The Hindu Business Line : Growing brands, together

"Category management ensures a long-term, mutually advantageous relationship based on growing volumes, commitment to the brand and growing category offtake."

As organised retail gathers momentum, it is beginning to experiment. Several retailers have initiated what is still a fairly new concept to India — category management. It is based on a category captain model, whereby a brand owner takes up cudgels on behalf of the retailer to achieve growth in a particular category.

Taking the lead to initiate this concept in India are FMCG players followed by those in other industries such as consumer durables and apparel.

A concept which is expected to benefit both the retailer and the manufacturer, category management is gaining ground in India. Explaining the concept and its benefits, Munir Suri, Vice-President, Head - South India Operations, KSA Technopak, says: "Category management as a concept has both the manufacturer and retailer playing separate roles and benefiting (each other). The retailer has access to valuable data on buying behaviour while the manufacturer or the category captain (usually the player with the largest market share) has an extremely good understanding of the category. In this relationship, the category captain gets access to shopping data for not only its own brands but also the competition's. In addition, as the category for the retailer grows, the category captain's volumes also grow. Apart from this volume growth, the category captain can launch products at different price points within the category thereby growing his market share."

The largest retailer in the country has already implemented this concept. States Damodar Mall, President, Food Bazaar, Pantaloon Retail, "We already have category managers in several categories - ranging from beverages and skincare to beauty and edible oil. These are with partners who are already leaders in their category, and it is all about creating retailing value. So, we already have the lead players doing category management projects for us."

Besides, category management also leads to a `safety mechanism' for retailers who want to hedge their risks in a competitive market place. In the case of Provogue, which doubles up as an apparel brand and a retailer with its offerings, category management for its allied categories such as footwear, where it lacks expertise, is expected to come in handy.

According to Salil Chaturvedi, Director, Provogue, "There is also a safety mechanism that we build in for ourselves. It is a dual-vendor strategy. Sometimes, the retailers' creativity may stagnate, and that is when a dual vendor can add value to the offtake of the category."

In the case of Provogue, it has entered into a licensee arrangement with M&B Footwear to sell the footwear category at its stores. Adds Chaturvedi, "While category management has still not evolved, it is the way forward for retailing. The big reason behind this is the development of software at the back-end operations whereby the vendor is directly updated on the sales and can add value to the category without using lopsided judgment."

Besides, there are other advantages to the concept. Giving an insight into the win-win situation for both retailers and manufacturers, Vivek Sharma, Vice-President (Sales & Marketing Services), Mirc Electronics (owners of the brand Onida), says: "It may not give the pricing advantage or result in any margin saving but ensures a long-term, mutually advantageous relationship based on growing volumes, commitment to the brand, growing category offtake ... better returns on per-square-foot basis for the retailer. It may appear that you also help in growing a competitor brand. But in the long term, the pie becomes bigger for everyone thus, benefiting the brand (which initiated it) the most. It's win-win (but `more win' for the market leader which initiates the category management)."

Adds Neeti Chopra, Head-Marketing, Trent, "Manufacturers do not save margins but gain in bottomline and profitability. The idea is to sell the higher-value, higher-margin products so that both the retail outlet and the category leader stands to gain."

Other apparel brands are also hoping to cash in on this opportunity. For instance, Arvind Brands is exploring the option of developing a `category captain model' by partnering with retailers to help them grow the apparel category. Darshan Mehta, President, Arvind Brands, says, "It is a dynamic market and we are looking at a new arrangement with retailers. The concept of a category captain model, which already exists in other countries, is being thought of and we might consider it within the next one year." Adds Mehta, "FMCG players are already doing it in a big way. For instance, in many countries Unilever has partnered retailers to grow the haircare or skincare categories. We might consider doing the same by partnering a single retailer to grow the apparel category. This may or may not include the competitor's brands as well."

To bring in category growth for the retailer concerned, Arvind Brands is at present scouting for a suitable retailer to partner. However, it has decided to restrict its category concept model to its domestic brands such as Excalibur, Newport and Flying Machine and the potential mass international brands it might bring at a later stage.

"Typically, the category captain model would take care of the stocking, supply chain and back-end and front-end manning for the retailer in the category concerned. The model would be to ensure that the retailer gets a certain growth in the category compared with its competitors," explains Mehta, who intends to bring the mass brands under this concept since luxury retailing is still nascent in India.

Adds Suri of KSA Technopak, "Category management is a detailed process and internationally, this has been executed in many cases. P&G, Kmart and Vanity Fair (the lingerie brand) are some of them. In OTC and healthcare products, GlaxoSmithKline in Europe has taken many initiatives. This concept is valid across categories such as apparel, general merchandise, paints and FMCG. Consumer goods companies, due to their international experience, are quicker to understand this. I believe that this will become the norm within the next 18 to 24 months. The FMCG category is expected to take the lead due international experience being duplicated here. However, the Indian FMCG industry still needs to go through the learning curve to implement this concept."

Dabur Foods has been trying out the concept for a while. It has entered into an agreement with the FoodWorld chain to manage its juices category. But, there continue to be impediments to its implementation.

As Sanjay Sharma, General Manager — Sales & Marketing, Dabur Foods, says, "In spite of modern trade growing, there is still not enough data available to study the footfalls and growth in the different categories. The modern trade has yet to get better-organised. Not all retailers are using the data to study category management in the country."

At the same time, there are other FMCG players looking forward to entering category management in the near future. According to Anand Kripalu, Managing Director, Cadbury India, "Retailers are not interested in market share; they are more keen on growing their categories. So they turn to manufacturers who have better understanding of the category. We are planning to become category captains and are ready as long as the retailers are ready."

In the durables category too, there are strides being made. Elaborating on the nuances of the deals struck between durable companies and durable retailers, Sharma of Mirc Electronics, says, "Specifically in the durables category, such partnerships leads to joint investment by companies to create home theatre rooms/AC rooms where consumer can experience higher-end LCD, plasma TVs, home theatres, DVD players or split ACs and upgrade from their ordinary CTVs to these higher-end home theatres. Category management in this sense is already being practised in the electronics and durable industry."

In fact, category management is particularly useful in technology-driven areas where consumer education with demonstration/experience is required (as the consumer is intimidated by technology and is hesitant to ask) and even with respect to dealers whose knowledge levels are low). It results in growth/development of new categories via demonstration and experience. Manufacturers may also offer easy finance schemes to ease purchase of high-ticket items such as LCD TVs and home theatres.

With the future heralding this concept, category management is being favourably considered by retailers. As Chopra of Trent, claims, "As modern retailing grows, this is the way ahead. FMCG is already doing it, and some larger consumer durable companies. All market leaders in their respective categories would always aim to do this in the most structured manner. At Star India Bazaar we are aiming to make this very significant in our processes so that we both grow — the manufacturers and us. Category management is a collaborative effort. The manufacturer cannot do without the retailer and vice versa."

A win-win situation for retailers and manufacturers, and as Indian retail evolves, category management is here to stay.