Commodity or Kirana?

Branded steel bars and plywood manufacturers are now actively communicating to the end-user, just like any other FMCG brand.

Popular Steel Enterprise on Kolkata's VIP Road isn't the usual saria store with untidy stacks of steel rebars taking up almost every inch of the floor and going well up to the ceiling.

In contrast, Anup Jaiswal's shop is bright and colourful, its walls painted in contrasting panels of stark white and acid yellow "" the colour of Tata Tiscon, one of the brands in his shop.

Up on one wall, a chart lists the recommended price, with a bold sign offering "home delivery". Prominently displayed next to it is the price list of another brand, Elegant, which also features a photograph of actor Sanjay Dutt with the tagline Steel ka naya funda!

Clean and airy, Popular Steel is a testimony to how far branded TMT (thermo-mechanically treated) bars, an improved variety of steel reinforcement bars, have transformed the commodity trade in steel reconstruction bars.

Until just a few years ago, steel rebars were traded like any other commodity: by weight, with no one "" manufacturer, retailer or consumer "" giving a thought to quality, packaging, or standardisation of product, much less in-store branding.

That's changed now. A Kolkata-based advertiser estimates TMT bar brands spend close to Rs 100 crore on advertising and brand promotion, calculating an average of Rs 3 crore or so among the over 30 branded TMT-bar makers. One of the biggest advertisers in the category, SPS Group's Bipin Vohra says Elegant TMT bars has a Rs 5-crore annual marketing budget for the electronic media alone.

Until recently, outdoors was the medium of choice, but now advertisements on radio and TV and filmstars as brand ambassadors are becoming common. Quite like any fast-moving consumer good (FMCG) like soap or toothpaste "" except that Sanjay Dutt or Dharmendra are signed on instead of Kareena Kapoor or Aishwarya Rai.

Although public sector steel manufacturer SAIL introduced TMT bars in India in the 1990s, the category really took off only after the launch of Tata Steel's branded rebar Tata Tiscon, in 2001, and its mass media promotion.

The decision to brand the commodity was taken, says Sunil Seth, chief marketing and sales (long products), Tata Steel, after a market survey revealed "a few home truths about the TMT-bar market in the country."

He identifies the learnings as: first, few end-consumers were aware of the finer points of TMT bars; and second, consumers often felt they had been cheated by the retailer. Building on these lessons, Tata Steel unleashed a slew of outdoor ads, hoardings, wall-paintings and bus-shelters with its signature creative "" the outline of a fist holding aloft a TMT bar on a bright yellow background, with the punch-line "atoot jod".

Other FMCG-like innovations include product packaging and standardisation of pack-sizes. For instance, Tata Tiscon, which used to sell in bundles of 80 tonnes, has started to sell in single pieces of fixed length "" the way the product is sold the world over.

"It's a trend," says Sanjay Agarwal, deputy managing director of Century Plyboards, "where commodities are increasingly being branded, whereas FMCG like soaps and toothpastes are increasingly pronounced to be commoditised."

Agrees Amitava Sinha, executive vice-president, Rediffusion DYR, "Internationally, generic products are moving up the value chain and commanding a premium on the perceived value additions."

But unlike consumer goods, the interesting thing about TMT bars or cement and plywood, the two other commodities used in the construction industry where branding is the new buzzword, is that the end user "" the house-owner "" almost never has a say in what variety or brand is used. Even individual home-builders leave the decision to the contractor or the mason. So how does branding work?

According Tata Steel's Seth, "Buyers of apartments are very careful and always ask about the bathroom fixtures or tiles being used. But no one thinks to ask what TMT has been used, something that is far more important." That's where brand communication comes in.

Ranjan Das, professor of strategic marketing at the Indian Institute of Management, Calcutta, says, "Branding helps break the clutter in the commodities trade, very important given the tremendous competition. For the consumer, it acts as a decision maker, because the brand communication promises a solution to their problems "" on-time delivery, strength, and so on. Over time, an emotion builds up around the brand."

Consider Greenply's reincarnated Sikh boy ad last year "" brand awareness polevaulted to new heights as a consequence.

"We identified 'durability' as the core motivation for consumers when they buy new furniture. We appropriated it and made relevant noise about the durability of our product through the TVC," explains Mohit Beotra, vice-president, Lowe, which handles the Greenply account.

He adds, "The same consumer who earlier left the decision to the carpenter now ensures that the carpenter buys Greenply." "Reverse branding" is the term Beotra uses to describe the way it works.

The Tata Tiscon TVC aims to make a similar emotional connect, fixing on strength as the core motivation of consumers buying TMT bars.

Branding certainly works, claims Greenply. According to company figures, sales soared by 42 per cent in the first half of FY05, when the TVC was first aired. "Enquires at the dealer-level, too, increased," reports Alex Joseph, general manager (communications), Greenply Industries, "leading to greater motivation."

Since then, Greenply has significantly expanded its dealership network as also reduced the credit period to dealers. In steel, on the other hand, Jaiswal reports that the increase in the number of brands has resulted in the credit period going up for distributors.

Kanchan Dutta of Innercircle, a Kolkata-based agency that handles MSP Gold TMT Bars, says the main objective of the branding exercise is to get a "higher price extraction per tonne".

In other words, when steel rebars were traded as a commodity, their price was determined by the price of steel at the time. But with branding, TMT rebar manufacturers can claim to have added value and hence, command a premium and also fix a price that is not tied to the cost of steel.

And, consumers need some prodding since the price differential between branded and unbranded goods is significant. While the per tonne price of local, commonly used tor-steel rebars is around Rs 23,000, that of a TMT bar is Rs 26-28,000. Premium brands can go higher. For instance, Tata Tiscon sells for as much as Rs 30-33,000 a tonne.

As Elegant TMT's Vohra says, "Branding is needed, since without it we were lumped as 'local' and consumers were simply not willing to pay a premium." In plywood, too, there's a price difference of 30-35 per cent between branded and unbranded varieties.

But there's a long way to go. Branded players account for just 10 per cent of the Rs 6,000-crore plywood market, whereas in steel rebars, the big players like SAIL, Tata Tiscon and Rashtriya Ispat Nigam Ltd have a share of 25 to 30 per cent. That's growing, but slowly. Clearly, the message is starting to go across to the consumer; but it just needs to be hammered home a little more.