PRATAAP SNACKS- STRATERGY TO BECOME A TOPDOG FROM AN UNDERDOG

BY

Sanjana Narasimhan

DM16158

INTRODUCTION

Prakash Snacks was started in 2003 by Amit Kumat and his brother Apurva. In the next decade,

Prakash Snacks emerged their way to become one of the top six snack manufacturers in India. Its

Yellow Diamond brand has been growing at a rate in excess of 50% every year since its start in 2003.

Parkash Snacks bootstrapped to became the fastest growing snack company In India.

This success of Prakash Food is because of their strong brand with consistent positioning strategy.

Amit Kumar raised his first fund for the company with the help of his brother’s schoolmate Aravind

Metha who was a significant player in the real estate business in Indore. Kumat got Rs 2.5 crores as

startup capital for his company. Arvind also became a partner in Prakash Snacks.

In 2011, the company made revenue of Rs.260 crore last year. It grew up to became a 400 crore

player in 2012. This growth that the company has obtained is exceptional in the tough Snack food

market. There is a host of unorganized players in the market and also multinational companies like

Frito-Lay. The other top players in the market are Haldirams, ITC and Balaji group, which is Gujarat

based entrepreneurial outfit.

The foray into the Snack food market is not difficult as the capital cost incurred are not high. But to

get a foothold in the market is very difficult. Large player like Perfetti Van Melle, ITC, Parle and

CavinKare tried to enter into the market and found it tough to establish themselves in the market.

This proves to show the exceptional strategy that Prakash foods would have used to create one of

the largest snack found companies in India. Kumat did an exception work of expanding beyond its

home base of Madhya Pradesh into Maharashtra, Delhi and Haryana, where they have managed to

gain a string leadership position.

This rapid expansion of Prakash Snacks led to investment from Sequoia Capital which went on to

invest Rs.125 crores in 2010. This investment helped the company in scaling up its operations.

Sequoia invested Rs.70 crores to build a new manufacturing line.

Prakash Snacks was brought by Prataap Snacks Private Limited and in a short span of time

established its brand “Yellow Diamonds”. Yellow diamonds went on to be recognized as tongue-

tickler by over a million customers all over the world. To reach out to all classes of customer, it

introduced a wide range of products in different pack sizes.

At present, Prataap Snacks has sales close to Rs 700 crores a year. It is trying to raise $50 -70 million

form PE investors. It is trying to expand its manufacturing capacity and extend its geographical

presence to tap into the growing demand for its products. The snacks consumption in India is

increasing and the snack industry as a whole is expanded to Rs 10,000 crore.

PRODUCT LINE

Parkash Snacks has a wide range of delicious snacks- Potato chips, Chulbule, Namkeen, Wheel chips,

Ring chips, Puffs and Creamy Stick, all under the brand mane of Yellow Diamond.

The Potato Chips comes with different variants, and is a huge hit in the product line of Prataap

snacks. The various flavours under Yellow diamond potato chips are Tom Chi, Plain Salted, Yummy

Masala, Cream N Onion, Nimbu Masala, Tasty Punch, Chatpata and Black Pepper. It is perfect

competitor to Lays, Uncle Chips and Bingo.

The Yellow Diamond Chulbule has various flavours like Teekha Tadaka, Tango Tomato, Achari

Chatka, Cream-N-Onion and Masala. This product is a competition to Kukure.

The Yellow Diamond Namkeen has various variants under it like All-in-one, Aloo Bhujia, Banana &

Pepper, Banana Salted, Bhel, Bhujia Sev, Chana Dal, Chana Nut, Corn Flake, Falahari Chivda, Garlic

sev Murmura, Khatta Meetha, Masala Boondi, Mixture, Moon Dal, Navratan Mixture, Ratlami Sev,

Sada Boondi, Sev Murmura and Tasty shing Bhujia. This product line is a competitor to traditional

snacks maker Haldirams.

The Yellow Diamond Puffs come in flavours such as khatta Meetha,Masala, Pudina and Tomato. It

will be a rivalry product for Cheetos.

It also has Ring chips and wheel chips in its product line which again comes with a number of flavour

choices.

The creamy stick comes in different variants like chocolate, orange and strawberry. It is a wafer stick

with cream in the centre.

INDIAN SNACKS MARKET

The India snacks industry was initially dominated by Haldirams and Uncle Chips. Then Pepsi entered

into the market with its snack Frito-Lay, which is presently dominating the snack food market with its

wide range of product portfolio. The other major player include Haldirams, ITC, Parle , balaji and

Prataap Snacks. India snacks market is divided into chips, extruded snacks (design-specified food)

and traditional snacks. The Chips market is dominated by Lays, bingo and uncle chips. The Kurkure

has majority of the market share in Extruded snack segment and the Haldirams holds a major share

in the traditional snack market.

The snack food market is moving for unorganized to organized sector. But the majority of the

demand is fulfilled only by six snack food companies. There is a lot of scope and demand in the

market which is rapidly expanding at a very fast phase.

There are a number of factor that are acting as a driver to the growth of the market in the recent

years like the higher disposable income, rapid purchasing power, lifestyle changes, inclination

towards package food products. Some of the other drivers are aggressive marketing campaigns that

are breaking the clutter towards packaged snacks and attracting the consumers towards it. Working

women network and fast retail network expansion are some of the other factors leading to growth.

STRENGHTS OF PRATAAP SNACKS

The main factor that decides the customer preference of snacks is the product taste. Prataap

has a large flavour variant in each of its products and has good taste for which it is known.

It has high innovation in its product line; it caters to across all classes of customers with its

wide category of products.

Equipment employed gives it the quality that it is aiming; Japanese machines are used

instead of Indian machines. The falling equipment prices played to the advantage of the

company. The company aimed at giving good quality products at a low cost.

The company used less advertisement and believed in giving higher margin to retailers or

freebees to customer for promoting the product. Thus the cost incurred is low giving high

profits and return on investment.

The success of the company mainly stemmed from the value it offered for its customers.

Most of its products are in the range of Rs 5 to Rs 10 range. Its strategy was to give higher

grammage in its packets than the market leader. Nearly 80 percent of its sales come from

Rs.5 packets.

It targets B, C and D Class outlets, which the large player did not target. These markets are

underserved and Prataap snacks cashed in on this by providing tasty and value products.

The distribution strategy of Prataap employs super stockiest, who not only distribute the

products but also market the products in their region. Thus the staff requirement is low,

which cuts cost for the company. Nearly 25 percentage of the review comes without any

sales support from the company’s side.

CHALLENGES FACED BY PRATAAP SNACKS

For Prataap Snacks to expand to other geographic regions and grown in the snack food market, it has

to overcome the following challenges it is facing:

1. The biggest problem that Prataap faces is its distributors are not supplied fast enough.

2. It has to start advisements and expand its staff base according to the requirements of the

company as it grows which would reduce its profitability and return on investment.

MARKETING MIX

The marketing mix that is employed by Prataap Snacks is

1. Product: The Prataap provides a wide range of Snacks under its brand “Yellow Diamond”

that caters to all classes of consumers. Prataap believes in providing taste, it offers a whole

gamut of flavours to choose. The product is known for its innovation in packet sizes and

products.

2. Place: Prataap has a distribution model that consists of stockiest, distributors and retailers.

The stockiest pay upfront and gain ownership of the product. They not only distribute their

product but also market it in their area. Hence less sales team is required from the

company’s side. They also directly ship their products to distributors from their warehouse.

The logistics incorporated by Prataap is a mix of their own logistics network as well as logistic

network from the distributor’s side. Prataap Snacks has mainly established a strong foothold

in Madhya Pradesh, Maharashtra, Delhi and Haryana.

3. Price: Praatap is always known for value that it provides in its product offering. 99 per cent

of the products offered by Praatap are in the price range of Rs 5 to Rs 10. It does not provide

credit to the stockist and the distributor. The company has a very low amount of bad debt.

4. Promotion: It did not believe in advertisement at the start which helped in obtaining high

profits for the company. But as the company is expanding geographically, it is coming up

with ads that focused on kids. Some of the other marketing techniques that Prataap

incorporated are Mass Media, Radio spots, Press Ad, Van Painting, outdoor Publicity, Cinema

slides, etc.

Direct communication activities that convey the benefits and values of its product are also

adopted like product sampling, participation in Fares & Festivals, demonstrations, school

promotion, etc. Point of Sale (POS) materials in the form of danglers, posters, banners,

display stands, etc. are used.

FACTORS INFLUENCING DIFFUSION / ADOPTION

1. Relative Advantage: The relative advantage that the product possesses is the value for

money, as it gives taste, quality, gamut of flavours and more grammage at a low price.

Which has caused high diffusion of Praatab Snack in the market, it is growing more 50

percentage year on year for its start in 2003.

2. Compatibility: The product has a high compatibility as it has both western and traditional

snacks in its product line. It has a wide range of traditional snacks in its product line under

the name Namkeen. The western snacks it provides like the potato chips and extruded

snacks also come with Indian flavours, hence it is highly compatible with the tastes, needs

and culture of the country.

3. Complexity: The complexity is very low, as it is very easy to buy the product and consume it.

4. Trialability: Majority of its products come in the price range of Rs5 to Rs10 and innovative

packet sizes, hence the trialability is high.

5. Observability: The observability is high as it is displayed in the selves in all stores and comes

with attractive packaging that catches the eye of the customers.

RECOMMENDATIONS:

Now as the company is growing and expanding into other geographic regions:

1. Strengthen distribution: Prataap Snacks should expand its distribution network and logistics.

As the company is expanding it is better to outsource its logistics to F&C agents and focus on

their core competency. This will reduce their cost incurred for trucks and warehouses.

2. Increase Sale force and staff: The Company can hire sales staff, who will help the company

convey the promotions and knowledge about the products to the distributors.

3. Adopt Technology: The technology and skilled staffs should be hired as the company

expands, so as to help the distributors with forecasting and order placement. This will

reduce the problem faced by the company of the products not reaching the distributors fast

enough.

4. TOMA: As snack is a low involvement product and the differentiation is not that high,

awareness of the product is important. This is because customers do not evaluate low

involvement product, they tend to purchase the product that comes in their minds first.

Thus the company should strive to achieve top of the mind awareness (TOMA).

5. Promotions: As of now the advertising that the company does is very minimal. The company

should take the peripheral route to endorse the product. They need to ramp up their

advertising to increase brand recall, this can be done by:

a. Celebrity endorsements/ Classical Conditioning: They should rope in celebrates who

resonate the values of the brand. They have started this by associating with the

Bhoothnath Returns team in co promoting their film through commercial, but more

effective commercial can be made by roping in a popular celebrity itself.

b. Affect: Emotions can be used to promote the brand such as fun and indulging. The

present Ad commercial did not bring in the emotions. For example: Lays came with you

can’t eat just one and brought in emotions of indulgence and pleasure. Lays used this act

of eating for pleasure without hunger and in excess, proving and emphasizing that

potato chips are irresistible.

c. Catchy slogans/ Taglines: It has to come up with catchy slogans that could help the

company increase the brand recall among the consumers. For example: Bingo came up

with “No confusion, Great combination”.

d. Jingle/ Music: The jingle can help in effective recall of the brand. For example: The Ad of

Nirma washing power ad is still remembered for its jingle.

e. Mere Exposure: It should start sponsoring TV shows and programmes in the long run.

For Example: DLF IPL/ Pepsi IPL, the mere association can increase the brand recall.

6. In-store promotion and Shelf Space: The Company should start doing in-store promotion

and buy shelf space in the long run as this is a very important for increasing the observability

of the brand, as the purchase decision is made in the stores only. This in-store promotion

can increase the awareness and sales to a large extent.

7. Increase PLC and growth: In the long Run the company can come up with different usage for

its snacks product. For example: They can come up with ads that show the product being

used for making different recipe and snacks. They can also come up with Ad that advertises a

number of products in a single Ad commercial, showing how its large category of Snacks

fulfils the requirement of all the family members like teenager eating Potato chips, children

eating Ring or wheel chips, a middle aged mother or father eating Extruded snacks/

Taditional Snacks products of Yellow Diamond and old age people going for Namkeen. For

example: Like the Panansonic Ad that shows that it has all the machines that make people’s

day to day work easier.

8. Expand across Class: The Company is now manly focusing on B, C and D Class outlets. It

should start penetrating into the A class outlets, this would increase the brand image and

the awareness of the product.

9. Expanding across geographies: Expanding across territories is very important as national

player are well known than local player, this in turn can increase the sales and brand image.

10. Co-Creation: They should work upon co-creation along with their customer to make them

feel involved with the product. For example: They can come with ads that show people

adding seasoning, lime and other ingredients with product like namkeens, chips and

Chulbule to come up with new chat. Then ask the people to send the company their recipe

which they tried at home along with their story.

REFERENCE

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an-underdog-brand-rahul-sharma-112101500079_1.html

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bhoothnath-returns-5903404045_1.html

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