Market research in India is a monopolistic business

In the corridors of India Inc, brand managers and business heads cling to
this number month after harried month. It influences bonuses, promotions
and, sometimes, even jobs. CEOs worry when it slips by so much as a
fraction of a per cent. No wonder, market shares are such precious digits to
companies.

When HUL and Nokia cry foul over third-party research agencies reporting
a slippage in their market shares, it could be the gripes of leaders losing
dominance. But it also focused attention on an aspect that's been under
scrutiny for long: how market share numbers are measured.

Market research in India is a monopolistic business, with each sector

mostly having one, occassionally two, players. So, for example, there’s
Nielsen in FMCG, GfK in consumer durables, IDC and GfK in mobile
phones, and Gartner and IDC in computers, to name a few sectors. They
conduct a retail audit within a sample of outlets to arrive at market shares --
generally, monthly -- by brand, category and geographies.

Companies source this data to see how they are doing in comparison with
the competition and to shape their business responses. It’s a tricky
relationship. For example, Hul is a Nilesen client, paying a few crore a year
to buy data from it. But it’s also a subject, with Nielsen quantifying HUL’s
performance in the market place against its competitors.

When issues arise, resolution entails a diplomatic touch, sometimes gentle,

sometimes firm. And issues related to two key aspects are common:
representation of new product categories, and variation between internal
numbers and external estimates.

INACCURATE REPRESENTATION
Nielsen tabulates numbers from 16,700 outlets to calculate FMCG market
shares across an estimated 8.4 million outlets in India. The set consists
largely of kirana shops, and not enough modern retail stores, chemist
shops, army canteens, tea shops, and highway and rural outlets. Several
FMCG companies say this composition does not accurately capture their
product sales.

“Categories with very low levels of penetration tend to be under-

represented,” says Dabur CEO Sunil Duggal. Then, there are certain outlet-
based tilts. For example, breakfast cereals, large packs of soft drinks,
juices and milk, and mouthwashes sell more in modern trade, while niche
products are found in certain types of outlets.

“Soaps can be uniformly represented through this exercise, but a category

like Chyawanprash, 45% of whose sales come through chemists, can’t,”
says former Dabur chief operating Kannan Sitaram, who is now an
operating partner with venture capital firm India Equity Partners.

Clients have raised similar issues in Nielsen’s retail audit for consumer
durables and mobile phones in India, a JV with German research firm GfK.
“They do not have a footprint in smaller towns,” says Amitabh Tiwari, head
of sales at LG India. Products like electric shavers, hair dryers and Mp3
players are not covered because the existing panel focuses on durables
stores, says Vivek Sharma, head-marketing and VP Indian subcontinent at
Philips Electronics. “New channels are getting missed. Cosmetics stores
that sell bindis, lipsticks and lingerie are now important for sales of hair
dyers and straighteners,” says Sharma.

VARIANCE IN NUMBERS
The other issue is a difference between Nielsen estimates and companies’
own internal numbers. While a variance of 2-4% is acceptable globally,
companies say it is often more. “In some cases for our reasonably well-
sized brands as well, it captures 50% of our sales. Yearon-year the gap is
not reducing,” says Sameer Suneja, managing director, Perfetti Van Melle.
This means any small losses in share could go un-noticed over many
months. Companies use Nielsen data to identify weak spots and take
corrective action through trade incentives and consumer promotions. Tiwari
of LG recounts a recent GfK-Nielsen report that showed LG’s share of
LCD TV sales in Vijaywada town as zero and the company had to show
invoices to the agency.

There are unique aspects of any trade that need to be captured accurately.
Candies, for instance, are sold to retailers in jars. “If a jar of 1,500 pieces is
opened in an outlet in a particular month it will be considered/reported as
sold for that month by Nielsen,” says Suneja. “However actual sales may
take place over two to three months. This should average out over a long
term period but the fluctuations in monthly shares due to this are huge, so
we read it accordingly.’’

Rajeev Karwal, founder of SME consultancy Milagrow and a durables

industry veteran, points out that between March and July many dealers
outside the regular durables network stock up on refrigerators to cash in on
the seasonal spike in demand. “If GfK-Nielsen does not do an expansion of
its enumeration exercise in the season, it’s bound to miss out on these
changes,” says Karwal who helped initiate the ORG retail audit for colour
TVs in 1987.

COMPANIES QUESTION
Companies have become more particular than before. “Organisations are
getting more sophisticated on the capture of last-mile data,” says Tarun
Arora, head of marketing at Godrej Consumer Products. “Their own ability
to measure data has also gone up. And so have expectations.” Market
share data is also used to reward brand and category managers. “Among
multinationals GfK is the Bible -- your headquarters evaluates your
performance based on this,” says Tiwari.
Companies are unhappy that even after paying high subscription fees for
retail audit reports they get a raw deal. Nielsen charges Rs 10-30 lakh a
year per category, going up to Rs 70 lakh. GfKNielsen charges Rs 25-40
lakh per category. But since they can’t dismiss them, companies tend to
work with market research agencies to rectify discrepancies. For example,
they share data on secondary sales. Similarly, CII's FMCG committee has
been in discussions with Nielsen for the past few years. Nielsen is believed
to have updated its FMCG outlet composition in 2006, but clients were
reportedly not satisfied.

A few modern trade chains are now part of Nielsen’s panel. These include
Future Group's Big Bazaar, Food Bazaar and Ezone stores.

“We share offtake information from our scan system with Nielsen,” says
Damodar Mall, director food strategy at Future Group. In durables, modern
trade chains such as Vijay Sales (38 stores) and Vivek’s (28 stores) are
together believed to sell 25-30% of high-end products like LCD televisions,
double door and frost-free refrigerators, front-loading washing machines
and split air-conditioners. But GfKNielsen has been struggling to include
them. “They tried a few years back. But we don’t want to share data due to
confidentiality,” says Nilesh Gupta, managing partner, Vijay Sales.

Both Nielsen India and GfK-Nielsen did not answer questions relating to
this story and on their audit methodology. Nielsen has evidently admitted to
gaps in its audit methodology. During the 2009-10 annual results call with
analysts, Nitin Paranjpe, CEO of HUL, said: “(Nielsen has) indicated to us
that till such time over the next 12 months these actions are completed we
should look at these numbers on a directional basis rather than in absolute
terms.” Hul did not participate in this story.

Last year Nielsen conducted a census of new outlets. Based on this, it

plans to roll out an updated panel of 25,000 outlets in July. “They’ve
reacted rather slowly,” says Arora. Lakshmi Kant Gupta, chief marketing
officer at LG India, concedes that GfK-Nielsen updated its durables panel
as well to include exclusive brand shops, which are strong on premium
products like flatpanel TVs. Any census or panel expansion exercise
means higher costs, which clients are generally not willing to share. “They
will ask for higher fees and that’s something we will negotiate. We know
they have great margins on this,” says the marketing head of a leading
FMCG company who doesn’t wish to be named

....AND RESPOND
Meanwhile, the consumer durables industry continues to rely on multiple
sources such as Display Search for flat panel displays, durables industry
body CEAMA and trade magazine TV Veopar Journal, ELCOMA for
lighting products, and NCAER which publishes household penetration
numbers. Some conduct periodic market estimation studies through smaller
research firms.

Among them is Noidabased Market Pulse which covers the telecom, DTH,
lighting and small appliances space. Founder director Ejaz Hoda says one
of GfK-Nielsen's clients shifted to its services a year ago. “It's a big MNC in
a sensitive category and a multiple channel product,” he says. Clients
sometimes also ask for a booster sample that gives greater weightage to
categories they’re present in. Some like LG do their own research. Every
year LG conducts an annual shop census by market, brand and sales.
During this month-long exercise the company deploys around 500 people
in addition to its 600-strong sales team. Client concerns, however, remain
about GfK-Nielsen’s willingness to discuss and resolve some of the issues.

“They are very reluctant to be transparent about their methodology and

process. I don’t understand why,” says Gupta of LG. He also points to the
quality of field investigators deployed by research agencies. “The quality of
data is as good as the fieldwork done. That's where the talent is the worst.”
The problems in the mobile handsets industry are a bit different. When
global research firm IDC showed Nokia’s share as 31.5% against GfK-
Nielsen’s 44.8% for the July-September quarter of 2010, Nokia lashed out
publicly alleging that IDC’s shipments-based methodology counted only
imports and not handsets manufactured at its factory near Chennai.

Nokia India declined comment for this story. Emails to IDC Singapore and
its global media head went unanswered. Till February 2011, IDC operated
in India through its India licensee Cyber-Media Research (CMR) and
reported mobile phone shares on a quarterly basis. The reports, priced at
around .`10 lakh annually, came with a time lag of 75 days. So data for the
Jan-March quarter, for example, was made available in mid-June.

Then there’s the question of whether shipments necessarily translate into

consumer sales. “Typically there’s seven days inventory at distributor level
and 15 days at retail outlets. So shipments are a fair indicator of market
share,” says Naveen Mishra, lead analyst, India telecoms practice at CMR.
Surprisingly, even smaller players who’ve been gaining share at the
expense of Nokia are concerned about the authenticity of market share
numbers.

“We don’t know which data to rely upon,” says SN Rai, co-founder, Lava
International. While GfK-Nielsen is said to cover 35 towns, Rai is not
convinced. “Our real issue is tier-II and III towns and they don’t measure
that adequately. Mobiles are totally different from durables. There are
handset retailers in over two-thirds of India’s districts,” he says. “None of
the agencies are equipped to do that kind of research.”