Sunday, May 2, 2010

Current Events: Business & Economy

FMCG companies hop on to the brand extension bandwagon

Are extending brands to boost growth, gain market share

Fast moving consumer goods (FMCG) companies such as Coca-Cola, Nestle, PepsiCo,

Dabur, Marico and Godrej are taking to brand extension to boost demand for their products

amid negative factors such as high inflation and the global financial crisis. According to

marketing research company IMRB, the FMCG companies launched 251 products (223

variants and 28 brands) in calendar year 2007 as against 191 (173 variants and 18 brands) in


Nestle launched a record number of variants this year — from its Maggi Cuppa Mania (the

instant cup noodles), Maggi Pichkoo (a tomato ketchup pouch pack) to Maggi Bhuna Masala

(a readymade cooking aid). It also introduced NesVita Pro-Heart, a fat-free packaged milk

product in Delhi/NCR region.

Other FMCG leading players such as Marico had launched Saffola Functional Food for

'diabetics management' and Britannia launched NutriChoice 5 Grain, a biscuit made from

five "healthy cereals". Dabur too unveiled a pudina variant of its popular Hajmola brand

apart from extending its Gulabari skin-care range.

Beverage company Coca-Cola India introduced apple flavour for its 'Fanta' brand as its rival

PepsiCo chose to introduce apple flavour for its 'Tropicana Twister' range. PepsiCo's food

wing, Frito Lay, extended its Kurkure range with Desi Beats apart from introducing new

flavours for Quaker Oats.

Godrej Consumer Products (GCPL) stretched its Ezee brand as a daily wash liquid detergent

under the new variant, Bright & Soft, and it intends to further extend it to the post-wash


Among the other launches, GlaxoSmithKline Consumer Healthcare India introduced Eno

Orange, while Reckitt Benckiser chose to relaunch Clearasil brand.

Soup was another category which witnessed a lot of action. While HUL launched a range of

Knorr soups targeted at mass markets, Nestle launched a slew of local variants of its Maggi

soup. Rising income and growing aspirations, coupled with lower penetration levels, have

fueled strong demand for lifestyle and value-added products.



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Marketing experts say brand extensions provide a more economical and risk-free approach of

sustaining growth in the present economic environment as against launching new products.

In terms of categories, brand extensions in personal-care, household-care and processed foods

drove growth in the FMCG sector.

In the processed foods segment, 'health and wellness' is the major theme, with most players

rolling out products around this platform.

FM radio, music industry at daggers drawn over royalty

Matter to come before copyright board

The battle between music companies and FM radio channels over royalty payments has come

out in the open. Music companies, already fighting rampant piracy, are demanding a doubling

of music royalty fees (from the current Rs 660 per hour of music played) that FM radio firms


They have also demanded that radio channels treat sound recording rights and rights in

musical lyrical works (tunes are copied by radio) as two separate sets of rights and playing

them without a licence would amount to copyright infringement.

India's 250-plus FM radio stations across 90 towns, represented by the Association of Radio

Operators in India (AROI), pay royalty to the Phonographic Performance Ltd (PPL), which

represents 160 music companies like Saregama India, Sony BMG Music, Universal Music,

Tips Industries, Venus Records & Tapes and others.

AROI said the current formula means that FM radio operators end up paying 15 to 50 per

cent of their annual revenue as music royalty fees, significantly above global benchmarks of

2 to 3 per cent.

Overall, the industry earns annual revenues of Rs 550 crore of which about Rs 100 crore is

paid as music royalty.

Sources said AROI may propose possible solutions like the royalty fee payment based on

population of a city, genre of music played by the stations and fees based on 2 to 4 per cent of

the annual revenue the stations generate.

The Information & Broadcasting ministry wanted both sides to talk and reach some sort of an

understanding on music royalty fees. Now the matter will be heard by the Copyright Board

where individual radio companies will present their case.



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The Rs 750-crore music industry is also demanding action against about 100 FM stations,

saying they have gone on air without taking licences from the music societies or from the

individual copyright owners, violating music copyrights.

FIPB sets aside L&T objections under Press Note 1

Former JV partner can set up wholly owned subsidiary

The Foreign Investment Promotion Board (FIPB) has cleared a proposal by German plastic

moulding company Ralf Schneider to set up a wholly-owned subsidiary in India, setting aside

objections raised by its former Indian partner Larsen & Toubro (L&T) under Press Note 1 of

the Foreign Direct Investment (FDI) policy.

This is the second time the FIPB has struck down Press Note 1 objections from an Indian

partner, the first being in October 2006 when FIPB cleared a proposal by the US-based

Guardian group over objections from the VK Modi group of Gujarat Guardian.

Press Note 1 is a guideline that requires foreign companies with joint ventures or technical

partnerships in India to obtain a "no-objection certificate" from their Indian partners if they

propose to set up the same or a similar line of business in India.

It has been the source of tension between several Indian companies and their foreign partners,

a prominent example being French foods major Groupe Danone's attempt to get a noobjection

certificate from the Wadia group, with which it has an equity tie-up in Britannia,

for fresh investments in India.

Ralf Schneider had tied up with engineering giant L&T in 1992 for a technical partnership

that expired in 2007. A few months ago, L&T invoked Press Note 1 blocking Ralf

Schneider's entry on grounds that the German company's plans would hurt the Indian


L&T had argued that one of its business units makes the same equipment that Ralf Schneider

intends to make in India. Sources added that the company thought the German firm's entry

would create confusion in the market with two producers offering the same product using the

same technology.

Ralf Schneider had countered L&T's argument saying Press Note 1 should not be applicable

in this case since the tie-up was a technical one and not a financial one and that it had expired

last year.



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Effie 2008: Lead India makes JWT agency of the year

BCCL is Client of the Year; O&M & Bingo! Win BE Bravery Award

JWT India hogged the limelight at the Effie 2008 awards given away at Mumbai recently.

The Lead India campaign for The Times of India got four big awards—

including the prestigious Grand Effie for JWT. The campaign also helped

JWT emerge as the 'Effie Agency of the Year'. Lead India also fetched

Bennett, Coleman & Co the title of 'Client of the Year'.

This year's Effie Awards was a keenly contested affair between JWT and

O&M, with both agencies virtually running neck-andneck all through the

awards function. In fact, it was the 'Grand Effie' for Lead India that

ultimately tilted the balance in favour of the former. Between them, JWT

and O&M carted away six of the seven gold Effies that were given away —

with Lowe laying its hands on the odd gold.

JWT won gold Effies for Lead India (Corporate Advertising &

Integrated Advertising Campaign categories) and Nike (Consumer

Products category).

O&M won golds for Bingo! (Consumer Products & Integrated

Advertising Campaign categories) and Vodafone (Services category).

Lowe won a gold for Idea's 'What an Idea' campaign in the Services


JWT, Lowe and O&M virtually dominated the awards, claiming 23 of

the 30 Effies that were given away. The other agencies that took home trophies were

McCann Erickson, Rediffusion Y&R, Bates 141, Mindshare and Mudra Multiplier.

JWT and O&M also won the three special awards constituted under the aegis of the Effie

Awards. O&M won the Brand Equity Bravery Award for the 'No confusion. Great

combination' campaign for Bingo! JWT was awarded the Marico Uncommon Sense

Award (for Lead India) and the Yahoo! Big Idea Chair (for

Second stimulus package unveiled

More steps to reverse economic slowdown

The government, in tandem with the Reserve Bank of India (RBI), has announced a second

stimulus package aimed at reversing the economic slowdown through higher public spending,

providing additional liquidity for onward lending at lower interest rates, boosting sagging

sale of commercial vehicles and making easier credit availability for the export sector,

housing and small industries.



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The package marks a clear shift from reining in inflation to spurring growth. The

government's total revenue loss in 2008-09 is expected to be Rs. 40,000 crore with a fiscal

deficit of about 6% of the GDP (gross domestic product), as per Planning Commission


The RBI slashed its key policy rates to inject an additional Rs. 20,000 crore into the banking

system. The government has asked the public sector banks (PSBs) to hike their credit targets

for the fiscal so as to ensure optimal disbursal of funds at least cost. Inflationary pressures are

easing and additional liquidity is being made available to PSBs at cheaper rates.

Since last October, the RBI has pumped over Rs. 3,20,000 crore into the monetary system to

usher in a low interest regime, especially when inflation was coming down in the wake of the

fall in the prices of fuel, metals and farm commodities.

The package has provided a reprieve for exporters in the form of higher rates for tax refunds

and a commitment that the DEPB scheme would be extended up to December 2009. Specific

sectors such as knitted fabrics, bicycles, agricultural hand tools and some categories of yarn

would get duty draw backs at enhanced rates.

It also permits States to access the market for borrowing about Rs. 30,000 crore to meet

additional expenditure during the year. The government has eased external commercial

borrowing (ECB) norms and hiked the FII (foreign institutional investor) investment limit in

rupee-denominated instruments to $15 billion from the current ceiling of $6 billion.

Rahul and Shishir Bajaj swap shares, end dispute

Shishir will exit from Bajaj Sevashram, have sole control over Bajaj Hindusthan

The warring Bajaj brothers have reached an agreement wherein family patriarch Rahul Bajaj

has agreed to give control of sugar company Bajaj Hindusthan to younger brother Shishir. In

return Shishir will exit from Bajaj family investment firms such as Bajaj Sevashram,

Jamnalal Sons and Bachhraj & Co.

The Bajaj family feud first hit headlines in 2002 with Shishir alleging his elder brother Rahul

of trying to oust him from the chairmanship of Bajaj Sevashram, one of the group holding

companies. This culminated with the Shishir group approaching the Company Law Board

(CLB) seeking redressal in March 2003. The board had suggested the warring sides to reach

an amicable solution.

Shishir Bajaj sold his 25% holding in the primary group investment firm Bajaj Sevashram to

his brother Rahul Bajaj in an off-market deal. This was after Rahul Bajaj transferred his

group's entire 29.62 per cent shareholding in Bajaj Hindusthan.



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Bajaj Sevashram, the primary group investment firm, holds 100% in the other holding

company Jamnalal Sons, which in turn holds a 78% in another investment firm, Bachhraj &


By selling his 25% stake in Bajaj Sevashram, Shishir Bajaj has exited all group investment

firms that held stakes in different companies of the Rahul Bajaj faction. However, he

continues to hold his direct investments in the companies of the Rahul Bajaj faction,

including Bajaj Auto.

According to stock exchange data for shareholding up to September, Shishir Bajaj held the

following direct investment in Rahul Bajaj faction companies: 0.5 per cent stake in Bajaj

Auto, 0.5 per cent in Bajaj Financial Services, 0.7 per cent in Bajaj Holdings, 0.6 per cent in

Mukund, and 0.1 per cent in Bajaj Electricals.

However, Rahul Bajaj has transferred his personal shareholding along with the group

shareholding of Bajaj Hindusthan to Shishir Bajaj. So far, Shishir Bajaj was acting as the

chairman for Bajaj Sevashram and Bachhraj & Co. With his exit, the board of these privately

held companies will appoint a new chairman.

The only unfinished task in the six-year-old saga remains the interest of minority

shareholders of Bachhraj & Company who together own 22 per cent in the group investment


Madhav N Pittie of the Pittie family that holds a 12.5 per cent stake in Bachhraj & Co on

Monday moved the Bombay High Court for the loss that the group's investment firm would

have made for selling Bajaj Hindusthan's share at current market price to Rahul Bajaj.

The matter of compensation for the minority shareholder is subjudice and it will take some

time before the loss is established and compensated.

Brand endorsements: Bollywood bowls cricketers out

Cricketers are being elbowed out of the endorsement market by film stars

Mahendra Singh Dhoni is a favourite of the advertisers. The Indian cricket team's captain

charges Rs 4-5 crore for every endorsement deal. At the last count, he had 18 contracts in

hand, including with Pepsi, TVS, Brylcreem, Future Brands and Dainik Bhaskar.

Dhoni's colleagues have however seen their brand values plummet. Sachin Tendulkar's

endorsement deals are down in single digits. Now, he only has seven. Virender Sehwag, who

had 14 in 2004, is down to six.



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Rahul Dravid, once much in demand, is barely in the reckoning. Zaheer Khan, who once

endorsed Castrol, Samsung, Anchor and Pepsi, is left with just Ariel and Airtel.

Surprisingly, this dismal form of cricketers on the advertising pitch has come at a time when

Indian cricket has notched noteworthy victories. These include the inaugural Twenty20

World Cup, Test series win in England, tri-series win in Australia, and beating Australia in

the recent Test series in India.

Film stars have taken the advertising world by storm. At the top of the heap is Shah Rukh

Khan, who endorses more than two dozen brands. Aamir Khan and Hrithik Roshan, too, are

popular with advertisers. Saif Ali Khan , another favourite, endorses eight.

Actresses are not far behind. Kareena Kapoor endorses nine brands (Airtel, Globus, ICI

Paints and ITC Vivel), Katrina Kaif has put her weight behind Slice, Nakshatra and Lakme,

while Priyanka Chopra is associated with Nokia, Spice, and Hero Honda.

Is the advertiser's preference for brand endorsements shifting from cricketers, or for that

matter, sports personalities to film stars?

Advertising professionals say it is not a new phenomenon. Historically, marketers have

always preferred actors over cricketers, barring a few names. The "few names" are Kapil

Dev, Sunil Gavaskar, Tendulkar and, more recently, Dhoni. There was a brief period when

the trio of Tendulkar, Dravid and Ganguly dominated the endorsement scene. But, apart from

that, film stars have always been the marketers' muse.

Marketers' preference for stars that provide instant recall is the major reason behind this shift.

Performance is one factor that matters most in the case of Cricketers. Film stars can afford to

have one or two flops, but cricketers cannot. For example, there is Irfan Pathan. After his

poor performance in the 2007 World Cup in the West Indies, he was dropped from many

endorsement deals. However, a Saif Ali Khan might give a flop movie, yet marketers will

continue to use him.

According to TAM's Adex analysis of celebrity endorsement on television during the first

two quarters of 2008, celluloid stars garnered the largest share (81 per cent), followed by

sports and television stars with 16 per cent and 3 per cent share, respectively.

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