Sixteen months after it acquired Reliance Cement Company (RCC), marking its foray into the premium category, Birla Corporation, the acquirer, is now planning to take the premium cement brand, Perfect, across the country except south India. This brand, originally made by RCC, landed up in its kitty as part of the takeover deal. This will mark the company's first ever rollout of a cement brand across the nation.
The Perfect brand of cement, which is manufactured from RCC's Maihar plant in Madhya Pradesh, is currently confined to central and minor parts of east India.
However, in the third quarter of the current fiscal year, Perfect, which underwent a packaging renovation, contributed atleast Rs. 2.3 billion to the company's consolidated turnover of Rs. 13.89 billion.
According to a senior company official, the Maihar plant offers it a strategic logistical advantage and can feed all regions save south India, thereby making the Perfect brand the most suitable candidate for a national rollout.
"So long, cement has been a localised commodity and its name was associated with the plant or the location where it is manufactured.
However, it is changing now and the brands are assuming national significance", the official told Business Standard.
Since the company doesn't have a south Indian presence, the availability of Perfect will be limited to northern, western and eastern parts of the country.
To up capacity utilisation at 90 per cent in the 3 million tonnes per annum (mtpa) Maihar plant, which essentially makes the Perfect brand of cement, the flagship company of the MP Birla Group has also started manufacturing its other budget brands from this plant.
As a result, in the crucial Madhya Pradesh-Chhattisgarh belt, the company's market share has now increased from eight per cent to 17 per cent in the last one year.
Besides, it is also working on a plan to introduce a new variant of the Unique brand of premium cement which will be rolled across the northern region. This brand of slag cement is limited to its eastern market and is currently manufactured from the Durgapur plant.
Post-acquisition of RCC's assets for an enterprise value of Rs 48 billion, the contribution of premium cement to Birla Corporation's consolidated sales has increased from 10 per cent to 25 per cent.
Company officials expect that in the next two years, revenue contribution from these premium brands will increase to 30 per cent.
According to industry estimates, premium brands directly pull up the bottom line by around 20 per cent as compared to budget brands and hence is likely to further improve the operating cash flow in the company.
"The idea is not just to focus on the premium category but push sales of other popular and budget brands as well also. But premium cement contributes much higher than the budget ones to the profitability", the official added.
As a result of the new synergy around the premium brands, the company's consolidated loss in the third quarter of the current fiscal year narrowed down by 47 per cent at Rs. 218 million as against the loss of Rs. 413 million it incurred in the similar quarter of the last fiscal year.
Focussing on a national rollout of its most premium brand, the introduction of a new grade of an existing brand and strengthen its budget brands portfolio, Birla Corporation has earmarked a 20 per cent increase in its marketing and promotional budget across its eight cement brands.