Calcutta's contrasts

I love contrarian ideas and appreciate contrasts. They invite nuance and greater understanding. Recently, I met with two companies headquartered in Calcutta or Kolkata: one listed and one private, one old and one new. One represents Calcutta, the other Kolkata. Both are consumer-facing.

The Imperial Tobacco Company (ITC) personifies India's historical legacy, while Wow! Momo embodies the emerging, vibrant spirit of modern India. ITC operates from Virginia House, located in the heart of the colonial city center, and serves as a vestige of the imperial past. A memento of Calcutta's once-prominent role. The city has however witnessed a decline and dwindling economic opportunity.

The city's loss of status as the capital in 1911, the overwhelming influx of millions of refugees, displaced by Partition and then after the 1971 Bangladesh crisis, and years of poor Communist rule from 1977 to 2011 have all taken a heavy toll on Calcutta.

Many talented people and companies left the city. Until the 1970s, West Bengal was the second-largest state in terms of registered companies. But by 2021, it had fallen to eighth. Renowned departees include Bata, Brooke Bond India, ICI India, Shaw Wallace, JK Tyre, and Philips India.

ITC, however, has remained loyal to its roots and the city. Despite being a legacy tobacco company—an industry often maligned and viewed unfavorably by many investors—ITC is astutely reinventing itself. It has developed formidable businesses in fast-moving consumer goods (FMCG), packaging paper, agriculture (ITC e-Choupal), and hospitality segments. Its successful hospitality enterprise was recently spun off and listed as a separate entity.

The somewhat undervalued ITC stock presents a fantastic opportunity for investors looking to participate in the Indian consumer narrative and premiumization. Many investors overlook the potential of ITC's cigarette business, which is set to benefit from the shift from unbranded to branded goods. Besides, its biscuits, beverages, soaps, and deodorants target the discerning Indian consumer class. ITC boasts a strong brand, excellent distribution, and a diverse product range.

Shareholders of British American Tobacco (BAT) can participate in the Indian market through ITC, as BAT still owns 25% of ITC's float. In 2024 BAT offloaded 3,5% of ITC shares.

Next, I had the opportunity to meet with one of the founders of Wow! Momo—a truly remarkable company. Who could imagine that a successful fast-food business could be built around Momos, the traditional Tibetan and Nepali dish? In Sector C, East Kolkata, a dynamic team of founders is doing precisely that. They are building India's fastest-growing quick-service restaurant (QSR) business.

This determined team is smart and focused, quietly addressing essential issues so crucial for success in the QSR space: logistics, cost management, consistency in taste, branding, and scale. From their Momo offerings (over 300 self-owned stores), they have branched out into Chinese (Chin-Indian) food with Wow! China and chicken dishes with Wow! Chicken. The newest foray is into ready-made meals with Wow! Instant, capitalizing on the hyper-local delivery trend. Blinkit will deliver ready-made frozen Momos to your home in an instant.

In the next two years, Wow! Momo plans to go public. If other companies like Jubilant and Devyani International are any indication, this IPO could be a blockbuster, generating substantial returns for investors. Their success (How Wow Momo's built a 2000 crore brand) has the potential to inspire others in Calcutta and throughout West Bengal.

What do these meetings reveal to me about Calcutta and India?

They demonstrate that whilst Calcutta might be struggling as a business center, it is not defeated. Despite their differences, I was impressed by the humility and grounded nature of the management teams of both companies. Both teams are determined to succeed. They remind us that success can be achieved in and from Calcutta. They prove that the city has the talent to compete with any other Indian business hub. The success of the Bengali diaspora in the USA and other countries is another avowal of this claim. Even more vivid a demonstration of the potential here is transformation of Southern Avenue, with its boutiques and cafés.

However, a critical question arises: why do the city and the state still languish? It appears to lack political leadership with a vision and the ambition to become a Tamil Nadu or Karnataka. There is no clear reason for this to change. Yet, I sense something deeper at play. The city seems to eschew ambition, almost embracing slow decline and celebrating being left behind.

How does one make sense of the discrepancy between the achievements of ITC and Wow! Momo, on the one hand, and stagnation, on the other? Answering this riddle, a local observer reminds me that Calcutta continues to serve as a key center of excellence in education (secondary and tertiary) cultural fields such as art, design, film, literature, and music. Their candid take: “We have certainly been left behind and find comfort in celebrating the past - a kind of indulgent nostalgia as an antidote to the decline of a once leading city.” They add that this “attitude is from a hurt pride, but among ourselves, there is frustration and anger as to how we have been left behind.”

A Bengali friend, now a successful journalist, sees Calcutta as a city that can thrive in a changing world. The city has a rich legacy of quality education and has the potential to become a hub for education and vocational training in India. Additionally, Calcutta has fostered leadership in the Indian media, advertising, and content industries. In an age where AI automates many aspects of IT services, new opportunities could emerge for the city. After touring part of Calcutta, it became evident that it could transform into a center for heritage tourism and culinary experiences.

My conclusion: Kolkata will eventually undergo a renaissance, indicating a significance greater than we might realize.

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