Dalmia Cement reworks its portfolio, but will the consumer bite the bait?

Certainly, cement is not a category that garners a tremendous amount of discussion, debate or interest beyond the basic needs of concrete construction. So what does a manufacturer do if it wants to get out of its comfort zone and command top of mind recall? First, establish a strong identity for its brands and second, give the potential customer a good reason to remember you next time she plans to spend money on a product from your industry. 

Dalmia Bharat Cement, the fifth largest cement producer in the country, is planning to just that by rationalising its brand portfolio, giving each brand a distinct personality and climbing up the value chain. But will the consumer bite?

First things first: The new brand architecture. As part of the restructuring of brands, Dalmia Bharat has identified three distinct consumer cohorts to be serviced by its three brands — the super-premium category will be led by Dalmia DSP, the premium will be led by Dalmia Cement brand with a handful of sub-brands; and the mass market will be catered to by the Konark brand, which was limited to the Odisha market earlier.

The Dalmia Cement brand, although available in an uniformly packaged format, has three variants — the Portland Slag Cement, which is eco-friendly, has long-term strength, and is resistant to sulphate and chloride attacks; the Portland Pozzolana Cement, which has improved concrete density and is ideal for coastal areas and aggressive weather conditions; and the Ordinary Portland Cement, which offers strength, volume stability and corrosion resistance. “There is a clear trend towards segmentation in the market. Given that, we have decided to reposition our brands as well,” says Ujjwal Batria, chief operating officer at Dalmia Bharat.

The brand restructuring follows the amalgamation of Dalmia Bharat, Dalmia Cement (Bharat) and OCL India Ltd into a single entity — Dalmia Bharat Ltd. Prior to the amalgamation, the company had a range of sub-brands -- such as Ultra in south India, and Fine Blend Composite and Konark in the east, besides a host of regional brands under the Dalmia mother brand. “These will all go away and the new branding initiative will result in the Dalmia brand becoming available across our markets. We are harmonising the brands,” says Batria.

All the Dalmia brands will be rolled out across the country. 

Dalmia Bharat chose to rework its brands and come up with a new architecture because it felt that over the years it had created too many regional brands, which blurred the mother brand in the consumer's mind. Now, given the company’s aggressive focus to evolve into a national player post the amalgamation, it needed a strong national brand. “There was too much clutter and we needed to simplify it. This simplification, backed by the focus on premiumisation, will help improve the margins as well,” says Batria.

In recent years, cement companies like Birla Corporation have also taken a similar path — come up with a flagship brand as part of its plans to become a national player. Its quest also led it to replace its localised entry-level flagship brands with a new premium one  —  the Perfect Plus  —  which it acquired in 2016 as part of the takeover deal with Reliance Cement Company.  In other words, besides rationalising its portfolio there was a very definite shift towards premiumisation.

Looks like Dalmia Bharat is going in the same direction. Why? Well, being the low-cost provider is a definite competitive advantage, but good luck maintaining that advantage! In some market, some brand would be planning to steal your thunder through even lower prices. So if your marketing spiel focuses mostly on price, you'll train your customers to constantly seek a lower price, both from you and your competition. That's a no win, say experts.

So your goal must be to provide value —  especially in a category where consumer involvement is an issue —  and you can maintain that advantage through a combination of price, reach and relationships. 

While Dalmia Bharat will be spending around 10 per cent higher than its normal spend on advertising behind  this effort, the company is expecting higher EBITDA margins as well owing to the premiumisation drive. Across its markets in the south and east, Dalmia DSP accounts for 10-11 per cent of the company's total sales which Batria expects will climb to 15-18 per cent by the end of this year and increase to 20-25 per cent in the 2020-21 fiscal. In fact, in the quarter ended September 30, 2019, the premium portfolio (Dalmia DSP) accounted for around 20 per cent of the total sales.

Improved sales of DSP Cement, Batria feels, will lead to improved realisation at the EBITDA per tonne level which will represent a 3-4 per cent increase in the group’s overall margins. Usually, its EBITDA per tonne stands at close to Rs 1,500.

The Konark brand accounted for 20 per cent of its sales and the rest was contributed by the variants of the Dalmia Cement brand.

Indeed, the brand restructuring has started reflecting on the company’s financials. The company reported an 8 per cent volume growth to 4.47 million tonne in the second quarter of the current fiscal year. That against the trend in the industry where volumes declined by 2-4 per cent on an average.