luxor writing instruments private limited

7/29/2019 Luxor Writing Instruments Private Limited

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LUXOR WRITING INSTRUMENTS PRIVATE LIMITED -MARKETING PENS IN INDIA

Case code- MKTG058Published-2003

"The mass-consumed pens are high impulse, low budget products and thus visibility

is most important. Besides, there is no brand loyalty for the bottom segment."

- Supratik Sengupta, Product Manager, Linc Pens and Plastics Limited [1]

INTRODUCTION

In 2002, Luxor Writing Instruments Private Limited

(LWIPL) had emerged as the market leader in the

premium pens[2] segment in India, with a market share of

60%. The company held a 10% share in the writing

instruments industry, next only to the market leader,Reynolds that held 12%. LWIPL had been in the pen

industry for nearly four decades. The company adoptedinnovative marketing strategies that had made it one of

the most popular pen manufacturers in India. LWIPL

offered a widest range of pens with leading brandsincluding Luxor, Pilot, Papermate and Parker. In

December 2002, LWIPL launched the world renowned

'Waterman' brand of premium pens in India.

This was possible after LWIPL's acquisition of a 50%

stake in the Indian operations of Newell Rubbermaid[3].The company planned to sell imported 'Waterman' pensfor the next couple of years and then start indigenous

production for these pens. The price of these pens ranged

between Rs.3,500 to Rs.50,000 and was made available innine sub-brands. LWIPL planned to sell these pens to

corporate customers. Commenting on the prospects of the

'Waterman' brand, DK Jain, Chairman of LWIPL said,"Because of its price and brand name, Waterman will

certainly have an edge over other premium brands in

India."[4].

The company planned to launch an international advertising campaign for thesepens. LWIPL was known for its heavy spending on advertising its products. It had

entered into several tie-ups with multinational pen companies that helped in

leveraging its current position in the industry. The fact that LWIPL was a debt-freecompany was another significant achievement.

However, with the rising competition and negligible presence in the faster growinggel pens segment, analysts felt that LWIPL had an uncertain future. Analysts also


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feared that LWIPL's decision to diversify into the hospitality and packaged foodsbusiness in 2001-02, might lead to a loss in market share in its core business.

BACKGROUND NOTE

The pens industry in India had passed through various phases with the changing

tastes and preferences of customers. Till the late 1970s, only two categories of pensexisted in the Indian market - fountain and ball point pens. During that time, people

preferred writing through a pencil rather than a pen. Moreover, people preferred

fountain pens, as it was perceived to write better compared to the ball point pens.Apart from domestic manufacturers, who manufactured fountain pens on a small

scale and sold them at cheaper rates, branded fountain pens manufactured by

leading international players such as Monte Blanc, Cartier and Parker were availablein India through the grey market. However, owing to their high prices, not many

people could afford to buy them. Camlin Limited was among the noted fountain penmakers in India during that time. By the late 1970s, fountain pens started loosing

their popularity as people found it cumbersome to refill the ink regularly.

[1] In an article titled "Penning the success story," by Aloka Majumdar in BusinessIndia dated August 25, 1997.

[2] Pens priced above Rs.50 as per the website, www.lincpens.com.

[3] Newell is a US based manufacturer and marketer of high volume stapleconsumer products with a turnover of $7 billion. The products manufactured by the

company include plastic products such as kitchenware, food storage products,insulated range and bathware. The company offers more than 3,000 products out of

more than 100 products have already been introduced in the Indian market. Thecompany made an entry into the stationary products business in 2000 with the

aquisition of Gillette's worldwide stationary business.

[4] In an article titled "The Write Stuff," in Business India by Devendra Mohan dated

December 23, 2002.

continued from : BACKGROUND NOTE

The 1980s witnessed an increased acceptance of ball point pens and Wilson Jotterwas considered to be the market leader in this segment. The pens manufactured by

Jotter were popularly called Jotter pens. The market for ball point pens was alsodominated by domestic players in the unorganized market. With the increase in

demand, existing players started expanding their capacities while many new playersbegan entering the market.

In 1982, Deepak Jain, managing director of Luxor Pen

Company (Luxor) entered into an agreement with the

Pilot Corporation of Japan to officially launch Pilot pensin India. In 1984, Suraj Mal Jain[1] started a

manufacturing unit for ball point pens and refills inKolkata and named it as Linc Writing Aids Private

Limited. The company launched new varieties such asdisposable pens into the market. In 1986, the French


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pen company, Reynolds entered the Indian marketthrough its subsidiary, GM Pens International Limited

by setting up a manufacturing plant at Chennai. Itused the latest technology to make pens and refills of

better quality and offered them at an affordable price.

The Reynolds 045 pens became very popular amongthe regular pen users; especially among the school and

college students. Until the late 1980s, not muchimportance was given to the promotion of pens and

there were very few recognized brands in the market.

Companies did not consider it worthwhile to investlarge amounts of money on promotional activities. The

focus was more on pricing and distribution. Pens weremanufactured in large volumes, and were priced

competitively. By 1990, 90% of the market share in

India was held by unorganized players.

In the late 1990s, the pen industry witnessed several developments. The varieties of

pens available in the market increased significantly. The new range of pensintroduced included Fibre Tip Pens[2] , Gel Pens[3] , Roller Pens[4] and Marker

Pens[5] . A marked change was also noticed in the attitude of people, and theybecame increasingly brand conscious.

By early 2002, some of the most popular brands in the Indian pen market comprised

of domestic brands such as Reynolds, Luxor, Cello, Rotomac, Kores, Today's, Montexand Add pens and foreign brands such as Mont Blanc, Flair (with Pierre Cardin),

Uniball and more. Consumers now had a wider choice, both in terms of differentvariety and the number of brands available. Gradually, the competition among

different pen brands intensified, which in turn, prompted these companies to

increase their spending on promotional activities.

According to the 2001-2002 figures, the writing instruments industry in India was

worth approximately Rs.15 billion[6]. Studies[7] on the industry had revealed thatthere were around fifteen organized players, which included both domestic and

international companies and more than 600 unorganized players. Though, in the

past, unorganized players accounted for a sizable share of the industry, their sharehad decreased significantly from around 90% in 1990 to just 20% in 2002. The huge

potential that the industry offered prompted existing companies to expand their

manufacturing facilities and encouraged new companies to enter the industry. Thishad led to intense competition in the industry.

The studies also revealed that the companies in the organized sector were putting

efforts in offering good quality products at competitive prices. At the same time,impetus was given to increase the visibility of their products in the minds of target

customers.

Established in 1963, Luxor had emerged as one of the leading companies in the penindustry. According to analysts, Luxor's marketing mix helped it to capture a sizeable

share of the industry. They also felt that Luxor's 50-50 joint venture with GilletteCompany[8] in 1996 helped it to strengthen its position in the industry. After


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entering into the joint venture, Luxor was renamed as Luxor Writing InstrumentsPrivate Limited (LWIPL).

[1] Suraj Mal Jain was the managing director of Linc Pens and Plastics Ltd. In 1976,he had set up a small manufacturing unit for ball point refills in Kolkata.

[2] In these pens, the ink is fed into the tip of the pen through a meshed fibrousreservoir which works on capillary action and the ink is then passed on to the ball

which rolls on the paper. These pens later came to be known as Roller Ball Pens.

[3] The pens with refills filled with gel ink, a semi-solid fluid, and pointed tip, which

enables smooth writing experience.

[4] A variety of fibre tip pens in which a regulator controls flow of ink thus

eliminating the need for an absorbent wadding, and yielding more ink holding andwriting capacity.

[5] A variety of fibre tip pens used for marking and highlighting.

[6] In an article titled "Charlie Parker's license to Quill," by Pramila N. Phatarphekar

in Outlook dated March 4, 2002.

[7] In an article titled "Luxor takes FMCG route to market Papermate stationery

products" dated September 2, 1999, by Kumar Kaushalam posted onwww.indianexpress.com.

[8] Gillette is a US based company and is the world leader in shaving products. Itsstationary products division had world famous brands such as Parker and Papermate.

In 2000, Gillette sold its stationary products division to Newell Rubbermaid.

THE MARKETING MIX

PRODUCTS AND PRICING

LWIPL had launched its first brand in 1963 - the 'Artist' fountain pen. However,owing to its small scale of operations during that time, the pens were made available

only in Delhi and surrounding areas. During the late 1960's, the Artist brand was

renamed as 'Luxor.' In 1982, LWIPL launched Pilot 05 microtip pens with needlepoint[1]technology.

Priced at Rs.10, this was the first model of Pilot pens tobe officially launched in India.The pens were

manufactured at the Delhi plant of LWIPL. Though Pilotpens were available in India prior to the launch, they

were available only in the grey market. LWIPL investedheavily to upgrade its technology to manufacture

microtip pens. These pens were launched with theintention of bridging the gap between ball point and


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fountain pens. Microtip pen was similar to a ball pointpen, with the ink filled within.

This turned out to be a unique selling proposition for

Pilot pens and they were quite successful as they were

considered to be an ideal substitute for fountain pens.LWIPL was able to sell 1,00,000 Pilot pens in the veryfirst year of their launch. However, the Pilot pens

launched initially were not refillable.

Due to the price conscious nature of middle class

people in India, the concept of disposable pens was notcherished for long. This prompted the company to

launch a new, refillable variant of these pens. LWIPL'spricing strategy was determined by factors such as the

demand for products, their brand image and the nature

of the target audience. When Pilot 05 was launched in1982, it was priced at Rs.10, and it was considered to

be expensive at that time.

However, in 1990, eight years after its launch, when the demand for these pens

reached its peak, Luxor sold them at Rs. 25 each. The price continued to remain thesame till early 2003, indicating the stagnant nature of its demand. On the other

hand, Pilot V5 was priced at Rs.45 at the time of its launch. These pens were pricedhigh due to its superior technology and the brand image that Pilot pens enjoyed.

However, after 12 years of launch, the price of these pens had to be reduced byRs.5.

In 1996, LWIPL launched Parker pens in India. Though Parker pens were popular in

India, they were available only in the grey market. Parker pens were primarily

targeted at the upper middle class consumers, senior level executives andbureaucrats. The initial range of Parker pens launched included Sonnet, Rialto,Frontier, Vector and Parker Classic. The most crucial decision for LWIPL was pricing.

At the time of the launch, the prices ranged between Rs.90 to Rs.10,000. Priced atRs.90, the "Vector" brand of pens was the cheapest in the range. Within four years,

"Vector" became the largest selling Parker brand in India. During the corresponding

period, the price was increased to Rs. 140.

continued from : THE MARKETING MIX

continued from : PRODUCTS AND PRICING

In 1999, LWIPL launched the 'Papermate' brand of pens in India. Papermate was thelargest selling brand in the US during that time. The brand strengthened thepresence of LWIPL in the low priced pen segment. These pens were primarily

targeted at the school and college students and were priced in the range of Rs 4 toRs 13. The specialty of this product was that they possessed the Lubrigude ink

technology[1] , which ensured that the ink did not leak, thereby offering acomfortable writing experience.


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In order to penetrate the Indian market, the companyoffered these global brands at lower prices. For

example, the Parker Vector roller pens were launchedat $3 compared to $9 in Europe. The Parker refills were

priced at a rate of Rs.35 compared to $3 in Europe.

Similarly, LWIPL launched the Papermate pens atnearly 1/3rd of the price in the US. In 2000, LWIPLlaunched the Parker Beta range, with prices ranging

between Rs.50 to Rs.75.

Targeted at the youth, the company sold around one

million pens within a couple of months of its launch. In2002, Parker pens were available in three broad price

categories (Refer Table I). By that time, the Parkerrange of pens had emerged as the largest selling brand

in the LWIPL pens portfolio, contributing 40% of its

revenues. LWIPL also launched a series of innovativeproducts in order to mark certain occasions.

In January 2000, the company launched the

"Millennium series" of Parker Vector roller pens. Thesepens had the world map inscribed on them and their

unique design enabled people to determine the timedifference between countries. Priced at Rs.250 each,

these pens became very popular.

In November 2001, LWIPL launched 'Special Moment', a gift pack consisting of

Parker Vector and Parker Beta pens, which had the signature of the brandambassador, Amitabh Bacchan inscripted on it. These pens were primarily targeted

at pen collectors, who were fond of Parker pens.

TABLE I

THE PARKER RANGE

MODEL PRICE RANGE (in Rs.)

BETA 50-75

VECTOR, REFLEX. 100-400

SONNET, RITALTO, FRONTIER 1000-5000

Source: ICMR

In February 2002, Parker launched the 'Black and White' range of Parker Vector ball

pens which were priced at Rs.145.each. In mid 2002, the company launched the'Football Legends World Cup edition' of Parker Vector pens in order to cash in on the

popularity that the event enjoyed. The pens had photographs of famous football

stars such as Maradona, and Pele inscribed on them. These pens were primarilytargeted at avid football fans, who would be interested in collecting pens bearing


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photographs of their favorite players.

In December 2002, LWIPL launched the "Gajgamini" range of Parker Sonnet fountainpens. The limited edition of pens (only 500 pens were released) was named after the

paintings created by noted artist MF Hussain[2] and also had his signature inscriptedon them. LWIPL priced these pens at Rs.5000 each.

[1] The technology enables pens not to smudge, smear, leak or leave blobs of ink onpaper.

[2] He is an Indian artist famous across the world for his paintings.

DISTRIBUTING PENS

In 1999, LWIPL launched the 'Papermate' brand of pens in India. Papermate was thelargest selling brand in the US during that time. The brand strengthened the

presence of LWIPL in the low priced pen segment. These pens were primarilytargeted at the school and college students and were priced in the range of Rs 4 to

Rs 13.

The specialty of this product was that they possessedthe Lubrigude ink technology , which ensured that the

ink did not leak, thereby offering a comfortable writingexperience. As the Parker pens were initially targeted

at the premium segment and carried a high price tag,

they were launched only in the four metros - Delhi,Mumbai, Kolkata and Chennai. The pens were made

available in large stationary stores and point ofpurchase displays were attached a lot of significance.

These pens were put on display in special racks so thatpeople could notice the complete range of pens. As the

demand of Parker pens grew, they were madeavailable in other urban areas of the country.

In order to increase the reach of Parker pens, the low

priced versions were made available in small stationaryshops. LWIPL later opened exclusive outlets of Parker

Pens in all major cities in India. When LWIPL launchedPapermate pens in India, it changed its distribution

strategy vis-a-vis that of Parker pens. The pens weretargeted at a wider cross - section of people, which

included students, executives and elderly.

Apart from relying on its existing sales force, the company tied up with Indian

Shaving Products Ltd (ISPL)[1]to distribute pens in the targeted one lakh retail

outlets in the first year of its launch. While the sales people concentrated ontraditional retail outlets such as stationary and bookstores, the tie up with ISPL

ensured that the pens were available in FMCG outlets such as shops and

supermarkets. This multi-pronged distribution strategy enhanced the reach ofPapermate pens.


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PROMOTION AND POSITIONING

LWIPL promoted its products primarily through advertising in the print and television

media. The company hired several advertising agencies in the past two decades. Thefirst advertising agency hired by LWIPL in the 1980s was 'Creative Works '[2], to

promote its Pilot pens. In the early 1990s, the company shifted to another agency,

RK Swamy/BBDO. In 1996, the advertising account of Parker was awarded toMcCann-Erickson[3], while the Luxor and Pilot brands remained with RKSwamy/BBDO. However, in 1999, when Papermate was launched, the account of all

the brands in the LWIPL portfolio was shifted to McCann-Erickson. In December2000, the advertising account was split again. Contact Advertising[4] was given the

charge of Luxor, Pilot and Papermate brands, while Lowe[5] was awarded the Parker

brand. However, in July 2002, the advertising account of Luxor, Pilot and Papermatebrands was also shifted to Lowe. As a result, Lowe was made responsible for

advertising of all brands in LWIPL portfolio.

[1] It was a flagship company of Gillette and was later renamed as Gillette India Ltd.

[2] Creative Works is the first full-service, retail based advertising and marketingagency serving small-to-mid-sized businesses, non-profit organizations andcorporate departments.

[3] McCann-Erickson is a US based advertising agency, which offers a wide range ofcommunication services in strategic planning, brand development and direct

marketing.

[4] Contact Advertising is a US based marketing communications firm withoperations spread all over the world.

[5] A reputed global advertising agency formerly known as Lowe Lintas & Partners,

India.

continued from : PROMOTION AND POSITIONING

The theme of advertising differed according to the product brands. For instance, theadvertising campaigns for Pilot brand stressed on the unique features of these pens.

During the 1980s, the advertising campaigns highlighted Pilot's dual features of aball point and fountain pen. In the 1990s, the campaigns stressed on the technology

used in making Pilot pens.

The campaign created by Contact advertising in 2002,featured the famous television actor Shekhar

Suman[1] , who highlighted Pilot's 'three dimpletechnology'[2] , which helped in smooth writing. In

July 2002, LWIPL felt that the students' memory had to

be refreshed with respect to the Pilot brand. Anadvertising campaign, 'Pilot - Reads well, Writes well'

was launched.. The campaign was very successful andwithin six months, the sales of Pilot pens increased by


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30%. Explaining the advantages of Pilot pens, PoojaJain, General Manager, LWIPL said[3] ,

"Today, the gel fad is dying and the consumer iscoming back to a more dependable and reliable

proposition for value for money, which Pilot offers. Pilot

is in fact perhaps the longest surviving and successfulbrand in the writing instruments category as it writesfour times more than any other needle point gel pen.

Pilot contributes 15% to our total turnover." TheParker brand received maximum advertising support

from LWIPL. Commenting on the target audience, John

Hadley, senior vice-president (sales and marketing),LWIPL said[4] , "Parker's target group is the top 12

million families in India and that gives us a big marketany way you look at it.

Our aim is to provide a decent writing instrument to Indians."In early 2001, LWIPL

roped in the famous film star and television icon Amitabh Bacchan to promote theBeta and Vector brands of Parker pens. The primary reason for choosing Amitabh as

a brand ambassador was his popularity among all groups i.e. children as well aselders and masses as well as classes. According to media reports, he was paid Rs 50

million for featuring in the advertisement. The ad campaign was a huge success andhad a high recall among television watchers.

In 2001, LWIPL roped in Shekhar Suman to endorse the Papermate brand. The

advertising campaign highlighted its unique selling propositions such as trouble freewriting, better quality and the rubber body of the pen, which enhanced its grip. It

also conveyed the message of romance by highlighting the two heart shapedsymbols, which formed a part of Papermate brand. Though the campaign attracted

reasonably good attention from the viewers, it was not able to generate the kind of

sales that the company expected and hence in July 2002, the advertising contract forPapermate brand was given to Lowe. In December 2002, an advertising campaignwas aired, which featured Papermate as 'Americas Largest Selling brand." Through

this campaign, LWIPL made an attempt to retain the American identity of thePapermate brand.

LWIPL also made efforts to change the positioning of its brand, if necessary. Forexample, when Parker pens were launched, they were positioned as a premium

brand targeted at the upper sections of the society, including senior executives,

businessmen and so on.

However, realizing that young people could also be the potential buyers for premiumpens, LWIPL targeted its Vector brand at young executives and its Beta brand for the

school and college going students. Explaining the necessity to change the positioningof the Parker brand, Sanjeev Goyle, Vice-President, Marketing, LWIPL, said[5] , "We

want the Parker brand in the pocket of every youth. To make this happen we've atwo-fold approach: one, shift Parker's positioning from a serious, daddy's pen to a

youthful and vibrant brand; and second, give multiple price and product options toaddress the entire section of the consumers.

1] Shekhar Suman is a famous television personality in India.


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[2] 24 A unique technology, which ensures constant flow of ink in the pen, enablingsmooth and clear writing.

[3] In an article titled "Luxor launches new TV ad campaign for Pilot," dated July 31,2002 posted on www.indiainfo.com.

[4] In an article titled "Signing On" by Ganga Subramaniam in Business India datedDecember 2-16, 1996.

[5] In an article titled "Luxor inks aggressive plans for Parker," dated June 28, 2001posted on www.financialexpress.com.

THE FUTURE

According to analysts, the major reason for LWIPL's success was its focus on offering

superior products to its customers. However, in spite of LWIPL's current leadingposition, analysts felt that the company would face tough competition in future from

other leading brands such as Reynolds, Rotomac and Today's.

According to analysts, LWIPL lagged behind in tappingthe full potential in certain categories. For example, in

the ball point pen category that contributed to around50% of the total sales in the pen industry, LWIPL had

just 5% share. Moreover, in the fast growing gel penssegment, the company had negligible presence.

Analysts also felt that excessive dependence on the

Parker brand, which primarily catered to the premiumsegment of the market, may not be fruitful for the

company in the long run.

But most importantly, analysts seemed concerned

about LWIPL's decision to diversify into the packagedfood and hospitality industry. In 2001, LWIPL

established Hazel Foods Pvt. Ltd. with an intention toenter the packaged foods segment and launched dry

fruits and spices under the 'Hazel' brand. In 2002,Luxor Hotels and Resorts Pvt. Ltd. along with the Hyatt

group[1] acquired utub Hotel in Delhi from the IndianTourism Development Corporation (ITDC)[2]. The

company also had plans to launch packaged water andenter into the convenience foods segment. For

packaged water segment, LWIPL planned to tie up withan international company.

Explaining the rationale behind these moves, D.K.Jain, MD of LWIPL and ViceChairman of Luxor Hotels and Resorts Pvt. Ltd. said[3], "Investments in categories

which show promising potential for growth and family interests" prompted this move.Analysts felt that these industries demanded a different set of expertise and a totally

different type of customers to be catered to. They felt that due to unrelated


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diversification, it would be difficult for LWIPL to focus on the writing instrumentsbusiness, where its core strength lay.

[1] The group is owned by the Pritzker Family of Chicago, Illinois. It owns orcontrols, a number of interests in the hospitality industry, including Hyatt Hotels

Corporation, Hyatt Equities LLC and Hyatt Vacation Ownership.

[2] It is an Indian public sector undertaking which had been established to

coordinate tourism related activities in the country.

[3] In an article titled "Luxor scripts a new plan," by Ratna Bhushan dated December

19, 2002 posted on www.blonet.com.

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