ASSIGNMENT ADVERTISING & SALES PROMOTION CEMENT INDUSTRY PROF. ANAND DESAI SATISHKUMAR BIRADAR Roll no 07 (MMM IV) The cement industry has come a long way since 1914 when the first cement plant was set up at Porbandar. In the past, the government’s regulation restricted the growth of the Indian cement industry. The removal of these controls resulted in rapid progress in terms of new capacity creation and higher production. As of March 2012, the country had an installed cement capacity of around 325-330 million tonnes with most of the capacities being added only during the last decade. | Evolution of the cement industry The cement industry is one of India’s core sectors. The country’s first cement plant was set up in Porbandar, Gujarat in 1914. Earlier, the government regulated the industry with licensing, price and distribution controls. A gradual removal of these controls resulted in rapid capacity creation. Following this, the country moved from a cement scarcity situation to a surplus position. As of March 2012, the pan India total installed cement capacity stood at around 325-330 million tonnes. Currently, India is the second-largest producer of cement in the world.
The evolution of the cement industry in India can be broadly divided into three periods – the period of total government control (up to 1982), the period of partial decontrol (1982 to 1989) and the period of total decontrol (after 1989). Period of total government control Events during the period of government control This period marked the beginning of cement industry where government, with an intention to promote the sector, exercised strict control over the industry. It set out production limits, price as well as the distribution channels that should be employed to sell cement.
This was aimed at ensuring fair prices to producers and consumers across the country, thus reducing regional imbalances. The fixed price at which producers would sell cement was based on the cost of production of cement throughout the country plus a marginal profit. This price contained a freight component that was averaged over the country as a whole. If the actual freight component of a manufacturer was lower than that included in the uniform price, producers had to pass on the amount to the pool sum, representing the difference between the uniform price freight component and the freight costs incurred by them.
On the other hand, if the actual freight incidence was higher than the freight element accounted for in the uniform price, producers were reimbursed the difference. This freight pooling system encouraged producers to set up manufacturing plants across the country. Before this system, the industry was concentrated in the eastern part of the country where accesses to raw materials were readily available. However, a drawback of this system was the lack of incentive to producers to minimise costs since they would be reimbursed by the uniform pricing system.
As a result, the average cost of production as well as demand for scarce railway capacity increased. Period of partial government decontrol Events during the period of partial decontrol On account of inefficiencies of the uniform price system, the government introduced a system of partial decontrol in 1982. A levy quota of 66. 6 per cent for sales to the government was imposed on existing units while for new and sick units the quota was lowered to 50 per cent. The balance 33. 4 per cent could be sold in the open market to general consumers.
A ceiling price was set for sales in the open market to protect consumers from unreasonable high pricing. During this period, cement producers were able to earn profits from the levy sale to government at fixed prices. But for the non-levy sales, profits decreased as there was a sudden increase in cement supply in the open market which led to greater competition among the manufacturers. During this period, the government gradually reduced the levy quota and increased retention prices in order to increase the profitability on sales in the open market.
Period of total decontrol Events post decontrol In 1989, the government removed all price and distribution controls. The system of freight pooling was scrapped and a subsidy scheme, to ensure availability of cement at reasonable prices in remote and hilly regions, was implemented. This opened up opportunities in the industry and was marked by huge investments in the coming years. Industry structure As of March 2012, the total installed cement capacity in India stood at approximately 325-330 million tonnes.
The industry can be broadly classified into pan-India, regional and standalone players. Pan-India players include large players like Holcim group companies- ACC and Ambuja and Aditya Birla group company- UltraTech Cement (including Samruddhi Cement) . Companies of both these groups are adding capacities through either greenfield or brownfield expansions. Players whose presence is restricted to one or two regions, with a stronghold in the markets of their respective operations are included in the category of regional players.
Key examples of players included in this segment are Jaiprakash Associates (North and Central), Lafarge (concentrated in the East), India Cement (South), Shree Cement (North), Binani Cement (North), Kesoram Industries (South), Chettinad Cement (South), Dalmia Cement (South), Madras Cement (South) etc. Players like Panyam Cement, Penna Cement, etc, are concentrated and operational in few states within a region. Owing to their largely local reach, these players are classified as standalone players. Industry structure as of March 2012
Industry status There’s something about walls and advertising. It’s ironic, really. On the one hand, you have telecom brand Airtel talking of breaking down walls (‘Deewarein Gir Jaati Hain’), while on the other, you have Ambuja Cement talking of unbreakable walls (‘Yeh Deewaar Nahin Tootegi’). Obviously, the context is vastly different in the two cases, but one can’t help but notice the strikingly opposite thoughts, executed along similar lines. | The demolition talks in progress| | Boy, interrupted| | Bulldozer fails| |
The stumped builder| | Rejoicing children| | ‘Ambuja Cement. Yeh Deewaar nahin tootegi’| A new television commercial (TVC) for Ambuja Cement, created by Grey Worldwide, revolves around the story of a wall that doesn’t break, seasoned with an emotional (almost humanitarian) twist. The TVC opens on a shot of the caretaker of an orphanage introducing the children to a Mr Choksi. She tells them that Choksi is going to build a hotel on the site of the orphanage. At this point, a little boy says to Choksi, “Sir, par last time… ” but he is shushed by an older boy. The following morning, the heartless Choksi arrives with bulldozer in tow. At his signal, the bulldozer delivers a powerful blow on the building, but is unable to bring it down. The little boy tries to explain again, but is stopped midway again by the elder one. Choksi tries his best, but is not able to demolish the orphanage. As he wonders about the strength of the building, the little boy says, “Arre sir, last time bhi yeh deewar nahin tooti thi (Sir, even last time, this wall could not be broken down). As a disappointed Choksi leaves with his men, the children and their caretaker start dancing in joy, and the voiceover concludes, “Ambuja Cement. Yeh Deewaar Nahin Tootegi. ” For the longest time ever, Ambuja has been harping on its ‘giant compressive strength’ proposition; the brand even created the visual of a ‘giant’ and then a broken hammer. Perhaps its most memorable ad was the one involving two estranged brothers trying to break down the wall that runs between their houses (Bhai Bhai, featuring Boman Irani, which was released six years ago).
After that humorous attempt, came some ads which presented the brand in a sentimental vein (the Dadi ad), a move that Vivek Deshpande, Ambuja Cement’s vice-president for brand and promotions, agrees was rather disastrous, so much so that the Bhai Bhai ad was recalled. “Our new ad is a correction of this,” he says, adding that the brand will now strike a balance between emotion and humour. The new film clearly explores a situation where a wall should not break for the right reasons.
Priti Nair, national creative director, Grey Worldwide, says that the strength of the wall was juxtaposed with the strength of character of the orphanage caretaker and the children. “Cement is a low involving category,” says Nair. So, the children element and the often used Bollywood type plot (victory of good over evil) were added to make the ad more entertaining. Nair and her team wanted to stay away from the stereotypical ‘milavat (adulteration)’ type ads for cement, or even those involving big buildings and pride of ownership. “We wanted to show the victory of the underdogs,” she explains.
The ad has been directed by Abhinay Deo of Ramesh Deo Productions, who says that the film had to strike a perfect pathos-humour balance. Interestingly, the initial idea was to show that the kids are also surprised when the wall doesn’t crack. “But we ruled that out,” Deo says, because the innocence of a small boy trying desperately to make the big, bad builder understand what his predecessors couldn’t do, would add to the fun element. “Another older child warning him to stay quiet in a rather knowing fashion builds the suspense,” he grins.
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