STRATEGlES ADOPTED BY UNlLlVER

As one of the strong and heathy companes n the word wth many
successfu brands, Unever has an opportunty to expand nto foregn
markets n order to gan access to customers around the word. Supported
by strengths of ts four key goba brands - Dove, Sunsk, Rexona and Lux,
Unever frsty entered n foregn market to compete nternatonay by
enterng |ust one or seect few foregn markets. Once successfuy
ntroduced ts product n severa market, Unever expands ts success
brand to many other markets and startng to compete gobay.
In enterng and competng n foregn markets for ts cosmetcs and
toetres product, Unever foows a goba strategy, aso caed by a thnk-
goba and act-goba strategy, The strategy usng essentay the same
compettve strategy approach n a country markets where the company
has a presence (wth ony mnma responsve to oca condtons), ses
much the same products everywhere (make mnor adapton to oca
countres where needed to accommodate oca countres preferences),
strves to bud goba brands, and coordnates ts actons wordwde
(centrazed). A goba strategy used by the Unever s preferabe to
ocazed strateges because Unever can more unfy ts operatons and
focus on estabshng a brand mage and reputaton that s unform from
country to country. It strategy mpes to the Unever success n budng
strong character brand such as Dove, Sunsk, Rexona and Lux. Moreover,
wth a goba strategy Unever shoud coordnated ts marketng,
operatona and dstrbuton wordwde.
Unever s ncreasng ts efforts to bud on ts ong-estabshed oca roots
n deveopng regons. Through ts we-estabshed dstrbuton network n
both the tradtona and modern reta outets and wth a good abty to
adapt successfu goba brand concepts to sut oca markets, Unever s n
a good poston to be abe to captaze on the growth forecast n these
regons.
Once Unever became one of the most successfu goba companes n the
word, t has many proft sanctuares. By havng mutpe proft
sanctuares, Unever has strong compettve advantage over ts
compettor wth a snge or few sanctuares. In the cosmetcs and toetres
gobay compettve ndustry, there are no doubt that Unevers ma|or
rvas over the next few years w be Procter & Gambe and LOra, both
of whch gve sgnfcant resources to new product deveopment actvty,
and respond to changes n the market faster than Unever. LOra aso
has the beneft of beng excusvey nvoved n cosmetcs and toetres,
unke both Unever and Procter & Gambe whch both have cross-ndustry
nvovement, such as n packaged food. Much the same group of rva
companes competes n many dfferent countres. Therefore, the
competton pursues the company to be more nnovatve n deveopng ts
products and mantanng ts brands.
To wn customers and saes away from seect rvas n country markets,
Unever empoy cross-market subsdzaton. Ths offensve strategy s
approprate for Unever whch s compete n mutpe county markets wth
mutpe brands and wde varety of products. Fnay n enterng the
emergng-country market Unever prepare to compete on the bass of ow
prces. Unever pursued ths strategy because consumers n emergng
markets are often hghy focused on prce, whch can gve ow-cost oca
compettors the edge uness a company can fnd ways to attract buyers
wth bargan prces as we as better products.
A strateges executed by Unever for competng n foregn market
resutng n moderate 5% saes growth n 2006 - |ust above market
performance - ensured that Unever kept ts poston as thrd argest
payer n cosmetcs and toetres wth a 7% market share. Second-paced
LOra fared a ot better, ncreasng the gap between the two companes
n part thanks to ts acquston of The Body Shop. Market eader Procter &
Gambe remaned over fve percentage ponts ahead of Unevers share.
In 2006, Unever remaned comfortaby ahead of Cogate-Pamove n
fourth pace. Unever decson to ntroduce ts product on emergng
market such as Asa-Pacfc, Latn Amerca and North Amerca mpes to
the hgh contrbuton of Unever tota revenue by 26%, 21% and 16%
respectvey.
STRATEGlES ADOPTED BY HUL
HULs hstory coud be traced back to year 1885, when the Lever Brothers
set up "Wam Hesketh Lever" n Engand. In 1888, the company entered
Inda by exportng "Sunght", ts aundry soap. In 1895, Lfebuoy soap was
aunched n Inda foowed by "Pears" n 1902, "Lux" fakes n 1905, and
"Vm" powder was aunched n 1913. In 1930, the company merged wth
"Margarne Une" (a Netherands-based company whch exported
vanaspat to Inda) to form Unever.
In 1931, Unever set up t frst Indan Subsdary, the Hndustan Vanaspat
Manufacturng Company for producton of vanaspat. Ths was foowed by
the estabshment of Lever Brothers Inda Ltd., n 1933 and Unted Traders
Ltd., n 1935, for the dstrbuton of persona products. In 1951, HUL
purchased pants at Trchy, Shamnagar and Ghazabad to expand ts
vanaspat producton capacty. By November 1956, the three Indan
subsdares merged to form Hndustan Lever Ltd (HLL).
HUL aso set up the Etah Dary for manufacturng dary products. "Ank
Ghee" was aunched n 1964. In the same year, HUL ntroduced ts Sunsk
shampoo. In 1967 HUL set up the Hndustan Lever Research Centre. "Rn"
detergent bar and "Bru" coffee was aunched n 1969. "Cnc" shampoo
was aunched n 1971, foowed by "Lr" bathng soap n 1974. The
company entered the ora care segment wth ts "Cose-up" toothpaste n
1975. Next they dversfed by ntroducng ndustra chemcas by settng
up pants at Tao|a n Maharastra (1974), Hada n West Benga(1976),
|ammu(1977) for synthetc detergents. In 1978, the company aunched
"Far & Lovey" cream.
In 1983, HUL set up a unt n Chandwara dstrct of Madhya Pradesh for
manufacturng synthetc detergents. HUL dversfed to agro-products, by
settng up a unt n Hyderabad n 1986. They aunched breeze soap n
1987 and set up a manufacturng pant at Pondcherry n 1988, for ts
persona care products. In 1989, HUL set up a detergent soap pant n
Sumerpur, Uttar Pradesh and a toet soap pant n Ora, Uttar Pradesh. In
1992, the Government of Inda recognzed HUL as Star Tradng House. The
same year, HUL aunched two more ora care products, "Pepsodent" and
"Mentadent-G".
In Apr 1993, HUL merge wth Tata O Ms Company (TOMCO), one of the
bggest mergers n Indan ndustry t that tme. The same year, HUL
aunched the "Vm" dsh-wash bar. In 1994, HUL and US-based Kmberey-
Cark Corporaton formed a 50-50 |ont venture, Kmberey-Cark Lever
Ltd., to aunched Hugges dapers and Kotex femnne care products.
In 1995, HUL formed a 50-50 |ont venture wth another Tata company,
Lakme Ltd, named "Lakme Lever Ltd to market cosmetcs. In 1996,
Brooke Bond Lpton Inda Ltd (BBLIL) merges wth HUL to market tea. In
|anuary 1996, group merged wth Ponds Inda Ltd. In 2000, HUL acqured
a 74% stake n Modern Food Industres Ltd., the frst pubc sector
company to be dsnvested by the Government of Inda.
Step toward Retail lnnovation for tapping Rural Market
Pror to the ate 1990s, HUL ke any other company had tradtona modes
of reachng out to the rura consumer, .e., through whoesaers and
retaers. It used van campagns to nduce the vage retaers to se ther
products. Later HULs vans were repaced by vans beongng to
redstrbuton Stocksts, who served a seected group of markets. Ony
25% of the vages coud be tapped ths way. Thus, HUL reazed that a
vast secton of the rura market s st untapped.
So, n 1998 they conceptuazed "Pro|ect Streamne" to ncrease the
presence n the rura market and reach out 100,000 reta outets by 1999.
The pro|ect amed at coverng 50% of the rura popuaton by 2003. HUL
apponted Rura Dstrbutors (RD). These RDs were attached to 15-20 sub-
stocksts. These sub-stocksts, who were ocated n the vages, were
expected to drve dstrbuton n the neghbourng vages through
unconventona modes of transport ke tractors, came carts, buock
carts, etc. Ths pro|ect heped HUL n extendng ts rura reach to about
37% n 1998 from 25% n 1995.
HUL reazed that consumpton of persona products among rura
consumers was very ow. For nstance, out of every ten peope, ony three
were usng toothpaste or tacum powder or shampoo, whe sx out of 10
were usng washng powders. Even n a category ke soaps, they found
that frequency of usage was once per fve bathng occasons. To ncrease
the usage of there product n rura market, n 1998 the Persona Products
Dvson of HUL took an ntated "Pro|ect Bharat" - a massve rura home-
to-home exercse to address these ssues. Company vans vsted vages
across the country to educate the customers and dstrbuted sampes of
ow-unt prce packs of shampoos, toothpastes, tacum powder or cream
among the rura peope.
The retang actvtes were supported by product demonstraton or vdeo
shows about product beneft and usage. In the frst phase of the pro|ect,
HUL targeted the vages havng popuaton fve thousand and above,
whe the second phase targeted the vages wth popuaton n the range
of 2,000 to 5,000. Ths pro|ect enabed HUL to cover 13 mon
househods by the end of 1999. The dea of provdng mcro-credt to
vagers began wth HULs Pro|ect Bharat. Groups of vagers (15 to 20)
beow the poverty ne were offered mcro credt of Rs.750 by banks. HUL
traned them to use ths credt to buy the companys products and se
them at a proft.
Phases in Retail lnnovation
Phase l - Operation Streamline - Accessibility
In 1998, HUL aunched Operaton Streamne to extend ther dstrbuton
network throughout Inda. Operaton Streamne s one of the ma|or
ntatves undertaken by HUL n recent tmes to penetrate the rura
markets, .e., to make ther product accessbe n rura market. In the case
of Operaton Streamne, the goods are dstrbuted from the C&F Agents to
the Re-dstrbutors, who n turn pass the products to the Star Seers.
Beng a cross-functona ntatve, the Star Seer ses everythng startng
from detergents to persona care products n rura areas. Operaton
Streamne opened up a new dstrbuton channe beyond the terrtores
that were covered by HULs earer, they apponted 7,500 new odd
dstrbutors. In ess than two years, the company doubed ts reach n rura
Inda. By mpementng Operaton Streamne HULs dstrbuton network
abe to cover 60 per cent of the vages wth popuaton greater than
2,000 and the vages havng roads.
Se of some of the product shot up n a very short span of tme, one of the
greatest achevements was the penetraton eves for ts Far & Lovey
cream rase neary three tmes n |ust three months of aunch of pro|ect.
Interestngy, the se of varous products appears to crack open the rura
markets. But 300,000 vages are st out of reach of HUL, so to reach
them t created a new super stockst and sub-stockst structure. The
super-stockst n the bgger towns serve these sub-stockst, who are pad
1-2 per cent more margns that the retaers. Ths s to cover the sub-
stocksts costs of servcng retaers n hs area. Snce the dstrbutor
cannot cover these retaers reguary n rura areas, these sub-stocksts
pay a very cruca roe as a stock ponts for the rura retaers. Then, once
dstrbutors create the necessary demand n rura market, the sub
stocksts carres ths process forward.
Phase ll - Project Bharat - Awareness
HUL mpemented a ma|or drect consumer programme caed Pro|ect
Bharat, whch covered 2.2 crore homes n rura areas. The prmary
ob|ectve of ths pro|ect s to create awareness of HULs persona care
products. Each home was gven a combo pack, at a speca prce of Rs.15,
comprsng a ow unt-prce pack of har-care (Cnc shampoo), denta
(Pepsodent toothpaste), skn-care (Far & Lovey) and body-care (Ponds
Dream fower tac) products aong wth eafets to make the customer
educated on dfferent products of HUL. Cose to 160 vans and around
thousand promoters (saes staff of the dstrbutors and other prvate
operators) were pressed nto ths Operaton. The cost of ths pro|ect came
up to be roughy Rs.13 crore. For demonstratng the products each van
was equpped wth a TV and VCR, had sx promoters. The pro|ect heped
emnate barrers to tra, and strengthened saence of both partcuar
categores and brands. Supported by audo-vsua demonstratons, fm
songs and mythoogca seras nterspersed wth ads of Lever product, ths
campagn heped the company n further penetraton of the rura areas.
Phase lll - Project Shakti - Action
HUL brought nnovaton n rura retang through "Pro|ect Shakt". To
deveop sustanabe market of ther product n rura area they nvoved the
rura poor. Dstrbuton acqured further mpetus through HULs "Pro|ect
Shakt" whch was based on the successfu Grameen Bank Mode of
Bangadesh. The pro|ect was started n 2001 n 50 vages nvovng
women beongng to mcro credt Sef-Hep Groups (SHGs) n the
Nakgonda dstrct of Andhra Pradesh (AP). Rura women organsed
themseves nto "thrft and credt" groups and began savng one rupee per
day. By 2003 corpus fund had ncreased to Rs.1500cr, of whch Rs.800cr
had been saved by 58 akh women. Ths group contnues ts operaton
funded by the savng of the members, bank oans and government
assstance. Members may borrow from ths group corpus twce n a year,
at the nterest rates fxed by the group. Though such oans can aso be
used to meet persona needs, the ob|ectve of the programme s to use
the funds to generate more ncome.
For Pro|ect Shakt, the SHGs were covered by three Mutuay Aded
Cooperatve Thft Socetes (MACTS). Each MACTS had 14 to 15 SHGs
under them. HUL aong wth a soca servce organsaton, Marketng And
Research Team (MART), asssted women n gettng mcrocredt to set up
an enterprse to dstrbute HULs range of products. To start an enterprse
ntay Shakt entrepreneurs take oan from SHGs. They take tranng for
three month then they start seng HUL products n sx to ten vages
havng popuaton from 1000 to 2000. They receve the stock at ther
doorstep from the company. They then se the products to vage
retaers and customers. To start they began wth four to fve brands of
HUL ke Lfebuoy, Whee, Pepsodent, Cnc Pus and Annapurna sat. Later
they keep on addng other brands ke Lux, Nhar etc. Shakt entrepreneur
normay earn Rs.1000 on the saes of Rs.10,000. By 2005, HUL had
reached 12,000 vages n 100 dstrcts and was abe to reach 1 crore
customer through 2800 Shakt entreprepeurs.
A woman from SHGs seected as a Shakt entrepreneur receves stocks at
her doorstep from the HUL rura dstrbutor and ses drect to consumers
as we as to retaers n the vage. Each Shakt entrepreneur servces 6-
10 vages n the popuaton strata of 1,000-2,000 peope. A Shakt
entrepreneur sets off wth 4-5 chef brands from the HUL portfoo -
Lfebuoy, Whee, Pepsodent, Annapurna sat and Cnc Pus. These are the
core brands that they ayer t wth whatever ese s n demand ke tacum
powder or Vasene durng wnters.
The Shakt Mode trans women from SHGs to dstrbute HUL products of
day consumpton such as detergents, toet soaps and shampoos - the
atters penetraton beng ony 30 per cent n rura areas. The women ava
of mcro-credt through banks. The estabshed Shakt entrepreneurs are
now seng Rs.10,000-Rs.15,000 worth of products a month and makng a
gross proft of Rs.700-Rs.1,000 a month.
The company s creatng demand for ts products by havng ts Shakt
entrepreneurs and educatng consumers on aspects ke heath and
hygene. The Shakt brand endorsers are under-prveged rura women
traned to manage busnesses. Shakt pro|ect s a wn-wn ntatve that
creates vehoods and a soca ntatve that mproves the standard of fe
and catayses affuence n rura Inda. What makes Shakt pro|ect unquey
scaabe and sustanabe and t contrbutes not ony to HUL but aso to the
arger nterests of the communty.
Phase lV - Product lnnovation - Acceptable and Affordable
To tap more and more rura consumers they deveop Non-Soap Detergent
Powder whch was aunched n the rura market n name of Whee
detergent n year 1988 to counter Nrma detergent. Wthn a decade
Nrma and Whee targetng the rura consumer started sharng equa
market share of 38%.
To meet the chaenge gven by another company n eary 1980s, .e.,
CavnKare whose eary avatar s Chk Shampoo whch created a
revouton n shampoo market, HUL aunched Cnc and Sunsk shampoo
n sma sachets. The Low Unt Prce (LUP) packs were successfu n rura
market to convert the consumer from soap to shampoo. 95% of the tota
saes of shampoo n rura area were through sachets t ate 90s.
In eary 2000s, to ncrease the penetraton of HUL products n rura area
they ntroduced Surf Exce, Ponds tacum powder, Far and Lovey,
Pepsodent, Rexona Deo-stcks n LUP packs. A these products are
successfu n wnnng the mnd of the rura consumers. HULs effort and
Shakt entrepreneurs ntatve together payed an mportant roe n
makng a these products successfu n rura market.
In May 2000, HUL aunched "Am" toothpaste to compete wth Dabur
toothpaste and was prced at Rs.3 per 20gm, Rs8 per 50gm and Rs.16 for
100 gm for the rura consumers. They were aunched n pastc fow wraps
rather than tradtona cartons, so that they coud be hanged aongsde of
the store. But wthn fve month of ts aunch they decded to wthdraw the
product from the market and decded to put ts effort to ncrease the
penetraton of ther other two products, Pepsodent and Coseup.
To support the Shakt entrepreneur HUL engaged Ogvy Outreach to
enhance the awareness of ther products n rura markets. HUL reazed
that 30 seconds advertsement n the Teevson may not abe to create an
mpact n the mnd of rura consumers, they have to be tapped by usng
unconventona meda through coourfu fyers, entertanng |nges, street
pays, cnema vans etc.
Phase V - Replication
The huge success of the "Pro|ect Shakt" has nspred the company to take
t to the nternatona eve. Ango-Dutch consumer goods ma|or Unever
has begun repcatng HULs rura mcro-enterprse, ed by women-
entrepreneurs, Pro|ect Shakt n severa nternatona markets. The pro|ect
has emerged as a successfu ow-cost busness mode and enhanced
HULs drect rura reach n the so-caed meda-dark regons. Armed wth
mcro-credt, rura women become drect-to-home dstrbutors of Unever
brands n rura markets. The Fortune 500 transnatona whch ses foods
and home and persona care brands n about 100 countres has stepped
up focus on the pro|ect gven that emergng markets now contrbute
around 44% to goba revenues.

The effort s expected to hep Unever tap fresh growth avenues n
emergng markets n the face of recessonary trends n the US and Europe.
Aso, gven the saturaton of urban markets, companes try to re-engneer
ther busness modes to derve growth from rura consumers.
The pro|ect s beng customsed and adapted n other Unever markets
such as Sr Lanka, Vetnam and Bangadesh. It s beng consdered for
other Latn Amercan and Afrcan markets. In Bangadesh and Sr Lanka, t
s beng promoted as |oyeeta and Saubaghya, respectvey. There s a
smar ntatve n Vetnam as we.
Conclusion
By 2006, through "Pro|ect Shakt" HUL coud reach 3400 dstrcts across
the country. Ths cruca pro|ect was abe to contrbute 15% of HUL rura
saes. The rura mcro-enterprse has heped the Rs.13,717-crore
Hndustan Unever n pushng growth rates n severa categores such as
persona wash, fabrc wash, shampoos, ora care and skn care. Brands
ke Annapurna, Lux, Lfebuoy, Breeze, Whee, Far & Lovey, Lakme,
Ponds, Cnc Pus and Pepsodent have sod good numbers n smaer
markets, company sources sad. Overa, around 50% of Hndustan Levers
revenues come from the rura markets n Inda.
Presenty the "Pro|ect Shakt" s operatng n ffteen states namey Andhra
Pradesh, Karnataka, Tam Nadu, Gu|arat, Madhya Pradesh, Chhattsgarh,
Maharashtra, Uttar Pradesh, Pun|ab, Haryana, Ra|asthan, West Benga,
Bhar, |harkhand and Orssa. There are over 45,000 Shakt entrepreneurs
coverng over 1,35,000 vages across 15 states. The huge success of ths
pro|ect, both n terms of fnanca returns and soca upftment, has
compeed as we as motvated the company to take ths ntatve at an
nternatona eve.
Severa commentators argue that snce busness s a subsystem of the
socety, soca good s mperatve. However severa others are of the
opnon that fnanca returns are more mportant. The pro|ect Shakt s an
nterestng ntatve whch takes care of both soca upftment and
fnanca returns. Ths pro|ect s apprecabe because t has not ony
enabed the company to attan ts ob|ectves but aso heped n
empowerng the downtrodden of the socety and n germnatng the seed
of entrepreneurshp.
STRATEGlES ADOPTED BY BROOKE BOND
COMPANY BACKGROUND
Unever was created n 1930 when the Brtsh soap maker Lever Brothers
merged
wth the Dutch margarne producer, Margarne Une. At the tme, an
nternatona
merger was an unusua move. But the owners of the two companes coud
see that
brngng together compmentary busnesses wth strong goba networks
woud
create new opportuntes.
Unever (Pakstan) Lmted Formery known as Lever Brothers (Pakstan)
Lmted
s by far the argest and most experenced fast movng consumer goods
(FMCG)
frm n Pakstan. It en|oys a very arge market share n consumer goods,
the ons
Brand Management 5 Supreme Back Brew
share even, and s partcuary domnant n tea and ce-cream. The argest
compettor
of Unever n Pakstan s Procter & Gambe whch aso s a house hod
name n
consumer goods a over the word.
Unevers prncpa actvtes are to manufacture and se spreads and
cookng
products, ce cream, beverages and home and persona care products.
Some of the
products n the unever ne are Brooke Bond, Lpton, Lux, Rexona,
Sunsk, Surf,
Bue Band and Panta.
RELAUNCH OF BROOKE BOND SUPREME
The recent faure of Brooke Bond supreme s the prme reason for re
aunchng Brooke Bond supreme n Karach. The ma|or reasons for the
faure of Brooke Bond supreme s credted to the taste preferences of
Peope
of Karach and to the ma|or compettons that Brooke Bond s facng from
Brand Management 6 Supreme Back Brew
Tapa Danedar, Tapa Famy Mxture and from Lpton Yeow Labe whch
s the famy brand of Unever aong wth Brooke Bond supreme.
Reasons Of Failure:
Brooke Bond supreme s one of the eadng tea brands a over Pakstan
but
the saes n Karach have been very poor snce ts ntroducton. The ma|or
reason of t s :
The ma|or concern whch prevas n the tea ndustry s the bend
tsef, and because of the preferences varaton of peope of dfferent
parts of Pakstan, one snge tea can not be ntroduced country wde
wthout any ateratons. After beng successfu n Pun|ab, when
Brooke Bond Supreme was aunched n Karach t was not atered,
whch resuted n the faure of the product
Peope of Karach prefer Danedar tea more then any other tea because
of the aromatc sme. Ths s the prme reason of the success of Tapa
Danedar n Karach.
Another reason that can be cted for the faure of Brooke Bond s the
ferce competton t s facng from Tapa and Lpton Yeow Labe.
Tapa have the upper edge over Brooke Bond s because of the quaty
of the tea and wth dfferent assortments t has covered the shef
space. On the other hand Brooke Bond supreme |ust have 2 dfferent
pack szes.
Introducton of SUPREME BLACK BREW
Brooke Bond supreme have been re aunched ony n karach consderng
the arge potenta market and penchant of the target market, we have
Brand Management 7 Supreme Back Brew
executed the concept of mut-brands and aunched Supreme as Supreme
Back Brew n Karach. The name Back Brew has been kept to catch the
eyes of peope of Karach who prefer ther tea strong and aromatc. Back
gves an mage of Strong and Brew comes from beverage whch reates
to
the aroma of the tea.
Supreme Back Brew have been re aunched wth many dfferent
assortments aong wth heavy advertsements and promotona schemes
as
t s the ony way t w entce the peope to try t, who as of now are
fathfu
to Tapa and Lpton.
Supreme Back Brew has been re aunched wth dfferent assortments to
cover the shef space to catch the peopes eyes. The dfferent
assortments
are:
Sma Pack: 100 grams
Famy Pack: 250 grams
Pastc |ars 400 grams
Tea Bags 50 Peces
Tea Bags 100 Peces
Str Ready
Str Ready s the poneer n ts category and have been aunched for the
frst
tme. It s as ts name suggests Str Ready. A tea bag s attached to a
spoon
whch you str and drnk at the same tme wth more convenence and
ease.
CURRENT MARKETlNG SlTUATlON
Brand Management 8 Supreme Back Brew
Market Stuaton
The tea ndustry of Pakstan consttutes the target market of neary haf of
the popuaton and yeary consumpton s 130,000 tons. And the
consumpton rate s st acceeratng at a fast pace, accumuates to be 6%
annuay.
The popuatons of tea Consumers represent the ncome eve and area of
resdence whch consttute of upper mdde cass n voume of 1,950,000,
mdde cass n voume of 5,200,000, ower mdde cass n voume of
3,900,000, ower cass 1,300,000, cacuated n percentage as 15%, 40%,
30%,
and 10% respectvey.
The preference of buyers shows the concern n quaty, aroma, strong
ness
and the nature of tea type. Normay the buyng decson of tea s taken by
househod women aged between 30 to 60. Ths category beongs to the
dssonance reducng buyng behavor where there are not many varetes
or
dfferences are there however the nvovement n the product s hgh.
Due to the humd weather and the hectc festye, tea works as an
effectve
stmuant. Another reason for tea beng a popuar stmuant s that coffee,
a
cose substtute of tea s comparatvey expensve whch most peope
cannot
afford.
Brand Management 9 Supreme Back Brew
Compettve Stuaton
Unever owns two of the most wdey recognzed product nes Lpton and
Brooke
Bond. The ma|or competton facng Lever at present s from Tapa
Danedar Tea,
who s truy a market chaenger.
Lpton comprses of Yeow Labe whch s desgned for upper mdde,
upper ower and upper mdde cass, whch s a market eader n the
ndustry, t comes n a the packages ncudng hard packs, |ars, and
teabags. Lpton yeow abe athough the drect compettor of Brooke
Bond
Supreme comes n the famy of Unever so t s prone to ts competng
attacks. Lpton foows a massve promoton scheme to hod ts share.
Rchbru s desgned for mdde and ower
upper casses, and Pear dust s desgned for rura areas, mosty dstrcts
of
Sndh where consumpton of dust s extensve. They both are not stated
as
drect compettors of Supreme because they are targetng to dfferent
audence. Lpton has a market share of 25%.
Brooke Bond comprses of Supreme and A1 karak Tea whch s desgned
for
ower casses, orgnay known as Kenya mxture and then A1 Kenya
mxture. Brooke Bond has a market share of 9%.
Tapa wth the assortments ke Danedar and Famy mxture coectvey
has a market share of 22% overa and n Karach t has 24%. Tapa s not
ony a drect compettor but can be stated as a ony compettor because
a
the ma|or market share hoders beong to the famy of Unever except
Tapa. Tapa aso comes n varous packages and consumes much of the
shef space n super markets and convenent stores. Tapa has the bggest
advantage of ts assortments as s served not ony by mxture but aso
Danedar whch s gettng very popuar day by day. Tapa has a good
mage
n consumers mnd and ts prce s aso reasonaby attractve.
A szabe porton of the market s domnated by oose tea or unbranded
tea.
However, these brands are currenty threatened by smugged tea from
Afghanstan whch s avaabe n the open market duty free. Ths has
posed
a ot of probems for genune mporters of tea who cannot compete wth
ths
tea because of ts ow prce. These unbranded teas have the bggest
market
share of 40% because of ts ow prce.
The other brands ncudng Sohn, Kohnoor, and Ispahan etc consttute
the
market share of 2% n Karach.
Brand Management 1 0 Supreme Back Brew
Dstrbuton Stuaton
Ths s the perfect exampe of two-eve channe dstrbuton whch woud
be from the manufacturer to the dstrbutor to the retaer. Normay the
margn of dstrbutor ranges from 8 to 10 percent per pack and the margn
assocated for retaer s 6 to 7 percent per pack. Athough t dffers from
company to company and brand to brand because of the varaton of the
szes and quantty dsparty.
Athough estabshed brands ke Tapa and Lpton do ntensve dstrbuton
whch has a ma|or draw back of prce wars and mage of the product
sacrfces as t can be found n ower cass geographca ocates.
Brand Management 1 1 Supreme Back Brew
Macro Envronment Stuaton
Due to the natura envronment, Tea s not produced n Pakstan, but ony
bended and packed. It s mported from Kenya, Indonesa, Sr Lanka,
Chna, Bangadesh, Inda and other countres. Agents n these countres
purchase t from aucton and export t to Pakstan. They work on
commsson bass, usuay ten cents per kg.
Unever (Lpton) n order to get backward ntegraton s expermentng n
Swat and Mansera to produce tea. Athough no sgnfcant resuts have
been
acheved, they are st tryng. If they get successfu a the products e n
the
famy of Unever w en|oy the owered prces of tea wthout havng to
pay
the mport duty whch w wn a compettve edge n terms of cost
eadershp.
The ega envronment posses some of the probems ke Tea saes have
contnued to suffer from rampant smuggng of tea. Lever presenty pays
more than 80% as taxes on mported tea. Ths has made tea smuggng
attractve. Not ony unbranded tea but aso estabshed brands are aso
threatened by smugged tea from Afghanstan whch s avaabe n the
open
market duty free. Ths has posed a ot of probems for genune mporters
of
tea who cannot compete wth ths tea because of ts ow prce.
The Soco-cutura envronment pays a very massve roe n tea ndustry
because the choces and preferences of peope n dfferent provnces are
vared to a great extent. In nteror Sndh and Baochstan, there are heavy
consumers of Dust tea, Pun|ab kes mxture and n Karach Danedar s
exceedngy popuar.
Brand Management 1 2 Supreme Back Brew
MARKETING STRATEGY
Overview
Accordng to our research target market n Karach prefer Danedar
and that s the reason why Tapa Danedar s so popuar. So Supreme
w be aunched n both mxture and Danedar.
The prcng of our product gves us an advantage n the market
compared to our compettors, as most brands are prced at Rs.46.
Introductory prcng w be offered for three months for Rs.36
(no proft bass).
There w be heavy advertsements done on supreme aong wth
saes promotona schemes both for the consumers and the retaers.
The am w be to create awareness n the peope and to nduce them
n tras of Supreme Back Brew.
Many assortments of Supreme w be taken out to cover the shef
space and hence creatng awareness whch w ncrease the choce
and chance at the part of consumers.
Brand Management 1 7 Supreme Back Brew
Product
Tea s an aromatc stmuant, contanng varous poyphenos, essenta
os
and caffene. The concentraton of caffene n tea ranges from 2.5% to
4.5%
and t s ths caffene content that makes tea a usefu stmuant. Tea s the
beverage made when the processed eaves of the tea pant are nfused
wth
bong water.
In Pakstan, tea s ony bended and packed, but not produced. Three basc
categores of tea are marketed n Pakstan, namey
Mxture
Danedar
Chura
Danedar s aso known as eaf tea whe Chura s known as dust tea. There
are around fve hundred favors avaabe n tea. Fne (Dust) tea grans are
dstngushed by D, D1, D2. The codes assgned to these grans consttute
the ma|or categores of tea -
Danedar - BP1 + BP
Brand Management 1 8 Supreme Back Brew
The rura areas of Snd are consdered to be heavy consumers of dust tea.
Pun|ab has a hgh consumpton of eaf tea. Accordng to our research
target
market n Karach prefer danedar and that s the reason why tapa
danedar
s so popuar. So Supreme w be aunched n both mxture and Danedar.
Because of the hgh brand awareness of Brooke Bond Supreme, It can not
be
changed durng reaunch but f ma|or ateratons. However two dfferent
product mxes for same brand n dfferent ctes may ead to confusonand
dscrepancy, so concept of mut brands has been executed. The new
name
w be Supreme Black Brew whch communcates the benefts of the
product such that the product s strong n ts bend and comes wth two
assortments demanded by the target market.
Price
The prcng strategy put to work s Markup Prcng Technque whch states
that after cacuatng the cost, requred margn n percent shoud be
ncuded
to determne the prce, Moreover competton prcng s aso consdered.
Therefore the prce s margnay hgh than that of compettors to educate
the consumers that the quaty of the product s mproved and of hgh
quaty. For an nstance prce of 100g s cacuated as foows.
Cost for 100 grams Rs 16.0
Packagng cost per box Rs 0.5
Dstrbutors proft margn Rs 3.6
Retaers proft margn Rs 3.0
Tota Rs 23.3
Gross Margn Rs 2.8
Brand Management 1 9 Supreme Back Brew
Tota Prce Rs 26.0
Prcng of other packages are 200gms for the prce of Rs. 56/-, teabags 50
pcs
are prced at 65, teabags are prced at Rs 125/- |ar s prced at Rs 100Rs.
Place
The company s usng a two-eve channe, where Company w hre a
dstrbutor who w work on commsson bass and further more the
dstrbutor w se the product to customer whch w utmatey be sod to
end-consumers. That s the channe of dstrbuton woud be from the
manufacturer to the dstrbutor to the retaer. The dstrbutor that we
have
decded upon s Internatona Brands Lmted (IBL).
In frst sx months the Brooke Bond w use seectve dstrbuton
technque
where retaers w ony be seected for dstrbuton accordng to the
geographca regons, where the exstence of target market s at arge
Brand Management 2 0 Supreme Back Brew
Reward power w be excercsed wth retaes that s the the margn per
pack w ncrease for dfferent range of saes voume.
La|awaab empoyees the push strategy as t offers the dstrbutor a margn
of
Rs 4 on each box of 250 grams. Smary, the retaers are offered Rs 3 on
each box of 250 grams. Ths margn s comparatvey hgh as compared to
our compettors.
Wthn Karach some of the ma|or areas that w be covered are as
foows:
Cfton, Defence, Tarq Road, PECHS, Bahadurabad, KDA Scheme1,
Saddar,
Gushan-e-Iqba, Nazmabad and Garden.
Promotion
In nta sx months prce w be sghty hgher than other brands so to
ncrease the prestge of the product, but after that schemes w be
ntroduced ke 10% free whch enhances the affordabty and does not
nstgate a prce decrease whch may resut n the change of percepton n
consumers mnd. N that can happen ether n form of oss of quaty or
oss
of saes.
Brand Management 2 1 Supreme Back Brew
Supreme empoyes the push strategy as t offers the dstrbutor (IBL) a
margn of Rs 3.5/- to Rs 4/- on each Pack. Smary, the retaers are
offered Rs 2.5/- to Rs 3/- on each Pack. Ths margn s comparatvey hgh
as compared to our compettors. The ob|ectve s to ncrease the saes ,
ncrease the awareness, and sustan preferences through the dstrbuton
network.
At the same tme, the pu strategy s aso beng empoyed. The
consumers
are beng drecty reached through the effectve meda pannng Foowng
are some of the schemes ncuded n the pan
Sampes n form of sachets w be dstrbuted to reta stores on the
bass of customers buyng tems more than 100Rs w be gven 2
Sachets to nduce peope to try the new product
If customers brng 10 packs of supreme they w be gettng 200 Rs
card worth of baance
Dspensers w be paced n 10 dfferent ocates of Karach, where
the exstence of our target market s at max.
Top Retaers w be gven 100 Packs per month for three months 300
Packs
Packaging
In fast movng consumer goods packagng and abeng pays an mportant
part. However there are very senstve decsons have to be made for
Brand Management 2 2 Supreme Back Brew
nstance coor scheme, types of packages, dstrbuton and retaer margn
on
dfferent packs, communcaton crtera and etc.
Dfferent Packages of Supreme Back Brew
1. Hard Packs ( Sma ) of 100g
2. Hard Packs ( Famy ) of 200g
3. |ars of 450g
4. Economy packs of 500g
5. Teabags of 50
6. Teabags of 100
7. Str ready packng.
The coor scheme has been chosen wth carefu consderaton of red and
back gradents. Orgnay Brooke bond Supreme served ony ower and
mdde casses. Now that upward stretch has been done and upper casses
has aso been targeted, so ts necessary to communcate hgh prestge
through abeng. Moreover red and back scheme s chosen to show the
strong nature of ts bend.
Brand Management 2 3 Supreme Back Brew
PRO|ECTED PROFIT AND LOSS STATEMENT
Budget has been done for the period of three months
Advertising Expenses
TELEVlSlON
Advertsng campagn w be featured on teevson emphaszng on the
new extenson of supreme. The ad w accentuate on the dfferenta
features and benefts of Supreme black brew and there by assent wth
sogan
to enhance the saes of the product.
The product w be advertsed on PTV and GEO. The preferred tme woud
between 8:00 - 10:00 at nght, as ths s the tme sot where maxmum
prospectve consumers are watchng teevson. The reason beng that
dramas, news and other popuar programs are teecasted at ths tme.
Release schedule & cost
of production (30 sec) T.V ad Rs Z50,000/-
Release on PTV on daily basis Rs 3,474,000
0Z fixed spot, alternate days.
@ 38,600/- at 7:40, 9:30 pm
Release on GEO on daily basis Rs Z,6J0,000/-
0J fixed spot, daily. @ J4,500/-
7:50, 9:J5 pm.
Total Rs 6,344,000}-
Brand Management 2 4 Supreme Back Brew
PUBLlCATlON MEDlA
As we are targetng upper as we as mdde casses Advertsements w
be
paced n magaznes and newspapers, both n Engsh and n Urdu.
NEWSPAPERS
Intay It s very necessary to communcate the new extenson of the the
product t shoud be profoundy advertsed n eadng newspapers ke
DAWN, NEWS and |UNG. At frst, the thrd page w be used, and the sze
of the ad w be haf of 1/4 pg. Ths w create awareness and attract
attenton.
DAWN on 3rd page
(J/8 (60cm) pg colored) @ J98,Z00/-
Once a month on Sunday Rs 594,400/-
jANG on 3rd page
(J/8 pg colored) @J65,600/-
Once a month on Friday Rs 496,800/-
Total Rs
1,091,200}-
Brand Management 2 5 Supreme Back Brew
MAGAZlNES
Due to hgh geographc and demographc seectvty and ts credbty and
prestge t s preferred that ths meda vehce shoud aso be seected. The
foowng magaznes have been consdered - Herad
HERALD (J pg colored ad)
Second Half, One insertion
monthly @ Z5000/- Rs
75000/-
SHE (J pg colored ad)
One insertion monthly @ 8000/- Rs
Z4000/-
MAG ( J pg colored ad)
One insertion weekly @ Z000/- Rs
Z4000/-
Total Rs
123,000}-
OUTDOOR MEDlA
Posters w be prnted and dstrbuted among reta outets. Cut outs w
be
provded to retaers n order to be put up n the ar space.
Four bboards of 5upreme 8lack 8rew w be set up. One on Shahrah-e-
Fasa, one near FTC, one near Schon Crce and one on Hasan Square to
get
hgh repeat exposure.
Posters and Cutouts Rs Z00,000/-
Z Billboards will be placed at
Shahrah-e-faisal, Clifton
Brand Management 2 6 Supreme Back Brew
Schon Circle
Cost of Billboard J0' X 5'
@ 5J000 per board Rs J53,000/-
Rent for three month
@ J80,000 and Z50,000 Rs J,Z90,000
Total Rs
1,643,000}-
SALES PROMOTlON
SAMPLES
Sampes n form of sachets w be dstrbuted to reta stores on the bass
of
customers buyng tems more than 100Rs w be gven 2 Sachets to
nduce
peope to try the new product.
J000 sachets per month
for 3 months 3000 sachets.
Cost of one sachet Rs Z.64
Total Cost Rs 7,920
PATRONAGE AWARDS
If customers brng 10 packs of supreme they w be gettng 200 Rs card
worth of baance.
Total Cost of Cards Rs 32, 000
FREE TRlALS
Brand Management 2 7 Supreme Back Brew
Dspensers w be paced n 10 dfferent ocates of Karach, where the
exstence of our target market s at max.
Dspenser cost @ 1750 Rs 17,500
Cost of ngredents Rs 6,800
Total Cost of Free Trial Rs 24,300
SCHEME lN ]ARS TO lNDUCE THE SALES
Scotch brite @ Rs 8.5 Rs 688
For 3 months Accumulated
For 8J Pieces.
Cash Rebates
Scheme OF SCRATCH CARDS IN EVERY FIFTH PACK OF TEA BAG
Cost of Scratch cards Rs J00
Total teabags sold with Rs J07
Scratch cards
Total Cost of scheme Rs 10,700
SCHEME FOR RETAlLERS
Top Retaers w be gven 100 Packs per month for three months 300
Packs
Cost of 300 Packs Rs 6,600
Grand Total of Sales Promotion Rs 82,208
Brand Management 2 8 Supreme Back Brew
COMBlNED EXPENSES lNCURRED DURlNG FlRST THREE MONTHS
TELEVISION COST Rs 6,344,000/-
NEWSPAPER Rs 1,091,200/-
MAGAZINES Rs 123,000/-
OUTDOOR Rs 1,643,000/-
CONTINGENCY Rs 500,000/-
Total Rs 9,701,200}-
SALES FORECAST
Karach's popuaton 13m
Target Market 11m
No. of househods 1.8m
Target Market Share of Supreme 10%
Consumpton per month 180,000 househods
Avg consumpton of househods/month 0.75kg
Consumpton of Supreme/month 135000 kg
Saes per day (Rs) 720,000
Saes per day (Kg) 4500
Saes per year (Rs) 259200000
Saes per year (kg) 1620000
Saes per year (Kg) 1620000
Revenue per year (Rs) 421,200,000
Saes per 3 months 405000 Kg
Brand Management 2 9 Supreme Back Brew
Revenue per 3 months 105,300,000
Proft n three months 10,530,000
Action Programs
On August 2nd The Product Brooke Bond w be aunched at the
venue AMI man campus and ts scae woud be Karach wde.
On August 17th, September 7th, October 5th advertsements w be
pubshed n eadng newspapers.
After sx months of Launch, the company w commence a
downward stretch, and w aunch a dust tea whch w be targeted
to ower cass ncome segments and nteror sndh.
On aternate days advertsements w be aunched n two dfferent
channes (PTV and GEO) on the bass of two fxed spots, e 7:30 and
9:30.
Brand Management 3 0 Supreme Back Brew
Advertsements w paced on Magaznes ke Herad, she, and Mag,
once every month.
On month end Dstrbutor w vst each retaer and gve the
compensaton on saes promoton schemes, company has chosen
The company w partcpate n meas, trade shows, and exhbtons
of a knd to ncrease the awareness of the new aunch.
Conclusion
Wth recprocty of understandng and strength of character
as the foundaton of Supreme Black Brew phosophy,
Brooke Bond takes the ead as a fore-runner n sophstcated,
ethca consumer marketng, seng and dstrbuton of tea
throughout the word.
The tea ndustry of Pakstan consttutes the target market of
neary haf of the popuaton and yeary consumpton s
130,000 tons. And the consumpton rate s st acceeratng at
a fast pace, accumuates to be 6% annuay.
Lookng at an extensve target market of eeven mon one
can say that there s st a chance to compete wth aready
estabshed brands. The pars of ths pro|ect has been ad
Brand Management 3 1 Supreme Back Brew
on to ths very foundaton That our product s postoned as
a quaty product, whch s easy affordabe. Athough the
task of educatng and spreadng awareness maybe a dffcut
task, but the new brand w be backed by the we-but
dentty of ts parent brand. The new brand whch matches
the preference of target market w successfuy commt the
task of deghtng customers and at the end of the year, t w
get a success to gan market share of 15% and captazaton
of 6000g of Back brew everyday.
Brand Management 3 2 Supreme Back Brew
KlNETlC HONDA
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Knetc Honda - The Break-Up: Break-Up Bues
It was n August 1998 that the frst chnks n the Knetc
Honda Motors Ltd. (Knetc Honda) armor were reported
by Busness Inda. Both Honda and the Frodas of
Knetc were quck to deny rumors of a spt, though
reports of the Frodas quety rasng resources to buy out
Honda's stake kept surfacng. The Frodas were even
reported to have securtsed the assets of ther two-
wheeer fnance company - 20th Century Knetc Fnance
(TCKF) - to rase ths money.
Troube had been brewng snce the company recorded a
oss of Rs. 6 crore n the frst quarter of 1998. Eventuay
Honda decded to put the matter to rest and caed Arun
Froda (Froda) to |apan n December 1998.
Honda made Froda an offer - ether he buy ther 51% stake or Honda
woud buy out hs 19%
stake. Anaysts remarked that t was dffcut for Froda to et go of the
company that he had
nurtured for the best part of hs fe. Eventuay, Froda negotated a dea
wth Honda, to acqure
ts stake at Rs 45 per share, (when the market prce was amost doube),
at a tota cost of Rs 35
crore. He aso sgned an agreement wth them for contnung to
manufacture and se the exstng
Knetc Honda modes. Honda aso agreed to contnue provdng technca
know-how support n
return for royaty and technca fees from Knetc.
Consderng the fact that Honda was the word's bggest and most
successfu scooter
manufacturer, the puout came as a surprse to ndustry observers, as t
was qute
uncharacterstc of Honda Motor to gve up a segment. More so, as |ust a
coupe of months
earer, Honda had been reported to be pannng to make further
nvestments n Knetc Honda1.
Ths was seen as a ma|or setback for the company. It was aso perhaps
the ony nstance of a
Honda faure anywhere n the word.
Startng Probem!
In 2001, the Knetc Group had two automobe
companes - Knetc Engneerng Ltd and Knetc Motor
Company Ltd. After the December 1998 dea, Knetc
Honda Motor Ltd was renamed Knetc Motor Company
Ltd. Knetc's story began n 1972 wth the founder
H.K.Froda buyng the 'Luna' moped's desgn from a
foregn company. The moped, whch amed at capturng
the bcyce market, went on to become such a huge
success, that Luna became a generc name for mopeds.
In 1985, under Arun Froda's (H.K.Froda's son)
eadershp, Knetc ted up wth |apanese auto ma|or
Honda Motor2 to form Knetc Honda Motors Ltd.
(KHML) wth both the partners hodng an equa stake of
28.56%. The company's prmary busness was
manufacturng scooters. Saes of spare parts formed a
mnor part of the turnover. The 'KH-100,' the frst
ungeared scooter n Inda, proved to be a huge success n
the nta stages.
Throughout the 1980s, Knetc remaned Inda's argest moped
manufacturer wth a 44% market
share and a 15% share3 of the overa two-wheeer market. A decade
ater, the company's moped
market share haved to 22% and the overa market share fgure reached
an abysma 5%. Aso, n
1991, Knetc, wth a turnover of Rs 121 crore, was competng on an equa
turf wth the Rs 140
crore TVS Suzuk and the Rs 150 core Hero Honda4. But by 1999, whe
TVS and Hero Honda
grew seven tmes over to Rs 1,018 crore and Rs 1,146 crore respectvey,
Knetc |ust managed
to doube ts turnover.
A ma|or reason for ths was the fact that Knetc seemed to have mssed
the puse of the market,
whch was fast movng towards motorcyces. Knetc had no motorcyces
to offer - many due to
the Honda |ont venture stpuatons. (Knetc coud not make motorcyces
because that meant
competng wth Hero Honda.) Knetc's fnanca poston aso took a
beatng n the ate 1990s.
Whe saes grew sowy, compared to ts compettors, ts operatng margn
was the owest n the
ndustry because of the hgh mport content of raw materas. Knetc aso
had to sheve ts pans
to aunch a sma, 500cc, 2-cycnder car after a substanta sum was spent
on the pro|ect5.
Wth Knetc Honda's fortunes decnng, Froda agreed to et Honda
ncrease ts stake to 51% n
1993, perhaps hopng that f Honda were n contro, t woud brng n new
products more qucky
and thereby mprove the company's prospects. But Froda soon reazed
that ths was not to be.
At a tme when ts compettors were spendng 1-1.5% of the turnover on
R&D, Knetc Honda
dd not move beyond 0.31%. On advertsng, Honda spent |ust Rs 20 crore
durng 1993-98. As a
resut, Knetc Honda's market share decned steady durng 1996-98.
In 1997-98, Knetc Honda's saes grew margnay to Rs 353 crore over
the prevous year, but
proft after tax dpped to Rs 2.16 crore from Rs 2.30 crore. Ths, couped
wth the Rs 6 crore oss
for the frst quarter of 1998 made the Frodas gve serous thought to
partng ways wth Honda.
Froda sad, "There was no growth, so we decded to revew the contract."
The new agreement
nvovng the Honda stake se-off and the technca coaboraton
arrangement was sgned after
ths. Commentng on ths, Froda camed, "It's a wn-wn scheme for
everybody."
Though Froda camed that Honda's equty sae decson was taken |onty
by both partners,
meda reports had a dfferent story to te.
Sourng Tes
Reports camed that rght from the begnnng there had
been dfferences between Honda and the Frodas over
the ssue of management of Knetc Honda. Froda
admtted that there were serous dfferences over ssues
ke ntroducton of new modes, advertsng expendture,
marketng strateges, etc. As a resut, the company
suffered n terms of growth and proftabty.
Under the |ont venture agreement, Knetc Honda
manufactured scooters and Knetc Engneerng made
mopeds. Both of them coud not manufacture each other's
products or motorcyces. Because Honda was present n
the motorcyce segment wth Hero Honda, the Knetc
group remaned n mopeds and scooters. Ths was not n
favor of Knetc because the moped market had decned
consderaby durng the 1990s. Knetc had ambtons of
becomng a fu range two-wheeer company as t was
strong n operatons and aso had a arge dstrbuton
network.
When Knetc deveoped ndgenous technoogy for ts four-stroke step-
through vehce K400, a
compettor to Hero Honda's Street mode, Honda saw t as an unfrendy
move.
The Frodas were unhappy about the fact that 'Knetc,' as an umbrea
brand was not beng
promoted. Consumers assocated the name Knetc wth scooters and
'Luna' wth mopeds, but dd
not see them as beongng to the same busness house. To support the
Knetc brand as an
umbrea brand wth a number of products under t, the Frodas wanted to
advertse heavy and
brng out new products. Accordng to Sua||a , "The te-up wth Honda was
mtng our
compettve capabtes."
Knetc Honda nsders camed that Honda had aways taken a 'haf-
hearted approach' towards
managng the company. They aso sad that Honda was too preoccuped
wth other markets such
as Indonesa and Thaand whch were growng much faster and where,
unke n Inda, Honda
was dong we. Aso, Honda's margns were much hgher n these markets
- even a 50cc Honda
scooter cost more n other parts of the word than the ead mode beng
sod n Inda. Yet, Honda
scooters were consdered expensve n Inda. Industry watchers ponted
out that Honda, wth a
ts resources, coud have easy engneered a product for the Indan roads,
but was smpy not
nterested.
Honda camed that t had decded to poston tsef as a nche payer at
the upper end of the
segment and that segment dd not grow as much as the company had
antcpated. Company
sources sad, "We mscacuated the purchasng power of the Indan
mdde cass. We thought t
woud go up, but t ddn't. Instead, the economy went nto a taspn and
we coudn't grow."
However, Honda admtted that havng |ust a snge mode for severa
years had worked to the
company's dsadvantage. But the nvestment requred to deveop and
ntroduce new modes was
very hgh, renderng the end product uncompettve and hence an
unattractve proposton. Honda
camed that the Frodas dd not have the marketng acumen of the
Mun|as of Hero Honda.
Dsagreements over advertsng expendture and the nterference of the
Frodas n the
appontment of deaers wdened the rft between the partners.
Indecor pantsKnetc wanted Honda to ncrease the advertsng
expendture, but Honda dd not agree. Beng a
arge organzaton wth varous decson-makng ayers, Honda wasn't
quck enough to react to
the demands of the marketpace. The |ont managng drector, a Honda
nomnee, was changed
every three years. Thus, by the tme he understood the demands of the
marketpace, t was tme
for hm to be repaced.
Unke the Hero Honda venture, where the Mun|as and Honda showed
compete fath n each
other and worked together as a team rght from the begnnng, the
Frodas and Honda reportedy
never shared a good rapport. In Hero Honda, the partners had equa
stakes and ths made
decson-makng easer. Moreover, because of ack of competton for a
ong tme, thngs were
easer for Hero Honda. But Knetc Honda had to compete wth a gant ke
Ba|a|. Aso, whe the
cost of makng the Knetc scooter was hgher than the cost of
manufacturng a motorcyce, the
seng prce of the atter was Rs 10,000 more. The proftabty of Hero
Honda, therefore, was
much more and they coud afford to spend more on advertsng. Aso, the
Mun|as coud take
ther own decsons regardng adspend. Froda sad, "If we coud have
done the same, t woud
defntey have ncreased Knetc's vsbty and voumes woud have
grown faster."
Honda's ext rased questons about Knetc's survva. It was thought that
the Rs 35 crore the
Frodas pad for acqurng the entre stake woud put a great stran on
ther fnances and weaken
the company. Anaysts were quck to comment that Knetc woud have
probems regardng the
deveopment and nducton of new products. Honda's technca support
mted to the exstng
range of products. And as the exstng products - Knetc Honda and
Marve - were not dong
very we at that tme, the wthdrawa was seen as an unwecome
deveopment.
Survvor
Froda dened that the droppng of the Honda tag from ts
scooters woud affect the saes. The company ntroduced
tough measures to factate mprovements on varous
fronts ncudng nput costs, asset management and
nventory management. Knetc reazed that ganng
customer and deaer confdence woud be a key task f t
wanted to survve wthout Honda. Knetc tod ts deaers
about ts product pans for 1999-2001 and tred to convey
to them that now on they woud be seng not |ust Knetc
Honda scooters, but promotng the umbrea 'Knetc'
brand. Ths meant that they woud aso be seng mopeds
and motorcyces. Ths n turn, meant hgher voumes and,
thus, hgher profts n the comng years. Knetc
conducted tranng programs for ts deaers to hep them
dea wth customers n a better manner. On the
dstrbuton front, Knetc gave ts deaers fu range or
'pavon' deaershp. A new Knetc ogo was adopted to
gve the company a new corporate dentty.
However, after the breakup, Froda's mmedate strategy was to push up
saes by gettng
the group's auto-fnance companes - Knetc Leasng & Fnance Ltd.
(KLFL), Knetc
Fncap and Knetc Capta Fnance (ater merged wth Knetc Fncap) - to
offer attractve
fnance schemes. Those fnance companes were strategcay ocated to
servce the three
bggest markets for two-wheeers n Inda - north, west, and south. They
offered a wde
range of fnance schemes (termed as Wonder Loans) to sut varous
customer needs. The
move pad rch dvdends as saes pcked up consderaby. Knetc Fncap
and Knetc
Leasng & Fncap contrbuted 20% of Knetc Honda's saes n 1999.
Knetc caed deaer meetngs n a regons of the country to assure them
of the company's
strong prospects even after Honda's departure, whch had a very postve
feedback. Knetc
aso stepped up promoton of the Knetc brand, usng both teevson and
newspaper ad
campagns. A consderabe amount was spent on an mage-budng
campagn for the
group. Adspend was ncreased from Rs.12 crore n 1997-98 to Rs.20 crore
n 1998-99. A
new pubc awareness campagn on road safety was aunched. The
company set up a drect
saes dvson as we, whch had 50 teams of peope gong from shop to
shop and door to
door, nformng peope about the company's products and the fnance
schemes offered. The
response was overwhemng and around 12% of the saes came from ths
dvson n 1999.
A survey conducted across nne ctes showed that Knetc had mantaned
ts hod, despte
Honda's ext.
On the customer front, Knetc aunched a new, aggressve and consumer-
focussed
marketng strategy, wth the new motto 'Coser to You.' The group
aunched 'Knetc
Care,' a package of post-sae and post-warranty benefts for the
consumers. Severa
'Knetc Meage Advantage' servce camps were hed across the country
where more than
25,000 scooters were tuned for optma meage free of cost. Scooter
servce campagns were
organzed, where spares and ubrcants were offered at a dscount and
abor charges for
repacng these spares were waved. For popuarzng the K4-100,
'Customer Satsfacton'
camps were organzed across the country. These were attended by over
18,000 customers,
who got free spare parts even though the warranty perod had apsed.
Knetc's moves on the operatons front, ncuded openng of more depots
around the
country and a change n the credt pocy. The Honda stake came wth
Rs.400-500 mon
as outstandng wth deaers. Once these were recovered, nterest costs
came down
consderaby. Knetc decentrazed the dstrbuton network and thus
reduced nventory
costs. Knetc Engneerng aready had 20 C&F agents across the country.
Knetc used
these agents to extend ts reach to sem-urban and rura areas. For
exampe, Knetc was
abe to reach paces ke Anand and Gandhnagar from a depot n
Ahmedabad wthn 24
hours. From ts Ptampur pant, ths woud have taken amost three days.
Knetc aso
approached banks and negotated deas to reduce ts cost of borrowngs.
Matera costs
were reduced by reducng unnecessary mports. To mprove the meage
of ts scooters,
Knetc consuted experts from around the word and ntroduced a new
technoogy n ts
new seres of scooters, rasng the meage from 30kmp to 50kmp.
A these efforts soon transated nto mproved performance, provng the
company's
detractors wrong. Knetc posted good resuts for both KEL (saes rose by
20%) and
KMCL (saes rose by 23%) for the frst haf of 1999. KMCL aso wped off
the prevous
year's oss of Rs 6 crore and posted profts of Rs 3.69 crore for the same
perod. In fReturn
of the Prodga
In August 1999, Honda announced that t was settng up a
whoy-owned subsdary to manufacture scooters n
Inda wth an nta capacty of one akh unts per year.
The company set up an ndependent dstrbuton network
for the new venture. Through ths $ 43 mon subsdary,
Honda panned to focus on scooters for a perod of fve
years. Later, Hero Honda and the Honda subsdary were
to be free to expand the range to ncude a two/three
wheeers. Honda's frst scooter mode was aunched n
md-2001. Around one-thrd of the tota proposed outay
of Rs 150 crore had aready been nvested by that tme.
Though the contract wth the Frodas prevented Honda
from manufacturng the same scooter through a
subsdary or a |ont venture, Honda got around the cause
by ntroducng scooters n a dfferent range. A Honda
offca sad, "Ths s an extremey mportant market for
us and there s no queston of gvng up the scooter
busness - we never gve up."
Honda's decson sparked off debates n ndustry crces over gudenes
regardng foregn
companes beng aowed to set up whoy owned subsdares n Inda,
when they aready had
|ont ventures here. The Confederaton of Indan Industry (CII) expressed
fears that ths coud
deveop nto a trend that woud adversey afect the oca partners n these
|ont ventures.
Knetc camed they were not perturbed by Honda's announcement, as
the group beeved they
were the de-facto eaders n ungeared scooters. Aso, they had the
excusve rghts to
manufacture the 100cc and 110cc, Marve, DX and ZX scooters. The
Frodas were not reay
surprsed by Honda's announcement, because at the tme Honda was
negotatng wth them for
the Knetc Honda stake, such a possbty had been dscussed. However,
many fet that Honda
coud eventuay enter the motorcyce segment as we - somethng whch
seemed strategcay
wrong gven the success of the Hero Honda venture. Sua||a sad, "If
Honda was serous about ts
scooter busness n Inda and wanted to grow n the market by ntroducng
new modes, then why
dd they not do so durng the 12 years that t was present n Inda, through
ts |V wth us? After
a, t had a ma|orty stake and fu management contro. Yes, ts true that
Honda has sad that t
w start by manufacturng a 4-stroke scooter frst through the new
company. But what one fas
to understand s why Honda shoud reenter a busness by settng up a
greenfed pro|ect at a
whoppng nvestment of over Rs.200 crore, when t has barey 10 months
ago exted that market,
uness t has a arger gamepan of manufacturng motorcyces too."
sca 2000, saes ncreased by around 25%.
Return of the Prodga
In August 1999, Honda announced that t was settng up a
whoy-owned subsdary to manufacture scooters n
Inda wth an nta capacty of one akh unts per year.
The company set up an ndependent dstrbuton network
for the new venture. Through ths $ 43 mon subsdary,
Honda panned to focus on scooters for a perod of fve
years. Later, Hero Honda and the Honda subsdary were
to be free to expand the range to ncude a two/three
wheeers. Honda's frst scooter mode was aunched n
md-2001. Around one-thrd of the tota proposed outay
of Rs 150 crore had aready been nvested by that tme.
Though the contract wth the Frodas prevented Honda
from manufacturng the same scooter through a
subsdary or a |ont venture, Honda got around the cause
by ntroducng scooters n a dfferent range. A Honda
offca sad, "Ths s an extremey mportant market for
us and there s no queston of gvng up the scooter
busness - we never gve up."
Honda's decson sparked off debates n ndustry crces over gudenes
regardng foregn
companes beng aowed to set up whoy owned subsdares n Inda,
when they aready had
|ont ventures here. The Confederaton of Indan Industry (CII) expressed
fears that ths coud
deveop nto a trend that woud adversey afect the oca partners n these
|ont ventures.
Knetc camed they were not perturbed by Honda's announcement, as
the group beeved they
were the de-facto eaders n ungeared scooters. Aso, they had the
excusve rghts to
manufacture the 100cc and 110cc, Marve, DX and ZX scooters. The
Frodas were not reay
surprsed by Honda's announcement, because at the tme Honda was
negotatng wth them for
the Knetc Honda stake, such a possbty had been dscussed. However,
many fet that Honda
coud eventuay enter the motorcyce segment as we - somethng whch
seemed strategcay
wrong gven the success of the Hero Honda venture. Sua||a sad, "If
Honda was serous about ts
scooter busness n Inda and wanted to grow n the market by ntroducng
new modes, then why
dd they not do so durng the 12 years that t was present n Inda, through
ts |V wth us? After
a, t had a ma|orty stake and fu management contro. Yes, ts true that
Honda has sad that t
w start by manufacturng a 4-stroke scooter frst through the new
company. But what one fas
to understand s why Honda shoud reenter a busness by settng up a
greenfed pro|ect at a
whoppng nvestment of over Rs.200 crore, when t has barey 10 months
ago exted that market,
uness t has a arger gamepan of manufacturng motorcyces too."
KlNGFlSHOR
Kngfsher arnes aunched ts domestc ar servce operatons n May
2005.KFA was promoted by UB group and offered a snge cass-
"Kngfsher Cass". KFA successfuy leverage the youthful and
vibrant image of its kingfisher beer brand and called its airlines
as 'Funliners' to emphasize the fun-filled experience. Wthn the
frst sx months of ts aunch, KFA managed to corner a 6% market share
n the domestc ar trave mark.
KFA started ts operaton n May 7, 2005, postonng tsef as a budget
carrer and not as Low Cost Carrer (LCC).
Following strategies were followed to make it one of the leading
Airlines in lndia.
It came up wth a very appeang promotona ne "Fy the good
tmes" and t refected n the experence the company offered to ts
passengers.
KFA s aso aunched Kngfsher express n order to tap nto the
growng LCC segment.
It panned to re-aunch ts commerca ar servce caed UB Arway
agan whch t had to wthdraw t due to government restrctons.
The company gave best servces to ts customers that were ke
provdng word cass nterors, and n-fght entertanment systems.
The company came up wth ony one cass arnes rather than other
arnes that had Busness Cass; Economy Cass the dea was to
combne Busness Cass experences and Economy Cass
experences n one.
Havng a snge cass freed up more eg space for passengers when
compared to norma economy cass fghts.
The company started addressng ts customers as "GUEST" rather
than passengers.
The company made ts mark by provdng ts guests wth more
egroom and bgger seats so as to provde better comfort.
KFA has set ts sght to become Indas argest arne both s capacty and
n market share.
KFA's Promotional Strategies
As part of ts promotona strategy the marketng team of KFA showcased
the arne as "the new fyng experence". The foowng ntatves were
taken as part of ts promotona strategy.
Advertsements hoardngs at arports depcted the stysh nterors of
the "Funners", whch conveyed youthfu, fun-fed, and word cass
mage.
INOX mutpexes n Mumba pubczed KFAs speca offers for a
month.
KFA was the offca trave arnes for the cast and crew of "Manga
Pandey"- the move.
KFA made use of varous fashon shows, ceebrty gof matches, New
Year partes a to bud ts "Kngfsher" brand.
The UB groups monthy magazne caed "Pegasus" pubshed
nformaton about KFA aong wth other nformaton reated to UB
group.
KFA aunched many attractve offers to promote ts saes ke the
"Kng Card" n assocaton wth ICICI Bank, n August 2005. Ths was
ment to creat oya customers for KFA by provdng benefts ke
prveged access to ounges, restaurants, free refreshments at
arports, access to 180 gof cubs across Inda, speca nvtes for
festye shows .
In October, KFA aunched "Chill Times Offer" n the month of
August 2005 and September 2005.
In October they aunched the "King Saver Offer" whch sad "Fy
ke a Kng, dont pay ke one".
KFA targeted the frequent fers busness traveer segment, whch
was domnated by |et Arways. By offerng a "King Saver Booklet",
Ths booket contaned sx free fght tckets and was presented as a
free gft f the passenger bought two such bookets each worth Rs.
26,999.Passengers coud ava off ths offer f they showed there |et
Prvege Member (God or Patnum) card.
Financial strategies:
KFA came up wth many new fnanca strategc moves that made t one of
the eaders of avaton ndustry the company had adopted foowng
strateges:
It purchased brand new A320 arcrafts powered by the cockpt that
was a paperess envronment.
In |une 2005 KFA panned to order US$5 bn at the Pars Ar Show, for
5 new A350-800 arcraft, and fve A330-200 arcraft.
KFA was frst Indan carrer to pace an order for A380s.
In November 2005 t paced an order for 30 A 320 and 20 ATR72-
500 arcraft at the Duba Ar Show. Ths ATR72-500 was worth
US$750.
To further ts expanson pan KFA put n ts bd to buy Sahara n November
2005.How ever negotaton came to a standst when KFA fet the
vauaton of Sahara Arnes of around US$750mn to US$1 bn. was too
hgh.
KFA has pans to make an Inta Pubc Offer (IPO) and rase around
US$200 mn that woud be used for ts feet acquston and route
expanson actvtes.
KFA set up Kngfsher Internatona Inc. (KII), a subsdary n US for ts
nternatona operatons. KFA pans to operate nternatona routs by end
of 2007. But KFA had yet to receve permsson from the Indan
government.
Accordng to Indan government domestc ar carrers are not aowed to
fy nternatona routes wthout fve year of domestc fyng experence.
But Mr. Maya sad f he faed to convnce the government to change ts
rues, t woud start an arne n a foregn country and fy t to Inda.
Human Resource Strategies
Pror to aunch, KFA sgned a "non-poachng aance" wth Ar Deccan
under whch both the arnes agreed not to hre each others empoyee.
KFAs fght attendants caed "Fyng modes" were seected through a
natona eve mode contest.
KFA aso stressed the fact that ts empoyees had to be capabe enough to
meet the arnes hgh servce standards.
Among one of the bggest HR move for KFA was addton of Nge Harwood
as Chef Operatng Offcer wth effect from August 1, 2005, to strengthen
ts management team.
Mr. Maya sad "Kngfsher Arnes Lmted has a frst cass management
team not |ust at top most eve but aso n the second ne. Ths s part of
the UB groups commtment to human resources".
lTC
The recenty reeased 6th Sustanabty Report of ITC has unveed the
company's 4-pronged strategy to meet the chaenges of cmate change.
The Report, prepared n accordance to the G3 gudenes of the Goba
Reportng Intatve at the hghest 'A+' eve s a vountary and transparent
dscosure of the Company's sustanabty ntatves and ts contrbuton
to budng economc, envronmenta and soca capta to secure the ong
term nterests of ts stakehoders. Recognsng the chaenges of cmate
change and goba warmng and ts mpact on compettveness, ITC has
adopted decsve strateges to progress ts own efforts to support natona
and nternatona endeavours n mtgatng the effects of cmate change.
ITC s 'carbon postve' for 4 consecutve years, currenty sequesterng
twce the amount of carbon that emtted from ts operatons. For 7 years,
t has aso sustaned ts 'water postve' status, creatng ranwater
harvestng potenta that s more than twce that consumed by the
Company. Irrgatng water stressed areas s a crtca need foowng the
mpact of cmate change on Inda's farmng sector. ITC's sustanabe
agrcutura practces aso hep farmers adapt to the vagares of cmate
change.
The four pronged strategy mpemented by ITC ncudes dentfyng
cmate change rsks n varous ITC busnesses and mpementng
adaptaton measures, mprovng compettveness through nnovatons n
products and technooges, mnmsng ts GHG emssons by achevng
mnmum specfc energy consumpton n each of ts busnesses as we as
expandng ts renewabe energy portfoo and enargng ts carbon postve
footprnt wth arge scae soca and
farm forestry programme.
ITC has aready poneered research n cona propagaton that has enabed
trbas and farmers to create pantatons n over 1,00,000 hectares. Ths
has aso enabed the creaton of 45 mon person days of empoyment
and has estabshed a arge green cover, hepng mtgate the effects of
cmate change. ITCs soca forestry pro|ect n Khammam has receved
CDM regstraton from the CDM-EB of the UNFCCC and s the frst of ts
knd n Inda and second n the word to have receved such a regstraton.
The Paperboards dvson of ITC has aso become the frst company n
Inda to become a member of the WWF-GFTN for responsbe forestry and
one of ts unts has aready receved FSC certfcaton. Apart from ths, ITC
has aso regstered another 7 CDM pro|ects that contrbute to cmate
change mtgaton efforts. ITC Sonar, the uxury hote n Kokata s the ony
hote n the word to have earned carbon credts.
Benchmarkng nternatona best case scenaros, severa of ITC's unts
have reported reducton n specfc energy consumpton, gven that
energy usage s a arge contrbutor to cmate change.
Currenty, over 30 % of the energy consumed n ITC's operatons are from
renewabe sources.
Recenty, at the 98th AGM of the Company, Charman Mr Deveshwar had
ponted out that the post-Copenhagen era woud brng n new chaenges
to compettveness of frms uness companes adopted ow carbon
strateges of growth. He had sad that "The abty of a busness
corporaton to adopt ow-carbon operatons as we as sustanabe
busness practces w be one of the key determnants of compettveness
n the years to come. Gong forward, compettveness and proftabty w
be ncreasngy nked to the abty of busness to make carbon reducton
and the creaton of sustanabe vehoods an ntegra part of ther vaue
proposton to consumers." ITC's strategy on cmate change addresses
these ssues of compettveness, thereby nvestng n the future securty of
ts stakehoders
RELlANCE
Reance s gearng to be a ma|or payer n the Indan Reta Revouton.
They are aggressvey workng on a pan-Inda network of reta outets n
varous formats. State-of-the-art technoogy, a seamess suppy chan
nfrastructure and unmatched customer experence, s what the ntatve
s a about.
Reance Reta, the 100%
subsdary of Reance Industres, entered the reta foray nvovng a
mnmum nvestment of Rs 25,000 crore. They pan to acheve a target of
Rs 10-bon revenue by 2010 empoyng 5,00,000 peope. Hntng at an
mpendng IPO, Reance reta, has renamed "Ranger Farm" to Reance
Fresh Ltd, havng hved the name of ther most popuar format. The
companys name w sound famar to the nvestors once the company
pans to tap the capta markets by factatng brand reca.
The frst of ther format s Reance Fresh, a convenence store. These
stores, range from 2,000 to 5,000 sq feet, provde customers wth a
varety of fresh fruts, vegetabes, stape foods and other products n a
word-cass ambence. They aggressvey partnered farmers by foowng a
farm-to-fok strategy to ensure fresh fruts and vegetabes at affordabe
prces. They chose Hyderabad to test waters, as the cty offers rea estate
at a prce that does not qute pnch. They seected the cream crowd from
poneers n organzed retaers to head the organzaton. Wth such a
strong foothod, they ventured and ther cash counters ccked Rs 3.5 to
Rs 6.5 akh per day and some outets at prme ocatons are averagng Rs
5 akh per day.
Vegetabe vendors and sma reta shop-owners are accusng Reance of
drecty httng ther busness. Reance Fresh w not compete wth oca
vendors due to potca reasons, and ther nabty to create a robust
suppy chan. Ths s dfferent from ther orgna pans. In states ke
Keraa, West Benga and Orssa, where they face opposton, they have
changed ther reta strategy by ntroducng arge supermarkets, where
they w not trade n fruts and vegetabes. Ths s a crtca factor n
assessng the mpact of reta gants on the unorganzed segment. These
Reance Super stores are arge supermarkets wth an area of 4,000-
10,000 sq ft and w stock grocery, statonary, pharmaceutca products
and appare ony.
In the foods busness, they have conscousy segregated ts vegetaran
and non-vegetaran tems by havng a separate brand - Deght for the
atter, wth a separate dstrbuton centre. Ths may be a smart move as
vegetarans are senstve to these ssues. Seeng huge opportuntes, they
have ntroduced own brands ke Dary Pure for mk, ghee, (the ony
other ma|or payer beng Amu) and Reance Seect for other categores
ke stapes. Ths w optmze margns and streamne suppy chan
because of buk procurement.
Reance Fresh w aso reta FMCG, home, consumer durabes, IT,
pharmaceutcas, and auto accessores, n dfferent formats ke
hypermarkets, supermarkets and dscount stores; however, food w be a
ma|or account. Reance Fresh, Reance Mart, Reance Dgta, Reance
Trendz (appare), Reance Footprnt (footwear, handbags, accessores),
Reance Weness (heath), Reance |ewes, Reance Tmeout (books and
gfts) and Reance Super (mn mart) are varous formats that Reance
has ntroduced.
There are 491 Reance Fresh stores and ths fgure s key to touch 1,400
by the end of next fsca, currenty spannng 2.2-mon sq. ft. In addton,
Reance Reta has entered nto an aance wth Appe for a chan of Appe
Specaty Stores branded as Store, Bangaore. Wth Marks and Spencer
they are exporng appare, gourmet food and cafes. Dversfyng nto
varous categores gves them an opportunty to tap the growng
segments wth mmedate effect and further mnmze potenta osses.
After the successfu aunch of consumer-good super market Reance
Fresh and Consumer Eectronc and Dgta, Reance Mart (1,50,000-
3,00,00 sq. ft.) s the company's hypermarket format. Around 23 percent
of the hypermarket foor space w be aocated to garment brands, whe
the rest w stock footwear, home goods and other products. Luxury
products w cover a foor space of 11 percent. Reance Reta Lmted
(RRL) announced a |ont Venture wth Peare Europe for the aunch of a
chan of optca stores. Ths w brng a word-cass range of prvate abe
frames, enses and sungasses. The optca ndustry s on the brnk of
ma|or growth and has few organzed payers. Even the Tatas have
ventured n ths segment.
Reance has bought propertes rangng from Rs 1,000 per sq ft to as hgh
as Rs 22,000 per sq ft or more for ther expanson. Reance now pans the
franchsee route for further expanson. Faced wth expensve rea estate
costs and deays n reta space acquston, the company s co-optng
exstng sma retaers n a formats other than Reance Fresh and
Reance Hypermarket. Ths s yet another success formua for gant
retaers.
Gven ther economes of scae and huge resources, exceent busness
acumen, and governmenta support, the ever-strategc Reance Fresh has
become an ambtous and strong force to reckon wth. They are abe to
provde ther merchandse at cheaper rates than any other retaer, and
have sgned rea estate deas at breakneck speed for mega pro|ects
across Inda. Reance and Future Group are the eary brds at makng a
dent n the arge proft from the reta sector n Inda, at exceent rea
estate rates for propertes n prme ocatons.
The reta sector empoys around 40 mon peope n Inda. Trade/retang
contrbutes to 14 percent of the servce sector. The fact that about 4
percent of the popuaton s empoyed n the unorganzed reta trade
makes t vta to the soco- economc equbrum n Inda.
Organzed retang and suppy chan ntegraton dspace abor n a abor-
surpus socety. These chans negate a arge and growng proporton of
added vaue away from producers to companes. Buk procurement
decreases producers margns. By controng both ends of the chan, the
company can buy cheap and se dear, thus severey undercuttng the
sma retaers and creatng a monopostc stuaton.
In addton, reta trade aso has a sky rocketng effect on the rea estate
prces. Markets, whoesae saes and reta form one axs of the economy,
whe productve sectors ke agrcuture, texte, and ndustres form the
other. Ambtous MNCs are tryng to contro both the axes of the economy
on the pretext of prvatzaton, berazaton, and gobazaton.
Therefore, Reance Fresh aong wth other domestc corporatons have a
mora standng. Aong wth the support of the government, they must
pave a path for an effcent reta market (no monopoy) n Inda and hep
mantan a soco-economc equbrum. Ths w reman the bggest
chaenge for Reance who eads the way as a corporate ctzen. The
growth must be through vaue creaton. Ths w hep the Indan reta
sector to reman fresh n a hygenc and ethca market.