It’s a deluge in the marketplace. India saw 1,500 brand launches in the past 18 months, which work out to three a day.
The only rider, according to AZ’s Managing Director Sujay Misra, is that while FMCG saw mostly line extensions, it was categories such as telecom and auto that saw genuine new product launches.
But the market is also a great leveller. The fierce competition ensured only 5 per cent of these brands survive, according to brand and marketing experts.
Take the example of Marico, which had to suspend the test run of its healthy snack, Saffola Zest, this year due to poor market response. It is now prototyping Saffola Oats, which the company is hoping will work. “It has to first meet action standards,” says Saugata Gupta, chief executive officer of Marico’s consumer products division. “The prototype will run for at least six months.”
Parle Products is another case. It recently launched Monaco Smart Chips, which has also got a lukewarm response, say industry sources. According to Pravin Kulkarni, general manager, marketing, the chip, an extension of the company’s popular Monaco biscuit, is about a “concept”, which will take time to take root. “Healthy snacks as a category is small at the moment, just about Rs 100 crore. We don’t expect it to grow overnight. Till that time we will stick around,” he says.
India, though, is better than markets in the West, say analysts. “There is a rule of thumb that exists in the West,” says Santosh Desai, chief executive officer, Future Brands. “It’s called the Black Eye Ratio. According to it, if 10 brands were laun-ched in a particular year, only two will survive and do well in 24 months. In 70 months, the number comes down to one product. That’s the success ratio.”
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Emerging markets such as India, according to Desai, can still absorb far more products, thanks to the underpenetration of brands and the growing market for organised products. “There are still a large number of categories in India where the organised to unorganised ratio is low. As modern trade evolves, the need for organised products will grow,” says Desai.
Extensions such as Knorr Soupy Noodles from Hindustan Unilever (HUL), for instance, have been “well received”, say company sources. HUL launched the product at the end of March. Still in the test marketing phase, it is available in modern trade outlets across the country and in both modern and traditional retail stores in the south.
According to a report prepared by retail and management consultancy Technopak, organised retail in India is likely to touch 25 per cent in the next 10 years from the current 5 per cent. “Launching brands then will be easier,” says Purnendu Kumar, associate vice-president, Technopak Advisors. “A marketer will not need to set up an exclusive distribution chain or network of stores. The footprint of organised retail outlets will suffice to push his products.”
Consumer product firms in India have disparate strategies when it comes to distribution of their products, one for traditional trade and the other for modern trade. “It becomes imperative to address these two segments differently,” says Dalip Sehgal, former managing director, Godrej Consumer Products Ltd (GCPL), now an independent FMCG expert.
Schemes offered via modern trade quite often differ from what is on offer in traditional retail outlets, he says. “Modern trade will typically have a lot of bundled offers, which are customised based on discussions between a retailer and a manufacturer. So, Nestle may decide to bundle a pack of Maggi noodles free with a bottle of Maggi ketchup or sauce in Big Bazaar outlets or Britannia may decide to give a discount on its biscuit packets in Spencer’s Retail outlets. The objective is to push the product.”
Retailers, say analysts, also run “bill buster schemes”, where on purchases of a certain amount, consumers get freebies or discounts on certain products. “Which brand to push depends on mutual discussions between the manufacturer and the retailer,” says Anand Shah, senior FMCG analyst at brokerage firm Angel Securities.