Monday, June 15, 2009

Valley of Death

KELLOGG’S and its not so crunchy Indian Story!
Ashutosh Dikshit | IIM Shillong

I remember the days when I was a kid and the only time I had tasted “branded” cornflakes was on the breakfast menu of the maiden International flight I had taken at that point in time. The brand name on the packaging was “Kellogg’s” with the distinct logo being prominently flashed.
In the late 1980s, the company had reached an all-time peak, commanding a staggering 40 per cent of the US ready-to-eat market from its cereal products alone. By that time, Kellogg’s had over 20 plants in 18 countries worldwide, with yearly sales reaching above US $6 billion.
However, in the 1990s, Kellogg’s began to struggle. Competition was getting tougher as its nearest rivals General Mills increased the pressure with its Cheerios brand. Kellogg’s management team was said to be ‘unimaginative’, and of ‘spoiling some of the world’s top brands’ in a 1997 article in Fortune magazine
In strong markets such as the United States and the UK, the cereal industry had been stagnant for over a decade, as there has been little room for growth. Therefore, from the beginning of the 1990s, Kellogg’s looked beyond its traditional markets of Europe, United States and India was as a suitable target for Kellogg’s products. It did not take the company a lot of time to decide that India with 250 million of middle class, showed the bright prospect of a potential untapped market.
In 1994, three years after the barriers to international trade had opened in India, Kellogg’s decided to invest US $65 million into launching its number one brand, Corn Flakes. The news was greeted optimistically by Indian economic experts such as Bhagirat B Merchant, who in 1994 was the director of the Bombay Stock Exchange. ‘Even if Kellogg’s has only a two percent market share, at 18 million consumers, they will have a larger market than in the US itself,’ he said at the time.
However, the Indian sub-continent found the whole concept of eating breakfast cereal a new one. Indeed, the most common way to start the day in India was with “chole bature” in North India and “Idly Sambar” in the South. While this meant that Kellogg’s had few direct competitors, it also meant that the company had to promote not only its product, but also the very idea of eating breakfast cereal in the first place.
The first sales figures were encouraging, and indicated that breakfast cereal consumption was on the rise. However, it soon became apparent that many people had bought Corn Flakes as a one-off, novelty purchase. Even if they liked the taste, the product was too expensive. A 500-gram box of Corn Flakes cost a third more than its nearest competitor. However, Kellogg’s remained unwilling to bow to price pressure and decided to launch other products in India, without doing any further research of the market. Over the next few years, Indian cereal buyers were introduced to Kellogg’s Wheat Flakes, Frosties, Rice Flakes, Honey Crunch, Special K and Chocos Chocolate Puffs – none of which have managed to replicate the success they have encountered in the West.
Furthermore, the company’s attempts to ‘Indianize’ its range have been disastrous. Its Mazza-branded series of fusion cereals, with flavors such as mango, coconut and rose, failed to make a lasting impression.
While Kellogg’ s has ushered in a shift in the Indian breakfast habits and adapted its line of cereal flavors to meet the Indian palate, the price of the product still restricts consumption to urban centers and affluent households causing the problem of lack of scalability in the market
As for Kellogg’s, it remains to be seen whether its move into other product categories, such as snack food, will be able to help strengthen its brand. ‘Kellogg’s is caught in a bind,’ is what remarked by one Indian brand analyst in Business Line newspaper. ‘It realises that cornflakes can make money only in the long haul, so it needs a product which will give it some accelerated growth in the interim. However, its area of strength worldwide lies in the breakfast cereal and not in the snack food category.’
Only time will tell whether Kellogg’s is able to sustain its brand identity or otherwise. However, there are some key Lessons from the Kellogg’s story
  • Lack of comprehensive Market Assessment. Why did Kellogg’s cereals have a tough ride in India? – They failed to assess and use to their advantage, every conceivable diversity in the Indian sub continent
  • Complimentary Product Variance: While the westerners consume cornflakes with cold milk, the product had little compatibility with hot milk that Indians are used to the first thing each morning. Hence product redesign was hardly given a thought. A case in point is that of Mc Donald’s that has come up with a plethora of customized menu options for the Indian foodie.
  • Local competitors are here to stay. Although Indian brands were worried that they would struggle against a new wave of foreign competition following the market opening of 1991, they were wrong. It was further promulgated by CK Prahalad, that ‘Multinational corporations must not start with the assumption that India is a barren field’.
  • Consumers will resist alienation from their core culture - ‘The rules are very clear,’ says Wahid Berenjian, the managing director for US Pizza (which has successfully launched a range of pizzas with Indian toppings) in an article for the newspaper, Business Line. ‘You can alienate me a bit from my culture, but you cannot make me a stranger to my culture. The society is much stronger than any company or product.’
The bottom line remains that Brands that want to succeed in India and other culturally distinct markets need to remember this parting comment which is of profound significance in the present scenario. But interestingly the world has turned a complete circle making markets unpredictable like never before.
…Jai Ho!

Tommy Hilfiger: The Power of the Logo Anjan Kumar Ash | IIM Shillong

If you see a rectangle logo that comes with the colors of blue, red, and white, then you are surely looking at the official logo of the fashion mogul known as Tommy Hilfiger. It was actually during the 90s when Tommy Hilfiger started making the rounds in the urban fashion scene. However, it was in the late 60s when Hilfiger ventured into the fashion arena.
Tommy Hilfiger is one of the world’s most-loved designer clothing brands. Initially it was a small, niche brand targeting upper class US consumers. During the 1990s Tommy Hilfiger moved to becoming a global powerhouse with broad youth appeal.
The Power Logo
Tommy Hilfiger, more than any other brand in the fashion industry, is a brand based on a logo. Everything about the logo, from the primary colours to the capital letters shouting TOMMY HILFIGER, suggested a bold, brash and 100 per cent US identity. Indeed, some of the company’s most successful products have been T-shirts with the red-white-and-blue logo emblazoned across them. When you wore a Tommy Hilfiger T-shirt everybody knew exactly what you were wearing, so long as they could read.
Problem Started
But then, the brand was suddenly dropping in 2000. Sales slowed down. To follow the trends, they tried to do the coolest, most advanced clothes. They didn’t just do denim embroidery. They jeweled it, studded it. But the customer did not respond in a big way as they expected, and the business – men’s, women’s, junior’s – suffered as a result. Tommy Hilfiger’s share price fell from a high of US $40 per share in May 1999, to US $22.62 on New Year’ s Day 2000, and was cut in half again by the end of that year. Flagship stores in London and Beverly Hills closed down. Various runway shows at fashion events worldwide were also cancelled.
‘Pushing the envelope’
The logo-centric US brand values had been present in other fashion labels – most obviously Calvin Klein and Ralph Lauren. But Tommy Hilfiger had taken it a step further. And by 1999, Hilfiger was starting to feel it might have been a step too far. The brand had in many senses become credible in high fashion circles but this credibility arrived, in part at least, by the brand’ s urban appeal. Hilfiger forged a formula that has since been imitated by Polo, Nautica, Munsingwear and several other clothing companies looking for a short cut to making it at the suburban mall with inner-city attitude.
‘Pushing the envelope’ strategy involved reworking the brand’s famous imagery – the logo. In other words, Tommy Hilfiger abandoned the values that had built the brand. They thought the customer didn’t want or like the Tommy logo anymore and they had to be much more in line with the Euro houses like Gucci and Prada. They felt very insecure about being a red-white-and-blue logo brand. So they removed a lot of stuff. They made it small.
Wrong Decision Continued
They wanted to target the high end consumers. Hilfiger launched a ‘Red Label’ sub-brand aimed at the very top of the market. This was a logo-less range of products including such garments as US $7,000 patchwork, python-skin trousers. Clearly these items were out of the reach of the average Tommy Hilfiger customer.
From 2001 they have been trying to go back to their own roots: classic with a twist. As a result of this, they are again able to attract customers and investors who were comfortable with Hilfiger brand. But till today it has not been able to go back to its glorious past: hot, sexy, flashy, zippy, preppy.

iPhone’s unsuccessful race in India Santosh K Mohanty | IIM Shillong
iPhone, the fastest and the most powerful phone from Apple has taken the world market by storm. According to Apple, iPhone is not just a phone; it’s a combination of revolutionary mobile phone, a widescreen ipod, and a breakthrough internet device which makes it special. Apple iPhone was rated as the Time magazine’s “Invention of the Year” in the year 2007. Despite all the accolades, iPhone 3G didn’t succeed in India. The product failed to cash on the hype that surrounded it.
On the launch of iPhone 3G, Apple’s CEO Steve Jobs mentioned that the phone will be launched at a price of $199 in all markets. But the promise was not kept in the Indian market. It was launched at a price of $700.The high price gave the initial setback to iPhone as Indian consumers were aware of its price in the US market. But apart from the wrong pricing strategy, iPhone had other problems which added to its woes.
iPhone also failed in its marketing, sales and distribution strategy. The product failed to connect with Indian consumers. iPhone was made available only through service providers Airtel and Vodafone. The product was not offered through the large retail chain in India, which accounts for the maximum sale of handsets in India. The availability of the product also affected its sales. The product lacked a marketing push. Even the two service providers Airtel and Vodafone didn’t push the product which also had adverse impact on its sales significantly.
Currently 3G services have been launched in India only by BSNL and MTNL, the two state owned telecom service providers. Private players are yet to get the license to launch 3G services. 3G services are not widely available across India, so consumers were not ready to pay for a service which was not widely available. Airtel and Vodafone were selling iPhone 3G handsets but did not provide 3G services. So even if the handset was compatible to offer 3Gservices it was of no use to the consumers who did not have access to 3G services.
Many analysts believe Apple is to be blamed for the debacle of iPhone in India. They downplayed the capacity of the Indian market, world’s fastest growing mobile market. Last year Apple made only 50000 iPhone sets available for the Indian market. Apple in its strategy to promote iPhone, completely missed out the two large mobile markets. It is struggling in India and is yet to enter the Chinese market.
There lies a chance ahead for Apple to revive the future of iPhone in India. 3G spectrum will be auctioned to private players soon. In few months time the 3G services will be available across the country, this gives Apple a new opportunity to relaunch iPhone in India. Its priced should be reduced; it should be made available through retailers and need to start an aggressive product campaign. It still has a chance to leave a mark in India, most lucrative mobile market in the world.
Mobile number portability will also be made available in metros in few months time. This can also boost the sales of iPhone where high end consumers who were reluctant to change their cellphone numbers can switch over to Airtel and Vodafone and can try iPhone. The need of the hour for iPhone is a revived pricing strategy along with a proper distribution and aggressive marketing pitch to strike a chord with the Indian consumers.

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