Bank on Cricket ING Vyasa
Who says cricket has lost its marketing charm?

(column by Disha Gandhi)

At least one marketer is still backing cricketers and cricket in India to fortify its brand promise. And with a good reason. ING Vysya, one of the fastest growing private sector banks in the country, is working closely with the cricket superstars like Ricky Ponting and Brian Lara as it tries to establish a toehold in the dynamic Indian banking sector.

Apart from recent additions to its portfolio of products – like the ‘zero balance’ Freedom Account and Orange Salary Account – the bank is trying to establish a connect with consumers in India through the national fixation – cricket and cricket stars. “There is lot of synergy in business and sports and similarities exist in leadership qualities of captains of both business and sports. It has been ING Vysya Bank’s endeavour to bring legends in sports field closer to their fans and budding stars. With events such as Innings with Ricky Ponting / Brian Lara, the bank is attempting to bring cricket crazy children to meet lions of cricket,” says Alok Duggal, Head, Marketing at ING Vysya Bank, when asked about the bank’s association with cricket.

Importantly, the stars are not just launching products, but also acting as good Samaritans interacting with youngsters and lending their charm and image to social campaigns. With the world champion captain of Australia, Ricky Ponting, ING Vysya has launched the ‘Run Ricky Run’ initiative whereby for every run that Ponting scores in One Day Internationals over the course of next year, ING Vysya Foundation (the social arm of the bank) will send an underprivileged child back to school. Vaughn Richtor, MD and CEO of ING Vysya Bank adds, “In our business, we help people, take care of their financial future, but of course, for these underprivileged children, first of all, we have to make sure they have a future. And education is the key to that. Through ING Vysya Foundation, we look to provide opportunity for kids to go to school. Cricket of course, is very important in this country and cricketers can help promote this cause.”

ING Vysya’s clever leverage of cricket is not only furthering their Corporate Social Responsibility cause, but also shows that sensibly and logically used, cricket still retains the brand building appeal in this country despite all the obituaries being written about its utility as a marketing vehicle.

Of Bubli and Bubbaloo

‘Kuch meetha ho jaye’ and Big B: the duo became the magic wand that successfully converted Indian tastes for the traditional mithai into chocolates. And now, Cadbury has boldly ventured into the bubble-gum space with ‘Bubbaloo’ and with similar panache, hopes to strengthen its confectionery portfolio. The chocolate major already has a strong presence in the candy space with ‘Éclairs’; and in the mint space with ‘Halls’. Bubbaloo’ will close the gap for Cadbury, allowing it to reap rewards in the Rs. 180 crore Indian bubble-gum market. The company aspires to seize about 10% share into its basket.

According to the Marketing Director, Cadbury India, Sanjay Purohit, “India is one of the fastest growing gum markets in the world and we see massive potential for Bubbaloo. The move will significantly contribute to enhance our leadership position in the category.” In India, Bubbaloo (already a dominant global brand present in 25 countries) will see a focused 360 degree marketing campaign in order to reach out to consumers. The campaign will be anchored by Bubba – the cat, the brand mascot. Cadbury is also keen to initiate various programmes and on ground activities to engage consumers. Adds Purohit, “We are looking to achieve double-digit market share in 18-24 months which will contribute to 5% of our total business.” With competitors like Boomer and Big Babool already reigning in the segment, Bubbaloo may face some obstacles, yet with the segment growing at 20% per annum, Cadbury is rightly investing time and energy to boost its chewy avtaar. 4Ps

(End of Disha Gandhi column)

How Far Can Bombay Dyeing & Wadias GO...

It had been pouring relentlessly that entire morning. As we weaved through the traffic and rain-drenched roads on our way to Paperbox House in a western suburb of Mumbai, the rain had reduced to a mere trickle, leaving behind its sticky and sultry after effects. So, the crisp air conditioned environs of his office came as a relief to us; the sweat sliding off our backs. The man seated across the table wore a trendy black T-shirt, projecting his fair skin and handsome features to perfection. Even as he flicked his IBM notepad shut; stubbed his Davidoff in the already overflowing ashtray and swiveled in his chair to face us, he caught sight of a copy of Business & Economy magazine lying on his table. The cover titled ‘360 Degrees of Separation’ had a visual of the two Ambani siblings in a faceoff. Sniggering, he leaned back on his chair. “That will never happen to us Wadias,” he said derisively, his self-satisfied smirk barely lacing his contempt.

Jeh Wadia, 34, Managing Director of Go Air and on the Board of other Wadia Group companies, indeed is only carrying on the legacy of his father Nusli Wadia’s bitter corporate feud with Dhirubhai Ambani, as those who’ve seen the 2007 Bollywood blockbuster Guru will readily testify to. Some would call it the born confidence that only old money can provide. Yet, the fact is that parvenus or not, the Ambanis have raced miles ahead of the Wadias in the corporate Sweepstakes in just one generation. Sample this:

• There was a time when Nusli Wadia controlled Bombay Dyeing sported a prized license to manufacture DMT, a raw material for polyester. That was in the late 1970s and early 1980s. Now, the son of his bitter rival Dhirubhai Ambani, Mukesh controls the second largest petrochemicals operations in the world.

• Once, Bombay Dyeing was a huge textile brand. It is still popular, but fresher and foreign competition has not enabled it to capitalise on the brand value that it once built up.

• Flagship Wadia Company, Britannia, although still boasting the largest market share in its genre, is facing fierce and relentless competition from close rival Parle, as also from ITC (Sunfeast) and Surya Agro (Priya Gold).

• GoAir controls just a minuscule percentage of the booming aviation market, where among private carriers; only Jet and Kingfisher seem to be making all the headlines of late.

Connect the dots and you realize that there’s clearly something strangely laid back about this more than 200 year old business house. Especially the 1990s and the turn of the millennium saw this mini-conglomerate of yesteryears struggling with archaic wisdom in a fast-transforming entrepreneurship led India. But Jeh arguably does not think that way. “We don’t chase paper valuations like market cap and market share. We have heritage and have been around for almost 200 years, and will be around 200 years hence when the upstarts have faded away,” he counters with a smug smile. Confidence or over-confidence, we don’t know, but such is the in-bred confidence of the business house that much to the chagrin of market watchers, the group companies (except Britannia) do not even regularly share information with equity analysts.

The business house traces its roots to a family of shipbuilders in Surat in the 1700s; from where the group diversified into a series of businesses to emerge as $738 million entity (only taking into account the turnovers of its listed entities, Bombay Burmah, Bombay Dyeing NPL and Britannia Industries Limited) today. But despite that, it’s undeniable that winds of change that breezed across India Inc. post-liberalisation left the Wadias mostly untouched. “Though they’re are one of the oldest groups of India Inc yet Wadias have been lacking definite strategy for a long time,” argues Jigar Shah, Head (Research) at KR Choksey Securities.

Today, while the fate of its flagship brand Britannia hangs in balance between the Kraft Foods-Danone tug-of-wars (see box), their eminently visible brand Bombay Dyeing (BD) retains only a shadow of its past glory. BD’s core business of DMT (dimethyl terephthalate), an intermediary used for manufacturing petrochemicals, is losing out to substitutes; while the textiles biz is floundering in the face of competition.

Of course, consumers are still using towels, bed sheets and pillow covers made by Bombay Dyeing, and market estimates suggest that the brand still commands a market share of over 36%. But the oomph factor has clearly declined. Gone are those days when the light-eyed Lisa Ray & Karan Kapoor wrapped in BD linen, caused a flutter. Instead, rivals like Welspun, Pantaloon Retail’s MeLa and Home Town, et al, are benefiting via enhanced visibility from their made-formall culture vis-à-vis Bombay Dyeing shops. Not that the attempts to win back the old BD brand recall is non-existent. Advertising budgets have seen a gradual rise over the last few years, new product launches are plenty and plans are afoot for an enhanced retail portfolio. “Competitors are fast capturing the market at the cost of BD, which has been comparatively complacent in its approach,” agrees Siddharth Roy, Executive Director of Response Media.

A look at the financials of Bombay Dyeing tell a similar story. The product- wise revenue/profit break-up of Bombay Dyeing is testimony that the group is losing to other players, which were quick to identify new emerging trends in the sector. Textile, which gave profits of Rs.422 crore in 2004, could manage just Rs. 368 crore in FY07; same was the case with DMT whose revenues fell from Rs.514 crore to a measly Rs.29.62 crore for the same period.

Yet, Chairman Nusli Wadia has all reasons to be smiling arrogantly. His sons have risen to the challenge at an opportune time; and the fasttransforming face of the Wadia Group is manifest in the spring in the gaits of the new-generation Wadia siblings, Ness and Jeh. The entry of young blood into the organization has begun the task of rejuvenating the ailing tiger, prompting a deafening roar to mark its mightiness.

Thanks to the duo, a new wave of reorganisation and restructuring has gripped the Wadia Group, notably during the last year and a half. Impressed with Temasek’s ownership and management patterns, Jeh and Ness have gone about systematically implementing a sustainable model to drive future growth of the Wadia Group. “We have put into place processes for corporate development and capital management; and have completely separated ownership from management. The family should focus on running the money, while the professionals should focus on running the business,” affirms Jeh. The change is visibly manifest in the group’s remarkable evolution over the last couple of years. Resolutely stuck to routine old economy businesses like chemicals, petro-chemicals, textiles, plantations, laminates, et al, for years, the Wadias have, of late, exited some non-lucrative businesses, as also begun their tryst with sunshine sectors like aviation and retail. “The junior Wadias are modern businessmen and will have a good future,” observes a market watcher. While Jeh is leading the group’s aviation foray with GoAir, Ness Wadia is giving direction to the group’s proposed retail foray. Both the brothers portend new strategies for the otherwise conservative group.

Like his younger brother Jeh, Ness too is a regular in the Page 3 party circuit, and in between partying and dating the Bollywood actor Preity Zinta, he is effectively shouldering the responsibility of utilising the hidden potential of Bombay Dyeing viz. the virtual gold mine of land bank that the Wadia Group is sitting on – about 40 acres in Mumbai’s Dadar district alone – with the total property value assigned between Rs.8,000-10,000 crore. The plan is to develop this real estate for commercial, retail and residential purposes based on the own, develop and operate model (see box).

According to Anukrat Jain of Indus View Advisors, “With Ness and Jeh, the group has got a new strategic intent. Their foray in real estate and retail clearly shows that the earlier vision of an old economy structure is out and the new vision is in. Ness Wadia says that we will move from a close knit family business to an open ended professionally run business. We hope to see that happen.”

The aviation foray, however, is littered with problems, at least for now. Our observation of the sustainability of the aviation venture, given the killing losses being made by most airliners, brings forth a smug smile from Jeh. “Yeah, I know. And that’s why we’ve restricted our expansion plans (to 35 aircraft by 2011). All my friends and foes (competitors) in the sector are busy buying more planes, while I’ve deferred my growth plans linking them to changes in taxation and policy. What’s the point of being aggressive in growth, if you’re not around till the end?” he asks. He similarly shrugs off the wave of consolidation in the sector, saying that was only for those wishing to strengthen their international routes, unlike GoAir, which is keenly focused on the high-potential domestic market.

Praveen Vetrivel, aviation analyst with the IBA Group believes that GoAir’s wait and see approach to market expansion might be a good thing. “The best case scenario is that the airline will build up a solid experience and brand. And as and when policy changes make expansion favourable, they can further grow their market share without affecting profitability,” he explains. Yet, the downside is that if large airlines survive the next few years of intense competition, they will give tough competition to GoAir. But the worst case scenario for GoAir then would be to pack-up their 4 aircraft fleet operation, which will be no skin off the back of its cash rich promoters.

For now, members of the Wadia clan are aggressively focused on identifying new business areas to take the group to the next level. In the same spirit, they are looking to offload GoAir’s day to day operations to a CEO who would continue reporting to MD, while Jeh himself, has already moved on to the next frontier viz. outsourcing services in the aviation sector with Go Ground, Go Cargo and Go Engineering. For now, airlines cater to most allied services in-house (including ground & cargo services, security, engineering), adding to the airlines’ burden of already heavy costs. “Because government policy does not allow outsourcing of these services, there are no service providers yet. But I’m moving now and once outsourcing is allowed, I will be king,” says the junior Wadia.

“Competition is always there in every sector but Wadias have been there for too long to be afraid of these things,” avers analyst Amir Ullah Khan. An entrepreneurial gusto; pushing for professionalism; dynamic leadership that demands accountability; unemotional severance of ties with non-performing businesses; and daring strides into new commerce avenues, combined with the centuries old business heritage of the Group, give the Wadias lethal ammunition to deal with all problems, real or imaginary. And while they remain a regular family run business like the Tatas, Birlas and Ambanis, fact is that flowing with the tidal changes sweeping the economy, the new generation at Wadias helm is pushing for a cataclysmic change at all levels. The legendry Nusli Wadia may or may not be advising his heir apparents at every level, yet through them, the senior Wadia is finally rekindling the fire in his group that had perhaps lost its way in the labyrinth of liberalisation.

Britannia’s Danone Woes
Ever since Chairman, Nusli Wadia bought into Britannia Industries in 1993, Britannia has undoubtedly remained crucial for Wadia Group as a whole. And not without reason! As opposed to other group companies, Britannia India commands almost 38% market share of the 1.1 million tonnes per annum biscuit market pegged at Rs.50 billion. What’s more, nearly half of the group’s turnover comes from Britannia. Amidst the group companies, Britannia is the only one that has been consistently showing great potential, closing the year ended March 2007 with gross sales of Rs.23.17 billion against Rs.18.17 billion the previous year. “Britannia has a strong brand equity. However since biscuit industry requires no rocket science technology, it attracts many small and new entrants. And Britannia has lost ground to may of these new entrants in some segments,” says Anukrat Jain, Associate, Indus View Advisors.

With the unceremonious exit of the then Britannia CEO - Sunil Alagh – in 2002; the company has been besieged by numerous management troubles, not least with its equal JV partner French dairy major Group Danone. And while till recently the standoffs with Danone merely comprised fi ghting over control of the bread & butter ‘Tiger’ brand of the company, the twist in the tale has come with US-based Kraft Foods’ interest in buying Danone’s biscuit arm globally. While Jeh Wadia pointedly refused to answer any query over the Danone-Britannia- Kraft Foods imbroglio, preferring a tightlipped “no comments”, the market is abuzz with speculation. It seems that the Wadia’s are caught in a situation where they either would have to cough up over Rs.1,000 crore to buy off Danone’s stake in Britannia (as they have right of fi rst refusal), or else agree to work with a new partner Kraft Foods, who is anyway under pressure from analysts about the deal’s extravagance as it does not include Danone’s Indian interests. If Kraft Foods’ ambitions enable it to pick up Danone’s stake in Britannia as well, then they may also make a handsome offer to Britannia shareholders, wresting management control away from the Wadias. “Controversies have diluted Britannia’s strategy. Though the company is doing very well, it has failed to deliver to its full potential in terms of shareholder returns, topline and bottomline. It should be trading at least three times its current prices today,” points out Jigar Shah of KR Choksey Securities.

There’s more! Britannia boasts a fantastic pool of products (Good Day, Pure Magic, Tiger, 50:50, et al), an effective distribution system, rich cash reserves, and understands the consumers taste well. Britannia’s understanding of the Indian consumer has always given it an edge against smaller unorganised players that fl ood the segment; but of late, nimbler competition has begun to gnaw at Britannia’s foundation. “Britannia has a wide portfolio like other FMCG players. But to sustain its leadership in the segment, constant value addition becomes necessary. Unfortunately, in all these segment ITC has done a brilliant job, while the Wadia’s have strangely forgotten to do so of late. This may disturb Britannia’s market position,” avers Sumeet Budhiraja, FMCG Analyst at Edelweiss Securities.

Little surprise that the last year has witnessed a boost of product innovation and renovation from Britannia. As Chairman Nusli Wadia asserts to his shareholders: We will continue to “deliver growth throughan emphasis on brand activation, anchored by new product launches.”

The Wadia Retail Rush
While low-cost housing remains a priority for the group, convinced that the organized retail opportunity in India is waiting to be harnessed, the elder Wadia sibling Ness is trying to gain maximum square footage in malls, as also high street square footage. Recently, Britannia also acquired a stake in Bangalore-based Daily Bread, a speciality manufacturer and retailer of premium bakery products, giving it an entry in the organized food retailing mart. Plus, thanks to Bombay Dyeing and Britannia, the group already boasts a vast and effective distribution network. Although a tad too late, they are now planning to capitalise on this strength, using the ready retail pipeline to pump down more products. Efforts are on to rope in big-ticket international brands like Gucci; with the additional possibility of encompassing all retail formats, including hyper markets. However, challenges like manpower crunch and product sourcing may play spoilsport if not dealt with effectively.

Undeterred, the Wadia’s are planning a massive retail investment of $2.5 billion and hope to capitalise on their Rs.8000-10,000 crore existing landbank in Mumbai itself. Moreover, not restricting their retail ambitions to only Mumbai, they are also planning to lease/acquire and develop other properties, to expand their retail operations across the country. This will enable the group to de-risk their operations geographically.