Strategy-wise, focussing on a particular region can work in favour of the cement manufacturers to improve its market share, however, according to Nilesh Narwekar, CEO, JSW Cement, this can happen only with strong network and assured cement demand.
What are the various experiments and innovations being tried out by the company to make their entire distribution channel an exciting proposition?
In terms of consuming segments, we have individual home buyers and small masons and contractors. On the other hand, we also have larger masons, larger contractors and builders. That said, we have direct consumers such as large institutions and large size infrastructure companies. So, this is the entire spectrum in terms of consuming segments.
As I move to institutional or large consumer base, the approach typically is more classic B2B where a company would want to go directly approach large consuming segments and sell product in bulk. These consumers (B2B) understand the economics, the cost benefit and understand the trade. In addition, such consumer base has a specific cement characteristic required for their projects. Here, to sell cement to B2B category, one has to be techno-commercially qualified.
That said, for a consumer base of individual home buyers, small-scale masons, and contractors, we typically have an approach similar to FMCG segment. This is mainly because, this segment is scattered with vast geographical reach. Here we target the primary customer as first point-of-sale.In turn, this consumer base will sell it to the secondary are retailers or sub-dealers. Here, the individual home buyers or the small masons and contractors either buy cement from sub-dealers or primary level.
Now, particularly for this segment, it becomes critical for a cement manufacturer to reach primary and secondary layer as it has a direct logistics bearing, a cost per tonne. That said, it is also necessary how a cement manufacturer attract enough primary and secondary layer to be a part of wanting to sell a particular brand. This is the first aspect.
The second aspect is whether cement manufacturers are able to attract and convince the primary and secondary layer stock cement brands and sell it to the consumers. However, it all depends on how a cement manufacturer services their needs by providing adequate room for margins, creating demand for a particular cement product and keeping the return on investment intact.
But when it comes to these two aspects, how cement manufacturers attract primary and secondary layers? And how critical is to reach them efficiently?
There are different ways in which we can potentially do that. Let me pick the first part. At the end of the day, primary and secondary layers are businessmen. They want to sell a product which is reputed and how this association with the product would uplift the geographic presence. So the onus is on cement player in investing creating adequate amount of demand with awareness for secondary layer, which is critical aspect as the demand for cement products are not as high as FMCG products. An FMCG product’s sales work more on a recall value, however, for cement although the recall values is important, as for a home buyer or contractor it’s a once-in-a-lifetime investment. So here, cement companies should be intelligent enough how to convince consumer to buy a particular cement product.
That is where influencers play a very critical role. As a company what is the kind of connect that the company has in the geography of my primary and secondary customer, what is the kind of connect company has with influencers, how well are they able to establish the connect that in case if consumers wants to come and buy as a influencer, how strongly you recommend a specific product. So it is not as easy as saying just distribute by product one time and everything will happen.
I am yet to here on the kind of innovation taking place in distribution channels…
What we have witnessed is cement manufacturers go around, identifying primary and secondary customers across the geography and apply certain FMCG principles. Here, by creating awareness across the geography for a particular cement brand coupled with adequate demand, influencers play an important role.
So how do I reach primary and secondary layers in a most cost-effective manner?
There are two ways a cement player can do it. Consider this: if cement player’s geography is limited, then it will be more beneficial for the manufacturers to move its cement from source with a best and cheapest route along with efficient transport management. Means, as a cement player, instead of selling my X million tonne in pan-India, the same can be sold in a designated geography. From sales perspective, it will be difficult, but if I have a strong network with assured demand from the region, my market share and volumes will increase in the region. However, it’s a double-edged sword.
Correct! It may backfire too…
But, as a largest cement producer, you have to take risk and protect the interests of your primary and secondary layers. And, that is why I am more emphasising on ensured large distribution channels, resources and off take of cement. The impact in terms of the return that I generate for the rupee that I spend will be much higher here. So everyone gets it intuitively but implementing it is a challenge. This is something which all cement companies in their own way are attempting to do. We are doing, and many other companies are doing.
Meanwhile, RMC, as a medium of the distribution channel is a successful example in western and European countries. Do you think, the same can be a replicated in India? What are the steps need to be addressed to make it more successful?
RMC, as a philosophy, is well estranged in metros and that is how it will grow. But for RMC it’s not an easy cakewalk in India. This is mainly because, if you have an individual home buyers as a consumer segment, RMC will not work out in your favour. RMC can be successful where you have bulk demand. For example, demand for large infrastructure projects. RMC would be more useful for programmes like Bharatmala, Sagarmala, development in eastern region etc., where demand is on a grater scale. Other than this, large metro cities too can chip in its contribution attracting RMC considering skyscraper and envisaged infrastructure projects.
– RAHUL KAMAT
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