DRAFT –II

EXAMINING PRODUCT LIFE CYCLE & MARKETING STARTEGIES ADOPTED BY

PROMINENT FMCG PLAYERS IN INDIA AS WELL AS ABROAD

Nearly twenty years ago the Indian government undertook a series of

policies that would change the face of the country. The government opened
up a tottering socialist economy to the greater world and liberalized its
policies for industry. The critics to this step were numerous and one point in
particular always figured in the arguments that they made. The critics were
nearly unanimous that the insular Indian industry, nurtured on licences and
trade quotas would soon be overwhelmed by the advent of the free market.
And one industry in particular was big on this list i.e. the Indian FMCG
industry. It was widely expected that the advent of global FMCG majors with
their expertise, international brands and experience of competing in the
world markets would sound the death knell for the nascent Indian FMCG
industry.
But the Indian FMCG players seem intent on proving all these predictions
wrong. For twenty years they held on even as the major markets were taken
over by the likes of P&G & Coca-cola. They took the time to understand the
dynamics of competition in this new era and changed their strategies and
processes to be more relevant to the Indian consumer and now they seem to
be intent on taking back their lost turf. From processed foods to milk
products to soaps the Indian players seem to be on a comeback trail. This
cover story attempts to chronicle the rise of this new brave breed of Indian
FMCGs from the viewpoint of three companies that seem to be on the
forefront of this revolution.
The interesting part of this entire story is that these companies have
followed entirely different strategies to counter the bigger players. Players
like Marico have successfully utilized the blue ocean strategy to establish a
first mover advantage in fields like skin care via the Kaya skin clinics while
Godrej has successfully leveraged its brand name and distribution strength
to play itself into a position of strength in the rural market for soaps. One
thing in common seems to be a new found understanding of the Indian
consumer. The Indian companies are putting great emphasis on
understanding the needs of the Indian consumers and tailoring their
products to those needs. This has helped some of them to discover niches in
the market that have been untapped by the MNCs and have helped them to
avoid competition. For example Emami’s ayurvedic formulations for its
products like Fair and Handsome have helped to stand out in the
marketplace and differentiate itself.
If the avoidance of completion by finding new differentiation strategies
seems to be the forte of some of the players others like GCPL and Dabur are
competing with the global majors head-on. Dabur particularly is in a difficult
industry with its oral care products with the market leader i.e. Colgate
commanding a huge market share of 53 percent compared to Dabur’s 13
percent. It has managed to capture a significant percentage of the fast
growing rural market by basing its positioning on herbal strategy.
These are exciting times in the FMCG industry. The Indian players seem to
have stolen a march over their bigger rivals with their unique understanding
of the Indian consumer and different positioning but it will not be long before
the bigger players react to this challenge. The next four years can prove to
be a trial by fire for these Indian majors as they fight to sustain the gains
they have made and capture markets that have been fortresses of the
multinationals.

PRODUCT LIFE CYCLE

The product’s life cycle - period usually consists of five major steps or phases:
Product development, Product introduction, Product growth, Product maturity and
finally Product decline. These phases exist and are applicable to all products or
services from a certain make of automobile to a multimillion-dollar lithography tool
to a one-cent capacitor. These phases can be split up into smaller ones depending
on
the product and must be considered when a new product is to be introduced into a
market since they dictate the product’s sales performance.

1. PRODUCT DEVELOPMENT PHASE

Product development phase begins when a company finds and develops a new
product idea. This involves translating various pieces of information and
incorporating them into a new product. A product is usually undergoing several
changes involving a lot of money and time during development, before it is exposed
to target customers via test markets. Those products that survive the test market
are then introduced into a real marketplace and the introduction phase of the
product begins. During the product development phase, sales are zero and
revenues are negative. It is the time of spending with absolute no return.

2. INTRODUCTION PHASE

The introduction phase of a product includes the product launch with its
requirements to getting it launch in such a way so that it will have maximum impact
at the moment of sale. A good example of such a launch is the launch of “Windows
XP” by Microsoft Corporation. This period can be described as a money sinkhole
compared to the maturity phase of a product. Large expenditure on promotion and
advertising is common, and quick but costly service requirements are introduced. A
company must be prepared to spent a lot of money and get only a small proportion
of that back. In this phase distribution
arrangements are introduced. Having the product in every counter is very important
and is regarded as an impossible challenge. Some companies avoid this stress by
hiring external contractors or outsourcing the entire distribution arrangement. This
has the benefit of testing an important marketing tool such as outsourcing. Pricing
is something else for a company to consider during this phase. Product pricing
usually follows one or two well structured strategies. Early customers will pay a lot
for something new and this will help a bit to minimize that sinkhole that was
mentioned earlier. Later the pricing policy should be more aggressive so that the
product can become competitive. Another strategy is that of a pre-set price
believed to be the right one to maximize sales. This however demands a very good
knowledge of the market and of what a customer is willing to pay for a newly
introduced product. A successful product introduction phase may also result from
actions taken by the company prior to the introduction of the product to the
market. These actions are included in the formulation of the marketing strategy.
This is accomplished during product development by the use of market research.
Customer requirements on design, pricing, servicing and packaging are invaluable
to the formation of a product design. A customer can tell a company what features
of the product are appealing and
what are the characteristics that should not appear on the product. He will describe
the ways of how the product will become handy and useful. So in this way a
company will know before its product is introduced to a market what to expect from
the customers and competitors. A marketing mix may also help in terms of defining
the targeted audience during promotion and advertising of the product in the
introduction phase.

3. GROWTH PHASE

The growth phase offers the satisfaction of seeing the product take-off in the
marketplace. This is the appropriate timing to focus on increasing the market share.
If the product has been introduced first into the market, (introduction into a
“virgin”market or into an existing market) then it is in a position to gain market
share relatively easily. A new growing market alerts the competition’s attention.
The company must show all the products offerings and try to differentiate them
from the competitors ones. A frequent modification process of the product is an
effective policy to discourage competitors from gaining market share by copying or
offering similar products. Other barriers are licenses and copyrights, product
complexity and low availability of product components. Promotion and advertising
continues, but not in the extent that was in the introductory phase and it is oriented
to the task of market leadership and not in raising product awareness. A good
practice is the use of external promotional contractors. This period is the time to
develop efficiencies and improve product availability and
service. Cost efficiency and time-to-market and pricing and discount policy are
major
factors in gaining customer confidence. Good coverage in all marketplaces is
worthwhile goal throughout the growth phase. Managing the growth stage is
essential. Companies sometimes are consuming much more effort into the
production process, overestimating their market position.
Accurate estimations in forecasting customer needs will provide essential input into
production planning process. It is pointless to increase customer expectations and
product demand without having arranged for relative production capacity. A
company must not make the mistake of over committing. This will result into losing
customers not finding the product “on the self”.

4. MATURITY PHASE

When the market becomes saturated with variations of the basic product, and all
competitors are represented in terms of an alternative product, the maturity phase
arrives. In this phase market share growth is at the expense of someone else’s
business, rather than the growth of the market itself. This period is the period of the
highest returns from the product. A company that has achieved its market share
goal enjoys the most profitable period, while a company that falls behind its market
share
goal, must reconsider its marketing positioning into the marketplace. During this
period new brands are introduced even when they compete with the company’s
existing product and model changes are more frequent (product, brand, model).
This is the time to extend the product’s life. Pricing and discount

policies are often changed in relation to the competition policies i.e. pricing moves
up and down accordingly with the competitors one and sales and coupons are
introduced in the case of consumer products. Promotion and advertising relocates
from the scope of getting new customers, to the scope of product differentiation in
terms of quality and reliability. The battle of distribution continues using multi
distribution channels. A successful .product maturity phase is extended beyond
anyone’s timely expectations. A good example of this is “Tide” washing powder,
which has grown old, and it is still
growing.

5. DECLINE PHASE

The decision for withdrawing a product seems to be a complex task and there a lot
of issues to be resolved before with decide to move it out of the market. Dilemmas
such as maintenance, spare part availability, service competitions reaction in filling
the market gap are some issues that increase the complexity of the decision
process to withdraw a product from the market. Often companies retain a high price
policy for the declining products that increase the profit margin and gradually
discourage the
“few” loyal remaining customers from buying it. Such an example is telegraph
submission over facsimile or email. Sometimes it is difficult for a company to
conceptualize the decline signals of a product. Usually a product decline is
accompanied with a decline of market sales. Its recognition is sometimes hard to be
realized, since marketing departments are usually too optimistic due to big product
success coming from the maturity phase. This is the time to start withdrawing
variations of the product from the market that are weak in their market position.
This must be done carefully since it is not often
apparent which product variation brings in the revenues. The prices must be kept
competitive and promotion should be pulled back at a level that will make the
product presence visible and at the same time retain the “loyal” customer.
Distribution is narrowed. The basic channel is should be kept efficient but
alternative channels should be abandoned. For an example, a 0800 telephone line
with shipment by a reliable delivery company, paid by the customer is worth
keeping.

Strategies of each product life cycle phase

MARKETING STRATEGIES OF FMCG COMPANIES
Marketing research, advertising and promotion are now considered some
fundamental processes that every company has to conduct in order to
cement their position in this competitive market. The top marketing
companies of India offer the best integrated marketing solution covering a
wide range of services including marketing strategy on the objectives and
goals, target client and expected growth.

GODREJ CONSUMER PRODUCTS LTD.

Noted among the top Indian marketing companies, Godrej aims at innovation. It
deals in fast moving consumer goods and operates in India and other cities across
the globe. The company provides variety in the brands like cosmetics, toiletries,
hair care, fabric care, baby care, household care and many others. GCPL , the
consumer products wing of the $2.1 billion Godrej group is well and truly making it
big in the FMCG space. The Adi Godrej headed company operates primarily in the
Home care and personal hygiene categories.

Rural focus:

GCPL’s efficient penetration of the Indian Market, especially the rural consumer
base deserves special mention. Hair dyes and Hennas which were once considered
luxuries in rural households are everyday products now. And GCPL has been
instrumental in bringing about this metamorphosis through its ambitious rural
expansion project Dharti, which was launched in early 2009. Beefing up an enviable
distribution network that spans 50,000 plus villages and 8000 small towns, the
company has ensured that almost half its revenues come from the rural areas of the
country.

GCPL is second only to Hindustan Unilever (HUL) in manufacturing bath soaps. Its
Godrej No:1 brand is the best selling soap in the Grade-1 category. Apart from this,
it’s impressive array of Brands also include Cinthol and a host of exciting Hair care
products. The Core competency of Godrej has been its ability to successfully create,
communicate and deliver a portfolio of value brands to the huge segment of cost
conscious customers. Even in times of recession the company decided not to raise
prices and successfully managed rising commodity prices through efficient cost
management and squeezing out efficiencies from its supply chain. It tailored the
size of the offering and not the product as such, and introduced them at price points
that the customers could afford.

Innovative promotions:

GCPL innovated and customized its Communication and promotional strategies in

accordance with its goal. Shunning satellite channels, GCPL decided to promote its
offerings on Doordarshan, All India Radio, local publications and regional TV
channels. For its hair colour products, GCPL depended more on word of mouth
publicity. It engaged around 50,000 barbers spread across 9 states in a Co-branding
exercise. GCPL provided them with grooming kits in exchange for prominent display
of its logos in the saloons. Since most people turn to their hair dresser for advice, it
made perfect sense to influence the influencer.

International Strategy:
Another striking aspect of GCPL’s success story has been its aggressive acquisition
drive. In the past few months, GCPL has announced 5 acquisitions: Indonesia-based
Megasari Makmur group and its subsidiary, the remaining shares of Godrej Sara
Lee, Nigeria-based Tura Group, and the Latin American based groups Issue and
Argencos. It has envisioned a three-by-three strategy for its international
operations: targeting the three continents of the developing world - Africa, Asia and
Latin America - and in three categories - personal wash, home care and hair care.
The decision to target emerging markets stems from the fact that they have
demographic and behavioural profiles that are similar to that of India.

These three continents are now on a growth trajectory and the opportunities that
they provide for the consumer products business are too lucrative to be missed. An
additional incentive to invest in these markets can also be traced down to the fact
that multinationals like Unilever, L’Oreal and Procter & Gamble don’t have a
domineering presence which provides ample scope for the regional brands to grow.
Also the acquisitions provide GCPL an opportunity to indulge in cross pollination of
brands; bringing some brands into India and taking some brands to these markets.

The Road Ahead

The emerging market centric acquisition focus has strengthened GCPL’s brand
portfolio by roping in strong brands like Good Knight and HIT which are among the
fastest growing FMCG categories. Also by bringing in GCPL, Godrej Hershey and
Godrej Sara Lee operationally into a single fold they can expect to achieve
distribution synergies and develop pioneering supply chain solutions.
The increased scale of operations would fuel the pace of innovation in the existing
portfolio and help leverage branding opportunities. The strong commitment that
GCPL has to the Godrej Group's core values, ethics, employees and consumers will
be instrumental for its success. Even though concerns may arise with regards to
GCPL’s exposure to currency risk and its ability to ensure an appropriate cultural fit
of acquired brands, it is well positioned to ride the growth wave. GCPL’s decision to
venture into emerging markets may be a small step for the company, but it may
well provide the fodder for Indian FMCG companies to take a giant leap in the near
future.

ITC
The ITC is undoubtedly one among the premier marketing companies of India. The
company has a market capitalization of about $19 billion and turnover of more than
$1.5 billion. It is also rated among the world's best big companies. It specializes in
hotels, agri-business, FMCG products, personal care, and branded apparel. Their
business motive is to create multiple drivers from corporate strategies. They have
peerless distribution reach, great supply chain management, and effective brand
building.
ITC's diversified status originates from its corporate strategy aimed at creating
multiple
drivers of growth anchored on its time-tested core competencies: unmatched
distribution reach, superior brand-building capabilities, effective supply chain
management and acknowledged service skills in hotelier. Over time, the strategic
forays into new businesses are expected to garner a significant share of these
emerging high-growth markets in India.
ITC Pricing strategy:

The pricing of the ITC food division depends upon the Customers’ demand schedule,
the cost function and the competitors’ price. The pricing of the company is such
that it caters to the need of all income groups of people but special provision has
been kept for Low and middle income group, and their pricing are competitive with
respect to other players like Britannia, Parle and Brisk farm.The company follows
the Going rate pricing that is the price of the product depends upon the competitors
price. The firm chooses pricing more or less the same as Market leader.

ITC Promotional activities

A particular budget is allocated for the promotion of the products, the local
promotion scheme is decided by the Area Sales Manages, it give its suggestion to
the District office and that is forwarded to the Head Quarter in Kolkata.In another
promotional scheme for Biscuits a particular number of cases is given freely to the
distributors according to the amount of sale they make, this was a drop down
promotion i.e. of the number of free cases that a particular distributors gets, off
them a
certain part is reserved for the retailers and customer if they buy a certain level of
biscuit
quantity.

ITC Distribution

Buoyed by a strong distribution network ITC is likely to retain its market share in the
cigarettes business; the ban on advertisements is likely to work in favour of ITC
thanks to the recall factor.The company's reliable distribution network also ensures
superior inventory turnover.

Marico

The uncommon sense that Marico believes in, has brought about radical results for
the company. Led by Harish Mariwala, the Company enjoys leadership positions in
most of the markets it is present in- viz. Coconut Oil, Hair Oils, Anti-lice Treatment,
Premium Refined Edible Oils, Fabric Care etc.
Be it the convenient packaging for Parachute from the erstwhile tin cans of coconut
oil, the introduction of heart care with Saffola in the edible oil market, or the
starching process branded and eased by Revive, Marico’s innovation has helped it
be the pioneer, stay consumer centric and sustain a firm hold in the market space.
Hair Oil market:
With Parachute and Nihar, Marico holds more than 50% market share in the
branded hair oil segment. It enjoys over 21% share of the 3000 crore hair oil
segment (composed of coconut hair oil, amla, light, cooling and tonics and gels). In
the coconut oil market, Parachute itself controls about 50% share of the market.
In the coconut hair oil market they have capitalised on the fact that consumers test
quality based on the oil’s aroma. From showing the concept of handpicking
coconuts from Kerala, to their ‘gorgeous hamesha’ concept of celebrating
womanhood, the brand has taken numerous leaps. The innovative packaging helps
the brand address changing consumer needs.
Edible Oil market:
In the premium refined edible oil market, Marico’s Saffola faces fierce competition
from Sundrop in terms of volume, with the former holding close to 50% share.
Safolla’s message has been clear. By showcasing mild fear, its commercials aim to
introduce heart care through the edible oil. Its approach is preventive. The ‘kal se’
campaign brought a quantum leap in sales while the ‘thief’ ad, and ‘dil ka haal’
reinforced the same idea to slightly varying targets- ranging from heart patients to
the 30 year old man, who is likely to face heart problems with the kind of lifestyle
he is leading. The ‘Prayaschit’/repent ad (guilt after indulgence in food) directly
targets the housewife who is, most often, the buyer in this case.
Having established Saffola as a healthcare product, Marico continues to leverage its
positioning into segments like packaged wheat flour, rice, and breakfast cereals
with a strong health quotient.
Innovation:
The spirit of innovation coupled with the ‘uncommon sense’ in Marico is evident in
its unique product designs. This covers the product idea, the packaging as well as
the product delivery. Innovation and uniqueness encompasses Saffola’s range of
functional foods, Parachute Therapie (hair fall reduction through hair oil), their Kaya
product range, Parachute Advansed Night Repair Crème, a bottle heater for
Parachute Hot Champi, Parachute massager for the working woman.

Overseas Presence

In addition to its presence in the domestic market, Marico has been strategic in
acquiring some international brands and leveraging its presence in foreign countries
in two ways- it not only taps newer markets but also strengthens its existing
portfolios.
For instance, in January 2010, the Malaysian unit of Marico bought the hair styling
brand ‘Code 10’ from Colgate Palmolive Company marking Marico’s entry in
Malaysian hair styling market, at the same time growing its strengths in hair creams
and hair gels market.
In May 2010, Kaya acquired the aesthetics business of the Singapore based Derma
Rx. The deal, while stitching together an additional turnover of about 50 crores and
37000 customers, brings with itself access to an advanced range of skin care
products for Kaya. This is complemented by access a network of suppliers of beauty
products from the developed nations.
In a similar case, the South Africa subsidiary of Marico acquired the healthcare
brand Ingwe in August 2010. First, the brand goes well with Marico SA portfolio.
Second, the acquisition strengthens the company's distribution reach, particularly
with independent trade and step up its growth momentum.
Marico’s international business has shown healthy contribution to its revenues- 23%
of the group's turnover in 2009-10. Moreover, thanks to such smart buys, the
international business witnessed a 29% sales growth during the June’10 quarter,
when its Indian sales posted a relatively meagre 6.8% rise over the same period a
year ago.

Way Forward
While a brand like Saffola may be priced for slightly higher income groups,
Parachute cuts across different income groups and yet has a premium appeal. In
the hair oil segment, the company has attempted to tackle the unorganized
segment through low-cost and small-unit packs.
It also plans to make it bigger in the cool oil segment (over 500 crore market)
through its recent launches- Parachute Advanced Cooling Oil and Nihar Naturals
Cooling Oil.
In near future, Marico plans to enter rural markets to tap their potential in a much
bigger way. It has already started adding to its distribution in areas of Madhya
Pradesh, Maharashtra and Karnataka. It continues to foray beyond the prominent
towns and districts, not only in terms of its distribution but also to understand the
rural needs and tune its portfolio to the same.
On the international front, considering the recent developments in terms of
acquisitions, it can be noted that the company is attempting to streamline its
manufacturing base and at the same time market its Indian brands through the
newly acquired distribution system. Marico is likely to continue with similar strategic
acquisitions adding to its revenue base simultaneously.
In terms of revenues, Marico aims to clock in Rs 2500 crore turnover for the
financial year 2010. This shall be a 9% rise on its last year’s returns, inspite of food
inflation and weak monsoons.

Please note: this DRAFT is in addition to the

earlier draft sent.