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Cementing new identity

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Large cement companies cracked the code and invested heavily in high visibility ATL (above the line) advertising, says Sandip Ranjan Ghose of Birla Corporation.

The advertisement of an iconic tea brand features a shop-owner trying to sell a packet of ordinary tea to a customer- saying "Chai toh chai hi hota hain".. The lady refuses to take it, explaining why she preferred only that particular brand. Cement marketing used to be similar with little differentiation between the offerings by manufacturers.

There was another reason for the late marketing evolution of the cement industry. As long as cement was under the control regime customers had little choice. They had to pretty much settle only for what was available.

At best, there were some perceived differences, determined largely by visual attributes such as colour and fineness. These, at times, resulted in the products of certain plants commanding a marginal premium over others. Because of this, the name of the plant where the cement was produced became the brand rather than the company that owned it. So, the trade would refer to it as Jamul, Satna, Maihar, Kota, etc. depending on the source of supply.

Thus, there was little incentive for cement-makers to invest in marketing. All brands of cement were generically positioned in terms of strength. Rarely did the communication extend to technical parameters such as setting time, workability and other BIS standards. Therefore, it is not surprising that the sales teams of cement companies were referred to as marketing. A practice that has not entirely disappeared since not all companies have a separate dedicated brand marketing vertical.

Life began to change in the 90s after decontrol – when, with a surge in capacities, the industry saw cycles of supply-demand imbalance and, consequently, the impact of real competition in the market. The first serious attempt at brand building was probably by Gujarat Ambuja, which came to challenge the dominant player in its home turf.

The advent of multinationals and the ensuing spree of consolidation, most notably Grasim’s merger with L&T cements, permanently changed the rules of the game. Soon, cement companies became one of the biggest advertisers on television and dominated the outdoor space, covering practically every inch of exposed wall in the countryside.

What makes India different from many other countries is the route-to-market. With a very high component of retail customers – the Individual Home Builder (IHB) segment – bulk of cement sales, including supplies to small or medium-size builders and contractors, happen in bags through the trade network. RMC, still is at a nascent stage and only large sites, can handle bulk deliveries. Thus, it is essentially a B2C business – in which dealers and stockists are the first level of customers.

Large companies cracked the code and invested heavily in high visibility ATL (above the line) advertising. Television commercials-especially cricket sponsorship-pleased the channel partners and wall paintings helped raise TOMA (top of mind awareness) with rural consumers. However, marketers soon realised they were missing a vital link in the chain – the influencers, comprising Masons, Engineers and Contractors.

This led to a renewed emphasis on influencer contact programmes through BTL (Below the Line) marketing activities. From simple gratification schemes, market leaders started developing more sophisticated technical selling competencies.

Separate Technical Services or Customer Service Teams were formed with the mandate for customer conversion through on-site demonstration. So, cement marketing drew from both pure play consumer and industrial product categories to developing a unique marketing mix, that is a combination of B2B and B2C businesses. The large players were naturally the early adapters as they jostled for space at the premium end of the market. This saw a burst of creativity but without any significant product innovation.

The first major disruption came with the introduction of laminated bags – pioneered by the erstwhile Lafarge for its Concreto brand of slag cement. The "tamper proof" packaging provided the consumer with a "reason to believe" the superior quality claim, addressing two common concerns of moisture absorption and pilferage. On the back of this innovation and smart celebrity advertising, Lafarge was able to establish itself over peers in its core markets.

However, not everyone was impressed. Traditional companies thought the extravagance of MNCs and large Indian conglomerates were wasteful. Much like the "tea-seller" they saw little point in branding a commodity. The old guard preferred to remain "price-takers" (and, in some cases, "cost warriors") and not spend resources for the race for price leadership.

This diametrically opposite strategies of two sets of players had an interesting impact on the market structure, polarising it into two distinct segments of premium and discount brands that came to be popularly known as "A" and "B" Group. The price gap between these was accentuated during 2010-2011 when the industry saw one of the steepest declines in demand growth. Since then, the twain has not met though, as we shall see later, there has been some cross currents between them.

The sustained investment in brand building had a positive fall out for the industry. Years of commoditisation of the product had led to very low consumer engagement with the category. But, with increasing visibility, thanks to the rural penetration of satellite television and high viewership of sports (primarily cricket) and news channels (rise in political awareness and high stake elections), consumer involvement with cement palpably increased.

This shift in consumer mindset coincided with the rise of aspirational middle class in "Bharat" comprising tier 2 and 3 cities, small towns and "urban" areas. This was in sync with trends in related products for construction and home-building, such as paint, tiles, sanitaryware and toilet fittings. The sentiment of "you build a home only once" resonated with "new India"more than ever before.

During the last decade, if one were to analyse, cement price increased marginally in real terms. However, the cost push on Fuel, Power and Logistics was relentless. This put margins of cement companies under pressure. This could only be partially insulated by tax incentives for new units and reducing lead to market by setting up grinding units closer to cementitious sources and consumption centre. But, manufacturers realised that the cushion will not last for ever. Salvation in the longer run, therefore, lies in improving realisation while ruthlessly pursuing cost reduction. Thus was born the new cult of "Premiumisation" in cement industry. Companies in the so-called"B" segment jumped on to the premium bandwagon by launching brands in paper (LPP) bags. Group A leaders launched"super-premium" variants with special attributes. While everyone was nibbling at different ends of the pie – a clear strategy was not in sight.

MP Birla case study
Sometimes, necessity is the mother of virtue. Birla Corporation faced a unique challenge. Due to historical legacy, it had inherited a slew of regional brands across the geographies where it was present. While Birla Chetak, often called Ghoda Chhap Cement by consumers, was its dominant brand in Rajasthan and North India, Birla Samrat (popularly referred to as Satna Cement) was its flagship in Central India. In the East, it had a niche premium slag cement, Birla Unique.

This put serious impediments in developing an unified brand strategy for the Company. There was considerable confusion in brand recognition among consumers and the trade due to the presence of several cement brands with the "Birla" suffix in the same markets. To resolve that it was imperative to have a common brand identity. Also, without a sizeable national presence it was not possible to provide adequate ATL support to each of the brands.

Merging the brands was not an option " because that would destroy the strong regional equity of each brand. Therefore, a mega brand transition like what UltraTech undertook after its acquisition of L&T’s Cement Division was neither advisable nor viable given Birla Corporation’s size and scale of operations.

The problem was compounded – when Birla Corporation acquired the Cement Business of the Reliance ADAG group in 2016. The Business Transfer Agreement provided a very short window for using the Reliance brand name. So, a quick name-change was almost a condition precedent of the deal. This posed several challenges on the marketing front. Though Reliance Cement had a very short life-span it had established its own brand salience. Reliance Group insignia gave it a special halo that could not be easily substituted in the trade and consumer mind-space.

At the same time, any value destruction of the brand would jeopardise the financials of the deal. However, the marketing team saw this as an opportunity to create a brand architecture for the group under a new MP Birla franchise. The strategy was based on segmentation of the market both in terms of price-points and geographies. Reliance Cement brand morphed into MP Birla Perfect Plus and became the group’s flagship premium cement brand across all markets.

The seamless brand transition ensured business continuity with minimum disruption in the trade channel, which helped the company scale-up and consolidate within a short time. Since then, MP Birla Perfect Plus has been extended into new geographies, increasing its share in the premium cement segment. Now, nearly 40 per cent of MP Birla Cement’s trade sales come from the premium segment " one of the highest among its peer group.

The Brand Architecture is founded upon the strong pillars of the regional Heritage Brands (Chetak and Samrat), flanked by Super-Premium and niche offerings. To have a common pan-India offering for the non-trade and Institutional customers and preserve the sanctity of trade (B2C) segment – MP Birla Cement has two special brands Multicem (blended cement) and Concrecem (OPC).

Albeit a very evolved architecture – it has probably yielded results with MP Birla Cement’s high share of trade sales (81.61 per cent) and blended cement (92.5 per cent) in the portfolio, during April to December/FY20.

The future of Cement Marketing, like almost every other category, is clearly Digital. We already find companies investing heavily in Data Analytics, CRM and Loyalty programmes for trade and Influencers and preparing for e-selling. The consumer today is more aware, tech savvy and looks for the best while building his dream house. The key would be to provide segmented solutions.

The future clearly belongs to brands offering segmented solutions to customers. Those who understand and connect with the consumers best will ultimately win the game.

ABOUT THE AUTHOR: Sandip Ranjan Ghose is the Chief Operating Officer of Birla Corporation (MP Birla Group). He has worked in senior leadership roles at Hindustan Unilever, ABP Group, HT Media and Lafarge. He is an ICF – PCC Leadership Coach. Ghose is a popular blogger, op-ed columnist and social-media influencer.

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Concrete

Lower sales realization impacts margins for cement makers in Q2 FY25

The industry encountered several challenges, including an extended monsoon season.

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Major cement manufacturers reported a decline in margins for the September quarter, primarily due to lower prices, which led to decreased sales realization.

With the exception of three leading cement producers—UltraTech Cement, Ambuja Cement, and Dalmia Bharat—smaller companies, including Nuvoco Vistas Corp, JK Cement, Birla Corporation, and Heidelberg Cement, experienced a drop in both topline and sales volume during the second quarter of the current fiscal year.

The industry encountered several challenges, including an extended monsoon season, flooding, and a slow recovery in government demand, all contributing to weak overall demand.

Despite these challenges, power, fuel, and other costs largely remained stable across the industry. The all-India average cement price was approximately Rs 348 per 50 kg bag in June 2024, which represented an 11 per cent year-on-year decrease to Rs 330 per bag in September, although it saw a month-on-month increase of 2 per cent.

In the first half of FY25, cement prices declined by 10 per cent year-on-year, settling at Rs 330 per bag. This decline was notable compared to the previous year’s average prices of Rs 365 per bag and Rs 375 per bag in FY23, as reported by Icra.

Leading cement manufacturer UltraTech reported a capacity utilization rate of 68 per cent, with a 3 per cent growth in volume. However, its sales realization for grey cement declined by 8.4 per cent year-on-year and 2.9 per cent quarter-on-quarter during the July-September period.

In response to a query regarding cement prices during the earnings call, UltraTech’s CFO Atul Daga indicated that there had been an improvement in prices from August to September and noted that prices remained steady from September to October. He mentioned that the prices had risen from Rs 347 in August to approximately Rs 354 currently.

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Concrete

Steel companies face Rs 89,000 crore inventory crisis

Steel firms grapple with Rs 89,000 crore stockpile amid import surge.

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Steel companies in India are facing a significant challenge as they contend with an inventory crisis valued at approximately Rs 89,000 crore. This situation has arisen due to a notable increase in steel imports, which has put pressure on domestic producers struggling to maintain sales in a competitive market.

The surge in imports has been fueled by various factors, including fluctuations in global steel prices and increased production capacities in exporting countries. As a result, domestic steel manufacturers have found it difficult to compete, leading to rising stock levels of unsold products. This inventory buildup has forced several companies to reassess their production strategies and pricing models.

The financial impact of this inventory crisis is profound, affecting cash flows and profitability for many steel firms. With domestic demand remaining volatile, the pressure to reduce prices has increased, further complicating the situation for manufacturers who are already grappling with elevated production costs.

Industry experts are urging policymakers to consider measures that can support local steel producers, such as imposing tariffs on imports or enhancing trade regulations. This would help to protect the domestic market and ensure that Indian steel companies can compete more effectively.

As the steel sector navigates these challenges, stakeholders are closely monitoring the situation, hoping for a turnaround that can stabilize the market and restore confidence among investors. The current dynamics emphasize the need for a robust strategy to bolster domestic production and mitigate the risks associated with excessive imports.

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Concrete

JSW and POSCO collaborate for steel plant

JSW Group and POSCO ink MoU for steel project.

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JSW Group has signed a Memorandum of Understanding (MoU) with South Korea’s POSCO Group to develop an integrated steel plant in India. This collaboration aims to enhance India’s steel production capacity and contribute to the country’s growing manufacturing sector.

The agreement was formalized during a recent meeting between executives from both companies, highlighting their commitment to sustainable development and technological innovation in the steel industry. The planned facility will incorporate advanced manufacturing processes and adhere to environmentally friendly practices, aligning with global standards for sustainability.

JSW Group, a leader in the Indian steel industry, has expressed confidence that the joint venture with POSCO will bolster its position in the market and accelerate growth. The project is expected to attract significant investments, generating thousands of jobs in the region and contributing to local economies.

As India aims to boost its steel output to meet domestic demand and support infrastructure projects, this partnership signifies a crucial step toward achieving those goals. Both companies are committed to leveraging their expertise to develop a state-of-the-art facility that will produce high-quality steel products while minimizing environmental impact.

This initiative also reflects the increasing collaboration between Indian and international firms to enhance industrial capabilities and foster economic growth. The MoU sets the stage for a promising future in the Indian steel sector, emphasizing innovation and sustainability as key drivers of success.

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