The Hindu Business Line : The reach of brands

Most of the time marketers are so tied up with managing brand shares that the corporate as a whole tends to lose focus and starts to work as individual units trying to achieve individual goals. Further, the corporate has no means to map its overall reach (number of consumers). It knows how its brands are faring with consumers, not how the corporate entity is doing. Hansa Research, through its study on Corporate Franchise, has taken a fresh look at a corporate's consumer base. It has defined corporate franchise as `net consumers' of a company spanning categories, brands and geographies.

According to the report, corporate franchise can have huge implications for a company. Firstly, it signifies the reach of the corporate, which market share — the more commonly used variable — does not. Secondly, it shows to what extent the corporate has been successful in leveraging its reach across its brands and products.

Mapping the franchise growth of leading FMCG and durable companies in the last five years from 2000 to 2005, Hansa has found that Hindustan Lever has emerged as the leader with a franchise penetration of 80 per cent in 2005. In other words, every four out of five households in India use at least one HLL product.

The Chennai-based CavinKare has registered the highest growth in franchise penetration in the last five years, but on a small base. Reckitt Benckiser follows this. On the other hand, Nirma is the only FMCG major that has witnessed a fall in its franchise.

A similar analysis for the durables sector has Philips as the brand that is present in 9 per cent of all Indian households. However, the corporate has seen a sizeable drop in its franchise penetration in the last five years. Philips, in fact, is the only corporate to have seen a decline. LG and Samsung have seen dramatic growth, although on very small bases.

Hansa chose corporates with a minimum `all-India' franchise penetration of 15 per cent in the case of FMCG companies and 5 per cent in the case of consumer durable companies. Beginning with HLL, the company with the highest penetration levels, the report states that eight out of ten households use at least one HLL product. This underscores the huge presence of the FMCG giant in the country. Not only is the giant omnipresent, it has more or less retained that position over the last five years.

While HLL has increased its consumer franchise from 150 million to 166 million homes, this growth has lagged behind the population growth in the country slightly. This makes a two percentage point decline in franchise penetration. Analysing by zones, the franchise penetration has shown the healthiest growth in the east zone, registering a 3 percentage point increase. The corporate has seen a drop in penetration of 8 percentage points in the north zone. Bihar, Orissa and Assam contribute the growth in the east zone. The loss of franchise penetration in the north is due to one of the largest franchise contributors, Uttar Pradesh.

The largest contributor to the franchise is toilet soaps. While this product category continues to be the penetration driver for HLL, it has, by itself, declined from a penetration level of 78 per cent to 72 per cent. But shampoos and washing powder have grown substantially, ensuring that the overall corporate franchise is more or less at the same level.

In the case of Colgate Palmolive, which increased its consumer franchise from 78 million to 85 million homes, this growth has lagged behind the country's population growth a little, making a percentage point decline in franchise penetration. By zone, the south, with a 3 percentage point increase, has demonstrated the healthiest growth. Incidentally, the south is the only zone where the corporate has seen growth. Colgate Palmolive has seen its highest drop of 4 percentage points in the north zone. The contribution of toothpaste has gone up by 5 percentage points in the last five years while that of toothpowder has come down by 6 percentage points. That the overall franchise of Colgate Palmolive has largely remained stable — an increase in the user base of toothpaste squared off by simultaneous decline in that of toothpowder — means that the corporate has been successful in graduating users from powder to paste, and had them sticking to the Colgate brand.

Four out of ten Indian households use Nirma's products. It saw a drop in penetration of 8 percentage points in the last five years. This translates to a drop of 4 million households in terms of its reach. From a zonal standpoint, the company has actually grown in the east, chalking up an increase of 2 percentage points. Its decline is steepest in the south zone at 13 percentage points.

The Tata group, comprising two Tata companies, Tata Tea and Tata Chemicals, has an all-India franchise of 35 per cent. It has increased franchise penetration from 30 per cent to 35 per cent, an increase in reach of 16 million homes. Its franchise penetration has grown the most in the West, a 6 percentage point increase, and the least in the south with a 3 point percentage point increase.

Parle Biscuits saw robust growth in its franchise from 26 per cent in 2000 to 33 per cent in 2005, an increase of 7 percentage points. The company's franchise penetration increase has been impressive in the north with a 14 per cent point increase. The East zone, where the presence of the corporate is relatively low, recorded the lowest increase of 3 percentage points.

The homegrown FMCG major, Dabur, has seen a healthy growth in the last five years. Its franchise has moved from 27 per cent in 2000 to 32 per cent in 2005, an increase of 5 percentage points. It now reaches 15 million homes, far more than it did in 2000. Dabur's growth has been the greatest in the east zone, where the company has seen an increase in franchise penetration of 8 percentage points. Its growth has been the least in the north zone (1 percentage point), owing in all likelihood, to a relatively high penetration already in the zone.

Consumer franchise for Marico shows that it reaches 32 million homes - up from the 22 million homes in 2000. Marico has expanded its franchise by 10 million homes in the last five years. Its penetration has intensified from 12 per cent in 2000 to 15 per cent in 2005.

Under the category of consumer durables, the Philips brands reaches 19 million homes. Although it is ranked No. 1 amongst durable companies, its franchise has declined by 3 million homes in the last five years. All zones have seen a decline in contribution, with the south zone seeing the maximum decline. This zone, where franchise penetration was the best compared to the other zones in 2000, has in fact, seen a 5 percentage point decline.

BPL, meanwhile, now reaches 14 million homes, up from the 11 million homes in 2000. Penetration has increased by 1 percentage point. The south zone, where the BPL franchise is the strongest (13 per cent), has seen a growth of 1 percentage point. Similar growth has been witnessed in the north zone. The lowest figures — of franchise penetration and growth in percentage points — are from the east zone.

Videocon Industries has been adding 7 million homes to its franchise since 2000. The company now reaches 18 million homes and this has resulted in an increase in penetration of 2 percentage points. In fact, BPL and Videocon's growth have been quite similar. The south zone is where BPL registered its most healthy growth and so did Videocon, which saw a 4 percentage point increase in franchise penetration in that zone. The east zone is where both the corporates saw their lowest growth in penetration.

The devil's re-launch seemed to have worked wonders for Mirc Electronics' Onida brand. The company grew its franchise by a whopping 4 million homes in the last five years and its penetration by 1 percentage point. It performed best in the south zone where penetration increased by 3 percentage points. Unlike most other durable companies, its performance in the east zone was remarkable . Mirc was able to increase its penetration by 1 percentage point in this region.

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