Branding in FMCG Goods in Changing Economic Conditions
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Published: Thu, 22 Feb 2018
An energetic person in field of marketing with knowledge base of B.E mechanical & Post graduate Diploma in Business management played a very important role for my thesis. He has an experience of more than tow years in Sales and Marketing, at Excell elevators and currently working at IIPM Ahmedabad, as a Senior Research Associate. Perfection and proper direction are his two keys to achievement for any work. Without his best guidance for this thesis, it would have been possible to complete this thesis.
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Research always start with a question or a problem. Its purpose is to question through the application of the scientific method. It’s a systematic and intensive study directed towards a more completed knowledge of the subject studied.
· Primary Research:
1. Interaction with customers by filling up questionnaires
2. Interview with Marketing manager
3. Total sample size which is taken into consideration for research is 100 respondents
· Secondary Research:
3. Articles and Magazines
4. Project Reports and News paper
Branding strategy :
Every organization has a brand, whether they have consciously developed or not. A brand is an expectation or a promise of experience. Whether that expectation is trusting, authoritative, innovative, brands are the short hand for describing the way a business, organization, product, services, or a person relates to its stake holders.
The way to build a strong to put their customers and their needs at the center of the every decision the organization makes. Overtime the customer centric action creates the differentiation in the marketplace and build an emotional connection with the customers. The process of managing brand as assets begins with the understanding the brand from the customers point of view. What image, reputation, perception does each customer and stake holder maintain that can be capitalized or corrected.
Managing brand as assets also requires a considerable effort to measure and quantify the impact of the brand on customer, their decision, and the companies financial performance.
Brand strategy is the plan for the company how it is going to create the value for the customers by building its brands strength and addressing its weakness. Brand strategies manifest product innovation, graphic design, store layout, customer service and many other components of the brand experience. The strategy provides the foundation for development of brand building program and typically includes brand objective, consistent brand name and identity systems, target audience and positioning, key communication messages and prioritization of brand touch points.
The recent global slow down as sent everyone in a tizzy. From financial institution to manufacturing industries, everyone has faced the heat of the slowdown. In this scenario I have taken up the matter of the Branding Strategy which is being applied in the FMCG sector. What kind of changes were applied or not and what were the strategies brought in to tackle the slowdown is the matter of study.
Different companies have tried to tackle the situation by bringing in new changes in their branding strategy. Some organization may not have required to change their strategies in the market. It may be because of their strong market presence, brand loyalty or strong financial performance.
Here some cases of the companies and their brand will be studied thoroughly. It will be seen that what kind of changes were made or no changes were made in the marketing strategy
A Brand is not a by-product, an ad-campaign, a logo, a spokesperson or a slogan. It is the differentiating identity and the most important reason for customers, employees, stake holders to do the business with you. In a real sense it’s a firms most important asset.
The new era has come, where innovation is the only way to stay in the market. Whether be it a product, an ad-campaign or marketing strategy innovation is the tool to survive.
But the recent recession gives us a thought, should the Branding strategy that is being applied remain the same?
The answer can be found looking at different cases. It may be necessary to look after the branding strategy to be applied in a different manner even if the current branding strategy is alright and doing good to fetch the business in the market. Because sticking to the old branding strategy may not always be a big hit. As earlier said innovation is very much important.
Recession Marketing Success Requires Boldness
Over the years hundreds of studies have been conducted to prove companies should maintain advertising during a recession. In the 1920’s advertising executive Roland S. Vaile tracked 200 companies through the recession of 1923. He reported in the April 1927 issue of the Harvard Business Review that the biggest sales increases throughout the period were rung up by companies that advertised the most. After World War II, Buchen Advertising, Inc. decided to plot the sales of a large number of advertisers through successive recessions. In 1947, it began measuring the annual advertising expenditures of each company. When they correlated the s with sales and profit trends before, during and after the recessions of 1949, 1954, 1958 and 1961, they found that almost without exception sales and profits dropped off at companies that cut back on advertising
The conclusion of six more recession studies by the group present formidable evidence that cutting advertising in times of economic downturns can result in both immediate and long-term negative effects on sales and profit levels. Meldrum & Fewsmith’s former Senior VP, J. Welsey Rosberg reports “ I have yet to see any study that proves apprehension is the route to success. Studies consistently have proven that companies that have the intelligence and guts to maintain or enlarge their overall marketing and advertising efforts in times of business downturns will get the edge on their hesitant competitors.
Their studies also discovered that after the recessions ended, those companies continued to insulate behind the ones that had maintained their advertising budgets. In 1979 another study by ABP/Meldrum & Fewsmith, covering the recession of 1974-75 and post-recession years, showed similar findings. They found that “companies which did not slash advertising expenditures during the recession years (1974-1975), experienced higher sales and net income during those two years and the two years following than companies which cut ad budgets in either or both recession years.”
In an economic downturn, there may be a inclination to give up on new thoughts and thinking, and just hunker down, until the worst is over. But, what if this is really our chance to observe new possibilities? If freaking out doesn’t make your numbers improve (and – at this point – you can lead a consumer to your product, but you can’t make her buy), what might happen when you use that brainwave space to identify and integrate consumer trends you never actually noticed before? Possibly amazing things.
Take Reena Jana’s quick hit Businessweek article and video with David Rockwell, architect/branding expert/set designer, as an example. He commented on hotel design, which has been on my mind a bit lately too. One of Rockwell’s thoughts: what about holding cooking classes in hotel kitchens? Such design thinking is worth a little hotelier attention these days, given the convergence of trends in staying home, cooking more, and being with family. What else, physical space or otherwise, is primed for such “transformability,” as Rockwell called it?
Cooking classes in a hotel kitchen could serve consumers and add value on so many levels – but without this “what now” sense of doom we feel, such ideas might never surface. Given extreme limitations, creative thinking is forced to be that much more bold, even as the solutions become more streamlined.
Here’s another example of transformability, in my mind: Consider how Subaru is handling the current “discount” season, with their “Share The Love” philanthropic campaign. Rather than promoting money-back at loan signing or one of the other classic year-end strategies for a car dealer, they kept within the tight parameters, learned more about their consumers and thought quite in a different way. What their research found was that a generous donation would very much resound with the types of people who’d be considering a Subaru buy right about now.
Inspiring customers into a car purchase during a downturn, and doing good at the same time? Wow. A tried and true, established auto industry tradition turned on its ear – transformed! Without an extreme impetus to fill a void of ideas in a difficult consumer environment, such a concept might never have surfaced.
If design thinking and transformability emerges only when long-established industries with entrenched business practices and ethnicity get hit this hard – maybe we have something to be thankful for after all? This overwhelming bad may have opened a few more of us up to a very clever, possibly unusual – and thereby all the more noticeable – leveraging of consumer development.
There’s a great deal of pluck and drag about the loss of fizz at Pepsi – and questionably at Coke, as well. Both companies face declining sales of their flagship brands and have used to greater or lesser success predictable ways to mask the elementary issue: Fewer people are buying less and less of these iconic brands.
conservative wisdom says do two things at once: Buy up more trendy beverages, like waters, sports and energy drinks; and work really, really hard to strengthen the base brands.
So, Pepsi hires Peter Arnell (of Tropicana Disaster fame), fires its long-time ad agency and creates a proposal that calls for marketing its wares at “the real me.” According to BusinessWeek, the challenge was to make Pepsi as culturally relevant as the iPod. Good luck with that, Peter.
The temptation of course is honest: Wouldn’t it be great if brown, sugary water could be as cool as the latest touch screen gadget? Gosh, it would be great. However, it’s not going to happen. So rather than sending marketing execs on “cool hunts” for design inspiration, here’s a more daunting trek: Take a look at what other brands have done, what Coke and Pepsi have to do – to each other. Grow share in a declining market.
It would be so great to imagine that there’s something to be done with either of these brands that could forge an entirely new category of experience – and therefore consumer behaviors – the way the iPod has. But the truth is they’d learn much more by taking a commuter flight to Winston-Salem, N.C. It’s so very transgressive to even suggest it, but the only people who have spent time trying to wrestle for share in declining markets are the tobacco brands.
(a) FMCG SECTOR
(i) Global Perspective:
The FMCG industry, or alternatively named CPG, abbreviation for Consumer Packaged Goods, deals mainly with the production, distribution as well as marketing of packaged goods for all consumers.
The Fast Moving Consumer Goods (FMCG) has to do with those consumables which are regularly being consumed. Among the first activities of the FMCG industry there is selling, marketing, financing, purchasing, and so on. Recently this industry has also launched in operations, supply chain, production, general management, etc.
The wide range of consumable goods provided by the FMCG industry turns over a large amount of money, while competition among FMCG manufacturing is become more and more fierce. Investors are putting more and more into the FMCG industry, especially in India, where the FMCG industry is the fourth largest sector, having a total market size of more than US$13.1 billion, and still estimated to double by 2010. In New Zealand as well, the FMCG industry accounts for 5% of Gross Domestic Product (GDP).
Some common FMCG product include food and dairy products, glassware, paper products, pharmaceuticals, electronics, plastic goods, printing goods, household products, photography, drinks etc, so here coffee, tea, greeting cards, gifts, detergents, soaps etc are all included.
The factors that made the FMCG industry a highly competitive one are low operational cost, solid distribution networks, and emergence of new FMCG companies. In addition, the growth of the world’s population is another responsible factor for the huge success of this particular industry. Some of the leading FMCG companies all over the world are Sara Lee, Nestlé, Unilever, Procter & Gamble, Coca-Cola, Carlsberg, Kleenex, General Mills, Mars etc.
Not only does it provide the necessary goods for day to day life, but the FMCG industry has also created tremendous job opportunities and careers. It is a stable, varied, and highly profitable industry, and the jobs it provide range from sales, supply chain, finance, marketing, operations, human resources, development, general management, and so on.
Recruitment has also grown together with the growth in the FMCG sector:
* The working force within FMCG manufacturing in the UK accounts for 14% of the total workforce in UK;
* Sales in the FMCG industry accounted for £14.5 billion in 2000, spent on non-food UK products alone, in grocery retail sectors in UK;
* In 2000 the non-food FMCG market in UK, raised to £110 billon.
Including sectors such as Food, Drink and Pharmaceutical the output registered by FMCG accounts for 19% of the UK’s GDP
i. Indian Perspective: The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of dollar 13.1 billion. It has a strong MNC, presence and is characterized by a well established distribution network, intense competition between the organized and unorganized asegments and low operational cost. Availability of key raw materials, cheaper labor costs and presence across the entire value chain gives India a competitive advantage. The FMCG market is set to treble from $11.6 billion in 2003 to $ 33.4 billion in 2015. Penetration level as per capita consumption in most product categories like jams, toothpaste, skin care, hair wash etc in India is low indicating the untapped market potential. Burgeoning Indian population, particularly the middle class and the rural segments, presents an opportunity to makers of branded products to converts consumers to branded products. Growth is also likely to come from consumer upgrading in the matured product categories. With 200 million people expected to shift to processed and packaged food by 2010, India needs around $28 billion of investment in the food processing industry
India has enacted policies aimed at attaining international competitiveness through lifting of the quantitative restrictions, reduced excise duties, automatic foreign investment and food laws resulting in an environment that fosters growth. Cent per cent export oriented units can be set up by government approval and use of foreign brand names is now freely permitted.
Automatic investment approval including foreign technology agreements within specified norms, up to 100 per cent foreign equity or 100 per cent for NRI and overseas corporate bodies investment, is allowed for most the food processing sector except malted food, alcoholic beverages and those reserved for small scale industries. 24% foreign equity is permitted in the small scale sector. Temprorary approvals for imports for test marketing can also be obtained from the Director General of foreign Trade. The evolution of a more liberal FDI policy environment in India is clearly supported by the successful operation of some of the global majors like PepsiCo in India.
The Indian government has abolished licensing for almost all food and agro-processing industries except for some items like alcohol, cane sugar, hydrogenated animal fats and oils etc. and items reserved for the exclusive manufacture in the SSI sector Quantitative restrictions were removed in 2001 and Union Budget 2004-05 further identified 85 items that would be taken out of the reserved list. This has resulted in a boom in the FMCG market through market expansion and greater product opportunities.
TRENDS AND PLAYERS
The Indian FMCG sector is the fourth largest sector in the economy and creates employment for three million people in downstream activities. Within the FMCG sector, the Indian food processing industry represented 6.3% of GDP and accounted for 13 per cent of the country’s exports in 2003-04. A distinct feature of the FMCG industry is the presence of most global players through their subsidiaries (HLL, P&G, NESTLE) which ensures new product launches in the Indian market from the parents portfolio.
Demand for FMCG products is set to boom by almost 60 per cent by 2010 and more than 100 per cent by 2015. This will be driven by the rise in share of middle class from 67% in 2003 to 88 percent in 2015
The boom in various consumer categories, further, indicates a latent demand for various product segments. For example, the upper end of very rich and a part of the consuming class indicate a small but rapidly growing segment for branded products.
The middle segment, on the other hand, indicates a large market for the mass end products. The BRICs report indicates that India’s per capita disposable income, currently at $556 per annum will rise to $1150 by 2015-another FMCG demand driver. Spurt in the industrial and services sector growth is also likely to boos the urban consumption demand.
The size of the fabric wash market is estimated to be $ 1 billion, household cleaners to be $ 239 million and the production of synthetic detergents at 2.6 million tones. The demand for detergents has been growing at an annual growth rate of 10 to 11 per cent during the past five years. The urban market prefers washing powder and detergents to bars. The regional and small un-organized players account for a major share of the total volume of the detergent market.
The size of the personal wash products is estimated at $989 million: hair care products at $831 million and oral care products at $537 million. While the overall personal wash market is growing at one per cent, the premium and middle end soaps are growing at 10 per cent. The leading players in this market are HUL, NIRMA, Godrej and Reckitt & Colman. The oral care market, especially toothpastes, remains under penetrated in with penetration below 45 per cent. The industry is very competitive both for organized and smaller regional players
The Indian skin care and cosmetics market is valued at $274 million dominated by HUL, Colgate Palmolive, Gillete India and Godrej Soaps. The coconut oil market accounts for 7 per cent share in the hair oil market. In the branded coconut hair oil market, Marico and Dabur are the leading players. The market for branded coconut oil is valued at approximately $174 million
FOOD AND BEVERAGES
The size of the Indian food processing industry is around $65.6 billion, including $ 20.6 billion of value added products. Of this, the health beverage industry is valued at $ 230 million: bread and biscuits at $1.7 billion: chocolates at $73 million and ice creams at $188 million
The size of the semi processed ready to eat food segment is over $1.1 billion. Large biscuits and confectionery units, soya processing units and starch glucose sorbitol producing units have also come up, cater to domestic and international markets.
The three larges consumed categories of packaged foods are packd tea, biscuits and soft drinks.
The Indian beverage industry faces over supply in segments like coffee and tea. However, more than half of this is available in unpacked or loose for. Indian hot beverage market is a tea dominant market. Consumer s in different parts of the coutry have erogenous taste. Dust tea is popular in southern India, while loose tea is preferred in western India. The urban rural split of the tea market was 51:49 in 2000. Coffee is largely consumed in southern states. The size of the toatla packaged coffee market is 19600 tonnes or $87 million. The total soft drink market is estimated at 284 million crates a year or $1 billion. The market is highly seasonal in nature with consumption varying from 25 million crates per month during peak season to 15 million during offseason. The market is predominantly urban with 25 per cent contribution from rural areas. Coca cola and Pepsi dominate the Indian soft drinks market.
Mineral water market in India is a 65 million crates ($50 million) industry. On an average, the monthly consumption is estimated at 4.9 million crates, which increases to 5.2 million during peak season.
RURAL MARKETS : SMALL IS BEAUTIFUL
By the early nineties FMCG MARKETERS HAD D OUT TWO THINGS
1) Rural markets are vital for survival since the urban markets were getting saturated.
2) Rural markets are extremely price sensitive
Thus, a number of companies followed the strategy of launching a wide range of package sized and prices to suit the purchasing preferences of India’s varied consumer segments. Hindustan Unilever a subsidiary of Unilever, coined the term nano marketing in the early nineties, when it introduced its products n small sachets. Small sachets were introduced in almost all the FMCG segments from oil, shampoo, and detergents to beverages
Cola major, coke brought down the average price of its products from around twenty cents to ten cents bridging the gap between soft drinks and other local options like tea, butter milk or lemon juice. It also doubled the number of outlets in rural areas from 80,000 during 2005 to 160000 the next year almost doubling its market penetration from 13 per cent to 25 percent. This along with greater marketing, led to the rural market accounting for 80 per cent of new coke drinkers and 30 per cent of its total volumes.
In this day and age, consumers automatically recount a product to the name of a particular brand. More specially, the status of the said brand tends to trigger signals of whether a product is cost-effective, superior in quality, or even connect to a particular social status. Numerous studies have maintained that brands have become powerful tools in modern marketing. It has become one of the major factors that consumers consider in their purchasing decisions. Any commercial organization knows this as a fact. That is why they are inclined to place their attention to brands and the demands of the consumers. It has become an requisite component of the marketing operations of the modern organization. For existing multinational companies, having a global brand name has been massively helpful in expanding their operations the world over. Presenting their products and services as the top alternative in the market nowadays is not enough to ensure the success. In this era where the consumer is independent, every company needs to build a brand that will be universally familiar in any market. Companies seek to establish a global brand with the ends of acquiring a bigger market share and a better position in the market. Though it is a common belief that having a global brand name equate to success in terms of business, there are still existing issues that comes with it. This paper will be considering the minutiae of establishing a global brand name. Similarly, the key reasons why this is being considered by most, if not all, companies will be taken into account along with the other alternatives that these companies have in marketing a global product.
II. Marketing Under a Global Brand Name
The term “global brand” is often interchanged with the term “global product.” However, there are studies that pointed out that the two are completely different terms. Basically, a global product connotes merchandise sold all over the world that share standardized attributes. This means that these products have a propensity to have a uniform set of characteristics and normally take on common brand names. On the other hand, a global brand tends to characterize the identity and image close to a specific product. More importantly, it is the blend of both tangible and intangible attributes that constitute a global brand.
Recent studies of global branding designate that the said concept is subject to the view of the individual consumer. More specifically, the more recent views of international branding strategy tend to reflect the demands of the consumers. As puts it, these global brands are subjected to the global culture. In its simplest terms, global culture pertains to a set of consumer tastes and values. These tastes and values do not necessarily share the same standards and often show conflict with one another. Thus, global brands have to take on a certain level of flexibility in their operations.
In its face value, this seems quite a daunting task for any company. However, this does not stop them from seeking to establish a global brand name and take on in global branding strategies. Why? The reason is that despite these complex concerns of the consumers, these brands have become embedded in their consciousness. The bottom-line is that, despite their best efforts, consumers cannot ignore global brands. The following parts will discuss the other advantages that companies enjoy in operating a global brand.
A. Creation of Demand on Other Countries
One of the advantages of having a global brand is the possibility of demand spillovers. This means that the marketing efforts held in a particular country could essentially multiply out to markets of other countries. Basically, the image of the global brands encapsulates this advantage. The concept of brand popularity and the country of starting point often establish this type of demand spillover. Share this suggestion of demand of global brands. Mainly, they call this element of global brands as the “global myth.” Simply put, demand of global brands tends to provide the consumers a feeling of having a “global identity” or having a feeling of being a “citizen of the world.”
Studies on the effect of brand popularity on the company maintained that it has major implications on its market share. In the study of they pointed out that the company acquires benefits from brand popularity. One benefit is that having brand popularity provides the consumers more confidence in their purchasing decisions with particular reference to giving the implied assurance that a popular brand is better than the alternative. Another benefit of brand popularity is the association of assessment to the product. Coined this dimension of global brands as “quality signals.” Thus, issues of price of the product with a global brand are often regarded as “reasonable” because of its perceived high value among consumers.
B. Strategic Appeal
Another perceived reason why organizations seek to establish a global brand is because of its strategic appeal. Indicated in their study that global brands tend to have more opportunities than their equivalent in the local markets. This is supported by the earlier studies on the markets in the US, Japan, and EU.Noted that global brands offers companies an efficient way of exhausting its resources. More specifically, maintaining global brands tend to offer the possibility of lower costs and having the highest quality product.
Aside from the earlier fact pointed out on the demand spillover, a consequent outcome of that phenomenon would be the demand for standardized products. This means that modifications to meet the local demands are significantly lessened as the demand replicate greater value with the unaltered global brands. In this regard, time and resources in the amendment processes is taken away which equates to cost reductions and further profit for the company. On the whole, the creation of global brands creates a much greater economies of scale and scope for companies.
III. Brand Management in the Global Setting
Recent marketing initiatives in the global setting have acknowledged the importance of bands in dealing with the dynamic business environment. Recent studies maintained that it is important for companies to treat their brand management initiatives as they treat their strategic management processes. ( 2001, 75) This means that the battle of brands in both their local and domestic counterparts have intensified throughout the years. This increase in the demands on the part of the organizations has given them the responsibility of making their brand management more systematic, scientific and a continuous process. The study of (2001, 75) basically maintained that companies should bake sure that their brand will be remembered constantly. Be it through logos or taste, the consumer has to readily recognize the brand right away. This is where brand management comes in to the picture.
There are studies that maintain initially what their brand intends to represent. In doing so, the company is able to find a way to position its brand with reference to the other players in the market. ( 2001, 75) This is seen in the case of global brands like Nike and Coca-Cola. In the case of Nike, they have decided to package themselves as a brand associated with winning. On the other hand, the Coca-Cola brand tends to place value on their universal taste. ( 2003, 198)
A case study of Procter & Gamble maintained that a use of a brand portfolio would be able to help a company in managing its brand in the global setting. (2003) With such a tool at their disposal, P&G is able to make sound decisions with regards to their brand management initiatives. In doing so, P&G are able to position their products properly with reference to the other players like Unilever, Kimberly-Clark and Colgate-Palmolive. Studies pertaining to branding strategies and theories point out two important components organizations should consider in their brand management initiatives. These are brand equity and brand value.
A. Value Creation in Branding
Brand value is the perceived worth of the consumers on the brand. The most notable form of value creation in brands is through advertising. (2003, 53) There are three known approaches in the creation of value in brands: decoration, gluing, and mascot approach. The decoration approach basically shows a branding strategy displaying differentiation by connecting the brand to completely different cues presented by the other players in the market. ( 1999, 51) The gluing strategy of value creation associates their product to certain emotional cues of the consumer. These are seen in advertisements that attempt to stir the emotion of the possible buyers. (1992, 10) The mascot approach on the other hand indicates the use of a human-like entity that is believed to be able to establish a connection to the potential buyers. The use of charismatic non-human characters (Pillsbury Dough Boy) tends to reflect this type of value creation approach in branding. ( 2004, 188) Basically, these approaches of value creation tend to be influential for the buying decisions of the consumers. In the same regard, the use of brands could also be a way towards building this value to the company.
B. Using Brand Equity
The term brand equity denotes the net revenue of the brand which it is expected
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