Ashok Jain, A cement industry veteran.Jain has extensive experience at the leadership level of major cement companies like ACC, Jaiprakash Associates and Dalmia Bharat etc. He is one of the first few pioneers of cement branding.Users say cement is a commodity, if it is so, why is branding relevant?
Cement is called a commodity as there is very little to differentiate one cement from another in terms of features or attributes. Yet, branding of cement is relevant due to its end-use pattern in India. Even today, 50-80 per cent of cement is consumed by individual home builders in different parts of our country, depending on the level of urbanisation and the penetration of the organised construction industry. For an individual home builder, cement constitutes only 5-12 per cent of the cost of the house. He is, however, aware of the importance of cement for the quality and life of his house. An individual home builder is generally not knowledgeable about cement. A brand gives him the trust and confidence about the quality and consistency of the cement he uses for building his house. The more a market is individual home-builder oriented, the higher is the relevance of cement branding. What difference does a strong brand make to the bottom-line of a cement company in India? What difference does it make to producers outside India?
The contribution of a strong brand to the bottom-line of a cement company can be significant in our country. If we consider the EBITDA range of Rs 600 to Rs 1,000 per tonne for cement companies in the country, even a net brand premium of Rs 5 per bag, i.e., Rs 100 per tonne, would mean an additional 16 to 10 per cent contribution to the EBITDA. The net premiums for some of the cement brands in our country are much more than Rs 5 per bag.
The contribution of branding to the bottom-line outside India depends on the nature of the market. It is definitely significant in other South Asian countries where the cement use pattern is similar to India.Do companies plan differently for corporate branding and product branding in the cement industry? How are these exercises differentiated?
As cement is the primary business for most cement companies in our country, we generally do not see any difference in corporate and product branding. There are only a few cement companies like UltraTech, Dalmia, etc., which are part of multi-business groups. In such cases, we do see a difference between corporate and product branding. What are the most interesting brand messages in the Indian cement industry? How have these been conveyed? Can you compare these with FMCG brands?
In our country, most cement branding messages focus on the strength of the cement in one way or another, as it is easy to make them understandable to the user. Some of the brands have been focusing on ‘concrete expertise’ in different forms in their messaging as that is what makes the house structurally strong. Consumer surveys have found that individual home-builders use premium cement brands for concrete applications (mainly columns and slabs) whereas they are ready to compromise on cement brands for mortar and plaster applications.
Only a few brands have focused on durability in their messaging. Many brands have tried to convey technological superiority by talking about manufacturing technology or use of cement in sophisticated applications. Is product quality associated with branding? Can you quote any examples of brands failing or succeeding due to product quality?
In the mind of the consumer, there is a definite association between the brand and good quality of cement. If there is a disconnect between the brand’s claims and reality, then sooner or later consumers realise it and the brand loses value. To retain its value, a brand must continue to enjoy the trust of its consumers. Compromises in quality or shortcuts have been tried by some companies, but they harm the brand in the long run.
Cement companies have definitely influenced which types of cement consumers choose and, consequently, their expectations about the quality of a cement brand. In our country, a deliberate impression has been created that the higher the strength, the better the cement for an individual home builder. On this basis, OPC was claimed to be superior to blended cements for all consumers, which is a claim that is not technically supported. Similarly, an impression has been created in many markets of the country that PSC, which has low early strength, is inferior to other blended cements, PPC and OPC, for all applications. On the contrary, PSC continues to enjoy the confidence of consumers in East India, where strong brands were built around PSC from the 1950s and 60s. Broadly speaking, what are the time and costs involved in creating and establishing a new brand for an all-India player or for a regional player?
In our country, we have many examples of strong regional brands and a few national brands, but many more failed cement brands. Many of the successful ones are legacy brands, while some of them have been built afresh.
Whether at the regional level or national level, building and sustaining a strong brand requires a different mind-set in the top management team or promoter. Branding requires a different and consistent management philosophy. Building a strong brand requires managerial actions on a number of fronts and not just on advertising and promotion. Money alone does not build a strong cement brand. Above all, building a strong cement brand needs a different type of sales and marketing team.
In our country, most cement companies fail in building cement brands as they do not have the patience required to build a brand. They start with the belief that if you launch the brand with a big budget for advertising and promotion, the brand will get built. The branding philosophy is not followed through. The team is not prepared and trained. Necessary actions on the logistics front or in the development of a quality network required to support the brand or customer service are not taken. In some cases, quality claims are not consistent with what is delivered. After some time, the management and sales team come under sales pressure and start taking actions which hurt the brand and its positioning and ultimately destroy the brand. What do you think of premium cement brands? What do they promise to deliver over and above normal cement? Can you give some good examples of value creation through premium branding?
During the last few years, we have seen many companies introducing premium cement brands at a significant price premium to normal cement. These premium brands are generally centred on high strength of blended cement, both PPC and PSC, particularly high early strength, and superior packaging. Only one or two premium brands have completely different new features. The trend started with East India, but now we find them in many parts of the country. The sales volumes of these premium brands are still very small, except for one premium brand which has been around for more than a decade. The focus of all these premium brands is the individual home builder only, who is looking for even higher level of security and confidence from the brand. Has the introduction of PPC and PSC thrown up a challenge for the cement industry?
Economic considerations have forced even diehard supporters of OPC to move to blended cements and promote them. There are only a few markets where OPC is sold for individual home building. The institutional segment, including RMC, is a major consumer of OPC today. The race for introducing higher and higher 28-day strength OPC is not witnessed anymore. These are welcome developments for sustainability of our environment and natural resources. This trend is also welcome for individual home builders.How common are brand transitions in India? Are they connected with M&A activity? Or are there exceptions? Can you share some interesting examples with our readers?
There are only a few examples of brand transitions; all related to, or a consequence of, M&As. Lafarge acquired the cement operations of Tata Steel and introduced the Lafarge brand. Aditya Birla group acquired L&T Cement and introduced the UltraTech brand by merging all the brands into it.
Dalmia and UltraTech acquired cement plants of Jaypee and introduced their brands. Similarly, Heidelberg introduced its brand when it acquired Mysore Cement plants. What we see more in the country are brand extensions where the strength of the existing brand is leveraged to introduce a sub-brand. How are brand and packaging strategies implemented in associated product categories like white cement, wall putty, waterproofing compounds, etc.? Is there any learning for the cement industry?
The scale and spread of grey cement puts it into a class by itself as far as branding and packaging strategies are concerned. Its scale allows it to use mass media for advertising, like the paint industry. However, the nature of the product imposes many limitations. Its performance is not visible for a long time, unlike wall putty or waterproofing compound. It’s not a product which you can touch and feel. The grey cement industry has, all the same, drawn lessons from other product categories with regard to its promotion through influencers. How relevant will cement brands be in India after, say, 20 years?
Cement brands will be relevant in India as long as the individual-home-builder segment remains a major user segment. The penetration of RMC in the country is still very low compared to even China. Even in the metro towns of Mumbai, Delhi, Kolkata, Chennai and Bengaluru, where the penetration of RMC is high and the organised construction industry is significant, cement branding has remained as important as before. For vast rural and semi-urban areas of the country, cement branding will remain as relevant after 20 years as it is today.Brief Profile of Ashok Jain
A Chemical Engineer from IIT, Bombay, has over 45 years of experience in the cement industry. Held senior management positions such as Joint Managing Director of Jaiprakash Associates Ltd and Executive Director of ACC Ltd. During his long career with ACC, he worked as Business Head of RMC and Refractory SBUs and as Director Marketing. He is an acknowledged expert in cement sales & marketing in the country. Currently he is advising Dalmia group to help them to achieve their growth ambitions.