The Web


Home > Business > Special

We also brand steel

Ishita Ayan Dutt | May 03, 2003

Can Tata Steel beat the ups and downs that plague the steel industry? That has always been one of the challenges facing the biggest players in the industry globally. Now Tata Steel is halfway through a programme to break the commodity cycle by branding more of the steel that it produces.

Tata Steel (Tisco) isn't the first company to brand its steel. Even in India other steel companies are hoping to keep their bottomlines steady by producing branded steel in their furnaces that customers will ask for by name. But Tata is pushing ahead with its ambitious plans to ensure that larger quantities of its steel is branded in the coming years.

Tisco isn't entirely new to branded steel. But for years its branded sales focused on products like Tata Bearings, Tata Tubes or Tata Agrico that form a relatively small part of the company's portfolio.

Sales of basic steel products under a brand name was limited. The paradigm shift that is now taking place is to drive basic steel products like sheets, construction bars and even coils that are finished for use on consumer durables and cars.

The plan aims to achieve another first: to sell the entire flat products output of 3 million tonnes with around 40 per cent as high-value flat products.

Does branding work in the steel business? Consultancy giant Booz Allen once demonstrated how smart strategies and business processes could be used to brand commodities -- or even sand, if necessary -- and create a  relationship between suppliers and buyers. Global steel companies like Posco have moved a long way in branding. For instance, Posco sends branded steel to India which is used for marine containers.

Tata Steel is a relative newcomer in the game. It started branding its main steel business in 2000, beginning with the steel wires used to construct reinforced concrete buildings. Later corrugated roofing sheets were offered in the market. Since both products were sold at a premium, initial offtake was slow.

But it has moved ahead swiftly. This year, it recorded revenues of Rs 750 crore (Rs 7.50 billion) from branded product sales. But this is just the beginning. According to the growth map drawn up by the company, the figure is expected to increase to Rs 1,500 crore (Rs 15 billion) by the end of 2003-04 and to Rs 4,000 crore (Rs 40 billion) by 2007.

The share of branded products is about 14 per cent to 16 per cent of the company's turnover.

This level has been attained over the last 10 years. From now the growth will be much more rapid than anything seen before.

With aggressive branding, this share is expected to increase to 28 per cent and thereafter continue to increase to a level of 40 per cent by 2007-08. Says B Muthuraman, managing director, Tata Steel: "Brand represents the 'totality' of a product or service -- including its uniqueness, its merits and its advantages to the customers."

Steel companies like Tisco hope that creating an identity for their  products will shield them from radical price fluctuations. So, even if spot prices soften, the brand can still sell at the same price.

Around 60 per cent of Tata Steel's products are sold through contracts -- quarterly, half-yearly or annually -- and so these products are naturally protected from price fluctuations. It is, therefore, the remaining 40 per cent that are subject to price fluctuations. This is where branding becomes important.

To ensure that its branding efforts get the highest priority Tata Steel has set up a brand management group that will steer the company closer to its goals.

The committee is overseeing the training of distributors and dealers who are being taught how to sell different brands. The brands will also be supported by advertising and promotion. Tata Steel plans to spend between 1 per cent and 1.3 per cent of brand-related turnover to establish the brands.

While branding, per se, is not new to the industry as a host of other steel majors have figured out its importance, Tata Steel has started branding a gamut of products at high speed.

The company's vision for 2007, which was charted at the  end of last year, rests on a number of strategic pillars or goals. One of these pillars is moving from commodities to brands.

One of the most important resolutions taken by the company for this year is that 100 per cent flat products to be sold through the distribution channel would be branded.

Simultaneously, the Tata Tiscon and Tata Shaktee brands in the rebar segment and GC sheet markets would be strengthened.

Tata Steel has also become the first company in the world to brand cold rolled (CR) strips. Tata Steelium, which is the name of the brand, was launched early this year. The move to brand CR strips came because the market is fragmented and a host of players including small ones cater to the white goods majors.

But branding is not new to Tata Steel either. The first generic brand from the Tata Steel stable was launched in 1927-- Tata Agrico. Though a generic brand, the brand covers the company's entire portfolio of agricultural implements and has managed to maintain leadership in the market.

The company claims that currently Tata Agrico commands a premium of 15 per cent over competing brands. Company sources say there are plans to increase Agrico's market share to 22 per cent by fiscal 2003.

Tata Steel has essentially three generic brands and three product brands. The generic brands are Tata Bearings, Tata Pipes and Tata Agrico. The product brands are Tata Shaktee in GC sheets and Tata Tiscon in rebars and now Tata Steelium in CR strips.

Tata Pipes, as the name suggests, is the steel pipe brand. Company sources say it commands a premium of 15 per cent over competitors and there are plans to increase it to 15 per cent in the coming year through loyalty initiatives.

Similarly, Tata Bearings primarily works in the two-wheeler and automotive ancillary segment and there are plans to increase the market share to 16  per cent from the current 13 per cent this year.

Till March 2000, Tata Steel had no powerful brands in its main steel business. It started by launching Tata Tiscon, which was a relatively small part of its production. This situation was reversed with the launch of brands like Tata Shaktee.

Tata Shaktee today commands a 10 per cent market share in the GC market and the company is confident of garnering more than 15 per cent market share this year.

Tata Tiscon has a market share of 8 per cent in the rebar market. The brand is mainly concentrated in the east where it has a 20 per cent market share. Tata Steel is also considering launching a number of new brands in 2004-05.

Stickiness and keeping customers is one side of the picture.

At another level steel companies have come to believe that branding can create a greater level of awareness and interest at the shopfloor level. The theory is that if workers know where their products are headed and what they will be used for, it creates a higher level of commitment.

The steel industry has been racing along at a surprisingly high speed during recent months, largely due to the huge buying from China. Tata Steel has also done extraordinarily well as the industry moved upwards.

There are signs that the steel industry is slowing slightly. And that's just when branded products are needed to ensure that sales don't slow down too much.

Powered by

More Specials

Share your comments

Article Tools
Email this article
Top emailed links
Print this article
Write us a letter
Discuss this article

Related Stories

Tata Steel to shut 3 ailing subsidiaries

India will soon need more steel capacity

Tata Steel to set up ferrochrome plant in S Africa

Copyright © 2005 India Limited. All Rights Reserved.