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CII FMCG Conclave reflects on industry issues

CII FMCG Conclave reflects on industry issues

Author | Noor Fathima Warsia | Wednesday, Dec 15,2004 8:06 AM

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CII FMCG Conclave reflects on industry issues

Consumer goods should move quite fast,
That was the case in the past.
But now they seem to move quite slow.
And if you ask those in the know,
They point to certain recent trends.

Nadir Godrej decided to put these words and more together for an apt beginning to the CII 3rd National FMCG Conclave, this year on the theme: Point v/s Counterpoint.

Godrej shared more on the reasons why there was a need to look at the FMCG sector and various aspects to ensure that the development pace of the sector is maintained.

Point: 21st Century Indian Consumer needs global brands vs Counterpoint: Indian Cultural diversity requires Indian brands

Introducing the speakers and the issues of Debate, Session Chairman HK Press, Executive Director and President, Godrej Consumer Products, opened the floor to S Pelle, Managing Director, Perfetti Van Melle India. to speak on the point. Pelle began with speaking more on brand and their power. “We can term brand as a symbolic construct made of a collection of information, a promise. And translating consumer satisfaction to devotion is creating brand equity,” he said.

He further explained more on the term ‘global brand’ and presented various reasons why a consumer buys global brands. Citing the example of Alpenliebe, which was introduced to India without any change and is doing very well for the company, he shared how a global brand could be a huge success in the country.

At the same time, he pointed the example of Chlor-Mint, which was re-branded, to suit the local market. Speaking more on this he elucidated, “There is a need to localise brands in many cases to ensure its acceptance. The real question here is whether global brands can replace local brands and the answer to that is, not really.”

With this Piruz Khambatta, Chairman and Managing Director, Rasna, came to the dais to present the Counterpoint. Demonstrating the problem on various levels of communication and promotion when a brand is introduced in the market, Khambatta digressed stating, “I don’t think the war is as much between global brand and local brand today, as they are between grass root brands and alien brands.”

He explained further that any brand that understood the market and its people and spoke to them in that language was a grass root brand. In this category he included the likes of Alpenliebe, Cadbury, Maggi and Britannia. “These brands understand the consumer mindset and hence are present with them at the grass root level. According to me, those are the brands that are successful,” he said.

Praveen Someshwar, Executive Director, PepsiCo India, took over from Khambatta to speak on the Point and reiterated the very point of understanding consumer needs.

He cited the example of Lays, which was launched in 1989 in the international flavour and failed to make a mark in the market. Pepsi then introduced the Indianised brand in 1994 and the brand has since worked well in the country. “The need is to respond to the environment and frame strategies in a flexible way,” he advised.

The final panelist of the session, Nikhil Sen, COO, Britannia India, then began on the counterpoint, “Global brands have a limited role to play. The success mantra of any brand cannot exclude a simple fact, Phir Bhi Dil Hai Hindustani.”

He stressed that it is only the local personalities that have worked in the country and can be successful. He shared data that showed that unlike other countries, Indians expect and demand localisation. They respect hierarchy and culture and are socially aware people. “There are four drivers that move the Indian consumer – religion, family politics, cricket and cinema. As long as this is the case, India rules in India and localisation works.”

The concluding note of the was that while the market is a fair mix of global and local brands, it is very important for any brand to speak the Indian language to be accepted by the masses.”

Point: Current laws and regulations facilitate growth of FMCG sector vs Counterpoint: Current laws and regulations hinder FMCG Industry

The session began with A Mahendran, Managing Director, Godrej Sara Lee, sharing on the various laws and regulations affecting the Indian FMCG sector. With a brief introduction to the speakers, he invited S Narayan, Former Economic Advisor to the Prime Minister to speak on the point of the session.

Narayan began with the forthcoming laws that will be in place in 2005, which as per him hold benefits for the FMCG sector. “One area where we see changes coming in is be the case of patents, where in the Indian Government has taken significant action to avoid international exploitation of the traditional Indian knowledge,” he began.

Amongst the other areas, where he sees action, he pointed, “VAT will be in place soon and it will bring with it benefits like reducing tax evasion, increase in tax revenues and clarity to consumers. The challenge is to deepen the internal market now.”

R Ramakrishnan, President and COO, Bajaj Electricals, who took the floor after this, stated how a clause like VAT would indeed have negative impact in the country. He spoke on the various rules and regulations in the country that is creating a problem for the present FMCG industry.

Drawing comparisons with the Chinese economy, he pointed, “In India FDI is to the tune of $ 2 billion. In China it is in excess of $ 50 billion. In China, the manufacturing costs are such that the consumption level is high. The population difference is just 20 per cent but for an example, Chinese beer consumption is 41 per cent more than that of India. Cigarette consumption is 23 per cent more. Irrespective of the category, every good is consumed more there.”

“There is a need for an annual review of laws and policies,” he said, “What might be true in 1960 surely hold no value now. India today is a food-surplus economy. Why does the price of bread have to be controlled? Or why do we have to still observe the laws of storage.”

He pointed more on how in the current structure, there are eight ministries looking into beverages, nine into food, which as per him, creates chaos in the system. Special Fiscal Incentives don’t manage to increase business they just shift them from one area to another. He said, “Laws need to be interpreted with a human face. Innovations that happen world over, cannot happen here because of these problems.”

Bejon Misra, CEO, Voice, then explained more on the needs of trust in the Government. “There are too many ad hoc organisations that are working on their own rules and regulations,” he pointed out. A few recommendations that he offered were that there should be mandatory customer charter for all FMCG manufacturing and service providers, consumer complaints needed to be institutionalised, improvement of infrastructure of consumer forums and amendment of consumer protection act.

With this, Bharat Patel, Chairman, Procter & Gamble, Healthcare and Hygiene took over. Citing instances in the same line as Balakarisnan, he said, “In a country like China, the indirect taxes are to the tune of 15 to 17 per cent. However, in India they are as high as 35 per cent.”

Another point he said would help the country’s economy was organising the retail sector. He shared that organised retail could give the economy an annual 1.5 per cent growth.

He concluded saying that he saw hopes in all these sectors, as the Finance Minister has expressed his intention to view all these sectors closely for he country’s growth.

Point: Indian Companies should go global with their own brands vs Counterpoint: Indian Companies should acquire global brands for growth

The session began with Arvind Sharma, Chairman and CEO, Leo Burnett, sharing on how there are global brands in the country that are constantly talked about. But attention is not drawn to examples like Fair and Lovely, which is a brand made in India by an MNC and then sent in the global market. The likes of Titan and Himalaya Drugs that are again taken to other countries.

With this Homi R Khusrokhan, Executive Director, Tata Chemicals, came up to present the Point. He began with the differentiation of brand acquisition versus organic growth. He said, “Globalisation is the ‘holy grail’ of most Indian companies.”

He explained more on how globalisation again had two components of global presence and global competencies. “Globalisation simply means to acquire competencies that help you compete on the global canvas, irrespective of the location.”

He pointed out reasons why a company should look at acquisition of global brands and the considerations one must keep in mind for acquiring brands. He said, “If one wants to be global player in a hurry, global acquisition is the way”

Moving forward in the session, Satish Mane, CEO, Foods Division, Cavinkare, took over explaining how Brand India has developed a positive image in the world now.

He also pointed that the brands have to in any case speak the local language in the country. Stressing on the need to have a cultural fit, he advised that unless various attributes were taken into consideration, chances were that the acquisition might just not work for the company.

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