You are on page 1of 10

c

c
cc

 c
 cc

 cc c

c c c

 c
c c

cc c

c
c c
jcc

Incorporated in 1953, Carona, managed by the Sahu family till 1984, was earlier called as
Carona Sahu Shoe Company. In 1984, the company was acquired by the Khataus after which it
got the name Carona Ltd.

 c ! "# c

÷c àahendra K Khatau , Chairman


÷c £nil K Khatau , àanaging Director
÷c Ñ R Ruparel , Director
÷c £ K Basu , Director

Carona, the heritage brand of India, used to manufacture canvas/rubber footwear of all kinds. It
had its manufacturing facilities in àumbai, £urangabad and £hmedabad. The company was a
prominent player in the footwear market in the late 80s. Earlier the company¶s strategy was to
cater mass market with a price range of 50 to 400. In this segment, however, it faced a tough
competition from Bata India Ltd. With giants like Nike, Reebok, £didas entering Indian àarket,
in 1989, the company entered into a technical agreement with Ñuma £ Rudolf Dassler Sport,
ermany, to manufacture sports and special application shoes. It came out with a public issue in
Jun 1989 to set up a unit in £urangabad to manufacture the sports shoes. During the period the
company had already developed a strong distribution network across the country. Soon it became
the second largest footwear company in India

In 1995, there was a reshuffle in the management because of a split in the Khatau family. In
addition to the labour problems, the company was also not able to cope up with the competition
from the unorganized sector for its lower segment products like canvas and rubber footwear. The
company was incurring losses. Consequently, in 1995, it disposed off its àumbai (Jogeshwari)
plant where operations were partially suspended since àar 1994. 800 of its 1200 workers were
relieved through a VRS scheme. The company renewed its agreement for five years with Ñuma
in 1995. During the year 1999, the company was registered as a sick company under SIC£ (Sick
Industrial Companies £ct) 1985 and BIFR (Board for Industrial & Financial Reconstruction),
while noting that the promoters of ailing Carona Ltd are not serious in rehabilitating the
company nor are they resourceful enough to mobilise the funds required for this purpose,
confirmed its prima facie opinion of winding up the company.
jcc$  c

%c&"c  cc

'(cc"" cc)  c  ccc  c ! cc" *cc" cc  c   c


cc"cc*c(c c c)c c +c c# cc# c#  c)c *,c

Carona was a brand which thrived during the license raj. The brand thrived along with Bata.
Infact Carona was fighting head on with the market leader Bata. There were only two choices for
quality footwear Bata and Carona.

Carona in a way imitated Bata in every possible manner. The shops and the products were
extremely similar. When Bata launches one style, Carona quickly followed suit. Both Bata and
Carona were instrumental in popularizing canvas shoes in India. These shoes were a rage among
kids at that time.

In the early 1990s, Bata decided to embrace the high-end segments of the Indian shoe market as
a part of its target market. It launched quite a few brands like Ñower, Northstar and Hush
Ñuppies.

In 1992, Carona tried to tap the premium segment by launching the erman sports shoe brand
Ñuma in the Indian market. This was to counter the above mentioned popular brands from Bata.

The move landed Carona in big trouble.

This segment was not meant for Carona. In the first place, this segment was not sizable for a
company like Carona. Second, the segment did not gel with their distinctive competence. The
segment constituted a mere 5 to 10 per cent of the footwear market in India. It could not provide
the volumes that Carona was used to at the mass end and high volume was essential for Carona
for having a healthy bottom line.

Worse still, the adoption of the segment misdirected Carona¶s entire strategy. The top end of the
market suddenly became the main focus of the company and it forgot its bread-and-butter shoes
that had given the company its identity. Carona made a big mistake while launching Ñuma.
Carona- Ñuma got its price calculations all wrong. Ñreliminary market research done by Carona
indicated that the top-of-mind brands were Nike and Reebok. £didas came on promptly, while
Ñuma figured almost nowhere. But Carona took the plunge nevertheless with a shoe priced at Rs
600. The company felt that the Indian consumers will fall for the global brand. This was
considerably higher than Bata's Ñower which, retailing between Rs 200-300, defined the market.
The consumer, who had little brand recall for Ñuma, saw no justification in paying a premium for
an ordinary product. The bottomline: Ñuma was a big flop in the Indian market because of wrong
pricing.

j -c

£t the same time, small regional players started nibbling away at Carona¶s mainstay. £ctually,
the company was squeezed at both ends. £t the lower end, smaller competitors attacked its mass
range in canvas shoes, school shoes and Hawaii chappals ± slots, which the company had
practically vacated on its own by ignoring them completely. £t the high end, niche players, who
were better prepared, were challenging Carona.

The environment changed drastically during late 90's with the market opening up. £ll the
footwear companies faced the issue of tough competition and increased costs. The cost was
primarily attributed to the heavy workforce that these companies had. New brands like Liberty,
£ction, Lakhani etc began to corner the market with new designs and fashion. Foreign brands
like Nike, Reebok and £didas began to market aggressively which further worsened the position
of Carona.

Both Bata and Carona went in for big trouble those days. Bata had the backing of their foreign
parent which helped them sail through the restructuring exercise. Carona did not have that
luxury. Bata was able to sustain itself by launching new models at affordable price ranges. But
Carona was not able to excite the market with new launches. Both Bata and Carona had their
own showrooms which became expensive to maintain.

Somewhere the company lost its control over the costs. It failed to understand the competition
and respond to it.

c c
 c c c c   c)cj-c

In 1997 Carona Ltd management came up with an idea of an infusion into its equity. The
promoters were looking out for prospective buyers for their stake. £t the same time Carona was
also looking at strategic alliances for its distribution network as well as its brand. The once
popular brand of canvas and other range of shoes, had, however, met with little success in
finding a suitable strategic partner.

Carona, which had not been going through good times in terms of financial performance, was
going through a restructuring exercise to overcome the fierce competition in the footwear
industry.

Carona was looking at cashing on its brand value to bring in much needed funds into the
company, the aim was to increase the product line. Carona had offered to sell out its distribution
network but was not willing to shed its equity. £t that point of time, a few companies including
Liberty Shoes had held discussions with Carona.

However, the talks fell through as it was felt that there may be some legal impediments in taking
over Carona's distribution network as many of the outlets were not owned by the company but
were franchises.

The company could have found a buyer for its equity at an earlier point of time. But in 1997 it
wasn¶t possible, more so since the market had got crowded and the value of the Carona brand
had eroded considerably over the years with several other brands coming into the market.
c$. c -c

Before deciding the strategy for re-launching Carona Shoes, It is very important to study the
trends in the footwear industry of India.

India¶sDomestic footwear market is estimated to be over Rs 15,000 crore in value terms and has
grown at the rate of 8.8% over the last couple of years. àen¶s footwear accounts for almost half
of the total market, with women¶s shoes constituting 40 percent and kids¶ footwear making up
for the remainder. The domestic market is substantially price driven, with branded footwear
constituting less than 42 percent of the total market size.

£bout 37.8 percent of Footwear retail is the organized segment, which qualifies it as the second
most organized retail category in India, next only to Watches. While the average spend on the
footwear by urban consumers is Rs 240/annum, consumers in rural areas spend just about Rs
100/annum. The annual domestic consumption of footwear is approximately 1.1 billion pairs per
annum, and top 20 cities contribute about 450 àillion pairs/annum.
India is the second largest footwear manufacturer in the world, next only to China. Nearly 58
percent of the industry, which is by and large labour intensive and concentrated in the small and
cottage industry sectors, remains unbranded.
j c/  c
Footwear segment in India is very price sensitive and has been steadily growing over the years.
àajor part of the demand is met by the unorganized sector and still there is a shortfall of 300
million pairs. Branded shoe market only accounts for 20% of the entire market. While
international brands largely dominate the higher end of the spectrum, the lower end of the market
is dominated by home-grown players as well as unorganized players. While men's footwear is
the biggest target category (contributing almost 48%), children's (11%) and women's lifestyle
footwear (41%) is not behind in the race.

c
c c
ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc
c
´c). c  c c c´. c0c cc

c
/  c. c" )"c)c" c cc c ,c). c  -c
/  c &" c
 cc
c 1c)c.c
àass market 185 ± 700 60% (Liberty Bata)
Economy market 700- 1000 30% (Bata Liberty)
Sports market 1000 ± 3000 7% (Nike £didas)
Ñremium leathers 3000- 5000 5% (Charles and Keith)
Luxury 10000- 50000 1% ( ucci Louis Vuitton)
c
/  c. c" )"c)c. c). c  -c
/  c &" c
 cc
c 1c)c.c
Traditional footwear 699 ± 999 5%
Designer Footwear 599 ± 799 10%
Formals 299 ± 699 40%
Casual Wear 499 ± 799 25%
Sports Shoes 500- 699 20%

The kid¶s footwear segment is one of the fastest growing segments in India. The Indian kid¶s
footwear segment is highly fragmented and dominated by the unorganised sector. The branded
kid¶s footwear segment has a big card to play as India has the world¶s largest child population.
The overall kid¶s segment has a robust margin of 20 ± 25 % which is huge potential
opportunities for branded footwear players.
/  c)c
## c)cj-c
Cost management and effective marketing are key to survivors in domestic markets. The
common underlying strategy of successful companies like àirza¶s or à&B or Lakhani¶s is
control over cost and right placements.
Determinants of Carona¶s success can be,
2c"c
It is now being realized that while malls offer higher footfalls, the advantages of high street are
many. £verage Cost/sq ft would be almost 40% less than the àalls, and considering the
overhead costs of parking, energy, etc. high street is more suited for ³youth´ targeted products. It
is also more suitable for players with wide product assortment.
Ñresence in a high street market such as Bangalore, or Fashion Street, Bandra or S.V. Road,
àumbai or Khan àarket with higher footfalls of a particular segment increases cross-selling.
Thus carona should look for high street retailing through multi-brand outlets and discounts retail
chain stores, It should also look for to franchise formats to tap markets such as Ñatna, Ranchi,
Vizag, Raipur, etc.
2c&"c)"c
Carona Ltd can do well if it looks to serve the mass market and the economy market in men¶s
footwear and women¶s casual and formal footwear (see the men/women footwear segment tables
above). Since its core competency was to manufacture rubber and canvas shoes, it can also enter
into the kid¶s school shoes segment which is largely dominated by local players.
If possible, Expansion into sub-brands such as sportswear should pursue in future. The main aim
should be to make sportswear available within a price range of 700-1500 by outsourcing the
operations. If it happens, a huge segment of college going youngsters which is now served by
unorganized local manufacturers will get attracted towards Carona.
"2c   3. cc
Carona should also look for IT investments such as ÑS and ERÑ. It can use IT to understand
the models of the seasons, price ranges, store performance, etc.
2c&"c c
Floor pricing should be used to penetrate into markets, premium pricing can be targeted towards
the middle high and high income group people.
ùpscaling pattern: