The Hindu Business Line : Branding irons

BRANDING and its related benefits are not common in the commodities business. That is the case even where the end-user is the man on the street. Brand recognition and recall is even more difficult to achieve if a commodity business only marginally addresses the common man. Steel is a classic example here.

Though branding is at least a three-year-old phenomenon in the steel industry, it has gained prominence only in the past few quarters.

The promise of better brand recall and the possibility of companies leveraging this to ensure higher brand loyalty amongst its customers has led to a number of steel manufacturers taking tentative steps towards establishing their own labels.

The advantages of branding steel are obvious for companies that have already tested the market for their brands and met with success. Brands give an otherwise indistinguishable product a new identity. They serve as a mark, an assurance of quality and allow the company concerned to charge a premium for the products, of course, after consumer acceptance.

Most brands are again part of the value-added steel products portfolio of the companies. This segment of the steel industry is the high volume, small-business-focussed products group. Brands are better accepted and there is a willingness to pay a premium amongst the potential customers for these products.

However, the incidence of branding is limited to the top three-four integrated steel manufacturers in the country. Some of the prominent steel brands in the market are Tata Tiscon, Tata Shaktee GC Sheet; SAIL's Salem Stainless, SAIL Jyoti, SAIL TMT; and Essar's 24-Carat Steel.

As can be seen from many of these brands, the products now cater to even individual consumers in the retail segment and not just institutional users.

The share of branded products in the product mix of companies has been rising in the past four years. The trend has been significant in the case of Tata Steel, which has been aggressively pushing its Tiscon, Steelium and Shaktee GC brands.

Tiscon is the brand for its new generation high-strength ribbed reinforcement bar, which finds applications in the construction industry, and Shaktee GC is its galvanised corrugated GC sheets brand, which mainly finds application in roofing.

In Tata Steel's case, the sales of its branded products are expected to nearly treble from the levels recorded in 1990-2000. From about 10 per cent during that year, when the company started looking more seriously at branding, the contribution of Tata Steel's brands will touch 28 per cent of the total turnover in revenue terms. In terms of volumes, nearly 15 per cent of the total steel sold was branded products.

The company's first brand, Shaktee GC, was launched in 2000, and then came Tata Pipes in 2002. This February, the company launched its own brand of cold-rolled sheets, Steelium.

This latest is the result of the success of the earlier two brands. While the earlier ones addressed the retail segment, the new brand will focus on the institutional segment. The product finds application in the white goods, appliances and automobiles, in addition to a few retail segments.

In fact, Tata Steel has used the opportunity offered by branding to wriggle out of the spot market for steel. Instead, the company now favours long- and medium-term contracts with its customers.

This gives the company the power to price its products higher, while continuing to retain customers and also be insulated from the fluctuations in the prices at the spot market.

SAIL has also met with success with its long products brands, SAIL TMT and SAIL Jyoti. Essar has, in preparation for the launch of its 24-Carat Steel brand, reorganised its marketing department and identified four major target segments:Automobiles, marine, consumer durables and retail sector.

The company hopes to address the retail segment of the market by setting up 200 exclusive steel marketing outlets across the country.

The demand from the retail segment is usually low-volume, for applications ranging from roofing and construction material to manufacturing truck or trailer bodies.

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