Changing market dynamics shape brand development


Brands market to women and new young drinkers

India is a key focus for global spirits producers seeking sales growth opportunities as their core markets mature.

International players are attracted to the substantial size of the Indian market, with about 485 million Indians currently of drinking age. In addition, per capita alcohol consumption is relatively low, but increasing by 10 to 15 percent annually, according to some predictions, with the number of drinkers expected to increase by 150 million over the next five years.

Factors driving this growth include the increased purchasing power of the middle class, the growing acceptance of alcohol consumption, and the greater financial and social independence of Indian women.

The regulatory environment moderates this growth, however, prohibiting liquor advertising. Restrictions have forced marketers to respond with clever digital campaigns, stealth ads for soft drink mixers branded the same as the liquor, and innovative packaging aimed at new young drinkers. And brands have introduced low-alcohol products to reach women drinkers.


Rebounding car market is one of world’s largest

Driven by the size of the market, low penetration, poor public transportation and the car ownership desires of the upwardly mobile and recently affluent, India’s car industry grew rapidly during the past decade and today is one of the world’s largest and most dynamic.

The market’s transformation usually is dated to 1982, and the introduction of the Maruti Suzuki 800, the first car designed for middle class aspirations and budgets. Today, the market leaders include a mix of Indian, international and joint venture brands, such as Maruti Suzuki, Hyundai, Mahindra& Mahindra, Tata Motors and Toyota.

Many brands offer a full range of passenger cars, SUVs, vans, and commercial vehicles, and sometimes motorcycles, although two- and threewheel vehicle makers also include brand leaders such as Bajaj Auto, Hero MotoCorp, and TVS Motor Company.

The Indian automobile category, which fluctuates with the health of the national economy, is about to experience a growth surge after two stagnant years, according to most predictions.


Banks add services and more branches

The banks category grew rapidly over the past decade, driven by the strength of the Indian economy and the relaxation of government regulation, which encouraged more competition. Banking in India today includes SOEs (State Owned Enterprises) and private institutions, both Indian and international.

Three of the top four most valuable Indian brands are banks. HDFC Bank, one of India’s first private banks, established in 1994, leads the ranking. Ranked third, State Bank of India formed the brand in 1955, prior to liberalization, although its earliest predecessor bank opened in 1806. ICICI Bank, which started in 1994, ranks fourth.

Banks are improving services, adding technology and opening new branches to serve the affluent middle class. They’re also expanding their presence in rural and semi-rural areas to serve the unbanked, driven by the financial inclusion policies of the Reserve Bank of India, the nation’s central bank.

A set of new regulations may soon increase the number of foreign banks operating in India and also impose standards to protect India’s banks from the kind of systemic problems that fomented the global financial crisis in 2008.

Modern banking in India began in the eighteenth century. Following India’s independence, in 1947, private banks functioned under government regulation. The government nationalized most banks in 1969, but relaxed some control with liberalization that started in 1992.


Rapid growth rate expected to increase

India’s booming ecommerce sector has a lot of growing room. Although India ranks third in number of Internet users, after the US and China, Internet penetration remains relatively low.

The number of Internet users totals around 213 million, according to the Internet and Mobile Association of India (IAMAI). That means only about 15 percent of Indians are online, compared with half the population in China, according to the World Bank.

The ecommerce category reached around $13 billion in revenue in 2013, and is expected to grow rapidly as more Indians shop online and more retailers compete for their spending, according to IAMAI. Leading those retailers are Indian brands such as the online mall Flipkart, started by former Amazon employees, and Snapdeal, with about 20 million users, which hopes to replicate the success of China’s Alibaba.

Amazon entered India in 2012. Two years later, just days after Flipkart raised $1 billion in funding, Amazon announced plans to invest $2 billion in India.

Walmart plans to open an ecommerce site in India during 2014. About one-third of ecommerce sales in India happen over mobile phones and that proportion is expected to increase.

Food and Dairy

Tastes evolve in world’s second largest market

India is the world’s second largest producer of food after China. Food store shelves are filled with local brands, often made by divisions of FMCG conglomerates owned by Indian companies or MNCs (Multinational Corporations). Nestlé India introduced Maggi, an instant noodle brand that promoted both taste and health, in 1982. Today, Indian consumers consider Maggi an Indian brand.

An Indian brand, the dairy cooperative Amul formed in 1946, just prior to the country’s independence, created the country’s modern dairy business and a direct link between dairy producers and consumers. Today Amul produces a wide range of dairy products.

Increasing income and urbanization are triggering a rapid change in food consumption patterns and variety. As more affluent families eat out more often, they expand their food repertoires. With more women in the workplace, the need for convenience has also introduced new food options, such as pasta sauces and packaged soups. And in the world’s largest vegetarian country, the number of nonvegetarians is growing.

Rising demand for variety and quality creates opportunities for the food processing and agriculture industries. Fully realizing these opportunities will require adding production facilities and improving the roads and other infrastructure that links supply in rural regions with the demand in urban centers.

Home Care

Normally staid category draws interest in India

Typically a fairly staid category, home care products in India are experiencing a surge of interest. That’s mostly because, as purchasing power rises, more households own washers and dryers and have the disposable income necessary for value-added products.

Growing awareness and concern about health and hygiene also is expected to drive category sales and product innovation. At the same time, both rural and urban consumers, regardless of income, remain concerned about value for money. Innovation will need to be accompanied by affordability.

The home care category consists predominantly of dishwashing bars and liquids, detergents, and household supplies. It developed over the past century as MNCs (Multinational Corporations), such as Hindustan Unilever and Proctor & Gamble, introduced, new products and educated users about benefits, which often included added convenience.


Penetration level low in growing category

India’s insurance business has grown rapidly since government reform opened the sector to private companies in 2000. Liberalization recognized the potential need for insurance products by an expanding middle class concerned with protecting recently acquired assets.

Penetration, still relatively low, is expected to increase because of steady demand and further relaxation of government regulations, which would permit a higher level of Foreign Direct Investment and also expand the role of banks as insurance providers for multiple insurance brands.

Meanwhile, operators in all sectors – property and casualty, life, and health – are improving their distribution methods, increasing online presence and attempting to analyze their client data to better anticipate needs and improve sales and retention.

A total of 52 insurance companies operate in India, more than half in life insurance, according to India’s Insurance Regulatory and Development Authority. Dominated by the state-owed Life Insurance Corporation of India, the sector also includes private and joint venture operators such as HDFC Life, ICICI Prudential, SBI Life, and Bajaj Allianz.


Sector shifts to branded mass market merchandise

Jewelry is one of the fastest growing sectors of India’s economy, driven by increasing demand and the ongoing transformation of the industry from a fragmented collection of family-run businesses to a more modern retail structure where large companies produce branded merchandise for the mass market.

The Indian government is expected relax restrictions on the import of gold, which traditionally has been an investment medium in India. Intended primarily to curb excessively smuggling, the government action should lower manufacturing costs, potentially making gold jewelry more affordable in the Indian market and more competitive for export.

India’s main jewelry specialties are gold, which has cultural and religious resonance, and diamonds. One of the world’s largest diamond exchanges is located in Mumbai.

Mobile Phones

Many brands compete for smartphone growth

India ranks second after China in number of mobile phones. Of India’s roughly 907 million wireless subscribers, perhaps only 10 percent own smart phones. However, driven by the interest in data consumption, and aggressive marketing by many phone brands, smartphones are the fastestgrowing segment of the mobile phone market.

The Indian smart phone market includes many strong international brands, such as Samsung, Apple, Nokia and LG, competing with a range of models, including their least expensive. Among the Indian mobile phone brands are: Micromax, Karbonn, Xolo, and Lava.

Having entered the market as low-price imitators of multinational brands, the India brands have achieved credibility, advertising features and emotional appeal as well as price, and implying their parity with global brands by engaging well-known brand ambassadors, like the actor Hugh Jackman, who has represented Micromax.

This more international image helps some of these brands build their export businesses, which are focused particularly on Southeast Asia, Russia and Africa. Many Chinese handset brands have entered India and sell affordable smartphones. These brands include: Gionee, Lenovo, OPPO, Huawei, ZTE and Konka.

In overall mobile sales, including feature phones, Samsung again enjoys a strong presence, along with Nokia, which is expected to benefit from investment by corporate parent Microsoft.

Motor Fuel and Lubricants

India imports crude oil and exports refined products

India ranks fourth among nations in total annual oil consumption. It remains dependent on imported crude oil to meet its energy needs, but has surplus refining capacity, making India an exporter of petroleum products.

Two SOEs (State Owned Enterprises) lead the industry: Oil and Natural Gas Corporation (ONGC) primarily focuses on oil exploration and production; and Indian Oil Corporation (IOC) operates most of the Indian refineries that produce petroleum products.

The Indian government opened these companies to partial public ownership when it liberalized the economy in 1991. The Indian government still holds a majority stake in the companies. Price controls on the public sector companies impacts their results.

Since 1991, independent oil and gas companies also operate in India. Following further relaxation of regulations, the Indian government allowed 100 percent Foreign Direct Investment in many industry segments. Stricter standards apply to private partnerships with SOEs.

Over 1,200 Indian and international companies market petroleum and gas products. Most are small or medium size Indian firms. Three public sector firms dominate manufacturing: Bharat Petroleum, Indian Oil Corporation and Hindustan Petroleum.

Foreign firms such as Shell, ExxonMobil, Elf, Castrol and Veedol also enjoy a presence in the Indian lubricants market. Most of these companies exist on their own, through wholly owned subsidiaries, which are companies incorporated in India. Castrol leads the automotive lubricants sector, followed by Servo, the Indian Oil brand.


Middle class aspirations fuel steady expansion

The decorative paints industry continues to grow by double digits, fueled by middle class aspirations, real estate expansion, and higher price points as paint companies introduce more premium products.

To further stimulate demand, paint companies have introduced initiatives to both inspire customers with new décor possibilities and instill confidence that they can complete more complicated home improvement projects.

Asian Paints recently opened retail outlets called the Colour Ideas Store, showrooms where designers offer free consultation. Berger Paints introduced Lewis Berger Design Stories, a collection of home decoration ideas presented as full solutions with professional advice.

Other key industry players include Kansai Nerolac, a subsidiary of a Japanese company, present in India since 1920; Shalimar Paints, formed in 1902; and Dulux, a subsidiary of Akzo Nobel, the global paint and coatings company based in the Netherlands.

Personal Care

Rising income, changing attitudes propel sales

Personal care enjoys healthy growth in India, driven by cultural regard for ideals of beauty, increasing disposable income, rising consumer demand in rural areas, and changing male grooming attitudes, which opens new marketing opportunities.

The category includes a wide array of products, such as hair care, skin care, and oral care. Among the key players are: Hindustan Unilever, Procter& Gamble and its Gillette brand, as well as the Indian brand, Dabur, which specializes in health and wellbeing.

Companies continue to introduce products specifically designed for the needs of Indian consumers and often market with an emphasis on beauty as a quality that can be enhanced, but which emanates within the person.

Some of the leading Indian brands, already present in various parts of Asia and Africa, are looking to strengthen their position in those markets, while others are looking to enter them.

Soft Drinks

Low consumption levels signals large opportunity

The Indian soft drink market includes a range of nonalcoholic beverages, including colas, juices, energy drinks, tea and coffee. Similar to the dynamics shaping the category in developed markets, health concerns are moderating the growth of CSDs (Carbonated Soft Drinks).

In contrast to more developed markets, however, per capita consumption remains relatively low, and distribution is fragmented, with much of it going through the traditional retail trade. Global leaders Coca-Cola and PepsiCo, and several Indian brand leaders compete, introducing new products to stimulate demand.

India is one of the markets where the Pepsi brand leads the Coke brand, although one of the country’s favorite drinks, Thums Up, is an Indian cola brand that Coke purchased in 1993. Pepsi entered India in 1989.


Relatively low penetration points to growth opportunity

India is the world’s second largest telecom market after China, with a total of around 935 million subscribers as of mid 2014, according to the Telecom Regulatory Authority of India (TRAI). Landline telephone subscribers totaled only 28.5 million in 2000.

Still one of the fastest growing telecom markets, the number of telecom subscribers experienced a 35 percent compound annual growth rate (CAGR) between 2001 and 2011, according to TRAI.

Only about 75 of every 100 Indian adults is a phone subscriber, however, a high level but less than the density of China or Brazil, and below the world average, indicating strong prospects for future growth.

The vast majority of the telephone subscriptions, 907 million, are for wireless service. Urban density is higher, indicating that many individuals have multiple subscriptions, in contrast to the rural areas where density is rising but the opportunity remains large. In the decade of 2002 to 2012, rural density increased from 1.2 million to 38.5 million, according to TRAI.

Private players dominate over 90 percent of the telecom market. They include: Bharti Airtel, Vodafone, Idea, Reliance Communications, Aircel, and Tata Docomo. Some of these brands are also leading providers of broadband service. All are attempting to increase revenue with data consumption, competitive rate plans, and new customer services.

  • The alcohol category includes spirits and beer.
  • The automobiles category includes cars and motorcycles.
  • The banks category includes public sector and private banks.
  • The ecommerce category is growing rapidly, but no brands appear yet in the BrandZ™ India Top 50 because none are publiclytraded, an eligibility criterion.
  • The food and dairy category includes cooking oil, biscuits, health food drinks, instant food, and dairy and milk products.
  • The home care category includes laundry products and household supplies like mosquito repellents.
  • The insurance category includes companies offering life, property and casualty, and health insurance products.
  • The jewelry category includes jewelry retailers.
  • The motor fuel and lubricants category includes brands that make and market lubricants, and the retail businesses of oil and gas companies.
  • The mobile phones category is growing rapidly, but no brands appear yet in the BrandZ™ India Top 50.
  • The paints category includes makers and retailers of decorative paint.
  • The personal care category includes hair care, hair oil, female beauty, male grooming, oral care, and personal wash.
  • The soft drinks category includes carbonated drinks, juices, tea and coffee.
  • The telecoms category includes brands that provide landline, cellular and broadband services.

Cross Category Trends

Current forces can propel or disrupt brand growth

Rural expectations are changing

Brands are moving into rural and semirural areas of India. Banks are opening branches and establishing a presence. HDFC Bank opened mini-branches staffed by only a couple of people. Hindustan Lever is increasing small town penetration of its FMCG (Fast Moving Consumer Goods) products. The trend is similar to the brand expansion into China’s lower tier cites. The difference is that the Indian government has not, literally, paved the way.

People are moving to cities

People from India’s rural areas are moving to the country’s cities seeking opportunity. Growth of the urban migrant population is the same phenomenon as happened in China. And there’s another similarity. People from rural areas who become urban dwellers don’t abandon their roots. When they return to their small towns and villages they potentially become ambassadors for brands they experienced in the city. This possibility is important for brands because in rural areas the recommendations of local leaders can carry more weight than media messages.

Value drives consumer spending

Chastened by the global recession and the slowdown in the growth rate of India’s economy, Indian consumers are purchasing more thoughtfully. Similar to many of today’s Chinese consumers, Indians prefer to purchase value rather than status. For those who can afford a luxury car, the badge is still important, but not as important as the drive. Less well off Indians have traditionally sought value. That’s one reason for the abundance of regional brands that compete with national names, which usually are more expensive.

Premium gains middle class attention

Some consumers are willing to pay a premium for certain products, such as healthier foods and beverages. Consequently, companies like Hindustan Unilever, Procter & Gamble, ITC, and Cadbury are adding more premium offerings to their product portfolios. Two leading paint brands, Asian Paints and Berger Paints, introduced initiatives to inspire more elaborate and upscale home decoration. Banks are increasing their focus on wealth management. Even some commodities, like rice, are branding to suggest a qualitative difference that deserves a premium.

Affordability reaches across the economy

Members of India’s rising middle class, and those who aspire to move up into that group, share the Indian dream, to prosper individually and as a family. Across the economic spectrum people are eager to have that dream realized sooner rather than later. Brands are responding with schemes to make their products and services more accessible. Buying on installment is available both for inexpensive products and luxury cars.

Consumers link brand with identity

Indian consumers increasingly consider the brands they choose as expressions of who they are as individuals. The connection between brand and identity extends to experiences, as people consider holidays abroad to more aspirational destinations, like Europe.

Young generation has different priorities

The median age of India’s population is 27. In contrast, people of median age in the US and UK are almost 40. This generational difference is significant for brands. India’s young people were born in the 1990s, post liberalization in a free market period that drove economic growth. Unlike their parents, their priority is not saving for a rainy day. They want nice things. But they’re also struggling to balance their desire to advance with the tug of family and tradition. That’s part of what motivates young people to move to the city. It limits the tensions at home. Brands need to communicate in new ways to reach them.

More opportunities open for women

The presence of more women in the workplace influences brand products and services and communications. Motorcycle brands have introduced subbrands aimed at women. Ads for Hindustan Unilever’s Fair& Lovely skin treatments emphasize themes of women’s empowerment, achievement, and transformation.

BrandZ India Top 50 2014

BrandZ Global 2014 Report Top 50 Report

Top 50 Chart

Top 50 Infographic

Methodology and valuation by Kantar Millward Brown

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