FMCG cos bank on speed to win

Cut Time To Market Amid Downtrading Fears During Slowdown

Mumbai: Fast-moving consumer goods (FMCG) companies are using speed as a competitive weapon to win in the market place, especially when talks of a slowdown bring the possibility of downtrading into sharp focus.

Growth in the FMCG Industry has not lost steam even as other sectors have slowed down, but there is concern about a possible impact considering a deficient monsoon this year. The industry believes there is one weapon which can help companies win, and that is speed.

A Boston Consulting Group (BCG) report, ‘Speed To Win’, says increased agility can solidify a competitive position, boost profitability and reduce risk. It says for standard new product development, a seven months time to market can separate the best in class from average players. But would it also work in a slowdown? “In slowdown situation it is even more important as the consumers typically start to change their consumption patterns and it is important to refine the offerings (in terms of price pack architecture, composition and packaging) to ensure alignment with the consumer requirements,” said Abheek Singhi, partner & director, BCG.

A company can outpace its rivals by increasing its market share, boosting its negotiating leverage towards trade and positioning itself as an innovator and the mantra is: standardize, prioritize and mechanize. Take the case of Nivea lipcare. Speed helped the company redefine this category with the trade in terms of merchandising and distribution. The category was treated like an “impulse confectionery” and not like a traditional skincare category. “Our actions have followed out thoughts and results are there to be seen. We have been quicker than most of competition in developing the premium lipcare category for Nivea. All our initiatives have hit before competition, be it variety/price points/distribution. This has given us leadership,” said Rakshit Hargave, MD, Nivea India.

With compressed product life cycles, especially in some of the newer categories, being quicker to the market is a great advantage. “Speed to market is important, not just with new product development but also with reaching out to the consumer and ensuring that even the remotest of corners of the country get the products in a short period of time,” said Sunil Duggal, CEO, Dabur India.

Dabur integrated its consumer care and consumer health businesses and this was the genesis of ‘Project Speed’, which was designed to help the firm cope up with challenges by leveraging the power of its combined product portfolio through a unified sales & distribution structure. Dabur has also put in place an initiative to double its rural reach. The company is hopeful that this would enable it to have a direct access to 3,000-population villages across 10 states that account for 72% ofthe rural FMCG potential.

Some other examples are brands from mid-sized companies like Paras and Emami which were successful in gaining share as their product development times were shorter than others in the sector. When Emami conceived the idea of a men’s fairness cream, it knew it had a winning concept. What was important, however, was to ensure that it was put into market at a speed before others. “We were able to go to market within just under a year from the time the idea was conceived. This requires great agility. It took our established competitors by surprise as elements of marketing were in place within the short time,” said N Krishna Mohan, CEO, sales, supply chain and human capital, Emami. As a result, Emami enjoys market leadership in the category.

“Empowered companies with flatter and decentralized decision making structures can outpace its rivals in speed to market. This, when accompanied by stronger local consumer insights can develop into a potent competitive advantage,” said Saugata Gupta, CEO, consumer products division, Marico.

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Taming the Data Deluge

Marketers and consumers struggle with the volume of data the world now generates. David Benady asks how the two sides can jointly control the tide, including the advent of brand ‘data stores’.

Data is inundating the economy, overwhelming consumers and businesses with swathes of information that they struggle to comprehend. The overload is set to spiral as social media, mobile and geo-location technologies spew forth yet more reams of data.

With billions of web searches made every month, more than 20,000 new books published weekly and more texts sent daily than there are people on Earth, data is increasing exponentially. The number of exabytes (EB – equal to 1bn GB) of information created in 2011 hit 1750, double the 2009 figure, according to IDC estimates. There is twice as much data as storage capacity.

This torrent of data makes it hard for marketers to ensure their brand messages are heard above the noise. Consumers have become reluctant to open the floodgates to receiving more irrelevant information, and some are wary of providing personal details.

Research company TNS has analysed the way in which consumers ‘eat’ at this table of information and created five consumer segments based on their readiness to absorb data. It calls the data deluge ‘information obesity’, and looks at the way people create their own ‘eating plans’.

You are what you ‘eat’
‘Fast foodies’, it says, consume the easiest, lightest data they can find. ‘Supplementers’ devour as much information as they can. ‘Carnivores’ consume only meaty chunks – whole books and in-depth research. ‘Fussy eaters’ are loath to consume information from any source, while ‘balanced dieters’ never consume too much information; what they do take comes from a variety of sources.

TNS marketing sciences director Russell Bradshaw says these ‘eating plans’ are a good way for marketers to target resistant consumers. ‘By understanding the predominant “eating plans” that exist among their brand franchises, brand managers and chief marketing officers have a tool for maximising the reach, resonance and values of their campaigns,’ he says.

TNS analysis suggests that ‘carnivores’ are more likely to shop at Marks & Spencer, while ‘fussy eaters’ tend to stock up at Asda. This gives M&S leeway to bolster its communications, giving customers big, meaty chunks of information they can savour slowly. Asda, meanwhile, would do well to deliver information in bursts and offer online nuggets such as tweets to appeal to voucher-hungry customers.

Marketers acknowledge that segmenting consumers by their propensity to consume information can be useful, but many see it as an add-on to the already tough task of identifying relevant audiences.

David Torres, global manager of chemicals technology at Shell Research, says that Shell intends to embed the TNS eating plans into its work, adding that brands need to search the data they have for clear and relevant insights.

Meanwhile, Stephanie Maurel, head of retention at Sport England, says the ‘eating plans’ could be useful if blended with other tools. ‘The TNS data obesity segmentation makes a lot of sense and rings true anecdotally. It is a great idea to segment by the information consumers are prepared to receive, although perhaps this is an extra step to be added to current tools,’ she adds.

Maurel’s role at Sport England is to use data to help various sports’ governing bodies to increase participation and attendance, a challenge for smaller sports, such as hockey. One solution is to take data from grassroots sources, such as social media, and integrate it with i n fo r m at i o n from elite sports events.

While small sports may be unsophisticated when it comes to data collection, Maurel says some governing bodies are using real-time data to build their popularity.

British Cycling, for example, gets feedback from locally organised Sky Ride mass-cycling events and feeds it through to its board meetings. This, in turn, helps it shape the way in which Sky Rides are organised.

For many brands, the UK’s data-chain is dominated by retailers. They control the all-important information about sales, which they then sell back to brandowners. Nonetheless, retailers, too, are suffering from information overload, according to Chris Osborne, retail principal at software supplier SAP. A recent survey by SAP found that more than half of retailers believe they have more information than they can handle. ‘Structured’ data – such as till receipts showing items purchased, times of day, quantities and prices – has been around for decades. Osborne advocates combining this information with ‘unstructured’ data – such as the random chat of social media – as the next great challenge for brands and retailers.

The prize will be to build a total view of each customer’s likes, behaviour and loyalty, and target offers accordingly. A crucial step is ensuring both types of data are gathered and acted upon in real-time.

Osborne believes the development that will enable this is ‘in-memory’ data analytics, where the data is stored in the computer’s memory for quick retrieval, rather than on a conventional database where it is stored on a hard disk, making it harder to access and wasting capacity.

He envisages a two-track economy where success will depend on efficient use of data. ‘The retailers that win out will be the ones that are very careful about how they use data and don’t swamp consumers with irrelevant offers,’ adds Osborne. ‘Retailers that create competitive advantage are (also) careful about how often they communicate with consumers.’

Useful data vs ‘noise’
Given the retailers’ iron grip on data, some brands have turned to comparison website Mysupermarket.co.uk to gain access to information about their own performance through mini-shops on the site. Reckitt Benckiser, Kellogg, Danone and Nivea are among those to have created such stores.

James Foord, vice-president of business development at Mysupermarket.co.uk, says brands are only just beginning to grasp the distinction between ‘data noise’ and what is useful. The site allows brand-owners to create a direct relationship with consumers and thus control their data. Brands can analyse the battle between their products and stores’ own-label versions, for example – data retailers rarely release. ‘This is the tip of the iceberg of what is possible. Brand stores will open up a whole new level of insight that has real value,’ adds Foord.

The battle for data control is about more than simply capturing as much information as possible and keying it into a database. Finding ‘smart’ data can save time and money in research and bring significant benefits for brands. The challenge is to find the pieces of information that help a brand locate its best customers and give insights into their motivation for buying a product.

Mike Dodds, chief executive of integrated agency Proximity, recalls a cat-food brand’s CRM programme in which customers were questioned about their behaviour. The question that delivered the best data was: ‘Do you celebrate your cat’s birthday?’ The responses helped the brand discover the most involved and valuable customers.

A potential barrier to the development of data-driven marketing will be consumers’ attitudes to privacy and control of their personal details. The online giants, such as Google, Facebook and Twitter, have built their businesses on getting users to give up their data in return for ‘free’ services. If the public refuse to play, this could put a spoke in the wheel of the data economy.

Chris Combemale, executive director at the Direct Marketing Association, says brands have to be upfront about privacy and make their policies simple and readable: ‘If you can’t put the policy on one page and make it clear, you have an issue.’ He also warns brands to avoid being ‘creepy’ online – by serving ads based on details consumers thought were private – which, he argues, can make digital marketing appear intrusive.

Modern marketing is essentially a battle for data. However, consumers themselves have the ultimate weapon: to switch off and stop sharing their information.

Technology was supposed to make life easier, but, in reality, it has made the world far more complex. The task of creating marketing campaigns that get heard above the din will only get harder still in a society deluged with data.

Marketing © Brand Republic

Rural India Laps up Diapers, Colognes, Sanitary napkins.

Rural consumers are buying diapers, salty snacks, colognes and even contraceptives other than condoms like never before, despite signs of falling demand for traditional FMCG categories such as shampoos and soaps in hinterlands due to unabated inflation. Data from Nielsen, a global provider of insights and analytics, shows that tens of contemporary and indulgent product categories including sanitary napkins and chocolates are growing at high double-digit rates in Indian villages (see graphic).

“The rural mindset is open to consumption of newer, more contemporary categories, as a result driving consistent growth,” says Nielsen India VP Prashant Singh.
Nielsen categorises rural markets as those with population of less than 5,000, but there could be some exceptions. It estimates that the country’s rural FMCG market will grow to $100 billion by 2025 from $12 billion in 2011.
For MNCs like Procter & Gamble and PepsiCo, it’s an achievement of sorts to have broken ground in rural markets, by initiating consumers into newer categories such as diapers and salty snacks and upgrading them from unbranded or regional products to branded ones like in the case of cooking oils.
So, how did they achieve this?
P&G adopted the classic and tested strategy of betting on low-volume, lowpriced packages — sachets in the case of detergents and shampoo, and, for diapers, a pack of two at Rs. 15.  The move has paid off.
“We have seen a near doubling of the diaper category in rural India over the last two years,” says P&G Brand Manager (Pampers) Girish Kalyanaraman.
P&G launched the country’s first lowpriced trial pack of two Pamper diapers two years ago, educated people in rural areas about the benefits of uninterrupted overnight sleep for babies; and ran an awareness campaign on Doordarshan and satellite channels. Result: Demand for diapers has grown 90% a year in the last couple of years.
American snacks and beverages maker PepsiCo is another company that achieved tremendous growth in rural areas. Besides using fixed low price points such as Rs. 2, 3 and 5, PepsiCo has been using innovation, backward linkages for procurement and expanded distribution to drive growth in the hinterlands, a PepsiCo spokesman said.
“There’s a massive under-served demand for hygienic packaged snacks; we are expanding our manufacturing footprint and investing heavily in expanding distribution,” he said.
The company has moved away from centralised manufacturing and, instead, partners with local entrepreneurs across the country to cater to regional preferences and tastes, using locally grown ingredients. Examples for this include the extension of Kurkure brand to three local variants — Mumbai Usal, Bengali Jhaal and South India Spice—and testing of Lehar Iron Chusti puffs and biscuits at Rs. 2 in Andhra Pradesh. Kolkata-based Emami—maker of Boroplus anti-septic cream and Zandu Balm pain reliever—broke into the rural cooking oil market with a Rs. 5 pack of its edible oil Healthy & Tasty. “Rural consumers are used to buying unbranded or loose oil from local kirana shops for Rs. 5 or 10,” says Emami Group of Companies Director Aditya Agarwal, explaining the idea behind the low-cost edible oil packet.

100 Retailers in Shopping Centers Released

China Chain Store & Franchise Association (CCFA) convened the Conference on Cooperation, Development and Exchanges Between Commercial Real Estate Developers and Chain Retailers in Ningbo of China’s eastern Zhejiang Province on June 9 and released the book 100 Retailers in Shopping Centers.

CCFA has selected over 100 outstanding chain retailers from its members in various business formats, which have the ability to make expansion nationwide. The Association categorized them according to existing business formats and functions of shopping centers and offered information on different aspects of these brands, such as features of their image, traffic, expansion rate and development plan.
Some are international brands, some are famous brands in China and some are leading brands in regions, including department stores, supermarkets, home appliance stores and household stores and covering all business formats like apparel, fashion, catering, cosmetics, entertainment, education and service. These can meet the demands of commercial properties to attract investment from various stores and provide a wide variety of retailers for commercial real estate developers.
In addition to the information in it, the book has also given professional analysis and different views from experts of shopping centers on the industry’s current situation, trend, investment, financing, planning and design.
It is a great aid for commercial real estate companies to learn and attract investment of their shopping center programs.
Here are some comments by developers of shopping centers on the book:
It is quite useful! The book can give guidance on brand portfolio and combination of business formats and it is a professional reference for the management of shopping centers.
– Wanda Commercial Management
Shopping centers are drivers for creating a fashionable and prosperous city, while brands are the core competitiveness of shopping centers in the market. Best wishes to 100 Retailers in Shopping Centers.
-Sunshine100 Real Estate Group
The book has integrated resources and set up platform for information exchanges, a show of CCFA’s function and value. 100 retailers is the start and we are aiming at 1000.
-Powerlong Real Estate Holdings Limited
The book is an excellent reference to see clearly the essence and core value of shopping centers.
-Shopping Center Department of CR Vanguard
Reading the book will free you from the worries when you are developing shopping centers.
-COFCO Commercial Property Investment Co., Ltd.

Successful Brand Marketing

With an increase in trust deficit world over, here is what brand managers need to weed out of their environments to retain their brands’ trust

MARKETING’s greatest invention is the brand. In effect unheard of 100 years ago, brands and branding now march triumphant. Everything and everybody — places and destinations, political parties and social movements, people (first celebrities and politicians, now, it appears, all of us) — are brands.

Yet, aside from a few usual suspects such as Apple, in the branding heartlands, all is not well. Y&R executives John Gerzema and Ed Lebar highlighted the problem in 2008, when they reviewed longitudinal evidence from Y&R’s Brand Asset Valuator research programme. In their book The Brand Bubble, they charted a ‘precipitous’ decline in brand trust since 1993, along with sharp falls in consumer perceptions of quality, brand awareness and ‘brand esteem’.

In 1993, for example, consumers trusted 52% of the brands researchers asked them about. Fifteen years later, the figure had fallen to 25%. Gerzema and Lebar pointed out that stock markets may have been pushing up the value of brand-owning companies, but brands themselves were being ‘hollowed out’.
Then came recession. Halfway through, Promise chief executive Charles Trevail observed that “according to every survey and index on trust in institutions and organisations from around the world, trust is in terminal decline”. Even when the recession was supposed to be lifting, Alterian chief executive David Eldridge commented on his company’s latest research: “Consumer trust is at an all-time low.”

So what’s the problem? How can brands and branding be so successful, yet so sickly at the same time? The answer may lie with the occupational diseases of brand management — diseases that are generated by the daily working lives of brand managers.

MASKING THE PROBLEM
Brand management as ‘mask management’ is the most common of such diseases. Because brands are all about external communication, many brand managers find it hard to resist the temptation to paint ‘lipstick on the gorilla’ — telling customers what the brand manager knows they would like to hear, rather than keeping to the truth of what the organisation can, or actually intends to, deliver.

In reality, the most important part of the brand manager’s job is one of internalisation: bringing customer views and perceptions from outside the organisation inside, so that the organisation understands, responds and resonates to customers’ changing demands. Yet, activity-wise, the minute-by-minute focus of the day job is external communication. When changing the external message is easy (and fun) and changing the organisation inside is hard (and painful), the lures of lipstick-on-the-gorilla mask management can become irresistible. In fact, they can even be dressed up as a new theory. Remember when we were told that punters didn’t buy the beer, but its advertising? Remember George, the Hofmeister bear?

Next on the list is brand hubris. Not long ago, it was fashionable among brand consultants to show their clients a chart depicting the relative prices of different T-shirts. Some sold for a fiver or less, while branded ones were at least £50. “Which T-shirt do you want to be?” the consultants would ask. The difference between being able to charge £5 and £50 lies in “branding”, they would say. “We can help you become experts at ‘branding’.”

Well, they may have been experts at branding, but they were dunces at economics. If you sell 1000 T-shirts for £5 with a £1 margin, you make £1000 profit. If you sell 10 for £50 with a £48 margin, you make £480 profit. By implying that the supply/demand curve could be ‘branded’ away, these consultants were usually doing their clients a real disservice. While they were doing the rounds with their presentations on ‘branding’, full of impressive words such as ‘intangibles’, the brand that romped it on the high street was Primark.

That is not to say that discounting is always the best strategy. Rather, it is to challenge the widespread belief that it’s the ‘extra stuff on top’ — the stuff added by ‘branding’ — that is the source of brands’ margins and profits. The fact is that, apart from some special cases such as luxury goods, if you look at most successful brands — such as Amazon, Apple, Dell, easyJet, Facebook, Google, IKEA, Nike, Starbucks, Tesco, Toyota, Virgin and Wal-Mart — what marks them out is not superb ‘branding’ (sometimes it’s superb, but very often it’s not) but that they deliver outstanding customer value, often via breakthrough innovations, technology and/or underlying business models.
‘Branding’ alone hardly ever makes a business successful. It is businesses, including their culture and ethos, that make brands successful. And as soon as the business drops the ball on innovation, service, quality or price, or forgets its cultural roots, the brand quickly loses its lustre.

CLARITY OF PURPOSE
Brand narcissism is our third, closely related, occupational disease. Brand narcissism works on two levels. At the first, every brand manager desperately wants their target audience to recognise their brand, love it and be loyal to it by, for example, acting as an unpaid yet enthusiastic brand advocate.
There is nothing wrong with these dreams per se. They are natural. What is wrong is when we morph the wish into a ‘strategy’ of ‘success by being popular’ — where getting people to talk about and ‘love’ the brand becomes an end in itself, pretty much divorced from the value it’s supposed to be delivering.

The second level of this brand narcissism, which is even more dangerous, is where the brand manager forgets the underlying purpose of the brand and starts acting as if it’s the job of the customer to add value to the brand (by paying a price premium or being its advocate, for example), rather than the job of the brand to add value to the customer.

An obvious point, perhaps, but it can be difficult to remember in a world where your every passing thought, and key performance indicator, is about how well-remembered you are, how preferred you are, or how many people are talking about you.

Our final occupational disease is toolkit myopia. Brand managers are surrounded by a dizzying array of sophisticated tools and techniques for research, testing, data-gathering and evaluation. They are on an endless quest for the breakthrough insight and the sparkling creativity. It’s difficult to master all these things and the quest easily becomes obsessive. So much so, that it soon seems as if excellence at these diverse technicalities lies at the heart of successful branding — when it is not.

You can, for example, use exactly the same technical toolkit, excellence, to build a brand that perfectly communicates a brand’s unique value.
And to hide the fact that the brand is nothing more than a me-too mediocrity. You can use technical excellence to articulate specialness and hide sameness, but content-wise, they are opposites, having an opposite meaning to the customer.

The one thing that branding as mask management, brand hubris, brand narcissism and toolkit myopia have in common is that they destroy trust. They are potentially catastrophic mistakes, yet they are in the air brand managers breathe, growing naturally in their working environment. So they have to be combated on a daily basis.

How? What’s the antidote? To remember that a brand’s real job is to build trust, and that everything the brand does must be tested against this yardstick. It’s this simple human understanding that successful brand managers never let anyone forget.

Chain Reaction

A 1700 crore brand, Amway India’s direct selling business journey involves thinking and acting like an FMCG company

FOR A company that’s built on a model of minimal mass media advertising and maximum direct selling, resorting to above the line communication sure does raises eyebrows. But William S Pinckney, CEO of Amway India knows that to drive the company further into the Indian market, using advertising to increase brand awareness is important. So from a corporate ad that projected Amway more as a FMCG company and less as a direct marketing business, Pinckney says the company will now start with category advertising soon to “to educate customers about the brand as many people don’t know us.”

Pinckney’s worry may be the unfamiliarity of the brand in India, but looking at the numbers Amway has notched up, it seems to be spreading the right message. Amway will be closing the financial year with a turnover of 1700 crore, clocking a CAGR of 20%. With over a decade’s presence in India, Amway today sells around 115 SKUs — from products in beauty to home and personal care. While beauty (10%) and HPC (30%) are important categories for Amway, 60% of its sales in India come from nutrition products and its brand Nutrilite, according to Pinckney, is among the Top 5 in the world in its category. Pinckney accepts that the company‘s growth has revved up only in the past few years thanks to key changes initiated in the overall business model.

The changes however do not mean that Amway has moved from its multi level marketing model that is the USP of the company. Products are still sold through a network of Amway Business Owners (ABOs) across the country with emphasis on bottomline margins. Pinckney says one of the thrust areas has been a faster delivery of the product range to end users. Using a network of seven contract manufacturing facilities, the SKUs move to a central warehouse and from there to regional warehouses across the four main metros — Delhi, Kolkata, Mumbai and Bangalore. Amway today has a network of 130 offices, 55 warehouses that reach around 4000 cities and towns across India.

Taking a leaf out of the FMCG sector, Amway has introduced smaller SKUs like single use sachets to generate trials among customers and get them interested. Further, to get customers to ‘touch and feel’ the products, the company has ‘brand experience centres’. These centres situated within shopping malls and high streets allow customers to look at the product range. Pinckney says that the centres are manned by consultants who provide information on the products on display. However, these centres don’t sell as he is clear that selling happens through ABOs. “The retail format is not a point of sale as we don’t want it to cannibalise our core business operation.

Customers can try our products at the experience centres and we will help them get in touch with the ABO in the area they live to buy the products,” says Pinckney. However like any FMCG company, Pinckney says providing a retail experience is important even for Amway and therefore the company plans to have a footprint across the country with over 30 brand experience centres.

Amway may have notched up some serious numbers in a short span of time, but there are challenges as it looks to scale up the ladder. Foremost is the beauty and personal care category that’s witnessing an aggressive play off between established FMCG players. Market observers believe for Amway to make an impact, it will have to project each product as a brand with its own character and personality. “A lot of brands in these category are imagery driven. Any premium that a brand charges depends on the brand message it sends across,” says one market observer. That’s precisely the reason why Amway is now looking at above the line communication for individual brands. On the other side of the spectrum is the price war that one comes across in home and personal care. With well known FMCG companies playing the price card regularly, Amway for its offering has to be in sync with the market when it comes to pricing, say market observers. Pinckney knows that in terms of marketing and communication, he doesn’t have the muscle to match the FMCG behemoths in the market. But Amway’s trying to overcome the perception and familiarity issue through training. Amway provides free training to its ABOs and so far it has conducted 29,000 training sessions for more than 1.5 million people. “As this is a one-to-one marketing business, it is important that ABOs know about the product they are selling,” says Pinckney.

Amway has acquired some traction in the multi level marketing business, but to keep the chain going, the company will need to think more like a consumer goods company and less like a direct seller.

 

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