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2006_jul_sep_121_127

2006_jul_sep_121_127

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M
r Shivram Bhat, Vice President (Marketing) and Mr Pradeep Menon, DGM(Marketing and Information System) were discussing the overall perform-ance of their company—Kurlon Ltd.—as the financial year, 2002-2003,drew to a close. They were trying to figure out whether the drop in sales was dueto the flaws in product design in terms of features and benefits offered to customers,changes in positioning strategy, low differentiation in the brand portfolio, ineffectiveadvertising and promotion strategy, wrong costing, and pricing structure, or dueto poorly motivated dealers. Their discussions were inconclusive as they realizedthat the time was too short for elaborate discussions and the issues on hand wereso large that they required the participation of more members of the senior man-agement team.According to Pradeep, “We need to do something innovative to once againaccelerate our pace of growth. May be we were never used to a decline in our marketshare and, hence, we have all become very complacent over the last few years. Itis not difficult to get back again on our usual growth path. But, for that, I feel, theintervention has to be done much more professionally.”Therefore, it was decided to convene a meeting of all the DGMs in Bangaloreto chalk out a strategy for growth.
KURLON LTD. : A PROFILE
Karnataka Consumer Products Ltd. (KCPL) was established in 1962 with the intentionof manufacturing accessory products for the purpose of relaxing and sleeping. KCPLwanted to establish itself as a reputed player in the comfort industry. The companyhad made a modest start by manufacturing cushion seats and bare blocks made of polyurethane foam for the automobile sector. The factory was set up in one of themain industrial estates of Mysore. It introduced the concept of rubberized coir andcushioning material using the know-how from Austria and raw materials availablelocally. While KCPL is headquartered in Mysore, its marketing division is locatedin Bangalore.In the year 1965, KCPL introduced, for the first time in the country, the conceptof rubberized coir mattress under the brand name, ‘Kurlon.’ It seemed the marketwas not yet ready for such an innovative product as the sales were found to be sluggish
Kurlon Ltd.
Simon George
describes a real-life situationfaced, a decision or actiontaken by an individualmanager or by anorganization at the strategic,functional or operationallevels
KEY WORDSBrand EquityProduct ModificationBrand PortfolioDecisionsProduct CostingBrand Positioning
MANAGEMENTCASE
VIKALPA • VOLUME 31 • NO 3 • JULY - SEPTEMBER 2006
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in the initial years. But, the company compensatedthrough brisker sales of its other products like cushionseats and bare blocks. During those days, the company’s business came largely from supplying bare blocks of rubberized coir to the furnishing and automobile manu-facturers who could finish the products according totheir requirements. For nearly two decades, KCPL movedon contently supplying bare blocks of rubberized cush-ioning material to the industrial buyers like PremierAutomobiles, Mahindra and Mahindra, and Nissan. Italso started supplying the rubberized coir mattress blocksto other mattress manufacturers who slowly startedaccepting the concept of rubberized mattress which wasradically different from the traditional cotton mattress.In 1983, the company decided to revive the manu-facturing of its own range of finished rubberized coirmattress for the end user. By 1985, the company had thecapacity to produce 800 tonnes of rubberized coir outof which 60 per cent was being sold as bare blocks andthe rest as finished mattresses. But, in 1987, the companystopped its line of bare blocks business and concentratedmainly on finished mattresses. In the 90s, KCPL addedpillows, bolsters, and cushion seats to its product port-folio. The company’s entire product portfolio consistedof mattresses, pillows, towels, doormats, and bedsheetsunder the Kurlon brand name . Rubberized coir mattresscontributed to 92 per cent of its sales. In 1995, the companychanged its name from Karnataka Consumer ProductsLtd. to Kurlon Ltd.
Company Performance
Kurlon Ltd. is a public limited company promoted byone of the highly successful entrepreneurs in South India.It is managed by a group of well-qualified professionalmanagers. Over the years, it has become a leader in theIndian comfort mattress industry. In 2001-2002, thecompany had a sales of Rs. 1,174.0 million with a profit before tax (PBT) of Rs. 44.0 million (Table 1). But, forthe year 2002-2003, with the report of a drastic drop insales and profitability, the company had chalked out asales of Rs.1,172.50 million with a PBT of Rs. 10.2 million.Kurlon also exported its products to West Asia,Singapore, Australia, Middle East, Sri Lanka, Maldives,etc. Even though there were complaints from some of the countries regarding the product, the export sales had been reasonably satisfactory contributing to 10 per centof its total mattress sales. The company realized that itssales in some of these countries were getting saturatedas customers in these countries were developing a strongpreference for full foam or spring-based mattresses. Thecompany’s profit and loss account for the years 2001 and2002 is shown in Table 2.
Product Details
Rubberized coir mattress was an evolution from thetraditional cotton mattress. Kurlon mattress was madeof millions of coir fibres bonded with latex and com-pressed to form rubberized coir block. A reinforced high-density centre part supported extra body weight andprevented sagging while a person rested or slept on it.
Table 1:
 
Sales Performance of the Company (1987-2002)
YearSales (Rs. million)
1987-8882.661988-89122.211989-90168.551990-91210.151991-92278.191992-93361.271993-94483.791994-95735.651995-961,009.241996-971,095.721997-981,130.021998-991,162.841999-20001,162.502000-011,132.852001-021,174.05
Table 2: Profit and Loss Account for 2001 and 2002
(Rs. Million)31-03-200231-03-2001
Income
Sales1,165.681,126.38Other income8.316.47
Total1,174.001,132.85Expenditure
Cost of sales including selling and administrative expenses 
Raw materials549.26533.05Manufacturing expenses61.9946.17Wages and salaries39.2837.39Transport and freight102.0599.03Commission on sales82.5475.31Sales promotion13.3619.49Advertising40.9743.20Other expenses165.96196.17
Total1055.451049.83
Bank and other interest49.0755.87Depreciation22.8922.36
Total1,127.421,128.07
Prior year item(-)2.586.84
PBT44.0011.63
Less: Provision for tax10.501.30
Profit after tax33.5010.33
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KURLON LTD.
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When a person sleeps on a soft mattress, the spine tendsto curve due to lack of support. Hence, the muscles atthe back try to pull the spine back to its original positionthroughout the night causing backache over a period of time. Some of the good quality mattresses have a densityof only 30 kg/M3 whereas the most common ones soldin the market have a density of 18kg/M3. The rubberizedcoir mattresses made by Kurlon have an average densityof 80 kg/M3 while orthopeadic mattresses have a den-sity of 100 kg/M3.The design structure of Kurlon mattress allowedfree circulation of air and prevented heat from buildingup between the mattress and the cot. A layer of foamwas laid over the rubberized coir block to provideadequate cushioning for the mattress. A wide variety of machine-sewn tapestry gave the final touch to themattress.
Manufacturing Process
The basic raw materials used for the manufacture of Kurlon’s rubberized coir mattresses were coir obtainedfrom coconut husk, liquid rubber/latex, and foam. Thehusk which was obtained after removing the coconutfrom the shell was passed through rollers and crushedso that cracks would be formed in the husk. The crackedhusk was soaked in water for the fibre to become soft.The husk was then passed through spiked rollers whichtore the fibre loose. The loose fibres were then made intoropes and kept in a curled form for two or three months.This stage of processing was done outside the factoryat various other sites. In the factory, the ropes wereunwound so that each fibre was in the form of a spring.This coir spring had resilience and formed the basicstructure of the mattress. The coir was pushed into aconveyor and sprayed with liquid rubber known as latex(obtained from the rubber tree by tapping). Latex wasmixed with chemicals like stabilizers, accelerators, etc., before spraying on the coir. The rubber sprayed on thefibre helped in binding the coir fibre together resultingin continuous sheets of rubberized coir which were cutto the required size. A rubberized coir pad was formed by laminating five to six fleeces of coir and latex togetherwhich was put in a hydraulic press and pressed to therequired thickness. This rubberized coir pad was thenvulcanized to form the mattress. It was the hydraulicpressing and vulcanization stage in manufacturing whichgave the required density and thickness to the mattress.The vulcanized pad was then trimmed to the correct size.Kurlon added two thinner layers of PU foam on the twosides of the rubberized coir blocks for creating softness.This was then covered with cloth to form a mattress.
Product Varieties
Though Kurlon manufactured rubberized coir mattress-es only, the mattresses available in the market could beclassified under the following four categories based onthe raw materials used:Natural: rubberized coir, cottonSynthetic: Full PU foamSpring mattress: Foam and steel springsLatex rubber mattressThe most popular varieties of mattresses in Indiaare that of cotton, rubberized coir, and foam which differin density, freshness, comfort, strength, and shape re-tention. Cotton mattresses, widely used in rural India,have a market share of about 70 per cent. In many foreigncountries, mattresses are reinforced with springs in thecentre to support the extra weight of a man’s body.Three years ago, Kurlon decided to have springreinforcements for its mattresses and identified a foreigncollaborator for the purpose. However, the project hadto be shelved for some time. Full foam mattresses arealso popular in many foreign countries. The demand forgood quality foam mattresses is picking up in the coun-try especially in the metropolitan cities. Foam mattressesare very light and washable and are cheaper than rub- berized coir. A comparison of the various categories of mattresses is given in Table 3.
Brand Portfolio
Kurlon produced PU foam (which occupies 10-20% of the volume of rubberized coir mattress) which was usedfor packing the two sides of the coir blocks inside themattress. In fact, the company has the technology, pro-cess, and manpower to produce PU foam for making afull-fledged PU foam mattress and was actively consi-
Table 3:
 
Comparison of Product Categories
Mattress TypeAdvantagesDisadvantages
PU foamSoft, very light,Hot, expensive,foldabletendency to sagLatex rubberNot as soft as foam,ExpensivecomfortableSpring mattressNo sagging, long life,Very expensive,supports the backcould get noisyas the mattress agesRubberized coirFirm, reasonablyTendency to sag,pricednot foldableCotton mattressCheap, foldable, anyForms lumps andsize possiblehence not uniform
VIKALPA • VOLUME 31 • NO 3 • JULY - SEPTEMBER 2006
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