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Seema Sindhu / New Delhi 23 Aug 10 | 12:45 AM After noodles, the Rs 100-crore pasta market is becoming a fresh battleground for FMCG companies. The latest entrant is the Kishore Biyani founded Future Group which is launching pasta under the brand "Tasty Treat". The company has partnered with Disney for leveraging Disney characters "Mickey Mouse" and "Donald Duck." Just a few months after Nestle launched Maggi Nutri-licious Pazzta in the Indian market, Hindustan Unilever is also planning to do the same under the Knorr brand. HUL entered the noodles market a couple of months back and has created quite a stir through soupy noodles. All the three, however, will have to compete with ITC's Sunfeast Pasta Treat which is the market leader and has a whole wheat based range (Masala, Tomato Cheese, Cheese and Sour Cream, Pizza style, Chicken and Tangy Tomato). Devendra Chawla, Business Head Private Brands, Future Group, says Future will enter the pasta and jam categories. "The idea is to grow consumption by participating in under-branded (few brands) and under-penetrated categories like instant pasta where modern trade has a large role to play," he says. Predictably, Future Group will market the product on the health platform. Tasty Treat pasta is made of suji, which is considered healthier than maida. It will be available in variants like masala, cheese and pizza style and will be priced at Rs 12-15 a packet. Existing brands are also in the same price range. Almost all instant noodles in India are positioned as health products, as they are often criticized as unhealthy or junk food. That's something which all companies want to avoid. For example, Nestle is also playing up the suji angle to communicate to consumers that the product is healthy. On the association with Disney, Chawla says instant pasta is targeted at kids and the partnership will help in last mile marketing. But the going may not be easy as Future will face competition from other brands like Feasters from retailers such as Aditya Birla Retail. Analysts say pasta is set to grow as the next big category after noodles. Purnendu Kumar, associate vice president, Technopak, says as the instant food market is growing fast due to the busy lifestyle of consumers, more companies are likely to join in. And since there are not many established players in pasta, the early entrants will have an advantage. According to a study by Ernst & Young, the marketfor pasta and noodles will grow 25 per cent per annum to over Rs 1,400 crore in the next five years.
at best.either through direct discounting or through volume offers (presented as 'extra value'). Lack of ideas: The 'big numbers' that monopolistic companies see tends to breed complacency and give a false sense of security. Cash cow effect: Since there is virtually no competition and economies of scale have been reached. Lowered defense preparedness: Lack of competition is a very serious marketing issue in monopolistic situations. It is assumed what has worked before will work again. BI is operating in a near monopolistic market. Let us call it Brand-I (BI) for the sake of this document. Some of the key challenges are: 1.Sanjay Kumar One of my clients is a classic success story. any company would be proud off. The brand needs to be bought on strengths other than just price. The price of 20 pack was $20 but the price for 30 pack carton was only $28. Assuming there are six competitors in a particular category and each competitor undertakes two initiatives a year.what is the real value of the brand under these circumstances? 4. but price cannot be reduced indefinitely. 100% unaided recall and almost perfect distribution coverage. Cost of growing the market: In a competitive market the cost of growing the whole market is shared. 2. such as the BI scenario. 5.Marketing Challenges in Monopolistic Markets Contributor . In a monopolistic situation. a 20 pack carton increased to 30 pack. 70%+ trial rate. the entire cost of developing the market lies with one player. What do you do with a brand like this which has very little to gain but a lot to lose? The situation is not unique to BI. This strategy has worked to date. Numbers. Companies have few options at this stage : . In the short period of 15 years. And the cost is shared. it has attempted to attract new users by increasing the size of its bulk offering discount eg. They look at the natural growth of the market and if the product's overall volume grew in correlation to it. The nearest competitor has 2% market share. 3. it leaves them open to attack from a well organized and cash rich challenger. Monopolistic markets present their own marketing challenges. BI has created and dominated the whole category of instant pasta in Saudi Arabia. Overall price increased but consumers paid less per pack. In short. It is a serious problem for all brands operating in monopolistic market situations. Every time BI hits a sales plateau. True brand strength: Most of the market's development is done using price as the prime lever . companies with such dominant market share are cash cows. The question is . This catches the company unawares. Executives draw comfort from the numbers and lose the appetite to experiment. Today it commands a 96% + market share. Since true brand strength is not known or. they take satisfaction in the overall numbers. is assumed (companies generally peg it at a very high level). then a total of twelve different initiatives can contribute to growing the overall market in any one year.
rather than the consumer. Companies start diversifying into new geographical markets to find new users. Offer better margins to distributors and retailers b. Companies using surplus cash from one operation to sustain operations in other markets. This is especially true in partnership companies. b. and .Determined competition. because in this instance marketshare does not automatically translate into a strong brand. Of the two. The acid test comes when competition enters the market and the monopoly player often sees a dramatic loosening of the bond between its brand and consumers! The problems for companies in monopolistic markets emerge from two ends: . c. This is a serious danger. 6. BI trying to leverage its name in pasta sauces. determined competition is relatively easier to handle. d.a. rather than looking at building the brand. Companies diversify into unrelated areas eg. Offer bulk discounts . Sales and Distribution: This is generally where the response begins because this is where the heat of competition is felt first. The company can: a. Let us look at some of the strategies the company may use to fight a determined competitor: 1.A stagnating growth curve even when price is dropped further. Company partners/ shareholders start milking the company. The focus shifts to trade. Brand building: The company starts exploring ways to increase volume and revenue.
In this 28% there will be: a. 28% of the population has not tried BI. The question is. Lapsed users . 3. Marketing: Only once the market stops responding to sales and distribution tactics. Further there is no guarantee that innovation that gets the company really excited will get consumers excited. Product Development: While the marketing war is on. what is the cost of getting them? Let us look into the case of BI. Big and costly promotions come in. Extra value offers like '15% more' follow. b. It could be! Let us look into it a little deeper.c. People who do not like the very idea of pasta b. Innovation is always a risky business. Some of the key reasons for stagnating demand can be as follows: There are no more users: This is generally not true. A stagnating growth curve is a more difficult issue to handle. Catch-up and real innovation can prove difficult and product development takes time. Users of competitor's products (4%) . c. There are always new users. the company also starts looking into product enhancements and new product launches. a. do classical marketing efforts begin. Advertising investment increases. Use its distribution strength to muscle out competition from shop shelves 2. This is generally the last option because it is the most expensive and time consuming option.who have outgrown the taste of instant pasta c. This looks like a potential market. and lastly. Offer loyalty programs d.
it can prove highly profitable in the long run. exporting becomes an attractive option . Every additional mile the company has to cover to reach consumers increases its costs.what is the cost of converting them? People are not consuming enough: This is most probably true. what is left is a very small potential of new users. Though an expensive way to get new users in the short run (sales & distribution costs as well as marketing expenses can be really high). if the company does decide to increase distribution. in principle. distributors may cover these costs with their margins. Is this consumption low. any experienced marketer will agree that getting existing consumers to move to new uses is a huge task. It opens up new markets. encourages the company to invest in new product development and may provide tax advantages. As volumes build up. or just enough? A very difficult question to answer. As marketers. salesmen overtime etc. Whatever the case. sales and distribution is the single biggest cost center. high. fuel. People not reached by distribution coverage If we take out these four segments. or 2 packs per person per month.d. Exports: With the emergence of WTO and various regional trade agreements. New uses: Old Use Old Use New Uses Maintain and increase consumption Encourage trail New Uses Innovate and Encourage trail of innovation Create a whole new maket 4. 2. costs go down and revenue increases. Some of the typical costs that go up are freight. vehicle wear and tear. This directly impacts upon the bottom line. One can pass some of these costs onto wholesalers and distributors. but if not and more likely . it is likely to lead to a cost increase. Consumers do not like to move out from the comfort zone they develop with a product. 3. let us look into some ideas for acquiring them. The average consumption of BI is 24 packs per annum per person. This is especially the case in a monopolistic situation.distributors will demand that these costs be covered. Let us try to tackle these two situations in their respective order: New users: If we agree. 1. So the issue boils down to. The first task with new users is to try to . If the product is really fast moving. Increasing distribution: In a typical FMCG operation. our aim is always to increase consumption of a particular product.as long as quality standards are adhered too. that new users are always there. where share cannot be gained from competitors increasing consumption is the only option for growth. If we look at the above matrix. Let us dip into the case of BI once more.
5.get them to use the product for its original use. New Coke and Pepsi Blue are two excellent examples of products failing to deliver on consumer and company expectations. 3. The basic brand values remain the same but every new variant gives incremental sales because of new trials. it will lead to increased consumption. 6. Time: It can take a long time to happen. BI also increased the consumption by putting the instant pasta in bowls and cups. Repositioning is an exercise in subtlety itself. it can also work in monopolistic markets.both that of the company and consumer. 1. 2. Well in certain cases it does. Sodas started being consumed even at times when they were traditionally not being consumed. New product development is expensive. Today automatic self service dispensers can be found in almost every nook and corner of big cities. There is a always a high risk that consumers won't accept it. so where a company tries to attract new users by repositioning its product for new uses. Plus trial by existing users adds to the overall volumes. Imagine Red . It is assumed that if we give consumers new ways to consume the product. This is also something simple to do because most of the variants are under the company's own control. By putting sodas in cans and self service dispensers. Competition: Competition is the most successful means of developing markets. Cash cow psychology kicks in and companies see no reason to invest. more initiatives. The key issue with long term loyalty promotions is that rewards need to be of a high perceived value and should change periodically so that consumer interest is kept alive. New uses: New uses are the first option that any marketer looks into. If you don't have competition. This lead to an increased out-of-home consumption of instant pasta. Packaging innovation: This is one area that has been perfected by soft drink companies. The very thought is daunting. Programs like recipe clubs work wonderfully for food related categories. packaging innovation does lead to increased consumption. soda companies were able to increase the consumption. create competition! Launch a B brand. Toothpaste. They keep on launching new variants. Internal competition works because both teams work to out-perform the other. Repositioning: This is a very complicated exercise for a variety of reasons: a. The problem with line extensions is managing expectations . Though it can be argued that line extension works in competitive environments. 4. Though both the examples are from different category. Sodas were traditionally available in glass bottles. cosmetic companies are generally masters of this strategy. hair dye. give it to a separate marketing and distribution teams with separate targets and budgets. Consumers will often associate products with a particular use. Long term loyalty promotions: This is something one rarely sees in the FMCG category because of the sheer volume of consumers and the data that one needs to track. New variants can be used to gain the interest of lapsed users as well as new users. this is possible. Out performing means more ideas. it must be careful not to alienate existing users Increasing consumption: Now let us look into some options for increasing consumption. But line extensions are relatively easy. But with a little insight and out-of-the-box thinking. Line Extensions: A company operating in a monopolistic market rarely has an incentive to upgrade its product offering because it is the only player.
death etc. In Saudi Arabia the instant pasta market is only 9% of regular pasta market. is that they are both made from flour. Regular pasta is all about meals.Bull trying to become Pepsi. Eg. and roles and responsibilities clearly defined for each participant. Key Managers: In most professional companies.nutrition is not a core association in consumer's minds.. Imagine instant pasta trying to reposition itself as a complete meal to compete with regular pasta. Institutional knowledge and valuable ideas tend to get lost. New managers have their own way of looking at things. In the late 70's and early 80's shampoos were new in India. The only things in common between instant pasta and regular pasta (spaghetti). The focus is on quick fixes. There is a huge perception barrier to overcome to make instant pasta into a meal. b. This is a classic repositioning example in which bar soap was repositioned out of the market. prices were high. Unless and until the repositioning exercise is well documented. People used bar soap to wash their hair. health. has cheese as one of the key ingredient. Instant pasta is exactly the opposite. Repositioning it like Pepsi will be rejected by clients. d. the focus is on quarterly sales. If an idea does not work in one quarter or two at most. shampoo usage was promoted as "everyday". Repositioning against what: This is another crucial issue. Rather it is positioned as a snack.they do . has a rich connotation etc. c. it is dropped. Repositioning exercises take a long time to deliver results. but it took time. Instant results: With the emergence of quarterly results. takes hardly any effort to cook and above all is cheap. The flip side of this argument is that new manages bring in new thinking. The communication themes were around "wash your hair twice a week with shampoos". In the 90's as volumes picked up. But if we dig a little deeper. Today consumer habits have changed and bar soap usage has become negligible. True. so that their thinking remains focused. it might not be so. a housewives involvement in her family's health. consistency of key managers is an area of concern. Since volumes were low. new assignments. entails time to cook. managers frequently move on because of various reasons like promotions. It is all about being instant . nutrition. Movement leads to a knowledge gap and new agendas. . Red Bull is an energy drink and will remain so in consumers mind.and this will be valuable if they are also guided by a repositioning document. So it may appear that repositioning instant pasta against pasta will lead to higher growth. Everything else is different.
but it is said to be growing at a CAGR of 15%. it was a different dream. Even vermicelli required some amount of cooking effort. I was skeptical at first. plain. Till date.the domestic market leader. one fine day. However.Nestle. I would not recommend it if one doesn t like cheese at all (that would explain the limited success in India). but it requires stability and commitment over a long period of time. and plain taste the same. Suddenly. is a little like teaching an elephant to dance. 2005 11:18 AM Instant food in India till last year meant only noodles. Given the number of Italian restaurant. A company needs to experiment based on its capabilities and the identified opportunities. there is no other player in the instant pasta market who has come up with a competing product. let alone people who can cook Italian. they are actually only three different flavours . Late last year. how can one prepare pasta at home. and all these contain cheese. you had to cook it yourself or had to find a suitable restaurant. All these flavours recommend adding milk in addition to plain water. Conclusion: For the company operating within a monopolistic market.from $136 mn in 2008. however.joined the pasta race with the launch of Maggi Nutra-licious Pazzta. but it cooks just fine without milk. and start eating Pasta Branded pasta market set to grow bigger Shilpa Phadnis | TNN Bangalore: Branded pastas still comprise a fraction of the branded noodles market. like noodles? In fact.which brought instant noodles to India.Ernst & Young forecasts that the noodles/pasta segment in India will touch $320 million by 2015.driven by the globalisation of the palate and the healthy alternative that it is seen to represent in the light meal snack segment.But with urban Indians experimenting with exotic macaroni and fusilli varieties.cheese.That may be about a tenth of the market for branded noodles. onion. .many expect the traditional Italian offering to narrow the gap with its Chinese kin (some people say its kind of pasta). the reality is that introducing fresh initiatives within monopolistic companies. no one strategy in isolation can guarantee volume growth. exactly like noodles. After all. and highly shedding that cheese inhibition. it is one of my personal favourites. Sunfeast (famous for their biscuists) came out with Instant Pasta. masala. If you wanted something foreign.Repositioning can increase volumes over the long term.and retailers private labels. Sunfeast instant pasta comes in four flavours . and just for the Indian palate.cheese. One can either microwave it or prepare it just like one prepares noodles.including Feasters from Aditya Birla More and Tasty Treat from Future Group. The branded pasta market is estimated at Rs 100 crore. Sunfeast pasta review Mamma Mia By: maddy100 | Dec 28.It was pitted against ITCs Sunfeast.
says Rajesh.Nutri-licious Pazzta too has been developed to deliver a short cooking time.but it is penetrating deeper to cover more markets. Hegde says.Such pasta packs are available between Rs 15 and Rs 18.cream onion and cheese.fortified with iron and vitamin.Future Group. Most pasta brands are concentrating on single serve pastas in order to generate more trials.ITCs Sunfeast is currently targeted at children in metros.The hot picks among our six flavours are the vegetarian ones tomato cheese.Like Maggi noodles and Sunfeast pasta. Nestle initially launched in metros and tier-I cities.head-private brands.and offers a taste that is specially developed for the Indian consumer Masala Penne with the signature Maggi masala taste and cheese macaroni.GM-marketing in ITC Foods. . Chawla says. Maggi has generally been focused on creating light meals.Its a sampling strategy to attract consumers into this category and help them overcome initial resistance. ITC and Nestle position their offerings as a healthy light meal.These give balanced nutrition for lower income families.says the company will diversify into other demographic segments depending on the adoption rate.at lower-price points.Nestle India GMfoods Shivani Hegde says the instant pasta is made from suji. feels Devendra Chawla.and V L Rajesh.The pasta market can follow the growth trajectory of noodles if more players join the pasta bandwagon.including tier-II cities.He believes it is possible now to market pastas even in tier-II and III cities as instant noodles has paved the way for experimentation in such categories.
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