Thursday, November 17, 2005

TOP 10 Global Leaders in Food

General Mills
Unilever Bestfoods

CASTROL's Repositioning Excercise

Changing Trends
  1. Indian consumers today are far more passionate about their cars and bikes
  2. They no longer look at their vehicles as a mere mode of transport but also want to maintain them well
  3. Caring for vehicles is becoming a priority for consumers
  4. People don't change brands easily, as they feel that by doing so, they are causing disservice to their vehicle
  5. rise in ownership value and pride in their car or bike, consumers are also careful about the brand of lubricant they use

Castrol's Financials: Turnover of around Rs 1,500 crore last year

Castrol's brand strategy: "It's more than just oil. It's liquid engineering."
The tagline `liquid engineering' talks about the inner strength of Castrol which enables the engine to perform better

Garage Owners to Masses

Media Agency: Ogilvy & Mather - Position Castrol as a brand that goes beyond other lubricant brands, and also brings out the emotional attachment people have towards their vehicles

Other Players: Most lubricant brands focus more on the vehicle, while we've tried to talk about the engine

Other Changes

  1. The brand also sports a new logo
  2. Invested in creating a new packaging for its products
  3. Previously there was not much synergy between the various packs. The packs containing truck oils looked different from the car oils. But now there is more synergy between the packs and they also bring out the brand's core proposition

Products: To fulfill the needs of a passionate biker or a car owner, the company has also rolled out a few specialised products such as Castrol Edge

Target Audience: ultra passionate consumer who wants the best for his car

Market Size: Lubricant market has registered a significant growth in value terms, but a fall in volumes. This is due to superior technology and the high-quality ingredients used in the lubricants. The market in value terms is growing by almost 7 per cent year-on-year

A truck driver who used to change the oil every 10,000 km will now do it once every 15,000 km

Promotional Campaigns

  1. Associating the brand with a lot of youth-based TV programmes such as MTV Youth Icon and Fame Gurukul on Sony
  2. Involved in a number of campus activities to promote its premium bike lubricant, Power One
  3. They sponsor rock concerts, 20:20 cricket matches and speed football
  4. They have tied up with cricketer Rahul Dravid and actor John Abraham to endorse the brand. But the initial campaigns will focus on the core proposition of the brand, which is liquid engineering

Hope Castrol will be able to realize value from the above excercise !!

Wednesday, November 16, 2005

Rise of Regional Brands

Small and regional brands score because they are often close to the market, respond faster to changes and are willing to learn from mistakes.

HINDUSTAN Lever Ltd (HLL), India's largest FMCG company, has struggled to grow in recent times. Many of its brands are no longer the stars of the past. HLL's experience is symptomatic of the kind of challenges faced by established brands today. The new threat comes from smaller players who have embraced a different kind of business model with a different value proposition. These include regional brands and private labels.

While HLL has been struggling, the regional players seem to be doing well. For example, CavinKare has been giving HLL a run for its money in the shampoo market. Anchor, one of the fastest growing FMCG companies in recent times, is hotly challenging HLL and Colgate in the toothpaste market. Jyothi has dislodged Reckitt Benckiser's long-time leader Robin Blue with its Ujala fabric whitener.

Regional brands typically take on well-known, established brands by pursuing a flanking strategy which can be of two types - geographical or need-based.

1) In a geographical attack, the challengers identify regions where the opponent is underperforming
2) The other flanking strategy is to serve unfulfilled market needs

The essence of a flanking strategy is identifying shifts in market segments that are causing gaps to develop, moving into the gaps and developing them into strong segments. Flank attacks make excellent marketing sense and are particularly attractive to challengers with fewer resources than their opponents. This is how Nirma has become a national brand, even though no one gave it a chance when it took on HLL.

Various factors have contributed to the rapid emergence of challengers in the past decade. In many product categories, technology is easily available. It is no longer the exclusive preserve of established players. Moreover, many entrepreneurs today are qualified tech-savvy people, if not technologists themselves. They understand the importance of technology.

Earlier, resources were a constraint. So established brands created high barriers to entry. But today even if the entrepreneurs don't have money to back their plans, angel investors and venture capitalists are around to fund them.

The smaller brands have also started delivering on the quality front. No longer can national brands pose as the sole guardians of quality. Probably the biggest strength the smaller brands bring to the table is that they are often close to the market and respond to changes faster. They are typically managed by more entrepreneurial teams which are flexible and willing to learn from mistakes. Indeed, one of the main points of criticism against HLL is the management hubris, that has grown out of years of experience in brand management and the comfort level that comes when a huge parent company's backing (in this case, Unilever) is available.

Branding is a risky business. While investments are heavy, the chances of success are small. But some of the entrepreneurs behind the challenger brands are showing a healthy appetite for risk. For example, Paras Pharmaceuticals (which has brands such as Moov, Dermicool, Krack and Livon) has a Rs 10 crore-12 crore annual advertising budget. Of course, some of these brands are also well-endowed and have the support of established business houses. Anchor toothpaste has the backing of a Rs 1,000-crore business group. Parakh Foods, which shot to the top of the growth league tables with its Gemini oil, is backed by a business group with a similar turnover. Adani Wilmar's Fortune oil comes from the Rs 10,000-crore Adani Group.

Some of these business groups have assets they are willing to leverage. The Parakhs have piggybacked on the Samrat brandname, a market leader in Mumbai in processed wheat and gram flour, to launch refined oil. Bhaskar Salt has been launched by the Dainik Bhaskar newspaper group, which has its own print publications and cable TV network.

The 40-year-old Anchor group made only switches during the first 30 years. Later, it diversified into lightings and luminaries, miniature circuit breakers, PVC wires, fans, mixers and irons. Realising it had a strong retail network, Anchor decided to enter the toothpaste business. The company went about identifying a unique selling proposition (USP) and found one which would never have occurred to an MNC - vegetarian toothpaste. Some of the standard ingredients in toothpaste are obtained cheaply from animal sources. Anchor found an alternative in vegetable oils.

The vegetarian theme has paid off with the company making inroads in States such as Gujarat and Rajasthan. Anchor has now started to look beyond toothpaste. It has big plans to launch soaps, talcum powder and confectionery. It is pretty confident about repeating the toothpaste success in soaps and shampoos.

The Parakhs started with a dal-and-besan mill in 1964. In the '90s, the business reached saturation point. Sensing little scope for expansion, they looked at new commodity-based businesses. With the Samrat brand for gram flour, semolina and wheat flour already established, the company launched Samrat edible oil, keeping its price low, while maintaining quality. Soon, another brand, Gemini, was introduced for refined sunflower oil. At Rs 36 a litre, it was 30 per cent cheaper than the price of Rs 52 charged by established players.

The Adanis formed a 50:50 joint venture, Adani Wilmar Ltd (AWL), with Wilmar Trading, Singapore. Fortune became the leader in the edible oil market by December 2003, with 17.25 per cent market share (pushing Agro Tech Foods to second position with 12.9 per cent), riding mainly on its strength in soyabean oil. Though Fortune has held on to its position over the past one year, it has realised the need to get into the largest-selling oil segment: sunflower. It currently has 22 per cent of the edible oil market, followed by Parakh Foods (Gemini) with 13 per cent, Kaleesuwari Refineries (Gold Winner) with 11 per cent and Agro Tech with 10 per cent (according to a report in Business Line dated March 3, 2005.). Fortune wants to overtake Sundrop by December 2005 and become the second-best selling sunflower oil brand in the country, behind only Gold Winner. With this goal in mind, the company is holding a price-line that is on par or lower than its competition by Rs 1-1.5 a litre.

The Dainik Bhaskar group entered the salt business to leverage its strengths in distribution. Bhaskar salt has targeted housewives with its catchy advertising campaign that describes the salt as natural, free-flowing, iodised, super-refined and hygienic. Bhaskar salt's USP is "India's first taste-enhancing salt." The company's message to customers is "Bhaskar salt is the purest, whitest and most consistent salt. So when you buy Bhaskar salt, you are buying health and happiness for your family." The brand is being promoted using outdoor media, point-of-purchase displays, print ads and cable television network. In the rural areas, Bhaskar is trying to expand its market by eliminating the use of unbranded salt.

A second threat on the horizon for the established brands is the store brand or the private label. Many large retail chains are sourcing items from original manufacturers and in some cases making them on their own. They don't have to bear heavy advertising and promotional expenses. The store label signals quality and consumers are attracted by significantly lower prices. These are not regional brands in the sense that they are sometimes found all over the country. But their strategy closely resembles that of regional brands.

The store brand is not a big problem in India as yet. But it will be when the retail industry takes off. As organised retailing gains momentum, private labels can be expected to become more popular, going by the trends in developed countries. Already, brands such as Nilgiris, FoodWorld and Trinetra have started making an impact in the grocery segment.
Private labels are already a big business in the US. According to the US Private Label Manufacturers' Association (PLMA), store brands now account for one of every five items sold everyday in US supermarkets, drug chains and mass merchandisers. That works out to sales of more than $50 billion.

Private labels are less likely to work when they are competing with a lifestyle brand. But in recent times, even lifestyle brands like Coca-Cola have found themselves under threat from private labels. Wal-Mart's Sam's Choice is causing major worries for Coke. A 2-litre Sam's Choice bottle sells for 50 cents compared with $1.25 for Coke. Store brands now account for more than a quarter of soft drink sales at Wal-Mart.

The established brands cannot afford to sit idle in the face of this threat from regional brands and private labels. They need to do a lot of soul-searching and keep reinventing themselves so that they do not leave any flanks uncovered. That calls for both smartness and hard work on the part of the owners of these brands to segment markets carefully. While the upper end of the market can be targeted in the traditional way, at the lower end, they must come up with an innovative business model that can break even at much lower prices.

Obsession with mainstream markets and inadequate attention to the bottom-of-the-pyramid markets will create serious problems for today's market leaders.

The leaders need to wake up quickly if they do not want their lunch to be eaten by the challengers.

Rural Brand Map by Harish Bijoor

Create brands keeping in mind rural imperatives

1.Reverse-engineered brands: Rural markets are different than the urban. Understanding is the key point. Reverse-engineer the brand quite unlike what we have done in the past. Go to the rural market and find out its wants, needs, aspirations, dreams and expectations. Go and meet up with a million villagers and create the product that is relevant to their needs. Stop depending on research numbers that run in the hundreds and a few thousands at the best! Ask the rural man what he wants. Engineer the product and the brand appeal and get back to him for a ratification. This time round as well, go back to the million hearts you reached out the first time to. Show it to him. Get it ratified. Insulate it all from the urban paradigm you have operated thus far within.

2. The name itself: Seek out the vernacular. Seek out the different. Seek out the name that is futuristic for sure, but seek it out in the ethos of the land the brand will sell within. Seek it out within the social milieu it will swim in. And don’t pass value judgment on the name that you seek out wearing tinted urban glares! And this goes for the slogan, the colour, and every component of brand appeal you will build for your brand of biscuit or bubblegum or bottle-cleaner or whatever!

3. The glitz and glamour of the advertising execution: Tread carefully here. Don’t for heaven’s sake decimate rural dress, culture, lingua franca, habit and rustic appeal. The point is to preserve and not decimate. Preserve and not clonalize! Watch out for the attitude that you covey. Look carefully for those hidden meanings that the hegemony of the urban marketer has cultivated in all of us. Take it through a thorough check and weed out the urban bias with a candour that will come more out of practice than upbringing and education. The fashion statement, the habit burr and the style-irreverence modern advertising seeks to throw at the viewer in the marketplace can on most occasions swim against the tide of social acceptance. Watch out for these signs and avoid them like the SARS!

4. Do a consciously aggressive rural job: Generations of wrong advertising and marketing norm has punctured the ego of the rural market for a while now. Go out there into the rural market with a passion to set right these wrongs. Do such an aggressive job on it that you will make rural a fashion statement even! Enough to make the urban man sit up and want to ape!! Position the rural ethos right. Position it uniquely with a yen to create a differentiation that is truly a world apart. Very few developed economies can boast a size of rural population that is multi-variegated as ours! Use it to advantage!

5.Packaging Right: Look for the ways and means that packaging will deliver freshness and maintain equity with the environment as well! The plastic revolution we witness today in urban markets is proving to be disaster! Fortunately for India, this revolution is as yet at a nascent stage in our rural markets. Imagine what would happen if the key issues of disposal were to affect three fourths a mass larger than it affects today in the country! The problem would multiply by a factor of four! Avoid this altogether and invent for the rural market forms of packaging that will be close to the environment we want to gift to our grandchildren marketers! Break away from the quality differentiation standards adopted by the modern marketer for Urban and Rural marketer. No apartheid here dear marketer! Equal money must deserve equal value!

6. The Price and Promotion Mechanics: The rural consumer has been through the throes of the games the urban marketer has played in terms of price and promotion. The rural dweller is tired really of collecting those inane sets of combs and tumblers and calendars alike. The rural consumer needs to be approached with a savvy sense of understanding his needs. Is it value that he seeks? If so what kind of value? Is it a value dictated by price? By quality? By quantity? Or by appeal? Functional or Emotional? Creating brands for rural India is a science that will require many ardent students who are willing to participate in this great big task of doing the different thing altogether in branding. It will require quite a bit of swimming against the tide of all that we have done in marketing in the past. It will require decimating many a myth. It will demand many years of hard work, something the urban marketer will find daunting. The rural market for brands is a powder keg of an opportunity waiting to be explored……not exploited! The traditional means of taking the urban brand and its appeal into the rural heartland will only destroy the fragile rural mind and milieu. I really hope the harm has not already been done! If it has, I rest my case…..a defeated soul in search of the ideal rural market!

Thanks Harsh !!

Yours Sincerely,
Nitin Kochhar

The Changing Face Of FMCG Marketing - Feb 26, 2003 by Mayank Krishna

FMCG (Fast Moving Consumer Goods) marketing is no more going to be the same again! The changing consumer mindset thanks to more knowledgeable and discerning customers coupled with changing competition and saturated market is giving a tough time to the FMCG marketers. The changed scenario not only demands a new game plan with a sharp and decisive strategy but also a lot of creativity and insight. Some of the players in Indian FMCG industry have already taken a lead and are smartly moving to chart a success story for their brands. Some brands that reaped magnificent dividend from adopting a new strategy are Fairever, Ujala, Ghadi detergent, Chik, and Dandi namak. If we analyze the success story of these brands, it will be self evident that their marketing strategy is not a jargon filled new model of marketing. It is more of common sense marketing. But then, common sense is not so common!

Razor Sharp Focus
A common thread that binds the strategy adopted by these brands is razor sharp focus. They clearly see their target market. They know their customers well. They are not targeting consumers who already have built-in perceptions. They are reaching out to untapped market within a well known product category. Their primary focus is on millions of lower middle class families in small towns and rural segment. They are doing what legendry management guru C K Prahlad advocates when he says in his published paper, "Raising the Bottom of the Pyramid: Strategies for Sustainable Growth" that the greatest challenge for managers is to visualize an active market when what exists is abject poverty. These successful brands are just doing that- focusing on untapped markets. Take the example of Dandi namak. Who would have advised them to enter the branded salt market when Tata and HLL virtually share the whole market among them? But they entered this category when conventional wisdom said no. And they became a success story overnight. How? The answer is focus. They entered the market not to compete with Tata and HLL, but with the focus to take branded salt to rural and semi-urban areas. With this narrow focus, they not only captured a large rural and semi-urban market but also got some share of the urban market due to rub off effect.

Moreover, these small players fully realize that in today’s world, marketing needs money. So they don’t shy away from investing in marketing. Again take the example of Dandi namak. They splashed out money on their lengthy TV commercials to ensure that the message gets ingrained in the mind of the prospect. Fairever and Ujala adopted the same strategy. Of course they don’t spend as much as the MNCs do but they do spend enough to get attraction. The best part is when they get attention and a little success, MNC Goliaths retaliate back with huge spending and these little Davids piggyback on that!

Communicating 2 Consumers
One of the important aspects of the strategy being adopted is effective communication about product. These wannabe marketers are sending just the right message to the consumers. If the advertisements of these brands are analyzed, it will be evident that they don’t go for blitz but instead try to relate themselves with their target customers. To achieve this object, they are not shying away from being unconventional. Take the case of Dandi namak. The TV advertisement was bland and uninteresting. However, without any glitz, it was able to connect to its target customers because it talked in the language of its target customers. These brands send a powerful message to their target customers that they are made for each other. Dandi namak, Ujala, Ghadi detergent, and Chik, projected that they belonged to the lower middle class! And this worked wonders.

Selecting a narrow terrain to fight!
The stratagem of this new breed of marketing is deciding the opponent to fight! In case of most of these brands, it is seen that they fight their marketing battle by selecting a particular company and in many cases a particular brand, which often is the market leader! Then they deploy their entire marketing arsenal on this selected competitor. Ujala applied this tactic to full advantage against Robin Blue and now it commands nearly three-fourth of the Rs2bn ultra marine blue market, Fairever did the same to Fair & Lovely, Ghadi detergent is doing it now to Nirma and Wheel, and Chik is going shoulder to shoulder with Clinic Plus, the market leader in shampoo. The case of Dandi namak is different only in the sense that it selected its battlefield instead of opponent. The battlefield, rural and semi-urban market, was such that no major marketing war was fought on it before. Even the advertising strategy is designed with an eye on its opponent. This hurts the big companies badly. They wake up from their complacent sleep to realize that they are being brutally attacked. And by the time they retaliate, it’s too late and they only succeed in helping these brands get more attention. HLL realized that it’s brand Fair & Lovely was in danger only after Fairever had garnered a healthy market share within months of its launch. Retaliatory advertising by Fair & Lovely only helped Fairever gain more attention!
The way these homegrown marketers are inducing insomnia to Kotler fed B-school grads is really amazing. By their ability to be flexible, innovative, and being close to their customers, they are conquering Indian market, which many MNCs find a tough nut to crack. The secret of their success is not hard to guess. It is connecting with the heart and soul of India- the lower middle class and the rural consumers. Are the FMCG giants listening?

Classi Article - Brands targeting the bottom of pyramid succeeded

But HLLs and ITC have understood the game plan of these small player and are very cautious on this front.

Once bitten twice shy !!

Sunday, November 13, 2005

Evolving trends & new Frontiers in Marketing

The dynamic market forces the marketers to be on their toes always. Past few years we have seen customers have become over demanding and is looking for delights may be via better experience, new product categories which will satisfy their ever increasing needs. Some of the consumers are even ready to pay a premium for these differentiators for the aspirational brands and the upcoming luxury segment.

At the same time customers have become more brand conscious. They prefer going for branded commodities for an extra penny. In past we have seen many commodities and low involvement categories being branded and many are on their way to get branded.

Over a period of time marketers have understood that there are customers who have specific needs which need to be fulfilled by niche products. Marketers have traveled a journey from mass to micro marketing.

These days customer care for convenience, which has forced marketers to go online for transactions and information dissemination of their company’s product and services.

With all this marketers also realized that the Indian urban market though look attractive, the treasure lies at the bottom of the pyramid. HLL, the FMCG leader realizes more than 50% sales from rural market. Other big and some regional players have tried to take this root, to overcome the saturated urban markets.

But where are these brands, experiences, niche and premium products available? In 1999, the retail organized sector was 1% of total retail sales, which on date is 4% and is projected to be 10% in 2010. So we have seen a shift in consumer buying behavior, from Kirana stores to Malls. But still we will have to see a major change in Indian retailing.

As product spaces become modularized, componentized, and compartmentalized to address the individual, customized, targeted needs of markets, the correspondent market space, and the value chains in them become more integrated. In a sense, products become disintegrated while markets become integrated. The future belongs not only to the convergence of devices, but also to divergent (i.e., specialized) devices.

The forces that are causing and shaping all above are Globalization, Technological Development and Deregulation. Distances are dead and the advent of Internet finally administered coup de grace to technology based competitive advantages. These numerous changes are generating a host of new challenges and opportunities. Moreover, these opportunities need to be looked upon from fresh perspectives.

Does that mean that the old and established principles of marketing are dead? No. Needs are still to be satisfied, Competition tackled and the biggest of all Customer is still the King.

Its not an easy world for Marketers !!

Tuesday, November 08, 2005

ITC Sunfeast Pasta Survey

Please fill the survey:

Nitin Kochhar
K Sarat Bhushan

IIFT, School of International Business

Saturday, November 05, 2005

The amazing story of ITC's rise

ITC. Tobacco, right? Er, right and wrong.
Wrong, because it's also been into hotels for three decades (ah yes, you say), but over the last few years, and pretty much under your nose, it's become a huge FMCG and lifestyle brand that, even though you buy it (perhaps unknowingly, unconsciously), still surprises you with the breadth of its spread.
Shirts and skirts. Pasta and paper. Biscuits and candy. Soaps and perfumes. Cigarettes too, of course. All ITC products.
India Tobacco Company? Yes, it still drives the business -- there wouldn't be an ITC without the filter tip that earns the company 87 per cent of its revenue.
But now, three years after it was set up, ITC Foods is nudging up the ladder. It might be a distant fourth (it contributes over 5 per cent of the turnover) in terms of revenue to tobacco, agri-business, and paperboards but it has already surpassed revenues from hotels in the last quarter.
And it is certainly a formidable force in the country's organised food biz.
Ravi Naware is the dapper divisional chief executive of ITC Foods and he doesn't believe in mincing words. "We want to become the number one foods company in India within the next five years" he says.
Wishful thinking? You couldn't be faulted for thinking so -- after all there's tough competition entrenched into the trade by big boys Unilever, Nestle and Britannia whose distribution prowess and popularity (some of the key brands are virtually household names) have to be matched, exceeded even, if it's to succeed.
But ITC Foods isn't balking at the challenge. Already, customer loyalty is being built up for its buffet of food products -- from biscuits, pasta, spices, confectionery and ready-to-eat foods to branded commodity products like flour, salt and spices.
The conglomerate has begun to grab slices of the market share from its rivals in the game. Aashirwad atta, for instance, is already the number one flour brand with a 40 per cent market share, virtually forcing Unilever to slow down its Annapurna atta.
Five months after its ready-to-eat pasta under the Sunfeast brand was pitted against kiddie favourite Maggi noodles, it has established its presence with 6 per cent in volumes of the branded noodles market.
Its Sunfeast biscuits are at number three position (after Britannia and Parle) with an overall 10 per cent share of the branded market. And in ready-to-eat foods, it's a close number two behind MTR Foods.
A slow starter in the confectionery segment (at number four position), its Mint-O has managed to grab a 40 per cent market share in its category.
The sales figures reflect this market thrust. This year, ITC Foods hopes to do sales in excess of Rs 800 crore (Rs 8 billion), and analysts reckon this as a growth of over 90 per cent over the previous year.
At this point, it's already 50 per cent of sales for both Hindustan Lever and Britannia, and a third those of Nestle. And its target for 2006? To double sales once again, to Rs 1,600 crore (Rs 16 billion).
Overall, ITC Foods has managed a 10 per cent market share in segments in which the others are operating -- biscuits {Rs 4,500 crore (Rs 45 billion), confectionery {Rs 2,000 crore (Rs 20 billion), atta and salt {over Rs 1,000 crore (Rs 10 billion) among others.
Says Naware: "For the next year or two, our strategy will be to consolidate and offer a greater range in the existing categories and grow these markets."
Strategically, the company has kept away from those markets where it does not have the back-end or does not see value additions. So it is unlikely to make forays into tea and coffee ("highly commoditised") or dairy products ("needs a very large infrastructure to source milk").
In both cases too, giants in the business (Unilever, Tata Tea, local brands and a huge unbranded tea market on the one hand, Nestle, NDDB and state-owned dairy corporations on the other) would make any headway in the trade extremely difficult.
Juices? Potato chips? Nothing is being ruled out yet, but ITC Foods is all set to invest Rs 450 crore (Rs 4.5 billion) in the next three years {apart from the Rs 150 crore (Rs 1.5 billion) it has already put in} as part of its long-term strategy of ruling the branded food market in India.
Industry analysts are suggesting it has earmarked a hefty 20 per cent of its sales for advertising and sales promotion, which should grab a good deal of media space.
What's ITC doing that's different from its competitors? Well, it is working on a different model from them, but Naware says the market is too big for anyone to worry about competition.
For instance, branded and packaged foods is only 8 per cent of a total food market worth a staggering Rs 5,00,000 crore (Rs 5000 billion). This is expected to increase to 15-20 per cent in the next six years. Should that happen, there's more than enough room, and then some more, for everyone to coexist.
What is different at ITC though is its ability to leverage its e-Choupals as a pragmatic rural supply chain system.
For the uninitiated, ITC's trading arm, the International Business Division, has set up over 5,000 e-Choupals covering 31,000 villages across the country where farmers can sell their produce directly sans middlemen or having to go to a mandi at a fair price, and also get information relevant to farming, weather and prices at other mandis, all on the net.
The "sanchalaks" (supervisors) in some areas also sell products manufactured by the company, and in some cases the company has started hypermarkets (Choupal Sagar) in rural locations to cater to rural needs.
This backward integration is at the heart of the enterprise. For instance, the entire wheat for Aashirwad atta is procured from e-Choupals.
The advantage, says Naware is twofold: by cutting the middlemen out, it saves 2 per cent on cost of wheat, which is significant in a low-margin commodity business; and the company classifies the quality of wheat and stores it separately so it does not mix with any inferior varieties, which is common enough if you were to buy it from a mandi.
The result is an assurance of quality. Using the same route, ITC acquires spices (chilli powder), again with a similar advantage. That it has stayed away from branded rice is because the majority of its e-Choupals are not located in rice farming areas.
The model is simple enough. ITC is looking at creating food verticals to integrate the foods division with that of IBD and the e- Choupals. In the case of wheat, Naware explains: "We do the first value addition by offering branded atta, the second value addition is through biscuits, and the third is pastas."
And points out that it would look at similar verticals for sugar (going up to confectioneries and chocolates) once it can be freely traded.
At the other end the e-Choupal has become an alternative distribution channel for ITC products. About 10-15 per cent salt volumes are sold through this chain; so are 5 per cent of the biscuits and confectionery items. And the numbers will grow once more Choupal Sagars get going.
The other key element ITC is leveraging for the foods business is its tobacco distribution chain. It has over 1.5 million tobacco retailers across the country, larger than Unilever's distribution chain of over 1 million, virtually neutralising the fact that it is a latecomer in the foods game. That's not to say it hasn't had to create a separate distribution system to sell Aashirwad atta and other FMCG products through kinara stores (3,50,000 outlets).
But biscuits and confectioneries are perfect complementary products that can be sold through the tobacco chain. Currently, as much as half the tobacco retailers carry confectionery and about 300,000 stock its biscuits. And as much as 40 per cent of the tobacco retailers are already stacking FMCG products other than just tobacco.
But perhaps the most important factor that has helped ITC sustain its foods business is its healthy financials backed by attractive tobacco margins that can absorb the pressure of losses in the FMCG business.
Says Mohan Krishnaswamy of ABN Amro, who tracks the company: "ITC is leveraging the strength of its cigarette business and does not face any immediate pressure of returns, which is not the case with the multinational food companies. So, it can build scale and wait for 2-3 years to build a viable business."
Analysts point out that operating margins for ITC are around 35 per cent as compared to 15 per cent for Hindustan Lever and 20 per cent for Nestle India.
This despite the fact that in ITC's non-cigarette FMCG business (which primarily includes foods) margins are negative (minus 35 per cent), so it resulted in losses of over Rs 190 crore (Rs 1.9 billion) last year -- but ITC has the strength to absorb the losses without affecting its bottomlines.
Unlike ITC, analysts say companies like HLL, which are trying to get in line with their international goals, are under pressure because they are concentrating on power brands and improvements in margins.
HLL's sales of processed foods have actually come down and ice-cream sales have grown only marginally in the six months ending June this year over last year.
Clearly, part of the foods strategy is prompted by ITC's attempt to reduce its dependence on tobacco, which constitutes over 87 per cent of its operating profits and over 71 per cent of its turnover.
But without excise (because excise duty on cigarettes is high it distorts the turnover in their favour) cigarettes contribute for only 55 per cent of the turnover.
To that extent, the non-cigarette FMCG business (at 5 per cent per cent of the company's turnover) might look small, but its contribution to turnover has already surpassed the company's hospitality business and is closing the gap with its paper business.
And without taking excise into consideration (excise on food items is very low) its contribution to turnover is already a healthy10 per cent.
Also, the FMCG business is growing much faster than others: FMCG revenues in the first quarter were up 90 per cent compared to hotel growth of only 36 per cent and paper of 22 per cent. Of course, the agri-business grew handsomely by 64 per cent and is the second-largest revenue earner after tobacco.
Not everything's hunky-dory though. Losses in ITC's FMCG business went up in the first quarter this year from Rs 39 crore (Rs 390 million) to Rs 54 crore (Rs 540 million), even though turnover went up by 90 per cent.
A Merill Lynch report on the company cautions: "We are a little disappointed by higher losses in the FMCG business on a y-o-y basis." It earmarks two risks: "Cigarette demand may slow down and FMCG losses may exceed expectations."
FMCG analyst Kunal Motishaw is monitorial too: "ITC has the potential to become the number one foods player, but food is not its core competency, hence it will be a tough task.
"Its strategy is totally different from that of HLL, Nestle and Britannia. ITC offers its distributors higher margins (ITC says it offers competitive margins) and also its products are more competitively priced as compared to its competitors, all of which has resulted in it cornering an over 10 per cent market share in a short span of time."
HLL and Britannia have predictably declined to comment on their rival's strategy, but another Mumbai analyst says: "ITC has no existing products so it has to first develop them, which might take them longer. The company right now is very clear about focussing on market share and not profitability."
But that isn't likely to put a brake to ITC's foodie ambitions. It has identified its immediate task to expand its reach into more cities and towns, to garner more retailers. The target is to reach 1.2 million retailers (from 8,00,000) in the next two years and to ensure they stack all ITC products.
More importantly, it is playing up product differentiation to catch the eye of the consumer. In the overcrowded biscuit category, for instance, ITC has introduced the popular Marie biscuit in an orange flavour. Customers used to the salty crackers of Parle's Monaco are being offered an alternative flavoured with chilli flakes.
In confectionery, ITC again changed the rules of the game by introducing flavoured mints in orange and lemon for Mint-O, and as much as 50 per cent of the mint volumes now come from this category.
That apart, it also introduced a format of six rolls (instead of 12) priced at Rs 2, which fits in well in cigarettes stores across the country. Buoyed with the brand's success, it has now extended the brand with the launch of cough lozenges and in a short three months, has already grabbed a 15 per cent share of the market.
As for the ready-to-eat food market, ITC has created two distinct segments -- the upper end catered through the Kitchens of India brand (based on recipes from its restaurants in Welcomgroup hotels) and the mid-market through the Aashirwad series.
ITC executives admit that this is a small market {total size: Rs 80 crore (Rs 800 million)} but it's growing at 35 per cent per annum. And even though a large number of players are packing meals into packets, Aashirwad is spreading the banquet across 15,000 retail stores, while Kitchens of India is available at 7,000 outlets.
Branded foods isn't likely to be a simple market to crack. But if the record up to now is any indication, it might suggest that ITC Foods has been able to understand the culinary palate of Indians much better than many of its competitors.
Tobacco company, did anyone say?Eh, that too.

MTR FOODS .. into Ready to Eat products and Retail

MTR Foods Limited is amongst the top five processed food manufacturers in India.

Starting with the legendary MTR restaurant in Bangalore, they now offer ''complete meal solutions'. Their wide range of products include ready-to-eat curries and rice, ready-to-cook gravies, frozen foods, ice cream, instant snack and dessert mixes, spices and a variety of accompaniments like pickles and papads.

They have expanded into retail as well - Namma MTR

They are into Convinience Segment - with Ready to Eat products.

Ready to Eat dishes are an amazing combination of convenience, taste and variety. They're 100% natural and have absolutely no preservatives. MTR's range currently comprises twenty-two delicious and completely authentic Indian curries, gravies and rice. They have successfully adapted technology from the Defense Food Research Laboratory, Mysore to make sure each dish has that "just-cooked" freshness.

Competitors: Sunfeast Pasta, Maggi, Bambino, Branded Breads (Harvest, Nilgiri)

What are different roles of a marketer?

Now that we have understood the characteristics of a marketer, we need to understand the different roles of a marketer. The generic roles are as follows:
  • Spot and choose right market segments (the T of STP)
  • Differentiate Offerings
  • Understand stakeholders philosophy
  • Design competitive strategies
  • Prepare customized offerings (trend of macro to micro marketing)
  • Customer loyalty programs
  • Prioritizing the customers
  • Improving sales force productivity
  • Measuring return on Investment from promotional campaigns
  • Strategic Brand Management - Increasing Brand Equity by building stronger brands
  • Market Research - ground work before making any marketing campaign
  • Channel management (Retail & Distribution Management)

Area Sales Manager

  1. Focuses on productivity of Working Capital and has to possess knowledge of costs or overheads of the product and the related statutory rules
  2. He suggests system improvements for cost control and to improve service levels.
  3. He is responsible for support to other functions in his specific product area and has to implement and champion various marketing and retailing initiatives undertaken in the field.
  4. He has to have a working knowledge of sales management and a basic understanding of brand management and market development.

Brand Manager

  1. He consistently focuses on productivity of Working Capital and has to possess knowledge of costs or overheads of the product and the related statutory rules
  2. He suggests system-oriented improvements for cost control and to improve service levels.
  3. He is responsible for support to other functions in his specific product area
  4. Implement and champion various marketing and retailing initiatives undertaken in the field
  5. He is responsible for developing the right marketing mix, achieving targets and designing marketing initiatives to generate or maintain demand
  6. He develops and implements the brand communication package and advertising systems and is responsible for agency handling and accounting
  7. He should be aware of the information systems involved in brand monitoring, possess market intelligence and focus on removing bottlenecks by improving the system
  8. He should possess detailed knowledge of each market segment, their positioning and interpret consumer research findings to help in the commercialization of New Product Introduction
  9. He should possess a basic understanding of sales management

Add roles left in the above list?

Friday, November 04, 2005

What should be the Characteristics of a Marketer ??

What is required in a marketer .. Many, lets list few of them ..

1. As there are different stakeholders in an organization like customers, employees, suppliers etc. So it becomes very important for a marketers to be good at managing people. Its important for him to understand their psycology and act diligently.

2. Suppose you are a Area Sales Manager in HLL, so need to deal with people across the distribution channel. So you have negotiate and convince the suppliers, wholesalers regarding the product margins, the targets for the quarter, the operational efficiencies etc. So a marketers should be a good negotiator and possess convincing skills.

3. Should be aware of the market dynamics, the external variables which affect the business, to take effective actions and compete better against the big players.

4. Innovations plays an important role. But too much of innovation is a disaster, especially in a Brand Management Profile. Recently, Unilever has taken power from the Brand Managers from different regions as they were making different marketing campaigns in different country. This affect the core global brand personality. What i feel is that, innovation to some extent is required may be 5 on 10. But if you are in an advertising world, then you need 8.

5. Hard Work is the key for success for a marketing career in a FMCG company. ASM have to slough like nuts, toching hundred of retailers, collaborating with suppliers, fulfilling targets. And as it margin scarce sector, to increase few more pennies in the Sales revenues is not an easy job. You actually have to walk under the sun to sell one more Liril. But thats where the learning is. Untill and unless you do down to the real market, you can never be an effective marketer.

6. When a person reach level 3 or 4 in the marketing ladder, something like VP or GM - Sales & Marketing, you should have the acumen to predict the market trends, the new product categories which can be introduced, different possible brand extenstions, converting the unfulfilled needs to real product which force the consumer to spend few more 100 Rs notes.

I will keep comment on this in future.

But i want you guys to respond to this question?
Marketers what do you have it in you?