Stuck in a time warp

Some years ago, a marketing genius from South India was the toast of the fraternity both in India and abroad. The genius in question, CK Rajkumar, had introduced shampoos in a sachet. Soon, a category that was slow to take off Indian shop shelves was showing explosive growth. The shampoo brand, Velvette, became the market leader and the subject of many case studies. Even formidable competitors such as Hindustan Unilever (then, Hindustan Lever) took note and replicated the strategy across many categories in its portfolio, shampoo being the primary one.

Circa 2014: D Shivakumar, Chairman and CEO, PepsiCo – India region, told marketers at a gathering of the International Advertising Association, India Chapter, in Mumbai last week, that it was time to move on.

Shivakumar, a former Levers executive himself who has also managed the hair-care portfolio for the company, was not just talking about shampoos, but about category after category where marketers were still chasing a penetration strategy (offering trial packs to induce first time users), while the consumers were more than ready for a consumption-led strategy (offering wider choice, creating adjacent category options, providing larger packs).

That hit home. The audience of both marketers and senior advertising executives soon took up that point for animated discussion in the ensuing question-and-answer session and the cocktails that followed.

Shiv, as he is popularly known in corporate circles, did provoke the audience, by telling them that the consumer was ready. There were enough indicators: consumer durables were being replaced faster, people who bought shampoo sachets were now washing their hair probably four times a week, opting for larger packs, and large-format retailers were vouching for consumers buying into newer categories. “The consumption game is a far more winning game in the long term, once you get the triggers of consumption right,” he says.

But as he probably himself pointed out, the shift is not a simple one. India falls short in retail infrastructure – there are not enough large-format outlets, as compared to the size of the country, that would encourage the consumption push. Moreover, the country lacks high streets for premium retailers.

Then, as Anisha Motwani, Director and Chief Marketing Officer, Max Life Insurance, points out: “India is many countries in one with a varied and diverse demographic structure. Therefore, it will be difficult to say whether it is largely a consumption or penetration marketing strategy which consumer brands may adopt. Marketers believe that the Indian market is largely untapped and is a low-hanging fruit. For them, penetration becomes crucial for reaching the market first and thereby driving sales success.”

However, there are exceptions. Life insurance is an under-penetrated category. Given that a consumer buys on an average 5.2 policies in his lifetime, the Indian average is less than 1. The company’s research indicated that current life insurance policy owners are 10 times more likely to buy again as compared to non-users of life insurance. Max Life Insurance therefore consciously decided to drive consumption amongst current users.

“It makes the potential amongst current users that much more attractive a market to target. We have focused our distribution and marketing efforts in 138 towns amongst mass affluent consumers and therefore a consumption marketing approach as opposed to penetration,” says Motwani.

But she’s not sure if that approach will work in other categories.

“There are some realities typical of the Indian consumer which prevent it from becoming a consumption market,” she says. For example, Indian consumers being cost-conscious, the mindset of ‘large packs = more consumption = wastage’ still persists. Also, in India large packs do not offer a substantial price advantage over the smaller packs and so do not get the consumer’s attention. For a shift to large packs, a price advantage of 20-30 per cent is normal in developed markets, she says. Third, households in India operate in smaller formats, with smaller bathrooms and kitchens. Storage space is always at a premium and smaller packs are more practical.

Jayant Singh, EVP-marketing, GlaxoSmithKline Consumer Healthcare, adds that companies, including his, are using both penetration and consumption strategies to drive their business. “It is not the question of either-or,” he says.

For example, there are still a large number of categories in India such as nutritional drinks where penetration opportunities are still very high, while categories such as toothpastes or soaps are highly penetrated. In nutritional drinks, the all-India penetration is just 23-24 per cent and 76 per cent of households do not consume them. Even in other categories such as mobile phones which are highly penetrated, lower prices are being used to further drive the market. Singh says GSKCH tries to balance both the strategies by offering bigger sizes as in the case of nutritional drinks – the Southern and Eastern regions have high penetration so they offer the larger 1-2 kg packs of Horlicks. “We also try and maximise the consumption opportunities by leveraging festivals, like Horlicks has been a part of festivals like Ramzan or Diwali or Chatt Puja in Bihar,” he says.

However, in toothpastes, it has opted for a different strategy. The company is trying to upgrade its consumers to premium products for specialised needs, such as Sensodyne.

Still, many are actually pursuing what Shiv advocated. Parle Products was a price warrior in the biscuits category, offering its fighter entry brand Parle G for a paltry ₹2. However, in recent times, the company is busy shaping its portfolio at the top end. If the average price of 1 kg of Parle G is ₹75, the company is now introducing premium products such as Black Bourbon or Hide & Seek Fab that would cost more than ₹200 per kg.

Pravin Kulkarnii, General Manager - Marketing, Parle Products, says, “In categories like biscuits, increasing consumption is the only way. The growth rates of biscuits at the lower price points have come down from 15 per cent to five per cent. Hence it’s the width of consumption (same set of consumers buying across categories) that we are targeting,” he says.

Premium biscuits currently account for about 7-8 per cent of the company’s turnover, but Kulkarnii sees that share going up to more than 15 per cent in two years.

“The margins are better and consumers are not too sensitive to price increases in that segment,” he says. Clearly, this topic has all the makings of a chicken-and-egg debate.

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