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L I Q U O R I N D U S T R Y A Toast to No More QRs Who says there isn't a Santa Claus? Eight months before the removal of Quantitative Restrictions (QRs) on bottled liquor, a covey of liquor manufacturers have unveiled plans to launch a bouquet of brands that will, almost certainly, bring a gleam to the eye of the individual who knows his Tanqueray from his Beefeater. United Distillers and Vintners (UDV), for instance, is seeding the market with promotions for its brands Johnnie Walker, J&B, and Baileys. Others are not far behind. Canadian liquor major Seagram, for its part, is getting set to launch its Chivas Regal brand; Bacardi, its Dewars and Bombay Sapphire; Pernod Ricard, its Aberlour, Clan Campbell, Wild Turkey, and Havana Club Cuban; Allied Domecq, its Ballantine's and Beefeater; and DCM Remy, its Remy Martin and Macallan. Hic! Things, won't be all of the happy-hour variety, though. Import tariffs will continue, and if they remain at the existing rate of 210 per cent level (with a 4 per cent surcharge) these cups that cheer will be quite dear. Most companies admit that until the tariff comes down at least to 125 per cent initially and to 75 per cent in the next two to three years, the market isn't really likely to be stirred by the availability of these brands. And then, there are always the local regulations. Avers Dinesh Jain, 38, Sales Director, Central Asia & Middle-East, DCM Remy: ''Every state in India has its own laws on the sale of international brands. We need more clarity.'' That apart, all imported brands will cost upwards of Rs 700 a bottle. This price-band constitutes less than 3 per cent of the total market (60 million cases a year, with each case housing 12 bottles). Says Jayant Kapoor, 49, Managing Director, Bacardi Martini India: ''Even in the other South-East Asian countries, where the import of bottled liquor has been going on for years, this segment accounts for less than 5 per cent of the total market.'' Still, the availability of brands hitherto sourced from the neighbourhood bootlegger should have a positive rub-off on the image of the companies, apart from adding not insignificantly to their margins. So, what's your poison going to be? -Jaya Basu C O M P U T E
R H A R D W A R E Thanks to the Net, Indian homes may be becoming pc-friendly faster than expected. A recent survey of computer hardware sales for 1999-2000 reveals that desktop pc sales jumped 37 per cent to cross the 1.4-million mark. pc shipments to households soared by 57 per cent, with the pure home segment-pc for personal use-growing by 67 per cent from 1.2 lakh units in 1998-99 to 2 lakh units last year. And 60 per cent of such first-time buyers bought PCs along with Net connection. As a result, the number of Net connections in India has risen from 3.48 lakh in May, 1999, to 8.73 lakh in May, 2000. Segmented, connectivity grew by 118 per cent among business users and by a steeper 205 per cent among households. ISPs like Satyam have in fact been bundling the Net connection with branded PCS like hp and Compaq. Says Vinnie Mehta, 32, Director, MAIT: ''Interestingly, most first-time buyers (FTB) are looking at browsing the Net through their pc. In fact, some 52 per cent of the FTBs in the business segment and 60 per cent in the household segment bought PCs along with a Net connection.'' Connectivity could increase further, given that an estimated two million PCs are available for refurbishing and sale at prices ranging between Rs 10,000 and Rs 15,000. The report says that even if half of this market is upgraded, it would fetch another Rs 1,500 crore to pc sellers and expand the Net market by another six lakh connections, or 18 lakh users. While pc sales are soaring, the share of branded PCs is slipping. For instance, the marketshare of assembled PCs grew from 53 per cent to 58 per cent. Transnational brands managed a marginal increase in share from 22 to 23 per cent, but Indian brands saw a huge erosion in marketshare from 25 to 19 per cent last year. But there is a huge market to tap. FTBs still constitute over half the market. In the second-half of 1999, two-thirds of the FTBs accounted for more than half the pc sales. The share of non-metro pc market grew from 29 per cent in 1997-98 to 37 per cent in 1999-2000. The share of sec b homes in total pc sales rose to 23 per cent, versus 77 per cent of sec a households. But the urban market had the lion's share, with the four large cities buying almost two-thirds of all PCs sold. -Pooja Garg C O L O U R T
E L E V I S I O N S Red is the hue staring colour television (CTV) manufacturers in the face. Thanks to a sluggish demand, increase in input costs, and the lack of any blockbuster sports event this year, CTV volumes during April-June, 2000, have shrunk by 28 per cent over the same period last year. In absolute terms, the figure is down from 13.50 lakh in the first quarter of 1999 to 9.70 lakh in the quarter ended last June. If the 1.5 lakh CTVs estimated to be lying with dealers are included, the drop in sales rises to a steep 50 per cent. Says Rajeev Karwal, 38, senior vice-president (consumer electronics), Philips (India): ''Last year, the May closing stocks were negligible. This year the warehouses are full.'' The slump is especially worrisome because for the last seven years the industry had been clipping at a rate of 20 per cent annually. And last year, sales grew by one-third over 1998-99. So, what explains the dramatic fall in CTV fortunes? A host of reasons. For one, there has been an upward rationalisation of sales-tax from 3 per cent to 12 per cent in some states. But others-including Maharashtra, West Bengal, and Punjab-that were expected to lower rates to 12 per cent have stuck to their higher rates. For another, input costs have gone up due to a hike in plastic prices and an additional five per cent premium on special import licences. The hike in diesel prices in February this year also increased freight costs by Rs 30 per set. All this has resulted in an average four per cent hike in CTV prices. Admits Ajay Kapila, 37, vice-president (marketing), LG Electronics: ''The sudden market decline has got everyone napping.'' To make matters worse, the colour picture tube (CPT) prices are set to go up by 6-7 per cent. Samtel Color revised its prices early July, and JCT Electronics is likely to follow suit in August. CTV manufacturers will have to either pass on the cost hike to consumers or absorb it and sacrifice some profits. Further, the recent drought in some states has severely affected off-take. The industry sold 4.8 million sets in 1999-2000. The figure this year is expected to pale in comparison. Says Karwal: ''Even to meet last year's figures, the industry has to sell 3.15 million sets, and that means having to grow at 15-16 per cent in the next six months.'' A tall order, indeed. -Ranju Sarkar E - B R O K E R A G
E The discount brokerage war is officially on. And there is terror on Dalal Street. www.5paisa. com, the broking Website of Indiainfoline Securities, has shocked brokers by offering rock-bottom brokerage charge of just 0.05 per cent on all trades that do not result in deliveries. The on-line trader is also offering margin trading with just a 25 per cent advance deposit and a facility to make spot payments and crediting sales proceeds even before the pay-out date. But competition is putting on a brave front. Says C.J. George, 45, CEO, Geojit Securities, the first securities firm to launch on-line broking: ''We do not intend to reduce the brokerage slab.'' Geojit charges 0.50 per cent for delivery compared to the online broker's 0.35 per cent. The industry average is 0.50-0.75 per cent. In the case of trades that do not result in delivery, Geojit charges 0.10 per cent brokerage against the 0.05 per cent charged by 5paisa. com. The average for the industry is 0.15-0.25 per cent. Says Hemang Raja, 44, CEO, Investsmart India: ''For quality service and advisory, the charges are bound to be slightly higher.'' But one cannot rule out an industry-wide cut in brokerage rates after the interface with banks and the depository is complete. In the US, in the first few years of on-line trading, competition among on-line firms reduced the brokerage rates from $52.89 per trade in the first-quarter of 1996, to a extreme low of $25. Charles Schwab charges a flat rate of $29.95 per trade up to 1,000 shares. The rates set by 5paisa.com will act as a strong entry barrier to wannabe on-line traders. And in the short-term, 5paisa.com's strategy could work out. But to stay on and succeed, 5paisa.com will definitely have to clock large volumes. -Roshni Jayakar A D V E R T I S I N
G It's every dream merchant's nightmare-having to choose from multiple media options and then discovering that it turned out to be a wrong choice. As Chivas Regal's television spot says, it helps "when you know''. Media divisions of advertising biggies, most of whom have international tie-ups, are already discovering the benefits of global affiliations. Now smaller agencies are scrambling to find peers who can offer media skills. For, the message is simple: those without world-class media expertise will sooner or later perish. Agrees Ashish Bhasin, 35, President, Initiative Media, the media arm of Lintas India: ''Without foreign expertise, agencies will be at a disadvantage. In fact, they won't survive.'' Bhasin may not be exaggerating. In today's fiercely competitive market, clients spend as much as 90 per cent of their advertising budget on media. And deciding how the budget will be carved up among the multiple media alternatives is not easy. For instance, even within television there are variety of channels and slots to choose from. Besides, the Net and radio are attracting an increasing number of users. Consumer awareness and aspirations are growing. An agency that is unable to provide the right mix of media-meaning the most bang for the buck-faces loss of clients. Avers Ravi Kiran, 33, General Manager, Media Tactics and Investments, Chaitra Leo Burnett: ''All agencies will have to either build their media product from scratch or ally with those who have.'' That's what the Rs 70-crore Percept Advertising did when its tie-up with Haku Hodo of Japan fell short of media expertise. To make up for Haku Hodo's lack of a media company, Percept recently tied up with Carat India-a part of Rs 4,500-crore Aegis Group, which is No. 2 in Europe and No. 5 worldwide, in terms of media services. The Percept-Carat tie-up is the first media joint venture of its kind. Says Harindra Singh, 40, Managing Director, Percept: ''Carat's media products will be taken forward to many more clients and brands.'' Carat Impact, the new joint venture, is expected to add Rs 100 crore to Carat's kitty. Where large global alliances are not possible, smaller agencies are settling for local giants. Vyas Gianetti Creative, a Rs 25-crore advertising agency, has inked a deal with RK Swamy/BBDO-India's seventh-largest advertising agency with billings of Rs 240 crore. While RK Swamy/BBDO will benefit from Vyas Gianetti's creative strengths, the smaller partner will be able to leverage its new collaborator's media expertise. Internationally, BBDO has a full-fledged media arm called Media Direction. With information media becoming increasingly fragmented, agency alliances of strength will be the norm rather than an exception. -Nita Jatar Kulkarni |
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