The Hindu Business Line : Pitfalls of brand marketing

THE DECISION OF India's largest sugar mill, Balrampur Chini, to retreat from marketing branded consumer packs is a valuable case-study in two different and significant ways. Some firms are by history, culture and tradition ill-equipped to handle what must seem to them an alien territory — marketing branded consumer goods. Organisational rigidities divide the two business terrains — those dealing with inputs, commodities, intermediates and utilities on one side, and marketers of consumer, household-use products on the other. Rare is the management team that crosses over from one to the other, easily and successfully. Second, it reiterates the extraordinary complications faced by a commodity transmuting itself into a household-use brand. Corporate leadership can make costly misjudgements in both.

Although there is of late increasing branding of articles such as salt, atta, rice, cooking oil and sugar, brand marketing, especially of edibles, remains a tricky business. Marketers of bulk commodities such as sugar can take either of two routes along the slippery slopes of the small-pack market. They can either infuse some distinctiveness into the commodity with an ingredient or a process (as in iodised, refined, vitamin-enriched and so on) or turn it into a value-added end product (for example, chocolates rather than cocoa powder). The motivations for both are the same: Distancing one's brand from the mass of similar offerings, and doing so at a higher profit. For this to happen, the value-added must tempt the housewife to pay a premium over, say, a kilogram of unbranded sugar or salt.

Merely creating a name and a good looking pack is just the beginning. Often, the more successful the company, the more likely it is to underestimate the pain and the time taken to persuade thousands of grocers to sell, and millions of housewives to buy, an unknown brand. This is more so in foods where a familiar brand scores by minimising the perceived risk in eating something you have not tried before. Not even the might of huge organisations such as Tatas, Lever and ITC, can alter this fact; as many have realised, at great expense. Furthermore, the new entrant must offer something more than the common or garden variety tea, wheat flour, cooking oil, salt or sugar. Commodities do not become profitable brands, simply because they offer clean, hygienically packed, standard-weight, and consistent quality; nor will the housewife pay a significant premium for them. She expects these benefits as a matter of course.

A greater worry for the marketer is the strong competition from store brands that can easily provide these minor trimmings at a lower cost too. Manufacturers who stop with these functionalities will always be vulnerable to fluctuations in commodity markets. Long-run profits will remain meagre and unpredictable. The management of India's largest sugar mill, therefore, deserves praise for exiting the branded business and demonstrating that wisdom consists of knowing what you are truly good at, and that retreat, like discretion, can sometimes be the better part of valour.

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