SACH is IN

So there is new toned milk in town – Sach. Sach is the new private label brand from the stable of Future Group of Big Bazaar fame. It will have many other things like Apparel, cooking oil, toiletries etc under the same brand name. I didn’t know anything about Sach when I entered Big Bazaar today and was attracted towards it by Sachin’s association. The price was Rs 42- a good Rs 10 higher than the standard Amul Toned Milk. Though today Sach was available for Rs 33 – a special Food Bazaar Offer. Testing the waters, I thought. A consistent toned milk drinker for the past 4 years and like a true early adopter I bought one pack.
Some thoughts about it.
1. Packaging: The brown Colored pack stands out – amidst the general Blue and white of the other brands. But for me a brown color doesn’t give a direct association with Milk . A blue or white is easily recognizable.

2. Price sensitivity: It is priced at RS 42 – at a premium to the normal available milk. Will the consumer be ready to pay this premium just for the Brand Name. Hard to say. I will not – ya despite Sachin being there all over the packaging.

3. Health Benefits: Ok. I can for once think of buying it if it gives me added health benefits – may be a competitor to the Amul Gold or the double toned milk. But just compare a standard Amul toned and Sach toned milk.



So what do you infer from the table above. Common perception says that Amul is far better in terms of nutritional value at much lesser the price.
Further problems for Sach occur due to the fact that it seems they are trying to play primarily on the health aspect - they have their nutrient values boldly pasted on the front of their packet (Amul has it in miniature font on a side).
Their primary motive is to position the brand as ‘Healthy’ – not only milk but everything associated with the Sach Brand (Source). So maybe they will succeed in this effort by offering health benefits upfront – but just a casual look under the hood reveals a starkly different picture.

4. Availablilty: Sach will be available only at Big Bazaars as of now. Now I don’t have any statistics on the percentage of milk being bought from modern trade channels but just observation of going to a big bazaar for the past 2 years tell me – very few!
Mostly prefer to buy it from the mom and pop stores. Why? The perception of being fresh. Though you can keep a tetra pack for 2 months without opening but the general tendency is to buy small quantities at regular intervals. Now keeping this in mind, can Sach compete with the highly efficient and well set distribution network of Amul? May be in their own stores but what about outside.


5. Brand Association of Amul with dairy products is very strong and that is some more challenge for Sach to break the mould and get into consumers mind and then the refrigerator. Amul may have become a generic brand and Sach may be attempting to break the clutter – but very difficult.
As of me, I am not buying it if it is priced more than Rs 33 and not available at the shop next door.

Bailouts...

“Bailout” is the hottest word around the globe today. Governments around the world are following what Keynes, one of the founders of Macroeconomics, preached after the Great Depression of 1929 – trying to increase consumption. 2 primary things are being done.

1. They are pumping in tax payer’s money into saving large organizations from crashing down, eventually saving lots of jobs and preventing unemployment which will further lead to decrease in demand of different commodities in the market. And which will further lead to closing down of more industries, more job losses and so on. The basic aim of this step is to keep the demand of different products high in the market. That is, people should not get a reason of not consuming. For this, there can also be tax rates increase because the government wants more money to bail these companies out.

2. Reducing Interest rates artificially so it is easier for:
a. Industries to borrow money. Presently, as people are buying less, industries are getting lesser cash inflow. Due to this it is tough for them to carry on their operations and produce and sell their products.
b. People have less incentive to save and they consume more, hence keeping the demand high
So the basic mantra is to increase consumption. But ironically, the basic reason for the current crises was the same – tendency to consume was much higher than tendency to save.
So the solution is the problem itself.
Now what will happen when interest rates are reduced artificially and tax rates are increased.

As is evident from the figure, it will lead to further failure in the long term.

What does the Austrian school of thought, people like F.A Hayek say. According to them, the government should losen its control at junctures like these. Rather than tax increases, tax cuts would benefit in the longer run. Tax cuts would mean more money in the hands of people. Now with same level of consumption, people can save more. More savings will result in interest rates coming down naturally.( Banks have more money to lend when savings are more. Hence lowering the interest rates). Hence it will be a natural reduction in the rates unlike the artificial one at present. The government has to become efficient and come in cost cutting mode to reduce the fiscal deficit it will incur due to lower taxes.

Kaushik Das explains this in detail here.