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
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
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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
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 Sunsilkgangofgirls.com).
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.