For the last twelve years the case against Bollywood actor Salman Khan, for driving his SUV while drunk and ploughing into five homeless people who were sleeping on the street, killing one and seriously injuring the other four, has been winding through the Indian courts. Importantly, following the event the actor did not turn himself over to the police for eight hours, and is on record saying he was not the driver when the incident occurred, although recently in the Mumbai court proceedings two witnesses have come forward to say that he was in fact the driver of the car and not his bodyguard who claimed to have been the driver, originally.

Why am I talking about this incident? The reason is that Salman Khan continues to act in numerous movies, continues to be a box office draw, and continues to be the spokesperson (or brand ambassador if you prefer) for numerous domestic and international brands. The last one in particular is striking as large corporates from around the world including Pepsico’s Mountain Dew; Coca Cola’s, Thums Up; Suzuki of Japan; Splash, the Middle East’s largest fashion retailer, as well as India’s Hero Honda, Sangini Jewelry, Yatra.com, and many other brands have contracts with Salman Khan!

To me, this is quite surprising because the brand owners are exposing the brands to risk. Indeed, in most markets around the world, even the hint of impropriety leads companies to drop the spokesperson. For example, following Tiger Woods’ car accident in late 2009 and his acknowledgement of marital infidelity, he was rapidly dropped as the spokesperson for AT&T, Accenture, Gatorade (a Pepsico brand), and Gillette (a P&G brand). Why did these brands drop Tiger Woods? According to one report, shareholders of the sponsoring companies lost between US$5 and 12 billion as a result of the scandal with “Investors in the three sports-related companies – video game maker Electronic Arts, Gatorade and Nike – fared the worst, experiencing a 4.3% drop in stock value.”

Most of us I think would agree that negligent homicide is a more heinous crime to be accused of than marital infidelity. If that is so, why is it that after 12 years, leading companies from India and around the world continue to sponsor Salman Khan? Is it that the local subsidiaries of global companies and Indian corporates are less knowledgeable about the potential consequences of using a scandal tainted spokesperson? Or is it that Indian consumers are so star struck with Bollywood actors that notwithstanding the accusations which look more and more true, they continue to adore the stars? Either way, it raises questions about Indian companies and consumers. I’d like to hear from you as to what you think!

The economic slowdown in the BRICS economies and indeed the emerging markets at large are posing a problem, particularly so for MNCs, as they eye rural markets for growth. MNCs, particularly, developed market MNCs, are by and large ill-poised to win in these markets.

Consider the automotive market in India. No developed market car maker has a market share greater than 6% of the Indian market; indeed the only foreign car maker with a greater share is Hyundai, an EMNC. In comparison, India’s Maruti has a 30%+ share of the market and over 30% of Maruti’s sales come from population centers with less than 10,000 people. Thus, in the rural markets, the incumbent brand and the one to beat is a domestic brand that over the past several years has been successful in defending its market position. India’s Mahindra and Mahindra is also a strong player in these markets with its robust SUVs.

Besides being the incumbent with a long and credible history, a key advantage that enables the likes of Maruti to defend their market position, particularly in rural markets is its extensive distribution system; Maruti has some 1300 dealerships across India. In comparison, Honda hopes to have 170 by the end of the current financial year while GM, which has been in India for almost 20 years now has less than 300!

That distribution plays a key role in building and sustaining a brand, particularly in rural markets, is undeniable. Consider the case of LG, again in India. It entered India late, in 1997, after all the global majors it competes with, e.g., Samsung, Whirlpool, GE, and Sony, were already in India. Yet, in a short span of 5-years, LG had catapulted to the number 1 spot in refrigerators, air-conditioners, and TVs. It did so by rapidly building sales offices around the country. While the companies it competed with had around 20 sales offices around the country LG had over 100. This support helped it to gain retail presence in over 15,000 outlets around the country and to be able to offer rapid response when it came to service. It has since complemented its retail footprint with its flagship LG Shoppes, which now number over 700 across India.

So, what’s the message? As MNCs eye and salivate over rural markets in the emerging economies, they need to step beyond the bigger population centers where they feel more comfortable. They need to build a deep and robust presence in rural distribution, through setting up offices through which to support a retail network. Only then can they hope to take a share of this potentially lucrative pie.