value brands by raj nair (avalon consulting)
DESCRIPTION
This slide deck was shared by Raj Nair at the TiE Institute Knowledge Series in Mumbai in July2010. The deck covers the concept of Value Brands. [Related Videos may be available at http://Youtube.com/EnterprisingINDIA ]TRANSCRIPT
CONFIDENTIAL
2010 © Avalon Consulting. All Rights Reserved
AVALON CONSULTINGNew Delhi Mumbai Chennai
VALUE BRANDS : GROWTH UNLIMITED
Presentation: July 17, 2010
TIE, Mumbai
2
AVALON CONSULTING
Roadmap
What are Value Brands ?
What does it take to build Value brands?
Can we penetrate International markets with Value Brands?
3
AVALON CONSULTING
The seller’s mindset seeks big volume, low price, decent quality to feed aspirations of consumers Buyer’s mindset: maximise value without compromising on benefits
Value Brands are Value for Money
Benefit Price Chart
100
0 100
Ben
efi
t In
dex
50
Value Bra
nds Territo
ry
Positive value
“Line of indiffe
rence”
Negative value
50
Perceived price index
4
AVALON CONSULTING
The situation in the mobile phone business
Multi Nationals unbeatable . Nokia, Samsung, Motorola, etc. Too
deeply entrenched not just in India
Prices are dropping with each new model launch
People looking for fancy phones with many features
Cheap Chinese phones of doubtful quality
Enter Micromax in 2008. Nobody gives them a ghost of a chance
Micro max-the story
09/07/10 – ND/pr
5
AVALON CONSULTING
Multi Nationals unbeatable . Now Micromax has beaten Motorola and is expected to be the No
2 after Nokia by the year end!!
How? Aggressive cricket focused marketing with a budget of Rs.100 crore and smart
distribution channel management (90,000 outlets in B&C Class town in 500 districts) to support
a Value for Money product proposition
Prices are dropping with each new model launch. They launched phones across the price
range up to Rs15000 but each model at much lower than the MNCs
People looking for fancier phones with many features. Give high end features in low priced
phones. Imagine QWERTY phones below Rs.5000! Now selling 1 million phones a month!!
Cheap Chinese phones of doubtful quality. Focus on acceptable quality
There is nothing Micro about Micromax
09/07/10 – ND/pr
6
AVALON CONSULTING
Launched in 1996 – Kwality Walls market
leader 40% share. Its predecessor Kwality,
well entrenched
Aggressive Pricing
‒ 25% to 40% lower than Kwality Walls
Built market shares through point-of-sale
promotion, product promotions and low
mass media
Leveraged the strong Amul brand
association with the integrated milk business
Many others have failed, before and after
Amul
#1 in India
34% market share
The Amul Ice Cream Story
09/07/10 – ND/pr
7
AVALON CONSULTING
• Category and Market Share growth because
o Value brands address aspiration needs of the masses
o Value brands are “good enough”…and more attractive than private label
• Made possible through
o Proliferation of low priced channels
o “Insurgent” business models
PricePoints
Time
Value Brands
Middle-of-the-Road
Premium
Why & How?
Value Brands normally drive out the middle-of-the-road segment in most categories over time
8
AVALON CONSULTING
Originally produced using excess
capacity in P&G, Henkel factories, etc.
Now produced in 5 ‘close to consumer’
factories
Extensive distribution with substantial
intermediary incentives / trade
marketing
Priced > 30% less than major brands #1 in China
24% market share
Chinese detergents– The Diao Story
09/07/10 – ND/pr
9
AVALON CONSULTING
1992 2003
24%
Diao BrandLaunched
Diao (Nice)24%
Qiqiang (Shanxi Nafine)
11%
Omo (Unilever)10%Tide (P&G)
9%
Liby (Guangzhou)
9%
Whitecat (Shanghai Whitecat)
6%
Lonkey (Guangzhou
Lonkey)4%
Dosia (Reckitt Benckiser)
4%
Fan (Shanghai Soap)
3%
Kami (xian Kaimi)
2%
Others17%
Chinese Detergents
09/07/10 – ND/pr
Diao Market Share, 1992-2003% Market Share
Relative Share by Value, 2003% Market Share
Diao rapidly ate up everybody else’s lunch to become the leader
Deja Vous?
10
AVALON CONSULTING
Nirma (the ‘original’ value brand) ,Ghadi and Fena in the detergents market
Ujala fabric whitener – 65% market share, displaced Robin Blue
A number of global examples…….
A number of other examples…….
09/07/10 – ND/pr
Procter & Gamble is expanding their portfolio into the value-priced segment. The successful launches of
Mach3 disposable razors in the U.S. Pampers Simply Dry diapers in
Germany Naturella feminine care pads in the
Arabian Peninsula
are three recent examples of products in this category.
L’Oreal ventured into the value products segment via its high-end brand The Body Shop. They launched a new line of cosmetics called The Original Collection, which includes 11 iconic Body Shop products sold at attractive prices.
11
AVALON CONSULTING
Roadmap
What are Value Brands?
What does it take to build Value brands?
Issues involved in penetrating International markets
12
AVALON CONSULTING
9 6 5 0 _ I n d i a
Big market in the chosen category
Value Brands strategy is not about winning a small prize at a low price
Nano is a Value Brand. Addresses a huge 2 wheeler market which has millions of car aspirants
Mayonnaise is not a category in India for a Value Brand. Niche market best addressed by a Store Label
Primary condition
09/07/10 – ND/pr
13
AVALON CONSULTING
Build low-cost Business
model1 4
Grow volumes
Pass margins on to retailers
2 Increase
distribution
3
Value Brands Virtuous Circle is not just about branding
09/07/10 – ND/pr
How are Value Brands created?
Isn’t it what Micromax, Amul and Diao did?
14
AVALON CONSULTING
Large gap between Entry and Premium prices…. mobile phones,
cars, garments , footwear, fashion accessories, etc.
Mid-market brands have weak Brand Utility
Population pregnant with aspiration….’climbers’
Access to retail space possible
‒ Independent distribution
‒ “Direct to Retailer” selling
Characteristics of markets that provide opportunity for Value Brands
09/07/10 – ND/pr
15
AVALON CONSULTING
Large ‘bottom of the pyramid’ market
‘Value Seeking’ customers
Large ‘Value Opportunity’ for new entrants
– McDonalds – The ‘Rs. 20 menu’
– Pizza Hut – ‘Rs. 75 per head treat’
– Reebok shoes priced at <Rs. 1000 for India
Lower cost structure compared to the Western economies
Is India ripe for Value brands?…….1
09/07/10 – ND/pr
16
AVALON CONSULTING
Roadmap
What are Value Brands ?
What does it take to build Value brands?
Can we penetrate International markets with Value Brands?
17
AVALON CONSULTING
9 6 5 0 _ I n d i a
The market exists in several categories
The recession has set off down-trading
China is creating some global brands in consumer durables – Haier, TCL, Lenovo….
Consumers have started trusting Chinese products because many famous global brands are sourcing from China
Why not Indian Products?
Is there an opportunity for Indian brands in global markets?
09/07/10 – ND/pr
18
AVALON CONSULTING
Branding challenge
Managing the channels
Establishing after sales service
Issues involved in penetrating developed markets are not trivial
09/07/10 – ND/pr
Issues
“You don’t get a Coke by putting four quarters in four machines. Think big.”
19
AVALON CONSULTING
9 6 5 0 _ I n d i a
Indian business plagued with the ‘Small is good enough’ mind set. Only a few like Mittals, Ambanis, Tatas, Infosys, Mahindras etc. and now young fighters like Micromax have broken away from it
Branding is so different from producing as a sub contractor
Creating global capacities starts with creating big capacity for the Indian market in most cases
Flawless execution and sustained effort.
Can we be an insurgent in export markets?
09/07/10 – ND/pr
20
AVALON CONSULTING
Branding challenge
Managing the channels
Establishing after sales
Issues involved in penetrating developed markets are not trivial
09/07/10 – ND/pr
Grass-root
M&A
OEM route
Issues Options
Think big, think smart
21
AVALON CONSULTING
For comments, views and suggestions contact me at
Avalon Consulting
Casa Avalon,
61 Dr.SS Rao Rd,
Parel, Mumbai 400 012
09/07/10 – ND/pr
Thank You