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com

1) Foodles in the Noodle Bowl

INDEX 3 26) Pepsodent fights on 61
2) HUL`S Marketing Mantra 4M 5 27) Prickly Competition to beat the heat 63
3) Oiling the Chain 6 28) Clash of the Teutons 64
4) The Battle of the Bourses 8 29) Three screens & the cloud 66
5) Back to Data 11 30) Coming out of the Closet 69
6) The Del Monte Difference 14 31) Match on for Videocon 71
7) Building Brand Infosys 16 32) Reebok Straddles Mass & Class 74
8) Entertainment Incorporated 19 33) IITS Slip in Asian University rankings 77
9) Nerolac nets a new Hue 21 34) Ad Fest or War Fest 78
10) Can Kwality Walls beat the heat 23 35) Idiots lead the pack 80
11) Spicejets flight to profit 26 36) Amrutanjan: Pain for suitors 82
12) Slower trade, Smaller packs 28 37) Fast moving food business 84
13) Turbo Turnaround 30 38) Stretching out in a tight space 87
14) Tale of Contrast 32 39) Summer Mischief 90
15) German Design 34 40) Scaling the Chinese Wall 92
16) Unity in Diversity 37 41) Volkswagens big leap 95
17) Change the Green Knight 40 42) General Electric 2.0 96
18) Korean takeover 43 43) Danone India seeks wealth in health 99
19) Indovation 46 44) Overseas Call 100
20) Building Virtual Mall 49 45) In-Film branding goes regional 103
21) A Fresh Coat for Dulux 52 46) Designs on Profit 104
22) Social Media altering role of Brand Managers 54 47) Are you game? 106
23) Seeking to score a Goal 55 48) Kellogg`s goes snacking 108
24) Chevrolet all the way 57 49) Radio days are back 109
25) Time to Zoop 59 50) Money for Value 110

Business Standard 2

FOODLES IN THE
NOODLE BOWL
GSK is pitching new Horlicks Foodles as a healthier option in instant
noodles. Can it storm Maggi’s stronghold?
G
laxoSmithKline Consumer
Healthcare (GSK) has entered the
instant noodles market which is
ruled by a brand that is synony-
mous with the category —
Nestlé’s Maggi. While its Rs 1,500-crore
malted drink additive, Horlicks, has had a
long reign at the top, this time GSK is the
challenger. Instant noodles were intro-
duced in the country by Nestlé under
Maggi in 1984. Since then, many rivals
have come and gone but Maggi’s rule has
remained unshakable. The market for
instant noodles is worth Rs 1,137 crore,
according to Nielsen, and is growing at 20
per cent per annum. Out of this, Maggi
Masala-flavoured maida (processed
flour) noodles command around 91 per
cent; other Maggi products and flavours,
and all other brands make the remaining 9
per cent. No other food category has such
dominance of one brand.
Horlicks Foodles is GSK’s attempt to
get a share of this pie. Not just Nestlé’s
Maggi, it has to contend with Hindustan
Unilever which has entered the instant
noodles snacking segment for the second
time with Knorr Soupy Noodles. (It had
earlier tried its hand with a tie-up with
Indo-Nissin for its Smoodles in the
1990s. It had also launched and later
withdrawn a rice- and vegetable-based
pudding with a chutney mix for evening
snacking called 4 O’Clock Tiffin earlier
this decade.) Private labels of large retail-
ers like the Future group (Tasty Treat)
have gained some traction with their
lower price tags — some of them claim to
www.business-standard.com
Sayantani Kar
have grown 15 per cent in the last one instant noodles were not usually consid-
year. ITC, which has done well for itself ered healthy. It found that mothers felt
in categories like flour, salted snacks, guilty serving instant noodles to chil-
confectionaries and biscuits, has so far dren because maida is not as healthy as
shied away from instant noodles; its atta or wholegram wheat. As a result,
cooks and experts have not been able to mothers fortified the noodles with veg-
come out with a unique flavour to take etables and eggs. This was a vital clue for
on Maggi. GSK has chosen Horlicks GSK before it got started. “The fact that
Foodles for its entry into salty foods, a the category is so lopsided presents a big-
category that hinges on the very subjec- ger opportunity
tive criterion of taste. On its target is 6 per
cent of the market in a year or so.
Health is wealth
GSK says Foodles is nutritious instant
noodles. Will that be enough to cause a
breach in Maggi’s stronghold? The
company claims the proof lies in
the test-marketing. GSK
Executive Vice-president
(marketing) Shubhajit
Sen says that Foodles
has been able to gar-
ner 5 per cent of sales
in the South and East
where it was soft-
launched before going
national. That could mean sale
of around Rs 25 crore from two
zones — around 2 per cent of the over-
all market. It was good enough for GSK
to compress the 18-month deadline for a
national rollout and do it in July.
Instant noodles are no longer alien
food in India. An IMRB report says
45 per cent of all households
consume instant noodles. But
GSK’s internal studies showed that
Business Standard 3

than usual to position oneself dif-
ferently and get heard. Even though
instant noodles right now have
their centre of gravity in taste, we
can afford to offer one with nutri-
tion because we are good at under-
standing what makes for nutrition,”
says Sen.
GSK struck a partnership with Nissin,
the maker of Top Ramen Smoodles, the
original Maggi-challenger. Nissin helped
GSK first in research and then in produc-
tion. The result was a maida product and
another noodle made from four different
grains as a healthier option. Both contain
minerals in their tastemakers. It made
sense to retain Horlicks as the mother
brand because of its strong brand equity
in the health segment. The brand’s India
sale alone contributes 70-75 per cent to
its global turnover. It also reiterated the
association with wellness. To drum in the
fact that Foodles stands for nutrition,
GSK is now working on a tactical insight
from its test launch: It found the need to
tag the packs with the respective flavours
and ingredients more clearly. It has also
ensured that it gives out clues of the noo-
dles being tasty and healthy on the pack
itself. “The key lies in increasing the visi-
bility,” says Sen. Horlicks has ensured
floor-standing units, hangars and baskets
at stores to highlight the product.
But isn’t it too late? Maggi reposi-
tioned itself as a healthier snack option
some years ago when it introduced rice
and atta noodles, and adopted the
tagline, “Taste bhi, health bhi” (Taste as
well as health). But the contribution of
these variants to its total turnover
remains small. It has in its portfolio no
fewer than three products and five vari-
ants in the instant noodles category.
Most may not contribute much to sales,
but they block out several entry points
for rivals. One has to try really hard to
come out with a killer product.
Meanwhile, Nestlé strengthened
Maggi's position last year by launching
an interactive advertising campaign,
which sought to build emotional bonds
with consumers.
Price play
GSK sure knows the market. To begin
with, Foodles will talk to urban con-
sumers, unlike Maggi which has gone
rural and deep into urban markets with
its small Rs-5 pack. “We were present
with only single-pack sizes which
account for 28-29 per cent of the market.
The larger family packs of eight and four
strips are being rolled out now,” informs
Sen. It is also priced at a premium, in
line with the mid-premium image of its
mother brand Horlicks. Its multigrain
variant costs Rs 15 for 80 gm compared
to Maggi’s Rs 10 for 80 gm.
To be sure, there exist smaller
brands than Maggi and Knorr in the
market like Capital Foods’ Ching’s
Secret and Smith & Jones, and
Choudhary Group’s Wai Wai. GSK may
try to gain a foothold in the market by
displacing these brands first. For that, it
can count on its revamped distribution
network — it reaches 600,000 retail out-
lets directly and another 1 million
through distributors. Of course, the
retailers who stock Horlicks can also
stock instant noodles. So far as private
labels are concerned, Sen says they are
just price warriors and that too within a
limited network. “Modern trade
accounts for only 8 per cent of the cate-
gory sale. Private labels often play the
low-cost card and are not really building
brands.”
That may be fine, but GSK has to
face a rejuvenated Hindustan Unilever.
It has packaged noodles with soup in
Knorr Soupy Noodles — while instant
noodles may be unhealthy, soup is seen
as a healthy option in Indian house-
holds. And there is sufficient differenti-
ation too: The product harks on the dif-
ferent way of eating noodles rather than
taste or nutrition. Taking the idea from
its Noodle Soup which was sold under
Knorr soups, the company is aiming to
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ride the noodle-eating habit to
popularise its soups which
were otherwise bought largely
in winter. In its aggression, it
even replaced soups with instant
noodles for the same positioning
as a mid-evening meal for kids. It
has cranked its sales force for
ground-level activation like in-shop
demonstrations.
Spreading risks
It is crucial for Foodles to succeed. It is,
after all, a part of GSK’s diversification
beyond malted health drinks based on
indigenously developed products. This
plan got momentum after Zubair
Ahmed took over as the managing direc-
tor in 2007. (He was running Gillette in
India but left after it got acquired by
Procter & Gamble.) At present, more
than 58 per cent of GSK’s revenue comes
from Horlicks, that too mostly from the
South and East. Good business sense
requires GSK to spread its risks across
more products and more markets. Thus,
while 2008 saw it launch variants of
Horlicks and a brand refresh of Boost,
2009 led it into biscuits, flavoured milk
and cereal bars. GSK is targeting half its
growth from new products every year so
that by 2012-13, 25 per cent of its busi-
ness comes from its Indian innovations.
Foodles could help GSK fortify Horlicks
across India. GSK tested Foodles first in
the South and East where Horlicks is
strong. Since milk is more abundant in
the North and West, flavours in the form
of ‘brown’ additives are more popular,
according to Shirish Pardeshi, senior
analyst of Anand Rathi Securities. So,
there is room for Horlicks to grow here.
Foodles could ride on its success. “With
Foodles, GSK could score better for the
Horlicks brand name in these regions.”
As income levels rise and packaged
food finds more takers, experimental
users will fragment the instant noodles
market. The next few months will
decide if the current crop of players can
continue to sell or will they have to go
for a market check. As for GSK, will
Foodles help it grab more sales? The
answer will show up in the next few
financial results.
4

HUL'S MARKETING
MANTRA: 4M
F
irm regains volume growth via
focus on market share, market
development, margins and
consumers' mood Sitting in his
corner office at Hindustan
Unilever's spanking new headquarters
in Mumbai, Nitin Paranjpe often walks
up to his sales director to ask him the fol-
lowing questions : Why has the compa-
ny's product movement slowed down in
Asansol in the past couple of days? Or,
why aren't there enough stocks in the
FMCG major's Coimbatore depot?
The questions are hypothetical, but
show how the fast moving consumer
goods major is using technology for mar-
ket development. HUL Chairman and
President of Unilever Asia, Africa Harish
Manwani says, “It's no longer enough
just to deliver the products, it's now
more important to compete for non-
users of branded FMCG products”.
HUL has gone into strategic partner-
ships with technology companies for
such targeted market development. For
example, the company's sales persons
will have in their hand-held devices all
details of kirana stores in the areas they
operate in.
Initiatives like this have given vital
marketing lessons in consumer insights.
For example, the company found that the
Annapurna atta sells more in the south
than north. Surveys found that unlike
the practice in the north, people in the
south eat rotis only occassionally and
prefer atta in packaged forms.
Manwani says these little things have
helped HUL achieve a double-digit vol-
ume growth in the first quarter of this
year. That's a sharp rebound considering
Arijit Barman
that the company's performance had
slipped in fiscal 2010.
“While everyone was going into
stores, we went into consumers' homes
to find out what she wants. This is a part
of the 4M of marketing - market develop-
ment, market share, margins and mood
of the consumers”, Manwani says. The
other part of course was constant inno-
vation to build markets. One of the rea-
sons why margins rose sharply during
the first quarter was better product mix
due to new launches. In the last one year
alone, HUL had 30 product launches.
HUL believes there is a huge market
development opportunity in countries
like India as consumption is still one-
third that in Indonesia and one-seventh
that in China.
He gives the example of Dove sham-
poo to show how market development
initiatives have worked for the company.
From zero, the company now has over 7
per cent of market share and leads in
modern trade. Soupy snacks are a differ-
entiated offering, so is Brooke Bond
Sehatmand tea, demonstrating HUL's
fundamental business model of strad-
dling the pyramid.
HUL has codified how it can go about
doing market development and cater to a
large number of heterogeneous con-
sumers. In the laundry market, for exam-
ple, the company has Wheel at the mass
end, Rin the middle and Surf at the top
end. Manwani says for a company like
HUL which has built brands and posi-
tions, the challenge is how do you get
people to use more, buy more, pay more,
which is uptrade. Take the example of
Ponds. It was earlier known only as a
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cold cream, but now it has seen signifi-
cant uptrade.
In the premium range, you have
Ponds age miracle and other skin care
products.
The same game is now being played
in the hair conditioning segment, which
has the potential to grow as big as sham-
poo. HUL is confident of trebling its rural
reach in two years - an audacious plan
considering that the company wants to
create in two years what it created in the
last 25 years. But Manwani is confident
of achieving that due to the company re-
emerging as thought leaders in the mar-
ket place.
It has launched initiatives like 'go to
market' and 'Bushfire' so that the compa-
ny can ensure reaching its products to
seven million outlets instead of selling
the product in just 2,000 modern trade
stores. There is a different level of chal-
lenge here,” he says.
Manwani says another important les-
son (the fourth' M') the company has
learnt is understanding the mood of the
local consumers. “Our formula is think
global, act local, as blindly transporting
products without local understanding
makes no sense. “If you are in India, think
obsessively about Indian consumers, but
act global. So find out the needs of your
Indian consumer and then use global
scale to provide the best solution globally
for the Indian consumer,” he says. Knorr
is a perfect example of this. From just
soup, it has not only moved to soupy noo-
dles (soups and snacks), which is a run-
away success, but is now positioned as a
complete cooking aid (meal maker) for
Indian housewives.
5
 www.business-standard.com

OILING THE CHAIN

Emami is bringing its supply chain up to speed as it enters
new categories Sayantani Kar

E
mami is bringing its supply chain
up to speed as it enters new cate-
gories You can't fault Emami
Director Aditya Agarwal when he says:
“Our strength lies in marketing.” With 16
per cent of its turnover reserved for mar-
keting, the Kolkata-headquartered
Emami, maker of FMCG and over-the-
counter health products, is undoubtedly
a marketing-led company. It has brands
like Himani BoroPlus (Rs 250 crore in
size) and Navratna (Rs 300 crore) in its
portfolio and wants to launch eight to ten
products every year. From a little over Rs
1,000 crore in 2009-10, it wants to become
Rs 2,000 crore in size within two years.
In the days to come, it is betting big on
products like soap, talcum powder and
shampoo - the bastion of multinational
corporations like Hindustan Unilever,
Procter & Gamble, Reckitt Benckiser and
Johnson & Johnson and homespun street
fighters like Godrej and Dabur. Just mar-
keting skills won't be good enough,
Emami has realised. It has thus under-
taken an exercise to make its supply surge in demand at the retail stores. The General Manager Samir Chaturvedi:
chain efficient. With seven factories, five former hiked operational costs (in occu- “This led to high variations in the
departments, around 120 stock keeping pied warehouse space, cost of buying amount that was forecast, produced, dis-
units (SKUs), many of which are season- raw materials, dead stocks and so on), tributed and got sold.” This was at the
al, 35 warehouses, 2,500 stockists and while the latter led to lost opportunities heart of the overhaul that Ernst & Young
4,25,000 retailers, it was a long chain. to sell to consumers who were looking suggested to the company.
The acquisition of Zandu added to it. for its products. “There would also be a
Emami went to work with Ernst & delay of two to three months for a new Silo breaking
Young's business advisory arm to stem product to reach the stores,” points out Emami opted for unified planning, as
supply chain efficiencies in late-2008. Emami CEO N Venkat. Ernst & Young had suggested. The con-
The professional services firm posi- It's not that the company did not solidated sales forecast that comes in
tioned its team at the Emami headquar- make demand forecasts. The problem now from the area sales managers, in the
ters to help the company achieve a lean- was the five departments entrusted with first week of the month, is first run
er supply chain, among other things. the job - sourcing, production, planning through the marketing and branding
Till then, Emami's products were not & logistics, sales and marketing - were teams. Both the teams arrive at a forecast
able to move quickly on the supply chain not working as one team. Each worked in that also takes into account any surge
to meet the change in consumer its own silo. Any change in customer expected after new brand campaigns or
demand. Either there would be a lot of preference got lost in the lack of commu- launches. The planning team then con-
inventory languishing along the chain or nication between the various depart- verts it into a production plan, in tandem
there would be too little to take care of a ments. Says Emami Supply Chain with production and sourcing teams. On

Business Standard 6

the next day, there is meeting of all the
five departments to freeze the sale and
production plan for the month.
Each brand with its different SKUs is
assessed on the previous month's leftover
stocks, the current month's forecast and
the next month's buffer stock forecast.
Since Emami, like many other compa-
nies, has a rolling system of forecasts
spanning three months, minor surges in
demand in the current month often
square off against the buffer stocks of the
previous month. However, what can set
off an inventory pile-up, and hence lock
up operating capital, would be an awry
forecast for the next month. One of the
metrics that Emami has evolved is fore-
casting fidelity which measures the accu-
racy for forecast. It has gone up from 50
per cent to 70 per cent of the stocks, which
shows that Emami is increasingly getting
the forecast for the next month right.
Accurate forecasting is even more crit-
ical for Emami because it has a large port-
folio of seasonal products like Himani
BoroPlus prickly heat powder and sun-
protection lotion for the summers and
Himani BoroPlus cold cream for the win-
ters. Of its 110 SKUs of FMCGs, around 22
are for winter, 33 are for summer and 55
are all-season. It has to take stock of the
sudden spikes in demand for one set of
products, while the other set slackens. A
bad forecast can leave Emami with old
stocks which could become redundant
the next season. Emami now forecasts for
its seasonal products four to five months
in advance, with in-built flexibility closer
to the season. This is also why it wants to
up its production capacity by as much as
40 per cent and automate its factories by
next year. Some products like Boroplus
Talc and Navratna Talc had faced a supply
crunch due to low capacity at Emami's
third-party manufacturers.
The leaner supply chain has brought
down Emami's own internal estimates of
loss of sale. Amidst an industry average of
0.8-1.3 per cent loss of sale of stocks,
Emami brought its own 4 per cent down
to 1-1.5 per cent. After all, 94 per cent of
the demand is being met by available
stocks as opposed to 80 per cent stock
availability earlier. The most tangible
result of the tighter supply chain has been
the cutting down the time inventory
spends in the chain, or lead time, from 37
days to 31 days. It has, consequently,
unlocked an estimated Rs 1 crore in work-
ing capital on an average every month.
Lean logistics
Costs have been drastically cut down in
transport, a vital part of logistics in sup-
ply chain. While a year back (2008-2009)
it was 2.59 per cent of the turnover, it is
now 2.3 per cent. Analysts estimate
some of the big multinational FMCG
companies to have transportation costs
of 4.7 per cent, even though these have
advantages of scale over Emami. Using
express modes (transport in less time for
a premium) for just 10 per cent of the
stocks instead of 30 per cent, enabled by
less last-minute surprise fluctuations in
demand (better forecast and adherence
to the universal plan), has helped.
Instead of hiring two or three large
transporters for its pan-India operations,
as it had done earlier, Emami has enlist-
ed 16 transporters. This has reduced
monopolistic pricing and got Emami
lower prices and better servicing. The
higher number of transporters has also
given the company the flexibility to
move its stock according to its forecasts
or when replenishment is needed. In
transport, and in sourcing, Emami con-
ducts reverse auctions now, where it sets
a cut-off rate and transporters and ven-
dors have to bid online.
Emami has also realigned its distribu-
tion chain. It has put up “mother” ware-
houses where all SKUs first reach from the
plants before these are redistributed to
smaller warehouses and stockists. Ernst &
Young Business Advisory Services Partner
Ashish Nanda says: “A mother warehous-
es was required to consolidate demand.” It
allowed better visibility of movement of
stocks and more flexible transfers.
“Earlier, we would have kept buffer SKUs
in different warehouses according to dis-
crete forecasts. So, if there was any change
elsewhere, stocks would be stuck in other
places.” says Chaturvedi.
Emami is trying out a more extensive
version of immediate replenishment of
stocks in its southern markets, as
opposed to the forecasting it does in the
other zones. Taking advantage of the fact
that it had a depot in Hyderabad, which
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www.business-standard.com
became its mother warehouse for the
south, Emami now keeps just 10 days of
buffer stock there. If those get pulled by
smaller warehouses, only then does it
refill the main warehouse. There is less of
dead inventory, yet the demand is always
met. The west and east zones would be
next on its replenishment model map.
However, the quest for tighter fore-
casts to lower loss of sale and operating
cost would only end with making sales
easier to track. Emami's sales team had
been manually filling out forms for fore-
casting, based on their targets and stocks
left behind at the depot. Emami is now
bringing its big distributors online with
the help of information technology, leav-
ing little room for assumptions. It will be
able to track sales that distributors make
to retailers. “Sale from the stockist to the
retailer cannot be manipulated. The
stockist might hoard up on stocks if there
is a good trade scheme going on for he
will have space to store, but the retailer
will often buy stocks that he can sell off,”
points out Chaturvedi.
With Zandu's biggest brand being
brought under Emami's core consumer
division and a new factory in
Uttaranchal, the supply chain integra-
tion has become easier for the acquisi-
tion as well. The Ayurveda products
under Zandu are planned separately to
take into account their 15 to 30 days of
production process (fermentation main-
ly). Chaturvedi claims it got easier when
Emami infused rigour into planning
products that would get made once in 4
months, once in three months and once
every month on the existing capacity.
Still, there are challenges that
remain. Emami's plants are located only
in the tax-free zones of the north and in
the North-East; the company therefore
has to work with higher lead times for a
pan-India distribution. Players who
have factories more liberally distributed
boast of turnaround time of 15 to 18
days because of faster transport and big-
ger scale of operations. That is why
Emami's move becomes significant in
the light of the opportunity at hand.
Branding differentiation alone would
not suffice. The full-blown benefits of
the supply chain changes should be felt
this financial year.
7

THE BATTLE OF
THE BOURSES
Bombay Stock Exchange, under new CEO Madhu Kannan, wants
to re-invent itself. Is it too late?
B
efore the year is over, Sensex,
which comprises the 30 most-
traded shares on Bombay
Stock Exchange (BSE), will
begin to trade on Deutsche Borse,
Europe's largest stock exchange. The
stated intention of the move is to draw
the attention of large investors abroad
to the happening Indian stock markets.
The unstated intention is to regain
market share and mind space from
arch rival National Stock Exchange
Sayantani Kar
(NSE). Nifty, the NSE index of top 50
shares, is already traded in the United
States and Singapore.
BSE, which traces its history to
1875, has been hammered black and
blue by NSE which was born as a
“child of competition” in 1992. BSE's
share of stock trading, cash as well as
derivatives, has fallen from 45 per cent
in 2000 to 12 per cent in 2005 and just
6 per cent now. NSE has a virtual
monopoly over derivatives (futures
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and options) trading in the country.
This is a vicious cycle. In stock mar-
kets, liquidity breeds liquidity.
Because of higher liquidity, the bid-ask
spreads (the difference between the
best buy and best sell prices of any
scrip) on NSE are lower, which brings
down the transaction costs for brokers.
So, NSE's position as the preferred
stock exchange gets strengthened day
after day, week after week.
MR Mayya, a former executive
8
 www.business-standard.com

director of BSE, says that the securities

scam of 2001, wherein some BSE offi-
cials were accused of leaking market-
sensitive information, was the final
straw. “That was the point when BSE
began to lose out and people moved on
to NSE,” says he. More than that, BSE
was unable to read the trend correctly
when derivatives trading started in the
country in June 2000. NSE, with its
nationwide reach, was able to capi-
talise on it better. The daily volumes in
the derivatives segment are now close
to Rs 90,000 crore - way above the Rs
20,000 crore in the cash segment - and
almost the entire trade is carried out on
NSE. Moreover, NSE has put in place
strong system and compliance
processes that have ensured that the
exchange never suffered on account of
any payment issue. Even when the
market went through tough times in
2008, thanks to the liquidity crunch,
there was never any stoppage.
Equity trading is big business.
Transactions have grown at a com-
pounded annual rate of 46 per cent in
the last 14 years. The future too looks of market development; Sayee helped him bridge the gap in active
good. Analysts at IDFC SSKI estimate Srinivasan, who was with the Chicago members with NSE, which had
that with improving penetration, vol- Mercantile Exchange, has come on reached as high as 40 per cent. With a
umes could grow at 12 per cent per board to lead the product strategy net worth of Rs 1,890 crore as on
annum till 2014 and will reach the size team; Nehal Vora, who has worked March 31, 2010, this was an affordable
of $5.3 trillion (Rs 2,46,10,000 crore) with DSP Merrill Lynch as well as the gamble for BSE to gain volumes. Half
per annum. Operating profit margins Securities and Exchange Board of the new members are also members of
of a stock exchange can be as high as 60 India, has taken over planning and pol- NSE. As arbitrage between NSE and
per cent. The stakes are too big for BSE icy; and Ashish Chouhan from BSE is a large business, this could help
to throw in the towel. It has a gameplan Reliance Industries is the deputy CEO. Kannan ramp up his volumes.
ready to recover lost ground. S Ramadorai, the former CEO of Tata With more membership, Kannan
BSE, for a long time, was seen as a Consultancy Services, has taken over hopes to get better volumes in the
club of a select few and a largely west- as the BSE chairman. The message derivatives segment in the days to
ern-India-oriented exchange. from his appointment is that the come. Over 50,000 derivative quotes
“Repositioning ourselves as a national exchange wants to build its technolog- are available on the BSE screen.
exchange with professionals and per- ical edge. “The strong management Kannan has launched software for
sons of eminence guiding us has been team is a definite advantage for BSE, derivatives called Fast Trade. It is, he
the first step,” says BSE Managing and this a huge change from the past,” claims, cheaper than NSE's NOW but
Director & CEO Madhu Kannan. Before says Mayya. easier for brokers to connect. Going
he took up this assignment in June last The next step was to induce brokers forward, Kannan wants to launch spot
year, Kannan was the managing direc- to trade on BSE. While NSE took the and futures trading on the same
tor of Bank of America Merrill Lynch. lead here by tying up with the regional screen. Through its strategic stake in
He has also worked as a senior execu- stock exchanges, BSE has slashed its the United Stock Exchange, BSE will
tive with NYSE Euronext. membership fees from Rs 1 crore to Rs offer currency derivatives and interest
10 lakh. As a result, Kannan claims, rate derivatives. But will this be
Revival plan 1,600 applications have come for enough to outpace NSE? It sure will be
Kannan's first step was to build a membership from all over the country. tough. NSE has taken the lead in futur-
world-class A-team. Thus, James “This way we can establish our pan- istic products like algorithmic trading
Shapiro has joined from NYSE as head India presence,” says he. This has also in which BSE's share is minimal.

Business Standard 9

According to Kannan, this is because
NSE does not allow such trades to be
executed on BSE by common mem-
bers.
Stock exchanges, the world over,
offer an ever-widening bouquet of ser-
vices to their members along with cut-
ting-edge technology. This is what
determines the success or failure of an
exchange. Kannan wants to tackle this
challenge by diversifying the BSE port-
folio, apart from increasing the depth
in existing verticals.
Thus, BSE has taken a stake in the
National Power Exchange, which will
trade in power units along with state-
owned utilities NTPC and NHPC.
Kannan claims that BSE's share in the
market for initial public offers (IPOs)
has improved significantly. More than
75 per cent of the companies that list in
India choose BSE as the designated
exchange. The listing of the Indian
Depository Receipts of Standard
Chartered gave BSE's image a boost.
BSE also has a dominant share in dis-
tribution of mutual funds through
stock exchanges.
In addition, BSE has increased its
stake from 38 per cent to 54 per cent in
Central Depository Services Ltd, a
clearing corporation, which will
enable it to process transactions at a
lower cost and offer speedier services.
(NSE, in turn, has picked up over 25
per cent in National Securities
Depository Ltd.) Depository fees form
35 to 40 per cent of the transaction
costs; a stock exchange can reduce
these costs by sharing common
processes and assets with the deposi-
tory. Also on the anvil could be a sepa-
rate trading platform for small and
medium enterprises, though such
experiments in the country have failed
miserably before.
Technology first
Kannan believes that the role of a stock
exchange has transformed from trans-
actions to a technology provider. So,
what's coming next? “Mobile phone-
based trading and dealing is being
looked at very closely, and we have
made presentations to the regulator on
this topic,” says Kannan. The potential
www.business-standard.com
KANNAN'S GAMEPLAN
There are two problems here. One
is that NSE is playing the same game.
z Revamp the top management “What we have tried to do ever since
NSE started is to see what the market
z Increase membership by
needs, validate it against market voic-
slashing fees es, and try and build that to provide
the best service at the lowest possible
z Launch spot and futures trading price. If that results in higher market
on the same screen share, it's good for us,” NSE Managing
Director & CEO Ravi Narain says. Two,
z Get into mobile-phone trading not everybody is sure that there will be
much demand for the historical data
z Get Sensex derivatives listed on lying with BSE. The demand in the
Deutsche Borse country is for live data feed and not
historical data, unlike in the West, say
z Provide technological solutions skeptics.
BSE has been valued at $1 billion
z Diversify into power trading, cur- (Rs 4,700 crore). It could list for trad-
rency and interest rate derivatives ing in the future, once the Bimal Jalan
Committee comes out with relevant
z Launch a new trading platform guidelines. As a precursor, it has start-
for SMEs ed publishing its business results.
(The net profit for 2009-10 was Rs 213
crore on a turnover of Rs 485 crore.)
to grow sure is huge. While there are Will it cut ice with traders and brokers?
just 15 million demat accounts in the One thing if for sure: Whenever the
country, there are over 600 million listing guidelines are in place, NSE
mobile phones. won't be left far behind.
BSE had recently acquired
Marketplace Technology, a firm that
specialises in equity trading related
software. It has 150 customers includ-
ing big names like Reliance Money,
ICICI Direct, Motilal Oswal, Karvy and
Anand Rathi Securities. Its front office
solution has been purchased by more
than 100 members of BSE. The acquisi-
tion has helped Kannan establish
BSE's presence in the technology
space. NSE, in turn, has an active
information technology IT division
that has built significant strengths in
this area.
A big business for stock exchanges
nowadays is data. Thus, exchanges
like the London Stock Exchange and
NYSE Euronext get only around half
their revenues from transactions - the
other half comes from data-related ser-
vices. BSE, with a strong brand and
huge pools of historical data, will look
at earnings from its data-related ser-
vices and also from training. “I tell my
team that while we settle trades, we
also do a lot of other things,” says
Kannan.
Business Standard 10
 www.business-standard.com

BACK TO DATA
Mukesh Ambani is re-entering the telecom business and is
betting big on wireless broadband. Can he put India on
the world data map? Surajeet Das Gupta

I
n 2002, when Mukesh Ambani
had launched his mobile and
fixed-line telecom services on
the CDMA platform, he was
determined to rewrite the rules
of the game. Unlike his rivals who
were out to chase revenue from voice
calls, his strategy was to go for the data
traffic. He decided to offer consumers
high-speed internet access at home as
well as on the move, which could be
used for high-quality video or music
downloads, but at a bargain price of
around Rs 500 a month.
His targets were ambitious: At least
40 per cent of the total revenue (mobile
and broadband) and at least 25 per cent
of the mobile revenue of Reliance
Infocomm should come from data
within five years. “We are gung ho
about data. We expect this market to
boom if we offer customers at home
and office applications at affordable
rates,” he had said in an interview to
Business Standard. But his dream of
putting India on the world data map
came a cropper. The Ambani brothers
split in 2005, and Mukesh Ambani had
to turn Reliance Infocomm over to his
younger brother, Anil Ambani. (It is
now called Reliance
Communications.) He also promised
never to enter telecom again.
Meanwhile, large telecom service
operators like Bharti Airtel, Vodafone
and Tata Teleservices continued to con-
centrate on voice calls. Tariffs conse-
quently dropped to amongst the lowest
in the world. And data took the back
seat. There are over 600 million users
of mobile telephony in the country, but
only 10 per cent of the industry's rev-

Business Standard 11

enue comes from non-data streams,
that too largely SMSs. The inability of
state-owned MTNL (in Mumbai and
Delhi) and BSNL (in the rest of the
country) to offer last-mile connectivity
has led to broadband penetration of
less than 1 per cent with only 9 million
subscribers. The market for data
remains hugely under-serviced.
In the last few weeks, the wheel has
turned a full circle. The Ambanis have
smoked the peace pipe and Mukesh
Ambani is free to pursue his data-dri-
ven telecom dream one more time. No
sooner had the ink on the Ambani
agreement dried that he picked up 95
per cent in Mahendra Nahata-promot-
ed Infotel Broadband Services, the
only company which has broadband
wireless access (BWA) spectrum - a
technology which offers high speed
wireless broadband to consumers -
across all the 22 telecom circles in the
country. It had paid Rs 12,847 crore for
this spectrum in an auction. Mukesh
Ambani will pay Rs 4,800 crore to sub-
scribe to fresh equity in the company.
So what will be his second-innings
strategy? Mukesh Ambani and his
team are not talking officially yet, but
internal presentations, discussions
with analysts and vendors who have
had detailed meetings with his A team
as well as key executives clearly give
some idea of the method in the mad-
ness. To be sure, a lot has changed in
the last five years. With over nine oper-
ators in each circle (compared to four
or five in 2006), voice tariffs have
dropped to their lowest and the service
has become a commodity. This has
depressed the profit margins of the ser-
vice operators. The realisation has
sunk in that data alone can help them
out of the logjam. This explains why
there was such a scramble for 3G spec-
trum in the recent auction. Also,
mobile penetration in metros has hit
100 per cent; data thus becomes cru-
cial for service operators to drive up
revenue. New devices like the Apple
iPad will fuel growth in the market.
Data over voice
It is clear that wireless broadband is
the way ahead. And that is what
Mukesh Ambani is banking on. In a
presentation to analysts, his people
have said that China has over 130 mil-
lion broadband customers, India can
reach that number in the next three to
four year, and they want leadership
position in that market. They could get
subscribers by offering unmatched
data speeds. This shouldn't be a tall
order because only 5 per cent mobile
subscribers use broadband wireless at
the moment.
Their claims are backed of course by
unmatched spectrum assets - 20 MHz in
BWA compared to 5 MHz in 3G. It
means Infotel can offer high-speed
applications to more subscribers than
its 3G counterparts. To the consumer, it
M&M IS AIMING TO
TAP THE GLOBAL DEMAND
FOR FUEL-EFFICIENT UTILITY
VEHICLES AT LOW PRICES
AS WELL AS ENVIRONMENT-
FRIENDLY VEHICLES
means he can get data speeds which are
five to seven times faster than 3G. Says
a senior executive of a leading mobile
service operator which has successfully
bid for 3G spectrum: “If you are looking
at data, BWA is far superior. But its
potential to offer voice is still not tested.
And India has a large voice market.”
Analysts and experts say that Mukesh
Ambani has got the timing right. Karvy
Stock Broking Analyst Harit Shah says:
“As of now, the data market is in its for-
mative stage. Voice is still the major rev-
enue generator but there is potential
demand for data, and tapping that
demand effectively will define suc-
cess.” Shah expects Mukesh Ambani
will not go for the retail market initially;
he will start with the enterprise market.
On its part, Infotel has clearly iden-
tified the market: Small businesses
which are looking to connect their
employees, the retail market which
entails connecting millions of homes
as well as offering mobile solutions,
Business Standard
www.business-standard.com
and the vast rural markets which can-
not be connected by expensive copper
for broadband. “The strategy, consid-
ering the licence cost, would be to
build a model which will be able to
attract a large volume of customers,”
says Protiviti Consulting Country
Head Mrityunjay Kapoor.
Most experts say that Mukesh
Ambani will choose the long-term evo-
lution (LTE) technology route instead
of WiMax (an alternate technology
which he might use for the intermedi-
ate period). Compare the speeds: At
present, companies like Tata
Teleservices offer dongles which trans-
fer data at 3 megabyte per second; 3G
services will give speeds of 14 to 20
megabyte per second; and LTE, which
is a fourth-generation or 4G technolo-
gy, provides speeds of 80 to 100
megabyte per second. The technology
is of course new. Its commercial
deployment was done recently by Telia
Sonera in Spain, that too in a few
cities. But the good news is that over
22 LTE networks will be up and run-
ning by the end of this year, and 110
networks in 48 countries are backing
this technology. This means there will
be enough equipment available for
Mukesh Ambani at reasonable prices.
Vendors say that initially high-
speed access on LTE will be available
only through dongles (like Tata
Photon), which means you can be
mobile with a laptop or take a fixed
wireless connection at home. But
mobile devices are expected to hit the
market by next year which would be
compatible with 2G, 3G as well LTE
networks. It may take these handsets
up to two years to gain scale and
become affordable. (The entry-level
prices are expected to be $200 to $300.)
These phones will ensure seamless
transfer from one network to another.
Thus you could be on 3G network in
Delhi but in congested areas like
Connaught Place the phone will
switch to an LTE network on its own.
What about voice?
But won't Mukesh Ambani ever offer
voice connectivity? Yes, he has said he
will offer voice over internet protocol
12
 www.business-standard.com

or net telephony, but this service under

the current regulatory framework will
be limited to consumers within his
broadband wireless network. That is
because net telephony is limited
between personal computers; you can-
not call a phone outside your network
or a fixed line. But, as analysts say, the
rules could always change. Technology
experts say that LTE networks are not
geared for voice telephony, as this can
lead to a fall in the utilisation of the
spectrum. Though Mukesh Ambani
has said that he will not look for a 2G or
a 3G network, most competitors say he
has no alternative if he wants to
become a big player. Says the CEO of a
CDMA mobile company: “I don't see
any business case based on just data in
India. He has to buy a 2G or 3G compa-
ny and offer BWA over it. Otherwise, he
will remain a small player.”
But there are alternatives. One,
Mukesh Ambani could initially bundle
free net telephony minutes with data
services to create traction amongst
consumers, especially in the small-
scale sector. Two, he could go for a vir-
tual network by buying capacity in
bulk from incumbents and sell it under
its own brand. The policy for this is
expected to be cleared soon by the gov-
ernment. Three, he could sign a roam-
ing agreement with a 3G operator to
offer LTE as well as 3G services.
Mukesh Ambani will look at low-
cost deployment of network. Since
Infotel is the only pan-India BWA
operator, the vendors and technology
it selects will virtually determine who
controls the Indian market. Says tele-
com analyst Mahesh Uppal: “Mukesh
Ambani choosing LTE will determine
the way technology will evolve in
India. The fact is that he has bought a Mukesh Ambani is aware of the cations. Two, the 3G networks are
good asset; whether he has paid too challenges such a strategy could face. unlikely to let him walk away with the
much, only time will tell.” Mukesh One is to build applications which will market without a fight. Vodafone,
Ambani doesn't have to start from make high-speed broadband worth- Reliance Communications and Tata
scratch because infrastructure can while to subscribe. It has to go beyond Teleservices might not have BWA spec-
now be shared. “Part of the strategy is just surfing the net. His team in its trum but are depending on 3G for their
to be asset light; so Infotel will out- internal presentations has argued that data services, which gives adequate
source about 15,000 towers and the personal computers and broadband speeds for the mass market. The battle
fibre optic network, which it requires internet are perceived to be business for the data market could see a blood-
for a pan-India launch. This will applications. This perception needs to bath like in the voice market.
reduce costs substantially,” says a be changed which requires bringing in
source close to the deal. entertainment-based broadband appli- (Katya Naidu also reported for this article)

Business Standard 13

THE DEL MONTE
DIFFERENCE
FieldFresh Foods wants Del Monte
to become one of the country’s top
food and beverages brands. Can it cut
through the clutter? Arunima Mishra
F
ieldFresh Foods wants Del
Monte to become one of the
country's top food and bever-
ages brands. Can it cut through
the clutter? It's an ambitious target.
FieldFresh Foods, the 50-50 joint ven-
ture between Bharti Ventures of the
Mittal family and Del Monte Pacific of
the Philippines, wants to find a place
among the top ten food and beverages
companies in India by 2014.
The categories it has chosen to oper-
ate in - sauces, juices, Italian cuisine
and packaged fruit - add up to a market
of Rs 4,000 crore, which is growing at 20
per cent per annum. The market may be
large but there are well-entrenched
players in the business like Nestle,
Hindustan Unilever, ITC, Heinz, Parle
Agro and Dabur. It won't be easy for
FieldFresh to snatch market share from
them. Still, it is dead serious. It plans to
pump in Rs 300 crore in a food process-
ing plant at Hosur in Tamil Nadu and in
research on fruit and vegetables. In less
than two years, it has reached its prod-
ucts to 20,000 retail outlets in 25 cities.
FieldFresh is banking on the exper-
tise of Del Monte, especially in supply
chain. “Del Monte is the only company
that supplies both fresh and processed
fruit. It has got pineapples from the
Philippines, peaches from South
Africa, olives from Spain, and prunes
Business Standard
www.business-standard.com
from California. This gives us a lot of
options,” says FieldFresh CEO Sanjay
Nandrajog. Before his current assign-
ment, Nandrajog held several leader-
ship positions in the Airtel mobility
business. FieldFresh is using the Del
Monte brand. Does it have any recall
with Indian consumers? “One-third of
all customers have come back to the
stores and have asked for a Del Monte
product,” says Nandrajog. Still, the
company needs to work on the brand.
“Del Monte is definitely going to see a
tough time in establishing itself as one
of the top food companies in India
amidst fierce competition from existing
players,” says KPMG Advisory Services
Manager Anand Ramanathan.
Fresh and different
Nandrajog and his team know that the
market is cluttered, and they need a
good differentiator if they want to stand
out. With this in mind, FieldFresh has
introduced two sauces in the market
called Zingo and Twango. “Ketchup and
sauces are one of the toughest categories
to crack as there are big players, and we
have our own Indian chutneys too. Our
effort was in terms of understanding the
need of the housewife. Today's house-
wife wants to experiment in the kitchen.
She wants to serve the food with her sig-
nature and also have something that can
be served with an idli as well as a sand-
wich,” says Nandrajog. For a first, Zingo
and Twango contain capsicum and
pineapple which give out a unique taste
and also contain fibre.
Will that be good enough? The mar-
ket for sauces is around Rs 900 crore in
the country. Nestle's Maggi leads the
pack with a market share of 41 per cent,
followed by Hindustan Unilever's
Kissan (26 per cent). The rest of the
market is with Heinz, Cremica, Tops
and others. Most of these brands have a
host of flavours developed specially for
the Indian palate. “Maggi sauces are
preferred for their superior taste, trust-
ed for their high quality and acknowl-
edged for their innovative offerings like
Hot & Sweet, Tomato Chilli, Oriental
Chilli Garlic and several others,” says
Nestle India General Manager (foods)
Shivani Hegde. Nestle has also come
14

out with small packs, called Maggi
Pichkoo, which has extended the mar-
ket to a whole new set of consumers.
The days to come will tell whether
or not Zingo and Twango have dented
the other brands in the market. But the
innovation was good enough for
FieldFresh to launch its inaugural
brand campaign. Scripted by Vandana
Katoch of Contract Advertising (Delhi)
and filmed by Shoojit Sircar of Rising
Sun Films, it showed a woman chasing
boys across streets after they share the
two sauces with her inside a train.
What's in the juice?
If flavour is the differentiator for Del
Monte sauces, packaging will differenti-
ate Del Monte juices. Instead of cartons,
FieldFresh is selling its juices in alumini-
um cans. The fruit juice market in the
country, estimated at Rs 2,000 crore per
annum, has three distinct sub-categories:
Fruit juice with pulp content of 80 per
cent and more (Dabur's Real, PepsiCo's
Tropicana), nectar with 40 to 80 per cent
pulp (Godrej's Xs) and fruit drink with
pulp of 40 per cent and below (Parle
Agro's Frooti, Godrej's Jumpin, Coca-
Cola's Maaza). With 20 to 30 per cent
pulp, Del Monte sells in the third catego-
ry. “We operate in the segment which is
refreshing and tasty. However, for a con-
sumer, a juice is just a juice, and he can
hardly differentiate. The youth keeps
looking for options that are different in
taste, and have a refreshment need as well
as a nutritional essence,” says Nandrajog.
He has in his portfolio five fruit drinks
and hopes to add a sixth soon.
Of course, FieldFresh hopes to score
with its aluminium cans. “We have
brought these packs (aluminum cans) in
an Indianised version at quick-service
restaurants and low-cost airlines. Also,
we have a vending option that can be
used at offices and other high-traffic
locations. It can dispense through the
day, churning out 20 cups a minute, and
it is more affordable. It also makes Del
Monte the first international branded
player in the fruit drink dispenser seg-
ment in India,” says Nandrajog.
FieldFresh hopes to rev up the excite-
ment at the youth hangouts this summer
with its on-ground activity, the Del
BE IT SAUCES, JUICES OR
PASTA, DEL MONTE IS TRYING
TO DIFFERENTIATE ITS
OFFERINGS IN ONE WAY OR
THE OTHER. IT OFFERS JUICES
IN CANS INSTEAD OF
CARTONS AND IS THE FIRST TO
ROLL OUT A JUICE DISPENSER
Monte Legend Brigade. The activation
that started during mid-June will travel
to metros and mini-metros where the
winner will receive a custom-made bike
worth Rs 200,000. Besides, an online
biker game is on at its microsite,
www.worldfoody.com. Anyone in India
can participate in the online game and
experience the thrill of biking. Yogesh
Bellani, business head (Del Monte Foods
Business), FieldFresh Foods, says: “This
initiative aims to popularise the range of
Del Monte fruit drinks in pineapple, four
seasons, pineapple-orange and the new-
ly-launched green apple and orange
flavours.” But this is a game others too
can play. “We control over 52 per cent of
the juice market in India. We continue to
look at newer variants to keep up the
excitement in the market,” says Dabur's
head of marketing for foods, KK Chutani.
Also, fruit juice is a heavily-adver-
tised category and most players are
spending big bucks on promoting their
brands. If FieldFresh wants to do well, it
too will have to put money behind Del
Monte juices. PricewaterhouseCoopers
Executive Director Anand Dikshit reck-
ons that most brands spend up to 18 per
cent of their turnover on promotion. The
norm for the food business is 13 per cent
to 15 per cent.
Pasta play
Del Monte has a whole family of Italian
products after having studied the gap in
the Indian market. Most of the products
- olive oil, pasta and sauces - are import-
ed and sell Rs 500-600 crore in a year.
Nandrajog believes that the pasta mar-
ket in India is emerging as the next-pre-
ferred healthy snack option. “There is
hardly any brand present here that
Business Standard
www.business-standard.com
offers authentic Italian pasta. Del
Monte sells authentic pasta, imported
from Italy, in the retail market. We will
continue to launch pasta stock-keeping
units of the same product type, but in
different shapes and varied measure-
ments soon,” he says. Del Monte also
offers Spanish olives, whether green or
black, pitted or stuffed or sliced. Its
extra virgin olive oil is a healthier alter-
native as a cooking medium, claims
Nandrajog, and comes in PET break-
resistant bottles in 1 litre, 500 ml and
250 ml. “Soon, we are going to launch
pasta sauces in India” adds he.
Pasta is not altogether new to the
Indian market as sometime back Barilla
Pasta, made from 100 per cent durum
wheat, came to India through a strategic
marketing tie-up with RR Oomerbhoy.
There are also a couple of other import-
ed brands from south-east Asia which
are selling in India. Then ITC's Sunfeast
portfolio was expanded in early 2005 to
include snacking options, pasta being
one, besides Aditya Birla Retail's
Feasters. Nestle (Maggi Pazzta) and ITC
(Sunfeast Pasta) have also launched
instant pasta. Market estimates suggest
that instant pasta is around 5 per cent of
the Rs 1,100-crore market for instant
noodles. Some feel that the real growth
opportunities are in instant pasta.
“Culinary pasta is for the real pasta
eater, for people who know how to cook
pasta, for which there is not a big mar-
ket as such in India,” says ITC Foods
Chief Executive Officer Chitranjan Dar.
Apart from B2C, FieldFresh also
does B2B sales. It sells fresh and canned
fruit, penne pasta, snack dressing, man-
go pulp, tomato paste, jalapeno, fruit
cocktail and whole corn kernels to
2,200 hotels, restaurants, bakeries and
so on in the country. Nandrajog claims
it is the only national player in the seg-
ment. There is a dedicated team of 70
men and women at Del Monte Foods
Business that services this sector. Does
it have a unique selling proposition?
“Our packaged fruits have an extended
shelf-life, and are also available in easy-
to-open cans to enhance consumer con-
venience. For our customers, we also
offer institutional packs,” says Bellani.
Over to the market place.
15

BUILDING BRAND
INFOSYS
A dedicated team makes sure the information technology brand grows
from strength to strength. Here’s how
T
he brand is rarely seen in the
mass media, makes do with
minimal advertising budgets,
operates in a sector that runs
the risk of turning into a com-
modity and is still worth almost Rs 37,000
crore. Infosys is a powerful brand in the
world of information technology. Its
founders like NR Narayana Murthy and
Nandan Nilekani enjoy iconic status in
Bhupesh Bhandari & Kirtika Suneja
the country and abroad, and it gets work
place, transparency and governance
awards with unfailing regularity. Its cam-
puses are world class. A large chunk of its
stock is held by employees.
That's the public face - what investors,
associates, analysts and employees get to
see. Behind the scenes, there works a ded-
icated team that regularly monitors
Infosys' brand health and makes sure that
Business Standard
www.business-standard.com
it grows from strength to strength. The
tools employed are soft in nature and seek
to create a halo around the brand. No big
bucks spent below the line, no media
blitzkrieg - the whole effort is to work on
the conscience of stakeholders like cus-
tomers, partners, shareholders, employ-
ees and the society. “Infosys 1.0 raised the
standard for delivery predictability,
financial transparency and corporate gov-
16

ernance,” says Infosys Technologies' head
of global branding and corporate market-
ing, Aditya Nath Jha. “The next stop is tal-
ent management, scalability and sustain-
ability - how do I paint the enterprise of
tomorrow.” Jha's choice as the brand man-
ager is interesting. He studied at the
Indian Institute of Technology,
Kharagpur, and worked as the creative
head of Ogilvy. He wrote the script for two
soap operas - Aflatoon and Wagle Ki
Duniya II - and ran a start-up in the educa-
tion vertical (“The model worked, the
business failed,” says he.) before he took
up the current assignment at Infosys.
Since end-2004, the Bangalore-head-
quartered company gets a quarterly
health check up of its brand done.
According to Jha, Infosys' unaided brand
recall in the US (the largest market for
information technology in the world) has
improved from zero then to 8 per cent in
March 2010, while the aided recall has
shot up from 18 per cent to 70 per cent.
The survey, carried out by Ronin, is con-
ducted not amongst CTOs but amongst
ordinary people. Jha, of course, is pleased
with the results. “We believe in crossing
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one hump at a time. We have moved
ahead of other Indian brands in the busi-
ness and are in the second level after the
big spenders like IBM, Accenture,
Deloitte and Hewlett Packard. In 2004, we
were at the third level,” says he.
There is noticeable improvement,
says Jha, in Infosys' brand perception as
well. The company measures it on six
parameters: Knows my business, has
solutions to my business problem, is a
technology leader, has a quality focus, is
reliable and delivers on promise, and
works like a partner. Respondents can say
don't know, not there, getting there,
always the best or the best there is. Jha
says that there are two noticeable shifts
between end-2004 and now: One, fewer
people now say don't know. This means
that more and more people now have
some perception of Infosys. And two,
there is an improvement in the number of
people with a positive perception. But
this is a gradual process. Jha admits that
movement in perception is sluggish when
compared to awareness.
Brand pull
One question that needs to be answered
here is that why does an information tech-
nology company need to develop a
brand? The brand comes handy in two
ways. One, it shortens the journey to the
bidding table. Companies that have a
strong brand are more likely to be called
by prospective customers than those with
lesser brands. Those companies thus
need to spend a lot of money on marketing
themselves. This game, Infosys knows, is
a bottomless pit. Big names in the busi-
ness like IBM, Accenture and Hewlett
Packard have marketing budgets that run
into hundreds of millions of dollars. Then
there are others like Capgemini and
Logica which spend tens of millions of
dollars. Infosys, which has always been
sharply focused on the bottom-line of its
business, cannot match these numbers.
So, it has no option but to work on its
brand. Infosys monitors all unsolicited
invitation to deals in excess of $8 million
per annum. Jha does not share the details
as it is sensitive information but discloses
that the increase from 2005-06 to now has
been well over eight times.
Two, a brand helps get repeat business
17

from the same customer. The business
logic here is that getting a new customer
on board is up to six times more expen-
sive than getting an order from an existing
customer. It is important for information
technology companies like Infosys to
leverage its customers for another reason.
Most customers start by outsourcing
peripheral work. Those who stay with a
customer one day graduate from low-val-
ue peripheral jobs to value-added core
work. “Between 92 per cent and 97 per
cent of our revenue in any quarter comes
from repeat business,” Jha informs with
quiet pride.
The traditional role of a brand has
been to fetch a premium over rivals. Does
its brand help Infosys command a better
price than others in the market place? Jha
says it does, and this gets reflected in the
company's superior net profit margins
(27.55 per cent for 2009-10) than rivals
like TCS (23.62 per cent) and Wipro (17
per cent). “Brand-building is a key part of
Infosys' strategy, and I think it is able to
command a price premium because of
this. The tools it has used well are public
relations, investor relations, analyst rela-
tions and, in the past few years, thought
leadership,” says ex-Infosys hand and for-
mer Wipro chief marketing officer Jessie
Paul who is now the managing director of
Paul Writer Strategic Services, a market-
ing consultancy. Paul calls Infosys a “sur-
round” brand which relies on the sur-
round aspects of its business to position
itself.
Still, Jha knows that brand premiums
are down across categories including
information technology as the search for
value has intensified amongst customers.
Much of what information technology
companies like Infosys do is standard-
ised. In the initial years, Infosys tried to
create a differentiator with its global
delivery model - it promised to go to any
location where the costs were the lowest,
which invariably was India. But others
have caught up. Even foreign-owned
companies like IBM and Accenture have
a huge presence in the country. Now,
Infosys feels, the differentiator for the
brand could lay in how it behaves. This
has, in fact, become a global trend.
Companies like Microsoft, Google and
even Toyota and Samsung are bigger
brands than their individual products.
Since the health of the parent brand has
occupied centrestage, it is important for
companies to nurture their brand image
with care. In Infosys' case, this perhaps
also stems from the firm belief of the
founders of the company that they will
chase not revenue or profit but respect.
To this end, the points of action identi-
fied by Infosys are: Integrity & transparen-
cy, fairness (prejudices of the past should
not affect business decisions), leadership
by example, customer delight and pursuit
of excellence. Infosys has got several
awards for integrity and transparency.
Recently, it was voted the “best managed
company” in India by investors and ana-
lysts across Asia in a poll conducted by
Finance Asia , a financial magazine. IR
Global Rankings and MZ Consult ranked
it amongst the best companies in Asia-
Pacific and China in the categories of
investor relations website, financial dis-
closure procedures and corporate gover-
nance practices. For ten years in a row,
INFOSYS FEELS
THE DIFFERENTIATOR
FOR THE BRAND COULD LAY
IN HOW IT BEHAVES
The Wall Street Journal has named it the
most admired Indian company. What
about customer delight and pursuit of
excellence? How do Jha and his team
measure it? “Our number of defects per
kiloline of code,” says Jha “is way below
the published benchmark of CMM Level
5 companies.”
Communicate to engage
This is not to say that Infosys does not
communicate. But it is different, says
Jha, from mainline brand communica-
tion. “We have moved from information
to engagement. The new media is all
about conversation.” Thus, the Infosys
brass can be found at the World
Economic Forum talking to business
leaders from across the world. The com-
pany has also sought to engage with
opinion makers on the subject of “the flat
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world” - a take on the book of a similar
name by Thomas Friedman who was
inspired by his long conversations with
Nilekani. So, what's the impact? Jha reels
off a string of numbers: Subscribers of
Infosys blogs from the Fortune 500 com-
panies have more than doubled in the
last two years, while their downloads
from the Infosys website have increased
68 per cent. Between April 2010 and
April 2009, YouTube (it has populated
the video-sharing website with short
films and interviews of its leaders) view-
ership has gone up 1.6 times, slideshare
downloads 2.8 times and Twitter follow-
ership 12 times. Also, says Jha, there has
been an increase in the ranks of evange-
lists who talk positively about the
Infosys brand and recommend it to oth-
ers. These could be customers, public
speakers, analysts or even journalists.
Most analysts believe Infosys has
made all the right moves. “Infosys wants
to make its brand visible in the market.
And it has improved because that is the
way the company pitches itself,” says
Punish Mishra, engagement director at
consulting firm Everest Group. But some
feel there is still an unfinished agenda - it
needs to do more in terms of succession
planning. “The perception is that the
succession line is not clearly demarcated
and the new CEO may not be of the same
public stature as the old ones,” says an
analyst who is not willing to be named.
Still others point out that branding is a
game most information technology com-
panies have woken up to. “Most of these
companies now are a brand persona in
themselves. For instance, Cognizant is a
deep-rooted company with offerings
from consulting to maintenance, while
TCS is one that brings big deals, size,
scale and pricing on the table. So, brand-
ing has gone up for the industry has a
whole,” notes Alok Shende, principal
analyst, Ascentius Consulting.
At the moment, the exercise seems
to have paid off for Infosys. The valua-
tion of Infosys, the brand, has improved
from Rs 14,153 crore in 2005 to Rs
36,907 crore in 2010. It was 23.2 per
cent of the company's market capitali-
sation five years ago; it stands at 24.6
per cent now. Jha and his team can take
some credit for that.
18

ENTERTAINMENT
INCORPORATED
Multiplex operator PVR is setting up entertainment cities across the
country.Will the move pay off?
M
ultiplex chain PVR wants
to try its hand at some-
thing new. It wants to set
up entertainment cities
across the country. Each
of these would have multiplex screens, a
bowling alley, a skating rink, a beer gar-
den and food courts. The first, spread over
150,000 square feet, will come up at
Noida in two-and-a-half years. By 2013,
PVR wants to have five more up and run-
ning in Bangalore, Hyderabad,
Chandigarh, Pune and the National
Capital Region. “This is a huge step for-
ward for us to realise our dream of becom-
ing an integrated entertainment compa-
ny. Our innovations are driven by our
customer's asprations,” says PVR
Chairman & Managing Director Ajay Bijli.
All told, the company plans to invest Rs
280 crore in the new venture.
To be sure, this is not the first diversifi-
Sharmistha Mukherjee
cation for PVR (2009-10 sales/revenue from
operations: Rs 338.55 crore, net profit: Rs
1.35 crore). In 2005, it had forayed into film
production and distribution. But the plan
for entertainment cities is by far its biggest
gamble till date. The reason for the foray is
not hard to find. The entertainment cities
are aimed at grabbing a larger share of the
wallet of all those who come to a multiplex
for entertainment. Sector experts believe
the multiplex business has turned into a
commodity - one is no different from the
other. Such add-ons are necessary if a mul-
tiplex wants to create buzz around itself.
Though PVR was the pioneer of multiplex-
es in the country, it has been left behind in
the numbers game. While it operates 136
screens in 18 cities, Anil Ambani-owned
Big Cinemas has 516 screens in India and
abroad (USA and Malyasia).
Explaining the rationale behind the
venture, PVR President Pramod Arora
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says that research indicates consumers in
malls and other commercial centres want
to unwind and relax in an environment
which is free from serious shopping.
Surprisingly, less than 20 per cent of all
the visitors to a mall or a shopping centre
comprise serious shoppers. The rest go
there for entertainment or just to chill out.
The immediate business viability sug-
gested creating a format to cater to that 80
per cent of the visitors who may spend
less than a serious shopper but are far
greater in number.
Consumer likes
Taking off from the insight, PVR conduct-
ed extensive surveys to understand con-
sumer preferences with respect to enter-
tainment. Three surveys were carried out
by the PVR as well as by agencies commis-
sioned to work on the project specifically
with focus on the formats which the con-
19

sumer believed to represent his happiness
quotient. As many as 350 visitors across
malls in the National capital Region were
questioned in each survey regarding the
frequency of their mall visits, purpose of
their visits, money spent on each visit,
views on the proposed format, entertain-
ment options they exercised and future
expectations. The respondents were all
between 12 and 40 years of age.
Inferences drawn from the exercise
indicated that entertainment as a concept
is largely restricted to watching movies in
cinemas in malls and shopping centres
across the country. The aspirational class
that throngs the malls, however, is looking
forward to forms of entertainment which
provide an eclectic mix of 'fun, food, fash-
ion and films'. It is on gauging this need
gap which has surfaced amongst con-
sumers that PVR has decided on setting up
entertainment cities in the country.
“Considering our core expertise, years of
business experience and a very clear and
distinct business opportunity, we felt it
made imperative sense to set up entertain-
ment cities to respond to changing con-
sumer demographics and purchasing pat-
terns in the country,” says Arora.
But PVR's expertise is in putting up
multiplexes and not in running bowling
alleys and food courts. How does it plan to
cope with the lack of these skills? PVR has
partners in these areas, and plans to lever-
age their expertise to good effect. It has an
alliance with Major Group of Thailand to
set up bowling alleys and skating rinks in
the country. For the food business, it has
formed a joint-venture company called
Food Union with Lite Bites of Amit
Burman. That may be fine, say critics, but
food is a tricky business. Visitors can get
tired of a cuisine or a format in a matter of
months. So, restaurants and food courts
need to continuously reinvent them-
selves. But this does not seem to bother
Arora. Food Union, says he, is a complete
provider of fine-dining solutions and has
something for every palate. “So we are
very positive that our food courts will do
very well with people and continue to do
so over the years since these will be a part
of the complete entertainment package
and destination.”
What about bowling alleys? Ever since
the mid-1990s, several bowling alleys
have been set up in the country. After
some initial traction, they begin to fall by
the wayside. Many of them have had to
shut shop. It is, after all, not an Indian
sport. Arora is only too aware of the disap-
pointing show put up by bowling alleys in
the country. He puts it down on their
incorrect positioning as a sport. “When
we launched in Ambience Mall, Gurgaon,
last year, it was a conscious decision to
reposition bowling in India as a lifestyle
sport. We wanted to create an environ-
ment for children, youth and families to
come and have an entertaining experi-
ence,” says he. “Ours is the largest 24-lane
cosmic bowling centre in India. We have
been able to create awareness and accep-
tance for bowling among the people.
What has worked well is the complete
repositioning of bowling as a fashion and
lifestyle sport instead of it just being a reg-
ular sport.” The bowling alley has
lounges, multi-cuisine restaurants, tattoo
parlours and karaoke. It is reasonable to
expect that PVR will replicate the same
format across its entertainment centres.
Brand-wise
Interestingly, PVR has given each of these
a new sub-brand. Thus, PVR BluO has
been chosen for bowling alley, PVR Food
Union for the food courts and PVR Sub
Zero for the skating rinks. This could also
be a strategy to raise funds in each of these
businesses on a subsequent date.
Interestingly, the architecture of the
Business Standard
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entertainment cities will be kept flexible.
The formats and services in demand can
be expanded quickly, and those which are
not in demand can be contracted. On an
average, PVR is looking forward to a pay-
back time of four years. The asset-
turnover ratio is projected to be between
1.6 and 1.8. The return on investment is
expected to be over 20 per cent.
There are still two pieces of the jigsaw
puzzle that PVR needs to fix. One is real
estate. Prices of commercial real estate
have begun to climb one more time. High-
quality retail space is once again selling at
a premium. Some retailers have got into a
revenue-sharing agreement with land-
lords. This protects them against any
downside in business. For the Noida
entertainment city, PVR will lease space
for 25 years. Based on the business
prospects, it is also considering entering
into revenue-sharing arrangements with
real estate developers.
The second will be price. PVR has on
its target non-serious shoppers, those
who aspire to a better lifestyle. But these
people have small budgets. Unless PVR
gets the price-value equation right in its
entertainment cities, the business model
could go haywire. This perhaps reflects in
the choice of cities for these centres. All
the six cities have a large presence of the
services sector and there are large pockets
of affluence. So, is the business model
scalable?
20

NEROLAC NETS
A NEW HUE
The number three brand in the decorative
paints segment wants to take on the market
leader,Asian Paints. But it could be a tall order
Viveat Susan Pinto
M
arketing experts have
often said: You either be
number one or two or
merge with the crowd.
But what do you do
when the number one leads by a clear
margin and both two and three are part
of the crowd?
Ask Kansai Nerolac, the number
three player in the decorative paints
market in India. It has a share of 13 per
cent to leader Asian Paints' 47 per cent,
and number two player, Berger Paints'
18 per cent.
Conventional wisdom would
demand that Kansai should be taking on
Berger rather than Asian Paints. But
Kansai has its sights at the top, putting
in place a three-pronged strategy that
includes focusing on differentiated
products, greater brand-building and
more retail initiatives on the ground. “If
you have to improve share, you have to
go that extra mile,” says Anuj Jain, vice
president, sales & marketing, Kansai
Nerolac.
This enthusiasm to wrest market
share from rivals, especially Asian
Paints, does not appear to be completely
misplaced, since Kansai leads the pack
in the Rs 4,000-crore industrial paints
market. It has a share of 62 per cent in
the automotive segment - a key one
under industrial paints. Overall, it has
over 40 per cent share in industrial
MARKET SHARE
PLAYERS DECORATIVE INDUSTRIAL
Asian Paints 47% 13%
Berger 18% 18%
Kansai Nerolac 13% 40%+
Source: Industry
paints to Asian Paints' 13 per cent. “It is
the undisputed leader in industrial
paints,” says an executive with a rival
firm.
This leadership in industrial paints
then is clearly goading it to take on its
archrival on the decorative side. But it
certainly won't be easy.
That is because Asian Paints has
ensured there are no chinks in its
armour on the decorative side at least.
The decorative segment accounts for
almost 70 per cent of the Rs 13,000
crore overall paints market.
Rivals such as Kansai, Berger, Dulux
and Nippon, have been trying hard to
wrest market share from Asian Paints
for some time now. But the latter's for-
midable grip over the paint distribution
network in the country, its ability to
churn out new products, as well as its
high-decibel ad campaigns have
ensured that it stays ahead of the curve.
Sample this: Asian Paints has over
25,000 dealers to Berger's 9,500 and
Business Standard
www.business-standard.com
Kansai's 6,500. Its
overall marketing bud-
get for the last financial year was Rs
244 crore as against Berger's over Rs 70
crore and Kansai's Rs 68 crore.
“So no matter how much you shout,
Asian Paints simply outshouts you,”
admits Berger Paints' senior vice-presi-
dent, sales & marketing, Abhijit Roy.
“Tell me one gap in their marketing
strategy and I would be ready to attack
them,” he says.
In contrast, Jain of Kansai strikes a
positive note. “There is no denying
Asian Paints' domination in the decora-
tive market. But how do you stand out?
You have to do something different. We
rather benchmark ourselves to interna-
tional standards.”
In the last one year, Kansai has
launched products such as lead-free
paints and paints with a heat guard
keeping the objective of differentiation
in mind. It is now in the process of
rolling a low VOC or volatile organic
compound (VOC) paint. Low VOC
paints are low-odour paints. “They are
designed to perform like conventional
paints without the harmful ingredi-
ents,” Jain says.
21

But are these initiatives really that
different? Not exactly, say rivals. Asian
Paints has had a low VOC portfolio for
about five to six years now, says the
company's vice-president, sales & mar-
keting, Amit Syngle. “Our lead-free
portfolio has been around for the last
two and a half years,” he says. Berger,
meanwhile, is in the process of intro-
ducing its low VOC range in a month or
two. Lead-free is also something that it
already has in its portfolio, says Roy.
Syngle says “Lead-free is a standard
that the industry moved to some time
ago. It is a moral obligation to take it up
because these products are not harmful
to the human body.” But Jain of Kansai
insists these trends were actually intro-
duced by it in the industry. “We were
the first ones to introduce lead-free
paints last year. The others have fol-
lowed us,” he insists.
The one-upmanship doesn't end
here. Jain says that as far as retail initia-
tives go, each company has a different
model. “Asian Paints has a dealer-cen-
tric network of stores, while we are
doing shop-in-shops.” Kansai, for the
www.business-standard.com
record, is in the process of rolling out
about 100 mini-stores in 35 cities.
Asian Paints, in contrast, already has
some 3,000 critical stores that act as
colour select outlets. It is also rolling
out high-end concept stores called
Colour Ideas in different cities. It is here
that prospective buyers/customers will
get a glimpse of what the company has
to offer in terms of colour and share.
Berger, meanwhile, is experimenting
with franchisee stores. It has 45 such
franchisee outlets at the moment.
“There is nothing unusual with a
retail footprint. It's an industry norm,”
says Syngle.
So can Kansai really beat Asian
Paints at its game?
Business Standard 22
 www.business-standard.com

CAN KWALITY WALLS

BEAT THE HEAT?
Ice cream majors have aggressive plans to gain bigger market
shares. Here’s how Hindustan Unilever hopes to stay ahead
with Kwality Walls Sapna Agarwal

U
nilever is the undisputed world
leader in ice creams. Its
Heartbrand ice creams -
Cornetto, Magnum, Ben & Jerry's,
Solero, Carte d'Or and Breyers - record-
ed sales of $11.08 billion in 2008.
Annually, the Anglo-Dutch company
spends around $70 million on ice cream
research. To strengthen its global posi-
tion, it last year acquired Inmarko in
Russia.
In India, the story is slightly differ-
ent. Hindustan Unilever, which is
owned 51 per cent by Unilever, has a 14
per cent share of the 100-million litres
and Rs 1,200-crore per annum ice
cream market, which makes it the sec-
ond largest player after Amul (38 per
cent market share). The gap is no less
than 24 percentage points.
But this perhaps is not the full pic-
ture. Hindustan Unilever executives
claim the company's ice cream busi-
ness is growing at almost 25 per cent

Business Standard 23

per annum. (Last quarter, sales hit Rs
90 crore). Volumes have almost dou-
bled in the last three years. And the
company has taken strategic initiatives
to outwit its rivals, most of them home-
spun players.
Homespun they might be, but the
rivals are no rabbits. Market leader
Amul has a huge emotional connection
with Indian consumers as it was the
nerve centre of the White Revolution in
India. Its ice cream is available in no
less than 70,000 stores across the coun-
try - a number it plans to raise to
100,000 in the next one year. Its growth
target for the year is 20 per cent. (The
market has grown at 15 per cent per
annum in the last five years.)
Vadilal, the third largest player in
the ice cream market with a share of 12
per cent and a strong player in western
India (Maharashtra, Goa and Gujarat),
has drawn up aggressive growth plans.
It will raise Rs 50 crore to expand its
capacity by 40 per cent and spread out
to new geographies. "New launches,
better availability, accessible prices and
better awareness as we doubled our
advertising spends on television have
helped us grow 40 per cent this sum-
mer," says Vadilal Managing Director
Rajesh Gandhi.
Mother Dairy (market share: eight
per cent) has fanned out from its strong-
hold of North India to the eastern and
western parts of the country in the last
few years. Its strength is the 4,000 push-
carts out on the streets of the country at
all times. As a large category of con-
sumers buy ice cream on impulse, this
fleet has helped Mother Dairy grow 35
per cent this summer. Mother Dairy
Chief Executive Officer Paul Thachil
makes no bones that this is a strength
he plans to leverage in the days to
come. "We will grow our pushcarts
25 per cent and increase our distri-
bution reach," says he.
Tough fight
Where does this leave Hindustan
Unilever? Ice cream volumes have
grown at a much faster pace than the
rest of its FMCG business. While over-
all FMCG volumes were up a paltry
two per cent in the quarter ended June
30, ice cream surged 24 per cent. But
this could be because of the low base of
the ice cream business.
IDFC SSKI Managing Director
Nikhil Vora says the ice cream category
is underinvested and is likely to remain
so for the next three or four years
because the profit margins are low - less
than ten per cent. In comparison,
FMCG margins are known to be in
excess of 15 per cent. "National players
and multinational corporations have
yet not made known any sure-shot plan
to invest in this category," says he. It is
worth noting that Nestle, another large
player in the global ice cream market,
has not entered the category in India.
So far, there has been no evidence of
down-trading on ice cream (consumers
buying cheaper brands or smaller
scoops), unlike other FMCG categories
like personal care, fabric care and oral
care. In spite of the economic slow-
down, this is an indulgence consumers
are reluctant to cut. In this scenario, the
low margins can best be explained by
the high cost of logistics.
Ice cream, according to Vora, cannot
ride piggyback on FMCG. The business
requires not just a separate supply
chain but also an entirely different cold
storage and dealer net-
work, communica-
tion and price
points. Sector
analysts point
Business Standard
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out that Hindustan Unilever has not
invested enough to grow the market.
Different approach
That it's an altogether different ball
game, Hindustan Unilever seems to
have been aware from day one. That's
why, instead of starting from scratch, it
entered the market through acquisi-
tions worth, industry sources say, Rs
150 crore. In 1993, it acquired Dollops
ice cream from Cadbury's. Two years
later, in 1995, it bought Kwality from
Ravi Ghai and Milkfood from Jagatjit
Industries to become the market leader
with an over 75 per cent market share - a
position it has since lost to Amul which
entered the market place in 1996.
To regain the lost glory, it decided to
focus on the top six metros of the coun-
try and has over the years expanded to
the top 30 cities. At play here, says
Hindustan Unilever General Manager
(sales and marketing) for Kwality Walls
Punit Mishra, is the 30:70 principle - 30
cities account for 70 per cent of the ice
cream consumption in the country. "We
are interested in increasing the con-
sumption of ice cream in the markets
that we are present in first," says he.
Given the cold storage infrastructure
in the country, it is perhaps easier to
manage the supply chain in just 30
cities. But this leaves the rest of the
market open to rivals including local
brands. Both Vadilal and Mother Dairy
with its battery of pushcarts have an eye
on the non-metro markets. It could give
them the first mover's advantage in the
cities and towns where Kwality Walls is
not yet present.
Mother Dairy, by the way, has devel-
oped a strong portfolio of local flavours
which could work well in the upcoun-
try markets. On its part, Hindustan
Unilever too has come out with ice
cream in litchi and coconut flavours at
different price points.
Meanwhile, Hindustan Unilever
has segmented the market in to three
categories: Kids, teenagers and fami-
lies. So, there is the Paddle Pop range
for kids, Cornetto for teenagers and
Red Tub for families. "A way to build
scale is through focus," says Mishra.
"The segmentation has allowed us to
24

create more consumption opportuni-
ties focused on segments like family
weekend for the Red Tub selection,
teenage hangouts for promotion of
Cornetto and fun and adventure for
kids with Paddle Pop."
With this segmentation, the
Kwality Walls range now plays at the
sensitive price points of Rs 5 and Rs 10
with Paddle Pop. The Cornetto range
targeted at the youth is priced between
Rs 20 and Rs 30. The take-home cate-
gory is priced between Rs 160 and Rs
210. Thus, it has products at all price
points of the spectrum.
But rivals have caught on to the seg-
mentation. Amul, for instance,
launched its 2-litre takeaway home
offer last year and has now become the
market leader in the category. "The offer
accelerated our growth pace to over 20
per cent as against the compounded
annual growth rate of 10 to 12 per cent
for the last five years," says RS Sodhi,
chief general manager of Gujarat
Cooperative Milk Marketing Federation
which owns the Amul brand. To press
home the advantage, Amul has come up
with 1-litre packs of its Exotica range
this summer that has Binge Roasted
Almond, Choco Bliss, Choco Chips and
Fruit Salsa Santra Mantra flavours
priced between Rs 120 and Rs 140.
New segments
Between kids and youth on the streets
and adults at home, a large chunk of ice
cream sales gets taken care of. Impulse
purchase from youth and kids accounts
for 50 per cent of the market. Family
consumption adds another 35 per cent.
Fifteen per cent of the market is in-par-
lour sale - a new segment that has
showed up in the last few years. This is
dominated by niche regional players
like Naturals in the West, Nirula's in the
North and premium players like Baskin
Robbins and the homegrown Italiano
Gelato.
Hindustan Unilever wants to have a
play across the entire ice creams pyra-
mid and has its Swirl parlours at the
upper-end to take on competition in the
artisanal ice cream segment. The Swirl
chain was started in 2004-05. The par-
lours do not sell the Kwality Walls range
www.business-standard.com
but create mixes like Cornetto Swirl ten per cent of the ice cream market in
which tie in with the mother brand. A the next three years," says Sodhi.
single serve of 250 ml here is priced at Hindustan Unilever too has got in to
Rs 60. "Retail is a big part of our strategy. the act this year with the launch of its
Here the focus is experience, visibility Selection range which comes with just
and the power of the brand. It is the the- 99 calories in 80 ml. This, in fact, is a
atre of ice cream," says Mishra. He plans segment where the company can draw
to grow the retail footprint of the Swirl on the expertise of its parent, Unilever.
parlours from 68 to 500 in high footfall With growing health consciousness,
areas like malls over the next three to Heartbrand is developing products that
four years. are lower in fat, sugar-free, lactose-free,
But competition is in no mood to as well as low-carb options and those
give up without a fight. With the advent with more nutritional goodies like cal-
of modern trade, Baskin Robbins now cium and fruit. It has come out with
covers 500 modern retail stores along new pack sizes which allow lower con-
with its retail foot print of 370 outlets. sumption. About 40 per cent of the
"We will add 100 retail outlets during research budget goes to enhance prop-
the year and also grow our modern erties of health and wellness. Clearly,
trade footprint. Modern Trade now con- there is nothing better than a well-
tributes to 15 per cent of our overall rev- stocked parent.
enues and we see this growing to 20 per
cent in the next couple of years" says
Ashutosh Goyal, general manager (mar-
keting), Baskin Robbins which has
established its leadership in the premi-
um ice cream category in the modern
trade channel.
Amul too entered the segment this
year with its Scooping parlours where it
serves sundaes, thick shakes and an
exclusive range of ice cream. "We will
have 1,000 franchises by the end of the
financial year, up from the current 250,
and thereon add 1,000 every year for the
next five years," says Sodhi who expects
retail to contribute to 20 per cent of
Amul's ice cream revenue in the next
three to five years.
Across the world, consumers have
turned health-conscious. They want to
cut down calorie intake because of the
alarming spread of lifestyle ailments.
And India is no different - it has the
largest population of diabetics any-
where in the world. Consumers have
begun to look for health and goodness
in whatever they consume and ice
cream is no exception.
Here, the lead has been taken by
Amul. It has developed a portfolio on
the health and wellness platform with
its probiotic and sugar-free category last
year. Its sugar-free probiotic Frozen
Food contains 50 per cent less fat and
half the calories than normal ice cream.
"We expect this category to account for
Business Standard 25

SPICEJET'S FLIGHT
TO PROFIT
How the low-cost airline pulled out of losses
O
n one of the first flights that
Sanjay Aggarwal took on
SpiceJet, the low-cost air-
line he heads, he was given
a sandwich packed in a flim-
sy box. Soon, he found that his lap was
full of crumbs from the stale bread. "I did
not feel like eating it," he recalls.
That experience proved salutary. It
played a part in the airline's efforts to
upgrade the food served on board, an
exercise that - among several others - con-
tributed to SpiceJet's turnaround in 2009-
10, the only listed airline to report a profit
for the financial year.
Though the bottom-line is modest (Rs
61.4 crore against a loss of Rs 353.2 crore
in the previous year), the airline's num-
bers are noteworthy for two reasons. One,
barring one quarter, SpiceJet made a prof-
it in every quarter last year (the losses in
the July-September quarter were on
account of fare cuts in response to similar
moves by Jet Airways and Air India which
were trying to win back customers after
they faced strikes). And two, other listed
airlines saw revenues fall (see table on
page 3) but SpiceJet, in which the politi-
cally well-connected media baron
Kalanithi Maran recently bought a 37.7
per cent stake from London-based
Kansagra family and US stressed-asset
specialists Wilbur Ross, saw its top-line
grow 29 per cent.
Aviation analysts say SpiceJet's turn-
around is principally on account of its
low-cost fare structure that gave it an
advantage as the aviation industry
pulled out of the stall last year, growing
16 per cent to 89.36 million passengers
after falling 11.2 per cent in 2008-09 (but
growth was nowhere near the high of 23
per cent in 2007-08). And it is also true
that the four low-cost carriers saw their
market share rise to 50 per cent from 35
per cent in 2008-09 (unlisted low-cost
Business Standard
www.business-standard.com
Kanika Datta & Mihir Mishra
leader IndiGo is also reported to have
made a profit in the just-ended financial
year). But SpiceJet also managed to grow
its market share 20 per cent, from 10.3
per cent last year to 12.4 per cent, with-
out adding capacity. Its flight back to
profit was, in fact, as much a result of
higher spending as of cutbacks. Here's
what it did.
Sweating the assets
Last fiscal, for instance, SpiceJet was able
to grow passenger traffic 44 per cent, more
than double the industry average. At least
half this growth, says Aggarwal, who took
charge in December 2008 at the height of
the aviation slowdown, was on account of
"sweating its assets more than usual" by
increasing aircraft utilisation. This metric
refers to the number of block hours that
an aircraft flies in a day and is a key way
for airlines to maximise revenue. By
focusing attention on ground-handling
26

and refueling times, and re-jigging airline
schedules, SpiceJet was able to raise air-
craft utilisation to 12.5 hours a day from
10.5 hours in 2008-09 - significantly high-
er than Kingfisher's 9.5 hours, Jet's 10.5
hours and Air India's 8.5 hours.
This alone helped lower SpiceJet's
cost base. Today, as a result of better air-
craft utilisation, SpiceJet's cost per avail-
able seat km (a measure of per-seat operat-
ing costs) is Rs 2.30, much lower than that
of competing airlines like Kingfisher and
Jet's which have around 60 per cent of
their capacity in low-cost operations.
Focusing on costs often entails more
than just cutbacks. So although SpiceJet
took such obvious steps as freezing
salaries and curtailing non-essential
expenditure, it also focused on maximis-
ing cost benefits. Globally, fuel costs
account for roughly a fourth of an airline's
expenses; in India, the proportion is
much higher at about 40 per cent, mainly
on account of the high local taxes that
state governments charge. Managing fuel
consumption, therefore, is critical to prof-
itability. SpiceJet's solutions for achieving
this were not strikingly novel in terms of
industry practice but they do highlight
the virtues of diligent cost management.
One of the ways the airline did this
was by focusing on what Aggarwal calls
"smart flying". This involves getting pilots
to adjust ascent and descent profiles to
yield significant cost benefits. For
instance, pilots were asked to ensure that
aircraft travelling short distances did not
climb too high and those flying longer dis-
tances climbed quickly (the broad rule
being that the climb should be directly
proportionate to the distance the aircraft
is flying). Also, fewer "hard landings" low-
er the need for aircraft repair.
Meanwhile, adds Aggarwal, there
were benefits to be derived from sheer
payment discipline. Several airlines
owed the oil companies fuel dues - Air
India owes over Rs 1,200 crore and
Kingfisher Rs 800 crore - but Aggarwal
says SpiceJet was able to embed a 15 per
cent discount in the fuel contracts it nego-
tiated by "paying its bills on time".
Likewise for airport and aviation charges.
The cutbacks are evident in the 14 per
cent fall in expenditure on fuel in 2009-
10.
"Cost avoidance," as Aggarwal puts it,
also helped. For instance, the airline
saved about Rs 1 crore by relocating its
training simulators from Hong Kong and
Dubai, and signing a three-year mainte-
nance repair and overhaul (MRO) con-
tract with Malaysian Airlines instead.
Fix the product
In any service-oriented business, cre-
ating passenger preference can only be
achieved through "product" and "people".
Yet, one of the big challenges of running
low-cost airlines is perception. "We had to
prove that low cost does not mean low
quality," says Aggarwal.
Part of this challenge was addressed
through SpiceJet's contrarian move of
upping its marketing budgets significant-
ly, but the perception problem proved a
particular hurdle when it came to hiring
and training people to meet Aggarwal's
objective of creating a dynamic talent
pool. Unsurprisingly, few people wanted
to work for a low-cost carrier. "We were
looking for people with energy and pas-
sion but discovered that we first needed to
tell our own story of why we are a better
place to work," he says.
The exercise in selling the SpiceJet sto-
ry and upgrading hiring requirements
paid off in terms of SpiceJet's efforts to
upgrade the food it served on board. On
the basis of feedback from the cabin crew,
the airline introduced a tea and coffee ser-
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vice when it became apparent that most
Indian passengers demanded this, espe-
cially on morning flights. The airline also
introduced kathi rolls on its snack menu
and utthapams and parathas for breakfast
after talking to cabin attendants.
Negotiations with suppliers also
ensured that the quality of food was
upgraded so that Aggarwal's experience
of stale, crumbling bread was not repeat-
ed. The result of this was a 200 per cent
increase in food sales last year, though
Aggarwal says this was partly on account
of the higher number of passengers
SpiceJet flew. Food sales do not contribute
significantly to revenues - just about 1.5
per cent - but a decent on-board menu can
ensure a high passenger conversion rate
of as much as 25 per cent.
As part of the exercise of "fixing the
product", Aggarwal says more people
were hired to maintain the interior of the
aircraft, carpeting on board was changed
and equipment painted more frequently.
Its fleet of 20 aircraft is washed every
three days against once a week before.
The rule of thumb was to cut expenditure
where it made sense, Aggarwal explains,
but not where it would harm the product.
Analysts have suggested that SpiceJet
found it easier to navigate itself back to
profit because it does not have interna-
tional operations like Jet Airways and
Kingfisher do - international passenger
traffic grew only 8.8 per cent last year. This
is true for Jet Airways, for which interna-
tional operations account for 59 per cent of
its revenues, but less so for Kingfisher
which derives just 10 per cent of its rev-
enues from international operations.
SpiceJet's biggest challenge, therefore,
could be looming ahead as it gets ready for
international operations from August,
starting with short-haul destinations
such as Male, Dhaka and Colombo (it has
reapplied for regulatory permission for
the last-named route after being turned
down once). Aggarwal counters that the
airline's international route choices will
increase aircraft utilisation since, for
instance, a Delhi-Chennai flight can add
on passengers for an onward journey to
Sri Lanka. Still, given the slow-pick-up in
international travel, globalisation will be
SpiceJet's next big test.
27
 www.business-standard.com

SLOWER TRADE,
SMALLER PACKS
Consumers have reduced their purchase basket and are clamouring for
discounts. It's not a seller's market, finds out an IMRB retail trade
confidence survey Byravee Iyer

R
etailers in the North and West
have a negative perception of
the current business scenario.
Their counterparts in the
South and East are positive on
the existing situation. But all are upbeat
about the future, though inflation is a big
worry. Retailers have found that con-
sumers have reduced their purchase bas-
ket and are happy with smaller pack sizes.
The clamour for discounts has risen
sharply. This should be an eye-opener for
marketers as well as brand managers.
Consumer sentiment is weak. It is certain-
ly not a seller's market.
These are the results of the first retail
trade confidence survey, Retail
Barometer, carried out by IMRB Retail. It
seeks to map the sentiment in the sector.
Assessment of retail sentiment helps
companies draw product distribution
schedules and plan pack sizes. The mar-
ket research outfit has measured senti-
ment by arriving at an index of current sit-
uation and an index of perceived
momentum.
A sample of 1,240 retailers was taken
by IMRB Retail across 20 centres in met-
ros, large towns with a population of 1 to 4
million, and small towns of 500,000 to 1
million people. Retailers covered in the
survey included kirana stores, chemist
stores, stationery stores and modern
stores. For the index of current situation
as well the index of perceived momen-
tum, retailers were asked to rank four
parameters - economic outlook, con-
sumer demand, supply of goods and infla-

Business Standard 28

tion - on a scale of five. Each score was
arrived at by subtracting the percentage of
positive responses from the negative
responses.
Negative North
The index of current situation is negative
in the North on account of the hugely-
negative economic outlook index. The
indices for consumer demand, supply of
goods and inflation too are negative for
the region. In the West, the economic out-
look, consumer demand and inflation
indices are in the negative. In the East and
South, all indices are positive except
inflation. Overall, retailers in the South
are most bullish about the current situa-
tion, followed by those in the East.
Retailers in the North are at the bottom of
the heap. The all-India index of current
situation is also negative, perhaps
because of the large representation from
the North in the sample.(See table)
The index of perceived momentum is
positive for all the four regions. The South
again is most bullish about the future and
the North the least bullish. But retailers in
all regions are worried about inflation and
its impact on business. Companies as
well as retailers have observed down-
trading amongst consumers because of
the rise in prices. Inflation, especially the
rampant rise in food prices, has worked
like a tax on the poor families because
food comprises a large chunk of their
expenditure. In the overall index too a
similar trend can be seen: The South
leads the pack, followed by the East, West
and North. "If we look at the Southern
region, consumers are generally more
optimistic. Also, there are far more metros
than smaller towns in the region, and
metros are always more optimistic; there-
fore, there is likely to be greater consump-
tion," says IMRB Vice-president Puneet
Avasthi.
Amongst retailers, the confidence
index of modern stores and chemist stores
is the highest, followed by kirana stores
and stationery stores. In other words,
kirana stores - and there are over six mil-
lion of these in the country - are not happy
with the current situation and do not see a
bright future. One reason could be the
advent of modern retail, which has affect-
ed them badly, especially in large cities.
www.business-standard.com
And among towns, the confidence index sumers are rationalising the increasing
is positive in metros and large towns, but cost of products across categories. The
negative in small towns. The survey says results indicate that due to the impact of
that retailers in small towns have been hit inflation, purchases have gone down
hard by inflation and the lack of an across categories. Moreover, customers
upward movement in demand. are looking for discounts in the form of
package deals and monetary discounts,
Retail despair with the personal care category leading
By mapping the retailers on the basis of the way. As many as 65 per cent buyers of
their sentiment, Retail Barometer says personal care products ask for a discount.
that as many as 54 per cent retailers in the Fifty-seven per cent demand a discount
country are in despair (the present situa- on staples & pulses, 55 per cent on
tion has deteriorated, the future situation processed food, and 52 per cent on home
will deteriorate further), 23 per cent are care products.
positive about the present as well as the
future (the Sunshine Group), 18 per cent
feel the present situation has remained
the same or deteriorated but are opti-
mistic about the future, and 5 per cent say
the present situation has improved and
the future will remain the same - it will
neither pick up nor worsen. Southern
retailers are the largest inhabitants of the
Sunshine Group.
As for inflation, the negative effects
have been felt more by the kirana and
modern stores where the quantity of pur-
chases across categories has gone down -
this is more noticeable in the case of
kiranas where customers across cate-
gories except for pulses & staples have
switched to smaller pack sizes. In modern
stores, people have shifted to smaller
packs for processed food. Chemists too
have witnessed purchase of smaller
packs, particularly for processed food and
personal care products. The impact has
been least felt by stationery shops.
Zone-wise, yet again the Southern
states' purchases have remained the same
across categories. The North, however,
has seen consumers shift to smaller pack
sizes for personal care and baby care
products. For processed food and OTC
(over the counter) products, they are buy-
ing less of the same packs. Still, con-
sumers in the North didn't compromise
on staples & pulses. In the East, people are
buying lesser quantities of the same packs
of staples & pulses and baby care, and
have switched to smaller packs for sta-
tionery, personal care, OTC, home care
and processed food. The West saw people
going for smaller pack sizes for staples &
pulses, stationery as well as baby care.
The study has also covered how con-
Business Standard 29

TURBO TURNAROUND
Some smart moves and course corrections have helped ICICI Prudential
turn profitable
F
or several years, ICICI Prudential
Life Executive Vice-president
Puneet Nanda has got the daily
sales report from his frontline
staff. In recent years, he gets it in the form
of a text message at seven in the morning.
It gives him the details of the sale done the
previous day. In a relatively new sector
like life insurance, this ought to be the
core team's mantra. Sale matters most
when a business is in the growth mode.
But for the last few months, Nanda has
been giving equal, if not more, attention to
Shilpy Sinha & Sidhartha
a dashboard that his company has
installed. Sitting in its Prabhadevi head-
quarters in Mumbai, the ICICI Prudential
top management keeps a close eye on the
dashboard that provides the expense
details of every major office across the
country. "Sitting here, you can switch off
electricity in any office if you find
wastage," says the head of the company's
operations and technology, Madhivanan
Balakrishnan.
The dashboard has helped. So much
so, the last financial year was a unique
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one in the history of the company. It was
the first year when its top-line grew,
expenses came down, and the company
turned profitable.
Smart cuts
A part of the reason for the cost-cut drive
was the downturn, which also made the
task simpler. Nanda, who is a key member
of the task force that meets every month to
see how costs can be lowered, says the
company renegotiated rentals in all build-
ings where it had offices. Over 350 of the
30

nearly 2,000 ICICI Prudential offices were
relocated to cheaper locations, while
another 300 were shut down. Travel,
domestic as well as foreign, was curtailed,
stationary was rationed and even air-con-
ditioners were switched off after a certain
time.
The only thing that survived the
downturn unaffected was salaries which
went up 12 per cent on an average last
year and top performers got a 25 per cent
raise. The reason was that there were few-
er people on the company's rolls. Forget
growing employees, even replacements
were next to impossible, resulting in the
headcount dropping from around 23,000
to 20,000. "We had to do it not just to get to
profitability, but to get fitter," says ICICI
Prudential Managing Director & CEO V
Vaidyanathan.
Controlling costs was one thing, but a
disciplined approach to margins has been
the key driver for Vaidyanathan and his
team's efforts to make India's largest pri-
vate life-insurance company profitable
after nine-and-a-half-years of operations.
"We cut fixed expenses by Rs 380 crore
and that is not going to come back," says
Vaidyanathan.
The focus on profitability came when
it dawned on the promoters that ICICI
Prudential had been in business for eight
years and they were still pumping in capi-
tal. But the pace of turnaround surprised
even insiders since the revised deadline
for getting into the black was set as March
2012. Vaidyanathan believes the founda-
tion of the business had a big role in this.
"It's the work of all the team members,
particularly the people who built the
business over so many years," he says.
ICICI Prudential, mind you, is one
among the four profitable private life
insurers in the country - SBI Life, Bajaj
Allianz and Kotak Life being the others.
There are 22 private life insurers around.
Arch rivals like HDFC Standard Life and
Max New York Life are still in the red. The
largest player in the market, of course, is
the state-owned Life Insurance
Corporation.
Sell right, sell long
Even in sales, ICICI Prudential has done a
course-correction. For a company that has
long been seen to focus solely on selling,
the mantra now is "selling right". Also, the
charge structure has been changed. So,
instead of frontloading the charges,
which in some cases were as high as 20
per cent in the initial year, the new prod-
ucts come with upfront charges of 6-7 per
cent. "Instead of paying more commis-
sions, we brought out new products that
were relevant for the current market
needs. Also, lower-charge products were
introduced," says Vaidyanathan.
Last year, ICICI Prudential's sales fell
continuously but, in a year of cost cuts, its
share of the market moved from 7 per cent
to about 9.5 per cent now.
The focus is on selling long. The
design of products has been remade in
such a way that the sale is for the long
term. Its products now offer bonus to
those who keep renewing their policies.
"We are encouraging policyholders to stay
long with a loyalty bonus. In some of our
products, we have said that if you cannot
pay the premium in one year we will defer
it by a year," adds ICICI Prudential
Executive Vice-president (sales & distrib-
ution) Tarun Chugh.
The other focus for the sales force is
selling to a grid. "The moment you sell the
right product, you ensure that people will
pay their premium on time," says Chugh.
And, to ensure that every new customer is
getting the right product, ICICI Prudential
is now calling buyers to check that the
policy sold to them actually fits in with
their profile.
All this has also meant that the sales
force needs to be retrained to ensure that
the policy lasts its term instead of cus-
tomers dropping out midstream. So for
the new entrants the hiring pitch is also
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different. To start with, ICICI Prudential is
only looking at those with prior experi-
ence in insurance. Besides, the job pre-
sentation makes the needs of the job clear.
"You need to tell people upfront that they
may be required to visit people at home
over the weekend or on a holiday since
that is how insurance is sold. Then it is up
to them to decide.... It was earlier like get-
ting to a chartered accountants' course:
Simple to get in but difficult to pass. Now,
we are moving towards the IIT model:
Tough to get in, but you don't fail once you
get in," says Judhajit Das, the head of
human resources. Das says that of the
2,000 new employees who came on board
this year, only 15 have quit so far instead
of the three-digit numbers that was the
norm earlier. The other focus area is pro-
ductivity which has gone up due to higher
sales and fewer employees.
But is the model sustainable? The
industry believes it is as everyone is trying
to control costs and turn profitable. But
Nanda is candid enough in admitting that
to reduce the expense ratio further will be
a tough ask. The company has lowered its
management expense from 14 per cent to
9.5 per cent in 2009-10, and going for-
ward the idea is to ensure that the top-line
grows faster than the expenses. "The
approach is to reduce the fixed costs and
make them variable," says Vaidyanathan.
So, in a lot of cases, the company is look-
ing to convert fixed costs into variable
costs such as real estate and also in the
case of certain non-core back-end activi-
ties. The idea is to be ready for business
cycles and stay profitable even during
tough times.
31

TALE OF CONTRASTS
The more, the merrier' has been the theme song of Bajaj Auto
for many years. Not anymore
I
ndia's second largest two-wheeler
company, which had bombarded
the market with multiple brands
(remember XCD, Kristal, Platina
and a few others?) to break the
near-monopoly of market leader Hero
Honda in the economy segment, has
withdrawn all but two of its brands.
The move is working. Last year, Bajaj
Auto posted its best-ever annual sales,
riding high on just two brands -
Discover and Pulsar. The Discover is
clearly positioned for the commuter
segment and the Pulsar as the 'sporty'
option. While the Pulsar has held its
own over the years in the power and
performance segment, the Discover is
Swaraj Baggonkar
the pivot in the commuting category.
Bajaj Auto Managing Director Rajiv
Bajaj says "brands can be created easily
by the R&D people. We have to figure
out if there is a third category of buyers
out there. A Pulsar buyer is sporty,
young, and wants to have some fun
with the bike. The Discover buyer is
more sober and an economy- conscious
person who wants to take a safe deci-
sion and higher mileage," he says.
"If we create a brand in the absence
of a target category, it could be like
putting up a restaurant which serves
food nobody wants to eat. I could put up
a Lebanese restaurant in Pune and go
bankrupt", adds Bajaj.
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The MD says a manufacturer can
merrily create a brand and forget about
it, but he also needs to look out whether
there is a category for it. "Creation of
brands is in the hands of the manufac-
turer but the creation of a category is in
the hands of the consumer. So unless
we are sure that there is a third category
there, we would be making a mistake by
creating that third brand", he says.
The company has changed its strate-
gy from a product to a brand-led compa-
ny as it believes that the product game
will not go anywhere and it is only
brands that will make all the difference.
Presently about 70 per cent of the
company's sales come from the
32

Discover and Pulsar segment, both of
which share seven models between
them - up from just three about three
years ago. The company reported its
highest ever monthly sales in April
(276,000 units) followed by a record
number in May. It aims to sell one mil-
lion Pulsar units every year starting this
year.
The company, which had a 20.47 per
cent market share in the two-wheeler
category in May - up from 19.05 per cent
in the previous month - is working on
adding yet another model under the
Pulsar category in the coming months.
It also launched last month a new 150
cc bike under the Discover brand. The
company intends to focus on just these
two brands till the market is mature
enough for more.
However, that's something the mar-
ket leader doesn't believe in. Hero
Honda, which had a 45.38 per cent mar-
ket share in May (48 per cent in April),
is planning a brand blitz by launching
at least two more new brand launches
this year to take its total tally to 10.
Anil Dua, vice president, sales and
marketing, Hero Honda, says, "We had
very successful brand launches in the
past including ZMR, Hunk, Passion Pro
and Pleasure and want that to contin-
ue."
Asked whether launching of new
brands and turning them into success-
ful ones is easier for a market leader,
Dua says the success came because
Hero Honda positioned its brands
sharply on a clearly differentiated plat-
form. "It's all a function of the home-
work and ground work. If the customer
trusts the company, the resistance to
new launches is less. It's indeed tougher
for a smaller company to promote a new
brand," he adds.
Splendour, which is in its 16th year,
is the largest two-wheeler brand in the
world followed by Passion.
Last year, five models under these
two brands clocked sales of over two
million units. The company says it is
presently struggling to increase the
capacity of the Hunk as demand is far
outstripping supply.
Business Standard
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A section of the market believes that
the success of the Hero Honda models is
more because of the company's brand
recall rather than the products them-
selves (remember the caption 'Fill it,
shut it, forget it'). But that still seems to
be only a minority opinion.
Fiscal 2010 saw Hero Honda launch-
ing nine new models across segments,
all of which are doing well. Sales of
Pleasure, for example, have already
crossed the 20,000 units per month
threshold. Also, powered by its 4,200
touch points, the company has already
crossed the landmark figure of four mil-
lion cumulative sales in a single year
and posted sales of more than a million
units for every quarter in FY'10.
33

GERMAN DESIGNS
Can Volkswagen become the people’s car in India?
V
olkswagen recently
announced the launch of its
high-end luxury car, the
Phaeton, in India. Named
after the son of Phoebus, the
Greek Sun God, it was unveiled at the
Geneva Motor Show in 2002, and it hit the
market in 2003. But the sales fell short of
expectations. It was positioned against
top-end brands like Mercedes, BMW,
Lexus and Volkswagen's own Audi. But it
lacked the appeal of the rival brands -
hence the lacklustre performance. But so
keen is Volkswagen to make the Phaeton
work in India that it has taken the car back
to the drawing board. The result: LED
daytime running lights, 18-inch wheels, a
new dashboard, 18-way adjustable seats,
better upholstery and even new air-condi-
tioning to suit the Indian climate.
Earlier in the month, Volkswagen,
headquartered in Lower Saxony in
Germany, had announced that it will
launch an all-new sedan, the Vento, in
autumn. It will be manufactured at
Volkswagen's factory at Chakan in Pune,
and has been completely designed to the
needs and expectations of the Indian con-
sumer. Also in the works is a small car. At
present, there are six cars in Volkswagen's
stables: The Beetle, Polo, Passat, Jetta,
Phaeton and Touareg. It could expand to
eight. It fits petrol as well as diesel engines
into its cars. Volkswagen thus straddles
Business Standard
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Byravee Iyer
the entire spectrum of the Indian market.
Its factory at Chakan, put up at a cost of Rs
3,200 crore, can make 110,000 cars in a
year. Those who have seen the factory say
this capacity can easily be doubled
because of the modular nature of the
plant.
Along with its other brands, Skoda
and Audi, Volkswagen has a share of less
than 1 per cent in the 1.3-million per
annum Indian car market. From here,
Volkswagen wants to raise it to 10 per cent
in five years. India is vital for
Volkswagen's plan to become the world's
largest car maker by 2018. In 2009, it sold
6.29 million cars. This had placed it on
the third spot after Toyota (7.23 million)
34
 www.business-standard.com

and General Motors (6.50 million).

Volkswagen is the largest player in China,
Europe and South America. In China, it
sold 1.4 million cars in 2009 - more than
the entire Indian market - and its share of
the market was an impressive 18 per cent.
India, which is expected to grow to 3 mil-
lion cars in five years, is the final frontier.
By itself it may not catapult Volkswagen
ahead of Toyota and General Motors, but
it is one of the few markets left with large
sale volumes up for grabs.
Automobile analysts expect
Volkswagen to use its learnings in China
here. These could be aggressive price tags
and high-decibel advertisements. But
China and India are different markets.
Large cars rule the roost in China. Small
cars form more than two-thirds of the
Indian market. On the positive side,
Volkswagen's strength lies in the mass
market. Its name, after all, means people's
car in German. Its presence in India can
no longer be dismissed, admit some
rivals. But quite a few insist that it will be
a tough challenge for Volkswagen to get
10 per cent of the market in five years flat.
They point to the example of General
Motors which had in mind a similar mar-
ket share by the end of this year but is now
unsure if it will be able to meet the target.

Building the brand

When Volkswagen started out last year,
research suggested that many people did
not know what the brand stood for, while
several others had not even heard of it.
That's when the company's brand man-
agers and marketers sat down with its cre-
ative agency, DDB Mudra, and thrashed
out a plan. "Low brand awareness was one
of our key concerns," says Mudra Group
Chief Creative Officer Bobby Pawar. With
that in mind, the brief given to Mudra was
to raise brand awareness and get con-
sumers engaged with the cars. "We want-
ed people to sit up and take notice," adds
Pawar.
Thus, last November, Volkswagen
came out with 13 advertisements in a
leading English newspaper. It told readers
all they ever wanted to know about
Volkswagen - how the name came about,
its product line and so on. The mandatory
TV commercial followed. By the time the
campaign ended, Volkswagen had used
18,000 television spots, 144 insertions in
broadsheet dailies, 50 insertions in maga-
zines, 280 out-of-home sites and 23 digi-
tal portals.
This was the biggest inaugural cam-
paign launched by a car maker in India.
To improve brand recall, the next cam-
paign showed all Volkswagen cars: The
Beetle, Passat, Jetta and Touareg. "This
denoted that we had integrated all our
brands with our products," Marketing
Manager Lutz Kothe explains. "Besides
that we had to keep the global style and
tone of warmth that Volkswagen cam-
paigns have while highlighting its posi-
tioning." A boy is given a round of the
Volkswagen showroom in the advertise-
ment. The salesman slots the various cars
into different stages of the consumer's life:
The Beetle for the young, the high-perfor-
mance Jetta for the mid-level executive,
the comfortable Passat for the chief execu-
tive and the Touareg for the lifestyle-con-
scious buyer. Has it paid off?
DDB Mudra claims that the brand
recall is now in double digits. There is still
a long way to go.
Some analysts feel Volkswagen has
made the right moves. "The feedback
around Volkswagen is that it's a much
awaited brand. It is truly the people's car.
Along with Hyundai, Volkswagen is top
of the mind for people," says Synovate
India Director and Head of qualitative
research Shravani Sen. "The fact that peo-
ple are only looking for fuel efficiency is a
myth; performance has become increas-
ingly important and that's really what's
helping Volkswagen."
German class
Are Indian car buyers willing to experi-
ment with a new brand? The evidence on
the ground is mixed. Maruti Suzuki still

Business Standard 35

owns almost 55 per cent of the market. In
spite of the rising competition, its market
dominance continues. On the other hand,
rivals have gained some traction from val-
ue additions and aggressive prices. Some
have focused in areas like the eastern
states where Maruti Suzuki does not have
a stranglehold over the market. The key is
to have a differentiator.
Volkswagen cars are positioned as
products of German engineering. In the
mind of the Indian consumer, Germany
produces the best-engineered products in
the world. Volkswagen has been quick to
latch on to it. But the car that is made in
India - the Polo - has up to 50 per cent local
components. This number will improve
further to 75-80 per cent in the days to
come. This is essential if it wants to price
its cars competitively. "Volkswagen's
dependence on imports has to reduce.
That will take some time. It can't happen
overnight as it has to scout for quality local
machines, alternate sources and so on,"
says PricewaterhouseCoopers' leader of
the automobile practice, Abdul Majeed.
So, is it really German engineering?
"The components are made to
Volkswagen's specifications and designs.
In that sense, the cars are German-engi-
neered," says an industry observer.
"German engineering stands for innova-
tive technology, safety, stability and stur-
diness. Sourcing local components which
can finally achieve this are chosen under
these high quality factors to achieve
'German Engineering," adds Volkswagen
India Director (cars) Neeraj Garg.
That apart, Volkswagen visits Indian
homes to understand how people live,
use their car, what they needed from their
car and so on. These insights have been
used in the design of its cars for the coun-
try. "In the beginning we thought high
quality is shown by dark interiors; but
after talking to people we realised that
they want bright interiors. And so we
added that change within two months,"
says Kothe. Volkswagen also discovered
that suspensions need to be conditioned
according to the roads in India, while air-
conditioners, horns and headlights ought
to be more powerful.
But how has it done so far? From
January to April 2010, Volkswagen sold
3,280 cars, compared to the 3,039 cars it
sold all of 2009. That may not be even a
blip, but there are indications that buyers
have begun to warm up to the brand. The
Beetle, for instance, has sold 284 since
January, the steep price of Rs 20.45 lakh
(ex-showroom, New Delhi) notwith-
standing. Throw in a little more and you
could buy an entry-level Mercedes! The
Beetle is imported from the Volkswagen
facility in Mexico and buyers have to wait
up to three months for delivery.
The small-car war
The big one, of course, has been the Polo
hatchback. Since its launch in February,
Volkswagen has sold 1,599 Polos so far.
The queue of buyers runs into thousands,
WHERE VOLKSWAGEN MIGHT
TRIP IS DISTRIBUTION. AT
THE MOMENT, VOLKSWAGEN
HAS 43 DEALERS IN 32
CITIES — WOEFULLY SHORT
OF RIVALS LIKE MARUTI
SUZUKI, HYUNDAI
OR TATA MOTORS
the company claims, and delivery can
take up to three months. The car is priced
at Rs 4.46 lakh. Though more expensive
than the Maruti Suzuki Swift (Rs 4.2
lakh), the Fiat Grande Punto (Rs 4.33 lakh)
and the Ford Figo (Rs 3.54 lakh), it is
priced below the Hyundai i20 (Rs 4.46
lakh). The price tag, some analysts
believe, could work against Volkswagen
because buyers are not willing to pay a
premium for a small car. The going could
get tougher when Toyota launches the
Etios. The car was shown at the New
Delhi Auto Expo earlier this year. Critics
felt it was a little under-designed, like the
Mahindra Logan, but Toyota can count on
its tremendous brand equity.
Volkswagen also knows that two ver-
sions of the same car - hatchback and
sedan - can work well in India. Maruti
Suzuki has reaped a rich harvest with the
Swift hatchback and Dzire sedan. The
Business Standard
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Vento, thus, builds on the Polo platform. It
will compete against bestsellers like the
Honda City, Ford Fiesta and Maruti
Suzuki SX4. But the game-changer could
be the small car. It is not clear what shape
it could take. But Volkswagen has such
cars in its global portfolio - the Fox in
Brazil and Ebisa in Spain. But India could
be different. Also, the market place is
crowded. To complicate matters further,
Hyundai and Honda are working on
brand new small cars. Honda, in the
Japanese style of perfection, has even
shipped some saris to its development
centre in Japan to make sure that Indian
women can get in and out of its new small
car with ease.
Where Volkswagen might trip, say
rivals as well as analysts, is distribution.
India is a large country and hundreds of
dealers are required to cover its length and
breadth. With about 300 dealers, industry
norms suggest, a car maker can cover up to
80 per cent of the market. How does
Volkswagen measure against this bench-
mark? At the moment, Volkswagen has 43
dealers in 32 cities - woefully short of
rivals like Maruti Suzuki, Hyundai, Tata
Motors and Mahindra & Mahindra. But
the network could expand in the days to
come. "We will be spread all over, and are
keen on increasing our penetration in line
with volumes. Hence we will open one
dealership every three weeks," says Garg.
"People's concern with Volkswagen is its
dealership and after-sale service. The
company needs to build that up fast. The
consumer is not going to wait," says Sen.
But Volkswagen could have an ace up
its sleeve. Last year, it had bought 19.6 per
cent in Suzuki Motor Corporation for $2.5
billion. The crown jewel of Suzuki, of
course, is its Indian subsidiary, Maruti
Suzuki. Ever since the acquisition, there
has been speculation that Volkswagen
and Maruti Suzuki will soon explore syn-
ergies in various fields. There have been
reports that top executives from the two
companies have met to kickstart such dis-
cussions. But sector experts doubt if the
co-operation will extend to distribution
because their car models clash. But
Maruti Suzuki's expertise in cost-effective
and high-volume production is some-
thing Volkswagen could leverage to good
effect.
36
 www.business-standard.com

UNITY IN DIVERSITY How Ajay Srinivasan is

driving integration
among the seven
financial services
businesses of the
Aditya Birla group
Shyamal Majumdar

H
is decade-long career at
Prudential Plc was the
stuff every St Stephens
and Indian Institute of
Management Ahmedabad
alumnus like him would aspire for. As
chief executive of the UK financial ser-
vice power house's Asian operations,
Ajay Srinivasan, then based in Hong
Kong, was managing assets worth $60
billion. And just when speculation
started that he was headed for London
to become one of Prudential's global
bosses, Srinivasan quit.
The destination he chose, however,
surprised many, though Srinivasan
says he didn't take much time to say yes
to Kumar Mangalam Birla's offer to tur-
bo-charge the Aditya Birla group's
financial services business. But it
couldn't have been an easy decision.
The Indian conglomerate's six-year-old
life insurance firm and the 13-year-old
mutual fund were languishing at that
point and the group had just quit retail
broking apart from going slow on other
services.
The structure also was a big prob-
lem. Though the Aditya Birla group had
a strong brand equity, the financial ser-
vices business was (it still is) under a
loosely-formed Aditya Birla Nuvo,
which is a holding company for diverse
businesses such as insurance, textiles,
telecommunication and even carbon

Business Standard 37

black. On top of that, quite a few veter-
ans who had held the financial services
business together for long had already
headed out.
But three years after taking charge,
Srinivasan sounds credible when he
talks about the “turnaround story”.
Consider the numbers. The growth
shown by the financial services arm
helped Nuvo return to profitability in
the quarter ended March 31, 2010. The
company reported a net profit of Rs 180
crore, compared to a loss of Rs 146 crore
in the corresponding period of the pre-
vious year. For the full year, net profit
was Rs 155 crore compared to a loss of
Rs 436 crore in the year-ago period. The
EBIDTA (income from operations) for
the full year at Rs 1,686 crore was the
highest-ever.
The journey that the Aditya Birla
Financial Services Group - Srinivasan
calls it a conglomerate within a con-
glomerate - has travelled in the three
years since the new team took charge
has been spectacular. Since 2007-08,
consolidated revenues have grown over
40 per cent to Rs 6,139 crore in 2009-10,
without including income from policy
holder investment, other income and so
on. Assets under management have
increased by 40 per cent to around Rs
80,000 crore. The number of customers
in the same period has increased to 5.6
million from 3.4 million, while the
number of employees has gone up to
around 16,000 from 10,000.
The numbers are still modest even
by Indian standards - the life insurance
and mutual funds businesses are the
fifth largest in India - but Srinivasan
says they should be seen from the per-
spective of where they were three years
back. And the platform has been set for
fulfilling the group's ambition to make
these two businesses among the top
three in India in the not-too-distant
future.
He could well be right. Because even
in a tumultuous 2009, Birla Sun Life
Insurance clocked robust volume
growth and gained market share even as
others struggled. The company's market
share in new premium income
increased from 7.8 per cent in March
2008 to 10.4 per cent by the end of 2009-
THE FIRST TASK WAS TO SET
THE STRUCTURE RIGHT BY
DRIVING INTEGRATION IN THE
CONGLOMERATE OF SEVEN
LEGAL ENTITIES. THE IDEA
WAS TO SEE IT AS ONE
VIRTUAL COMPANY WITH
MANY REAL BUSINESSES
10. In such a challenging environment,
Birla Sun's new business premium
grew by 44 per cent against a 3 per cent
decline in growth for the industry. If the
life insurance business has been a suc-
cess story, so has been the asset man-
agement business which saw assets
grow at an average 31 per cent, com-
pared with the industry growth of 7 per
cent in that period.
However, there are still many grey
areas. Analysts say even as the group
revs up its financial services business,
it would need to pump in funds, and
that's a huge concern. Also, Nuvo has a
market cap of just around Rs 7,300
crore, which is less than half the m-cap
of Reliance Capital (over Rs 15,500
crore), a pure financial services compa-
ny. But nobody can deny that the top
team at ABFSG has covered a huge dis-
tance in the last three years. Here's how.
Driving synergies
The first task, Srinivasan says, was to
set the structure right by driving inte-
gration in the conglomerate of seven
legal entities - from life insurance to
mutual funds, private equity, wealth
management, non-banking financial
company, retail broking and a general
insurance broking business. The idea
was to see it as one virtual company
with many real businesses. Earlier, they
were all operating as islands with sepa-
rate management structures and with-
out a common vision. That has been set
right, partly by giving a common identi-
ty to some of the firms. For example, the
broking, wealth management and dis-
tribution businesses are now posi-
tioned under one brand, Aditya Birla
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Money. Attaching the Aditya Birla
brand name to each of the businesses
was important as investors in India still
prefer safety over returns and are
always looking for reassurance.
Therefore, who offers the service is
often much more important than the
offering in the market.
Integration, the group believes, is
critical because of the competitive
advantages that can emanate from
being able to drive synergies across the
platform. “Whether we integrate the
backend in terms of the way technology
works or the front-end in terms of the
way the customer sees us, what is
important is that we must offer a com-
mon platform. Our view is that given
our target customer with whom we are
looking to build long and sustainable
relationships, having a broad-based
offering of products and services is crit-
ical,” Srinivasan says.
That explains the group's initiative
to make its top teams at all the seven
arms sit together. It has taken up five
floors at the One India Bulls Centre at
Lower Parel with a seating capacity of
950. Earlier they were scattered all over
Mumbai. Even the back office opera-
tions for its diverse financial services
businesses have been brought under
one roof at Thane, a Mumbai suburb.
Earlier this month, the group set up its
operations hub at a 95,000 sq ft state-of-
the-art office with 1,350 seats.
But the bigger game plan has been to
allow the separate management struc-
tures to continue with each company
having its own CEO (except for life
insurance where a global search is on)
under a super-structure that Srinivasan
heads. A crack team has been formed
consisting of people who head func-
tions such as marketing, information
technology and so on across the group.
For example, the group has replicated
the IT platform across the seven busi-
nesses, whether it is facilities manage-
ment, or common infrastructure in
terms of network. Similar initiatives
have been introduced in a number of
other platforms like human resources
and marketing. Apart from saving cost
through less duplication of work, it
helps operate as an integrated entity.
38

The group has now sought approvals
to formalise this process through the
formation of a holding company for its
financial services businesses.
Distribution muscle
Almost 55 per cent of household sav-
ings lie in bank deposits, the penetra-
tion of products like mutual funds is
less than 5 per cent of household sav-
ings and life insurance penetration is
less than 15 per cent. This is the oppor-
tunity that the Aditya Birla Financial
Services is planning to target.
For the group, therefore, building
distribution infrastructure was the sec-
ond critical element. Helped by the
acquisition of Apollo Sindhoori, a retail
broking firm from the Chennai-based
Reddy family to take advantage of cross-
selling opportunities with the existing
insurance and mutual fund business,
the financial services business has
more than doubled its points of pres-
ence to over 1,600 (from 735 in 2007).
Another 200,000 channel partners
ensure that the group's presence is
spread across more than 500 cities.
Aditya Birla Money, for example, has a
distribution network of over 850
through its own and sub-broker branch-
es, a large customer base in excess of
400,000 and a strong technology back-
bone.
Srinivasan says life insurance has
got 600 branches, and the asset manage-
ment company has 110 offices. It's a
good enough base and going forward,
there will be some amount of incremen-
tal expansions, but the focus now will
be on driving efficiency and productivi-
ty across the channels. That's a key
challenge.
Srinivasan says turbo-charging
essentially involves building the pipes
to push the products through. Another
focus area has been customer experi-
ence because although this business
can tend to be fairly hardnosed and very
much about numbers, at the end of the
day, “the way the customer experiences
us, and the way the customer can actu-
ally deal with us at different points will
differentiate one provider from anoth-
er.”
For example, Birla Sun Life
KUMAR MANGALAM BIRLA,
CHAIRMAN OF THE ADITYA
BIRLA GROUP, IS HOPING TO
EXTEND THE GROUP’S
STRONG BRAND EQUITY
TO THE FINANCIAL
SERVICES SPACE
Insurance set up a centralised claim set-
tlement cell much ahead of its competi-
tors. Last year, for example, it processed
99.49 per cent of all individual death
claims received, processed 100 per cent
of all death claims received for group
business and achieved individual death
claims outstanding ratio of 0.51 per
cent and 0.00 per cent for group death
claims.
New businesses
While the acquisition of Apollo
Sindhoori marked the re-entry of the
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www.business-standard.com
group into retail broking, Srinivasan's
top team has been active on other fronts
as well to make it a diversified, one-stop
financial powerhouse. Take private
equity. Aditya Birla Capital Advisors,
the private equity firm led by Bharat
Banka, closed its maiden fund in March
with a size of Rs 881 crore, much ahead
of similar ambitions of the Tatas and the
Reliance ADAG group. The target is to
raise at least a billion dollars (Rs 4,700
crore) in three years.
Among the other initiatives, there
are a few that stand out. One of them is
an alliance with Korea's Woori
Investment. Aditya Birla Financial
Services Group will now be able to raise
about $500 million funds overseas for
its mutual fund, private equity and real
estate funds. Besides, the alliance will
strengthen Aditya Birla Money's posi-
tion in the broking space by introducing
an institutional overseas broking plat-
form that can be used for institutional,
high net worth individuals and non-res-
ident Indian investment from Korea to
India and vice versa. Then there was the
recent partnership with SBI Cards to
offer co-branded credit cards to all cus-
tomers of the Aditya Birla group. The
co-branded credit cards will be avail-
able to over 28 million customers of the
group companies - Aditya Birla Retail,
Aditya Birla Financial Services, Idea
Cellular and Madura Garments.
“The eco-system of the group's huge
customer base and small companies
associated with the group is a huge
catchment area for us, something others
in the field haven't got. The good news
is we have barely scratched the surface
of this eco-system, so the potential is
enormous,” Srinivasan says.
Also on the roadmap is an aggressive
entry into the rural space and
Srinivasan wants to replicate the
“sachet story in the FMCG industry” in
the financial services space also. That
means volume play with low-ticket
products. He is, however, mum on the
specifics and would only say that what
his seven companies have done so far is
just the first phase of a long success sto-
ry.
His boss, Kumar Mangalam Birla,
would be pleased with that.
39

CHARGE OF THE
GREEN KNIGHT
Can Reva Electric Car Company leverage its
first-mover advantage in the soon-to-be-
crowded electric car space? Byravee Iyer
A
t 7, Race Course Road, the resi-
dence of Prime Minister
Manmohan Singh, you can find
a glittering array of cars. They are all fit-
ted with post-modern gizmos and secu-
rity gadgets, and their armour is thick as
a tank's. There is also a small electric car
which is used to carry passengers, one
at a time, from the high-security gates to
the house. It rubs in a subtle message to
visitors from abroad: The Prime
Minister's office is environment-friend-
Business Standard
www.business-standard.com
ly, and India can make an electric car on
its own. The Reva has a place of pride in
the fleet.
Cut to the Australian outback 20
years ago. Chetan Maini, a student at
the University of Michigan, races the
solar-powered car he has built from
scratch, against venerated names like
Honda. At the end of the long drive,
Maini comes third. More than that, it
makes Maini, 19, think seriously about
electric vehicles. He first takes a
Master's in mechanical engineering
from Stanford University, with a focus
on hybrid electric vehicles, and then in
1994 sets up Reva Electric Car
Company in Bangalore, India's hi-tech
capital, in collaboration with
California-based AEV LLC. He names
the company after his mother. Over the
next seven years, Maini and his men
research electric cars, register five
40

patents and try to develop insights into
the consumer's mind. In 2001, Maini
launches his first car - a two-seater that
can touch speeds of up to 60 km per
hour and run 80 km on a single charge -
under the brand Reva in India and G-
Wiz in London.
Since then, Maini has put the car
through two upgrades: The Reva-i with
lead acid battery in January 2008 and
the Reva L-ion with high-performance
lithium ion battery exactly a year later.
He has sold 3,400 Revas so far - 1,700 in
India, including the one to the Prime
Minister's office, and an equal number
abroad. These cars have together logged
70 million kilometers, Maini, the vice-
chairman and chief technology officer
of Reva Electric Car Company, says with
quiet pride. The company has the
world's largest deployed fleet of electric
cars, with customers in 24 countries.
Electric cars, given the new-found
environmental consciousness of gov-
ernments and consumers across the
world, are the flavour of the season.
Countries like the UK and even China
have offered subsidies for electric cars
to cut down carbon emissions and
reduce dependence on fossil fuels.
Automakers are falling over each other
to have hybrids, which run on fossil
fuels as well as battery, and electric cars
in their portfolio. Thus, automakers
will introduce 42 electric models by
2012, says a recent study by
PricewaterhouseCoopers. Electric cars
will be 2 per cent of the global market by
2020, Volkswagen has predicted, while
Nissan's Carlos Ghosn has put the fig-
ure at 10 per cent. Clearly, Maini has the
first mover's advantage in a market that
will only go north in the days to come.
But the ride so far hasn't been
smooth. In the days before the launch,
Maini had counted on a subsidy of Rs
100,000 by the government on each car.
This was supposed to bring down the
ownership cost. However, when the car
eventually launched, the government
yanked the subsidy off. This threw
Maini's plans off gear, and as a result,
the two-seat car's cost came to as much
as a Maruti 800. On top of it, there
weren't enough recharge booths in the
country. The looks were not worth writ-
MAINI IS LOBBYING HARD
WITH THE GOVERNMENT TO
BRING DOWN THE EXCISE
DUTY ON COMPONENTS
FROM 8 PER CENT TO NIL
ing home about, and there wasn't any
thrill in the speed. The lack of an air-
conditioner was a huge negative in the
North. Little surprise then, Reva
Electric Car Company hasn't managed
to break even yet. But Maini is confi-
dent things could change for the better
in the days to come. He has his strategy
ready.
New looks
Maini is all set to launch the Reva
NXR, short for Next Reva, in the second
quarter of this year before the
Commonwealth Games open in New
Delhi in October. It will, he hopes, solve
some of the problems of the Reva -
looks, range, air conditioning and
speed. The Reva NXR, a four-seat three-
door hatchback, will have a range of
almost 160 km on a single charge and
can hit top speed of 104 km per hour.
Standard charging will require eight
hours, but there is a quick charge option
of 90 minutes as well.
Up next is the Reva NXG (Reva Next
Generation), which will hit the market
in 2011. This two-door two-seat car has
been styled by Dilip Chhabria, will
have a range of 200 km and a top speed
of 130 km per hour. "There was no real
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consumer insight we could use for the
NXG because it's a new category, so we
couldn't create a hypothetical user,"
says Chhabria, adding: "That said, we
knew that Reva is a niche player and
therefore we have to give it a bold and
radical look. That's not an approach
other manufacturers can take." Maini
had showcased both the cars at the last
Frankfurt Auto Show. The Reva NXR
will carry a price tag of almost 15,000
in Europe, up from the 9,430 (£8,495)
for the G-wiz. The price for the NXR in
India hasn't yet been determined.
The Reva NXR and Reva NXG come
with REVive, a remote emergency
charge. If a customer runs out of charge,
he can SMS the customer support cen-
tre which, in turn, will access the car's
battery remotely and activate reserve
energy. "This should last until the per-
son gets home or to a charging destina-
tion," claims Maini.
Maini is withdrawing the G-Wiz
from the US and UK. It will be replaced
by the new models. In India, he's still
reviewing whether or not to replace the
old models.
All told, Maini hopes to sell 8,000
cars this year, more than double of what
he has sold in the last eight years. To
cater to the demand, Maini is investing
Rs 30 crore to raise his production
capacity in Bangalore from 6,000 per
annum to 30,000 per annum. The low-
carbon plant is being built to LEED
(Leadership in Energy and
Environmental Design) guidelines.
Among other things, the plant will har-
vest rainwater, use natural light and
ventilation, and employ solar energy for
electricity and heating. "The combina-
tion of vehicle and plant designs, and a
provision for battery recycling mean
that the Reva NXR will have one of the
lowest dust-to-dirt carbon footprints of
any car in mass production," says
Maini.
Interestingly, Maini wants to pitch
both the Reva NXR and Reva NXG as
the second car of the family. There's a
keen reason behind this. Five years ago,
only 20 per cent of cars sold in the coun-
try were second cars; today, that seg-
ment is as big as 40 per cent. Close to
500,000 cars every year, in other words,
41

are bought by people who already own
a car. Maini feels that in the second car
people look for something that is city-
centric. That along with rising fuel
prices, he hopes, will drive customers
straight to him.
The profile of Maini's customers is
such that only 40 per cent buy on
installments, way below the industry
average of 75 per cent. Still, to bring
down the cost of buying the car, Maini
has unbundled the car and the battery -
the buyer needs to buy only the car and
can take the battery on lease from the
company. The buyer thus cuts his cost
by Rs 60,000, while Reva Electric Car
Company books the depreciation.
Maini is also lobbying hard with the
central government to bring down the
excise duty on components from 8 per
cent to nil. This could bring the price of
the car down by 6 per cent.
Of course, electric cars are totally
exempt from excise. The Delhi govern-
ment has given a subsidy of 15 per cent
on electric vehicles, and exemption
from road tax and value-added tax of
12.5 per cent. As a result, Reva prices
are 18 per cent lower in Delhi than else-
where in the country. The company
wants other states to grant similar bene-
fits.
Technology for all
At the Delhi Auto Show, General
Motors displayed a battery-powered
Chevrolet Spark, called e-Spark. It will
be launched by the end of the year, and
the company is hopeful of selling at
least 5,000 of these cars in the first year.
The technology for the car has been pro-
vided by Reva Electric Car Company.
This gives General Motors a new buzz
in its portfolio. And for Maini, it opens a
new revenue stream, though it is not
clear if his company has been paid a
lumpsum for the technology or it will
get a cut on sale.
More important, it gives Maini
access to over 200 General Motor sales
and service outlets in the country. At
present, he has just two company-
owned dealerships in Bangalore and
Delhi. With the tie-up, he should be
able to sell through the Chevrolet deal-
erships. Won't this create issues with
retailing his own car? Not really, says
Maini. "The two products offer different
benefits and will only provide the cus-
tomer with more options."
The tie-up with General Motors does
not preclude Maini to sell his technolo-
gy to others. He knows that there is a
scramble amongst automakers to come
out with electric cars - under attack
from investors and the general public
for their wasteful ways, these compa-
nies are desperate to show that they are
responsible corporate citizens and care
for the environment. Obviously, there
will be companies willing to pay Maini
what he wants. In an earlier interaction
with Business Standard, Maini had
indicated that he could do a similar deal
with others. "Alliances such as this are
going to be the order of the day. No one
carmaker has such deep pockets as to
get into everything," says
PricewaterhouseCoopers Leader (auto
practice) Abdul Majeed.
Maini knows that it will take a while
for environmental awareness to settle
in among Indians. The western markets
have matured faster. He thus plans to
have manufacturing plants abroad - the
United States, Europe, Southeast Asia
and South America - with local part-
ners. "Exporting cars is the old way of
doing business, and manufacturing
them locally will involve millions of
dollars, not to mention several man-
hours," he explains. The technology
and the brand will be owned by Reva
Electric Car Company, while the local
partner will chip in with insights into
the local market.
Maini has already struck a deal with
New York-based Bannon Automotive.
The plant will come up near Syracuse,
New York. Typically, an assembly plant
in the US can cost $100 million. In
Maini's scheme of things, a plant that
can assemble 30,000 vehicles a year
should not cost more than $30 million.
"It's like a factory in a box," he says. The
company will use local components
and manpower to keep costs low.
Breakeven could happen once the ven-
ture hits volumes of about 5,000 cars.
Going forward, the company is keen
on using its technology on three-wheel-
ers and buses as well. "We're in positive
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www.business-standard.com
discussions with a lot of people and
everything seems to be coming togeth-
er," says Maini. But two-wheelers do not
interest him. He finds that segment of
the business low-tech, high-investment
and low-margin.
Good enough?
But just how efficient is this green
machine? Not too much, says Sharad
Verma of The Boston Consulting Group.
The environment-friendly argument,
according to him, doesn't work because
it runs on power, and the bulk of power
in India is generated from coal. "Electric
cars are more feasible in markets like
the United Kingdom where 40 per cent
of the power source is non-thermal,"
says Verma.
What could make matters worse is
that the best brains in the car industry
too are working on solutions similar to
Maini's. Global automakers like
Daimler, Nissan and Toyota are testing
electric versions of their cars. Mass-
market companies like Maruti Suzuki,
Hyundai, Tata Motors and Mahindra &
Mahindra too want to roll out their elec-
tric cars.
Maini, on his part, feels that aware-
ness is a huge challenge for his busi-
ness. "When people walk into a regular
car showroom, they know exactly
which car they want to buy. But when
they come into our showroom, they
have no idea of its benefits," he admits.
Financial constraints have limited the
firm's mass-marketing initiatives. (In
2006, two US-based investors, Global
Environment Fund and Draper Fisher
Jurvetson, put in $10 million each for
minority stakes in the company.) As a
result, it is forced to rely on motor
shows, word-of-mouth and direct mar-
keting at events and conferences.
The clincher, of course, is the low
cost of running the car. The Reva's oper-
ational cost is as low as 4 paisa per km.
This is way below the most fuel-effi-
cient car on the road, the Tata Nano,
which costs Rs 2 to run the same dis-
tance. The fight's on.
42

KOREAN TAKEOVER
How Korean consumer durable majors LG and Samsung knocked out
rivals in the fight for market share and brand recall Bhupesh Bhandari
S
ome time in the middle of
1994, the Dhoots of Videocon
put their brightest man,
Ravinder Zutshi, on a special
project. They had been
approached by Samsung which was keen
to sell its consumer electronics in India.
The Korean company had proposed a
joint venture which could source prod-
ucts from Videocon's factories at
Aurangabad in Maharashtra. Zutshi was
asked to study the possibilities.
Quantitative research threw up no
surprises. Unaided awareness about
Samsung was close to zero, aided aware-
ness was slightly better at 7 per cent.
People thought the Japanese were the
masters of all technology, and the Koreans
were at best imitators. But when he dug
deeper, Zutshi found deep dissatisfaction
amongst consumers from multinational
(Sony, Sanyo, National, Philips and oth-
ers) as well as Indian (Videocon, Onida,
BPL et al) brands. The consumers' aspira-
tion and awareness were high, but the
technology made available to them was
low. And there was no indication that any
of them would invest in the latest technol-
ogy. After-sale service existed only on
paper.
Zutshi's report said there was a big
gap that could be exploited. With better
technology, contemporary products and a
customer-friendly disposition, Samsung
stood a fair chance in the market. The
Dhoots trusted Zutshi. If Samsung did
well, they argued, their factories at
Aurangabad would run at full capacity,
and whenever the foreign investment
rules were further liberalised, they could
sell their stake to the Korean chaebol and
make a neat pile of money. Quickly, they
formed a 49:51 company with Samsung.
It was 1995.
Around the same time, LG (it was at
that time known as Lucky Goldstar) sent a
large and high-powered team to India.
The odds were stacked against the com-
pany - low awareness of its brand, poor
perception of Korean technology and so
on. But the team saw that the Japanese
were not too interested in India; Europe
and the US were their primary focus. This
had made Indian brands complacent, and
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they lacked the financial wherewithal to
come out with cutting-edge technology.
LG also found out that education was
very high on the agenda of Indians. The
team members knew that it was educa-
tion that had transformed South Korea
from a poor agrarian country into a devel-
oped industrial powerhouse in a matter of
decades. The same would happen in
India, the team reported to its bosses back
home. The LG brass was convinced and
made up its mind to enter India. As rules
did not allow a fully-owned subsidiary, it
first tried its luck with Bestavision and
then with Chandra Kant Birla. Finally, in
1997, when the foreign ownership rules
were relaxed, it came on its own.
Cut to the present. In most product
categories of the consumer electronics
market, LG and Samsung lord it over a
market share of over 40 per cent - televi-
sion, refrigerators, air-conditioners,
washing machines and microwave ovens.
Outside South Korea, this has not hap-
pened in any other large market. In cer-
tain categories, their products sell at
prices similar to Japanese rivals - a clear
43

indication that the perception of the
Koreans being poor cousins of the
Japanese is history. Their brand recall is
universal. Indian brands, with the excep-
tion of Videocon, which has now hired
ex-LG honcho Kwang Ro Kim as chief
executive, are on oxygen. LG did business
of $2.8 billion in 2009. India accounts for
about 6 per cent of LG's worldwide
turnover. "We want to raise it to at least 10
per cent by 2012," says LG India
Managing Director Moon Bum Shin. "By
2015, India will become the second
largest contributor to LG's revenue after
the US and ahead of (South) Korea," he
adds. Samsung crossed the $2-billion
mark in 2009 - India is around 2 per cent
of its global turnover. How did the
Koreans get the better of rivals in India?
Strong foundation
Both LG and Samsung knew that half
measures wouldn't work in India. Thus,
LG has invested $300 million and
Samsung $200 million in two production
facilities each. "It wasn't a global factory
that also supplied to India. We didn't want
to make the customers wait," says Rajeev
Karwal, who drove sales and marketing at
LG from 1997 to 2003, then headed
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Philips and Electrolux in India, and now
runs a consultancy for small-scale enter-
prises called Milagrow. Apart from
Videocon, no rival of the Koreans has put
up large production facilities. "In terms of
investments and technology, no other
Indian company apart from Videocon had
the might to rival them," says Videocon
Chairman Venugopal Dhoot.
LG and Samsung brought the latest
products, customised them to Indian con-
ditions (Samsung, for instance, reduced
the size of the freezer in its fridges because
Indians didn't want it; LG cut out all frills
that were not required in India) and began
to give quick after-sale service. Samsung,
says Zutshi, now deputy managing direc-
tor, Samsung India (the Dhoots exited the
venture in tranches by 2002; it had bro-
ken even by 1998), was the first in the
industry to give uniform training to all
technicians. "When pagers came in July
1995, we gave one to all technicians
across metros," says he. Also crucial were
the Korean price tags. LG as well as
Samsung prices were up to 20 per cent
below Sony, but around 10 per cent high-
er than Indian rivals. The brands were
positioned as value for money.
They spent large sums of money on
brand promotion. Both LG and Samsung
now earmark 4 to 5 per cent of their
turnover for brand development, above-
as well as below-the-line. This translates
to ad spends of at least Rs 400-500 crore
from each. In the initial days, when they
were yet to build scale, help poured in
from their Korean parents in liberal mea-
sures. The Koreans knew little about
cricket but were quick to join the band-
wagon in India.
But how did they address the quality
perception? For the first three months,
Samsung campaigns focused on its tech-
nological achievements. It was, after all,
the world leader in colour picture tubes
and semiconductors. "If you don't want
the best, go to Sony, National and Philips,
we said in our advertisements," says
Zutshi. Karwal says he was able to con-
vince the LG brass that it should build on
its Korean heritage and not hide it. "The
company wanted to play on the Goldstar
brand because it had some recall. But I
argued that it had failed in India so why
harp on it? We went ahead with LG. I said
44

let's not pretend to be what we are not."
"Where they have scored," says the top
functionary of a rival, "is that they treated
India differently than other Asian mar-
kets." And they ambushed rivals whenev-
er they could. Karwal says when he came
to know that Sony was ready to launch its
flat-screen television, he rushed to Seoul
and managed a consignment of 500 flat-
screen televisions to launch first.
"I also got to know that Sony had
booked the centrespread of a publication.
So, I bought the wrap-around which said
ours was the flattest thing on earth."
The Japan factor
Still, LG and Samsung owe a debt to their
neighbours across the sea - they were
quick to adopt the best manufacturing
practices of Japanese companies.
Samsung, for instance, uses the just-in-
time supply principal with its vendors -
they need supply only when the factory
demands. Its vendor development exer-
cises could be straight out of the Japanese
management textbook. "They (the
Koreans) combine American marketing
with Japanese manufacturing," says
Karwal.
So, where did the Japanese go wrong?
An industry veteran, who for long worked
with the Japanese, says they tested the
waters in India for too long, and thereby
lost the first-mover's advantage to the
Koreans. Panasonic India CEO Daizo Ito
admits that the company has ratcheted up
its focus only in the last one year.
"Panasonic has been in the Indian market
for long but, as a part of strategy, the focus
has been increased exponentially since
last year or so." The Japanese also went
after the premium slots in the market, and
thereby missed the volumes. "LCD televi-
sion is the only segment where we com-
pete (with the Koreans) but here too our
and their key target segments are differ-
ent. We are focused on households with
an annual income above Rs 5 lakh, unlike
the Koreans," says Sony India Managing
Director Masaru Tamagawa.
The question is, have the Koreans tak-
en an unassailable lead over the
Japanese? The Japanese take heart from
their large market share in automobiles,
cameras, cordless phones, small appli-
ances and LCD televisions. Panasonic, for
one, is aiming for growth of over 100 per
cent in each of the next two years, and
double-digit market share in LCD televi-
sion. "Coming from the Japanese domain,
the quality and reliability of products is
our strength. The challenge is to make
this strength reach the consumer," says
Ito. "The retail experience is also the key.
Therefore, we have continuously expand-
ed our brand shops and presence at other
retail counters." But this is the game the
Koreans seem to have perfected.
Trade relations
When the Koreans first came to India, the
consumer electronics trade was archaic
and in disarray. All producers had
appointed distributors who then sold to
the dealers. There was thus little direct
contact between the dealer and the com-
pany. No company had a full portfolio of
products, so the dealer had to deal with
several producers and their distributors.
Companies that did have more than one
product had separate divisions for each
line, which often didn't talk to each other.
This only compounded the dealer's
headache. Companies encouraged multi-
ple dealers in every location - the rivalry
kept the trade margins low.
"The first thing we did," says Zutshi,
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"was that we cut out the distributor." This,
at one stroke, improved the profit margins
of the dealers. More important, it
improved their bankability. And dealers,
who were reluctant to invest at the behest
of the distributors, began to jazz up their
showrooms. Of course, they began to
push the Samsung brand with gusto,
though its price tags were higher than
those of Indian brands.
LG too took a new approach. Instead of
going to all, it identified the best dealer in
every locality, the one with maximum
footfalls. It made sure that the dealer did
not face competition from others in the
vicinity. As a result, the dealer, who earli-
er got no more than 5 to 6 per cent com-
mission on sale, now began to get as much
as 12 per cent. This was unprecedented in
the history of Indian consumer electron-
ics. The goodwill helped LG and
Samsung expand quickly to the heart-
land. And that was the key to its success.
Ever since, dealership for a Korean brand
has been more profitable than others.
This is a point even rivals do not dis-
pute. Onida Vice-president (sales, service
and marketing) Sriram K says that the
Koreans invested upfront and got the
rewards later. "At one point, LG was even
known as a credit brand because of how
flexible it had become in trade circles,"
says he. "It realised that doing business in
India needed flexibility and therefore
extended credit to dealers unlike a lot of
other multinationals. Now that it has
strong relations with the trade, it has
tightened the terms. But the initial flexi-
bility helped it garner volumes." That's
the learning.
Additional contribution with
Amit Ranjan Rai & Sayantani Kar
45

INDOVATION!
India is emerging as a source of best practices
in management and strategy Kanika Datta
W
hen Renault India's
head of marketing,
Gerald Porcario, com-
pleted his three-year
stint in India a couple
of weeks ago, he did not get the usual
posting back to Paris or some Euro-zone
market. Instead, he's headed for another
non-European developing country on
the specific understanding that he
leverages the learnings from the "super-
complexities" of the Indian market in
his new bailiwick.
Over 2004 and 2005, Pune-based
Bharat Forge, one of the India's largest
producers and exporters of automobile
components, acquired companies in
such bastions of sophisticated engi-
neering as Germany, Sweden, and the
United States. It might have been
expected that the Indian unit would
draw on manufacturing knowhow from
the overseas companies it acquired and
not vice versa. In Bharat Forge's case,
however, it was a maintenance manage-
ment practice developed in India that
was implemented in its overseas units.
Till recently, the flow of manage-
ment and strategy knowhow was one-
way; it was India that absorbed busi-
ness models, technology and manage-
ment systems from foreign corporations
and institutions. As India Inc raced to
globalise and global companies sought
to exploit the country's low-cost talent
pool, such industrialised-economy
concepts as Kaizen, The Toyota Way,
Six Sigma and so on gained currency.
Today, India is no longer just a desti-
nation for manufacturing, services and
research in which corporations lever
lower cost into a competitive advantage
- it is also gaining traction as a source of
best practices in management and strat-
egy.
Ironically, this strength flows from
the complexities of doing business in
India, both in terms of the regulatory
environment and scarce resources.
"The market in India is very fast-moving
and not particularly stable; so you need
a fast and flexible approach to manage-
ment, and Indians are used to dealing
with ambiguities," says Arindam
Bhattacharya, managing director, The
Boston Consulting Group (BCG), and
Business Standard
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co-author of the book Globality:
Competing with Everyone from
Everywhere for Everything.
Dealing with ambiguity
A case in point is the problems with the
Logan, developed and produced by a
51:49 per cent joint venture between
Mahindra & Mahindra (M&M) and
Renault. When it was launched in 2007,
the Logan was positioned as a low-cost
mid-sized car that was expected to sell
about 2,500 units a month. By October
2009, it was selling less than 500 a
month. As executives in Renault, which
exited the joint venture earlier this year,
admitted, the principal problem was
pricing.
One, the Logan's price was scarcely
lower than competing products like the
Tata Indigo, Maruti Swift Dzire or Ford
Ikon because of the relatively high
import content. Two, the Logan suffered
when the government introduced a
dual excise duty structure soon after the
car was launched. Cars up to 4 metres
long attracted a 12 per cent duty; those
that were longer attracted 24 per cent
(the rates have since changed to 10 and
22 per cent).
The obvious solution was to reduce
the wheel base to below 4 metres to take
advantage of the lower duty, but as
Sylvain Bilaine, then country head and
managing director of Renault India,
admits, the French car-maker "was not
capable of fast decision-making". In
contrast, Tata Motors was able to dis-
play the kind of rapid and adaptable
approach that most Indian corporations
take for granted and reduced the length
of the Indigo to benefit from the duty
differential.
Bilaine, who spent about a quarter-
century in the automobile business, has
been struck by Indian management's
flexible response to dynamic market
conditions. So much so that he is par-
laying the lessons he learnt in his five
years of association with India via SyB
Consulting, which provides consultan-
cy to companies interested in investing
in India. "M&M taught us to be very
quick in our responses," he says.
He points out that western compa-
nies typically follow strict manufactur-
46

ing practices in order to achieve Six
Sigma standards. Therefore, the pro-
duction and launch schedules tend to
be followed with as much exactitude as
possible. Indian companies, on the oth-
er hand, tend to be less rigid in their
approach, which enables them to react
to developments more quickly.
M&M, for instance, rescheduled the
launch of the Xylo utility vehicle to
accommodate the installation of a dual
air-conditioner once it discovered that
this would have been a critical element
of customer demand.
Likewise, Bilaine says, the speed
with which automobile companies
were able to respond to the credit
crunch after the Lehman Brothers bank-
ruptcy is another key takeaway for glob-
al conglomerates. "The credit market in
Mumbai completely dried up between
October 2008 and March 2009 and
spreads were out of whack," he recalls,
"But companies like M&M and Bajaj
Auto moved really fast to reduce stocks
and align working capital management
- so much so that M&M actually had the
cash to buy Satyam some months later!"
The jugaad advantage
The most noticeable impact of such
flexibility, however, lies in frugal engi-
neering, an approach that is making
India globally unique because it yields
advantages for businesses that tran-
scend just labour costs. Bilaine refers to
it as "Indovation" but prefers the com-
mon Hindi term jugaad which he says is
a striking feature of the Indian business
landscape.
Indian businesses have a way of
making things differently, he says,
maybe because as a poor country India
has had to cope with minimal
resources. For instance, mudguards
made in India can be 75 per cent cheap-
er than anywhere else in the world sim-
ply by using recycled rubber. It is the
same approach that encouraged Indian
car manufacturers like Tata Motors and
M&M to source second-hand assembly
lines from the West and re-configure
them in India for their car projects, a
move that lowered costs by as much as
30 per cent.
Indeed, multinationals are increas-
ingly looking at India as a means of
drawing lessons on resource maximisa-
tion. For instance, Renault-Nissan's first
green-field plant in Chennai spread
over 760 acres and with an eventual
annual capacity of 400,000 cars was
completed in 21 months against an
average time of 36 months for plants of
comparable capacity.
The experience has encouraged the
alliance to examine the kind of "safe
shortcuts" that can deliver a huge leap
forward in terms of time and cost for
future projects, says Ashish Sinha,
Renault India's spokesman. "It's a ques-
tion of solving the cost issue but keep-
ing quality constant," he adds.
Renault-Nissan, a relative latecomer
to India, is trying to derive business
learnings with its multiple alliances:
With Bajaj Auto, to develop a low-cost
car, and Ashok Leyland for light com-
mercial vehicles. This "cross pollina-
tion" of ideas is being extended to the
alliance's design studio in Mumbai
where talent is being hired locally.
The broad idea is to train them in the
Renault philosophy and then give them
a free hand to develop India-driven con-
tent. Together with Renault's Rumanian
unit, the India design studio has been
mandated to develop a concept car that
will be unveiled at a major car
show next year. The specific
brief is for interior colour
and styling. One idea
that has already attract-
ed attention, for
instance, is using
woven fabrics as car
upholstery.
Integrating best
practice
Some of these learnings
may appear basic or low-
tech, but Indian firms are
finding that their unique
approach to lean manufac-
turing may well have
global applicabili-
Business Standard
www.business-standard.com
ty in higher technology as well. Bharat
Forge's maintenance management sys-
tem is a case in point.
Developed over 15 to 18 years in
Bharat Forge's Indian factories, it is an
extremely mechanised process that
focuses on minimising downtime, or
the time scheduled for machine mainte-
nance. Obviously, lower downtime
means higher plant profitability.
Equally, scheduled downtime is prefer-
able to unscheduled downtime caused
by machine failure. The system that
Bharat Forge developed in India and
that was implemented by its best prac-
tices group in plants it acquired over-
seas entailed creating a robust informa-
tion system that anticipates problems
before they occur. "We feed into the
computer, everyday and every hour,
every piece of data that tells you what
you have to do during the manufactur-
ing process, instead of making you deal
with the problem during the down-
time," says Baba N Kalyani, chairman
and managing director, Bharat Forge.
As a result, Bharat Forge plants
worldwide have an average down time
of less than 10 per cent, the norm for
efficient plants worldwide.
The critical point about the Bharat
47
 www.business-standard.com

Forge experience, again, is the flexibility. acquisitions did not result in the usual
Asked about implementing indigenous- top-level exodus that follows most
ly developed technology in overseas M&As. "On the contrary, we ended up
units it has acquired, Kalyani said, retaining people," says Mukundan.
"There's nothing hard and fast about our Importantly, the soft integration
approach." He said the company has allowed the company to move talent
established a "best practices group" that around to exploit its acquired global
comprises two or three people from each skill base. For instance, the operational
of its plants worldwide to focus on head of the Kenya plant had moved
improving all-round performance and from a unit in Wyoming, US, and the
implementing the maintenance manage- CFO of the US operations had previous-
ment system was part of that exercise. ly headed the same function in the UK
business. Regional managers are now
'Soft integration' also responsible for key group customer
Like Bharat Forge, other Indian compa- accounts, an example of how Tata
nies acquiring corporations overseas Chemicals has been able to leverage its
have opted for distinctive organisation- global network to deepen relationships
al structures that enable them to max- with customers.
imise global competitiveness. BCG's To be sure, many of the best prac-
Bhattacharya describes it as "soft inte- tices that have evolved from the exigen-
gration". cies of doing business are scarcely big-
For example, Tata Chemicals ticket in nature - India Inc is yet to
acquired UK-based Brunner Mond deliver a concept equivalent to, say, a
Group and its Kenyan subsidiary, Six Sigma or Toyota's seminal logistics
Magadi Soda Company, in 2006 and system. But as globalisation raises the
US-based soda ash producer General stakes in staying competitive, the coun-
Chemical and Industrial Products try may just emerge as the source of use-
(GCIP) in 2008 to expand its chemicals ful next practice.
business which accounts for roughly
half its sales. Instead of opting for the
"hard integration" process that typically
follows mergers and acquisitions, Tata
Chemicals allowed each entity to retain
its local identity but created a structure
to leverage global strengths.
To coordinate operations across its
four geographies, it put in place a global
advisory council that comprises the
heads of the Indian business, Brunner
Mond, GCIP and Magadi plus the vice-
president, marketing and strategy,
based in India.
Meanwhile, reporting structures
have also been kept flexible. For
instance, the human resource chief of
each organisation reports to an overall
head in India but also to the chief of
each geography. As with Bharat Forge,
this flexibility enables the group to
cherry-pick the best practices from
within the global organisation, explains
R Mukundan, managing director, Tata
Chemicals.
The benefits have accrued in terms
of talent retention and operational
excellence, he adds. For instance, the

Business Standard 48
 www.business-standard.com

BUILDING A VIRTUAL MALL

Buoyed by demand from small towns,Home Shop 18,the 24-hour
shopping channel from Network 18,is eyeing rapid growth.But the
journey so far has been far from smooth Bhupesh Bhandari & Sayantani Kar

I
t accounts for 4.5 per cent of all
digital cameras sold in the coun-
try, and is the largest seller of
stainless steel dinner sets. No
retailer sells more Reebok mer-
chandise than it. Whirlpool has come
out with a new range of refrigerators
especially for it. TV 18 Home Shopping
Network, a joint venture of Network 18
(51 per cent), South Asia Infrastructure
Fund (34 per cent) and GS
Homeshopping of South Korea (15 per
cent), has covered some distance in the
two years that it has been around.
It closed 2009-10 with sales of Rs
330 crore. TV 18 Home Shopping
Network CEO Sundeep Malhotra hopes
to double the number during the cur-
rent year. But is it profitable? Not at the
moment, admits Malhotra. "To make a
business profitable in just two years
would be a mistake. The priority for us
was to put the infrastructure in place.
Second was to build a team that knows
how to do it the right way and third was
to de-risk the concept by getting some
consumer traction. Hopefully, this year
in the third or fourth quarter we will
break even operationally." But there is
value in the company. GS
Homeshopping recently paid $18.5 mil-
lion for 15 per cent in the company,
which values TV 18 Home Shopping

Business Standard 49

Network at around $123 million (Rs 578
crore).
It was a bold gamble for Network 18.
The broadcaster had a pie in news, gen-
eral entertainment and films. But home
shopping was a different ballgame.
Indians have always wanted to touch,
feel and compare the things they want
to buy. Would they order something
they saw on television? The only argu-
ment in favour was the reach of televi-
sion: Malls are there only in about 35
cities of the country, and the internet
population is just 40 million. In con-
trast, there are about 100 million cable
& satellite homes in the country and
another 20 million direct-to-home tele-
vision connections. (The assumptions
weren't wrong: Almost 70 per cent of
buyers on Home Shop 18 are from small
towns where there are no malls and
internet penetration is low.)
Some broadcasters had tried their
hand at something similar through
teleshopping. But it was a low-intensity
operation. The products were restricted
to health, wellness and spirituality. It
was more of a trading operation. There
were no brands, no ownership of con-
sumer fulfillment; the company that
supplied the product would also give an
info-mercial which could be dubbed in
the local language.
What TV 18 Home Shopping
Network has attempted is quite differ-
ent. "It is a virtual mall. It is more about
brands, not magic," says Malhotra. In
simpler terms, it is an alternative distri-
bution platform. The only expertise of
Network 18 that could be leveraged was
programming for the channel and its
distribution. It requires a call centre to
interact with the buyers, a full-fledged
merchandise team, and a well-oiled
logistics network to reach the product
intact and in time to the buyers. The
problem was that this had not been
attempted before in India.
Consequently, there was no business
model to replicate. Malhotra and his
team had to learn on the job.
Early lessons
Home Shop 18 started with Ferns &
Petals. The flower retailer was told that
it will be on national television for free;
all it had to do was help deliver its prod-
ucts on time. A 15-second commercial
was made, and a toll-free number was
given to viewers. A call centre with 18
seats was taken on rent in Okhla. The
commercial was aired on the Network
18 channels. The very first day, there
were 250 calls. Within a week, it had
reached 500. But the call centre opera-
tions went haywire. The flowers
reached late, often to the wrong
address. There was total chaos.
Malhotra had learnt his first lesson: If
the business has to run smoothly, he
will need his own call centre.
TV 18 Home Shopping Network
thus set up its own call centre in Noida,
which is 450-strong now. It handles up
to 20,000 calls in a day; Malhotra
expects the traffic to double by Diwali.
In the beginning, not more than 5 per
cent of the calls got converted into pur-
chases; the ratio is now as high as 30 to
35 per cent. The average talk time two
years ago was 14 minutes; it is now
down to 7 minutes and 30 seconds.
This, says Malhotra, means that buyers
require less convincing now. This has
improved the efficiency of the team and
pulled down his costs. In the last two
years, the average size of purchase has
improved from Rs 650 to Rs 2,650. "The
average ticket on the internet for e-com-
merce is Rs 400. Our numbers are much
higher. It's about confidence and trust,"
says Malhotra.
Still, 22 to 23 per cent of the orders
get returned (most buyers prefer to pay
on delivery because they either don't
possess a credit card or are wary of giv-
ing its details to a call centre); when
Home Shop 18 started, it was as high as
60 per cent. Therefore, for bulkier prod-
ucts which are difficult to ferry, the
company takes the money in advance
from the buyers.
Rich customer database
Of course, the call centre has given the
company a rich database on 2 million
customers: Where they stay, who they
are, what do they buy, at what time do
they watch television and so on. This
opens up huge possibilities for
upselling. Malhotra says that already 7
per cent of his turnover comes from
Business Standard
www.business-standard.com
upselling - the call centre calls up con-
sumers and recommends products on
the basis of their past purchases. And
the upside could be huge. In the works
is a loyalty programme for buyers,
which will be driven through coupons,
redemption points and so on. Sixteen
per cent of the customers make repeat
purchases.
The next step was to get the right
brands on board. The proposition to
brands was strong: Home Shop 18
could help a lesser-known, foreign or
local, brand go on national television
for free. It could also help the brand
reach 3,000 cities and towns in the
country at one go. And this was the only
medium which allows the product to be
demonstrated. All of this can otherwise
suck a lot of money and time. Malhotra
and his team told these brands that
what can otherwise take up to five years
will happen in a jiffy if they sign up
with Home Shop 18. Good logic but
nobody was convinced.
"When we started going from brand
to brand, everybody was sceptical that
the image of his brand will get eroded.
Such was the legacy of teleshopping.
They told us that we will undercut their
dealers who will be upset," says
Malhotra. "The first brand we got was
Ceasefire because nobody else was
ready to stock it and it had lost its distri-
bution footprint; but it had recall and
was a good product. Second was
Vespro, a camera brand based out of
Mumbai. It sold only through internet
and catalogues and used to do sales of
Rs 4.5 crore per annum. It now does Rs
40 crore through Home Shop 18."
Today, Home Shop 18 sells 480
brands and 23,000 products. Before a
brand joins the bandwagon, there is no
way to tell whether it will sell or not - it
is a risk the company has to take. "We
are going to do lingerie very soon; we
don't know if it will succeed," says
Malhotra. Still, 45 per cent of the sale
on Home Shop 18 is jewelry, appliances
and kitchenware.
This is buying without touch and
feel. There are only two triggers that
will compel an impulse purchase: One,
the product is unique and the viewer
doesn't know where to find it (because
50

it may not be widely distributed), and
two, the value proposition is very
strong. Does it mean lower prices? "Not
necessarily," says Malhotra, "it could
also mean offers. Not every product can
be discounted, not every brand wants to
be discounted." This suits brands fine
because they are able to cut out whole-
saler and retailer margins. The selling
expenses are lower, and that money can
be ploughed back into combo offers.
To ensure delivery on time, TV 18
Home Shopping Network has integrat-
ed its information technology system
with those of all its vendors. Every
order moves electronically to the ven-
dor as well as the designated courier
company. It collects the merchandise,
delivers it to the buyer and transmits
the money to TV 18 Home Shopping
Network.
Inefficient system
Of course, this system of money collec-
tion is inefficient. It can take up to a
week for the money to reach TV 18
Home Shopping Network which then
needs to pay the vendor. To cut this
cycle short, it has piloted a project with
ICICI Bank and DHL where the courier
goes to the buyer with a swipe machine
for credit cards. But it is not certain how
quickly and to what extent this can be
upscaled - each of these machines costs
Rs 14,000. Meanwhile, the company is
toying with the idea of setting up its
own warehouses across the country. It
will help shorten delivery time in cate-
gories like jewelry (it sells jewelry
worth Rs 5 crore every month). These
warehouses will also come in handy
once TV 18 Home Shopping Network
decides to sell private labels in the
future.
Are buyers happy? Malhotra says he
has hired an agency to measure con-
sumer satisfaction and fulfillment.
What about the brands? "We did one
pilot a few months back with
HomeShop18 and were pleasantly sur-
prised by the response in both large and
small markets. This medium is increas-
ingly getting used by customers who
can't come to our stores for geographical
reasons or who want to buy products
that can be bought with just a demo
www.business-standard.com
rather than touch and feel," says Future capita income). This would be 50 mil-
Group Director (food strategy) Damodar lion households." Joshi, in fact, wants to
Mall. soon sell cars on television. It has, after
But not all TV 18 Home Shopping all, been done successfully in China.
Network products are on television. At least three other groups are
Those which are not on television can known to be toying with the idea of
feel shortchanged. There is limited home shopping. "We want to see how to
bandwidth, and each product has to be sell on the three screens: The mobile
sold for half an hour, argues Malhotra. phone, computer and television.
Of the 23,000 products, maybe about Consumers spend a lot of time there,"
1,000 to 1,500 have been on television, says Mall of Future Group. Malhotra
the rest are on catalogue or net. (The learnt from trial and error. Mall and oth-
internet could be a route for the product ers will know what pitfalls to avoid.
to come on television.) "Products need
to be researched, and each feature has
to be converted into a benefit. We have
to marry that with consumer need.
Also, we need to get the call centre
trained," says Malhotra. On average,
Home Shop 18 puts 15 to 20 products
on air. How are these products selected?
"What matters is sale per minute and
margin per minute. That is what the
core team monitors - what to show on
air. The scheduling has to be worked
around it," says Malhotra.
All that is fine, but how does
Malhotra get viewers to his channel?
Home-shopping, after all is not appoint-
ment viewership; it is snacking in
between channels. If it is an interesting
product, the viewer will hang around.
"It is difficult," says Malhotra. "So far,
our priority has not been to force people
to watch." Home Shop 18 is in 30 mil-
lion cable & satellite homes in the coun-
try. It is not yet present on the direct-to-
home network.
If a new business model has run suc-
cessfully, can rivals be far behind? Star
CJ, a joint venture between the Star
Group and CJ O'Shopping of South
Korea, has started with six hours on Star
Utsav for now. It awaits the nod for a 24-
hour channel. "Television viewing is far
from saturated. In India, we say there is
130 to140 minutes of viewing per capita
per day, while in the US it is 300 per
capita per day. So, consumers have to
get used to the idea of doing more with
the television," says Star CJ Network
CEO Paritosh Joshi. "The basic trigger
(for home-shopping) is the growth in
discretionary income. About 20 per
cent of India's population has sizeable
discretionary income (twice the per
Business Standard 51

A FRESH COAT
FOR DULUX
Paints giantAkzoNobel hopes to strengthen its
Dulux brand in India through innovations and
by expanding reach and capacity.A new paint
variant which brings down the
temperature by 5 degrees is a case in point
Sayantani Kar
A
couple is busy trying out vari-
ous contraptions to cool their
house down, while a neigh-
bour looks on. When asked
what he does to keep his house cool, he
mentions that his paint does it all. It
makes the couple look silly, sweating it
out with myriad ways when just paint-
ing the exterior of their house would
have done.
AkzoNobel India, the advertiser,
claims that the latest variant of its
Dulux WeatherShield, called
SunProtect, brings down the tempera-
ture of walls by 5 degrees by reflecting
the infra-red rays of the sun. This, of
course, does not mean that you could
do away with your air-conditioners or
coolers since there are other factors
which go on to determine the tempera-
ture of the rooms. But this is a new USP
that AkzoNobel wants to create for its
brand. The timing, of course, is perfect.
The summer is at its peak; large parts of
the country have reported all-time high
temperatures.
The more the temperature outside,
the more marked the temperature con-
trol of the walls painted with Dulux
WeatherShield SunProtect. But what
will happen in winter? Will it bring
down the mercury by 5 degrees when
the nights are cold? The company says
this property won't be at work during
winter, though the paint will retain oth-
er qualities such as waterproofing.
Directed by filmmaker Rajiv Menon,
the TVC was developed by BBDO. Ajai
Jhala, the CEO of BBDO, says, "We had a
tangible benefit to work on - that of the
technological breakthrough. So the ad
uses simple observational insight of
how people go to great lengths to make
their homes cooler. We wanted to tell
them how this functional paint could
well be a modern way of doing so, elimi-
nating all the other methods." Apart
from television, a campaign on radio
has also been launched. To drive the
message home, Dulux plans to carry out
activation campaigns where consumers
can compare the difference in tempera-
tures of surfaces with and without the
paint.
The product is a result of the tech-
nology brought in by AkzoNobel. The
Dutch paints giant had bought over ICI
Dulux in 2008. AkzoNobel's head of
marketing, Hemant Somani, says, "The
product, which was a result of our
Business Standard
www.business-standard.com
research, will now be rolled out into
other South-East Asian markets as well.
It was developed especially for tropical
countries such as India." Technology
and positioning are not the only
enabling results of the AkzoNobel
takeover. Somani points out that effi-
ciency in global sourcing (raw material
prices are always a bone of contention
in the low-margin, high-volume decora-
tive paint market) has been brought in
too. Tough market
The decorative paints market in the
country, estimated at Rs 10,000-11,000
crore crore per annum, is tough. Asian
Paints, which leads the pack with over
50 per cent share of this market, is wide-
ly distributed and enjoys great brand
equity. It has an amazing variety of pack
sizes and was the first to launch tinting
52

machines that cut down the need
to stock different shades of
paints. A dominating mar-
ket share helps in many
ways. An industry observer
says that Asian Paints has a
competitive ratio of two (its mar-
ket share, in other words, is more
than twice its nearest rival), which
gives it a huge advantage over others in
purchase of raw material as well as dis-
tribution. "It can afford to participate in
segments where the profit margins are
not so good," the analyst points out. "It
also uses it to leverage its position with
the dealers."
Asian Paints is followed by Kansai
Nerolac and Berger Paints which have
market shares of 17 per cent each.
AkzoNobel, the world's largest paint
and coating company, is fourth in the
pecking order with 10 per cent. But the
market is growing fast once again. The
housing sector has picked up after a lull
of two to three years and consequently
the demand for paints is strong.
Analysts say the gap between repaint-
ing (the biggest sales generator for deco-
rative paints in India) too has dropped
from the earlier five to seven years.
Paint makers like AkzoNobel need to
innovate to catch the market in its
upswing.
AkzoNobel has begun by consolidat-
ing the various brands in its portfolio
under ICI Dulux. It would look to gener-
ate 80 per cent of the business from two
brands, one of which is Dulux and the
other is yet to be identified. AkzoNobel
India will also expand capacity to dou-
ble the current 70 million litres that it
produces every year (the industry
churns out 940 million litres). This will
require investments of up to Rs 100
crore, which will enable the company
to source products from India to sell in
neighbouring markets. Expansion
plans
Distribution too would see a boost of
about 10 per cent every year. Currently,
AkzoNobel products are present in
about 8,000 outlets. But it will need to
grow its network in smaller cities and
towns. Asian Paints, after all, had
weathered the last slowdown in real
estate because of its large presence in
www.business-standard.com
analysts call a lack
of focus. Even now, as
AkzoNobel ups the ante,
other players have lined up
expansion plans. The market too
is changing with an increasing need
to cater to smaller towns which
have been upgrading to paint.
Distribution and product mixes for
not only large cities but smaller ones
too have to be figured out. AkzoNobel
has to get its act together in a market
that it wants to make its hub for South
Asia.
small-town India. While demand from
large cities had been affected, there was
no let up in demand from smaller
towns. And this kept the company
going.
AkzoNobel also plans to focus on
professionals who influence the buyer,
such as interior decorators and
painters. "Earlier, we spoke only to the
home-owners. But now, we have
engagement programmes for long-term
partnerships with professionals as
well," says Somani. While Asian Paints
has led retail innovation with its
ColourWorlds and studios, AkzoNobel
is looking to open more than 100 Dulux
Decorative centres or paint studios by
the next quarter to create a similar
ambience.
ICI Dulux had led the premium
emulsion paint segment with its Velvet
Touch. It was eventually usurped by
Asian Paints' Royale because of what
Business Standard 53

SOCIAL MEDIA ALTERING
ROLE OF BRAND MANAGERS
BYRAVEE TYER
D
an Okpara had an urgent question
for Coca Cola. He had consumed
some Coca Cola but was keen to
know the sugar content level in the bever-
age. He requested the company for an
honest answer. Less than 45 minutes lat-
er, Coca Cola responded with the specific
measurements of sugar in the drink.
Okpara was relieved.
His is simply a case in point. Social
networking sites like Twitter, Facebook
and Orkut are being increasingly used for
promotional activities that engage audi-
ences for a certain activity in an effort to
create a buzz and get feedback from the
community. However, it is also being
used by disgruntled customers to air their
greviances, drastically altering the tradi-
tional role of brand managers.
"Today's brand manager's job is like
that of an air controller. He has to handle
above the line, below the line as well as
social media activities to navigate a
brand. As a result, today a brand manager
is far more important in an organisation,"
explains Hareesh Tibrewala, Joint CEO of
Social Wavelength - a social media man-
agement firm. "Now a customer service
issue is a branding issue," he adds.
Some companies have understood
this trend well. Titan's Fastrack, for
instance, now has a separate two-member
digital brand team. "Two years back, we
hired one person purely for digital mar-
keting. We knew this would require dif-
ferent skill sets since communication and
instinct are a very important part of this
brand manager's role," says Simeran
Bhasin, Marketing head, Fastrack and
new brands.
Moreover, Bhasin says Fastrack's fan
page has grown from just 30,000 in
January to about 2,10,000 members at
present. "It's not a job that needs one hour
a day, we need them to track online trends
and we need people who are on the ball."
FMCG major Marico, too, uses social
media sites to its advantage, particularly
for its Safola brand. "The point is to inter-
act with the consumer and make him a
part of the brand and that's tricky busi-
ness," says Sameer Satpathy, head of
Marketing for Marico.
More importantly, though, has been
the learnings the company has got from
this. "We've picked up little cues particu-
larly when it comes to communication.
For instance, one particular ad featured
this lady who was much-talked about on
Twitter, and we realised people reacted
positively to that particular protagonist.
Similarly for Arise, there was a gap in
communication that we picked up from
there and we later plugged the informa-
tion in," he adds.
But not all companies understand
social media well. According to
Tibrewala, companies in the Cola and
entertainment sectors are doing a com-
mendable job in this space, while manu-
facturing firms are lagging. "Perhaps it's
because these companies see this is a
business opportunity and monetise the
social media platform, this eventually
convert into profits," he points out.
Experts feel brand managers in India
are not adept at handling negative com-
ments and feedback. Many of them are
not sure how to handle negative feedback.
Bhasin of Titan concurs: "It's impor-
tant to have a quick response no matter
what." Still, there are exceptions the team
makes. For example, if a customer is mere-
ly making a passive comment on the
brand's communication, brand managers
are likely to overlook it, on the other hand
if it is a product or service complaint, the
response is immediate.
Business Standard
www.business-standard.com
Others like Cadbury India, mean-
while, have yet to make their presence felt
online.
According to a company executive,
the confectioner is more selective about
what it does online. At present, it uses
social media for its premium products
like Bournville and Cadbury Dairy Milk
Silk where it has about 12,000 and 10,000
members respectively, and for the rest it
still largely uses traditional media like
television and radio. Interestingly
though, its digital media happens to be its
fastest growing in terms of expenditure.
Likewise for telecommunication ser-
vice provider Idea Cellular. Says Chief
Marketing Officer Pradeep Shrivastava,
"As a marketer our model is to reach out to
as many people as we can in a cost effec-
tive way. That happens through TV, radio,
on-ground, and it is not feasible for us to
turn that model upside down." Having
said that, he adds that he and his brand
team use social media for their larger
theme campaigns, "Does it deliver a good
and strong message - yes. Will it replace
mass media? No."
54

SEEKING TO SCORE A GOAL
Cartoon Network, 9XM, BBC and AXN are among those channels
gearing up to cash-in on the FIFA soccer mania SWARUP CHAKRABORTY
A
s the world gears up for
kicks and head butts
between players of 32
nations in South Africa,
television (TV) channels
too are working to increase their eyeballs
and brand image by piggybacking on the
buzz surrounding the FIFA World Cup
which begins on June 11.
Cricket may command the highest
number of viewers but the upcoming
FIFA World Cup, too, is expected to have
over 110 million viewers in India —
almost double from 2006 when the FIFA
World Cup generated a cumulative reach
of 55-60 million viewers.
While advertisers in India are expect-
ed to spend around Rs 180 crore during
the telecast of the 55 matches on ESPN
Star Sports, some other channels — in
the music, news and animation genres
— are working on programming content
around football. Channels like Cartoon
Network, music channel 9XM and news
network BBC have planned to cash-in on
the soccer fever by on-air, on-ground and
online activities.
Cartoon Network, for instance, has
started a new digital initiative, Toon
Football, where users can make their
own teams and play virtual soccer. “We
started this initiative in March this year
as sports was a new genre for us. We feel
that it was an opportune time for toon-
football.com as we are targeting a user
base of half a million,” says Benjamin
Grubbs, regional director, Turner
Interactive.
The channel has monetised the
online venture as consumers can buy
coins for upgrading to the next level of
the game. A fee is levied on the coins
which consumers can pay for through
their credit cards. “The number of our
Business Standard
www.business-standard.com
loyal consumers has already crossed
2,50,000,” says Grubbs.
Music channel 9XM will have on-air
content and is slated to do on-ground
activities to create further awareness and
brand building. “We will have on-
ground activities in multiple cities like
Mumbai, Delhi and Kolkata where 9XM
goodies will be given to soccer fans. We
are going to spend a substantial amount
of money on these activities,” says Amar
Tidke, head of programming, 9XM.
“In our on-air strategy, the channel
will wear a FIFA look where the 9XM
dudes — Chhote, Bade, Betel Nuts and
Bheegi Billi — will wear soccer T-shirts.
We are also exploring the possibility of
developing a soccer game online,” adds
Tidke.
Leading news broadcaster BBC has
also lined up content surrounding the
soccer mania. Over the course of the
55
 www.business-standard.com

to increase the number of eyeballs, ESPN

tournament, BBC World
Service will have a special
daily multimedia show
which will let fans air their
views. BBC.com/worldcup will
be offering video and interactive
content online.
In the IT space, Satyam Computer
Services Limited (rebranded as
Mahindra Satyam) expects to garner close
to $20 million (little over Rs 90 crore)
from the game. The Hyderabad-head-
quartered IT outsourcing provider is the
first Indian company to sign with FIFA, as
a sponsor and official IT provider for the
2010 and 2014 editions of the game. As
part of the deal, the company has devel-
oped an event management solutions sys-
tem which will enrich the experience of
all fans arriving in the stadia to watch the
z Over 110 million Indians are Star Sports, the official broadcaster of
expected to watch the soccer games FIFA World Cup has already sold 95 per
cent of its advertisement inventory to
z Advertisers in India are expected advertisers such as Vodafone, Airtel
to spend around Rs 180 crore during DTH, Nokia, Samsung and Hero Honda.
According to industry estimates, the
the telecast of the matches
sports broadcast genre is expected to
z FIFA World Cup ratings stand at fetch around Rs 2,500 crore this year
from the Indian Premier League, T20
9.1 — comparable to top-ranking
World Cup, Asia Cup and the upcoming
soaps and cricket one-day matches FIFA World Cup, among other sporting
events.
z 95% advt inventory has been sold
to players like Vodafone, Airtel DTH,
Nokia, Samsung and Hero Honda
matches. The company will be managing
250,000 accreditations and 130,000 vol-
unteers, besides distributing over 3 mil-
lion tickets online.
Soccer viewership has been on the
rise in India. The 2002 FIFA World Cup in
India garnered ratings as high as 9.1 tele-
vision ratings (TVRs) — among males,
15+, Sec A, B & C, Cable and Satellite
households — which is comparable to
top performing soaps and cricket one-day
matches (ODIs). The Euro 2004 contin-
ued the growth and had a cumulative
audience reach of 32.3 million viewers.
As channels employ these strategies

KICKING HARD
9XM: The music channel hopes its on-air ‘9XM dudes’ will be soaked in FIFA fer-
vour which might find resonance with audiences thereby strengthening the
brand

BBC: The news network will not only have content on FIFA but also showcase
highlights online. It will also have a programme where fans will air their views
about the tournament in a bid to develop better brand association

CARTOON NETWORK: Online game ‘toon football’ is expected to attract newer

audiences even as it increases visibility and brand recognition among gamers
who might not be animation watchers

AXN: It’s the exclusive broadcasting partner of the FIFA World Cup Kick-off
Celebration Concert in India.

The concert will feature musical performances by international artistes like

Alicia Keys, Black Eyed Peas and Shakira.

Business Standard 56

CHEVROLET ALL THE WAY
How General Motors has tried to build the Chevrolet brand in India
Bhupesh Bhandari
S
ometime towards the end of
2011 or the early part of 2012,
General Motors will launch
trucks in India. These will be
small machines meant to ply
inside cities, and will take on Tata Motors'
Ace and Mahindra & Mahindra's Gio. The
architecture of the trucks will be sourced
from SAIC of China, which now holds 50
per cent in General Motors India, but
these will be customised for India inside
the General Motors Technology Centre in
Bangalore. It has been decided that the
trucks will sport the Chevrolet badge on
the grill, that famous bowtie.
Launched in India in 2003, General
Motors seems to think Chevrolet has hit
critical mass in cars and is ready for exten-
sion to trucks. In the first quarter of this
year, research conducted by TNS showed
that Chevrolet's brand recall and percep-
tion have improved in the last seven
years; the recall has done better than the
targets, though the positive opinion has
fallen short of the target (see Chevrolet
Health Check). Some of the shortfall can
be explained by the bankruptcy of its par-
ent in the United States about a year ago.
But Chevrolet in India is not big. It is a
fiercely competitive market, the final
frontier for the car makers of the world.
For the first four months of 2010,
Chevrolet's market share was 4.6 per cent
- small, though double of the 2.2 per cent
in January-April 2009. The target for 2010
was 10 per cent. General Motors India
President & Managing Director Karl Slym
was confident till a year ago that the target
will be met; not any longer. "That target
was set before the bankruptcy in the
United States," says he.
On the positive side, India has become
the fourth-largest Chevrolet market in the
world after the United States, China and
Brazil. (There is one Chevrolet bought
every eight seconds in the world.) Slym is
hopeful of closing this year with sales of
over 135,000 and next year with over
200,000. General Motors, mind you, had
started out in India in 1996 with Opel. It
had launched three models, the Astra,
Corsa and Vectra. In 2003, it switched to
Chevrolet. Apart from these two, General
Motors had other brands like Buick, GMC
and Cadillac also in its stables. But the
way the Indian market was shaping up -
buyers preferring small cars because of
their low cost, fuel efficiency and ease of
parking - the company decided to go
ahead with Chevrolet. There was some
recall for the brand in India; many people
remembered the Chevrolet Impala in old
films. (If General Motors decides to enter
the luxury segment in the future, brands
like Buick and Cadillac will be brought in.
That segment is out of Chevrolet's reach,
though the brand covers 95 per cent of the
price points in the country.)
Chevy or nothing
The problem with the switch to
Chevrolet was that there was confusion in
the mind of the consumers. Was it
General Motors? Or was it Opel? Some
thought it was Chevrolet, and a few
thought it was Daewoo because General
Motors had acquired the passenger car
business of the bankrupt Korean chaebol.
Slym says some even confused it with
General Electric (then led by "Neutron"
Jack Welch)! The first step was to remove
everything from all communication
except Chevrolet. The General Motors
logo was taken off all advertisements; it
was Chevrolet all the way. Business cards
of the sales team sticks to Chevrolet, and
so does the official website.
In 2003, an audit carried out by TNS
showed that people thought General
Motors was a great international compa-
ny with high-quality products and
Chevrolet was a great brand. On the flip
side, there was concern that these cars
would be fuel guzzlers and expensive to
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www.business-standard.com
own. The task for the General Motors
team was cut out. The first priority was to
offer high fuel efficiency in all its cars.
General Motors India Vice-president
(sale, after-sale and marketing) Ankush
Arora claims that three Chevrolet cars
have best-in-class mileage: The Spark
(18.9 km per litre), Beat (18.2 km per litre)
and Tavera (16.4 km per litre). All the oth-
er Chevrolets - the U-VA, Optra, Aveo,
Cruze and Captiva - are in the top 25 per
cent in their respective categories. Similar
claims of fuel efficiency, of course, are
made by rivals including Maruti Suzuki
and Hyundai. There is no end to these
claims and counterclaims.
The second task was to keep the prices
low. This required the company to have a
small car in its portfolio. Chevrolet went
mass in 2007 with the Spark. The job was
not easy. The car had had a bad first
innings when it was launched many
years ago as the Matiz by Daewoo, good
reviews notwithstanding. From 2003 to
2005, General Motors debated whether or
not to acquire the Daewoo factory at
Surajpur near Delhi. It finally decided
against the acquisition. That delayed the
Spark's launch to 2007. It is priced at Rs
2.83 lakh (ex-showroom, New Delhi),
which is higher than the Maruti Suzuki
Alto (STD BSIV; Rs 2.29 lakh), but below
the Hyundai Santro GL (Rs 3.4 lakh). The
Chevrolet small car portfolio got strength-
ened last year when it launched the Beat
for Rs 3.42 lakh.
A car industry veteran says that all
Chevrolet cars for India are designed in
South Korea and not Europe or the United
States, and that's why it's able to keep a lid
on the prices and offer better fuel efficien-
cy. This has also helped it gain a foothold
in the small car segment. Are the low
prices strategic pricing to gain market
share? General Motors has in the last one
year or so invested close to $500 million
(Rs 2,350 crore) in two facilities (one at
57

Talegaon in Maharashtra and another at
Halol in Gujarat); how does it still manage
to write such aggressive price tags? "No
car at the moment," says Slym, "is sold at a
loss."
Last year, when General Motors had
filed for bankruptcy in the United States,
Chevrolet ran the risk of becoming a dis-
counted brand. Left to themselves, the
dealers could have dumped the stock in
the market, just like they sold Daewoo
cars at throwaway prices when the com-
pany went belly up. That would have fin-
ished the brand. But Slym held on to his
prices, deployed his own people at 35 key
dealerships that accounted for 70 per cent
of Chevrolet volumes in the country to tell
buyers that all is well and launched two
new cars: The Beat and Cruze. (There are
now eight Chevrolet cars on the road,
which is second only to Maruti Suzuki's
fleet of 13.) Slym also replaced film star
Saif Ali Khan with himself in the com-
mercials - such was the need to convince
buyers. The trick worked. "It is definitely
not a discounted brand," says Synovate
India Director and Head (qualitative
research) Shravani Sen. "That the compa-
ny continued to invest mattered a lot to
the buyers." Arora gives another interest-
ing piece of information: For every car,
almost 80 per cent of the sales are
bunched at the top end. In other words,
price is not the only consideration for pur-
chase.
There is another way that the compa-
ny has protected the brand image of
Chevrolet: It has not encouraged its use in
the taxi segment. The Tata Indica and
Mahindra Logan know what it means if
the brand gets associated with taxis: The
consumer begins to look down at it. Slym
says there is no cap on sale to fleet owners,
but the company is cautious while selling
to fleet owners. In the works is the CNG
Aveo which will be sold to this segment of
the market. Focus has also been given to
the brand in areas that have been under-
serviced by the large players, like the East.
"Our share there is twice or thrice of our
national share," says Slym. "People there
are more ready to experiment with a new
brand."
Brand promise
The company also realised that apart
www.business-standard.com
from the price of the car, buyers also to 210 in end 2009. Slym plans to end the
spend a lot on service and maintenance. year with 300. "Eighty per cent of them are
Slym has thus devised a scheme where (financially) healthy," says Arora. "The
the company gives free service for three other 20 per cent are new. The gestation
years or 45,000 km, whichever comes ear- for breakeven is 18 to 24 months." In addi-
ly, for the Spark. This includes spares, ser- tion, the company wants to deploy on the
vice, maintenance and labour. It also roads mobile service vans, and set up
guarantees a maximum expenditure on pick-up points for cars ready for service.
service for three years on any car (Aveo: Rivals have taken note of it. "Chevrolet
Rs 15,999, Optra (petrol): Rs 17,999, for is the fifth best-distributed car brand in
example) - anything in excess will be the country after Suzuki, Hyundai, Tata
reimbursed by the company. The amount and Mahindra & Mahindra," says a Honda
was fixed keeping in mind the maximum India executive. Slym is not too unhappy
money that a consumer can spend. with the results: "I wanted people to test-
Naturally, no claim for reimbursement drive our cars before they buy. We are now
has so far come to the company. in the consideration set for most car buy-
Coupled with the low acquisition and ers. That's the job of the brand."
maintenance costs, General Motors has
tried to build the brand promise for
Chevrolet as "more" - a Chevrolet gives
more than rivals. The Cruze thus comes
fitted with cruise control and push-but-
ton start. The Beat, though prices under
Rs 4 lakh, features automatic climate con-
trol, integrated stereo with USB port and
stylised wheels.
One rival says that though there are
eight Chevrolets in the market, four cars
have been discontinued by General
Motors in the last few years: The three
Opels and the Chevrolet Forrester. "This
puts a fear in the mind of somebody who
had bought these cars. It crashes the
resale value of the car. You have lost that
customer forever," says he. One way
General Motors has devised to deal with
the problem is to set up exchange coun-
ters at its dealerships, where these cars
can be sold. At the moment, 41 of its deal-
ers have this facility; the company wants
to raise that number to 100 by the end of
the year.
How much of this has helped the
brand? The perception on the cost of own-
ership of Chevrolet has improved from
negative to neutral in 2010, says Arora.
The task now is to push it to positive terri-
tory. Latest research, again by TNS, shows
that consumers continue to see General
Motors as a great international company
with high-quality products and Chevrolet
as a great brand; but their concern now is
the reach of its service network. To
address this perception, General Motors
has ramped up its network of dealers.
From 85 in end 2007, the number went up
Business Standard 58

TIME TO ZOOP
Titan has re-entered the children's
watch segment. It is the only big
branded player in the largely
unorganised market
BYRAVEE IYER
W
hat's pink or purple, has
summer flowers on it,
and can be worn on
your wrist? It is Titan's
new range of children
watches called Zoop. Titan has re-entered
the children's watch segment which, the
company feels, is 14-million strong.
Eleven years ago, Titan had tested the
waters with a brand called Dash. It was
targeted at children between six and 14
years, and was priced at Rs 250 to Rs 395.
But children didn't warm up to it, and
Dash was withdrawn quietly in 2003.
Titan says the failure had less to do with
the time of the launch than with the price.
"We were unable to get it at the price we
wanted, but it had nothing to do with
demand problems," says Suparna Mitra,
Titan's head of global marketing.
This is a market not many watch mak-
ers have focused on. Branded players are
not aggressive in this space. Timex puts it
down to low margins. "We do have a chil-
dren's range in our portfolio. There's huge
potential in this segment; however, it's a
big challenge for any branded watch com-
pany to venture into it and become a vol-
ume player, while providing a good mix of
quality and relevant pricing," says Timex
Managing Director VD Wadhwa.
Titan had this gap in its portfolio for
seven long years. Swatch does have a chil-
dren's range in its portfolio, but its watch-
es are priced very high. Watch making for
Swiss brands like Swatch is an intrinsic
affair that cannot be outsourced to low-
cost producers in India or China. The
market is dominated by imported stuff
which comes with no guarantees, no
www.business-standard.com
brands. Any watch
that fails has to be
dumped because
there is no way it can
be repaired.
Given the huge
presence of unbranded
watches in this catego-
ry, why is Titan, the
Tata-owned company,
keen to get in? The move is
an offshoot of a project the
company did to assess the
impact of phones on watch sales.
Watch makers, especially those at
the lower end of the market, have
for over a decade tried to grapple
with the problem. The lifestyle cat-
egory, of course, is immune from it.
The results Titan saw were interesting:
While it did not affect demand from those Following that, Titan researched over 200
over the age of 25, those younger than that children across various cities. According
tended to bypass watches and go straight to the study, children consider watches a
to mobile phones. At the same time, every unique product and amongst the top ten
twelfth enquiry at a store was for a child's items they want to own. Some of the other
watch. items that have made it to the list include
trinkets, bags, caps and so on. Further, it
Plug the gap was clear that today's children want
"That's when we realised that as a big something that reflects their personality,
watch maker, and to sustain our market and at the same time gets them attention
share, we have to get into this category," and makes them stand out.
Mitra points out. Shyamala Ramanan, Mitra and her team have tried to use
Titan's marketing manager, adds: "We these lessons for features and designs in
strongly believe that the launch of Zoop their watches. As a result, the girl's watch-
has been a significant move for Titan. es come in candy colours and floral
Brand Titan has already made its place in designs, whereas for boys the watch mak-
the heart of all adults, and Zoop will help er has decided to go with the sailing
us create recall of our brand amongst chil- theme using nautical signs and sail ele-
dren below the age of 12 years." ments. Will it work?
That was nearly two years ago. Brand consutants are bullish about
Business Standard 59

Zoop. Anand Halve, the co-founder of
Chlorophyll Brand and
Communications, feels that while Dash
was slightly ahead of its time, Zoop might
just get it right. Says he, "Today it's unbe-
lievable how much money parents are
willing to spend on their children, while
earlier they'd merely buy something
unbranded and inexpensive. So maybe
it's time for Titan to give it a shot." Further,
he's convinced mobile phones won't
replace watches. "Watches are increasing-
ly morphing into accessories; besides, no
school would allow children in this age
bracket to carry cell phones to class, while
a watch is allowed," Halve adds. Another
brand expert was more cautious saying
that Zoop's success really depends on the
kind of volumes it can get.
Zoop was piloted in six cities back in
2008 and has since rolled out across the
entire nation that culminated in the
recent national launch. With Zoop, Titan
is hoping to sell its wares to a younger
audience aged between 5 and10, and at
price points of Rs 350 to Rs 900. However,
given that unbranded watches can cost as
low as Rs 40, how does Titan intend to
compete with them?
Play it cool
To tackle that, the company wants to cre-
ate brand pull. It has come out with a tele-
vision campaign which shows a young
boy who wants to be cool; and for that he
needs a cool watch. He makes up a story
and manages to take his brother's watch.
The ad will air for six weeks on all chil-
dren's' channels, as well as Discovery,
Animal Planet and some general enter-
tainment channels when children's
shows are on air. On the positioning of 'Be
cool… be more', "Every Zoop watch is
designed keeping in mind the playful-
ness, vivid imagination and the cool atti-
tude that today's children exhibit," claims
Ramanan.
In addition to that, there will be a print
campaign and a host of contests for chil-
dren. Titan is also working on a digital ini-
tiative to promote Zoop. It is chalking out
a school contact programme, though
Titan executives stop short of divulging
the details. All this hasn't come cheap for
Titan which has spent as much as Rs 2
crore so far on marketing the brand. More
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Swiss-made Xylys for the connoisseur
and Titan Edge (touted as the world's
slimmest watch) for the trendy. Zoop, tar-
geted at children, plugs the one gap that
remained in its portfolio. It also sells in its
stores foreign brands like Hugo Boss and
Tommy Hilfiger under licence agree-
ments.
Today, Titan has its finger in every pie.
Started more than two decades ago, it
sells watches, jewelry (under Tanishq
brand), eyewear (Fastrack) and eye care
products (Titan Eye+). It initially sold
through dealers. A few years on, it
realised that it needed to be in regular
touch with customers and thus decided to
open its own stores and franchise. Zoop
will be sold in 1,200 multi-brand outlets
and about 298 World of Titan stores across
140 cities and towns in India.
could come in the future. "We intend to
aggressively push this brand," says
Ramanan.
An equally important point for the
company was the name. Titan has always
been known for catchy, quirky names like
Nebula, Raga, Regalia, Octane and Xylys.
This time too, it was keen to have a name
that stands out. For that it hired Ormax, a
research outfit, which has a company
called Cognito that generates and
researches names for brands. According
to Titan executives, getting the name right
included three things: Understand the
brand idea, shortlist from a long queue of
names, and research children. "We had to
see how badly a name could be misspelt,
whether or not it had a meaning in other
languages, and children were even asked
to mispronounce deliberately," explains
Mitra. Consequently, Zoop, a phonetic
sound, emerged the winner.
Titan is India' largest watch brand - it
has 60 per cent of the organised market for
watches. It has segmented the market
finely: Sonata for the masses, Fastrack for
the youth, Raga for women, Nebula
(made in 18-carat gold) for the affluent,
Business Standard 60
 www.business-standard.com

PEPSODENT FIGHTS ON
Hindustan Unilever has rolled out a new campaign for its flagship
toothpaste, this time with Shah Rukh Khan, as it takes on the market
leader, Colgate BYRAVEE IYER

S
et inside a bathroom, the ad
opens when a young boy asks
his father, played by super-
star Shah Rukh Khan, why he
has to brush his teeth every-
day. The father slips into a character,
puts on a gruff voice and explains to his
son that if he doesn’t brush his teeth,
germs will attack it and his white teeth
will turn black.
Making gestures with his hands, the
father says that using Pepsodent just for
two minutes will kill germs, which is
why germs are scared of the toothpaste.
Simultaneous, he tries to scare his son
with a devious laugh. But when his wife
enters the bathroom with her hair on
her face, the plot falls flat and it is the
father who ends up getting a fright. We
hear SRK’s voiceover: 95 per cent germ-
free in two minutes — Pepsodent
Germicheck+. tle ahead of its time because it was posi- from germs; it could fight germs for
That’s a lengthy explanation for a tioned as a mouth freshener. “With hours after brushing. By 2000,
35-second ad, but for Pepsodent this is Close Up on a weak wicket, the compa- Hindustan Unilever had changed the
vital. The message and the brand posi- ny needed a brand like Pepsodent brand communication. It no longer cen-
tioning are very clear: Pepsodent helps which targeted children,” says one tred around the fight with germs;
fight germs, and children should know brand expert. instead, it described the benefits of
which toothpaste to use. The dash of The pester power of children is well- using Pepsodent. The move didn’t work
humour makes the serious message acknowledged by marketers. and soon the original communication
lighthearted. Pepsodent, after all, holds Companies across categories like was brought back. By then, Pepsodent
the key in Hindustan Unilever’s fight healthcare, personal care, newspapers had tried every trick in the book. So
for a larger share of the Rs 3,000-crore and even computers have realised that much so, Hindustan Unilever aggres-
per annum toothpaste market. While the best way to enter homes is through sively marketed it in the rural market at
Colgate-Palmolive leads the pack with children. Also, it is the best way to hook Rs 10 for a 40-gram pack, though it was
its brand, Colgate, with a 52.5 per cent a customer early in his life. originally positioned as a premium
share, Hindustan Unilever (Pepsodent Talking to children was fine, but brand. (Traditionally, Pepsodent has
and Close Up) is a distant second with Pepsodent needed a differentiator. The occupied premium price points of Rs 30
22 per cent. task was far from easy. Colgate is almost and Rs 54.)
A tooth and nail fight a generic brand. People in India still say Pepsodent had to do something real-
Hindustan Unilever had launched Colgate when they want to say tooth- ly big to make its mark. Research sug-
Pepsodent in 1993 in an attempt to chal- paste. The company had cleverly posi- gested that mothers worry about what
lenge Colgate. Hindustan Unilever, the tioned itself as the toothpaste which their kids eat, especially when they are
country’s largest personal care compa- helps fight tooth decay. away from them, and its impact on their
ny, had first come out with Close Up to So, Hindustan Unilever positioned dental health. Using that insight,
take on Colgate. Experts say it was a lit- Pepsodent as long-lasting protection Pepsodent launched the ‘Dishoom

Business Standard 61
 www.business-standard.com

Dishoom’ ad that said: Let Pepsodent Sundaram feels he has a winner on his
fight germs for you. Thus, the new cam- hands. “SRK was the obvious choice.
paign showed a young boy looking at We have always seen him take out time
sweets in a store, wondering which for his kids; besides, he’s got a lot of
ones to pick. His mother sees him on the credibility. That makes him a natural fit
closed-circuit television and, instead of and consumers believe in him.” But
getting worked up, calmly picks up brand consultants aren’t so sure.
Pepsodent. “Whether SRK is the right choice, I
Finally, Hindustan Unilever had hit don’t know, frankly I liked the position-
bull’s eye. Pepsodent’s market share ing of the mother,” says one. Of course,
went up from 10.96 per cent to 13.81 SRK has endorsed other Hindustan
per cent in a matter of eight months. Unilever brands like Lux in the past. For
“Dishoom Dishoom was a very power- the first time, a man was shown using
ful idea with which Pepsodent really the soap which had always taken top-
managed to take on Colgate which notch Bollywood heroines as its brand
doubtless straddles the entire category,” ambassador.
says a brand consultant. Next, The ad broke on May 19 and will air
Hindustan Unilever came out with ads across all channels. For now it is just a
like Bachche jhoot nahin bolte (kids TVC, but Hindustan Unilever is work-
don’t tell lies) where a non-Pepsodent ing on other activities around the cam-
user is forced to lie to his mother about paign as well.
his eating habits. The ad didn’t strike
the same chord with people. As a result,
Hindustan Unilever’s market share has
slipped 25 percentage points in the last
one year. Aware of that, the company
knew that something needed to be
done.
Fresh take
Having spoken to customers exten-
sively, the company backtracked on its
previous stand of using the mother and
brought in the father. “Everyone usually
associates the mother with dental care,
but we wanted to show the role of the
father in grooming his kid,” says
Srinandan Sundaram, Hindustan
Unilever’s head for oral care.
Asked why the brand promise has
been changed so frequently, Sundaram
says: “We are not changing our position-
ing, we have always maintained that we
are a germ-fighting brand; we’re only
executing it differently.”
Considering that, the brief given to
creative agency Lowe Lintas was to
explore the father’s role while driving
home the key message. Lintas’ work
was made easier as the ad is a replica of
Unilever’s global campaign for
Pepsodent. The task was to find the
right person to play the father’s role; the
ad would otherwise fail to register any
impact on viewers.
The choice was SRK, the most pow-
erful communicator in India today.

Business Standard 62

PRICKLY COMPETITION
TO BEAT THE HEAT
I
t ranks a close second to heritage
brand Nycil in the prickly heat
powder market but Ahmedabad-
based Paras Pharmaceuticals
believes its 'stay cool, think cool'
campaign for 'Dermicool' will give it the
desired edge.
“We have allocated 15 per cent of our
sales for advertising and brand promo-
tion. While our advertising budget has
been similar to last year, our sales are
expected to increase 40 per cent over last
year due to the increased heat this sum-
mer. We know that in summers, people
lose their cool easily. Through this cam-
paign, we want to tell people they can be
cool mentally when they are physically
cool," says S Raghunandan. managing
director and chief executive officer,
Paras Pharma.
The company has also launched
three new variants - 'cucumber slice', 'cit-
rus blast' and 'watermelon'. “Dermicool
is both, a prickly heat powder and cool-
ing talc. We do not look at Ponds or the
like as competition as we combine prick-
ly heat and cooling under Dermicool. For
us, brands like Boroplus, Navratna and
Nycil are the competitors. In fact, we are
second yet very close to Nycil in the
prickly heat powder market segment.
And I can say confidently that we are
growing faster than competition as just
five years ago, we were half of Nycil and
today we are 75 per cent of Nycil," says
Raghunandan.
Dermicool enjoys a 30 per cent mar-
ket share in the Rs 200 crore prickly heat
and skin care segment. Nycil, from
Heinz India has a 37 per cent share while
Emami's Boroplus Ice accounts for 20-25
per cent of the market.
Paras Pharmaceuticals, which was a
Chitra Unnithan
sponsor in the recently-concluded ICC
World Cup Twenty20, has also launched
Dermicool in 50 gm packs available at Rs
20 for rural markets. The strategy
appears to have worked with the brand
contributing almost 15 per cent to its
sales this year. The original 'thanda-
thanda, cool-cool' Dermicool brand is
expecting a sales target of Rs 75 crore this
year.
Nycil, however, is not sitting tight.
Says Sundip Shah, Vice President -
Marketing & Business Development,
Heinz India Private Limited: “Nycil,
with more than 40 years of legacy, is a
market leader with a 37 per cent market
share." The company recently launched
Nycil De-o Fresh Skin Care Talc, extend-
ing the brand equity of Nycil. “Our
research indicated the need for a skin
care talc that ensures sweat absorption,
protection from body odour and a de-
odorizing fragrance which keeps skin
fresh and healthy. Hence, Nycil De-o
Fresh which is undergoing consumer
tests in Andhra Pradesh & Kerala."
Kolkata-based Emami, on its part, is
targeting kids as its prime consumers to
increase its market share for Boroplus
Ice prickly heat powder, which currently
enjoys a market share of 20-25 per cent.
The brand is currently promoted by the
glamorous Kareena Kapoor along with
some kids enacting the 'All izz well' song
from the movie '3 Idiots'.
“We are at number three after Nycil
and Boroplus and plan to handle compe-
tition through the ad campaign. In fact,
the theme is a popular one among kids
and that takes care of our aim. We have a
budget of Rs 10 crore for advertising and
promotion of Boroplus Ice and Rs 8-10
crore as advertising budget of Navratna
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THE MARKET IS
HOTTING UP
z The prickly heat powder is a Rs 200
crore market
z Nycil from Heinz India is the mar-
ket leader with 37 per cent market-
share
z Dermicool from Paras enjoys a 30
per cent market share
z Emami's Boroplus Ice accounts for
20-25 per cent of the market
z Nycil recently launched Nycil De-o
Fresh Skin Care Talc
z Emami is targeting kids
Cool, which is an increase of 25 per cent
over last year," says Harsh Agarwal,
director, Emami Ltd. The company is
expecting a growth of 20-25 per cent for
Boroplus Ice and at least 50 per cent for
Navratna Cool Talc, which has a market
share of 10-15 per cent, according to
Agarwal.
A new entrant into the market, the
Sundeo Summer Powder is also vying
for attention through its TV ads. “We
launched the product in April, by when
60-70 per cent of the peak season for the
product had already passed. For the sun
to shine on us, it will take another season
to guage the consumer reaction to our
proposition. The new-born baby has
been given Rs 6-8 crore for advertising
and promotion," says Darshan Patel,
managing director of Vini Group and for-
mer co-promoter of Paras Pharma.
63

CLASH OF THE
TEUTONS
The battle between automotive luxury brands
Mercedes-Benz and BMW is being played out in India on three
fronts – products, distribution and events
B
y attaining the leadership
position in a country in just its
third year of operations, BMW
India created history within
the group worldwide. In 2009,
BMW sold 3,619 units, while Mercedes-
Benz India managed 3,247 units. BMW
overtook Mercedes for the first time when
the January 2009 sales were revealed and
hasn't looked back since.
It was a rude shock for Mercedes-Benz
- after all they had a 12-year presence in
Srinivas Krishnan
the country and whatever they had put up
for sale was getting sold. Suddenly, they
were not number one in the luxury car
segment anymore. It was time to act, and
act fast.
The action began at the Auto Expo in
January, where a collective intake of
breath accompanied the rise of the gull-
wing doors of the SLS AMG supercar -
easily, the star of the show. Internally,
Mercedes-Benz called it the 12x12 strate-
gy. It would be an unprecedented
Business Standard
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onslaught of 12 new cars and/or variants
in the first twelve weeks of the year, rang-
ing from the huge GL-Class SUV to the
armoured S-Guard limousine and every-
thing in between.
Certainly, its Munich-based competi-
tor was in no mood to stay quiet. BMW
introduced the limited edition Gran
Turismo, the extremely powerful X6 M
SUV, a host of other variants and just last
month, the all-new 5 Series. Over and
above this, to garner more volumes, both
64

players have introduced stripped-down
versions of their big sellers - as seen with
the Mercedes-Benz C-Class Executive
Edition and the BMW 3 Series Corporate
Edition - to bring in not just newer cus-
tomers into their fold but big-ticket fleet
operators as well. It's not even the middle
of the year yet and both manufacturers
promise a host of more new cars.
“We assure you that the rest of 2010
will also be highly engaging and we do
have a few more surprises in store for our
customers," says Wilfried Aulbur, the MD
& CEO of Mercedes-Benz India. His “few
more surprises” could be the category-
busting R-Class, the cabriolet version of
the stylish E Coupe and new products
powered by the recently introduced CGI
technology.
BMW too promises not to relax. “In
2010, we will resolutely expand our prod-
uct range and thus cover all the opportu-
nities in the luxury segment which are
relevant for us," promises Dr Andreas
Schaaf, the new president of BMW India.
That would mean, among others, the
revamped X5 in the third quarter of the
year, new variants of the 5 and the much-
anticipated X1 compact SUV to be assem-
bled at their Chennai plant - thus making
it within reach of many Indians.
Car manufacturers always use new
product launches to drum up excitement
and keep the tempo up in the market-
place. When it comes to luxury cars, new
engine technologies plus safety and com-
fort features also play a big role. But in this
case, both the luxury car makers realise
they need to do more than mere product
launches - after all, they are selling a
lifestyle and not just automobiles.
Both manufacturers have inevitably
associated themselves with golf, high
fashion and varied touch-and-feel experi-
ences with the brand for customers.
Beyond the association of the brands in
high profile activities, both the German
manufacturers realise the game is going to
be played out at the retail level.
“With an investment of over Rs 200
crore in network, Mercedes-Benz is now
present in 26 cities with 55 touch points,
the largest for any luxury player in India,"
says Aulbur. In fact, the manufacturer has
weeded out underperforming dealers,
leading to a 30 per cent churn in their
www.business-standard.com
z In 2009, BMW India sold 3,619
units; Mercedes-Benz India sold
3,247 units
z Both players have associated
themselves with golf, high fashion
and varied touch-and-feel experi-
ences with the brand for customers
z They are selling a lifestyle and not
just automobiles
z The game will also
be played out at the retail level
z Jan-April ‘10 sales are neck-and-
neck: BMW sold 1,621 units, while
M-B did 1,603 units
2009 line-up.
BMW, being the newer player and
with only 17 dealer facilities, is racing
against time to establish its presence in
more cities. “An aggressive plan was
implemented for completion of phase 1
(12 dealers in the major metros) much
ahead of schedule. Owing to an exuberant
growth potential, we will expand opera-
tions in 10 additional cities in phase 2 of
our dealer network strategy," says Schaaf.
Though both carmakers may say they
are not in the volumes game, numbers
always provide a huge morale booster
and, well, who doesn't want to be a leader.
In January-April 2010, BMW sold 1,621
units while Mercedes-Benz's revival has
translated into 1,603 units. “Our sales
numbers reflect our traction in the mar-
ket," says Dr Aulbur, while Schaaf says,
“One thing is certain: this is the moment
of transition."
The race is pretty close and there are
still eight long excruciating months to go,
during which the action can get quite
intense. Better strap up.
Business Standard 65

THREE SCREENS
AND THE CLOUD
Microsoft is promising a whole new user experience with
its retooled and re-engineered offerings. Can it regain ground
lost to rivals?
0
ver the next few months, people in
India will get to use the next gener-
ation of Microsoft's mobile phone
operating system, the Bing search
engine, Windows Live Messenger, an all
new Hotmail and probably also a new
television game that does not require con-
trols. This is the first marketing blitzkrieg
from the Redmond-based company.
Microsoft wants to regain the territory it
lost over the years to rivals like Google,
Yahoo!, Symbian, Apple, Nintendo and
Bhupesh Bhandari
Sony. And Microsoft is dead serious about
it. In 2009, when most companies cut
back their research budgets, it spent as
much as $9.5 billion on new products, up
from $8.1 billion the year before.
(Microsoft too faced a tough year: Its total
earnings fell 3 per cent to $58.3 billion
and operating income fell 9 per cent to
$20.3 billion in 2009.)
There are three screens, Microsoft
knows, which hold great potential: The
mobile phone, personal computer and
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internet. Television, the fourth, could
come into the picture once Microsoft
launches its game some time in the future.
Codenamed Project Natal, it will require
no controls to play and will track the play-
er's full body movement, and recognise
his face and body. It will work on every
Xbox 360 console.
The market in India sure is huge.
There are over 600 million mobile phones
in use in the country, 36 million personal
computers and 50 million internet con-
66

nections. While the mobile phone space
is undoubtedly huge, are the other two
really big in a country of 1.1 billion peo-
ple? Ranjiv Singh, the chief marketing
officer for Microsoft India's consumer and
online business, has a different take on it.
Internet, says he, is largely an urban play.
As 50 million connections would mean a
total internet population of 250 million, it
covers a large section of the country's
urban population of around 350 million.
“By 2013, we will be at 95 million, that
will make us the third-largest internet
population in the world," says he.
The personal computer numbers are
small, and smaller still if you look at those
installed at homes (the consumer seg-
ment that Microsoft is targeting) - just 11
million. The market for personal comput-
ers, feels Singh, is all set to take off. “Sales
grew 30 per cent last quarter. Growth fore-
casts are between 20 per cent and 30 per
cent. Prices have come down, so afford-
ability is no longer an issue. Social net-
working has increased the relevance of
the personal computer," says he. Growth
in fixed-line broadband (50 per cent in the
last one year) as well as wireless broad-
band (200 per cent) and the improvement
in the retail environment augur well for
the personal computer market. Of course,
laptops and netbooks have outpaced
desktops in sales.
Between the three screens - the mobile
phone, personal computer and internet -
Singh reckons the opportunity for a com-
pany like Microsoft could be as high as
$10 billion (Rs 45,000 crore).
What seems to have fuelled
Microsoft's appetite is the success of
Windows 7. In India, it has increased the
Windows run rate by six times. Ninety per
cent of the shipments are currently on
Windows 7. Much of this success, accord-
ing to Singh, has come from Microsoft
Security Essentials bundled with
Windows 7, which detects, blocks and
removes viruses, spyware, trojans, bots
and other malware. As many as 44 mil-
lion Indians use email and 25 million
browse the internet everyday. This
ecosystem is fraught with malware.
Between January and June 2009, 3,286
Indian websites were hacked; over 4,000
Indian portals were defaced in 2008; and
between April and December 2008,
phishing reported losses of Rs 46.6 crore.
This has made Indians alive to security
solutions.
Microsoft does not disclose its India
numbers. Analysts reckon it did business
of around $500 million (Rs 2,250 crore) in
the country in 2009, of which about a
fourth came from the consumer segment.
Globally, Microsoft gets a larger chunk of
its revenue from this segment. One reason
for its lower contribution in India could
be the extent of software piracy in the
country. According to the 6th annual BSA
and IDC Global Software Piracy study,
illegal shipments accounted for 65 per
cent of the software sold in India in 2009 -
though 3 percentage points below what it
was in 2008, this is way above the global
average of 43 per cent.
Experts believe that in the consumer
market Microsoft lost its momentum
because many a time its products did not
talk to one another and it needed to plug
that gap. This allowed rivals to steal a
march over it. Little surprise, a lot of
Microsoft's research money has gone into
the new offerings. “We have relooked,
retooled and re-engineered what we were
doing. The consumer is not satisfied with
what is there in the market; he is looking
for innovations," says Singh. “The main
idea is to make it simple for the consumer,
and delight him. We first looked at the
Microsoft silos to see what does the con-
sumer want, and then integrate that into
our offerings. We are for the first time
being open about what we are integrating.
The brand lives with its consumers. So,
there is integration of not just Microsoft
properties but whatever the consumer
wants." Simplify matters and offer the
customer whatever he wants is
Microsoft's new mantra.
Smart phone wars
Microsoft CEO Steve Ballmer unveiled
the Windows Phone 7 Series, an operat-
ing system for smart phones, at the
Mobile World Congress 2010 at Barcelona
on February 15. “In a crowded market
filled with phones that look the same and
do the same things, I challenged the team
to deliver a different kind of mobile expe-
rience. Windows Phone 7 Series is a
phone that truly reflects the speed of peo-
ple's lives and their need to connect to
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other people," Ballmer had said.
According to IDC, there are about 2.5
million smart phones in India - a small
market. But the numbers could rise expo-
nentially with the launch of 3G (third gen-
eration) service by telecommunication
companies some time later this year.
Almost 70 per cent of the market is with
Symbian. It is followed by Research in
Motion (the maker of Blackberry phones),
Microsoft's Windows Phone, Apple's
iPhone and Google's Android. Analysts
expect Android to gain market share in
the days to come because of its open
nature which allows handset makers to
customise the applications. Google is also
known to be working on a new operating
system. This market will therefore not be
a cakewalk for Microsoft. “It is a real chal-
lenge for Microsoft because there are a
variety of other platforms there.
Microsoft's Windows Phone doesn't work
on Linux. So, there is a huge gap," says
Ascentius Consulting Principal Analyst
Alok Shende.
Singh, on his part, is confident about
Windows Phone 7 series which will be
available towards the end of the year.
“Competition in the market will be around
differentiation. Microsoft has a very seri-
ous proposition here," says he. Thus, “live
tiles” on the screen will show real time
content and not static icons. There will be
a dedicated Bing button on the handset for
internet search. Friends will be tagged
with feed from all social networking sites -
Facebook, LinkedIn and so on. Videos and
pictures across social sites can be viewed
and shared in one step. It will come fitted
with Xbox Live games and will have
music from Zune.
The challenge for Microsoft will be to
sell the operating system to handset mak-
ers. Singh says that Microsoft will be
selective here. “One of the things we are
doing differently is that we will tie up
with manufacturers absolutely commit-
ted to delivering the promise. We don't
want people to change the way we visu-
alise things, our consumer insights," says
he. “There has to be strict control on how
we land the promise to the consumer."
Microsoft is learnt to have tied up with
some large handset makers, though their
names are under wraps. Singh also indi-
cates that in the future Microsoft could
67

launch something similar for lower-end
phones as well. “We can look at the entire
market rather than just at the top end. It's
no more about voice and SMS alone. You
can anticipate what will be the next wave,
and then you can come in and play. That
is where Microsoft will have some really
serious stuff to offer."
Web wisdom
Gartner Principal Research Analyst
Diptarup Chakraborti has an interesting
take on Microsoft's internet strategy:
“This is the first time Microsoft has faced
a real threat. Earlier it easily beat Apple,
Netscape, AOL and Linux. This time it's
not been able to overcome competition
from Google as fast as it would have liked
to. At the end of the day, Microsoft is a
desktop software company; but with per-
sonal computer growth less than antici-
pated it knows that it has to reinvent to
become an internet player."
On the web, Microsoft has kicked off
its new innings with Bing, its new search
engine. Google had, over the years, deci-
mated all competition. Microsoft figured
out that there has been an online infor-
mation explosion in the last few years.
The number of websites has increased
from 100,000 in 1997 to 200 million in
2009, the number of links has increased
from 25 million to one trillion and the
content has shot up from 15 terabytes to
5 million terabytes.
Yet, showed research carried out by
Microsoft, users are dissatisfied. Search
results for 50 per cent of the queries failed
to meet the consumer's needs (they are
either abandoned or refined), and 35 per
cent of people expressed dissatisfaction
with search today - and this percentage
increased when they moved into task-
focused activities like finding a product or
getting local information. Twenty-five per
cent of the queries resulted in a person
clicking through to a site from the results
that didn't meet his needs. Users want
help in their search. Seventy-two per cent
of the people surveyed said current
search results are too disorganised. But
search is important. Users are focused on
tasks and decisions. Sixty-six per cent
people reported using search engines to
make decisions. Long sessions are becom-
ing more common, with over 46 per cent
of searchers' time being spent on sessions
over 30 minutes in length.
This has shaped Microsoft's vision for
Bing. “There is a huge amount of dissatis-
faction between what is you intent and
what the search engine throws up. Bing is
a decision-making engine. We said let us
first understand the intent of the user and
then complete the query to help him
decide," says Singh. Apart from that, Bing
loads all image and video results on one
page. If you take the cursor to the video, a
small preview is played, which lets you
know if this indeed is the video you are
looking for. A feature of Bing in the US is
that it gives you a virtual tour of a city,
down to the prices inside a store. This fea-
ture is yet to launch in India.
In six months, Singh says Bing has
moved Microsoft's market share in the
US from almost 2-3 per cent (it had Live
search earlier) to 11.7 per cent. In India,
the share stands at 1.2 per cent. (It is still a
beta site.) The task at hand is not easy.
Google has become one of the biggest
brands in the world. How will Bing take it
on? “People will go for what works for
them. Advertising will get you only this
much; product usage, loyalty and experi-
ence which will get consumers come to
Bing again and again," says Singh.
“Search has remained static for ten years.
When did you last hear of innovation
here? The best form of flattery is imita-
tion. The competition is tracking what
we have done." Microsoft, it is thus safe to
assume, will depend on word-of-mouth
publicity for Bing.
Meanwhile, rivals will not sit idle and
twiddle their thumbs. “We are going to
focus on emerging markets because
Yahoo! has a mindshare there. It is a com-
petitive market and we will attract and
retain users by keeping them engaged
with the web. Yahoo! talks about you and
caters to individual needs. We will offer
an attractive set of products and services
to our users that are better than are com-
petitors," says Yahoo! India R&D CEO and
Vice-president Shouvick Mukherjee.
Live and kicking
Meanwhile, Windows Live Messenger,
which was announced on April 30, is
aimed at the 38 million active online con-
sumers and the fast-growing tribe of
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social networkers and users of instant
messaging. Bing is integrated into it, so
that users can attach links, images and
videos without leaving the conversation
window. It has a “social dashboard” with
updates from across networks. It is also
integrated with mobile phones using
Windows Phone, iPhone and Blackberry.
Users can also play around with availabil-
ity. After office, for instance, they can
block the device for messages from office.
But the biggest innovation has been in
Hotmail. Research showed that 80 per
cent users want email to be more efficient.
Many of them said it takes too long to get
through their inboxes. Half of them even
said they were missing important mes-
sages because of all the clutter in their
inbox. In the new Hotmail, Microsoft has
attempted three things to make email
more efficient: Help users manage the
clutter in the inbox, save time on every-
day tasks, and integrate social networks
within the inbox.
Thus, the sweep function will help
users block email from a sender forever.
Other email (Gmail, Yahoo! and others)
will also get displayed on the Hotmail
home page. Bing, of course, has been inte-
grated into Hotmail. Special capacity has
been created for sharing images. “There
are 1.5 billion photos that are uploaded in
the Hotmail environment every month.
Through the integration of Skydrive, the
user can at one go send up to 200 photos
of over 10 gigabytes," says Singh. “The
images you get now are links and not
images, which is not a cool experience. In
the new Hotmail you will get the pictures
as well as the video on your screen. You
won't get distracted from what you are
doing. This improves efficiency without
losing the environment."
The all important question is will it
work? Will Microsoft get advertisers on
board for the internet-based initiatives?
India, mind you, is a very traditional media
market, and digital advertising is not more
than 3 per cent of the pie of Rs 18,000 crore.
Experts say it is not easy for companies to
build brands online. Microsoft has a large
team in place to get advertisers. Can they
get the money? Much will depend on what
users have to say.
With contributions from
Kirtika Suneja & Byravee Iyer
68

Men in India seem to be in a rush to be the fairer sex. So Hindustan
Lever is the latest to make a splash with its range of Vaseline whitening
facewash and cream
I
t is still a fairly small segment -
just Rs 186 crore out of the total
Rs 2,200 crore-plus fairness
cream market, according to
Nielsen - but one that is growing
at a fast clip of 31 per cent. Clearly,
men in India wouldn't mind being the
fairer sex, if marketers' pitches for
men's fairness creams are anything to
go by.
To secure early leads, marketers are
expanding their portfolio beyond
creams and straddling different price-
points with various ranges.
Differentiation, for now, seems to have
been relegated in favour of endorse-
ments by filmdom's and cricket's A-lis-
ters for their communication.
Hindustan Unilever (HUL) is the
latest to make a splash with its range of
Vaseline Men Anti-Spots Whitening
COMING
OUT OF THE
CLOSET
Sayantani Kar
facewash and cream. In what is seen by
observers as retaliation to Garnier's
campaign with star endorser John
Abraham, HUL has roped in Shahid
Kapur. Garnier, Loreal's natural ingre-
dient-based brand, launched its
Garnier Men PowerLight range of
moisturisers and facewash last year.
But won't the star endorsements by
every brand erode differentiation?
Garnier Marketing Manager Richa
Singh says, “John Abraham's positive
energy and the will to be active helped
us portray him in a way that was real to
both him and our brand. It appeared
genuine." HUL Skin Care General
Manager Govind Rajan feels, “It is
always better to start with the young
who are more amenable to change.
Hence, Shahid Kapur". On its part,
Nivea has associated with India cricket
Business Standard
www.business-standard.com
captain Mahendra Singh Dhoni. The
first mover, Emami's Fair and
Handsome has Shahrukh Khan as its
endorser.
Kolkata-based Emami first saw the
need for a men's fairness product, beat-
ing bigger players. Research had
showed that the country's leading
women's fairness cream, Fair and
Lovely, had then owed over 30 per cent
of its sale to men users. Emami's Fair
and Handsome, launched in 2005, was
followed by HUL, the makers of Fair
and Lovely, which launched Fair and
Lovely Menz Active in 2006.
Beiersdorf AG, the German parent of
Nivea, entered next with its Nivea for
Men products. Smaller players include
Elder Healthcare's FairOne Man, a
Shahnaz Hussain franchise. (See chart
for market shares)
69
 www.business-standard.com

Heavy advertisers such as HUL and from embattled. Goenka points out, ""It
Garnier are now looking to expand the is one thing to have a brand and quite
skincare category beyond vanilla fair- another to focus on it. What will be the
ness creams with face washes and sun- war chest that larger players will set
screens, though experts question the aside for their men's brands? We have
efficacy of these products. “How can 20 per cent of revenues going into
brands have facewashes which lend advertising and Fair and Handsome
fairness?" asks one. Emami Group remains a focus brand, he asks. HUL,
Director Mohan Goenka believes that for example, does not intend to extend
“product extensions will be only to its Fair and Lovely Menz Active, but
support the mother brand of the fair- wants to concentrate on Vaseline Men.
ness cream." On the whole, most players say they
Marketers admit that fairness is the want to grow the market, so the more
foremost concern of users but insists the merrier.
that it only points to the underlying
need for a healthy skin. Nivea For Men
Group Brand Manager Sudarshan
Singh says, “Whitening emerges as the
prime need. Since Indian men spend a
lot of time outdoors, they desire to
reverse the effect of the aggressive fac-
tors and hence use whitening creams.
The other big need is also of oil con-
trol." Adds Garnier Marketing Manager
Richa Singh, “Our products address
the need for a clear and glowing skin,
albeit without a tan and dark spots."
The brands are banking on the halo
effect of the names under which they
launch their men's fairness products,
apart from the star pull. Singh says,
“Our differentiator is what Garnier
stands for overall - fusing nature with
technology." HUL's Rajan says,
“Vaseline has always been viewed as
an expert brand on skincare thanks to
its heritage. So it has the credibility to
create a habit of skincare regime."
Brands are also straddling different
price points, either through different
product ranges or through packaging.
Garnier launched satchets of its cream
early this year. Its parent, L'oreal also
has a range for men's whitening cream
priced much higher. HUL covers the
mass market with its Fair and Lovely
Menz Active. With Vaseline Men, it
will focus on modern retail, which
Rajan admits will yield a higher
throughput as it is targeted at the
urban man. “Men are wary of walking
into a fancy and cosmetic store and
tend to pick up products from
chemists and hypermarkets," he adds.
Emami, still lording it over the mar-
ket with its Rs 125 crore brand, is far

Business Standard 70

MATCH ON FOR
VIDEOCON
The consumer electronics major has entered the cutthroat mobile
telephony market and is confident of acquiring 100 million subscribers
in three years. Can it break the clutter?
V
ideocon Industries Chairman
Venugopal Dhoot has a clear tar-
get. In three years flat, he wants
100 million subscribers for his
mobile telephony service. That it took
Bharti Airtel, the market leader, 14 years,
Vodafone 15 years and Reliance
Communications 7 years to hit the mark
does not bother him. He is ready to invest
Rs 14,000 crore to get there. Videocon
Mobile Services, an arm of Videocon
Industries, is the 13th player in the mar-
ket.
India may be the world's fastest-grow-
ing market (over 600 million users; num-
ber projected to rise to 800 million in
three years), but it is also the most com-
Sayantani Kar
petitive. Cut-throat rivalry has brought
down profit margins of incumbents at an
alarming rate. The average revenue per
user for GSM has fallen 35 per cent to Rs
144 per month in the last one year, while
that for CDMA has shrunk 26 per cent to
Rs 82 per month.
Clearly, this is no place for the weak of
heart. So why does Videocon want to try
its hand at telecom? It is a large player in
consumer electronics, though Korean
chaebols LG and Samsung lead in the
market by a fair margin. It has interests in
oil & gas. (Videocon has 25 per cent in the
Ravva field off the Gujarat coast, and
owns assets in Brazil, Mozambique,
Australia and Turkey. While Ravva went
Business Standard
www.business-standard.com
into production some years back, other
blocks are under exploration.)
It recently ventured into direct-to-
home television. Profit margins in con-
sumer electronics are under pressure,
though they are still healthy in oil & gas.
Videocon's gross profit margin in con-
sumer electronics fell from 13 per cent to
10 per cent, and in oil & gas from 32 per
cent to 29 per cent. DTH is still in invest-
ment mode, and Videocon is at the bot-
tom of the heap - the industry is known to
carry losses in excess of Rs 5,000 crore on
its books.
Dhoot gives a text-book answer. “Tele-
density in the country is just 46 per cent.
We are in it for the long term. Often, we
71

have entered sectors even when they
were yielding low margins in the short
term and when people were shying away.
In 1994, oil had seen low margins but we
went ahead." Sector analysts say
Videocon can build great value for its
shareholders in telecom. Along with a
few others, Videocon got spectrum for a
song - just Rs 1,651 crore. Unitech, one of
them, then sold 67.25 per cent to Telenor
of Norway for Rs 6,120 crore without a
single subscriber on board. Similarly,
Swan Telecom sold 45 per cent to Etisalat
of Abu Dhabi for around Rs 4,000 crore.
Imagine Videocon's valuation if it has 100
million subscribers on board! Bharti
Airtel, which has 138 million subscribers,
is capitalised in the stocks markets at Rs
111,780 crore. However, Videocon has
spectrum only for 19 of the 22 circles in
the country, unlike Uninor, Tata DoCoMo
and others who have a pan-India licence.
So it may be valued slightly below these
rivals.
In fact, Dhoot does not rule out selling
26 per cent in the near future to a foreign
partner. He may need the money to fund
his expansion plans. State Bank of India,
the country's largest lender, has commit-
ted Rs 7,000 crore; which means he still
needs to arrange Rs 7,000 crore. This is
where the stake sale fits in. There have
been talks of Vivendi of France buying
into Videocon but those have now faded
out.
Some analysts believe Videocon's cap-
ital expenditure could be higher than pro-
jected because it has only 4.4 MHz of
spectrum, which could constrain its
growth. So, it will either have to acquire
another service operator or buy spectrum
afresh. This could be costly. Each MHz of
2G or 3G spectrum could cost as much as
Rs 2,500 to 3,000 crore.
Brand advantage
To be fair, Videocon does come to the mar-
ket with some advantages: It has a wide
distribution network and a brand that is
well recognised. “Our brand has become
well established over the last 25 years,
and we have reached India's remotest
corners with our after-sales service,"
says Dhoot. “Our strength in servicing
and reach is what makes us confident of
acquiring 100 million subscribers by the
end of three years." Some observers agree.
“Videocon can bank on its brand presence
unlike other newcomers such as Uninor,"
says Romal Shetty, who heads the tele-
com practice at KPMG.
McCann and Interbrand ran a research
before the launch of Videocon's mobile
services, which concluded that it would
be best to go with Videocon as the brand.
It would also have a halo effect on other
businesses. The group had done a brand
overhaul in 2009, engineered by McCann,
which many felt at that time was done to
pave the way for savvier telecom advertis-
ing. Operators have been known to spend
13 to 15 per cent of their turnover on
advertising which has seen no dearth in
media innovations and creative content.
Some observers feel telecom will there-
fore be a tough challenge for Videocon.
“The incumbents already have a good
brand recall, having built emotional con-
nect over the years. So, there is no room
for error for Videocon," says Milagrow
Business Knowledge Solution Founder
Rajeev Karwal who has in the past worked
with LG, Electrolux and Philips.
The other advantage Dhoot can count
on is his distribution network. Apart from
50,000 dealers of Videocon consumer
electronics, Videocon owns the Next and
Planet M retail networks, which together
are over 1,000-store strong. In addition,
“OUR STRENGTH IN SERVICING
AND REACH IS WHAT MAKES
USCONFIDENT OF
ACQUIRING 100 MILLION
SUBSCRIBERS BY
THEEND OF
THREE YEARS”
Business Standard
www.business-standard.com
the company plans to enlist over 20,000
independent dealers right away and
another 25,000 in three months' time. But
it will have to do more. Bharti Airtel, for
instance, hopes to have a distribution net-
work of 2 million by the end of the year.
Dhoot looks unfazed. "(Bharti) Airtel
claims over 110 million subscribers.
Videocon as a brand already reaches as
many as 160 million consumers," says he.
While most of these consumers may
already be with other network operators,
Videocon expects 30 per cent of them to
convert to its network. Industry data sug-
gests that as many as 50 per cent sub-
scribers change their service operator in a
year. This is the opportunity Videocon
has in sight. The operator is reaching out
to existing consumers in Mumbai's sub-
urbs with a pilot loyalty programme. It
calls on such consumers and offers them
a tentative enrollment plan to switch to
Videocon Mobile Services.
Also, a new player in the market need
not set up its own infrastructure of tow-
ers; it can take on rent those of rivals. This
compresses the capital investments
72

required in the rollout as well as the go-to-
market time. In fact, Videocon plans to
take on rent 80 per cent of the towers it
needs. It will fix its own towers where the
network is weak. That is why, in its first
television campaign, it has played heavily
on the “signal” of the network as the dif-
ferentiator. Most subscribers in India refer
to the strength of the network as signal.
Through its tagline, Pakdo life ka har sig-
nal (catch every signal of life), it hopes to
own the word in recall among sub-
scribers, rather than give prosaic explana-
tions about network coverage.
The tagline can also be localised as the
brand rolls out in different areas. It
infused a local flavour when advertising
its launch in Tamil Nadu - its first circle -
by placing ads in Tamil during the recent
Indian Premier League matches.
“Advertising in the regional language on
national channels struck an emotional
chord with consumers," says Videocon
Mobile Services' head of marketing, Sunil
Tandon. As the group has consolidated
media buying, the telecom service hopes
to save 5 to 10 per cent on advertising
costs.
Bundled plans
But the clincher could be something else -
bundling. There is talk in the market
place that Videocon could offer consumer
electronics like an LCD television if a sub-
scriber guarantees a certain annual usage
of airtime. Analysts say Videocon could
sell its connections along with handsets
which will be either subsidised or com-
pletely free. The condition could be that
the user has to remain on the network for
a minimum of two years and use the ser-
vice for a minimum specified period of
time. “Rather than cut tariffs, players can
subsidise the handsets. By tying handsets
to the network, operators can offer differ-
entiation over a longer period of time than
temporary tariff plans," says Ernst &
Young Partner (technology, communica-
tion and media) Amit Sachdeva.
In markets such as the US and Europe,
this is common business practice. It
would allow Videocon to rise above the
price-play among GSM players. In India,
CDMA operators have locked third party
devices with their networks. But con-
sumers resented that because there was
www.business-standard.com
forever a limited choice of handsets.
Videocon, on its part, has already
launched as many as 24 handsets and is
ready with 20 more. This, experts believe,
will help Videocon acquire low-revenue
subscribers.
Dhoot admits such a strategy indeed is
on the drawing board. “The handset busi-
ness would allow us to bundle our net-
work with it. It will allow us to introduce
youth-focused applications and flexibili-
ty in pricing." This is somewhat similar to
what Videocon did in DTH - it bundled
the set-top box with the DVD player and
television. (Its d2h service has got nearly a
million customers since launch in
September 2009, which is 5 per cent of
the market.) Dhoot also plans to build a
suite of value-added services for the
youth. But the space is crowded, and his
application developers will have to think
really out of the box.
Has Videocon got it right? What do the
initial numbers suggest? In less than two
months, it has covered six of the 19 circles
it has spectrum for, with six more likely to
be covered before 100 days. Tandon
claims that 100,000 subscribers came on
board within four days and it has already
crossed the 1-million mark. (In contrast,
Uninor, which started its rollout in
December 2009, has got 2.5 million sub-
scribers) Dhoot's job is to find another 99
million subscribers in a little less than
three years.
Business Standard 73
 www.business-standard.com

REEBOK STRADDLES
MASS AND CLASS
The sportswear giant is targeting a bigger share of both the lower and
upper ends of the market. Has it got the balance right? Surajeet Das Gupta

R
eebok had some time back
hired an international
agency to help it identify
locations for its stores on the
basis of income pockets.
The agency devised a plan that looked
good on paper: Divide each city accord-
ing to the postal codes.
The assumption was that people
covered by one post office would have
somewhat similar incomes. Within no
time it was proved that the formula will
not work. The Greater Kailash post
office in New Delhi, for instance, is a
high-income neighbourhood but also
includes the mid-income locality of
Zamroodpur. Should Reebok then put
up a store there or not? What products
should it stock?
For Reebok, the country's largest
seller of sportswear and apparel, this is
a challenge it has to wrestle with every
day. It wants to become a mass-market
brand, and the location of stores holds
the key to that. This, mind you, is not
the first time that its market research
and assumptions have gone awry.
When it first entered India in the ear-
ly-1990s, it had assumed that every car
owner could be a potential buyer for
expensive Reebok sneakers. It proved to
be a gross overestimation of the mar-
ket's potential. Little did it realise that

Business Standard 74

cars were bought on installments here,
and a large number of drivers didn't
own the cars - these were provided by
the office!
But it has got over the initial hic-
cups. Though fourth in the global
sweepstakes after Adidas, Nike and
Puma, it leads the pack in India with a
53 per cent share of the branded sports
footwear market (estimated size: Rs
3,500 crore per annum).
In fact, India is the only market in
the world where Reebok has such domi-
nance in the market place. So much so,
two of its Indian honchos - Muktesh
Pant and Sidharth Verma - were given
prestigious assignments abroad.
Though the brand is owned by Adidas,
it was decided to let it run as an inde-
pendent entity in India, lest the
momentum be lost.
No guts, no glory
Reebok enjoys almost total brand recall
in the country. And its lowest price
point is below Rs 1,000 - Rs 990 for a
pair of jogging shoes, to be precise. The
two basic requirements for going mass-
market have thus been fulfilled. The
task in hand is to reach its shoes to con-
sumers all over India.
The choices are clearly defined: You
can tread slowly, open a few stores in
the top metros and grow cautiously,
which is what most of Reebok's rivals
have done; or you can go by your gut
feel and move fast to touch the con-
sumer. The second option is riskier, but
the rewards, if it succeeds, are higher
too. And this is what Reebok has done.
It has over 1,000 stores in over 325
cities and towns across the country,
which is more than double of any of its
rivals, and the numbers continue to add
every day. About one-third of its stores
(over 300 outlets) cater to the lower end
of the market. And it offers over 80
stock-keeping units (SKUs) under Rs
2,590, which form the bulk of its sales.
About 70 per cent of its sale volumes
come from low-end products, though in
terms of value they constitute 50 per
cent of the revenue. And to keep costs
down, over 80 per cent of the footwear
is manufactured in the country.
“This business is less about strategy,
more about intent and marketing
courage," says Reebok India Managing
Director Subhinder Singh Prem. “India
is changing every three years. Today, we
have 300 million consumers. Our aim is
to cater to at least one billion Indians
and become both a prestigious and a
mass brand."
Prem admits that it is difficult to
identify where to locate a Reebok store,
as demographic and psychographic
data available in the country is scanty.
He says the division of cities, towns and
rural locations based on socio-econom-
ic data is imperfect because in reality
you can never know when a city has
ended and rural area has started. The
REEBOK BELIEVES ANY
LOCATION WHICH HAS A
POPULATION OF 10,000 TO
15,000 CAN SUSTAIN A
STORE, ESPECIALLY
IF IT IS A SERVICE HUB
census data of 2001 is too old, and
everyone has to add in some multiple to
get to the real numbers of a town or city.
“You cannot wait for the data to
come; it will be too late and you will
miss the market opportunity. So you
must go to the consumers," says Prem.
In other words, use your instincts.
That's not to say there is no method
in the madness. The company has
developed its own yardstick: It believes
any location which has a population of
10,000 to 15,000 can sustain a Reebok
store, especially if it is a service hub. So
the whole idea is to go ahead, put in a
store and see if it works. The option to
pull out is always there. Says Prem:
“The good thing is that 95 per cent of
the time we are successful, which could
be because we are not taking enough
risks."
Of course, Reebok has to ensure that
the franchisee doesn't lose too much
money if the store does not work. So
Prem says the exit costs have been kept
low and even the lock-in for the fran-
Business Standard
www.business-standard.com
chisee is short.
Rivals in the business say that the
cost of opening a Reebok store in a semi-
urban market is not more than Rs 2
lakh. “There are basic fixtures in these
stores. The person who runs the store
also owns the place; so there is no rental
to give. Even if he sells three or four
pairs a day, he will make a profit of Rs
30,000 to Rs 40,000 a month which is
good," says a rival.
“The other advantage is that the
company gives the shoes on a consign-
ment basis, so you pay the company
only when you sell." The flip side is that
Reebok's cash flow can get stuck if a
store does badly. The company's rev-
enue would always be lower than the
number of shoes dispatched from its
factories.
Price barriers
Some others say that Reebok's prices
aren't low enough for the bottom of the
pyramid. “We sell well as compared to
Reebok. With similar specifications,
our shoes would be priced at a third of
Reebok's. There are always people who
do not have that kind of disposable
income, and they come to us," says
Liberty Retail Managing Director
Anupam Bansal.
Can Reebok produce quality prod-
ucts at even lower prices and break the
existing price barrier? This is necessary
if Prem wants to hit his target of one bil-
lion customers. There is hope. The
company has, after all, brought down
its entry level price from around Rs
1,390 a few years ago to Rs 990 now.
And, of course, Reebok's research and
development centres abroad are work-
ing to break new price barriers.
Says Prem: “On one hand we expect
to offer more lower-priced shoes to
expand the market, on the other we
expect more people will see a rise in
their incomes (so that they can afford
the shoes). And we will reach some-
where midway."
Does Reebok run the danger of ignor-
ing the well-heeled urban buyers in its
quest to reach the masses? For that,
Prem is also experimenting with new
mediums which will supplement his
already large advertising budgets. The
75

focus now is to leverage social websites
and offer consumers knowledge about
its products.
“What makes this medium powerful
is that it is a two-way dialogue and there
is credibility of information," says
Prem. One idea which has been floated
is to set up Reebok Clubs across web-
sites were people can exchange notes
on fitness and Reebok products, and
give their independent opinion. The
company feels it can extract more value
this way than from an advertising cam-
paign.
But different markets and segments
have different requirements and aspira-
tions from a sportswear or lifestyle
brand. So how does Reebok cater to the
varying choices? Data shows that con-
sumers are changing their old pair of
shoes much faster than before. Middle-
class buyers now change their footwear
every three months, down from eight to
12 months earlier. And at the lower end
of the market, consumers are changing
once in every 15 months compared to
three years earlier. This, Prem says,
offers an amazing opportunity for
Reebok.
“The customer who buys entry-level
Rs-990 shoe upgrades to the next level
just like you upgrade your car. And as
he is already hooked on to Reebok; so,
his next shoe will also be the same
brand, provided of course we offer him
wide variety and a new offering at every
level and price point," says he. So
Reebok launches over 42 SKUs every
month and at least a new footwear tech-
nology every two months.
Mass vs class
Detractors and competitors, however,
say that the company's strategy may
take the sheen off the brand. “You can't
be a prestigious brand and at the same
time sell it for under Rs 1,000. Also you
will compromise on quality and these
shoes are known for their performance.
You can't be both a mass as well as a
class brand," says a rival.
Indeed, apart from airlines like
Virgin and Kingfisher, there aren't too
many brands that straddle all ends of
the market. Remember, Toyota had to
come out with Lexus to tap the top-end
www.business-standard.com
of the car market. instance, some years ago decided
Reebok, of course, is aware of the to go mass with packs priced at Rs 5. It
challenge. One way to overcome it is to did get volumes but its profit & loss
segment the market, and have sub- sheet began to bleed. Prem needs to
brands for each segment. For instance, avoid that trap.
Reebok has created a segment for
health- and figure-conscious women. It
has launched Easytone footwear which
promises to help tone the legs and butt.
These are, of course, global products
launched recently and available at a
stiff price starting from Rs 4,999. Says
Prem: “It's a challenge to segment the
market, but we need to do that to grow
and address the specific needs of cus-
tomers."
Similarly, to cater to the fashion-
conscious, Reebok has tied up with
designer Manish Arora for the Fish Fry
range. It's a small market but if offers a
style statement and that gives the brand
an extra dimension.
Reebok recently found that people
above the age of 60 prefer to use sandals
in their morning walk with friends.
Prem caught on to the potential when
he saw his father and his friends not
using sports shoes while walking in the
morning.
“The challenge here was to encour-
age them to sample our Rs 990 shoe so
they could understand the superiority
of the product," says Prem. So, it has
taken steps to reach such prospective
customers. For instance, it has done a
promotion with Mail Today under
which it offers free Reebok shoes with
an annual subscription. “The whole
idea is that when the above-60 con-
sumer uses the shoe, the next shoe he
will buy also will be Reebok” says Prem.
For the mass market, Reebok has
bonded well with cricket. It has set up
exclusive cricket stores which stock
pads, wickets and other cricketing gear.
It has extended its sponsorship with
Kolkata Knight Riders by opening an
exclusive store in Kolkata which sells
KKR merchandise. As many as nine
players in the Indian cricket team use a
Reebok bat. It has benefitted from tying
up with cricketers much before they
become stars.
For instance, Yuvraj Singh was taken
on board nearly nine years ago. Will
Prem's gamble pay off? Coca-Cola, for
Business Standard 76

IITS SLIP IN ASIAN
UNIVERSITY RANKINGS
A
majority of premier Indian
Institutes of Technology (IITs)
have not performed well in the
2010 QS Asian University Rankings
released today.
IIT Bombay's rank, for instance, fell
six places to 36 this year. It was ranked
30 last year. IIT Kanpur, too, slipped
three notches to be ranked at 37 against
34 last year, while IIT Delhi fell from 36
to 39 this year.
“The rankings are OK. We are not
obsessed with it. Our endeavour is to
continue our efforts to excel in teaching
and research and we are constantly try-
ing to improve," countered Devang
Khakkar, director, IIT Bombay.
IIT Kharagpur, on the other hand,
climbed 84 positions up to figure at 57
against 141 last year. The University of
Hyderabad, which did not figure on the
list at all last year, was ranked the 81st
best Asian university this year.
IIT Guwahati, too, stands at 66 this
year against 171 last year. “Though we
are not aware of the process of the rank-
ings, we are happy that we have
climbed 105 notches. We are constantly
attempting to get better and we hope to
figure in the list of at least the top 50
best institutions next year," said
Gautam Barua, director, IIT Guwahati.
The rankings listed Asia's top 200
universities, where 12 Indian institu-
tions figure, including seven IITs and
five universities. “Strength in academic
peer recognition helped seven Indian
Institutes of Technology and 15 South
Korean universities appear in the Asian
top 100," a note from the QS press office
said.
www.business-standard.com
BS Reporter
Meanwhile, among the 200 best strength of Hong Kong and Japan,
Asian universities, the University of which together accounted for all of the
Hong Kong retains the top slot this year top five positions. The Asian University
too, The Hong Kong University of Rankings have been compiled by using
Science and Technology is ranked 2nd parameters that are considered to be
against 4th position last year and more appropriate to institutions in this
National University of Singapore is region. These parameters include
ranked 3rd against 10 th last year. assessing a combination of regional and
“The rise of National University of international factors, such as peer and
Singapore to third place overall is recruiter reviews, the international
underpinned by a strong performance research capabilities of the institution,
in the international faculty, internation- teaching quality, and internationalisa-
al students and academic peer review tion of the staff and students, among
measures, amidst a drive to internation- others.
alize Singapore's universities," the QS
press office said.
In total, 11 countries are represented
in the top 200, with Japanese universi-
ties occupying 57 of the top 200 and five
of the top 10 places in this year's table.
“Government-led investment, most
recently through the 'Global 30' pro-
gramme, has helped drive up standards
by attracting high-quality international
students and staff, areas of the rankings
in which Japanese universities excel,"
the release added.
Highlights of the research include
the continued dominance of Japan's
universities and the success of Hong
Kong's increasingly internationalised
institutions, which take three out of the
top four places. Measuring factors
including the quality of research
through citations, and the proportion of
international students and staff, the
rankings indicate that an international
outlook adds considerably to the repu-
tation and status of universities in the
region.
In 2009, the rankings revealed the
Business Standard 77

AD FEST OR WAR FEST?
The schism in the ad industry has come to the fore with the controversy
over the Goafest awards
A
dvertising awards in India
have never been free of
controversies. Allegations
of 'scam ads' winning
awards or of a particular
agency winning most of the trophies -
thereby hinting at a possible rigging of
the awards - have surfaced off and on.
But self-voting - the issue currently
raging like a ball of fire in the Rs 32,000-
crore Indian advertising industry - is
unprecedented.
Self-voting means that a juror is vot-
ing for a piece of work produced by his
or her agency. The Creative Abbys,
which was held during the annual
Goafest in April, was marred this year
by episodes of self-voting by certain
jurors. Almost 29 such instances were
found by the Advertising Club of
Bombay during investigations last week
following a controversy over the judg-
Viveat Susan Pinto
ing of the creative awards at the Goafest
this year.
If the shock of this wasn't enough, a
rather aghast industry is now having to
deal with finger-pointing and the high
drama that goes with it.
“You will hear from us," says Arvind
Sharma, chairman, Leo Burnett, South
Asia, in response to his agency and
National Creative Director K V Sridhar
having reportedly been served a legal
notice by the Mudra group following
comments made by Sridhar in the wake
of the self-voting controversy. “I cannot
speak on the matter,"' he says. But
Sridhar does confirm that the legal
notice to him and his agency has been
received. “Our legal department is look-
ing into the matter," he says. “But we
have asked the organisers of Goafest to
give us access to the video-recording of
the judging that happened, so that
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www.business-standard.com
everybody is clear who did what. It sets
the record straight," he says.
Clearly, the last hasn't been said on
this, with more skeletons likely to tum-
ble out of the cupboard in the forthcom-
ing weeks.
Madhukar Kamath, managing direc-
tor and chief executive officer, Mudra
group, could not be immediately
reached for his comments.
The Ad Club, on its part is taking no
chances, writing to agencies and its
members involved in self-voting,
politely requesting them to return their
trophies to the body. “We are hopeful
they will accede to our request and
return their trophies," says Ajay
Chandwani, chairperson of the Creative
Abbys this year.
Industry sources say that agencies
involved in self-voting will have no
choice but to return their metals in
78
 www.business-standard.com

order to avoid being discredited by the Adman David Ogilvy, who founded
Advertising Agencies Association of advertising agency Ogilvy & Mather,
India (AAAI), which is one of the main once famously said, “Never write an
organisers of the Goafest. “I don't think advertisement which you wouldn't
the agencies involved would want to want your family to read. You wouldn't
risk being discredited by the AAAI," tell lies to your own wife. Don't tell
says Rohit Ohri, managing partner, JWT them to mine." What Ogilvy was basi-
Delhi. “Their reputation is at stake here. cally advocating was the need to have
Besides, it makes sense for them to take some ethics in advertising.
moral responsibility and own up. The But ad men and women over the years
industry has to be rid of this mess. You seem to have opted to give this message
have to make a start somewhere," he a clear pass.
says.
But the creative head of a reputed ad
agency, which has opted to stay out of
Goafest this year, says he doesn't see the
agencies under the scanner returning
their metals at any cost. “Why would
they want to own up?," he says. “I don't
think they would do it. That will be a
bigger credibility issue for them
because clients then will cease to
respect them. No agency would want
that."
If the Ad Club does manage to get the
agencies to toe its line, it will be another
unprecedented step in the history of
Indian advertising. Though controver-
sies have plagued the industry for long,
there has never been an instance when
agencies were asked to return their tro-
phies. Says the creative head, “The fact
that the Ad Club is writing to agencies
today indicates just how deep the
malaise is."
His reference here is to the hunger
for awards, which most in the industry
say, is at the heart of the matter. “The
fact that your next increment depends
on it and that it will get you peer
approval is what is driving this phe-
nomenon," says Kiran Khalap, co-
founder of brand consultancy chloro-
phyll. Agrees Elsie Nanji, who started
ad agency Ambience (now Publicis
Ambience) alongwith advertising veter-
an Ashok Kurien in 1987, and who is
now managing partner of Publicis's
design shop Red Lion. “I feel sorry for
the youngsters today who are in the grip
of this. There seems to be no escaping
this with certain agencies setting aside
time and money for this," she says.
A call to clean up the system rages
furiously as the mess gets deeper by the
day.

Business Standard 79

IDIOTS LEAD
THE PACK
3 Idiots wins the 2009 Brand Derby, the research for which was
done by Ipsos.Heavily-advertised categories do well; clutter-breaking
work gets rewarded
A
film that released at the fag
end of the year and spoke
out against blinkered educa-
tion raced ahead of rivals in
highly-promoted categories
like automobile, telecommunication and
food to win the 2009 Brand Derby. 3
Idiots - produced by Vidhu Vinod
Chopra, directed by Raju Hirani and with
Aamir Khan in the lead - was the most
Bhupesh Bhandari
power-packed launch of last year. As
many as 78 per cent of the respondents,
all top marketers of the country, called it
very successful (see The Complete
Story). They also ranked it first amongst
the very successful launches of 2009
(Ranking Among Very
Successful Brands). The
Derby ranks brands that
were born in 2009.
Business Standard
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The film, which had stellar perfor-
mances by Khan, Boman Irani and others,
good music, smart dialogues and slick
visuals, was produced for Rs 35 crore, and
has done business of over Rs 400 crore.
This makes it the biggest grosser of all
times in India. More than four months
after it was released in threatres, there is
still no sign of 3 Idiots on DVD or pay-
per-view television.
What was the reason for
its success? 3 Idiots
80

struck a chord with the young as well as
the old - anybody who has had to learn,
more often than not under duress, unin-
telligible stuff by rote. Experts say it was
also the involvement of Hirani and Khan,
men with the Midas touch, which tilted
the scales in favour of the film. Hirani has
directed iconic films like Munnabhai
MBBS and its sequel, Lage Raho
Munnabhai (it had won the 2006 Derby),
and Khan has acted in super-hits like
Ghajini (eighth in the 2008 Derby), Rang
De Basanti and Tare Zameen Par. “If you
take these two men away, the film falls
flat," says Dentsu India Executive Vice-
chairman & Chief Creative Officer Gullu
Sen. “They picked up a sensitive subject
and cleverly wove a story around it.
Formulas have been well taken care of."
3 Idiots, mind you, does not lend itself
to either serialisation or extension into
product categories like gaming and mer-
chandise. Film pundits say the story has a
conventional end which cannot be
reopened, and Khan is unlikely to repeat a
character - such is his fear of failure. And
you don't find 3 Idiots merchandise
because the main characters were ordi-
nary boys, not superheroes. That's per-
haps also the reason why gamers have not
developed applications around these
characters. Yet, 3 Idiots beat brands like
Tata DoCoMo, Samsung Corby, PepsiCo's
Aliva and Chevrolet Cruze in the Derby.
Like 3 Idiots, Tata DoCoMo has bene-
fitted from the freshness of its idea. Fifty-
three per cent of the respondents thought
it was very successful. The telecom space
had become overcrowded by 2009, to say
the least. To break the clutter, it came out
with a whole new plan - why pay for a 60-
second pulse when you can pay by the
second? The idea appealed to customers.
Those who switched to its plan began to
report up to 20 per cent drop in their
monthly bill. The message spread
through word of mouth. Indians live their
lives outside their homes, and anything
good or bad about a product gets dis-
cussed threadbare online as well as
offline. A bad product will find it difficult
to hide, just like a good product can per-
haps make do with fewer advertising
rupees.
Amongst the very successful brands,
Tata DoCoMo shares the second slot with
General Motors' Chevrolet Cruze. Last
year was one of unprecedented crisis for
the car maker - its parent in the US filed
for bankruptcy, and potential customers
in India panicked whether Chevrolet cars
will get serviced and resold. General
Motors, at that time, had announced that
it will launch two new cars within the
year, the Cruze and the Beat, and stuck to
the promise. That gave a boost to the con-
fidence amongst customers. Result?
Though there was a blip in sales after the
crisis broke out, numbers in the last one
year have more than doubled. Buyers of
the Cruze, in fact, have to wait for well
over a month for delivery. “We knew at
that time any price cut would be hara-kiri;
our brand equity would get diluted. So,
we decided to go steady with our new
product offers," says General Motors India
Vice-president (sale, after-sale and mar-
keting) Ankush Arora.
For the Derby, Ipsos, the market
research specialist, surveyed 102 market-
ing professionals in Mumbai, Delhi,
Kolkata, Chennai, Hyderabad and
Business Standard
www.business-standard.com
Bangalore in February and March 2010.
Of the 32 entries in the Derby, there are
eight telecom brands, seven food brands,
six auto brands, five media & entertain-
ment brands, three FMCG brands, two IT
brands and one footwear brand - sectors
with heavy ad spends.
The top five brands - 3 Idiots, Tata
DoCoMo, Bajaj Pulsar 135LS, Nokia E72
and Samsung Corby - were launched in
categories that saw hectic activity in
2009. This shows that adversity often
brings out the best in brand managers. It
also helped that budgets in 2009 were
tight and agencies were under pressure to
deliver more bang for the buck. The mes-
sage in the Derby for the marketer is that it
is possible to break the clutter with a good
product and some kickass marketing.
“Differentiated differentiation is the key
now," says Ipsos President (loyalty, media
and public affairs) B Narayanswamy. In
the 2008 Derby, the Nano and the Indian
Premier League had come on top, which
raised the bar for brand builders and mar-
keters. Innovation was valued highly in
this Derby too.
There are no entries from consumer
electronics and apparel this year. As in
the past, real estate and financial ser-
vices are absent in the Derby. While real
estate has the handicap of building very
localised brands, financial services
build formless brands. Still, it's time the
sector woke up to the advantage of strong
brand equity. In the financial crisis
induced by the fall of Lehman Brothers
in September 2008, state-owned banks
and insurance companies got a lot of
business. People thought their money
was safe with them. Clearly, brand pow-
er is important in the sector.
81
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AMRUTANJAN: PAIN
FOR SUITORS
The heritage brand, which has retained its number
two position through an aggressive rural push, seems
to be a permanent takeover target. But the bidders have
had zero luck so far Viveat Susan Pinto & P B Jayakumar

T
he Chennai-based Amrutanjan
has been in the news as a
takeover target over the past cou-
ple of years. And the buzz just
refuses to die down even though the pro-
moters have told the stock exchanges
time and again (the latest denial was
issued last month) that they have no
intention to sell out.
The scrip has gone up over 150 per
cent in the last one year because of the
takeover reports. What added fuel to the
fire was Emami Chairman R S Agarwal's
reported statement last month that he was
interested in buying Amrutanjan. His
company, however, was quick to clarify
that the chairman had only expressed his
desire to acquire any fast moving con-
sumer goods or pharma business or com-
pany, including Amrutanjan, within its
financial and operational resources.
Meanwhile, names of various other suit-
ors including Dabur have been doing the
rounds.
So what makes the 115-year-old
Amutanjan brand an attractive takeover
target? “It's difficult to dislodge
Amrutanjan," says the executive of a firm
who has been trying hard to steal some
market share from the brand in the hope
of improving his company's prospects in cent, and was acquired by Emami in share at 5 per cent, and this, despite it
the Rs 1,500 crore pain management mar- 2008. being a strong brand overseas.
ket. But Amrutanjan, as the executive Emami's other pain relieving product - Tiger, for the record, has a strong fran-
points out, sits firm in the marketplace Mentho Plus - has a market share of 15 per chise on its home turf of Singapore. It was
with a share of 29 per cent - second only to cent only. Elder Healthcare's Tiger balm, out licensed to India via an agreement
rival Zandu, which has a share of 45 per on the other hand, has an even smaller with Elder a few years ago. The latter

Business Standard 82

hoped to make a dent in the marketplace
with Tiger, but to no avail. The market
share continues to be in single digits
though Managing Director Anuj Saxena
says the brand is doing well. He says, “We
spent the first few years fighting legal bat-
tles with copy cat versions of the brand.
We lost some time there."
Even then, Tiger's inability to make
much headway in the balm market
speaks for itself - Zandu and Amrutanjan
are just too strong.
For Amrutanjan, in particular, retain-
ing its number two slot over all these
years has been far from easy in a market
that has seen competition growing at the
same time. As an FMCG analyst points
out, “When competition increases, the
first to be attacked are the number two
and three brands. They are the ones chal-
lengers go after typically. The number one
is secure in that sense because chal-
lengers are not baying for its blood at the
first instance. The number two always
has a greater threat of seeing market share
eroding as challengers increase."
So how has Amrutanjan managed to
hold its own in a market that has seen
Emami and Elder get active over the last
few years, not to mention the growing
threat of duplicates as well.
By staying relevant, say analysts.
Amrutanjan has transformed itself into a
youthful product with new packaging
and variants. There are three key variants
as of now - a pain balm, a strong balm and
a maha strong balm. Plus, the brand has
extended into segments such as roll-on
liquids, cold gel packs, reusable gels, joint
ache creams and sprays in quest for neo
users.
Amrutanjan's pricing of its balm is
also on a par with leader Zandu - Rs 20 for
the standard 8-gm-pack. Tiger is slightly
expensive at Rs 22, say observers. “So that
gives consumers a choice of two products
at the same price point," says a source.
That's not all. To increase brand recall,
Amrutanjan has also changed its advertis-
ing strategy - moving away from regional-
level campaigns to a national-level exer-
cise replete with a new tagline - Be ready
with Amrutanjan.
As the brand makes the transforma-
tion from regional to national, it has
retained one attribute though - its grip
www.business-standard.com
over rural and semi-urban markets. That
has been the heart of Amrutanjan's distri-
bution strategy - keeping its key consumer
profile intact even as it seeks new users.
Amrutanjan, as rivals point out, is
strong in non-metro markets. “By and
large, pain balms are strong in tier two
and three cities. It's not an urban phenom-
enon unlike pain rubs and creams which
are. That is because consumers in small
towns and cities are comfortable using
pain balms as opposed to pain rubs or
creams," says an executive from Elder
Healthcare.
In these small towns and cities, the
fight then is a square one between
Amrutanjan and Zandu, say analysts.
Both have their strongholds - Zandu in
the north, and Amrutanjan, in the south.
Both over the years have moved to allied
areas - taking the battle to each other's
door steps in the process. So Amrutanjan
has been fighting hard for share in the
north, while Zandu has been seeking con-
sumers in the south. Have they succeed-
ed? For now, Zandu seems to be having an
upper hand with greater market share, say
analysts, though Amrutanjan is not giving
up yet in its quest for market share
beyond the south.
What it is banking on are its trademark
properties, say sources, its distinctive yel-
low balm with a strong aroma. It is these
medicinal properties that have ensured
that consumers in the south have
remained loyal to it despite the onslaught
of Zandu. As an executive with a rival
healthcare firm says, “People love apply-
ing a balm before retiring for the night in
the south. And if that is an Amrutanjan
nothing like it."
Business Standard 83
 www.business-standard.com

FAST-MOVING
FOOD BUSINESS
ITC Foods has
achieved scale, built
brands and turned
profitable.What
drives its growth?
Bhupesh Bhandari

I
n August 2001, ITC made a mod-
est entry into the food business
with its Kitchens of India ready-
to-eat preparations. The company
ran popular restaurants, Bukhara
and Dum Pukht, in its hotels. These
restaurants, the company felt, were suc-
cessful because it understood the
Indian palate well. Hence, the new line
of business. A more serious effort was
made a year later when ITC launched
its flour under the Aashirvaad brand.
This was followed by candies, biscuits,
snacks, salt, pasta and spices. The size
of the food market was just too tempt-
ing. Within fast-moving consumer
goods, food has always been the largest
category. A large part of that is still sold
loose; so the upside for packaged foods
remains sizeable.
The news is that ITC has crossed the
first hump in terms of volume, market
share and profits. Its food business is
over Rs 2,500 crore in size. If beverages
are excluded, investment analysts reck-
on, this should put ITC amongst the top
three food companies in the country
after Nestlé and Hindustan Unilever.
ITC Foods Chief Executive Chitranjan
Dar runs 40 food factories across the
country and a product development

Business Standard 84

centre in Bangalore. It is the market
leader in one category - flour -, and is
second in confectionery, salt and pack-
aged snack, and third in biscuits. It has
in its portfolio six brands (Aashirvaad,
Sunfeast, Bingo, Kitchens of India,
Minto and Candyman).
And it has turned profitable. Till
recently, profitability of this division
was a huge concern for ITC. Not any
longer. Investment analysts say the
profit margins are below 5 per cent, and
the company's next task should be to
raise it to the industry norm of 5 to 10
per cent.
ITC's competitive advantage from
day one has been procurement of com-
modities. The agri-business division of
ITC connects with 5 million farmers in
170 districts of 16 states. The company
leverages this to good advantage for all
the commodities it requires for the food
business: Wheat, sugar, edible oil, pota-
toes et al. Such commodities account
for almost 60 per cent of the costs of the
business. This is the reason why Dar is
not too bothered about the private food
labels of large retailers. Most of them
buy commodities from the spot market.
So, when prices rise, like wheat from
September to December, they find
themselves in a jam. “The sharbati vari-
ety of wheat this year is not available.
It's fully sold out. That's where our
strength lies," says Dar. ITC uses shar-
bati wheat for its premium flour called
Aashirvaad Select. The other advantage
has been ITC's retail network for ciga-
rettes. About a third of the company's
food products apart from flour (snacks,
biscuits and candies) are retailed
through these shops.
Local preferences
The company was also quick to realise
that the foods business in India requires
sound knowledge of local tastes and
preferences. Food habits in the country
change after every hundred miles. So,
this is a business in which local compa-
nies stand a better chance of success. It
is an entry barrier for multinational cor-
porations, though the two largest food
companies in the country are foreign-
owned. “Food is a very personalised cat-
egory. It's not like soap. You can get
some space if you can create differentia-
tion," says Dar, a veteran of 25 years at
ITC. “Brands will need to be fragmented
to cater to local tastes and preferences.
So there can be no omnibus product
which can be a national hit."
ITC's biggest brand is Sunfeast - bis-
cuits and now pasta. In biscuits, ITC is
ranked third after Britannia and Parle.
(See table.) The journey so far may have
been easy because ITC has grown at the
cost of local brands. The days ahead
could be tough. “In biscuits," says Dar,
“you can take on formidable rivals with
formidable products. The most success-
ful products are 30 to 40 years old.
Cookies or glucose biscuits belong to
the 1980s and before." In the mid to pre-
mium category, Dar feels there are sev-
eral taste buckets and categories avail-
able on the health & nutrition,
indulgence and convenience platforms.
“In these three platforms there is still a
lot to be exploited. It is possible to inno-
vate around that. One who does it the
best will walk away with the market."
Some time back, ITC came out with
Sunfeast pasta. This remains a small
category. Market estimates suggest that
it was till six months ago just 2.5 per
cent of the Rs 1,100-crore market for
instant noodles, which may have dou-
bled with Nestlé's entry into the seg-
Business Standard
www.business-standard.com
ment. This has fuelled the buzz that the
next stop for Sunfeast will be instant
noodles. Dar denies there's any plan for
instant noodles, “at least not in the next
quarter". The problem here will be to
create a product that stands out from
Nestlé's Maggi. Over the years, Nestlé
has come out with so many variants of
the product that there isn't much left to
add. Dar admits that ITC's product
development team has worked on
instant noodles but could not come out
with a killer recipe. There has also been
speculation that ITC will take Sunfeast
to newer categories like packaged water,
tea and bread. Dar denies all such talk.
Flourishing with flour
Aashirvaad is ITC's brand for staples.
Branded flour sales in the country are
around Rs 4,000 crore, which is just 4
per cent of the market - rest is all sold
loose. (Conversion to packaged flour is
happening at about 8 per cent per
annum.) Out of this, national brands
like Aashirvaad, Shaktibhog,
Annapurna and Pilsbury sell around Rs
1,700 crore. Aashirvaad's share of the
market is above 50 per cent, market ana-
lysts say. This perhaps is the reason
why the brand is not heavily advertised
in mass media. “Somebody has to pay
for it. In the South we do advertise,
85

because it a nascent concept there. In
the North, we work at the points of pur-
chase," says Dar. Aashirvaad is avail-
able in outlets that sell 80 per cent of the
packaged flour in the country. The
product is tweaked, claims Dar, for dif-
ferent markets. The one sold in Delhi,
for instance, is a blend of four flours.
The mix is changed right through the
year to give the same quality to con-
sumers, says he.
ITC first extended the brand to salt.
Its market share is 10 per cent, next only
to Tata Chemicals' Tata Salt (over 30 per
cent). Here, ITC's focus is on the rural
markets. Unlike flour, rural households
have converted swiftly to packaged salt.
So, its retail network is not the same as
packaged flour. ITC, says Dar, has there-
fore appointed a whole army of tradi-
tional wholesalers to reach these
remote markets. Since this market is not
scientifically tracked, Dar says he does-
n't know how deep he has penetrated.
Next was the turn of Aashirvaad
spices. This industry has a handful of
national bands like Ashok, MDH and
Everest which are personally driven by
their promoters. This makes them for-
midable opponents. ITC's strategy here
has been to go for blends, so that the
brand can charge a premium over oth-
ers. The problem is that all rivals have
come out with various blends. To create
a differentiation, ITC will have to come
out with something really new and dif-
ferent. That's the challenge that the
company's researchers in Bangalore
face. To begin with, ITC has decided to
sell in the South where consumers are a
little particular about the spices they
buy. The northern markets will come
later.
Would ITC like to come out with oth-
er staples under the brand, like rice and
sugar? Dar rules out the possibility. For
rice, he says that ITC does not have a
procurement infrastructure in place.
Basmati rice, that is what Aashrivaad
could look at, is grown in Punjab,
Haryana, Jammu and parts of
Uttarakhand - not ITC's stronghold. “As
and when our agri-business division
begins to export basmati rice, we will
also start to sell in the local market,"
says he. Sugar too doesn't excite him
www.business-standard.com
because there is no opportunity to cre-
ate differentiation.
Bang on with Bingo
ITC's most audacious move in foods so
far has been Bingo, its ready-to-eat
snack, which took on the might of Frito
Lays (market share: 60 per cent; brands:
Lays, Kurkure, Aliva and Uncle
Chipps.) Bingo has grown through
some innovative products and kickass
promotion. Its share of the Rs 3,000-
crore market is 10 to 12 per cent. Frito
Lays has hit back with its new range of
Indian snacks. Parle too has entered the
market with aggression. Sector experts
point out another challenge: Bingo's
positioning is such that it needs to come
out with new flavours and advertise-
ments all the time. “It's a dangerous
game," says a Mumbai-based analyst.
“Customers can lose interest if we do
not innovate continuously," Dar admits,
“So you need to look at new textures,
flavours and shapes regularly. In terms
of flavours, our target is one or two
launches a year. In texture and shape,
there should be one new product in two
years. There are eight to ten flavours
always in the pipeline in various stages
of development."
In confectionery, ITC lags behind
Perfetti because it doesn't have a chew-
ing gum in its portfolio, though it has
candies, éclairs, toffees, chews, lacto
and so on. “There is a lot of proprietory
work in gums that needs to be done. You
need to develop the gum base, for
instance. We don't want to outstretch
our limited means," says Dar. That
leaves in Dar's portfolio Kitchens of
India, which is small. That category
may not be more than Rs 30 crore. In
fact, export of the brand could be five
times more than domestic sale. But the
North American markets, which ITC
has in its crosshairs, could be tough
because of the inability to export meats
there. Dar says the company could look
at local production to get over the prob-
lem. But that can wait: Dar's hands are
full with other brands now.
Business Standard 86
 www.business-standard.com

STRETCHING OUT
IN A TIGHT SPACE
Bajaj Corp plans to extend the hair-oil company into other personal
care categories. Can it take on well-entrenched rivals? Sayantani Kar

W
hen the Bajaj brothers,
Rahul and Shishir,
split their business in
2008, the sugar busi-
ness, under Bajaj
Hindusthan, went to Shishir Bajaj. It is
the country's largest sugar producer -
more than double in size of its nearest
rival. The business is driven by Shishir
Bajaj's elder son, Kushagra. Those who
know him well will tell you that his
appetite for growth is far from satiated.
Some big ticket acquisitions could hap-
pen in the days to come.
In addition, father and son own and
run Bajaj Corp. The closely-held hair oil
company is a hidden gem. In 2008-09, it
did a business of Rs 244 crore with a
gross profit margin of 62 per cent and
net profit margin of almost 20 per cent!
The return on capital employed, at last
count, was 188 per cent. Its Almond
Drops is the largest brand in the fragrant
hair oil market with a share of 51 per
cent. It is the third-largest hair oil brand
in the country after Marico's Parachute
and Dabur Amla.
This seems to have fuelled Kushagra
Bajaj's ambitions for the fast-moving
consumer goods business. Sector
experts expect Bajaj Corp to get into pany to the next orbit. The personal kept at a minimum with a lean team.
soaps, skincare, shampoos and other care space in FMCG is far from satura- Higher numbers of distributors' sales-
hair oils in the near future. Bajaj Corp is tion. We hope to tap that," says men in the sales team cut costs up to a
tightlipped about the new product Kushagra Bajaj. third for the company. The challenge is
lines. But it has filed a draft red herring Bajaj Corp's strength is that it runs a to rein in raw material costs. Bajaj Corp
prospectus with the Securities and tight ship. The company claims it has Vice-president RF Hinger says:
Exchange Board of India for a public one of the lowest cost ratios in the “Forward buying in liquid paraffin and
issue. This is where growth capital will industry. It is an asset-light business bulk deals for packaging material and
come from. “The IPO will take the com- with low overheads. People costs are vegetable oils for every quarter help

Business Standard 87

keep our costs in check."
Also, unlike pure oils, Bajaj can
price Almond Drops, which is scented
and comes with added ingredients, at
Rs 38 per 100ml, much higher than
coconut oil which sells at Rs 21 per 100
ml. Only cooling oil (Himani Navratna
and others) retails for more at around Rs
44 for 100 ml. The company operates
three factories in Uttarakhand and
Himachal Pradesh and hence gets sub-
stantial tax breaks. It reaches 1.5 mil-
lion retail outlets in the country.
Challenges ahead
Is this good enough for Bajaj Corp to
get into new categories? The challenges
are huge. One, expansion into soaps,
shampoos and skincare will bring Bajaj
Corp face to face with the might of
multinational corporations like
Unilever and Procter & Gamble. Hair
oil, as it happens, is a uniquely South
Asian product. As a result, it does not fit
into the global product development
plan of most multinationals. That's why
the Indian market is ruled by homespun
companies like Marico (coconut oil),
Dabur (amla oil), Bajaj Corp (fragrant
oil) and Emami (cooling oil).
Two, Kushagra Bajaj has so far
proved his mettle in sugar which is a
commodity business; brands are a dif-
ferent ball game. Bajaj Corp, for
instance, spent only Rs 18 crore in
2008-09 on advertising. On a turnover
of Rs 244 crore, this works out to a little
over 7 per cent of turnover. This is way
below the 13-15 per cent norm in the
FMCG business. Also, Bajaj Corp is
largely a single brand company. Though
it also has amla and jasmine hair oil as
well as a tooth powder, almost 90 per
cent of its business is Almond Drops.
But this could change in the days to
come. The draft red herring prospectus,
which lists the products for launch as 1,
2, 3 and 4, puts down the marketing
budget for 2011 at a total of Rs 60.7
crore for the four products. That would
be almost 20 per cent of its earning,
should it continue with a 22 per cent
growth rate. “For marketing, the top ten
soap brands spend around Rs 600 crore
in advertising every year. If we have to
make noise, we need to have a similar
budget. We will need at least 10 per cent
share of the voice," says Bajaj Corp
Director (sales & marketing) Sumit
Malhotra. This is where the IPO money
will come in handy. Some develop-
ments suggest that the company is
ready to step on the gas. It has signed on
Lara Dutta for a new campaign. For its
southern market, it has Ramya, the
Kannada actor, advocating the oil's
nutrition and protection quotients.
A brand strategy is also in place. “We
have identified categories in personal
care in which we could extend Almond
Drops. Segments in which we can't, we
will look to acquire brands or launch
new ones," says Malhotra. Bajaj Corp
claims it has zeroed in on companies to
acquire. For now, these would be brands
that Bajaj Corp can retail through its
existing system for better profitability
through synergies. “We would be saving
up to 5-7 per cent distribution costs that
way," says Malhotra. Its attempts at
acquiring brands over the last two years
did not meet with success. Naturally, it
is reticent to delve into its current
prospects. Bajaj Corp plans to divide
the market into four zones for launch of
its four products. “We looked at the kind
of distribution we had. We were strong
among grocers, so we could flop in
launching a chemist-led product," says
Malhotra. Both extensions and new
products would need to start in the mar-
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kets the company is strong in - North,
West and East. In the South, the compa-
ny will work towards increasing the
brand recall of Almond Drops.
Within hair oils, it is important for
Bajaj Corp to get into new categories.
Nielsen puts the branded hair oil mar-
ket at Rs 4,943 crore and growing at 13
per cent. Of this, coconut oil is 52 per
cent, amla 15 per cent, light or fragrant
hair oil 14 per cent and cooling hair oil
12 per cent. If it wants to expand, Bajaj
Corp cannot ignore the other categories.
While the company is tightlipped about
its plans, market observers say that
cooling oil could be next on the compa-
ny's radar. “It is strong in the Hindi-
speaking belt where cooling oil has a
strong hold. Cooling oil is also priced
higher than regular hair oils, in the
same range as Bajaj Almond Drops,"
says Technopak Advisors Associate
Vice-president Purnendu Kumar. This
segment has been growing at over 20
per cent per annum.
Crowded space
Emami Director Harsh Agarwal does
not seem too bothered: “Our brand is
strongly entrenched in the market,
which makes it difficult for newcomers
to carve a niche for themselves." He
adds that Marico and Dabur have both
backed off from the segment. The brand
is fortified with Shah Rukh Khan and
88

Amitabh Bachchan as brand ambas-
sadors.
Malhotra, on his part, rules out an
entry into coconut oils for now. But he
is confident that the brand equity of
Almond Drops will fetch him cus-
tomers in other categories as well. “The
name of the game is conversion. You
have to convert the person from the hair
oil he or she is currently using. For us, it
has to be other branded oil because of
the premium pricing of Almond Drops."
he says. This is easier said than done,
say rivals. Hair oil is bought largely by
women who happen to be very loyal
towards the brands they consume, and
it takes a lot of persuasion to change
their preferences.
Meanwhile, attracted by Almond
Drops' domination of the fragrant hair
oil market, rivals have entered the seg-
ment. Marico with its Hair & Care light
hair oil and Dabur with its Vatika are the
latest entrants to the almond hair oil
space. Says Dabur India Executive
Director (consumer care) VS Sitaram:
“We will leverage our herbal heritage
for Vatika Almond oil since it is
enriched with herbs." Then there are
imminent new brands such as Mumbai-
based VVF's newly acquired
Mahabhringol oil which could be
redone in a year's time for launch. VVF
also lays claim to backward linkages in
oil-making, just like Marico in coconut
oil.
Aware of the mounting competition,
Bajaj Corp has begun to expand
Almond Drops in the South. “The
South being a stronghold for coconut
oil, we had to offer something more
wholesome," says Malhotra. While
southern markets account for 28 per
cent of the overall hair oil market, light
hair oils only get one per cent of their
revenue from there. Brand ambassadors
would also help make it younger,
according to Kumar of Technopak. The
company has done well in the other
regional market of the East, where Dey's
Medical's Keo Karpin, the second
largest light hair oil, rules the roost. It
has around 40 per cent of volume share
and 43 per cent value share in this mar-
ket.
Almond Drops' unique selling
www.business-standard.com
“FOR MARKETING, THE TOP
TEN SOAP BRANDS SPEND
AROUND RS 600CRORE IN
ADVERTISING EVERY YEAR. IF
WE HAVE TO MAKE NOISE,
WENEED TO HAVE
A SIMILAR BUDGET”
proposition is its Vitamin E content that
is claimed to be 300 times more nutri-
tious than coconut oil. The ingredient
open up possibilities for extensions in
skin care such as creams and soaps, as it
would for scalp and hair care products
such as shampoos and creams, details
of which will be let out after the IPO. To
initiate further, Bajaj Corp is also push-
ing its smaller packs priced at Re 1 and
Rs 5 in these regions. “The smaller units
give around 7 to 8 per cent of total
sales," says Malhotra.
Emerging from a one-brand compa-
ny to a multi-brand one would require
Bajaj Corp to juggle priorities. Would it
scatter its focus? Kumar of Technopak
says: “It is better to diversify and lever-
age top-lines and economies of scale,
rather than wait for margins to get hit
with new player coming in." Malhotra
agrees, “Organic growth for our flagship
hair oil brand, Almond Drops, is 30 per
cent. But sooner or later, it will slow
down to 13 per cent. For a boost, we
have to look at inorganic means beyond
the existing product, outside hair oils."
Well said, but can he deliver?
Business Standard 89

SUMMER MISCHIEF
Rasna has repositioned again, this time it is wooing kids by
being bold and naughty
C
ute is out and naughty is in.
Just ask Rasna. The com-
pany, which for years
relied on innocence to sell, has
now repositioned itself as a
bolder and naughtier option. In
line with that, the company has
changed its 'I love you Rasna'
positioning to 'Shararat ki ek
ghoont' (one sip of mischief).
The genesis for the campaign was
that even though the company has a 97
per cent market share in the concentrat-
ed juice category, it was keen to rope in
non-users, especially those who con-
sume aerated beverages to quench their
thirst. Other players in this industry
include Coca-Cola's Sunfill which has a
market share of 2 per cent, followed by
Sugar Free (0.2 per cent), C Sip Vitamin
C, Kissan Mr Fruit and Tang.
Rasna Chairman & Managing
Director Piruz Khambatta says: “The
change comes after research we con-
Byravee Iyer
ducted showed there was a marked shift
in motherhood." The consumer study
conducted across four towns covered
600 families. Findings revealed that
there are three types of mothers: The
new-age mother whose relationship
with the child is empowering, nurtur-
ing and friendly; the vigilant gatekeeper
mother is more balanced, goal-driven
and bureaucratic, who urges her child
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to become an achiever; and the tradi-
tional oppressive mother who is
authoritative and strict, which in turn
either creates a rebellious child or a
loner.
Having discovered these three
traits in mothers, Khambatta decided
that his brand had to be one which part-
ners in exploration, discovery, victory
and fantasy. With that in mind,
Khambatta and advertising agency
Mudra sat down to deliberate. “I also
wanted to appeal to the up-market sec-
tions, so I had to show them today's
world," adds he. The company decided
to come out with three TV commercials,
all showing children pulling a fast one.
For instance, one of the ads showcases a
young girl competing with a battery-
operated bear and an Egyptian mummy
for Rasna. The moment the buzzer goes
off the girl puts her hand behind the
bear's back and pulls out the battery,
thus killing the battery-operated bear.
90

Similarly, the child then throws
the second competitor out of the
way by removing the pin stuck on the
length of cloth taped around the
Egyptian mummy. Having overpowered
both her competitors, the girl then
happily sips away all of the Rasna
drink. The ads end with the tag line:
Shararat ki ek ghoont.
Change with the times
Rasna was launched in 1982 by
Pioma Industries. In 2008-09, company
posted revenues of Rs 400 crore, which
was 30 per cent higher than the previ-
ous year. The demand for Rasna peaks
during the summer months. Most of the
company's business is transacted from
January to July. As Rasna is the category
leader by a far margin, the company
does not set aside a large part of its rev-
enue for advertising and brand build-
ing. This year, for instance, it plans to
spend Rs 17 crore. This would not be
more than 4 or 5 per cent of the turnover
for the year. Most beverage companies
spend up to 15 per cent of their turnover
on brand building.
Though it is the market leader,
Rasna has frequently felt the need to
rediscover itself. This is not the first
time Rasna's trying its hand at reposi-
tioning. Five years ago, the company
decided that it no longer wanted to be a
kid's drink. That was when many com-
panies had decided to take the health
route and Rasna was swift to join the
bandwagon. Thus it changed its tagline
to “Relish a gain". To reiterate its point it
launched Juc Fit, a fruit-based health
drink. Khambatta even roped in brand
consultant Shombit Sengupta of
Shining Emotional Surplus to design a
new logo for the company. Thus was
born the leaf logo which signifies value
for money and health.
Marketers opine that the move did
little for Rasna. On the contrary, many
people started moving away from it and
drinking aerated beverages which were
very competitively priced. Rasna made
an effort to enter newer markets
like the milk foods category with a
brand called Shake Up. It also tried to
make its mark in the Cola market with
'Rasna Cola Cola', but neither of the
www.business-standard.com
two really took off. Khambatta explains.
On the distribution front, Rasna has
New positioning the market nicely covered with 1.8 mil-
As for the latest positioning of Rasna lion retail outlets, a 460-strong sales
that builds around the smart kid, brand force, 4,500 stockiest, 35 depots and
consultant Harish Bijoor of Harish five branch offices. It is available in all
Bijoor Consults feels that in a society villages and towns with a population of
like India it's important for a brand like 5,000 or more.
Rasna to evolve. “A child 20 years ago
was far different from children today.
Everything is getting edgy and mar-
keters need to keep pace," he says.
However, he's not very excited by the
tagline, “I'd rather prefer visual naugh-
tiness like the new Limca ad, than have
such a tagline."
THE COMPANY HAS
CHANGED ITS YEARS
OLD ‘I LOVE YOU
RASNA’ POSITIONING
TO ‘SHARARAT KI
EK GHOONT’
Typically, summer at Rasna implies
launching new variants. In the past the
company came out with products like
premium Powder, Alphonso Mango,
Home made Nimbupani, Ghar ka
Range, Aquafun and so on. This time
though, Khambatta believes he's got it
right with the new ads. He's also not in a
hurry to launch variants just yet.
“While we will be coming out with vari-
ants in the second half of the year, right
now we're just concentrating on this,"
he admits.
The product proposition of value-
for-money stays the same. “We contin-
ue to have SKUs from 50 paise onwards
that go up to Rs 10," says Khambatta. He
harps on the Rasna per glass value, cit-
ing that a glass of Rasna along with sug-
ar will cost Rs 3 as opposed to a glass of
Tropicana, which will cost Rs 15. But
how does he manage to keep prices so
low? “We are a fully Indian company
and we manufacture every required
ingredient here itself. There are no
imports of concentrates as the case may
be with multinational corporations,"
Business Standard 91
 www.business-standard.com

SCALING THE
CHINESE WALL
W
hen telecom equip- company, which operates in a highly
Telecom equipment ment maker ZTE first price- and technology-competitive mar-
maker ZTE had to set base in India in
1999, it faced a prob-
ket, has moved up from being India's
tenth-largest player to the fifth-largest
overcome strong lem common to (Ericsson, Nokia, Nokia-Siemens and
Chinese companies: The general suspi- Huawei precede it). It accounts for the
prejudices to establish cion that their business practices were lion's share of CDMA networks run by
itself in India somehow devious and their “cheap”
products flawed. A decade later, this lit-
state-owned BSNL, Reliance
Communications and Tata Teleservices,
Kanika Datta tle-known Shenzhen-headquartered and, in the past year and a half, has

Business Standard 92

bagged orders from several of the new
licencees. So much so that India has
become ZTE's largest overseas market.
How did ZTE overcome the odds to
establish itself in a market in which
strong biases persist? D K Ghosh, chair-
man and managing director of ZTE
India since 2006, says the solutions lay
in addressing cultural issues as much as
realigning business practices.
Mind your language
For Chinese companies globally, lan-
guage is inevitably a big barrier and the
toughest to overcome. China is one of
the world's most linguistically isolated
countries, making it difficult for people
to pick up Mandarin easily. The fact
that few Chinese executives spoke
English, the global language of busi-
ness, increased the scope for misunder-
standing. This was the issue Ghosh says
he tackled first.
“The cultural gap has been a big
problem for us and I knew I had to take
steps to bridge this. One of the things I
did was to alter the format of our senior
management meetings," Ghosh says.
Typically, meetings that were held to
discuss Indian operations were attend-
ed by senior Indian managers and
Chinese executives from headquarters.
“From the outset I found that these
meetings would be conducted in
Chinese - which none of the Indians
understood! So I stopped proceedings
and appointed an English interpreter
from among the senior executives." he
explains.
In the absence of this, there was a
clear wall between the Indians and the
Chinese - not least of which was the lin-
gering suspicion that the Chinese exec-
utives actually knew English but pre-
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www.business-standard.com
tended not to understand to suit the sit-
uation. Once the presence of an inter-
preter became standard practice at
ZTE's India meetings, these misgivings
abated. “It was a simple solution but it
proved far-reaching because a lot of key
information would have been lost if the
meetings had been conducted in
Chinese only," Ghosh adds.
Trust exercises
Multinationals in general tend to
appoint their “own” people to senior
positions in companies they set up
overseas and Chinese companies are no
different. Given the language barriers,
however, this practice also heightens
the potential for misunderstanding. For
India, however, ZTE made an excep-
tion, introducing the concept of trusted
managers, a model it eventually repli-
cated worldwide.
93

ZTE found that the concept of train-
ing trusted managers for the India oper-
ations was possible because Indians
have a wide breadth and flexibility of
knowledge (in terms of technical com-
petence/software and so on). Therefore,
the thinking went, if Indians could be
trained to be international managers
and technical experts, it would help
ZTE in its global sales effort. To start
with, 300 Indians with two or three
years' experience were hired and relo-
cated after short local orientation to
China where they were given intense
training across disciplines for almost a
year. Candidates were then screened
based on their specialisation and indi-
vidual competence and relocated to dif-
ferent departments in India.
“This marked a major change; earlier
the Chinese management could not
trust anyone local with classified infor-
mation," says Ghosh. “Now, for the first
time in the world, these Indians would
be the nucleus of a trusted core team."
Today, of the 2,000-odd employees in
ZTE India, 86 per cent are Indian.
Now, just under a year later, the
model is being expanded and consoli-
dated - more people are being selected
from India, Bangladesh and so on, and
the model is being replicated in Europe
where ZTE has hired Europeans to be
trained in China.
Meanwhile, says Ghosh, there have
been lots of experiments to improve
relationships across nationalities. “One
has to do with recognition - we have
been rewarding locals with more than
average performance with a lot of pomp
and show."
Don't 'buy incompetence'
Managing the external environment in
terms of customer perception is also
critical to overcoming reputation prob-
lems. In ZTE's case, this required alter-
ing familiar but less savoury business
development practices and realigning
the sales pitch to allay customer fears.
One of ZTE's biggest critics in the
initial days was state-owned BSNL.
Dissatisfied with its equipment and ser-
vice, “they were almost throwing things
at us," says Ghosh. “In this connection,
one of the common practices was that of
www.business-standard.com
ONE OF ZTE’S BIGGEST with. Ghosh provides a recent example
when a ZTE team comprising Chinese
CRITICS IN THE INITIAL and Indian technical experts was con-
ducting some testing work in a public
DAYS WAS STATEOWNED thoroughfare. “Our Chinese experts
were working feverishly and this imme-
BSNL. DISSATISFIED WITH diately aroused the suspicion of a shop-
ITS EQUIPMENT AND keeper who phoned the police com-
plaining that they were spies and so on,"
SERVICE, ‘THEY WERE he says. The police arrested everyone
but they were soon freed after ZTE we
ALMOST THROWING explained the issue. “But the incident
goes to show that this kind of distrust
THINGS AT US’ remains and there isn't much we can do
about it," says Ghosh.
passing gifts under the table to get busi-
ness. I put a stop to that," he adds. The
focus, instead, was placed on project
execution.
Obviously, there was a rebound of
sorts for some time but things settled
down after that because, as Ghosh
points out, “people now had to deliver
instead of buying incompetence".
Now, ZTE equipment accounts for
85 per cent of BSNL's CDMA network.
At the same time, Ghosh says he also
stopped the practice of sending out a
“football team” on customer calls -
another common Chinese business cus-
tom - because it made them uncomfort-
able. “As a result, perceptions gradually
improved because our executives estab-
lished personal links," he adds.
Tying in with this, of course, was the
quality issue. As Ghosh points out, this
was essentially a “state of mind” and the
cumulative effect of working with cus-
tomers gradually helped establish
ZTE's reputation as a technology-leader
(for instance, it is the leading provider
of NGN, a fixed-line 3G network prod-
uct).
Meanwhile, ZTE also focused on
customer needs. For instance, one of the
major issues with new telecom
licensees was the shortage of finance.
“Chinese banks are flush with funds, so
we were able to organise $4 billion to $5
billion for Indian operators to set up
their networks," says Ghosh. “Most of
these projects would have not have tak-
en off if it hadn't been for this," he adds.
Of course, prejudices and “security
concerns” remain - a fact that Chinese
companies will have to learn to live
Business Standard 94

VOLKSWAGEN'S BIG LEAP
The world’s third largest car maker is all set to make a splash in India
with a slew of launches
V
olkswagen (VW), who?
That's the common question
the bosses at the world's
third largest car maker faced
every time they made a mar-
keting pitch in India. While its two sister
brands - Audi and SkodaAuto - had a
high recall value, very few were aware of
the VW brand name here.
Not anymore. Look at the long queue
for the German car maker's latest offering
- Polo - launched in India just two
months back. Consumers are willing to
wait three to four months for the hatch-
back priced at Rs 4.55 lakh (ex-Mumbai),
although cheaper models of other manu-
facturers are being offered off-the-shelf.
VW claims it has confirmed orders for
about 6,500 units for Polo, while 500
have been delivered already.
Neeraj Garg, Director, Volkswagen
Passenger Cars, Volkswagen Group Sales
India, says VW indeed had a very low
brand recall in India. To correct that,
Garg says, “the company opted for a con-
tinuous activity in the market because
brand awareness always has a shelf life.
We need to improve our brand aware-
ness, we need to improve our reach. The
fact that we have been successful in
being different from others in the market
is what is going to work for us".
VW is taking the “continuous activi-
ty” part quite seriously. Polo was the lat-
est in a chain of six models ranging from
compact cars to big sedans to giant sports
utility vehicles launched in the last two
years.
The company produces/assembles
the Polo, Jetta and Passat in India while it
imports the Phaeton, Touareg and
Beetle. While Polo is manufactured in
the company's 110,000 units per year
capacity Chakan plant, the Passat and
Jetta are assembled at Skoda's
Aurangabad plant.
Swaraj Baggonkar
And there's more to come. VW is gear-
ing up to launch a sedan in the mass mar-
ket segment later this year. The new car
in the mid-level category will compete
against models such as Maruti's SX4,
Fiat's Linea, Hyundai's Verna and Ford's
Fiesta.
It is also working on a car that would
replace Polo in the entry-level segment.
VW hopes this will generate almost dou-
ble the volumes compared to Polo,
which will remain its flagship premium,
yet volume generating car. All these ini-
tiatives are expected to increase the VW
group's share in India from the current 1
per cent to 10 per cent in the next five
years.
What makes VW's gameplan in India
all the more interesting is its decision in
December last year to pick a significant
minority stake in Suzuki. Though the
details are sketchy, there has been
intense speculation in industry circles
that the tie-up will lead to joint develop-
ment activities in India - a country where
Maruti makes one in two cars sold.
With so much at stake in India, VW
figured out that it needed to make a huge
noise about its challenger status in India.
So when it launched Touareg and the
New Beetle Sedan late last year, VW did
the most expensive print advertising
campaign in India with a multi-crore
roadblock campaign across all editions
of India's largest English daily, The
Times of India. Roadblock refers to an
advertiser paying a premium to black out
all other advertisers.
Mumbaikars also saw other initia-
tives such as a giant banner in the sky
displaying the new Beetle and the VW
logo - a first such campaign for any auto-
mobile manufacturer.
The company is now looking at more
innovative ways for taking its brand for-
ward in a tough market, which is con-
Business Standard
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trolled by only three manufacturers -
Maruti Suzuki, Hyundai Motors and
Tata Motors with combined sales of well
over 1.4 million units (as of March 31,
2010).
Lutz Kothe, chief general manager,
marketing and public relations,
Volkswagen Group Sales India, says
innovation is the way to go. “Our cars
carry innovation and so our marketing
campaign should also carry innovation.
We had to do something which could
make India talk about us. We had a sig-
nificant double digit jump in sales after
the campaign," Kothe says.
But will good cars and innovative
campaigns be enough for a late entrant
like VW to take on the established lead-
ers in areas of technology, distribution
and reach?
The jury is out on this. While many
point to the uphill task that a late entrant
like VW has in building its brand in
India, VW executives are confident.
“The loyalty factor for auto brands", says
Kothe, “is quite low in India compared to
other markets. This means customers are
looking for newer things in their cars. We
do not see a situation where we have to
pull customers, they are and will readily
come to us".
Adds Garg: “The Indian car market is
going to grow to three million units from
1.7 million units in another three to four
years time. That gives enough opportu-
nity to all players for expansion".
VW has also been building distribu-
tion. It presently has about 25 stand-
alone dealers and intends to take it up to
40 in India as the company does not
want to utilise the dealer resources of its
sister brands for distribution. There will
be gradual ramp-up in the number later
with the next phase of expansion
planned for areas outside the main cities.
Watch this space.
95

GE India’s new president & CEO, John Flannery, plans to resurrect the
company’s fortunes by localising operations
T
ill recently, General Electric
(GE) honchos would often talk
of a turnover of $8 billion in
India by 2010. This was 16 per
cent of the company's projected emerg-
ing market business for the year. At that
time, GE hoped to sell gas turbines, con-
sumer loans, water treatment plants,
medical equipment et al in large num-
bers; hence the ambitious target. GE
had ended 2008 with $2.8 billion. So,
will it hit $8 billion when the books are
closed for the year? The day of reckon-
ing is almost here.
GE India President & CEO John
Flannery says the company no longer
discloses numbers for one country
alone. So it's difficult to get him to com-
ment if GE is on course to reach that
size. But he does indicate that the target
may have been ambitious. “There is no
shortage of opportunities in India, and
there is a good fit to become two or three
GENERAL
ELECTRIC 2.0
Bhupesh Bhandari
times the size we are today. That puts us
somewhere close to the number you are
poking at," says he. “Some of those
things were aspirational, an attempt to
get the organisation excited."
In his letter to shareowners in the
2009 annual report, GE Chairman of the
Board and Chief Executive Jeffrey
Immelt had said that GE had a $38-bil-
lion business in growth markets, which
include resource- and people-rich
regions like West Asia, Latin America,
China and India. “We sought out pock-
ets of growth wherever we could find
them. We deepened our position in fast-
growing markets in Australia, Brazil,
China and India."
That GE may have fallen short of its
target for India does not mean that GE
hasn't tasted success in India. It ran a
hugely successful business process out-
sourcing outfit, Gecis, till 2004 when it
was sold to General Atlantic Partners
Business Standard
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and Oak Hill Capital Partners for almost
$500 million. The John F Welch
Technology Centre in Bangalore, which
was inaugurated in September 2000,
has helped GE cut drastically go-to-mar-
ket time (up to 50 per cent in some cas-
es), save huge amounts of money and
develop products for world markets. No
estimates of the benefits are publicly
available. Bangalore is a cost centre for
GE, into which it has so far invested
$175 million. It has four partnerships
going in India with state-owned Bharat
Heavy Electricals Corporation, State
Bank of India, Wipro and now Triveni
Engineering. And it is very much in the
reckoning for the Indian Air Force's
order for 126 fighter jets.
But there have been serious reverses
too. GE Capital had taken a huge expo-
sure to unsecured loans and delinquen-
cies were high. It so much wanted to
invest in a diesel locomotive factory in
96

the country; but right before the general
elections last year, the government
scrapped the bids and decided to put up
the factory on its own. The GE gas tur-
bines at the Dabhol power plant of
Ratnagiri Gas & Power broke down.
Nuclear power is another huge oppor-
tunity (GE was one of the most vocal
supporters of the Indo-US civilian
nuclear deal), but nobody knows when
it will start rolling. Then TPS Chopra,
the successor of GE's first CEO in India,
Scott Bayman (he drove GE in India for
ten long years), left last year. Chopra
would often complain of the slow pace
of affairs in India.
Clearly, things haven't gone the way
they were intended. How much has that
deterred GE? “We are very proud of
what we have accomplished so far in
India. Are we satisfied with where we
are? No, we have still higher aspira-
tions," says Flannery. “We are here for
the long haul. We will make major
investments. We are going to do what it
takes to win in India. Some things have
balanced favourably, some
unfavourably. That's not uncommon in
a developing economy."
The task ahead
Flannery brings with him consider-
able experience. A 1983 graduate of
Fairfield University and an MBA from
the Wharton School at the University
of Pennsylvania, he has spent 22 years
in GE. Before he moved to India, he
was president & CEO of GE Capital for
Asia Pacific. His brief, before he
winged his way to India in January,
from Immelt was three-fold: Grow
GE's presence in multiple dimensions,
localise it and transform the organisa-
tion for the long haul. Flannery does-
n't like to call it Plan B - it is more
like revised Plan A, says he. The
macroeconomic opportunity in India
still excites GE. The opportunities in
GE's core areas of infrastructure
(power, railway, water treatment and
so on), oil & gas and finance continue
to remain huge. “These (growth) mar-
kets are investing trillions of dollars
in infrastructure and favour a multi-
business company that can bring solu-
tions. This allows us to form a 'com-
pany-to-country' approach in coun-
tries where government and business
work together to solve infrastructure
needs," Immelt had said in his letter
to shareowners.
Flannery's first step has been to
change GE's reporting structures in
India. Ever since GE set up shop in
India, all the business lines reported to
their global business headquarters. As a
result, they didn't have a reporting rela-
tionship with the Indian CEO. What it
meant was that GE's business in India
was not looked as a single profit & loss
centre. Key decisions on products, dis-
tribution and investments were taken
outside India. The results, as a conse-
quence, were less than desired.
All management thinkers have
stressed the need for multinational cor-
porations to think local. Those who lis-
tened carefully to the Indian customer
have gained immensely; those who did-
n't have failed miserably. The success of
LG and Samsung of Korea and Suzuki of
Japan can largely be attributed to strong
local product development, manufac-
turing and distribution. All of them
empowered their local employees to
take important decisions. GE now is a
standalone profit & loss account in
India. Business lines all report directly
to Flannery. “I will be able to control the
vast majority of decision-making," says
he. In fact, the buzz in the market place
is that the Bangalore technology centre
too may become a part of the integrated
Indian operations soon.
This will help GE go to a customer
with more than one product. Till recent-
ly, various GE teams often made separate
sales pitches to the same customer.
Flannery admits this can often become
very frustrating for the customer. With
integrated operations, GE will be able to
present a unified face to the customer. “It
also gives us more scale and critical
mass, creates better jobs and career
opportunities. The company with the
best team on the field ends up number
one or number two," says Flannery. But
he stresses that India will still stay very
closely connected to GE's international
business: “The centre of gravity will be
India, but we are not seceding from the
company. We will get the best from GE. It
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has the history of evolving as the markets
change. The hallmark of the company is
constant evolution."
Go local
That taken care of, Flannery wants to
localise GE's business. This means
sending people out to the market to
gather what products and services are
required, designing and manufactur-
ing those products in India, and final-
ly distributing them in India. The first
is on track, says he. For design,
Flannery plans to leverage the skill
sets of the Bangalore technology cen-
tre. So far, it has focused on GE's glob-
al requirements. To save cost and time
was the first brief to the centre. The
business verticals for which this work
is done are aviation (commercial air-
craft engines), energy (oil and gas,
power and water treatment), trans-
portation (diesel locomotives and sig-
nal systems) and healthcare. In addi-
tion, there is a 400-strong team which
carries out work on “Blue Sky” tech-
nologies - new substances, materials,
nanotechnology and solutions.
The brief could now change. In addi-
tion to the work it is doing, it will work
on products that could be relevant for
India. “The brief is changing as we speak
in an incremental and supplemental
way. It will continue to be a key base for
GE's global operations; that won't stop.
But we will add resources to go local;
some resources may be shifted," says
Flannery. “For the past 18 months, there
has been in-country, for-country team at
work for India-specific products and
designs." To be fair, some products devel-
oped at Bangalore have already found
their way to the Indian market - the elec-
trocardiogram that weighs just 1.1 kg
and costs around Rs 35,000, the low-cost
baby warmer which sells for around Rs
150,000, for instance.
The next part of the jigsaw puzzle is
local manufacturing. Here, Flannery
wants to make use of frugal Indian man-
ufacturing skills. Immelt had outlined
the strategy in his letter. “Our focus is
on introducing more new products at
more price points. We are driving man-
agement practices to capture new
opportunities, called reverse innova-
97

tion. Essentially, this takes a low-cost,
emerging-market business model and
translates it to the developed world," he
had said. “To this end, we have devel-
oped a full line of high-margin, low-cost
healthcare devices, designed in China
and India, and now marketed success-
fully in the developed world."
GE already has two manufacturing
joint ventures in India with BHEL and
Wipro; it has now signed a third one
with Triveni for steam turbines. GE,
says Flannery, found Triveni efficient in
turbines of up to 30 MW. Its own
strength is above 100 MW. So, the two
have come together for turbines of 30
MW to 100 MW. “If it works well, you'll
have a new player in 30 MW to 100 MW
with the best in technology and cost-
competitiveness. We could distribute
these turbines globally in the long term.
That's where GE's distribution capabili-
ty, global footprint and customer rela-
tionships would come in," says
Flannery. GE, of course, is impressed
with Triveni's supply chain, production
design and costs. It can deliver turbines
at low price points. “Triveni can do
reverse innovation. It, we observed,
was consistently hitting price points
lower than that of global manufactur-
ers. We are not talking of a 5 or 10 per
cent change in margins," says Flannery.
The prices could be 30 to 40 per cent
below global prices, experts reckon.
The reason for the tie-up is clear.
GE could do more such tie-ups with
low-cost manufacturers in the days to
come. “You will see more investments
in supply chain and direct manufactur-
ing capabilities. That can be green-field
or partnerships or even acquisition of
companies with a manufacturing foot-
print," says Flannery. So far as a distrib-
ution network in the country is con-
cerned, Flannery says he still needs to
figure out how to go about it.
Ups and downs
A broad strategy is fine, but Flannery
needs to look at individual businesses
as well. In financial services, it was an
open secret that GE Capital was stuck
with huge delinquencies in its retail
portfolio. There was also talk in the
market that GE Capital was looking
for a buyer for its portfolio. Flannery
admits there was a problem of delin-
quencies with unsecured retail loans.
To deal with that, GE Capital has
shrunk its retail loan book. A part of
its transportation finance portfolio
was sold to Shriram Transport
Finance Company in December last
year. This, says Flannery, has brought
down the delinquencies as well as the
losses. “GE Capital became profitable
in India for the first time in two years
during the January to March 2010
quarter," says he.
Going ahead, Flannery has decided
to focus on institutional finance in
areas that tie up with GE's business. In
other words, it could finance the pur-
chase of turbines by power plants,
water treatment equipment by factories
and healthcare machines by hospitals.
At the moment, this book is as small as
that of retail finance. “We aren't talking
of big dollars at present," says Flannery.
On the positive side, he adds that the
partnership with SBI, India's largest
lender, for credit cards is steady. “We
would like to build on this relation-
ship," says he, but does not give details.
There have been some positive
developments on the railway business
as well. Strained for resources, the
Indian government has come round the
view that it won't be such a good idea to
put up the locomotive factory on its
own. So, it has restarted the process to
find a private investor. And this time
the stakes are bigger: Not just diesel
locomotive, it also wants an electric
locomotive plant and another one to
make spares for the two factories. “We
will take another crack at it. We will def-
initely restart our interest in the diesel
locomotive factory and assess the other
two; they look interesting as well," says
Flannery. In the last round, GE had
developed a prototype for the diesel
locomotive in its Bangalore centre. So,
it has a product ready to offer. Flannery
says it is not certain if GE will return
with the same prototype.
Power play
Power will be a tougher nut to crack.
One, GE's strength is gas turbines,
renewable energy (wind and so on)
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and nuclear power - the gap in its
portfolio is coal, which is 50 to 60 per
cent of the market. “We will continue
to look at ways to play in that," says
Flannery. But he is convinced that the
dependence on coal to generate power
will decline over time. “Coal tends to
be more commodity- and less technol-
ogy-driven. We are trying to stay up
on the technology curve. Coal tends to
be a very basic technological and
engineering undertaking. For environ-
mental reasons, higher growth will be
in other sectors of the energy space."
Two, there have been aggressive
sales from China. So much so, local
manufacturers of power equipment are
lobbying hard with the government for
protection in some form. Flannery feels
GE still has an advantage over others.
“It's very important to look at the life-
cycle cost of this equation. We have a
very strong story there around technol-
ogy and service offering. These are very
long-lived assets."
Three, Dabhol was bad publicity for
GE's turbines. Flannery says GE engi-
neers have fixed the problem and all
turbines at the power plant in
Maharashtra are on stream. A service
contract has been written for GE. And,
adds he, Dabhol no longer crops up
when GE executives make a sales pitch
to power companies. Four, the fate of
nuclear power in India, which can be a
huge opportunity for GE, still hangs in
balance. Consensus is yet to emerge on
the liabilities that could arise from a
Chernobyl-like accident. Still, Flannery
is convinced of the opportunity for GE
in power; what also excites him about
the business is that every order for tur-
bines comes with regular revenues from
maintenance contracts.
Jack Welch, GE's best-known CEO
and Immelt's predecessor, had laid down
the principle that the company ought to
be amongst the top three players in every
line of business in a market; it should
exit any business where it is a laggard. It
may not be the right time to put India
through that test. Flannery, on his part,
says if he can grow the company, localise
it and change its structure, his job will be
done. “If I can do these three things, my
bosses, I think, will be happy."
98

DANONE INDIA SEES
WEALTH IN HEALTH
A year after its split with Britannia, the French
dairy major is betting big on milk products. But
the task ahead is tricky
Archana M Prasanna & Kalpesh Damor
I
t’s a market that has so far been the
stronghold of local co-operatives,
but Groupe Danone is unperturbed.
A year after its split with Britannia
Industries, the French foods major’s
Indian subsidiary, Danone India, is quiet-
ly charting plans to grab a significant pie
of the flavoured and value-added milk
category.
The task ahead is a tricky one. On one
hand is the competition from co-opera-
tives which occupy a lion’s share of the
market with their grassroot level distribu-
tion system. On the other are national
players like Britannia and Nestle which
have a strong customer connect.
However, Danone is banking on its prod-
uct innovation to make an impact.
In the first five months of operations in
India, the company has launched three
products — chocolate smoothies (Choco
Plus) in Hyderabad, plain yogurts
(Danone Dahi) and a range of flavoured
yogurts (strawberry, mango and vanilla),
in Pune and Maharashtra. It has partnered
with Dynamix, as the co-manufacturer
for Danone products in India.
According to industry estimates, the
size of the flavoured and value-added milk
market is around Rs 250 crore. Gujarat Co-
operative Milk Marketing Federation
(GCMMF), which owns and markets the
Amul brands of dairy products, is the
leader in the segment with 60 per cent
market share. Other strong regional play-
ers include Saras in Rajasthan, Verka in
Punjab and Nandini in Karnataka. These
regional players cumulatively enjoy the
second largest share.
Analysts say that the market is crowd-
ed with similar products, which is the
oneof the main reasons why most players
haven’t managed to grow beyond their
regional markets.
But Danone is clear about its position-
ing in this category. “We have launched a
chocolate smoothie and not chocolate
flavoured milk,” says a Danone
spokesperson. “Our operations are funda-
mentally different from the others. In the
dairy sector, other players are focused
heavily on the plain milk business, while
our focus is on value-added products.
Besides, we will not launch products that
are not perceived as healthy.”
It is not difficult to see why Danone is
conscious about launching its products
under the health and nutrition label. “The
flavoured milk segment is one driven by
the well -to-do income class and is there-
fore focused on the health platform, “says
V Sridhar, additional director, food and
agriculture, Technopak Advisors.
But Danone’s former business partner,
Britannia Industries, has also adopted the
same health route for a variety of its prod-
ucts in recent times. The company has
test-marketed Actimind, its functional
flavoured milk product, four months back
in Tamil Nadu. “We don’t want to be just
another player in this market by simply
adding flavour into milk. Our objective is
to build the functional health and nutri-
tional market,” says Vinod Menon, head
of dairy business in Britannia Industries.
Britannia’s initial foray into this space,
however, was not too encouraging. It had
launched a flavoured milk called Zip Sip
a few years ago but discontinued it later.
“Milk-based products is a tough cate-
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gory to be in,” says Sanjay Sharma, CEO
of MTR Foods which had experimented
with a number of flavours like almond,
chocolate, thandai and cinnamon-based
milk before deciding to focus on almond
for its flavoured milk. Essentially, every
value-added feature becomes crucial in
the category as there are as many as a few
hundred manufacturers in each region,
he says. MTR Foods’ use of saffron and
almond flakes in its flavoured milk are
some examples of value additions taken
up by companies in this segment.
It is also a price sensitive market.
Danone’s chocolate smoothie, Choco
Plus is priced at Rs 15 for a 200 ml tetra
pack, while Britannia’s Actimind is
priced at Rs 15 for 150 ml bottle. Market
leader Amul’s Kool is priced at Rs 13 for a
200 ml bottle and 200 ml tetra pack. Most
players are in the Rs 13-18 price range for
175-200 ml offerings.
Analysts say that while the current
phase would be about educating the mar-
ket about the product, the next level of
innovations would be crucial for compa-
nies. For example, Britannia has already
taken the lead in adopting HDPE bottles
which are of superior quality, more con-
venient as opposed to tetra packs and is
ideal for storing dairy products for a
longer duration.
Danone says that acquisitions will
play a part in Danone India’s business one
way or the other. “We are aware that there
are numerous local companies in India.
But we will not be able to share any details
about any talks for a potential joint ven-
ture or buyout. We are continuously eval-
uating opportunities and are in touch
with other players in the industry,” says
the Danone spokesperson.
Britannia says that is working towards
products that could add value to milk in
the near future. Amul is in no mood to
acquiesce its market share either.
“In order to face competition, Amul
will focus on further improvement in qual-
ity of its products. It currently offers milk in
eight flavours and intends to give thrust on
its existing flavours this summer,” says a
senior Amul executive. Technopak’s
Sridhar says that the next level of innova-
tions in the flavoured milk business would
be about lower calories, higher nutrition
and convenience in packaging.
99

OVERSEAS CALL
Godrej is on an acquisition drive to expand its hair care, home care and
personal wash business in Asia,Africa and South America
M
ore than a century ago,
Ardeshir Godrej gave
up law and decided to
make surgical equip-
ment. He took a loan
from a friend of his father, and with that
money he made scalpels, forceps, scis-
sors and pincers. He then showed these
to the owner of the company he was
working with. The owner was
impressed with what he saw but when
Godrej requested the product be tagged
“Made in India", the deal fell through.
Today, the Rs 10,000-crore group
named after him wants to straddle the
emerging markets in Asia, Europe,
Africa and South America with its hair
colours, household insecticides, soaps
Byravee Iyer
and so on. A quarter of its business
comes from abroad, and it wants to
scale up the contribution in the days to
come. It has become the second-largest
player in insecticides in Asia (Japan
excluded).
Much of this growth has come
through acquisitions. So far, Godrej
Consumer Products has spent almost Rs
2,000 crore to buy companies, brands
and distribution networks abroad. The
company's board last year authorised it
to raise Rs 3,000 crore for expansion.
So, the war chest still has considerable
ammunition left, though some of this
money, around Rs 800 crore, may go in
the purchase of Sara Lee's 51 per cent
stake in Godrej Sara Lee.
Business Standard
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“Over the last few years, we have fol-
lowed a very disciplined and focused
approach to identifying acquisitions
that represent a strong fit with our busi-
ness, both strategically and opera-
tionally," Godrej Consumer Products
Chairman Adi Godrej recently said in a
statement.
The acquisitions, fast and furious
that they have been, appear fragmented
across geographies and product lines.
For the company, there is method in the
madness. “It's our “3 by 3” matrix strate-
gy," says Godrej Consumer Products
Managing Director Dalip Sehgal. The
company will operate in three conti-
nents (Asia, Africa and South America)
in three categories: Hair care, home care
100

(including insecticides) and personal
wash.
The three continents have now
begun to grow fast, which has opened a
huge market for consumer products.
These are also markets where multina-
tionals like Unilever, Procter & Gamble
and L'Oreal don't have an overbearing
presence; this leaves ample scope for
smaller companies and regional brands
to grow. And the three product cate-
gories are those in which the Godrej
group has done well in its domestic
market. Godrej Consumer Products is
the leader in hair colours and dyes with
brands like Godrej Expert, Renew and
Colour Soft. Its Godrej No. 1 is the third-
largest brand in the soap market after
Hindustan Unilever's Lifebuoy and
Lux. And Godrej Sara Lee leads the
pack in household insecticides with
brands like Goodknight, Hit and Jet.
“These emerging markets are not very
different from Indian consumers, and
hence we will build on what we already
know," says Sehgal.
Investment analysts say that Indian
companies like Godrej Consumer
Products have realised the worth of
emerging market and are thus in a hurry
to expand there. “The company's strate-
gy is similar to other Indian FMCG com-
panies like Marico, which are trying to
garner 24 to 30 per cent of their busi-
ness from their international business,"
says Anand Shah of Angel Broking.
Apart from Marico, Dabur and Wirpo
too have begun to push hard in East
Asia and West Asia, respectively. So,
Godrej Consumer Products may not be
the only one to think of emerging mar-
kets; but it is certainly the most aggres-
sive of the lot.
A close scrutiny of the acquisitions
shows that Godrej Consumer Products
has brought products, brands as well as
distribution networks. This gives it the
opportunity to move products across
geographies. Trade channels can be
used to sell multiple products. Its
regional brands can thus become multi-
national in nature. “It's all about cross-
synergies," says Sehgal.
African safari
The focus on emerging markets is
new. The first overseas acquisition that
Godrej Consumer Products had done
way back in 2005 was Keyline Brands in
the United Kingdom. This company
owned brands that once belonged to
large companies like Unilever and
Henkel but had become too small for
their attention - Erasmic, Aapri, Nulon
and Cuticura. These brands were
retailed through large chains like
Sainsbury's, Tesco and Boots, and
Godrej Consumer Products thought it
could use the acquisition to place its
own brands in the network. But growth
in this business has been lacklustre,
around 7 per cent per annum. Some of
these brands have been taken to West
Asia (the rights for the best-known of
these, Cuticura, are held by Chennai-
based Cholayil Pharma) and Sehgal
says the sales force will be strengthened
to sell more through groceries.
Godrej Consumer Products has done
a course-correction since then. Its ener-
gies are now focused on the emerging
markets. Africa is the most densely pop-
ulated continent in the world and hous-
es 13 per cent of the population.
Further, its economy is anticipated to
grow at 4.3 per cent this year. Godrej
Consumer Products started out with
South Africa where it has acquired two
hair care companies - Rapidol and
Kinky. Rapidol is into hair colours,
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Kinky into extensions, braids and so on.
Rapidol has grown 49 per cent in the
last one year and Kinky has grown 39
per cent.
The South African market for hair
care is huge. Godrej Africa Director &
Chief Executive Officer Keith Harrison
puts it at $2 billion. Analysts say Godrej
Consumer Products has bought smart.
Rapidol's competition is restricted to
L'Oreal's Dark n lovely, and its Inecto
sells at a discount in the price-sensitive
market. Rapidol therefore lords it over
90 per cent of the market. And Kinky, it
is estimated, sits on approximately 12
per cent market share, although this
category is not read by Nielsen or any
other market tracker. At present, it has
24 stores across three provinces in
South Africa and is in the process of
expanding to rest of the country.
Rapidol and Kinky export to 15
African countries. But Godrej
Consumer Products has bigger plans. It
is on a mission to set up four hubs
across the entire continent that will
cover South Africa, West Africa, East
Africa and Central Africa. This is a part
of the company's 'One Africa' strategy,
which looks at opportunities across the
continent.
Apart from hair care, Godrej
Consumer Products also has an eye on
the personal wash market in Africa.
“Personal wash is a huge opportunity in
the continent," Godrej Executive Vice-
president (international operations)
Jimmy Anklesaria says. “Recent reports
suggest that the African continent is
vulnerable to the swine flu epidemic; so
personal wash becomes critical for us."
This is where its acquisition of Tura
from Lornamead fits in with its soaps,
moisturising lotions and skin creams,
all sold under the Tura brand. It gives
Godrej Consumer Products inroads into
West Africa, particularly Nigeria which
has a population of 140 million and eco-
nomic growth of about 6 per cent per
annum.
Tura reaches about 70 per cent of
total outlets in Nigeria. Once the deal is
through, Godrej Consumer Products
will be able to mount its hair care prod-
ucts on this network. In addition, this
gives Godrej Consumer Products an
101
 www.business-standard.com

opportunity to sell its Indian brands Hit, which is for use against flying and
like Renew, Godrej No. 1 and Cinthol in crawling insects like cockroaches, has
the oil-rich country. In fact, Godrej No. built the category from scratch in the
1 has already begun to sell in certain last 15 or so years.
pockets of Africa. Cuticura too is being Sara Lee, it is an open secret, has
tested in the region. Over time, Godrej decided to exit its consumer products
plans to take its household insecticides business of around $2 billion per
also to Africa. annum to focus on foods. Godrej has the
right to buy it out of the joint venture,
Asian ride Godrej Sara Lee (it did a profit after tax
While Africa is a virgin market, Asia of Rs 104 crore on a turnover of Rs 755
has strong regional brands. Sector crore in 2008-09), in such a case and the
experts predict a scramble for these right to sell brands like Ambipur, Kiwi
brands and markets in the near future. and Brylcreem in the country. It is cer-
Several of these brands have already tain that it will exercise this right. There
changed hands. Godrej Consumer have also been reports that Godrej
Products joined the bandwagon recent- could be in the race to acquire Sara
ly when it bought Indonesian maker of Lee's consumer products business.
household insecticides Megasari This still leaves the third pillar of the
Makmur along with its distribution strategy, South America, unclear. Some
company. announcements in this regard could
Megasari Makmur is a young compa- come in the future. Still, it has been a
ny - it was formed in 1996. But its acqui- long journey for Godrej since the days
sition gives Godrej Consumer Products of its founder.
a strong foothold in Indonesia which is
one of the largest markets in the region.
At $345 million, it is the fourth-largest
market for household insecticides in
the world after China, Brazil and India.
Megasari Makmur has 35 per cent of
this market. As much as 72 per cent of
Megasari Makmur's business comes
from insecticides with brands like Hit,
Stella and Mitu, though it is also
Indonesia's biggest maker of air-care
products and wipes. The acquisition
comes with six factories, 11 branches
and 74 regional distributors. The deal is
expected to be closed in a couple of
months. It will catapult Godrej as the
second-largest household insecticide
company in Asia (ex-Japan).
Godrej Sara Lee has been active in
Asia for a while. Its products are sold in
51 countries, most of it in the Indian
sub-continent. It has full-fledged opera-
tions in Sri Lanka and Bangladesh and
now wants to set up a plant in Nepal. In
India, of course, it straddles the whole
spectrum of household insecticides
with mats, coils, lotions and aerosols.
Goodknight, a mosquito repellant in all
the four forms, is a category leader. Jet is
smaller but has a market share of
around 80 per cent in anti-mosquito
coils in the state of Andhra Pradesh.

Business Standard 102


IN-FILM BRANDING
GOES REGIONAL
After Bollywood, it’s the turn of others to integrate brand promotion
with the storyline of their movies.
W
hile watching the
Bengali film Antaheen,
in which Rahul Bose
plays a cop cyber-
romancing a television
journalist, one wonders why the girl
keeps oiling her hair. But the piece falls
into place when you notice that the open-
ing credits acknowledge the contribution
of Nihar, a hair oil brand of Marico, which
sits proudly next to the girl when she is
tending to her hair.
In-film product promotion has been a
common feature in Bollywood movies for
some time now; it's now spreading to
regional films as well. Regional film pro-
ducers have also started echoing what
their Bollywood counterparts have been
saying for a while: If there is a movie,
there will be products placed in it, mostly
those that have paid to be in the frame.
So in the Telugu film, Anukokunda
Oka Roju, actor Jagapati Babu is seen car-
rying a pack of Real juice most of the time.
In Bhojpuri film Parivaar, the hero takes
up dealership of HUL's brand Wheel
when his financial condition worsens.
Others aren't far behind. The seven
brothers in the Marathi film Amhi
Satpute use Tata's Ace to transport their
farm produce to the town. In the same
film, a restaurant owner serves his cus-
tomers rotis made from Annapurna atta.
Product placement in Hollywood
films actually started a long time ago.
Among the earliest to tread this path was
Wings, a silent film released in 1927. The
first to win Best Picture Oscar, it con-
tained a plug for Hershey's chocolate.
However, it is now that brands have
begun to speak louder than ever in film
Swarup Chakraborty
scenes. Brand experts say even though
film-branding is not the main medium for
marketing of brands (it accounts for just 2-
3 per cent of the total advertisement bud-
get of most big brands), it is cost-effective
and acts as a bonus value.
In-film branding in fact helps to
reduce publicity budgets of films by a
minimum of 15 per cent.
Producers say if the low shelf life of
movies has cut down theatrical collec-
tions, it has opened another window of
revenue in the form of brand associations
or in-film placements. Brands expect high
visibility not only from theatres, but also
when the film is shown on TV.
“Though the theatre life of movies has
reduced to three or four weeks, it still
makes sense for brands to associate with
films as they enjoy visibility, when they
are aired on TV. They don't have to pay for
advertisement spots separately," says
Harsha Joshi, chief operating officer
Madison India.
Rahul Puri, Executive Director - Mukta
Arts, says if done well, brands get an enor-
mous reach through in-film promotions.
Mukta arts first used this in the Rishi
Kapoor starrer Karz almost 30 years ago.
“The HMV record in the Om Shanti Om
song is still something people associate
with," Puri says.
According to industry estimates, big
brands are ready to pay anything between
Rs 5 crore and Rs 12 crore to be part of a
big film from an established banner.
Brand experts say brand integration or
in-film placement is not just plain vanilla
advertisement. “In-film helps the brand
in getting instant recognition because
unlike TV where during advertisements,
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viewers shuffle the channel, the advan-
tage of in-film placement is that the view-
er can't skip the message," says Ajay Das,
media controller-strategy and planning, R
K Swamy.
The process of brand and film integra-
tion has also led to a marriage of alliance
between the two. “Brands and producers
do understand the value that both parties
can bring to the table and in delivering a
co-owned message through film," says
Shikha Kapur, VP Marketing UTV
Motion Pictures. For example, in recent
films like 3Idiots, it's difficult to miss the
ubiquitious two-wheeler - Flyte, a power
scooter brand from the Mahindra
group.The scooter was central to the film.
The Volvo SUV XC90R design was anoth-
er strategic placement in the film. Volvo
specially got two red SUVs air-lifted from
its headquarters in Sweden to facilitate
the integration.
No one is however clear about the
exact return on investment on in-film
placement. “A brand comes on board not
for the cash component of in-film but for
an overall synergy with the film. For
example, we associated with Sunsilk for
Fashion. The brand was in the film and
went on to create a property outside the
film, which helped both the film and the
brand," says Kapur.
And it is not just in-film that brands
target while tying up with films. Today all
big banner movies are marketed heavily
so the brands associated with the movie
are promoted too.
For example, a fashion show was
organised to promote the movie Ghajni
and Aamir Khan walked the ramp in Van
Heusen customised attire for the film.
103

DESIGNS ON PROFIT
Automobile designer Dilip Chhabria nurtures global ambitions, wants
to go mass-market in India and diversify into areas like furniture,
refrigerators and television
D
ilip Chhabria was recently
approached by a Hyderabad
real estate developer who
wanted India's best-known
automobile designer to come
up with home theatres for the Rs 15-crore
villas he is building in the city. The brief
was to design post-modern television and
speakers - something that would fit in
well with the deluxe surroundings. So
pleased is Chhabria with the results that
he has put together a team of 20 to look at
opportunities in this area.
But what's a car designer doing with
televisions? “I want to pander to the
human psyche to deliver change.
Whatever we do, it should be from a glob-
al point of view at Indian costs. That's my
vision," says Chhabria. Shorn of the jar-
gon, it means that Chhabria wants to sell
designs abroad because he can do it
cheaper. It also shows that Chhabria has
opened another source of revenue and
diversified his risks.
From designing cars for people with
deep pockets, Chhabria has come a long
way. He has done buses, motorcycles and
Byravee Iyer
even helicopter interiors. He has begun to
do office and home interiors, furniture,
refrigerators and now televisions also.
Interiors, he is confident, will account for
almost 30 per cent of his business in the
next few years. Just how big is Chhabria?
His DC Design is closely held. So, its
financials are not in the public domain.
Some of his friends say that it could be
around Rs 50 crore in size. Chhabria of
course is tightlipped about it. “People
always perceive us to be far bigger than
we are, and it ends up hurting investors."
But he does admit that his gross profit
margins could be as high as 30 per cent.
Not bad at all.
As a child, much of Chhabria's time
was spent sketching cars. This fascination
led him to the Automotive Art School at
Pasadena in the US. After a short stint at
General Motors, Chhabria returned to
India and used his father's business infra-
structure to design car parts. Around that
time, Mahindra & Mahindra wanted to
upgrade the design of its SUV called the
Armada. The company was happy with
his work and pushed him to start his own
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www.business-standard.com
design consultancy. Thus was born DC
Design in 1993. “Mahindra & Mahindra
promised me I'd always have business,"
Chhabria laughs.
Seventeen years later, Chhabria can
boast of a whole lot of customers like Tata
Motors, BMW and General Motors. He
has also worked for top lawyer Rohit
Kocchar, businessman Adi Godrej and
Bollywood superstars Shah Rukh Khan,
Amitabh Bachchan and Ajay Devgan. On
the non-auto side, he has designed for
Coca-Cola and Videocon. Aware that the
business is driven solely by him and that
he needs to build an institution that out-
lives him, Chhabria has set up with the
DY Patil group the DYP-DC Centre for
Automotive Research and Studies at
Pune. Growth has been rapid. In 1993, the
company had eight employees on its rolls
and came out with just two cars. Today,
Chhabria has 450 people working for
him, who churn out 250 unique cars a
year. Next year he hopes to increase that
number to 600.
And DC Design does not have a mar-
keting team. Typically, the company gets
104

about 100 calls a day. A small team of two
has been set up to take these calls. On an
average, about 15 of these turn out to be
prudent for business. Following that, quo-
tations and specifications are sent back
and forth. Finally, the customer comes
down to Chhabria's office and freezes in
on the specifications. Terms are settled
and money is transmitted. “We keep in
mind those who are willing to pay, and we
also have to see if it (the order) can be
scaled up. If it meets the criteria then we
start work," says Chhabria.
Revenue streams
Chhabria has two streams of revenues.
The business-to-business stream comes
from companies that need design inputs,
changes, upgrades and so on. The busi-
ness-to-consumer stream of course
comes from individuals. “We've con-
sciously ensured that both these busi-
nesses contribute equally to our rev-
enue," says Chhabria. But why not focus
entirely on the business-to-business
side? After all, isn't this where the money
lies? “We don't have to do a project just for
revenue. It has to excite us, and only then
do we ask ourselves if it is profitable,"
says he. To underscore the point,
Chhabria says the car he designed for
Shah Rukh Khan cost the actor Rs 4 crore.
At any given time, his 450 employees
work on 40 projects. “We've got to finish
projects in about 4 months; anything
more than that and people lose interest."
Within the business-to-business opera-
tions, it is the foreign automakers who
take up the bulk of DC Desgin's time; so
much so that the ratio is at 75:25 against
Indians. However, he is confident that the
figures will reverse in five years' time.
“That will grow our Indian side," he
answers cautiously. According to him, the
main issue with Indian companies is the
lack of importance given to design; most
of them seek “tangible changes".
“International companies have 200-mem-
ber design teams; here in India there are
just about 20 people working on design,"
Chhabria adds. Getting on board Indian
companies, Chhabria reckons, will also
improve his profit margins.
For Chhabria, the leap of faith will
happen when he designs a car up from
scratch. That alone can pitchfork him into
the league of global design houses like
Pinnifarina of Italy. To be sure, he has
made a beginning here. Chhabria helped
Reva design its next generation of cars,
the NXG and NXR. But that is hardly
mass-market. He has put in place a 30-
member team just for this in the last three
years. “In terms of design, we're the
biggest; but now, having worked with
Reva, we've got our engineering capacity
also ready," says he. However, he feels that
it will be at least two years before he
acquires the complete suite of skills.
Skill and scale
The advantages, Chhabria claims, are all
with him. “We do things which are not
from the mediocrity of India. We are mav-
ericks because we provide first-world
attributes at third-world costs." In fact, he
goes on to say that he costs just about a
fourth of the likes of Pinnifarnia or any
other Japanese or American design firm.
What is more, his team works 70 hours a
week, versus the 35 hours people in
organisations abroad put in. “As a result,
we take 60 per cent of the time the others
take; this makes us the fastest developers
in the world," he says. “And if you're wor-
ried about quality, you can read the letter
of appreciation from Renault." The letter
from the company's design head, Patrick
Lecharpy, said: “You've reached the level I
dreamed. You can now compete with the
best international designers."
To gain scale, Chhabria needs to go
mass-market. For this, he last year inked a
pact with former Maruti Suzuki honcho
Jagdish Khattar's Carnation Auto that
deals with automobile service, spares,
accessories and pre-owned cars. The duo
will provide customisation solutions and
semi-customisation kits across the coun-
try through Carnation's nationwide net-
work. For Chhabria, this means addition-
al volumes of about 500 to 1,000 cars a
year. “Volumes were an issue we were
grappling with as it made no sense for us
to open showrooms on high rentals for a
few thousand cars," says Chhabria.
“Chhabria was not a name accessible to
the masses. Through this partnership,
Carnation will make it affordable and
available to the masses," adds Khattar.
First off the block is the Innov8, a take on
the Toyota Innova, which will be followed
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by kits for the Honda City and the Maruti
Suzuki Swift. The partnership went live
last month, and Khattar says the initial
results “are encouraging".
Not a cakewalk
Design, especially in the world of automo-
biles, has become a fast-moving commod-
ity. Consumers have begun to tire of
designs quickly. Car upgrades have
become more frequent. Chhabria is only
too aware of the challenges it poses. “With
every generation, cars have begun to look
more aggressive and mean. But it's impor-
tant to levitate ten years ahead. From the
time it goes from pen and paper to the
actual launch, it's about five years. And
after that the car has to be valid for anoth-
er five years." There's a tinge of sadness
when he adds, “But at the end of the day,
90 per cent of car design is regulation and
there's only 10 per cent of creativity that
can be manipulated."
Chhabria, of course, has begun to
hedge his risks. He has thus expanded
into refrigerators, home and office interi-
ors, bus bodies, motorcycles, helicopter
interiors. Explaining the rationale,
Chhabria says, “We got into furniture
design as we saw a huge potential there,
and we took orders from our automotive
clients. Besides, our identity is one of
innovation, design and creativity. As a
design company, we could do just about
anything else, and so we took a top-down
approach." There are other challenges
too. There are people around in the coun-
try who simply copy his designs. And he
has to worry how to retain the 450 people
he has trained. “So many of them are
lured by West Asia and the hefty salaries
offered there. To beat that, we are paying
West Asian wages here (four or five times
that of India).”
Those who have worked with him
have kind words to spare. Sanjeev Shah of
Everest spices is a longtime customer of
the company and has so far had six of his
vehicles modified by DC Design. “I just
tell him what I want, and in the last 12
years he's always managed to get it right,”
says he. But Chhabria will need more
than just kind words from friends if he
wants to join the big league of global auto-
mobile designers.
105

ARE YOU GAME?
Pepsi uses gaming to make its ad campaign more engaging.
T
he game is on. Pepsi is cur-
rently running one of its
costliest advertisement cam-
paigns, The Game, riding on
the Indian Premier League
wave. The campaign builds on Pepsi’s
youth-centred theme of Youngistaan,
introduced two years ago, taking it to
another level. This time it combines
gaming with TV advertising. The latest
campaign, rolled out two weeks ago,
casts film stars Ranbir Kapoor, who is
also Pepsi’s brand ambassador, and
Sanjay Dutt. It is designed as an interac-
tive game spread across three levels,
with each level corresponding to one
commercial. Of the three, two are
already on air and the third is expected
to go on air soon.
In the commercial for Level 1, Ranbir
Kapoor is seen entering a maze looking
for a Pepsi. Inside the maze are seated
game master Sanjay Dutt and next to him
his lady love, played by actress
Jacqueline Fernandes. Continuing in the
spirit of earlier Pepsi commercials where
Ranbir is shown devising ingenious
Amit Ranjan Rai
ways to grab a Pepsi, here he must fight
the game master. Dutt, dressed in a bulky
red suit, plays the role of villain as he
tries to keep Ranbir away from Pepsi. He
makes Ranbir fall into a tub of water and
prompts the viewer to crack a riddle:
“Pepsi peeyega to bolega yahi!”(What
will Ranbir say on drinking Pepsi?) A.
Wow, B. Now, or C. How. A number
flashes on the screen which users can
call/SMS with what they think is the
right answer. They can also log on to the
Youngistaan website (www.youngis-
taan. com) and play the game.
In the commercial for Level 2, which
broke last Thursday, Ranbir solves the
riddle and breaks out of the water tub,
only to land in a tunnel whose exit door
is locked. Chotu, a one-foot-tall gaming
character sent by the game master,
prompts Ranbir to find the key to the
door. Within no time hundreds of Chotu
look-alikes appear, all shouting: “Where
is the key?” Stuck again, Ranbir has three
options to choose from to get to the next
level, A. Magnifying lens, B. Scissors,
and C. Horse shoe magnet.
Business Standard
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The commercial for Level 3 breaks
this Thursday, followed by the conclud-
ing film the week after. The winner will
get Rs 50 lakh. Besides, there are prizes
(free mobile talk time and songs down-
loads) for thousands others who give the
correct answers. All the ads in the cam-
paign end with the new tagline
“Youngistaan Ka Wow”, which was
introduced in February this year in
another Pepsi commercial where Ranbir
manages to steal a bottle of Pepsi
reserved for the leader of a country.
Engaging consumers
For several years now, Pepsi has been tar-
geting the youth — between 16 and 25
years — as its core audience. The entire
series of Youngistaan campaigns — the
first one rolled out in early 2008 with the
tagline “Yeh hai Youngistaan meri jaan”
— has centred on appealing the youth of
today who is smart, in control of himself
and believes in achieving whatever he
wants. “While the series has been able to
bring alive the optimism in today’s
youth, the challenge for us was to take
106

the communication to a different level.
Instead of a one-way communication,
we wanted the new campaign to be
something that could engage our target
group. We wanted to effectively engage
the youth with the brand,” says Sandeep
Singh Arora, executive vice-president
(marketing), PepsiCo India.
How to do that? Says Arora, while
television is certainly the most effective
medium when it comes to reaching the
audience, the challenge was how to
make it more participative. Reality TV
was one of the ideas that was bounced
during the brainstorming, but certainly
not the most captivating. Gaming, which
interests a big section of Pepsi’s target
group, appeared more effective. The
company along with its creative agency
JWT India thus decided to create a single
360-degree gaming campaign that not
only involved television on a big scale
but also mobile phone and the internet,
the two widely popular digital mediums
for its target group. While Pepsi has been
using these mediums for promotions, it
has never done so in a unified way until
now.
Pepsi identifies 9 per cent of the view-
ers that watch TV as its key target group
(between ages 16 and 25); the other 90
per cent are the more general viewers in
all age groups. With the new campaign it
wants to sharp shoot its communication
on the 9 per cent (target group) so that a
significant number among them partici-
pate in the game and thus engage with
the brand. At the same time, it doesn’t
want the campaign to be unexciting for
the rest 90 per cent. “The task for us was
also to ensure there is huge entertain-
ment for the balance 90 per cent, and in
fact, also getting some of them to partici-
pate in the game,” says Singh.
Brief and action
The brief to JWT India was to create a
360-degree gaming campaign with an
idea captivating enough to excite Pepsi’s
key target group to engage with the
brand, and at the same time thoroughly
entertaining for the rest. Singh says,
“The one thing we kept insisting was to
do it at a scale and level that would actu-
ally wow the audience.”
JWT India Executive Creative
www.business-standard.com
“INSTEAD OF A ONE-WAY
COMMUNICATION, WE
WANTED THE NEW
CAMPAIGN TO BE
SOMETHING THAT
COULD ENGAGE OUR
TARGET GROUP”
Director Soumitra Karnik, who concep-
tualised the campaign with his team,
says, “If the product is about refresh-
ment, then its communication also
needs to be equally refreshing. We have
attempted to mix the niche format of
video-gaming with the mainstream.
While the digital media happens to be a
part of our 360-degree approach to the
campaign, we have now made the TV
commercial interactive. This is some-
thing never been done before. The con-
sumer is actually playing the game with-
in the commercial.”
The TV commercials for the cam-
paign which broke on March 27 will be
beamed throughout the IPL cricket
series. “IPL is the perfect platform to roll
out the campaign because the game is
designed to be sequential and interac-
tive. Day after day, week after week, the
whole country would be glued to this
one sporting event which will help us to
build quick reach,” says JWT’s Karnik.
Besides IPL, the commercials will be
aired on most other popular channels
with a heavy presence on general enter-
tainment channels. The campaign is
supported with a number of online ini-
tiatives as well. For instance, on April 2,
Pepsi invited Ranbir Kapoor for a chat
with fans on Facebook. Approximately
21,000 fans logged on to participate.
As for the response to the ad, Pepsi
says there were close to 1 million partici-
pations in a week for level 1 of the game.
“The numbers speak, the game is already
massively popular,” says Karnik. “It will
certainly be one of the most seen cam-
paigns this IPL season,” adds Singh.
Business Standard 107

KELLOGG'S GOES
SNACKING
The premium brand has gone to the bottom of the pyramid by
launching corn flakes at a price point of just Rs 10.
I
t’s not only the mass brands that are
adopting small-pack strategy to
increase penetration; premium and
niche brands like Kellogg’s too are going
the same way.
You can now buy Kellogg’s Corn
Flakes, the company’s flagship brand, for
just Rs 10. The company calls it Kpak for-
mat. It is the third brand to be added in the
Kpak range (after Chocos and Honey
Loops). The idea is to increase the pene-
tration of the Kellogg’s’s brands through
affordability, as breakfast cereals are still a
very small market in India.
Anupam Dutta, Managing Director,
Kellogg’s India, says, “Low price points
help us reach the Tier II and III towns. We
launched Chocos Kpak in Tamil Nadu
first and then rolled it out nationally. The
small pack for Kellogg’s’s Corn Flakes was
first test-marketed in Tamil Nadu, and
going by the response, we decided to
launch it nationally this year.”
A low fat option, Kellogg’s’s Corn
Flakes at Rs 10 has what the company
calls ‘Iron Shakti’. The product position-
ing has been changed as well: From a
breakfast cereal, it is now also a ‘Shaam ka
Nashta’ (evening snack). The new posi-
tioning will help promote out-of-home
consumption.
While the small-pack strategy will
help Kellogg’s push sales in tier II and III
towns, the company is not looking to hit
rural markets yet as it feels there is still a
lot of head-room in urban India, consider-
www.business-standard.com
Seema Sindhu
ing the low penetration. distribution network in line with its
Kellogg’s has a market share of more expansion plans and bring out new intro-
than 70 per cent value share in the ready- ductions.
to-eat cereal category. But competition for In India, Kellog’s is present only in
Kellogg’s is heating up. PepsiCo has breakfast cereals. However, worldwide it
increased its focus on Quaker and is also has a wide portfolio of product categories
planning to bring more products from its like cookies, crackers, toaster pastries, ,
global breakfast portfolio. frozen waffles and veggie foods. But at the
Competition is also strong from the moment Kellogg’s has no plans to diversi-
private labels of some retailers like the fy into other categories.
Future Group, which have made a huge
success out of its Tasty Treat cornflakes.
But Dutta is unfazed: “More players will
only help drive category growth,” he says.
Devendra Chawla, Head (private
brands) of the Future Group, agrees:
“There’s no competition as the category is
under-penetrated. More players will only
help the category grow. For instance,
before our launch of Tasty Treat corn-
flakes, only two out of 100 bills at our
stores used to be of cornflakes. After our
launch, it has become three on an aver-
age.”
While Tasty Treat cornflakes are
priced the same as Kellogg’s, none is avail-
able at the Rs 10 price point, which gives
Kellogg’s the first mover advantage.
The size of the ready-to-eat breakfast
cereal category is around Rs 350-400
crore and is growing at 30 per cent. “There
is immense potential for a category such
as ours that remains untapped. And the
active category growth is likely to benefit
all players,” adds Dutta.
Kellogg’s plans to further expand its
Business Standard 108

RADIO DAYS ARE BACK
India Inc has been quick to spot the value-for-money brand promotion
opportunity on radio
R
adio Days, an award-win-
ning 1987 film directed by
Woody Allen, looks back on
American family life dur-
ing the golden age of radio.
The narrator (Woody Allen himself)
tells us how the radio influenced him
in the days before TV. Each member of
the narrator's family finds in radio
shows an escape from reality through
the gossip of celebrities, sports legends
of the day, crooners, etc.
Woody Allen isn't alone. For many
like him, that golden age of radio is
only in the dark alleys of nostalgia.
But the good news is that there are
some early signs of an increasing num-
ber of people getting hooked to their
favourite radio shows once again. And
India Inc has been quick to spot the
opportunity of value-for-money brand
promotion on radio.
Consumer durables major LG, for
instance, is running extensive cam-
paigns to promote mobile phones, air-
conditioners, refrigerators and micro-
ovens through radio advertisements. L
K Gupta, chief marketing officer, LG,
says the medium has evolved substan-
tially in the last three to four years both
in terms of engagement as well as
reach to more cities. It provides room
for customizing messages for brand-
building which serves to connect bet-
ter with consumers at the local level.
A spokesperson from Samsung
agrees that radio gives good recall to
advertisers as a support medium to
television and print. "Brands attempt-
ing to improvise jingles tend to have
higher return on investment on radio
than on any other media. For all our
campaigns involving consumer partic-
ipation we prefer using the radio as it
has an immediate impact," he says
Samsung advertised on radio wide-
Sharmistha Mukherjee
ly to encourage consumer participa-
tion in nominating torch bearers for
the Beijing Olympics in 2008. Since
then the company has increased ad-
spends on radio significantly.
It is not only out-of-the-jar advertis-
ing campaigns which vie for listeners'
attention on radio channels these
days. In a unique radio activation mod-
ule formulated by Pepsico India
recently, youngsters were invited to
participate in creating the 'Youngistan
ka Wow' anthem with musical duo
Vishal and Shekhar in the span of a
day.
Sandeep Singh Arora, executive
vice president marketing (Cola),
Pepsico India, says, "While television
gives you great reach, it is only radio
which provides the flexibility to inter-
act and co-create with listeners. The
'Youngistan ka Wow' anthem campaign
was run across 23 cities in the coun-
try."
Radio also allows advertisers to
reach out to a specific target group
without having to purchase media
space on a national scale. The low
investment required has further
spurred advertisers' interest in the
medium. LG's Gupta says, "While the
cost per thousand reach for a 30 sec-
ond commercial on television is
around Rs 2000, for radio it is approxi-
mately Rs 150."
Big FM, a Reliance Media World ini-
tiative, has registered a 10 per cent rise
in the number of brands which adver-
tised on the channel last year over the
previous year. Praveen Malhotra,
senior vice president sales, Big FM,
says, "We are seeing companies across
categories using radio effectively for
building brands."
To cash in on the potential the sec-
tor is showing, Radio Mirchi has start-
Business Standard
www.business-standard.com
ed offering all-round solutions to
advertisers. Prashant Panday, chief
executive officer, Radio Mirchi, says,
"We create solutions for brands using
the best tricks in the radio business. If
required, we add in the on-ground and
online components as well."
Radio Mirchi currently has over
5,000 brands which advertise across
the network. More than 30 per cent of
the business comes from retail clients.
Apart from retail advertisers, all tele-
com, auto, FMCG, consumer durables,
media and entertainment, education,
real estate and BFI (banking, finance,
insurance) brands, Panday informs,
spend heavily on radio.
However, everyone agrees radio
still has a long way to go. Ashish
Pherwani, associate director, media
and entertainment, at Ernst and
Young, says the advertising revenue of
the radio industry at Rs 800 crore is
just 3.5 per cent of the total advertising
pie and saw flat growth in the previous
two financial years due to the econom-
ic slowdown. But things are changing
and he expects the industry to grow by
roughly 10 per cent in the current
financial year.
A lot, however, will depend
on the third phase of the FM privatisa-
tion policy and whether it permits
players to bid for multiple frequen-
cies/licences in metros, he adds.
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 www.business-standard.com

MONEY FOR VALUE

Tata Sky wants to net the value-conscious consumer willing to pay for
it.Will it get enough volumes? Sayantani Kar

T
here is a new pecking order in tor has to acquire 5 to 6 million sub- 270 a month. (It could result in cash flows
the world of DTH (direct-to- scribers, who should each pay Rs 300 a of Rs 135 crore a month!)
home) services. Sun Direct month, to break even. Tata Sky could be Sun Direct Chief Operating Officer
has replaced Tata Sky as the almost there. It hit the 5-million customer Tony D’Silva argues what matters is not
number two after Dish TV mark on March 25. While Kaushik does gross ARPU but net ARPU — what is left
with 5.3 million subscribers. But this not give absolute numbers, he says his after paying the broadcasters for chan-
doesn’t seem to bother Tata Sky too much. average revenue per user (ARPU) is dou- nels. “That is why our margins remain
The company says it is no longer focused ble of its publicly-quoted rival (Dish TV). low. When we claim an ARPU of Rs 99 to
on volumes alone; it wants to focus also For the quarter ended December 31, 2009, 105 a month, we give just the subscription
on the quality of customers and maximise Dish TV had disclosed an ARPU of Rs 135 revenues.” So, a high ARPU is meaning-
revenues from them. a month. This puts Tata Sky’s ARPU at Rs less if the channels are priced high.
For an industry mired in losses of Where everybody agrees is that DTH
almost Rs 5,000 crore, this could blaze a ARPUs, like in telecom, are low in India.
new trail. As Tata Sky has a quarter of the The industry average is around $3
20 million DTH customers in the country, (Rs 135 to 140). In contrast,
sector experts believe it carries a quarter Malaysia has an ARPU of
of the industry’s losses on its books. The $25, Australia $60, the
closely-held company, which is a venture
of the Tata Group and STAR and started
operations in 2006, does not disclose
its profit and loss.
All operators give a subsidy on
the set-top box. The DTH volumes
are still small to justify local pro-
duction of set-top boxes. So they
have to be imported. The larger
your base of customers, the larger
will be your losses. This is what
Tata Sky wants to plug. “We will
never sacrifice volume share com-
pletely for value share. But we
believe that a sustainable business
model will come from adequate share
in value terms and not from volume for
volume’s sake,” says Tata Sky CEO
Vikram Kaushik. “Every one started talk-
ing of how many million connections one
had. That, multiplied by the amount of
loss per box, will prove lethal!”

Numbers count
Vivek Couto, the founder of Media
Partners Asia, a Hong Kong-based media
research agency which tracks the DTH
industry in India, reckons that any opera-

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 www.business-standard.com

US $70 and UK $90. So, there could be an

upside to the business.
At the end of the day, DTH is a sub-
scription-based business. Long-term
health will depend on subscription
renewals. “You have to have a healthy
relationship with the subscriber, where
he should place adequate value to what
you offer and he should be willing to pay
you,” says Kaushik. “If he continues to
seek only the cheapest product available,
then he is not the kind of subscriber to
give you that value. In fact, it is a danger-
ous subscriber to acquire because he
might churn out.”

Willing to pay?
Tata Sky thus wants customers who are
willing to pay a small premium for more
value. It has put in place a segmented
strategy with products, services and fea-
tures aimed at different segments, skewed
of course towards the quality-conscious
subscriber. Kaushik claims that two-
thirds of all Tata Sky customers are from
socio-economic category A, and another
one-third are from B plus.
It first launched a set-top box with a
recorder called Tata Sky Plus in 2008.
After initial sluggishness, volumes have
now begun to pick up. Tata Sky Chief
Marketing Officer Vikram Mehra says
that as many as 10 per cent of Tata Sky’s
new customers opt for Tata Sky Plus. This
has helped the company drop Tata Sky
Plus prices to Rs 5,999. But rivals may
soon launch a similar product.
The company is betting on its value-
added services as another glue for the val-
ue-conscious subscriber. It is the only
operator which charges for all its interac-
tive services since its launch in 2006.
Most players provide these for free
with the exception of movies on demand.
Says Dish TV Chief Operating Officer
Salil Kapoor:
“The DTH industry is still at an early
stage for value-added services. Users
need to get into the habit of using services
through their TVs; hence, our suite is for
free.”
Teams from both Tata Sky and its part-
ners develop the content after sounding
concepts out with various consumer pan-
els. Educational services for children
have been popular on Tata Sky.
“ WE BELIEVE THAT A
SUSTAINABLE BUSINESS
MODEL WILL COME FROM
ADEQUATE SHARE IN VALUE
TERMS AND NOT FROM
VOLUME FOR VOLUME’S SAKE ”
Subscribers who use this service have
been found to spend 66 minutes on it per
day, according to a study by GFK-Mode.
An insight revealed that parents wanted
their children to learn something out of
the themes that they were fond of watch-
ing on TV, such as cartoons on Disney and
Turner. Tata Sky roped in the same brands
to deliver content. Apart from nursery
rhymes, mathematics and general knowl-
edge, there are also craft lessons from
Pogo, for instance. This service has found,
says Mehra, 500,000 takers.
It was another such insight that led to
the latest service that teaches English. A
large number of housewives felt their lack
of confidence in speaking the language
hampered their interactions with their
children. The mothers did not want to
enroll in a course as that would let the cat
out of the bag; they were happy to learn in
the confines of their bedroom. Research
also showed that a full course could cre-
ate tension with the husband who would
keep a tab on the wife’s progress. So, the
content, which has been developed with
the British Council, offers tips on how to
speak English. The content is new every
day. Mehra claims that 100,000 people
have signed up for the service and anoth-
er 1,500 or so are joining every day.
Both the services have been priced at
Rs 30 a month. Others such as the one on
cooking are bundled at a slight premium.
GFK-Mode recently surveyed over 6,500
users to find out the usage of interactive
applications on the Tata Sky platform. It
found that on average, a household
watches television for 180 minutes, of
which 34 are spent on the value-added
services. “No single channel can claim
that viewing time on a daily basis,” says
Mehra.
It is obvious that Tata Sky is spending a
good amount of money on the content,
either through one-time payments or
shared revenues. So, does it make money
on these services? This is important
because it could launch more such ser-
vices in the future. “We have started mak-

Business Standard 111


ing money on the interactive services,”
says Mehra.
That customers have begun to move
up the value chain also shows, claims
Mehra, in the market for movie on
demand. “We are the only player who can
claim more than 2 million purchases in
our three years of operation. Movie after
movie, we realise that any movie which is
released on Tata Sky has a much bigger
buy-rate than other platforms,” says he.
Kaminey in 2009 saw 78,000 hits on Tata
Sky, which an industry observer said was
significantly higher than other platforms.
Slumdog Millionnaire, which was exclu-
sively available on the platform for four
days before others could air it, got around
150,000 hits. Tata Sky has also stopped
giving free subscription to customers.
Many rivals give a few months’ subscrip-
tion free with every connection.
Movies, interactive services and a pro-
gramming guide in Hindi, Tata Sky
believes, have widened its base beyond
the larger cities. Since 2009, it has been
getting more than 50 per cent of its vol-
umes from outside the 50 top cities. “Bad
quality theatres in small towns have
made our paid movie service popular
with the value-conscious consumers
there,” says Mehra.
Stiff competition
But is it good enough? Will these services
help Tata Sky acquire and retain cus-
tomers? The competition in the market
place is severe. Apart from Dish TV and
Sun Direct, there are Airtel Bharti DTH,
Videocon d2h and Reliance BigTV com-
peting for the pie. Dish TV is the market
leader with its own suite of value-added
services, Sun Direct is a price warrior
with a strong brand equity in the South,
and Airtel is riding its leadership in the
telecom space to expand. Videocon d2h is
trying something new by bundling the
set-top box in the television. It is banking
on its strengths in television manufactur-
ing and distribution.
Like Airtel, Tata Sky wants to leverage
the distribution of Tata Teleservices to
reach its hardware and recharge coupons
to customers. Tata Sky also has more than
1,500 exclusive franchise outlets with a
service called BOB, or boy on bicycle, for
home deliveries. The company spent
www.business-standard.com
almost six months to get it right to fine than 82 per cent of installations within 24
tune the scheme because it wanted it to be hours anywhere in the country,” he adds.
profitable for the boys who are hired by its Will Tata Sky’s bet on value-added ser-
franchisees. vices for higher paying consumers pay off
Fine-tuning its customer service is a or is it barking up the wrong tree?
must if the company wants sticky price-
agnostic customers. Tata Sky has three
different call centres at Pune, Mohali and
Hyderabad with almost 1,300 people.
Doesn’t it make more sense to have a sin-
gle call centre because efficiencies would
be better? “We intentionally went with
different regions because we didn’t want a
Punjabi speaking in a Marathi accent or
vice versa,” says Kaushik. “Typically, TV
is consumed by the elderly or housewives
who are more comfortable in their own
dialect rather than English. This makes
the consumer comfortable.”
According to Tata Sky, Nielsen has
said that customer satisfaction is higher
for it than any other company in DTH. But
that was in 2007. Rivals surely have got-
ten wiser since then. For example, Dish
TV knows the value of retaining sub-
scribers rather than just acquiring new
ones. “For every acquisition, we have a
retention scheme. Over the last one year,
we have had four different recharge offers
for our existing consumers such as giving
away Rs 300 worth of content free for
every recharge of Rs 300. There would be
no point in acquiring subscribers if we
can’t hold our existing flock together,”
says Kapoor of Dish TV. He should know
because Dish TV remains the largest play-
er with over 6.8 million subscribers.
For Tata Sky, Mehra claims, ease of
recharge is a differentiator. “We were the
first to start a pre-paid service. As we
speak, only 15 per cent of our recharges
are actually vouchers that you have to buy
from a shop; 85 per cent of it happens over
SMS, the web or call centres which are
even equipped with voice-recognition
software. These are convenient options
for the customers. We have customised
our services to the way our subscribers
want them,” he adds.
“We are also very serious about track-
ing customer service. Every Monday
morning, people report to me what is the
percentage of field repairs that were
addressed within 24, 48 and 72 hours.
What is the percentage of installations,”
says Kaushik. “Last week, we made more
Business Standard 112