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A U T O M O T I V E New Car, Huh? Here's a pop quiz. How many car models and their variants are there in the Indian market? Twelve, 24, or 94? 12? Wrong. 24? Wrong again. Yes, the answer is an unbelievable 94, not counting multi- and sports utility vehicles. Having variants to make a product portfolio of one or two look plump is an old trick that car manufacturers have been pulling on their customers. But now they are even more desperate to perfect that marketing mantra. The reason? These are times when the Indian automobile industry is creaking under the weight of a huge overcapacity and slackening demand. The growth in passenger car sales during the first six months of the current financial year was under 2 per cent. Rolling out new models helps. Thanks to the launch of 13 new models in the last two years, sales soared by more than 40 per cent in the first half of 1999-2000. Points out B.V.R. Subbu, 45, Director (Marketing & Sales), Hyundai Motor Company India: ''(Variants) enhance the image of the car and we get to move up the value chain. Besides, it provides customers one more option.'' But new models don't come cheap. Each new model entails an average investment of Rs 300 crore. That's the reason why the profits of market leader Maruti Udyog, which has launched four new models in the past 11 months, has been falling each year and this financial year may be no different. So, what's the answer? Proffers Jagdish Khattar, 57, Managing Director, Maruti Udyog: ''Investing in new models is expensive. Introduction of variants is the least expensive way of creating excitement in the market.'' Since no new investment in dies or tools are required, launching a new variant could cost as little as Rs 20,000-50,000 per car. Thus, no less than three variants were launched between end of August and end-September this year: Hyundai launched the Accent GLX; Ford launched the Ikon Sxi; and Honda rolled out the City with VTEC engine. Of the three, perhaps only VTEC, with its more powerful engine, can claim some real advancement over the existing City. ''What's happening in the Indian market is in sync with the practice elsewhere,'' notes Maruti's Khattar. Not that the variant story doesn't have a flip-side. Sure, the new whistles and bells may come cheap, but not all of that cost can be passed on to customers. In any case, unless there's a real differentiation, buyers may decide not to fall for the trick. Damned if you do, damned if you don't. -Suveen K. Sinha C
O U N T E R F E I T I N G One out of every four Gillette razors sold in China is fake. Procter & Gamble estimates that 15 per cent of the all the soaps and detergents that sell under its brand names in the Chinese market are fake, resulting in an annual loss in sales of over $150 million. Such figures aren't readily available for the Indian market, but when market research firm ac Nielsen did a quick preliminary survey in August-September, it came up with equally startling evidence of a booming counterfeit product market. Here's a sampler: there are 45 different 'varieties' of P&G's popular Vicks range of products; Reebok says it loses Rs 5-10 crore in apparel sales because of counterfeiters, and Heinz India has been grappling with counterfeit Glucon-D and Nycil, both its flagship brands. Of the 30 FMCG brands surveyed, some had 20 or more look-alikes. The worst hit by the counterfeiting scourge are the fast moving consumer goods (FMCG) majors-whose relatively low-tech products are easy to duplicate. Says Bharat Patel, P&G India's Chairman: ''Popular brands are estimated to be losing 10-30 per cent of their revenues to pass-offs and counterfeit products.'' No wonder manufacturers are sitting up and taking notice. More important, they are joining hands to combat the menace. Recently, consumer products biggies, including Hindustan Lever, Colgate, P&G, Coca-Cola, Britannia, and SmithKline Beecham, have banded together under the Federation of Indian Chambers of Commerce and Industry's (FICCI) Brand Protection Committee (BPC) to fight against counterfeiting. The main focus of the BPC will be to target spurious or counterfeit manufacturers because that is where the root of the problem lies. Says Siddhartha Dasgupta, FICCI's Deputy Secretary: ''They generally attack the number one brands and don't touch other brands.'' Which is why fake Colgate toothpaste is common, but Pepsodent rare; and counterfeit versions of Britannia or Parle more rampant than, say, McVities. BPC, which will collaborate with the government, industry, and consumer associations, will basically try to replicate what the Indian music industry has done for the past three years. Under the aegis of Indian Music Industry (IMI), music companies have joined hands to conduct raids and initiate prosecution against offenders. BPC, which is chaired by P&G's Patel, aims to do exactly the same. Like the IMI, which had hired the help of top ex-cop Julio Ribeiro to turn the heat on music pirates, BPC too is trying to rope in former Intelligence Bureau Director Arun Bhagat to help it fight the scourge. (''At the moment we are still discussing the details,'' is all Bhagat would say.) For the moment, the BPC will confine its efforts to the FMCG sector, but the malaise really runs across a much broader swathe of industry. The pharmaceuticals industry alone is believed to be losing more than Rs 700 crore because of counterfeit drugs. Now that is really scary. -Ashutosh Sinha E
L E C T R O N I C D E S I G N A U T O M A T I O N Next time you use a Motorola mobile phone, or switch on your IBM pc or plug on to the World Wide Web via a Texas Instruments cable modem, don't be surprised if you find that your equipment's brain-the microprocessor-is India-designed. That's because, increasingly, Electronic Design Automation (EDA) companies are tapping into the local pool of hi-tech skills and discovering that it is as good as any in the world. In comparison to EDA, software programming is low-brow. It's like comparing a space shuttle to a car. And EDA giants who think India is a great place to be in are National Semiconductors, Texas Instruments, IBM, and Cisco. Not coincidentally, all of them have their R&D centres in Bangalore, and source from vendors like Wipro, Tata Elxsi, and Silicon Automation Systems. Most of the work done locally is in areas of chip design for graphics, networking, broadband communication, mixed-signal processing, digital signal processing (DSP), power switches, video modules, wireless, and Voice Over Internet Protocol. Says Yogesh Dayal of IBM India: ''Five years ago, when we started chip designing in India there was a lot of skepticism. Today, we have 50 patents to our credit and are second only to IBM's centre in Haifa, Israel.'' The oldest EDA player in India is, of course, Texas Instrument. Its 15-year-old R&D outfit in Bangalore is considered a global powerhouse in designing chips for broadband communication, DSP, and mixed-signal processors. Says Sham Banerji, Director, DSP Product Development, TI India: ''Ankur, which was totally developed here, has generated hundreds of millions of dollars for TI global.'' TI India has nearly 150 patents to its credit, and several of its employees even receive royalties. Similarly, National Semiconductors' five-year-old facility in Bangalore is doing cutting-edge design work. It is currently working on future generation chips for wireless and networking technologies, and information appliances. Says Ashok Kumar, Country Head, NatSem India: ''The Indian centre is a major player in NatSem's worldwide scheme of things.'' No reliable figures about the industry revenues are available, but TI India's Managing Director, Srini Rajam, estimates that the turnover could be $150 million a year. The potential, he says, is much more. Others like Himanshu Singh of Cadence Design System agree. But a lack of skilled manpower (nearly 5,000 chip design engineers are required each year) and stiff competition from higher-paying jobs in the US could stunt the industry's promising growth. -Venkatesha Babu B
R A N D E D S A L T If Mahatma Gandhi were alive today, he'd probably be planning another Dandi March. And again for the same reason: to make his own salt. For, the new brands of healthful salt being launched in the Rs 100-crore organised salt market could prove unaffordable to most people in the country. For instance, the Mumbai-based Marico Industries has launched two new salt products, Saffola Plus and Saffola Mineral Enriched, priced at Rs 11 and Rs 25 per kg, respectively. Just why would anybody pay Rs 25 for a kilo of salt? Marico's answer: Saffola Plus has 10 per cent less sodium than ordinary salt, while Saffola Mineral Enriched, as the name suggests, has 25 per cent less sodium. Too much of sodium in diet, as is now being discovered, is bad for the heart. Says Marico's Managing Director, Harsh Mariwala, 49: ''The Saffola brand is associated with health, and the new salt variants fit very well with our portfolio of healthy oil.'' If you thought Marico was being optimistic, think again. Fast moving consumer goods major Hindustan Lever Ltd (HLL) is launching its own low-sodium brand of Annapurna salt. The salt, which is reported to have 50 per cent less sodium, is being test marketed in Mumbai and Navi Mumbai. Its national rollout will depend on the test results. Says an HLL spokesperson: ''Health has become an important plank for us.'' Adds Jagdeep Kapoor, 39, Samsika Marketing Consulants: ''Consumers are increasingly weighing products against parameters of health, safety, and trust.'' That's why HLL and the other major brands like Tata Chemicals have decided to continue with iodised salt despite the government lifting the ban on non-iodised salt. But the focus will increasingly be on the niche, high-paying low-sodium market. Even market leader Tata Chemicals could be launching such a product. Says a non-committal senior Tata Chemicals executive: ''We have always looked at all opportunities that can be tapped.'' What next? Designer salt? -Jaya Basu M
A R K E T I N G Never say never. Arch-rivals of the potato wafers market, Uncle Chipps and Frito Lays, will soon be siblings. A deal is afoot to acquire the Indian brand from Amrit Agro. Though the deal amount and other details were unavailable at the time of going to press, it is clear that the acquisition will give the Pepsi brand a vice-like grip on the organised potato chips market. Currently, there are just four major players in the wafers business: Frito Lays, Uncle Chipps, Haldiram, and Hello. Although the 3.5-lakh tonnes per annum salty snackfoods market is worth Rs 2,800-crore, wafers account for just 7 per cent of it at Rs 120 crore. Apparently, entry barriers in the segment are extremely high. Explains Gokul Patnaik, 53, President, All India Food Processors' Association: ''Players here need to make sizable investments not just in expensive processing equipment, but also in the back-end (potato quality).'' Currently, wafers are bought more by affluent families, but marketers find demand rising from the lower segments (where namkeens are more popular). Uncle Chipps is the most popular local brand, and acquiring it will help Frito Lays consolidate its position in the market. When CEOs go munching, they don't buy their own bags. They buy their own companies. -Shamni Pande |
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