Marketing Application and Practices

Topic: FMCG
Group Members: Ketki Kadam 61 Salman Khan 77 Deven Maker 93 Febin Thomas 101 Neha Ashokan Vinit Paul 118 Submitted to Prof. Deepa Rohit

INDUSTRY DETAILS: What is FMCG? Fast Moving Consumer Goods (FMCG) goods are all consumable items (other than groceries/pulses) that one needs to buy at regular intervals. These are items which are used daily, and so have a quick rate of consumption, and a high return. FMCG can broadly be categorized into three segments which are: 1. Household items as soaps, detergents, household accessories, etc, 2. Personal care items as shampoos, toothpaste, shaving products, etc and finally 3. Food and Beverages as snacks, processed foods, tea, coffee, edible oils, soft drinks etc. Global leaders in the FMCG segment are Nestl, ITC, Hindustan Unilever Limited, Reckitt Benckiser, Unilever, Procter & Gamble, Coca-Cola, Carlsberg, Kleenex, General Mills, Pepsi, Gillette etc. Overview The burgeoning middle class Indian population, as well as the rural sector, present a huge potential for this sector. The FMCG sector in India is at present, the fourth largest sector with a total market size in excess of USD 13 billion as of 2012. This sector is expected to grow to a USD 33 billion industry by 2015 and to a whooping USD 100 billion by the year 2025. This sector is characterized by strong MNC presence and a well established distribution network. In India the easy availability of raw materials as well as cheap labour makes it an ideal destination for this sector. There is also intense competition between the organised and unorganised segments and the fight to keep operational costs low. Packaged snack food industry The salty snack foods industry has a unique structure, since Frito-Lay, a division of PepsiCo, controlled about two-thirds of the total market share. Although the industry has some elements of a monopoly (aggressive pricing and distribution policies among chip makers), the regional presence of many large and small manufacturers keeps it highly competitive. Numerous companies of varying size make up the snack industry. Many compete only on a regional level, although some find it difficult to price their products competitively with the larger manufacturers. Others, however, create a market niche, sometimes with a specialty product such as kettle-style potato chips or baked chips sold through health food stores. If their products meet with success among customers, the smaller makers can often charge higher prices than the biggest manufacturers. Larger manufacturers are generally full-service snack companies--those offering a full range of products, including potato chips, and other salty snacks. The smaller producers are more likely to specialize. Issues relating to FMCG sector

Managing the price increase Promotional pressure Price war Cost of production Local market This sector will continue to see growth as it depends on an ever-increasing internal market for consumption, and demand for these goods remains more or less constant, irrespective of recession or inflation. Hence this sector will grow, though it may not be a smooth growth path, due to the present world-wide economic slowdown, rising inflation and fall of the rupee. This sector will see good growth in the long run and hiring will continue to remain robust.

Major Market Players: Frito-lays and Lehar foods a division PepsiCo produces products like Lays, Kurkure, Uncle Chips and other namkeens. An American multinational with over a billion dollars in sales and holds the largest market share in the entire salted snacked foods. Lehar foods were formed to counter the local namkeen producers like Bikaji, Balaji, etc. ITC food products: The Indian subsidary of TC is second to Frito-lays in terms of producing western snacks. It entered the market on 2007 with very famous Bingo product. It has successfully emulated lays in the indian snack market giving lays a tough competition. Balaji: The journey of Balaji Group in year 1976 by the member of Virani family. For supplying wafers and namkeens to local brands to the patrons of Astron Cinema, Rajkot. Due to the shore supply of that product they decided to make their own product line in year 1982. By the overwhelming retail success they inspired to set a semi automatic plant. Instead of preparing wafers by the traditional frying method this semi automatic plant boosted the quality, taste and more sales also. The fame of taste reached to the whole Gujarat hence it was time to take over the whole Gujarat so that biggest automatic plant of Gujarat came in to the picture. Quenching the demand of Gujarat, Maharashtra and Rajasthan region Balaji Group is now looking forward to march over India. It has products under the category of namkeen, bhujias and varities of snacks. Haldiram: Haldiram's is one of India's largest sweets and snacks manufacturers, based in Nagpur, India. It was founded in 1937 by Gangabisenji Agrawal, as retail sweets and namkeens shop in Bikaner, Rajasthan, India. Boletos, Takatak, Whoopies, Minute Khana (Microwaveable Food), Namkeens.

Parle food products: Parle Products company was founded in 1929 in British India. It was owned by the Chauhan family of Vile Parle, Mumbai. Parle began manufacturing biscuits in 1939. In 1947, when India became independent, the company launched an ad campaign, showcasing its Gluco biscuits as an Indian alternative to the British biscuits. Under the Snacks category is Monaco Smart Chips, Parle's Wafers, Fulltoss. Bikanervala: It is another big player in the northern part of india. Producing products like Bikano namkeems, bikano crunchy munchy etc.

Market size: Indian packaged food industry is likely to double to USD 30 billion by 2015, on the back of arrival of multinationals in the sector and modern retail trade, industry body Assocham said today. At present, the market size of the sector stands at USD 15 billion and its grow ing each by almost 25%. The market in India is diverse and large with over 1,000 different snack products and some 300 types of savouries.

Source: Economic Times sep 26,2012

Market share: FritoLay India leads the market with a share of 40.8% branded snacks market this year. Balaji holds 19.7% share, followed by uncle ch ips and B ingo w ith 8.8% and 7.5% respectively.Below chart shows the share in two quarters last year.(Source: Economic Times)

ParleWafers Bingo Uncle Chips Balaji Lays 0

6.2 6.3 8.4 7.5

8.7 8.8
18.2 19.7 42.7 40.8 20 40 60

Apr-Jun'12 Jul-Sept'12

Share(%)
Rs.595.2
0 Rs.787.20 6.23.3 8.2 14.3 48.5 8.4 Lays Uncle Chips Balaji Bingo Parle Wafers Haldirams Others

Rs.1372.8

Rs.806.4

Above chart shows the share in terms of revenues of all the major in the snack foods mark. TURNOVER: Experts value the Indian snacks market at around $3 billion. And branded segment makes up for roughly 50% (Rs.6,000 crore approximately). Thus, while the competition is on rise, this space, with approximately 1,000 snack varieties vying for consumers palette, is gradually getting cluttered, increasing the worries for branded players, especially for the market leader Frito-Lay. Frito-Lay found itself in the middle of an issue with its market share falling from 66% in 2008 to 58% at present in the Rs.2,500 crore potato chips segment. PRODUCT PORTFOLIO: Pepsico has categorized its product into 3 categories: 1)FUN FOR YOU: LAYS,CHEETOS,KURKURE ETC 2)BETTER FOR YOU: ALIVA & BAKED LAYS 3)GOOD FOR YOU: QUAKEROATS Pepsico has a turnover of 20 billon in which frito lays has contributed around 12 billon .frito lays is the largest contributor to Pepsico ltd .

Brand Strategies To offer consumers products, which they have never eaten before. So innovation becomes the core part of that strategy. We have got a strong consumer insight set-up, and R&D set up. The two work very closely to come up with relevant products for the Indian consumers. The specific example of that were the different Lays flavours during the Cricket World Cup and the recent Daal variant of Kurkure. So innovation is the key for us. At the same time, our pricing will also be important. We already have different pack sizes priced at Rs.3 to Rs.30. And this will help us cover entire range of consumers across different regions. Positioning Lays are available in over 1 million outlets in urban markets, besides metros. Their next phase of growth is the rural market, and we are preparing for that. They are coming out with communication and price packs relevant for rural consumers like lesser price, and smaller pack sizes. Besides, they are investing in terrestrial media, and other relevant local media. Today, rural consumer is a savvy consumer who looks for quality, and all their brands have the potential to crack the rural market.

Target Segment 1) Supermarkets 2) Retail shops 3) Wholesellers

Pricing Strategy The Indian Snacks market has a value of around $ 3 billion out of which roughly 50 percent makes up for the branded segment,so in order to survive and succeed in such a market a company needs to have a fair pricing strategy 1. Competitive Pricing Strategy- Frito_lay adopted a competitive pricing strategy for the Lehar namkeen brand. It launched chip priced 40 percent lower than that of the premium lays brand in Gujarat and Maharashtra taking the competitor brand balaji head on.a brand which controls a majority share in these markets. The basic idea behind the move was to protect its urban turf without diluting the premium equity of the potato chips space. 2. Pricing Strategy for Rural Markets: Frito lay in order to make its presence felt in the rural market launched smaller packs of Rs.3 and Rs.5 of Kurkure and Cheetos. Introduction of smaller packs targeted towards small quantity consumers and middle low income customers. 3. Pricing Strategy for Premium and Super Premium Customers: apart from making its presence felt in the rural market, frito-lay is also upping its premium at the same time. By targeting the health conscious customers with quaker oats Brand. Targeting super premium customers, it also started test marketing its rs 550/- priced lays packed in select stores in metros. Promotion Strategy 1. Celebrity advertising: Frito-Lay made an effective use of celebrity advertising for its products. Celebrities are usually used as people get easily influenced by them. Like they used Juhi Chawla for Kurkure and Saif Ali Khan and Dhoni for Lays. 2. Events such as cricket world cup: in order to promote lays Fruo-lay launched different flavours of lays during the world cup and used to heavily advertise during the intervals. 3. Campaingns: Fruto-lay organised different campaigns and events to promote its products like recently it organised Kurkure khao, helicopter ride pe jao contest in selected cities. 4. Websites: Frito-lay has its websites for all its products, in which recipes, nutritional facts are given for each of its product.

Competition analysis Direct competition After spending a decade on Indian soil and creating a market for branded snacks in India, PepsiCos food division, Frito-Lay, is now attempting to hold on to its market share of over 50% in the particular segment. And its all because of a flurry of both past and new entrants like Balaji wafers, Parle, Perfetti, and of course, ITCs aggressive posturing with Bingo, a brand which is growing almost on a daily basis. At the same time, competition from the local players too has intensified manifold. Experts value the Indian snacks market at around $3 billion. And branded segment makes up for roughly 50% (Rs.6,000 crore approximately) of this pie. But what makes the segment most attractive for both local and branded players is its double digit growth rate that is well supported by rising income and changing consumption patterns in the country. Thus, while the competition is on rise, this space, with approximately 1,000 snack varieties vying for consumers palette, is gradually getting cluttered, increasing the worries for branded players, especially for the market leader Frito-Lay.

Indirect competition Packaged sev bhujia and chanachur are replacing potato chips and finger sticks in shopping bags, helping traditional packaged namkeen topple western snacks for the first time in the branded salty snacks market. Branded namkeen such as dal, chivra, bhujia and nuts accounted for 52% of total salty snacks sales of about Rs 9,400 crore in the year ended June with both multinationals and home-grown companies pushing namkeen into hinterland with attractive packaging and pricing."A large part of unorganised market is gradually shifting towards namkeen as companies have increased availability and affordability of such products in recent times," PepsiCo is facing increasing competition from companies such as, branded namkeen market leader Haldiram, Balaji, Bikanervala and Bikaji, and newer entrants like Parle Products that have realised ethnic namkeen is fast gaining popularity and also offer higher margins than potato chips.

COMPETITORSMARKETING STRATEGIES Bingo Chips Strategy The Bingo brand of chips was launched by ITC on 14th March 2007 with an aim to capture at least 25 percent market share of the Rs 2000 crore branded snack market within five yrs. This was an extremely ambitious target according to observers as the market was dominated by the Frito Lay group (owned by Pepsi Co) with a slew of brands like Lays, Kurkure and Uncle Chipps holding 50 per cent of the market share. The other was the Haldiram group with 25 percent of the market share. The organized snacks category is subdivided into the Traditional segment (Bhujia,Chana etc) dominated by Haldiram. The second category is the Western segment(potato chips,cheese balls,puffs etc) and the Finger snacks segment which is an adaptation of traditional snacks to the western format. The latter two categories are dominated by the Frito Lay group. ITC has launched an aggressive marketing campaign to gain entry into and capture a sizeable market share in the extremely competitive world of snack foods. The success of Bingos marketing strategy can be attributed to the following 4 Ps:1. T.V. Ad Campaign 2. Assortment of flavors and eye catching packaging 3. High availability at big and small retailers across the country

4. Pricing Strategy

1. T.V. Ad Campaign Bingos launch was strategically timed around the World Cup to cash in on the tremendous popularity that such leisure and cocktail snacks would find among cricket lovers in the country. So cricket lovers could enjoy their favourite matches while savouring an all-new range of innovative Bingo snacks during the World Cup. The idea is to get the consumer to take that first bite. Not only the flavours but also the advertising was supposed to have an Indian touch! The advertising strategy used humour to sell Bingo. The advertisements were well received by the audience. The notable ones included the Bingo is the crunchier potato chips ad, to the Tamil learning bingo ad. The ones which followed were one in which a man is declared pregnant for his craving for Bingo Achari Masti and the Glad Bangles-Mad Angles advertisements. These advertisements were telecast on almost all channels-national, regional, sports, news and of course kids channels. This sudden media blitzkrieg of ads left a mark in the audiences minds and it showed. In certain areas, Bingos market share touched 50 per cent; in no market is it less than 15 per cent. In April 2007 Bingo had also launched a website BingeOnBingo.com with an aim to target the youth online.It basically tried to engage the youth in a SecondLife type of environment to advertise ITC s products. Of late, many brands are choosing this new marketing strategy of virals to promote their products and the latest to join the bandwagon of viral ad campaigns is Bingo. It has recently developed its first viral petkapaap.com for Bingo Mad Angles - Achaari Masti. Viral marketing uses social networks to create and spread brand awareness.

2. Assortment of flavors and eye catching packaging The product offered is available in a wide array of flavours, shapes and sizes. Mainly there are two categories of products-Potato Chips and Finger Snacks The potato chips are available in many flavours inspired by the snacking habits of different parts of the country like Masala Chaas, Chatpata Nimbu and Paneer Tikka. In addition to these 4 flavours, the classic flavours of Masala, Tomato and Salted are also available. The offerings under the finger snacks segment are equally unique and consist of pakoda inspired chips like Live Wires, Khakra inspired Mad Angles, and corn based chips like Tedhe Medhe.In all there are 16 variants of Bingo.

Bingo ensured the quality of its products due to the strong farm linkages of ITC which ensures only the selected grade of raw material goes into making Bingo chips. The packaging of the product has been slick and eye catching. Bingo is available in packets in a myriad colors like orange, blue, red, yellow, green, purple. Not only do bright colors attract the attention of little children but also of adults. Snack food is an impulse buy. The brightly coloured stands with the Bingo label on top make it stand out in a shop. Bingo therefore is the most seen brand when you look for snacks, greatly increasing the chances of it being bought.

3. High availability at big and small retailers across the country The large, country wide distribution network of ITC built up over the years was a key factor in Bingos ubiquitious availability. As a result one can find a Bingo pack of chips even at the smallest shop in the remotest parts of India.In India the unorganized snacks sector is twice the size of the organized sector. So in small towns villages one wont find a Lays or a Haldiram but a Bingo along with the local unbranded snacks. It also has entered into an agreement with the Food Bazaar chain of outlets for retail of its Bingo and other brands of food products. ITC Foods was counting on Lays and Kurkure not being around, when it entered the Food Bazaar chain. While backend sourcing tie-ups between the two had sweetened the relationship, the bottom line is Bingo, which is what you see most when you look for salted snacks. It's not just here that Bingo has struck at the small shops, to which it's offering a margin that's 4% to 5% higher than what Frito Lays is paying. Not just that, if the display is better, they get paid even more. ITC Food's largesse is largely to catch up with Frito Lay's national reach of 8 lakh outlets.

4. Pricing Strategy The pricing strategy adopted by Bingo is a clever one. Bingo is priced the same as the Lays brand of chips at Rs10 for a 35g packet and Rs5 for the smaller one. A factor that aided Bingo was the failed pricing strategy of Lays in late 2007.Frito Lay had increased the price of Lays from Rs10 for 35g to Rs15 for 45g. That impacted the sales of Lays which finally went back to the Rs10 formula. By adopting a consistent pricing strategy and by offering higher margins to the retailers Bingo has won the retailers hearts.