India News and Features Alliance (INFA) - International Firms Arrive:INDIANS, BUILD UP BRANDS, by Dr. Vinod Mehta, 7 November 2007

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. The foreign brand names in this case have an edge over Indian brands. However, with the economy booming, the time is ripe for Indian companies to start thinking in terms of establishing brand names for their products, not only in the domestic market but also in the international market. They must have a time horizon of 15 to 20 years to establish their brands, which will bring them immense benefits for a number of years in the long run.

It is not an easy task, but Indian companies will have to learn to build up their brand names 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 foreign brands that entered India haven’t done so well. Therefore, instead of worrying about foreign brands coming to India, our companies should concentrate their energies on establishing their own brands worldwide.

About a decade ago a report in a weekly newspaper stated that the foreign brand names were crowding out Indian brand names in the domestic market. It said that the multi-national corporations (MNCs) had purchased out 31 Indian brand names since their entry into the Indian market. Two most significant examples were in the soft drinks and ice cream sector.

In the 31 cases that had been cited, the Indian companies had sold their brands for various reasons ranging from making a fast buck as in the case of soft drinks and ice cream industry while the going was good, to the inability of the Indian partners to raise matching resources for the continuation of their partnership.

At one level, one would have wished these brands to survive and expected the Indian entrepreneurs to give a fight to the multi-nationals, but at another level there is little to mourn about the demise of some of those brand names.

If one looks back in the Indian corporate history, one will find that even in the protected market environment a number of Indian brands that had emerged on the top simply disappeared from the market making way for other Indian brands to emerge. This is a natural process of the survival of the fittest. Those companies, which are run by non-professionals, who are unable to interpret the market signals even when the market is highly protected and monopolistic type, will never survive and in fact did not.

For instance, a number of television manufacturers emerged on the scene in the early sixties when India was still in the black and white TV era. The top names that emerged then were Televista, Weston and Standard. After being at the top they just disappeared. The question is: who were responsible for the death of these brands when there was no outside competition per se?

At one point of time, Murphy was on the top amongst radios but it too disappeared from the market. Two German manufacturing companies namely Telefunken and Grundig tried unsuccessfully to enter the Indian radio market in a joint venture with an Indian firm but both disappeared from the Indian market without a trace.

Recall that during the Janata Government regime the Coca Cola company was booted out of India in the soft drinks field, instead a new soft drink “Double Seven” was started with much fanfare. It was marketed and distributed by the Government-owned Modern industries. And, it was during this era that other Indian soft drinks namely Thumps Up and Campa Cola from private companies emerged on the Indian market. Both these companies were able to capture a large chunk of the Indian soft drink market and wiped out “Double Seven” from the Indian market. No tears were ever shed.

The moot question is that when no tears were shed when new Indian brands crowded out old brands from the domestic market, why should tears be shed when International brands are crowding out some Indian brands?

Commonsense economic explanation for the crowding out of Indian brand names by other local brand names was simple: those companies which were inefficient for one reason or the other had to make way for the more efficient. The same logic would also apply in the case of multi-national companies crowding out inefficient and mismanaged Indian companies including their brand names.

But, there have been certain exceptions when established brand names were sold out by their owners just to make loads of money. For instance, in the soft drink sector owners of leader “Thumps Up” sold its brand to the Coca Cola company rather than fight it. Similarly, the Indian ice cream leader, namely “Kwality” sold out to Hindustan Lever (now Hindustan Unilever) to rake in money rather than fight back.

There were other companies like such as Lakme cosmetics of Tata which sold out to Hindustan Lever for a very different reason: the product under the Tata group was perennially making losses. So it had two alternatives; either to close down or to sell itself to another company. Another Tata company namely Tomco which was also running into losses had no option but to sell out. Similarly, Vijay Malaya Group which is into the liquor business was not doing well with its preserved Food Division, so it sold out the section to an MNC.

Initially, the Godrej Soaps felt its business would not survive when international Camay soaps decided to enter the Indian market. Out of fear it joined hands with the Camay Group. However, later the Godrej soap broke away from Camay and decided to compete with it on its own as it found that Camay soap had little demand in the country. But, one should also keep in mind that when some established brand is being taken over by MNCe, there are other reputable Indian brands which are determined to put up a fight as well as there are emerging brands which decide to take on these MNCs in the domestic market.

Take the case of Amul and Mother Diary in ice cream sector, which has taken on Hindustan Lever's “Walls” ice cream headlong. Incidentally, it may be mentioned that this is within the organized sector only. There is a vast unorganized sector in ice cream which no MNCs or even Amul would be able to compete. In the cheese sector too, Amul has taken Britannia and Dabon cheese (now Lebon) headlong.

Similarly, a few years ago, in the soap and detergent sector it was the new Indian brand Nirma which gave Hindustan Lever a run for its money. Today, this Indian brand has decided to give a fight to international detergents like “Surf”, “Arial” and “Henko”, which are currently being sold in India. Two foreign brands in toilet soap namely Camay and Imperial Lather are still struggling to establish themselves here. It may be observed that if foreign reputed brands find it difficult to establish themselves in India, it is going to be a tough fight for Indian brands to establish themselves in the overseas market.

As of now, it is difficult to say how Indian brands will fare in the international market, but one thing is certain that the opening up of the Indian economy in these past 15 years has made these companies not only cost and quality conscious, but has increased their appetite to capture the foreign markets. It will be difficult but once if their mind is made up then they are sure to emerge successful in the coming years.

This is what is required of an entrepreneur: to take risks, to produce quality products and to compete in the international markets and emerge a winner. By their actions, the owners of Kwality ice cream and Thumps Up have unfortunately revealed that they were only market operators and not entrepreneurs. Therefore, there is no need to weep over the fact that they sold their brands to the foreign competitors, instead look forward and see how Indian entrepreneurs can be encouraged to fight the MNCs not only in the home turf but also abroad and establish themselves.

These 15 years of economic reforms has belied the myth that foreign brands will always crowd out Indian brands. One should be firm that the Indian brands have the capacity to give fight back both in domestic and international markets, provided they maintain consistent quality and keep prices competitive. Now, Indian companies need to change their outlook and become aggressive. ---INFA