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Nourish Indian Brands:MNCS CROWD OUT DOMESTIC PLAYERS,Dr. Vinod Mehta,23 August 2007 Print E-mail

Economic Highlights

New Delhi, 23 August 2007

Nourish Indian Brands

MNCS CROWD OUT DOMESTIC PLAYERS

By Dr. Vinod Mehta

Brands have an important role to play in a buyers' market.  Once the brand value is established it is relatively easier to sell the goods.  In this regard the foreign brand names have an edge over the Indian brands.  As the foreign brands enter the Indian market in a big way there is a danger that Indian brands may be crowded out unless the Indian companies are willing to give a fight to the foreign brands.

The economic reforms of the past one-and-a-half decade have given confidence to the Indian industry to establish their brand names not only in the domestic market but also in the international market.  However, the time is ripe for the Indian companies to start thinking in terms of establishing brand names for their products. 

It is not an easy task but Indian companies will have to learn to build up their brand name if they have to survive in the competitive market, both domestic and foreign.  There is nothing to be afraid of, as past experience shows that all the foreign brand names which entered India have not done so well.

A few years back a report in a financial weekly stated that foreign brand names were crowding out the Indian brand names in the domestic market.  According to the report the multi-national corporations (MNCs) had purchased 31 Indian brand names since their entry into the Indian market. The two most important examples were in the soft drinks and ice-cream sector.

In all the 31 cases, the Indian companies had sold their brands for various reasons. Ranging from wanting to make a fast buck while the going was good as in the case of the soft drinks and ice-cream industry to the inability of the Indian partners to match foreign resources for the continuation of their partnership.

At one level, one wishes these brands had survived and the Indian entrepreneurs had fought the MNCs. But at the other, there is nothing to mourn about the demise of some of these brand names.  If one looks at India’s corporate history, one finds that even in the protected market environment, a number of top Indian brands just disappeared from the market making way for other Indian brands.  They adhered to the natural process of the survival of the fittest. 

For instance, a number of top TV manufacturers in the early sixties like Televista, Weston and Standard just vanished after a while. Questionably, as there was no external competition at that time, who were responsible for the TV makers’ death?

In the field of radio, the Murphy brand was on the top for a while but it too disappeared from the market. Two German companies --- Telefunken and Grundig --- tried unsuccessfully to enter the market through a joint venture with an Indian company but both sank without a trace.

In the soft drinks field, the Janata Government booted out Coca Cola and replaced it with a new indigenous drink called Double Seven which was marketed and distributed by the Government-owned Modern Industries.  This era also saw the emergence of Thumbs Up and Campa Cola, soft drinks manufactured by the private sector. Both these captured a large chunk of the Indian soft drink market and crowded out Double Seven from the market. 

The moot question is: No tears are shed when new Indian brands crowd out other Indian brands from the domestic market, why should tears be shed when international brands crowd out some of the Indian brands?

Commonsense avers that the crowding out of an Indian brand by other Indian brand names is due to the company’s inefficiency which has been steam-rollered by more efficient companies.  The same logic also applies vis-à-vis MNCs crowding out inefficient and mismanaged Indian brands and companies. 

However, there have been exceptions wherein strong brand names were sold by their owners for monetary reasons. For instance in the soft drink sector, the Thumbs Up owner sold the brand to his competitor Coca Cola rather than fight back.  Ditto the case with the Indian ice-cream leader Kwality which was bought by Hindustan Lever (now Hindustan Unilever).

On the other hand, Lakme cosmetics and Tomco of Tata, which were perennially making losses, were faced with two options: close down or sell out. The Tata’s exercised the second option and sold out both. Lakme to Hindustan Lever. Similarly, Vijay Mallaya’s UB Group sold its preserved food division to a MNC.

When the MNC Camay Group entered the Indian market, Indian soap maker Godrej out of fear that it would be unable to survive joined hands with Camay.  Only to separate and compete later. It is another matter that Camay flopped. Similarly, in the detergent sector it was the Indian brand Nirma which gave Hindustan Lever a run for its money a few years ago. Today, there are other Indian detergent brands, apart from Nirma, which are fighting the international detergent brands like Tide, Ariel and Henko.

Pertinently, one needs to remember that when an MNC takes over an established Indian brand, there are other established Indian brands which are determined to fight the MNC in the domestic market.  Again, in the ice-cream sector both home-grown Amul and Mother Dairy have taken head-on Hindustan Lever's Walls ice-cream. If this is happening within the organized sector there is a vast unorganized ice-cream sector in which no MNC even Amul would be able to compete.

Clearly, these developments of the past ten years should give the Indian industry confidence to enter the international market. There is no need to weep over the fact that they sold their brands to foreign competitors but to look forward and fight the MNCs. Admittedly, it is a very difficult task to establish oneself in the foreign market but once Indian companies are determined to do so they are sure to emerge successful in the coming years.  Towards that end they need to take risks and make quality products.

In sum, the economic reforms have exploded the myth that foreign brands will always crowd out domestic brands.  The Indian brands have the capacity to fight the foreign brands provided they maintain consistent quality of their product. ---- INFA

(Copyright India News And Feature Alliance)

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