DEC. 22, 2002
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Two Slab
Income Tax

The Kelkar panel, constituted to reform India's direct taxes, has reopened the tax debate-and at the individual level as well. Should we simplify the thicket of codifications that pass as tax laws? And why should tax calculations be so complicated as to necessitate tax lawyers? Should we move to a two-slab system? A report.


Dying Differentiation
This festive season has seen discount upon discount. Prices that seemed too low to go any lower have fallen further. Brands that prided themselves in price consistency (among the consistent values that constitute a brand) have abandoned their resistance. Whatever happened to good old brand differentiation?

More Net Specials
Business Today,  November 24, 2002
 
 
Betting On Value

"The manufacturers and marketers of cotton products need to work towards creating a contemporary image for the natural fibre."
,
Associate Director,
KSA Technopak

Most of the arguments made by the various stakeholders are based on the assumption of cotton being a commodity and not a consumer product. There is also deep-seated scepticism as to whether cotton can stem its decline vis-a-vis other synthetic fibres.

I strongly feel that cotton's fortunes depend largely on the industry understanding the needs and preferences of consumers and offering the right product solutions to meet these needs. The market tends to produce alternatives for any product or service that fails to evolve in keeping with shifting tastes of consumers. It is a well-known fact in the industry that cotton offers all the benefits offered by its synthetic rivals and much more. The big question is: Is the consumer at large even aware of these benefits to the extent that these outweigh any price advantage he may derive from buying synthetic fibre? An even bigger question is: Has anyone actually tried to reach out to the consumer and talk about the pluses of 'going' cotton. It shouldn't be too difficult for the cotton industry to make up, through an intensive image re-positioning, for the natural fibre's relative lack of glamour. Perhaps, the industry has been taking things for granted for way too long. Cotton, like all other products, needs to be marketed to the consumer and perhaps re-positioned as a consumer and fashion item with a glorious past and an even greater future. This will definitely go a long way in reversing the dismal projections put out at the Indian Cotton Board's anniversary summit.

It is also far from clear that the growth in demand for synthetic fibres will happen at the expense of cotton. If the clothing consumption pattern in India is compared with those of the developed markets, it could be argued that there is enough room for all segments, given that the players work towards growing the overall market with innovative products and convincing marketing.

The real game is about creating more options for the consumer. The industry should get down to the main task facing it: promoting cotton's use through an image re-positioning and an information blitz. The manufacturers and marketers of cotton products need to work towards creating a contemporary image for the natural fibre. The industry should tune in to the prevailing consumer preferences and invest enough resources that would enable it to make matching product offerings. Through image re-engineering and slick branding, a premium can be built up for cotton products.

Finally, it must be pointed out that many of the ills of the industry are primarily due to the short-sighted policies of cotton manufacturers and marketers themselves. The only remedy for this can be a drastic change in the attitudes of the industry bigwigs.

" While price often weighs against cotton, it would be not be true to say that the market is solely driven by price. The issue here is not so much price as value for money."
, President,
Arvind Brands

Unquestionably, manik raj is on the right track. There are strong indications that the worst may be over for cotton and that things may already be changing for the better. What's helping this reversal of its declining fortunes is the increasing realisation that synthetic fibres don't come within a mile of cotton in terms of breathability, moisture management and the overall consumer experience.

Let's talk about fashion. World over, the trend now is that of "going back to the roots". Take food, for instance. Genetically modified food and food made with the use of inorganic fertilisers, insecticides or pesticides are increasingly being spurned by the consumer in favour of basic natural foods. The logical corollary of this in the textiles industry is a return to natural fibres such as wool and cotton.

At the premium-end in the apparel market, the consumer is increasingly getting sold on cotton. Even in the mid- and low-price segments, where affordability of cotton is an issue, synthetic fibres are being blended with cotton and branded as Chief Value Cotton, Cotton Rich etc., to highlight the cotton component of the fabric and, in fact, to hide the presence of other fibres. This is proof enough of the fact that cotton is on its way back.

One argument that often comes up when discussing the fortunes of the cotton industry is that of competitiveness of synthetic fibres vis-a-vis cotton when it comes to price. While it is true that this often weighs against cotton, it would be an oversimplification to say that the market is solely driven by price. The issue here is not so much price as value for money (as the advertising line goes, "the consumer is not a moron, she is your wife!"). The marketplace is full of examples of white goods, passenger cars, and cellular services, where the consumer is willing to pay more where he smells better value, especially when he can feel and touch it.

A whole new consumer consciousness can be built up around cotton through relentless campaigns and product launches. Giving the cotton quality seal a premium image would be an additional pull factor.

One thing that will go a long way in making cotton manufacturing more competitive would be to make improvements along the entire chain of handling cotton, from the time it is picked up from the farm till the yarn manufacturing stage, as well as resolving sticky problems such as mixing of cotton coming from smaller farms and the contamination of cotton due to mishandling in transit and at the ginneries. Revamping this entire process would go a long way in bringing Indian cotton closer to its international cousins not only in terms of cost of production, but also quality-wise.

Cotton industry has lagged other textile segments in adopting new technologies that could help it lower production costs and improve product quality. Adoption of techniques and processes that add value, e.g., imparting cotton with stain/wrinkle repellency without taking away the inherent strengths of breathability and hand feel of cotton (new age technologies are beginning to do just that in the US), can also help push the envelope for cotton that much further.

"The cotton seal can at best be a strong catalyst. The entire industry, including farmers, mills, brands, retailers and the government, need to collaborate to make cotton a success."
, Executive Director, Vardhman Spinning and General Mills

One important thing all industries have to watch out for is how their product caters to the consumer's interests. The product being offered in the market has to possess attributes such as value, innovation, trust, ability to provide excitement, and leadership (vital) in order to find a place in the consumer's shopping basket.

Traditionally, cotton has enjoyed an advantage when it comes to value, trust and leadership in India. Its natural qualities, breathability, feel and absorbency have always evoked trust among consumers. What it has lacked so far is the ability to excite the consumer and a relative absence of innovative products. In recent times, however, cotton's advantage in leadership and value have also come under threat from synthetic fibres. Its declining share has made its leadership position in the domestic market shaky. To make things worse, the low prices of polyester have tilted the scales against it in terms of value as well.

The cotton quality seal was introduced in the US in the mid-70s when the share of cotton in consumer demand there was at an all-time low of 34 per cent. Aggressive marketing, lower prices and easy maintenance had made polyester the perfect cotton substitute for most Americans.

The cotton quality seal sought to promote demand for the natural fibre, by providing a branded identification to cotton products through point-of-purchase signage (e.g., "If it isn't 100 per cent cotton, it isn't real denim") and by increasing awareness through focussed television advertising. The impact of the campaign is reflected in the way consumer demand has shaped up for cotton since then in the US -- today the share of cotton stands at over 60 per cent. The cotton quality seal in India promises to bring in product innovation and the missing excitement factor. A concerted countrywide campaign to promote cotton consumption will also be crucial if cotton is to reclaim its pre-eminence among fabrics. In addition, the campaign will also reinforce the trust in cotton products and bring in world class marketing and quality standards to the business.

It would, however, help to remember that the quality seal is no magic wand. Indian cotton yields remain at less than half the global average. Seed quality and farming practices need to be drastically upgraded if the prospects for cotton are to improve. Research and development efforts have to be stepped up with the help of the government. On the innovation front, the industry must bring in products like wrinkle-free, stain-resistant and easy-wash garments, and new yarn like compact or core-spun yarns. This will help drive down prices while improving industry competitiveness.

Though Raj's proposed strategy of adopting the world famous cotton quality seal is a big leap forward, the benchmark can at best be only a strong catalyst. The most important factor in making cotton a success will be ability of all the sections of the industry, including farmers, textile mills, marketers, retailers and the government to collaborate to survive.

 

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