Rural Marketing SAINAND BEEDIS

Submitted By Group 9
Amber Yadav 15/68
3/20/2013

Arnab Guha Malik 15/74

Hersh Kenkare 15/91

Abhisek Paul 15/197

Ankur Dey Tarafdar 15/204

Sumanto Das 15/256
1

RM SAINAND BEEDIS | IIM KOZHIKODE

Case Facts!!!
Current Sales trend:

+
Manufacturing in Koratla and Hyderabad (Karimnagar District, AP)

January to June : 150 bags per month (Peak Season)

_

July to December : 128 bags per month (15% drop in sales ) (Lean Season)

Leading beedi manufacturer in Bhadrachalam town area in terms of market share Production facilities in Hyderabad and Koratla in Karimnagar district

Bhadrachalam (83.33%)

Kothagudam (0%) Cherla (92.86%) Palawancha (8.57%)

Started in 1979-80 by Satyanarayana
2

3/20/2013

RM SAINAND BEEDIS | IIM KOZHIKODE

Current Scenario!!!

CUSTOMERS
•Average monthly income of Rs. 1000 •Purchased beedis in loose for Rs. 1 or Rs. 2 instead of buying in packs •Quality, brand and price are critical •Target market: agricultural laborers and teenagers

Intense competition

•Regional and Local Players •Stagnant Sale

Low Quality / Price
COMPETITION
•Highly fragmented market with no beedi manufacturer having a share of more than 5% •Competition regional in nature •PVS beedis biggest competitor in Bhadrachalam •S beedis a competitor in Palawancha and Kothagudam markets •Competition from imitation brands

COLLABORATORS
•Started off by selling directly to retailer •Currently have 2 distributors in Bhadrachalam and Cherla

•Counterfeit Products

Failure of Farmash Sainand Beedis

•Similar Quality as competitor •Low Price

3/20/2013

RM SAINAND BEEDIS | IIM KOZHIKODE

3

Marketing Strategy – The 4 Ps | Product

Size of the bag 20 beedis made one packet Product sold in 2 sizes : bigsized and normal sized 70% high quality tobacco, 30% lower quality tobacco 20 packets made one bundle 10 bundles were tied together 10 such units made one bag

Hand rolled beedis by the locals

Tendu Leaves and tobacco sourced from nearby areas : Karnataka, Gujrat, MP, Orissa

Price
Brand Sainand (Normal) PVS (Normal) S beedi (Big) Dost (Big) Manufacturer 36.45 (7%) Distributor (Margin) 39 (2%) Wholesaler (Margin) 39.8 (2.5%) Retailers (Margin) 40.8 (17.6%) Consumer 48 Cost to Consumer (per stick rate)

12 paise
14.4 paise

60.4 (2%)

61.6 (16.9%)

72

64.8 (2.8%)

65.6 (9.75%)

72

18 paise

36.6 (2.7%)

37.6 (27.6%)

48

12 paise

Kismet (Big)

31 (3.2%)

32 (25%)

40

11 paise

The cost per stick is less than the major brands but more than the local players

Place

Storage - Central storage in Bhadrachalam

Delivery - Kothagudam and Palawancha mandal were located contiguously

Selling - Through Retailers - Replenishment once a week - Regular servicing – Less stock at retailer

- Distributors in Bhadrachalam and Cherla Mandal

 Nearby areas – 2 wheelers

 Upto 10km – Cycle rickshaw van  10km – 60km – autorickshaw/ van

Credit Policy  Credit to retailer on first purchase  Feedback and request for payment on second purchase  In case of an increasing demand it could recover some of the due amount on the pretext of supplying stock  Most of the benefits were in the form of kind and not trade discounts

Promotion
P
R M O T E *
• Promotion strategy was to focus on high quality of tobacco from Nippani

• Cinema slides, wall paintings, shop paintings & audio cassettes with recorded message

• Rickshaw decorated with posters and equipped with loud music • feedback mechanism- wholesaler had to sign in the locations covered

• Free sampling of beedis

• Consumer promotions • Rs 1, 2, 5 denominations in pack • Silver coins on completing the brand name • Educating consumers against duplicate brands

• Promotions on erected tents

Issues in 2001

Sustaining
Continue the 5% growth in the Bhadrachalam market Countering competition from PVS beedis and local players

New Markets
Market entry into Kothagudam, Palawancha

Gain retail shelf space, counter stiff competition

Option 1:To enter into new adjacent markets: Kothagudam and Palawancha

Palawancha has a potential of 35 bags per month and Kothagudam 60 bags . Low penetration of Sainand Beedis – 3 bags per month in Palawancha

Geographically closer to Bhadrachalam

Sainand Beedis manufactures beedis of similar high quality as that of its competitors in Palawancha and Bhadrachalam

PROS

Customers are highly brand loyal and the market is strongly held primarily by few competitors

Sainand beedis’ initial efforts of promotion had little impact

Competitor’s distributor had considerable influence on wholesalers

CONS

Option 2: Increase efforts in existing markets to gain market share
PROS • Sainand Beedis commands higher brand awareness in Bhadrachalam and surrounding areas • Provides high quality beedis at low cost as compared to its competitors • It has established distribution channel in the Bhadrachalam and Cherla areas CONS • Stagnant growth observed in the market • Competition mainly because of the presence of local brands and imitation products

Way Forward

Stagnant growth in existing markets

Huge potential in neighboring new markets

Sustainable growth through new market entry

Ansoff Matrix - Analysis
PRODUCTS
EXISTING NEW

EXISTING

Market penetration

Product Development

MARKETS

NEW

Market Development

Diversification

Consumer Purchase Behaviour
Behavior Consequences

• Consumer segment: Agricultural Labourers & Farmers • High brand loyalty • Price Sensitive • Regional and seasonal influences on purchase Summers -> stronger beedis • Quality perception: taste & type of ash • Loose units preferred over packs

• Retailer promotions of much greater significance • Need to compete in brand image as well as cost • Peer group acts as source of information • Low awareness / exposure to news media promotions

Retailer Characteristics
Characteristic Rural Market Spread

Current Situation
Spread over 3 mandals
Distance from Major market Bhadrachalam Regular sales calls on retailers

Implications
High-cost distribution system Good channel promotion Do not prefer to stock Regular supply

Retail Shelf

Space constraint with retailers

Sales & Stock Turnover

Retailers preferred brands with quick stock turnover

Need to create brand loyalty

Channel Behavior
Attributes
Credit facilities to consumers

Current Scenario
Low cost FMCG product Intense competition based on cost • Wholesaler: Driven by demand from retailer • Retailer: preferred brands with quick stock turnover Wholesalers influence retailers •Consumer promotion schemes • Awareness about duplicate brands •Distributor incentives

Implications
Insignificant influence Sainand beedis favorably placed

Pricing & under-cutting

Reason for stocking

Local consumer base driven

Source of Information

Manufacturers need to consider consumer and wholesalers

Promotions

Retailers overlooked (low incentives)

Recommendations
Use delivery vans as a promotion van for the new areas. This will help reinforce the brand in the minds of the customers

Promotion: Demand Creation

To generate sampling, provide free trials through the promotion van
As the retailers seek demand in the local market to stock products, we plan to use audio and visual promotions in haats and fairs to reach out to a larger base Radio advertising to target the gricultural labourers

Delivery van can be used as point of sale until retailers gain confidence on the brand/ till demand is created in the market
Trade promotions targeted at wholesalers and not just retailers – quantity purchase scheme, discount schemes; wholesalers important influencers for retailers As and when demand increases, we propose to create a new storage point to cater to the needs of Kothagudam and Palawancha

PLACE

Existing Market Future Scope

Should go for paper ring with transferring the additional cost of 3.6% to consumers - Fight with counterfeited products, Increase brand awareness Launch Farmash Sainand beedis as there is good scope in these market for big beedis (table 1)

Appendix
Remarks Target Sales (No of Bags per month ) No of Bags to be sold per day No of bundles to be sold per day Profit per bundle (Rs2.5 per bundle) Total Cost Per day Total Profit per day Total profit per month Total Monthly Profit after hiring the van (Daily cost 225 per day) (1st month = 10 days, the next 2 months = 5 days each) Overall Profit for both market Month 1 5 0.167 16.7 41.75 66 -24.25 -727.5 Month 2 10 0.34 34 85 66 19 570 Month 3 15 0.5 50 125 66 59 1770

-2977.5 -5955

-555 -1110

645 1290

3/20/2013

RM SAINAND BEEDIS | IIM KOZHIKODE

17

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