Birla Corp to take RCC brand across India
Sixteenmonthsafteritacquired Reliance Cement Company (RCC) marking its foray into the premium category, Birla Corporation, theacquirer, isnow planning to take the premium brand, Perfect, across the country except south India. This brand, originally made by RCC, landed up in its kittyaspartofthetakeoverdeal.
This will mark the company’s first ever rollout of a cement brand across the nation.
The Perfect brand, made at RCC’s Maihar plant in Madhya Pradesh, is currently confined to the central and minor parts of east India.
However, in the third quarter of the current financial year, this brand, which underwent a packaging renovation, contributed atleast ~2.3 billion to the company’s consolidated turnover of ~13.8 billion.
The two other premium brands – Unique and Ultimate, confined to West Bengal, Bihar, and Uttar Pradesh – accounted for another ~1.16 billion of the total quarterly sales.
According to the company, the Maihar plant offers a logistical advantage and feeds all regions save south India.
“Cement has been a localised commodity and brand name was associated with the plant or location where manufactured. It is changing and brands are assuming national significance”,
the official told Business Standard.
The company doesn’t have a southern presence. To up capacity utilisation at 90 per cent in the three million tonne per annum Maihar plant, which essentially makes the Perfect brand , the flagship company of the MP Birla Group has also started manufacturing its other budget brands from there.
In the Madhya PradeshChhattisgarh belt, the firm’s market share has increased from 8 per cent to 17 per cent in the last one year. It is planning to introduce a new variant of the Unique brand of premium cement, which will be rolled across the northern region. This brand of slag cement is limited to its eastern market and is manufactured from the Durgapur plant.
Post acquisition of RCC’s assets for an enterprise value of Rs. 48 billion, the contribution of premium cement to Birla Corporation’s consolidated sales has increased from 10 per cent to 25 per cent.
Company officials expect that in the next two years, revenue contribution from these premium brands will increase to 30 per cent.
According to industry estimates, premium brands directly pull up the bottomline by around 20 per cent as compared to budget brands and hence is likely to further improve the operating cashflow in the company.
“The idea is not just to focus on the premium category but push sales of other popular and budget brands as well also. But premium cement contributes much higher than the budget ones to the profitability”, the official added. As a result of the new synergy around the premium brands, the company’s consolidated loss in the third quarter of the current fiscal year narrowed down by 47 per cent at ~218 million as against the loss of ~413 million it incurred in the similar quarter of the last financial year.
Birla Corporation has earmarked a 20 per cent increase in its marketing and promotional budget across its eight cement brands.