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Continuing our conversation with Laura Ries on her new book, Origin of Brands: Jennifer asks: You make the point that a brand is designed to fill a hole in the mind, and that brands cannot be successfully transferred to other products or categories. Yet I believe that good brands often grow on 2 different trees or branches; one is defined by the category and the other by the target audience or lifestyle. You say that McDonald's is defined by the category (hamburgers), yet it is also defined by a target audience (restaurant for kids). If you can associate a brand with multiple branches, you stand a good chance of evolving the brand and successfully expanding it to fit other products. McDonald's, for example, can expand from hamburgers effectively IF (and only if) their new offerings fit on the "restaurant for kids" branch. Nike is not confined by the "athletic shoe" branch as it has also defined itself on an aspirational 'athlete' branch, so it has been successful in launching other products under the Nike brand (we'll see about the golf clubs). You say in the book that the Cayenne is the first step in the downfall of Porsche, yet I see it as a successful venture because the Cayenne is designed for the same upscale performance-minded buyer; it doesn't fit on the 'sports car' branch, but it does fit on the corollary high-performance lifestyle branch. The VW Phaeton failed because it didn't fit on the VW 'for the people' branch; the VW Touareg succeeded because it did (despite the spelling of the name). IBM successfully extended its brand from computers to tech services by leveraging its position on the "trusted" technology branch. I'd enjoy your comments and responses on this subject. Laura responds: There are two issues involved here: (1) Would the companies you mentioned have been even more successful if they didn’t try to associate the brand with multiple branches? (2) Were the competitors to these companies asleep at the switch which allowed these companies to line extend the brands? Take one example. Both McDonald’s and In-N-Out Burger started in California. Both were originally focused on hamburgers, fries and drinks. Nothing else. Today the average McDonald’s does slightly more than $1.5 million in annual sales while the average In-N-Out Burger unit does $1.9 million. Which brand has the better strategy? We say In-N-Out Burger does because they still sell only hamburgers, fries and drinks and out-sell McDonald’s. Both companies made mistakes. McDonald’s by expanding their menu. And In-NOut Burger by not expanding their geography.
Jennifer asks: There’s a recent article in Reveries Cool News about McDonalds turning around their business through line extensions. I looked up their stock trend and, in fact, it’s more than doubled in the last two years as they’ve moved away from both burgers AND kids. I'd enjoy your thoughts on how that’s happened… because I agree with you; I have no idea what McD’s stands for anymore. Laura responds: McDonald’s sales are up, but so is Burger King’s. The question is why. My feeling is that McDonald’s has greatly improved operations and that the line extensions have had little to do with its recent successes. I think you’ll also find that the improvements are likely to be temporary in nature.
India's Fmcg Brands Ready to Move into the Fast Lane
Posted on: Saturday, 26 April 2008, 03:00 CDT By Coutinho, Ashley FMCG companies are fighting to stand out amid the clutter of a massively reinvigorated consumer market, reports Ashley Coutinho The US recession may have put the breaks on India's economic engine, but there is another growth story in the country that is beginning to pick up steam. After a long lull, the FMCG sector is making a comeback. Changing spending habits and rising rural incomes are driving the sector forward, opening new opportunities for both local and multinational companies. In the first 10 months of 2007, there were 251 product launches, including 28 new brands, compared with 191 for the same period of 2006. And while snacks and foodstuffs remain the category leaders, the recent upturn in the FMCG sector can in part be accounted for by the increased outlay on health and beauty products, particularly in urban markets. "Indian consumers are getting more demanding and hybrid in their consumption patterns," says Kai Boris Bendix, managing director of Nivea India. "They may want the cheapest atta and rice, but don't mind splurging on muesli and cosmetics." This marks a distinct shift from previous spending. The growth of health products in India was particularly flat in the first half of this decade as people busied themselves purchasing bigticket items such as mobiles and motorbikes. But now that many consumers have already upgraded, their income is being directed towards pampering themselves.
"Those FMCG categories that enable achievement and lifestyle look set to thrive in 2008, while those that offer traditional, basic needs of hygiene and protection will face pressure," says Shripad Nadkarni, director of consultancy MarketGate. India's FMCG market is under-penetrated in these categories,Nadkarni argues, giving ample scope for the introduction of new products. Anand Shah, an FMCG research analyst at Angel Broking, says most FMCG companies are responding to the new demand by concentrating on developing a big theme and building a portfolio around it. Nestle, for example, has identified 'health and wellness' as its focus area, while local FMCG company Dabur is positioning itself around ayurvedic (a traditional Indian system of healthcare), natural and herbal products. At the higher price end, companies are leveraging health and wellness trends by focusing on providing 'experiential' and 'higher order' benefits rather than purely functional ones. Rural demand Changing urban purchasing preferences, however, only partly account for the rise in FMCG sales. Potentially more significant is the growing rural market. The estimated number of households using FMCG products in rural India has grown from 131 million in 2004 to 140 million in 2007, according to market research company IMRB. Total FMCG spend in rural areas grew at 25 per cent last year compared with 2003, as opposed to 16 per cent for urban markets in the same period, although the average spends are still lower than the urban figures."The per capita income growth in India is driving up consumer spends in rural areas as well as urban," says Shah. Poor infrastructure and limited media reach have in the past been major impediments in rural India, but as these improve, companies will get more aggressive, says Saugata Gupta, CEO of consumer products at cosmetics company Marico. FMCG marketers are already busy devising new ways to reach the rural markets. Accordingto Raj Kumar Jha, national director of knowledge at Xpanse Asia,the rural division of Starcorn MediaVest Group, companies are relying less on outdoor advertising and have turned to either radio or TV and one-to-one contact programmes in rural areas. For instance, 'Fair & Lovely Vani', the rural marketing programme for Hindustan Unilever's whitening brand Fair & Lovely, aims to empower rural women to earn a livelihood, while at the same time improve the distribution and reach of its product.
After identifying villages for activation, the programme informs villagers about the company's product through contests, paper chart presentations, live product demonstrations and usage basics. This strategy focuses on educating retailers who serve as the mouthpiece for the brand, which works well in an environment where the majority of consumers purchase according to price rather than brand. Reckitt Benckiser has been following a similar line, educating retailers on how its long-duration Mortein mosquito coils can help prevent and save on costs to treat malaria. Others companies are using social initiatives to make inroads. ITC's eChoupalinitiative,forexample,isan online service that primarily tells farmers the price at which ITC will buy soya or wheat that day. However, it also doubles up as a distribution network through which the company can sell its products to the farmers. ITC anticipates the network will cover over 100,000 villages by 2012, representing over 15 per cent of rural India. Likewise, Hindustan Unilever's Project Shakti, under which the 'Fair & Lovely Vani' programme is run,offers a range of mass-market products to self-help groups - local women trained in the basics of enterprise management. Armed with microcredit, these women become directto-home distributors in rural markets. According to Hindustan Unilever, the Shakti model creates a win-win partnership between the product and the consumer, building a self-sustaining cycle of growth for all. Despite the increase in rural spending, N Venkat, CEO of cosmetic group Emami, argues that the urban market will continue to dominate over the next eight to 10 years. However, if growth continues at current levels, it may only be a matter of time until the rural consumer gains parity with its urban equivalent. New Players But even as the rural and urban consumer markets expand, competition remains fierce, with MNCs like Unilever and Procter & Gamble facing the heat from local challengers. The clutter in the crowded FMCG space has further intensified with companies such as ITC, Beiersdorf and L'Oreal upping the ante. L'Oreal recorded 40 per cent sales growth in 2007, while Beiersdorf, which entered India only two years ago,has spread its reach to 150 cities and increased its product list to 44. According to ACNielsen, Beiersdorf s Nivea brand has already become number one in the men's whitening category and number two in deodorants. "It will be easier for us to adapt to the evolving consumer and new market realities, since we carry no traditional baggage or mindset," says Bendix. Meanwhile, domestic conglomerate ITC, which until five years ago primarily focused on selling cigarettes, has diversified into shampoos and soaps, targeting both the premium and mass markets. It is also slated to enter the hand wash and
deodorants categories. Shah says ITC has not been afraid of going overboard in spending marketing money to buy market share and is using its distribution clout, thanks to the surplus cash it generates through its cigarette business. "While other companies have to focus on margins and profitability, ITC is ready to bleed," says Shah. Even so, industry players believe ITC is spending disproportionately and a key issue for it will be sustainability. With a market that up until now has relied heavily on product extensions, future success could depend on the ability to build new brands. "Once you saturate the market or leverage the potential of extension, then what do you do?" asks Shah, adding that overusing extensions can impact the brand perception and dilute brand equity. With consumer wallets under pressure from various other sectors, FMCG companies will need to create compelling roles for their brands, beyond just functionality of product and memorable advertisingcampaigns."If you don't command rich mind-space, brands will be pushed into the commodity space," says Nadkarni. Entering new FMCG territory: how India's brands are diversifying well-loved favourites to keep consumers interested Horlicks Horlicks has been positioned for many years in India as a 'nourishing family drink'. In an effort to stimulate growth and strengthen leadership in the health food drink category, GSK Consumer Healthcare launched new flavours that included Chocolate and Toffee, in addition to the more traditional Classic.The drink's new ' variants were demonstrated through the 'Apangopang jhapang campaign, which talked directly to children rather than to their mothers. The company has most recently introduced Women's Horlicks, with the tag-line 'Your Body Needs You Too', urging women in India to take care of their nutritional needs. TataTea Traditional tea producer TataTea entered the wellness platform last year with the launch ofTataTea Life. The product contains herbal variants like Brahmi, Tulsi, Cardamom and Mint, and is aimed at health-conscious youth. The brand has also introduced the Tetley Green Tea range with the aim of widening its consumer base. Tata has further targeted a new youth market with its 360-degree 'social awakening' campaign 'Jaago re', which provides a platform for discussion of social issues. The company has also announced a sponsorship
tie-up with UK football team Arsenal to start a football tournament and coaching programme for children aged 10 to 15 years. Parachute Advansed Marico's Parachute Advansed brand launched the 'Gorgeous Hamesha'campaign to establish itself as a beauty brand in 2007. The company went on to push its health and wellness credentials even further with the launch of the One-Hour Champf campaign, which plays on the art of ayurvedic head massage (champi) to drive the use of hot oil as a critical part of the hair care regimen. The company has backed the champi platform through a number of product and marketing innovations, most notably by introducing its branded massager device. The latest offering from the Parachute Advansed brand Hot Champi - is a hair oil warmer that delivers an instant hot oil massage. "Those FMCG categories that enable achievement and lifestyle look set to thrive in 2008" Fiama Di Wills Tobacco and FMCG giant ITC entered the premium personal care category in the second half of last year with the launch of the Fiama Di Wills shampoo brand. The new product is in effect an extension of ITC's super premium personal care brand Essenza Di Wills, launched in 2005 but available only in ITC hotels and Wills Lifestyle stores. Fiama Di Wills was the first ITC personal care brand to target the mass retail market. The shampoo was positioned as a 'gentle care shampoo' under the tagline 'Beautiful You.Today. Tomorrow'. The company has since released a range of shower gels and soaps under the Fiama Di Wills brand, as well as a lower pricebracket shampoo and soap brand, Superia. Last month, ITC expanded its personal care portfolio even further by launching the Vivel Di Wills brand in the India market. "While other companies have to focus on margins and profitability, ITC is ready to bleed"
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