ITC Interrobang Case Challenge 2011 Bingo!

Bingo! Mad Angles

ITC Interrobang Case Challenge 20111

Yesterday at The BT Marketing Hall of Fame Awards, Palace Towers, Mumbai (10th Oct '09) Satya looked around as he settled into his seat in the auditorium. As Marketing Chief for ITCs food business, he had to make these appearances as part of Good PR. It wasnt exactly his cup of tea- he was a fighter, someone who had worked his way to the top by wrestling with business problems and driving his team to deliver. As crowded as Churchgate Station, he muttered to his colleague Ramesh, sitting to his right. Ramesh was the Brand Manager in charge of Bingo!, ITCs snack food brand and its newest baby. Bingo! had been launched only two years ago, with much fanfare and brilliant, clutter-breaking, TV commercials. Satya and Ramesh had redefined the market with snack-offerings in new formats and flavours through Bingo! Over the last two years they had worked together with feverish intensity on newer flavours, marketing campaigns and media strategies. Ramesh and Satya had been in the middle of an intense debate on how to increase Bingo! Mad Angles market share, when Satyas secretary had interrupted, (much to Rameshs relief), to remind them that they had to be at the Business Times Marketing Awards ceremony in exactly 45 minutes, and that they wouldnt make it unless they left immediately. It was a glamorous evening red carpet, a few Bollywood starlets, and the Whos Who of corporate India in full attendance. Finally the announcement came And the winner for the Most Innovative Marketing Campaign goes to ITC for Bingo!. Go on Ram, it's your big day, whispered Satya to his colleague, as the crowd broke into applause. Ramesh stepped forward to receive the plaque and citation, as the applause built into a crescendo. As Ramesh made his way back to his seat, shaking hands and high-fiving people all the way, a video on Bingo! Mad Angles started playing on the big screen. ITC has created a brilliantly innovative offering, in a daring bid to win market share in the Snacks market, boomed a deep-throated voice-over to the video which showed Mad Angles Ads and Mad angle packets in grocery stores occupying rack after rack. At the post ceremony cocktail party (Satya referred to it as Air-kissing-fest Part II), Satya and Ramesh bumped into Vivek, Marketing Head of Frito Lays India the dominant market leader in the snacks market with 80% share. Just as Bingo! had begun to grab market share from Frito Lays and all market-research data had indicated that it was set for take-off, Frito Lays counterattacked. A heady cocktail of brilliant distribution, smooth logistics, massive ad spends and Bollywood stars was all set to block Bingo! in its quest for market share. Congratulations, gentlemen! said Vivek, as he shook hands with Satya and Ramesh. Thank you, said Satya, Nice to see you in such a magnanimous mood. Vivek smirked as he helped himself to a handful of peanuts. I dont mind you guys winning a few awards if thats what makes you happy. I have a few market share trend reports on my desk in the office that make me happy. Kurkure Desi Beats has also got a fabulous initial response Satya gritted his teeth. I'm off now Ram. Lets pick up that discussion tomorrow morning.

This Case is developed by and is the sole property of ITC Limited. This is for academic purposes only and is not intended to be copied or displayed or reproduced at any place outside the Campus.

ITC Interrobang Case Challenge 2011 Bingo!

Ramesh was about to remind his boss that tomorrow was Sunday, and that he had promised to a get together for close friends. Something in his boss manner told him that Satya didnt give a damn about Sundays, or promises made to his friends. Ramesh had seen that look before. The target was locked in. He now had to figure out how to achieve it. Sometime in the early 2000s at Virginia House, ITC Limited Headquarters, Kolkata Indian Consumers in the eyes of manufacturers are almost like a Bird of Gold. With an Urban population growing much faster than the total population it is expected to account for 37% of Indian population by 2025 vis--vis just a 26% in 2005. It is forecasted that Indian GDP is to grow at 7.3% for the next two decades against the 6.0% growth rate that India has seen in the last two decades. This is expected to make India the 5th largest consumer market, behind US, Japan, China & Britain. Keeping these perspectives in mind ITC Limited diversified into other FMCG sectors like Food and Personal Care. ITC entered the Food business in 2002 with brands like Sunfeast in biscuits (now Indias third largest brand), Aashirvaad in staples (now Indias largest Wheat Flour Brand), Minto & Candyman in confectionery (Indias largest confectionery manufacturer in the operating segment). Later in 2005 ITC successfully ventured into the wet snacking arena with Indias first Instant Pasta. Today, pre lunch, Satyas office, at ITC Foods Division Headquarters, Bangalore Ramesh woke up as the alarm went off at 7. The last evening had barely sunk in. It felt great when years of hard work gets recognized. This is what he had always dreamt of. He looked out of his window to notice a quiet and peaceful Bangalore morning. He wondered if this was the silence before the storm. After all, what Vivek had mentioned last night was indeed concerning. Bingo!s shares had stagnated over the last few months and the Frito Lays decline had been somewhat arrested. More concerning than that had been the launch of KurKure Desi Beats. This was Frito Lays entry in to the triangular format snack similar to Bingo! Mad Angles which was the most accepted amongst all Bingo! snacks with a significant share of the finger snacks industry. He picked up his Blackberry and was surprised to find mails at mid night from the sales head, Mukesh. He knew Mukesh was also in Mumbai city the previous day on a market visit. What had happened in Mumbai? Was this regarding KurKure Desi Beats? Is there some other problem?, these thoughts crossed his mind as he clicked on the track ball to check the mail. Satya was visibly disturbed when Ramesh entered his office sharp at 9. Not exactly the mood he wanted Satya to be in after Mukeshs mail. Reshma is on her way, she will take ten more minutes said Satya sipping on to his black coffee. Reshma was the head of product development for ITC snack foods and had been closely involved with the brand since the last 2 years. It was no surprise that Satya had also called her in for the meeting. Ramesh apprised Satya about Mukeshs mails and that was enough to change the look on Satyas face from one of disturbance to one of extreme concern. Not only Frito Lays, but also other discount players like Balaji & Yellow Diamond had launched triangular shaped snacks in the market. In fact there was confirmed news of Haldiram, another discount player dominant in parts of North, of launching a triangular shaped snack next month. Discount players typically offer twice the grammage as full price players at the same price. They have significant cost advantages over the full price players account; 1. Limited or no advertising 2. No merchandising in the form of racks 2

ITC Interrobang Case Challenge 2011 Bingo!

3. Lower grade of packaging 4. Distribution cost advantages account their regional approach 5. A different quality product Although discount players were small in size, contributing to 27% of the snacks industry, one could not afford to ignore them. These players were largely dominant in the Western parts of the country where they controlled more than 50% of the market. In fact, 2 of the largest snacking markets of the country Gujarat and Maharashtra were dominated by discount players. Discount players, till now, had been dominant only in the Potato chips part of the industry. However, with growing ambition, they found it hard to ignore the lucrative finger snacks market. This was one of their attempts to change the game in the finger snacks market as well. A typical grammage comparison between discount and full price players can be seen in Annexure 2 The shares of discount players across the key regions and segments can be seen in Annexure 3 Dont worry Satya, Frito Lays has not been able to match the product strengths of Bingo! Mad Angles said Reshma as she gulped down the last sip of her Elaichi tea. I have had an expert panel test the panel the whole of last week on all product parameters She continued, and Desi Beats is not up to the mark. Reshma showed a number of slides which evaluated the product on a number of sensory parameters such as taste, texture, aroma, mouth feel, bite size and flavour. She concluded Satya, we have made the Mad Angles product after years of research and the recipe is a closely guarded secret. I dont think competition can imitate this product any time soon Satya & Ramesh got some confidence. However, both also knew that consumers never really bought products, they bought brands. Just having a superior product will not suffice in this battle. KurKure Desi Beats already had a new campaign with Kareena Kapoor as the brand ambassador. Bingo!, till now, had stayed away from using celebrities to promote the brand. Further, Lays was out spending Bingo! on a factor of 3.5 : 1 in putting behind monies on advertising and promotions. The brand communication in most cases, especially in low involvement categories like snacks, builds suitable product perceptions over a period of time. Further, product superiority had still not been validated by the consumer.

Ramesh, what about the product testing of Mad Angles versus Desi Beats quizzed Satya. Sir, I had briefed Aziz and the results will be in by tomorrow responded Ramesh. Knowing what Satya was about to instruct, Ramesh picked up the phone to call the head of consumer research, Aziz. Aziz informed that the first cut results had come in but the detailed report will be available only on Monday. Aziz, I want to see these results TODAY post lunch said Satya keeping down the phone. Just as he handed over the phone to Ramesh, his phone buzzed and he picked up the phone Yes Maam muttered Satya. This was Naina on the other line. Naina, a dignified and a sharp women in her late forties was the divisional chief executive of ITC Foods. Ramesh knew that she was in the US for a business conference. Ramesh wondered behind her reasons on calling on a Sunday afternoon. 3

ITC Interrobang Case Challenge 2011 Bingo!

Thanks so much Maam..... and we will certainly discuss the equity research with you tomorrow said Satya keeping down the phone. Apparently Naina had called Satya to congratulate him on the BT awards. She also wanted to discuss the Bingo! brand equity research. This was a project which had been initiated by Satya a few months ago. Aziz had presented the results last week and while most things were looking fine, there were some pertinent concerns as well. Satya said Ask Aziz to summarize the equity as well in our meeting post lunch. He also asked Reshma to leave for the day. Ramesh wondered when he would leave. There was a small celebration planned at home in the evening to celebrate the BT award but Nainas call bothered him. This issue was suddenly getting serious. Very serious.

Between 2005 & 2007 at ITC Foods Division Headquarters in Bangalore and ITC manufacturing facility at Uttaranchal India is practically composed of many mini-countries in themselves "the United States of India" as Satya likes to call it. Habits differ (almost every few miles!), taste preferences differ and as a consequence even the food eaten is very different by state. Hence any product that needed to address such a large cross-section of people needed to be customized to try and offer a unique organoleptic experience to the target consumer. Snacking as a habit has existed in India over generations, be it Tea time snacks (both morning and evening tea accompaniments) or mini meals which are as much huger quenchers as they are taste lures. With increasing urbanization, the consumer is far more mobile today and hence, is in the need for mini meals prior to actual dinner times. Mobility also means the need for convenience, a need that is quite well met by packaged snacks. Thus the first step for ITC in designing its new Snacks brand was to understand the category of snacking from the consumer perspective. To this end an extensive consumer understanding study was instituted to gain an in-depth understanding of the varying preferences of taste & food and how these differed by region.

What is the world of snacking and what has changed from the recent past? True to the diversity that India has, Snacking also has various regional lingos like Nashtha in North and West, Jalkhabar in East and Morumoru in South. Hence the need is to understand the peculiarities of snacking across regions. Refer to Annexure 4 for key snacking trends across India What are the prime snacking occasions and what are the important needs to snack? Snacking as the word suggest is highest during the evening, i.e. post 6pm in the evening universal across different consumer segments. Like most food categories snacking also happens primarily In home, however significantly more than 1/4th of the consumption happens outside of home. For a range of needs on snacking, please refer to Annexure 5 Who is the consumer, and which segment should ITC target? Having arrived at the key Need states to be targeted it was essential to identify the core target profile for the category. A large study was conducted with over 2500 consumers across the country. It was found that Dry Packaged snacks were consumed more during 4pm to 6pm. It 4

ITC Interrobang Case Challenge 2011 Bingo!

was also found that a substantial section of tweens and youth consumes dry packaged snacks between 10 am and Noon. However post 6pm snacking was mainly Fresh and Hot snacks. Penetration levels ( consumed atleast once a week ) declines by age group. It is highest in the 10-19 age group ( almost 90% ) and drops to 75% in the 26-35 age group. Proportion of heavy users ( 4-6 times a week ) also declines with age. Also considering the depth of consumption by individuals a consumption concentration curve was created which showed that the heavier dry packaged snackers belonged to SEC AB and were of 15-25 years of age. There was however no gender bias in it. This segment of New India youth were the core target segment for the category. This also implied that badge value, trendy and a constant buzz value would lead to a success. Origin of Mad Angles Within the packaged salted snacks segment there was need to be differentiated. The search hence began with basics the hunt for a differentiated product. It was observed that consumers preferred a Sweet & Sour Taste over the rest of the Indian flavours. They found this kind of flavour to have a very high synergy with Snacking and compared it to some of the Indian traditional snacks like Vada Pav, Dabeli & Pani puri. Consumers slotted most of the existing flavours from the house of Frito Lays in the Khatta Meetha (Sweet & Sour) segment, whereas the existing traditional dry snacks were primarily in the Salty Zone. Please refer to Annexure 5 for flavour continuum. Consumers also voiced the dissonance of having monotony in the shapes and sizes of the dry snacks which are currently available. They were looking for something with a different shape and even with a larger size, but apt for a trip to the mouth. The insight was to take a Habit snack and try and tweak its construct to deliver a popular Western snack. The innovation could be done along Product development vectors of Texture, Taste (through flavours) or shape / size, thereby creating an irresistible combination. A case in point would be the snack Khakhra, a popular dry snack found in almost every household in the Western Region. This is a popular snack option, thanks to it crispy texture and a universal base, which can take on multiple accompaniments such as pickles / sauces. So an original & innovative format came about, inspired from the Khakhra, but being westernized through the transformation of size, shape and texture as well as the modern seasoning. This led to the creation of Bingo! Mad Angles. Marketing Bingo! Mad Angles Core consumer proposition Bingo Mad Angles offered the consumers the familiarity of a "Habit" Indian Snack - in terms of flavour and texture, in a modern trendy and innovative format of a triangular product. Hence it was the "Perfect Snack" As an outcome of this prolonged & exhaustive research, the ITC team identified a platform that cut across cultures & one that automatically elicited the interest of the youth Humour. The communication thought of Perfect from all Angles" expressed in a light hearted manner was born out of this critical insight. In line with the platform chosen even the names given to the flavours like "Achari Masti" & "Tomato Mischief" were catchy, & youthful

ITC Interrobang Case Challenge 2011 Bingo!

Today, post lunch, Satyas office, at ITC Foods Division Headquarters, Bangalore Biting on to a chip of Fiery Red Tomato, Aziz indicated that the product testing with the consumer for Bingo! Mad Angles versus KurKure Desi beats had been very positive. All 3 flavours of Mad Angles were tested against both the flavours of Desi beats in 3 zones North, West & South. While the test had as many as 16 sensory parameters, on some of the critical parameters such as overall likeability and taste likeability, Mad Angles was a clear winner. Aziz closed his presentation with a summary slide. Ramesh quickly noted down SOUTH in bold on his notebook. South, although, contributed to only 18% of the industry, was very important for Bingo! as it contributed to more than 30% of Bingo! sales by value. He had to discuss these results with Reshma the next day. Satya, looking somewhat comforted now, still knew that things are very different when consumers consume a Brand. OK, Good, discuss these with Reshma and let's move on to the summary of the equity study He said puffing away his favourite brand. The Mad Angles equity study looked good. The brand was performing well across regions and was being perceived as being funny, humorous & irreverent. All these were the values which ITC wanted to instil the brand with. In fact, on most of the metrics, the brand was performing much better than the new brand launch norms. On why consumers have liked Mad Angles, they had indicated its great taste and mouth feel, its unique shape and some exciting Indian flavours. To summarize, consumers liked the brand on each and every aspect. Ramesh had not seen consumers providing such a positive response for any brand across the various brands even during his consumer interactions during the snacks U&A. Satya said, One of the problems of innovation is that we may get trials from the initial few but": 1. How do we get trials from the larger masses? 2. How can we continue to maintain the loyalty of the existing franchise? 3. A number of "me-too" products were being launched by competition particularly Desi Beats from Kurkure - How should we respond? 4. The Discount players were copying the format and giving additional quantities How should we respond? 5. The brand seems to have taken off in Non South markets but still appears slow off the blocks in South. We are funny and mad, all right. But are these values enough for long term loyalty. After all, ultimately the consumer is looking for a great tasting product. "We have never communicated that gentlemen" Ramesh heaved a sigh of relief as Satya walked out of his room towards his car. He thought of 2 women he needed to call urgently. Asha, his wife, the get together later this evening had to be postponed. And Nisha, head of planning at Ogilvy Bangalore, to take her through todays discussions. Put yourself in Rameshs shoes, summarize the problem and work out the possible solutions to Satya's posers.

ITC Interrobang Case Challenge 2011 Bingo!

Annexure 1 Contribution by region for each format Potato Wafers All India (U+R) North Zone (U+R) 40% East Zone (U+R) 13% West Zone (U+R) 29% South Zone (U+R) 17% All % pertain to value shares Finger Snacks 37% 16% 29% 18% Contribution within region by format % of PC 65% 67% 62% 65% 64% % FS 35% 33% 38% 35% 36% Value Growth of each format Potato Wafers 15% 14% 12% 22% 6% Finger Snacks 15% 19% 14% 15% 10%

**Finger Snacks example : Kurkure, Mad Angles, Tedhe Medhe, Chataka Pataka etc.

Annexure 2 Potato Chips grammage comparison of Full Price and Discount players Price Point Rs. 5 Rs. 10 Rs. 20 Annexure 3 Industry construct; Full price and discount players Potato Chips Region All India North East West South Finger Snacks Region All India North East West South Full Price 75% 81% 94% 48% 90% Discount 25% 19% 6% 52% 10% Full Price 71% 83% 89% 35% 91% Discount 29% 17% 11% 65% 9% Full Price 14 Gms 30 Gms 70 Gms Discount 25 Gms 55 Gms 110 Gms

ITC Interrobang Case Challenge 2011 Bingo!

Annexure 4 Key snacking trends across India: Consumers from the North look out for Snacks which are Hot & Fresh, snacks which give Non Traditional Flavours and also International Brands. They have a low preference for dry snacks. Consumers in the West of the country have similar preferences as that of North but they favoured sticking to the traditional palate. The highest set of repertoire consumption happens in the North followed by the West. Consumers in the East of the country have fewer options in Snacking, also unlike North they prefer to consume more of Local Dry Snacks but have a trait similar to that of consumers from the North; they too show preference for non-traditional flavours. Snackers from the South are the most restrained set. They also experiment with the least set of options. Unlike the other regions preference for traditional flavours/dishes is the highest in South. Despite some behavioural similarities the Snacking Basket is very region based. Annexure 5 Needs and Occasions of snacking: Although the time of day is relatively similar across consumer groups the need to snack was quite different. The largest Need Segment was Time Pass. Packaged branded salted snacks had a very high synergy with the platform of Bonding & Time pass. Hunger is another significantly large snacking need. This need segment could also be further subdivided into Physiological need (Dying to eat) and Psychological Need (Pick me up). However in both the states synergy with packaged branded snacks were very low. Indian traditional hot & fresh snack dominated the space. Being out of home and enjoying the freedom of youth is an occasion when packaged branded snacks plays the role of an enabler. Importance of packaged salted snacks at occasions when you are out of home and having a blast with family is also very low. The smallest of need states was Special Occasions. Special occasions have an overwhelming role of High Badge Value and Extreme Indulgence. However if its a college going crowd and a simple date then packaged finger snacks might appear in the list, else again has a very low synergy.

This Case is developed by and is the sole property of ITC Limited. This is for academic purposes only and is not intended to be copied or displayed or reproduced at any place outside the Campus.