The Hindu Business Line : The sunny South beckons

Southward ho! That's where several ad agencies are headed, as growth slows down in Mumbai, and sectors such as retail, IT and entertainment grow significantly in the south. The challenge is to manage sharp regional differences, a huge unorganised sector and a traditional reticence.

GREY Worldwide recently ran a recruitment ad for its Chennai office that said: `The last time we were here, you were Madras, and we were Trikaya'. The agency exited the city about five years ago, frustrated by the slow growth opportunities. But a lot has changed since then, and not just the name - sectors such as information technology and retail have largely led the change, but so has the impressive growth of several regional brands and non-metro markets. And, while the southern states have always had higher-than-average rates of development, per capita income and education, there has also been a change in the southern consumer, who has long been stereotyped as conservative. Alongside, regional media - the likes of Sun TV, ETV Eenadu and Malayala Manorama - have become powerful vehicles for advertisers looking beyond the Hindi belt. Also, after a period of reorganisation and new fiscal disciplines put in place by international parents, it is now a period of relative stability, so agencies are looking at ways to grow their business. And to grow beyond Mumbai and Delhi, it is necessary to go south, long regarded as a backwater of the industry.

A guesstimate puts the size of the southern ad market at Rs 1,500-Rs 2,000 crore, and growing at 10-12 per cent annually, as compared to the national average of 6-8 per cent. And, while Bangalore and Chennai are the obvious bets, the markets of Hyderabad and Kochi also hold enormous potential, experts say. While the big ones - JWT, Lowe and Ogilvy & Mather - have been around for a while, others are now re-entering the market or beefing up their operations. Mudra recently announced that it would consolidate the offerings of its offices in Bangalore, Chennai, Kochi and Hyderabad into Mudra South. Grey has set up a new office in Chennai, and other agencies are rumoured to be testing the waters - to either set up offices, or partner with small regional agencies. "Even the state Chief Ministers talk branding - they understand the language of marketing and communications," says Madhukar Kamath, MD & CEO, Mudra. "It's actually surprising that we haven't paid more attention to the south before."

Certainly, no one believes it will be easy. While the south may seem like one homogeneous market, the four states have their own individual quirks and idiosyncrasies. Local and regional brands, while hugely popular, still operate in a very unorganised fashion. As for the stereotype of being conservative - well, there's a reason why it became a stereotype in the first place. Still, the market is too big and too important to ignore and it is the potential for growth, as much as the current size, that is attractive to advertisers now. "Agencies are where the advertisers are - Kolkata was up on the advertising map once, but today, the industry's presence there is marginal, not because agencies chose not to work there, but because very few large advertisers are there," says Srinivasan K. Swamy, Managing Director, RK Swamy BBDO. "When advertisers set up offices, the decision is taken not on a geographical basis, but on merits of economics and other considerations of the management." So agencies are looking more closely at the south now because they have had business gains - as in the case of Grey (which has recently won SaraLee, Medimix, a TTK brand and AVT) - or because they are not strong there, and feel that it is an easy market to consolidate in, he adds.

In the case of Grey, which has an office in Bangalore, the decision to exit Chennai was made at a time when the market was not yielding significant returns, says Nirvik Singh, Chairman - South Asia, Grey Worldwide. The decision to re-enter the market was made because of the potential for growth: "The marker has grown fast, and we are prepared to refocus our energies there, as we see great opportunity," he says. "We believe the market is also ready for a fresh perspective." When Grey ran the recruitment ad, Singh received more than 300 applications in the first couple of days, he adds.

The new opportunities are coming largely from regional brands that have grown rapidly in the last five or six years - the likes of Fairever and Nyle, Arun Ice Creams, Henko, Milka Bread, Medimix, AVT and Trigger jeans. Alongside are national advertisers for whom the southern markets are important, and who have learned that merely dubbing an ad in Tamil, Telugu, Malayalam and Kannada won't do. For some categories like Health Food Drinks (the likes of Boost and Milo), fairness creams and two-wheelers, the south is a significant market, and advertisers as diverse as Horlicks and Nerolac Paints have taken to region-specific advertising. "To get under the skin of the audience, advertisers must use words or phrases and symbolism that connect more easily with the consumer," Swamy says. "To this end, agencies in the south are better equipped to handle it, as would be north or west-based agencies to handle their respective regions."

Take the case of Coca-Cola: While its national ad account is with McCann-Erickson, the beverage major works with Orchard Advertising on the Coke brand in Tamil Nadu and Karnataka, and with Lowe for Fanta. Tamil Nadu is among the biggest markets for Fanta, whose endorser in that state is the popular Tamil actress Simran. "You have to understand the idiom of the local market for the advertising to work, and you also need to be able to provide ground support to national brands in these states," says Nitish Mukherjee, Executive Director, Orchard, which also handles Toyota. For Procter & Gamble, which introduced Head & Shoulders Naturally Clean specifically for the southern markets (and West Bengal), the region is a "focus geography" for all its products, accounting for anywhere between 30 and 60 per cent of sales volumes, a spokesperson says. For Kinetic, the south accounts for 50 per cent of volumes for automatic gear scooters, and while its national advertising is done out of Mumbai, ground events and promos are managed by regional agencies "If a larger agency can give us the services we require in these markets, we would work with them," says Punit Chaudhry, General Manager - Sales & Marketing, Kinetic.

Advertising is on an upswing largely because of the vibrant regional media: ETV Eenadu, Sun TV and Gemini TV rank only behind Doordarshan 1, DD Metro and the trio of Star, Sony and Zee in terms of viewership, according to IRS 2002. Malayala Manorama ranks third among all dailies with an estimated 94 lakh readers, while Daily Thanthi is fourth (87 lakh readers), Eenadu fifth (80 lakh readers), and Matrubhumi eighth (74 lakh readers). In the last year, while readership of dailies has largely declined, readership for Malayalam and Kannada dailies has grown, and while readership for all magazines has declined, readership of Malayalam magazines has grown. "When you have media that is so strong, then you need advertising in that language," says Ashish Bhasin, Director, Integrated Marketing Action Group of Lintas.

Besides mass media advertising, there are also opportunities in below-the-line activities like DM, PR and one-on-one communication because of the regional differences, and because back offices of several services majors - such as CitiBank and Standard Chartered - are based in the south. Time was when the south was dominated by family-owned chit funds, and saree and jewellery stores. Today, saree retailers like Nalli, Chennai Silks and Deepam Silks, and jewellers like Mustafa and Khazana are large and organised, with respectable ad spends. Retailing - which is more organised there than in other parts of the country, in turn presents opportunities for FMCGs, foodstuffs and durables; there are also opportunities in IT and ITES, education, entertainment and even sport (cricket and tennis, yes, but also motor racing, rallying and go-karting). Bangalore is also home to several apparel, lifestyle and liquor brands. Mudra estimates that IT recruitment advertising in Chennai alone can account for Rs 50-75 crore. RK Swamy has a recruitment services division in its Bangalore office and a pharma division in Hyderabad, while Grey is bringing in its full complement of PR, events and Grey Digital - perhaps even healthcare - to Chennai.

There is also potential in smaller towns like Coimbatore, Mangalore and Thiruvananthapuram, and in the unorganised sector, according to Jayraj Rau, Vice President & Client Services Director, JWT. "The organised market in Chennai and Bangalore is close to saturation, and while Hyderabad is growing, the smaller cities and towns are still largely unexplored," he says. "There's business here, which can be well worth it in three to five years." And the southern consumer - typified by the young IT professional or call centre executive - is a far cry from the stereotyped conservative, idli-eating, dhoti-wearing entity of yore.

But besides the international names like Wipro, Infosys and Kerala Tourism, only a handful of national brands are handled out of the south - Ford, Toyota, TVS Motor, CavinKare, Brooke Bond, Reynold's, Parryware, MRF, Titan and St. Gobain, among them. Pond's, which was among the biggest accounts handled out of Chennai, moved to Mumbai when the company merged with HLL. Hyundai, whose manufacturing base is Chennai, is serviced out of Delhi, where its marketing function is based, and Van Melle, which was based in Chennai, moved to Delhi after Perfetti acquired it. But geography should not make a difference, insists Mudra's Kamath. "We've grown brands like Vimal, Rasna, Paras and Cadila out of Ahmedabad," he says.

However, local advertising remains unorganised, and much of the work for even large retailers cannot be reliably captured. Another challenge is to educate reticent regional brands on the importance of advertising, and convince larger brands that they do not have to go to a Mumbai agency. In the past, agency outposts in the south were staffed with mediocre talent, which fuelled the belief that Mumbai's work was superior, Lintas' Bhasin says. This also led to a flight of talent from the south - a trend that agencies now hope to reverse. Perhaps it is too early to tell if the south will be the next big thing, but for now, the ad industry compass is pointing south. And on a more philosophical note, with a "shrinking world and real time communication, if there is any divide, it is only in the minds of some people," Swamy says.

Model for growth

THE south may seem an attractive destination, but agencies have burned their fingers in the past, and will approach Round Two with caution. Mudra has aggressive growth targets for Mudra South, which is a consolidated front of its operations in Chennai, Bangalore, Kochi and Hyderabad. Together, they do business worth Rs 100 crore, and have a resource pool of about 70 people. "This makes it a large operation from a national perspective, with businesses in virtually every major category - be it FMCGs, services, corporate, b2b, retail," says R. Lakshminarayanan, Executive Director, Mudra, who heads Mudra South. So when it comes to pitches or working on new campaigns, there is a more efficient pooling of resources and strength, he adds.

With this set-up, a creative person from the Chennai office could work on a Bangalore account, and an art director from Kochi could crack a concept for Hyderabad. This "cross- fertilisation" is becoming increasingly common in the agency structure, says Manish Porwal, General Manager - Business & New Initiatives, Starcom Worldwide. "The ability to handle tactical work in the respective stations, and get strategic inputs from the larger talent pool sitting in Mumbai or Delhi, helps," he says. Starcom is looking to align with regional hotshops or creative standalones in the smaller markets, providing strategic planning and media buying to the mix.

Ogilvy & Mather's Mumbai creative frequently gets on a plane headed south for large pitches, while its Chennai and Bangalore offices tweak national campaigns like Asian Paints (like "pramadham" for the "badhiya hai" ad) for the southern markets.

Ideally, a large southern agency like Mudra South will be like "the two-headed Janus, providing a national network for regional clients looking out, and the local expertise for national clients looking in," says Lakshminarayanan.

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