Value brands by Raj Nair (Avalon Consulting)


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This slide deck was shared by Raj Nair at the TiE Institute Knowledge Series in Mumbai in July2010.
The deck covers the concept of Value Brands.

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Value brands by Raj Nair (Avalon Consulting)

  1. 1. Value brands : growth unlimited<br />Presentation: July 17, 2010<br />TIE, Mumbai<br />
  2. 2. Roadmap<br />What are Value Brands ?<br />What does it take to build Value brands?<br />Can we penetrate International markets with Value Brands?<br />
  3. 3. Value Brands are Value for Money<br />The seller’s mindset seeks big volume, low price, decent quality to feed aspirations of consumers <br />Buyer’s mindset: maximise value without compromising on benefits<br />Benefit Price Chart<br />100<br />Value Brands Territory<br />Positive value<br />“Line of indifference”<br />Benefit Index<br />50<br />Negative value<br />0<br />100<br />50<br />Perceived price index<br />
  4. 4. Micro max-the story<br />The situation in the mobile phone business<br /><ul><li>Multi Nationals unbeatable . Nokia, Samsung, Motorola, etc. Too deeply entrenched not just in India
  5. 5. Prices are dropping with each new model launch
  6. 6. People looking for fancy phones with many features
  7. 7. Cheap Chinese phones of doubtful quality
  8. 8. Enter Micromax in 2008. Nobody gives them a ghost of a chance</li></ul>09/07/10 – ND/pr<br />
  9. 9. There is nothing Micro about Micromax<br /><ul><li>Multi Nationals unbeatable . Now Micromax has beaten Motorola and is expected to be the No 2 after Nokia by the year end!!</li></ul>How? Aggressive cricket focused marketing with a budget of Rs.100 crore and smart distribution channel management (90,000 outlets in B&C Class town in 500 districts) to support a Value for Money product proposition<br /><ul><li>Prices are dropping with each new model launch. They launched phones across the price range up to Rs15000 but each model at much lower than the MNCs
  10. 10. People looking for fancier phones with many features. Give high end features in low priced phones. Imagine QWERTY phones below Rs.5000! Now selling 1 million phones a month!!
  11. 11. Cheap Chinese phones of doubtful quality. Focus on acceptable quality</li></ul>09/07/10 – ND/pr<br />
  12. 12. <ul><li>#1 in India
  13. 13. 34% market share</li></ul>The Amul Ice Cream Story<br /><ul><li>Launched in 1996 – Kwality Walls market leader 40% share. Its predecessor Kwality, well entrenched
  14. 14. Aggressive Pricing
  15. 15. 25% to 40% lower than Kwality Walls
  16. 16. Built market shares through point-of-sale promotion, product promotions and low mass media
  17. 17. Leveraged the strong Amul brand association with the integrated milk business
  18. 18. Many others have failed, before and after Amul</li></ul>09/07/10 – ND/pr<br />
  19. 19. Premium<br />Middle-of-the-Road<br />Value Brands<br />Time<br />Value Brands normally drive out the middle-of-the-road segment in most categories over time<br />Why & How?<br /><ul><li>Category and Market Share growth because
  20. 20. Value brands address aspiration needs of the masses
  21. 21. Value brands are “good enough”…and more attractive than private label
  22. 22. Made possible through
  23. 23. Proliferation of low priced channels
  24. 24. “Insurgent” business models</li></ul>PricePoints<br />
  25. 25. <ul><li>#1 in China
  26. 26. 24% market share</li></ul>Chinese detergents– The Diao Story<br /><ul><li>Originally produced using excess capacity in P&G, Henkel factories, etc.
  27. 27. Now produced in 5 ‘close to consumer’ factories
  28. 28. Extensive distribution with substantial intermediary incentives / trade marketing
  29. 29. Priced > 30% less than major brands</li></ul>09/07/10 – ND/pr<br />
  30. 30. Chinese Detergents<br />Diao rapidly ate up everybody else’s lunch to become the leader<br />Diao Market Share, 1992-2003<br />% Market Share<br />Relative Share by Value, 2003<br />% Market Share<br />Diao BrandLaunched<br />DejaVous?<br />09/07/10 – ND/pr<br />
  31. 31. A number of other examples…….<br /><ul><li>Nirma (the ‘original’ value brand) ,Ghadiand Fena in the detergents market
  32. 32. Ujalafabric whitener – 65% market share, displaced Robin Blue
  33. 33. A number of global examples…….</li></ul>Procter & Gamble is expanding their portfolio into the value-priced segment. The successful launches of <br /><ul><li>Mach3 disposable razors in the U.S.
  34. 34. Pampers Simply Dry diapers in Germany
  35. 35. Naturella feminine care pads in the Arabian Peninsula </li></ul>are three recent examples of products in this category. <br />L’Oreal ventured into the value products segment via its high-end brand The Body Shop. They launched a new line of cosmetics called The Original Collection, which includes 11 iconic Body Shop products sold at attractive prices.<br />09/07/10 – ND/pr<br />
  36. 36. Roadmap<br />What are Value Brands?<br />What does it take to build Value brands?<br />Issues involved in penetrating International markets<br />
  37. 37. Primary condition<br /><ul><li>Big market in the chosen category
  38. 38. Value Brands strategy is not about winning a small prize at a low price
  39. 39. Nano is a Value Brand. Addresses a huge 2 wheeler market which has millions of car aspirants
  40. 40. Mayonnaise is not a category in India for a Value Brand. Niche market best addressed by a Store Label</li></ul>9650_India<br />09/07/10 – ND/pr<br />
  41. 41. Build low-cost <br />Business <br />model<br />Grow volumes <br />1 <br />4<br />2 <br />3<br />Increase <br />distribution<br />Pass margins on to retailers<br />Value Brands Virtuous Circle is not just about branding<br />How are Value Brands created?<br />Isn’t it what Micromax, Amul and Diao did?<br />09/07/10 – ND/pr<br />
  42. 42. Characteristics of markets that provide opportunity for Value Brands<br /><ul><li>Large gap between Entry and Premium prices…. mobile phones, cars, garments , footwear, fashion accessories, etc.
  43. 43. Mid-market brands have weak Brand Utility
  44. 44. Population pregnant with aspiration….’climbers’
  45. 45. Access to retail space possible
  46. 46. Independent distribution
  47. 47. “Direct to Retailer” selling</li></ul>09/07/10 – ND/pr<br />
  48. 48. Is India ripe for Value brands?…….1<br /><ul><li>Large ‘bottom of the pyramid’ market
  49. 49. ‘Value Seeking’ customers
  50. 50. Large ‘Value Opportunity’ for new entrants</li></ul>McDonalds – The ‘Rs. 20 menu’<br />Pizza Hut – ‘Rs. 75 per head treat’<br />Reebok shoes priced at <Rs. 1000 for India<br /><ul><li>Lower cost structure compared to the Western economies</li></ul>09/07/10 – ND/pr<br />
  51. 51. Roadmap<br />What are Value Brands ?<br />What does it take to build Value brands?<br />Can we penetrate International markets with Value Brands?<br />
  52. 52. Is there an opportunity for Indian brands in global markets?<br /><ul><li>The market exists in several categories
  53. 53. The recession has set off down-trading
  54. 54. China is creating some global brands in consumer durables – Haier, TCL, Lenovo….
  55. 55. Consumers have started trusting Chinese products because many famous global brands are sourcing from China
  56. 56. Why not Indian Products?</li></ul>9650_India<br />09/07/10 – ND/pr<br />
  57. 57. Issues involved in penetrating developed markets are not trivial<br />Issues<br /><ul><li>Branding challenge
  58. 58. Managing the channels
  59. 59. Establishing after sales service</li></ul>“You don’t get a Coke by putting four quarters in four machines. <br />Think big.”<br />09/07/10 – ND/pr<br />
  60. 60. Can we be an insurgent in export markets?<br /><ul><li>Indian business plagued with the ‘Small is good enough’ mind set. Only a few like Mittals, Ambanis, Tatas, Infosys, Mahindras etc. and now young fighters like Micromax have broken away from it
  61. 61. Branding is so different from producing as a sub contractor
  62. 62. Creating global capacities starts with creating big capacity for the Indian market in most cases
  63. 63. Flawless execution and sustained effort.</li></ul>9650_India<br />09/07/10 – ND/pr<br />
  64. 64. Issues involved in penetrating developed markets are not trivial<br />Issues<br />Options<br /><ul><li>Branding challenge
  65. 65. Managing the channels
  66. 66. Establishing after sales
  67. 67. Grass-root
  68. 68. M&A
  69. 69. OEM route</li></ul>Think big, think smart<br />09/07/10 – ND/pr<br />
  70. 70. Thank You<br /> For comments, views and suggestions contact me at<br /><br />Avalon Consulting<br /> Casa Avalon, <br /> 61 Dr.SS Rao Rd,<br />Parel, Mumbai 400 012<br />09/07/10 – ND/pr<br />