India Overview | Insights
1. Service sector brands dominate in value
Service sector brands – the banks, insurance companies, and telecoms – account for the largest proportion of value in the BrandZ™ Top 50 Most Valuable Indian Brands 2014. Many of these brands are relatively young, formed in the last 35 years after the market liberalization of the 1990s. They have invested tremendously in building brand and scale.
The strength of this sector is not particular to India. Because financial institutions and telecoms are fundamental to the growth of nations, the service sector generates high brand value across the BRIC countries. However, in India, service brands account for a rising proportion of GDP growth, formerly driven primarily by agriculture. And distinctive to India, these brands primarily are privately owned, not SOEs (State Owned Enterprises).
Because of the nature of their businesses, and because they understand that opportunity in a land of 1.25 billion inhabitants is not limited to the expanding middle class – as significant as that is – these brands also organize their offerings to meet the needs and aspirations of the broadest passible market, as they expand both in urban and rural areas.
Banks, in particular, articulate the need for inclusiveness, and advance a progressive, and commercially viable, social agenda to meet the needs of the unbanked. Telecoms promote programs to make their services widely affordable. While building scale, however, the service sector brands have not sufficiently developed deep relationships with their customers.
Having built scale, the service sector brands are salient, a BrandZ™ measurement of being familiar on a top-of-mind basis. They’ve have had a meaningful impact on improving the lives of many Indians, opening bank branches in remote regions and empowering small vendors with mobile phones.
Consumers, however, don’t see these brands as meaningfully different. Meaningful (meeting functional needs and cultivating emotional attachment) and different (being distinguished, even a trend setter) are, along with salient, BrandZ™ metrics that contribute to brand equity.
Service brands need to invest in building customer relationships. They need to evolve from being providers of products and services to being trusted service partners. Having said that, Indian service brands have been relatively innovative. Three banks appear among the India Top 5 brands in brand contribution, the BrandZ™ measurement of brand influence alone, when all other factors, including financial power, are stripped away.
2. FMCG brands excel in brand contribution
Of the Top 10 Indian brands in brand contribution, nine are in FMCG categories. While these brands lack the near monopolistic influence of the service category brands, they score well in the BrandZ™ MDF (Meaningful Different Framework) of brand equity. And the brands are salient, well known to the point that they come easily to mind.
These brands achieved MDF strength in a variety of ways, some of which pertain to brand age and brand ownership. Brand age in India divides into three periods: before independence in 1947; after independence but before market liberalization in 1991; and post liberalization. In contrast to the service brands, mostly formed post liberalization, the FMCG brands came into being much earlier. Many have long Indian heritage.
They’re all private. Individual Indian entrepreneurs formed a few of the brands. Some brands fit under the master brand of an Indian family conglomerate with a portfolio of brands across categories. Others are brands that MNCs (Multinational Corporations) introduced to India which, over decades of marketing, have become Indian brands in the consumer mind.
Although these brands have achieved strong brand equity, they lack the scale of the service sector brands, in part because the nature of their categories requires reaching market segments rather than the full mass market. Their strong equity enables these brands to build scale without sacrificing their meaningful difference, an important advantage. However, these brands haven’t fully leveraged their equity to pursue new business opportunities and increase earnings.
3. Private brands comprise most of the India Top 50
Brand ownership reveals one of the key distinctions between India and other BRIC markets. Over 85 percent of the India Top 50 most valuable brands are privately owned. In China, valuable brands are much more likely to be state owned. While private brands predominate in Brazil, ownership is not the determinative brand success factor that it is in India.
The difference in India is the presence of Indian family conglomerates and MNCs. The family owned conglomerates have succeeded where conglomerates often fail, creating master brands that convey trust and reliability across disparate categories, while at the same time accruing economies of scale. Additionally, the family conglomerates have succeed where family businesses often fail, in transmitting a sense of mission and business acumen to successive generations.
Similarly, the MNCs have achieved an elusive goal of multinationals. MNCs in India have combined the advantages of global scale and expertise with the need to gain deep local market insight and be perceived as a local brand.
The family owned conglomerates need to continue do what they do best, build businesses using their respected master brands. But they need to consider potential shifts in consumer attitude toward master brands. While young people respect tradition, they’re also more inclined look beyond it, for new ideas and experiences.
At the same time, the family conglomerates need to prepare for audiences where the master brand has little or no currency – outside of India. Having built world-class marketing competence, some of the family owned conglomerates are ready for new growth stages, with expansion abroad and the acquisition of international brands for introduction in India.
The MNCs have done an excellent job of building valuable brands. Of the Top 50 most valuable Indian brands, 34 percent are owned by MNCs. The MNCs now have an opportunity to build scale, in part by leveraging their market presence to rapidly reach groups of consumer who desire – and for the first time can afford – their products and services.
4. Brands face greater potential and competition
India’s history, culture, and democratic values make it a tolerant country open to new ideas. It’s also a country that’s hospitable to brands. Indian consumers like brands. They have long experience with brands.
These conditions make the market fertile for new brand entries. But it also makes the market competitive. The relative lack of SOEs and the predominance of privately ownership, mean that Indian brands have significant brand building experience. In the BrandZ™ power index, a measurement of brand equity, the India Top 50 most valuable bands score virtually the same as the Global Top 50.
Both new entrants and existing Indian brands face similar market opportunities. These include: reaching the growing number of consumers now able to purchase products and services; and communicating both to the mass market and to market segments, which have economic scale in India.
Until now, salience has been important. Many Indian brands build top-of-mind awareness with celebrity brand ambassadors, often movie stars or sports stars. Those tactics will go only so far as the Indian market evolves. Consumers will look for brands that promise and deliver meaningful and differentiating benefits that improve life in some way.
In part because of government policies, some sectors have been more protected than others from foreign competition. The absence of significant overseas competitors in retailing, for example, has meant that the manufacturer brand owner drives brand building. In countries with more developed modern retail sectors, the brand owner and retailer share brand building power, or compete for it.