Professional Documents
Culture Documents
Business
School
Academic
Yr.
2010
-
2011
Acknowledgement
Writing a dissertation is always the most challenging part of a students life. It was definitely
the most important academic contribution by me. This however would not have been possible
without the encouragement and support of a few people. Here I take this opportunity to
display my gratitude towards them.
First and foremost, I would like to thank my professor, Dr. Erik A. Mooi for being a source of
support and encouragement, guidance and persistent help. Thank you sir for your time,
support and patience. My Sincere thanks to both academic and non-academic staff of the
Aston University and Aston Business School, for all their assistance.
I would like to thank my parents for love and support bestowed on me. Thank you for your
blessings. Also I would like to thank my friends for staying by me during the difficult parts in
the strange and unknown country. I would then like to thank all the data sources which helped
me complete the dissertation.
Last but not the least, I would like to thank God for all.
Nikunj Agrawal
Abstract
This research attempts to study the packaged foods market in the lucrative Indian market. The
study gives an overview of the Indian packaged food market. Market leaders in the Indian
packaged food market in the six different categories of packaged foods are studied. Factors
such as the market leaders, market share, factors influencing buying, key drivers in the
packaged food market and future of the packaged foods in India are some of the important
aspects of the research.
To understand the successful marketing strategies and the role of marketing strategies in
companys success, a company analysis of ITC Foods from the point of view of marketing is
done. Major information sources for the research is the internal and external data available
online. Importance of Innovation and competitive strategy in the formation of marketing mix
of ITC Foods is firstly studied. The effectiveness of proper execution of the marketing mix is
then studied with the help of various marketing theories and models propounded by marketing
scholars. The finding, recommendation of marketing strategies and the future on packaged
foods in India is then stated.
Table of Contents
1. Introduction..................................................................................................................... 7
1.1 Research Introduction .......................................................................................................7
1.2 Packaged Foods ................................................................................................................7
1.3 Industry Background. .......................................................................................................8
1.4 Indian Food Processing industry ......................................................................................8
1.5 Research objectives and road map. .................................................................................10
1.6 Research Structure ..........................................................................................................11
1.7 Methodology ...................................................................................................................11
2. Literature Review ......................................................................................................... 13
2.1 Definition of Marketing .................................................................................................13
2.2 Marketing Strategy .........................................................................................................13
2.2.1 Marketing mix .........................................................................................................16
2.2.2 Competitive Strategy ...............................................................................................17
2.2.3 Porters Five Forces ..................................................................................................18
2.3 Brand image ....................................................................................................................19
2.4 Awareness of consumers and reasons for popularity.....................................................20
2.5 Factors influencing consumption and Brand Composition ............................................21
2.6 Marketing strategies by companies.................................................................................24
2.7 Importance of promotion ................................................................................................25
2.8 Innovation in food marketing .........................................................................................26
3. Methodology .................................................................................................................. 30
3.1 Research design ..............................................................................................................30
3.2 Secondary research .........................................................................................................31
3.2.1 Sources of secondary research .................................................................................31
3.3 Constructs .......................................................................................................................33
3.4 Propositions ....................................................................................................................33
3.5 Case study (Company Analysis) .....................................................................................34
3.6 Analysis type ..................................................................................................................35
3.7 Models and theories ........................................................................................................35
4. Market overview ........................................................................................................... 36
6
4.1 Area of Research: Indian Market ....................................................................................36
4.2 Processed Foods India : ..................................................................................................37
4.3 Indian Packaged foods market : ......................................................................................38
4.4 Consumer Trends Fuelling the Indian Packaged Food Market ......................................48
4.5 Key Growth Enablers......................................................................................................49
1. Introduction
The Indian
8
tools and equipment, despite this fact, people are still searching for new methods to prompt
up the cooking activities with a view of coping up with their mechanical life, as they lack of
adequate time to cook in the conventional Indian methods. In this ever changing social and
domestic scenario, both women and men have to unavoidably go for work and are employed
to supplement their income, as a result of this, cooking food in the conventional methods is a
suffering for women. Capitalizing this situation, business houses ranging from small time
manufactures to multinational corporations have started innovating and commercializing
easy to cook food items like noodles, vermicelli, gulab jamun, instant idli, vada, dosa mix,
etc., that are otherwise called instant. The instant food products are not only easy to cook but
also have a significant role and place in the celebration of the family functions and religious
functions of the people.
With he entry of food multinational companies and the propagation of Quick Service and fast
food Restaurants (QSR) outlets have indeed further added to the boost of the packaged food
industry. The proliferation of modern-day retail business types and the rapid increase of
hypermarkets/ supermarkets, fast food outlets and shopping malls combined with the
promising industry trends is adding to the fundamental shifts in the Indian grocery and food
industry.
The food processing and production industry in India is considered to be one of the largest in
terms of growth, production, export and consumption prospects. Significant sub sectors in the
food processing industry are, fish-processing, processing of fruit and vegetable, milk
processing, packaged/convenience foods, meat and poultry processing, grain processing, soft
drinks, and alcoholic beverages. . (Sajani Mrinalini Dutta, Rohit Chadha, Rohit Bhatiani
(2008).
In the past few decades, Indian companies have taken big and vital steps in producing milk,
food grains, vegetables and fruits. The production of raw food materials is worth over Rs
60,000 crore in India. After the calculation of primary, secondary and tertiary processes, total
sum of the food industry is estimated as Rs.1,10,000 crores. This huge cost overrun replicates
the alluring opportunities in the food-processing industry, offered to the Indian economy to
the whole and to the entrepreneurs in individual. The attractive marketing opportunities lie in
advancing the grains and commodities to branded and packaged products and into convenient
foods, which yield value for money paid. Products aimed towards young adults and children
and products providing to those who live a rapid modern-day life are the need of the hour.
Appreciating the potentials in the food market and with a view of providing further boost, the
government has provided exemption from excise duty for ice cream, condensed milk,
preparations of meat, pectins, fish and poultry, yeast and pasta. Adding to the relief, excise
duty on a few ready-to-eat and packaged foods is curtailed from 16% to 8%. (Budget, 2007)
The volume of packaged foods market in India is valued to be US $ 10 million & with the rise
in the segment, it is expected to cross US $ 20 million by the end of the year 2014. Packaged
food contribution is now 4 % of the total Food and Grocery (F&G) market, is anticipated to
reach 5 per cent of total food & grocery market by 2014. . (Sajani Mrinalini Dutta, Rohit
Chadha, Rohit Bhatiani (2008).
The Food processing industry plays an important role in associating the farmers to the end
consumers in the Indian domestic together with the international markets. Food processing
10
along with efficient marketing efforts has the capacity of resolving the basic agricultural
problems like wastages, surpluses, reasonable remuneration to the harvesters and growers and
rural jobs. Keeping a view of 10 years ahead, production of foods is anticipated to double.
These harvests, if processed and marketed briskly, can led to become India the leading
suppliers of food, globally.
Among the processed food segment, Packaged food products occupied a considerable shelf
space in stores and super markets in India. Food companies through instant food products had
provided high quality food choices, which would have been inconceivable to ancestors.
Instant food mixes formed a range of convenience food for households, being easy to use
without terminal processing and women found it very convenient to use. It helped them to
save time and effort and relieved them of the tedious jobs of collecting various ingredients,
cleaning and sorting them and preparing food.
3. Marketing strategies adopted by ITC Foods, in the Indian packaged food market.
The Strategy by ITC Foods with respect to demographics, product life cycle stage,
competition, area of operations and etc will be studied and taken under consideration.
The efficiency and effectiveness of ITC Foodss functional and departmental activities
will be analysed.
11
1.7 Methodology
The research tends to understand the packaged foods market in India. For understanding the
marketing strategy, The primary data sources are available public data, industry studies and
selected private data files to measure trends in packed food sector. Research will take a close
look into the articles, readings, and publications about successful marketers and various
packaged food companies strategy implications.
Additionally the structure of the research presented, so as to give a clear explanation of each
construct and the propositions taken, is designed in such a way to answer the research
questions with all the components of the paper. Research will be aided by graphical
representations and marketing models to add theory aspect and make the research intact with
the theories.
The research is then followed by concrete recommendations to answer the final research
question, that is understanding the Marketing strategies in the Indian Packaged food Industry.
12
The findings in the research of the successful marketers will act as a bench mark for the
new entrants or failures in the packed food industry.
13
2. Literature Review
In this chapter, research works done in the past regarding awareness, factors influencing the
consumption, brand loyalty, brand composition and demand estimation of food products by
researchers and scholars has been reviewed and presented. The literatures and the studies
done will help in understanding the marketing mix of the companies.
14
Kotler (2003) defined marketing strategy as a set of business principles that an enterprise
uses to serve its customers and achieve profitability. Armstrong and Kotler (2003) realized
that marketing strategy is designed to direct an organization to use its resources optimally to
meet the customer requirements and realize its marketing goals in a more efficient way than
its competitors. While some of the others regarded marketing strategy to be four dimensional,
channel strategy, including low-cost strategy, branding strategy, and innovation strategy.
Hence it can be derived that marketing strategy and product innovation are inter-related and
closely linked. Therefore Innovation is given importance in our study and different aspects of
Innovation
related
to
the
industry
will
be
studied.
Although marketing strategy has been proposed in many different ways, most researchers,
scholars and theorists have explained marketing strategy via the incorporated aspect of 4Ps Product, Price, Place, and Promotion. (Kotler, 2003).
Implying the theories, it can be said that Marketing strategy is the marketing sense through
which an organization tries to achieve its marketing objectives by optimum utilization of
resources and opportunities in the market. It reflects the strategies for target markets and
positioning accordingly to build the firm's differential advantage. It should include the market
segments where the company will target. These segments differ in needs and wants, responses
to marketing, and profitability. The company should then work into those market segments
where it can best perform from a competitive point of view. It should develop a marketing
strategy on the basis of feasibility and potential success for each targeted segment
accordingly. Matching of the activities of an organization to the environment in which it
operates is referred as strategy. Marketing strategy formulation involves setting the objectives
of an organization by performing the internal and external analysis.
Though formulating a strategy which is consistent and constant in nature is a difficult task for
any marketing team, performing the strategy work that is, implementing it as it was planned
throughout the organization structure is even more difficult (Hrebiniak, 2008). There are
countless factors that can potentially affect the process of successfully implementing the
strategic plans in the organizational action. Strategy implementation, unlike strategy
formulation is many times considered as a craft, instead of a science, and the previous
researches have described it as as uneven and eclectic (Noble, 2008). It can be implied that,
even after a comprehensive strategy, strategic framework or single strategic decision has been
planned and formulated, significant difficulties and practical problems are usually
experienced during the successive implementation process.
15
Here are some of the illustrations in the packaged food market over the previous few years,
where many companies have successfully implemented their strategies and without increasing
their sales volume significantly, they have increased the net earnings.
It was done by
competition among companies and producers is sure to intensify. In the cut throat Indian
Packaged food market, it can be said that commercialization and product development is the
need of the hour for succeeding.
In our study of processed and packaged foods which are novel to Indian market and
consumers, majority of Indian consumers and potential customers have had less of experience
and hence have not exactly developed predisposed and willful attitudes towards processed and
ready to eat products. Moreover, food and taste is closely affiliated with the rick Indian
culture.
Our research unearths that in order to achieve their business goals how important is the role of
product development and commercialization. After a company defines its objectives clearly,
level of performance would be realized. The dimension in which the company appears to be
the most distinguish and capable from the rest, should incorporate the business practices foe
its
product
development.
16
For designing the marketing mix for the strategy planned, a strategic fit of companies
resources and the market opportunities should be considered.
17
18
19
delivery to the customer.
20
21
urban areas, promotion and awareness thus becomes easier for the companies as the access
to people in urban areas is easier and convenient.
Beverland (2001) analysed the brand awareness for ZESPRI kiwi fruit within the markets of
New Zealand. The efficiency of the branding strategy used for the kiwi fruits in New Zealand
was studied. The implications from the research for agribusiness in using the data,
composed of surveys of the kiwi fruit consumers in three of the major super markets in
Auckland, the findings suggested that there is a low level of Brand awareness of ZESPRI
among the consumers (n=106). It was indicated that the brand awareness could increase by a
customer relationship-making program, towards the targeted supply chain and target
customers. Customer relationship, though being a modern day marketing concept has become
a necessity for the companies to adhere, for creating a differential advantage over the
competitors.
Nandagopal and Chinnaiyan (2003) concluded that the level of awareness among the rural
consumers about the brand of soft drinks was high which was indicated by the mode of
purchase of the soft drinks by Brand Name. The major source of brand awareness was word
of mouth followed by advertisements, family members, relatives and friends. From the
research it is clear that buying behaviour in rural India is often an influence of trend
prevailing in the society. Innovative ways of promoting the product is the necessity for
spreading awareness and brand preference in the rural India.
It can be concluded that brand awareness is the first stage of acquiring customers. But there
are various ways of acquiring customers, it differs with the area of operation, price elasticity
and ways of promotion
building positive relations with the customers.
22
Silayoi and Speece (2004) suggest the significance of packaging and design as a way of
branding and communicating in the highly competitive consumer markets of packaged food
products. The packing conveys implied meaning, whether favourable or unfavourable and the
presumption about the product.
Underwood et al. (2001) advocates the impulsive imagination aspects of how a consumer
reacts to the product tastes, looks, smells, feels, or sounds at the time when they are watching
a product on the shelves. Furthermore, if the brand is competing in a highly competitive
market or a crowded category, an eye catcher trick for the crowd could be disrupting their
eyes as they walk past the shelf set. Some of the most vital quantitative tools are density,
spectral data, ink trapping, dot area and control of the observed area. It should be insured that
the printer uses these methods and devices for a better print quality on the package (Levey,
2004). The theories of Levey and Underwood talk about the first impression of the product. It
can be implied that the fist impression gives the customer a feel of the product. The product
should be designed in such a way that it conveys a positive perceived value of the product.
Jorin (1987) examined changes in spending power and buying habits of Swiss consumers
since the beginning of the 20th century and in the more recent past. Current trends include
greater emphasis on health and safety of foodstuffs and less attention to price, increased
demand for low calorie light products and increased demand for organically grown foods. For
young people, more concern with enjoyment and less for health, with more meals eaten away
from home, and generally an increased demand for convenience foods. The prospects for high
quality branded products are seen to be good. Quality is such an element in foods, which
cannot be overlooked.
Ryan (1982) recommended that attitude formation is influenced by normative beliefs, as
perceptions might be based on the information and reviews provided by the experts or by the
expectations and demands of other socially or personally significant people. He believed that
external expectations do affect internal and psychological predispositions (attitudes). For
example : in the case of new products. There are many ways of forming perceptions about the
products. In the case of an established product, the reviews, past experiences, the availability
and promotion by the company are few of the factors which lead to formation of moulding of
perceptions about the product. While in the case of products to be launched, the pre-launch
promotions, the product expectations, the content, innovation and etc. are seen.
23
Sabeson (1992) in his study stated that, high quality, price and taste of the product were the
major criteria based on which the consumers selected a brand of processed fruits and
vegetable products. Fruits and vegetables when sold without association of any brands the
above factors count. But after the radical change in grocery and food sales pattern, marketing
strategies and brand image do matter and play a vital role in the buying behaviour.
Rees (1992), observed that factors that influence the consumers intent and choice of
packaged food are advertising, texture appearance, flavour, means, reduction in traditional
cooking, disintegration of family, an increase in snacking. etc. Increasing use of microwave,
ovens and household and demographic role changes have moulded the eating habits.
Development and organization in retailing with as much as
supermarkets is said to be vital. Consumers have been responding positively to messages and
notices about healthy and safe eating. They are particular of the ways in which the food is
provided and produced and want natural, safe and high quality food, priced reasonably.
While the study undertaken by Sheeja (1998) in Coimbatore district considered the quality
aspects like aroma, taste, freshness and purity as the major factors deciding the preference for
a particular brand of processed spices. It can be inferred that there are different characteristics
that build up the brand image and positive buying attitude of customers for food items in
India.
Kamalaveni and Nirmala (2000) reported that, there is complete agreement between ranking
given by the housewives and working women regarding the reasons promoting them to buy
Instant food products. Age, occupation, education, family size and annual income had much
influence on the per capita expenditure of the Instant food products. Women are still the
decision makers for household stuffs in India. The companies ought to decide the marketing
strategies according to the thinking, mind sets, perception and buying behaviour of women.
Kubendran and Vanniarajan (2005) elicited that the change in consumption pattern was due to
changes in food habits. If income and urbanization increase among consumers, the percentage
of income spent on consumption increases. The urban consumers preferred mostly branded
products compared to rural consumers. The most significant factors influencing buying
decisions were accessibility, quality, regular supply, door delivery and the mode of payment.
Ramaswamy et al. (2005) studied consumer behaviour towards instant food products in
Madurai, the second largest city in Tamil Nadu, India and observed that consumers do build
24
opinion about a brand on the basis of which various product features play an important role
in decision making process. A large number of respondents (78%) laid emphasis on quality
and 76% on price which is an important factor, while 64% of respondents attached
importance to the image of the manufacturer and 50% considered packaging as an important
factor and an equal percentage (50%) felt longer shelf life influenced them.
Low and Lamb Jr. (2000) came out with an interesting finding that famous and renown
brands exhibit multi-dimensional brand associations, complying with the fact that customer
have a more developed remembrance and memory structures with brands more familiar to
them. Consumers would generally spend more energy in recalling and processing earlier
information relating to familiar brands as compared to novel and unfamiliar brands.
From all the above researches it is clear that there are various factors that influence the
consumers buying behaviour for food products.
Some of the imperative ones are quality, price, promotion, social trends, family preferences,
brand image, past experiences and etc.
This research is concerned about the marketing strategies by the companies with reference to
the marketing mix designed by the companies that lead to market penetration.
25
The analysis of consumers assists companies in developing the marketing strategies by
gripping issues like :
The psychology of consumers choices affected by factors like reason, sense, and choice
between different types of food (e.g. products, brands);
The psychology of consumer being affected by the environment (e.g., family, culture,
media, signs);
The behaviour of consumers while shopping or making other marketing decisions;
Restrictions in consumer knowledge, customer education or information processing
skills affecting decisions and marketing results;
How the customer motivation and decision strategies differ amongst food products,
different in the level of importance or interest which is caused to the customers; and
How companies can develop and adjust the marketing strategies and marketing
companies to access the consumers minds more effectively.
The basic aim of the study after understanding the packaged food market is to analyse the
marketing strategy of companies in the market. Relevant models will be used for doing the
analysis, comparing the data with theories and coming on a conclusion.
26
advertisement policies. Using the results, the researcher drew implication for the trend in
company policies related to pricing, promotion and advertisement. The researcher used a twostage approach, allowing him to assess the quarterly (medium term) effects of promotion and
advertisement along with their long term (infinite horizon) effects. The results observed were
consistent complying with the hypothesis tested that consumers tend to be more of promotion
and price sensitive across time as a result of increased promotion and reduced advertisement.
Neslin Scott (1999) developed a model and tried to examine the role of retail promotions in
assessing future brand loyalty of customers with the help of feedbacks given after purchases.
Purchase feedbacks denoted the effects of present purchases on brand preferences in the
future. The research was conducted on the basis of two product categories and comparison of
the effectiveness of non-price versus price retail promotion was done. It was observed that instore price promotion has a negative purchase feedback compared to non-promotion
purchases, while non-price promotions like sampling or features display had a negligible
effect or had a positive purchase feedback, compared to purchase made without promotion.
27
Midgley and Dowling (1978, p. 236) states innovativeness as: the degree to which an
individual is receptive to new ideas and makes innovation decisions independently of the
communicated experience of others. According to them, innovativeness is like a personality
trait which can have an influence over a range of product-specific behaviours, comprising the
early adoption of innovations.
An intermediate level of innovativeness - product-category-specific innovativeness, which
portrays definitive action on one hand, and abstract personality traits on the other has been
recommended by Midgley and Dowling (1978). They try to measure the effect of innate
innovativeness on the basis of various differences between individuals, situational factors
and variables which have an influence on the actual adoption of innovations.
Earlier studies have found that there is a relation between innovativeness and various
consumer characteristics discovered by various researchers such as opinion leadership
(Turnbull and Meenaghan, 1980), demographics, communication behaviour (Bass, 1969;
Boyd and Mason, 1999), and various consumer values (Daghfous et al., 1999). Extremely
innovative consumers generally are youths, economically affluent, highly educated and
qualified opinion leaders, who get the new product specifications and information directly
from the marketers and mass communication (Turnbull and Meenaghan, 1980).
Hirschman (1980) disputes that distinctive innovativeness only partly accounts for the
differences within individuals in the adoption behaviours. She anticipated that innate novelty
seeking, conceptually indistinguishable from the willingness to adopt new products
(Hirschman, 1980, p. 285) and creativity are complimentary, with the other variables, so that
to serve to clarify or to distinguish adoption behaviour.
Grounded on the two conceptual outlooks, Foxall (1988) advises that cognitive style
influences objectified consumer innovativeness more than cognitive level (creativity),.
Cognitive style is well-defined as the individuals characteristic mode of information
processing and is distinguished both conceptually and operationally from level of creativity
and cognitive level or complexity (Foxall, 1988, pp. 80-81), and could be used to
differentiate customers in relations of behaviour of innovation adoption. Bonfield (1974)
discovered a greater normative influence on behavioural intents for customers with low brand
loyalty and higher education.
Apart from this, distribution and marketing concerned policies and decisions are now of the
supreme significance in the food marketing world. This is with respect to the existing
economic crisis state in most of the economic world and the cost effectiveness issues that
28
ought to be considered at fluctuating level of economic development. While reviewing
food-marketing systems from varied cultures, economic, political, environmental and cultural
aspects should be considered of the respective countries involved (Kaynak, 2002).
Furthermore, religious and cross-cultural food taboos should be taken into consideration
while conducting food business globally. For example, it would be as grave as a sin, trying to
sell pork-based products in Pakistan and other Muslim countries and beef-based products in
India. As both the food products are strictly prohibited due to religious constraints in the
respective countries, although their consumption is quite high in the western countries without
any constraints. This is the reason all the foresaid issues and conspiracies must be considered
while performing food marketing, globally. Though, best marketing and business practices
should be established to increase the business performance appreciably.
As the society has gradually turned into a knowledge society, the always rising significance of
knowledge demands a modification in rationals concerning innovation.
Nonaka, 1994 expressed that innovation is a process by which the organization creates and
defines problems and then actively or pro-actively develops new knowledge systems to solve
them. Nonaka's theory can be perceived as a continuation to the Schumpeterian theory, which
opposes the focus on unchanging products/processes and believes that firms should make
rivals' positions obsolete by creating or adopting innovations!Conner,(1991). Thus, the
relationship between knowledge and innovation lies at the core of competitive advantage and
can prove to give the firm sustainable competitive advantage over the competitors.
Our approach of marketing innovation shadows Nonaka's belief and is within the framework
of strategic value innovation. !Hamel, 1998; Kim and Mauborgne, 1999. Hamel, 1998
stresses that strategy innovation leads to wealth creation; it is explained as the capacity to
restructure the present industry model in such a way that it creates new and fresh value for
customers, undermines competitors, and produce wealth for all stakeholders in newer ways.
In marketing, the corresponding concept is marketing innovation.
Innovation lies in different aspects and functions of the business. This research focuses to
cover the significance of Innovation as an independent variable which has an effect on the
three of the 4 Ps of the marketing mix, namely:
Product
Innovation has a lot to do with the product development, especially in the food
industry. Innovative techniques are being used to make the food taste better, to make
the food healthier and cost it less to the customers. Innovativeness is also very vital in
developing new products with creative ideas and efficient operations.
29
Place
Packaged foods, a product purchased by the families or individuals to meet the
hunger need, needs to be placed strategically and wise fully to penetrate in the
markets. Ex. Availability of lays chips in the hill stations and remote areas. New
innovative techniques are developed by the companies to place the goods strategically
in the market such that, they do not loose out customers.
Promotion
Innovative ways to promote the brands and spreading awareness are developed and
used in the current food markets of India.
30
3. Methodology
This chapter gives an outlook of the methodology used for the research undertaken to study
the Indian packaged food market, the awareness of consumers about packaged food products,
factors influencing consumption in choosing the particular brands in the study area and to
analyse the marketing strategies adopted by ITC Foods in the packaged food market.
31
websites
mainly
used
to
access
data
32
online.
(http://tutor2u.net/business/marketing/research-secondary.html)
The secondary research helped establish knowledge base and give better insights for
interpretation, analysis and suggestions relating to the project.
For implying the theories and relating it to the market, lecture slides on marketing and
strategy, books by marketing experts, journals and articles will be used. According to the
research structure designed, the first part of the research will comply of the market analysis.
The analysis will comply the market leaders, the brand composition in the market, the brand
preferences, reasons for preference and etc.
Research will take a close look into the articles, readings, and publications of successful
marketers and various packaged food companies strategy implications for giving the market
!
overview.
The second part of the research is explaining the Marketing strategies adopted by ITC foods
by illustrations and Indian Market facts. It will cover the marketing strategies adopted by the
!!
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COMPETITIVE STRATEGY
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MARKET PENETRATION
33
3.3 Constructs
The first Construct is taken as the marketing mix design of the companies. The elements of
marketing mix are dependent on two of major factors.
Product (ex. product development), place (ex. supply chain management and SKUs),
promotion (ex. innovative ways to promote and create awareness about the product) and price
(ex. competitive pricing) are dependent on innovativeness and competitive strategy seeing the
area of operation. These factors will help to design the 4 Ps.
Therefore Product, place, price and promotion are the dependent variables, dependent on the
independent variable Innovation and competitive strategy.
The measurement of effectiveness of the 4 ps will be the execution success of the marketing
mix and the observed results after the implementation.
Second construct is the effect of marketing mix in market penetration. Market penetration is
dependent on the marketing strategy designed by the company, which is portrayed by the
marketing mix of company.
Sales, market share and other financials are the metrics which can be used to determine the
market penetration.
In the second construct, Market penetration is the dependent variable which is depended on
the independent variables Product, Place, Price and Promotion.
3.4 Propositions
As per Prof. (Nick Lee, 2008, pg 127, 128) in the book Doing business research, a proposition
is, a statement that predicts a relationship between two or more variables, one that answers
research questions and makes predictions. The propositions valid for the research are as
follows:
34
Segment
Products
ITC Ltd.
Staples, Biscuits, Snack Wheat flour, salt, ready-tofoods and Ready to eat eat
foods
meals,
confectionaries,
biscuits,
snacks
The main aim of forming the ITC case and giving its background is analysing the marketing
strategies adopted by the company.
35
36
4. Market overview
37
38
India saw a speedy growth in the economic segment with the help of economic reforms
during the phase of 2004 to 2007. FDI inflow increased and GDP growth was at 8-10 per cent
during the period. The global economic downturn seen in 2008 had a deep impact on the
economy with industrial output slowing down and inflation increasing by two percentage
points over the previous year to 8.3 per cent. Nevertheless, the real GDP growth remained
sturdy at 7.3 per cent.
39
The main categories of packaged food include, baby food, dried/ canned processed food,
dairy products, confectionery, frozen processed food, meal replacement products, ice cream,
noodles, pasta, nutrition/staples, ready meals, dressings and condiments, sauces, snack bars,
spreads, soup, sweet and savoury snacks, bakery products, etc. Exhibit 1 summarizes the key
players in the packaged food segment.
Company
Hindustan
Segment
Products
Limited (HUL)
Foods, Dairy,
biscuits,
instant
coffee,
dairy
infant
food,
and confectionaries
ITC Ltd.
Snack
foods,
meals,
snacks,
salt,
biscuits,
confectionaries
Snack
Foods
beverages
Dabur India Ltd.
Culinary
Products
Beverages
pastes,
chilli
tomato
powder,
Confectionary
Ltd.
Bakery Products
milk,
bread,
fruit
drinks,
40
fruit juices, fruit nectar,
and tomato puree
The growth of the Indian processed food market is expected to be supported by the growing
and organized retail penetration. A number of categories, which are highly dependent on
organised retail-like frozen food products - are expected to witness significant growth in the
years ahead.
The segment that has shown maximum exponential growth is the ready-to-eat segment. Ever
since the processes of freezing and chilling products have become very refined,
technologically sound and subject to stringent hygiene practices, this sector has expanded and
is anticipated to grow in the coming few years. Staples, which are currently sold loose, are
also expected to undergo significant changes with the advent of private labelling. The trends
of wellness food, is expected to grow in the forms of nutritionally enhanced, fortified foods,
organic foods and probiotic food. Organic food is rapidly becoming a distinct and welldefined category. Similarly, the other concepts mentioned here will grow as much and
gradually occupy more shelf space in the near future.
41
The market of packaged food in India is an anticompetitive monopolistic market. In all the
different categories of packaged food there are several players which have similar product
lines and comparable prices yet they are striving to differentiate their products with their
planned marketing strategies .The market can be further segregated in 5 segments
Dairy
Confectionaries
Biscuits
Snacks
Staples
42
Strategic Management Group, (TSMG). In their analysis, it was assumed that the factors
adding to the growth of this sub-sector would be changes like disintermediation, cold chain
development, streamlining of taxation, diminishing culinary skills, economies of scale
possessed by the supplier, complemented with rising disposable Indian's incomes, and the
necessity of convenience on the customer side.
Brands
Description
Gits manufactures particular type of ready to- eat, instant
Gits
Haldirams
forms of chats like, bhel puri ,alu tikki, dhokla, chana masala,
pao bhaji, pakoras, gol gappa and sev puri.
Offers packaged syrups, sweets, namkeens, pickles, cookies,
Ethnic Kitchens
MTR
company
presently
offers
twenty-
two
Indian curries,
and
authentic
43
9%
ITC Ltd.
8%
MTR
48%
Kohinoor
35%
Others(Gits, Priya
Foods etc.)
Dairy
The dairy sector ranks first in terms of processed foods with 37 per cent of the produce being
processed. The organized sector processes an estimated 15 per cent of the total milk output in
India. There are 676 dairy plants registered with Government of India, which come under the
organized sector. Milk and its products contribute about seventeen percent of the countrys
net expenditure on food and food products. The traditional products of dairy is responsible for
about fifty per cent of the net amount of milk produced. The dairy products market is
hopefully to grow at more than 20 per cent over the coming years.
Following are the facts related to Indian dairy industry as per Indian Brand Equity Foundation
(2008). Food Processing : Market and opportunities.
India stands first in the world in terms of milk production .The output is expected to
be about 108 million tonnes, growing at a compounded annual growth rate of 4 per
cent.
The dairy whitener market comprises of sweetened milk powders, condensed milk and
creamers. Its market size is estimated at US$ 450 million.
Ghee is the most widely marketed and branded product with a nation-wide penetration
of 24.1 per cent. It is estimated to be growing at a rate of 8 per cent per annum
The cheese market is estimated at US$ 2.49 million for (54000 tonnes in volume
terms), growing at a rate of nearly 10 per cent per annum. The organized cheese
market is dominated by processed cheese which accounts for 74 per cent market share
The ice-cream market in India is estimated at US$ 226 million, with the organized
44
market at US$ 158.2 billion. This is currently growing at 20 per cent.
Confectionary
The Indian Confectionary market is valued around Rs.2500 crore. The market is segregated
into seven major categories:
1. Hard boiled candies
2. Toffies
3. Eclairs
4. Chewing gum
5. Bubble gum
6. Mints
7. Lozenges
Perfetti van melle
ITC Ltd.
Nestle
Cadbury
Cofitos
Candyman
Eclairs
Bubbaloo
chocotella
Minto
Dairymilk
Alpenliebe
Polo
5 Star
Centre mint
Milk chocolate
Gems
Centre fruit
Munch
Perk
Marbels
Fun bar
Halls
Chocoleibe
Kit Kat
Eclairs
Mentos
Protex happydent
Milky Bar
Big babol
Alpenliebe
lollipop
Happydent white
Frittella
Chatar patar
Alpenliebe
creamfills
Centre shock
45
Market Share - Confectionery
ITC Ltd.
3%
37%
Cadbury
Nestle
7%
11%
Others(Parle,
Joyco, HUL etc.)
Biscuits
The biscuit market in India is valued to be approximately worth Rs. 5000 crore. In the Indian
Biscuit industry out of the net production 60% percent is produced by the organized sector
and the rest 40% is produced by the bakeries which form a part of the unorganized sector.
Britannia
ITC
Ltd
Parle
Priyagold
(Sunfeast)
Good Morning
Marie
Parle-g
Butter Bite
Milk bikis
Dream cream
Krack-Jack
Classic Cream
Pure magic
Milky Magic
Monaco
Butter Lite
Treat
Fit kit
Kreams
Big Boss
Good day
Choco Nut
Marie Lite
Nutri choice
Butter Nut
Milk Shakti
Magic Gold
50-50
Tiger
46
8%
ITC Ltd.
12%
10%
Priyagold
Britannia
32%
Parle
38%
Others(Bonn,
Anmol etc.)
Snacks:
Snacks industry overview
The Indian Snacks industry is valued to be of 1800 Crore Rs. and is growing at a remarkable
10% every annum. In the world the Indian snack market is the largest and is dominated by
potato chips which has a share of about 85% in the total snacks market.
Product Price
Product Price
Product Price
(ITC Ltd)
(Frito Lay)
(Haldiram)
Bingo
Lays
Namkeen
Rs. 5
Rs. 5
Rs. 5
Rs. 10
Rs. 10
Rs. 10
Rs. 20
Rs. 20
Rs. 20
Lehar Namkeen
Rs. 5
Rs. 20
Kurkure
Rs. 5
Rs. 10
Rs. 20
47
12%
16%
ITC Ltd.
FritoLay India
27%
Haldiram's
Others
45%
as on June, 2008
Staples
Key players in the stales market are :
ITC
HUL
Pilsbury
Marico
Nirma
Market Share - Staples
ITC Ltd.
24%
HLL
42%
Pillsbury
13%
21%
Others(Sri Lal
Mahal, Local
Brands etc.)
48
49
wellness and health packaged foods. Organic products are thus likely to see strong
development, generally targeting affluent urban consumers. Naturally healthy products could
also see a growing emphasis on their health benefits, with basmati rice, for example, having
its low glycaemic index emphasised on the packaging.
50
51
Advances in packaging technology have not only improved the shelf life of products but
also significantly reduced the cost of packaging.
New Product Introductions by Brands
Many manufacturers/brands are creating the market by frequently introducing new products
for packaged food. Large multinational companies like Nestle have been able to do this very
successfully. The new products are customised as per the requirements of Indian consumers
and are targeted at satisfying their unmet needs.
In addition to existing brands, a number of importers are also importing a significant amount
of processed food from European and South-east Asian countries. The imported product
categories are targeted at the premium segment of the market.
Growth in Freezer Space
There has been a remarkable expansion in product categories and ranges due to considerable
growth in freezer space in modern retail formats. The retail freezer space for 2008 is
estimated to be 247,000 cu. ft. This is expected to grow to 531,000 cu. ft by 2014 at a CAGR
of 14 per cent. The frozen food segment, originally covering only frozen meats, fish and
poultry products, currently includes frozen vegetables, ready-to-eat foods also, and will grow
to US$ 2.6 billion by 2014 from US$ 1.8 billion in 2008. This growth has been fuelled by the
increasing availability of freezer space in modern retail shops.
The graph below shows the increase in freezer space corresponding to the increase in number
of stores in future. Dairy products, confectionery and ready-to-eat products have received a
robust boost in obtaining shelf space and corresponding sales due to their positioning and
supporting infrastructure.
(Sajani Mrinalini Dutta, Rohit Chadha, Rohit Bhatiani (2008). Opportunities in the Packaged
Food Market in India.www.technopak.com. 03)
52
5. ITC Case
53
The food market in India is monopolistic. In all the different categories there are several
players who offer almost the same products and at the same price, yet they are differentiating
themselves with their planned marketing strategies. It is very easy to enter this business and
this is a big benefit to ITC as they have been able to enter numerous categories in this
business.
1. Ready to eat
54
ITC diversified into the branded & packaged food segment through the introduction of a
brand named Kitchens of India. In the year 2004, it launched the brand KoI which included
spice conserves, spice and fruit conserves. The spice and fruit conserves were made jointly
with a food expert named Karen Anand.
fruit conserve was set at Rs 70 and cooking paste for Rs 30 which was a hundred grams pack
.The Aashirvaad brand introduced cooking pastes that were multipurpose and for a pack of
eighty grams it was priced Rs 10. The production of these products was outsourced to save
the operating cost to contract manufacturers.
In 2005, ITC introduced itself to the branded spices segment and in the year 2006 to the
segment of instant mix through Aashirvaad brand. The annual turnover as per April 2006, in
the segment of ready to cook and ready to eat was about Rs. 700 million and posted a growth
of twenty percent annually. In the year 2006 the ready to eat market was dominated by MTR
which had 60 percent share whereas ITC had 35percent share. 40-50% products of the KoI
brand were exported to Switzerland, Canada, The USA, Australia and the UK.
During the mid of 2006, within the KoI brand ITC decided to offer 10 more varieties within
the price of Rs 35- 98 . In the year 2007, few products were introduced in the ready-to-eat
segment such as conserves, curries, chutneys ,biryanis ( Bhori Biryani, nor Mahal )and few
new variety products from Gharana ( Keema Mutter, Paneer malai). ITC food expects to have
a market share of 50- 60% by 2008-09 after the launch of these products.
2. Confectionary
ITC at present has the brands named Candyman and Mint-o in the market. Mint o fresh
was able to secure 17 percent share in the market of cough lozenges in India whereas Perfetti
the former leader was able to achieve only 14.3% share by chloromint.
In the whole
confectionary market ITC has just 3 percent share whereas Perfetti has 37 percent or more
and offers many brands. Hence it can be seen that ITC is lagging behind.
3. Staples
55
In the year 2002 ITC introduced itself in the staples market by offering wheat flour with the
brand Aashirvaad. The Aashirvaad brand was extended to edible salt in the year 2003 by ITC.
In 2006, ITC had 40 percent share in the market of the whole packaged food industry worth
Rs 6 billion. Its biggest Competitor was Annapurna brand by HUL which had a market share
of just 18 percent. The market growth rate was 12 percent. ITC extended the Aashirvaad
brand by launching mixers, salt and ready-to-cook pastes under the Aashirvaad Umbrella. In
the organized salt market worth Rs. 4 billion (2006) ,ITC had a market share of mere 5
percent compared to the market leader , Tata salt with market share of 28 percent.
4. BISCUITS:
.The biscuit market in India is valued to be approximately worth Rs. 5000 crore. In the Indian
Biscuit industry out of the net production 60% percent is produced by the organized sector
and the rest 40% is produced by the bakeries which form a part of the unorganized sector.
SUNFEAST a premium product of ITC is helping the company to acquire a huge share in the
market. They should get 12 percent market share within the next few years.
5. Snacks
The Indian Snacks industry is valued to be of 1800 Crore Rs. and is growing at a remarkable
10% every annum. In the world the Indian snack market is the largest and is dominated by
potato chips which have a share of about 85% in the total snacks market. ITC has been able to
penetrate quickly into the market through its brand Bingo by its adaptive pricing technique
and unique promotion.
56
ITC's Mission
To improve the potential of the company in the global environment.
5.4 Design
As per the culture and structure of ITC, it can be concluded that ITCs design is roughly
based on divisional structure. The different businesses of ITC in the different industries are
autonomous units but they are all controlled by the board and corporate management
committee which is the top level. The operating and strategic decision making power is in the
hands of the divisional managers. They also have the responsibility of the performance of the
business. Support services are provided by the top management to the different divisions. The
top management behaves as an external evaluator , overseer and controller of performance.
Thus the top level is able to concentrate on the long term goals as it does not have to
concentrate on the everyday operating details.
In the December 2010 quarter the sale of Potato Chips under the brand Bingo grew by 48
percent. In the category of biscuits, Sunfeast sales increased by 28 percent in the quarter
where the product mix was improved. This was led by huge growth in the sale of valueadded varieties of creams and cookies. The key drivers of growth in the food business are
biscuits and snacks.
57
58
Blending of core competencies and leveraging ITC umbrella positives to form new
areas of growth.
Through the launch of the brand Kitchens of India ITC entered the packaged and branded
food business. ITC has been adopting a broad spectrum for entry in the staples, confectionery
and snack food segment since June 2002. Today the food business in the market can be
represented in four different categories. They are
* Snack food
* Confectionery
* Staples
* Ready-to-eat food
To guarantee the customers high standard of food hygiene and safety, it assists outsourced
manufacturers to implement hygiene standards that are world class by the certification of
HACCP. ITC has quickly gained a standing in the market in all of its six brands such as
sunfeast, Bingo, candyman, Aashirvad, Kitchens of India and mint-o because of its strong
commitment towards quality which is benchmarked internationally.
59
BUYER
POWER:-
LOW-
UNFAVOURABLE.
THREAT
OF
SUBSTITUTES
:-
HIGH-
MODERATELY
UNFAVORABLE
DEGREE
OF
RIVALRY:-
LOW
UNFAVOURABLE
Porters
Five
Forces
SUPPLIER
POWER:-
NEUTRAL
THREAT
OF
NEW
ENTRANTS:-
NEUTRAL
In case of ITC, following were the main reasons for the degree of threat from each factor :
It almost seemed packaged food had evolved over the years from its status from a bare
psychological needs in Maslows hierarchy to aesthetic needs of health and well being. The
only chant heard around was about the forces of consumerism, globalization and rising
income levels in third world countries, which would be upholding the future of this Industry
high. However it did not take long for this recent recession to shed those claims and reject
those profound theories.
The matter of fact is that packaged food Industry, particularly its consumption is as
susceptible to cyclical trends of economy as any other industry today It does not take much
for any consumer today to trim his food budget in wake of credit crunch and move to alternate
cheaper avenues like fresh foods. Hence, it becomes imperative for both, Incumbent players
and New Entrants to estimate the very forces that will be deciding the fate of this industry
over a period of next 2-3 years.
60
Following are the conclusions drawn on the basis of observations about the companys
performance and results.
Competition and rivalry - Low Unfavourable
Characteristic
Comments
Product
Differentiation
Conclusion
High
Quality
and
Convenience.
to
frequent
churning
and
fierce
and Rigorous price and process wars are waging the Unfavourable
Process War
Consolidation
delivery.
&Due
Concentration
to spate of acquisitions and expansions, the Unfavourable
industry is getting concentrated
and
consolidated.
Storage Costs & As this industry deals with highly perishable Unfavourable
Time to Market
Growth
Economies
Scale
61
important in attaining cost efficiencies. Each player
is trying to exploit the global sourcing model to
rationalize its cost and pass on the benefits to its
customers
Comments
Conclusion
Buyer
Awareness
have trimmed
Unfavourable
their expenditures dr
Product
innovation
Availability
Substitutes
do
not
pose credible
backward Favourable
backward
Integration
Buyer
Concentration
62
and only likes of Walmart, Carrefour are able to
exert any influence, retaining the threat of
retaliation.
Comments
Conclusion
Availability
Low
Concentration
Low
differentiation
Switching Costs The switching cost for the suppliers are huge as the Favourable
procurement for raw materials are done through
contracts and tender processes and are long term in
nature.
Comments
Conclusion
63
to all
Customer
Loyalty
Capital
requirements
Compliance
regulations
Asset
food companies
Favourable
are
highly speciali
Specification
Expected
retaliation
64
6.4.2 Product
65
Diversification of products:
Diversification of its products has been ITCs successful strategy. Where Bingo is considered
it introduced sixteen different flavours in comparison to Lays its biggest competitor which is
available only in four flavours. This can be seen in the biscuits and ready-to eat segment also.
A wide market could be attracted with the help of this strategy.
Market differentiation
ITC diversified in the packaged food division by introducing ready to cook products under the
KoI brand. These products are premium and the target group includes NRIs, tourists, etc. It
launched varied products in all the segments of biscuits also. For instance under the Sunfeast
product segment it launched cream biscuits with butterscotch, Orange Marie , biscuits with
chilli flakes and honey flavoured biscuits .
Maintenance of freshness and hygiene
ITC ensured that
the supply chain gave positive response and stressed on forecasting the
sales accurately with the help of MIS system through inputs from sales personnel and
distributors. The company worked on minimizing the transit time so as to assure the products
freshness by keeping the transit norms company specific. The tangible characteristics of
supply chain such as the trucks and warehouses were controlled and monitored to retain
cleanliness.
Regular introduction of new products (all products):
ITC gained a reasonable market share in a short time and thus recognized that, it was
necessary for the company to come up with new products on a regular basis to be in the
competition. Hence ITC is increasing its product range and also its distribution network. In
the wafers and biscuits segment, its launching new flavours and products on a weekly basis.
Its the same with Ready-to-eat.
Innovation (all products):
ITC changed its focus to innovation when the need and time came to launch new products.
ITC for all of its products could identify the niche or market innovatively. .
66
6.4.3 Price
Cost control strategy
ITCs main challenge when it entered the food division was to compete with the existing
players. It recognized that it will have to price the products equivalent to the competitors
price or even less so as to overcome this challenge. For this, ITC planned to use the strengths
of other businesses of the company. ITCs packaging and printing business offered cost
effective, innovative and high quality packaging. Through its e choupal initiative ITC gained
cost advantage over its rivals. This facilitated the company to procure resources to the fullest
efficiency.
ITC placed itself in the mid of the table of Porters generic strategies in order to compete with
the market leaders like Britannia and Parle.
6.4.4 Place
67
Distribution Network
The distribution network of ITC was already huge because of its tobacco business. The same
network of distribution was used by ITC for its wafers and biscuits. Through this the products
got a good launch and it also facilitated in increasing sales. At the moment ITCs Bingo and
sun feast are offered in about 1.8 million stores while Parle is offered in only 1.5 million
stores. For Kitchens of India, ITC Ltd had to just append to the already well established
network and enjoy the larger market share. ITC uses FIFO method to reduce the wastage of
goods due to expiry. They also keep the good on constant move from low sales area to high
sales area. The company collects all the expired goods four times a year, and destroys them.
Retailers must return expired or damaged products within six months after the date of expire.
Adjustment for them is done in three months time. ITC provides their retailers with racks,
hangers, etc to display the products. The benefits received by the retailers depend upon their
sales volume and also the location of their shops.
Flow Diagram
CNF
FACTORY
WHOLESALE
DEALER BASE
WHOLESALE
DISTRIBUTOR
RETAILER
6.4.5 Promotion
68
Extensive advertising
It is the difference in advertising where ITC showed a difference when compared to its
competitors. They appointed the best ambassadors and the best professionals available in the
country so that their products are renowned. The marketing campaign for minto and bingo
were award winning. They hired the most famous stars from the sports and film industry for
eg Sachin Tendulkar and Shahrukh Khan for biscuits and for mint-o fresh Rakhi Sawant was
hired. Per day, per channel on television ITC booked 10-15 spots on youth channels like Star
World and MTV, news channels and Hindi Channels like Star and Zee TV. IT advertised on
radio channels and in national dailies too. The products were even advertised through
hoardings in the top thirty cities. As per the industry analysis , the company spent somewhere
around hundred crores on marketing. These promotion activities made ITCs products known
in the market and helped in attracting consumers.
To sum up..
In the year 2003 by entering the biscuits market and introducing 3 different types of biscuits
such as cream, marie and glucose , ITC did what any new entrant would do i.e emulating and
imitating Britannia as it was the leader. Their strategy focused on producing those products
which were successful from before. ITC introduced new flavours which were never before
made once their brand was recognized in the market, which was a result of ITCs plan of
exploiting the opportunities through new products. Finally by launching Bingo in the year
2007 and with the help of the strategies mentioned above, ITC became successful in its food
business in the year 2008. At last it turned into a profitable business after the launch in the
year 2001.
69
Organizational
Rating
Remarks
Flexibility
Acquisition
of 8
resources
Planning
Productivity
efficiency
and 8
70
Availability
of 8
information
6
Stability
Here is a study of ITC Foods marketing strategy of two of its successful brands, Sunfeast
biscuits and Bingo ! snacks.
6.6 Innovation And Competitive Strategy For Designing The Marketing mix Marketing Mix Development For Sunfeast Biscuits
In Chennai , twentieth April 2004 the food division of ITC ltd announced the Sunfeast
variety of biscuits by introducing Marie, Glucose and cream biscuits. According to ITC
Chennai Branch manager Mr Sambit Satapathy sunfeast marked the entry of ITC foods in the
branded biscuit market and offering biscuits in both value added and basic segments. The
brand essence of Sunfeast, Spread the smile denotes
contentment, pleasure, happiness and satisfaction that a person would get from the biscuits.
The Sun mascot reinforces the brand imagery and positioning by expressing the gratifying
and emotional features of the product.
For launching the new recipe of biscuits, ITC did a market research. It was revealed by the
research that there were gaps in the segment which the company could use and the consumers
desired to experience new differentiated innovative products. It can be revealed that the
existing players did not come up with innovative products. There was hardly any innovation
in the biscuit industry as Marie was Marie and Glucose was still Glucose, so ITC decided to
attack on this point. In the year 2003, Six ranges of Sunfeast were launched by the company.
71
But the risk was calculated. ITC was not only stuck with the favourite categories of
biscuits like Bourbon cream, Marie and glucose but also launched innovative biscuits such as
Marie light, cream biscuits with butterscotch flavour and also Marie with orange flavour. The
Sunfeast umbrella grew by introducing Sunfeast Milky Magic in the year 2004. Lately it has
introduced the Sunfeast Golden bakes and sunfeast Snacky. ITC s annual expenditure on
marketing is estimated around Rs115-120 crores and is one among the largest spenders on
promotions and ads in the biscuits segment. Pricing model of Sunfeast Biscuit.
For initial offerings, Sunfeast Glucose Biscuits which delivered the goodness of wheat, is
available in 19 gms, 75 gms, 100 gms priced at Re 1, Rs. 3, Rs. 4 respectively, which targeted
the children from 4 years to 14 years.
Sunfeast Orange Marie offered in a differentiated way in packings of 200 gms, priced at Rs.
13,and the crispy &light Sunfeast marie Light were offered for the housewives in packings of
400 and 200 grams which were priced at RS 24 and Rs 13 respectively. Smooth and yummy
cream biscuit , Sunfeast Bourbon cream ,Sunfeast butterscotch Cream , Sunfeast orange
cream , all these biscuits are available in a packing of 100 grams and are priced at Rs 12, Rs
12, Rs 11, and Rs 11 respectively. These biscuits target the children between the age group of
4 to 14 years. ITC placed itself in the segment where it could compete with the bullies in the
market and survive with cost foucs.
After an years research and development in the products and wide spread sampling
throughout the country the food division of ITC Ltd as they are ahead in product innovation
came up with 2 new flavours Butterscotch cream and Orange Marie biscuits. These biscuits
were launched in the Indian market for the first time.
The market share of both Britannia and Parle is reducing as indicated by AC Nielson.
According to the March2006 sales audit , there is loss in the volumes of both parle and
Britannia. Britannias share dropped to 30.5 percent in may 2006 from 35.8 percent in the
years 2004-05(volumes) and parle share dropped to 38.4 percent from 42.2 percent during the
same period. The biscuit market in India is approximately around 4500-5000 crores and is
dominated by Britannia and parle.
Parle is considered as the volume leader and includes brands like Monaco, Krackjack and
parle-G whereas the value leader is Britannia and comprises of brands like Goodday, tiger,
milk bikis, 50:50 etc. but now this market has moved away from the core. ITCs sunfeast
share has increased to 6.7 percent from 2.7 percent. Where value is concerned , the market is
lead by Britannia which has 37 percent share , parle 32.3 percent and lastly ITC with
72
6.3percent. However, there is still a wide gap and hence Sunfeast has a long way to go.
Both Parle and Britannia are big players and have high volumes ,thus they can easily lower
their margins. So for sunfeast to be in the reckoning it will also have to lower its prices which
will squeeze the margin further. At present the game is not fully played but today sunfeast is
the brand which is preferred.
offerings were further differentiated by providing SKUs at Rs. 5, Rs.10 and Rs. 20
Pricing strategy
The main objective for ITC was to see through the existing competition in the market.
Hence, it launched a direct frontal attack by introducing similar priced SKUs.
ITC already enjoyed cost advantage over competitors through its initiatives. One of them was
e choupal. The timely supply of raw inputs and materials are also facilitated through this.
ITCs packaging and printing business has led to innovative, cost effective and high quality
packaging.
Promotional strategy
During the world cup the launch of Bingo was strategic to cash in on the popularity of snacks
among the cricket lovers of the country. The advertising strategy revolved around slapstick
humour and irrelevant themes to hold eyeballs, garner attention and interest, and stand out
from the clutter. Bingos advertisement was a perfect combination of innovation in
advertisement and creativity.
Per day, per channel 10-15 spots were booked by ITC, 20 spots on radio stations supported by
1000s of hoardings advertising the product. According to industry estimates, the total
advertising spend in the initial 6 months were roughly 100 crores.
While its competitor Fritolay focuses on celebrity endorsements, Bingo chose a different
route. It didnt have an ambassador!
73
As the product is aimed at the youth, digital media was heavily used. For instance, the
Bingo National Gaming Championship across 4 cities with more than 25,000 participants.
Bingeonbingo.com and Mad Angles Twister Application (Facebook) were other initiatives in
online media.
Distribution strategy
ITC already had a well-established distribution network through its cigarette and tobaccorelated offerings which were leveraged in case of Bingo. Further, the company distributed 4
lakh racks across all retailers for the benefit of displaying the brand at maximum points of
sale. Within 6 months, Bingo was available across the whole country among 2,50,000
retailers. A crucial alliance which happened with the Future group lead to all future group
retail outlets like Big Bazaar, Food Bazaar stocking just the Bingo brand. Local Betel shops,
HORECA (Hotels, Restaurants and Cafes), were used for distributing Bingos to the varied
classes of audiences.
Thus it was proved in the case of ITC Foods that innovation and competitive strategy were
responsible for the design of marketing mix.
Mar 08
Sales
Mar 06
Mar 05
Mar 04
13,947.53 12,369.30
9.790.53
7,639.45
6,470.44
Operating profit
4.403.94
3,956.41
3,327.38
2,792.56
2,360.59
Interest
4.61
3.28
11.93
42.43
24.79
Mar 07
Gross profit
74
5,010.23
4,289.62
3,601.53
2,985.94
2,560.68
EPS
8.28
7.18
5.95
8.79
6.43
The net sales of ITC increased to 13947.53 crores out of which the sales of non cigarette
business grew by 29 percent as a result of investments in the FMCG market.
2006
2007
2008
Sales (crores)
1230.54
1698.53
2526.60
The food business is growing at a rapid pace and sales grew by 35 percent in 2007. Almost
150 products are included in it. The growth in the different sectors as per product
categorization is: there was a growth of 55 percent in the biscuits sector.
In the staples category there was a growth of 52 percent , and in the confectionary segment
sales grew by 51percent.RTE sales increased by 35 percent. to maximize the companys
profit, ITC is planning to expand its RTE segment.
On the whole, ITC foods has been able to capture 10 percent of the market in the sectors
where other companies too are operating confectionery (Rs 20 billion), Salt and Aata (above
Rs 10 billion) ,biscuits (Rs 45 billion) among others. In the next year or so , ITCs strategy
will be to offer and consolidate a wide range in the present categories and thus growing those
markets. As a part of its long term strategy apart from the Rs 1.5 billlion that the company has
invested ,ITC foods has planned to invest Rs 450 crore in the coming 3 years so as to rule the
Indian Branded food market. It can be seen that ITC increased the sales every year and
penetrate in the market as a result of its successful implementation of marketing strategies
which was led by innovation and competitive outlook.
The company was able to penetrate in the market with its rising sales figures and was able to
acquire majority of the market share in the ready-to-eat and staples sector.
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ITC by entering the food sector created a huge impact on its progress. This involved a
big risk but due to the strategies it was able to mitigate it.
The different strategies ITC adopted were: they introduced six flavours in Sunfeast
which no other leading biscuit company had done and thus were able to create interest
among people and children especially.
To promote their brand they applied the strategy of celebrity endorsement and their
brand ambassador was made as Shahrukh Khan. This increased the demand as
Shahrukh Khan is famous amongst children.
The sunfeast biscuits had a different taste than the others which increased the craving
for newer taste.
ITC also launched many other famous brands like easy-to-cook products, sunfeast
pasta-treat etc.
The easy-to-cook products were well liked by the Indians due to the fast life. They
continuously innovate and create high quality new brands and products which helped
them to create customer loyalty.
Quality never comes cheap but the same quality can be provided in a reasonable price.
The products of ITC in context to quality are at par to the quality of other products in
the market as well is priced reasonably.
The fine advertisement policies carried out by them has encouraged the customers to
try their products once at least. For instance their advertisement in which a kid enters a
cream world creates excitement among children which leads to increasing sales.
ITC's tagline "Spreading the Smile" is very attractive for people. Sun' their mascot
creates a healthy and a happy feeling among the consumers seeing it.
Competition is really tough in this area be it regional, national or international. Also the cost
of labour, petrol and wheat are rising every day. The government is imposing different
restrictions which have also led to reduction in profit margins for instance there is a restriction
on the export of non vegetarian food. To make up for this, the company is working on
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reducing the cost of the biscuits by directly buying wheat in large quantity from the
farmers with the help of its e choupal initiative. The price of the staples is also reduced
following this measure. Lately where its confectionary segment is concerned, its planning to
launch a brand of chocolates in association to an American Firm. Lastly After analysing it
can be said that food sector is the toughest to compete in as big companies are present
already.
77
78
79
The government of India is doing its best to encourage the processing sector by
introducing various schemes, subsidies, trade liberations, tax deductions etc. It has
also made efforts to bring in new technologies to India by using its international
contacts, set up R&D labs, centers and industrial training facilities.
The main reasons for consumer shift towards processed and Ready To Eat foods is
because:
Taste, Quality, and Flavour remains fresh till the expiry date.
The increasing number of working bachelors who stay away from their homes.
80
Less expensive as compared to the availability of Indian cuisine in the foreign
country restaurants.
The consumers came to know about RTE packs from Television Ads and display at
malls and the word of mouth was virtually very less. This proves that two promotion
methodologies were very effective. The third and the most important as far is food
products are concerned with word of mouth. Marketers can work on it only happen if
the consumers are satisfied with their experience and will they give a positive word of
mouth feedback to their relatives and friends. This is the most effective form of
communication when it comes to something edible as Indian consumers tend to trust
people who have already sued it rather than advertisement.
8.2 Recommendations
They have a perception that these RTE meals are not manufactured under good
conditions. Secondly, they also feel that Ready to eat meals is not good for health.
Hence marketers have to touch upon this point. The advertising, communication and
promotion should revolve around this point. Packaged foods are relatively new to
India hence proper awareness have to be created by companies.
The ready to Eat marketers should bank upon its strengths i.e. time saving, effort
saving and easily available option. The promotion, Packaging should revolve around
these characteristics as we all know in the traditional Indian urban family time is less.
People crave to spend time with their family after hard day at work. However, various
limitations like cooking food etc hamper this. RTE should consider this as their
positioning strategy.
The pricing strategy should be designed in such a way so as to be competent with the
restaurants rate. People do not mind spending more if it saves time. However they will
spend only a reasonable hike in price. If there is a lot of difference between the
restaurant price and RTE price they would go for the former.
81
Aggressive marketing and product development activities undertaken by the
processed foods players. This collaborative learning from each other and collectives
successes and failures enhances the viability and growth of the industry as a whole.
Any Organization works in an organizational manner. A proper combination of coordination amongst the different functions of the business will certainly enhance the
performance of the organization.
The need of the hour is aggressive marketing. With the rising competition, new and
innovative ways of marketing products aggressively should be used.
The competition is intense in the market, so for gaining the preference, the company
should add some value. CSR and customer service are examples of doing it.
82
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