Herd Mentality - Part II

Three's company, rest's crowd

From Bikes to Airlines to Cement, Troikas Corner 80 % of Market

What's common between Hero, Honda, Bajaj Auto, TVS, Maruti Udyog, Hyundai, Tata Motors, LG,
Sony, Samsung, Apple, Samsung and vivo , Indi go, spice jet Holcim, Grasim, India Cements, Tai Hotels,
ITC Hotels and Oberoi Groups?

All these companies are part of a troika that dominates their respective sectors, with a combined market's
share of up to 80 %. From bikes, cars, consumer durables, mobile handsets, paints, tyres, steel,
aluminum, airlines, hotels to cement, an increasing number of sectors in India are now led by a set of top
three players, with rest of the companies being forced to become niche players or also-rans.

According to Vivek Gupta, Managing Director of AT Kearney (India), "It is a natural phenomenon in a
growing economy, though we cannot say it is a sign of maturity". He adds. "A sector starts with few
players and then there is a burst of new players. It is followed by consolidation, and ultimately a handful
remain in the game."

Until recently, in most of the sectors, market share was dispersed among half of a dozen equally strong
players. Mergers and acquisitions combined with general market dynamics has however now
concentrated market share among the top three players. Marketers call it the Rule of Three. Economists
call it Oligopoly- the dominance of few players in a sector.

Though internationally, it has always been like this. Recall the big-two in the American Auto market Ford
and General Motors or the dominance of Federal Express, UPS and DHL in the global express courier
and logistics market. Story of Amazon and Wall mart. A similar pattern is now emerging in India.

Take the passenger car market for example. Though there are over dozen players in the
industry and new players entering every year, Maruti Udyog, Tata Motors and Hyundai
together account for over 85% all cars sold in domestic market.

Ditto in the motorcycles, Hero, Honda, Bajaj Auto and TVS Motors. The big-four, now
account for over 90 % of the market.
In telecom it is all about power of three Reliance Jio, Bharati airtel and Vodaphone Idea combined
We also observe that post liberalization other than banking and insurance sector (where trust and security
is more important than service ) every other sector, public sector has taken a back seat and private sector
dominates

.
 Paints to durables, the Trinity ( power of three ) is in

From paints to Airlines, it is usually the top three companies in any sector that corner the market. In the
paints sector, Asian Paints, Goodlas Nerolac and Berger dominate the market. Over the years, the sector
has gone through a consolidation where some players have got extinguished while few others have been
relegated to niche segments.

The phenomenon is not restricted to manufacturing sector alone. Service sector is witnessing an equally
large polarization. It is all about TCS, INFOSYS And WIPRO. It is also about highest no of employees,
profit and global clients

After the collapse of JET, KINGFISHER sky is ruled by INDIGO AND SPICE JET

Move over to the hospitality sector. Despite the expansion of international chains, the three desi majors-
Indian Hotels (Taj), ITC Hotels and Oberoi Hotels continue to dominate the luxury and business hotels
segment.

"Every sector passes through an evolutionary and revolutionary phase. In the latter, there is either a steep
growth or a steep decline. Those companies survive who are able to manage the growth or the decline
phase as has happened in airlines," says Jagdeep Kapoor of Samsika Marketing. In consumer durables,
LG, and Samsung are by far the drivers of business. Says Girish Rao, head of sales at LG Electronics, "In
durables we have seen single product companies going down the ranks. The three top player-, are also the
ones who have a multiproduct portfolio across segments."

In Consumer Durable Sector if the extent of consolidation is considered, the top two players - LG, and
Samsung control 60 %. This is true even as more than 20 other brands are fighting for the rest of the
market and new players are entering the market.

Till two years ago, India had four equally large cement makers with dozens of regional players. After
recent consolidation, the two players namely Aditya Birla group and Ultratech and Holcim group that
now controls ACC and Gujarat Ambuja, together account for over half the market. Combining India
Cements, the three account for over 60 % of the cement market. A similar equation has emerged in the
mobile handset market. While new warriors from China (Bird, Haier TCL ), Korea (LG & Samsung) and
Taiwan (Benq) are launching their products in India, the sales volume continue to be dominated
by the troika of APPLE, SAMSUNG AND VIVO, XIOMI

The story is getting repeated in digital camera market. The segment is still a relatively nascent in India is
game between the three multinationals - Olympus, Canon and Sony.