C1 MMII Noodles

8/11/2019 C1 MMII Noodles

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Marketing Strategy

Crown Noodles

Marketing Objectives

Enter the Indian instant noodle market with an initial market share of 1-1.5% in the first

year.

To promote Crown Noodles as a healthy, ready to eat, convenient food among 15-29 year

old young adults and working professionals.

To offer product features like quality, taste at a competitive price.

Growth of Noodles Market in India

MARKET TRENDS

The Indian FMCG snacks market is set to treble from US$ 11.6 billion in 2003 to US$33.4 billion in 2015. Penetration level is only 30% for the major brands in the InstantNoodles market in urban areas. The per capita consumption for the instant noodles andpasta segment is low indicating the untapped market potential.

Growth will continue to be fuelled by convenience products such as noodles and ready

meals with 202 million people expected to shift to processed and packaged food by 2015.Consumption pie Source: KSA Technopak Consumer Outlook 2004

Rapid urbanisation, increased literacy and rising per capita income, have all caused rapid

growth and change in demand patterns, leading to an explosion of new opportunities.Around 45 per cent of the population in India is below 20 years of age and the youngpopulation is set to rise further.

CROWN


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While instant noodles are still not generally consumed as main meals in India, moreindividuals are bucking this trend and accepting them as an option. This is, howevermostly restricted to busy working adults who live independently or only with theirspouse, away from their parents, and who have little time to prepare their own meals athome. Given the requirements for convenience and saving time, these individuals resort

to easy-to-prepare meals, such as instant noodles.

The BRICs report indicates that Indias per capita disposable income, currently at US$556 per annum, will rise to US$ 1150 by 2015 -another demand driver. Spurt in theindustrial and services sector growth is also likely to boost the urban consumptiondemand. Only about 8-10 per cent of output is processed and consumed in packagedform, thus highlighting the huge potential for expansion of this industry.

Currently, the semi processed and ready to eat packaged food segment has a size of overUS$ 70 billion and is growing at 15 per cent per annum.FICCI( Federation of IndianChambers of Commerce and Industry) has predicted an overall growth of culinary

products/snack food to be 10 percentage.

MARKET GROWTH

General growth of the Indian Noodles sector for the FY 2000-2010 FICCI , states that the

culinary products and snack category, under which Instant Noodles is classified, has hada robust growth of 8%.

Growing by a more than robust 21% in current value and 16% in volume, growth in

noodles will be among the fastest in the various packaged food products in India.Current

value sales of noodles in stood at slightly over Rs 9 billion, with instant noodlesaccounting for more than 66% of the total value sales.

Reasons for Diversification

The organization (valued at Rs. 10000 crore) has excess cash. It is looking for opportunities to

invest this capital to create long term growth. Instant noodles market in India offers such

chances. As plotted on Ansoffs Matrix, this will be a diversification (New market & New


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product) for our organization.

Unrelated diversification is a form of diversification when the business adds new or unrelated

product lines and penetrates new markets. In this case the company that makes industrialproducts is diversifying its business into the FMCG category. It is getting into the noodles

market. As this a new product for the company and the company as well is new to the market, it

will fall into the diversification grid in the Ansoffs Matrix

SWOT Analysis

Strengths

Ours is a Rs. 10000 crore company, with a huge capital in hand to invest.

Since buying power is available, we can establish a new production facility with scope for expansion in

the future. It can also take over brands already operating in the market. That would help in getting a

customer base along with the brand equity.

The company can use their industrial contacts to avail proper distribution channels and effective

communication networks.


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The company already has a clear idea about the laws pertaining to environment, location of business,

etc which can help it to optimize its business in this product category too.

Accessibility to raw materials will be easier owing to the companys present business and industrial

contacts.

The company can invest a huge amount in IMC, thereby making their presence felt in the market.

Weakness

Industrial goods has got no relation with FMCG products, therefore this is a new sector for the company.

The company is new in terms of experience in this area and does not have a customer support.

Consumer loyalty to operating players such as Maggi and Top Ramen is huge and it is not easy to shift

such customers.

In B2B market, the company had to deal with a very limited number of customers, whereas now thecompany has to tap a huge market, which is already dominated by some players.

Opportunities

The instant noodles segment is projected to grow at a tremendous rate reaching 139.2 billion packs by

2015 (report by Global Industry Analysts Inc.)

Increase in the potential consumer base i.e., single working professionals, student population, owing to

the change in lifestyle, set by increased working time, demand for convenience food and ready meals.

There is a rapid economic growth and rise in disposable incomes.

There exists an upward trend of convenience food consumption.

There exists a huge untapped serviceable upward class rural base.

Threats

Competition with established players, such as Maggi, that occupies a market share of 79.3%. This makesentry into the market difficult.

Innovations in the product category by existing players, such as cup noodles and mug noodles, make the

penetration all the more difficult and threaten the level of acceptance.

Foreign players like Wai Wai and Rum Pum have forayed into the noodles market and have made their

brand presence.


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Parle and other brands are threatening to offer their distribution channels to international noodle

brands, wishing to make an entry.

Consumers might not be able to relate to the diversification from industrial products to noodles.

Market Segmentation

Geographic segmentation

We plan to launch our product in India. The current market of Instant noodles in India is 90000 Tonnes

which is over INR 1300 cr. (US$260 Million) and is growing at a phenomenal rate of 1720 % every year.

Our focus will be the Urban Areas as the major consumption of Noodles is in Urban Areas.

Demographic Segmentation

We aspire to market our product in a way that our noodles become a daily consumption Item for our

Consumers. Keeping that in mind it is of extreme importance to set the demographics right.

Target Age group of 1529 yrs.

Family size : Single, Neutral Family or Children in the same age group.

OccupationWorking professionals and students.

YOUNG ADULTS (15 -29 YRS)

Year 2005 2010 2013 2015

Male 153026 165790 174087 174236

Female 141077 153477 161571 161957

Total 294103 319267 335658 336193

Source : Eurometer International statistics and UN


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Source : UN Census Data, Euromonitor Database, 2005

Psychographic Segmentation

Our aim is to Target Students and Working professionals having limited time to cook, but still want to

have a healthy snack along with students as they want tasty and healthy Snacks during School/ College.

As the Company is a giant in Industrial Products. The product can easily be marketed to Cafeterias and

Canteens of Industries.

Positioning

Survey results shows that college going students and kids prefer a food product which can be readily

made. The targeted customers are very concerned about the taste.

Keeping in mind the "time value" and "convenience" factor, the product will be positioned as "Instant,

tasty and Healthy. The look of the brand will help it positioned as a "vibrant" product. It will be

projected as an ideal snack to have when a student comes from college, or a child comes from school.

The packaging will be developed so as to be aesthetically pleasing.The brand Crown Noodles will

effectively communicate the product's features to the targeted segment of Young Adults. The aspects

"Distinctive and Affordable would be considered to position the product. It will be projected as a high-quality food product that provides nutritional value at a competitive price. Image, brand personality and

weakness of the major competitor is analyzed to differentiate and develop advantages. Considering the

same, Quality (associated with health) will be the major positioning tool. The current product of the

market leader is not considered to be healthy. Hence much of the focus will be towards the 'healthy"

part of the "Instant, Tasty and Healthy". Our communication to the customers will focus on the

endorsements from nutritionists and dieticians.

Children(2 - 9 yrs)

Teenagers (10 - 14

yrs)

Young Adults (15 -

29 yrs)

Middle Aged

Adults(30 - 59 yrs)

Pensioners(60 +)


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Marketing Mix

Integrated Marketing Communications

As a new entrant in the noodles market, the main aim of the IMC mix is to create awareness in the

consumers and generate shelf space for itself in the retail segment. The following approaches aresuggested to achieve this:

1. Advertising:As an FMCG good, television and print advertising helps in capturing a wide

consumer base at the same time. FMCG goods are highly tangible, are purchased often and have

low brand loyalty. Thus, by continuous advertising activities, the brand can be regularly kept in

the consumers memory in order to replace his previous choice.

2. Sales Promotion:To create shelf space, the product would need to be pushed by the dealers

and distributors. This means adopting a strategy that integrates the interests of the company as

well as the dealers, so that maximum visibility is available for the product. This can be achieved

through samples, bonus packs and contests; basically events and promotional activities at the

point of purchase.

3. Public Relations: To communicate the value of our product, efficient use of PR can be done.

With the fun and easy image of our product, the company can sponsor events for young kids in

schools and community centers, among others. The main aim of PR should be to align the

message of the product with that of the target segments needs and value perception, and

therefore, should be d0ne at multiple levels.

When designing the IMC mix, the following suggestions can be included:

Get product endorsed by a renowned chef/nutritionist to highlight the health component of

the product and also to eliminate the perception of noodles being junk food. It should be

promoted as an alternative to snacks, which is easy to make, good to eat and has health

benefits OR is harmless to health.

Make use of efficient TV communication to highlight the various aspects of the product,

through multiple advertisements, spanning different durations, so that the entire value

proposition can be communicated to the consumer.

The packaging of the product should be bright and flashy; in short, it should attract the

consumers eye. It should also highlight the value of the product so that consumer is moved

to buy it.


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Marketing Research Decision

The MR for launching our product i.e. crown noodles was outsourced to one of the premier MR

companies TNS India Private ltd. The decision to outsource MR was based on the fact that validation and

authenticity of data is very important. TNS was hired based on their market credibility on the field. They

provided us the data for taking strategic business decisions. The Details of market research data in

provided below.

Noodle Market Share IndiaMaggi is the biggest player with 86.00% of market Share.

Bifurcation of data collected in Market survey research

A total of 4356 Individuals were interviewed. The profile of respondents by genders is given in table

below.

Gender/City Delhi Mumbai Bangalore Ahmadabad

Male 780 690 570 845

Female 340 390 440 301

Total 1120 1080 1010 1146

86%

3%2%3%

6%

Noodle Market -India

Maggi Knorr Foddles Ching's Secret Others


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Questionnaire and Response

Q1) Which Brand of noodle you like/buy most?

Q2) Your buying decision is based on which factor? (Taste, Nutrition, Easy to make, others)

86%

3%2%3%

6%

Product preferenceMaggi Knorr Foddles Ching's Secret Others

31%

11%

28%

25%

5%

Taste Nutrition Price Easy to make Others


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Q3) Will you buy noodles of some other Brand (other than what you are buying)?

Financials1.Breakeven Analysis

In this section we will look at different costs involved in the production of our noodles

comparing it with minimum sales required for at least no profit, no loss scenario.

The various costs involved in production of noodles are

a) Fixed costs

I) Land & Building

A small plot of land of about 200 Sq m with construction on about 60% of it. Main

production area would occupy around 50 sq. m whereas packing room and storage area would occupy

the rest.

Particulars* Area (sq m) Cost (Rs.)

Land 200 80,000

Building 120 200,000

Total 280,000

*Data has been assumed, real values might differ.

II) Plant & Machinery

keeping in mind the financial viability the production capacity is assumed to be 10

tonnes in the first year with available space to expand upto 30 tonnes per year in the future.

38%

48%

14%

Yes No Maybe


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Following machines will be necessary

Item Qty Price (Rs.)

Extrusion Machine 1 100,000

Pre-conditioner 1 70,000

Mixer (50 Kg) 1 50,000Packing & Sealing Machine 1 80,000

Weighing Scale 1 10,000

Total 310,000

III) other assets like furniture, stationary & miscellaneous will constitute costs of Rs. 100,000

IV) Power requirements will be 5 HP. Annual expenditure at capacity utilization will be Rs. 60000

b) Variable costs:

I) Manpower Costs: Monthly salary will be of the tune of Rs. 20000

II) Noodles are made up with many ingredients with major input being Wheat flour. Other

requirements will be corn, Rice flour, protein isolates, salt, spices, edible oil etc. All of them are easily

available. Packaging design will be outsourced and the packaging material will be sourced from a

supplier.

This cost can be shown as

Product Qty (Tonnes) Price/Ton (Rs.) ValueRaw Material 5 70,000 350,000

Packaging Material 5 12,000 60,000

III) Selling Expenses can be assumed to be 30% of sales value. This will include TV ads, Print ads,

Event sponsorships etc. This can be reduced once the product is established in the market.

Fixed costs Rs.

Land & Building 280,000 (Sunk Cost)

Plant & Machinery 310,000 (Sunk Cost)

Miscellaneous Assets 100,000Power 60,000

Total Fixed Costs 750000 ( only 160000 to be considered)

Variable Costs Per tonne of production

Manpower 25,000

Raw material & Packing Material (350000+60000)/5=82000

Marketing Expenses 30% of sales value


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Let the efficiency of production be X tonnes. Pricing the 80gm pack of noodles at Rs. 22 (same as our

competitor) i.e. at Rs. 275 /Kg, lets say it is provided to retail agent at 20% margin i.e. Rs. 220/Kg

So no profit & no loss equation is

160000 + (107000*X) + 0.30*X*1000*220 = Revenue = 220*X*1000

X=3.41 Tonnes

% efficiency = 3.41/5 Tonnes = 68.28%

The plant must operate & sell at a minimum efficiency of 68.26% in order to reach no profit no loss

situation.

C1 MMII Noodles

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