Maggi Crisis - Will Marketers Win Again?

Maggi and the Lead Crisis seems to be going out-of-hand for Nestle. I have written earlier about Maggi and is one of my favourite examples to wake-up students in the class, so felt obliged to share my view on the crisis. I have few die-hard fans at home too…

Historically we have seen brands go this kind of challenge, once with the Cadbury's worms issue and the Pesticide Issues with the Colas drinks, and they have recovered fairly well from the crisis, so the same prognosis goes for Maggi too. But yes, a lot needs to be done before the recovery would happen. I am going a little ahead of time, as the worst of the crisis is yet to come, and that would happen over the next couple of months, with more reports coming in and the media having a gala time, debating the issue on the prime time :)

The reasons why I say that Maggi would make a come-back, (though in the process some other brands would be able to gain market-shares which they would have never dreamt earlier) is the loyalty it has developed over the years and the loyal Maggi eaters would eat it anyway, good or bad. The second reason is marketing, they have had very good marketing brains working for the brand and that has been the reason for its success and they would fall back on the same people to help them revive the brand. My guess is that the strategy would already be getting ready in the boardrooms and mid-night oil must have been burnt reading the experience of coke and Cadbury’s..

But interestingly one challenge which I see is winning back the “Mother", though most of the communications have mother at the centre, but she has not been very happy with serving Maggi to her children all along.  I overheard this conversation between a mother and her seven year old daughter, where the child was asking the mother about MSG and the problems with it, and the mother extended it to even pizzas saying that even they were not good. Over the years the typical mother has been grudgingly let the child eat the quota of Maggi without being able to do much, now here she sees a window of opportunity. She will try and use this crisis to wean the child away from Maggi. But my hunch is that the marketers will use more powerful tricks to win both of them back, for the child is the taste and mother the convenience…

I have used the word "Quota" in Maggi consciously, ideally it should be 'rationing' as the child is not allowed to eat Maggi whenever he or she wants....

Emergence of New Product Categories in Grocery

Normally we assume that in grocery as a category one would not see many new categories emerge, but for the last couple of years or slightly more one can see at least 4-5 new categories emerge and become high growth categories..

The new categories are,

Oats

Green Tea

Olive oil

Frozen food (the likes of smiles….)

There seems to be two strong reasons for the emergence of these categories, one is the increasing health consciousness among the Indian consumers and second is the increasing presence of organized retail. The first factor heavily influences three out of the four categories, but the organized retail  impacts all the four, because for many of them some handholding is required which is easier in the organized retail domain rather the dominant mom-n-pop stores….

May be the category of energy drinks can also be added to the list….

Brands and Consumers

We have been talking about how control of a brand has moved away from the marketer closer to the consumer. For a marketer this can be quite disconcerting, but this can also be seen as a window of opportunity and this post is about that opportunity. First to start with the negatives, the loss of control means that not everything that the consumer does with your product or writes about is something which is as per the instructions on the box or as the marketer would want it to be. For example most of the companies have their face book fan pages and a cursory visit to some of them would point out that not all what is being written about your product/service is positive. On the flipkart facebook page, I can see a lot of very specific complaints about poor product or poor service. How is this an opportunity? One can ignore these complaints saying that they are probably a few disgruntled customer making unnecessary noise, or show your responsiveness by trying to resolve the issue in the open. Each complaint resolved would add to the credibility of the firm. On the same lines, what happens when a product is being used for purposes other than it is meant to be, the legendary use of washing machines in Punjab to make Lassis kind of situations. Consumer finds innovative uses for your product, which may or may not help your brand. I read a very interesting piece recently on how consumer are experimenting with use of Oats in typical Indian dishes. The opportunity lies in using insights from consumers or create a forum where they could probably share their recipes and the company could also go ahead and come up with new product ideas based on some of these ideas.

Where are the poster boys of Indian growth story?

When we spoke about the Indian growth story, mobile and cars were the poster boys...(apart from IT of course) every month we would quote the number of new mobile users being added and that we were the fastest growing mobile market in the world. Now with the slowdown and perhaps in a category like mobile the growth will not come from new subscribers. More about the mobile story in another post some time the focus is one falling car sales…

I had written blog posts every time the sales of cars would hit a new high, (raining cars in India) so thought it was but appropriate to write about the first fall in car sales in a decade (Car sales crash first time in 10 years). The reasons for the fall in the sales include the increasing fuel prices, expectation that prices would fall, and of course the negative mindset that the consumers have got into.

My take on the sales in the car market is that, the conditions which were driving the sales of car for the last ten years have not changed much, lack of public transport, the status symbol associated with owing a four-wheeler, increased choice for the consumer. Only thing which is not working in the consumers favor is the ever increasing fuel cost but that many of us realize is part of the reality. We typically take the extremes while reacting to either a slow down or a growth, something similar to which happens in a stock market, market is at its peak, one finds small investor rushing into the market and when the market is at its lowest the small investors are typically found busy selling...

The auto market and the growth is there to stay, this a just small blip in the sales chart.

And in the meantime it might be best of times to buy a car, best deals possible are currently on offer..

Desi Brands in the Smartphone Sphere

The mobile phone market seems to be again on fire, with the players who had initially missed the bus, in terms of the shift to the smartphone making most of the noise. Today Nokia is seriously looking at making a comeback with its Lumia Series and even blackberry is trying its best. For a market observer this a pattern which keeps repeating, the market leaders sticking to their old way of doing things and more nimble competitor identifying the next shift early and capitalizing on it.

The more interesting part is what is happening with the Local brands of the likes of Micromax, Karbonn and others. These Desi Brands had an initial dream run in the value segment, with companies like Micromax becoming overnight success stories and started being counted among the world's top 10-15 handset manufacturer. Again expected, that the local players would fill up the gaps in the lower end of the market…

But when the shift occurred and consumer started moving towards smartphones, with their own app ecosystems in place, many expected the local players to roll over and die, because the smart phone domain is expected to be more technology driven and not a price-only but feature rich market place. And this did apparently happen for atleast a couple of year with not much noise or activity from their end. But they have made their comeback (for more read, http://goo.gl/DLwUc), with Micromax in the second position in the market and Karbonn in the fifth place. I find this both interesting as well as heartening that these firms have been able to make a comeback, as they are supposedly the ones who are able to customize more...

I think the learning is that a value conscious segment exist in all markets, especially in the Indian market.

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....

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..

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..

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..........

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.

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 ....

Why is Nano not selling?

This question has been bogging me ever since I read the news that they have been able to sell only 500 odd Nanos for the month of November. This is a figure which has surprised many, including me given the fact that Nano is the cheapest car in the world. Nano had in fact brought India and the Indian automobile industry into highlight as no other event had dine earlier, there were worries that Indian roads will soon be full of Nanos and the already congested road infrastructure would fall apart . I myself has written a post earlier in how Nano is perhaps a car for the BOP consumer..

I tried speaking to a few others to understand the possible reasons for the low sales, I will just briefly list the possible reasons ,

Price on road is much higher than the initially 1 lakh tag and many consumer feel that they can always upgrade to a Alto by stretching a bit more.
Not being seen as a car , because of it's looks and the fact that it cannot be driven beyond a certain speed..
The fire incidents have only added to the perception of quality and safely issue with the car.
Inadequate credit facility to push the sales of the car, especially to be upgrade the two-wheeler owner to upgrade (he is the target consumer)
Maybe the car buyer in India has upgraded, they don’t want to buy a low-priced car and would want to start with the next level of cars.
The issue of low-price itself could be the one which is hampering the sales, as a car is seen as a status symbol and a low-priced car defeats that basic purpose of owning a car.
Even the issue of delayed deliveries may have added to the problems and many consumer have felt disheartened by the long waiting periods initially..

I might have left out some more reasons, but still find it very difficult to come to terms with the fact that in country of our size a product like Nano could not find more than 500 buyers, I think there is bound to be some thing is not getting covered, and perhaps in the coming days we will be able to understand the issue better...

Even Carl-Peter Forster, managing director and CEO, Tata Motors said “These are new ways of marketing the Nano. To be frank, we are learning as we do. We market a passenger car to customers that are either never there to dream of a passenger car or they couldn’t afford a passenger car. It’s a very different way of marketing. It means new channels for the dealers.”

Raining Cars in India

I have written earlier that cars and economic growth were connected, at least they were during the last fifty years , though now things are changing. But even then one can observe how the increasing prosperity in India is getting reflected in the type and number of cars which are plying on the roads today. Every month we find that the car sales touching a new record level in terms of numbers , and the only aberration perhaps would be the low sales figure of Nano in November, apart from that for almost every car company sales have been good..

The segment which saw maximum activity in the initial days of liberalization was the entry level, the 800's , Alto's and Santro's, but now the focus is slowly shifting to the next level which is defined by cars like Swift, i10, i20. And we have a lot of players who are looking at this segment which is just above the entry level. Players like Toyota and Honda have their new cars entering this segment and knowing both the companies and their reputation one can foresee the life of entrenched players like Maruti and Hyundai getting more and more difficult in the coming days and the consumer spoilt for choice. Toyota Etios is predicted to be a game changer in the segment ...

At one time a company like Maruti could afford to continue with the same model for more than two decades, but those are days which have gone and the marketer of today can hardly afford to relax, he has to respond and be on the treadmill of continuous improvement to just retain its place in the market...

Credit Card usage in India

Read an interesting bit of news that use of credit cards is going down, and that of debit card increasing link

People belonging to a generation before were strictly against debt, the saying "keep your legs within the blanket" which meant that live within your means was what they believed in... But the younger generation , was thought to be the one which did not seem to care much about swiping the card and making purchases. Spend today and pay later was seemed to the order of the day..

But the data from RBI, shows a different picture, consumers not using their credit cards and moving on to debit card use. Is it just a blip and consumers would again switch back to their credit cards is something which needs to be seen, but maybe the consumer is also getting smarter in realizing the high interest rated being charged....

Car Sales and Production Delays

Last few months have been really good for the car Industry, we have seen record sales happening(July saw a 38% growth). With India becoming the fastest growing automobile markets in the world, this is in the backdrop of the sales stagnating in the US market. The growth is fueled by the series of new models launched by car manufacturers, especially in the B segment of the market, demand from rural markets, and with the Indian market entering the beginning of the festive season I think the next few months are going to be even more exciting for the automobile industry. Most of us get into the serious shopping mode only during the festivals and companies also wait to launch best of their schemes during this period, or is it the other way round ...a chicken and egg situation!!!!

But what surprised me was the news that both Maruti & Hyundai will not be able to match the demand due to capacity constraints. It is a window of opportunity for the many other players in the market who have always been wanting to get that extra market share, but seeing it from the number one and number two car makers in India, seems strange, because this growth is something which has been happening for some time now and suddenly you do not have production to cater to the demand?? Loyalty for a brand is good thing to bank on , but how long will someone wait for a car , especially in an era where we have got used to the off-the-shelf availability across many categories.

And once a consumer switches and picks up a car from some other manufacturer , he may never give you another chance. I think Maruti & Hyundai need to watch out ...

Indian Mobile Handset Market - Smaller Players Making a Dent!!!

It is predicted that India will have a mobile subscriber base of 1.159 Billion by the end of 2013 and become the world's largest market, from the currently fastest growing. For one who has seen the growth of the market from close quarters (though more as a consumer..) it has been a industry which has come from nowhere and gone on to become huge, though the scene on the service providers front is not very rosy especially looking at the future and the fact that the call rates are among the cheapest in the world make the life even more tough for them.

But what has surprised me in the recent times, is the emergence of strong local players in the Handset market. The structure of the market is very clear, you have a dominant player in Nokia with more than half of the market under its belt and then you have a host of players jostling for the second place. And we would have cover stories devoted to players who would gain 1-2% market share to become the number two player in the market. Just to give you an idea of how competitive the market is, 28 new vendors have been added in a space of one year. So in such a competitive market how easy or difficult is it for a new player to gain market share???

There is a detailed story of How MicroMax Mobile did it in Business Today. The story goes on to tell how Sharma who founded the company saw two features battery life and signal reception being the ones which were the number one priority for many of the low-income consumers, and capitalized on the opportunity. Now this insight is not something for which you need McKinsey's study???

It was not that the emergence of these local vendors was something which happened overnight, they were making their presence felt through local ads, and I could see many people slowly buying them, like my gardner has recently brought a Lava phone. But it was this IPL which brought the focus, with many of them capitalizing on the opportunity to highlight their brands..

We have known about the first mover advantage, though the evidence on the advantage is not very clear, but it seems intuitive that if there is a gap in the price-value equation it should be the existing players who should be able to see it first and capitalize. I can understand when it happens along with a shift in the technology, but....

But it definitely provides a lot of food for thought smaller players suceeding in an extremely competitive market. And the mobile handset market is only going to become more and more crowded with time, and success of MaxMobile is only going to add to the rush...

Monsoons and the Indian Market

Monsoons is a reality of Indian market, a good proportion of the growth of the Indian economy is still dependent on how adequate the rainfall is across the country. But as with many other things we tend to take the monsoons for granted and it is only when we have a drought hanging over the country that we start talking and discussing about it as is apparent from the recent news items on weak rains and impact on FMCG revival, impact on the stock market ,and the FM lowering the economy's growth to 6 plus from 7%.

The linkage of good monsoons and Indian market is because of another reality which we keep ignoring and about which I have written about earlier also, it is the rural market. link to my earlier posts on rural marketing.

The rural economy is heavily dependent on monsoons and many companies are dependent directly for their sales from the rural markets (more than 50% for FMCG and durables), and with an inadequate monsoons the rural consumption falls and so does their overall sales. There are many more whose sales are indirectly dependent...

And the urban consumers is dependent on the farmer for his of pulses and cereals..... as some one told us that the farmer is a better marketer than his urban counter part as we depend more him for our daily needs than he does on us!!!!! And with sowing down by 20% the prices are bound to climb higher in the coming days with toor dal touching the feared 100/- mark.... the impact would be more pronounced on the monthly budget soon.

The sad part is that we tend to draw up plans to combat the impact of bad monsoons the year we have a problem and when the rains are back to normal the next year we forget and go on with life. This year it is seen as more important as a weak monsoons might extend the slowdown...

Another write-up in NY times of the same issue, link

A Marketer's Ability to See the Future

As the caption says one needs the ability to see and believe in the future, that is an ability which a marketer needs. In the book 'Made in Japan' it says Akio Morita declined to sell unbranded electronic goods to a major US retailer, and said he would sell it only with the name Sony on it , and these were the initial start-up days when no one even knew about Sony.

I was reminded of this need to be able to see the future when I see the Volvo Buses plying in Bangalore. When the Volvo started its operations in India in early 2000 I was one of those skeptics who never believed that it had a market in India, at best maybe a niche market, but today they are the most sought after services in the state and private transport. A detailed article in Business World gives the current status and demand for the bus, link.

We tend to underestimate how consumers tend to assess value, and how much they are willing to pay for the value that an air-conditioned, reliable and comfortable bus service.... Many years back when Reynolds first came in with its pens in India, n the late 80s or early 90's, most of the pens which were available in the market were priced 1/4th of Reynolds, but once the consumer used a Reynolds he would come back and buy only that .....

But the point which I want to make is how would Volvo know that its buses would be well accepted 8-10 years down the line, one needs to be able to have a faith in its products and understand the market and stick to ones plans (though a fair bit of research is an essential part of backing up certain decisions ), and ample risk appetite..

PS: I find the bus service between the new airport in Bangalore and the city is picking up , when the airport was opened in May end the buses were plying empty now they are quite full...food for thought you provide good reliable services to people, they are willing to try it ....

ET Front Page News - Acquistions, growth and Rs 1 Trillion

The very first blog which i had written was on the growth in the Indian markets. In Today's Economic Times the front page has three different pieces of information, the first one is the possibility of Tata Motors being the forerunners in acquiring Land Rover and the Jaguar at around $ 1.5 Billion. Second is the news of an addition of 5.6 million users in the fastest growing cellular market in world, and the doubling of Bharati's Profits. Last bit is the Rs 1 trillion volume in the markets on thursday for the first time (though latest news the sensex has dropped by 500 points !!!!).

Though the first news that Tata motors in the acquisition mode might be considered as no news at all after the acquisition spree that Indian companies are in..... but still this acquisition would bring into the Tata Portfolio two very powerful Brand names. The addition of new subscribers into the mobile telecom network also would be considered as a stale news. The 1 trillion turnover in the markets would raise a few eyebrows, but I see the significance of the fact that they have all come on the same day and are on the front page, which empassises the boopm that Indian markets are going through.....