In my own circle, nobody uses a VIP: Dilip Piramal

VIP Industries Chairman, Dilip Piramal, in an interview with Ajita Shashidhar and Arpita Mukherje of Business Today, admits that his 40-year-old brand has been losing out on the aspiration quotient.

Q. VIP is a 40-year-old brand, but the year-on-year growth has been quite slow. In fact, luggage as a category has been seeing slow growth. Why is it so?

A. Our growth rate got impacted as our economy wasn't competitive enough. People forget that from 1956 to 2001, import of consumer goods was just not allowed into India. There was a blanket ban. So anything that was sold in India had to be made in India. We did not grow much during that period.

Q. Your daughter, Radhika, has been in the business for a while now. What has been her biggest contribution?  

A. I really needed Radhika. All my good guys, for example Sanjeev Aga, became the MD of Idea. He got five times higher remuneration and we could not retain him. So it was getting difficult to get somebody good from outside. And then fortunately, Radhika came in and her biggest contribution has been that she has helped rebuild the company as a good corporate entity. Our management has become much more professional. We had good professionals but our calibre had really come down. We used to recruit first day at the IIMs. Blowplast was like a nursery of middle managers. And all my management trainees of the 80s are today CEOs of large corporates. Sanjeev Aga, for instance, was handling a very ordinary marketing job in my company and then I made him head of my plastic division, Moderna, and then I made him head of VIP. After Sanjeev's departure, our top management became quite weak. We were recruiting such horrible people that I was just appalled. Market share didn't fall because at that time Samsonite had just come in and Sanjeev had done a good job of keeping Samsonite at bay.

Q. But you did lose out to Samsonite eventually, didn't you?

A. In the late nineties, we had about 50 % of the organised market. Then Samsonite got its act together and our market share did go down. I think it went down to about 45 % in 2005-06. After Radhika came, the best thing was that she really got good managers. We also shut down our factories in India and started importing from China. This helped us to improve our profitability and consequently we were able to attract better talent.

Q. VIP does have the largest market share in the luggage category and is almost synonymous to luggage, but the brand is not aspirational. Your thoughts?

A. VIP has always been the market leader. We have had some difficult times, but not so much due to competition, but because of the economy and our costs going up. But the brand has been always well looked after. So, for our brand, I have never compromised on advertising even in the worst of times. The easiest thing, particularly for Indian managers who are not so marketing or advertising-oriented, is to cut down advertising because it doesn't have an immediate impact on sales. Even Radhika used to say this to me. I used to tell her it doesn't work that way. For a brand like VIP, you cannot co-relate this season's advertising to sales. If you don't advertise in one season, nothing is going to happen to your sales. There is always a tendency for the top managers to show a better bottomline by cutting down on advertising. I have never allowed that. We have always nurtured our brand extremely well and the other thing which Indian companies do is they compromise on quality during bad times. I have never allowed that.

Q. You have tried to diversify your business lately. You have got into handbags and also re-launched Skybags as a youth brand. Can we talk about it?

A. We had already launched Skybags before Radhika came in and handbags were in my mind for 15 years. Our research was showing that a heritage brand such as VIP does not appeal to the youth. They all will say that VIP is a good brand but it is an avuncular brand, it's my parent's brand. It's always been in the family, but it does not excite me. And they go for a foreign brand. So we launched Skybags as a youth brand. In my own circle, nobody uses a VIP. In the beginning I used to be a bit disappointed but now I know if I was not the owner of VIP, I would also not use a VIP because every Tom, Dick and Harry is using a VIP.

Q. You do have a number of brands such as Carlton, Skybags etc, but there seems to be a confusion. More than often the sales person at a VIP store is unable to explain the difference between a VIP and Carlton?  

A. Carlton is in the upper category. It's a different brand, and more expensive. Marketing theory says that if your market share is more than 35% in a particular segment, then you can start another brand. When I bought Aristocrat in 1987, I didn't merge it with VIP because I needed another brand. But we didn't have so much money to push another brand so gradually Aristocrat faded away. But it's still there, it still hasn't died. We have Skybags, which is a youth brand and then we have Alfa also for the smaller markets.

Q. Why are the growth rates in the luggage industry so slow?

A. Luggage is not an item of casual purchase. You only use it when you need it. You buy a piece of luggage may be once in two or three years, that's why the luggage market is very small.

Q. How has Caprese performed?

A. We have to now build handbags. It's been my idea for the last 15 years to have a luggage story in handbags. There was no mass brand of handbags. What luggage was in the 70s, I want to replicate it in handbags. It is much more difficult today because launching a brand is very expensive. Building a brand is expensive because there is so much clutter on television. Caprese is taking a bit longer than I would have expected.