Fmcg Companies in Rural Markets (1)

8/2/2019 Fmcg Companies in Rural Markets (1)

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FMCG COMPANIES IN RURAL MARKETS

INTRODUCTION

Fast Moving Consumer Goods (FMCG), also known as Consumer Packaged Goods(CPG),are products that have a quick turnover, and relatively low cost. Consumersgenerally putless thought into the purchase of FMCG than other products. Theabsolute profit made on aFMCG product is less; however they are generally sold inhigh numbers. Hence profit inFMCG goods generally scales with the number of goods sold, rather than the profit madeper item.

The classification generally includes a wide range of frequently purchasedconsumerproducts including: toiletries, soaps, cosmetics, teeth cleaning products,shavingproducts, detergents, and other non-durables such as glassware, bulbs,batteries,paper products and plastic goods. The category may includepharmaceuticals,consumer electronics and packaged food products and drinks, althoughthese areoften categorized separately.

The Indian FMCG sector is the fourth largest sector in the economy with a totalmarket size inexcess of US$ 13.1 billion. It has a strong MNC presence and ischaracterized by a wellestablished distribution network, intense competitionbetween the organized and unorganizedsegments and low operational cost.Availability of key raw materials, cheaper labor costs andpresence across the entirevalue chain gives India a competitive advantage.

The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in2015.Penetration level as well as per capita consumption in most productcategories like jams,toothpaste, skin care, hair wash etc in India is low indicatingthe untapped market potential.Burgeoning Indian population, particularly themiddle class and the rural segments, presentsan opportunity to makers of brandedproducts to convert consumers to branded products.

Growth is also likely to come from consumer 'upgrading' in the matured productcategories.With 200 million people expected to shift to processed and packagedfood by 2010, Indianeeds around US$ 28 billion of investment in the food-processing industry.

NEED OF FMCG IN RURAL AREAS

After years of growth derived primarily from the urban markets, the FMCGcompanies havenow realized that India lies in its rural villages. So much so thatrural marketing has becomethe latest marketing mantra of most FMCG majors.With extensive competition not only fromMNCs but also from the numerousregional players and the lure of an untapped market hasdriven the marketers tochalk out bold new strategies for targeting the rural consumer in a bigway. To gauge the extent of shift in focus of the FMCG giants just sample this:

recentlyGodrej Consumer Products Ltd (GCPL) did something that it hadn't done before;itintroduced smaller pack sizes of some of its soaps and put them on the market forRs 5.And FMCG giant HLL has just launched a green variant of Lifebuoy soap,which, it hopes willbe a winner in the rural areas. Also, don't be too surprised if youvillage folk having their hairwashed and dyed as they are only taking advantage of the live demonstrations conducted byChennai-based CavinKare Products. So it isclear that rural markets have caught the eyes ofFMCG marketers and it is beingtargeted through experiments in a big way.

Over 70% of Indias 1 billion plus population lives in around 627,000 villages in ruralareas.This simply shows the great potentiality rural India has to bring the much-needed volumesand help the FMCG companies to bank upon the volumedrivengrowth. Also, the ruralmarket has been growing steadily over the years and is nowbigger than the urban market for

FMCGs (53% share of the total market) with anannual size in value terms currentlyestimated at around 50,000 crores. It is adefinite boon in disguise for the FMCG majors who


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have already reached theplateau of their business curve in urban India and are desperatelyseeking newways to increase sales.

To drive home the potential of rural India just consider some of these impressivefacts aboutthe rural sector. As per the National Council for Applied EconomicResearch (NCAER) study,there are as many 'middle income and above' householdsin the rural areas as there are in

the urban areas. There are almost twice as many'lower middle income' households in ruralareas as in the urban areas. At thehighest income level there are 2.3 million urbanhouseholds as against 1.6 millionhouseholds in rural areas. According to the NCAERprojections, the number of middle and high-income households in rural India is expected togrow from 80million to 111 million by 2007. In urban India, the same is expected to growfrom 46million to 59 million. Thus, the absolute size of rural India is expected to bedoublethat of urban India. But despite the high rural share in these categories, theruralpenetration rates are low, thus offering tremendous potential for growth.

Thus it becomes amply clear that rural India has to be the hot target in future forFMCGcompanies as it presents a plethora of opportunities, all waiting to beharnessed. Many of theFMCG companies are already busy formulating their ruralmarketing strategy to tap the

potential before competition catches up. All biggies inthe industry be it HLL, Marico, Colgate-Palmolive or Britannia, are showing deepinterest in rural India. However not everything is allrosy and there exist some grayareas in the rural strategies also.

DEVELOPING EFFECTIVE RURAL MARKETING STRATEGY

The winning strategy is to focus on the core competency such as technologicalexpertise todesign specific products for the rural economy. The most remarkable example in this contextis the launch of sachets which has transformed the ruralmarket considerably as packaging insmaller units and lesser-priced packs increasesthe products affordability. Also companieslike HLL and Nestle who have adoptedthis strategy have benefited tremendously. Anothercase is of Britannia with its Tiger brand of low priced and conveniently packaged biscuits

becoming a greatsuccess story in rural markets.

Along with the cultural dynamics, the needs and latent feelings of the rural peoplehave to bewell understood before launching products in rural segments. Marketerswould do well to firstunderstand this and then designing products accordingly. Forexample, Cadburys haslaunched ChocoBix, a chocolate flavored biscuit which isbased on the consumer insight thatrural mothers opt for biscuits rather thanchocolates for their children.

Another very important factor that needs to be looked at is the proliferation of spuriousproducts. Rural masses are illiterate people and they identify a product byits packaging(color, visuals, size etc.). So it becomes very easy for counterfeitproducts to eat into themarket share of established reputed brands. The retaileralso gets a larger profit on selling

the counterfeits rather than the genuine productsand hence is biased towards the fakes.Brands such as "Jifeboy", "Bonds Talcum","Funny & Lovely" etc., which are doing therounds of rural markets, poseconsiderable challenge to rural marketers.

The rural market remains quite price-sensitive and thus squeezing costs at everystage is ofvital importance. Some FMCG giants like HLL are in process of enhancingtheir control onthe rural supply chain through a network of rural sub-stockists, whoare based in the villagesonly. Apart from this to acquire further edge in distributionHLL has started Project Shakti inpartnership with Self Help groups of rural women.A very significant step for change could bean effort to directly tap the haats,mandis, melas and local bazaars which provide anopportunity of promoting thebrand in front of a large congregation of rural consumers.

Finally an effective rural strategy for FMCG companies must include the use of traditionalmedia for creating awareness about their products in the rural markets. The traditional


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media, with its effective reach, powerful input and personalizedcommunication system willhelp in realizing the goal. The advantages of traditionalmedia which make it a powerfulmarketing communication channel are: accessibilityis high, it involves more then one sense,interest arousal capability is high andminimum cost. Brooke Bond Lipton India Ltd (BBLIL)markets its rural brandsthrough magic shows and skits.

Barring a few, notable exceptions, rural marketing in India is still about a vancampaign, abadly-made commercial, a few painted walls and the occasionalparticipation in village haatsand melas. But then, "rural" means different things todifferent people: from 500,000 peoplefor consumer durables, to less than 50,000 for fast-moving consumer goods. Still, it isheartening to note the increasingawareness of the importance of rural markets - or, at least,of companies wanting tomove beyond urban boundaries.

According to estimates by the Rural Marketing Agencies Association of India, thetotal budgetfor rural marketing is only about Rs 500 crore (Rs 5 billion), comparedto the over Rs 13,000crore (Rs 130 billion) allotted to mass media. This is grosslyinadequate to cover the hugepotential for different products in rural markets. Of course, clients' reluctance to spend bigmoney for bigger results in rural markets isbecause there are no standard performance

yardsticks for judging the efficacy of the rural marketing efforts.

Companies like Cavin Kare (Chik Shampoo, Meera Herbal Powder, Fairever Cream and soon), Anchor (100 per cent vegetarian toothpaste), Ghadi detergent powder and Power soapare proof that regional brands can become brands to reckon with. And don't forget Nirma,the most enduring example of a brand that began as a regional player and is now a giant.

COLGATE PALMOLIVE INDIA LTD.

COLGATE PALMOLIVE - CIBACA TOOTHPASTE

Client: Colgate Palmolive

Product: Toothpaste

Brand: Cibaca

COMMUNICATION STRATEGY

Pitched against low priced products using Colgate lineage and the resultant globalqualityassurance at the same price point.

A well planned mobile marketing activity, which included interactive product oriented game,an edutainment film using well know TV stars of Karnataka, besides product sampling, salesand placement

Result Awareness for the brand has increased multifold and is reflected in the spontaneousincrease in sales.

TOOTHPASTE MARKET PICKING UP

The company had undertaken a 17% price cut in flagship toothpaste brand Colgate DentalCream (CDC) in the first quarter and a substantial price reduction of Colgate Cibaca in thesecond half. These reductions affected about 65% of the sales in FY04.Despite the lowervalue growth due to price reductions, Colgate has been able to grow volumes in thetoothpaste segment in FY04. Toothpaste volumes grew by3.5% during the year as againstan 8.3% decline in FY03. The growth trend in first five months of 2004 reveal a robust 7.9%

growth in volumes as against a 5.1%decline during the same period.


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Successful launches

The company launched Colgate Herbal White in the toothpaste range and ColgateMotionKids Indias first battery powered toothbrush for kids in the Toothbrushcategory during theyear. New launches in the personal care portfolio includePalmolive Aroma range of ToiletSoap, Liquid Hand Wash, Shower Gel and TalcumPowder. These have also contributed to

the volume growth.

Strategy

Colgate plans to focus on strengthening dominance and reignite growth in coreoral carebusiness. The strategy would be to defend and grow base business andimprove share infast growing LPP segment.

The company plans to build preference for Colgate Cibaca by leveraging onColgate equityand matching prices of competitors to aggressively to counter LPPthreat. The companyplans expand market by using local press to communicatevalue and through micro targetingwithin key LPP states.

Over the long term, Colgate plans build a strong presence in emerging PCP (Personal CareProducts) liquids categories. While this is small segment, the company expects the categoryto grow sharply over the next 5-10 years and it would emerge as an important business infuture. Personal products currently account for 7% of revenues.

MARKETING MIX FOR COLGATE PALMOLIVE INDIA LTD

Colgate Palmolive is the market leader in the Indian oral care market, with a 51%marketshare in the toothpaste segment, 48% market share in the tooth powder market and a 30%share in the toothbrush market. Presently it is facing competition from no. 2 player HLL andmore recently from small local players (Meswak, Babool, Anchor ) and other MNC's such asSmithkline (Acquafresh ). The future strategy of the company in Oral Hygiene Products for2006-07 on the basis of 4 P's would be:

1. Products:Colgate-Palmolive will provide the public with safe and effective products andwillstrive to produce products that have the lowest practical impact on the environment. CPwould come up with another strong brand name other thanColgate and Cibaca. CP shouldalso try to position some innovative toothpaste witha brand name other than Colgate butunder the umbrella of Colgate Palmolive. Intoothpowder, it would endorse the developmentof Colgate Ayurvedic Toothpowder'focused toward rural rich and consuming class. Theyshould come up sachets of these tooth powder and position toward rural population who buyin smaller lots. ForUrban rich and consuming class, CP would come up with the products onthe basisof functional benefits. E.g. CP would expand Colgate Herbal brand to herbal

cloveflavor, herbal lime and mint flavor etc. For toothbrush, CP woulc concentrateonfunctional benefits and would launch different toothbrushes for different agegroups. Iwould also launch a special toothpaste and toothbrush for kids in the agegroup from 4-10years.

2. Packaging: To reduce the impact of our product packaging on the environment, we willwork toimprove the environmental compatibility of all our packaging materials.Colgateendorses the worldwide hierarchy of solid waste management: sourcereduction;recycling (including reuse); incineration; and land filling.

3. Price: The price would largely be based on the competitor's price. From the nicheproductse.g. Colgate herbal, Colgate Blue etc, I would charge higher premium thanthegeneric dental white crme that would be focused on consuming and lowerincomeclasses. The pricing would be done on the basis of price points and thepackagingwould be customized on the basis of price points.


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4. Promotion:CP would be positioning Colgate dental white crme and toothpowder towardsrural rich segment. For rural consuming class CP would be endorsing Cibaca toothpaste.Most of the promotional expenses would be T.V. media as it would have betterreach to bothurban and rural population by 2006-07. Apart from T.V., FM radio forurban population andMW and SW radio would also be used for promotion towardsrural population. For urbanpopulation hoarding on national highways outside themetros would provide better eye catch.

5. Place:CP would try to increase product penetration to rural population as by 2006-07therural population who is rich and consuming class would be 209Mn which is notmuchlesser than urban rich and consuming population of 253Mn people. CP would trytoincrease the wholesalers to smaller towns and would track the distribution path sothat theyare covering all the village areas around the towns.

6. Facilities: Colgate-Palmolive is committed to the health and safety of our employees andthe communities in which we operate, as well as the protection of the environment. Wewillestablish and maintain programs for the operation and design of our facilitiesthat meet orexceed applicable environmental, health and safety laws andregulations.

7. Business: Colgate-Palmolive will consider environmental, health and safety issues in allsignificant business transactions, including acquisitions, divestitures, discontinuance ofoperations, and entry into joint ventures. We will also act in a responsible mannerwithrespect to the environmental protection of the lands under our managementand ownership.

COLGATE'S BRIGHT SMILES, BRIGHT FUTURES

The Colgate Bright Smiles, Bright Futures Oral Health Educational Programworldwide wasdeveloped to teach children positive oral health habits of basichygiene, diet and physicalactivity. This Program also encourages dentalprofessionals, public health officials, civicleaders and most importantly, parentsand educators to come together to emphasize theimportance of oral health as partof a child's overall physical and emotional development.

Under this Program conducted by Colgate-Palmolive, India children in primaryschoolsreceive instructions in dental care from members of the dental professionnominated by theIndian Dental Association. Education is imparted with the aid of audio-visuals and printedliterature created by the company. Free dental healthcare packs, including samples, are alsodistributed by the company to encouragethe practice of oral hygiene.

Teachers Training Program is an integral part of the School Dental HealthProgram,conducted regularly across the country to promote preventive dentalhealthcare.Colgate also has launched its first-ever online school curriculum featuring funandentertaining activities.

The Colgate top management met up with the Analyst community in Mumbaiyesterday todiscuss FY03 results. Managing Director Graeme Dalziel made adetailed presentation onthe oral care category, Colgates performance andcompanys strategy for the business.

SLOWDOWN IN INDUSTRY

The oral care market degrew by 9% in 2002-03 in value terms. The urbantoothpaste marketwitnessed a 3.8% decline, while the rural market degrew by6.2%. An analysis of thedegrowth trend revealed that almost 69% of the drop inurban consumption was due todecline in consumption of toothpaste, while 31%was attributed to partial shift of consumersfrom toothpaste to toothpowder. In the rural markets, 67% of the decline was attributed todrop in consumption. 6% of decline was due to partial shift to tooth powder, while almost18% of decline wasdue to total shift to Toothpowder. Over 9% of decline in volumes wasattributed toconsumers exiting from the category itself and moving back totraditionaldentrifices.


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COLGATE IMPROVES MARKET SHARE

Despite the slow down Colgate has managed to improve market share in all thethreecategories viz. Toothpaste (+1.2%), Toothpowder (+1.1%) and Toothbrush.(+0.4%)

CHANGE IN MARKETING STRATEGY

Colgate has taken an average price cut of 17% on its toothpaste brand portfolio, ina bid tospur volume growth in the category. This is a major strategy change ascompared to thepromotion driven marketing being undertaken previously, whichfailed to generate theanticipated growth. Although adspend in absolute terms hasbeen lowered by 20% atRs1.85bn, Colgate has managed to up its share of voice inthe toothpaste category from43.1% in FY03 to 51.3% in FY03, reflecting thatcategory ad spend have gone downsignificantly.

HLL'S NIHAR COCONUT OIL

INTRODUCTION

The hair oil market is huge, valued at Rs 6 bn. Due to the varied consumption habitsofconsumers across the country, where coconut oil and edible oil areinterchangeably used, thesize of the market is likely to be higher than estimated.More importantly, the market isgrowing at an impressive 6-7% in volume termsdespite the high penetration level.

Usage of hair oil is a typical Indian traditional habit. It is perceived to offer benefitsofnourishment, hair strengthening, faster and better growth, and reduce theproblem of fallinghair. Hair oil is a very Indian phenomenon. It is used as aconditioner and nourisher. Thereare two types hair oil available in the market;coconut oil and non-greasy perfumed oil.Coconut oil comprises 2/3 rd of the totalmarket and the balance comprises the non-greasyperfumed oil.

Usage of hair oil is an everyday habit with 50% of the population out of which someperceivethat massaging the head with hair oil has a cooling impact. Thepenetration of hair oil is fairlyhigh at around 87% and evenly distributed among theurban and rural areas. The majorpositioning platforms for hair oil are purity, hair nourishing and more recently, non-greasylook. Coconut oil and perfumed oilaccounts for about 65% and 35% of market in volumeterms.

Unlike shampoos or hair colors, which are products relatively new to the Indianpsyche, theusage of hair oil is a deeply ingrained habit with Indian consumers. Therefore, this is oneproduct where the major players do not have to fight eithermonetary or psychologicalbarriers to usage. But this does not necessarily meanthat being a branded player in the Rs

1,300-crore hair oils market is easy.Branded players account for just over a third of the total hair oil market. Players inthe plaincoconut oil segment operate in a category where there are few entrybarriers in place. Looseoils are priced on the basis of input costs and availability, both of which are notoriouslyvolatile. Since branded players have to grow at the expense of the ubiquitous unorganisedsegment and a host of regional and local brands, it is difficult to shield margins and sellingprices from the vagaries of loose oil prices.

KEY OBJECTIVE

The main objective of Nihar coconut oil is to overtake the loose oil consumers inrural areas.It also aims at being the market leader in rural market by overcomingother brands.


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It is a quiet conquest by Hindustan Lever Ltd (HLL) in the rural coconut oil market.HLL'sNihar coconut oil achieved a market leadership in the rural coconut oil marketin October2000, by displacing all-time leader Parachute of Marico Industries.

As per market research firm ORG-Marg's retail audit for the rural coconut oil market,Nihar'smarket share stood at 25.4 per cent in volumes in October, while that of Parachute was at

23.6 per cent. The total volume of the rural coconut oil market isaround 54,000 tonne,growing at 6-7 per cent annually. Even as HLL has managedto scrape through theleadership position of the rural coconut oil market, it is still farfrom being crowned the all-India leader in coconut oils.

NIHAR DISPLACES PARACHUTE IN RURAL COCONUT OIL MARKET

It is a quiet conquest by Hindustan Lever Ltd (HLL) in the rural coconut oil market.HLL'sNihar coconut oil achieved a market leadership in the rural coconut oil marketin October2000, by displacing all-time leader Parachute of Marico Industries.

As per market research firm ORG-Marg's retail audit for the rural coconut oil market,Nihar's

market share stood at 25.4 per cent in volumes in October, while that of Parachute was at23.6 per cent. The total volume of the rural coconut oil market isaround 54,000 tonne,growing at 6-7 per cent annually. Coconut oil is a relativelynew area for the multinational,and HLL unleashed significant aggression in thismarket in the last two-three years.

The multinational's strategy is simple: to upgrade loose oil consumers by offering low-unitprice packs. The Nihar low-price pouches launched early this year seem to have performedthe trick. Pricing is a critical issue in the branded coconut hair oil market where theconsumption of low-priced loose oils is huge. So as to tackle the pricing issue, HLL launchedNihar and Cococare in various price points in pouches, such as Rs 5.50 for 50 ml, Rs 10 for100 ml and Rs 20 for 200 ml.

HLL believes that low-unit price packs will lead to substantial conversions of theloose oilconsumers to packaged and branded oils. This, the multinational feels,would also enable thecompany to gain a higher share of the market. Rural andurban markets contribute equally tothe overall Rs 500 crore coconut oil market. HLL's portfolio of brands in this sector compriseNihar and Cococare.

These together command a market share of about 20 per cent share of all-Indiacoconut oilmarket. Marico's flagship brand Parachute is the all-India market leaderwith a share of about53 per cent. Thus, even as HLL has managed to scrapethrough the leadership position ofthe rural coconut oil market, it is still far frombeing crowned the all-India leader in coconutoils. Nihar's all-India share at the endof 1999, stood at 12 per cent, as per ORG-Marg retailaudit for the rural plus urbanmarket.

The brand's share in the beginning of 1999 stood at 9.5 per cent. However, sincethis gain inshare has not really impacted Parachute's all-India market share, theshare has beengarnered through conversion of loose oil consumers.

VALUE-ADDED HAIR OILSGiven the limited differentiation possibilities in the coconut oilsegment, majorplayers in the branded hair oils market have been training their sights onvalue-added hair oils. This has spawned a range of product innovations -- hair oilswithherbal ingredients, non-sticky oils, light hair oils, and lately, dandruff solution hairoil.

An entry into the value-added hair oils segment appears to offer quite a fewbenefits to thebranded players. One, with easier differentiation from the regionaland local brands,establishing a brand identity is easier. Two, this makes value-added hair oils less vulnerableto price competition from cheaper alternatives. Third, value addition helps players commanda price premium over the no-frills coconut oil brands.


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Both herbal oils and non-sticky hair oils have been quite successful as productconcepts.Dabur India's Vatika hair oil, one of the first players to milk the herbalcategory throughaggressive advertising, registered a growth rate of 74 per cent in1998-99. Dabur's hair oilsbusiness continued to grow at around 18 per cent in1999-2000. HLL's Clinic Plus non-stickyhair oil (which combines coconut oil andmineral oil) has also been an unqualified success.While Parachute continued to remain the lynchpin of Marico's hair care business, it was thevalue-added hair oils,such as Hair and Care, which clocked higher growth rates of late.While Parachute'sgrowth rate fell from 14 to 6 percent in the first half of 2000-01, Hair andCare'sgrowth rates improved from around 7 per cent to 23 per cent in the same period.HLL'sClinic All Clear hair oil and Parachute Dandruff Solution has also entered thefray.

Nihar Perfumed Coconut Oil continued to grow well, while Clinic All Clear Dandruff Oilregistered substantial growth of more than 50 %. Nihar Amla Oil was alsolaunched aroundthe end of the year, to exploit opportunities in this segment of hairoil.

NIHARS MARKET SHARE

For Nihar coconut oil, the company has already established rural leadership.According to

ORG-Marg figures for market share in rural areas for 0ct 2000, Nihar isat 25 per cent ascompared to Parachute at 24 per cent. In December 99, Parachutewas at 28 per cent asagainst Nihar at 15 per cent. To increase urban penetration,the company is changing theimagery of the product by changing the productpackaging. The 200 ml bottle is much sleekerand contemporary.

MARKETING MIX FOR NIHAR COCONUT OIL

1. Product: Packaging innovationsNihar, India's only double filtered coconut oil has made achange in packaging andlogo, which is innovative, convenient and vibrant. The logo letteringis now in a fresh green color and sports a leaf over the brand name. Nihar has consistentlybeen bringing innovations to its consumers, it was the first to introduce the wide mouth jar

and pouches packaging.

In keeping with Nihar heritage, the new packaging is part of Nihars constant endeavors onimprovising and providing quality to our consumers. The tamper proof jar has beenintroduced with grooves on the side for a firmer grip giving the jar a more feminine aspect.The flip top tin has been designed for convinience in pouring out the oil; the wide mouth jarcan be used in different climatic conditions. The essence of the new packaging is to bringabout practicality in daily usage of the Nihar coconut oil.

The range of double filtered Nihar coconut oil includes:

Flip top tin, available in 200 ml and 500 ml

Tamper proof cap, available in 100ml, 200ml, & 500 ml with grooves on the sidefor an easyhold when oily.

Wide mouth jar available in 200 ml and 500 ml

Pouches available in 50 ml, 100ml and 200 ml

2. Process of preparing the Double filtered Nihar coconut oil

The double Filtration process involves the production of filtered coconut oil from copra. Thisis done by downsizing the copra, which is then passed through a cooker and steam heatedfor facilitating oil release. The copra is then crushed at a higherpressure. The final step in

this stage involves sieving the oil and parts of thecrushed copra through a screen. This stillmurky oil is allowed to partially settle inflat-bottomed collection tanks. In the second stage


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the filtered coconut oil is mixedwith special quality silica and recirculated, this continues untilthe required clarity isachieved. This filtered oil with adequate purity finally goes to thepackaging line.

Nihar has also migrated to low unit packs to rope in new users. HLL has launched100 mlpouches of Nihar priced at less than Rs 10. Apart from making the productmore affordable to

mass market consumers, the 100 ml pouches are cheaper on aper ml basis than the largerbottles and flip top packs. This is likely to bring in newusers from the loose oil segment.

3. Pricing

To tackle the pricing issue, HLL has launched Nihar and Cococare in various pricepoints inpouches, such as Rs 5.50 for 50 ml, Rs 10 for 100 ml and Rs 20 for 200 ml.HLL believesthat the low-unit price packs will result in upgradation of the loose oilconsumer to this brand,and enable the company to gain a higher share of the market.

For example, Nihar's small packs in AP has led to the brand's market share gain in this statefrom a marginal 2% in April to 35 %.This example is being replicated by the company in

each of the states where Nihar and Coco care draw large consumption. The company feelsthere is enough room for brands to gain share by upgrading loose oils users.

The price of copra, the key input in coconut based hair oils, has been a key factordetermining the fortunes of the major players in this segment. The continuation of thepresent price trends in copra would probably determine the near term financial performanceof the large players in the plain hair oils business. On this count, thereappears to be no nearterm cause for worry. A large part of the decline in copraprices is due to the substitution ofcopra by cheaper imported palmolein.

4. Place ( Distribution)

HLL has a very good distribution network. Hindustan Lever has leveraged the micro-creditmodel to expand its rural market from its present 40 per cent penetration.Leveraging themicro-credit model to expand its rural market, it is piloting `ProjectShakti' -- its five-month-oldmarketing initiative involving women belonging tomicro-credit self-help groups (SHGs) in theNalgonda district of Andhra Pradesh.

The project, with an obvious `win-win' partnership potential, involves women fromSHGsturning into direct-to-home distributors for HLL in their area, thus helping thecompanyexpand its rural market from its existing 40 per cent penetration invillages with population ofover 2000. For the women, it means income generationwithout the headache of starting theirown venture and becoming vegetablevendors, fish vendors, pan shop owners, etc., whichhas generally been the micro-credit model to date.

Andhra Pradesh was obviously chosen for the pilot project as 20 per cent of itsruralpopulation is covered by the micro-credit model. The micro-credit concept, that impacts45 lakhs women belonging to 3.33 SHGs in the State, creates wealth for the members of thegroups and helps them better their lives and alleviate poverty. The micro-finance collected inthe State, through savings as well as institutional loans, isaround a whopping Rs 800 crore.

For the project, 50 SHGs closest to the highway in Nalgonda district were identified. Theseare covered by three Mutually-Aided Credit Thrift Societies (MACTS), whichact as semi-distributors in the project. MACTS, which generally consist of 14 to 15SHGs, are federatedinto a co-operative and work in close tandem with the SHGs. Infact, the project has hadseveral interesting spin-offs. One of the MACTs distributingHLL products has started its ownsupermarket, while another is shortly purchasing avehicle for its distribution network.


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The investment opportunity is relatively risk-free and high on return. HLL iscommitted toproviding the necessary training inputs to these groups on the basicsof enterprisemanagement which the groups can then use to enlarge theirinitiatives.

5. Promotion

Nihar attracts a large consumer preference in Bihar, Uttar Pradesh, MadhyaPradesh,Rajasthan, Andhra Pradesh and Bengal. Promotional activities are region-specific andlocally flavored to suit the brand's requirement in its area of strength.

The customers in the rural area are very price sensitive. Great emphasis is laid onthe pricefactor and so they advertise keeping in mind the price. A lot of emphasis isgiven on the priceand they also compare the product with the local brands and howit is superior in quality fromthe other available local brands.

Nihar does advertise in the rural area but they dont use much of newspaper asthere is avery high level of illiteracy in the rural area. They do use advertisingthrough T.V. Nihar's"kudrat ki shakti" ad clicked in the market place as it wasdistinctly different to the usual hair

oil ads, HLL feels. But that is also not on a largescale as the T.V hasnt yet reached theinteriors of rural areas.

PROBLEMS FACED BY NIHAR

Strong competition from other players in the market, especially Parachute of Marico

industries.

Pricing is a critical issue in the branded coconut hair oil market where theconsumption of

low-priced loose oils is huge.

STRENGTH OF NIHAR

Nihar can gain market share from conversion of loose oil consumers. The strategyis to

upgrade the loose oil use to Cococare/Nihar by offering small pack forms,which are

affordable.

Nihar has a very strong distribution network, so it can reach more rural areas withits help

and cover the market.

CONCLUSION

In a very short period of time Nihar has been successful in gaining control over theurban

market as well as the rural market. With the help of its strong distribution andits continuousinnovations to match the consumers choice it can continue tomaintain its leadership in rural

market.

CHENNAI-BASED CHOLAYIL GROUPTHE MEDIMIX SOAP

INTRODUCTION

Medimix has a large user base among the SEC B and C segments and in rural areasin the

30-plus age group. They are trying to widen its usage by bringing the SEC Asegment into

their fold. They want to make it a mass, urban and young brand. Thisis because it has takers

among older consumers who have seen through the mythof instant and cosmetic results.


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They know the long-term benefits of Ayurveda. Butthis needs to be communicated to a

younger audience and they have succeeded indoing that with the recent campaigns.

The company's aggressive communication strategy has been one of the key factorsbehind

the growth. Communication has really made the company grow to what it istoday. It had a

good product, but they managed to spread awareness and widen itsuse in the earlynineties when the cable and satellite television arena opened up. Though they

were small then, they used to spend nearly 25 per cent of the turnoveron

communication and marketing. Now this has settled to around 15 per cent. But

itwould continue to follow a communication-led strategy. They have been

verymeticulous in their approach and they research all their ads by getting

theiragencies to test them on various focus groups before launching them.

When VS Pradeep took over the reins of this company in 1983, it had a turnover of

less than Rs 1 crore. Today it stands at Rs 200 crore. It was then a single

productcompany with one brand, Medimix. Today it has 12 brands in their

portfolio. It wasonly a south-based company; today it is a national entity. Six years

ago theyheaded west by tapping Maharashtra and two years ago they went

completelynational. Today they have 1,200 distributors across the country. In fact,

theirpenetration in the south is as high as 80 per cent. In Tamil Nadu alone, in

terms of penetration alone, Medimix is second only to Hindustan Lever's Hamam.

Coca-Cola is using their distribution network to distribute its soft drink

concentratebrand Sunfill in the south. That is because its own network reaches

only thoseplaces where soft drinks are retailed and not to those small kirana

stores in theinteriors where they reach.

All other players are talking of a complete health platform today; they have

alwaystalked about holistic healthcare. They widened our user base through

ourcommunication strategy. They started off by telling users of solutions to

theirspecific problems. For instance, they started off by talking about how the

soaptackled the problem of prickly heat in summer as well as pimples and

dandruff. Thus, they concentrated on each problem separately and communicated

thebenefits of the soap.

Thereafter, they widened the strategy by placing the soap on a value-for-

moneyplatform and said that this soap was a one-stop-cure for a range of health-

relatedproblems. Now, they have further broadened this plank to include thewhole familyand they are saying the soap offers total health protection and

addresses each of your individual needs. Their financial targets would be to build

their organisation to a Rs 1,000-crore entityin the next five years. This will be done

by growing in the categories they arepresent in and eventually by getting into new

areas of growth.

THE RIGHT MIX

MEDIMIX AYURVEDIC SOAP FROM THE CHENNAI-BASED CHOLAYIL GROUP,

BUILDSITS SUCCESS ON A MEDICAL PLATFORM


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Soap maker Medimix, from the Chennai-based Cholayil group, is the

maverickmarketer that got its product and marketing mix just right. The

company's success is reminiscent of Nirma's in the west. Its revenue rose

metroically from Rs. 50 crorefour years ago to Rs. 200 crore last year (2001) on

sales of its ayurvedic soap.Besides, it got an ORG rating of number nine, among

soap categories on a nationalbasis with minimal high decibel advertising, no sexypackaging, no glamorous filmstar endorsements and no compromise on its shape,

perfume or colour in order tobag bulk orders from hotels.

Six plants of the Cholayil group make 1.5 crore cakes of soap, each weighing 75

gmand 30 lakh cakes of the 125 gm variety. The soaps are made manually,

without theuse of power and even the cutting of the bars into cakes is done by

hand-operatedhydraulic cutters. However, the company plants to set up a state-of-

the-art unit in Goa. "Once production starts there we will make 1,000 cases per

month andestablish a supply beachhead to serve the northern market," says

K.H.S. Manian,Vice-President, sales at the company.

The story of Medimix is the evolution of a home-grown product... from idea

toresearch to manufacture, packaging, distribution and marketing, all done by

afamily proprietary concern. Most important, the company has managed

todeveloped a brand on its own terms. It all started with Dr. V.P.S. Sidhan (who

traceshis bloodline to the Cholayil Tarawad of Kerala, a family lineage of

ayurvedicvaidyans, followers of saint Narayana Guru), who served as assistant

medical officerwith the Southern Railways. Sidhan had trained for his DMS at the

Kilpauk MedicalCollege and so ayurveda took a back-seat until his retirement. His

medicalexperience showed that chronic ailments, especially skin conditions,

defiedallopathic remedies and post retirement, he focused on finding cures

throughayurveda. His work with Viparthy Oil (extract of wild ginger) and its

efficacy intreating skin diseases yielded promising results.

Now all he needed was a better vehicle to overcome the oil mess as an applicator.

So, Medimix soap was born. Sidhan's soap was made with 18 herbs in a coconut

oilbase in the backyard of his Chennai Cuoolamedu house. The firm was

incorproatedin the name of Sidhan's wife Sowbhagyam. She also doubled up as

chief manufacture! In 1969, Sidhan launched the Medimix brand as a total

ayurvedicskin-care soap with just Rs. 500 as seed capital and lots of goodwill fromthemedical fraternity and chemists network. Sidhan's soap and its efficacy

spreadthrough actual-user endorsements. "We priced it at 85 paise at the time

and todayit sells for Rs. 9.50," says Manian. There are five plants, one in

Pondicherry, two inChennai, one in Tada in Andhra Pradesh, one in Bangalore and

one in Viilupuram, tocater exclusively to hotel bulk orders."

According to the July-September 2001 ORG figures of volume in tonnes of the top

25brands of soap on a national basis. Medimix at 2625.3 tonnes is way above

MysoreSandal, Margo, Nirma, Jai, Cinthol Fresh, Pears, Lux International skin care,

Liril andDettol. In the south zone alone it is the sixth-highest seller with 1,873

tonnes.


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What is the strategy that worked for Medimix in a bubble-filled soap arena inwhichmultinational companies such as Hindustan Lever Limited tower above the rest of themarket? Manian unabashedly says that his group had to run all existing andconsideredmarketing wisdom on its head. "While FMCG (fast moving consumergoods) products usually

take off in the urban centres, and then spread through thehub format, Medimix was pitchedin the villages first," says Manian. "We targetedthe village kirarmiuala, our best friend andlocal influencer of decisions so far asbuying habits go. He accepted the merits of Medimix asan ayurvedic product.When he was convinced, his customers got convinced. The onlyalternative wasChandrika soap, which had adopted a direct marketing approach. We used toattendnumerous village melas and talk to the people. We went all over India only twoyearsago. Today, of the three lakh tonnes of soap sold, ayurvedic soap comprises 7percent, ofwhich we have 3 per cent."

Medicated soap that is 100 per cent handmade is exempt from tax and ruralconsumersseem to be attracted to the medical qualities of the soap far more thanthey are to the samequalities in a cosmetic, according to Manian. He says thatwhen a villager visits a city he asks

for Medimix soap by name. No offers, noschemes, no inducements. As Chandrika soap wasfollowing the monopoly of directdistribution. Medimix decided to woo the stockiest anddistributors and claims thereare 25-year-old loyalties here. "From 1969 to 1990 growth wasslow," says Manian.'But when S. Pradeep joined the company as managing director the firmtook off in just four years."

It is Pradeep's idea to target hotels. A firm decisions were taken that Medimixwouldaggressively market to over 3,000 small hotels all over India, even in smalltowns.Pradeep says he was pleasantly surprised to find that even foreign tourists toplacessuch as Pondicherry were impressed by the medicated quality of Medimix."Wedecided that we would not compromise on the packaging or appearance or theperfumeor colour of the soap to gain entry into five-star hotels. Hotels will neverbuy at the maximumretail price (MRP), so we supply at cost. What's more, we evenmanage the inventory forthem."

While Medimix has done well, the company's brand extension, Vrinda Tulisi Soapfailed andis being relaunched with a changed perfume and translucent appearance.Meanwhile,Manian is focusing on the Indian community in the Middle East, wherehe believes Medimixcan command loyal customers. The product is exported toBrazil and Italy, as well. "Even inthe Indian market, there is a 50 per cent untappedpotential," he says. "We have plans forsandal soap, Viha, and a herbal Ziva shavecream. People are turning to ayurveda in a bigway.

"We have the research and knowledge capabilities to turn out more ayurvedicproducts and

build on our current marketing strength. In the past five years ouradspend has grown toRs.30 crore. We conducted an ayurveda Congress inHyderabad and got an impressiveresponse."

Medimix has proved that it is not always glitz and glamour that sells products... aback-to-your-roots plank that espouses natural products appeals to the averageIndian.

NIRMA

MODEST BEGINNING

A brand that was to become a model for other budding entrepreneur had veryhumble

beginnings. At the fag end of the sixties, Karsanbhai Patel, a 25-year-oldchemistmanufactured detergents at his home in Ahmedabad. The detergent namedNirma, after hisdaughter Nirupama, was cycled to retail outlets. Since its veryinception, Karsanbhai had his


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finger on the pulse of the people as he realized theneed for a cheaper detergent. Hence, hesold the detergent for Rs. 6, one-fourth of the price of similar products then available.

THE 4PS OF MARKETING

During that period the detergent powder category belonged almost entirely toUnilever's Surf.

Launched in 1959, Surf grew in the market and became thebenchmark in the eyes of boththe housewife and competition (which was thenlimited to three wholly Indian manufacturersGodrej, Tata and Swastik). Commonopinion prevailed that a quality detergent, had to be ablue powder packed in acolourful carton. But Nirma was launched as a white colouredproduct, packed inpouches sealed at the top, with no colour or design sophistication on thepack.

1. Packaging:

The attractive feature was to be the price-around 35% of Surf!

2. Price:

Soon the brand began to sell like hotcakes and Nirma's market share grew from 0%in 1976to 61.6% in 1987. It soon pushed HLL over the top. Nirma also dared tobreak the "rule" thata packaged, especially advertised brand needed theparaphernalia of branch offices, areamanagers, and sales representatives in ordercarry it through a wide and complicatednetwork. Instead, Nirma went in for whatthe West would have called a 'no-frills', approachnot just in the product formulationand cost elements, but also in the all-important sales,distribution andorganisational arrangements.

3. Planning:

With one of the most comprehensive and widespread distribution network, Nirmareachedinto the very heart of India. In the process, it pioneered rural marketing inIndia-anotherreason for its astounding success. In the early 1980's despite the factthat 70% of India's 750million lived in rural areas, big MNC's avoided them for thesimple reason that it was difficultto penetrate. Nirma's success in rural India alsodispelled the myth that rural consumers arepoor and do not have the disposableincome to buy consumer goods. Nirma's policy ofmanufacturing a low cost "valuefor money" product was also aided by the fact that Nirmaoperated in the small-scale sector. This helped it save an enormous amount of excise dutythatmultinationals had to pay on every kilo of detergent produced. This prevented MNCsfrompulling down prices to a level attractive enough for the middle and lower-middle classes, thebulk segments for Nirma sales. Understanding the economicsand rules of the rural game,Nirma identified that expensive advertising had noplace in a market where the buyer was tooprice-sensitive.

4. Promotion:

Nirma used radio, posters, banners and mobile vans among others as better mediaoptions.It was also one of the first major advertisers on the National Network, a factborne by its jingle(Nirma Detergent tikia, iske jhaag ne jaadu kar diya), which stillgenerates instant recall.When you hear the all too-familiar tune Washing PowderNirma, you instantly know what it istalking about. The title 'Nirma Girl' going roundand round on her feet and her white dressrising fluff too made for a strongmnemonic for the brand. This stood up to Surf's Lalitaji's"samajhdari."

SETTING THE PACE


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By the early 1980s the burgeoning sales of Nirma reached a rate of growth that wasnearlythrice the industry average. In the past few years while the industry hadbeen growing at therate of 15 per cent annually, Nirma's growth had been at least30-35 per cent. In a swift,single move, Nirma shattered the myth of "economy atthe cost of quality."SUCCESSFULLYDIVERSIFYING INTO PREMIUM BRANDSOnce it had positioned itself as the largest sellingdetergent, Nirma moved on tobecoming an FMCG. As the first step it changed to a soaps &detergent company. They said that Nirma would stay successful only as long as it remainedwithin theconfines of economy priced detergents. But that was not to be. Nirma's forayintothe premium brand segment, in cakes and detergents turned out to be a repeatsuccessstory. Nirma is today ranked among India's top 20 .most distributed brands.It has built up a30% market share in the premium detergent segment and alsoachieved greater than 20%share, in less than two years, in the premium soapsmarket.

Today Nirma has diversified into personal care market with Shikakai, BeautyShampoo,toothpaste and has also launched the Nirma brand of iodised salt.

NIRMA-PROFITS AND POSITION (AT HOME AND ABROAD)

Nirma's products over 800,000 tonnes of detergent and over 80,000 tonnes of toilet soapsannually are consumed by over 250 million customers, through a wide network of 400distributors and about a million retail outlets.

It ranks No.2 in toilet soaps; but mainly, in just seven years of marketing soaps, Nirma soldmore volumes than the others had in 25 years!

In international markets too, such as Bangladesh, Nirma has left behind both, Unilever and P& G and now plans to export detergents to Russia and the MiddleEast.

MOVING FORWARD THROUGH BACKWARD INTEGRATION

By manufacturing their own raw material, in the form of Linear Akyl Benzene (LAB)and Sodaash, Nirma offers more value to its buyers. The Rs. 4.5 billion LABmanufacturing plant atSavli (the most modern in India and the second best in theworld), was set up in minimumtime and cost once again showing astutemanagement skills. It also has the largest soapmanufacturing facility in thecountry, under a single roof. A state-of-the-art packaging plant(another first inGujarat) catering to a staggering 1.2 million polythene bags and 6 millionwrappers,daily!

ECO-FREINDLY AND ENVIRONMENTALLY SAFE

At the very outset, Nirma was a phosphate-free detergent, making it eco-friendly. Adetergentby-product, Spent acid, is not released into the environment, but used asraw material in theSSP fertiliser unit. At the Mandali complex, alone, 1,00,000 treescan be found on a 125 acrecampus.

NIRMA - SWOT ANALYSIS

Strengths:

Strong Brand equity. Nirma is a Rs. 17 billion-umbrella brand offering consumers abroadportfolio of products at multiple price points in the Detergents, Soaps &Personal Care

market.


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Produces a range of industrial chemical products which primarily serve as rawmaterial orintermediates for Soaps and Detergents business.

Market leadership in detergents and fabric wash and second largest player in toiletsoaps.

Wide distribution network.

Weakness:High interest burden.Less presence in premium segment.Lacks global tie-ups and thus finding it hard to tap export markets.Opportunities:ExportsAcquisitions for strengthening its distribution tie-ups.Entry into other categories like shampoos, toothpastes and fabric whiteners.

Threats:MNCs coming, to India particularly in Toilet and Soap industry. Emergence ofsmallbut strong regional players.

Nirma as a brand has been able to etch a niche for itself in the face of intenseMNCcompetition. It has not only emerged victorious in its core competency,detergents,but has also successfully moved on into newer products. Nirma'sachievement issurely something about which an Indian can be proud of, a brandthat has lived upto its catch line; Better Products, Better Value, Better Living!

THE MAN BEHIND THE BRAND

A man of exemplary vision and extraordinary courage, Mr. K. K. Patel had hisfingeron the proverbial pulse of the rural India, from the very beginning. He is the

stuff that legends are made of. The Wall Street Journal, The Economist, DiscoverIndiaand the Economic Review have all featured him at some time or the other.Amarketing wizard, humanitarian and entrepreneur par excellence, hismarketingexpertise forms the basis for case studies at Business Schools.

Mr. K.K. Patel firmly believes that a person who has received a lot out of lifeneedsto give something back. One among the many contributions has been theNirmaMemorial Trust that takes care of deprived women in Gujarat. TheNirmaFoundation, set up in 1979, has donated millions, within the state & outside,forschools, colleges, temples and social institutions.

The best reward of all for Mr. K.K. Patel, as he often says continues to be "the

smileon the face of a satisfied buyer." He built the brand, Nirma, from scratch,took itfrom strength to strength and, in the process, pioneered rural marketing inIndia. The result being one of the most comprehensive and widespread distributionnetworks in the country. Housewives swear by it, retailers stock it, unfailingly, andbrand loyalty continues to increase.

Nirma has arrived and has truly become a household name, in every sense oftheterm.

Commenting on his success the in September 10, 1988. The Economistwrote:"Rarely does a small manufacturer in a developing country take on a

bigmultinational and win. Mr. K.K. Patel has done it in India, taking three-quartersof Hindustan Lever's potential market from it.


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"BRITANNIA INDIA LTD (BIL)

INTRODUCTION

Britannia India Ltd was incorporated in 1918 as Britannia Biscuit Company Ltdandcurrently the Groupe Danone (GD) of France (a global major in the foodprocessingbusiness) and the Nusli Wadia Group hold a 45.3 per cent equity stakein BILthrough AIBH Ltd (a 50:50 joint venture). BIL is a dominant player in theIndianbiscuit industry, with major brands such as Tiger glucose, Mariegold, Fifty-Fifty,Good Day, Pure Magic, Bourbon etc.

The company holds a 40 per cent market share in the overall organised biscuitmarket and has a capacity of 300,000 tonne per annum. Currently, the bakeryproduct business accounts for 99.1 per cent of BIL's turnover. The companyreported net sales of US$ 280 million in 2002-03. Britannia Industries Ltd (BIL)plans to increase its manufacturing capacity through outsourced contract

manufacturing and a green field plant in Uttaranchal to expand its share in thedomestic biscuit and confectionery market.

Britannia Industries Limited (BIL) has emerged as one of the largest foodcompanies in India by 1999. According to a survey conducted by ORG-MARG andA&M,Britannia was the fifth most popular brand in India in 1997 and was the onlybrandbelonging to the food category to figure in the top 10. A strong brandname,superior quality products and an enviable distribution network had helpedBILbecome the market leader with 40% share in the Indian biscuit market.

The company has rationalised its product portfolio, pruning the number ofbrandsfrom 35 to 25, so that it can devote greater attention to key businesses.In 1998, the company moved into the mass market for biscuits introducing low-priced varieties under the umbrella brand, TIGER.

The success of this brand has enabled Britannia expand its market share inthe"Glucose" biscuit market from 10% to over 20%. While growth rates in the mid-priced and premium biscuits have flagged, it is TIGER which has keptBritannia'sbiscuit business roaring.

BRITANNIA PLANS TIGER VARIANT

BRITANNIA Industries Ltd to planning add another flavour to its existing Tigerbrandof products following its success story in the rural areas

Earlier, with its two previous glucose biscuit brands -- Glucose D and Circus -- ithadonly 10 per cent of the market-share. But the single-minded effort ofconceiving andpromoting Tiger in the mass rural market has paid dividends. Mr

Tiwari spoke aboutthe distribution channels that have brought results in the ruralmarket. Apart fromstockists and sub-stockists, Britannia has used traditional haatsand melas topromote the Tiger brand. It has made the ongoing Kumbh Mela amajor promotionand sales outlet.

Whenever they come to know of a major mela or haat, they ensure that their

brandis stocked in large quantities, In fact, low cost distribution channels are oneof themain challenges in rural marketing as extensive and sparsely populated


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areas haveto be covered for the desired results. ``Corporates who want accuraterural marketresearch to be done need to be aware that the costs arehigh, the timetaken ismore and productivity is low,'' said Mr Diwakar Srivastava, ResearchManager, A.C.Nielsen. Mr Srivastava, who has been involved in rural marketresearch in North aswell as South India, believed that penetration of products washigher in the Southdue to better road infrastructure, larger areas underelectrification and higherliteracy levels.

Market share:Britannia-43%, Parle-33%, Bakemans-11% and others 13%.

RURAL MARKET - A WORLD OF OPPORTUNITY

According to a National Council for Applied Economic Research (NCAER)study,there are as many 'middle income and above' households in the rural areasas thereare in the urban areas. There are almost twice as many 'low middleincome'households in rural areas as in the urban areas. At the highest incomelevel thereare 2.3 million urban households as against 1.6 million households in

rural areas.

Britannia Industries launched TIGER biscuits especially for the rural market.Itclearly paid dividend. Its share of the glucose biscuit market has increased from7%to 15%.

Today TIGER is a Rs. 200 crore brand with a market share of 24%. Having grownat25% to 30% in the past growth is fast slowing down.

TIGER has been positioned as a nutritional product with the new logo being"EATHEALTHY THINK BETTER". The high nutritional value includescarbohydrates,proteins, calcium, etc.

The company's latest offering is "Britannia Tiger Chai Biscoot". The producthasbeen launched in Maharashtra, West Bengal and Karnataka on the flagship"TIGER". The TIGER brand currently has four variants including TIGER CashewBadam, TIGERProtein, TIGER Coconut and now Chai Biscoot.

Britannia with its TIGER brand of biscuits with its low priced and convenientpackageproducts designed for the rural masses have been other pioneers inruralmarketing. Thus, Britannia has been able to derive more than 30% of theirrevenuesfrom rural market.

THE BRITANNIA TIGER LAGAAN MATCH

This was how the campaign took place: You needed to purchase a 100 gm. Pack ofTIGER biscuits for which you will get aspecial "Britannia Lagaan Booklet". 10000early birds will win a prize. There is alsothe possibility of being selected in theteam that will play against the "Lagaan XI"team.

Britannia pumped in around Rs. 2.5 erodes to ensure the success of thispromotional offer. Analysts say that there was an incremental 20% jump in saleswhen the scheme was on.

This promotion was done in both the rural and urban areas, thus it not only gave

the company an increase in the sales but also gave the brand and the companyrecognition.


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THE BRITANNIA TIGER BACHAO AANDOLAN

This was conducted by Britannia Industries with a view to reach its rural customerand also the target segment. This took place in the year 1998 when the companyundertook the responsibility of protecting the tiger community hand in handwiththe forest department of Gujarat, MP, etc. This was done by selecting 12 kidswhowere interested in the campaign. The children were selected from a villageinRajasthan. The campaign is still being carried out by the company and is one ofthesuccessful ones. It has become a social responsibility of the company.

HOARDINGS

There are hoarding, which are put up by the company in the rural areas. Thehoardings are mostly put up with complete information regarding the product. Theinformation is given in the local language in order to let people know about theproduct. The hoardings also have the mascot tiger which emphasises a strong

healthy individual.

T.V.

The various ad campaigns throughout the country are done by preparing a singleadvt but the language in which it features is according to the regional language ofthat state. The ads include famous personalities like Saurav Ganguly. The adsmainly focus on the children and emphasise a strong diet for a healthy mindandbody.

School children in rural areas are often given small packs at a confessional rateand at times they are distributed as free samples.

Ps OF TIGER BISCUITS

1. Pricing & packaging: The product is specially designed for the rural market andthe economy class. Packing Price250 gms Rs. 10100 gms Rs. 475 gms coconut Rs. 5

The product is priced very low giving equal importance to quantity and price bothof which are important features for the success of a product in the rural market.

Britannia TIGER has been able to meet both the norms as mentioned above andhasmet with roaring success in rural areas.As the definition goes, the amount thatthe consumer is ready to pay for the servicegranted is what is price. This is verytrue in case of TIGER biscuits. An entry into themarket was made only afterstudying the complete details and profile of the marketand the result was a totalsuccess.

2. Packaging:

The products are packed in airtight plastic wrappers in an attractive bright redandyellow colour, which catches the eye and is an important feature to market

aproduct in rural areas. The important feature is the energetic tiger shown onthepack, which emphasises good health, comes your way with Britannia TIGER.


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The packaging also gives complete details of the price, packaging date,ingredientsand the nutritional value. A complete plant product, it is denoted by thegreen dot.

Since the target is the economy class and the rural segment, the main featureisthai Britannia TIGER also features the product name in Hindi.

3. Place:

The distribution network is very strong.

Manufacturing PlantLocation: Andheri.

Outsourced to Oasis Enterprises

C & F Agent: At district level in various states of India

Wholesaler: At taluka levels in various states

Retailer: Retailers in villages are supplied by the wholesaler at the taluka level

Final Customer

4. Positioning:

Positioned mainly for the rural segment and with a new slogan "Eat healthy,thinkbetter", as a brand of premium quality with factors pertaining to health andneedsof the consumer being the main factor.

PROBLEMS FACED BY TIGER

Competition:

From local players in many states who infringe with low quality products andsimilarpackaging. Since the rural customer depends mainly on the packagingavailable, itis easy for competitors to sneak in the market affecting the marketshare of TIGER.

Saturation:

Experts have said that TIGER has reached saturation in its PLC. Thus a declineispossible in the near future resulting in decline of the company share of thewhole.

BRITANNIA LOOKS BEYOND BISCUITS

Bakery major Britannia Industries is planning to "go beyond biscuits'' NusliWadia,Chairman, said.BIL has a presence in biscuits, breads and cakes mainly with a 37 per cent marketshare. Mr. Wadis said the company's future growth could be either throughacquisitions or through an organic growth. Its new manager Vinita Bali said

BILwould ramp up its distribution network by tapping the malls. She said Britannianowhad six power brands each exceeding Rs. 100 crore in sales. She said exports


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and rural marketing were the two thrust areas and BIL, which penetrated the ruralmarket riding the Tiger brand, was now planning to take its upmarket biscuits andtiffin cakes into rural areas.

Addressing shareholders, Mr. Wadia said amid steep increases in prices of agro-products, the main raw materials; it had launched a strategy of forward buying ofcommodities through commodity exchanges as a hedging mechanism. Alongside,itwas also implementing 14 projects aimed at improving productivity,betteringrecipes and toning up logistics. A further VRS was proposed to trim the2,500workforce.

CONCLUSION

In the end it is certain that FMCG companies will have to really gain inroads intherural markets in order to achieve double digit growth targets in future. Thereishuge potential and definitely there is lot of money in rural India but the smartthingwould be to weigh in the roadblocks as carefully as possible. The

companiesentering rural market must do so for strategic reasons and not fortactical gains asrural consumer is still a closed book and it is only throughunwavering commitmentthat the companies can make a dent in the market.Ultimately the winner would bethe one with the required resources like time andmoney and also with the much needed innovative ideas to tap the rural markets.

A mention of rural India may conjure up an image of abject poverty in the minds ofmany people. This, however, does not hold true in the case of a few fastmovingconsumer goods (FMCG) companies that have over the years been givingtheir ruraloperations a renewed thrust. Why would these companies be tappinginto the ruralmarkets in the first place?

First, let's take a look at the distribution networks of three leading FMCGcompaniesin India - Hindustan Lever Limited, Colgate Palmolive and Britannia.

These threecompanies are market leaders in their core areas and much of theirsuccess has todo with the intricate marketing networks they have developed overthe years.Hindustan Lever, as would be expected, has the largest reach in terms ofthemarkets serviced. Colgate, on the other hand, has adopted aconcentratedapproach by focusing on fewer markets. Britannia, compared to thefirst two, has amuch smaller reach.

Colgate and Britannia now derive 35% and 30% respectively of their turnoverfromrural markets.

Britannia and Colgate, apart from Hindustan Lever, are the only FMCG companiesin India that derive over 30% of their revenues from rural markets. Britannia hasrejuvenated its rural thrust by the launch of Tiger biscuits, while Colgate has beenattempting to woo the rural masses by offering low priced products in convenientpackaging.

The success of these companies has as much to do with understanding thepsycheof the rural family as it have to do with a rural distribution network. Atypical ruralfamily is a price conscious consumer and this is where the key tosuccess lies.Hindustan Lever, for example, extended its strategy of volume drivengrowth intorural markets and met with much success. Britannia on the other had

launched Tiger to take on the existing economy brands in the market.

Fmcg Companies in Rural Markets (1)

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