| When a David takes on a Goliath and gives it a run, it makes for a good, inspirational story. There is no shortage of admirers for the David and critics for the Goliath.
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| Yet deep down every David wishes to be a Goliath and dreams of not behaving like one when he becomes one! There is bigness in an elephant that is desirable. Yet is there anything inspirational about the elephants?
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| Unilever has gone through tough times recently. And so have other multinational FMCG companies. They are alleged to be not-in-touch with consumer realities, slothful and unwilling to innovate. However, a closer look at their circumstances and more non-partisan view of their performances actually should inspire admiration.
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| Large brands tend to operate in markets that are fairly saturated. Penetration levels of branded products are quite high or have reached saturation levels. The potential for greater expansion is difficult. This is because income growth in India in the last decade has happened in the upper income groups.
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As per an NCAER study, the growth of incomes in the last five years of the 1990s was as follows:
Lower 10.8 per cent
Lower Middle 0.9 per cent
Middle 5.3 per cent
Upper Middle 9.9 per cent
Upper 21.5 per cent More money with the same people does not mean that people will spend more on the same category — the ones that multinational FMCG brands are mostly operating in. Consumers tend to then spend more on newer products/categories or upgrade to better products — which are fairly limited in the FMCG category.
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| Large brands by nature tend to be the pillars of companies and come with a baggage of history of what has made them work and what hasn’t. A company’s dependency on them to facilitate any new initiatives — like funding new product launches — puts additional burden and responsibility on the larger brands.
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| It is tough psychologically to actually shift gears dramatically and distort the mix that’s worked in the past. And given that today managers don’t see themselves “dedicated for life” to a company, it becomes easy to maintain the status quo. They are stars and cash cows at the same time. “If it ain’t broke, don’t fix it” — seems to be the principle guide their nurturing.
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| Large brands by sheer spread open themselves to regional vulnerability. To get to large sizes, brands need to be distributed widely and often appeal to a wide group of people — thus not focused in targeting. Any new brand launch in the market is likely to hit the larger brands’ volumes most — because the new brand tends to be more targeted.
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| And the growth of regionalism in India has only added to the stress on the larger, national brands. It’s easier said that savvy marketers must attack themselves to keep themselves relevant. But it is difficult to do given that one is often targeting a wide group of consumers and any initiative could adversely hurt some section within that group.
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| The creation of brand extensions only adds to marketing budgets, sales SKUs and portfolio complications. And then the question of impact on brand equity arises.
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| New brand introductions even by big brand owner companies is always more attractive than extensions as they yield immediate results and fame to the brand manager launching the same — though later they often become sacrificial lambs at the altar of brand rationalisation or when they cannot sustain themselves.
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| Large brands tend to depend on change in consumer behaviour for growths and this is the toughest to achieve. Marketing is about satisfying consumer needs, wants and desires. However, once a brand has satisfied a need or want, the challenge becomes of “expanding the need/want”.
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| Current usage of toothpastes is once a day, which is an accepted social norm. Once, penetration of 90 per cent plus has been reached by the category, further growth will come from getting consumers to brush twice a day which is a more difficult task.
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| Marketing principles say it is the task of the market leader to do the same, which is fine, but results are not easily forthcoming. In a world where a consumer has so many other unfulfilled needs, he or she tends to prefer to spend on satisfying those needs.
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| Large brands have to often defend more than attack. Once a brand is big and dominant, the first task is often seen to be to consolidate what you have and then attempt to fly from there. The romantic notion of the “small” that once you are big, you have a springboard to fly is only that — a romantic view. One never knows when one is big enough and by the time one realises it, it is sliding! It is this mindset of defence that makes any aggressive initiative against oneself difficult.
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In this context, there is much to learn from Unilever and the other MNCs in India. And today’s growth sectors like automobiles and telecommunication companies will turn to these FMCG giants for inspiration sometime in the future when their growth plateaus out.
- Cost management — when top lines become difficult to grow, focus on cost so that bottom line shores up. Levers has managed that successfully year on year
- Make brand more accessible — in saturated markets, getting new users is always more difficult. Levers has however, constantly attempted to reach geographies within the country not reached. And looked at offering packaging and delivery options that make the brand accessible to newer consumers. Low unit sachet packs and offering natural, herbal variants were initiatives in that direction.
- Drive behaviour change — the toughest thing to do — get current consumers to use more of the product. Again Unilever has repeatedly tried to stimulate this through its lead brands.
- Look for value extraction — never an easy thing for a mass marketer whose mindset is more volume driven. However, this will be the mantra of the future in keeping with the way most developed markets go. Unilever’s introduction of Lipton ice tea is a move in that direction.
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| These are both time consuming and long term and do not offer the excitement of immediate results of a new launch. But that is the way to go.
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| Sometimes initiatives in re-engineering do help in giving new impetus to big brands. IBM internationally shifted gears and focused on services to get growths in the mid-1990s but has slowed down again in the early 2000s! Closer home, Lifebuoy’s recent repositioning from the “male health soap” to “family germ kill” soap yielded big growths on a big base was extremely daring and admirable. Cadbury Dairy Milk’s big shift in 1998-99 to “legitimise mass consumption” and gaining over 25 per cent growth in an indulgence category is again very creditable. This was tied up with an active promotion of a smaller pack at the ground level.
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| But such examples are truly few and far between and often a result of hard work and perseverance. Making elephants dance is not easy. Expecting them to do so easily and criticising them when they don’t, is not fair.
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| Something worth thinking about.
madhukar.sabnavis@ogilvy.com (The writer is country manager — Discovery, Ogilvy and Mather India. The views expressed are personal) |
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