Goderj

Godrej's customers in India give thumbs up to rebranding

Thu, 2010-10-21 07:49 Source: The Hindu Business Line

Following Indian retail major Godrej's rebranding, Ashutosh Tiwari, executive vice president of Strategic Marketing commenting on customer behaviour says, "The consumers' willingness to purchase more volume, to buy a greater range of products, to pay a premium and to recommend the brand to others has gone up by 20-25 percentage points since we launched our rebranded products."

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The Rs 7,200-crore Godrej Group has finally unveiled its brand new corporate identity and branding strategy at its headquarters in Mumbai on Friday. The groups strategy outlined a roadmap to invest in a renewed Godrej masterbrand and corporate identity to support the targeted revenue growth of 25-30% compounded annually, for the group. It was two years ago that the 111 year old Godrej Group had appointed global brand consultancy firm Interbrand to reposition its master brand with a makeover that makes the group identity modern as well as contemporary. Unveiling the groups brand strategy, group chairman, Adi Godrej said, The Indian consumer now has a more demanding and youthful mindset. At Godrej, we have always been at the helm of changing and redefining the marketplace and this will now be reflected in a marketing and branding strategy that accelerates profitable growth.

Incidentally, Godrej had closely worked with Interbrand to study the Godrej brand across employees, consumers, investors and business partners and redefine its approach to harnessing the brands intrinsic strengths. On the groups makeover strategy, Tanya Dubash, excutive director & president (marketing), said, The revitalised corporate identity is a result of a detailed analysis of our product, service and business portfolio. Using the Godrej brand as a unifier of our businesses and people made sense because it is our most valuable asset, it cannot be replicated and it spans all our businesses. According to Godrej, the group plans to invest significantly in the Godrej Master Brand as part of a systemic plan for creating a strong Godrej brand franchise through strategies for product and brand development, retail channel strategy, communication and talent management. The initial phase of the initiative will build the Godrej Master Brand in tandem with the four businesses of personal grooming, furniture, property and aerospace, said Dubash. Ever since the Godrej Group was founded at Lalbaug in 1887, the group had sported a traditional logo thats common for all its business ranging from soaps to steel boards. Shedding its fuddy-duddy image, the group has now opted for a new brand identity to acquire an international appeal in global markets

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Adi Godrej used the economic slowdown as a window to rethink the groups strategy and boost the coolness quotient of the brand. Walking into the 112-year-old Godrej groups sprawling campus in Mumbais Vikhroli, one can clearly see that a makeover is underway. Staffers at Godrej Consumer Products are settling into their new all-glass office, with bubble-gum pink and acid green artwork and exposed industrial pipes. The pipes seem like a fun reference to this manufacturing campus and the artwork comes from the groups splashy rebranding campaign. Till about a year ago, Godrej was seen as a brand its target customers said their mothers or grandmothers used, says chairman Adi Godrej. The group was trying to move away from its image as a soaps and locks seller when the economic slowdown hit. The impact was varied. Demand for the premium apartments Godrej Properties was developing slackened, its public issue had to be delayed and sales at the largely export-led oleochemicals business fell. Thats when Godrej decided to focus on selling consumer products to rural India, where he expected government investments to ensure buoyant demand. He quickly shifted the thrust of the properties business to low income households rather than marquee properties such as the high-rise Planet Godrej in Mumbai. That, along with a cost cutting exercise and rebranding campaign, have helped Godrej Consumer and Godrej Industries, which makes oleochemicals, step up its sales and profits. The public issue of Godrej Properties may

finally happen this fiscal year and the group may be riding on both momentum and coolness. But getting here was an arduous journey for group companies. For instance, Godrej Consumers soaps and hair dyes sold largely in cities. When it decided to pay better attention to buyers in villages, the rural market didnt open up easily. Most people who could afford soaps already used other brands and changing habits was hard, says Pritee Panchal, a consumer products analyst at brokerage SBI Capital Markets. Godrej broke in by not taking as steep price hikes as some of its competitors did when commodities prices rose. The company did hair dye sampling through village barbers and introduced small soap packs for Rs 5 for Godrej No 1; it put out ads only on channels that reach rural India best: Doordarshan and All India Radio. It has added 5,000 villages to its distribution network in the last six months. What little sacrifices we made last year, we are recouping this year. The market is also rewarding Godrej Consumer, says Godrej referring to the near trebling of the companys stock in the last one year. Godrej spoke from his Vikhroli office that is filled with photos of his children and grandchildren and paintings by well-known Indian artists. Consumer products were relatively less vulnerable to the slowdown than the groups properties business. There too, Godrej has turned to building homes in the Rs 5 lakh to Rs 25 lakh bracket. It has launched low-income housing projects in Kolkata and Ahmedabad and plans to launch one in a Mumbai suburb. While developers had traditionally preferred to develop higher margin homes to justify the high cost of construction and buying land banks, Godrej was one of the first developers to move into low-income housing. This means our sales growth will be dramatic, says Godrej, explaining how he expects to make up for the lower profit margins. We will not be selling flats in 10 or 20, but in numbers of 2,000 and 5,000. So we expect rapid growth. As one of Mumbais largest land owners, Godrej will also develop the property in Vikhroli, which takes up most of the central suburb. Bala Balachandran, one of the longest serving members of the Godrej Consumer board and a professor at Northwestern Univeritys Kellogg School of Management, recalls a strategy meeting that led to this reorientation towards rural markets and low income housing. Asked what they think Godrej Consumers main product was, most executives came up with Cinthol or Godrej No 1. But Adi Godrej, who is known around the office for his punctuality, said it was something more, including the brands connect with the customer and its distribution system. All the focus on rural and the segment that he concentrates come from the customer centric culture of GCPL [Godrej Consumer Products], says Balachandran. That also determines the acquisition strategy as he is rapidly building inorganic growth both within [and] outside the country. These acquisitions may well have helped Godrej make the transformation it had tried for years. From being a soap company, they have transformed quite well, says Sonam Udasi, vice president, research, at Brics Securities. The recent integration of Sara Lee into Godrej Consumer Products has meant shareholders get a full range of consumer products in the GCPL valuation, he says. Godrej Consumers recent growth comes with the first included numbers of Sara Lee, which makes room fresheners and mosquito repellents. Both the mosquito repellent segment and the companys overall sales have grown sharply in the last

year. Analysts say they expect Godrej to increase its stake in the company from the current 49 percent. Godrej says he has used the slowdown as an opportunity to add talent and buy ad space for the rebranding campaign sensibly. Godrej Properties and Consumer have acquired toptier talent as has the newly set up strategy office. He says the cost-cutting also allowed Godrej Consumer to spend almost twice as much on advertising and double profits. This is our only extravagance, says Dalip Sehgal who heads Godrej Consumer Products, referring to his new office. Even here, we spent sensibly. Over the last year, the group has created task forces to reduce costs, and strategic groups across companies to deal with a market situation they have never seen: The yo-yoing of commodity prices, closure of modern trade stores and the move of some consumers to smaller pack sizes and lesser known brands. We pulled forward some initiatives like increasing penetration in the rural market, says Sehgal. With the new strategy of tapping the middle and lower ends of the market, Godrej expects the Godrej brand name to work for him. In the low income housing market, known for fly-bynight builders, the Godrej name will be leveraged more. With all this is mind, Godrej launched the groups first ever ad campaign for the Godrej brand rather than for its individual brands such as Cinthol soap or Godrej Hair Dye. Aimed at packaging the brand for younger consumers, the campaign showcased the groups products for the space programme, and included sponsorship of the Indian Premier League and a show created to promote the Godrej products range, called Godrej Khelo Jeeto Jiyo. Godrej says the group will continue to build on branding. Group companies have used the campaign to target their individual advertising better. For instance, Godrej Consumer now buys ads more on Doordarshan because the brand campaign takes care of cable television. It means Godrej Consumer has an advertising budget lower than most competitors. Godrej says that while last year, the company sacrificed profit growth for sales growth, they are reaping the results of their new market offerings, a deeper talent pool and lower costs. But analysts say competition is also tightening in this space. It is not as if only Godrej Consumer is growing, says Brics Securities Udasi. Many of the mid-cap consumer companies are seeing similar growth and are in similar spaces, including Marico, Dabur, Jyothy Labs and Emami. While the Godrej brand name does bring brand recall, Godrej will have to keep innovating and improving distribution to stay ahead, he says. There are signs the grand old group is getting nimbler. At the Vikhroli campus, the groups consumer durables division, known for its iconic Godrej cupboard, has set up what is known as the space office. While the steel Godrej cupboard was a staple in older Indian homes, the glass encased space office showcases Godrej executives working on stark white furniture that the division now makes.