MNCs find there’s something about desi brands

Purvita Chatterjee Mumbai | Updated on January 09, 2018

Multinationals have relied on acquired local brands to grow in the Indian market

In 1993, when Coca-Cola acquired domestic brand Thums Up, it had intended to sideline it in favour of its own flagship cola. But the strategy did not work as it realised that erstwhile Thums Up consumers would turn to its rival brand Pepsi, instead of its own cola.

Over the years, Coca-Cola has not managed to steal the ‘thunder’ from Thums up and now the 40-year-old brand is being targeted to become the first-ever $1 billion cola brand from India by 2020.

MNCs have been increasingly dependent on the acquired brands which have remained the star performers in their portfolio.

Apart from Coca-Cola-owned Thums Up, there are others like Heinz (Complan), Hershey (Sofit), Orkla (MTR Foods), which are betting on their acquired domestic portfolio than trying to scale up their international offerings rapidly in the Indian market.

“Most of the MNCs have botched up when it comes to killing the acquired brand to grow their own portfolio. Even HUL tried to remove Kwality Walls after acquiring it but had to go back to it. Thums Up has always remained a bigger brand than Coca-Cola all these years . The acquirer has to understand why the brand was built and what it stands for, instead of trying to apply their own thinking. After Thums Up, Coca-Cola is also trying to make Maaza which was acquired from us, as a $1-billion brand today,’’ says Ramesh Chauhan, Chairman, Bisleri International, the erstwhile owner of brands like Thums Up, Maaza and Limca, which he sold to Coca-Cola in 1993.

In fact, even today, Thums Up has a dominant position in the cola category followed by Pepsi and Coca-Cola. “Foreign companies want to acquire Indian brands but Indian consumers do not want to acquire foreign taste. This holds true for not only brands like Thums Up which has always had a larger share than Coca-Cola, but a host of others. Thumps Up holds the highest rank and has pushed Pepsi and Cola-Cola in the pecking order of cola brands,’’ observes Jagdeep Kapoor, Managing Director, Samsika Marketing Consultants.

Other food brands like Heinz (now a part of Kraft Foods), after struggling to establish its iconic Heinz ketchup, went back to focussing on its acquired Glaxo portfolio with Complan as its flagship brand. Now, after its merger with Kraft, it has been trying to introduce new products like Heinz malted drinks, but it is Complan which contributed more than 50 per cent of Heinz’s turnover of ₹2,000 crore in the past couple of years.

Even US-based $7.4 billion Hershey has been slow in launching its iconic chocolate brands in the country like Hershey’s kisses and Reese’s. In fact, when it had entered India through a JV with Godrej in 2008, it had considered the local brands of Godrej like Sofit as jewels in its portfolio. Today, even as it has become an independent subsidiary, it continues to stay invested behind the soya drink brand of Sofit, as it is a leading brand in the category.

Others like the Norway-based Orkla Group, which acquired MTR Foods in 2007, has been reluctant to unleash its own portfolio. While it has recently entered the confectionery segment with its own brand of Laban, acquiring local brands will be the way forward. “Orkla believes in acquiring local brands and building them. It has already invested ₹150 crore in its Indian subsidiary,” said Sanjay Sharma, CEO, MTR Foods.

Published on November 30, 2017

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