ITC is using every strategic resource it has in his arsenal to make a mark in the snack foods business. ANGSHUMAN PAUL takes a look
Tactic No 2: Leverage conglomerate efficiencies & advantages
Consider these facts. Thanks to cigarette operations, ITC’s food products are showcased in 2 million outlets, including paan shops, compared to competitor Unilever India’s 1.5 million. “But it’s not only about the tobacco distribution network. Even when it comes to procurement, ITC had planned for the future through the e-Choupals network. Unilever never had the patience to create such a model on a long-term basis,” points out Mahesh Joshi, Associate (Institutional Equity), Edelweiss Securities.
In fact, ITC now hopes to expand its procurement business and provide the back-end supply chain to other food chains. In 2007, it roped in Japan’s Marubeni, which will help ITC access the former’s warehousing & logistics skills. And that’s not all. ITC uses its paper company to provide cost-effective and attractive packaging for its products. It borrows chefs and recipes from sister concern Welcome Group Hotels for Kitchens of India. “I think for a long sustainable economy & business, whenever any business houses enter a new arena, it should be totally prepared in all possible ways on its own resources,” says renowned economist Amartya Sen.
Tactic No 3: Take care of the other Ps
ITC Foods has been careful in choosing its brand ambassadors, Shah Rukh Khan and Sachin Tendulkar. “A brand ambassador has to very convincing to push your products, and both our brand ambassadors have helped us capture the market,” feels Naware. However, others say this is not critical. Explains Richa Arora, General Manager (head-marketing), Britannia Industries, while explaining why Britannia did not continue with Sachin Tendulkar, “It’s not that he was not successful, but somehow we felt that our brands can be promoted without a strong brand ambassador.”
When it came to pricing, ITC didn’t sell its products at lower prices than those of its competitors; rather, it increased the quantities. It was similar to the strategy pursued by the two cola giants who, instead of reducing their prices, increased the quantities served in a bottle. The idea was that price slashing is perceived as a sign of weakness, and adding quantities increases the customer’s value perception. Even on the distribution front, ITC has ruffled feathers. Delhi-based dealers contend that ITC gives them 4-5% higher margins than Kurkure.
However, in the near future, ITC itself will face competition on all its successful fronts. Players like Reliance Retail and Wal-Mart will set up as efficient, if not more, backend operations over the next 2-3 years. They’ll perhaps have lesser retail outlets, but surely more floor & shelf space as they plan small & huge malls & supermarts. In some ways, Reliance Retail has already started playing the price warrior game.
Consider these facts. Thanks to cigarette operations, ITC’s food products are showcased in 2 million outlets, including paan shops, compared to competitor Unilever India’s 1.5 million. “But it’s not only about the tobacco distribution network. Even when it comes to procurement, ITC had planned for the future through the e-Choupals network. Unilever never had the patience to create such a model on a long-term basis,” points out Mahesh Joshi, Associate (Institutional Equity), Edelweiss Securities.
In fact, ITC now hopes to expand its procurement business and provide the back-end supply chain to other food chains. In 2007, it roped in Japan’s Marubeni, which will help ITC access the former’s warehousing & logistics skills. And that’s not all. ITC uses its paper company to provide cost-effective and attractive packaging for its products. It borrows chefs and recipes from sister concern Welcome Group Hotels for Kitchens of India. “I think for a long sustainable economy & business, whenever any business houses enter a new arena, it should be totally prepared in all possible ways on its own resources,” says renowned economist Amartya Sen.
Tactic No 3: Take care of the other Ps
ITC Foods has been careful in choosing its brand ambassadors, Shah Rukh Khan and Sachin Tendulkar. “A brand ambassador has to very convincing to push your products, and both our brand ambassadors have helped us capture the market,” feels Naware. However, others say this is not critical. Explains Richa Arora, General Manager (head-marketing), Britannia Industries, while explaining why Britannia did not continue with Sachin Tendulkar, “It’s not that he was not successful, but somehow we felt that our brands can be promoted without a strong brand ambassador.”
When it came to pricing, ITC didn’t sell its products at lower prices than those of its competitors; rather, it increased the quantities. It was similar to the strategy pursued by the two cola giants who, instead of reducing their prices, increased the quantities served in a bottle. The idea was that price slashing is perceived as a sign of weakness, and adding quantities increases the customer’s value perception. Even on the distribution front, ITC has ruffled feathers. Delhi-based dealers contend that ITC gives them 4-5% higher margins than Kurkure.
However, in the near future, ITC itself will face competition on all its successful fronts. Players like Reliance Retail and Wal-Mart will set up as efficient, if not more, backend operations over the next 2-3 years. They’ll perhaps have lesser retail outlets, but surely more floor & shelf space as they plan small & huge malls & supermarts. In some ways, Reliance Retail has already started playing the price warrior game.
Source : IIPM Editorial, 2012. An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
