Wafer Warfare

A project aimed at understanding the Indian Wafer Snacks Market

with special emphasis on Market Size, Market Structure,
Competitors and their Strategies.
By:-
Rahul Vaswani
Chetanas R.K Institute of Management & Research
Roll No:116 (M3, MMS Marketing)
The size of the Wafer Snacks Segment in India is estimated to
be 4,500 5000 crores


The market is growing at 30 percent annually


The branded players account for 2,000 crores of the market size


Major branded players include Frito-Lay, Bingo, Haldiram,
Balaji, Parle


Potato Chips and Potato based items account for 85 percent of
the total snacks segment.


As per Nielsens Retail Audit, Frito-Lay commands 45% market
share, followed by Haldiram at 27% and Bingo at 16%


The rest is divided between new players such as Smart Chips,
regional players such as Balaji and handful of unorganized players
Introduction to the Indian Wafer Snacks Segment


Prominent Brands and their offerings

Lays
Kurkure
Lehar Namkeen,
Cheetos
Uncle Chipps
Frito-lay
Bingo
ITC
Musst Bites & Stix
Smart Chips
Cheeslings
Parle
Snacks
Balaji Wafers
Haldiram
Yellow Diamond among other local players.
Other
Players
Analyzing Segment Attractiveness
(Porters 5 forces)
Industry Attractiveness (Porters 5 forces)

Threat of new entry:

As the market is growing at 30 percent annually, new
entrants may consider it a profitable venture

As branded players are priced similarly, new players might
penetrate by adopting a lower price or by offering more
grammage at the same price (Balaji-strategy)

New players with a distinct USP and marketing strategy
may find it easier to enter the market (Bingo Strategy)

Unorganized players still account for half of the total wafer
segment, thereby discouraging market entry

Veteran players such as Fritolay, Haldiram etc enjoy
economies of scale, well-established distribution and good
distributor relations.

Hence, the threat of new entrants is moderate.
Competitive Rivalry

High Competition Branded Players involved in cut-
throat competition to increase market share, entice new
consumers, find new markets


Low Quality differences among branded players.


Quality difference between branded and unbranded
offerings is offset by low price offered by unbranded players


Cost of switching is low as all players have a similar
pricing strategy


Brand Loyalty is high for branded players

Industry Attractiveness (Porters 5 forces)

Hence, the threat of competitive rivalry is high.
Bargaining power of suppliers

Suppliers provide raw materials such as potatoes, spices and
other ingredients. Their ability to raise input costs is high.


Higher cost of input commodities leads to lower margins,
making the market unattractive for distributors and retailers (in
an already low-margin, high-volume market)


Shortage of any input material may also affect production
and thereby impact distribution.


Veteran players like Fritolay and ITC already have a well-
established network of suppliers. ITCs e-choupal venture
permits a steady supply of raw materials at the lowest price.

Industry Attractiveness (Porters 5 forces)

Hence, the bargaining power of suppliers is high.
Bargaining power of consumers

Frito-Lay enjoys a healthy lead with a 45 percent market
share for its portfolio of products


Competitor differentiation is in terms of variants and
communication.


Ability to substitute is high as brands are priced similarly
and distribution problems for one brand promote sales for the
other.


Price Sensitivity is high. An increase in the price of Lays
may promote a switch to Bingo for most buyers (except for
loyalists)

Industry Attractiveness (Porters 5 forces)

Hence, bargaining power of consumers is high.
Threat of substitutes.


Indian Snack Segment is high-volume, low-involvement
driven (thrives on impulse buy)


All snacks are considered to be substitutes of each other
Biscuits, Wafers and local snacks like Chakli, banana chips,
farsan etc are all substitutes of one another


Industry Attractiveness (Porters 5 forces)

Hence, the threat of substitutes is high.
Final Verdict

The market is unattractive for players who:



Aim to be a me-too product with no significant
differentiation
Do not have a well-established distribution network
Do not have good supplier and dealer relationships




However, if one can Pull a bingo or carve out a Smart
Niche ala Smart Chips, the entry to this market may be
profitable.

Industry Attractiveness (Porters 5 forces)

Understanding
The
Market Structure
Fritolay (45 percent cumulative share
consisting of Lays, Kurkure, Uncle Chipps,
Cheetos and Leher)
Market
Leader
ITCs Bingo (16%) posing a threat to Lays
through its direct frontal attack
Market
Challenger
Balaji and local players such as Yellow
diamonds. Also included are unorganized
offerings, aimed at the price-sensitive, less
loyal audience.
Market
Follower
Parle Monacos Smart Chips which has
identified itself a niche of the more health
conscious section of the audience by offering
them a baked variant of chips.
Market
Nicher
MARKET STRUCTURE

Stages in the
Lifecycle
of the Category
Product Development Stage

This stage is characterized by

No Sales & Profit

Product Testing identifying a sample target group to
evaluate the potential of the product

Research & Development aimed at constantly
improving/differentiating the product

Eg, before Launch, Bingo developed a cross-sectional team
of 8 individuals who travelled across 14 cities to identify the
snacking habits of the Indian Consumer. The team found out
that local-tasty snacks like khakra, vada pav , samosas, etc
were the popular choices among the Indian audience. Based
on this information, the company decided to develop flavors
with an Indian taste.

Test Marketing may be conducted by launching the
product in one or two markets initially.


Lifecycle Stages of the Wafer Segment

Introduction STAGE

The product is launched in the market, either as a single
variant or multiple variants, single SKU or multiple SKUs. In this
case, it is advisable to go for multiple SKUs to off-set price-
sensitivity.

The price is set keeping in mind the competitors offering, the
price-sensitivity, market size, cost of switching, extent of brand
loyalty among other factors. However, it is advisable to follow
the leader in this regard unless there is a significant USP. If the
product is me-too, a lower price is advisable

Promotional Spends, if launched nationally, must be high
enough to gain maximum visibility in the early stages. Efforts
must be made to keep the communication simple and unique.
The launch campaign must be such that it doesnt get lost in the
clutter.

FMCG thrives on distribution so the firm must have a well-
established network in its place. The firm may look at providing
add-on schemes, value deals to dealers and retailers not
provided by competitors.


Lifecycle Stages of the Wafer Segment

Growth


Depending on the success in the growth stage, the firm
may aim at product improvement. In terms of SKUs,
packaging, etc.


The company may introduce newer variants through
continuous R&D


The firm may undertake sales promotion such as extra
grammage, freebies, etc.


Example: The sales of Lays multiplied through the
introduction of Tazo


If the product was launched in smaller markets, the firm
may consider increasing distribution coverage.

Lifecycle Stages of the Wafer Segment

Maturity

The market becomes saturated. Hence, the firm may place
emphasis on :-

Lifecycle Stages of the Wafer Segment

Product Modification
Re-branding Strategies
Distribute in selective profitable
areas
Exit out of markets where the
product doesnt get the desired sales
numbers
Decline


The Company may withdraw the product
from the market. If in-case of a multi-brand
company, the company may focus on profitable
brands (cannibalize its weaker brands)


The firm may adopt a permanent sales
promotion strategy such as buy one-get one
free, discounted price, more grammage in case
of large unsold inventory.


Lifecycle Stages of the Wafer Segment

Marketing Strategy adopted by Frito-lay
(The Market Leader)

Product Strategy:-

Frito-Lay's product strategy aims at differentiating among its
own brands in terms of product taste, design, packaging and
target audience.
Marketing Strategy of Frito-Lay

One of the power brands under Fritolay comes in 5 different
flavours. Tomato Tangy, Classic Salt, Cream n Onion are the
popular westernized variants, while Magic Masala and Lime
Masala are aimed at craving the Indian-taste.
Lays
Launched in 1999, the brand symbolizes the spirit of India with its
Indianized farsan-like flavors. The newly launched Desi Beats
variants are a direct answer to Bingos strategy of launching
Indianized flavours.
Kurkure
Launched in 1995 provides variety from other Fritolay offerings
such as Cheese Puffs & Masala Balls. The product differentiation
is apparent in terms of design and shape. Also the inclusion of
cheese as an input material distinct it from other brands.
Cheetos
A salt farsan-like snack aimed is a direct alternative to the
offerings of unorganized players.
Leher
Namkeen
Pricing Strategy


The pricing strategy for Lays is consistent with other
competing players. As this market is driven by high-
impulsive buyers of snack foods, there is very little
dichotomy in the pricing strategies of all major players.


Lays and Kurkure, the two popular choices, come in
different SKUs priced at Rs.5, Rs, 10 and Rs. 20, similar to
Bingo and Haldiram.


Recently, however Fritolay launched a Rs.3 SKU for its
Kurkure brand in a bid to compete more aggressively.

Marketing Strategy of Frito-Lay

Promotional strategy


Realizing the direct threat posed by Bingo to its market share, Fritolay
revamped its branding strategy for all leading brands.

For Lays, the company signed on ambassadors Saif Ali Khan & MS
Dhoni. Indianized versions of Lays were also launched after Bingos
success with Indian flavours. These included Chat Street,

Chala Change Ka Chakkar the largest ever brand promotional
strategy undertaken by Fritolay aimed at bringing all its flagship brands
under one roof. This massive umbrella campaign would allow chosen
customers to live the life of a Bollywood Indian celebrity for a day.

Chai Time Achievers a Kurkure centric campaign was aimed at the
housewives in India. The Idea was to promote heavy audience interaction
by sending recipes for new flavours. The winning family would then have the
opportunity to have their photographs on one million Kurkure packs

Aside from Juhi Chawla, the company also signed on Kareena Kapoor
for the Desi Beats version of Kurkure.

Other initiatives include posters at unconventional retail points such as
cyber cafes and telephone booths, a tie-up with South-Western Railways,
known as Kurkure Express to increase brand visibility.

Marketing Strategy of Frito-Lay

DISTRIBUTION STRATEGY

Being first in the market through its acquisition of Uncle
Chipps, Fritolay already has a well-established network of
distributors and retailers pan-India. The brand loyalty enjoyed
by Lays was leveraged during the launch of Kurkure, Cheetos
and the recently launched Aliva


Frito-Lay has a distribution network of 30 CFAs and 2
RDCs who service 800 distributors who sell to 4 lakhs retailers.


Fritolay boasts of reaching more than 1 million retail
outlets countrywide covering 100 towns. The Company, with its
manufacturing plants in Punjab and Pune, aims at investing
20 crores to extend distribution facilities to improve coverage
and increase product shelf life by 120 days.

Marketing Strategy of Frito-Lay

Marketing Strategy adopted by Bingo
(The Market Challenger)

Product strategy

Bingo positioned itself as chips with an Indian twist.
The 16 flavors introduced at launch were carefully
developed through R&D.

The initial offerings were a mix of potato chips and
finger snacks.

The Potato chips segment includes variants like
masala, salted, tomato inspired by the snacking habits of
the Indian consumer

The offerings under Finger Snacks include the pakoda
inspired Live Wires and Khakra inspired Mad Angles

These offerings were further differentiated by providing
SKUs at Rs. 5, Rs.10 and Rs. 20

Marketing Strategy of Bingo
Pricing strategy


The main objective for ITC was to compete effectively with
players who were already there. Hence, it launched a direct
frontal attack by introducing similar priced SKUs.



ITC already enjoyed cost advantage over competitors
through its e-choupal initiative. This also facilitated timely
supply of raw materials.



ITCs printing and packaging business also lead to high-
quality, cost-effective and innovative packaging.

Marketing Strategy of Bingo
Promotional strategy


Bingo was strategically launched at the time of world cup to cash
in on the popularity of snacks among the cricket lovers of the
country.

The advertising strategy revolved around slapstick humor and
irrelevant themes to hold eyeballs, garner attention and interest,
and stand out from the clutter.

ITC booked 10 to 15 spots per channel per day, 20 spots on radio
stations supported by 1000s of hoardings advertising the product.
According to industry estimates, the total advertising spend in the
initial 6 months were roughly 100 crores.

While its competitor Fritolay focuses on celebrity endorsements,
Bingo chose a different route. It didnt have an ambassador!

As the product is aimed at the youth, digital media was heavily
used. For instance, the Bingo National Gaming Championship
across 4 cities with more than 25,000 participants

Bingeonbingo.com and Mad Angles Twister Application
(Facebook) were other initiatives in online media.
Marketing Strategy of Bingo
Distribution strategy


ITC already had a well-established distribution network through
its cigarette and tobacco-related offerings which was leveraged in
case of Bingo.


Further, the company distributed 4 lakh racks across all
retailers to display the brand at all Points-of-sale.


Within 6 months, Bingo was available across 2,50,000 retailers
across the country.


A crucial alliance with Future group which lead to all future
group retail outlets like Big Bazaar, Food Bazaar stocking only
ITCs Bingo


HORECA (Hotels, Restaurants and Cafes), Local betel shops
are all being used to distribute Bingo to a wide range of audiences
Marketing Strategy of Bingo
Marketing Strategy adopted by SMART
CHIPS
(The Market NIChER)
Product strategy

Parle Monaco recently entered the chips segment with its
healthy variant called Smart Chips. Realizing the recent
market trend of being more health conscious, Parle,
through Smart Chips has carved out its own niche.
Highlighting its USP of being baked rather than friend.
Smart Chips comes in 4 different flavors:


Simply Salted
Tangy Tomato
Crazy Chat
Macho Masala
Marketing Strategy of Parles Smart Chips

Among its competitors, Parle has had a tough time
gaining a considerable market share for its snack
offerings. Must Bites & Must Sticks together account
for 5-7 percent of the total organized wafer chips
segment

Pricing strategy
Similar to competitors, Smart Chips comes in two SKUs. Rs. 5
for a 25 gm pack and Rs. 10 for a 50 gm pack


Promotional strategy
The ad campaign, handled by Thoughtshop Communications,
features Aamir Khan advocating the benefits of baked chips over
the fried ones taking a subtle shot at competing brands

The ad highlights the USP of the product in a humorous way
without sounding to preachy or serious, which enables it to stand
out from the clutter.


Distribution strategy
Being a veteran player in the food and snacks segment, Parle
already has a well-established framework of distribution through
its biscuits and other snack offerings. This has enabled Parle to
distribute Smart Chips effectively, reaching millions of retail
outlets.

Thus, with the advent of Smart Chips, Parle has carved out a
small niche for itself aimed at the health conscious snack-lovers.
However, it remains to be seen how this product performs in the
long run.
Marketing Strategy of Parles Smart Chips




Frito-Lay's Success Mantra Right Strategy at the Right Time

Respond to Competitors threats
When Bingo started eating into Fritolays market share, the company proactively responded by launching its own
versions of Indianized flavours spread across all its brands. Taking a cue from its competitor in terms of increased
audience interaction and online marketing, Fritolay expored new mediums of advertising which lead to the launch of the
massive Chala Change Ka Chakkar Campaign
Consistent Communication
Fritolays communication is one of its key strengths. It has managed to create a distinct image for all its brands
Kurkure, Lays among others. Any launch of a new variant/line extension is supported by a 360 degree marketing
campaign to create awareness and induce trials.
If youre not the first in the market, compete head on
and if possible acquire the competitor
Being first in the market, in 1992, Uncle Chipps enjoyed tremendous success. When Fritolay entered India in 1996 with
its brand Ruffles, it went head on with Uncle Chipps but still couldnt gain significant market share. However, post 2000,
it bought out Uncle Chipps for an undisclosed sum, thereby wiping out its sole competitor in the branded wafer market.

Learnings from the competitors.


A well-planned full frontal attack on the leader may
sometimes yield fruitful results (Bingo)
A thorough analysis of the leaders offerings will reveal
missed opportunities (Smart Chips)

Once a USP over the leader and other competitors is
identified, it must be communicated in simple and clear
terms (Smart Chips)
Innovative advertising and communication, if done right,
helps stand out from clutter and reach the target audience.

If there is no significant product or distribution
differentiation, focus on the other 2Ps namely Price and
most importantly promotion.
WEB-BASED REFERENCES

1) http://www.imagesretail.com/support_jan_suplychain.htm
2) http://www.televisionpoint.com/news2009/newsfullstory.p
hp?id=1244814371
3) Official Websites of Fritolay, Parle, Balaji, Bingo among
other brands
4) http://www.afaqs.com/perl/news/story.html?sid=20324
5) http://www.moneycontrol.com/news/business/frito-lay-
loses-snack-mkt-share-to-itcs-bingo_300325.html
6) http://www.bizdewz.com/parle-monaco-smart-chips-vs-
lays-or-aliva/
7) http://www.afaqs.com/perl/news/story.html?sid=25651
8) http://economictimes.indiatimes.com/news/news-by-
industry/cons-products/food/Balaji-Wafers-a-name-to-
reckon-with-in-Gujarat-snacks-
market/articleshow/5367599.cms

REFERENCES

TEXTUAL REFERENCES

1) Marketing Strategy Walker, Mullins, Boyd
2) Marketing Strategy & Plans Michael Vaz
3) Class Handouts Prof. Dr. Amit Rangnekar
THANK YOU