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AVALON CONSULTINGNew Delhi Mumbai Chennai

VALUE BRANDS : GROWTH UNLIMITED

Presentation: July 17, 2010

TIE, Mumbai

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Roadmap

What are Value Brands ?

What does it take to build Value brands?

Can we penetrate International markets with Value Brands?

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The seller’s mindset seeks big volume, low price, decent quality to feed aspirations of consumers Buyer’s mindset: maximise value without compromising on benefits

Value Brands are Value for Money

Benefit Price Chart

100

0 100

Ben

efi

t In

dex

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Value Bra

nds Territo

ry

Positive value

“Line of indiffe

rence”

Negative value

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Perceived price index

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The situation in the mobile phone business

Multi Nationals unbeatable . Nokia, Samsung, Motorola, etc. Too

deeply entrenched not just in India

Prices are dropping with each new model launch

People looking for fancy phones with many features

Cheap Chinese phones of doubtful quality

Enter Micromax in 2008. Nobody gives them a ghost of a chance

Micro max-the story

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Multi Nationals unbeatable . Now Micromax has beaten Motorola and is expected to be the No

2 after Nokia by the year end!!

How? Aggressive cricket focused marketing with a budget of Rs.100 crore and smart

distribution channel management (90,000 outlets in B&C Class town in 500 districts) to support

a Value for Money product proposition

Prices are dropping with each new model launch. They launched phones across the price

range up to Rs15000 but each model at much lower than the MNCs

People looking for fancier phones with many features. Give high end features in low priced

phones. Imagine QWERTY phones below Rs.5000! Now selling 1 million phones a month!!

Cheap Chinese phones of doubtful quality. Focus on acceptable quality

There is nothing Micro about Micromax

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Launched in 1996 – Kwality Walls market

leader 40% share. Its predecessor Kwality,

well entrenched

Aggressive Pricing

‒ 25% to 40% lower than Kwality Walls

Built market shares through point-of-sale

promotion, product promotions and low

mass media

Leveraged the strong Amul brand

association with the integrated milk business

Many others have failed, before and after

Amul

#1 in India

34% market share

The Amul Ice Cream Story

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• Category and Market Share growth because

o Value brands address aspiration needs of the masses

o Value brands are “good enough”…and more attractive than private label

• Made possible through

o Proliferation of low priced channels

o “Insurgent” business models

PricePoints

Time

Value Brands

Middle-of-the-Road

Premium

Why & How?

Value Brands normally drive out the middle-of-the-road segment in most categories over time

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Originally produced using excess

capacity in P&G, Henkel factories, etc.

Now produced in 5 ‘close to consumer’

factories

Extensive distribution with substantial

intermediary incentives / trade

marketing

Priced > 30% less than major brands #1 in China

24% market share

Chinese detergents– The Diao Story

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1992 2003

24%

Diao BrandLaunched

Diao (Nice)24%

Qiqiang (Shanxi Nafine)

11%

Omo (Unilever)10%Tide (P&G)

9%

Liby (Guangzhou)

9%

Whitecat (Shanghai Whitecat)

6%

Lonkey (Guangzhou

Lonkey)4%

Dosia (Reckitt Benckiser)

4%

Fan (Shanghai Soap)

3%

Kami (xian Kaimi)

2%

Others17%

Chinese Detergents

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Diao Market Share, 1992-2003% Market Share

Relative Share by Value, 2003% Market Share

Diao rapidly ate up everybody else’s lunch to become the leader

Deja Vous?

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Nirma (the ‘original’ value brand) ,Ghadi and Fena in the detergents market

Ujala fabric whitener – 65% market share, displaced Robin Blue

A number of global examples…….

A number of other examples…….

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Procter & Gamble is expanding their portfolio into the value-priced segment. The successful launches of

Mach3 disposable razors in the U.S. Pampers Simply Dry diapers in

Germany Naturella feminine care pads in the

Arabian Peninsula

are three recent examples of products in this category.

L’Oreal ventured into the value products segment via its high-end brand The Body Shop. They launched a new line of cosmetics called The Original Collection, which includes 11 iconic Body Shop products sold at attractive prices.

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Roadmap

What are Value Brands?

What does it take to build Value brands?

Issues involved in penetrating International markets

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Big market in the chosen category

Value Brands strategy is not about winning a small prize at a low price

Nano is a Value Brand. Addresses a huge 2 wheeler market which has millions of car aspirants

Mayonnaise is not a category in India for a Value Brand. Niche market best addressed by a Store Label

Primary condition

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Build low-cost Business

model1 4

Grow volumes

Pass margins on to retailers

2 Increase

distribution

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Value Brands Virtuous Circle is not just about branding

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How are Value Brands created?

Isn’t it what Micromax, Amul and Diao did?

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Large gap between Entry and Premium prices…. mobile phones,

cars, garments , footwear, fashion accessories, etc.

Mid-market brands have weak Brand Utility

Population pregnant with aspiration….’climbers’

Access to retail space possible

‒ Independent distribution

‒ “Direct to Retailer” selling

Characteristics of markets that provide opportunity for Value Brands

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Large ‘bottom of the pyramid’ market

‘Value Seeking’ customers

Large ‘Value Opportunity’ for new entrants

– McDonalds – The ‘Rs. 20 menu’

– Pizza Hut – ‘Rs. 75 per head treat’

– Reebok shoes priced at <Rs. 1000 for India

Lower cost structure compared to the Western economies

Is India ripe for Value brands?…….1

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Roadmap

What are Value Brands ?

What does it take to build Value brands?

Can we penetrate International markets with Value Brands?

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The market exists in several categories

The recession has set off down-trading

China is creating some global brands in consumer durables – Haier, TCL, Lenovo….

Consumers have started trusting Chinese products because many famous global brands are sourcing from China

Why not Indian Products?

Is there an opportunity for Indian brands in global markets?

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Branding challenge

Managing the channels

Establishing after sales service

Issues involved in penetrating developed markets are not trivial

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Issues

“You don’t get a Coke by putting four quarters in four machines. Think big.”

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Indian business plagued with the ‘Small is good enough’ mind set. Only a few like Mittals, Ambanis, Tatas, Infosys, Mahindras etc. and now young fighters like Micromax have broken away from it

Branding is so different from producing as a sub contractor

Creating global capacities starts with creating big capacity for the Indian market in most cases

Flawless execution and sustained effort.

Can we be an insurgent in export markets?

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Branding challenge

Managing the channels

Establishing after sales

Issues involved in penetrating developed markets are not trivial

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Grass-root

M&A

OEM route

Issues Options

Think big, think smart

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For comments, views and suggestions contact me at

raj.nair@consultavalon.com

Avalon Consulting

Casa Avalon,

61 Dr.SS Rao Rd,

Parel, Mumbai 400 012

09/07/10 – ND/pr

Thank You