Friday, August 11, 2006

Coke, Pepsi and public relations

Brian Bremner and Nandini Lakshman write in BusinessWeek:

Welcome to the India instalment of the fabled cola wars. But this time around, global soft-drink heavies Coca-Cola and PepsiCo are actually on the same side. Their adversaries: a feisty New Delhi-based environmental group, left-leaning politicians in Southern India, and non-stop press coverage that has raised angst levels over pesticide traces discovered in these companies' carbonated drinks. On Aug. 9, the dispute escalated when India's southwestern state of Kerala, home to about 30 million people, banned the Indian subsidiaries of both companies from making or selling their beverages…

In short, this is shaping up to be a public relations calamity of the first order. True, this is a $2 billion market that both Coca-Cola and PepsiCo dominate with a combined share of roughly 80%-plus. Still, "as multinationals, the scrutiny is going to be a little higher, and the public is going to make a judgment," says Madan Bahal, managing director of Adfactors Public Relations, a Mumbai-based firm that represents international companies such as IBM India, Barclays Bank and ABN Amro Banking Group. "And if the judgment is that there is something fishy going on, it will harm you."

This probably won't be an easy judgment to make for most Indian consumers, given the complex technical issues involved. What touched off the controversy was allegations made by the New Delhi Center for Science and Environment (CSE) that pesticide residues found in Coca-Cola and PepsiCo brands were 24 times higher than new safety standards on soft drinks that have been developed by the Bureau of Indian Standards. (These new rules on soft-drink pesticide levels haven't taken effect yet.)

PepsiCo and Coca-Cola have attacked the CSE's findings in advertorials published in Indian newspapers…

Both companies insist their beverage products present no health threats. "Our products are safe and we measure that against the most stringent standards, the European ones," says Coca-Cola Asia spokesman Kenth Kaerhoeg, who is based in Hong Kong…

Prema Sagar, founder and principal of public relations firm Genesis Burson-Marsteller, which represents PepsiCo, also questions the accuracy of CSE's data, given the work was done by its own labs without any outside peer review. "It is not valid," says Sagar. (Coca-Cola has also questioned the integrity of CSE's testing methods.)

She says that both PepsiCo's and Coca-Cola's economic contributions to India and environmental work done there aren't getting the attention they deserve in this dispute. Given the big corporate names involved, the scrutiny has been extremely intense in India. "Big American global brands are going to attract attention," she says. "The attack on the colas right now grabs space" in the media.

That's certainly true, but other public relations pros such as Adfactor's Bahal think both companies might be inviting trouble by primarily going into attack mode on CSE and merely making general assurances that their products are safe. A better approach, Bahal says, would be a more "substantive response" on precisely what levels of pesticides are in their drinks, why that isn't a health threat, and exactly what both companies do to keep it that way.

Admittedly that's tough advice when it basically involves mentioning a pesticide like Lindane, a known carcinogen, or a neurotoxin such as Chlorpyrifos in the same breath as your franchise product. Still, Bahal points out the contrasting approach that Cadbury India took three years ago when live worms started showing up in the company's chocolate products in Mumbai. When Indian government lab reports confirmed the problem, the company quickly investigated and overhauled its packaging procedures to calm consumer fears. That quick action and candor, plus recruiting Bollywood legend Amitabh Bachchan as a new pitchman, quickly restored the brand image. "They were specific on all counts," says Bahal.

Right now, though, the cola tussle in India is being driven more by primal emotion directed at big foreign companies and public fear. PepsiCo pitchman and Bollywood actor and heartthrob Shah Rukh Khan, who says if Pepsi is banned in India he will go overseas to swill the stuff, suggested a more sensible approach would be for everyone to calm down and wait until the government weighs in on the matter. Yet, given the rancor unleashed by this controversy, it may be a while before cooler heads prevail.

Tuesday, August 08, 2006

Teens spend 600% more time online: McKinsey study

Abbey Klaassen reports in AdvertisingAge:

A McKinsey & Co. study predicts that by 2010, traditional TV advertising will be one-third as effective as it was in 1990.

That shocking statistic, delivered to the company's Fortune 100 clients in a report on media proliferation, assumes a 15% decrease in buying power driving by cost-per-thousand rate increases; a 23% decline in ads viewed due to switching off; a 9% loss of attention to ads due to increased multitasking and a 37% decrease in message impact due to saturation.

"You've also got pronounced changes in consumer behavior while they're consuming media," said Tom French, Director, McKinsey. "And ad spending is decreasingly reflecting consumer behavior."

Thank a combination of older technologies such as cable, PC computers, cellphones, CD players, VCRs, game consoles and the Internet, along with more recent ones -- PDAs, broadband Internet, digital cable, home wireless networks, MP3 players, DVRs and VOD-- for those changes. And teens foretell an even more radical shift in future media consumption, the report points out: They spend less than half as much time watching TV as typical adults do. Teens also spend 600% more time online, surfing the web.

According to Forrester Research's most recent North American Consumer Technology Adoption Study, people ages 18 to 26 spend more time online than watching TV and are adopting new technology faster than any other generation. Because of that, they tend to be more receptive to blog, podcast and mobile-web ads.

That leads one to wonder whether consumer marketing mixes should change to reflect consumer behavior.

The answer is not quite -- yet, at least. The Catch-22 is a "chaos scenario" that smart marketers have read about in these pages: a dearth of online-ad supply and the web's generally fragmented nature will keep TV in booming business for the next several years.

"Should everybody shift 30% of their dollars to the web?" asked Amy Guggenheim Shenkan, senior practice knowledge specialist in McKinsey's San Francisco office. "No. There wouldn't be room today if everybody wanted to shift online. Last year [online media] was $12.5 billion, by end of 2007 digital advertising will be $18 to $25 billion. ... So we're seeing a lot of growth, but if you want to match up share of attention and share of dollars it couldn't happen for that reason." The TV ad industry is a $68 billion one.

So what's a marketer to do? Read AdvertisingAge for more details.

Monday, August 07, 2006

Sify’s performance will speak for itself

R Ravichandran interviews Raju Vegesna, Chief Executive Officer and Managing Director, Sify, in The Financial Express:

My mandate will be to unlock the greater value of Sify’s multiple businesses such as broadband, enterprise solutions and portals through strategic investments, technology and processes…

We will continue to focus on growing each of our businesses in India. These include the Internet access -- cyber cafes and broadband-to-home initiatives....
Our portal initiatives are rapidly gaining momentum. Efforts will also be made to grow the enterprise and managed services business. A key strategic thrust will be on our international services that include e-learning and infrastructure-managed services. To meet growing demand, we recently opened our third data centre in Bangalore…

Sify is, has been, and will be one of India’s finest companies in data connectivity services for enterprise and consumers. This has been well recognised both in India and abroad. It will continue to focus on its customers, growth and profitability from its businesses in India and overseas in the years ahead. Going forward, I am sure our performance will speak for itself.

400% online revenue growth

Manasvi Mehta interviews Haresh Chawla, CEO of TV18 in Business Standard:

Going forward, we expect the TV–Internet combination to be an effective tool for building communities and for offering solutions to advertisers. I would not be surprised if, one year down the line, we are known as much for our Internet properties as we are today for our TV properties.

We’ve done over $1mn in revenues from our Internet businesses in the last two quarters. The revenue stream, though only comprising about 10 per cent of our topline, has grown by over 400 per cent since last year.

We expect this kind of momentum to continue. Our spends on these businesses is marginal compared to competition since we have a large television franchise and thus our customer acquisition costs are minimal.