This story first appeared in DNA Money edition on Monday, Feb 4, 2013.
Is sales all about selling and servicing?
Chocolate maker Cadbury India, for one, seems to believe it is possible to put the sales function to various other uses, including gauging consumer buying behaviour, increasing visibility and footprint, and even creating demand – transforming an art into a science, as it were.
“The approach is crucial if sales as a function has to deliver expectations and the organisation’s wider vision,” said Sunil Taldar, director - sales and international business of Cadbury India.
“Besides, the Indian retail sector is undergoing significant changes and hence a lot of our focus is on display and compelling in-store execution through perfect stores. As our products are mainly in the impulse buying category, creating an overall shopping experience by making the entire product range available in the perfect stores is crucial. We also work towards prioritising the channel and retail environment that will give maximum traction,” he said.
In view of the growing intensity of competition in the Indian fast-moving consumer goods space, Cadbury India — a subsidiary of Mondelez International, the $32 billion global snacking major formed in October last year after Kraft Foods decided to split its confectionery and grocery businesses into independently listed companies — has over the last few years effected significant changes in the way its sales staff approach the market.
“Creating a seamless, two-way procedure in terms of flow of sales and related information from the company to its distributors and the sales staff booking orders from the retailers” plays a very important part, said another official.
To this end, the company has armed its distributors with touch-screen hand-held devices embedded with proprietary software to ensure smooth and timely flow of information in the distribution channel.
The device gives the sales representative at the distributor end access to all the information about retailers in his area of operation, purchase history (including products and number of units bought, etc). It also allows him to book new orders across product categories without the hassle of making manual notes or filing a purchase order book at the end of the day.
This gives the company a clear understanding of what kind of demand is getting generated, how various products and the stock at the distributors’ end is moving across the retail network that boasts of over 800,000 outlets across the country.
“All the sales representative has to do is download the day’s activity on the distributor’s computer (that also has a proprietary billing software and is connected to Cadbury’s servers) and a purchase order gets generated automatically. This saves a lot of time, while ensuring there is no room for error in the entire process,” a company official explained at the Sales Revolution Day organised by the company on Friday.
The event, yet another strategic initiative, gave the company’s non-sales staff an insight into its sales function.
As part of the first phase of this activity, some 800 non-sales employees drawn from its offices across the country were sent out in groups to different markets along with their sales colleagues.
They were set two tasks for the day – first, follow a seven-step procedure to create a perfect store and second, identify a new store based on three visible markers.
“The next phase will be to compile all the data in terms of stores visited, perfect stores created and new stores opened in the ensuing days. Employee groups will also share insights and observations with the sales staff in addition to a 45-second video capturing specific learnings derived from this exercise,” said a company official.
Sunday, 14 April 2013
DLF sells 150 mw wind farm for Rs280 crore
This story first appeared in DNA Money edition on Friday, Feb 1, 2013.
Moving closer to its goal of exiting non-core businesses, realtor DLF has sold its 150 mw wind turbine project in Gujarat to a unit of Bharat Light & Power Pvt Ltd, netting Rs 282 crore, minus liabilities.
Under the deal, BLP Vayu (Project 1) Pvt Ltd would take over the wind turbines in Kutch on ‘as in where in’ basis via slump sale.
Industry sources said the deal value is around Rs500 crore as BLP Vayu is also taking over liabilities and relevant long-term loans of Rs 215 crore.
Sriram Khattar, senior executive director, DLF, said, “We are well on way to get north of Rs 800 crore through sale or transfer of our entire wind turbine projects. Negotiations are on for the balance projects and we hope to close them soon.”
DLF, along with wholly owned subsidiary DLF Home Developers, had 227 mw wind turbines in four states.
The BLP Vayu deal leaves it with three sites – Rajasthan (34 mw), Tamil Nadu (33 mw) and Karnataka (11 mw). It is not clear if the remaining projects will also be acquired by BLP Vayu or there are other bidders as well.
Industry experts said as the wind turbines are located in different locations, valuations will have to be different.
“I’d expect the balance projects to be valued in the same ratio, give or take 5-7%,” said an analyst. Aashiesh Agarwaal, research analyst, Edelweiss Securities, said the deal is a positive as DLF is currently saddled with a huge debt of Rs 21,200 crore.
“Consummation of the wind power sale, along with Aman Resorts sale, would contribute Rs 2,100 crore towards debt reduction. The closure of the deal would bring total divestments in fiscal 2013 to around Rs 5,240 crore as against its guidance of Rs 5,000 crore.
“Divestment of the balance wind power units, at advance stages of negotiations, is expected to generate around Rs 250 crore,” said Agarwaal in a company note. “The deal is among the last of the assets lined up for monetisation,” he noted.
Moving closer to its goal of exiting non-core businesses, realtor DLF has sold its 150 mw wind turbine project in Gujarat to a unit of Bharat Light & Power Pvt Ltd, netting Rs 282 crore, minus liabilities.
Under the deal, BLP Vayu (Project 1) Pvt Ltd would take over the wind turbines in Kutch on ‘as in where in’ basis via slump sale.
Industry sources said the deal value is around Rs500 crore as BLP Vayu is also taking over liabilities and relevant long-term loans of Rs 215 crore.
Sriram Khattar, senior executive director, DLF, said, “We are well on way to get north of Rs 800 crore through sale or transfer of our entire wind turbine projects. Negotiations are on for the balance projects and we hope to close them soon.”
DLF, along with wholly owned subsidiary DLF Home Developers, had 227 mw wind turbines in four states.
The BLP Vayu deal leaves it with three sites – Rajasthan (34 mw), Tamil Nadu (33 mw) and Karnataka (11 mw). It is not clear if the remaining projects will also be acquired by BLP Vayu or there are other bidders as well.
Industry experts said as the wind turbines are located in different locations, valuations will have to be different.
“I’d expect the balance projects to be valued in the same ratio, give or take 5-7%,” said an analyst. Aashiesh Agarwaal, research analyst, Edelweiss Securities, said the deal is a positive as DLF is currently saddled with a huge debt of Rs 21,200 crore.
“Consummation of the wind power sale, along with Aman Resorts sale, would contribute Rs 2,100 crore towards debt reduction. The closure of the deal would bring total divestments in fiscal 2013 to around Rs 5,240 crore as against its guidance of Rs 5,000 crore.
“Divestment of the balance wind power units, at advance stages of negotiations, is expected to generate around Rs 250 crore,” said Agarwaal in a company note. “The deal is among the last of the assets lined up for monetisation,” he noted.
Samsung lines up durables push
This story first appeared in DNA Money edition on Wednesday, January 30, 2013.
Samsung India Electronics is aiming at a 35% turnover growth this fiscal on the back of its new range of split air conditioners and refrigerators.
Last year, too, its revenues grew 35% to Rs27,000 crore.
Rajeev Bhutani, head - home appliance business, Samsung India, said, “With the 2013 range, we are looking at a 50% growth both in the split air-conditioners and refrigerator categories.”
Samsung’s home appliance segment grew 7% in 2012, with the frost-free refrigerator category growing 25% and split AC segment 88%.
The company had a 24% market share in the overall refrigerator category in 2012 with the frost-free share of 33.6%, up from 31% last year.
Mahesh Krishnan, VP-consumer sales, said the split AC segment grew 27%, which was very good.
“We exited the window AC market last year and are now focusing completely on the split ACs with the new range,” said Krishnan.
The company is also looking to almost double the number of Samsung Digital Plaza, its single-brand retail store chain, to 600-700 by December.
Samsung has launched 29 new split AC products for the Indian market in the price range of Rs23,100-60,990.
Its new digital inverter refrigerator series is customised for the Indian market. With a strong compressor, the new range eliminates the need for a separate stabiliser.
“The refrigerators come with a 10-year warranty, which is a world’s first. Other features include ‘coolpack’ that delays the rise in temperature when the power is off and prevents food from spoiling,” Bhutani said.
Samsung India Electronics is aiming at a 35% turnover growth this fiscal on the back of its new range of split air conditioners and refrigerators.
Last year, too, its revenues grew 35% to Rs27,000 crore.
Rajeev Bhutani, head - home appliance business, Samsung India, said, “With the 2013 range, we are looking at a 50% growth both in the split air-conditioners and refrigerator categories.”
Samsung’s home appliance segment grew 7% in 2012, with the frost-free refrigerator category growing 25% and split AC segment 88%.
The company had a 24% market share in the overall refrigerator category in 2012 with the frost-free share of 33.6%, up from 31% last year.
Mahesh Krishnan, VP-consumer sales, said the split AC segment grew 27%, which was very good.
“We exited the window AC market last year and are now focusing completely on the split ACs with the new range,” said Krishnan.
The company is also looking to almost double the number of Samsung Digital Plaza, its single-brand retail store chain, to 600-700 by December.
Samsung has launched 29 new split AC products for the Indian market in the price range of Rs23,100-60,990.
Its new digital inverter refrigerator series is customised for the Indian market. With a strong compressor, the new range eliminates the need for a separate stabiliser.
“The refrigerators come with a 10-year warranty, which is a world’s first. Other features include ‘coolpack’ that delays the rise in temperature when the power is off and prevents food from spoiling,” Bhutani said.
Sunday, 17 February 2013
At Aegis, digital, OOH big bets
 |
| Ashish Bhasin |
After 21 years with Lintas Group, an opportunity came by in 2008 from Aegis Media which had a struggling unit in the country – Carat. It had 50-odd people, making losses and wasn’t doing global standards of work. That’s when Ashish Bhasin took over as CEO for South East Asia and South Asia and Chairman for India. Since then, the company has grown to 500 people as of today and from one business to 11 different lines of businesses. He spoke about the agency’s overall business and the advertising industry in general. Edited excerpts...
How
far as the Dentsu-Aegis deal reached since considering it was signed in the
first quarter of fiscal 2013?
Dentsu is in the process of acquiring Aegis
Plc and being a global deal it will take time to conclude. The transaction hasn’t yet completed but once
it is done we will be part of the Denstu family. We do anticipate that it
should happen soon, but nothing is done till it is done. The situation is that the
deal requires regulatory clearance from several countries. I am not very sure
but my understanding is that approvals have been received from most of the key countries
except China where it is work in progress.
How
will both entities function after the deal is completed?
Our global CEO has very clearly said
that it will be business as usual. Aegis Media will work as a brand by itself.
What and how will things unfold is something that I’m not privy to but our
understanding is that it will be an independent operation that will continue to
run under the Dentsu umbrella.
The
year gone by has been a very exciting one for Aegis. How was the business like
for the Indian unit?
With a total of 150-odd clients all across
in the group, it has been a very good year for Aegis globally and an
exceptional one for us. In 2012, we crossed the Rs 1,000 crore turnover mark
and the year has been a record breaking spectacular year both in terms of
growth in revenues/billing/profits as well as number/quality of people etc.
Which
segments have seen the maximum growth?
While all businesses have done well, digital
and out of home (including retail) in particular are very fast growing
verticals. That’s because more clients and volumes are coming in, in these
lines of businesses. However, print and television continue to be large in
India and hence are major contributors to the business.
Your
company straddles the entire gamut of advertising and marketing services. How has
the approach helped?
Clients today want the benefit of specialisation
but are fed up of silos (an advertising industry jargon indicating various departments
/ divisions). Each one is trying to push their agenda. For instance, the out-of-
home (OOH) guy will focus only on outdoor and scrap every other media. Clients
today want a complete solution and not just print or television. At Aegis, we have this system of ‘one country
one P&L’. While all the departments / divisions have their individual
targets, the profit and loss (P&L) statement outside India goes through one
person.
For us, what really matters is doing things
that are right for the client. As a result the client benefits from all the specialisation
we offer and is saved from the hassles of siloisation. This philosophy has clicked
very well for us. Having said that, we might only have an advantage window of around
six months or so because others are quickly catching up to this approach of
doing business.
With
business growing exponentially, you must have a very aggressive expansion plan.
India is not really four metros of
Mumbai, Delhi, Kolkata and Chennai, which is why we already nine offices and
should be adding another one in Kochi sometime soon. The ambition is to have a
minimum of 16-18 offices in two years from now. Reason being, there is a lot of
business in tier II and rural markets. It’s more about touch and feel these
days besides what may work in Kochi may not necessarily work in Chandigarh. One
needs to understand the local market / media and related outfits to ensure best
results and maximum impact of the client’s communications and initiatives.
Talking
about rural demand, there are very mixed opinions in the market. Could you
throw some light on the ground realities?
I think there is complete confusion. I can
confidently say that having pioneered rural marketing in India by setting up set
up Linterland – the rural marketing unit of Lintas – which was the first
attempt any agency made to have a proper rural network. I am a big believer in
rural markets. There are 100 ways in which one can touch and engage a consumer
and touching, feeling, reaching out to them in person is definitely very
important.
Despite phenomenal growth in the number
of television and newspapers, there is a very large part of our population that
is unreached by any mass media. Even if they are theoretically reached the
communication isn’t effective because for eight hours in a day they don’t have
electricity.
On the other hand, there is this largest
gathering of humanity at Kumbh Mela with almost 10 crore people attending which
presents a huge opportunity for marketers and brands to reach out to them. There
is no option or alternative for companies to look at rural and reach out. Companies
will have to find a way and as agencies it is our duty and a great opportunity
to be able to deliver that.
What
is your approach the rural markets? What activities are undertaken there?
I was involved in the launch of Wheel detergent
powder for Hindustan Lever (now Hindustan Unilever Ltd - HUL) back in mid 80s
to early 90s. When I started working as an account executive on the brand, first
thing HUL made you do was to go for 15 days and live in Etah (a village in
Uttar Pradesh HUL had adapted). So you literally lived the way villagers would
live there. What you learnt out of that was really insightful. That’s why I insist
my rural guys to go and spend some time in villages before they actually start
talking about it. That’s where all of India. It is through these initiatives
that we have tracked various activities for the rural market including drawing
up a calendar of village supermarkets or ‘Haat’, ‘Mela’ calendars, van
operations, planning and data mining for rural markets etc.
What
are your plans for 2013 looking like? Could you tell us about the key
opportunities for Aegis this year?
Our plans are largely based on the clients
and opportunities in India. The key opportunities we see are in the digital and
mobile space. That is why we have made disproportionate
investment in this space including acquiring iProspect. Considering a lot of
search is now happening on mobile handsets / devices so digital will certainly be
the name of the game. The OOH media will be huge and so will be outreach (touch
and feel activation or experiential).
Print and TV will continue to dominate
for a long time to come but agencies will have to discover new ways of handling
it.
For instance, there is complete lack of qualitative research in India hence
as a result we have made the largest investment ever on a single source data. Imagine,
despite having a 20,000-25,000 crore advertising market, we don’t have any
large reliable single source data in the country. We have Consumer Connection System
(CCS), which is a global Aegis Media tool and world’s largest single source
data. It has more than 300,000 samples globally. We have brought that and are running
it in India with a very large sample size across 18 cities which is a very
robust plan. This initiative is giving us immense insights into how a consumer
interacts, how s/he consumes media - you can actually take it down to a
category and a brand.
Could
you elaborate a bit on the digital and mobile space activities?
Digital is not about putting a banner
advertisement on a website anymore. It’s about engaging the consumer, developing
applications for mobile phones related devices. While Ipads and Tablet devices are
not that big in India, with prices coming down gradually, the entire dynamics
of the game is changing and very rapidly than anyone can realise. In such an
environment continuing with just a print, television or banner advertisement will
not help the client engage a consumer because s/he is moving much faster. Our
entire focus on digital is holistic and there is no line or separation between
creative and media in digital because it’s all one.
People earlier didn’t think that a large
set of consumer will transition from desktops to mobile devices and
advertisements were never made keeping mobile devices in mind. This is
certainly a huge problem for marketers and brand managers. Interestingly, one
of our verticals, Isobar enjoys a preferred Facebook page developer status and
those are the kind of areas we will have to stay ahead of the curve and your
job is never done here. By the time you’ve finished it, you become obsolete.
How
do you deal with the related technology requirements?
We are putting together a large tech
team including programmers, net developers – nothing to do with advertising –
to be able to deliver the digital communication. One can conceive and create a
great idea but delivering it will be impossible if you don’t have an equally great
tech team. In a sense tomorrow, our competition could very well be a large information
technology (IT) major because that whole line is blurring now. Currently we
have 18 people and the plan is to at least double the number in the next few
months.
Do
you see the tech team getting bigger eventually?
If the approach really works one can
easily look at a number of 200 people just doing tech because the business
vertical will then be catering to the global markets and not just India. It’s
like how the IT majors including Infosys, Wipro and TCS that do tech
development in their areas globally. There is nothing that prevents advertising
companies like ours to start doing it as well.
Sunday, 27 January 2013
Zee thumps St with 41% profit growth
This story first appeared in DNA Money edition on Thursday, January 24, 2013.
Zee Entertainment Enterprises Ltd, India's leading media company, has reported a 40.5% year-on-year (yoy) growth in net profit for the third quarter at Rs 193.3 crore, lifted by a strong surge in advertising and subscription revenues.
Advertising and subscription revenues during October-December grew 28.8% and 25.6% yoy to Rs 509.4 crore and Rs 409.8 crore, respectively.
Subhash Chandra, chairman, Zee, said the first three quarters of this fiscal have been good for the company with strong performance relative to the industry and competition.
“With one quarter to go, we are looking forward to a strong growth this year. The highlight for this quarter is the strong growth momentum in advertising revenues, despite subdued spends. The performance illustrates that our investments in content are yielding good returns,” said Chandra.
The company’s consolidated operating revenues at Rs 938.8 crore for the third quarter rose 26.3% over the year-ago period.
Operating profit, or earnings before interest, tax, depreciation and amortisation (Ebitda), for the third quarter stood at Rs 261.1 crore. Ebitda margin for the quarter was 27.8%, while net profit margin stood at 20.6%.
With digitisation bringing in a transformational change in the Indian television industry, the company is of the opinion that it will benefit all stakeholders.
Punit Goenka, managing director and chief executive officer, Zee, said, “Our subscription revenues during the third quarter are the highest ever, and with digitisation rollout they will improve in the medium term.”
While the Zee network viewership witnessed a successful mix of new and returning shows, the management is confident of the next 12 months and will continue to invest in new content and channels.
“These investments will have an impact on our operating margins in the short term, but will enhance our performance in the medium term as well,” said Goenka.
The company trumped the overall industry, too.
Atul Das, chief strategy officer, Zee, said, “While the overall industry is estimated to have grown 9-10%, our performance in the first nine months has been 27% growth over the same period last year. The growth is also an indication of strong performance on viewership and better monetisation of our properties,” said Das.
The third quarter also saw Zee launch India’s first edutainment channel called ZeeQ aimed at children in the age group of 4 to 14 years.
Response to the channel has been very good, Das said, adding the company is keen on adding more pay TV properties.
Ankit Kedia, analyst with Centrum Broking, said the company will benefit from the Phase II and III of digitisation and margins will continue to be healthy at 26-27%.
With more than Rs 1,100 crore of cash, the company would look at new investment opportunities, he said, citing the new initiatives, including ZeeQ and Ditto TV
Zee Entertainment Enterprises Ltd, India's leading media company, has reported a 40.5% year-on-year (yoy) growth in net profit for the third quarter at Rs 193.3 crore, lifted by a strong surge in advertising and subscription revenues.
Advertising and subscription revenues during October-December grew 28.8% and 25.6% yoy to Rs 509.4 crore and Rs 409.8 crore, respectively.
Subhash Chandra, chairman, Zee, said the first three quarters of this fiscal have been good for the company with strong performance relative to the industry and competition.
“With one quarter to go, we are looking forward to a strong growth this year. The highlight for this quarter is the strong growth momentum in advertising revenues, despite subdued spends. The performance illustrates that our investments in content are yielding good returns,” said Chandra.
The company’s consolidated operating revenues at Rs 938.8 crore for the third quarter rose 26.3% over the year-ago period.
Operating profit, or earnings before interest, tax, depreciation and amortisation (Ebitda), for the third quarter stood at Rs 261.1 crore. Ebitda margin for the quarter was 27.8%, while net profit margin stood at 20.6%.
With digitisation bringing in a transformational change in the Indian television industry, the company is of the opinion that it will benefit all stakeholders.
Punit Goenka, managing director and chief executive officer, Zee, said, “Our subscription revenues during the third quarter are the highest ever, and with digitisation rollout they will improve in the medium term.”
While the Zee network viewership witnessed a successful mix of new and returning shows, the management is confident of the next 12 months and will continue to invest in new content and channels.
“These investments will have an impact on our operating margins in the short term, but will enhance our performance in the medium term as well,” said Goenka.
The company trumped the overall industry, too.
Atul Das, chief strategy officer, Zee, said, “While the overall industry is estimated to have grown 9-10%, our performance in the first nine months has been 27% growth over the same period last year. The growth is also an indication of strong performance on viewership and better monetisation of our properties,” said Das.
The third quarter also saw Zee launch India’s first edutainment channel called ZeeQ aimed at children in the age group of 4 to 14 years.
Response to the channel has been very good, Das said, adding the company is keen on adding more pay TV properties.
Ankit Kedia, analyst with Centrum Broking, said the company will benefit from the Phase II and III of digitisation and margins will continue to be healthy at 26-27%.
With more than Rs 1,100 crore of cash, the company would look at new investment opportunities, he said, citing the new initiatives, including ZeeQ and Ditto TV
Ikea gets FIPB go-ahead for Rs10,500 crore FDI
This story first appeared in DNA Money edition on Tuesday, January 22, 2013.
The Foreign Investment Promotion Board (FIPB) has cleared Rs 10,500 crore investment proposal of Swedish furniture major IKEA to set up shop in the country with cafeterias. The FIPB had earlier permitted it to invest Rs 4,200 crore for opening single-brand retail stores.
Commerce Minister Anand Sharma said late on Monday that IKEA's case for investment is cleared, which is a positive development. "The government is committed to playing a constructive role in enhancing FDI, especially in areas which create jobs and provide technological enhancement. Globally, IKEA has a business model which integrates in its embrace SMEs (small and medium enterprises) and domestic industry, making them the part of global value chain," he said.
IKEA Group, which manufactures and sells home and office furnishing products, proposes to invest in single-brand retail trading in India through a 100% subsidiary. With the FIPB clearing the way, the retailer would also be able to open cafeterias in their stores.
The proposal will now be placed before the Cabinet Committee on Economic Affairs (CCEA) for final approval. Any investment over Rs 1,200 crore requires approval from the CCEA which will take another 15-odd days to clear the proposal.
Calling it a sane decision, Arvind Singhal, chairman, Technopak Advisors, said there was no reason for the Indian government to take such a long time on a globally respected and ethics-driven company.
"However, I don't think we will see the first IKEA store opening anytime in the next two years if not more. While they are a very successful retailer globally, they do a careful study before entering any new market. Whatever they will do in India will be after a very careful evaluation of the ground realities viz Indian consumers' buying habits, whether they will travel long distances or not, etc," said Singhal.
IKEA typically takes over five to seven lakh square feet of retail space in most of the markets it operates in. Will it take the same approach in India given the kind of retail space in the country? "It is not necessary if they will replicate a particular approach / format in other countries of the world, feels Singhal.
"I really don't know what would be their store size in India, but whatever IKEA stands for in terms of good quality, affordable pricing, good service and good dealing with their vendors, etc. is something that will be consistent in the Indian market as well," he said.
The Foreign Investment Promotion Board (FIPB) has cleared Rs 10,500 crore investment proposal of Swedish furniture major IKEA to set up shop in the country with cafeterias. The FIPB had earlier permitted it to invest Rs 4,200 crore for opening single-brand retail stores.
Commerce Minister Anand Sharma said late on Monday that IKEA's case for investment is cleared, which is a positive development. "The government is committed to playing a constructive role in enhancing FDI, especially in areas which create jobs and provide technological enhancement. Globally, IKEA has a business model which integrates in its embrace SMEs (small and medium enterprises) and domestic industry, making them the part of global value chain," he said.
IKEA Group, which manufactures and sells home and office furnishing products, proposes to invest in single-brand retail trading in India through a 100% subsidiary. With the FIPB clearing the way, the retailer would also be able to open cafeterias in their stores.
The proposal will now be placed before the Cabinet Committee on Economic Affairs (CCEA) for final approval. Any investment over Rs 1,200 crore requires approval from the CCEA which will take another 15-odd days to clear the proposal.
Calling it a sane decision, Arvind Singhal, chairman, Technopak Advisors, said there was no reason for the Indian government to take such a long time on a globally respected and ethics-driven company.
"However, I don't think we will see the first IKEA store opening anytime in the next two years if not more. While they are a very successful retailer globally, they do a careful study before entering any new market. Whatever they will do in India will be after a very careful evaluation of the ground realities viz Indian consumers' buying habits, whether they will travel long distances or not, etc," said Singhal.
IKEA typically takes over five to seven lakh square feet of retail space in most of the markets it operates in. Will it take the same approach in India given the kind of retail space in the country? "It is not necessary if they will replicate a particular approach / format in other countries of the world, feels Singhal.
"I really don't know what would be their store size in India, but whatever IKEA stands for in terms of good quality, affordable pricing, good service and good dealing with their vendors, etc. is something that will be consistent in the Indian market as well," he said.
HUL set to pay Rs150 crore extra royalty next year
This story first appeared in DNA Money edition on Wednesday, January 23, 2013.
Hindustan Unilever Ltd (HUL), the country’s largest fast moving consumer goods company, reported a 15.59% on-year jump in net profit to Rs871.36 crore for the October-December quarter on a 10% rise in sales to Rs6,433.69 crore.
The performance was not impressive, considering the company has witnessed around 5% volume growth, said Naveen Trivedi, FMCG analyst at Karvy Stockbroking.
“The price hike taken hasn’t helped in expanding margins as well. On that basis, the numbers were not substantially great. In fact, they show some concern on the company’s overall volume growth.”
The results were, however, overshadowed by the news about HUL’s increased royalty payment agreement to parent Unilever for technology, trademark licence and other services.
Till now, HUL used to pay 1% royalty on net sales of specific products manufactured with technical inputs developed from Unilever. The new arrangement, effective February 1, envisages a gradual increase in the existing royalty cost.
According to R Sridhar, CFO of HUL, royalty from February 1 to March 31 next year is estimated to be 0.5% of turnover.
At an expected turnover of Rs30,000 crore next fiscal, that would mean an additional outgo of Rs150 crore – or about Rs37.5 crore per quarter.
The company will pay about Rs22 crore extra for February and March this fiscal.
Thereafter, the increase will be in a range of 0.3% to 0.7% of turnover in each financial year, leading to a total estimated royalty cost increase of 1.75% of turnover, Sridhar said.
The impact under the previous agreement resulted in a royalty cost of around 1.4% of turnover. But with the new agreement in place, royalty is expected to be around 3.15% of the turnover by March 31, 2018.
“Since royalty will increase every quarter, Ebitda margin in the next quarter will be suppressed by 50 basis points, at least moving up to 170 bps by fiscal 2018. We will have to see how the company performs in the coming quarters going forward,” said Trivedi.
Industry observers and stock market experts gave a thumbs-down to the royalty issue, saying it harms the interests of minority investors in India.
Hindustan Unilever Ltd (HUL), the country’s largest fast moving consumer goods company, reported a 15.59% on-year jump in net profit to Rs871.36 crore for the October-December quarter on a 10% rise in sales to Rs6,433.69 crore.
The performance was not impressive, considering the company has witnessed around 5% volume growth, said Naveen Trivedi, FMCG analyst at Karvy Stockbroking.
“The price hike taken hasn’t helped in expanding margins as well. On that basis, the numbers were not substantially great. In fact, they show some concern on the company’s overall volume growth.”
The results were, however, overshadowed by the news about HUL’s increased royalty payment agreement to parent Unilever for technology, trademark licence and other services.
Till now, HUL used to pay 1% royalty on net sales of specific products manufactured with technical inputs developed from Unilever. The new arrangement, effective February 1, envisages a gradual increase in the existing royalty cost.
According to R Sridhar, CFO of HUL, royalty from February 1 to March 31 next year is estimated to be 0.5% of turnover.
At an expected turnover of Rs30,000 crore next fiscal, that would mean an additional outgo of Rs150 crore – or about Rs37.5 crore per quarter.
The company will pay about Rs22 crore extra for February and March this fiscal.
Thereafter, the increase will be in a range of 0.3% to 0.7% of turnover in each financial year, leading to a total estimated royalty cost increase of 1.75% of turnover, Sridhar said.
The impact under the previous agreement resulted in a royalty cost of around 1.4% of turnover. But with the new agreement in place, royalty is expected to be around 3.15% of the turnover by March 31, 2018.
“Since royalty will increase every quarter, Ebitda margin in the next quarter will be suppressed by 50 basis points, at least moving up to 170 bps by fiscal 2018. We will have to see how the company performs in the coming quarters going forward,” said Trivedi.
Industry observers and stock market experts gave a thumbs-down to the royalty issue, saying it harms the interests of minority investors in India.
Hind Unilever bets big on product innovation
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| R Sridhar |
Hindustan Unilever’s third-quarter performance presentation starts with a visual on the Dove Elixir premium hair oil brand, a category into which the company has recently extended the Dove brand. R Sridhar, chief financial officer, is quick to point out that it’s a key innovation, apart from several others by the company in the third quarter. He spoke about the overall fast moving consumer goods (FMCG) market scenario in the country, consumer behaviour, etc as also the company’s plans and strategy ahead. Edited excerpts...
On overall FMCG market scenario
During the third quarter, the FMCG market continued to grow in double digits. However, we also saw that slower growth in discretionary category continue on a sequential basis. As for soaps and detergents, growth continues to be price-led. We have also seen a slowdown in modern trade (as a channel) retail growth in the December quarter. On the other hand, Canteen Stores Department (CSD), which was a bit of a challenge, has shown recovery. The pace of store additions has slowed, in fact it is negative, indicating that the more stores were shut than new ones were opened. The input cost environment was holding firm as was the competitive intensity during the quarter.
On the HUL’s third quarter performance
In what has clearly been a challenging environment, it is a consistent broad-based growth and margin / profit improvement. While our reported growth might be 10%, but because of the exports demerger our underlying domestic consumer business growth is about 15% and volume growth is 5%. Both Home and Personal Care and Foods & Beverages registered double-digit growth. Operating margin has expanded by 40 basis points and this is the sixth consecutive quarter wherein the company has shown consistent (40 bps) growth. Advertising and promotions have been stepped up by Rs150 crore to 12.8% of the sales. For the nine months ended December, we have grown consumer business 16%, with a 7% underlying volume growth. Margin is up by 100 bps and profit after tax before exceptions is up roughly 27%.
Key product innovations
The Lifebuoy colour changing hand wash and the Dove Elixir premium range of hair oil are some of the key innovations being introduced. This apart there was a new variant in Sunsilk, Vaseline, whole new range of Brylcream hair gels and cream and Knorr soupy noodles towards the end (last week of December) of the quarter.
Immediate concerns
In the near term however, there are a couple of concerns, particularly volatility - global markets, local markets, currency, commodity - which is continuous in nature. We will have to be very conscious as the inflationary pressures may put some stress on consumer wallets.
Outlook
As we look ahead we are positioned well in a FMCG market, which has clearly got positive growth outlook over the medium to long term. The company is positioned well, whether it is our portfolio of brands or our superior capabilities.
From bulk sales, DLF goes piecemeal
This story first appeared in DNA Money edition on Tuesday, January 22, 2013.
DLF Ltd is staggering inventory from its projects to benefit from frequent price increases and protect margins from cost escalations.
India’s top realtor, which launched quite a few projects in the last year, has been offloading inventory in bulk till now.
Rajeev Talwar, executive director of DLF, said, “We are now releasing limited stock so that the increase in costs will be met through differential pricing over each subsequent release. While the idea is to release a large number of projects, taking a piecemeal approach will help us increase returns.”
In the absence of an escalation clause, cost increases had to be borne by the developer. Over the next 3-4 years, DLF expects new projects to generate Rs2,000-3,000 crore in sales annually. While launches would happen across the country, most would be in the National Capital Region and some pockets in south India.
The realtor launched a couple of residential projects last quarter including the luxury development DLF Sky Court at Gurgaon. Talwar said all projects have received a good response.
DLF Sky Court was launched at `6,000 per square foot (psf) and is currently being sold at Rs6,250 psf, according to real estate brokerage, InvestInNest.com.
On revival in real estate, Talwar said traction in the commercial space will largely depend on how soon the economy improves. The residential market, on the other hand, has kept up with people’s aspirations, he said.
“As the economy gets better and incomes get distributed, there will be greater traction in the entire residential segment – be it luxury, premium and middle-income. We are quite certain that future launches will elicit a much higher response than what was seen in the last 2-3 years,” he said.
DLF Ltd is staggering inventory from its projects to benefit from frequent price increases and protect margins from cost escalations.
India’s top realtor, which launched quite a few projects in the last year, has been offloading inventory in bulk till now.
Rajeev Talwar, executive director of DLF, said, “We are now releasing limited stock so that the increase in costs will be met through differential pricing over each subsequent release. While the idea is to release a large number of projects, taking a piecemeal approach will help us increase returns.”
In the absence of an escalation clause, cost increases had to be borne by the developer. Over the next 3-4 years, DLF expects new projects to generate Rs2,000-3,000 crore in sales annually. While launches would happen across the country, most would be in the National Capital Region and some pockets in south India.
The realtor launched a couple of residential projects last quarter including the luxury development DLF Sky Court at Gurgaon. Talwar said all projects have received a good response.
DLF Sky Court was launched at `6,000 per square foot (psf) and is currently being sold at Rs6,250 psf, according to real estate brokerage, InvestInNest.com.
On revival in real estate, Talwar said traction in the commercial space will largely depend on how soon the economy improves. The residential market, on the other hand, has kept up with people’s aspirations, he said.
“As the economy gets better and incomes get distributed, there will be greater traction in the entire residential segment – be it luxury, premium and middle-income. We are quite certain that future launches will elicit a much higher response than what was seen in the last 2-3 years,” he said.
Sunday, 20 January 2013
‘Social media, consumers are today’s advertising regulators’
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| Josy Paul |
This Q&A first appeared in DNA Money edition on Wednesday, January 16, 2013.
Unusual is the business card of Josy Paul, chairman and chief creative officer of the Indian branch of BBDO, the global advertising major. It has neither office address nor landline telephone numbers. Even more surprising, it has his mobile number and email ID – things that VIPs usually prefer to keep private. The elegant black card even contains his Jet Privilege card number. Surprises don’t end there: the card gives away the registration number of his five-year-old Black Honda Civic. “I’m either on the road or on a flight travelling across the country. It’s practically a mobile office in my case. Hence, it made sense to have office coordinates replaced with these numbers.” In this discussion the adman speaks about Strategic design in communications, reality advertising, the digital medium, corporate campaigns. Edited excerpts...
You pioneered reality advertising in India, isn’t it?
Reality advertising as a concept was explored even before we experimented with it. It’s just that in our case the timing was very appropriate. We conceptualised an idea and designed a communication strategy around it when reality television programming was gaining momentum in the country. The Gillette ‘Women Against Lazy Stubble’ campaign for P&G not only became a huge movement in the country but also activity that created a world record in the Guinness Book and the Limca Book of Records. We have only built on what other good people have left behind.
While not taking credit for anything, it was just our response to a situation, opportunity or a problem. We feel that it has to be real and engage people in the real way that is authentic. If it happens to have some correlation with some work done before, we are more than happy. We accept that, maybe, things like this have been done before and hence would not claim to be pioneers. We have set up a philosophy for ourselves — that of creating ‘acts’ and not ‘ads’. In a way, we’ve laid down a set of principles which, maybe, the people before had not fully organised. Earlier, people were doing random ads while we’re taking a more organised approach to it.
Do you agree that advertising is closer to what the product / service stands for these days?
We’re living in a new world with a new kind of consciousness, that of a Facebook and Twitter, which is out there and driven by real people in a real world. That consciousness won’t allow the false and fakeism. Therefore, it’ll be very important that we only talk about what’s being achieved rather that what is going to be achieved. One can talk about ideas that are useful, something that is real and measurable; or you can be highly entertaining and help people be entertained for that moment. Ads could be illogical sometimes but should be highly entertaining. Having said that, nobody will be able to fake it in their communications any more because social media will kill you even before industry body takes you up. People these days are not shying away from speaking up, if they find something that’s objectionable. I’d say the consumers are the biggest industry regulators today.
Is the corporate sector getting more serious about campaigns?
I’m seeing greater consciousness among our clients for the simple reason that they also believe that’s the future. We aren’t telling them any new things. They are already in it and are trying to find a way to leverage a social context and still be sustainable at a commercial level. None of the work we do is CSR (corporate social responsibility) as companies are seeing direct benefits as well. The ecosystem is benefiting out of it and so are brands at sales and goodwill levels. It’s straddling both ways and can’t be one versus the other because then it’s not sustainable.
What kind of an impact will new media like online platforms and social networks have on television ads, in terms of reaching the target audience?
Television is still the lead medium to reach out to a larger set of people whom the corporate sector is targeting. Having said that, the way people are using television as a medium these days is changing significantly. Companies may decide to go with various available formats: that is, public relations, documentary, 30-second advertisements, etcetera. So, the corporate sector is still using the television medium, but the format is changing. Social media is playing its part by keeping the engagement alive and forcing everybody to think about interface and whether it will become a one-to-one transaction (which is a short-term thing) or a one-to-one interaction (which is a long-term thing).
How is 2013 looking for BBDO in terms of business?
We had a fantastic 2012 with interesting campaigns like the re-launch of Blackberry with ‘Action starts here’ where we made the star the hero. I think the challenge in 2013 is how to scale up these ideas and create greater impact. I think the base has been set — in the sense that this approach to appetising is here to stay for a while. Now we’ve to think about how to make it really big. The second challenge is, culturally, how do we get every one of us in the agency — we were two people earlier; now, we’re more than 100; and more will join — to understand and be with us equally and hunt for both the solution and craft and quality of solution. It’s a huge challenge and we are focusing on our reputation rather than our bottomline.
Consolidation is seeping into the Indian advertising industry. Is BBDO looking at any inorganic opportunity?
There are conversations at all times and the thing is, it’s not only about BBDO, which is part of a large organisation called Omnicom which is always looking for opportunities or possibilities to grow its objectives. I think it’s in that zone and we personally don’t get involved. We are content creators and like to remain that way.
Unusual is the business card of Josy Paul, chairman and chief creative officer of the Indian branch of BBDO, the global advertising major. It has neither office address nor landline telephone numbers. Even more surprising, it has his mobile number and email ID – things that VIPs usually prefer to keep private. The elegant black card even contains his Jet Privilege card number. Surprises don’t end there: the card gives away the registration number of his five-year-old Black Honda Civic. “I’m either on the road or on a flight travelling across the country. It’s practically a mobile office in my case. Hence, it made sense to have office coordinates replaced with these numbers.” In this discussion the adman speaks about Strategic design in communications, reality advertising, the digital medium, corporate campaigns. Edited excerpts...
You pioneered reality advertising in India, isn’t it?
Reality advertising as a concept was explored even before we experimented with it. It’s just that in our case the timing was very appropriate. We conceptualised an idea and designed a communication strategy around it when reality television programming was gaining momentum in the country. The Gillette ‘Women Against Lazy Stubble’ campaign for P&G not only became a huge movement in the country but also activity that created a world record in the Guinness Book and the Limca Book of Records. We have only built on what other good people have left behind.
While not taking credit for anything, it was just our response to a situation, opportunity or a problem. We feel that it has to be real and engage people in the real way that is authentic. If it happens to have some correlation with some work done before, we are more than happy. We accept that, maybe, things like this have been done before and hence would not claim to be pioneers. We have set up a philosophy for ourselves — that of creating ‘acts’ and not ‘ads’. In a way, we’ve laid down a set of principles which, maybe, the people before had not fully organised. Earlier, people were doing random ads while we’re taking a more organised approach to it.
Do you agree that advertising is closer to what the product / service stands for these days?
We’re living in a new world with a new kind of consciousness, that of a Facebook and Twitter, which is out there and driven by real people in a real world. That consciousness won’t allow the false and fakeism. Therefore, it’ll be very important that we only talk about what’s being achieved rather that what is going to be achieved. One can talk about ideas that are useful, something that is real and measurable; or you can be highly entertaining and help people be entertained for that moment. Ads could be illogical sometimes but should be highly entertaining. Having said that, nobody will be able to fake it in their communications any more because social media will kill you even before industry body takes you up. People these days are not shying away from speaking up, if they find something that’s objectionable. I’d say the consumers are the biggest industry regulators today.
Is the corporate sector getting more serious about campaigns?
I’m seeing greater consciousness among our clients for the simple reason that they also believe that’s the future. We aren’t telling them any new things. They are already in it and are trying to find a way to leverage a social context and still be sustainable at a commercial level. None of the work we do is CSR (corporate social responsibility) as companies are seeing direct benefits as well. The ecosystem is benefiting out of it and so are brands at sales and goodwill levels. It’s straddling both ways and can’t be one versus the other because then it’s not sustainable.
What kind of an impact will new media like online platforms and social networks have on television ads, in terms of reaching the target audience?
Television is still the lead medium to reach out to a larger set of people whom the corporate sector is targeting. Having said that, the way people are using television as a medium these days is changing significantly. Companies may decide to go with various available formats: that is, public relations, documentary, 30-second advertisements, etcetera. So, the corporate sector is still using the television medium, but the format is changing. Social media is playing its part by keeping the engagement alive and forcing everybody to think about interface and whether it will become a one-to-one transaction (which is a short-term thing) or a one-to-one interaction (which is a long-term thing).
How is 2013 looking for BBDO in terms of business?
We had a fantastic 2012 with interesting campaigns like the re-launch of Blackberry with ‘Action starts here’ where we made the star the hero. I think the challenge in 2013 is how to scale up these ideas and create greater impact. I think the base has been set — in the sense that this approach to appetising is here to stay for a while. Now we’ve to think about how to make it really big. The second challenge is, culturally, how do we get every one of us in the agency — we were two people earlier; now, we’re more than 100; and more will join — to understand and be with us equally and hunt for both the solution and craft and quality of solution. It’s a huge challenge and we are focusing on our reputation rather than our bottomline.
Consolidation is seeping into the Indian advertising industry. Is BBDO looking at any inorganic opportunity?
There are conversations at all times and the thing is, it’s not only about BBDO, which is part of a large organisation called Omnicom which is always looking for opportunities or possibilities to grow its objectives. I think it’s in that zone and we personally don’t get involved. We are content creators and like to remain that way.
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