MBA SEM III

306 CONSUMER BEHAVIOUR

UNIT II Case Study

ITC -AASHIRWAD ATTA---- CHANGING ATTITUDE ,APPROACH OF INDIAN CONSUMER.

INTRODUCTION

Chitranjan Dar has every reason to smile. ITC Foods, the company he leads as Divisional Chief Executive, has revenues of Rs 5,000 crore - despite being a late entrant into the $25-billion Indian food industry. Last year, ITC Foods overtook the food business of India's largest consumer goods company, Hindustan Unilever, in terms of revenue. It leads in the Rs 4,500-crore branded atta category - its Aashirvaad brand has a 26 per cent market share. It is the third largest player in the Rs 21,000-crore biscuit industry, giving stalwarts such as Parle Products and Britannia Industries stiff competition. It leads in the cream biscuits category with a 26 per cent market share.

Seated in his office on the sprawling premises of ITC's old tobacco factory in Bangalore, Dar can barely contain his excitement about his company's newest product, Farmlite biscuits, a premium oats-and-almond cookie. "One of our early learnings was that in India, taste is paramount in anything that one does," he says, biting into a Farmlite biscuit. "Nobody is going to sacrifice taste for the reason of health. It took us a while to develop something which will give us this combInation." The biscuit, he says, is the first of a range of Farmlite healthy snacks.

mpany has been able to innovate in a cluttered market, and come up with differentiated products in the mass and premium segments. Its deep pockets and willingness to pump money into the foods business helped, but Dar says it hasn't quite been a cakewalk. The company's first biscuit, called iBisc, bombed. Dar says iBisc was ahead of its time. "We realised that though we wanted to be different, it was also important to be strong in conventional categories," he says.

That is why the company invested in conventional categories, such as glucose and cream biscuits, and chips. But breaching the strongholds of Parle and PepsiCo is not easy. ITC's distribution strength, built over decades, came to its rescue. Its distribution channels, which directly reach more than two million outlets nationwide and more than 4.5 million stores through wholesalers, would be the envy of any consumer goods company, says Raghu Vishwanath, Managing Director of Vertebrand Management Consulting. "ITC cleverly realised it has a starting-point advantage in distribution, and knew exactly how to reach big and small outlets across the country," he adds.

Although there was some scepticism about stocking ITC's food products in the early years,

the trust and credibility the company created through its distribution practice helped it break the ice. Sanjiv Puri, ITC's Divisional Chief Executive for trade, marketing and distribution of fast-moving consumer goods (FMCGs), says: "It has helped us drive penetration of FMCG products across channels, outlets and markets."

While the launch and distribution of mass products gave the company much-needed scale, it wasn't a game changer, given that rival brands such as Parle and Britannia had a combined share of 70 per cent of the biscuits market. In noodles, ITC was pitted against Maggi, which had more than 75 per cent of the market. The only way for the company to make a dent was to innovate. "Getting into conventional categories was always part of the plan, but we were up against traditional hot rivals," says Dar. "We realised that... we need to understand the consumer and make the experience better. But consumer preference may not be the only driver. Therefore the need for innovation - for having something differentiated in terms of packaging, communication or product - would be very important for Sunfeast to become a strong brand."

The gap that the company could take advantage of was at the premium end. It would also improve profitability, as margins were considerably higher than for basic biscuits and atta.

What followed was months of effort, with Welcomgroup chefs trying to perfect recipes that could become successful brands. Dar says the chefs created as many as 40 or 50 options, and some became successful premium brands such as Dark Fantasy, Chocofills, Choco Melts, Delicious and, most recently, Farmlite.

Devendra Chawla, CEO of the Future Group's Food Bazaar, says ITC Foods succeeded in the market because it went above the value chain and developed a market for value-added categories above the basic level.

The strategy was timed well, as India was moving up the consumption curve, and even consumers in small towns wanted premium products. For example, Dark Fantasy, priced at Rs 30 for a 75g pack sells in 450,000 outlets nationwide, out of which 100,000 outlets are rural.

Regional Preferences

Few customers are aware that the Aashirvaad atta in Delhi or Lucknow is not the same as in Bangalore or Chennai. Dar says that special blends and granulations for different markets has been key to ITC's success in a category where rivals have gone horribly wrong. He says: "We realised that the blend that people like in the North may not be the same in the South. In the South, which is not an atta-consuming market, atta has entered homes because it is considered a healthy option. In the North, atta is consumed daily, and the look and granulation required there are different." He says it took ITC three years of research before the atta finally hit the market.

Future Foods' Chawla agrees that customising food for regional preferences is important. "Preferences change every 200 km," he says. "The dal in Maharashtra tastes different in Pune and in Kolhapur. Similarly, the paratha in North India is made of wheat flour, but the one in Kerala is

ITC realised it has a starting-point advantage in distribution, and knew how to reach big and small outlets: Raghu Vishwanath MD, VertebrandBrand specialist Harish Bijoor, CEO of Harish Bijoor Consults, says: "India needs and demands possibly 40 types of attas. ITC needs to invest in this through their R&D efforts. Catering to the commonality-run market will dry up as an opportunity, as consumers flock to brands that offer differentiations that they possibly don't even know they could crave."

Atta is emotional subject with Indians

MUMBAI: Atta is an emotional subject with Indian consumers and the quality of chappatis determines the mood around the dining table. "If you have won that round, you are in business" says Ravi Naware, divisional chief executive of ITC foods division in an exclusive interview.

KEY WORDS---

INDIAN CONSUMER. MARKETING REGIONAL PREFERENCES, ATTITUDE MARKET SHARE SUCCESS 1

QUESTIONS

Q 1 Traditionally atta market is dominated by local flour mills ,but ITC has changed the scenario, what further is needed to grow ?

Q 2 In India 68 % population is rural based .What ITC needs to do to gain this market share

SOLUTIONS

SWOT ANALYSIS—ITC FOOD DIVISION

STRENGTH

1 A part of large corporate house2 It has an extensive distribution network3 Ashirwad Atta is quality product and well accepted by consumers4 It has excellent insight of Indian Consumer

WEALNESS

1 Margins are constrained as it is a generic product

2 Many customers really cannot differentiate between quality product and local product

3 Distribution and logistics costs are very high

OPPORTUNITIES

1 Market potential is very high

2 ITC can operate at large scale PAN India

3 Indian consumers attitude is changing and is more open to convenience products

5 Rural customers are aspiring to become Urbinite

THREATS1 Local players have advantage of costs2 Rural people yet to accept the concept po packaged Atta.

SOLUTIONS

ALTERNATIVE I 1 Company to continue to focus on health quality , convenience and advantages of branded product2 Utilise the existing strength of wide distribution network of ITC Tobacco Division.

ALTERNATE II

1 To appoint Franchisees at district level to cater to local areas and thereby reduce distribution / logistics costs

2 To offer further specific product quality of texture etc locally3 Support Franchisees with National advt. & sales promotional activities

CONCLUSION / MY OPINION

1 To adopt strategy of blend of both above solutions2 To appoint Franchisees at smaller markets / Far off markets to begin with.

Key concepts Take home for students

1 Consumers tastes and lifestyle is changing and affects purchase decisions2 Marketing mix can change the consumers buying decisions.

MBA SEM I

106 BASICS OF MARKETING

UNIT II Case Study

NESTLE INDIA - MAGGI---CLALLENGE OF RE ENTRY IN INDIAM KITCHEN

 With the Maggi ban hitting sales of company's other products as well, Nestle India's new chief Suresh Narayanan on Saturday said bringing the instant noodles brand back to the market is his top priority as he sought to strike a conciliatory note with authorities.

The company has also identified other categories and looking at opportunities of introducing new products to overcome the challenge that has resulted in the company recording its first quarterly loss in over three decades.

"Task number one is to get Maggi back. That's an important part of what I will be focussing on," Narayanan, who took over as new Managing Director of Nestle India five days back, said in an interaction with reporters here.

Seeking cooperation from authorities, he said: "It is my endeavour and those of my colleagues that we come to with respect, with cooperation, with support from the authorities, I am not in a confrontational frame.

"...Nestle is a part of this country. We will be a part of this country as we have been for the last 100 years respecting the laws of the land and also respecting all the authorities. It is my hope that we are able to find a solution and we are able to move forward."

He, however, declined to 'hazard a guess' on how soon Maggi will be back on shelves saying the matter is sub-judice as Nestle India has challenged the ban on Maggi by central food safety regulator FSSAI in the Bombay High Court.

Narayanan said due to the ban, "a whole business segment has been dismantled" and "the whole system (of supply chain, manufacturing and distribution) is on freeze". Hit by ban on its Maggi instant noodles, Nestle India reported a standalone loss of Rs 64.40 crore for the quarter ended on June 30, 2015 -- its first quarterly loss in over three decades. It had posted a net profit of Rs 287.86 crore during the April-June quarter of financial year 2014-15.

Calling for an "introspection" within the company to overcome the challenge of Maggi ban, he said: "As a consequence of what has happened we will be having a process of introspection as an organisation, in terms of learning what was the thing happened, what was the thing that was right what was the thing which we have done was not right."

This is going to be constituting the part of the learning of the organisation. All this is internalised and taken for the future in terms of assuring that the company doesn't come by the unfortunate incident again, he added.

When asked if the ban on Maggi has hurt sales of other products of the company, he said there has been impact as the products were sold in the same geography as Maggi.

In order to overcome that, Narayanan said the company would be increasing the advertising and marketing spend on other product categories.

Why Nestle Can't and Won't Forfeit Brand Maggi

As Nestle braces to regain consumer trust over safety of its popular noodles, the jolt on its India operations will be severe, given the position "Brand Maggi" has enjoyed in its ecosystem, analysts said. But all may not be lost either, for a marquee brand built over three decades.

Little wonder, the stock may have lost 15 percent in some six sessions since a sample of Maggi noodles from a small town in India's most populous state, Uttar Pradesh, allegedly found higher-than-allowed levels of some harmful substances (lead), eventually resulting in India's food safety watchdog banning its further production, sale and export.

But investors still appeared to have hope.

At noon on June 5, for example, when the packed press conference of Nestle, addressed among others by its global chief executive Paul Bulcke, was in full swing at the Oberoi Hotel here - and the food safety authority's order was out by then - the stock actually rose, from the day's low of Rs.5,718 to a high of Rs.6,127.

"The fall in the Nestle stock isn't very significant. The price reflects investor sentiment, which is driven by consumer sentiments. Nestle's consumers are now anxious," said Dipen Seth, head of institutional research at leading brokerage HDFC Securities.

What the analysts did concede was that the developments would affect the stock for some time.

"Nestle’s effort towards driving premiumisation and improving the overall growth trajectory may take a hit because of change in focus to damage control and revive the Maggi brand," said Edelweiss, an investment advisory, maintaining that costs on this can hit margins.

"Also, during this phase, the brand may lose market share to rivals like ITC’s Yippee, adding further fuel to fire," it said. "In a bid to revive the brand, the company will have to invest heavily to communicate that its products are safe -- similar to what Cadbury did in 2003."

A closer look at the numbers on Nestle's operations reveals how Maggi dents its top line.

Among the four divisions of Nestle India, the category of "prepared dishes and cooking aids", which broadly translate into Maggi, accounted for 31.5 percent of sales in 2014, as per the last presentation the company made before analysts.

Among the remaining divisions, the category of "milk products and nutrition" had the largest share of 47.1 percent, followed by 12.2 percent for "chocolates and confectionery" and 9.2 percent for "beverages".

The Maggi unit saw a 1.8 percent increase in volumes in 2014 over the previous year and 8.1-percent rise in value at Rs.21.4 billion. "Value market share stable at 80 percent in noodles. Good response to Maggi oats noodles. Strong performance of fortified seasoning," it said.

What about exports?

"Nestle India currently exports small quantities of Maggi noodles to the US, Canada, UK, Australia, Singapore and Kenya," Nestle said. "We also make Maggi noodles in other countries and these are not affected by the situation in India," it added.

"We are working closely with the regulators in each country to explain the situation in India and, where they want to test the products, we are cooperating fully with them."

Globally, the consolidated revenues from Maggi alone for 2014 are not available. But the category of "prepared dishes and cooking aids" accounted for 13.54 billion Swiss francs ($14.4 billion) out of the total group sales of 91.6 billion Swiss francs ($97.5 billion).

Also Brand Finance, the London-based intangible asset valuation consultancy, in its latest report for 2015 ranked Maggi 23rd globally, with a value of $2.4 billion. Nestle, its parent, topped the list with an assigned value of $21.2 billion.

This apart, the brand, which extends to a range of products, has a significant share in the annual global market for instant noodles of 102.74 billion packets. In India and Malaysia, where Maggi has significant presence, the market size is estimated at 5.34 billion and 1.34 billion packets, respectively.

What does it take to recover from the crisis?

It is not going to be easy. The Maggi brand, which came into existence in Switzerland in 1872, and came into the Nestle fold in 1947, has products ranging from soups and noodles to sauces and seasonings.

In India, it was launched in 1982-83. Today, after 32 years, it ranks among the most recognised brands, almost synonymous with instant noodles. While it cannot really fade away from memories -- nor will Nestle allow it -- salvaging the trust will also require pro-active action by the firm.

"The best way to get over this is: Nestle should start communicating with stakeholders. Written communications are very important. The company should make some audio-visual and post it on their site for people to see," said noted market analyst Deven Choksey.

"To recover from this, there are two key elements -- trust of consumer and trust of investors. The business performance of the company originates from the consumer performance. At the end of the day, the truth should come out whether the product is safe or not," Seth added.

The company, perhaps, also realises as much. Rebuilding trust and consumer confident was one phrase that was repeated several times over at the press meet by chief executive Bulcke, who was specifically dispatched to India to clear the air with all sections of stakeholders, from regulators to consumers.

"Maggi has been trusted in India for over 30 years. Trust of our consumers and safety of our products is our first priority anywhere in the world," Bulcke said, adding: "Our priority now is to engage all stakeholders to clear the confusion. Maggi will be back on store shelves soon."

KEYWORDS

Consumer confidence, market leader , ban on product buying decision , household productRegain market consumer psychology

QUESTIONS

Q 1 How to regain the customers back at the same level of sales volume and profitability ?

Q 2 Do you think that Indian Consumers will go back to the brand which has been banned.

SOLUTIONS

SWOT ANALYSIS—NESTLE INDIA - MAGGI

STRENGTH

1 MNC with large resources at disposal2 It has an extensive distribution network3 Most trusted brand across India 4 Extremely satisfied customers

WEALNESS

1 Ban on product by various state govts has stopped business

2 Has incurred over 350 crores loss in recalling and destroying Maggi

4 Has suffered worst ever Image loss in co. s history5 Company is overdependent on Maggi Noodles for its sales and profits

OPPORTUNITIES

1 Market potential is very high

2 Nestle can operate at large scale PAN India

3 Indian consumers sill have confidence on cos product

THREATS1 Local players ,competition can take advantage to establish their brand2 Consumers can develop taste for other alternatives for snacks.3 Consumers can go back to traditional breakfast items ( Region wise)

SOLUTIONS

ALTERNATIVE I

1 Undertake a consumer survey for -- Image research and alternate arrangements made by them in absence of Maggi.

2 To reintroduce the Maggi with a NEW tag giving correct information and dispelling the doubts / questions bothering consumers3 Ensure that the product information is available to customers giving complete details for their evaluation and to make purchase decisionTo use the marketing mix stimuli to have positive impact on consumers.

ALTERNATIVE II

1 Reintroduce product with emphasise on Govt. Certification and clarifications from FDA

2 T0 put appropriate marketing efforts to include Maggi Noodels in the Mid Day Meal Schemes of various state govts. Which can give a quantum jump in sales and profitability.

CONCLUSION / MY OPINION

The company can certainly regain its market in India over a period of time . The real challenge is how soon .The company should adopt the Marketing strategy to WIN consumer back by adopting combination of above both solutions on a time frame.

CONCEPTS / TAKE HOME

CONSUMER BEHAVIOUR, PURCHASE DECISION STEPS FOLLOWED BY CUSTOMER CUSTOMER SATISFACTION AND CONFIDENCE.

QUESTIONS

Q 1 Traditionally atta market is dominated by local flour mills ,but ITC has changed the scenario, what

MBA SEM III

306 CONSUMER BEHAVIOUR

UNIT I Case Study

TATA NANO – CUSTOMERS DILEMMA

INTRODUCTION

It has been a lost decade for Tata Motors. The 138,455 cars the company sold in India in 2013-14 are close to the number it clocked in 2003-04, even as the car market almost tripled during the period, from 902,096 to 2.5 million units.

While car industry sales have grown, although slowly of late, Tata Motors’ market share has fallen from a peak of 16.9 per cent in 2004-05 to 5.5 per cent in the past financial year.

Background of Tata Nano

After having successfully launched the low cost Tata Ace truck in 2005, Tata Motors began development of an affordable car that would appeal to the many Indians who drive motorcycles.[4] The purchase price of this no frills auto was brought down by dispensing with most nonessential features, reducing the amount of steel used in its construction, and relying on low cost Indian labour.[citation needed] The introduction of the Nano received much media attention due to its low price.[5]

TATA NANO IN SLOW LANE AGAIN

Financial Year Nano sales in #2009-10 303502010-11 704322011-12 745272012-13 53848

2013-14 211292014-15 15933

Tata Nano Alto 800* The Nano's trunk is only accessible from inside the car, as the rear hatch does not open.[21]

* Maruti 800 initially had only an opening rear-windscreen, but later got a full hatchback.

* One windscreen wiper instead of the usual pair (also seen earlier on certain Citroen and Mercedes models)[5]

* Two windscreen wipers.

* No power steering initially, unnecessary due to its light weight.[5] Added in higher variants in later models.

* Power Steering only in higher variants.

* Three lug nuts on the wheels instead of the usual four (also seen on Smart)[22] * Four lug nuts per wheel.

* Only one wing mirror on base models. Higher variants fitted with passenger side ORVM from 2012 onwards.[5]

* No option for both side ORVMs in any variant.

* Radio or CD player is optional (the idea picked on some basic car models in North America and all basic cars in India) [5]

* Radio/CD Player is optional.

* 10 airbags on any model[23] * 10 airbags in any variant.* 624cc rear engine has 2 bigger cylinders (312cc each)[5]

* 800cc front engine has 3 smaller cylinders (266cc each).

* No air conditioning in base model (as on most basic car models in Europe and North America)[5] * No air conditioning in base model

* Front passenger seat same as the driver seat, and the headrests are integrated.

* Front passenger seat same as the driver seat, but headrests separate. Later models switched to integrated headrests.

* Thinner 135/70-R12 space saver spare tyre. * Full size spare tyre.* No external fuel filler cap. Fuel inlet is accessed by opening the front hood.

* External fuel filler cap.

* Front door power windows only offered on highest variant. PW switches placed on central console rather than on door pads.

* Front door power windows only offered on highest variant.

Negative publicity

There were reports of several fire incidents involving the Nano.[36] The company denied those were connected to the car’s design or its parts and blamed "foreign electrical equipment" found on top of the exhaust system.[36] The company offered to retrofit the exhaust and electrical systems but refused to recall the cars.[36] Tata extended the warranty on the car, including those already sold, from 18 months to four years in early December 2010.[36]

The Nano has received a tepid reception from Indian consumers. Reasons given have included that it is still too expensive compared with a motorcycle.[37] Also it is identified as the cheapest car,[38] whereas a secondhand car that was more expensive when new has more social cachet.[39]

The fires and other safety issues have also been nominated.[37]

Damage control

Within a fortnight of Tata Group chairman Ratan Tata's admission that there have been mistakes in the marketing and distribution of the Nano, an official at Tata Motors has said all elements of its strategy are in place to push sales. Initiatives to reach out to various sections of target customers, including initiatives to undo the perception that the Nano is a poor man's car, have already begun to yield positive results and improve sales, said R Ramakrishna, the company's vice-president said. "Quite a lot of marketing activity is in place now - reaching out to the target segments; network strategy; handling the customers at the dealerships ; tie-ups with various financiers ," he said in Hyderabad on Friday, "Every single element is falling in place now."

New Tata Nano Twist 2014

Tata Motors finally endows its city car with a feature that was high in demand - power steering.

It is best not to use terms like ‘all-new’ and ‘next-gen’ when it comes to each successive Tata Nano, as that is not Tata Motors’ strategy for this car – at least for now. Like we’ve seen over the years since its launch, the company prefers to give its small city car sequential updates annually to make it more appealing, rather than massive overhauls. That’s understandable, as a whole load of updates at once would push the price of this car up and prove counter productive.

So, over the last few years, we’ve seen the addition of gloveboxes, a left wing mirror and an audio system, to name a few, and improvements to the suspension, seats, ergonomics, engine and

gearbox – basically just about every single part of the car. Which means, in essence, this Nano is far improved from the one Tata Motors launched back in 2009.

So what has it done for the Tata Nano? In a nutshell, it’s made it much better suited to its purpose – of being a compact runabout for the city. On the non-power-assisted car, you have to wrench the wheel around at parking speeds and low-speed agility is really poor. All the effort and concentration required meant you often preferred not to change course and just dive in an out of gaps.

Top 10 best selling small cars in India

India TV Auto

New Delhi: These cars are loved by Indian consumers for their styling, comfort, fuel efficiency, pricing, and maintenance cost. For most it is hard to imagine a life without these vehicles. Clearly, the top-seller – the Alto – is not only Maruti’s best-selling car; it’s also one of the best-selling cars in India. At Rs 2.44-2.99 lakh (Rs 3.19-3.56 lakh if you want CNG), the Alto is an ultra-affordable, user-friendly, efficient and hassle-free car. Here is a complete list of India’s top ten best selling small cars.

Maruti Alto 800Maruti SwiftHyundai I 10Hyundai eonHyundai i20TATA Indica VistaHyundai SantroFord FigoVolkswagen Polo

KEY WORDSCONSUMER SALES TATA NANO CONSUMER PERCEPTION MEDIA ROLECUSTOMERS SATISFACTION COMPETITION VALUE FOR MONEY STRATEGY

Questions

1 ) Why consumers buying behavior changed from very positive to very negative ?

2 ) What should be the future Marketing Strategy for winning customers confidence back ?

SOLUTIONS

SWOT ANALYSIS—Tata Nano

STRENGTHS

1 A very old and reputed automobile company in India 2 The company has large resources at its disposal in terms of finance vendors etc.3 The company has strong R & D team 4 The company has access to best automobile techonoligies in world as it has acquired

prestigious brands such as Jaguar , Land Rover from Ford.5 The company has excellent sales and service & spares network across India and has total

coverage of Rural India

WEALNESSES

1 The company has an image of a commercial vehicle manufacturer rather than as a car manufacturer due to its Indica range .

2 The initial image of Nano was a cheap car but over a period prices have escalated and consumer does not perceive it as a chap car.

3 The negative ublicity has driven away the customers.4 The overall customers confidence in theproduct is lost due to multiple reasons.

OPPORTUNITIES

1 The market for small cars in India is still very large and with growing middle class the potential will remain for years to come.

2 Even though MNC may offer small cars still Nano can be an alternative choice for consumers especially of rural areas.

THREATS

1 Competition can enter small car market with still economy varients

2 Competition can offer better techonology at competitive prices to customers.

SOLUTIONS

ALTERNATIVE 1

ssss

1 The company has not been able to gain customers confidence inspite of its strong marketing efforts across marketing mis such as New varients / colours Heavy advertising on print as well as electronic media .

2 The consumer is still hesitant to make purchase decision for Nano due to past experience and negative publicity.

3 In such situation the company should focus on Export Markets especially in developing countries , where the market is open and unbiased.

4 The company can have rub off effect of its other MNC car brands being sold world wide.

ALTERNATIVE 2

1 To introduce niche market models such as CNG version Bifuel vehicles etc to get some volume in exixting markets

2 To launch innovative marketing schemes such as buy back after 5 years at pre fixedprice Zero maintenance for 5 years etc .

3 To adopt alternative channels of sales as Direct marketing to gain some volume and also get direct customer feedback which can be used for further marketing strategy formulations.

4 To focus on Rural markets b & c class of towns for promoting existiong models / varients of Nano.

CONCLUION / MY OPINION

1 It is very challenging task of reviving a product such as TATA NANO in India in such a adverse market scenario with strong customer resistence.

It is a classic case for any marketing student and professional to find out a solution to win the customer for this product.

2 In view of such a complex situation the company should adopt combination of both the above alternatives for short term volume gain and long term objective to gain customer confidence.

Key Concepts

Consumer buying behavior , decision process , marketing mix , stimulus, negative publicity for product , customer confidence ,