An analysis of the battle of the siblings. It's Chauhan versus Chauhan again. Last month, when Parle Agro's Prakash Chauhan muscled into brother Ramesh's turf with the launch of Bailley's soda in Mumbai, it marked round two of the battle between the Chauhan brothers.
Four years back, while brother Ramesh was busy fighting the by-now infamous cola wars of the early nineties, Parle Agro's Prakash Chauhan quietly muscled into the growing bottled mineral water market. Not many were willing to put their money on challenger Bailley, given that Ramesh's Bisleri brand was almost generic to the category. Yet in a space of four years, Bailley actually turned the tables on market leader Bisleri in selected markets in eastern, western and some parts of southern India. Today, Bailley is a powerful number two to Bisleri.
The Rs 300-crore soda market forms the backdrop of the tussle between the two brothers. For long, Ramesh Chauhan's Bisleri soda had been bottled and marketed by brother Prakash in Mumbai. The trouble started when Prakash asked Ramesh to change the brand name of Bisleri soda to Bailley. As Prakash saw it, there was ample reason to do so since as a late entrant in the mineral water market Bailley had done very well. Ramesh obviously refused. Prakash stopped bottling Bisleri and launched Bailley soda.
That was enough to provoke Ramesh, who immediately countered with a new brand launch in Mumbai Parle Mango in a Tetrapak with the obvious intention of hitting Parle Agro's Frooti.
Now all eyes are riveted on the soda market. It is expected that Ramesh will soon relaunch Bisleri in Mumbai. But before that, he has to put in place a bottling and distribution network, which will take time. So will Bailley be able to make the most of Bisleri's absence from the market?
Although Bailley is an obviously hurried launch, it is evident from its marketing mix that it is aimed to stir up the fizz in the largely commoditised soda market. "Our aim is to take Bailley national in the foreseeable future," affirms David Jacob, director, Parle Agro.
Bottle battles That's not an easy task. Entry barriers in the soda market are very low. The cost of making soda is not very high, as the product is merely water mixed with carbon dioxide. As a result, the soda market in India is
characterised by the presence of strong regional and local players. Says R Ravishankar, vice president, SSC&B Lintas, "The high level of localisation is because the investment required to set up a soda plant is very minimal. And since the bottles have to be returned and refilled, the geographical radius of operations
has to be within the manufacturer's control, not over long distances." The result: a high degree of fragmentation, with each
town supporting its own soda manufacturer, who holds on to his territory by quick servicing and distribution.
But this high level of loca-lisation has one another effect. To a consumer in small town India, soda is simply a commodity. Especially in the villages, brand loyalty is unheard of. Says Jagdeep Kapoor, managing director, Samsika Marketing Consultants, "The soda consumer is of three basic types. The first is the whisky drinker who mixes soda with his drink. Two, the 'aid to digestion' drinker who feels happy after he burps, and the third type mixes it with lemon and salt. Soda is a poor man's soft drink, especially in the SEC D and E class towns." This explains why some parts of rural India has soda bottles of a different kind, called 'marble soda', which does not have a cork cap, but is sealed with a marble. And this product is priced around just Rs 2.
That's a sharp contrast to the consumer who uses soda as a mixer. He is very brand conscious (and not very price sensitive), as he gets used to the taste of his brand of soda with his drink.
The existing brands that cater to this market are strong regional brands like Duke's, Schweppes and Mr Pik, besides the only national brand like Bisleri.
Competing with the unorganised competition isn't easy, especially because retailers get far better margins than the organised players' 15 per cent.
Then again, an organised sector player has to combat the burden of additional levies. There is a 40 per cent central excise duty, besides a 20 per cent state sales tax (in Maharashtra), leaving less than 5 per cent as profit margin. For an entrant, the key, therefore, is to build up volumes. Bailley's task is cut out especially since brand loyalty in the soda market is difficult to establish.
Power to the people
Research conducted by Parle Agro revealed that the Indian consumer had an affinity for strong tastes. As Samsika's Kapoor says, "For the consumer, the fizz which escapes while opening the soda bottle is absolutely essential. And, of course, a large burp." That explains why Duke's soda in Mumbai is the market leader, because until now, it had the highest carbon dioxide content.
Yet as Parle Agro saw it, Duke's had not quite capitalised on its intrinsic product strength. Its advertising was minimal and it had never cornered the strength platform. Besides as a bar owner in Mumbai affirms, "Duke's bottles allow the fizz to escape."
The opportunity for Bailley's was to seat itself firmly in the
consumer's mind as "the strong soda". The concept behind Bailley's soda is to offer the consumer a perceptibly stronger drink. At over 5 per cent, its carbon dioxide content is 1 per cent more than the international standard. The unique packaging the bottle is shaped like a grenade connotes the 'explosive' qualities of the brand. The brand descriptor is equally evocative: Bailley's "power soda". Says Jacob, "We will ensure that the taste of the soda will be consistent for the consumer, at any part of the country. Over time, we are sure that the consumer will be converted to our brand." Priced on par with competing brands (at Rs 7 for a 300 ml bottle), Bailley is hoping to build up trials quickly.
Bailley's comet
Bailley's soda challenge has interesting parallels with its mineral water thrust.
Not only were market conditions similar, with Bisleri being the only national mineral water brand, along with scores of smaller, highly regionalised players.
As the market leader, Bisleri had not taken up the task of market creation with full earnest. As a result, Bailley quickly moved in to those markets where the leader was either not present or its service left much to be desired. Soon, with Bailley expanding its franchise across the entire country, there was a shakeout. Over time, the real losers turned out to be the regional players who had to contend with the product and brand promises that Bailley offered.
Today, with 22 bottling franchisees spread across the country and five PET bottle manufacturing plants, Bailley today is growing at an astonishing 75 per cent. The mineral water market in India itself is growing at a healthy 20 per cent.
Says Jacob, "By introducing Bailley soda, we are extending our brand franchise of 'trust' and reinforcing it. The name connotes quality, which lends itself to our soda." Jacob is confident that the market for soda can only grow, as there is a huge potential for an established brand to get itself customers. "We are in the process of converting what is essentially a commodity product into a brand."
Bailley has chosen to attack Mumbai first. The reason is clear. Between the two cities, Mumbai and Delhi comprise 20 per cent of the market. By cornering a large slice of the Mumbai market, Bailley is hoping to gain the critical mass to penetrate other markets.
Although it is yet to announce its plans, the distribution push will logically be through its existing mineral water distribution infrastructure. Its existing bottlers are strong, given that they are Coke bottlers in nine centres, including Calcutta and Coimbatore.
Franchising will actually snowball. As Ravishankar says, "Franchising is symbiotic. The brand allows itself to be franchised, and the franchisee has the strength of the brand for marketing, distributing and selling the product." As brand success is intrinsically linked to distribution extension, every time Bailley soda will inevitably make inroads into regional brand territories. In the urban markets, the key task for Bailley soda is to open up newer retail outlets like bars and clubs, and then plan a visibility drive there.
Ramesh's options
Will Bisleri hit back? As Prakash Chauhan virtually controls the soft drinks distribution infrastructure in Mumbai, Bisleri soda seems to be sidelined for the moment. However, Ramesh Chauhan has the option of riding on the distribution network that he controls for Bisleri mineral water, and use it for selling soda.
Conversely in Delhi, Ramesh Chauhan controls the trade, which would make the going uphill for Bailley soda. If Ramesh Chauhan has to get going, he has to find distribution width for his brand. His existing Bisleri mineral water network width is very narrow compared to the base soft drink business.
In the end, the battle may not take place at all, if the other possibility sketched by market analysts is to be believed. In the past, both the brothers had a mutual understanding on the mango drink, Maaza. Since Maaza would have cannibalised on Prakash's Frooti, the brand was never launched in Mumbai. Similarly, the soda business could be carved up between the two brothers with Ramesh holding on to the Delhi market, and Prakash operating in Mumbai.
But if history does not repeat itself and Ramesh is still keen to penetrate Mumbai, it leaves him with only one option: set up a new bottling plant in Mumbai.
