The Hindu Business Line : A time for gifts

The concept of corporate gifting during the festive season has never had it so good. For, post economic downturn, corporates are now loosening purse strings, and generously at that.

At one time, soaring stock indices and rising bottomline of companies would literally result in a river of gifts flowing out to dealers, vendors, clients and the media. Gifts ranging from cakes, dry fruit packets, dairies, telephone indexes, organisers and pens were the run of the mill kind. Lampshades, mixers, juicers, watches, clocks, gold or silver coins were the occasional variants.

Today, companies are returning to a comfortable profit regime after facing rough times with the downturn in the economy. There was considerable cost cutting, and, in the last five years, companies had reduced budgets for gifts. For, with shrinking profit margins, the attention was obviously on how to stay in the black and not dip into the red. Therefore, gifting had been pushed down on the priority list. But that may change to some extent this festive season.

In the first week of October, the 30-share sensitive index of the Bombay Stock Exchange (BSE) rose beyond the level of 4,600 points as investors went on a buying spree. By the end of October, the index could go past 5,000 points.

Leading companies had also turned in fairly good financial performance during the first quarter, and the trend is expected to continue through the second quarter. Clearly, widespread monsoon rains across the country augured well for the rural economy, which, in turn, helped propel stock indices and profits of companies. Evidently, this is an indication that employees and clients of companies would receive gifts this season.

"Fund managers and clients would certainly reap the benefits of stock markets going up," a senior executive of a securities firm in Mumbai said. Gifting as a concept is inherent in the Indian culture — particularly among the Gujarati community. Much of the stock broking and commodity trading businesses were predominantly conducted by Gujaratis, though this is changing, he added.

Such gifting happens mostly during the festive season, and this Diwali it is no different. The festival of lights also coincides with the harvest of the crop and the start of a new year for the trading community. "Giving out gifts is like extending good wishes for the New Year," said a commodity trader.

Internationally, it is the Christmas and the New Year season that is the time for giving and gifting. In India, most corporates distribute gifts for New Year. Budgets for gifts at corporate houses and securities firms are likely to be higher this year as compared to the last couple of year as the overall economic climate has improved.

However, those opting for gold coins as gifts this season, may be in for a surprise, given that gold prices have been soaring in international markets, driving Indian prices higher.

Gold was in the region of $375 per troy ounce. The demand for gold in India has always been price sensitive, and any further northward movement would result in off take petering out. Greeting card and gifts company, Archies Limited, has been growing its corporate gifting segment year on year.

"We have been growing our business of customised greeting cards for large corporate houses," says Vineet Chugh, Manager, Sales, Archies Ltd.

Some of its leading clients include Reliance, Shell, ICICI Bank, Apollo and Sony. For Archies, corporate gifting business is much higher during New Year as compared to Diwali and Christmas.

Cadbury India Limited, which has a significant presence in corporate gifting, is likely to be adversely impacted following the Food and Drug Administration's (FDA) laboratory findings that some of the samples of Cadbury products contained worms.

Increasingly, gifting, as a concept, is being used by companies as a marketing tool, to create brand awareness. T-shirts, caps, umbrellas, bags, etc.— all of these may work well when it comes to creating awareness about brands, which are jostling with one another to create an impression on the potential consumer.

As marketing concepts evolve within the corporate world in India, brand recall — not merely for fast moving consumer goods but also for sectors such as banking, insurance, television channels and some of their individual serials — is gaining importance. "For us it is like a brand extension," said an official at music channel, MTV. The recipient of the gift could be anyone. But the channel does not follow an organised corporate gifting system.

"There is a lot of scope for growth for this market," says Rohini Mendonca, who has made a foray into the business of gifting. She manufactures custom-made T-shirts, caps, clocks and watches for her clients. "These items are like gimmicks for the clients who want to distribute them, freely, as gifts," she said. However, margins are very thin with too many entrepreneurs entering this field.

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