The Hindu Business Line : ‘Indian cos have to spend to defend themselves’

David Haigh, the CEO of Brand Finance Plc, was in India recently from the UK to evangelise what he has been doing for a few years among Indian corporates: that the wealth of a company is in its brands and intangible assets. Speaking on the CEO’s role in brand value governance at a seminar organised by Brand Finance India, Haigh said a corporate needs to define a coherent business strategy around customer needs, market dynamics, competitive position, financial resources and also devise a consistent brand strategy around these same parameters. There are four key challenges, says Haigh, for the CEO to have visionary brand leadership: understanding the brand, innovating, aligning the brand and being accountable for the brand’s performance. Haigh spoke to BrandLine on a variety of issues around brands and strategy. Excerpts:

The whole business environment has changed the world over, but does it present a good opportunity for Indian companies to take advantage and look at taking market positions abroad?

There are several things Indian companies can do. In the current economic downturn many overseas companies may stop spending money in India; it’s an opportunity for Indian companies to spend more to reinforce their position. Foreign companies will fall into two groups — either they are doing badly at home and will spend their marketing money here thinking this is a growth market or they are doing badly at home and pulling back generally. Whichever it is, Indian companies have to spend money to defend themselves. For example, if Coca-Cola found that it wasn’t growing well in America and switched its marketing budget to India it would blow everybody else out of the market. The same with Unilever or anybody else so Indian companies have no choice but to defend themselves.

The second thing is coming from a value proposition which is much more attractive in recessions — obvious isn’t it — and if Indian companies and brands have struggled to get established abroad, these are the conditions that would make it easy: ‘We have got good quality, we’ve got everything you want, we are cheap and we are from India’. People may give you a trial now which they may not have before and if they like what they see they will keep buying so now is a great time to launch in foreign markets and for those companies that are cashed up or got money in the bank now is the opportunity to go and buy brands that are struggling and re-engineer them from the inside.

Like the Tatas did with Corus and Jaguar/ Land Rover?

Except they bought both before the market hit the bottom, they got a reasonable price, but the market has come down further. If you go into Britain or Europe there are scores of brands that are going bust — good brands but just that they ran out of cash.

Do you see anybody doing that now?

Well, there is a lot of interest.

Brand Finance has been doing a comprehensive study of Indian brands over the past few years. Which brands do you deem capable of riding out the slowdown?

The Tatas, obviously, because the group is widely diversified and because many of the industries it is in are very basic industries, but the area of concern is the car business; while they bought nice brands the whole car industry is really suffering. The tea business, beverage business, hotels business might suffer, the Taj hotel business is exposed to the domestic market so may not take a hit whereas overseas hotels have been hit (this interview was done just before the terror attack on the Taj), the chemicals and watch businesses are doing just fine so they could ride out the recession – any group heavily exposed to the Indian market will be able to ride out the recession.

Typically, when you look around the world, what do brands do during a slowdown?

Generally speaking you get a knee-jerk reaction from the finance guys, no advertising, no spending on marketing promotions, but there is a small minority of companies which is smart, and see where everybody else stops. You get better value for money if you keep on spending and grow your share. Diageo, Nestle, L’Oreal are not slowing down. Most of the big companies are not slowing down, they are reinforcing their strength. It’s medium-size players who are nervous.

What attributes do you think brands need to have a in a time like this?

The good brands review what customers are looking for and adjust their offers. If you have profiled your offer in a boom time when people were looking for certain things and would pay a certain price, when there is a slowdown, you have to relook at what they want because the profile and target price may have changed. So if you are carrying on as you were six months ago, you are mistaken. Someone else would have reconfigured the offer, dropped prices or offered better service and taken share off you. So, the main thing brands don’t always do is move quick enough to reconsider what they offer.

Tailor it to the situation?

When markets are booming, brands spend time on grading the quality aspects of their offerings and jacking up the price; they are quick on the way up as they want to make sure they get their share of the upside, but when things go bad they are not as quick, they don’t realise that people are in denial. They will be changing their lifestyles. For example, the car market — during the boom, cars were sold with lots of gadgets, but with the recession people are looking for no-frills cars, so if you don’t respond to that the next guy is going to do it.

You have been interacting with top Indian management for the past four years that you have been here. Do you see an increasing awareness of the brand as an intangible asset?

Sure, India has learnt very quickly to do international business and high-level branding and marketing, particularly among the large businesses, companies such as Godrej, the Tatas, Vijay Mallya, they all know what to do; some countries are not as quick.

A point made at the seminar was that India-branded goods would see a 30 per cent drop in value when marketed abroad. What is your view?

Yes, for example, who would buy Indian wine — I’ve tried it and it’s as good as Chilean, Argentinian and Australian. Or, who would buy Indian malt whisky, which is at least as good as some Scotch whiskies. But who would buy it; they may buy Japanese whisky. So I think there is a problem as people don’t associate India with high-quality products. Where India is seeing a boom is in providing services to other people, textiles, finished garments, consulting services, software services, but most are not branded under Indian brand names, all branded by someone else.

But, that’s changing isn’t it, slowly? Especially in software?

Yes, gradually. For example, Wipro is now just becoming an acceptable vendor to major international organisations such as EDS, CapGemini, Accenture which are considered to be top-level global service providers. Wipro is still slightly disadvantaged because it comes out of India but that is changing, and they could be as good as anybody else.

Software development has provided a good calling card for Indian brands, hasn’t it?

What they really need to do now is to leverage it by getting people to go out and create the brand so if someone wants software he should be saying he wants it out of India. They expect cars to come from Germany and electronics to come out of Japan and Korea and so it should be for software. It should be the strength of the sovereign brand.

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