TALE OF CONTRASTS

Business Standard-

While Bajaj Auto wants to focus on just two brands, rival Hero Honda will add more to its already crowded product portfolio.

The more, the merrier’ has been the theme song of Bajaj Auto for many years. Not anymore.

India’s second largest two-wheeler company, which had bombarded the market with multiple brands (remember XCD, Kristal, Platina and a few others?) to break the near-monopoly of market leader Hero Honda in the economy segment, has withdrawn all but two of its brands.

The move is working. Last year, Bajaj Auto posted its best-ever annual sales, riding high on just two brands - Discover and Pulsar. The Discover is clearly positioned for the commuter segment and the Pulsar as the ‘sporty’ option. While the Pulsar has held its own over the years in the power and performance segment, the Discover is the pivot in the commuting category.
Bajaj Auto Managing Director Rajiv Bajaj says “brands can be created easily by the R&D people. We have to figure out if there is a third category of buyers out there. A Pulsar buyer is sporty, young, and wants to have some fun with the bike. The Discover buyer is more sober and an economy- conscious person who wants to take a safe decision and higher mileage,” he says.

“If we create a brand in the absence of a target category, it could be like putting up a restaurant which serves food nobody wants to eat. I could put up a Lebanese restaurant in Pune and go bankrupt”, adds Bajaj.

The MD says a manufacturer can merrily create a brand and forget about it, but he also needs to look out whether there is a category for it. “Creation of brands is in the hands of the manufacturer but the creation of a category is in the hands of the consumer. So unless we are sure that there is a third category there, we would be making a mistake by creating that third brand”, he says.

The company has changed its strategy from a product to a brand-led company as it believes that the product game will not go anywhere and it is only brands that will make all the difference.

Presently about 70 per cent of the company’s sales come from the Discover and Pulsar segment, both of which share seven models between them — up from just three about three years ago. The company reported its highest ever monthly sales in April (276,000 units) followed by a record number in May. It aims to sell one million Pulsar units every year starting this year.

The company, which had a 20.47 per cent market share in the two-wheeler category in May – up from 19.05 per cent in the previous month – is working on adding yet another model under the Pulsar category in the coming months. It also launched last month a new 150 cc bike under the Discover brand. The company intends to focus on just these two brands till the market is mature enough for more.

However, that’s something the market leader doesn’t believe in. Hero Honda, which had a 45.38 per cent market share in May (48 per cent in April), is planning a brand blitz by launching at least two more new brand launches this year to take its total tally to 10.

Anil Dua, vice president, sales and marketing, Hero Honda, says, "We had very successful brand launches in the past including ZMR, Hunk, Passion Pro and Pleasure and want that to continue.”

Asked whether launching of new brands and turning them into successful ones is easier for a market leader, Dua says the success came because Hero Honda positioned its brands sharply on a clearly differentiated platform. “It’s all a function of the homework and ground work. If the customer trusts the company, the resistance to new launches is less. It’s indeed tougher for a smaller company to promote a new brand,” he adds.

Splendour, which is in its 16th year, is the largest two-wheeler brand in the world followed by Passion.

Last year, five models under these two brands clocked sales of over two million units. The company says it is presently struggling to increase the capacity of the Hunk as demand is far outstripping supply.

A section of the market believes that the success of the Hero Honda models is more because of the company's brand recall rather than the products themselves (remember the caption 'Fill it, shut it, forget it’). But that still seems to be only a minority opinion.

Fiscal 2010 saw Hero Honda launching nine new models across segments, all of which are doing well. Sales of Pleasure, for example, have already crossed the 20,000 units per month threshold. Also, powered by its 4,200 touch points, the company has already crossed the landmark figure of four million cumulative sales in a single year and posted sales of more than a million units for every quarter in FY’10.