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Submitted By: ABHISHEK SRIVASTAVA 002 BEENA VENUGOPALAN 012 JOTINDER SINGH 022 NISHANT DHORELIYA
Submitted By: ABHISHEK SRIVASTAVA 002 BEENA VENUGOPALAN 012 JOTINDER SINGH 022 NISHANT DHORELIYA

Submitted By:

ABHISHEK SRIVASTAVA

002

BEENA VENUGOPALAN

012

JOTINDER SINGH

022

NISHANT DHORELIYA

032

RADHA A

042

SOUBHAGYA RATH

052

YOGESHWAR DUTT

062

EXECUTIVE SUMMARY Nestlé India is a subsidiary of Nestlé S.A. of Switzerland. With six factories

EXECUTIVE SUMMARY

Nestlé India is a subsidiary of Nestlé S.A. of Switzerland. With six factories and a large number of co-packers, Nestlé India is a vibrant Company that provides consumers in India with products of global standards and is committed to long-term sustainable growth and shareholder satisfaction. The company is known for its brands in the Milk Products & Nutrition, Prepared Dishes & Cooking Aids, and Chocolates & Confectionery segments.

Nestlé leads the value sales of noodles in India with a market share of 79.3%. A testament to Nestlé's domination of the sales of plain noodles is the fact that for its instant noodles brand Maggi, among all its global offices, India accounts for the highest level of volume sales for the company.

This marketing plan analyses the current marketing mix of Maggi Noodles, studies the popularity of the two new health variants Vegetable Atta and Dal Atta Noodles and makes suggestions with regard to introducing a new brand “Cup O Maggi” in the cup noodles segment. Various tools like surveys and secondary sources of information have been utilized for the purpose of this analysis.

TABLE OF CONTENTS 2. SITUATION ANALYSIS 5 2.1 Market Summary 5 2.1.1 TARGET MARKETS 5

TABLE OF CONTENTS

2. SITUATION ANALYSIS

5

2.1

Market Summary

5

2.1.1 TARGET MARKETS

5

2.1.2 MARKET DEMOGRAPHICS

5

2.1.3 MARKET NEEDS

6

2.1.4 MARKET TRENDS

6

2.1.5 MARKET GROWTH

8

2.2 SWOT

10

2.3 COMPETITION

11

 

2.3.1 TOP RAMEN

11

2.3.2 ITC SUNFEAST PASTA

11

2.4

CURRENT MAGGI NOODLES BRAND

12

IDENTITY/KAPFERER’S PRISM

12

2.5

PRODUCT OFFERING

13

2.6

PRODUCT DISTRIBUTION

13

2.7

KEYS TO SUCCESS

14

2.7

CRITICAL ISSUES AND CHALLENGES

14

3. MARKETING STRATEGY

15

3.1 MISSION

15

3.2 MARKETING OBJECTIVES

15

3.3 INDUSTRY SEGMENTATION

16

3.4 TARGET SEGMENTS FOR MAGGI NOODLES

22

 

3.4.1 MAGGI 2 MINUTE NOODLES

22

3.4.2 MAGGI CUP O NOODLES

23

3.5

POSITIONING OF MAGGI

23

3.5.1 MAGGI 2 MINUTE NOODLES

23

3.5.2 CUP O MAGGI

23

4. MARKETING MIX

24

4.1

CONSUMER SOLUTION

24

4.1.1 IMPROVING THE DAL ATTA VARIANT

24

4.1.2 NEW PRODUCT: THE CUP-O-MAGGI

24

4.1.3 PACKAGING

24

4.2 CONSUMER COST

25

4.3 CONVENIENCE

26

4.4 COMMUNICATION

27

4.5 MARKETING RESEARCH

28

5. FINANCIALS

31

5.1

BREAKEVEN ANALYSIS OF A 100 TONNE CAPACITY PLANT OF CUP O

MAGGI NOODLES

31

 

5.1.1

BREAK-EVEN ANALYSIS

31

FINAL TOTAL COST ANALYSIS

33

5.1.2 ANALYTICAL BREAK-EVEN ANALYSIS

33

5.1.3 GRAPHICAL BREAK-EVEN ANALYSIS

34

5.2

SALES FORECAST

34

APPENDIX A: INDIAN INSTANT NOODLES MARKET GROWTH GRAPHS

36

APPENDIX B: NESTLE MAGGI NOODLES FORECAST RETAIL SALES

37

1. INTRODUCTION Ever since its launch in India in 1983, this brand has become synonymous

1. INTRODUCTION

Ever since its launch in India in 1983, this brand has become synonymous with noodles. The bright red and yellow colours of the packet with the brilliant blue “2-minute Noodles” printed on it has found a place on every kitchen. Over the years, Maggi has grown as a brand and positioned itself as a “Fast to cook! Good to Eat! “food product.

The history of this brand traces back to the 19th century when industrial revolution in Switzerland created factory jobs for women, who were therefore left with very little time to prepare meals. Due to this growing problem Swiss Public Welfare Society asked a miller named Julius Maggi to create a vegetable food product that would be quick to prepare and easy to digest. Julius, the son of an Italian immigrant came up with a formula to bring added taste to meals in 1863. Soon after he was commissioned by the Swiss Public Welfare Society, he came up with two instant pea soups & a bean soup- the first launch of Maggi brand of instant foods in 1882-83.Towards the end of the century, Maggi company was producing not just powdered soups, but bouillon cubes, sauces and other flavourings.

However in India (the largest consumer of Maggi noodles in the world!) it was launched in 1980 by Nestle group of companies. Maggie had merged with Nestle family in 1947.

When launched it had to face a stiff competition from the ready to eat snack segments like biscuits, wafers etc. Also it had other competitor the so called home made snacks which are till today considered healthy and hygienic. Hence to capture the market it was positioned as a hygienic home made snack, a smart move. But still this didn’t work, as it was targeted towards the wrong target group, the working women.

After conducting an extensive research, the firm found that the children were the biggest consumers of Maggi noodles. Quickly a strategy was developed to capture the kids segment with various tools of sales promotion like pencils, fun books, Maggi clubs which worked wonders for it. No doubt the ads of Maggi have shown a hungry kid saying “Mummy bhookh lagi hai” to which his mom replies “Bas do minute!” and soon he is happily eating Maggie noodles. Further the MAGGI 2-MINUTE Noodles has been renovated to provide 20% of the RDA 1 of Calcium and Protein for the core target group building on the nutrition proposition “Taste bhi health bhi”. The company could have easily positioned the product as a meal, but did not, as a study had shown that Indian mentality did not accept anything other than rice or roti as meal. They made it a easy to cook snack that could be prepared in just two minutes.

The formula clicked well and Maggi became a brand name.

1 Recommended Dietary Allowances for children of 7–9 years as per “Nutritive Value of Indian Foods”, published by Indian Council of Medical Research, Reprinted ‘04.

2. SITUATION ANALYSIS Nestlé’s Maggie noodles is the leading brand in the instant noodles segment

2. SITUATION ANALYSIS

Nestlé’s Maggie noodles is the leading brand in the instant noodles segment in India, enjoying a market share of 79.3%. The brand has grown to an estimated Rs 200 crore & contributes to around 10% of Nestle India’s top line. Being the pioneer in the noodles market has given it a first mover’s advantage over other brands. Maggi has regularly come up with new flavours and has recently launched two variants- Vegetable Atta and Dal Atta noodles, catering to the increasing demand for healthy snacks.

2.1 Market Summary

2.1.1 TARGET MARKETS

Primary target: Children (<16)

Nestle plans to widen its target audience by launching new variants Vegetable and Dal atta noodles for health conscious people.

2.1.2 MARKET DEMOGRAPHICS

Demographics:

Region: urban, semi-urban, rural (recent) Occupation: Housewives, working professionals, self-employed Sex : Unisex Income: 1,20,000 p.a. upwards Social class: Middle and upwards Family life cycle: Young, single, married with children.

Behavioural:

Occasions: Regular, Everyday user-urban, rural-depends on the temporal aspects of the consumer’s life(varied usage in terms of time of time of day, week, month, year) User status: first time user-rural, potential users-semi-urban, heavy users-urban Usage rate: Heavy user-urban, light-rural, medium-semi-urban Loyalty status: hard core and shifting loyals Buyer-Readiness Stage: rural-some are aware, semi-urban:some intend to buy(aware, informed),urban: informed(some desire,some intend to buy) Attitude toward product: Enthusiastic, positive

Psychographics:

Lifestyle: Hard pressed for time

2.1.3 MARKET NEEDS The urban Indian is used to having his di nner late from

2.1.3 MARKET NEEDS

The urban Indian is used to having his dinner late from around 8:30 pm to as late as 11 pm. Hence a convenient snack between lunch and dinner is an often exercised option. In rural areas, smaller priced packs stimulates demand.

Maggi is a fun and convenience brand which sits strongly in its position as a "good to eat, fast to cook" anytime snack and is popular across different age groups. Opportunities in practically all consumption categories arise in terms of "reach" and "medium of consumption". Hence the onus is on the company to make it easily available and affordable and in different sizes, catering to different categories of users like the new Maggi chota pack conveniently priced at Rs 5 for 50gms. The Indian palate is not too adventurous in terms of trying out new flavours.In fact today, Maggi have settled at standard flavours such as curry, masala, tomato and chicken and not much experimentation is necessarily required in the noodles market. People prefer to have it easily available and affordable.

2.1.4

MARKET TRENDS

 

The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015.

Penetration level is only 30% for Maggi Noodles in urban areas as well as per capita consumption for the Instant noodles and pasta segment is low indicating the untapped market potential.

   

Urban

Rural

 

Population 2005-06 (mn household)

53

135

Population 2009-10 (mn household)

69

153

% Distribution (2005-06)

28

72

Markets (Towns)

3,758

62,700

Universe of Outlets (mn)

1

3.3

 

Urban profile

Source:Statistical Outline of India (2005-2006)

 

Burgeoning Indian population, particularly the middle class segments and the rural segments, presents an opportunity to makers of branded products to convert consumers to branded products.

Growth is also likely to come from consumer 'upgrading' in the matured product categories.

At 4% constant value CAGR into the forecast period, value growth for packaged food is predicted to remain healthy. Growth will continue to be fuelled by convenience products such as noodles and ready meals with 200 million people expected to shift to processed and packaged food by 2010

Manufacturers are introducing low-priced goods in smaller pack sizes. As a result, the rural marketing efforts have pushed the demand for sachets in many consumer goods

markets. Priced at Rs0.50-1.00, sachets ha ve proved to be extremely popular in smaller towns

markets. Priced at Rs0.50-1.00, sachets have proved to be extremely popular in smaller towns and villages, where households cannot afford to buy larger packs due to financial constraints.

afford to buy larger packs due to financial constraints. Consumption pie Source: KSA Technopak Consumer Outlook

Consumption pie

Source: KSA Technopak Consumer Outlook 2004.

An average Indian spends around 40 per cent of his income on grocery products.

 

1996

2001

2006

 

Population (millions)

846

1,012

1,087

Population <25 years of age

480

546

565

Urbanisation %

26

28

31

Consumer Profile

 

Source: Statistical Outline of India (2005-2006)

 

Rapid urbanisation, increased literacy and rising per capita income, have all caused rapid growth and change in demand patterns, leading to an explosion of new opportunities. Around 45 per cent of the population in India is below 20 years of age and the young population is set to rise further.

While instant noodles are still not generally consumed as main meals in India, more individuals are bucking this trend and accepting them as an option. This is, however, mostly restricted to busy working adults who live independently or only with their spouse, away from their parents, and who have little time to prepare their own meals at home. Given the requirements for convenience and saving time, these individuals resort to easy-to-prepare meals, such as instant noodles.

Increased health consciousness and abundant production of quality soyabean also indicates a growing demand for soya food segment.

1200 1000 800 600 400 200 0 2003 2015 Income (US $/annum) Rise in disposable

1200

1000

800

600

400

200

0

2003 2015
2003
2015
Income (US $/annum)
Income (US
$/annum)

Rise in disposable income (US$/annum)

Source:Euro monitor, BRICs Report (Goldman Sachs)

The BRICs report indicates that India's per capita disposable income, currently at US$ 556 per annum, will rise to US$ 1150 by 2015 -another demand driver. Spurt in the industrial and services sector growth is also likely to boost the urban consumption demand.

Only about 8-10 per cent of output is processed and consumed in packaged form, thus highlighting the huge potential for expansion of this industry. Currently, the semi processed and ready to eat packaged food segment has a size of over US$ 70 billion and is growing at 15 per cent per annum.

FICCI Federation of Indian Chambers of Commerce and Industry has predicted an overall growth of culinary products/snack food (10%)

2.1.5 MARKET GROWTH

General growth of the Indian Noodles sector FY 2005-2006 FICCI states that the culinary products and snack category, under which Maggi noodles is classified, has had a robust growth of 8%.

Growing by a more than robust 21% in current value and 16% in volume, growth in noodles will be among the fastest in the various packaged food products in India. (Refer Appendix A: Indian Instant Noodle Market Growth Graphs)

Current value sales of noodles in stood at slightly over Rs 9 billion, with pouch instant noodles accounting for more than 66% of the total value sales.

Growth of Maggi Noodles FY 2005-2006

For the FY 2005-2006, the growth of Maggi noodles was an impressive 15%, with sales at Rs 6.75 billion and profit at Rs 2 billion.

Maggi Market Share in Instant Noodles Category 79.5 79 78.5 78 77.5 77 2000 2001

Maggi Market Share in Instant Noodles Category

79.5 79 78.5 78 77.5 77 2000 2001 2002 2003 2004 2005 2006 Market Share
79.5
79
78.5
78
77.5
77
2000
2001
2002
2003
2004
2005
2006
Market Share (%)

Maggi Market Share in Instant Noodles Category (2000-2005)

Source: Euromonitor International Packaged Food in India May 2006

It has maintained a market share of around 78% despite increasing competition.

The relative performances of the Maggi variants has been presented using the BCG matrix

The Boston Consulting Group’s Growth-Share Matrix

 

High

STARS

QUESTION MARKS

Market

( MAGGI Veg Atta Noodles)

(MAGGI Chicken, Dal Atta Noodles)

Growth

   

Rate

CASH COW

DOGS

(MAGGI Masala flavour)

(MAGGI Tomato, Curry flavours)

 

Low

 
High
High

Low

(MAGGI Masala flavour) (MAGGI Tomato, Curry flavours)   Low   High Low Relative Market Share

Relative Market Share

2.2 SWOT Strengths Weakness Strong brand recall and the product is almost eponymous to the

2.2 SWOT

Strengths

Weakness

Strong brand recall and the product is almost eponymous to the brand. Market leader with 79.3% market share in terms of value. Highest advertising share(72% (TV AdEx 2004-05)). Emotional relationship with the consumer. A strong distribution network of the parent company Nestle.

Tagged as a product having no health value. It has tried to bring in innovation but has failed.(Dal Atta Noodles refer survey noodles). The product features have remained almost constant since inception in 1983 with any trial of innovation misfiring. Market share has fallen from the 80% in 1998-99 to 79.3% in 2005-06.

Opportunities

Threats

The instant noodles segment is projected to grow at a tremendous

Competition is increasing with established competitors in other segments are foraying into the noodles segment seeing the capacity of growth. Top ramen the prime competitor has come up with new exciting instant noodle offerings like cup noodles and mug noodles which threatens to eat into Maggi’s market share. Foreign players like Wai Wai and Rum Pum have forayed into the noodles market and have made their brand presence in eastern markets while indigenous Parle is threatening to offer their distribution network to international noodle brands wishing to make an entry. Top Ramen has repositioned itself on a health platform with a new baseline “Get on Top” fortifying its product with calcium and vitamins. The product as priced higher than its main rival Top Ramen.

rate with the market size doubling by

2010.

Increase in the potential consumer base i.e. single working professionals and student population Rapid economic growth and rising disposable incomes make a strong case for a premium brand like Maggi. Upward trend of convenience food consumption. Huge untapped serviceable upward class rural base.

 

2.3 COMPETITION 2.3.1 TOP RAMEN 'Don't be a noodle, be a Smoodle,' was the ad

2.3 COMPETITION

2.3.1 TOP RAMEN

2.3 COMPETITION 2.3.1 TOP RAMEN 'Don't be a noodle, be a Smoodle,' was the ad that

'Don't be a noodle, be a Smoodle,' was the ad that brought the Top Ramen brand into limelight when it was launched in 1991.

Market share FY 2005-2006: 14%

Variety:

a) Packet Noodles: Macho Masala, Funky Chicken, Oye Tomato, Curry Smoodles.

b) Cup Noodles: Spicy Vegetable, Tangy Chicken

Packaging and Pricing:

 

Pack Size

Price

Top Ramen

(gm)

(Rs)

Packet Noodles

50

5

 

100

10

 

400

34

Cup Noodles

80

20

Distributor: Marico Industries

Distributor strength: About 130000

USP: 'Don't be a noodle, be a Smoodle,' innovative flavours and its cup noodles

2.3.2 ITC SUNFEAST PASTA

flavours and its cup noodles 2.3.2 ITC SUNFEAST PASTA ITC launched India's first instant pasta snack,

ITC launched India's first instant pasta snack, Sunfeast Pasta Treat in 2005. Made from high protein Durum wheat, Sunfeast Pasta Treat is not fried and does not contain maida, making it a nutritious snack. This ready to cook pasta comes with a sauce maker inside the pack.

Market share FY 2005-2006 : The ready-to-eat Sunfeast Pasta Treat has clocked 6% of the

Market share FY 2005-2006: The ready-to-eat Sunfeast Pasta Treat has clocked 6% of the branded noodles volume in just one year.

Variety: It is currently available in four exciting flavours: Masala, Tomato and Cheese, Sour Cream Onion and Cheese.

Pricing: priced at Rs. 12/- for the Masala flavour and Rs.15/- for Tomato and Cheese, Sour Cream Onion and Cheese.

Packaging: Each pack is an 83 gm pack with a 15 gm sauce maker

Distributor: ITC Limited

USP: Sunfeast is made from durum wheat and is promoted as a healthy alternative to instant noodles made from the less healthy maida (a type of wheat flour that is slightly lower in quality).

2.4 CURRENT MAGGI NOODLES BRAND IDENTITY/KAPFERER’S PRISM

Physique

Yellow packaging,

Tasty

Maggi Noodles
Maggi Noodles

Kid,

Personality

Playful children,

Hurried youth

Relationship Fast to cook and good to eat, “Mummy bhookh lagi”, “Taste bhi health bhi

Culture

Family,

Dual Income,

Self Image

Reflection

Family oriented

Fun-loving

Independence

2.5 PRODUCT OFFERING Maggi Noodles comes in 4 variants: 1. MASALA: This is the original

2.5 PRODUCT OFFERING

Maggi Noodles comes in 4 variants:

1. MASALA: This is the original and most widely liked flavour of Maggi and hence has been brought out in 6 different packaging sizes; the maximum in any variant

2. CHICKEN

3. CURRY

4. TOMATO

5. VEGETABLE ATTA NOODLES: Launched in April 2005, this variant had contributed to 11 per cent in value to the instant noodle category within 7 months of its launch; this was the beginning of the “Taste bhi Health bhi” focus

6. VEGETABLE DAL ATTA NOODLES: Continuing the healthy snacks trend, this variant was launched in May 2006.

 

Pack Size

Price

MAGGI 2 Minute Noodles

(gm)

(Rs)

Masala

50

5

 

100

10

 

200

20

 

400

38

 

600

54

 

800

72

Chicken

100

10

Curry

100

10

Tomato

100

10

Vegetable Atta Noodles

100

13

 

400

50

Vegetable Dal Atta Noodles

100

13

 

400

50

Variants, Packaging, Prices

Source: Nestle India

2.6 PRODUCT DISTRIBUTION

Maggi Noodles is being sold through 2,60,000 outlets (FY 2005-2006), which comprise of grocers, convenience stores, supermarkets and miscellaneous channels. The average Indian still prefers shopping through the traditional grocers or “kiranas” as can be inferred from the higher distribution of 62.8%.The rising popularity of the “mall-culture” in the urban and semi-urban areas also reflects on the slight increase in distribution through supermarkets / hypermarkets.

Channel

2005

2006

Traditional grocers

63.0

62.8

Convenience stores

20.0

20.0

Supermarkets/hypermarkets

16.6

16.8

Others

0.4

0.4

Overall

100.0

100.0

India Dried Pasta & Noodles off-trade distribution channels, by value, 2005-2006 (%)

Source: Denis Mason, Datamonitor

2.7 KEYS TO SUCCESS Maggi has had the first mover advantage w ith respect to

2.7

KEYS TO SUCCESS

Maggi has had the first mover advantage with respect to the Instant noodles segment in the Indian market. Continued innovation in terms of flavours and themes – from an ordinary 2 minute bite to a healthy snack.

2.7

CRITICAL ISSUES AND CHALLENGES

To sustain its growth and maintain its position as the leader in the Instant Noodles segment: Nissin’s Top Ramen and recently ITC’s Sunfeast pasta have been eating into Maggi Noodles’ market share of the Instant Noodles Market.

To be increasingly viewed as the preferred snack of Indians.

3. MARKETING STRATEGY 3.1 MISSION To be considered as the number one snacki ng option

3. MARKETING STRATEGY

3.1 MISSION

To be considered as the number one snacking option of India combining the values of convenience, taste and health.

3.2 MARKETING OBJECTIVES

Increase value market share to 80% in the instant noodles market by 2007-08 from

the current 79.3%. To promote Maggi noodles as a healthy ready to eat convenient food among mothers

and single working professionals. To provide line extension by introducing Cup Noodles/Mug Noodles.

To upgrade the existing product features viz. packaging, ingredients, special additives based on consumer feedback.

The objectives were arrived at based on the analysis of Ansoff’s Grid.

ANSOFF’S PRODUCT/MARKET EXPANSION GRID

Existing Markets New Markets
Existing
Markets
New
Markets

Existing products

New products

MARKET PENETRATION

PRODUCT DEVELOPMENT

( Upgrade existing variants of MAGGI)

(Introduce new variants of MAGGI)

MARKET DEVELOPMENT

DIVERSIFICATION

(Finding new markets for existing variants of MAGGI)

(Launch totally new variants of MAGGI in totally new markets)

 
   
 
 

3.3 INDUSTRY SEGMENTATION

 

The taste preferences and eating habits of consumers bear a high correlation with their age. Based on this, we can segment the market into the following age groups:

 
 

1990

1995

2000

2005

2010

2015

Children: (2-9 years old) Tweenagers: (10-14 years old) Teenagers: (13-19 years) Studying Age: (18-22 years old) Young Adults: (15-29 years old) Middle-Aged Adults: (30-59 years old) Baby Boomers: (40-59 years old) Pensioners: (aged 60+)

169,999

181,521

187,940

189,211

184,457

184,376

89,781

100,560

109,302

114,583

117,137

114,226

120,293

127,645

142,432

153,781

160,728

162,495

80,812

85,918

92,074

103,179

110,642

115,126

230,839

249,149

270,576

294,103

319,267

336,193

243,295

277,343

316,065

358,164

398,405

440,655

134,212

151,646

174,986

202,754

232,801

261,349

57,029

65,643

75,712

86,585

99,728

 

117,168

 

Age wise break up and forecast of the population Source: UN census data, Euromonitor database

 

Age wise break up of the population (2005)

     

86,585

189,211

202,754

202,754 358,164

358,164

 

Children: (2-9 years old)202,754 358,164      

   

114,583

Tweenagers: (10-14 years old)114,583  

 

Teenagers: (13-19 years) 

 

Studying Age: (18-22 years old) 

 

153,781

Young Adults: (15-29 years old)153,781

Middle-Aged Adults: (30-59 years old)old)   153,781 Young Adults: (15-29 years old) 103,179 Baby Boomers: (40-59 years old)  

103,179

Baby Boomers: (40-59 years old)103,179  

 

Pensioners: (aged 60+) 

 

294,103

 

Agewise Breakup of Population, 2005

 

1) CHILDREN Children as an age group are a marketer’s delight. With “pester power” children play a significant role in decision making and purchase choices of just about anything ranging from food items to beverages to chocolates. As consumers, children know exactly what they want and do not experiment too much with flavour or colour.

 

Children rule Indian families consider children to precious gifts of God, and parents in all income groups do all they can for their offspring. Indian parents are still not completely comfortable with paid

baby sitters or day care help and use the larger extended family or friends to

baby sitters or day care help and use the larger extended family or friends to help with care and supervision of children.

Rush for pre-school admissions Throughout urban India, parents of nursery age children are looking to send them in the best private school they can afford. Pre-schools for toddlers in the 2-3 age group are mushrooming all over the country, as anxious parents recognise the perceived benefits these can bring.

'000

1990

1995

2000

2005

2010

2015

Male

87,953

93,797

97,055

97,624

95,041

94,897

Female

82,046

87,724

90,885

91,588

89,416

89,478

TOTAL

169,999

181,521

187,940

189,211

184,457

184,376

as % of total population

20.29

19.67

18.63

17.37

15.82

14.88

Children (2-9 years old) 1990-2015 Source:Euromonitor International from national statistics and UN

2)

TWEENAGERS

The tweenagers age group consists of children on the threshold of adolescence and as a segment are a difficult lot. Though they are not sure about their choices on an emotional plane, they are a trendy new group that is extremely savvy and self assured when it comes to taking decisions regarding consumer goods and wants. Urban children in this age group would have some amount of pocket money with an upper limit of Rs100 per month. Though allowances have gone up, parental control still exists over this market segment. Impulse foods rule the preference scale as far as the buying behaviour of tweenagers in India is concerned. In fact, the top six expense items for tweenagers seem to be impulse foods: 17% of the total pocket money spent on ice creams, 12% on chocolates and 10% each on soft drinks and fast food according to a newspaper report in the “The Times of India”.

A key role to play in decision making With increased awareness through television and advertising, tweenagers are an important influence on family decision-making in urban India. They have also mastered the art of nagging their parents into making purchases of gadgets or products that they want. Among the areas where they make their influence felt are the purchase of such items as a newly launched chocolate bar, instant noodles and breakfast cereal.

With a penchant for hi-tech and an ease with new technology far superior to their parents, these tweenagers are more familiar with operating mobile phones, the TV remote, DVD player and computer programmes, as well as the product features.

Cricket-crazy boys Cricket is the obsession and passion of boy tweenagers in India. This interest cuts across income and socio-economic groups. Low income boys will play on the streets with makeshift bats and stumps, middle-income children can be seen playing in gardens and at school, while boys from more well-to-do families go and play in organised coaching camps. With their education demanding less time at this age, parents are generally quite happy to see their boys spending so much time on cricket.

Lifestyle concerns in urban India A 2005 study of 10-16 year olds in urban India

Lifestyle concerns in urban India

A 2005 study of 10-16 year olds in urban India revealed a sedentary lifestyle among 72% of

the 20,000 children sampled by Lifetime Wellness Rx Ltd in the cities of Allahabad in the north and Hyderabad in the south. Of those sampled, 52% of children showed a risk of developing chemical dependence, with the problem probably attributable to a scarcity of playgrounds and too much TV viewing. Even television channels are zeroing in on this segment in recognition of this fact. There is nothing subtle about the age group any more. They like to hear it straight and then make their independent choices and judgements. On the flip side, they are becoming increasingly vulnerable to media blitzkrieg.

'000

1990

1995

2000

2005

2010

2015

Male

46,682

52,240

56,672

59,329

60,571

58,960

Female

43,098

48,320

52,630

55,254

56,565

55,266

TOTAL

89,781

100,560

109,302

114,583

117,137

114,226

as

% of

10.71

10.90

10.84

10.52

10.04

9.22

total

population

Tweenagers (10-14 years old) Source: Euromonitor International from national statistics and UN

3)

TEENAGERS

On the brink of adulthood, teenagers like to emphasize and express themselves in a manner that catches attention. They have experimental with their food with a preference towards innovative offerings but form strong opinions which they carry forward in life. They are also predisposed towards snack items as they tend to feel hungry between traditional meals. They have a lot of say about the food that they want to consume with limited parental control.

Mobile phones This is the mobile phone generation in India. They are completely at ease with new technology and are heavy users of value-added services like SMS, ring tone downloads and

cricket score updates. Most still depend on their parents for pocket money but are heavy users

of these services. In many urban, middle-income households teenagers are now given a pre-

paid SIM card with a certain value for the month, in addition to allowances for travel and entertainment.

Hard pressed for time Teenagers like buying books, music and expensive branded footwear, as well as watching films and socialising with friends. Older college-going teenagers high school pupils tend to frequent coffee bars, which are a relatively new focal point for socialising. Teenagers are also among the regular users cinema multiplexes and entertainment zones. This age group is extremely conscious of their facial and physical looks. They are expected to fuel demand for skin care products as well as health and nutrition-related goods. Urban teenagers are far more socially active today and find some difficulty in balancing their school routines with their personal schedules.

'000 1990 1995 2000 2005 2010 2015 Male 62,853 66,433 74,027 79,765 83,246

'000

1990

1995

2000

2005

2010

2015

Male

62,853

66,433

74,027

79,765

83,246

84,033

Female

57,440

61,212

68,405

74,017

77,482

78,462

TOTAL

120,293

127,645

142,432

153,781

160,728

162,495

as

% of

14.35

13.83

14.12

14.12

13.78

13.11

total

population

Teenagers (13-19 years old) Source: Euromonitor International from national statistics and UN

4)

STUDYING AGE

A

rise in the number of colleges and institutions of higher learning both government owned

and privately financed has enabled a larger number of youth to graduate from their portals.

This population grew since 2000 but is set to stagnate in the forecast period with couples

actually postponing the child bearing decision and some even rejecting the idea of having one

at all. This age group has taken up to snacking as a way of life as they keep missing regular

meals due to erratic schedules. They have longer waking hours and due to this the traditional three meals does not suffice with the need for filling snacks.

Rising financial freedom With growing aspirations on the academic front and shrinking global boundaries this age group has an unquenchable thirst for information whether through their PCs or cell phones. With a rise in employment opportunities in the Business Process Outsourcing (BPO) sector, more and more consumers in this age group are juggling jobs along with their studies for the sake of the financial freedom it gives them.

Summer jobs

Until the 1990s, summer vacations were a time to relax, read and catch up with friends. This

is no longer the case. Now, teenagers either find a summer job, or undertake activities such as

a trek in the mountains, river rafting or rock climbing. Summer jobs may cover a range of activities from delivering newspapers to working in a restaurant.

'000

1990

1995

2000

2005

2010

2015

Male

42,311

44,932

47,947

53,651

57,402

59,638

Female

38,501

40,986

44,127

49,528

53,240

55,489

TOTAL

80,812

85,918

92,074

103,179

110,642

115,126

as

% of

9.64

9.31

9.13

9.47

9.49

9.29

total

population

Studying age (18-22 years old) Source: Euromonitor International from national statistics and UN

5)

YOUNG ADULTS

Young adults (15-29 years old) represent the largest spending segment in the country. Youngsters are part of a middle-class boom in India. Of the US$30 billion spent by Indians on themselves in 2003, young adults spent close to US$10.5 billion with their spending levels

rising 12% each year at twice the pace of the economy’s growth according to various

rising 12% each year at twice the pace of the economy’s growth according to various trade press publications. Young adults grew 8% in numbers over the 1999-2004 period and is likely to grow at approximately the same pace.

Rising disposable incomes College graduates and students still studying are landing well-paying jobs in a host of emerging industries that barely existed at the start of the new millennium – retail chains, fast food restaurants, mobile phone companies, call centres and data processing firms. Many have access to disposable incomes of Rs8,000-10,000 per month thanks to the BPO boom in India. This age group still does not have responsibilities of running a household, marriage or worry about their children’s education. Thus, this income is almost entirely spent on non-essential items. Most purchases made by this age group are on impulse. There are 16 million urban consumers in the 20-25 age group.

Need for convenience Many single working professionals have to live away from their parents due to the demand of the jobs. This yuppies (young upwardly mobile professionals) class has a hard time preparing food and for them convenience is major issue. They are ready to pay a premium for quality and convenience. Also always being on the move they have a need for food item that can be easily consumed and disposed of.

'000

1990

1995

2000

2005

2010

2015

Male

120,916

130,305

141,223

153,026

165,790

174,236

Female

109,923

118,843

129,353

141,077

153,477

161,957

TOTAL

230,839

249,149

270,576

294,103

319,267

336,193

as % of total population

27.55

27.00

26.83

27.00

27.38

27.13

Young adults (15-29 years old) Source: Euromonitor International from national statistics and UN

6)

MIDDLE-AGED ADULTS

These middle aged men have strict preferences over food and they generally stick to their choices. They experiment less and go for products that will enhance their social status. The women in this age group are ones who the primarily buy food items for the entire household though their choices are shaped by the preferences of the household members. The women in this segment play an important role as most of the choices of food items have to pass their scrutiny before it is consumed in the household.

Responsibilities Between the ages of 45 and 55, men find themselves with children who are able to leave school or facing crucial board examinations. Some may also have wives with settled careers. These factors make them reluctant to leave or move from their city of residence and they would rather resign and move to another job rather than displace the family. Others find themselves redundant in the new hire and fire labour environment. There is a trend for such people to enter the BPO sector as well.

Mid-life career change In urban India, among the middle class, there are a significant number

Mid-life career change In urban India, among the middle class, there are a significant number of men who are making career switches, some out of choice and others out of necessity. Tired of their current salaried jobs, some are taking the entrepreneurial plunge, setting up businesses such as small IT- service firms, adventure tourism companies or leadership training consultancies.

'000

1990

1995

2000

2005

2010

2015

Male

125,217

143,223

163,764

186,055

206,920

228,338

Female

118,079

134,120

152,300

172,109

191,486

212,317

TOTAL

243,295

277,343

316,065

358,164

398,405

440,655

as % of total population

29.03

30.06

31.34

32.89

34.16

35.56

Middle-aged adults (30-59 years old) Source: Euromonitor International from national statistics and UN

7)

BABY BOOMERS

The concept of baby boomers may not be that relevant to India notwithstanding the impact of and its participation in World War II. This generation has virtually seen it all right from Indian Independence (1947) to the Indo-Pakistan war (1965). However, having been born in an age of constrained resources, this segment is somewhat cautious about its approach to consumerist tendencies although it is adopting some of them. For example, a number use mobile phones for their functional use but frown on the use of credit cards and buying branded clothing.

Health-related products, children’s education, automobiles, retirement planning, insurance products and vacations form the bulk of their expense.

'000

1990

1995

2000

2005

2010

2015

Male

68,010

77,278

89,882

104,720

120,490

135,142

Female

66,202

74,368

85,105

98,034

112,310

126,207

TOTAL

134,212

151,646

174,986

202,754

232,801

261,349

as % of total population

16.02

16.43

17.35

18.62

19.96

21.09

Baby boomers (40-59 years old) Source: Euromonitor International from national statistics and UN

8)

PENSIONERS

In the 1950s and 1960s, government jobs were among the few acceptable job occupations for people from respectable households. Changing technology and globalisation have changed that with unconventional income opportunities now presenting themselves to Indians. Some pensioners have sought and enjoyed success in information technology-related endeavours whilst others have put their considerable English language skills to good use in service industries. Pensioners have been the hardest hit section of the population. With declining interest rates, they have had to play a more active role in financial management. Some of

them are even trying to keep abreast of current happenings and learning how to use

them are even trying to keep abreast of current happenings and learning how to use a computer or access the Internet. There food preferences are shaped by their health conditions and they stick to their preferred food items.

Independent living on the rise From the 1980s onwards, there has been a steady migration of young adults and students to the US, in search of better opportunities. Most have chosen to settle and make their lives in that country. Therefore, their ageing parents have had to learn to continue to live independently.

Retirement communities viewed as an option Retirement homes were previously viewed negatively in India. If the elderly went there, it meant they had no one to care for them, and were in a sense for the destitute elderly. In the new urban India, however, well-appointed retirement communities are mushrooming, and couples in their 60s are going there of their own volition.

While the numbers are not yet significant, a trend is likely to increase in line with growth in the numbers of India’s elderly. It is also now an option for the middle-income and salaried classes. In families where there is a proprietary business, or a family practice, two-to-three generations will continue to live together.

'000

1990

1995

2000

2005

2010

2015

Male

28,085

31,905

36,292

41,109

47,286

55,928

Female

28,944

33,737

39,420

45,476

52,441

61,240

TOTAL

57,029

65,643

75,712

86,585

99,728

117,168

as % of total population

6.81

7.11

7.51

7.95

8.55

9.45

Pensioners (aged 60+)

Source: Euromonitor International from national statistics and UN

3.4 TARGET SEGMENTS FOR MAGGI NOODLES

3.4.1 MAGGI 2 MINUTE NOODLES

Maggi 2 Minute Instant Noodles is already associated with convenience and taste and is currently accepted as a valid filling snack between meals. Maggi will continue to leverage its brand equity and target the following segments for this product.

Children and Tweenagers: This is a large segment and is Maggi’s stronghold. The age group between 4 and 14 years has largely similar tastes and is traditionally targeted by Maggi. These segments perceive Maggi instant noodles as a welcome change in taste from the regular Indian fare and they are fascinated by the curly shaped noodles. For these segments innovative products also have novelty value, however, certain dominant preferences emerge. Realizing this early, Maggi shifted focus from the lady of the house to the end consumer i.e. children themselves ending up as the market leader of the instant noodles segment. Early buy in of this segment will help Maggi to sell in other segments in future.

Studying Age: The studying age segment though not traditionally targeted specifically has been devouring Maggi

Studying Age: The studying age segment though not traditionally targeted specifically has been devouring Maggi 2 minute noodles. The proposition of convenience of cooking as well as that of a tasty filling snack attracts this segment which due to erratic schedules keeps missing their regular meals.

3.4.2 MAGGI CUP O NOODLES

Maggi Cup O Noodles is Maggi’s answer to Nissin’s Cup Noodles. With reduced cooking time of ½ a minute, ease of preparation and no need of separate plates Maggi Cup O Noodles promises to appeal to anyone in need of a quick, convenient bite. Maggi Cup O Noodles being a premium priced product, the segment targeted should one which is ready to pay a premium for a quality convenient food. The following segment promises to be the best bet.

Young Adults: The growing class of affluent young adults does not mind paying higher prices for quality products. They are hard pressed for time and would pay a premium for convenience. This segment has a good top of the mind recall of Maggi as a brand as the current members of this group were the targets of Maggi in the 1980’s and they retain fond memories of Maggi, a emotional bond which can be leveraged to win them over to Maggi Cup O Noodles. This segment is growing and has the potential of accepting Maggi as a mainstream food item as they see instant noodles as a natural part of Indian food culture.

3.5 POSITIONING OF MAGGI

3.5.1 MAGGI 2 MINUTE NOODLES

Maggi 2 Minute Noodles will continue with its current positioning of convenience and as a “fast to cook, good to eat” snack as this seems to be working well. To prevent Top Ramen, the main competitor, from eating into its market share some product innovation is required as otherwise Maggi may get stereotyped as an unexciting product. Top Ramen is following a cost differentiation technique. To deal with this Maggi has to position itself as a differentiated product. The market is very sensitive to taste and rejects any flavour it dislikes with Maggi having learnt it the hard way, thus the product can not be greatly differentiated with on basis of taste. On the other hand Maggi has to deal with the negative perception of Maggi has of being unhealthy in an increasingly health conscious market, a major threat in the current scenario. Both these problems can be tackled by positioning Maggi as a snack with nutritional value. The recent launch of “Veg Atta Noodles” and “Dal Atta Noodles” with the promise of good nutritional value ventures in this area. Another

3.5.2 CUP O MAGGI

The main USP of Cup O Maggi is convenience without compromising on taste. Nissin’s Cup Noodles is a huge hit with the consumers liking the concept of noodles served in a cup and the extra convenience of not dealing with cleaning/needing plates and the lesser time required for preparation. Cup O Maggi is targeted towards a segment that values time and convenience as well as is getting increasingly health conscious. So Cup O Maggi with added nutrition and wholesome components will position itself as a healthy and convenient food option that can be had anywhere, anytime. The crux of positioning will be “Healthy Snack Anywhere, Anytime”.

4. MARKETING MIX 4.1 CONSUMER SOLUTION The instant noodles segment of Maggi is the ma

4. MARKETING MIX

4.1 CONSUMER SOLUTION

The instant noodles segment of Maggi is the market leader in its segment. Available in 4 flavours, the Masala flavour is the hot favourite by a huge margin followed by Maggi Vegetable Atta and Tomato flavour. The Maggi Dal Atta variant shows a poor response.

4.1.1 IMPROVING THE DAL ATTA VARIANT

Maggi Dal Atta variant ranks really low on taste as suggested by the Marketing Research Survey. The existing Sambar taste doesn’t go too well with consumers even from the south Indian market. For which we plan to replace the existing Tastemaker with a Spicier Tastemaker to go with the traditional Spicy Indian taste.

4.1.2 NEW PRODUCT: THE CUP-O-MAGGI

Maggi is market leader in its segment but it still has no product to challenge the growing threat posed by Cup Noodles from Top Ramen, its closest competitor. The cup noodle market is expanding rapidly and there is a huge scope for gaining further market share by entering this segment which is currently dominated by Top Ramen. To challenge this threat we propose to launch a new product to directly compete in this segment with the name Cup- O – Maggi.

Features of Cup –O – Maggi

To be made available in two flavours Masala and Chicken to cater to the overall

market palate. The noodles will be available in a Plastic cup and just require hot water to be added to

prepare them. This is to capture the market which has a growing demand towards convenience foods. Dried Vegetables and Dried Chicken chunks to be made available inside the cup

The new improved spicier Tastemaker also to be added to the cup

The Market Research Survey importuned us to improve the taste and provide better health benefits. For this purpose the improved Tastemaker has been added to Cup-O-Maggi. To cater to the demands of the growing health conscious people nutritious veggies and chicken chunks have also been added. These extra pieces are already available with the Maggi range of soups and the same can be used in Cup-O-Maggi also thus dispenses the need for setting up of a new processing factory specially for the manufacturing of food pieces.

4.1.3 PACKAGING

Major changes are required in the packaging of Maggi noodles as suggested by the Marketing Research Survey:

Maggi noodles packets to be flimsy which require to be torn apart carefully so as to not spill the contents. Another issue is with the multi brick packets. Once opened they cannot be stored as it is and the contents have to be transferred to another container.

To counter the problem, we plan to Increase the thickness of the plastic sheets u

To counter the problem, we plan to

Increase the thickness of the plastic sheets used in the Maggi Noodles packets to give

more strength to the packet and allow easy & safe opening of the pack To provide a Zip-Seal facility along with the existing sealing to allow the packets to be stored easily

4.2 CONSUMER COST

Pricing strategy for the existing variants of Maggi Noodles is based on the objective of ‘Maximising Market Share”. These variants are competitively priced. As the segment is highly price sensitive, any price change initiates an instant price check reaction from the competitor.

 

Pack

Size

Current

Price

Revised

Price

MAGGI 2 Minute Noodles

(gm)

(Rs)

(Rs)

Masala

50

5

5

 

100

10

10

 

200

20

20

 

400

38

36

 

600

54

54

 

800

72

72

Chicken

100

10

10

Curry

100

10

10

Tomato

100

10

10

Vegetable Atta Noodles

100

13

13

 

400

50

50

Vegetable Dal Atta Noodles

100

13

13

 

400

50

50

Maggi 2 Minute Noodles Proposed Revised Prices for existing package sizes

Reducing the price of the 400g pack of Maggi Masala is a very aggressive move to directly attack the competitor whose 400g variant is priced at Rs 34. The effect of the downward revision in price can be offset by the increase in sales volume.

Pricing strategy for the launch of Cup-O-Maggi is based on the objective of achieving “Product Quality leadership”. Its segment is less price-sensitive so it will be premium priced to target the higher end customers. Creation of a premium brand gives the company an opportunity to provide a differential pricing and service offering to the customer thereby creating a key differentiator.

CUP-O-MAGGI Pack Size (gm) Price (Rs) Masala 80 20 Chicken 80 20 Cup O Maggi

CUP-O-MAGGI

Pack Size (gm)

Price (Rs)

Masala

80

20

Chicken

80

20

Cup O Maggi Proposed Pricing and Packaging

Product pricing is based on offering high value to our customers compared to most price points in the market. Thus using the Competitive- Parity method, Cup-O-Maggi has been priced at Rs 20 for an 80g pack of Masala and Chicken flavours to directly compete against the competitor cup noodles which are also priced at Rs 20 for an 80g pack.

The pricing will be regularly revised according to the changing forces in the market environment.

4.3 CONVENIENCE

To keep up with the growing trends in the Noodles sector, an intensive dealer-distributor network is desired. Maggi has a well established distribution network. As of now, the strength of our already robust distribution network could be leveraged to introduce and sell our new product: ‘Cup-o-Maggi’ noodles, as also the improved versions of the Dal Atta variant. The target markets of ‘Cup-o-Maggi’ are primarily present in the metropolitan cities as well as the tier-II cities.

In addition for Cup O Maggi we propose that:

Maggi Noodles have tie-ups with Corporate Houses

Depending on the initial sales of Cup O Maggi, introduce vending machines for the same at schools, colleges as well as corporate houses.

initial sales of Cup O Maggi, introduce vending machines for the same at schools, colleges as
4.4 COMMUNICATION PROMOTION OF CUP O MAGGI With the introduction of Cup-o-Maggi noodles, we propose

4.4 COMMUNICATION

PROMOTION OF CUP O MAGGI

With the introduction of Cup-o-Maggi noodles, we propose to move away from the ‘Child and Mother’ approach of Maggi. The Cup noodles would be targeted at the young single professionals, as also the housewives, basically people who might prefer to go for a quick meal instead of cooking a whole traditional Indian meal, specially in case of early work-day mornings or a ‘tired’-evening quick snack (in case of professionals). An associated tagline with the Cup-o-Maggi advertisement campaign could be: ‘Cup-o-Maggi’: ‘Healthy Snack Anywhere, Anytime! “

SUGGESTED FUTURE CUP O MAGGI ADVERTISING CAMPAIGN

World Cup 2007 (13 th March 2007 to 28 th April 2007) Families, couples, kids all enjoying their cricket with Cup O Maggi; at home, drive-in screens. Get a cricketer to endorse Maggi noodles.

GENERAL PROMOTION

Events and Experiences: Hold the Online Maggie Recipe Challenge, wherein innovative recipes with Maggi Noodles as a base are invited. Winning entries are compiled into an e- cookbook which is published online.

Celebrity endorsement: Maggi has associated itself with celebrities like Bollywood actress Priety Zinta recently. The reason being Maggi has always been the kids snack. The same is brought out and highlighted in the charms of Preity and her bubbly and vivacious zing, with which she portrays the brand that is Maggi.

Television Advertisements: Portraying hassled double income families, finding relief at the end of a tiring day with a quickly conjured up bowl of Maggi 2 Minute noodles. Portray different flavours available and focus on the health aspect of the fortified 2 minute Noodles and the Dal and Vegetable Atta Noodles. Communicate the new improved east-to-use packaging and the going spicy of Dal Atta Noodles.

4.5 MARKETING RESEARCH An online survey was undertaken at http://www.createsurvey.com/c/39191-OSMZz4/ The following

4.5 MARKETING RESEARCH

An online survey was undertaken at http://www.createsurvey.com/c/39191-OSMZz4/

The following sections deal with the results obtained on the basis of the 30 point questionnaire put forth in the survey.

4.5.1 Maggi Noodles Performance on various attributes

1400 1200 1000 800 600 400 200 0 Brand Image Price Taste Packaging Health Availability
1400
1200
1000
800
600
400
200
0
Brand Image
Price
Taste
Packaging
Health
Availability
Ingredients
Variety

4.5.2 Attributes on which Top ramen smoodles performs better then Maggi noodles

Ingredients

Packaging

Taste

Price

0 20 40 60 80 100 120 140
0
20
40
60
80
100
120
140
Packaging Taste Price 0 20 40 60 80 100 120 140 No. of people ranking Top

No. of people ranking Top Ramen smoodles better then Maggi noodles

4.5.3 Attributes on which Top ramen cup noodles performs better then Maggi noodles Ingredients Convenience

4.5.3 Attributes on which Top ramen cup noodles

performs better then Maggi noodles

Ingredients Convenience in cooking Packaging Taste 0 20 40 60 80 100 120
Ingredients
Convenience in
cooking
Packaging
Taste
0
20
40
60
80
100
120

4.5.4 Maggi Packaging size preference

800 gms 600 gms 400 gms 200 gms 100 gms 50 gms 0 0.1 0.2
800
gms
600
gms
400
gms
200
gms
100
gms
50 gms
0
0.1
0.2
0.3
0.4
0.5
4.5.5 How do you like to consume your Maggi ? 11.02% 6.82% 43.31% 38.85% Plain

4.5.5 How do you like to consume your Maggi ?

11.02% 6.82% 43.31% 38.85%
11.02%
6.82%
43.31%
38.85%

Plain maggi4.5.5 How do you like to consume your Maggi ? 11.02% 6.82% 43.31% 38.85% With vegetables

With vegetables4.5.5 How do you like to consume your Maggi ? 11.02% 6.82% 43.31% 38.85% Plain maggi

With chicken4.5.5 How do you like to consume your Maggi ? 11.02% 6.82% 43.31% 38.85% Plain maggi

Your secret4.5.5 How do you like to consume your Maggi ? 11.02% 6.82% 43.31% 38.85% Plain maggi

recipe

5. FINANCIALS 5.1 BREAKEVEN ANALYSIS OF A 100 TONNE CAP ACITY PLANT OF CUP O

5. FINANCIALS

5.1 BREAKEVEN ANALYSIS OF A 100 TONNE CAPACITY PLANT OF CUP O MAGGI NOODLES

In this analysis we will look for the different costs involved in the production of Maggi cup

noodles and then comparing it with the total sales to find out the minimum efficiency at which the plant should operate in order to have a neither loss nor profit relationship. This is done by

finding the Break-Even point of operation. If the plant operates at the efficiency higher than that indicated by the Break-Even point than the plant operates at a profit and vice-versa.

5.1.1 BREAK-EVEN ANALYSIS

The cost involved in the production can be divided into two categories viz. fixed cost and variable cost. They can be defined as

Fixed cost: This is the cost which is independent of the quantity of the product produced e.g. Land &Building cost, plant & Machinery cost etc.

Variable Cost: this is the cost that varies with per unit of product produced e.g. Raw material cost, packaging cost etc. The break up of the various costs is shown below

1. Fixed Cost

A. Land and Building

A plot of land of about 200 sq.mtrs. with built-up area of 100 sq.mtrs. is sufficient. Land

would cost around Rs.60,000/- whereas cost of construction could be Rs.2.50 lacs. Main production area would occupy around 50 sq.mtrs. whereas packing room and storage area

would occupy balance area.

Particulars

Area (sq. mtrs.)

Cost (Rs.)

Land

200

60,000

Building

100

2,50,000

 

TOTAL

3,10,000

B. Plant and Machinery

Marketing is the key success determinant and the production capacity has to be finalized

accordingly. Keeping in mind the financial viability, the rated production capacity is assumed

to be 100 tonnes per year with 300 working days and 2 shifts per day.

This would necessitate installation of following machines: Item Qty. Price (Rs) Extrusion Machine 1

This would necessitate installation of following machines:

Item

Qty.

Price (Rs)

Extrusion Machine

1

1,00,000

Pre-conditioner

1

80,000

Mixer ( 50 kgs capacity)

1

1,00,000

Pouch Packing and Sealing Machine

1

1,00,000

Weighing Scale

1

10,000

 

TOTAL

3,90,000

C. Miscellaneous Assets

Other assets like furniture and fixtures, storage facilities, working tables, SS utensils, etc. would call for expenditure of Rs. 50,000/-.

D. Utilities

Power requirement shall be 20 HP whereas per day water requirement would be 500-550 liters. Annual expenditure at full capacity utilization will be Rs. 1,10,000/-.

2. Variable costs

A.MANPOWER REQUIREMENTS

Particulars

Nos.

Monthly

Total Monthly

Salary (Rs)

Salary (Rs)

Machine Operators

2

4,000

8,000

Skilled Workers for Packing

2

3,000

6,000

Semi-skilled Workers

2

2,000

4,000

Helpers

2

1,000

2,000

Salesman

2

2,000

4,000

   

Total

24,000

B. Raw and Packing Materials

Noodles are made with the help of many ingredients with major input being wheat flour. Other materials required are corn and rice flour, protein isolates, salt, spices, edible oil,

preservatives etc. All of them are easily available. Packing materials are equally important. Colourful and attractive pouches shall have to be printed and outer packing will be corrugated

boxes.

This cost can be shown as Product Qty. Price/Ton Value (Tonnes) (Rs.) Raw Material 100

This cost can be shown as

Product

Qty.

Price/Ton

Value

(Tonnes)

(Rs.)

Raw Material

100

70,000

70,00,000

Packing Material

100

@ Rs.20,000/ Ton of Finished Goods

20,00,000

   

Total

90,00,000

C. Selling Expenses

Marketing will be a key element. Expenses shall have to be incurred on transportation, Publicity in local media like newspapers, hoardings and TV scroll, selling commission, free Sampling etc. A provision of 30% of sales value is made every year to take care of these Expenses since the product is new thus more emphasis is given on this section. This expense can be reduced once the product is well established in market.

FINAL TOTAL COST ANALYSIS

FIXED COSTS

In Rs.

Land and Building

3,10,000

Plant and Machinery

3,90,000

Miscellaneous Assets

50,000

Utilities

1,10,000

TOTAL FIXED COST

8,60,000

VARIABLE COSTS

Per tonne of production

Manpower Requirements

24,000

Raw and Packing Materials

90,000

Selling Expenses

@ 30% of Total sales

5.1.2 ANALYTICAL BREAK-EVEN ANALYSIS

Let total production be X tones. Since the 80 gm pack of Maggi is available for Rs.20 i.e. Rs.250/kg so lets say that Maggi Noodle is supplied to the market agent at Rs. 180/kg

So for no profit no loss equation is

860000+ (1,14,000*X) + (30/100)*X*1000*180= (180*X*1000)

860000 = (180000-114000-54000)*X

X = 71.66 tonnes

Final conclusion : The plant must operate at the minimum efficiency of 71.66% in order

Final conclusion: The plant must operate at the minimum efficiency of 71.66% in order to reach break-even analysis point i.e. not to suffer any loss.

5.1.3 GRAPHICAL BREAK-EVEN ANALYSIS

The result obtained above can be verified by plotting a graph between the total cost and Quantity of Maggi produced. The graph is shown below.

Break Even Analysis 20 15 10 5 0 0 20 40 60 80 100 120
Break Even Analysis
20
15
10
5
0
0
20
40
60
80
100
120
-5
Rupees (in millions)

Sales (in tonnes)

Variable Cost

Revenue

Cash Balance

5.2 SALES FORECAST

5.2.1 MAGGI INSTANT NOODLES

Sales by value

For the year 2007 Projected value of instant noodles category (Refer Appendix B)= Rs. 8,611.1 million The desired market share by value = 80% Therefore, projected value the sales need to be 80% * Rs.8611.11 = Rs. 6888.88 million.

Sales by volume

Average retail price per 100 gms of Maggi (across all SKUs) = Rs.9 Price for one thousand Tonnes of Maggi = 9 * 10^7 rupees Projected value of sales = Rs. 6888.88 million Therefore, Projected volume sales = (Projected Value of Sales / Price per thousand Tonnes) = 76.5 thousand Tonnes. For year 2007 projected category sales = 96.9 thousand Tonnes. Therefore, volume market share of 78.95 % for the year 2007 is projected.

5.2.2 PROPOSED : CUP O MAGGI NOODLES Sales by value For the year 2007 Projected

5.2.2 PROPOSED : CUP O MAGGI NOODLES

Sales by value

For the year 2007 Projected value of cup noodles category (Refer Appendix B) = Rs. 143.1 million The suggested target market share by value = 20% Therefore, projected value the sales need to be 20% * Rs.143.1 = Rs. 28.62 million.

Sales by volume

Suggested retail price per 80 gms of Cup O Maggi = Rs.20 Price for one thousand Tonnes of Cup O Maggi = 20 /80* 10^9 rupees Projected value of sales = Rs. 28.88 million Therefore, Projected volume sales = (Projected Value of Sales / Price per thousand Tonnes) = 0.115 thousand Tonnes. For year 2007 projected category sales = 0.6 thousand Tonnes. Therefore, volume market share of 19.17 % for the year 2007 is projected.

APPENDIX A: INDIAN INSTANT NOODLES MARKET GROWTH GRAPHS Indian Instant Noodles Market Retail volume growth

APPENDIX A: INDIAN INSTANT NOODLES MARKET GROWTH GRAPHS

Indian Instant Noodles Market Retail volume growth trends

GRAPHS Indian Instant Noodles Market Retail volume growth trends Indian Instant Noodles Market Retail value growth

Indian Instant Noodles Market Retail value growth trends

APPENDIX B: NESTLE MAGGI NOODLES FORECAST RETAIL SALES Nestlé India Ltd Shares of Pack aged

APPENDIX B: NESTLE MAGGI NOODLES FORECAST RETAIL SALES

Nestlé India Ltd Shares of Packaged Food by Subsector 2001-2004

% retail value rsp

2001

2002

2003

2004

Instant noodles

79.3

77.3

78.1

78.5

Forecast Retail Sales of Noodles by Subsector: Value 2005-2010

Rs million

2005

2006

2007

2008

2009

2010

Instant

6,077.5

7,300.6

8,611.1

9,959.2

11,319.4

12,667.3

noodles

Cups/bowl

84.8

112.6

143.1

175.2

206.8

237.6

instant

noodles

 

Forecast Retail Sales of Noodles by Subsector: Volume 2005-2010

 

'000

tonnes

2005

2006

2007

2008

2009

2010

Instant

59.9

71.6

84.0

96.9

110.1

123.1

noodles

Cups/bowl

0.3

0.5

0.6

0.8

0.9

1.1

instant

noodles

Source:

Trade press (The Economic Times, The Hindu Business Line, Financial Express, Business Standard, India Infoline, agencyfaqs.com, Mid-day, rediff.com), Company research, Trade interviews, Euromonitor International estimates