Branded commodities in the Indian market scope and potential

Abstract

Introduction ' The commodity market in India today is largely unbranded and unorganized. However with the increasing alliance of the middle class and changing socioeconomic pattern, changes are coming in with a number of companies entering the branded commodity market. In this scenario it becomes essential to understand the consumers attitude towards branding of commodities which have traditionally been sold unbranded. This study is an attempt to study the commodity market in India and the main objectives are as follows: l. Identifying the needs of the consumer and the trade. 2. Identifying advantages and disadvantages of branded commodities. 3. Identifying the target segment and potential consumers. 4. Studying the companies currently in the field and those planning to enter. 5. Determining the maximum price premium acceptable to the consumers. The study has made use of both primary and secondary data. For primary data a survey was conducted among the residents of Ahmedabad and for secondary data government and private publications were used. Indian Commodity market The Indian commodity market is basically unbranded. The branded commodities market shares are very small - wheat (l%), sugar(0.1°/ii), salt(I5%). But some commodities constitute a large market e.g. Rs. 400 crore mineral water market, and several companies - both domestic and foreign are planning to enter the market. This has increased competition leading to lower margins and shake-outs in certain product groups. Advantages of Branded commodities Certain advantages are unique to branded commodities. For instance in the case ot common salt the Government can ensure that the salt sold is iodized. In other words it

is much easier to implement stringent product standards in case of branded commodities because defaulters can always be traced backwards. It offers better and consistent quality, longer shelf life and convenience in usage. Consumer Survey The survey came up with interesting results. l00% of the respondents were using branded salt and 82% branded milk. Branded flour, sugar, etc. had very few takers. The three important attribute groups in order are taste and health, convenience, and price. The consumers’ perception is that branded commodities are better than unbranded ones in taste, quality and shell" life, but are expensive and not fresh. Brand loyalty is quite high with few people reporting problems. 73% respondents were satisfied with the price differential and gave an average acceptable premium as 8.5% over unbranded ones. Conclusions The study ended with the following conclusions regarding the branded commodity market: l. The consumer is very clear as to what attributes are important to her in purchasing commodities. The attributes in order of importance are taste and health aspects, convenience of purchasing and keeping quality, and price. 2. Market penetration of branded commodities is very high in case of salt and milk but is quite low in sugar, rice, etc. and non-existent in fruits and vegetables. 3. Branded commodities have a definite edge over unbranded ones as far as consistency in price and quality are concerned. 4. Companies in this business have to battle with deeply entrenched consumer habits which are the major impediment to increased sales The marketers need to substantiate their claims regarding the products’ benefits over unbranded ones. 5. Changes in cost structure are necessary. It is seen that margins on branded commodities are very low despite the consumer not being price sensitive.