beacon march 2015

VOLUME 03BEACON ISSUE 03MARCH 2015 i

VOLUME 03BEACON ISSUE 03MARCH 2015

ContentsABOUT US

OUR TEAM

INDUSTRY ANALYSIS

COMPANY ANALYSIS

BRAND ANALYSIS

CONFLUENCE ‘15: AN EVENT REPORT

CONCEPT OF THE MONTH:CUSTOMER LIFETIME VALUE

VOLUME 03BEACON ISSUE 03MARCH 2015 1

OUR PRESENCE

ABOUT US

VISION

The SIMCON - SIMSREE consulting club is an initiative started in 2012 for those students in pursuit of excellence in management consulting and strategic management. Aimed at creating awareness among the students about consultancy as a discipline, the club strives to maintain strong relations with top consultancy firms and provide platform to craft highly skilled & competent consultants from SIMSREE. The club is a resource for information about consulting and a place for students to obtain real-world consulting experience.

SIMCON provides an avenue of interaction among faculty, students and alumni through competitions, live projects, guest lectures, and conclaves. For this purpose the club has also been publishing its monthly newsletter – BEACON (BE A CONSULTANT) and maintains a FACEBOOK PAGE where latest news and development in the consulting industry are posted.

MISSIONTo create awareness amongst the students about consulting industry & its latest trends.

To maintain strong relations with top consultancy firms.

To provide platform to craft highly skilled & competent consultants from SIMSREE.

To provide exposure to students via competitions, live projects, guest lectures & conclaves.

Contributions invited:To make this feature a successful effort, we seek continued involvement and contribution from our readers, that is YOU. We invite articles, research papers, and trivia on themes related to consulting. Be it industry news, consulting trends, a joke, a cartoon or feedback, we are eager to hear from you. So go ahead, do your research, pen down your thoughts and mail your entries to [email protected].

Best Regards,SIMCON - SIMSREE CONSULTING CLUB


SANANDAN DESHPANDE

NIKHIL RAO

AMEYA MAHABAL

DEEPESH JETHWANI

PRATHAMESH INDANI

SUSHIL GURAV

TEJAS SHAH

OUR TEAM


FOOD AND BEVERAGE INDUSTRYINDUSTRY ANALYSIS


IntroductionFood and beverage sector consist of two industries in itself: food processing industry and non-alcoholic beverage industry. It is considered as a sunrise sector gaining a lot of prominence in recent years. Major segments in food industry are dairy products, bakery products, confectionary products and meat & poultry products. According to IBEF, India’s food processing industry accounts for nearly 32% of country’s total food market. It is among the biggest industry in India and ranks fifth in terms of production, consumption, export and expected growth. Currently it is growing at 10% per annum and is expected to reach US $194 billion by 2015 from US $121 billion in 2012, according to Indian Council of Agricultural Research (ICAR). The packaged food sector would reach US $30 billion in 2015 from US $15 billion in 2013 owing to rise in household income and changing consumer eating patterns. Urban India is the largest consumer of the packaged food industry as of now contributing nearly 75% to it. The share of food processing sector in total country’s exports is as high as 12%. According to data released from Agricultural and Processed Food Products Export Development Authority (APEDA), the country’s agricultural and processed food exports stood at US $12,797.65 million in the year 2013. According to Department of Industrial Policy and Promotion (DIPP), India attracted a foreign direct investment (FDI) of US $3,776.57 million during 2000-2013.

Other Products

Dairy Products

Grain Mills Products

Beverages

Meat,Fish,Fruits,Vegetables

% Contribution

40.20%

10.80%

24.50%

5.00 %

19.60%

A) Fruits and Vegetables segmentFruits and Vegetable segment forms an important component of consumer spending. India has a climate which enables a lot of fruits and vegetables to be grown. India is second largest producer of fruits (81.285 million tonnes) and vegetables (162.19 million tonnes) in the world and thus contributes to 12.6% and 14.0% of the total world production, respectively.

Consumption and ExportsIndia’s exports are less than 2% of its production. This is partly because of rising expenditure on fruits and vegetables. The expenditure has risen to US$ 3100 billion in 2010.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Exports as % of Production (Volume)Exports (Mn tonnes)

'10'09'08'07

2.6

1.5

2.3

1.2

3.4 3.3

1.6

Export

Food ProcessingFood processing industry is directly linked to the agricultural industry. If the agriculture production increases, the food processing industry will also flourish. It is regarded as a ‘sunrise industry’. FSSAI looks after the regulations and standards governing the industry. The industry is poised to be worth around US$ 67 billion. India’s food processing industry is mainly export oriented. The country’s geographical advantage of connectivity to different regions helps it in the export. Top Companies in Food Processing

Company Net Income (in Rs Cr)Nestle 1117.13

GlaxoSmith Consumer Healthcare

674.75

Britannia 369.83KRBL 265.31

Kwality 126.63Key Problem Areas in Food Processing• Inadequate infrastructure facilities• Food safety laws and discrepancies in state and central policies • Lack of adequate trained manpower

B) Meat and PoultryLivestock has been the second most important support for rural population of India, next to agriculture. With

0

10

20

30

40

50

OkraCauli�owerOnionBananaPapayaMango

44.1%42.6%

25.6%

20.2%

37.0%35.6%

India's Production as a % of World Production


the changing eating habits and greater purchasing power the segment is increasing at a very fast pace. India is fifth largest producer of meat across the world.

0

50

100

150

200

Processed

Unprocessed

PorkOvinePoultryBovine

Meat Market (2010) in Rs. Bn

140

48

178

9.00

131

1.0014.00

0.00

C) Milk and Dairy ProductsIndia is the largest producer of milk and accounts for more than 16% of the total world’s milk production. Operation Flood has resulted in triple increase milk production from 1979 to 2008.

0

50

100

150

200

250

300Grams/capita/day

'2010'2000'1990'1980'1970'1960

Milk Production (1960-2010)

124 128112

176

217

252

Issues and Challenges• Inadequate feeding of animals• More disease incidences• Lack of chilling capacities• Exploitation of farmers with regards to payments• Involvement of too any intermediaries• Lack of infrastructure• Lack of cold storage facilities• Highly unorganised market (nearly 80%)• Less penetration to rural markets

0

1

2

3

4

5

6

Growth (% per annum)

'2010'2000'1990'1980'1970'1960

Milk Production Growth (1960-2010)

1.6

0.7

3.4

5.5

4.1

3.8

D) Non-alcoholic beverage segmentCurrently the non-alcoholic market in India stands at US$ 1.2 billion. This market is expected to grow at 20% on year on year basis. Non-alcoholic drinks include carbonated drinks, sparkling beverages, still beverages, fruit juices, energy drinks, sodas, tea and coffee. Leading players in the market are Coca-Cola, PepsiCo, Parle Agro, Dabur and Godrej.

Non-alcoholic market demands are increasing with the rising disposable incomes of people. Also, rising global temperatures has increased the demand for these markets. However, increasing health awareness, especially regarding obesity, among the consumers is anticipated to act as a key restraining factor for the market. Nonetheless, this issue has been solved by the introduction of diet and zero-sugar drinks by leading companies. Changing trends in the consumer segments has also made it more difficult for manufacturers to gauge the needs of the consumers and hence come up with innovative products. Multinationals like Nestle, General Mills, DANONE, Unilever and PepsiCo are largely entering into the health foods and beverages market. This market is somewhat niche in India as of now and hence is considered as the growing industry.

Porter’s Five Forces:

1) Threat of Substitutes: Low Food and beverages forms the core of living. The threat of substitute for this industry is very low. The trends of eating and drinking might change with time but overall you cannot replace the industry by a substitute.

2) Bargaining Power of Buyer: HighWith a large number of products in the market and daily innovations there is no dearth of suppliers. Hence customers are at a luxury of choosing from a host of products. Government has also allowed 100% FDI in this industry. Hence overall buyers have a high bargaining power.

3) Bargaining Power of Suppliers: ModerateFood and beverage industry is hugely dependent on the agricultural products for its raw materials. Agricultural produce for the needs of the country is just sufficient. Milk production in the country though highest, is least exported as the demand is very high in the country. Moreover, the companies have fewer options as imported products increase the price of the end product. But the suppliers are sometimes exploited


on price by middlemen or companies. Hence suppliers have a moderate bargaining power.

4) Threat of New Entrants: HighGovernment provides a lot of subsidies for food processing and hence establishing shop is quiet easy. Economies of scale are also very low. But the barriers from the government side are quite high. Hence the threat of new entrant is very high.

5) Competitor Rivalry: HighThere is high concentration amongst the industry. There are a lot of players in the industry for every product category. Though in every category there is a power struggle between 2-3 large players, there is very little scope for price appreciation. Hence there is a high rivalry amongst existing competitors.

Government Support for Food ProcessingFood Processing has been identified as a priority sector in the ‘Make in India’ initiative and hence the government is providing ample support for budding entrepreneurs to venture into it. Some of them are as follows:• 42 mega food parks are being set up in public-

private partnership at an investment of INR 98 Billion rupees. These parks would have around 1200 developed plots with basic infrastructure enabled that entrepreneurs can lease for the setting up of food processing and ancillary units.

• Attractive fiscal incentives have been instated by central and state governments and these include capital subsidies, tax rebates, depreciation benefits, as well as reduced custom and excise duties for processed food and machinery.

• INR 500 Million has been allocated for the development of indigenous cattle breeds and

an equal amount has been set for starting a blue revolution in inland fisheries.

• The government has introduced several schemes to provide financial assistance in the form of grants and subsidies for the setting up and modernization of food processing units, the creation of infrastructure, support for research and development and human resource development as well as other promotional measures to encourage growth within the processed food sector.

Key Happenings in the Industry• According to Department of Industrial Policies

and Promotion (DIPP), the food processing segment in India has received investments valuing approximately US$ 6,215.46 million during the period of 2000-2015. Some of the major investments were in the start-ups like Foodpanda.in (online food ordering website) and Zomato (online restaurant aggregator). Amul also plans to invest Rs 5000 crore in setting up new processing plants till 2020.

• Ms Harsimrat Kaur Badal, Union Minister for Food Processing Industries of India has inaugurated a mega international food park at Dabwala Kalan, Punjab. This is first of its kind initiative.

• The scheme of Cold Chain, Value Addition and Preservation Infrastructure provides integrated cold chain and preservation infrastructure facilities without any break from the farm gate to the consumer, has been started by GOI. Individual, Groups of Entrepreneurs, Co-operative Societies, Self Help Groups (SHGs), Farmers Producer Organizations (FPOs), NGOs, Central/State PSUs etc. with business interest in Cold Chain solutions are eligible to setup integrated cold chain and preservation infrastructure and avail grant under the Scheme.

Emerging Trends• Transformation of Cuisine• Evolution of Beverage as a game changer• Infusion of Entertainment in F&B sector• New Expansion Opportunities• Social Media Transforming businesses

ReferencesIBEF, FoodBEVTech, Food Processing India-717, Food Processing India - 719, India Micro Finance, BCG, Techno Park


BRITANNIA INDUSTRIESCOMPANY ANALYSIS


Company Overview

Britannia was started as a biscuit company in 1892 in a nondescript house in Kolkata. The initial investment at the time of foundation of this company was Rs 295. The company merchandised its operations by 1910 with the advent of electricity and in 1921 Britannia became the first company east of Suez Canal to use imported gas ovens. Along with the flourishing business the company had acquired a reputation for quality and value. The Government also showed its trust in Britannia during the World War II by giving it the contract to supply large quantities of “service biscuits” to the armed forces.Parry’s used to be the distributor for Britannia biscuits in India. In 1975, Britannia took over distribution business from Parry’s. After the public issue in 1978, Indian shareholding in Britannia crossed 60%. The company was re-christened Britannia Industries Limited (BIL) in 1979. In 1983, the company crossed the revenue mark of Rs 100 crore. Britannia unveiled its new corporate identity in 1997 through its new campaign “Eat Healthy, Think Better” and made its entry into the dairy products market. The “Britannia Khao, World Cup Jao” campaign further highlighted the popularity of Britannia amongst its consumers.Britannia entered into 21st century as one of the India’s biggest brand in food industry. Innovative marketing strategies like Lagan match which was voted as India’s most successful promotional activities of 2001, have helped Britannia to grow in to the brand it is today. In the same year 2001, Britannia 50-50 Maska-Chaska became India’s most successful product launch. Britannia’s New Business Division formed a joint venture with the world’s second largest dairy company – Fonterra in 2002 and this marked the birth of Britannia New Zealand Foods Pvt. Ltd. Forbes Global rated Britannia ‘One amongst the Top 200 Small Companies of the World’ and The Economic Times rated Britannia as India’s 2nd Most Trusted Brand.

ManagementMr. Nusli Neville Wadia ChairmanMr. Varun Berry Managing DirectorMr. Vinay Singh Kushwaha VP – Supply ChainMr. Hemant Rupani VP – SalesMr. Manjunath Desai VP – Strategy & Business

DevelopmentMr. Sudhir Nema VP – R&D & QualityMr. Ali Harris Director – MarketingMr. Anand Agarwal General Manager – Finance

and TaxationMr. Ashok Namboodiri Head – Dairy BusinessMr. Gunjan Shah Head - International Business Mr. Harish R Navarathna Head – Corporate ITMr. Indranil Gupta Head – Contract

ManufacturingMr. Manoj Balgi Head – Procurement

Mr. Muthukumar Vemban General Manager – Own Manufacturing

Mr. N. Venkataraman Director – FinanceMr. Rajesh Arora General Manager – Legal &

Company SecretaryMr. Ritesh Rana General Manager – HRMr. R K Agarwal General Manager – ProjectsMr. Sanjay Mkukherjee Head of ReplenishmentMr. Sudarshan K.C. Head – Legal

New Product Offerings• Britannia Super Sipper Offer: Starting from March,

a sipper is given free with every 200 gm pack of Britannia Cheese Slices.

• New Britannia Tiger: Britannia Tiger has gone considerable shift in its product offering, transforming itself in a healthier and tastier avatar and thereby addressing every mother’s concern on their kids’ nutrition. It is now packed with 25% of daily growth nutrients.

• Britannia NutriChoice Oat And Ragi Cookies: These are ‘Diabetic Friendly’ Essentials specially designed for people with diabetes. These biscuits are scientifically created to suit the special lifestyle and nutrition needs of diabetics to manage extreme swings in blood sugar levels.

• Veg Cake: It is a 100% vegetarian cake with all the softness and delight a cake should have. It has zero cholesterol and 3 months shelf life.

• Treat Fruit Rollz: Britannia Treat has launched the new Treat Fruit Rollz for kids. These rolls are filled with fruits and provide a healthy and tasty food for kids. Fruit Rollz comes in four flavors – Juicy Apple, Strawberry Surprise, Tangy Orange and Delicious Dates.

Shareholding Pattern

Competitor AnalysisName

(Rs. Crore)Market

Cap.Sales

TurnoverNet

ProfitTotal

AssetsNestlé 70,197.4 9,854.8 1,184.7 3,558.2

Others

Central Govt

Financial Institutions

Mutual Funds / UTI

General Public

Foreign InstitutionsForeign Promoter

Other Companies

% Shareholding as on Dec 2014

50.75%

19.46 %

17.20 %

5.09 %4.16% 0.02% 0.02%

3.30%


Britannia 25,844.0 6,307.4 369.8 858.1GlaxoSmithKline Consumer Healthcare

24,623.9 4,868.6 674.8 1,812.9

Hatsun Agro 3,413.5 2,493.5 81.7 575.0KRBL 3,377.9 2,791.3 265.3 2,335.5

Competitor Profiles:1) Nestlé• Nestlé is the world’s leading Nutrition, Health and Wellness company headquartered in Switzerland. It has presence across India with 8 manufacturing facilities and 4 branch offices.• It has market capitalization of Rs 70,193.39 crores which is more than 2.5 times the market capitalization of Britannia Industries.• Nestlé India signed an Agreement with Magic Bus India Foundation on 17th December 2014. Nestlé will be able to reach out to 50,000 adolescents in a year, across metros raising awareness about Nutrition Health and Wellness.

2) GlaxoSmithKline Consumer Healthcare• GlaxoSmithKline is a leading healthcare company formed by the merger of GlaxoWellcome and SmithKline Beecham.• Journey of GSK Consumer Healthcare in India began with Horlicks.• Horlicks, Boost, Maltova and Viva are the Nutritional products manufactured by GSK Consumer Healthcare.

3) Hatsun Agro• Hatsun Agro is the largest private sector dairy company in India based in Chennai.• Arkoya, Hatsun, Arun Icecreams, Hatsun Dairy, Ibaco are the brands under Hutsun Agro.

SWOT Analysis Strengths

• Over 100 years of history• Brand name accepted across different generations• 2nd in Market Capitaliation• Non seasonal food and hence available throught the year• Strong distribution network even in remote areas• Innovative marketing

Weaknesses• High investment in technology and advertising(around Rs 503 Cr)• Concern of public with regards to consumption of processed food leading to health issues• Market Capitaliation is one third that of Nestle• Illegal strikes of contract workers t Delhi factory had partial impact on production• Low Profit Margin as compared to competitiors

Opportuni�es• Growth of Indian economy and improved lifestyles of Indians shall provide opoortunities for premium products like Good Day Chunkies• Busy schedules of working class population• Unexplored segments such as cakes and rusk

Threats• Competitors with lower price offerings• Increase in cost of raw materials• Local dairies and bakeries• Entry of new domestic & international players• Volatality in commodity prices

Key Financials

Parameter FY14(Rs crores)

FY13(Rs crores)

Growth

Net Sale of Products 6,829.32 6,135.91 11%

Profit from Operations 544.02 347.49 57%

Profit Before Tax 569.32 358.43 59%

Net Profit 395.35 259.50 52%

Consolidated net sale of products increased from Rs 6135.91 crores in FY13 to Rs 6823.32 crores in FY14 showing a growth of around 11%. Consolidated net profit for FY14 was Rs 395.35 crores compared to Rs 259.50 crores in the previous year showing a growth of 52.3%.Around 30% increase in milk cost impacted the Dairy business of Britannia. As a result, turnover dropped to Rs 299.32 crores compared with Rs 309.19 crores in previous year. Net profit also dropped to Rs 10.67 crores compared to Rs 35 crores in previous year as a result of inordinate inflation in milk cost.Daily Bread, a manufacturer of premium gourmet bakery products reported a turnover of Rs 19.94 crores during the year compared with Rs 23.06 crores in the previous year. Loss for the year was Rs 3.30 crores compared to Rs 2.67 crores in the previous year.

0

10

20

30

40

50

60

70

80ROCE

RONW

FY14FY13FY12FY11FY10

PROFITABILITY (%)

36.48

15.92

41.20

21.48

48.7652.43

46.7044.45

49.80

61.02

RONW and ROCE had dipped during FY13, but it has increased again in FY14. RONW increased from 46.7 to 49.8 and ROCE increased from 44.45 to 61.02. The operating profit margin increased from 6.8% in FY13 to 9.07% in FY14 and net profit margin increased from 4.16% in FY13 to 5.69% in FY14.


The current ratio has been consistently below 1 from FY12. It is 0.75 for FY14.

0.0

0.2

0.4

0.6

0.8

1.0

1.2


1.111.06

0.69 0.690.75

CURRENT RATIO

The low value of current ratio indicates that company could face difficulties in future meeting its short term financial obligations. EPS has increased from 19.57 in FY13 to 30.84 in FY14 showing a growth of 57.58%.New Developments1) With the commissioning of a Greenfield facility for biscuit manufacturing at Jhagadia, Gujarat and commencing work on the new Greenfield project in Perundurai, Tamil Nadu, Britannia increased operating control on capacity. To improve the back-end planning and processing, it implemented the process of Advanced Planning & Optimizing (APO) tool which will provide an integrated platform to calibrate supply to a dynamic demand scenario.2) In a top level management change, Britannia appointed Mr. Varun Berry as its Managing Director with effect from 1st April 2014. Mr. Berry replaced Ms. Vinita Bali who retired as MD of the company with effect from 31st March 2014.3) To reclaim the market share and improve margins, Britannia’s new CEO Varun Berry has focused on improving the company’s distribution network, energizing sales staff, cutting low margin products and rebuilding the management depleted by ethos. The company has been unable to come up with new biscuit brands for past few years and hence this has been made the top priority of the company now. Mr. Varun Berry said in an interview that Britannia will launch new products and packaging across its portfolio but the cutting edge and disruptive aspects would be on the premium side.4) Britannia launched #BonTheOriginal campaign for marking the 60th year of Britannia Bourbon biscuits. #BonTheOriginal went online with a website inviting fans to be a part of bon 6 – the unboxing of #BonTheOriginal on 6th February 2015. The website worked as a teaser for the launch of the new biscuit. Users were made to ‘Unbox the Bon6’, making some of them believe that the website was unveiling a new smartphone. Features such as ‘Super Surround Sound’, ‘Chocolaty Version 2.0’, ‘Auto Charge Unlimited’ were mentioned which created the buzz.

ConclusionToday, more than a century after the company was founded; the tiny investment has grown into crores of rupees. The company offers a wide spectrum of products ranging from the healthy and economical Tiger Biscuits to the more lifestyle oriented Milkman Cheese. With the trust of almost one third of India’s one billion population and the strong management at the helm, Britannia looks to continue following its path of dreaming big, being innovative and providing quality products to its consumers.

ReferencesBritannia - Company Overview, Money Control - Britannia, Reuters, Money Control - Results, Nestle - About Us, Nestle - Press Release, Britannia - Overview

0

10

20

30

40

50


48.77

12.16

15.63

19.57

30.84

EPS


FEVICOLBRAND ANALYSIS


Fevicol is one of the most iconic brands in India with a very strong brand recall, so much so that, even the Prime Minister of India, Mr Narendra Modi referred to Fevicol while commenting on the strong bond between Japan & India, while on his tour to Japan in 2014.

Fevicol : A HistoryFevicol is a brand of adhesive manufactured & marketed by Pidilite & synonymous with the word adhesives in India. This is a commendable feat considering it is a brand in a low involvement category such as adhesives which, rarely gets free & earned media. Fevicol currently has around 70 percent market share. The rest of the market share is captured by its competitors - Falcofix, Bluecoat, Vamicol & Araldite, part from many local brands in the unorganized segment.It was first launched & marketed in India in 1959 and was promoted as easy to use glue for carpenters, as an alternative to fat & collagen based adhesive which had to be boiled before application. Today, Fevicol is a generic name in the adhesive category sold in over 50 countries & a familiar sight in most of the Indian households. During the time of its launch, it was primarily meant to be used as glue for woodworking while secondary applications included uses in flooring, footwear & upholstery.

One of the earlier print ad of Fevicol

The unique selling proposition of Fevicol was its ease of application as it was a synthetic resin adhesive. This made the product an instant hit with the wood furniture making industry. Pidilite realized that the brand’s popularity & success can be leveraged by launching a variant suitable for the retail segment. The first such variant, a collapsible tube of 30gm was launched in the early 1970’s. Subsequently, Fevicol was made available in various packages making it usable for variety of day to day activities. These multiple packages helped to change the image of Fevicol from

an industrial product to an all purpose glue.Over the years, Pidilite has expanded the Fevicol brand which now includes various speciality products, few of which are mentioned below –

Product Name

Use/ Property

Product Name

Use/ Property

Fevicol SH White glue based adhesive

Fevicol Marble

Glue

Glue for marble &

graniteFevicol SpeedX

Fast setting synthetic adhesive

Fevicol Foam Fix

Adhesive for foam

Fevicol Marine

Water resistant adhesive

Fevicol SR 505

Synthetic rubber

adhesiveFevicol WRA

Wood reinforced adhesive

Fevicol VC 31

Water based

adhesive for flooring

Fevicol SR 998

Quick bonding adhesive

Fevicol DDL

For superior

wall finishFevicol SR

X-PRESFaster

bonding for tough

conditions

Fevicol Glue Drops

Glue drops for instant bonding

Branding StrategyFevicol adopted a twin approach of i) Engaging effectively with its core target audience – the carpenters to become their go-to brand and ii) Creative advertising targeted towards the retail segment, which helped in making it such a strong brand.

Connecting with the core segment :

The core target audience for Fevicol was always the carpenters. Apart from maintaining good product quality, what helped Fevicol cement its place as the ultimate adhesive was its close contact with the carpenters. Most competitors – comprising of small scale local manufacturers & multinational brands like Movicol – marketed their products through timber markets & hardware stores. On the other hand, Fevicol directly approached the carpenters & this turned out to be the game changer for Pidilite and helped Fevicol cement its place in the adhesive segment.Fevicol has successfully managed to build this relationship with carpenters & end users through various programs. Fevicol Furniture Books, which showcases to the carpenters the current styles &


trends in furniture market, helped the company build awareness for the brand. Fevicol Champion’s Club (FCC) is another such initiative aimed at creating a platform for carpenters to increase their social contacts and help them be a part of the social network through various activities that focus on uplifting their lifestyle. Activities such as Swatch Bharat Abhiyan, FCC Maha Milan (a networking opportunity for various office bearers of various chapters), blood donation camps, free dental check-ups & celebrations during festivals have been organized under the FCC initiative. There are 380 such clubs which have over 40,000 members. In 2014, Fevicol came up with a unique pan India initiative under the FCC, Shram Daan Diwas wherein more than 30,000 woodworkers & contractors repaired & refurbished furniture at government schools & local NGOs free of cost to mark the day.

Winning hearts through humour:

The witty ads of Fevicol played a very important role in making Fevicol a household name with tremendous brand recall. The advertisements were so successful that they managed to make an adhesive product into an FMCG item. Ogilvy and Mather (O&M) has been handling the Fevicol account since the 1970s and over the past 20 years, they have together bagged more than 99 awards (Cannes, Abby, Asian Ad awards & Clio to name a few). The strategy adopted by O&M for Fevicol was to make bonding a Fevicol attribute & the agency successfully used intelligent humour to convey this meaning. For their Fevicol adverts, O&M has won

the Campaign of the Century Silver at the 2000 Abby Awards. Some memorable ads of Fevicol

1) Fevicol ka majboot jod hain....tutega nahi:

This ad marked the beginning of the 1st big campaign for Fevicol. Originally, this ad was written for a radio spot for Fevitite, a super fast adhesive brand of Pidilite and was handled by ad veteran Piyush Pandey. The original spot was 'Fevitite ka majboot jod hain...tutega nahi’.

When the founders of Pidilite, the Parekhs, heard the spot, they immediately liked it & asked him to make a TV Commercial out of it. Interestingly, Mr Pandey roped in his friend, Mr Raju Hirani for the TVC. Later, the owners felt that the ad was better suited for the mother brand, i.e. Fevicol. They provided him with more budget & asked to reshoot the ad for Fevicol.

2) Fevicol Truck Ad:

The ad, released in 2002, shows a bus in Rajasthan which is overloaded with passengers. Surprisingly, no one falls off, in spite of the large number of passengers. Later, it is shown that there is billboard of Fevicol at the back of the truck thus implying that the strength of Fevicol is so strong that even the mere mention of the name Fevicol is enough to ensure a superior bond.

The unique feature of the ad was the fact that not a single word regarding Fevicol or its advantages was


spoken in the entire ad but still the message was very subtly being conveyed across. This ad also won the Silver at Cannes Lion awards, which is considered the Oscars of the advertising world.

3) Fevicol Hen & Egg Ad:

This ad, made in 1998, shows a worker trying to crack open an egg. He tries everything, including hitting the egg with the hammer to break it open, but in vain. The last shot shows a hen pecking at food which is kept in an old Fevicol container. This ad again did not make use of any dialogues but was still able to very effectively communicate the message.

4) Moochwali Ad:

This ad was released in 2009 to celebrate the 50 years of existence of Fevicol. The ad shows a village girl who sticks a moustache on her upper lip during a play and is unable to take it off later. The ad film covers her journey from childhood, teenage years, wedding, motherhood, death & rebirth, where it is shown that she is reborn with the moustache still being present. In the end, the film shows the tagline – ’50 saal se campaign’.

Social Media presenceFevicol currently has its official page on Facebook and has its own Twitter handle as well. However, the number of likes & followers for their Facebook & Twitter page is 16,970 & 146 respectively. Fevicol does not have its own Youtube Channel, although Pidilite has its own official YouTube channel where it posts the various ads of Fevicol & its sub brands using this medium.The level of engagement through social media is quiet low considering the huge popularity enjoyed by Fevicol. A primary reason for this is the content shared through the social media channels which is more focussed on supplementing its other mediums, like posting pictures taken at events organized by Fevicol, leading to lower engagement. Content, specifically created for its social media channels to engage the followers, is currently missing.

BillboardsApart from the TVC, Fevicol has also effectively used


posters & billboards to market its brand in a witty manner.

Other Mediums • Fevicol Song in Dabangg 2 – Pidilite signed a

marketing & promotional deal with the makers

of Dabangg 2. An item song featuring Kareena Kapoor was shot for the film which used the word ‘fevicol’ in its lyrics & under this deal, the company was to co-promote the song through its TVC, hoardings & other mediums.

• Pidilite has also done in-film placement in movies like Golmaal & Son of Sardaar.

• During the Star Sports Pro Kabaddi League held in July 2014, the line "Fevicol ki pakad chootegi nahin” was used for on-air & on-ground promotions every time a kabaddi player was caught. This turned out to be a good strategy for Fevicol for its brand promotion as the league’s viewership was around 128 Million.

Recent Developments

o Reducing environmental impact• Pidilite is working towards environment friendly

products & has launched Fevicol AC Duct King Eco Fresh which offers eco-friendly solution for HVAC insulation, without emitting toxic fumes.

• The company is also migrating to green & cleaner fuel like Bio-Mass & Pipelined Natural Gas which has helped them reduce carbon footprint while operating boilers & thermal-fluid heaters

• It has also increased the power generated by windmills which is used for its factory operations

o Increase in manufacturing cost• The depreciation of rupee and the rising costs of

key raw materials such as VAM impacted the profit margins for the company in the last fiscal year

• The company is working towards reducing the raw material cost to ensure that the profit margins are maintained & consumers do not have to pay more for its products

It is to the credit of the people associated with Fevicol for making it one of the most admired brands in India & that too in a non-interesting category like adhesives. They have, over the years, not just managed to keep up with its legacy but perhaps improve & expand it even further through its connect with the carpenters as well as witty TVC. Although it remains to be seen how Fevicol manages to retain the strong brand recall as well as use newer mediums like social media more effectively, given the strong brand equity its enjoys, the brand will continue to hold a place in the mindshare Indian consumers.

ReferencesAfaqs, Mint, Business Standard, TOI, Pidilite


CONFLUENCE '15EVENT REPORT


CONFLUENCE '15EVENT REPORT

SIMCON organised its Annual Consulting Conclave, Confluence on the 8th of February, 2015. Based on the theme “India -A Gateway for Global firms”, Confluence ’15 aimed at focusing upon the industry requirements and steps the government can take to ensure progress for the country. The event began with the Welcome Note by Director of SIMSREE, Dr. Sandhya Dhabe. She introduced the theme for the event & highlighted the significance of relevance of the theme in present times. In line with this theme the Chief Guest for the event, Mr.Vivek Kulkarni (Founder & Chairman, Brickworks India) spoke on the topic “Supremacy for India amongst emerging markets”. Mr. Kulkarni highlighted upon various statistics showcasing India as the path ahead for global growth. Post the Chief Guest speech, it was time for the first panel discussion. The topic for discussion was “India’s Investment Landscape –The Road Ahead”. The panel discussion consisted of the below panellists:• Mr.Girish Vanvari (Partner & Co-Head Tax, KPMG)• Mr. Prateek Pant (Executive Director, RBS)• Mr. Anant Gupta (Vice President, Kedaara Capital)• Mr. Santhi VIjetha (Director, Grant Thornton India)• Ms. Mukti Hariharan (Vice President, Credit Suisse) Ms.Mukti was the Moderator for the panel.The panel highlighted the policy paralysis along with various other issues plaguing the scope of growth for India presently. Mr. Vanvari highlighted how they need to keep themselves on toes to understand the ever changing laws. The panel touched upon the topics of GAAR, GST and other such policies that prevent multiple investments in India along with how India has the potential to tap into multiple such opportunities with regards to FDI, FII through M&As etc. The discussion revolved around activities that would result in ease of doing business in India like Tax reforms, GST, single window clearance and other such activities. The wariness of the investors in investing

in India was cited by examples like the Vodafone Tax case. The conclusion of the discussion was that unless India removes the road blocks, it would not attract huge investments. The first panel answered the queries put forth by the students from various topics such as Tax, GAAR.The topic for the second panel discussion was “Adapt or Innovate - The Mantra for Survival & Sustained Growth’ from a marketing perspective. The panellist were:• Mr. Mohan V ( Former Executive Director/VP, HJ Heinz)• Mr. Vinay Gupta (Business Head, VG Retail Consulting)• Mr. Sandeep Zutshi (CEO & Co-Founder, Ascentaz Consulting)• Mr. Sunit Kishore (Head of Marketing, Novartis)• Mr. Joydeep Roy (Member of Governing Council, IIB) – ModeratorDiscussion started with Mr. Roy giving a brief about the discussion to follow and handing over the reins to the panellist. The discussion flowed in a question answer format where the moderator would ask a question in order to structure the discussion. Mr. Zutshi started with different types of innovations that we see in the world today- product, process, communication and technological innovation. Be it the Nirma or Balaji wafer, product innovation is right in your face and hence the most visible. The discussion moved then towards how Indian markets perceive any innovations. The session being an interactive one, the famous question of which of brick and mortar or e-retail industry would dominate in India came out. This was answered in different perspectives with Mr. Vinay Gupta explaining that the market always come to an equilibrium – eventually price would not be the competing factor but service alone would be the deciding factor. Mr. Mohan talked about how innovation is sometimes has to be achieved in the realms of the business and brand. Mr. Sunit Kishore steered the discussion towards the pharma industry and expressed how innovation is actually an over hyped word in the industry circles and how companies view innovation as just a task to do and hence do it for sake of it. This statement gave a very interesting path to the discussion and everyone started about their experiences of such incidence in their industries.

Overall the session was very interactive with students asking a lot of questions and the panellists and moderator answering them with patience. The students gained a lot of insights from both the panel discussions & from the Chief Guest’s address.


CUSTOMER LIFETIME VALUECONCEPT OF THE MONTH


CUSTOMER LIFETIME VALUECONCEPT OF THE MONTH

Customer Lifetime Value : An IntroductionCustomer Lifetime Value is the measure of the profit a company makes from a particular customer from their entire relationship. CLV is an important concept as it encourages companies to shift their focus to customer relationship’s long term health, rather than quarterly profits. It provides an upper limit on the amount to be spent for acquiring a new customer. For calculating CLV, the money spent on serving a customer is subtracted from the revenue earned from a customer, after adjusting all payments for the time value of money. As per Pareto’s Principle, some customers contribute for the majority of the revenues for a company and identifying these customers is extremely valuable for a company, as these are the ones who matter the most. CLV provides a different dimension to customer acquisition. Generally the focus is more on acquiring more number of customers at minimum cost. CLV, on the other hand, helps you in optimizing your

acquisition spending resulting in maximum value, rather than minimum cost.For example, consider three companies A, B & C. For customer acquisition using minimum cost strategy, the figure are:

Firm Total Spend Customers

Customer Acquisition

CostA Rs 100 100 Re 1B Rs 200 80 Rs 2.5C Rs 300 50 Rs 6

As per the customer acquisition cost, company A might seem to be the best one. However, the picture changes when one takes into account the CLV.

Firm CLV Revenue ProfitA Rs 10 Rs 1000 Rs 900B Rs 20 Rs 1600 Rs 1400C Rs 50 Rs 2500 Rs 2200


As seen from the above example, when we consider the value that your customer will bring to your business, the acquisition strategy can be fine-tuned resulting in more profitable customers at lower costs.

Calculation of CLV

There are two popular methods of calculating CLV1) Historical CLV – • Under this method, the CLV for a customer is

calculated on the basis of the amount previously spent by them on that company

• Within Historical CLV, Average Revenue Per User (ARPU) & Cohort Analysis are the popular approaches

• ARPU – In this method, the average revenue per month for all customers is added and then multiplied by 12 or 24 to get the 1 year or 2 year CLV

• Cohort Analysis – This method takes ARPU method a step further. It calculates ARPU per month per cohort (cohort is a group of customers sharing some common attributes)

2) Predictive CLV –• This method projects the spending of the new

customers in their entire lifetime• Since the calculations for Historical CLV are

backward looking, they sometimes end up giving misleading results

• The advantages of Predictive CLV is that it gives the long term value of customers right away and can be very helpful in taking business decisions

Applications of CLV

CLV helps you in taking important business decisions such as: • Marketing – What should be the amount to be

spent on acquiring a customer?• Customer Support – What is the amount that can

be spent on servicing & retaining a customer?• Sales – Who are the customers the sales

representatives should focus on most of the time?• Product – How can the company offer better

products & services to the best customers?

Advantages of CLV

• Helps in selecting the most suitable customers & subsequently in the decision making process for

devising customer specific communication• Determining the optimum level of investment in

sales & marketing strategies• Rather than focusing on cheap customers who

might bring much revenue to the company, CLV encourages marketers to invest resources on the long term value of the customers

• Helps in focusing on management of customer relationship as an asset

ReferencesCustora, Kiss Metrics

beacon march 2015

Education

consulting industry

beacon issue

packaged food industry

industry news

consulting trends

management consulting

biggest industry

packaged food sector