Unilever drives market development of coffee in India, esp growth of premium coffee segment. (The Hindu Business Line)

Within the cramped confines of South Mumbai's Suryodaya outlet opposite Churchgate station, customers have been surprised to see a mannequin holding a tray of Bru's Exotica coffees. Taking on the onus of building the premium coffee category, Hindustan Unilever Ltd (HUL) is pushing its latest range of international coffees from Brazil, Colombia and the Kilimanjaro region with prices that are nearly double that of Bru Instant. While modern trade will play a major role in building the category, HUL is also roping in local stores such as Suryodaya to vend its exotic coffees.

The 50-year-old coffee brand from HUL's stable has now entered the premium end of the Rs 950-crore organised coffee market hitherto dominated by imported brands. Even its nearest competitor Nestle has a single brand, Nescafe Gold, in the premium segment, and HUL sees this as an opportunity to tap into the trend to consume high-end coffee at home.

“We have to create the premium coffee market and would be investing in market development in the next 3-4 years. While tea penetration is 96 per cent, coffee penetration is as low as 12-15 per cent,” says Arun Srinivas, Vice-President (Beverages), HUL. But considering the coffee category is growing at almost 20 per cent, HUL is tapping into the trend, be it at home or even at cafés.

“There is a lot of urbanisation, affluence and lifestyle changes happening among Indian consumers. We intend capturing this trend by launching Bru Exotica, the world's finest coffees from Brazil, Colombia and Kilimanjaro. This would give Indian consumers a chance to indulge in international flavours from the comfort of their home,” says Srinivas. Adapting these international flavours to suit the Indian palate, HUL believes the market is now ready to accept these premium coffees but recognises there will be challenges to drive penetration for the category in both the urban and rural markets.

It has roped in actors Priyanka Chopra and Shahid Kapoor to endorse the latest range. The ads show both the actors enjoying these international blends as they imagine dancers from these countries entertaining them as they sip their brew. “We are the only ones investing in the premium coffee category, unlike our competitors who have not done much to build the category in terms of advertising,” adds Srinivas, alluding to Nescafe Gold.

Emulating the Starbucks strategy of selling the coffee brand through retail stores and its own chain, HUL's new premium offering is in sync with the launch of its Bru World Cafes which sell premium coffees.

HUL took a big leap forward into coffee retailing through its Bru World Cafes early this year. While a pilot is currently on in Mumbai with six outlets, a nationwide launch soon should see the Bru franchise being strengthened courtesy such cafes. “We have been a product-driven company but now we are getting into services with Bru, just like we had done for Kwality Walls' Swirl parlours. We are testing out the Bru Cafe in places such as Juhu, Bandra and Mulund (all in Mumbai) currently,” said Srinivas. HUL's nearest competitor Nestle has also tried the concept of Nescafe Coffee Parlours in the past.

Says Harish Bijoor, CEO, Harish Bijoor Consults, who has earlier worked in the coffee sector: “Every product must have a ‘service' avatar. Youngsters who experience the ambience of a Bru World Cafe will take its positive strokes back to the coffee their moms will buy off the kirana store shelf. Exotic coffee is a tough and generic task in India. I do believe this is the route for roast and ground filter coffee to take. Instant coffee adopting this stance is a tough one to justify. Real good exotic coffee is best had in the filter coffee form. Bru is trying to break this paradigm. And that's tough to crack.”

Industry observers believe that while Bru has brand recognition, HUL would have to go beyond coffees at its cafés to make a success of this business.

According to Harminder Sahni, Founder and Managing Director, Wazir Advisors, “HUL's Bru has brand recognition and the company understands how to manage its supply chain. But just having cafés under a pure-play coffee brand is not going to work for HUL. It has to look beyond coffee if it has to sustain it as a retail business.” In fact, most of the existing coffee chains such as Barista and CCD (Coffee Café Day) get more revenues from the non-coffee part of the business and this is what is expected to work for a typical coffee chain.

HUL is already selling its tea brands at its cafes and it may be a matter of time before it unleashes a full-fledged foods portfolio.

“Food services is already growing in excess of 35 per cent and it is going to be a new opportunity area for HUL as it will give it a larger part of the market,” observes Pankaj Gupta, Head (Consumer & Retail), Tata Strategic Management Group.

With a dominant share in the southern markets (estimated at 65 per cent), Bru continues to be the second largest coffee brand (with a value share of 44 per cent) in the country with variants such as Bru Lite, Bru Green Label Roast and Ground, Bru Ice and Bru Hot Cappuccinos to create segments within coffee. But more than segmentation, it is about getting tea drinkers to also consume coffee, and this applies to even the rural markets.

For instance, HUL has been trying to build the instant coffee market in rural India through body-mounted DVD players engaging 15 million households.

“The task was to build the category by reaching out to non-drinkers and encouraging them to try Bru. The team working on Bru is using body-mounted DVD players to build the market across rural areas and small towns in the South, says Srinivas.

According to the company, the Bru team of promoters goes from door to door and shows one of three short films depending on whether the householder currently drinks tea, filter coffee or another instant brand. They then offer the consumer a Bru sample. “So far the team has reached over 15 million households with the brand gaining a 70 per cent share of new category entrants and increasing sales by around a third,” claims Srinivas.

Penetration of instant coffee in the South is quite low, particularly in small towns and rural areas, so the task was to build the category by reaching out to the non-drinkers of instant coffee and encouraging them to try Bru. Is it doable? “Totally,” says Bijoor, who says he has been championing this cause for many years now. “”Instant coffee offers convenience, economy, ease of use and the ability for every home to be a coffee-making home, never mind that you do not have a filter or a percolator. It is coffee dumbed down to its lowest degree of ease. If one is to penetrate rural markets instant coffee is the best way to go.”

With HUL pushing its coffee portfolio in both the urban and rural markets, hopefully the high price of the commodity will not affect its brand building efforts. According to Kaustubh Pawaskar, analyst at brokerage firm, Sharekhan, “HUL's beverages portfolio has been growing between 13 and 15 per cent and is a small segment within the foods portfolio.

Considering the segment is still underpenetrated unlike its HPC (home and personal care) portfolio, there is scope for the FMCG player to drive coffee consumption in the country. Hopefully its brand building efforts in the category will not get impacted by the high raw material costs hitting its margins.”

But HUL is ready to splurge on its coffee brand considering Bru has recorded a 26 per cent growth, according to Nielsen. “Commodity prices are at their peak for coffee but we will not stop investing in and building our brand,” says Srinivas. HUL, it is clear, knows its brew.

CGI 2011: Girls, Women, and Water (Business Insider, Angry Bear Blog)

Forty billion (40,000,000,000) miles of walking for water per year; a leader of Kenya claims that eight billion of that is done in their country alone. That’s a lot of manual (gynical?) intervention, often during hours of darkness with a full day ahead of them, with low marginal productivity. Pat Mitchell, the President and CEO, The Paley Center for Media, notes that her great-grandmother did the same thing—in the United States. Tyler Cowen’s claim of a “Great Stagnation” look more and more backwards.

Marta Echavarria, a Colombian who is the Founding Director of EcoDecision, opens by discussing how important for health and growth it is the downstream and upstream process is managed. She notes that she began working for sugar producers—large water users, almost all men—whose initial idea was “to buy the watershed.” This didn’t work, so instead producers and cities built community Water User Associations that worked in both directions—reforestation, usage controls, and “water quality trading,” which is something like cap-and-trade but with market segmentation based on the absolute need for purity. Echavarria noted that she is one of the rare women involved—“the world of water is male,” and “water rights are linked to land rights, which remain dominated by males.”

Echavarria was followed by Betty Kyazike, who is a Ugandan Branch Manager for Living Goods (which Mitchell describes as “a mash-up between Avon and Microfinance”), which serves 700 communities, and whose business model depends primarily on recruiting women as sales operatives. Kyazike, one of the most dynamic speakers at the conference, manages a branch of 50 communities, having risen from an initial sales position to run “the top-performing branch” of the organizations. (Mitchell: “I don’t think we’re at all surprised.” Did I mention that Kyazike speaks, in English at least, with the cadence of a hyperactive William Shatner?)
As with the earlier meeting, Ms.Mitchell notes that there is an education process to selling the Living Goods products: showing how they can prevent and reduce the spread of diseases such as diarrhea and cholera through sanitation and hand-washing. Teaching disease prevention and risk reduction through products such as water treatment tabs and filters. Literally, life-changing products in the developing world.
(I really want to find someone to put a music track behind Kyazike’s presentation; it would be a best-selling album.)

Keith Weed, the Chief Marketing and Communications Officer for Unilever, follows by noting that if his sales staff had Kyazike’s passion, they would be even bigger than they are. Unilever has committed very publicly to a Sustainable Living Plan, which is very public and very centered on potable water. Again, this is about providing products that can change people’s lives. “On average, the walk to collect water is 3.7 miles per day”—at least half of which is carrying heavy water over unsteady ground. (He tried it and ended up with a backache.) One of the things that Weed notes is that people don’t tell the truth about what they did—not always deliberately lying so much as not being fully aware of how much is used or how much time something takes to do. Weed notes that the biggest daily use of water is laundry: adding a cleanser that allows people to go from using three buckets of water for rinsing to one is both a behavioral change and a water savings. Similarly, he notes that there are more mobile telephones than toilets in India—and mobile telephones were a change in behavior in themselves.

Mark Tercek, the President and CEO of The Nature Conservancy notes that when poaching in Kenya is stopped, money starts flowing back into the city, which uses it for education and water. One village combined this by making water pickup available in the schools, aiding both areas. The side benefit of conservation is also that the people feel safer when the poachers are gone; Tercek cites a woman who “no longer sleeps in her shoes” because she now will not have to be ready to run in the middle of the night.

Tercek tells about how Quito, Ecuador, was contemplating an investment in a large water treatment plant. Instead, The Nature Conservancy and others were able to convinced them to invest in upstream conservation that keeps the water clean before it gets there (on the model of NYC, which receives its potable water from upstate). In doing follow-up work on the project, The Nature Conservancy discovered that the added efforts upstream had led to entrepreneurial expansion: women who used to raise sheep making clothes for local sales instead. Marta Echavarria noted that a similar effort afoot in Lima, Peru, led by AquaFund (which is part of the InterAmerican Development Bank) that has produced a Water Trust Fund with reciprocal agreements to finance local businesses. But she notes that these efforts need to scale, and are being impeded by historic water and land rights restrictions.

In a discussion more related to Organization Management than the specific topic, a speaker from the audience noted that her new organization was attempting to raise $1B over the next five years. Mark Tercek pointed out that it is not necessary to form a new organization if there is already one working in the same space; in the NGO/Charitable Organization sector, you often can get a better return by advocating, supporting, and helping existing organizations to improve. After all, his organization spends—and, more importantly, can spend—half a billion dollars a year. Collaboration, not competition, can produce better results in the public sector.
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Clinton Global Initiative 2011 (Girls, Women, and Water)

Clean water and just watershed management are issues critical to healthy development that disproportionally affect girls and women. In most societies, women are responsible for collecting and managing the household water supply for cooking, cleaning, bathing, drinking, growing food, and raising livestock. Beyond the management of household water lie larger systemic issues, including unequal access to water supplies, lack of access to sanitation, lack of adequate facilities (particularly in schools), unequal land rights, and the inability to use water for large-scale food or livestock production. Similar to food allocation and money management, studies show that when women are in charge of water, water practices improve for all members of the family and community, and that projects designed and run with the participation of girls and women are more sustainable and effective than those that are not. This panel will explore how girls and women can tangibly improve outcomes for the health and productivity of households and ensure the long-term sustainability of water resources for entire communities. Furthermore, the session will focus on what can be scaled, and how to include girls and women in scaling efforts.

Participants:
Marta Echavarria, Founding Director, EcoDecision
Betty Kyazike, Branch Manager, Living Goods
Pat Mitchell, President and CEO, The Paley Center for Media
Mark Tercek, President and CEO, The Nature Conservancy
Keith Weed, Chief Marketing and Communications Officer, Unilever

http://www.clintonglobalinitiative.org/ourmeetings/2011/meeting_annual_multimedia_player.asp?id=67

Market Leader Interview with Tom Holmes

Have a read through my recent chat with Market Leader's Tom Holmes about Unilever's integrated marketing strategy.