Tuesday, December 13, 2011

Standard Pack Sizes : Impact on Price Points..

I was reading a newspaper article on a new regulation wherein the Government has decided to reintroduce standard pack sizes for several items of everyday household consumption. The argument is that companies have been reducing the quantity of the product without changing the price of the product, which is not in the interest of the consumer. A consumer would not check the weight of a biscuit pack every time he buys. The non-standard pack size made it easier as they would keep reducing the quantity being sold without changing the price.

But one of the main reasons why companies have been reducing the quantity (without touching the pricing) is that in many categories especially biscuits, chocolates, chips… they are trying to hold on to certain price-points which the consumers and retailers are comfortable with. Like in the biscuits business it is the Rs 5 which is very critical and the SKU at that price point tends to be the volume driver for many brands. The moment the regulation of standard sizes is introduced many of these brands will have to vacate that price slot and move higher or lower price points. The other reason reducing the quantity is to indirectly pass on the price hike to the consumer.

I feel that this regulation is not really needed for, on two accounts, one is the assumption that consumers are not smart to realize the change in the product quantity. He might get fooled once, and then he would realize & factor- in his next purchase. The second reason is that the convenience which certain price points give, both to the retailer as well as the consumer; imagine giving 7.25 for a 100 gm biscuit packet..

Wednesday, December 7, 2011

Too Much of Steve Jobs??

Missing out is Pepsi to Apple.....

Tuesday, December 6, 2011

FDI in Retail - Kirana Stores

The debate on allowing FDI in retail is something which is up for discussion, so thought I should also pitch in with my thoughts. There are many dimensions and stakeholders here, the farmer/producers, the consumers, the kirana stores and of course the international retailers who are waiting to enter the Indian market.

I will start with focusing on the kirana stores or the small mom-n-pop retailers, which I have certain familiarity because my own research work. We are known as a country of shopkeepers, because of the high retail density and the sheer number of shops. In fact in the last five years I have been observing the large number of new small kirana stores which have come up in just the 3 km stretch before my residence. ( if one were to hazard a guess based on these 3 kms the growth of kirana stores in India, it might be in the high 30s). In India setting up a retail store is considered to be the easiest way to help settle down a young guy. So the concern is that if the bigger international retailers were to come in then probably these smaller retailers would be wiped-out, estimated between 10-15 million. If that were to happen then obviously it would become a major issue. But then the percentage of organized retail even in countries where they have been for long is not 100%, infact the percentage varies in countries like Japan , Malayisia and Thailiand they are from the high sixties to 40%.

And to tell the retail in India has not evolved in the last twenty would be very wrong, our own home grown retailers Like Big Bazaar, Reliance retail, Spencers have been there for quite some time, and have we seen small retailers close shop because of them? Infact I have personally seen these Kirana store respond by upgrade their shops and increasing their service levels.

By saying that the Kirana stores would disappear would be saying that exist because of an inefficiency in the market and the moment it is removed by bringing in more efficient larger retailers, the smaller inefficient ones would disappear. The reality is that the smaller retailers exist because they provide value by providing location convenience, smaller assortments and personalized services. And yes some of them would get impacted, those who are not able to respond to the changes. Have we not seen the STD booths disappear after mobiles came in, but then the STD booths have morphed into some other kind of retail store. I firmly believe that the retail scene would evolve very rapidly and change in the form of entry of larger organized retailers is inevitable and would happen.

In my next post I will look into the other stakeholders in the retail business and how would they be impacted...

Monday, November 28, 2011

Wooden Toys & Handicrafts : Disappearing

chanpattana toys
The basic logic behind segmentation is that there is heterogeneity in demand and  there would be demand for products /services across the value spectrum. But then today in many categories we can see mass manufacturing over-weighing this logic, we can see that happening in the case of traditional handicraft products, products made from clay, wooden toys.

The list is very long , and some of these products have even disappeared and for those which are still around you have to search for them as they have been substituted by cheap Chinese products. I have nothing against cheap Chinese stuff, I do realize that they do offer a value proposition for many of us. But my issue is that many retailers and even manufactures have abandoned the little high price reasonable quality (LHPRQ) platform in the market. They have started believing that only cheap (many a times low-quality) offering is the only offering which the consumer is interested in.

I also realize that with the advent of these 'cheap' products the market for the LHPRQ products must have shrunk, but if one is willing to wait out there would be a lot of consumers who would after some time look for better quality products. And in the meanwhile you would always have your loyal followers...

Wednesday, November 2, 2011

Price Discovery through Fevicol

The other day one of our Guest Speakers Mr Manoj Shelar shared a very interesting example on price discovery. He said that at one point in time many of the plywood stores would deliberately sell Fevicol at a much lower price because carpenters would use the pricing of fevicol as an indicator of how the shopkeeper would price other products. The shopkeeper in turn would deliberatley keep the price of Fevicol low and then make his profits from plywood and other products.

I have always felt the same strategy is used by the sweet shop people, where they price their samsoas very low....

This strategy is used by many other retailers too, also known as the loss leader strategy, where there would be some categories in which the retailers would not make any or only a little profit, but they would increase the traffic to the store. And once you have more walk-ins the overall sales would improve and the retailer would make profits.

Wednesday, October 26, 2011

Is there an opportunity in this complexity?

The number of charger in a average household...
This was when I was trying to find the charger for my mobile..

Interesting Gift Packs for Diwali

Monday, October 24, 2011

Korean or a Chinese Diwali!!!

A few days back I was reading about how this Diwali would be a Korean Diwali ,acknowledging the dominance of the three Korean majors LG, Samsung in Consumer Durables and Hyundai in cars. What I found more interesting than the dominance part was the observation that perhaps they have managed to understand the Indian consumer better than many Indian companies.

I also find that this Diwali would also be a Chinese Diwali, looking at the sheer dominance they have in the Diwali lights. A few years back setting up the lights for Diwali use to a exercise in itself, testing, checking and setting up the lights use to be both an expensive and an activity which needed a professional electrician. But today one just needs to walk into the market to pick-up Chinese lights , which are reasonably reliable and very cheap. A couple of hundred rupees and you will have enough lights for your home.

And the fact of the matter is that no one is complaining that the lights are Chinese and the new TV which you have bought is a Samsung. In fact there seems to be a shortage of the Chinese lights in the market!!!!!!

I have always believed that the Indian consumer is a value seeker and this highlights it....

Sunday, October 23, 2011

Business Plus Sustainability - Nitin Paranjpe HUL CEO

This post is in continuation with the previous one on the talk given Nitin Paranjpe, CEO of HUL . He spoke at length on the issue of how businesses of tomorrow will have to strive to achieve a balance between business goals, sustainability and customer value. He said the currently there are very few examples which could take care of the all the three concerns, and shared the effort by HUL on that front,

The first example he shared was the example of Surf Excel, where a technology improvment was helping users reduce the water needed for rinsing by half. This took care of all the three stakeholders, consumers and the environment gained because of the reduction in the consumption of water and the sales of the product would also improve because of the value being delivered to the consumer.

The second example was of Pureit, a water purifier which addressed the critical issue of clean drinking water without running water and power, combined with low cost. Contribution to the society was in helping check diseases which spread through water and the product was targeted at the huge untapped market for clean drinking water.

The third example was that of lifebuoy soap, where they promoted the concept of washing hands in villages through the use of a visual aid and in the process addressed many diseases which would spread because of unclean hands. HUL being the market leader would gain the most by the increase in the usage of soaps and in the process also improve health.

He said that there were the very few examples that he currently had and even these had come up in the last few years and the need to come up with more of these innovations was critical and how do you push the organization and managers towards these goals was going to be critical...

Saturday, October 22, 2011

India Story : Road blocks Ahead

This blog is dedicated to the India Story, the great belief that we would continue to grow at the same pace which we have witnessed in the recent past. The belief that the time for the Indian market and the consumer has come.....

But in the last few months we suddenly find the unending euphoria about India suddenly taking a hit. Lot of this is driven by what is happening in Europe, but within the country too, the increasing interest rates, inflation & the rising petrol costs has everyone wary. The sudden assurance that we would start growing at double digit rate is being rethought.

I had the opportunity to listen to Mr Nitin Paranjpe CEO of HUL. He spoke a lot about these issues and brought out the darker side of the growth story and how it needs to be handled if we need to keep growing. He reminded the listeners how we had wished away the issues of illiteracy, health, infrastructure, corruption , perhaps hoping that high growth would take care of it. He said that inclusive growth was not a political jargon but the need of the hour. And as a corporate one cannot be a bystander and not do anything….

He said that it was imperative that businesses come up with customer propositions which take care of the environment, make business sense and add value to the customers. This trisection is currently very small and in the coming years it needs to be expanded. He gave a few examples, which I will share in the next post. But all in all, corporate world is seriously trying to address issues related to sustainability and inclusive growth as they also realize their future is also intertwined with these issues..

Thursday, October 20, 2011

Brands Losing their way

I have always felt in the country we have had many good brands, and they have lost their way either due to mismanagement or sheer greed. I will share a few examples to elaborate my point of view,

Let us start in the cookery segment, where we have really old brands like prestige and hawkins. We have the experience of using these brands across many years; some of us would still have the 20 year old pressure cookers in their houses in working condition. The brand was built on their performance many years back, but if some one has bought a cooker from either of these companies in the recent years would have a very different story to tell. Do not get me wrong, I do not want to buy cookers which last for 20 years, but I want to buy products which perform. I have had a couple of bad experiences and I thought probably it was a factor of chance, but then when I saw the queue of people waiting to get the valve replaced, or getting their cookers repaired it makes me realize that the problem is much more acute than a few one-off cases. The unfortunate part is that there are no viable substitutes in the market, or maybe we see them as inferior just because we are so used to the old biggies.

My second example is from the mobile services domain. I am talking about the market leader, airtel. Till the time they got into financial pressure, the services were good, but then for the last couple of years you would find them giving you new unasked service and start charging you for the same. One will have to fight out and by the time it is discontinued the company makes some money. My emails to the ombudsman of the company have gone unanswered. And this again is not just across one number, but across many which I know. The disappointing point is that when the going is good the brands fulfill their promise but the moment they are under a little pressure they go back to the pre-liberalization mindset of trying to squeeze maximum out of the consumer without worrying about the future.

The third example is from another brand which I have a lot of admiration for - 'Big Bazaar'. I use to be a loyal customer buying my monthly groceries from them. Then for the last couple of years I had stopped visiting them. The other day I went to buy some groceries and was shocked by the approach they have adopted. In many products there was a difference of 30/- kg if you were to buy a half kg versus a one kg pack, which I found very difficult to digest and ended up walking out of the shop after making less half of my planned purchases. The core proposition which the brand 'Big Bazaar' stood for me is low-cost and I felt that they were fiddling with that core proposition itself.

Building a brand takes many years but destroying it takes a couple of bad experiences!!!!!!! And rebuilding the trust with the consumer would take longer, if it can ever be done.

Friday, October 14, 2011

Most Trusted Brands in India :Brand Equity 2011

Globally we have many brand ranking agencies which rank brands, like Interbrand and Brandz Top 100, but in India not much of formal ranking is done. Though some of these agencies have started working in India too, but the Brand Equity Most Trusted Brands Ranking is an annual ranking which is keenly followed. A look at the top ranking this year,

The major change this year has been that Colgate has come back to the top slot after many years and Nokia has dropped to number 5. Nokia's drop is perhaps reflective of its performance in the market place. The ranking is accompanied with a series of interesting write-ups on various brands,

Starting with how Colgate regained the top slot again, to the analysis of why Nokia fell from the top. Then there is an interesting piece by Pankaj Ghemewat on Coke and Globalization and by Nirmalya Kumar on how brands need to gain trust of the consumers, and become a positive force in the larger community. There are few more stories which one can read.

Thursday, October 6, 2011

Tabs also ready for the explosive growth?

Indian government yesterday launched of the cheapest tablet PC in the world at $35, which adds to the dropping prices of tabs. Though this $35 tab might not change the dynamics of the tab market, but Amazon Tab might , which is predicted to have an huge impact on both Samsung Galaxy Tabs & Apple ipad. Earlier companies like Bharati & Reliance had also launched their tabs at $250.

I feel in the tab market is ready to take-off, as mobiles had done when prices crashed. The applications and use for which tabs are put also would increase(Ex - Salesmen of HUL use Samsung tabs for booking orders from retailers) . People would find it easier to use a tab to access internet, with its bigger screen and ease of use versus mobile phone. The volumes will have to come not just from people who would buy the tabs as a second PC or replacement for a laptop but also from users who do not have a PC. And it for the last segment where pricing would matter and the volumes would come from..

Sunday, October 2, 2011

Honda Brio Another Made for India Car

I have written earlier on the effort made by multinationals in India on making products exclusively for Indian consumers. Honda Brio is new addition to that list; another notable recent addition would be Toyota Etios, again in the car segment. Brio is according to economic times the fourth new car to hit the Indian roads in the last ten days. This is in stark contrast to the pre-liberalization days when the choice use to be limited to either an Ambassador or a Fiat and Maruti 800 in the later days.

For both Honda and Toyota the new small cars are the cheapest cars in their stables, and both the companies are looking at them to drive volumes and reach out to tier II and tier III cities. But one does feel that it is a little too late, hope not too little though, given their reputation. Were they expecting that Indian's would line up for Corolla's and Cities. Though these models do sell and would keep selling, but would never be volume drivers. In that even the American auto makers (supposed to have lost their nimbleness to the Japanese) have had better offerings in the segment, in fact Figo has turned out to be a game changer for Ford in India. But then maybe they made an entry and the consumers will decide the winners.

Perhaps one more realization for the auto makers has been that maximum activity is in the 4-6 lakh segment and not the bottom of the market , which players like even Nano are finding it difficult to crack. So every serious player in the car market has a very strong offering in that bracket. The bottom line is that the choice for the consumer is increasing..........

Friday, September 30, 2011

King Fisher Red is Dead

When I read the news that Kingfisher has decided to close down its low cost operations Kingfisher Red, one part of me was happy , having traveled in many sectors on Red, but then I also felt sad as it was the erstwhile Air Deccan which was getting a final burial.

In the list of brands which we have lost in the recent past I have always felt that Air Deccan was on top of the list. To me it showcased the power of pricing and the influence it can have on expanding the overall market in a category. Air Deccan also was a sort of showcase example of power of opening up of the economy and the reflection of the increasing disposable income.

Captain Gopinath , expressed his disappointment at the closing down, but then his suggestion that all domestic should have been Red and international could have been First also goes against Kingfisher's positioning as the 'King of Good Times' . Closing down would also be a factor of the current finacial situation the airline is in. From a branding angle I would have felt that they should have used to Air Deccan name for the low-cost airline and retained the kingfisher as a full service airline. The synergies of combing the two airlines , in terms of ground operations and other logistics could still have made sense.

But then there is another theory where people suggest that acquisition was driven by the urge to start international flights which was restricted to airlines with a minimum years in operations and acquiring Air Deccan gave that status to Kingfisher.

Wednesday, September 28, 2011

Monday, September 26, 2011

Thursday, June 30, 2011

FMCG Majors and Indians

I was reading a newspaper article in TOI on how Asian Executives are increasingly in demand in corporate world worldwide . The article was written against the backdrop of the news that Harish Manwani is set to become first COO of Unilever, which is seen as an acknowledgement of the growing importance of Indian/Emerging markets. The recognition for the Indian talent has always there, historically many multinationals have looked at their Indian operations as a hunting ground for fresh talent.....

Harish Manwani is actually an addition to the list, other are PepsiCo chairman and CEO Indra Nooyi and Rakesh Kapoor the global CEO of Reckitt Benckiser. I have looked at only FMCG sector there are more people in other sectors also, and this probably is just the start...

Saturday, May 21, 2011

Dhoni & McDowells

disappointed by Dhoni on this....

Perhaps I was expecting too much from him, with the status he has achieved he could have always said 'No' to this surrogate ad and it wouldn’t have made a difference to the crores he would anyway make. But ....

Tuesday, April 5, 2011

Value of Brand Dhoni !!!!!!!!!

I thoroughly enjoyed the world cup success and was quite impressed with the overall team performance and especially Dhoni's role in the success. I think many of us have always have been waiting for that one individual who would come true on the big match day and win matches for us ( like the Aussies have always had and even with Pakistan at time).

My first tweet after the world cup victory was how many ads will I see dhoni in :)

My fear is proving to be right , the endorsements rates have sky rocketed and quoting from live mint article "

Dhoni charges Rs. 6-7 crore per endorsement per year and already endorses around 19 brands, including Sony, Pepsi, Reebok and Big Bazaar, leaving only a handful of categories such as financial services and four-wheelers he is yet to enter. That may happen now.

One report in economic times says the endorsements rates might even cross 10 crores...

I have never been convinced about the over use of celebrity endorsements and I think we will hit the peak in the next coming months in terms of Dhoni & team endorsing products across the range.. and the focus will be back on cricket , which had actually changed with the some success in other sports

Saturday, March 26, 2011

Whole Grain - The New USP for Food products??

A few years back a pack of bread use to be a pack of bread, today if you were ask for pack of bread you would be in turn asked if you want brown , whole grain, multi-grain and so on....

In fact at times I think we are also going in the American way of increasing choice for the consumer to the point of confusion, for people who want to know more about increasing choice and confusion could read Paradox of choice by Barry Schwartz....

But coming back to the Whole Grain/Multi Grain phenomenon in food products. Today health seems to be a plank on which every food manufacturer wants to climb on, be it the old Maggi or the new Horlicks foodles to even Kellogg's corn flakes. The idea is probably to work on the anxiousness of the mother who sees the child glued in front of the TV or computers rather than going out and playing, and the increasing consumption of pizzas, burgers, chips...

It doesn't help that obesity is “the emerging Indian epidemic”, and the problem is going to only increase in coming days, with the marketers held answerable at some point or the other. Globally health consciousness has increased but we as a society still see a fat baby and compliment him as being from a well-to-do family. In fact in many parts of country food needs to cooked in Ghee or at least as much oil as possible, acting as an indicator of the status of the household...

We would be needing a change in the way we perceive obesity and change our food habits drastically if we need to move on to become a more healthier nation and the whole-grain and multi-grain products seem more as a gimmick or at best a drop in the ocean...

Saturday, February 19, 2011

A Fistful of Rice By Vikram Akula

In 'A Fistful of Rice' Vikram Akula traces out his journey of starting SKS and shares his philosophy, take on tackling the poverty and rural issues in the country. The strength of the book is it very well-written and easy to read (infact at times a little too easy) and gives us an understanding of the for-profit micro finance model as against the NGO model which Grameen Bank promotes.

The book starts with his experiences on his visits to India in his childhood and moves on to the days where he started working in rural India and to the part where his search for a scalable model helps him conceptualize the SKS model. The idea he promotes through the book is that it is not a bad thing to make profits from micro finance or the poor. His idea is that one will not able to attract more money (other than grants and government funds) unless and until you are able to provide decent returns. This is what Late Prof C K Prahalad propounded in his book bottom of the pyramid where he said that there is money to be made by serving the world's poor.

Towards the end of the book, Akula shares the new areas in which SKS is expanding , from using their reach in rural India to sell product to their members, the non-profit work which they are doing in areas of education & health....

The book was written before the Microfinance crisis hit, so there is no mention about that, and the negative coverage which the industry has got, but then these issues are out the scope of this post, but there are a lots of positives which one can take away after reading the book especially for people interesting in making their presence felt in rural India.

Wednesday, February 16, 2011

Retail Consolidation : Observations from the Indian Market

In one of my earlier study on understanding retailing in villages, I had observed how retailers in the smaller villages had more generic offerings (even homogeneous) but as the population of the villages increased more specialized retailer would come up. I could not empirically test it but then there is some support in the theory and logically also it makes sense because a specialized retailer would survive only a certain minimum scale.

Now on my recent trips to the markets in some of the Meteors gave me a different flavor of how things are evolving, at one end we have the emergence of these more specialized retailer, like Mobile stores (driven by the mobile revolution), baby care stores like Baby center catering exclusively to needs to babies and pregnant mothers ... and at the other end of the evolution the smaller specialized stores like the chemists and consumer durable shops are becoming more more generic in their offerings. I still remember a couple of years back when I was looking for a camera roll (yes people still buy it!!) I could get it in a near by chemist store who was literally stocking everything which a typical grocer would do, and chances of you getting a specialized medicine was also low.

Some of these changes can be attributed to the emergence of organized retail and consumer willingness to travel some distance to buy products at these larger format stores. The smaller shops are reacting by adding more categories to gain economies, but a lot these need to studied in order to document this evolution and how it will impact the retail structure in the country….

Monday, February 14, 2011

Packaging Quality & Size

The rising inflation is making FMCG marketers rework their packaging strategy. The sachet revolution has become a folklore in the marketing world, on how it pushed consumption into newer and newer markets. But the current need to revisit their packaging decision is not driven by the need to increase penetration, but from the need to control price increase. Though some of the companies are still working on reducing the weight & keeping the price constant, I am not sure about its efficacy, when the reduction is 5-10 gms , as in the case of biscuits & confectionery maybe the consumer will not notice but when the weight goes down from 500gms to 325gms it sure to be noticed ...

The second aspect is related to coming up with cheaper packing options, so that it helps them save money. This again seems to be a very risky strategy where in many categories the packing also protects the basic product itself , especially in the context of the mom-n-pop stores in Indian retail. They say that when Marico first introduced plastic containers for parachute they had to do a lot of convincing before the retailer agreed , because till that point plastic quality used to be so bad that rats could actually eat into the containers!!!

And overall the packing quality has never been comparable to the developed world , either in terms of quality or in terms of details on the packs. Are we moving in the right direction?

Friday, February 11, 2011

Growth - But Sustainable ??

Every company wants to grow, and post liberalization we have seen companies grow at rates which were unheard of earlier. Airtel, LG, Nokia, Hyndai are examples of this fast growth..

The news is that HUL has set a target of 50,000 crores by 2015, link to the story. To put the target in perspective, it took the company 75 years to touch 20,000 crores and now wants to reach 50k. According to the news paper article these kind of target are called BHAGs, or Big Hairy Audacious Goals, in multinational parlance. Those which provide a sense of larger purpose and propels the organization to move at a faster pace.

My take on the audacious goals is that , though it might help push the company beyond the typical growth targets of 10-12% and be happy,, to look beyond and stretch their resources to meet these targets, it will also create a lot of pressure in the system ( distribution channels and sales personnel) which needs to be handled well. Even if an inorganic way of growth will not be an easy one.

But yes from an outside observer it will be interesting to see how things evolve ....


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