-------------------------------------------------------------------------------How ITC turned biscuits business around Govindkrishna Seshan BS June 28, 2006 11:20 IST

Biscuits and tea in the morning were a routine. So were the key market players a nd their favourite products. The two major players Britannia and Parle were busy biting of chunks of the nati onal market among themselves, with a host of smaller brands in various regions. While the business was still very competitive, there wasn't anything groundbreak ing. In 2003, with ITC foraying into the segment, a lot of that changed. At that time, Britannia and Parle held, between them over 82 per cent of the mar ket in value terms. The rest too was firmly held by smaller players like Priya G old which had a strong presence in the north. So, in essence, the market already had strong well entrenched players. So how could a late entrant like ITC make i ts mark? Three years down the line, however, things have changed a lot. It is a classic s tory of the hare and the tortoise. While it is far from winning the race, slowly and steadily, the tortoise is gaining ground. The late entrant is already on the podium in the third place with as much as 7 p er cent of the market in terms of value. "ITC made hay when the sun wasn't shini ng," says a consultant who's been tracking the industry for a long time. But fir st, why did ITC? train its eye on biscuits? Ravi Naware, chief executive, ITC Fo ods, makes it sound simple. "We decided to enter the foods segment because it's a Rs 550,000 crore (Rs billi on) market in India. But only 6 per cent of this is branded and packaged. In dev eloped markets, nearly 95 per cent of the food market is branded and packaged. S o there was lot of scope for a branded player." In foods, biscuits was tempting. The Rs 4,000-crore (Rs billion) Indian biscuits market has grown at 12-14 per cent year-on-year. Then, there was a business syn ergy. ITC was already value-adding to wheat with its branded atta presence. By e ntering the biscuits segment, it could also improve its bottomline further. But despite the fast growth rates, the biscuits industry was not all rosy. Over the years, even giants like Hindustan Lever had failed. For instance, HLL which had flirted with biscuits under the Max brand exited in 2005. But ITC's Sunfeast has a different story to tell so far. the strategist lo oks at the gameplan of a late entrant and how the biscuits industry has responde d. New recipe Before entering the segment, ITC dug into market research. Research revealed tha

sa at new products. That was precisely what the c ompetition had not done in a big way. "The? biscuits industry had witnessed little innovation. More recently.? Digestive Marie -." And in biscuits. which entered the western region in 2000. Findings revealed that cons umers wished to taste new and innovative products. marketing and innovations.which the company claims has been very suc cessful. the industry has seen a flurry of innovations from the big two . helped matters. Says Pravin Kulkarni. In 2003. The company says the brand? is now available in nearly 1. the company also looked at grocery stores and other retail formats. distribution channels are very im portant." In 2005. setting up a distribution channel is anything but easy. Says Naware. Sunfeast has been fortunate: thanks to its tobacco busi ness. However. marketing. ITC stuck to category favourites like Glucose. In 2006.the company's nam e for the hole-in-the-wall pan-beedi shops -. ITC launched Sunfeast with six ranges. distribution and visibility are extremely important as it's partly a impulse pu rchase product. before Diwali. is struggli ng to find its feet even five years later. Britannia launched Occasions -. Say s a consultant. Richa Arora. Sunfeast followed this up with the launch of Sunfeast Milky Magic. Britannia did re-launch its Tiger brand in 2005.t the category had gaps which ITC could settle into.was launched by Parle in early February 2006. it also launched innovations such as orange-flavoured Marie. Analysts believe that just because Sunfeast was a new brand.boxes of assorted biscui ts priced between Rs 50 and Rs 200 -. Britannia Industries. Distribution maze It's common knowledge. The company used its existing network of convenience stores -. Not content with the existing resources. But it was a calculated risk. Consumers were just waiting for something new. Brit . "We are not just looking such as different occasions is looking at more than just products. that for FMCG products. Britannia la unched its new double-flavoured Mariegold and 50-50 Chakkar. Glucose wa s Glucose and Marie was still Marie. Yes. Parle Products." Even the competition had not made things better. Consider this. however. In 2004. it also has laun ched the Sunfeast Snacky and Sunfeast? Golden Bakes.8 million outlets. general manager. in this regard. And Parle is all se t to launch at least two new products before the end of this year.for Sunfeast. "The biscuits industry had not witnessed any major product innov ation in years. Between 2000 and 2005 neither P arle nor Britannia launched any major new product. ITC already had a good understanding of distribution channels. but tapping newer opportunities -as well as out-of-home consumptions." The company decided that this could be its biggest point of attack. something fresh. Ma rie light and butterscotch-flavoured cream biscuits. Along with that. Priya Gold. But Britannia claims that it general manager and head of ys. Marie and Bourbon cream. "For biscuits. when Sunfeast happened.

nearly 1 0 per cent of its turnover on marketing. For two years then. the popular television series that was a rage among children." Pricing models The biscuits industry now has two clear models. . some which showed a complete cream world wit h cream rivers. mothers received informatio n on the importance of glucose. For promotions in southern s tates. Says a consultant.the company had teenage sensations Sania Mirza and Mahe sh Bhupathi campaigning for it. Essentially. In the same year. Shah Rukh Khan as its brand ambassador.5 million outlets. Sunfeast's next step was to step up its branding and promoti on. the wholeness of wheat and so on. the comp any tied up with Bey Blades.tit led the Sunfeast Open -. Sunfeast launched its major campaign. Parle. The company claims that it has been spending 35-40 per cent of its turnover from the biscuits segment on advertising and promotions. It signed on Hindi film act or.? Until last year. low margin game. Ad thrust In August 2003. the company undertook a major sampling exercise to promote the product. But Britannia and Sunfe ast look at a two-pronged strategy. Priya Gold spent close to Rs 45-50 crore (Rs billion). on general entertainment channels. Parle products plays the low pri ce game at all varieties of biscuits from glucose to cream. were targeted at kids watching cartoon channels. says it is? available in 1 . Parle plays a high volume. At the same time. Even market leader Britannia with spend s of Rs 100 crore (Rs billion) (2004-05) spends about 10 per cent of sales on ma rketing. it is yet to do something groundbreaking. "Although Sunfeast's Shah Rukh Khan association is interestin g. the brand did all the usua l rounds -. ITC is cl early? among the largest spender on ads? and promotions in the biscuits category .annia claims it has a superior distribution clout with its presence in nearly 3. Going by that number. booking that corner space in your favourite newspaper and so on. But that's not all. the seasoned player itself. to promote itself. Sunfeast has signed Tamil super star Surya as a brand ambassador. blocking television spots.riding behind buses. Well differentiated advertisements. But Arora says that the figure will increase substantially in 2006-07. as the official sponsor of? the WTA tennis championship -. cream mountains and cream trees. Analysts say that ITC's deep pockets have helped Sunfeast in many ways. High margins in cream variants and volumes f rom the Marie and Glucose segments. ITCs annual marketing spends are estimated to be in the region of about Rs 115-120 cr ore (Rs billion). In April 2005. 3 million outlets. But industry experts aren't impressed. Analysts predict that these figures are all set to rise this year. Also. a month after its launch. like Britannia khao world cup jhao or the Lagaan promotion for that matter.

consumers are extremely price sensitive. Creaming the market. Mahesh Bhup ati and Sania Mirza.? Britannia leads the market with 37 per cent market share. Innovation in the product line -.000 crore (Rs billion) biscuits segment -. Even Priya Gold has seen a minor dip from 6. the companies have little choice." No w onder all the Glucose and Marie variants straddle price points of Rs 4-6 (for 10 0 grams).3 per cent. But what can the bigger players do? Alagh has an interesting observation. however. all of Parle's products lie in the price range between Rs 4 and Rs 6 f or 100 gram packs. "the biscuit consumer is willing to pay more only when he sees a clearly diffe rentiated product.7 per cent. Both Britannia and Parle have very high volumes and can easily afford to lower their margins. Gained an edge from the well established distribution network of its tobacco bus iness. chairman. Says Naware. Except for Hid e & Seek. In terms of value. Britannia's shares ha ve dropped from 35. Says h e. the gap i s still wide. in Glucose and Marie. To be fair. Marie and the popular glucose varieties make up for nearly 55 per cent of the Rs 4. ITC's Sunf east has been a big gainer with its share increasing from 2. Branded the WTA tennis tournament with promos starring tennis stars.3 per cent and ITC's 6.200 crore (Rs billion). Parle's shares have also dropped from 42. only charges Rs 5 for its cream variants. "Biscuits have always been a low margin. . Sunfeast still has a long way to go." Importantly.5 per cent in May 2006 (volumes). Parle. Hence companies have little choice in terms of pricing. SKA Advisors. fo llowed? by Parle's 31.7 to 6. Key challenges Back in 2003.4 per cent in the same period.For instance.4 per cent to 5 per cent. While the full game is ye t to be played out. for the moment the sun seems to be shining on Sunfeast. Nevertheless. and former CEO of Britannia Industries . Signed up big film stars like Shah Rukh Khan and southern star Surya as brand am bassadors for Sunfeast. both Britannia and Parle have lost volumes. According to the AC Nielsen retail sales audit in March 2006. nobody thought? Sunfeast would have consumers eating out of its ha nds. . high volume game.a significant R s 2. "Seven per cent in less than three years is something that we could have only dreamt about. As there is little differentiation. Says Sunil Alagh.biscuits with butterscotch cream with actual g ranules in the cream. But these segme nts are important. cream biscuits from both Britannia and Sunfeast cost Rs 10 for 100 grams." A potential after-effect? Sunfeast too may have to drop its prices to be in the reckoning and this will squeeze its margin even lower.8 per cent in 2004-05 to 30. industry barometer AC Nielsen has indicated that both Parle and Bri tannia are losing market shares. . strawberry cream with flavour-enhancers and orange-flavour ed marie.2 to 38.

but not strong enough advertising campaigns for big brand recall. rewritten. needs further embellishments Big brand ambassadors. The gap between the number three and the top two slots is too wide.com///money/2006/jun/28spec. -------------------------------------------------------------------------------URL for this article: http://www.wikipedia. . \ site : http://en. . broadcast. This material may not be pub lished.htm -------------------------------------------------------------------------------© 2003 rediff..com India Limited. Competitors can play the low price game as they have volumes to support. All Rights Reserved.org/wiki/Promotional_mix . or redistributed.rediff.

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