Wafer WarfareA project aimed at understanding the Indian Wafer Snacks Marketwith special emphasis on Market Size, MarketStructure, Competitors and their Strategies. Submitted To:- Prof. Dr. Amit Rangnekar By:- Rahul Vaswani Chetana‟s R.K Institute of Management & Research Roll No:116 (M3, MMS Marketing)
Introduction to the Indian Wafer Snacks Segment The size of the Wafer Snacks Segment in India is estimated tobe 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 ofthe total snacks segment. As per Nielsen’s Retail Audit, Frito-Lay commands 45% marketshare, followed by Haldiram at 27% and Bingo at 16% The rest is divided between new players such as SmartChips, regional players such as Balaji and handful of unorganizedplayers
Prominent Brands and their offerings •Lays •KurkureFrito-lay •Lehar Namkeen, •Cheetos •Uncle Chipps ITC •Bingo Parle •Musst Bites & Stix • Smart ChipsSnacks • Cheeslings Other •Balaji Wafers • HaldiramPlayers •Yellow Diamond among other local players.
Industry Attractiveness (Porter‟s 5 forces)Threat of new entry: As the market is growing at 30 percent annually, newentrants may consider it a profitable venture As branded players are priced similarly, new players mightpenetrate by adopting a lower price or by offering moregrammage at the same price (Balaji-strategy) New players with a distinct USP and marketing strategymay find it easier to enter the market (Bingo Strategy) Unorganized players still account for half of the total wafersegment, thereby discouraging market entry Veteran players such as Fritolay, Haldiram etc enjoyeconomies of scale, well-established distribution and gooddistributor relations. Hence, the threat of new entrants is moderate.
Industry Attractiveness (Porter‟s 5 forces)Competitive Rivalry High Competition – Branded Players involved in cut-throat competition to increase market share, entice newconsumers, find new markets Low Quality differences among branded players. Quality difference between branded and unbrandedofferings is offset by low price offered by unbranded players Cost of switching is low as all players have a similarpricing strategy Brand Loyalty is high for branded players Hence, the threat of competitive rivalry is high.
Industry Attractiveness (Porter‟s 5 forces)Bargaining power of suppliers Suppliers provide raw materials such as potatoes, spices andother ingredients. Their ability to raise input costs is high. Higher cost of input commodities leads to lowermargins, making the market unattractive for distributors andretailers (in an already low-margin, high-volume market) Shortage of any input material may also affect productionand thereby impact distribution. Veteran players like Fritolay and ITC already have a well-established network of suppliers. ITC’s e-choupal venturepermits a steady supply of raw materials at the lowest price. Hence, the bargaining power of suppliers is high.
Industry Attractiveness (Porter‟s 5 forces)Bargaining power of consumers Frito-Lay enjoys a healthy lead with a 45 percent marketshare for it’s portfolio of products Competitor differentiation is in terms of variants andcommunication. Ability to substitute is high as brands are priced similarlyand distribution problems for one brand promote sales for theother. Price Sensitivity is high. An increase in the price of Laysmay promote a switch to Bingo for most buyers (except forloyalists) Hence, bargaining power of consumers is high.
Industry Attractiveness (Porter‟s 5 forces)Threat of substitutes. Indian Snack Segment is high-volume, low-involvementdriven (thrives on impulse buy) All snacks are considered to be substitutes of each otherBiscuits, Wafers and local snacks like Chakli, bananachips, farsan etc are all substitutes of one another Hence, the threat of substitutes is high.
Industry Attractiveness (Porter‟s 5 forces)Final VerdictThe market is unattractive for players who: Aim to be a me-too product with no significantdifferentiation Do not have a well-established distribution network Do not have good supplier and dealer relationshipsHowever, if one can “Pull” a bingo or carve out a “Smart”Niche ala Smart Chips, the entry to this market may beprofitable.
MARKET STRUCTURE Market • Fritolay (45 percent cumulative share consisting of Lays, Kurkure, Uncle Chipps, Leader Cheetos and Leher) Market • ITC‟s Bingo (16%) posing a threat to Lays through its direct frontal attackChallenger • Balaji and local players such as Yellow Market diamonds. Also included are unorganized offerings, aimed at the price-sensitive, less Follower loyal audience. • Parle Monaco‟s Smart Chips which has Market identified itself a niche of the more health conscious section of the audience by offering Nicher them a baked variant of chips.
Lifecycle Stages of the Wafer SegmentProduct Development StageThis stage is characterized by• No Sales & Profit• Product Testing – identifying a sample target group toevaluate the potential of the product• Research & Development – aimed at constantlyimproving/differentiating the product• Eg, before Launch, Bingo developed a cross-sectional teamof 8 individuals who travelled across 14 cities to identify thesnacking habits of the Indian Consumer. The team found outthat local-tasty snacks like khakra, vada pav , samosas, etcwere the popular choices among the Indian audience. Basedon this information, the company decided to develop flavorswith an Indian taste.• Test Marketing – may be conducted by launching theproduct in one or two markets initially.
Lifecycle Stages of the Wafer SegmentIntroduction STAGE• The product is launched in the market, either as a singlevariant or multiple variants, single SKU or multiple SKU‟s. In thiscase, 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, theprice-sensitivity, market size, cost of switching, extent of brandloyalty among other factors. However, it is advisable to followthe leader in this regard unless there is a significant USP. If theproduct is me-too, a lower price is advisable• Promotional Spends, if launched nationally, must be highenough to gain maximum visibility in the early stages. Effortsmust be made to keep the communication simple and unique.The launch campaign must be such that it doesn‟t get lost in theclutter.• FMCG thrives on distribution so the firm must have a well-established network in its place. The firm may look at providingadd-on schemes, value deals to dealers and retailers notprovided by competitors.
Lifecycle Stages of the Wafer SegmentGrowth• Depending on the success in the growth stage, the firmmay aim at product improvement. In terms ofSKUs, packaging, etc.• The company may introduce newer variants throughcontinuous R&D• The firm may undertake sales promotion such as extragrammage, freebies, etc.•Example: The sales of Lays multiplied through theintroduction of “Tazo”• If the product was launched in smaller markets, the firmmay consider increasing distribution coverage.
Lifecycle Stages of the Wafer SegmentMaturityThe market becomes saturated. Hence, the firm may placeemphasis on :- Product Modification Re-branding Strategies Distribute in selective profitable areas Exit out of markets where the product doesn’t get the desired sales numbers
Lifecycle Stages of the Wafer SegmentDecline• The Company may withdraw the productfrom the market. If in-case of a multi-brandcompany, the company may focus on profitablebrands (cannibalize its weaker brands)• The firm may adopt a permanent salespromotion strategy such as buy one-get onefree, discounted price, more grammage in caseof large unsold inventory.
Marketing Strategy adopted by Frito-lay (The Market Leader)
Marketing Strategy of Frito-LayProduct Strategy:-Frito-Lays product strategy aims at differentiating among itsown brands in terms of product taste, design, packaging andtarget audience. • One of the power brands under Fritolay comes in 5 different Lays 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. • Launched in 1999, the brand symbolizes the spirit of India with its Kurkure Indianized farsan-like flavors. The newly launched “Desi Beats” variants are a direct answer to Bingo‟s strategy of launching Indianized flavours. • Launched in 1995 provides variety from other Fritolay offerings Cheetos 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. Leher • A salt farsan-like snack aimed is a direct alternative to the offerings of unorganized players. Namkeen
Marketing Strategy of Frito-LayPricing Strategy The pricing strategy for Lays is consistent with othercompeting players. As this market is driven by high-impulsive buyers of snack foods, there is very littledichotomy in the pricing strategies of all major players. Lays and Kurkure, the two popular choices, come indifferent SKU‟s priced at Rs.5, Rs, 10 and Rs. 20, similar toBingo and Haldiram. Recently, however Fritolay launched a Rs.3 SKU for it‟sKurkure brand in a bid to compete more aggressively.
Marketing Strategy of Frito-LayPromotional strategy Realizing the direct threat posed by Bingo to its market share, Fritolayrevamped its‟ branding strategy for all leading brands. For Lays, the company signed on ambassadors Saif Ali Khan & MSDhoni. Indianized versions of Lays were also launched after Bingo‟ssuccess with Indian flavours. These included Chat Street, “Chala Change Ka Chakkar” – the largest ever brand promotionalstrategy undertaken by Fritolay aimed at bringing all its flagship brandsunder one roof. This massive umbrella campaign would allow chosencustomers to live the life of a Bollywood Indian celebrity for a day. “Chai Time Achievers” – a Kurkure centric campaign was aimed at thehousewives in India. The Idea was to promote heavy audience interactionby sending recipes for new flavours. The winning family would then have theopportunity to have their photographs on one million Kurkure packs Aside from Juhi Chawla, the company also signed on Kareena Kapoorfor the “Desi Beats” version of Kurkure. Other initiatives include posters at unconventional retail points such ascyber cafes and telephone booths, a tie-up with South-WesternRailways, known as “Kurkure Express” to increase brand visibility.
Marketing Strategy of Frito-LayDISTRIBUTION STRATEGY Being first in the market through its acquisition of UncleChipps, Fritolay already has a well-established network ofdistributors and retailers pan-India. The brand loyalty enjoyedby Lays was leveraged during the launch of Kurkure, Cheetosand the recently launched “Aliva” Frito-Lay has a distribution network of 30 CFAs and 2RDCs who service 800 distributors who sell to 4 lakhs retailers. Fritolay boasts of reaching more than 1 million retailoutlets countrywide covering 100 towns. The Company, with itsmanufacturing plants in Punjab and Pune, aims at investing20 crores to extend distribution facilities to improve coverageand increase product shelf life by 120 days.
Marketing Strategy adopted by Bingo (The Market Challenger)
Marketing Strategy of BingoProduct strategy Bingo positioned itself as chips with an Indian twist.The 16 flavors introduced at launch were carefullydeveloped through R&D. The initial offerings were a mix of potato chips andfinger snacks. The Potato chips segment includes variants likemasala, salted, tomato inspired by the snacking habits ofthe Indian consumer The offerings under Finger Snacks include the pakodainspired „Live Wires‟ and Khakra inspired „Mad Angles‟ These offerings were further differentiated by providingSKU‟s at Rs. 5, Rs.10 and Rs. 20
Marketing Strategy of BingoPricing strategy The main objective for ITC was to compete effectively withplayers who were already there. Hence, it launched a directfrontal attack by introducing similar priced SKU’s. ITC already enjoyed cost advantage over competitorsthrough its e-choupal initiative. This also facilitated timelysupply of raw materials. ITC’s printing and packaging business also lead to high-quality, cost-effective and innovative packaging.
Marketing Strategy of BingoPromotional strategy Bingo was strategically launched at the time of world cup to cashin on the popularity of snacks among the cricket lovers of thecountry. The advertising strategy revolved around slapstick humor andirrelevant themes to hold eyeballs, garner attention andinterest, and stand out from the clutter. ITC booked 10 to 15 spots per channel per day, 20 spots on radiostations supported by 1000’s of hoardings advertising the product.According to industry estimates, the total advertising spend in theinitial 6 months were roughly 100 crores. While its competitor Fritolay focuses on celebrityendorsements, Bingo chose a different route. It didn’t have anambassador! As the product is aimed at the youth, digital media was heavilyused. For instance, the Bingo National Gaming Championshipacross 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 BingoDistribution strategy ITC already had a well-established distribution network throughits cigarette and tobacco-related offerings which was leveraged incase of Bingo. Further, the company distributed 4 lakh racks across allretailers to display the brand at all Points-of-sale. Within 6 months, Bingo was available across 2,50,000 retailersacross the country. A crucial alliance with Future group which lead to all futuregroup retail outlets like Big Bazaar, Food Bazaar stocking onlyITC”s Bingo HORECA (Hotels, Restaurants and Cafes), Local betel shopsare all being used to distribute Bingo to a wide range of audiences
Marketing Strategy adopted by SMART CHIPS (The Market NIChER)
Marketing Strategy of Parle‟s Smart ChipsAmong its competitors, Parle has had a tough timegaining a considerable market share for its snackofferings. Must Bites & Must Sticks together accountfor 5-7 percent of the total organized wafer chipssegmentProduct strategyParle Monaco recently entered the chips segment with itshealthy variant called “Smart Chips”. Realizing the recentmarket trend of being more „healthconscious‟, Parle, through Smart Chips has carved outits own niche. Highlighting it‟s USP of being baked ratherthan friend. Smart Chips comes in 4 different flavors:Simply SaltedTangy TomatoCrazy ChatMacho Masala
Marketing Strategy of Parle‟s Smart ChipsPricing strategySimilar to competitors, Smart Chips comes in two SKU‟s. Rs. 5for a 25 gm pack and Rs. 10 for a 50 gm packPromotional strategy The ad campaign, handled by ThoughtshopCommunications, features Aamir Khan advocating the benefits ofbaked chips over the fried ones taking a subtle shot at competingbrands The ad highlights the USP of the product in a humorous waywithout sounding to preachy or serious, which enables it to standout from the clutter.Distribution strategy Being a veteran player in the food and snacks segment, Parlealready has a well-established framework of distribution throughits biscuits and other snack offerings. This has enabled Parle todistribute Smart Chips effectively, reaching millions of retailoutlets. Thus, with the advent of Smart Chips, Parle has carved out asmall niche for itself aimed at the health conscious snack-lovers.
Frito-Lays Success Mantra – Right Strategy at the Right Time 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. 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. 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”
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.
REFERENCESTEXTUAL REFERENCES1) Marketing Strategy – Walker, Mullins, Boyd2) Marketing Strategy & Plans – Michael Vaz3) Class Handouts – Prof. Dr. Amit RangnekarWEB-BASED REFERENCES1) http://www.imagesretail.com/support_jan_suplychain.htm2) http://www.televisionpoint.com/news2009/newsfullstory.p hp?id=12448143713) Official Websites of Fritolay, Parle, Balaji, Bingo among other brands4) http://www.afaqs.com/perl/news/story.html?sid=203245) http://www.moneycontrol.com/news/business/frito-lay- loses-snack-mkt-share-to-itcs-bingo_300325.html6) http://www.bizdewz.com/parle-monaco-smart-chips-vs- lays-or-aliva/7) http://www.afaqs.com/perl/news/story.html?sid=256518) 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