Wafer WarfareA project aimed at understanding the Indian Wafer Snacks Market with special emphasis on Market Size, Market Structure, Competitors and their Strategies. By:- Rahul Vaswani Chetana‟s R.K Institute of Management & Research Roll No:116 (M3, MMS Marketing) The size of the Wafer Snacks Segment in India is estimated to be 4,500 – 5000 crores The market is growing at 30 percent annually The branded players account for 2,000 crores of the market size Major branded players include Frito-Lay, Bingo, Haldiram, Balaji, Parle Potato Chips and Potato based items account for 85 percent of the total snacks segment. As per Nielsen’s Retail Audit, Frito-Lay commands 45% market share, followed by Haldiram at 27% and Bingo at 16% The rest is divided between new players such as Smart Chips, regional players such as Balaji and handful of unorganized players Introduction to the Indian Wafer Snacks Segment Prominent Brands and their offerings •Lays •Kurkure •Lehar Namkeen, •Cheetos •Uncle Chipps Frito-lay •Bingo ITC •Musst Bites & Stix • Smart Chips • Cheeslings Parle Snacks •Balaji Wafers • Haldiram •Yellow Diamond among other local players. Other Players Analyzing Segment Attractiveness (Porter‟s 5 forces) Industry Attractiveness (Porter‟s 5 forces) Threat of new entry: As the market is growing at 30 percent annually, new entrants may consider it a profitable venture As branded players are priced similarly, new players might penetrate by adopting a lower price or by offering more grammage at the same price (Balaji-strategy) New players with a distinct USP and marketing strategy may find it easier to enter the market (Bingo Strategy) Unorganized players still account for half of the total wafer segment, thereby discouraging market entry Veteran players such as Fritolay, Haldiram etc enjoy economies of scale, well-established distribution and good distributor relations. Hence, the threat of new entrants is moderate. Competitive Rivalry High Competition – Branded Players involved in cut- throat competition to increase market share, entice new consumers, find new markets Low Quality differences among branded players. Quality difference between branded and unbranded offerings is offset by low price offered by unbranded players Cost of switching is low as all players have a similar pricing strategy Brand Loyalty is high for branded players Industry Attractiveness (Porter‟s 5 forces) Hence, the threat of competitive rivalry is high. Bargaining power of suppliers Suppliers provide raw materials such as potatoes, spices and other ingredients. Their ability to raise input costs is high. Higher cost of input commodities leads to lower margins, making the market unattractive for distributors and retailers (in an already low-margin, high-volume market) Shortage of any input material may also affect production and thereby impact distribution. Veteran players like Fritolay and ITC already have a well- established network of suppliers. ITC’s e-choupal venture permits a steady supply of raw materials at the lowest price. Industry Attractiveness (Porter‟s 5 forces) Hence, the bargaining power of suppliers is high. Bargaining power of consumers Frito-Lay enjoys a healthy lead with a 45 percent market share for it’s portfolio of products Competitor differentiation is in terms of variants and communication. Ability to substitute is high as brands are priced similarly and distribution problems for one brand promote sales for the other. Price Sensitivity is high. An increase in the price of Lays may promote a switch to Bingo for most buyers (except for loyalists) Industry Attractiveness (Porter‟s 5 forces) Hence, bargaining power of consumers is high. Threat of substitutes. Indian Snack Segment is high-volume, low-involvement driven (thrives on impulse buy) All snacks are considered to be substitutes of each other Biscuits, Wafers and local snacks like Chakli, banana chips, farsan etc are all substitutes of one another Industry Attractiveness (Porter‟s 5 forces) Hence, the threat of substitutes is high. Final Verdict The market is unattractive for players who: Aim to be a me-too product with no significant differentiation Do not have a well-established distribution network Do not have good supplier and dealer relationships However, if one can “Pull” a bingo or carve out a “Smart” Niche ala Smart Chips, the entry to this market may be profitable. Industry Attractiveness (Porter‟s 5 forces) Understanding The Market Structure • Fritolay (45 percent cumulative share consisting of Lays, Kurkure, Uncle Chipps, Cheetos and Leher) Market Leader • ITC‟s Bingo (16%) posing a threat to Lays through its direct frontal attack Market Challenger • Balaji and local players such as Yellow diamonds. Also included are unorganized offerings, aimed at the price-sensitive, less loyal audience. Market Follower • Parle Monaco‟s Smart Chips which has identified itself a niche of the more health conscious section of the audience by offering them a baked variant of chips. Market Nicher MARKET STRUCTURE Stages in the Lifecycle of the Category Product Development Stage This stage is characterized by • No Sales & Profit • Product Testing – identifying a sample target group to evaluate the potential of the product • Research & Development – aimed at constantly improving/differentiating the product • Eg, before Launch, Bingo developed a cross-sectional team of 8 individuals who travelled across 14 cities to identify the snacking habits of the Indian Consumer. The team found out that local-tasty snacks like khakra, vada pav , samosas, etc were the popular choices among the Indian audience. Based on this information, the company decided to develop flavors with an Indian taste. • Test Marketing – may be conducted by launching the product in one or two markets initially. Lifecycle Stages of the Wafer Segment Introduction STAGE • The product is launched in the market, either as a single variant or multiple variants, single SKU or multiple SKU‟s. In this case, it is advisable to go for multiple SKU‟s to off-set price- sensitivity. • The price is set keeping in mind the competitor‟s offering, the price-sensitivity, market size, cost of switching, extent of brand loyalty among other factors. However, it is advisable to follow the leader in this regard unless there is a significant USP. If the product is me-too, a lower price is advisable • Promotional Spends, if launched nationally, must be high enough to gain maximum visibility in the early stages. Efforts must be made to keep the communication simple and unique. The launch campaign must be such that it doesn‟t get lost in the clutter. • FMCG thrives on distribution so the firm must have a well- established network in its place. The firm may look at providing add-on schemes, value deals to dealers and retailers not provided by competitors. Lifecycle Stages of the Wafer Segment Growth • Depending on the success in the growth stage, the firm may aim at product improvement. In terms of SKUs, packaging, etc. • The company may introduce newer variants through continuous R&D • The firm may undertake sales promotion such as extra grammage, freebies, etc. •Example: The sales of Lays multiplied through the introduction of “Tazo” • If the product was launched in smaller markets, the firm may consider increasing distribution coverage. Lifecycle Stages of the Wafer Segment Maturity The market becomes saturated. Hence, the firm may place emphasis on :- Lifecycle Stages of the Wafer Segment Product Modification Re-branding Strategies Distribute in selective profitable areas Exit out of markets where the product doesn’t get the desired sales numbers Decline • The Company may withdraw the product from the market. If in-case of a multi-brand company, the company may focus on profitable brands (cannibalize its weaker brands) • The firm may adopt a permanent sales promotion strategy such as buy one-get one free, discounted price, more grammage in case of large unsold inventory. Lifecycle Stages of the Wafer Segment Marketing Strategy adopted by Frito-lay (The Market Leader) Product Strategy:- Frito-Lay's product strategy aims at differentiating among its own brands in terms of product taste, design, packaging and target audience. Marketing Strategy of Frito-Lay • One of the power brands under Fritolay comes in 5 different flavours. Tomato Tangy, Classic Salt, Cream „n‟ Onion are the popular “westernized” variants, while “Magic Masala” and “Lime Masala” are aimed at craving the Indian-taste. Lays • Launched in 1999, the brand symbolizes the spirit of India with its Indianized farsan-like flavors. The newly launched “Desi Beats” variants are a direct answer to Bingo‟s strategy of launching Indianized flavours. Kurkure • Launched in 1995 provides variety from other Fritolay offerings such as Cheese Puffs & Masala Balls. The product differentiation is apparent in terms of design and shape. Also the inclusion of „cheese‟ as an input material distinct it from other brands. Cheetos • A salt farsan-like snack aimed is a direct alternative to the offerings of unorganized players. Leher Namkeen Pricing Strategy The pricing strategy for Lays is consistent with other competing players. As this market is driven by high- impulsive buyers of snack foods, there is very little dichotomy in the pricing strategies of all major players. Lays and Kurkure, the two popular choices, come in different SKU‟s priced at Rs.5, Rs, 10 and Rs. 20, similar to Bingo and Haldiram. Recently, however Fritolay launched a Rs.3 SKU for it‟s Kurkure brand in a bid to compete more aggressively. Marketing Strategy of Frito-Lay Promotional strategy Realizing the direct threat posed by Bingo to its market share, Fritolay revamped its‟ branding strategy for all leading brands. For Lays, the company signed on ambassadors Saif Ali Khan & MS Dhoni. Indianized versions of Lays were also launched after Bingo‟s success with Indian flavours. These included Chat Street, “Chala Change Ka Chakkar” – the largest ever brand promotional strategy undertaken by Fritolay aimed at bringing all its flagship brands under one roof. This massive umbrella campaign would allow chosen customers to live the life of a Bollywood Indian celebrity for a day. “Chai Time Achievers” – a Kurkure centric campaign was aimed at the housewives in India. The Idea was to promote heavy audience interaction by sending recipes for new flavours. The winning family would then have the opportunity to have their photographs on one million Kurkure packs Aside from Juhi Chawla, the company also signed on Kareena Kapoor for the “Desi Beats” version of Kurkure. Other initiatives include posters at unconventional retail points such as cyber cafes and telephone booths, a tie-up with South-Western Railways, known as “Kurkure Express” to increase brand visibility. Marketing Strategy of Frito-Lay DISTRIBUTION STRATEGY Being first in the market through its acquisition of Uncle Chipps, Fritolay already has a well-established network of distributors and retailers pan-India. The brand loyalty enjoyed by Lays was leveraged during the launch of Kurkure, Cheetos and the recently launched “Aliva” Frito-Lay has a distribution network of 30 CFAs and 2 RDCs who service 800 distributors who sell to 4 lakhs retailers. Fritolay boasts of reaching more than 1 million retail outlets countrywide covering 100 towns. The Company, with its manufacturing plants in Punjab and Pune, aims at investing 20 crores to extend distribution facilities to improve coverage and increase product shelf life by 120 days. Marketing Strategy of Frito-Lay Marketing Strategy adopted by Bingo (The Market Challenger) Product strategy Bingo positioned itself as chips with an Indian twist. The 16 flavors introduced at launch were carefully developed through R&D. The initial offerings were a mix of potato chips and finger snacks. The Potato chips segment includes variants like masala, salted, tomato inspired by the snacking habits of the Indian consumer The offerings under Finger Snacks include the pakoda inspired „Live Wires‟ and Khakra inspired „Mad Angles‟ These offerings were further differentiated by providing SKU‟s at Rs. 5, Rs.10 and Rs. 20 Marketing Strategy of Bingo Pricing strategy The main objective for ITC was to compete effectively with players who were already there. Hence, it launched a direct frontal attack by introducing similar priced SKU’s. ITC already enjoyed cost advantage over competitors through its e-choupal initiative. This also facilitated timely supply of raw materials. ITC’s printing and packaging business also lead to high- quality, cost-effective and innovative packaging. Marketing Strategy of Bingo Promotional strategy Bingo was strategically launched at the time of world cup to cash in on the popularity of snacks among the cricket lovers of the country. The advertising strategy revolved around slapstick humor and irrelevant themes to hold eyeballs, garner attention and interest, and stand out from the clutter. ITC booked 10 to 15 spots per channel per day, 20 spots on radio stations supported by 1000’s of hoardings advertising the product. According to industry estimates, the total advertising spend in the initial 6 months were roughly 100 crores. While its competitor Fritolay focuses on celebrity endorsements, Bingo chose a different route. It didn’t have an ambassador! As the product is aimed at the youth, digital media was heavily used. For instance, the Bingo National Gaming Championship across 4 cities with more than 25,000 participants Bingeonbingo.com and Mad Angles Twister Application (Facebook) were other initiatives in online media. Marketing Strategy of Bingo Distribution strategy ITC already had a well-established distribution network through its cigarette and tobacco-related offerings which was leveraged in case of Bingo. Further, the company distributed 4 lakh racks across all retailers to display the brand at all Points-of-sale. Within 6 months, Bingo was available across 2,50,000 retailers across the country. A crucial alliance with Future group which lead to all future group retail outlets like Big Bazaar, Food Bazaar stocking only ITC”s Bingo HORECA (Hotels, Restaurants and Cafes), Local betel shops are all being used to distribute Bingo to a wide range of audiences Marketing Strategy of Bingo Marketing Strategy adopted by SMART CHIPS (The Market NIChER) Product strategy Parle Monaco recently entered the chips segment with its healthy variant called “Smart Chips”. Realizing the recent market trend of being more „health conscious‟, Parle, through Smart Chips has carved out its own niche. Highlighting it‟s USP of being baked rather than friend. Smart Chips comes in 4 different flavors: Simply Salted Tangy Tomato Crazy Chat Macho Masala Marketing Strategy of Parle‟s Smart Chips Among its competitors, Parle has had a tough time gaining a considerable market share for its snack offerings. Must Bites & Must Sticks together account for 5-7 percent of the total organized wafer chips segment Pricing strategy Similar to competitors, Smart Chips comes in two SKU‟s. Rs. 5 for a 25 gm pack and Rs. 10 for a 50 gm pack Promotional strategy The ad campaign, handled by Thoughtshop Communications, features Aamir Khan advocating the benefits of baked chips over the fried ones taking a subtle shot at competing brands The ad highlights the USP of the product in a humorous way without sounding to preachy or serious, which enables it to stand out from the clutter. Distribution strategy Being a veteran player in the food and snacks segment, Parle already has a well-established framework of distribution through its biscuits and other snack offerings. This has enabled Parle to distribute Smart Chips effectively, reaching millions of retail outlets. Thus, with the advent of Smart Chips, Parle has carved out a small niche for itself aimed at the health conscious snack-lovers. However, it remains to be seen how this product performs in the long run. Marketing Strategy of Parle‟s Smart Chips Frito-Lay's Success Mantra – Right Strategy at the Right Time Respond to Competitor‟s threats When Bingo started eating into Fritolay‟s market share, the company proactively responded by launching it‟s own versions of Indianized flavours spread across all it‟s brands. Taking a cue from its competitor in terms of increased audience interaction and online marketing, Fritolay expored new mediums of advertising which lead to the launch of the massive “Chala Change Ka Chakkar Campaign” Consistent Communication Fritolay‟s communication is one of its key strengths. It has managed to create a distinct image for all its brands – Kurkure, Lays among others. Any launch of a new variant/line extension is supported by a 360 degree marketing campaign to create awareness and induce trials. If you‟re not the first in the market, compete head on and if possible acquire the competitor Being first in the market, in 1992, Uncle Chipps enjoyed tremendous success. When Fritolay entered India in 1996 with its brand “Ruffles”, it went head on with Uncle Chipps but still couldn‟t gain significant market share. However, post 2000, it bought out Uncle Chipps for an undisclosed sum, thereby wiping out its sole competitor in the branded wafer market. Learning‟s from the competitors. • A well-planned full frontal attack on the leader may sometimes yield fruitful results (Bingo) • A thorough analysis of the leader‟s offerings will reveal missed opportunities (Smart Chips) • Once a USP over the leader and other competitors is identified, it must be communicated in simple and clear terms (Smart Chips) • Innovative advertising and communication, if done right, helps stand out from clutter and reach the target audience. • If there is no significant product or distribution differentiation, focus on the other 2P‟s namely Price and most importantly promotion. WEB-BASED REFERENCES 1) http://www.imagesretail.com/support_jan_suplychain.htm 2) http://www.televisionpoint.com/news2009/newsfullstory.p hp?id=1244814371 3) Official Websites of Fritolay, Parle, Balaji, Bingo among other brands 4) http://www.afaqs.com/perl/news/story.html?sid=20324 5) http://www.moneycontrol.com/news/business/frito-lay- loses-snack-mkt-share-to-itcs-bingo_300325.html 6) http://www.bizdewz.com/parle-monaco-smart-chips-vs- lays-or-aliva/ 7) http://www.afaqs.com/perl/news/story.html?sid=25651 8) http://economictimes.indiatimes.com/news/news-by- industry/cons-products/food/Balaji-Wafers-a-name-to- reckon-with-in-Gujarat-snacks- market/articleshow/5367599.cms REFERENCES TEXTUAL REFERENCES 1) Marketing Strategy – Walker, Mullins, Boyd 2) Marketing Strategy & Plans – Michael Vaz 3) Class Handouts – Prof. Dr. Amit Rangnekar THANK YOU