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Four years into its dairy foray, Britannia now wants to do to milk what it did with Tiger in its biscuits business: go mass market.
Last year in August, when Britannia decided to drum up some excitement over its straggler Milkman Butter, it ran a high-decibel campaign on Kaun Banega Crorepati. The ad quickly gained audience, but finding consumers for the butter is proving tougher. According to org data, Milkman butter had just 5 per cent share of the market, although it has been around for three years. But butter's is a market that Britannia badly wants to conquer. Reason: at Rs 650 crore a year, butter is the biggest processed dairy product. More importantly for Britannia, its success in the dairy business depends on it winning in this key segment. In 1997, when it made the diversification, Britannia expected dairy to fetch 15 per cent of its topline. Today, with just Rs 120 crore in sales, the new business is worth less than a tenth of Britannia's Rs 1,350 crore turnover. Worse, it is still loss-making, although no specific figures were provided to BT. Still, the company's 47-year-old Managing Director, Sunil Alagh is unfazed: ''We never had the illusion that the dairy business would be an easy one, especially when there is a formidable competitor like Amul. But give or take one year, we will turn dairy profitable.'' By September this year, Alagh expects the business to break even. To make the dairy venture profitable, Britannia now plans to do in milk what it did with 'Tiger' in biscuits: go mass market. The market potential is mind-boggling. India produces some 78 million tonnes of milk a year, valued at Rs 42,000 crore (@ Rs 12 per litre). Even a 5 per cent share of that market would mean Rs 2,100 crore in sales for Britannia. For starters, Britannia intends to concentrate on metros and large cities. About three months ago, it debuted in Delhi with fresh milk. Says P.K. Malik, Senior Vice-President in charge of Britannia's dairy business: ''The initial response has been very good, and our target is to capture 10 per cent of Delhi's 14 lakh litres-a-day pouched-milk market in one year.'' If Malik hits the target, Delhi alone could add Rs 60 crore to Britannia's sales. Britannia's over-arching ambition, however, is to sell a product to one in every three Indians. And if the performance of its stock-it has stayed between Rs 550 and Rs 750-is any measure, then Alagh's confidence isn't solitary. BT estimates that the company will end 2000-01 with a topline of Rs 1,350 crore and profits before tax and exceptional items will be around Rs 100 crore-a 24 per cent jump. Time to say cheese, Mr Alagh? -Dilip Maitra LITIGATION It's them, the Viagra clones. Imitation is not always the best form of flattery. Particularly, if you are a drug company. Ask Zydus-Cadila. Early this month, Pfizer got the Delhi High Court to restrain Cadila from selling Penegra. Why? Pfizer thinks Penegra sounds and looks too much like its popular and original male impotence drug, Viagra. That Pfizer complained isn't much of a surprise. What is, though, is that it is Pfizer international that slammed Cadila. Pfizer hasn't yet launched Viagra in India, but has registered it as a trade mark. The court case, which will likely net other imitators, could be a precursor to Viagra's entry into India. Zydus-Cadila, meanwhile, is gearing up to contest Pfizer's claims. ''We stand on firm ground. In the meantime, of course, we will be honouring the court injunction,'' Cadila's senior Vice-President, P. R. Joshi, told BT. Joshi could take heart from a little-publicised case filed by Pfizer against an obscure Hardwar-based Yogis Herbo Club, which sells its own drug for treating ed, under the brand Indiagra. The case was filed before the Delhi High Court on May 25, but no injunction has been issued yet. -Suveen K. Sinha SECTOR
ANALYSIS Groaning under huge unproductive assets and overcapacity, the steel industry has no choice but to consolidate to survive.
Plagued by dumping, overcapacity, weak demand, and depressed prices, the steel industry is walking on thin ice. The largest steelmaker, Steel Authority of India Ltd (sail), is neck deep in red with a net losses of Rs 729 crore last year. Its plants at Rourkela and Durgapur are faring no better. Rourkela Steel is still reeling under interest and depreciation burden of Rs 500 crore. The biggest private player, Tata Steel, is miraculously profitable, but only thanks to aggressive cost cutting and improved efficiencies. Some of its rivals are less fortunate. Jindal Vijayanagar Steel, Essar Steel, Lloyds Steel, and Mukand Ltd all are in losses, putting at risk financial institution loans of more than Rs 22,000 crore to the sector. Points out Mukesh Gupta, Chairman of Llyods Steel: ''Consolidation should be the name of the game in steel today.'' Tata Steel plans to approach the BIFR (Board for Industrial and Financial Reconstruction) to get control over Indian Steel and Wire Products, which owes it Rs 45 crore. But it's not just recovery of dues that Tata Steel has in mind. ISWP commands a 50 per cent share in wire rods, and an acquisition would consolidate Tata Steel's position in that segment. What should be worrying financial institutions, however, is the losses of public sector steel makers and of some new plants that came up post delicensing of the sector in the early Nineties. Indian Iron and Steel Company (IISCO), a fully-owned subsidiary of sail, has been on the block for sometime now. But despite the interest shown by a handful of foreign bidders, there has been no real progress for China, among others. Again, there is no dearth of interest in the modern, 3.2-million tonnes per annum Rashtriya Ispat Nigam Ltd (RINL). But there are two problems: The time and cost overruns in implementation of the project have seriously affected its viability. And since the company employs 3,000 people in Vizag, Andhra Pradesh chief minister Chandrababu Naidu is not in favour of its privatisation, fearing retrenchment. Given the state of affairs in the industry, there were rumours that the FIs themselves may push for a consolidation in their portfolio companies. But pushing through with such a plan may be virtually impossible. Besides, the industry feels there may be a different solution to the problem. Says J. Mehra, CEO, Essar Steel: ''What is needed is to address the problem of surplus capacity. A consolidation may not necessarily help.'' In hot-rolled coils, for instance, there is a surplus capacity of 3.5 million tonnes, and merging two weak companies will not make a strong one. Says Akash Jyoti, a steel analyst at ICRA: ''Much of the near-term consolidation will be in restructuring of internal operations.'' Adds Ahmed S. Firoz, Director, Economic Research Unit, Ministry of Steel: ''Some kind of a protective regime needs to be there for some more time.'' Eventually, though, the key to survival will be in raising efficiencies, and not barriers. -Ranju Sarkar & Rakhi Mazumdar AMERICAN DIARY A week in San Jose is all it takes to realise that tech slowdown is real and scary.
I had heard, read and written about the downturn in the Valley before visiting it at the end of May. But now standing in the heart of San Jose, the magnitude of it all hits me with a new force. Talk of layoffs pervades every nook and cranny of Valley talks. I happened to spend a couple of days there with a group of Indian 'software types' in San Jose, Santa Clara (where Intel is headquartered), and all that they talked about was layoffs, job interviews, layoffs, H1B, layoffs, project lives, layoffs, green cards, and layoffs. Stories abound. Not the least intriguing is the one involving Intel. The High Priestess of the Valley is known to give a signing bonus of $15,000 to $20,000 to recruits. Now it is offering a 'not signing bonus' of a similar amount-in addition to the signing bonus-to some personnel it had issued offer letters to some time ago, but doesn't need them any more. Then, there are some more poignant stories I got to hear. Vasant Marathe was all set to come home to Mumbai in June to get married. He got laid off in May. Now, he has a job offer with a measly billing rate of $36 an hour-a far cry from $60, four months ago. But worse happens. A software couple had applied for a Green Card and it was being processed, when one fine day both got laid off. Bench itself has become a four-letter word in techland. Mohan Kumar was working on a project that ended last month. First day on the bench, he gets fired. His friend Vivek Bhargava was on the bench for four months, but was lucky to land a project just before the slowdown struck. Now, he is safe for a year. All vacations in India have been put off as those whose projects end in July-September are busy drafting CVs. The businessmen I met in the Valley put up a brave front saying, ''It's a cold, not a cancer.'' May be it is that spirit that makes America and the Valley so resilient. -Suveen K. Sinha HARD-DRIVE If you are an inveterate scribbler, and can fund your scribbling, the Transnote is the machine for you. At first sight, the IBM Transnote is a best-of-both-worlds device. It is a notebook, and it is a notebook. That isn't a profound philosophical observation; it's a statement of fact. Open the sleek portfolio in which the Transnote comes, and that's just what you see: a notebook computer, the sleekest ThinkPad (600-mhz Pentium III, 64 megabytes of memory, and a 10-gigabyte hard drive) I've ever set my eyes on, to the left, and a notebook, with smooth ruled paper, to the right. The keyboard on the computer looks a bit small, but the Transnote isn't a device to be rated on qwerty-size; the touch-pen, and the touch-screen controls on the machine make it evident that this device isn't really targeted at people who like typing. The notebook (the legal pad, that is) rests on a handwriting-trapping tablet. Write on it using a special pen-flick the cap off the touch-pen, and you have it-and sensors on the tablet transfer the 'ink' or the writing to the screen of the computer. Now, before you start celebrating the conversion of your doodles into neat text files, read this: the Transnote makes no claims of converting handwritten scribbles into text files. The machine is all about handwriting capture, not handwriting recognition. That said, the utilities are nifty: all files are stored by date and time, and if you forget to tap the button you're supposed to, so as to tell the machine you need a new page-lest you superimpose writing on more writing-the Transnote lets you disentangle the pages. Two utilities I must confess I didn't use much were keyword-indexing, and 'transferring to lists'. The first lets you pick keywords based on which you can index documents for future searches, and the second allows you to scribble appointments onto the pad, and then transfer them to lists. The portfolio itself can be folded: the notebook comes on top when you're writing; the pc when you're, well, computing. Design is what makes the Transnote: the computer screen can be held up on a hinge, or it can remain flat. Using the touch-pen, you can take notes, or tap out notes on a on-screen keyboard. That'll be an assett at meetings where using a portable the conventional way may attract raised eyebrows. Still better, the screen can be positioned away from the user, at people sitting, say, on the other side of the table. One click of the mouse is all it takes to flip the contents-that's cool-and the presentation is on. And if you have a Bluetooth phone and a connectivity pack, you can establish a link between the Transnote and your mobile phone using an infra-red hook up; the computer comes with its own I-R port. The Transnote is light enough, at just over 5 pounds, but the portfolio's off size made it a tight fit in my soft-leather executive bag (a pretty big one at that). The machine is also fairly skeletal in terms of drives-everything is external-and battery life (just over two hours). However, you can continue to write furiously on the pad, and the files will be transferred after the machine charges up. So, is all this worth the Rs 2.5 lakh plus the machine retails at? If you are a furious scribbler, yes. If you aren't, but still like the looks of the little beast, indulge yourself anyway: functionality is for the proles. -R. Sukumar PARTNERSHIP Tata Engineering decides to buy fewer engines from Tata Cummins, but exports to a Cummins JV in China save the day.
It took five years for Tata Engineering to decide to source engines for its trucks from its joint venture with Cummins, Tata Cummins Ltd (TCL). It took just 10 months, and a bad market, for the company to reverse its decision, and reintroduce its inhouse engine (christened the 697). The company cites customer preference as the reason for its change of mind, but cost could well have played a part. The move to the 697 will, for instance, reduce the tag on the LPT 1613, one of Tata Engineering's best-selling Medium Commercial Vehicles (MCVs) by Rs 40,000. That's a significant cost difference in a recessionary market and TCL's MD, Ravi Venkatesan knows it. ''When the market is booming, customers don't bother about prices as long as they get a good product.'' Tata Engineering's decision to offer customers of the LPT 1613, and buses, the option of a 697 engine could see TCL's sales fall by between 25 and 30 per cent. All other models will continue to be fitted with Cummins engines. ''All our heavy trucks will come with Cummins engines, and this is the fastest growing segment of the market,'' says Ravi Kant, Executive Director (Commercial Vehicles, Business Unit), Tata Engineering. The immediate impact of the reintroduction of the 697 will be a fall in TCL's capacity-utilisation levels. This year, the company will probably produce just 45,000 engines, well below its capacity of 70,000. Looking for ways to plug the gap, TCL found an opportunity in China. The company has begun exporting components to Dongfeng Cummins Engine Co., a Cummins joint venture, and hopes to move up to engines soon. The reason? Cummins Inc. is pretty impressed with TCL's cost structure. At 250,000 trucks a year, the Chinese market is roughly double the size of the Indian market. Better still, the market is booming. This year, TCL will export 2,000 engines to China as a sort of seeding exercise and a run-up to the real offensive. ''This setback actually proved a blessing in disguise,'' gushes Venkatesan. What's that they say about fortune favouring those with powerful parents... -Roop Karnani
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Recently,
when the US President, George Bush, announced a plan to restrict steel
import into the US, Indian manufacturers went scurrying to Delhi to ask
for a similar cover. Their point: steel worldwide is a local commodity,
without significant international competitiveness. The North Block
mandarin may or may not feel moved. But there is enough bathos in the
steel story.
Picture
yourself right here,'' urges a sign on the translucent glass door on which
I am examining my portly self, touching up my hair before entering the
next building that houses the headquarters of San Jose Chamber of Business
& Commerce. The fine print under the sign says that the building has
vacant office space. I look around and, sure enough, many such vacant
signs suddenly pop up in sight. Not too long ago, these were offices where
billion-dollar dotcom dreams were born over steaming cups of coffee and
creamy donuts. But this is 2001. And the end of May. If I needed any proof
that dotcoms were dead, then I had it staring me back from these empty
offices.
