A slowing economy and surging inflation are not the best conditions for launching new products – especially in the fast moving consumer goods (FMCG) sector, where consumer favour can disappear faster than the froth whipped up by the soap or toothpaste in question.
But caught between twin pincers of slowing topline growth and shrinking profits, FMCG manufacturers are running out of options. With big-budget new launches few and far between in these tight times, they are resorting to the second-best option – re-launching their existing brands.
A spell of re-launches
The past two months alone have seen a flurry of re-launches and brand extensions in the FMCG sector. Procter & Gamble re-launched its Oral B toothbrushes, Emami ran a new campaign for Malai Kesar cold cream, Wipro repositioned Sanjeevani honey as Glucovita honey and Nestle too rebranded its milk and yogurt as Nestle A+.
Besides, existing brands already carry a huge burden of investment. Dumping a brand before it has paid for its investment is tough for an FMCG company. “So if the company feels minor tweaking will improve the product performance, or more aggression is needed on the marketing side, they re-launch,” says Mr Gaurav Gupta, Director, Deloitte.
Re-launches or brand extensions become even more attractive when sales volumes are slowing and margins getting squeezed. The data on the FMCG sector actually shows better profit growth this year than last year, but sales growth has been slower.
Most companies have managed bottomlines by resorting to direct price hikes, or indirect increases by tweaking pack size. Production efficiencies have also been stepped up to combat input cost inflation. But if the volumes fail to keep pace, then the high profits become unsustainable over the long run.
Says Mr Shreekanth PVS, FMCG analyst, Angel Broking, “Companies re-launch and re-brand every time a product does not work or market aspirations change. Lifebuoy's repositioning has, for instance, been a success. It was initially projected as a normal bathing soap and later repositioned in the health and wellness category.”
Which was the reasoning behind Wipro Consumer Care rebranding Sanjeevani honey as Glucovita Honey. Mr Anil Chugh, Senior Vice-President, Wipro Consumer Care, says, “Consumer research showed consumers perceive both honey and glucose drink categories deliver strongly on ‘health and energy' benefits. Since we have a strong brand in Glucovita, it makes perfect sense for us to re-launch the Honey range under the Glucovita umbrella.”
Competitive activity is another factor. Pushed by the growing activity of rivals in the milk and yoghurt segment, Nestle too unveiled it's ‘A+' brand in December.
“This is basically a rebranding exercise. We are going aggressive on communication. Otherwise, the milk quality and price remains the same,” said Mr Kumaran Nowuram, General Manager, Dairy Business, Nestle India Ltd.
The company refused to quantify the investments in the exercise, saying “it is a continuous improvement programme and investment spans years”.
Companies typically re-launch products every few years to add new features or reposition to keep the brands fresh and relevant.
“For example, last year our brands Chandrika ayurvedic soap, Glucovita glucose powder and Wipro Babysoft Diapers all underwent a re-launch on account of either a new positioning, new ingredient or new variant,” says Mr Chugh.
Emami too has come up with the a new communication campaign of adding ‘double kesar ' to its Malai Kesar brand face cream claiming more fairness and winter protection.
“The new brand communication highlights the additional benefit of Kesar, given to the consumers at the same price. We have to keep introducing novelty. We have revamped the packaging of other brands as well, like Zandu Pancharishta and Zandu Nityam Churna,” says Mr Krishna Mohan, CEO, Emami Ltd.