In some sense, the onus of fighting the drought has been passed on to the States many of which have neither the will nor the wherewithal to undertake effective relief work. While de-hoarding operations at the State level must continue, it is important that the Centre makes food product imports and movement smoother. For instance, greater coordination among agencies such as ports, customs and plant quarantine would help clear imports of pulses, sugar and edible oil faster. Movement of essential foods should be expedited by making railway rakes available on priority. It is important that the government does not send out panic messages of large-scale imports; they do nothing except propelling international prices up. Open market sale of rice and wheat must commence soon in a regionally-differentiated strategic manner intended to meet consumer needs.

For the aam aadmi, this festival season may not be as bright as he would have expected. It is absolutely essential that the rigours of the drought, especially affecting the poor, are mitigated as much as possible. This is possible only if the Government demonstrates through policy action enough commitment to advancing the welfare of the poor. If there is a fortuitous extension of the monsoon beyond September into the first two weeks of October, sub-soil moisture would improve, boosting the prospects for the rabi crop. That is a hope. Even after six decades of planned development if we have failed to make the economy substantially drought-proof, it is a sad commentary on our policies and administration.

Anil Chugh, Senior Vice-President, Wipro Consumer Care and Lighting

Anjali Prayag

For over 20 years now, the Santoor woman has continued to baffle people with her ‘ageless skin.’ Is this an adman’s bold bet on selling a concept or is it just a creative expression that has worked well for a traditional sandal p lus turmeric soap for over two decades?

Today, as the No. 1 soap brand in South India and No. 3 in the country, Santoor’s context of ‘mistaken age’ has not lost its sheen, insists Anil Chugh, Senior Vice-President, Wipro Consumer Care and Lighting. The need for maintaining a youthful skin is universal and cuts across cultures. “Women like their skin to lie about their age and in the last 20 years, we have made the context of ‘mistaken age’ contemporary and so it has not lost sheen,” argues Chugh in favour of the campaign retaining the same proposition for long.

Santoor, launched in 1984, was an atypical soap for the period, positioned in the ‘natural ingredients’ segment when the market was crowded with 100 brands from 20 companies with health, beauty and skincare and freshness as their selling points. The dominant brands then were Lifebuoy, Liril, Lux, Rexona, Hamam and Cinthol. An extensive market research threw up the answer for Wipro Consumer Care, a soap that would offer consumers the benefit of ‘younger looking skin’ with ‘natural ingredients’, and thus the beginning of a creative expression that has remained consistent through two decades.

Although the company has retained the concept in essence, it has allowed the protagonist to evolve from a traditional ‘mother’ to an achiever willing to step outside her home. The year 2003-04 was a landmark year for the company when the brand was re-launched with glamour and achievement both woven into the product. The white variant was launched in 2006 and the company brought in Bollywood actors Saif Ali Khan and Madhavan to add glamour and male admiration to the mix.

And so the mother-daughter characterisation continues. Chugh is confident that if the company continues to keep it current and relevant it will not lose its sheen even in the future. More importantly, it’s working well and there’s no compelling reason to change it, he believes.

When Wipro’s consumer care division test marketed Santoor in the country in 1984, it was found that the then four lakh-tonne soap market, growing at five per cent per annum, needed a soap that created a unique brand and what was desirable was ‘looking young.’ Three re-launches later and at a market size of 5.57 lakh tonnes and value exceeding Rs 7,606 crore, the original sandal plus turmeric (Orange) offering has two new variants (Santoor White and Glycerine). Why did the company take so long to experiment with the brand? Chugh says that any new variant should expand the market, adding new customers to the brand and enhance its equity, and all this without cannibalising the current customer base. Therefore, the company waited for its core offering to achieve critical mass before addressing new segments through variants. Santoor is now a Rs 600-crore brand with its three variants.

With a value share of 15.1 per cent in the South Indian market and 7.5 per cent all-India, it is now among the top three brands in the country, and grew at 18 per cent last year. But Chugh is all poised to replicate the soap’s success in the South in other upcountry markets. In Maharashtra, for instance, Santoor is a close No. 2 with 22.7 per cent market share in June 2009, just behind Lifebuoy which is at 22.9 per cent.

Santoor has now occupied two price positions in the soap market: Santoor Soap priced at Rs 18 for 100 gm in the popular price segment and Santoor Glycerine priced at Rs 20 for 75 gm in the premium price band. In 2008, the premium soap market was estimated at Rs 1,750 crore and the popular segment at Rs 4,184 crore. The sub-popular range accounted for about Rs 1,674 crore.

Apart from the soap variants, Santoor has extended the brand to new but related products: cream, face wash and talc. Though Chugh refuses to divulge individual sales details, the talc is doing well with a market share of around seven per cent in some of the core Santoor markets, he says. The company has effectively used the modern retail format for these products. Enchanteur and Romano, brands from Unza, its overseas acquisition, were launched to address the needs of the customers walking into these stores. Enchanteur is a fragrance-led brand in personal care for women with products in the deodorant, perfumes, talc, hand and body lotion and handwash categories. Romano is a male grooming brand with hair gel, shaving foam, shampoo, talc, shower foam and deodorant.

In fact, the brand’s regular categories have a respectable presence in these stores and its market shares are relatively higher here than traditional trade market shares. These stores give the company the opportunity to interact with customers more closely, he says.

With Santoor wooing the 30-something Indian woman, isn’t it an oversight to leave out the majority of the potential user segment? Isn’t the brand alienating the man of the family, who’s left to admire the ‘woman with young-looking skin?’ Chugh explains that the brand’s positioning of ‘secret of younger looking skin,’ is universal and cuts across all age groups. The mother-daughter combination connotes that it is a soap for the family. We are not alienating the ‘man’ in the family, insists Chugh, explaining that in India, sharing a soap among family members is quite common. Moreover, soaps targeted at men or the ‘masculine soaps’ segment is very small in India.

The company is also betting on another variant with natural ingredients that would address customers in the urban and Tier I cities seeking premium and luxury offerings. Chugh says the ‘modern’ variant would be launched during the coming season and would be priced at Rs 18 per 100 gm pack. The Santoor woman has thus evolved with the soap while the soap has evolved with her.

One view is that China is fast on its way to surpassing Japan as the second largest economy in the world. China’s economic growth has contributed to more than 70 per cent of the world’s economic growth in recent times . Further, fortunately for China, the Chinese economic stimulus package has worked far better than the much-touted stimulus package of the US administration.

SUCCESSFUL STIMULUS

One reason why China’s economic stimulus package has worked is that its stimulus package focuses on government spending on infrastructure projects. The Chinese authorities were already in the midst of an aggressive programme of building infrastructure, even before the onset of the slowdown .

The additional money given for the stimulus package could, therefore, be readily absorbed by readymade projects. Meanwhile, in the countryside, the authorities have been busy spending the stimulus package on infrastructure projects. These initiatives will provide a boost to the economy, besides improving its manufacturing efficiency and export competitiveness.

The Peoples’ Bank of China – its Central Bank – has also concentrated on providing additional loans to various infrastructure projects from the national banking system. This has meant that the fiscal economic stimulus package of government works more efficiently in China than in the US or elsewhere. Obviously, there was a risk that some of these large loan funds could flow into equity or real estate. The Chinese authorities are fully aware of the dangers of such mishaps.

The fact that the economic stimulus package in China has succeeded is an illustration of how a determined government, which spends public money efficiently on well-designed infrastructure projects to stimulate the economy and ensure jobs and economic growth, can succeed in the current context.

Chinese monetary authorities and the government have worked in tandem to ensure that the objectives of growth and employment generation are not compromised.

BLOATED RESERVES

The growing strength of China in the global economy brings with it certain problems, both for China and the rest of the world. One of them concerns the aggressive policy of China in encouraging exports by maintaining competitive exchange rates. This has led to China’s reserves increasing over the years.

A recent report points out that China’s reserves amounting to $2 trillion are parked in dollar-denominated securities, mostly US Treasury bonds. China has legitimate concerns over the devaluation of the dollar.

A recent article in the Financial Times (FT) exploring how China is trying to find its wayout of the dollar trap points out that if China tries to diversify its dollar holdings by selling its US Treasury securities and moving into other currencies, it will damage further the value of the US dollar and will reduce the value of its residual holdings.

The Chinese dilemma is thus obvious. It can content itself by threatening to move out of US Treasury securities. But, if it carries out its threat by selling its Treasury holdings, it would be acting in a self-destructive manner.

According to an FT article, China is, however, exploring the alternative of making renminbi (the Chinese currency) an international currency. That is to say, instead of trades into and out of China being settled in dollars, which are then converted into renminbi, China would, under the new alternative, encourage settling in terms of renminbi itself. The article points out that this may not be such an out of the way solution.

Much of Chinese trade, other than with US, is conducted with emerging market economies, who are familiar with settlement in renminbi.

The FT reckons that such a mode of settlement will make the renminbi one of the most active foreign currencies so far because of the size of Chinese trade with other emerging market economies.

China is already encouraging trade denominated in renminbi by subsidising exporters and importers who quote in that currency. Internationalisation of renminbi and its emergence as foreign currency is thus not out of reach. But whether this will by itself solve the problem of China’s accumulated reserves is doubtful.

CURRENCY OPTIONS

Owning a reserve currency as the national currency is a course fraught with certain problems. It tends to magnify every trade fluctuation into a currency crisis. It was for this reason that Japan consciously avoided the use of the yen as a reserve currency. China’s ambition may, however, be for renminbi to take its place alongside the dollar, establishing itself as a global reserve currency. The middle kingdom aspires to be a real successor to the US and the UK!

Further consequences follow from the move to internationalise the renminbi. China will have to liberalise its capital account rules. China’s corporates and individuals should be free to move their wealth into and outside the country without any permission from the government or the monetary authority. Capital account convertibility seems to be a prerequisite for any currency becoming a reserve currency.

If China is to play a significant role in the world’s future alongside the US and Europe, it will have to move towards renminbi also becoming an internationally used currency, both for purposes of trade and other settlements. This will call for fundamental changes in China’s economic management.

China has, in keeping with its growing economic strength, asserted itself in international economic management. It has played an increasing role in the World Bank and the IMF. To wit, it is likely that G-8 is reduced to G-2 — the US and China. Will India try to forge a strategic alliance with China in future? The path of wisdom is to recognise China’s increasing prowess in global economic affairs and form an alliance with that mighty nation. We have a lot to gain and little to lose by focusing on a China-India bloc.

China’s future role in the international dialogue across various countries and financial institutions depends on its success in handling the impact of the global economic crisis on its own economy. So far, China’s success seems to have surpassed all other countries. It has benefited from its conscious policy mix of state control and market-related economic management. India has a lot to learn from China’s success.

R. Ravikumar
Vinay Kamath

Chennai, Aug. 9 Amitabh Tiwari, Business Head (Home Entertainment Business), LG Electronics India (P) Ltd, recalls that last year the company struggled to sell even 50 units of its top-end 50-inch plasma TVs a month.

During Diwali, it sold 110 units across the country. Suddenly, this year, it’s all changed. In the last four to five months, LG has been selling 750 plasma TVs a month and Mr Tiwari says the company has nearly run out of stock.

What’ve changed, as Mr Tiwari explains, are wider market reach for the plasmas, lower prices, newer technology and greater awareness among consumers, not to mention a propensity to spend.

Dropping prices

Plasma TVs, which sold for almost Rs 1 lakh last year, have seen prices dropping by approximately 40 per cent. While LCD TVs saw a drop in prices by 20-25 per cent on an average, depending on the models and brand, other categories saw a minimum of 15-per cent drop.

This is evident from the fact that there is a marked shift in consumer preference for high-end consumer electronics and durables in recent times, a trend seeping even into semi-urban towns.

According to Mr Tiwari, big-ticket items such as flat panel TVs, 350-litre-plus refrigerators, top- and front-loading models of fully automatic washing machines contribute close to 32 per cent of the company’s total turnover. “If the trend continues, this will breach 40 per cent next year,” he says.

Samsung India’s Deputy Managing Director, Mr R. Zutshi, says 62 per cent of AC sales came from split air-conditioners, which cost at least 20 per cent more than window ACs. The shift is even more pronounced in the South where 80 per cent of the sales came from splits. While Samsung’s sales of LCD TVs saw a 117-per cent growth, Mr Zutshi says the company’s washing machines business is growing by 31 per cent, the bulk of it coming from the high-end. “The share of fully automatic machines in our sales of washers will be 45 per cent this year.”

He says the trend is also catching on in the rural market. Thanks to the expanding distribution network, service back-up and increasing disposable incomes, people in rural areas too want to graduate to technically-superior models of durables.

The shift towards top-end appliances is also reflected in the overall industry. According to industry officials, who quote research body ORG-GfK figures, in 2008, when the entire colour TV category grew by 13 per cent over the previous year, flat panel TVs – dominated by LCD TVs – grew 65 per cent.

In the refrigerator segment, 350-litre and higher capacity fridges grew 15 per cent against the overall segment growth of 8 per cent. The growth of direct-cool refrigerators was only 9 per cent.

In the air-conditioner category, which grew 15 per cent, split ACs registered a growth of 22 per cent while window ACs posted a growth of only 5 per cent.

Ditto with washing machines: the fully-automatic front-loading machine range (which is considered to be the top-end segment) grew at 20 per cent against the overall washing machine category growth of 9 per cent.