ACE Corporation - Gaining Market Shares in Slow Growth Markets

GAINING MARKET SHARES IN SLOW GROWTH MARKETS: A CASE STUDY ON SEWING MACHINES*
Many managers, particularly those in marketing, seem obsessed with growth. Their objectives tend to emphasize annual increases in sales volume, market share, or both. But the biggest challenge is in making money in markets that grow slowly, if at all. The majorities of product markets in such slowly growing markets are in the mature or stagnating stage of their life cycles. What strategies does a company adopt to grow in these markets? This case study on the sewing machine market addresses these issues that confront an organization. A cash cow is one of the four categories (quadrants) in the BCG growth-share matrix that represents the division within a company that has a large market share within a mature industry. Such businesses generate high profit margins: so high that it is responsible for a large amount of a company's operating profit. Risks of a cash cow include complacency, with management ignoring the need for change as market forces erode value and sewing machine could fall into this category especially, for the organized industries. Introduction to Sewing Machine Before 1900, women spent many of their daylight hours sewing clothes for themselves and their families by hand. Women also formed the majority of the labor force that sewed clothes in factories and wove fabrics in mills. The invention and proliferation of the sewing machine freed women of this chore, liberated workers from poorly paid long hours in factories, and produced a wide variety of less expensive clothing. The industrial sewing machine made a range of products possible and affordable. The home and portable sewing machines also introduced amateur seamstresses to the delights of sewing as a craft. The sewing machine has changed the face of industry by creating the new field of ready-to-wear clothing. Improvements to the carpeting industry, bookbinding, the boot and shoe trade, hosiery manufacture, and upholstery and furniture making multiplied with the application of the industrial sewing machine. Industrial machines used the swing-needle or zigzag stitch before 1900, although it took many years for this stitch to be adapted to the home machine. Electric sewing machines were first introduced by
Sujit Sengupta, Professor- Marketing & Sales, IILM Institute for Higher Education, New Delhi
Allyn in 1889. Modern electronic devices use computer technology to create buttonholes, embroidery, overcast seams, blind stitching, and an array of decorative stitches. 1. OVERVIEW OF THE SEWING MACHINE INDUSTRY & MARKET The domestic sewing machine industry is valued at Rs.750 cr. Ludhiana boasts of being Asias leading producer of domestic machines. The market size for domestic and semi-industrial sewing machines, in terms of numbers are 3 million units per year. The overall market is witnessing a CAGR of 5% in quantity terms. About a decade ago the exports made were worth Rs.400 cr. but now the industry is struggling to touch even Rs.100 cr. figure due to high raw material prices and competition from its Chinese counterparts. Close to 70% of the sewing machine market falls in the unorganized sector - also referred to as SSI (Small Scale Industry) brands. Allyn India a subsidiary of Allyn NV of Netherlands and Ace Corporation have been the two leading players in the organized sector who hold a little over 20% of the market share between themselves. The profiles of these two leading companies are given below. Allyn was the first multinational industrial company manufacturing sewing machines in Glasgow, Scotland. The company made an entry into the Indian sub-continent as early as 1871 when it established its office in Bombay, the commercial hub of this subcontinent. Allyn and sewing soon became synonymous. Now, 135 years later, Allyn became not only a leading player in sewing machines but has also expanded its product range to become committed to meet all the requirements of any Indian household. Allyns product range had included small domestic appliances, such as Food Processors and Electric Irons, Furniture and Consumer Electronics products. The Allyn- Pride and Allyn- Rage are house hold names in India, Ace Corporation is an associate company of one of Indias renowned business groups. The first sewing machine was manufactured under the brand name Ace at their factory in Calcutta in the 1940s. Since then Ace Corporation has grown to a multi product consumer durable marketing and distribution company reaching out to people to the remotest corners of the country and the world. The company has a diverse product portfolio that includes the following several product lines, the most noteworthy amongst them are: fans, sewing machines, motors, pumps and home appliances.
In the initial years both Allyn and Ace were manufacturing their own sewing machines. For the last ten years these sewing machines are mostly being sourced from Ludhiana. The market for upper end machines have also developed in the meanwhile and most of these machines are sourced from the overseas. In the year 2004, Allyn India has been in deep financial straits resulting in a significant drop in their market shares. During these years, the space vacated by Allyn was captured significantly by Ace Corporation by some active marketing efforts. In their best of times (preceding the financial problems) Allyn India had clocked a turnover of Rs. 150 cr. Out of this, the contribution of the sewing machines segment was Rs. 110 cr. Ace Corporations out of a total turnover of Rs.550 cr in 2005- 06, the sewing machine segment contributed to over of Rs.100 cr an increase of over 50% in the previous year. Allyn NV and Allyn India are in the process of restructuring and have made a one time settlement of Rs.700 cr with the consortium of bankers. They are now looking forward making ambitious plans to not only regain their lost market shares but a reentry into different segments of sewing machines market through a marketing subsidiary Asia Pacific. The industry can be broken down into distinctive segments such as: Type Straight stitch Light industrial machines Semi automatic zig-zig stitch machines Imported zig-zag stitch machines Ratio 80% 18% 1% 1% Nos./yr. 21.5 lacs 4.8 lacs 0.24 lacs 0.18 lacs
1. 2. 3. 4.
Market shares of different brands during the year 2006 is provided in Exhibit I and summarized below: Ace: Allyn: Laxmi: Pooja: 16% 4% 2% 3% Relson: Revo: Novel: SSI*: 3% 3% 2% 67% *Small Scale Industry
As evident from the figures, the straight stitch machines, also known as the black machines hold the 80% of the market, followed by light industrial machines. The small scale industries (SSI)
dominate almost 67% of this market. There is no single SSI brand that is particularly strong. A sewing machine customer demands a rugged and a strong product which will be able to withstand wear and tear. As such, the demand for Cast Iron machines (eg. Black machines and others) has always been higher. The Aluminum die cast machines are imported as nobody at present has the manufacturing facility in place for sewing machines. Developing sewing habits of customers is an important marketing skill that is necessary to increase sales of sewing machines. The future would see a growth in the semi-industrial and industrial segment but at the same time there would be a usage of the zigzag segment by housewives. The straight stitch machine (black machine) would remain strong in the rural segment of the market. In the Straight Stitch Segment where the market size is 21, 50,000 nos. per year, the Regional and SSI brands control 80% of the market. In the organized segment both Allyn and Ace were the leaders but of late due to Allyns financial position their market shares have fallen. Ace is the leader with 16% share followed by Allyn at 4%. The overall industry has remained more or less dormant with average growth of around 5%. However within the industry in the past 5/ 6 years there has been a major shuffle in the market shares of various brands. For example, Ace has been able to gain shares at the cost of Allyn. Similarly, Aces presence in the domestic Industrial segment has ensured some of the brands losing their share. Aces annual sales in the preceding 3 years. Year Sales (Qty.) 2003-04 1,50,000 2004- 05 1,42,000 2005- 06 1,90,000
The SSI sector is either fragmented, as in Punjab state, where no single SSI brand is particularly strong; or there is presence of prominent regional brands in pockets, e.g. Rita in Rajasthan, Novel in Southern Maharashtra, Durby in North Karnataka, Vidya in AP and Pooja in the Canteen Stores (CSD) segment The straight stitch machines are available in three variants: Hand machine Foot machine Motorized machine In the Light Industrial Segment, where the market size is close to 480,000 nos. per year, there are quite a number of players with following market shares:
Relson: Revo: Ace:
19% 16% 7%
Sagar: Allyn Others
5% 1% 52%
The market growth in this segment is as high as 56%. Customers who drive this segment are Masters, small garment fabricators, boutique owners. It is becoming popular among housewives also. This segment totally dominated by SSIs. The categories in the light industrial segment are: Straight Stitch Embroidery Over lock Leather Stitch
Aces annual sale in this segment has been: Year Sales (Qty.) 2003-04 19,100 2004- 05 22,600 2005- 06 35,300
The Zig-Zag segment (Semi and Auto) can be classified into following two broad categories: I. The Aluminium Die Cast Automatic imported machines The market size is 20,000 nos. per year. Both Ace and Allyn are the market leaders with 60% and 28% market shares respectively II. The cast Iron Semi and Full Zig Zag Domestic machines The market size is 24,000 nos. per year. Ace has a market share of 65% and Allyn only 10%. Earlier, in this segment Allyn Rage was dominating this segment. These machines can: Recreate the sewing interest and habit among the urban housewives. Open up the vast latent market in most parts of urban India. In the developed countries, these are the machines which are sold, with wide visibility and availability. Aces annual sales in these two segments have been: Year 2003-04 2004- 05 2005- 06
Sales (Qty.)
21,000
22,000
27,000
As can be seen from the above, the market size of sewing machines is the Straight Stitch segment is far above the other two segments. But this segment is dominated by the Regional and SSI brands who sell by virtue of their price and depth of distribution. There are also High Speed Specialized Industrial machines which addresses the requirement of the growing apparel industry. The stitching speeds of these machines are 5500 stitches per minute. The market size is 1,50,000 units per annum and dominated by imports from JUKI and Brother. 2. SEWING MACHINE ATTACHEMENTS: There are four distinct components of a Straight Stitch Sewing Machine as represented by: A. Head B. Hand combination a. Hand attachment b. Base i. Wooden ii. Plastic c. Cover C. Foot combination a. Table b. Stand c. Accessories (belts, clips etc.) D. Motorised combination a. Motor b. Table c. Base The Head is the heart of the sewing machines. A customer may choose a hand operated, foot operated or a motorized machine depending upon requirement and trends of the market. For eg. preference in North India is that of the hand operated machine, South India the foot operated machine. Western and Eastern India machine are equally divided into hand and foot operated machine. 3. COST & PRICE: With a selling price of say, Rs.1000/-, the gross margin a company selling a branded a standard sewing machine is roughly between 35% and 40% varying from model to model. Selling expenses for a
marketing organization including logistics cost varies between 10% and 12%. Break-up of cost from procurement price to ultimate selling price is provided in Exhibit 2. Straight Stitch The customer price for different combinations of the Straight Stitch machine is indicated below:
Item Hand combination Head Hand attachment Base Cover (plastic) Total Foot combination Head Table Stand Accessory Total
Ace/ Allyn (Rs.) 1400 100 150 350 2000 1400 300 1000 30 2730
SSI Brand (Rs.) 900 50 60 150 1160 900 175 700 20 1795
There is a clear advantage of about Rs.1000/- between the price of an organized and a SSI brand. A standard sewing machine is not a high- tech product. There is no significant product differentiation except in terms of the quality. Due to stiff competition from the unorganized sector, the organized players Ace and Allyn have launched several line extensions at different price points to address different segments in the Straight Stitch market. For example, in the case of Ace, the starting point is their economy model Ace Bermina which is available at Rs. 2000/-. Prices of straight stitch models are provided in Exhibit 3. In case of Allyn their largest selling model in Straight Stitch segment is Allyn Pride priced around Rs.2000/-.The Ace Master is supplied exclusively to Canteen Stores Dept (CSD) To compete with the SSI brand that dominates 80% of the market, in order to substantially increase volumes, the organized players will need to lower their price somewhere at the SSI levels. This is not feasible in view of the considerably higher marketing expense organized players have to bear. A mid way approach may also not be practical as this would result in a lower average recovery per unit sold plus cannibalization. The incremental volume increase will not justify this increase. Light Industrial Segment: These sewing machines comprise of the machine top, stand and a motor. Companies normally provide the top. The other items are manufactured and supplied locally to the trade upon requirement. Ace machine top prices are provided in Exhibit 4.
The cost of stand varies between Rs.2000/- to Rs.2500/- and that of the electric motor is Rs.1500/-. This is an additional cost which gets added to the above price. Zig-Zag Segment Prevailing prices of the zig-zag segment is provided in Exhibit 5.
4. DISTRIBUTION: For straight stitch sewing machines, the rural markets have tremendous opportunity because saturation levels have almost reached the urban areas. Demand is mostly from rural India, class II tier towns. Consumers in the Class III, IV and V towns are increasingly becoming brand conscious, with media revolution increasing their exposure, and aspiration levels are rising. Hence there is a latent demand for possessing and owning a branded sewing machine by the rural people. But they aspire for the same at an affordable price and customers from remote places are visiting Class II/ I towns and buying Branded Goods from there. In addition the Commercial Bulk Buyer including the various Govt. bodies that drive the segment include: The All India Zilla Parishads Social Welfare Dept. Backwards Class Corporation (BCC) Rajiv Gandhi Rozgar Yojana Cooperative banks who supply to their beneficiaries Gujarat Rural Industrial Marketing Corporation (GRIMCO) The Red Cross Church (specially in Kerala & T.Nadu)
4. DISTRIBUTION CHANNELS Ace Corporation follows in general a two-tier channel approach as structured below. Only in exceptional cases for penetration to interior towns the three tier approach is used. The dealer and the wholesaler are not permitted to stock any other sewing machine brand other than Ace. The institutional customer comprises of Government agencies, welfare associations, Canteen Stores Department etc.
Ace Corporation
Company Showroom
Dealer (Metro/ Class I/ II Towns)
Distributor (Small Towns)
Institutional Customer
Retailer
Customer
Customer
Customer
COMPANY SHOWROOMS: Traditionally, the channel for sales of sewing machine in the urban areas has been through showrooms that could be company owned or franchised. Apart from showcasing the complete product range, these outlets provide customers an opportunity to attend product demos, and have their after sales concerns attended to. The company showrooms do not stock any other brand. Of all the products sold from the company shops, the contribution of Sewing machines sales constitutes approximately 40% depending on their locations. Most showrooms are located in high traffic zones. Each and every sewing machine needs assembly of the various accessories before the sale is made to a customer. This can be carried out by a trained mechanic only. Allyn before their financial crisis had about 600 company showrooms located all over India and a great majority of sales took place from these showrooms. When the other hand, Ace has a network of 61 showrooms across the country but mostly located across SEC A-plus cities and they double up as retailers Instead of splurging on advertising, company officials of both Allyn and Ace believe that it is wiser to spend on infrastructure at its showrooms, training programmes, MIS development, hosting home shows and other below- the-line exercises. Allyn was also selling through a hire-purchase system from company showrooms, which allowed consumers to pay in monthly installments. In the process Allyn ran up huge debts owing to uncontrolled hire-purchase about four years back, which was among the key factors that `killed' the company. However, according to
Allyn, the hire-purchase business of its showrooms did help in seeing a turnaround that grew by 106 per cent. Presently, Allyn India has had to shut down a certain number of stores. Though Company shops are a highly profitable channel, the average turn over per shop has been Rs. 11.5 lacs per year for sewing machines. The problems that are associated with the performance of Co Shops are: a. The no. of customer walk- ins b. Conversion rates c. Average transaction value DEALERSHIP NETWORK: Ace has been supplementing its sale by appointing exclusive sewing machine dealers who are authorized to sell only Ace sewing machine aside from other consumer durables. Though the tendency to stock and sell other cheaper brands is tempting, the company has strictly maintained its stand on exclusivity. This policy has been working very satisfactorily till now as the market had all along shown a healthy increase and the brand name strong amongst customers. Another advantage of having exclusive dealers is that they are prepared to go to any extent to increase their sales by participating in any kind of promotional activity either on their own or what is recommended by the company. Out of a network of 1780 Ace dealers in 2006 spread across Metro, Mini Metro, Class I, Class II, and other towns, only 1120 (63%) are productive i.e who sell a minimum assigned quantity of sewing machines a month. The limited sewing machine dealerships are a major and inherent problem. Allyn had 2500 retail outlets, but these were not exclusive. Based on classification of the towns, the number of dealers selling Ace Sewing Machines in various parts of the country is provided in Exhibit 6-A and 6-B. Column 8 gives the total number of dealers whereas; column 9 is the total number of productive dealers. Productivity norms are defined by the company on the minimum number of sewing machines that are required to be sold every month. This classification will vary from one town classification to another, A dealer will be required to sell more number of machines in a class I town as opposed to a Class V town to be eligible as a Ace dealer.
From the exhibit it will appear there are states such as Rajasthan, Orissa, Karnataka, Maharashtra and Kerala where Aces distribution is inherently weak. Causes can be related to strength of the competition, the demographics (size, structure and distribution of populations) and size of the market. The urban markets have started showing signs of stagnation in the straight stitch segment whereas, markets in the rural areas continues to show growth. The rural consuming class is growing at about 3-4 percent per annum, which roughly translates into 1.2 million new consumers yearly. In the coming years the rural market is going to remain a reality. Taking a look at these statistics: Frost free refrigerators are selling better in rural India In the 6 lacs odd villages. 90% of durables are purchased by people from class I,II and III town. 400 minutes of average cellular airtime usage in rural areas as against a monthly average of 120 in Mumbai and 180 in Delhi Disposition to branded consumer goods is increasing Penetration of toothpaste is better than toothpowder Nuclear family culture has arrived in rural India Two in five toilet soap users regularly use more than one brand of soap More than 50 per cent use branded skin creams Nine out of ten house holds use branded washing powder (bar & detergent) The ownership of durables by rural consumes as per data available is given in Exhibit 7. Rural customer is a price sensitive customer but Ace brand carries trust in the hinterland. There are three main reasons for Ace not being able to penetrate the rural consumer:
a) Price differential with the SSI brand b) Lack of dealership retailers are reluctant to take up sewing machine dealership. c) The issue with the exclusivity clause that Ace reinforces and does not want to dilute. d) Even if they were to be exclusive, a dealer will not be able to sustain being dependent on a single brand as the sales volume will not justify its existence. Markets dominated by the SSI brands are Rajasthan, Orissa, Maharashtra, M.P and Karnataka. It is preferable for companies to focus on small towns with populations ranging from 50,000 to 80,000 (like Bijnor in UP) and their surroundings areas. 5. SEWING SCHOOLS Ace has established a network of 455 sewing and design schools across the country. Students are given lessons on machines provided by Ace. A certificate is provided upon completion of the curriculum. Having learnt and practiced in Ace machines, it works as an indirect sales promotional tool as well. A curriculum upgrade and other initiatives are currently under process. This will give these schools a professional image and greater visibility. 6. INTERNATIONAL MARKET On the basis of data available for African countries, Allyn is the dominant player in majority of the African markets in the black flat bed cast iron sewing machine range. The African sewing machine market: Apart from Allyn, Chinese black sewing machines are also present. Butterfly (BUTTERFLY is the well-known trademark of China and its designs and products are made according to the international standards such as "ISO" and "JIS") has presence in many countries. According to estimates, African black sewing machine market is around 75,000 units per month. The important markets are South Africa, Nigeria, Ghana, Kenya and Tanzania. Ghana has a potential of 6500 units per month. South Africa and Nigeria are bigger markets with potential estimated at 5 times that of Ghana.
Reports point that Butterfly is the market leader in Ghana, and Allyn in Kenya. South Africa resembles a somewhat different market with players like Janome and Brother also active with the Zig-Zag range. The F.O.B. China price for the head unit of the fastest moving model of Butterfly in Ghana, JA 22, is USD 19.00. The cost sheet of a sewing machine imported into India is provided in Exhibit 8. Africa is primarily a wholesale market, with marketing initiatives aimed at the dealer/ wholesaler, rather than the end user. Allyn Africa Middle East Limited is the marketing and distribution management arm of the company operating from Amman (Jordan), with two support offices in Cairo and Johannesburg. The Allyn product range in the Africa Middle East region varies from one country to the other, but it covers a wide range of domestic, artisan and industrial sewing machine. Allyn has a strong distribution network in almost all countries in the region. In Africa, Allyn has distributors in Algeria, Ghana, Kenya, Madagascar, Malawi, Mauritius, Nigeria, South Africa, Sudan, Tunis and Zambia. In the Middle East, Allyn has distributors in Bahrain, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, UAE and West Bank. Allyn sources the black sewing machines from China and earlier from India. For the Chinese machines, prices are f.o.b. Hong Kong or China port; minimum order of 150 machines. For orders of less than 1200 machines, prices are ex works China. With supplies from India now closed, Allyn is facing supply constraints. The time is ripe for Ace Corporation to enter the African market aggressively.
7. STRENGTHS & WEAKNESS OF THE DIFFERENT BRANDS STRENGTHS Ace Organization and people Strong network across the length and breadth of the country. Distribution set up Ability to launch of economy range Wide range Enjoys a cash cow position
Allyn Excellent brand image. Perceived better quality in many geographical areas mainly, South India Rita Strong presence in Rajasthan In house manufacturing. Good Quality. Value for Money to the customer Extended credit policy Durby Strong presence in South Maharashtra and North Karnataka Good industrial range, and Link model Extended credit policy. Good Quality. Value for Money to the customer
Novel Strong presence in Maharashtra Good industrial and zigzag ranges Good brand image. Extended credit policy Good Quality. Value for Money to the customer
Vidya Strong presence in AP and Tamil Nadu In house manufacturing. Good Quality. Value for Money to the customer Extended credit policy Strong contacts in institutional segment Pooja Very strong presence in Canteen Stores (CSD) segment Good Quality. Value for Money to the customer WEAKNESSES: Allyn: Financially uncomfortable Inconsistent supplies Out of market for six months Attrition of key personnel Dealer base eroded Future uncertainty Inability to extend credit facility Ace: Inconsistent product quality Inconsistent supplies especially in industrial and semi zig-zag segment Stability and training of personnel Rita, Durby, Novel, Vidya, Pooja: Regional players, national presence is limited Limited resources
THREATS: Ace Allyns resurgence Allyn NV and Allyn India are making an all out effort to come back with a different model Competition from SSI players Low price imports from China Governments policies on regional and free trade agreements could result in opening the door to more imports, resulting in unequal competition OPPORTUNITIES Trends, attractiveness of the market: There has been a significant churning in the industry, especially in the organized sector, with Allyn in dire financial straits. With Allyn vacating space, there is scope for improvement within the current set up. The time is ripe for Ace, which has shown a healthy growth to seize the initiative and look at the bigger perspective and opportunities that galore in the domestic market and beyond. The overall domestic sewing machine market has reached maturity; organic growth beyond a point will have diminishing returns unless inroads can be made in highly competitive SSI segment. Overall industry is also stagnating, inorganically could be considered. the need to grow
The sewing machine customers are basically from rural India and which accounts for more than 70% of actual sewing machine purchase. The unorganized SSI sector continues to dominate the sewing machine market, with market share over 60%. Tax restructuring post VAT With 4% VAT on sewing machines, the price differential between organized and SSI brand has reduced. With media revolution increasing their exposure, and aspiration levels are rising. There is a latent demand for possessing and owning a branded sewing machine by the rural people. But they aspire for the same at an affordable price and customers from
remote places visit Class II/ I towns and buy branded goods from there. The international market is yet to be tapped
8. SALES Ace Corporation sales trend during the 5 years has been provided in Exhibit 9. Note: Data presented in the case study has been collated from documented sources. Names have been modified to remove reference to any particular group or company.
Issues: Companies in the organized sector have internal constraints such as their relatively higher marketing expenses and their necessity to sustain a differentiation in the product quality as opposed to the SSI. As a result, this sector in the sewing machines largely dominated by the SSI has not been able to make a significant breakthrough given the vast untapped potential in the sewing machine market. Strong companies such as Ace, Allyn can at most enjoy a cash cow status in the product-portfolio matrix. The future appears to be threatened. The corporate objective of Ace Corporation is to increase the sales of sewing machines to 70,000 nos. per month in the next two/ three years. Formulate a strategy specific for this market situation taking into consideration Allyn Indias likely attempt to stage a strong comeback.
Exhibit- 1 Market Size: 220 Th.nos./ month Year 2006
Selling Price Break-up of Sewing Machines Exhibit - 2

MRP (Rs.) RETAILER PRICE AFTER MARGIN OF 20% PRICE AFTER VALUE ADDED TAX OF 4% LESS INCENTIVES CASH DISCOUNT 1% TURN OVER DISCOUNT 2% QUANTITY DISCOUNT 3% TOTAL INCENTIVE NET DEALER BILLING PRICE LESS SALES PROMOTION 3% NET SELLING PRICE PURCHASE PRICE PROFIT PROFIT %AGE 1000 833 801 8 16 24 48 753 24 729 525 204 39
Prices of Straight Stitch Machines Exhibit - 3.

1. Ace Bermina Rs.2000/5. Ace Link Deluxe Rs.2000/-
2.
Ace Bermina Deluxe
Rs.2075/-
6.
Ace Master Super Deluxe
Rs.2050/-
3. 4.
Ace Prima Family Ace Prima Ultra
Rs.2125/Rs.2275/-
7. 8.
Ace Reliable Ace Streamline
Rs.2650/Rs.2875/-
Prices of Light Industrial Segment Sewing Machines
Exhibit - 4
1. Straight Stitch Ace Rotary Stitch Master 2. Embroidery Ace Magic Master Rs.4175/4. Leather Stitch- Ace Leather Stitch Master Source- Market survey Rs.3750/Rs.2700/3. Over Lock Ace Lock Stitch Rs.2350/-
Prices of Zig-Zag Segment Sewing Machines Exhibit - 5

1. Semi Zig-Zag# Ace (Elena ) 2. Semi Zig-Zag# Ace (Charm) 3. Auto Zig-Zag*Elegance Rs.8900/5. Rs.5950/4. Rs.4550/3. Auto Zig-Zag* Stitch Magic Auto Zig-Zag* Trendy Auto Zig-Zag* Charisma Source- Market survey Rs.14,000/Rs.10,500/Rs.11,450/-
# Cost of table extra at Rs.2000/-
* Auto Zig-Zag machines are imported from Yamata Sewing Machine Co. Japan and co-branded Ace-Yamata
Town Classification EXHIBIT 6- A

TOWN CLASSIFICATION POPULATION NO. OF TOWNS NO. OF TOWNS WITH PRODUCTIVE DEALERS 27 39
METRO MINI METRO
>10 LAC 5 LAC TO !0 LAC
27 42
CLASS I II III IV V TOTAL
> 1 LAC 50TH. TO 1 LAC 20TH. TO 50TH. 10TH. TO 20TH. 5TH TO 10TH.
345 484
215 177
275 4186 5084 733
Source- Company sources
Dealership Network (Ace Corporation) EXHIBIT 6- B

PRODUCTIVE DEALERS MINI CLASS CLASS OTHER METRO I II S (3) (4) (5) (6) 7 0 5 17 6 3 5 6 3 4 8 0 3 2 3 7 79 30 0 17 16 40 30 23 11 9 10 28 16 16 15 30 24 315 12 0 16 19 13 14 21 13 5 10 41 7 14 10 15 11 221 26 0 26 24 30 8 19 51 5 46 29 26 27 11 38 30 396 TOTAL NO. OF DEALERS (8) 115 63 136 108 123 96 116 142 68 103 123 80 112 101 150 145 1781
STATES PUNJAB DELHI RAJASTHAN U.P.EAST U.P. WEST A.PRADESH TAMILNADU KERALA KARNATAKA ASSAM BIHAR ORISSA W.BENGAL GUJARAT MUMBAI M.PRADESH TOTAL
METRO (2) 3 34 6 6 3 9 9 0 3 0* 5 0* 6 10 14 1 109
TOTAL (7) 78 34 70 82 92 64 77 81 25 70 111 49 66 48 100 73 1120
% PRODUC DEAL (9
68
54
51
76
75
67
66
57
37
68
90
61
59
48
67
50
63
*In Kerala, Assam & Orissa there are no metro cities Source- Company sources
Ownership of Durables by Rural Customer Exhibit - 7

PRODUCT No. of owners PRODUCT per 100 house holds 53 Pressure cooker 19 Wrist watch 13 16 Transistor Sewing machine
-
Bicycle Ceiling fan Table fan B & W TV
No. of owners per 100 house holds 13 76 42 55
Source- Business India
Costing sheet for Imported Sewing Machines Exhibit 8
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22.
FOB Price China Freight/ Cartage Total $ cost Rupee value Insurance charges CIF Cost Customs duty Countervailing ED Education Cess Landed cost Domestic expense C & F charges/ Port charges Bank/ LC charges Currency fluctuation/ Forward cover Inland freight Inspection charges Interest cost 30 days Turn over tax/ octroi Current asset/ credit cost Replacement/ Service Packaging expense Total cost
US $ per Machine Estimated at US$ 2150/ container 1+2 Rs.41 per US $ 0.4% of 110% of C&F value 4+5 5% basic 16% + 2% cess 2% on CD + CVD 6 + 7 + 8 +9
2.45% of C & F price 1% of CIF price 6% P.A taken for 3 months of C & F price Average weight at Rs.8/ kg 1.5% FOB value @8.5% p.a of FOB cost (INR) Av. Cost 1% on transfer price 15% for 90 days at transfer price Estimated at 10% of transfer price
Source- Company sources
Sales Trend of Sewing Machines (Ace Corporation) Exhibit - 9

SEGMENTS
00-01
MONTHLY AVERAGE SALE

01-02 02-03 03-04 04 - 05 05 - 06
Th.Nos/PM Automatic Zig-Zag Semi-automatic Zig-Zag* Straight Stitch Industrial Total 0.7 1.1 18.9 1.6 22.3 0.7 1.1 17.8 1.9 21.5 0.9 1.3 25.0 2.7 29.9 1.2 2.5 26.8 5.0 35.5 1.5 3.0 30.0 5.5 40.0 2.0 4.0 33.0 6.0 45.0
*In this segment when Allyn was active, their Rage Model was selling @5000 nos. per month

ACE Corporation - Gaining Market Shares in Slow Growth Markets

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ACE Corporation - Gaining Market Shares in Slow Growth Markets

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GAINING MARKET SHARES IN SLOW GROWTH MARKETS: A CASE STUDY ON SEWING MACHINES*

Relson: Revo: Ace:

Sagar: Allyn Others

Dealer (Metro/ Class I/ II Towns)

Distributor (Small Towns)

Exhibit- 1 Market Size: 220 Th.nos./ month Year 2006

Selling Price Break-up of Sewing Machines Exhibit - 2

Prices of Straight Stitch Machines Exhibit - 3.

Ace Bermina Deluxe

Ace Master Super Deluxe

Ace Prima Family Ace Prima Ultra

Ace Reliable Ace Streamline

Prices of Light Industrial Segment Sewing Machines

Prices of Zig-Zag Segment Sewing Machines Exhibit - 5

# Cost of table extra at Rs.2000/-

Town Classification EXHIBIT 6- A

METRO MINI METRO

>10 LAC 5 LAC TO !0 LAC

CLASS I II III IV V TOTAL

275 4186 5084 733

Source- Company sources

Dealership Network (Ace Corporation) EXHIBIT 6- B

METRO (2) 3 34 6 6 3 9 9 0 3 0* 5 0* 6 10 14 1 109

TOTAL (7) 78 34 70 82 92 64 77 81 25 70 111 49 66 48 100 73 1120

Ownership of Durables by Rural Customer Exhibit - 7

Bicycle Ceiling fan Table fan B & W TV

No. of owners per 100 house holds 13 76 42 55

Source- Business India

Costing sheet for Imported Sewing Machines Exhibit 8

Source- Company sources

Sales Trend of Sewing Machines (Ace Corporation) Exhibit - 9

MONTHLY AVERAGE SALE

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