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Strategies & Market Trends : India Coffee House -- Ignore unavailable to you. Want to Upgrade?

To: Mohan Marette who wrote (3787)	2/21/1999 11:30:00 PM
From: Mohan Marette	Read Replies (1) \| Respond to of 12475

Strong Indian brands, FMCG & Non-FMCG February 16, 1998 -------------------------------------------------------------------------------- By Ketan Shrimankar -------------------------------------------------------------------------------- Brand name businesses are the watch word in the capital market for investors and businessmen alike. While investors are frantically buying up stocks of companies with strong brand name products, businesses are queuing up to acquire brands and brand name companies. This is pushing up the valuation of such companies to unprecedented heights. Strong brands go hand in hand with a well laid out distribution and marketing network. Such networks also command attractive valuations in the marketplace. As was witnessed recently in the case of Geep Industrial Syndicate Ltd. Geep sold its brand "Geep" for battery cells and torches along with the marketing network and one of its plants to Gillette. While the brand "Geep" did not command a high market share in its product group, what attracted Gillette to Geep was its robust rural marketing network. Gillette has the products to piggy back on this network and exploit it fully. While the MNCs have the deserved valuations, there are quite a few Indian brands that go abegging. These brands accompanied by their distribution network are an attractive proposition for any foreign company in a country where setting up distribution logistics is difficult and time consuming. Most of these companies are either in the process of being re-rated or selling out to an external buyer for the brand. In both the cases, investors stand to benefit. We discuss below a few Indian brands that have transcended the commodity name tag and achieved a respectability in the market place for their quality, consistency and innovativeness. 1. Navneet 'Navneet' is the brand name of Navneet Publications Ltd. for its school reference books, guides, study books, children's books etc. Navneet enjoys the leading market share in the states of Gujarat and Maharashtra in the school book category. In order to gain entry into all the schools in these two states, Navneet has a large team of canvassers who interact with school authorities and local dealers to canvas for and source orders and service the markets. This distribution strength has helped Navneet achieve a pre-eminent position in the business. Such close interaction also enables the company to know the views of the customers first hand and take necessary remedial action in subsequent editions or launch of new books. Navneet has also entered the stationery and children's books recently. In order to provide access to all its products under one roof, Navneet is adopting the franchisee route. The company recently opened its first franchise shop in Mumbai. Navneet has also launched a web-site to sell its products via internet; though it may take it a long time to get any sizeable business from the channel. However, the growth of school books has been stagnant for some time. A sizeable growth only comes in when there is a change in the syllabus and students are forced to buy new books rather than use second hand ones. Seeking new avenues for growth is imperative for the company. 2. Zodiac 'Zodiac' brand in ties enjoys the highest market share in India and is almost a generic name for the product. This same umbrella brand is used for shirts as well by the company. The listed company Zodiac Clothing Co. Ltd. is engaged mainly in exports under its own brand name and that of others. While in the domestic market, Zodiac brand products are manufactured and marketed by its subsidiary, Mayfair Bombay Ltd. Mayfair is owned 54% by Zodiac, while the rest is held by promoter Nooranis' group companies. Zodiac is marketed in India through exclusive chain of stores under a franchisee arrangement. While the company has not yet achieved a strong bottomline growth, the topline is growing on the back of strong advertising support. In the last two years, Zodiac has spent a sum of app. Rs 5 crores on advertising and marketing. This expenditure, written off in the books, will pay rich dividends in the future. The brand has numero uno status in ties, while in shirts it is fighting against competition from foreign brands such as Arrow, Louis Philippe, Van Heusen, etc. Even in the face of such stiff competition, Zodiac has retained its reputation of a premium product through new offerings and maintaining product quality. 3. Onjus & Life Enkay Texofood Ind. Ltd has two business divisions: texturising and food processing. With in food processing, the company process fruits and fruit pulp to produce juices and pulp for export and domestic market. In 1997, Enkay entered the domestic market with branded orange juice tetrapak: 'Onjus'. In year ended March 1999, the product is expected to tote up sales of Rs 40 crores. Onjus has already acquired a 19% market share in the tetrapak fruit based drinks, while it is a leader in the orange juice category. In August 1998, Enkay launched another tetrapak: 'Life' mango juice. In the year ended March 1999, Life is expected to achieve sales of Rs 25 crores. Both the products have maintained their quality in terms of taste and consistency since launch and what is significant is that they have achieved this volume of sales with little advertising support. The company plans to roll out nation wide supported by strong advertising. The story is made interesting with another development. Enkay has announced plans to spin off the texturising business into another company, retaining the food processing business in the company. This would enable investors to gain a better idea about the food processing business valuation. Investors holding shares in Enkay will get one share of the new company for each share they hold in Enkay. However, there is one irritant in the whole affair; the brand name 'Onjus' and 'Life' are reported to be held by a group company of the promoters. These are just some of the brands that deserve to be looked into. We shall discuss a few more brands in the next article, viz. Fevicol, Sandesh, Amrutanjan, Camlin, etc. (Ketan Shrimankar is a chartered accountant by training and runs a research and consultancy firm Equisearch in Mumbai)