India Heterogeneity:

g y The Product
Customization Challenge
 PepsiCo - A Global Powerhouse

In our field of p
play…
y … And on the FMCG landscape
p
 A Portfolio Promise Of Refreshment,
F
Fun &NNutrition
t iti

A spectrum of beverages delivering fun and refreshment Snacks offering plenty of good food and 'good fun'

Dairy

Tropicana, the best of fruit The Quaker range of healthy food choices

Re-hydration and sports nutrition expertise

A Culture Of Excellence That Builds Powerful
T d
Trademarks,
k While
Whil Incubating
I b ti Innovation
I ti
 PepsiCo India: A Force To Reckon With

9 # 3 FMCG Business
9 #1 F&B Business

# Basis overall system turnover

Powered By A Portfolio Addressing A Range Of
Beverage And Snack Needs
Beverage Need States Snack Need States

Refresh Refresh
Hydration Enjoyment Sustenance Enjoyment

Health Indulgence Health Indulgence

Nourishment Transformation Nourishment Enhancement

Energy
Energy
Driven By
y Muscular,, Consumer-
Consumer-Preferred Brands
 Our Key Enablers

Intuitive,
Entrepreneurial
p Robust GTM
Insight driven
Insight-driven
Culture Systems
Marketing

Communication Operational
Prowess E
Excellence
ll

5Th Best Marketing Team

2009: Brand Equity

• Empowered • 14,800 routes

Culture
• Reach > 1MM O/Ls
• Drive for Results
• Weekly frequency
• Values Oriented
• Leaders in Modern
Best PepsiCo Intl Beverage
• Visionary Trade
Marketing Team 2009
Another Key Enabler: Agile Response To A Changing
M
Macro Environment
E i t And
A d Business
B i Dynamic
D i
FROM TO
FROM FROM
Talking Only
Addressing
To
Cohorts
Teens

Fun And Refreshment Range Of Need-States

Equity + Need-
Short Term,
state Based,
Equity Driving
Value
l
Innovation
Only Accretive
Innovation
 Our Building
g Blocks

1 RELEVANCE 2 INNOVATION

How our brands integrate into How we craft our portfolio

consumers’ lives… to be…

… Resonant with their values, … Aligned with consumers’

attitudes, lifestyle beverage and food need-states

… Reflective of their physical … Appropriate for the occasions

and emotional needs, today they consume us in
and tomorrow
… Cognizant of their concerns on
… Integrated into their daily Value, Health &Wellness,
rituals Affordability
Our Most Iconic Brands and Enduring Growth
Stories Have Been Built On These Pillars Of
Relevance & Innovation
Communication Relevance
P
Pepsi
i The
Th VVoice
i Of Youth
Y th
 The secret to Pepsi’s continuing relevance?
No holy cows…
cows

…Not Cricket – …Neither Celebrities … Not even

India’s Religion – India’s demigods the product

Commemorative My Pepsi
flavors My Can

PepsiCo
global
formulation
adapted for
AP palate
preference
 Flavor Relevance
Converting Consumer Franchise Into Brand
Evangelists

The Magic and Emotions Of Cracking Indian

Growing the Tribe
Bollywood in a Bag street
t t - snack
k codes
d

Indian flavors are 30% of mix

 Occasion Relevance
Anchoring
h i Tropicana
i iin our consumer’
consumer’s lives
li

Occasion Based Marketing Product Innovation

Anchor Tropicana in the • The Indian habit of

breakfast occasion,, rooted Street Fruit Juice is
in product functionality well developed

• “Mixed Fruit” one

of the most p
popular
p
flavors

• Tropicana Mixed
Fruit Juice
developed
exclusively for India

• Portfolio Mix: 25%

 Driving Relevance Via Subverting an
Existing
g Habit
Kurkure - The Code
Code--Breaking Indian Snack

Kurkure has always driven relevance by breaking existing codes

Brand role: Innovation pipeline

“Transformation Catalyst”
Leveraging regional
“The Great Indian palate preferences
Family” and “Tea-time”
are two enduring themes
– challenged and
reinvented by Kurkure

Product as hero
Product sensorials deliver a unique and wicked
twist on familiar Indian Namkeen codes.
The Namkeen experience
experience, but as a delicious,
delicious
twisted finger snack
Ingredient As Relevance Driver
Mood
M d Ko
K do
d Lemon
L K
Ka Lift!
Cultural Significance of
Lemon

• Zesty, yet cooling

• Sharp sensorials
transform a bland
experience
• Catalyst and Problem
Solver

Values it transfers to
Brand 7 UP
• Mitigates category
barriers of
“Artificiality”
• Differentiates 7 Up in
a “Clear/Water-like
category
 Relevance Via Cultural Codes

Baked crackers with an Indian heart

Culturally Relevant Locally Relevant

Ingredients Stimulating Flavors

The Indian preference for Chai and “Chatpata”

 Globally Too, PepsiCo Is Driving Greater
C
Consumer T
Traction
ti Via
Vi Local
L l Relevance
R l
Evoking food codes, memories and Rediscovering the Re-framing existing
emotional benefits anchored in local best of tradition snacking rituals
food rituals
Mexico Thailand
Europe

Russia Poland z Natural ingredients

z Made 100% with olive oil
 Case Study Issue – Executive Summary

• Category Trends: Fundamentals are robust, huge headroom for growth.

As the
h PepsiCo
i portfolio
f li off ffoods
d and
dbbeverages evolves,
l the
h kkey consumer
cohort will continue to be “Youth”. Two other cohorts will assume increased
significance: “Women”, and “Base of Pyramid” consumers

• Consumer Trends: Buoyed

y by
y strong
g macros,, the Indian consumer’s
aspirations, interests and symbols of upward mobility are converging at a
national level

• We are also witnessing a celebration of regionalism

• F &B Trends: Experimentation, convenience, wellness, rise of regional

cuisine, renewed belief in traditional ingredients, value-seeking, strengthening
franchise of regional brands

• Outlook:
• Affordability”, “Access” and “Relevance” will be key drivers

• “Local relevance” is a potent growth lever…can unlock consumer demand,

particularly
i l l if it
i also
l hits
hi the
h sweet spot on Affordability
Aff d bili
 ‘4th Largest Economy In PPP ’

12.3 • By 2032 India will be among the

three largest markets in the
world – Bric Report Goldman Sachs
PP) US $ Trilllion

8.1

• India is amongg the three most

GDP (PP

4.1 attractive FDI destinations in the

3.6
world – AT Kearney
2.5

US China Japan India Germany

• India has among the highest
returns on foreign investment –
US Department of commerce

Source: World Bank, 2007

 Key Drivers of Consumer Change
Ideas that have Ideas that will Ideas to
arrived progress Anticipate

Affluence / Education Higher

Economy / Acceptance to
Globalization
Technology

Demographic Urbanization Environment –

Dividend Growing concern
on Ecology

Technology Infrastructure Culture / Media

/ Politics
The Indian Consumer Is Coming
g Of Age
g

• Leapfrogging technology and becoming more global

in his aspirations

• The emergence of a consumer who expects a

resolution of all contradictions -

• Taste v/s Health,

• Value v/s Premium experiences

• Convenience v/s Cost

• The convergence of desires, aspirations across

demographic divides
 Youth And Women Are Key Consumer Cohorts Of the
Future and Their Physiological
y g and Emotional Needs Will
Guide Business Strategy For Many Categories

Segment size: 302 mn ( U+R); 43 mn ( SEC ABC)

Youth
Between ’03 and ’50, India will add 250 mn to its labour pool @ 14 mn/year.
By 2020, 78 mn Indians or 61% of India will be < 35 years

130 mn (Urban); 80 mn ( Literate women)

Women 107 mn ( Working women)
Working women are expected to be 20% of the workforce by 2020

Source: Segment size numbers - IRS Round 2, ‘09

 302 Mn Youth In India

98 Mn youth in Urban India

145 Mn married youth

23 Mn metros, 75 mn non-metros
62 Mn college educated youth

43 Mn in Sec ABC,31 mn ABC non-metros 128 Mn working youth

73 Mn youth students

Source: IRS Round 2, ‘09

Indian Youth: Breathe Globalization, Live Technology,
Grapple With Unlimited Choices
Dream- Family as
Self-obsessed, Chasers, Risk anchor, and
materialistic, but takers Friends as
looking for a Family
cause

Challenging the
mainstream, but
Staying ahead on
high need to
the style curve is
belong
very
y important
p

Money is the
Technology is barometer of
the great success; Real joy
enabler Hunger to expand lies in spending
horizons; fear of
being
g left behind

This is broadly true both of Metro Youth, as well as Youth in Non-Metros

The Urban Indian Woman Is Evolving On All Developmental
Metrics – Education,
Education Employment
Employment, Social Development
 Across Demographic Segments, The Indian Woman
E hibit Core
Exhibits C Traits
T it

Increasing Family comes

fi st
first Conflict
concerns about between self
Health, tho’ little and role of
action caregiver

Increasing need
Very Focused to celebrate
about
b seeking
ki i di id lit
individuality,
value sexuality

Defers
Gratification, Stressed by the
Looking for challenge on
guilty about self- Convenience,
indulgence Multitasking
but couched in
rationality
 Additionally, Base Of Pyramid Consumers Are Beginning To
R fl
Reflect Consumption
C i Patterns
P Similar
Si il To
T Those
Th At
A The
Th Top
T

All India
56% of the fmcg spends
spends* from BoP
SEC A, B, C, **Avg. Spend in
Top of % Contr. of
SEC R1, R2 Spends Rs/HH/Yr
Pyramid
(ToP) 36% ToP 44% Rs.7861

BoP 56% Rs. 5577

(Urban 24%,
Rural 32%)

Base of
SEC D, E,
Pyramid
(BoP)
( o ) SEC R3,
64% R4, R5 With very similar
i il fmcg
f spending
di patterns
tt

Urban 15%
18% 18% 19% 19% 17% 18%
Rural 48%
12% 13% 11% 12% Personal Care
14% 15%

Home care

Food &
140 MN HHs/ 700 MN 70% 68%
67% 66% 72% 70% Beverages
individuals

2008 2009 2008 2009 2008 2009

All ToP BoP

* 22 fmcg categories considered
Source: IMRB HH Panel
 Demographic distinctions (Metro v/s Non Metro, SEC) are
becoming less relevant today, as motivations, interests, symbols of
success become more congruent

SID’S
WORLD BUNTY’S
WORLD
Yet, The Indian Consumer Has A Gemini Soul…

Western Aspiration Indian Soul

T lki
Talking H
Health
lth W lki
Walking Indulgence
I d l

Splurge Save

Regional
National
Pride
Identity

Pizza Tadka Maar Ke

Unified As We Are, By A Singular National Identity
A dC
And Convergentt Aspirations…
A i ti
…Our “Regional” roots exert strong influence, particularly
on issues we’re
we re emotional about, like

1 Festivals 2 Rituals 3 Family

 … And Food

4 Food

Driven as much by our taste buds, as by our cache of childhood memories

 Consumer Attitudes Towards F&B Are
I
Increasingly
i l B Being
i Driven
D i B Four
By F Factors
F t

1 2
F i
Fusion Functional
Indulgence Experimentation
Experience Natural
Health Obesit
R i
Regional l y
Lifestyle
cuisine Exclusivity
Women’s Wellness
nutrition Sustaine
Convenie d energy
3 nce
Provenance Snacky-
Grow-it- Meals
Organic
yyourself
Sustainability 4
Downsizing
Tradition’s Slow food
B Brands
treasure
Therapeutic Small Value
chest Packs
Nutrition
 For The Purpose Of This Case, We Will
F
Focus On
O These
Th Two
T
1
F i
Fusion Functional
Indulgence Experimentation
Experience Natural
Health Obesit
R i
Regional l y
Lifestyle
cuisine Exclusivity
Women’s Wellness
nutrition Sustaine
Convenie d energy
nce
Provenance Snacky-
Grow-it- Meals
Organic
yyourself
Sustainability 4
Downsizing
Tradition’s Slow food
B Brands
treasure
Therapeutic Small Value
chest Packs
Nutrition
 Lets First Talk About The Experiential Aspect
Of Food
F d

1
F i
Fusion Functional
Indulgence Experimentation
Experience Natural
Health Obesit
R i
Regional l y
Lifestyle
cuisine Exclusivity
Women’s Wellness
nutrition Sustaine
Convenie d energy
nce
Provenance Snacky-
Grow-it- Meals
Organic
yyourself
Sustainability
Downsizing
Tradition’s Slow food
B Brands
treasure
Therapeutic Small Value
chest Packs
Nutrition
Indulgence, Exclusivity, Convenience Are Big Trends
 So Is Regional Cuisine

Regional - The New National

A resurgence of regional pride.

A desire to go back to one’s
p
roots and also experiment with
our regional flavors and foods.
 Key Drivers

In Calcutta, Andhra Food is big, Chennai is

Rise in domestic tourism, eating experiencing a growth in Kerala cuisine and the
out South Indian Dosa is now considered India’s
national dish

Increasing Experimentation
with tastes, textures, flavors

Stress, lifestyle-related diseases

triggering a return to ingredient
logic, the do-good value of the
food we grew up with

The quest for Natural, Fresh,

Authentic
 A culinary osmosis between regions is tingling many palates.
Our broadband dining category of Mughlai and Madrasi is fast blurring.
blurring
Today, more than ever, there's a steaming exchange of cuisines
criss-crossing state borders, and foodies are savouring the barter.
- Outlook India

A mouthful of India http://www.outlookindia.com/printarticle.aspx?229806

Bharat ke Bhoj http://www.outlookindia.com/article.aspx?263519
 Regional Fusion

The desire
to experiment and be
adventurous.

The desire to hold on to or rediscover our

regional cuisine.

The end result: A melting pot of ingredients,

flavors, textures and a possible
reinvention of what is ‘our’
our food.
India Is A Culinary Smorgasbord
 Zone wise broad differences…
differences…

North : Ostentatious East : Hypchondriacal

yp
Taste Palate: Wheat, Lentils Taste Palate: Rice, Potato, Lentil
Food Flavours: Spicy,Masala Food Flavours: Chilly, Mustard, Poppy
Snacks :Light crispy, Multi Texture Snacks :Crispy, Soft fillings
Beverages Consumed: Thick Milk,
Milk Beverages Consumed: Thin
Thin, Bitter
Bitter-Sweet
Sweet,
Sweet& Sour 30%* Salty

Fav Beverages: Tea, Sherbets, Lassi. Fav Beverages: Leaf/Black tea, Sugarcane

24%*
23%*
West : Egalitarian South : Strong Sensorials
Taste Palate: Rice, Lentils
Taste Palate: Wheat, Rice,Gram Meal
Food Flavours: Coconut, Curry leaves
Food Flavours: Tomato, Sweet&Spice
Snacks: Thin crust, Dual Texture Snacks : Hard Crunchy

g Consumed: Thick & Thin,,

Beverage Beverages Consumed: Thin, Bitter-
23%*
23% Sweet Sour
Sweet,
Sweet & Spicy
Fav Beverages: Rasam, Dust tea, Filter
Fav Beverages: Milkshakes, Aamras, coffee,Coconut water
Sugarcane
* % Of India Population
Much of the experimentation with food is an urban phenomenon.
While some degree of the the “eating
eating out”
out culture”
culture is percolating
down to lower town classes, their food habits tend to be a lot
more entrenched, and affinity with traditional food habits is even
higher eg Lassi in Punjab or Kokum Juice in Maharashtra
higher…eg Maharashtra.
 Second, The Indian Consumer’
Consumer’s Traditional
V l
Value O
Orientation
i t ti Has
H Sharpened
Sh d

F i
Fusion Functional
Indulgence Experimentation
Experience Natural
Health Obesit
R i
Regional l y
Lifestyle
cuisine Exclusivity
Women’s Wellness
nutrition Sustaine
Convenie d energy
nce
Provenance Snacky-
Grow-it- Meals
Organic
yyourself
Sustainability 4
Downsizing
Tradition’s Slow food B Brands
treasure
Therapeutic Regional Small Value
chest Packs
Nutrition players
Trial Packs, Value, Wallet
Wallet--Friendly Are Key Trends

Private Labels

Kitkat single finger

McDonald’s menu offering has

become more “value-meals” heavy
2 rupaye mein 2 laddoo!

Trial packs retailed as singles

LUPs – low unit packs

 Regional Players Have Driven Salience Via Local Market
U d
Understanding
t di andd Geographic
G hi Focus
F

• Non-food
Non food categories mostly
dominated by strong national
brands.

• Within Food category, regional

brands far more salient:
e g In the cooking medium
e.g.
segment, there are strong national
brands like Fortune, Dhara,
Sundrop or Dalda. However strong
regional brands too:
TN - Gold Winner; Gujarat -
Tirupati; Maharashtra - Star.

Source: AC Nielsen Data, 2007

The Retail Landscape Remains Highly Fragmented;
Organized Retail At Only 5%, Though Projected To
Grow To 3 Times Current Size By 2014

A predominantly Traditional retail landscape provides

leverage for operating models of regional players
 Regional Players - Some Success Factors

Conversion of
Unbranded to
Branded

Regional
Relevance

Affordability
& the Value
Proposition
p
 Value Is Driving
g Penetration and Growth

Absolute Value Price Points

Price Entry price

points
Rs. 1 2 8 10 15 20

Rs.2 Rs.5
Rs.3
Rs.5

Rs 5
Rs.5

For the value

value-conscious
conscious Indian consumer,
consumer Value will always remain a big driver
driver. According to a Sept
’09 Datamonitor survey on “Impact of the Global Crisis on Consumer Attitudes and Behavior in India”
69% of respondents based their decision for food and beverages on the basis of value or cost.
 “Value
Value”” continues to g
grow … and is here to stay
y

Progression of Value market Value play is a reality

Contribution of Value Player to Western Salty (Rs) Contribution of Value Player to Categories (Rs)

41%
27%
23%
19% 23%
14% 15%
12%

Toothpaste Toilet Soaps Cream Bisc

'06 '07 '08 '09F '10F Colgate

C l t vs Premium
P i vs Britannia
B it i vs
Anchor Others Parle

Price 1.7 1.4 1.4

‘Small Pack’ Transactions–
Transactions– 95% vs 65% PI Index
Yrs In +12
12 +25
25 +12
12
Market

Source: Nielsen Retail Audit

Today Value Is A Significant Mix Of FMCG
Business & Is Projected To Grow

% of Revenue from Value portfolio

Biscuits Detergent
g Soaps
p Tea Salty Bev.
S k
Snacks
 The Lower SEC Business Opportunity
pp y
Lower SEC Opportunity Aspiring for “More”
“India Shining” has changed their
B Brands driving conversions
li
lives and
d aspirations
i ti
on the back of ‘value”
From To

% Volume share gain from

Unbranded to Branded

A
Brands
Si ifi
Significant
t Spends
S d on Aspiration
A i ti
32%
SEC SEC SEC SEC
68% Total A B C D/E
B Brands % % % % %

25.
25
Groceries 28.7 21.8 6 28.0 35.0
Medical 4.3 3.7 3.9 4.4 4.7
Unbranded Grooming 3.9 3.2 3.1 3.2 5.3
Investmen
ts/
Savings 8.6 11.1 9.4 8.9 6.4
Source: HH Panel Branded Shift( 08/06), SEC
D/E, 6 Metros
 For BoP Consumers, Large Size Aspirations Are Being
Accommodated In Small Pack Sizes

Growing Spends On FMCG brands Increasing move towards Premium brands

ToP BoP Non Premium Premium
SKIN CARE 25 37 Growth in Growth in
SHAMPOOS 21 30
GLUCOSE POWDERS 16 30 Avg Spends Avg Spends
LRBs 31 28 DETERGENT CAKES / WASHIN -2 66
DISH WASH 28 24
TOILET SOAPS 15 20 TOILET SOAPS 8 4
DETERGENTS/W.SOAP 20 20
COFFEE 7 19 ORAL CARE 1 3
WASHING POWDERS
TALCS
28
4
18
14
COFFEE -5 7
COOKING MEDIA 1 10 NOODLES -19 15
ORAL CARE 4 10
TOILET/BATHROOM C 2 6 TEA 0 3
MILK FOOD DRINKS 7 5
INSECTICIDES -1 4
HAIR OILS -1 8
JAMS
TEA
-4
1
4
3
SALT -7 5
However, Pack Size and Price Critical
% value
Small pack growth
penetration (small
packs)
DETERGENT CAKES/ WASH 30.8 11
TOILET SOAPS 67.0 12
SHAMPOOS 84.0 9
ORAL CARE 28 2
28.2 10
COFFEE 12.4 5
BLUES/ WHITENERS 17.1 30
TEA 27.9 15
DISH WASH 23.1 40
Source: IMRB HH Panel HAIR OILS 15.4 7
The Implications For PepsiCo
Given The Relatively Lower levels Of Penetration,
O
Our C
Categories
t i H
Have HHuge H
Headroom
d F
For Growth
G th

However,
H overcoming
i these
th category
t barriers
b i will
ill be
b
key to accelerating growth

¾ Affordability
¾ Access
¾ Relevance
Regional Relevance Could Be A Key Enabler

• For food and beverage brands where taste and flavors

are key, regional relevance not only recruits new
consumers, but also gives brands a chance to innovate and
connect.

• However, the key to profitably sustaining a regionally-

relevant proposition, is a fundamental change in the
operating business model.

• All elements of the value chain must be re-engineered to

deliver a consumer-relevant proposition that balances local
relevance
l with
ith a sound
d value
l proposition.
iti
Regional Relevance Could Be A Key Enabler ( contd.)

Truly
y unlocking
g Local relevance will mean

• Going beyond “flavor-based” innovation

• Leveraging the flavors

flavors, textures
textures, formats
formats, food
codes and rituals unique to each region
 Your Challenge

Drive
D i greater
t regional
i l leverage
l for
f
PepsiCo’s portfolio of Foods and Beverages
by
y recommending g a locally
y relevant p
product
proposition that delivers business growth
 Your Playing Field
UTTAR PRADESH WEST BENGAL ANDHRA PRADESH

TAMIL NADU

MAHARASHTRA
 Your Tools

Undertake a deep dive on your chosen state.

• Macro and socio-economic trends, penetration trends across categories
• Consumer outlook, lifestyle and attitudes.

Shadow a successful example of local relevance

• For your chosen state, track the business strategy of any brand that
has successfully leveraged local relevance
• Illustrate
ll their
h i building
b ildi bl
blocks
k off success

Category and Consumer Understanding

• Study PepsiCo’s Make-Sell-Deliver model - Foods/Beverages ( Appendix A)
• Undertake your secondary research on the foods and beverages category
• Esomar paper on discriminating values of the 4 regions ( Appendix B)
 Your Deliverable

Craft
C ft a business
b i model
d l for
f a packaged
k d
food OR beverage product that delivers a
sustainable ggrowth opportunity
pp y via local
relevance and differentiation
 Your Output Must Encompass

• Macro Environment, Industry Trends, Relevant Consumer

Energies with respect to the State of your choice

• Product Strategy – Overview, Segmentation, Targeting,

Packaging, Core Proposition, Potential Brand Positioning

• Size
Si off Prize
P i

• Competitive Overview – Competitive landscape, Source of

competitive advantage

• Go To Market: S&D Overview, Channel Strategy

• Financials: Pricing Strategy, Cost Structure, Revenue Streams

Thank You
Reference Material
 Appendix A
The PepsiCo Make
Make--Sell
Sell--Deliver Model
Advantaged
g Operating
p g Systems
y

Strong Supply Chain Network

• 45 plants across India

• 16 Company owned; 29 franchise

• Varied manufacturing platforms

• Coldfill, hotfill, hybrid, asceptic, ambient

• PC, random & schaff extrusion, baked RBS

• Pioneers in contract farming

• 10,000
10 000 farmers

• Seeds to storage
Franchise owned
• Mini tuber facility
Company
C owned
d
• Oats, corn & juices
 Beverages
Make--Sell
Make Sell--Deliver
 The
e Business
us ess

Pepsi makes and

supplies
pp concentrate

Company Owned Franchise Owned

Bottling Operation Bottling Operation

J
Pepsi V Local Bottler
makes,
k sells,
ll & makes,
k sells,
ll &
delivers product delivers product
Pepsi & Partner
make, sell, &
deliver product
 Supply Chain Master Flowchart

WAREHOUSING,
RAW MATERIALS PRODUCTION DISTRIBUTION
DISTRIBUTION,
AND RETAIL

Concentrate Supply Chain Planning Product Freshness

Packaging Syrup Making Sensory

Innovation Package Handling Quality

Water Filling

Carbon Dioxide Measuring Performance

Sweeteners Quality

Sensory
Sensoryy

Quality
Go-To-Market Strategy differs depending on Market
dynamics and trade structure
PLANTS AS&D

PCE DISTRIBUTION CENTERS

Wh/in Plants
Or
Separate DCs

AS&D
RETAILERS MOD. TRADE KEY ACC. W.S. AS&D

RETAILERS WS
W.S.
DIRECT DELIVERY INDIRECT DELIVERY
 Channel Segmentation
IN HOME OUT OF HOME

On Premise On The Go
Modern Traditional
Trade Trade
TT - OP O - OP
Hyper (> 40)
Convenience
S
Super (4-40)
(4 40) F d Service
Food S i
Restaurant
Club/ Pub
Grocer
CVS (< 4) Leisure SS Leisure
Cinema
C&C Catering
g
Office
Trvl & Trspt
Institutions
Discounters Education

Food Services Leisure

QSR s F/Court Casual Dine Fine Dine Caterer Multiplex Amu Park/ FEC

Railways Airport Airlines 5* Hotels

 Foods
Make--Sell
Make Sell--Deliver
 Distributed Manufacturing Footprint
Plants /
Co-packs

Distribution
Centers (DC’s)

Channo

Distributors

Kolkata
4 Co-
packers:
Retailers Pune
• Faridabad
F id b d
• Erode
• Rajkot
• Barabanki
Consumer
 Manufacturing Equipment

RANDOM EXTRUDED LINE

• State of Art Machines

• Latest Technology

POTATO CHIPS LINE

PACKING MACHINES
Win-win Self Sustaining Contract Farming Model

Agri Quality based fixed buyback

Companie
s ‘Pay for Performance’ systems to Advantaged
drive quality and continuous Seed
Govt
supply
program
s Seed
Companie
s

Locally evolved
Farmer Farmer’s FRITOLAY
Banks
Organization
Directly with the
Farmer Govt

Input
Companie
p Provide technical support
pp and
s extension services for chip grade Program
P
farm practices. support
3P
Services

“Partners in Progress” Model

 Advantaged GTM – Width Via 3rd Party DSD Model
GTM Split

Loading GTM DB DSD WS / SS

~ 3 Plants
~ 4 Co-Packs
Model Company

Selling DC
~ 35
~ 100
Cust. DC ~ 150 Distributor ~ 1900 Distributor
~ 0.1 MM

RSA (3P) ~ 4600 WS / SS

Delivery Store ~ 1.3 Mn

Advantages: PI Advantages: Retailers

• Pioneer in Out of Store • Merchandising and Stock

Mer’dising rotation
Merchandising • A Store outside the store • Incremental volumes –
• Distribution
i ib i reach
h Driven
i by
b
PI products
 Traditional Trade: The organization structure at field level is based on 3rd
party model- i.e
i e the distributors,
distributors who run routes
routes, which are supervised by
company sales officers.

ASM/Territory
/ y Head (2
( nd Level))

Factory Sales Executive (1st Level)

Route Trainers (3rd Party)

DC RSA (Frontline) 3rd Party

Distributor

Route

Retailer

Rack
Area Manager
The structure in Modern Trade at field level is based on Accounts -
i.e the Chains, which are supervised by company sales officers.

Key Accounts Manager + Zonal Sales Manager

MT ASM/Territory Head (2nd Level)

MT Sales Executive (1st Level)

Factory

DC Merchandisers (3rd Party)

A/C Chain
Warehouses

MT Stores
 S&D Value Chain

Costs% DB DSD
(Value Chain) (Direct Business) (Direct Store Del.)
WS / SS

Retailer Margin 17%-18% 10%-12% 10%-12%

Distributor Margin - 5%-6% 7%-8%

Trade Spends 4%-5%

4% 5% 5%-6%
5% 6%
(
(Including
l di Expiries)
i i ) 3%-4%

Route Cost 2%-3% 1.5%-2% -

Supervision Cost 2%-2.5% 1.5%-2% 1%-1.5%

Total 25%-28.5% 23%-28% 21%-25.5%

 Operating Model

1
Local and Distributed sourcing
g to leverage
g Distributed Manufacturing
g
Sourcing & Footprint
RM
Agro: Benefits of Contract Manufacturing

2
Self owned facilities for Capital Intensive lines (Potato Chips / Crackers)
Manufacturing
Outsourced manufacturing: for Traditional Category (Namkeens / Oats)
& Operations
De-centralised manufacturing for Inbound and Outbound Freight Benefits

3
Strong 5K Route Infra across the Country
Sales &
Pioneers in Out of Store Merchandising (Racks)
Distribution Differentiated Margins for Different Channels

4
Advertising & Powerful Brands
Marketing A&M Investments for Brand and Category Growth
 The Four Regional Zones
Discriminating Values
Appendix B

Source: ESOMAR Paper “Patchwork Quilt” by Sangeeta Gupta, Abhijeet

Patwardhan, Seemeen Khan
 Authors’ foreword
“Our
Our approach has been to examine the four zones on
discriminating values, to highlight the most
meaningful characteristics that each part of the
country
t is
i unique
i about,
b t based
b d on our considerable
id bl
experience across categories and brands.
g
While we are aware that `regional diversity`
y exists at
levels much finer than just zonal, at a state, district
and even further, we choose to draw slightly wider
boundaries only to help actionability which
which, from a
marketer`s perspective is easiest with a zonal
perspective”.

Source: ESOMAR Paper “Patchwork Quilt” by Sangeeta Gupta, Abhijeet

Patwardhan, Seemeen Khan
 Tangible improvement
in experience
Strong

Bright Hot Techy

Sensory careers
Technology
Stimulation

Sharp
Striking
The South Innovations

Indian
Fiber
Safety Patience

Compliance
Rationality Hard
Diligence work

Evaluative

Steadiness
The South exhibits a distinct need for stronger
sensorial stimulation

Taste
The everyday cuisine of sambars, fried chilies, tamarind, red chilly gunpowder, the
Andhra custom of green chilly accompaniment etc
AI North East West South AI North East West South

p
Proportion of Dust
Tea to Total 35 4 15 46 80 Penetration of Gels 5.5 5 3.4 4.7 7.5
Source RSA 2003 Source NRS 2002

AI South
AI North East West South

Penetration of Filter Mango Fav. Flavor

Coffee 62
6.2 02
0.2 01
0.1 09
0.9 21 7
21.7 iin t
toffee
ff candy
d 11 23
Source NRS 2002 Source Sweet tooth Confectionary U&A 2003

Smell
The largest market for incense sticks
sticks, the almost universal practice of flowers in the
hair, the preference for sandalwood and jasmine in talcs, soaps etc

AI North East West South AI North East West South

Penetration of
Penetration of Deos 1.4 0.8 1.5 1.4 2 Shampoos 23.4 19.3 24.9 15.4 34.2
Source NRS 2002 Source NRS 2002
The South exhibits a distinct need for stronger
sensorial stimulation

Sight
The riot of colors from the lungis and saris, to the rangoli and kathakali, and
even the temples
The color, vibrance and titillation of cinema

AI North East West South

Cinema Regular 9.9 3.9 8.6 7.5 20.9

Source NRS 2002

Touch

AI North East West South

AI North East West South

Proportion of Talc
Massaging is good
(face) 19.6 3.2 8.3 22.4 48 for baby's skin 34 16 36 37 62
Source NRS 2002
Source Baby Care Study 2001

The custom of weekly oil massages, the interesting belief that skin benefits most
from babies’ massage v/s the Northener’s belief that it is the bones; the marked
preference for topical medication for headaches and backaches
 Techy
y is good
g The Diligence-
St di
Steadiness Ethi
Ethic
• High propensity to think rational and be stringently
evaluative
• A study
t d off investment
i t t behavior
b h i in i this
thi region
i
indicates a low risk market, with the highest preference
for savings in the post office (NRS2002)
• It is not immediate success that is so captivating here,
but a strong belief in working hard and waiting for the
fruits of their labor to come to them over time, unlike the
North and West where the young desire immediate
• Products that have a technological edge are believed to success
deliver a tangible, discernible advantage. • That patience is a virtue to this populace was also seen
From two wheelers to paints, one has seen the South in a study done on home loans - people wait till they are
quickly upgrade to technologically superior products. older before they look at property acquisition, unlike the
North.
• Nerve center of the IT revolution
Age of recent
home-owners Delhi Bangalore
North East West South
Share of flat
CTVs in the AI 25 - 35 years 76 38
pie
i 22 22 25 30 36 - 45 years 22 46
Source GFK 203
46 - 50 years 2 16
AI North East West South Source Study on Home loans 2003

Correct recall
AI North East West South
of software
celebs 29 25 20 26 41
Like to pursue Agree to
professional statement
course 21 15 19 18 29 "Want to be
Accessing the successful
Internet 17 14 14 18 23
asap" 63 68 62 72 51
Source Youth Study 2001
Source Youth Study 2001
 Need to
influence others
Internal
not so
imp
Power-
Location Status Servility
Deference
Outward Seeking Aggression
Orientation

Size
Need to
make a
statement
The North Dominance

Indian
Fiber
Straightforward Subordination
of women

Direct
Chauvinism

Simple,
i l Easy
Weaker position of
women
 Societal approval is a pivotal value for the
North Indian
Social approval is derived from the respect others give you due to your possession
of wealth, glamour and power. Large cars, Location of house, large size
packs/SKUs, large sizes in durable purchase

North East West South

Large front
loading
washers/Total
front loading
washers 53 39 36 30
Big Screen
Flat
CTVs/Total
Flat TVs 10 3 6 5
Source GFK 2003

This `outward drive` is further borne out in the youth study, wherein
the North Indian youth clearly wants a
glamorous profession, quite unlike the south.
All India North South

Agreement with
statement
t t t "Want
"W t a career
in a glamorous
profession" 10 13 6
Source Youth Study 2001
 Aggression - Abla Nari – The attitude
D
Dominance
i t
towardsd Women
W

• The North Indian is also high on the y different

• The north is characteristically
needs of dominance and influence over over other regions in the manner that it
others. He tends to be an extrovert, is relates to and treats its women
more ‘pushy’ and demanding of others • Women here seem to be under greater
when
h h
he can b
be male
•Prevalence of the Power-Servility subordination and at the receiving end of
syndrome a lot more male chauvinism
•Pronounced
Pronounced concept of “Ji
Ji Hazuri
Hazuri”
• Dominant culture of deference,
ingratiation and servility to people in A more literal example of the subordination of
power women is seen in a study on sexual habits

AI North East West South

Largest Brands positioned
concentration of on macho,
the ‘Power Seeker’
Man on Top (%) 53 60 52 52 42
aggression,
segment (mystery dominance values
shopping do well Source Sexual Habits Study 2003

exercises)
 Attracted to
special
Evolved genres of
health
humor
products
d

Into
fitness Poor
and Hypochondria health Self Intellectualism
exercise conditions actualization

High claimed
suffering
The East Spurn
Materialism
Indian
Fiber
Emotionally
vulnerable Confident

Child Protective
Assertive
Centric
Strong
Achievement Women
Focus
Sensuality
The Health Neurosis Mishti Baby
y

Whether rooted in inadequate

While motherhood is revered
nutrition, a genetic lactose intolerance,
across the country, the Bengali
or whether it is `just-all-in-the-mind`
` `
focus on the child takes on an
the Bengalis are certainly
altogether new meaning. The
hypochondriacal in their practices and
attention, pampering and
beliefs regarding health. du ge ce received
indulgence ece ed by tthee
children of Bengal finds little
The East zone complains of the most match elsewhere in India.
‘severe’ of pain suffering. They also believe An insight neatly leveraged by
they are the more severe acidity sufferers.
p
brands like Complan and Junior
(17% claiming ‘very severe’ in the east
Horlicks.
compared to a 2% to a 12% elsewhere).
Not surprisingly, Calcutta had the highest
number of men who did some form of A study on childrens` policies
exercising, even if it is only a morning walk. for an insurance company found
that Kolkatta was clearly more
North East West South oriented towards planned
Figures in % savings to meet specific needs of
Very Severe
Suffering 6 18 17 13 the child such as education,
S
Source OTC U&A 2001 marriage, medical expenses
AI North East West South etc…
unlike another center (Delhi)
Men Into Exercising
which was more excited by
34 33 40 34 24
family oriented benefits.
Source Wallet Watch 2004
 Women Power
Quite different form her northern sister, the eastern woman has an inherent
streak of self confidence; she is assertive, outspoken and enjoys a fair
amount of significance in society.
society

“I think the Bengali middleclass women have greater security than the north-
Indian woman” Pradip Sinha, Historian

Media has oft lauded her for her sensuality,

sensuality her love of romance and the arts.
arts

A small hint of this sensuality was evident in our study on lingerie. While the rest of
the country preferred the subtler shades of white, cream and beige, the Bengali
woman proclaimed her preference for red.
red
Figs in % Delhi Kol Mum Chen

Own Red bras 1 26 1 1

Own Red panties 5 36 17 43
Source Lingerie U&A 2002

“Red in the Bengali culture stands for a sign of luck, emotion, fortune and copulation.”

Bengali women are also more involved in current affairs and actively
participate in societal events. In fact, there were more Bengali women
freedom fighters than women freedom fighters from the rest of the country.
This woman strength perhaps has roots in the fact that the society is a
staunch worshipper of many Goddesses - Durga, Kali and Saraswati and
hence respects the many forms of the woman.
 The Idealistic Eastern Male
Poles apart from the dominant, aggressive, status seeking northerner, the Eastern Man is
idealistic, argumentative, lazy, romantic and a dreamer.
Over the years we have witnessed the excellence of the East in the area of thought,
thought
literature and culture. The intellectualism that this zone has inherited is very much a part
of their culture and tastes even today. Combine this with the frustrations of low incomes
and a lack of economic achievements, the male here displays strong ideological
tendencies (often socialist), and is quite cynical. He consciously avoids overt status
symbols , and is happy at his `addas`
addas with much friends and `fafffaff !!`

Studies in the paints category indicate that while all the other zones admit to getting
their homes painted to impress others, this zone is the exception.

Findings from “Hercules”, a qualitative study on the Indian male

“this is really our favorite past time ..we spend a lot of time debating such issues. It's a great way to
spend time. Not only do we keep up with what is happening around us but also its nice to figure out who is
the more intelligent
intelligent”

“There is work around… its not that we can`t find any work, but I want work that can challenge me
intellectually. No point doing something that is dull”

“Biharis are looked down everywhere in India, we need to fight this image.. We’ve to show the rest of the
country
t what
h t we’ve
’ done
d in
i the
th pastt and
d what
h t we are capable
bl of…”
f ”

“In the evenings when friends meet, we very often sit and discuss culture and history.. it makes us feel
very good about ourselves”
 Enjoy Seeing Money
Independent G
Grow

Open
-ness
Respect Democratic Joy of
f
for Traditionality Money
Women

Healthy
parent-child The West
relationships
Indian
Fiber
Guileless

Simplicity
Travel &
leisure
Humble
 Democratic &
E lit i
Egalitarian
We observe here a far more `equal-
rights`
` society, there is a high degree
of respect for people across
socioeconomic
classes. This is evident in the
professional ethic, cutting across
hierarchies.
“Our cook is called Maharaja, because
nobody can cook like him…, He is the
master of the kitchen and we all
respect him like an elder of the
household.”
Women in this part of the country are
independent, empowered and actively
encouraged to manage a variety of
outdoor jobs, even go out and work.
The large number of women on two
wheelers is evidence of this.
The Attitude to
M
Money
Paiso Vadhe ane Paiso Vasool
Money y is important
p to p
people
p here.
Money for moneys` sake! They like to
see their money grow and building
money is an end and achievement in
itself.
In the west, people enjoy just
“In
counting money as it grows!”
The north, on the other hand, sees
money as a means to power and
status in society and it is something
to be flaunted to get recognition.
Hence, the practice of spending
money on the most coveted, most
expensive assets.
For the south money is a means to
safety and something to fall back on
in times of need.
The east, almost looks down on the
concept of money and materialism as
being inferior to their main pursuit ,
th t off intellectual
that i t ll t l actualization.
t li ti
 Simplicity & Frugality
This value is best expressed through the Maharashtrian principle of “Sadhi rahani ani
uccha vichar” translated as “ simple living and high thinking.”

This zone is characterized by simplicity and humility of the people. Excessiveness,

immoderation and extravagance are certainly antithetical to western sensibility, both in
thought and living.
The other dimension of this simplicity is prudence. Prudence and a matter- of fact
approach towards material comforts characterize the western outlook. This has
percolated the very way of living, from the simple weddings to the home décor, which
may be elegant, but often borders on the minimalist and functional.

“To one used to the grandeur of north Indian weddings, attending a Maharashtrian
wedding can be an education in itself
itself. The ceremony is simple
simple. Both parties contribute
equally to the wedding expenses. The traditional dowry consists of a few fixed items
and is, by no means, a lot. The wedding 'feast' is simple, consisting of the traditional
puri-aloo and shrikhand served on steel thalis from which guests partake. The “
cocktails and drinks night” preceding the actual wedding have not percolated the
Maharashtrian wedding routine.
routine ” Extracted from secondary source

The west is also known to be frugal in its habits. Particularly famous is the Ahmedabadi's
miserliness.
Lko Kol Ahd Cochin

Incidence of Gifting(%) 47 38 3 25
Average Spent ( Rs) 490 474 343 584
Source Wallet Watch 2004