ITC Agro Products

SUNFEAST
Strategic Marketing Management

Submitted BySagar Sahai(1221330) Elis Mary George(1221445

Indian FMCG Industry Indian FMCG Biscuit is a fast growing industry, with strong players in the market, as Sunfeast, with such a strong competition consumer is the king with better prices, much improved quality and variety of the products. The project tries to draw a comparison in the major brands focusing on the distribution network, market penetration and the range offered. Sunfeast formed in 2003, being a comparatively much newer company has given tuft competition to this industry. Sunfeast also had a strong backup of brand image of ITC.Ltd and used it at most of its advantage.

Biscuit FMCG Biscuit holds a very significant position in FMCG sector. The 10,000 large biscuit industries are invaded by new players whilst older players struggle to get new markets. India has the turnover of 3000 cores of that the unorganized sector accounts for the maximum amount as thirty fifth. India is the third largest manufacturer of biscuits after USA and China. The segment is expected to grow at a rate of fifteen percent within the next few years. Britannia, Parle-G, Priyagold, ITC Sunfeast area unit a number of the popular brands. Biscuits area unit placed at a better supply chain than Bread in India. This can be the rationale as biscuits occupy hours of the assembly capability of bakeries. Cadbury, Nestle and Brooke Bond tried to enter the biscuit market however their efforts flopped. A series of latest players are waiting to enter the biscuit market.

2.3 ANNUAL GROWTH

The biscuit industry in India had an annual growth as below within the last few years:-

2008-09 16% 2009-10 14% 2010-11 11% 2011-12 11% 2012-13 09% Figure 2.3

Growth(%) Of Biscuit Industry In India

20 15 10 5 0 Year 2009 2010 2011 2012

16 14

11

11

9
Growth(%)

Source: www.indianmirror.com

3. COMPANY PROFILE

3.1 About ITC ITC is one amongst India's foremost personal sector firm with a capitalization of $ forty five billion and a turnover $ seven billion. ITC is rated among the World's best leading firms, Asia's 'Fab 50' and also the World's Most honorable firms by Forbes magazine and among India's most Valuable firms by Business nowadays. ITC ranks among India's '10 most Valuable (Company)

Brands', in an extensive study conducted by Finance Brand and released by the Economic Times. ITC is also ranked among Asia's fifty best performing firms compiled by Business Week.

VISION Sustain ITCs position as one of Indias most valuable corporations through world class performance, creating growing value for the Indian economy and the Companys stakeholders

MISSION To enhance the wealth generating capability of the enterprise in a globalising environment, delivering superior and sustainable stakeholder value

ITC in cludes a wide-range in FMCG, Hotels, Specialty Papers Paperboards , Packaging, Agri-Business, and data Technology. Whereas ITC is an impressive market leader in its ancient businesses of Hotels, Paperboards, Packaging, Cigarettes, and Agri-Exports, it's quickly gaining market share even in its emergent businesses of prepackaged Foods & Confectionery, attire, aid and writing paper. As one of India's most valuable and revered firms, ITC in its wide arena gave the impression to be dedicatedly nation-oriented. Chairman Y C Deveshwar calls this supply of inspiration "a commitment on the far side the market". In his own words: "ITC believes that its aspiration to form enduring price for the state provides the driving force to sustain growing shareowner price. ITC practices this philosophy by not solely driving each of its businesses towards international height however by conjointly consciously tributary to enhancing the competition of the larger price chain of that it's an area."

Sunfeast

This is a whole within the snacks food phase. ITC entered the biscuits market with Sunfeast whole in July 2003. The ITC web site says: Sunfeasts whole essence, Spread the Smile connotes happiness, happiness, satisfaction and pleasure. The organism Sunny reinforces the emotional aspects of the whole. Tagline of Sunfeast Biscuits is: Jo Delaware jitne ki sakti i.e. one that offers the ability to win. So, once more it's exploitation emotional charm. ITC entered into the Biscuits market with the Sunfeast variety of biscuit segments, Marie and Cream Biscuits. Sunfeast's whole essence depicts happiness, happiness, satisfaction and pleasure. In a short span time, Sunfeast has well-established presence in most classes of biscuits and is additionally a key player within the food and instant noodles segments. Over the years, ITC has launched many alternative products like cookies and food beneath Sunfeast brand. Sunfeast uses celebrity endorsements for promotions. The King Khan Shahrukh Khan and wonder queen Diya Mirza area unit shown in Sunfeast advertisements. Most Sunfeast advertisements revolve round the theme of happiness. An added common them across Sunfeast advertisements is that they use kids plenty. There appears to be two-fold reason for exploitation kids. Kids area unit one key target phase UN agency uses these product. It's terribly straightforward to emotional connect with oldsters (who area unit the buyers) by exploitation kids. To market Sunfeast whole, ITC conjointly goes for sponsoring events like lawn tennis tournaments. ITC reports 21.2% jump in net profit at Rs 1836.42 crore; no impact on cigarette sales despite increase in taxes KOLKATA: ITC Ltd reported 21.2% jump in net profit at Rs 1836.42 crore for the second quarter ended September 30, on back of 19.6% growth in net sales at Rs 7146 crore. The Kolkata-based marketer's non-cigarette FMCG business, comprising of packaged food, personal care, lifestyle retail and stationery products, registered robust revenue growth of 26.4% at Rs 1690 cr and reduced losses by 45% at Rs 30.31 cr over same period last year. boosting the company's over-all profitability.

The brands of ITC foods are as follows:

Aashirvaad Bingo Sunfeast Kitchens of India Mint-o Candyman The various variants of biscuits offered by Sunfeast are as follows:

1) Chocolate Sunfeast Dark Fantasy Choco Fills is the latest and the most premium offering from the portfolio of Sunfeast. a) Dark Fantasy b) Dark Fantasy Choco Fills 2) Dream Cream A creamy delight. a) Bourbon b) Strawberry c) Choco Vanilla d) Butterscotch 3) Nice These are crisp coconut biscuits showered with sugar crystals. 4) Crackers These are thin biscuits, taste of salt and sweetness. a) Sweet n salt b) Snaky Chili c) Salted 5) Marie a) Marie Light b) Oats c) Orange

6) Milky Magic 7) Special Cookies a) Butter b) Cashew c) Choco d) Kesari Elaichi e) Milk 8) Special Cream a) Elaichi Cream b) Orange Cream c) Pineapple Cream 9) Glucose

Biscuits became the key market players and their favorite products.

a) The two major players Britannia and Parle were busy biting of chunks of the national market among themselves, with a host of smaller brands in various regions. b) While the business was still very competitive, there wasn't anything groundbreaking. In 2003, with ITC foraying into the segment, a lot of that changed. c) At that time, Britannia and Parle held, between them over 82 per cent of the market in value terms. The rest too was firmly held by smaller players like Priya Gold 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 its mark? d) Three years down the line, however, things have changed a lot. It is a classic story of the hare and the tortoise. While it is far from winning the race, slowly and steadily, the tortoise is gaining ground. e) The late entrant is already on the podium in the third place with as much as 7 per cent of the market in terms of value. "ITC made hay when the sun wasn't shining," says a consultant who's been tracking the industry for a long time. But first, why did ITC train its eye on biscuits? Ravi Naware, chief executive, ITC Foods, makes it sound simple. f) "We decided to enter the foods segment because it's a Rs 550,000 crore (Rs billion) market in India. But only 6 per cent of this is branded and packaged. In developed markets, nearly 95 per cent of the food market is branded and packaged. So there was lot of scope for a branded player." g) 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 synergy. ITC was already value-adding to wheat with its branded atta presence. By entering the biscuits segment, it could also improve its bottomline further. h) But despite the fast growth rates, the biscuits industry was not all rosy. Over the years, even giants like Hindustan Lever had failed. i) 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 looks at the gameplan of a late entrant and how the biscuits industry has responded.

j) New recipe k) Before entering the segment, ITC dug into market research. Research revealed that the category had gaps which ITC could settle into. Findings revealed that consumers wished to taste new and innovative products. That was precisely what the competition had not done in a big way. l) Says Naware, "The biscuits industry had witnessed little innovation; Glucose was Glucose and Marie was still Marie." The company decided that this could be its biggest point of attack. In 2003, ITC launched Sunfeast with six ranges. But it was a calculated risk. ITC stuck to category favourites like Glucose, Marie and Bourbon cream. m) Along with that, it also launched innovations such as orange-flavoured Marie, Marie light and butterscotch-flavoured cream biscuits. In 2004, Sunfeast followed this up with the launch of Sunfeast Milky Magic. More recently, it also has launched the Sunfeast Snacky and Sunfeast Golden Bakes. n) Analysts believe that just because Sunfeast was a new brand, helped matters. Says a consultant, "The biscuits industry had not witnessed any major product innovation in years. Consumers were just waiting for something new, something fresh, when Sunfeast happened." o) Even the competition had not made things better. Between 2000 and 2005 neither Parle nor Britannia launched any major new product. Yes, Britannia did re-launch its Tiger brand in 2005. p) But Britannia claims that it is looking at more than just products. Richa Arora, general manager and head of marketing and innovations, Britannia Industries, says, "We are not just looking at new products, but tapping newer opportunities -- such as different occasions as well as out-of-home consumptions." q) In 2005, before Diwali, Britannia launched Occasions -- boxes of assorted biscuits priced between Rs 50 and Rs 200 -- which the company claims has been very successful. r) In 2006, however, the industry has seen a flurry of innovations from the big two. Digestive Marie -- was launched by Parle in early February 2006. Britannia

launched its new double-flavoured Mariegold and 50-50 Chakkar. And Parle is all set to launch at least two new products before the end of this year. s) Distribution maze t) It's common knowledge, that for FMCG products, distribution channels are very important. u) Says Pravin Kulkarni, general manager, marketing, Parle Products, "For biscuits, distribution and visibility are extremely important as it's partly a impulse purchase product." And in biscuits, setting up a distribution channel is anything but easy. Consider this. Priya Gold, which entered the western region in 2000, is struggling to find its feet even five years later. However, in this regard, Sunfeast has been fortunate: thanks to its tobacco business, ITC already had a good understanding of distribution channels. The company used its existing network of convenience stores -- the company's name for the hole-in-the-wall pan-beedi shops -- for Sunfeast. Not content with the existing resources, the company also looked at grocery stores and other retail formats. The company says the brand is now available in nearly 1.8 million outlets. Britannia claims it has a superior distribution clout with its presence in nearly 3.3 million outlets. Parle, the seasoned player itself, says it is available in 1.5 million outlets. Sunfeast's next step was to step up its branding and promotion.

In August 2003, a month after its launch, the company undertook a major sampling exercise to promote the product. For two years then, the brand did all the usual rounds -- riding behind buses, blocking television spots, booking that corner space in your favourite newspaper and so on. Well differentiated advertisements, some which showed a complete cream world with cream rivers, cream mountains and cream trees, were targeted at kids watching cartoon channels. At the same time, on general entertainment channels, mothers received information on the importance of glucose, the wholeness of wheat and so on. Also, the company tied up with Bey Blades, the popular television series that was a rage among children, to promote itself.

In April 2005, Sunfeast launched its major campaign. It signed on Hindi film actor, Shah Rukh Khan as its brand ambassador. In the same year, as the official sponsor of the WTA tennis championship -- titled the Sunfeast Open -- the company had teenage sensations Sania Mirza and Mahesh Bhupathi campaigning for it. But that's not all. For promotions in southern states, Sunfeast has signed Tamil super star Surya as a brand ambassador. Analysts say that ITC's deep pockets have helped Sunfeast in many ways. The company claims that it has been spending 35-40 per cent of its turnover from the biscuits segment on advertising and promotions. Going by that number, ITCs annual marketing spends are estimated to be in the region of about Rs 115-120 crore (Rs billion). Until last year, Priya Gold spent close to Rs 45-50 crore (Rs billion), nearly 10 per cent of its turnover on marketing. Even market leader Britannia with spends of Rs 100 crore (Rs billion) (2004-05) spends about 10 per cent of sales on marketing. But Arora says that the figure will increase substantially in 2006-07. ITC is clearly among the largest spender on ads and promotions in the biscuits category. Analysts predict that these figures are all set to rise this year. But industry experts aren't impressed. Says a consultant, "Although Sunfeast's Shah Rukh Khan association is interesting, it is yet to do something groundbreaking, like Britannia khao world cup jhao or the Lagaan promotion for that matter." Pricing models The biscuits industry now has two clear models. Parle products plays the low price game at all varieties of biscuits from glucose to cream. Essentially, Parle plays a high volume, low margin game. But Britannia and Sunfeast look at a two-pronged strategy. High margins in cream variants and volumes from the Marie and Glucose segments. For instance, cream biscuits from both Britannia and Sunfeast cost Rs 10 for 100 grams. Parle, however, only charges Rs 5 for its cream variants. Except for Hide & Seek, all of Parle's products lie in the price range between Rs 4 and Rs 6 for 100 gram packs.

To be fair, in Glucose and Marie, the companies have little choice. As there is little differentiation, consumers are extremely price sensitive. But these segments are important. Marie and the popular glucose varieties make up for nearly 55 per cent of the Rs 4,000 crore (Rs billion) biscuits segment -- a significant Rs 2,200 crore (Rs billion). Says Sunil Alagh, chairman, SKA Advisors, and former CEO of Britannia Industries, "the biscuit consumer is willing to pay more only when he sees a clearly differentiated product. Hence companies have little choice in terms of pricing." No wonder all the Glucose and Marie variants straddle price points of Rs 4-6 (for 100 grams). Key challenges Back in 2003, nobody thought Sunfeast would have consumers eating out of its hands. Says Naware, "Seven per cent in less than three years is something that we could have only dreamt about." Importantly, industry barometer AC Nielsen has indicated that both Parle and Britannia are losing market shares. According to the AC Nielsen retail sales audit in March 2006, both Britannia and Parle have lost volumes. Britannia's shares have dropped from 35.8 per cent in 2004-05 to 30.5 per cent in May 2006 (volumes). Parle's shares have also dropped from 42.2 to 38.4 per cent in the same period. Even Priya Gold has seen a minor dip from 6.4 per cent to 5 per cent. ITC's Sunfeast has been a big gainer with its share increasing from 2.7 to 6.7 per cent. In terms of value, Britannia leads the market with 37 per cent market share, followed by Parle's 31.3 per cent and ITC's 6.3 per cent. Nevertheless, the gap is still wide. Sunfeast still has a long way to go. But what can the bigger players do? Alagh has an interesting observation. Says he, "Biscuits have always been a low margin, high volume game. Both Britannia and Parle have very high volumes and can easily afford to lower their margins." 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. While the full game is yet to be played out, for the moment the sun seems to be shining on Sunfeast. Creaming the market. . .

Innovation in the product line -- biscuits with butterscotch cream with actual granules in the cream, strawberry cream with flavour-enhancers and orange-flavoured marie. Gained an edge from the well established distribution network of its tobacco business. Signed up big film stars like Shah Rukh Khan and southern star Surya as brand ambassadors for Sunfeast. Branded the WTA tennis tournament with promos starring tennis stars, Mahesh Bhupati and Sania Mirza. Needs further embellishments Big brand ambassadors, but not strong enough advertising campaigns for big brand recall. The gap between the number three and the top two slots is too wide. Competitors can play the low price game as they have volumes to support.

The major competitors to Sunfeast who were identified during the study are Britannia and Parle.

"The creamy category contributes to less than 20% to the complete Britannia business. However, in the recent past some key brands like Bourbon and Treat have gained much stronger position and appeal with consumers and have grown fast than the overall biscuit market. Bourbon, in fact, has its share of 9% (9.2% last year)," said a Britannia spokesperson.

Competition has also been there in different categories including a huge launch of Oreo which has a market share of 1 % in the biscuit market, with an innovative and a superior consumer quality, Britannia creamy segment will be sustaining pricing. ITC has invested in Sunfeast premium creamy biscuits were at higher than 114% in the last two quarters. In comparison, Britannia spends on the premium segment of cream biscuits increased to 6%.

ITC gathered an edge with its high priced range of cream biscuits receiving a positive response from the market with sales volumes of tremendous growth. Parle Products now is the biggest biscuit maker, and tries to enter this premium creamy segment.