Dabur inks pact with IOC for rural retail partnership

Homegrown FMCG major Dabur entered into an agreement with Indian Oil Corporation (IOC) to service rural market demand for consumer goods through the latter’s chain of Kisan Seva Kendra (KSK).

Under the agreement, IOC’s over 1,600 KSK across the country would stock and sell Dabur’s range of healthcare, oral care, personal wash, skin care and home care products, the company said in a statement. The agreement is initially for a period of five years.

“Dabur already has a strong rural footprint with a pan- India network of over 2,200 stockists and super-stockists. The agreement with IOC will help Dabur expand its rural footprint and better reach out to rural consumers,” Dabur India Vice President-Sales (Consumer Care Division) George Angelo said.

IOC’s KSK is a chain of one-stop rural retail outlets that offer fuel and other non-fuel value-added services like seeds, pesticides, fertilizers, grocery, personal care, tools, auto spares etc, in the rural markets.

Dabur will now offer its range of consumer goods in the chain. “IOC was looking at widening the product portfolio being offered at its KSK to include FMCG (fast moving consumer good) items and reach out to rural women. We felt it was a good opportunity to further penetrate the rural market,” Angelo added.

$3.5bn worth FMCG products sold in rural India in ‘07: Assocham

2007 has been an eventful year for the FMCG industry, especially for the rural segment. Sale volumes touched $3 billion in the first 10 months, and are likely to go up by another $0.5bn by end December, according to estimates released by Assocham, based on feedback from its leading constituents in FMCG sector.

By end 2007, FMCG size in value terms is expected to be over $18 billion of which its rural segment could be slightly more than 1/5th of total FMCG market. In calendar 2006, total FMCG market size was estimated at $15 billion of which rural segment was measured at around $2 billion.

In India there are approximately 128 million households and the rural population is nearly three times more than the urban. As a result of growing affluence, fuelled by good monsoon and increase in agriculture output to 200 million tones, rural India has a large consuming class with 41% India’s middle class and 58% total disposable income.

Rural market also accounts for half the total market for TV sets, fans, pressure cookers, bicycles, washing soaps, blades, tea, salt and toothpowder and this market is growing much faster than its urban counterpart.

Reasons for increased market penetration

* Higher consumption patterns of rural population for consumer durables like refrigerator, TV sets, electrical appliances, personal care products, toiletries & soaps and soft drinks

* In 2007 various budgeted products designed for the rural segment were introduced and resultantly sales increased by over 30%

In Calendar 2007, FMCG total sale by December 2007 end would be in the range of $3.5 billion thanks to attractive X-mas and year-end discounts

ASCI pulls up top FMCG firms for misleading advertisements

Hindustan Unilever, Henkel India and Proctor and Gamble have been pulled up by the Advertising Standard Council of India (ASCI) for misleading advertisements during July-September in 2007.

The FMCG majors were among total 11 advertisers against whom complaints were upheld by the Consumer Complaints Council (CCC) of ASCI during the period.

Hindustan Unilever had to modify a TV commercial of its product Vim dish wash liquid which according to the CCC was a misleading advertisement. The commercial against which complaint was made claimed that ‘just one drop enough. New Vim drop has 10 times more lime power than the bar´.

Based on the complaint, the advertiser had to provide proof and substantiate that ‘one drop’ of Vim could produce the cleaning effect as visually depicted and claimed in the voice over of the TV commercial.

Eventually the commercial had to be modified as the claim mentioned in the advertisement was misleading as the ‘cleansing protocol´ provided in the report submitted by the advertiser did not appear in the advertisement.

Similarly, Henkel India claimed that ‘each drop of prill has active ingredients which removes grease better than the bar´ and according to the CCC, claim mentioned in the advertisement was not substantiated adequately.

Subsequently, the advertiser conducted the cleaning efficiency test with an independent lab for which they have provided a copy of the report.

Even Proctor and Gamble had to assure appropriate modification of the TV commercial which claimed that one tablespoon of ‘Tide’ was sufficient for washing a bucket full of clothes.

According to a complaint, the advertiser contradicted its own statement in the advertisement of ‘1 spoon´ being required when actually ‘1 scoop´ is required as mentioned on the pack.

Besides the leading FMCG firms, United Spirits, Coca Cola India, Perfetti Van Melle, Mahindra Renault, KBM Marketing and Rajvansh Clinic were other companies against which complaints were upheld by the CCC during the period

Dabur forays hard surface cleaner mart

Consumer goods major Dabur India Limited Tuesday launched Dazzl, the company’s latest floor cleaner in South India, and signed actor Khusboo as its brand ambassador.
Two variants, Dazzl Antibacterial Kitchen Cleaner and Dazzl Disinfectant Floor Cleaner,were launched, aiming to tap the high growth opportunity in this category, a top official of the company said.
Girish Kumar, senior general manager, Home Care, Dabur, said a new product was being launched by the company after a gap of 10 years.
“It is a well-researched product and the respective variants are made using unique formulae like SQL Activ and Dirt Trap Technology, respectively,” he said.
Dazzl will be initially introduced in Tamil Nadu and Karnataka by the Rs 2234 crore worth Dabur,which forayed into the home care market in 2004 with brands like Odonil, Sanifresh, Odomos and Odopic, before acquiring Balsara.
Dabur’s home care portfolio registered a growth of 35% in 2006-07, a company press release said.

Britannia cracks Chutkule to take on ITC, Pepsico

Britannia and ITC Foods are set for a battle cry in the snack food market now. Biscuit major Britannia is re-entering the snacks segment with a big nationwide push behind Chutkule brand. This will see the the Nusli Wadia-controlled company taking on the might of Pepsico’s Lay’s and Kurkure and ITC Bingo, launched early this year. Britannia, which made a rather tepid entry into snacks in the past, and ITC are already locked in a marketplace slugfest for dominance in biscuits. “The snacking space in India is huge and we will certainly focus on expanding our range here. But we will not replicate the products present here and are keen to enter the snacking market in our own distinctive way,” said Neeraj Chandra, VP (Marketing, Sales & Innovation), Britannia. Chutkule, launched into the market with one variant, is expanding the range in a bid to carve out a distinct space in the segment. “ This market it is all about variety, creating new sensations and being available at all locations. The market has both organised and unorganised players and finding the right flavours and differentiation is the current challenge,” he added. The company is likely to even look at bakery products that could be introduced in the snacks segment. Britannia had earlier ventured into the snacks market with its brand Snax, which was slowly phased out . The organised snacks market is around Rs 2,000 crore, growing at 15-20%. Frito Lay is the market leader with its Kurkure and Lay’s brand. But catching up is ITC’s Bingo, which aims at garnering 50% market share in the next two years. Britannia’s other focus in the market is the growing adult indulgence segment, which it has now entered with Pure Magic cookies and is going ahead with plans to expand this portfolio. “ We think its a segment that is showing very healthy growth and we expect to extend our portfolio in this segment. It also gives us a chance to upgrade our margins and improve realisations. We will look at rolling out Pure Magic cookies across other metros, we have so far restricted it to Delhi and Bangalore,” he added.

Amul in multinational arena with snack launch

Taking a cue from the success of ITC's Bingo, Gujarat Cooperative Milk Marketing Federation (GCMMF), universally known for its dairy products brand Amul, has decided to enter the branded snacks market with Munch Time, a salty snack much like Frito Lay’s Kurkure in taste.

The product is being test-marketed in Gujarat and is expected to be rolled out nationally in two months. Priced at Rs 5 a packet, the snack is targeted at teenagers and children.

The branded snacks segment has recently seen a surge in activity with the high-decibel entry of ITC’s Bingo, which has quickly grabbed 15 to 16 per cent share of the Rs 2,000 crore market from leader Frito Lay.

GCMMF first made Munch Time, which comes in masala, tomato and mint flavours, for the government’s mid-day meal programme. However, the cooperative has been quick to spot its potential in the fast-growing branded snacks segment.

“We had been thinking about launching this product for quite some time. We manufacture it at our facility in Gujarat. Based on the response to the test-marketing, we will consider a nation-wide launch,” said R S Sodhi, general manager, marketing, GCMMF.

The new snack has, however, already found its way into many stalls in neighbouring Maharashtra.

The launch of Munch Time is a significant departure for Amul, whose core business is milk and dairy products.

But the company’s distribution muscle is expected to help the company reach out to a large number of outlets. ITC’s vast distribution is seen as the key to Bingo’s success. It enjoys an exclusive presence in some shops including big retail outlets.

The new edge of competition has led Frito Lay to undertake a massive brand-building exercise for its brands.

Sodhi said GCMMF’s main challenge will be brand building. The company has already begun working on a campaign for the new product through its advertising agency FCB. The company aims to highlight its “nutritional value”.

M&A wave hits consumer goods space; Dabur, HLL, Marico on prowl

Merger and acquisitions is the toast of the season and a full platter of deals is expected to hit the table very soon in the consumer goods space involving leading players like HLL, Dabur, Marico and United Spirits.

A number of consumer goods firms have sounded out their advisors and investment bankers with takeover plans in both domestic and international markets, while the likes of Dabur, HLL and United Spirits are actively eyeing growth through inorganic route, merchant banking sources said.

FMCG and healthcare products maker Dabur is holding discussions on a number of potential acquisitions, including Singapore’s beauty products manufacturer Unza Holdings, although it has been deterred by the high valuations being demanded by its target companies, the sources said.

Dabur’s top management team told analysts at a conference organised by investment banking giant Citigroup earlier this month that the price asked by most targets was too high and the company would wait for the right opportunity.

However, Dabur conceded that it was actively looking for acquisitions in both domestic and overseas markets.

The analysts believe that Dabur’s successful experience with past acquisitions has further boosted its appetite and it could continue to adopt inorganic growth route for complementing its existing product portfolios and expansion into the new segments and markets.

The company had recently acquired Balsara Hygiene at an attractive valuation, which it turned around within six months, and also got access to fast growing home care segment besides expanding its oral care portfolio.

Vishal Retail to open speciality store for FMCG & apparel

Delhi-based Vishal retail will soon set up a chain of speciality stores to retail its apparel and FMCG range across the country, as it firms up plans to introduce private labels for consumer durables and mobile phones. The company has also chalked out plans to launch quick service restaurants for which it is in talks with real estate developers to lease out space at prime locations including Delhi Metro stations. "We will introduce a range of private label consumer durable items and mobile phones at the stores in next 3-4 months, and the products will be sourced from China," Vishal Retail Ltd CMD Ram Chandra Agarwal said. He said the consumers will get a mix of both private labels and others brands at the stores. The company would also start retailing liquor at its stores before end of this year. On the company's foray into manufacturing mobile phones he said, "The pilot launch of the two models of our Z-line mobile phones has been successful, and since the response has been good, the mass launch will be at the stores in next 3-4 months." Vishal currently has around 65 stores across India, is focusing on developing speciality stores for apparel and FMCG items. The plan was to have a total of 90 stores March next year, of which the new ones will be a mix of both hypermarket and speciality formats.

Dabur: Adding Flavour

Dabur has a penchant for venturing into new spaces, whether it’s soaps or retailing of beauty products. The latest product from the Rs 2,172 crore firm is a malted beverage called “Chyawan Junior” positioned it as a chocolate -flavoured ayurvedic drink. Says K K Rajesh, executive vice-president, Dabur, “It contains herbs to improve the stamina and the chocolate flavour makes it more appealing to children.”

The positioning might well work but the brand is likely to remain a small one. Explains Aniruddha Joshi, analyst at Anand Rathi Securities, “There is a market for the traditional ‘chyawanprash” product so with a tastier option Dabur can perhaps create a niche. However, it’s share is unlikely to be more than 5-6 per cent.”

But Dabur’s not shying away from the competition. By pricing Chyawan Junior at Rs 120 for a 500 gm bottle, it has taken the market leader Glaxo SmithKline Consumer Healthcare’s, Horlicks, head on.

That would seem to be a bold move on the part of Daburgiven that GSK, which has four brands in Horlicks, Boost, Maltova and Viva commands a market share of over 70 per cent. The firm has only improved its share over the years.

Indeed as Nikhil Vora, partner, SSKI Securities observes, “Dabur may have wanted to redefine the pricing somewhat by opting for slightly lower margins but bigger volumes.”

After all, milk product companies such as Nestle and Amul have tried their luck with brands Milo and Nutramul respectively but in spite of having strong synergies and distribution set-ups, they haven’t really done too well.

As Arvind Mahajan, executive director, KPMG, points out, “It’s a relatively difficult market to crack. One reason for this is that because it’s a product for children, you need to get the taste right. It’s not enough if the product is nutritious. Also consumers seem to form a habit of drinking the same product so it takes time to break that habit.”

The malted beverages market, at around Rs1,540 crore (source: AC Nielsen), is crowded with half a dozen players. At around 8 per cent in value terms and less than 3.5 per cent in volumes, the growth has been modest. GSK’s Vice-President, Marketing, Shubhajit Sen, however, pegs the growth at 12-14 per cent in value and 7-9 per cent in volume terms.

The business can be a fairly profitable one though: GSK’s operating margins are in the region of 16.5-17 per cent and Horlicks and its variants are firmly entrenched with a market share of over 50 per cent.

Says Sen, “We have been able to keep the category relevant to customers. We have expanded the usage by associating with exam preparation and dampening the seasonality effect of summers by driving cold consumption with Chocolate Horlicks.”

Sen believes the growth has been driven by both new users as well as higher consumption by existing users. Adds Rajesh, “The introduction of new variants has also helped grow the market. Companies are abandoning the one-size-fits all positioning and generic selling points of the past in favour of targeted messaging based on health benefits. ” Rajesh believes the market can grow at 15 per cent in the future.

What Dabur has going for it is a strong distribution network since it already sells products such as honey and juices. Says SSKI’s Vora, “Dabur’s distribution is probably better than GSK’s and that should help it to do good volumes.”

However, as KPMG’s Mahajan points out, “Typically malted beverages have done better in the eastern and southern markets. So Dabur will need to ensure that it has a good reach in these parts of the country.”

Joshi, however believes that though the availability of milk has never been an issue in the north, Dabur might succeed with a differentiated product. Moreover, the “Chyawan” brand should come in handy though Dabur will need to spend heavily on advertising—typically GSK’s ad spends are about 12 per cent of sales. Rajesh hopes to ‘take a prominent position in the market’ in the next few years. For sure it won’t be easy but it’s well worth a try

Fruit Drinks: Pepsi Coke in new turf war

Coca-Cola and Pepsi, which have triggered books and case studies on the cola war, are ready to battle each other on a new turf in India: fruit drinks. Pepsi is said to be ready with Tropicana Twister, an orange drink, to take on Coca-Cola’s Minute Maid, which debuted in India in February and went national in May.

According to industry and trade sources, Twister will strike next month at the time of Diwali and the executive of one retail chain said the date had been fixed as November 9. The Indian arm of PepsiCo though is playing with its cards close to its chest. An email from its public relations agency said: “PepsiCo would be happy to share the details on Tropicana Twister close to the time of the launch.”

The launch of Twister, already successful in Vietnam, will do more than add another brand to the shelves. It will mark Pepsi’s entry into a segment in India that has opened up with the entry of Minute Maid, which, full of orange pulp, is neither pure juice like Tropicana nor plain fruit drink like Coke’s own mango drink Maaza.

There is immense opportunity to be tapped in the segment of juice and fruit drinks. Its size is estimated at Rs 5,000 crore, which is not much less than the Rs 6,000 crore that the carbonated drinks market – cola, lime and orange put together – is worth. What is more, brands account for less than a quarter of the juice and fruit drinks market, leaving the field open for the big boys to take some easy pickings at the expense of small companies.

In volume terms, the total juice market in India – juices, nectars and fruit drinks – is pegged at 500 million cases. Of this, only 10 per cent is accounted for by packaged products and the rest is sold loose. Within this 10 per cent – or, 50 million cases – 85 per cent is taken up by mango-based drinks, juices and nectars. Against this, trade sources say Minute Maid sold a million cases in the first month.

In anticipation of Pepsi’s imminent challenge, Coca-Cola is not sitting quiet. It is test marketing Maaza Aam Panna, a spicy, tangy mango drink, in 1,000 stores in Agra, Bareilly and Lucknow. It is being bottled in Bhopal and sold in 200 ml tetra packs priced at Rs 12.

“In Maaza, Coca-Cola India already has the country’s number one juice drink brand. Now with the national launch of Minute Maid Pulpy Orange, we believe this would further extend Coca-Cola India’s leadership in the juice drink segment,” said Venkatesh Kini, vice-president, marketing, Coca-Cola India.

Coca-Cola and Pepsi squaring up in the fruit drink segment shows the shape of things to come as the two companies have been increasingly looking for revenue streams other than those of carbonated soft drinks. Besides, say experts, fruit beverages overcome the price barrier that the pricier pure juice brands have not.


Battleground

Pepsi to launch Tropicana Twister, an orange drink, during Diwali to take on Coca-Cola’s Minute Maid
The segment of juice and fruit drinks in India is estimated to be Rs 5,000 cr
In volume terms, the total juice market in India - juices, nectars and fruit drinks - is pegged at 500 million cases. Of this, only 10 per cent is accounted for by packaged products and the rest is sold loose