20,250,378 27,000,504 33,750,630

Total Import Duty & Taxes 13,569.36 27,138.72 40,708.08 54,277.44 67,846.80

Shipping & Insurance 49,994 56,271 64,231 70,666 73,942

Net Sales 6,686,436.64 13,431,842.28 20,145,438.92 26,875,560.56 33,608,841.20

Cost of Goods & Services (40%) 4,011,861.99 8,059,105.37 12,087,263.36 16,125,336.34 20,165,304.72

Operating and A&P 427,000 440,659 448,643 454,934 462,234

Gross Margin 3,584,861.99 7,618,446.37 11,368,620.36 15,670,402.34 19,703,070.72

Lisencing (.75) 2,688,646.49 5,713,834.77 8,728,965.27 11,752,801.75 14,777,303.04

PER UNIT PRICE (USD)Initial + scratcards + Final Pymt

$10 + $108 + $5 = $135USD

PLEASE NOTE:

Loose projections

only.

Conclusion Risks: • Unstable political, economic and financial environment.• Lack of infrastructure and inability to reach remote rural communities.• Lack of capital and the accumulated costs involved to produce, transport, distribute and market the product.

• New entrants and firmly established competitors.

Opportunities: • Large population and a massive untapped market.• Partnering (and bundling products) with local mobile telecommunications companies who currently serve half of India’s rural population (ie. immediate access to market share).

• Key partnerships would spread the responsibility of the core business functions to the respective licensing entities while creating immense opportunities for reach and sustainable long-term growth (and profit).

Thank you