Bicycle Industry

Merida enters India sans road bicycle

Perhaps due to bicycle industry commotion about how China’s emerging middle-class will secure growth for every brand under the sun, India is often overlooked. 25 years after its first export, Merida, Taiwan’s second-largest bicycle manufacturer, is finally dipping a cautious tyre – but not a skinny one – into the Indian market.

On numbers alone, India would appear a more attractive market to a bicycle brand than China. Though conceding a population difference of 100 million to China, India (estimated population 1.2 billion people) has almost twice the ‘Generation Z’ pipeline, whilst English features as the nation’s second-most widely spoken language.

Rather than pursue a capital-intense direct entry into the Indian market, Merida has selected a Delhi-based distributor, APPL Bikes Ltd, to provide its market development platform. Whilst Merida has the financial clout to open its own operations in India, it has tacked independent of the popular “what would Giant do?” approach; after all, Merida continues to engage a distributor in Australia (Advance Traders, owned by Flight Centre Limited), which has a numerically greater high-end market – at least for now – than India.

Giant, the globe’s biggest bicycle manufacturer with own-brand production of over five million units, made a similar soft entry into India – via a specially-created subsidiary of motorsports business, Red Rooster Racing – in 2010, but has advanced its domestic product mix to include a road bicycle; the INR28,900 (USD580) Shimano Sora-equipped SR2. Conversely, Merida has not yet introduced any road bike models, much to the bemusement of enthusiasts on India’s popular cycling forums.

At a product management level, Merida needs to close the yawning gap between Giant’s entry-level SR2 and its own ‘Ride Lite 901-com’ which, at USD1000 (INR50,000), is a cost bridge too far for most Indian consumers [CiQ note: Merida does offer a 'Ride 88' model in select markets, which retails for marginally less]. In theory, the Taiwanese-based company could easily leverage its OBM status by fast-tracking the development of a more competitive road bike product. Merida could even afford to run such a project at an operational loss initially to build market share; though that could present mid-term brand image hazard, which the company may be understandably keen to avoid.

Merida could do worse than look to Cannondale (Dorel Industries group of brands) and Bianchi (Grimaldi Industri subsidiary, Cycleurope, group of brands) for inspiration; the industry icons have already paved the way for imports of premium bike brands into India. Indeed, both chose the same distributor, TI Cycles, to host their dual market launch in early 2009. In the two years since, each brand’s respective product array has expanded upwards; likely betraying a comparable growth in sales of more expensive bicycles. This should be good news for Merida.

Also on the upside, India’s deferred GST (Goods and Services Tax) – now due to be implemented in 2012 – promises to provide an opportunity for manufacturers of imported goods to be competitive. A centralized taxation structure could make “off-sheet” opportunities for corrupt supply nodes more difficult, due to its uniform and transparent nature. Again, this is a positive outcome for bicycle brands like Merida.

Speaking of deferred events, the UCI1.1 ranked Tour de India – currently a “series” of two one-day races, following Pune’s withdrawal from the original concept – will now take place in late March/early April. Perhaps there’s an opportunity for Merida to step in as bike sponsor. Or, it could wait to see what Giant does.

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