Short-lived affairs

Niche brands often fade out quickly. A look at what can go wrong

When Sai Ghatpande went to her kirana store in Mumbai's Andheri West area last month, she returned empty-handed: the retailer didn't have Cadbury's Drinking Chocolate. The 21-year-old chocoholic was undeterred: she did a round of five stores in the neighbourhood and finally gave up. All the stores had run out of the sweetened-cocoa milk additive and Cadbury India had not replenished stocks for some months.

Given that kind of brand loyalty, why is Cadbury allowing such problems to crop up? Is it just a supply chain issue or has the company phased the product out? Neither, claims the company.

But it's not just Drinking Chocolate. Many other small brands have met the same fate, the biggest culprit being their "niche" character. Marketing experts point out that although niche brands create all-new categories, they die natural deaths.

Of course, some huge marketing triumphs have also been in niche categories. Remember Saffola? In the edible oils market, Marico Industries' safflower oil created a distinct space for itself as an oil that is "good for the heart". Two other Marico products were runaway successes: Mediker, an anti-lice shampoo (acquired from Procter & Gamble in 1999), and Revive, an instant fabric starch.

Then there was ItchGuard, Paras Pharmaceuticals' potion for ringworm infections. ItchGuard not only created a new category of anti-itching products, it inspired a whole generation of me-too products such as B-Tex, Itch-Nil and ItchCare.

But for every success that tom-tom the power of niche marketing, there are several that fell by the wayside. In the mid-1980s, Lipton introduced a soft drink, 21. Soft-focus advertising and a new taste (not cola, lemon or orange) didn't help sales.

As did another carbonated drink of that era: Cola-Lite. There just weren't enough takers for the low-calorie soft drink. And both Paloma Iced Tea in the 1980s and Nestle's Nestea a decade later, which offered the iced tea in powder form, soon withdrew (although never-say-die Nestle is back with powdered iced tea).

But why do niche brands fail? Declares a consultant, "While you must have a niche in the market, you should also find a market in the niche." Put simply, it means that before entering a niche business or a category, it is critical that the company gauge that market from a future growth perspective. Otherwise, points out the consultant, "the brand may fold up."

That's been the fate of several brands. The list includes, apart from Drinking Chocolate, Coca-Cola India's energy drink Shock, Lakme's Orchids range of cosmetics, both of which were eventually phased out. And Tata Motors' Tata Safari, which jumpstarted the sports utility vehicle (SUV) segment with a bang but is now running on empty. To understand the dynamics of niche marketing better, consider these case studies.

Faded glory

The changing dynamics of the colour cosmetic industry in 2001 had an unlikely casualty "" Lakme-Lever. India's first name in cosmetics saw its super-premium brand, Lakme Orchids, withering away mainly because of the price factor.

The colour cosmetic range was targeted at the top end, priced two-and-a-half times above Lakme's mid-priced Ultra range. But it was more expensive than even the international arrivals. While brands like Revlon and Oriflame were priced at Rs 80 to Rs 100 for lipsticks and nail enamels, Orchids entered the market in 1994 with lipsticks and nail enamel that cost Rs 195 and Rs 165.

Lakme tried to repair some damage when it relaunched Orchids in late-1998, laying emphasis on the product's export qualities and its upgradation. Prices were brought down to Rs 125 (nail enamel). Company sources claim the new gameplan resulted in a 300 per cent growth for the brand in terms of value.

But autumn came too soon for Orchids: in mid-1999, Lakme rolled out its new line of colour cosmetics under the Lakme label. Again, price was the culprit. The Lakme brand cost 15 per cent more than the Ultra range (which was phased out that year). Product quality and range, too, improved. With offerings like non-transfer lipstick, liquid lip colour and water-proof eyeliners, Lakme was moving up the ladder of aspiration to match global brands.

The success of Lakme signalled the end of Orchids since the disparity between the brands disappeared. Lowering the price of the Orchids range was not an option, since that carried the danger of cannibalising Lakme. An HLL spokesperson says the Orchids range was barely netting 3 per cent of the Rs 90.51 crore Lakme-Lever turnover (January-December 2000).

Points out a consultant, "This is where companies go wrong when it comes to niche brands. With its high price point Orchids could have been a strategic offering and image driver, rather than a harbinger of sales."

Shock value

When Shock was launched in February 2002, the idea was to create a new market "" carbonated energy drinks. But Coca-Cola India's attempt to go niche fizzled out. And how.

Consider this. Even though no official figures are available on the size of the carbonated energy drinks market in India, industry sources peg the market at around Rs 6 crore to Rs 7 crore. That's less than 0.1 per cent of the Rs 5,000 crore carbonated soft drinks market!

So, the choice Coca-Cola India had was to either grow the energy drinks category in India or let the brand stay in cold storage. It chose the latter.

Consider the mistakes the company made. Shock was not distributed through the regular retail channels. Positioned as a lifestyle drink, it was available at upper-end retail stores and discos, pubs and clubs. Shock was typically meant for people who worked and played hard since it was being sold on the energy-replenishment platform. The drink promised a perceptible physical benefit "" relief from stress, alertness and vitality. Despite the hype, Shock failed to hold even that limited audience.

Pricing became the critical factor in the way of the brand's growth "" a bottle of Shock cost Rs 30. And with margins between 8 and 10 per cent, retailers had little incentive to push the product. The fizz fell flatter when taste was considered: Shock's initial flavour was too reminiscent of tonic for Indian taste-buds. Coca-Cola did try to sweeten it, but to no avail.

Although Shock's biggest challenge was to carve a niche for itself, it created room for others. Recently, the global leader in energy drinks, the $1.5 billion Austria-based Red Bull, entered the Indian market.

Sinking chocolate

Drinking Chocolate, better recognised as "hot chocolate", has never been a mainline brand for Cadbury India. And the recent increases in cocoa prices has left a bitter aftertaste. Chocolate manufacturers were hit by the upsurge in cocoa prices in late 2002, which hit a 20-year peak. From $ 900 a tonne in early 2002, by October cocoa prices had escalated to $ 2,358 a tonne. Chocolate makers across the world had to tighten their belts to minimise the impact on their bottomlines.

Other than cutting costs and reducing the cocoa grammage in lower-end products, the next best thing was to shift focus from less lucrative brands like Drinking Chocolate to those that were more profitable.

"It's in times like these that the niche brands take a backseat," explains a consultant. The change in policy made sense: even after 25 years, Drinking Chocolate's share of the market is an embarrassing 0.3 per cent, and Cadbury sources admit that the brand has never really grown to much more. That's surprising, considering the product has never had to face any competition thanks to its niche character.

The shift in focus is not the only reason why the production of Drinking Chocolate has been impacted. A look into the brand's past suggests that the bigger problems were a lack of identity and unclear positioning.

Cadbury India General Manager, marketing, Sanjay Purohit agrees. "Drinking Chocolate has always had a confused imagery. While it was launched purely as a chocolate drink, over the years, people started to use it more as a cooking additive," he says.

At present, almost 50 per cent of the product's usage is for cooking; and that in turn affects Cadbury's sales of Cocoa Powder, which is meant for cooking.

Then came the last straw. In June last year, Cadbury launched yet another chocolate drink called Delite, based on feedback that consumers wanted an additive that would mix well with cold as well as hot milk. To add to the confusion, Drinking Chocolate and Delite are at similar price points. While a 500 gm pack of Drinking Chocolate sells at Rs 105, Delite is priced at Rs 110 for a 500-gm pack.

With cannibalisation added to its cup of sorrows, Drinking Chocolate looks doomed. Although Cadbury is unwilling to accept that. "Drinking Chocolate is a brand that has been adopted by consumers. We didn't have to do anything to build its image. It has been selling on its own for decades now, without the company putting in too much effort," insists Purohit.

But this is perhaps just where the company went wrong. Says a marketing consultant, "It's a small and niche brand. Cadbury could have done justice to it by establishing its image firmly from the beginning."

Running on empty

Tata Motors' Safari was a niche offering to Indian motorists when it was launched in 1997 "" the SUV segment didn't really exist at the time.

But the road travelled by the Safari is riddled with potholes. The Safari was initially targeted at weekend travellers and those who drove long distances. Over 1998-99, Tata Motors sold around 350 Safaris a month (about 4,200 a year), thanks to the first-mover advantage.

Less than a year later, sales had dropped to 250 units a month as the the novelty wore off. According to industry watchers, the main reason the Safari didn't succeed was that although it was called an SUV, it was little more than a multi-utility vehicle, a much less desirable choice. For instance, the Safari had a mildly-tuned 2000 cc (cubic capacity) engine and a four-wheel drive. In contrast, popular international SUVs like the Pajero and the Land Cruiser have four-wheel drive as standard fitment and almost twice-as-powerful engines.

So Tata Motors needed to do something in an effort to retain Safari's SUV niche intact. The Safari was relaunched in 2002. It was upgraded with new interiors, twin air-conditioners, new switchgears and improvised suspension. The company also launched the luxury variant "" Safari EX "" in October 2002, complete with features like rooftop air-conditioners and blowers, a Blaupunkt music system, lumbar-support seats and brushed metallic interiors.

That still didn't assure the Safari a smooth ride ahead. Competition from Mahindra & Mahindra (Scorpio), Mitsubishi (Pajero), Hyundai (Terracan), Subaru (Forrester) and Honda (CRV), led to a jam for the Safari on the Indian road. So, all the efforts of glamourising the Safari couldn't save its niche.

While the Safari is still managing its run till it can, Lakme Orchids was phased out and Shock died a natural death. And a big question mark hangs over Drinking Chocolate.

Perhaps niche marketing may not be such a viable strategy after all.