Journey from commodity to brand
Journey from commodity to brand

Journey from commodity to brand

For long, cement is regarded as commodity but off late, it is treated as a "Brand". This has not happened overnight but it is an interesting journey. We take our readers through this historical migration that is still happening.

Indian cement industry is characterised by the co-existence of both large manufacturers (national players) as well as small players (regional players). Presently there are more than 65 cement manufacturers in the country. However, the big companies- UltraTech, ACC and Ambuja Cement - together have 44.2 per cent of the industry capacity. It should be noted that in FY2008, their share was just 34.3 per cent. However, these big companies may have to cede some ground by 2021 when their share will see a slight fall to 42.4 per cent due to capacity expansion by others. In last 10 years, cement manufacturing capacity has more than doubled, which is mainly due to strong demand the industry had experienced till FY 2012.

Commodity
Cement is a commodity as vital to fast-growing economies as oil or steel, fertiliser. Some say, uniqueness of the Indian market has made cement producers act a lot like makers of consumer products. Market pressure and consumer structure have pushed major cement players in the country to start investing into more than just making their product strong and efficient. They are now adding personality to the construction material, by building brands around it. And they are doing it by the rules of consumer marketing. The outcome can only be interesting. All over the world major quantity of cement is distributed in the bulk mode and very little goes through bags. However many thinkers have expressed that in India the quantity distributed through bulk is going to increase but what goes through bags will be a significant volume which the producers can't ignore.

Why a sack of cement is worth more for the customer? Why he thinks the product offered to him is better than others? In short the product when goes as a brand to him must have enhanced value, not just through advertisements but in the real sense. Normally in retail cement market, the buying decision is taken by contractors, middleman or mason. Let us now take a few interesting cases.

Ambuja
Ambuja Cement is a multi-region cement manufacturing company. The company has significant presence in northern, western and eastern regions. The company does not have cement capacities in the southern and central regions. About 85 per cent of its sales come from retail segment. The company is expanding its cement capacity by 3.1 MTPA in Marwar which is scheduled for commissioning in FY 20-21.

It is Ambuja, in the year 1983 set up a plant for manufacturing 0.7 MT cement on the western coast and started selling cement. It realised the potential of Mumbai market for retail business and came with an idea of "giant compressive strength". Sooner many other cement companies and even today all new launches are centred on compressive strength of cement. However due credit must be given to Ambuja for capitalising on the strength attribute of a cement. Ambuja soon focused on various means like good advertisement, handsome returns to retailers and fulfilling all other expectations of a cement seller. Then came the gradation of cement, like 43,53 etc. and further was the buzzword ISO 9002. Every where Ambuja scored much better than the existing players. The others had to simply follow what Ambuja was doing.

Talking about the advertisements, we would like to mention a few exceptions like ACC, Shree and JSW, which have never used strength of cement as an attribute in their advertisements. ACC follows an approach of a single mother brand, being one of the oldest cement companies. On the other hand, even today a majority of cement producers create their advertisements only around strength. There are many other attributes of cement, which a creative advertiser is yet to find out. Shree cement is yet another exception.

While talking about the strength of cement, what users expect is a consistent level of strength for batches after batches supplied to him. Giving one time high strength is not a big deal. We can quote here the case of L&T Cement when being sold as brand L&T that had a very high reputation of consistent strength, which even many users acknowledge today. A good number of staff who worked then at L&T and are now part of UltraTech. It was also a very credible brand among cement traders for its fair dealings. While launching UltraTech as a brand, Kumar Mangalam Birla, Chairman AVB Group expressed the optimism that "UltraTech Cement will resonate with buyers in just the way L&T Cement did. Nothing has changed except the name. What was L&T Cement becomes UltraTech Cement". This clearly indicates that he acknowledged the brand value of L&T. There is no wonder, among all the institutional buyers L&T was the most favoured brand for a very long time. The name UltraTech itself has resemblance with L&T and has a tagline "The Engineers" Choice
. Today UltraTech is the largest selling brand in the country that is closely watched by every cement user.

Lafarge story
About 65 per cent of cement is used by individual house builder and around 19 to 20 per cent is infrastructural demand. Lafarge India has launched its premium cement brand, Lafarge Concreto. Lafarge was then the cement market leader in eastern India with a market share of 20 per cent followed by Grasim and Ultratech with 17 per cent. Concreto is reportedly superior quality cement that helped in building better structures that last longer, a consulting civil engineer said.

Cement accounts for about 15 per cent of the total construction cost of a typical house. Though Concreto was priced higher than the normal Lafarge cement, its superior quality and increased durability would more than compensate the increase in cement cost, he said. Concreto was 5 ruppes costlier than other variants.Today the brand has gone to Nuvoco.

Packaging of cement
When cement started selling as a brand, the first innovation that happened was paper packing. To give a premium status to the product, many companies started supplying cement in paper bags especially 53 Grade in good olden days. The higher price could neutralise for the increased cost of paper. However paper packing had its own problems like more handling charges, higher bursting rate while packing and controlled conditions for storing stock of paper bags. The production rate of packing was required to be compromised therefore it was not sustainable.

The other innovation came with 25 kg bag instead of normal 50 kg packing. However this also did not last because production rate was simply halved given the same packing machine. The recent innovation has been polypropylene laminated bags. These are costlier and better looking bags with multi-colour printing option. This innovation is still under observation and yet to accepted fully. So far the practise has been to source the packing material from outside the plant however few cement companies have invested in producing their own packing bags.

We must mention here what has been happened in the segment of white cement, the product always enjoys an elite status over grey cement. The use of cement being very restricted it was many times sold loose for limited application by a retailer. The smart marketing officers saw a potential here and both Birla White and JK Cement introduced 1 kg and 5 kg pack for white cement which instantly became a success. In terms of profit for the companies, these product baskets have been giving highest earnings. The extension to white cement has been "Wall Care Putties." This value added product is giving handsome returns on investments.

Networking
Networking with engineering fraternity and user community is a very important aspect of brand building exercise. Cement being an intermediate product always converted into some other form. E.g it is converted into concrete or plaster mortar. The role played by consulting engineers is extremely important here. On the strength parameters, L&T was extremely consistent, which was proved to engineering community by providing standard deviation values drawn over a period of time. The engineers are required to use these values in designing concrete mixes. In case of any decorative applications role of an architect is vital. Therefore white cement producers are well connected with architects. Flooring, plastering are other applications of cement where architects have a say.

The other important agency that play a crucial role is mason who uses the cement with his own hands. Generally a retail buyer of cement will not displease the mason who is working for him. Cement companies organise mason meets regularly but after some time these turn out to be monotonous and gift distribution event. Some kind of innovation if can be brought to mason meets then it will be a very useful forum for spreading a message. Retailer of cement is another channel partner who has a role to play. Schemes worked out for retailers are parallel to what are run by FMCG companies. These have to be consistent and transparent in execution. Retailer always compares the schemes offered by different companies and chooses the one best suited for him.

Commodity vs. product (Brand)

  • A commodity is a raw material used in the production process to manufacture
  • finished goods, while a product is a finished goods sold to consumers
  • No value is added to a commodity, which can be grown, extracted, or mined
  • Commodities are traded on exchanges through futures contracts, stocks, and ETFs, and can also be bought and sold in their physical states
  • Products are sold on the market for consumption by the average consumer and can also be found in investment portfolios.
Guide to brand building:
  • Make your brand as unique as possible
  • Quickly globalise brand and its products
  • Brand is an investment and not cost
  • Reward customers involvement and make them active promoters of your brand
  • Encourage communities that share your values
  • Donations to good causes to prove that brand is sensitive to the world around
  • Sponsorship to a good cause or an event
  • Service associated with a brand
  • Don't overload customers with too much of technical data and literature
  • Speak the language, the customer understands
  • Interaction with customers at regular intervals

- VIKAS DAMLE

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