snacks industry presentation

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Wafer Warfare Wafer WarfareA project aimed at understanding the Indian Wafer Snacks Market with

special emphasis on Market Size, Market Structure, Competitors and

their Strategies.

By:-

ARPITA NAGAR

Submitted To:-

Dr. PRASHANT GUPTA



The size of the Wafer Snacks Segment in India is estimated tobe 4,500 ² 5000 crores

The market is growing at 30 percent annually

The branded players account for 2,000 crores of the market size

Major branded players include Frito-Lay, Bingo, Haldiram,Balaji, Parle

Potato Chips and Potato based items account for 85 percent of the total snacks segment.

As per Nielsen·s Retail Audit, Frito-Lay commands 45% marketshare, followed by Haldiram at 27% and Bingo at 16%

The rest is divided between new players such as Smart Chips,regional players such as Balaji and handful of unorganized players

Introduction to the Indian Wafer Snacks Segment



Prominent Brands and their offerings

Lays

KurkureLehar Namkeen,

Cheetos

Uncle Chipps

Frito-lay

Bingo

ITC

Musst Bites & Stix

Smart Chips

Cheeslings

ParleSnacks

Balaji Wafers

Haldiram

Yellow Diamond among other local players.

OtherPlayers



Analyzing Segment Attractiveness

(Porter¶s 5 forces)



Industry Attractiveness (Porter¶s 5 forces)

Threat of new entry:

As the market is growing at 30 percent annually, newentrants may consider it a profitable venture

As branded players are priced similarly, new players mightpenetrate by adopting a lower price or by offering moregrammage at the same price (Balaji-strategy)

New players with a distinct USP and marketing strategymay find it easier to enter the market (Bingo Strategy)

Unorganized players still account for half of the total wafersegment, thereby discouraging market entry

Veteran players such as Fritolay, Haldiram etc enjoyeconomies of scale, well-established distribution and gooddistributor relations.

Hence, the threat of new entrants is moderate.



Competitive Rivalry

High Competition ² Branded Players involved in cut-throat competition to increase market share, entice newconsumers, find new markets

Low Quality differences among branded players.

Quality difference between branded and unbrandedofferings is offset by low price offered by unbranded players

Cost of switching is low as all players have a similar

pricing strategy

Brand Loyalty is high for branded players


Hence, the threat of competitive rivalry is high.



Bargaining power of suppliers

Suppliers provide raw materials such as potatoes, spices andother ingredients. Their ability to raise input costs is high.

Higher cost of input commodities leads to lower margins,making the market unattractive for distributors and retailers (inan already low-margin, high-volume market)

Shortage of any input material may also affect productionand thereby impact distribution.

Veteran players like Fritolay and ITC already have a well-established network of suppliers. ITC·s e-choupal venturepermits a steady supply of raw materials at the lowest price.


Hence, the bargaining power of suppliers is high.



Bargaining power of consumers

Frito-Lay enjoys a healthy lead with a 45 percent marketshare for it·s portfolio of products

Competitor differentiation is in terms of variants andcommunication.

Ability to substitute is high as brands are priced similarlyand distribution problems for one brand promote sales for theother.

Price Sensitivity is high. An increase in the price of Laysmay promote a switch to Bingo for most buyers (except forloyalists)


Hence, bargaining power of consumers is high.



Threat of substitutes.

Indian Snack Segment is high-volume, low-involvementdriven (thrives on impulse buy)

All snacks are considered to be substitutes of each otherBiscuits, Wafers and local snacks like Chakli, banana chips,farsan etc are all substitutes of one another


Hence, the threat of substitutes is high.



Final Verdict

The market is unattractive for players who:

Aim to be a me-too product with no significant differentiation Do not have a well-established distribution network

Do not have good supplier and dealer relationships

However, if one can ´Pullµ a bingo or carve out a ´SmartµNiche ala Smart Chips, the entry to this market may beprofitable.




UnderstandingUnderstanding

TheThe

MarketMarket StructureStructure



Fritolay (45 percent cumulative share consisting of Lays, Kurkure, Uncle Chipps, Cheetos and Leher)

MarketLeader

ITC·s Bingo (16%) posing a threat to Lays through

its direct frontal attack

Market

Challenger

Balaji and local players such as Yellow diamonds.Also included are unorganized offerings, aimed atthe price-sensitive, less loyal audience.

MarketFollower

Parle Monaco·s Smart Chips which has identifieditself a niche of the more health conscious sectionof the audience by offering them a baked variantof chips.

MarketNicher

MARKET STRUCTURE



Stages in theStages in the

LifecycleLifecycle

of the Category of the Category



Product De velopment Stage

This stage is characterized by

No Sales & Profit

Product Testing ² identifying a sample target group toevaluate the potential of the product

Research & Development ² aimed at constantlyimproving/differentiating the product

Eg, before Launch, Bingo developed a cross-sectional teamof 8 individuals who travelled across 14 cities to identify thesnacking habits of the Indian Consumer. The team found outthat local-tasty snacks like khakra, vada pav , samosas, etc

were the popular choices among the Indian audience. Basedon this information, the company decided to develop flavorswith an Indian taste.

Test Marketing ² may be conducted by launching theproduct in one or two markets initially.

Lifecycle Stages of the Wafer Segment



Introduction STAGE

The product is launched in the market, either as a single variant ormultiple variants, single SKU or multiple SKU·s. In this case, it is

advisable to go for multiple SKU·s to off-set price-sensitivity.

The price is set keeping in mind the competitor·s offering, the

price-sensitivity, market size, cost of switching, extent of brand loyalty

among other factors. However, it is advisable to follow the leader in

this regard unless there is a significant USP. If the product is me-too, alower price is advisable

Promotional Spends, if launched nationally, must be high enough to

gain maximum visibility in the early stages. Efforts must be made to

keep the communication simple and unique. The launch campaign

must be such that it doesn·t get lost in the clutter.

FMCG thrives on distribution so the firm must have a well-

established network in its place. The firm may look at providing add-

on schemes, value deals to dealers and retailers not provided by

competitors.




Grow th

Depending on the success in the growth stage, the firmmay aim at product improvement. In terms of SKUs,packaging, etc.

The company may introduce newer variants through

continuous R&D

The firm may undertake sales promotion such as extragrammage, freebies, etc.

Example: The sales of Lays multiplied through theintroduction of ´Tazoµ

If the product was launched in smaller markets, the firmmay consider increasing distribution coverage.




Maturit y

The market becomes saturated. Hence, the firm may placeemphasis on :-


Product Modification

Re-branding Strategies

Distribute in selective profitableareas

Exit out of markets where theproduct doesn·t get the desired salesnumbers



Decline

The Company may withdraw the productfrom the market. If in-case of a multi-brand

company, the company may focus on profitablebrands (cannibalize its weaker brands)

The firm may adopt a permanent salespromotion strategy such as buy one-get one

free, discounted price, more grammage in caseof large unsold inventory.




Marketing Strategy adoptedMarketing Strategy adopted

by Fritoby Frito--lay lay

(The Market Leader)(The Market Leader)



Product Strategy:-

Frito-Lay's product strategy aims at differentiating among itsown brands in terms of product taste, design, packaging andtarget audience.

Marketing Strategy of Frito-Lay

One of the power brands under Fritolay comes in 5 differentflavours. Tomato Tangy, Classic Salt, Cream ¶n· Onion are thepopular ´westernizedµ variants, while ´Magic Masalaµ and ´Lime

Masalaµ are aimed at craving the Indian-taste.

Lays

Launched in 1999, the brand symbolizes the spirit of India with itsIndianized farsan-like flavors. The newly launched ´Desi Beatsµvariants are a direct answer to Bingo·s strategy of launchingIndianized flavours.

Kurkure

Launched in 1995 provides variety from other Fritolay offerings

such as Cheese Puffs & Masala Balls. The product differentiationis apparent in terms of design and shape. Also the inclusion of ¶cheese· as an input material distinct it from other brands.

Cheetos

A salt farsan-like snack aimed is a direct alternative to theofferings of unorganized players.

LeherNamkeen



Pricing Strategy

The pricing strategy for Lays is consistent with other

competing players. As this market is driven by high-impulsive

buyers of snack foods, there is very little dichotomy in the pricing

strategies of all major players.

Lays and Kurkure, the two popular choices, come in different

SKU·s priced at Rs.5, Rs, 10 and Rs. 20, similar to Bingo and

Haldiram.

Recently, however Fritolay launched a Rs.3 SKU for it·s

Kurkure brand in a bid to compete more aggressively.




Promotional strategy

Realizing the direct threat posed by Bingo to its market share, Fritolay

revamped its· branding strategy for all leading brands.

For Lays, the company signed on ambassadors Saif Ali Khan & MS Dhoni.

Indianized versions of Lays were also launched after Bingo·s success with Indian

flavours. These included Chat Street,

´Chala Change Ka Chakkarµ ² the largest ever brand promotional strategy

undertaken by Fritolay aimed at bringing all its flagship brands under one roof. This

massive umbrella campaign would allow chosen customers to live the life of aBollywood Indian celebrity for a day.

´ChaiTime Achieversµ ² a Kurkure centric campaign was aimed at the

housewives in India. The Idea was to promote heavy audience interaction by

sending recipes for new flavours. The winning family would then have the

opportunity to have their photographs on one million Kurkure packs

Aside from Juhi Chawla, the company also signed on Kareena Kapoor for the

´Desi Beatsµ version of Kurkure.

Other initiatives include posters at unconventional retail points such as cyber

cafes and telephone booths, a tie-up with South-Western Railways, known as

´Kurkure Expressµ to increase brand visibility.




DISTRIBUTION STRATEG Y

Being first in the market through its acquisition of UncleChipps, Fritolay already has a well-established network of distributors and retailers pan-India. The brand loyalty enjoyedby Lays was leveraged during the launch of Kurkure, Cheetosand the recently launched ´Alivaµ

Frito-Lay has a distribution network of 30 CFAs and 2RDCs who service 800 distributors who sell to 4 lakhs retailers.

Fritolay boasts of reaching more than 1 million retailoutlets countrywide covering 100 towns. The Company, with its

manufacturing plants in Punjab and Pune, aims at investing20 crores to extend distribution facilities to improve coverageand increase product shelf life by 120 days.





by Bingoby Bingo

(The Market Challenger)(The Market Challenger)



Product strategy

Bingo positioned itself as chips with an Indian twist. The 16

flavors introduced at launch were carefully developed through

R&D.

The initial offerings were a mix of potato chips and fingersnacks.

The Potato chips segment includes variants like masala,

salted, tomato inspired by the snacking habits of the Indian

consumer

The offerings under Finger Snacks include the pakoda

inspired ¶Live Wires· and Khakra inspired ¶Mad Angles·

These offerings were further differentiated by providing

SKU·s at Rs. 5, Rs.10 and Rs. 20

Marketing Strategy of Bingo



Pricing strategy

The main objective for ITC was to compete effectively withplayers who were already there. Hence, it launched a directfrontal attack by introducing similar priced SKU·s.

ITC already enjoyed cost advantage over competitorsthrough its e-choupal initiative. This also facilitated timelysupply of raw materials.

ITC·s printing and packaging business also lead to high-quality, cost-effective and innovative packaging.





Bingo was strategically launched at the time of world cup to cashin on the popularity of snacks among the cricket lovers of thecountry.

The advertising strategy revolved around slapstick humor andirrelevant themes to hold eyeballs, garner attention and interest,and stand out from the clutter.

ITC booked 10 to 15 spots per channel per day, 20 spots on radiostations supported by 1000·s of hoardings advertising the product. According to industry estimates, the total advertising spend in theinitial 6 months were roughly 100 crores.

While its competitor Fritolay focuses on celebrity endorsements,

Bingo chose a different route. It didn·t have an ambassador!

As the product is aimed at the youth, digital media was heavilyused. For instance, the Bingo National Gaming Championshipacross 4 cities with more than 25,000 participants

Bingeonbingo.com and Mad Angles Twister Application(Facebook) were other initiatives in online media.




Distribution strategy

ITC already had a well-established distribution network through its

cigarette and tobacco-related offerings which was leveraged in case of

Bingo.

Further, the company distributed 4 lakh racks across all retailers todisplay the brand at all Points-of-sale.

Within 6 months, Bingo was available across 2,50,000 retailers across

the country.

A crucial alliance with Future group which lead to all future group

retail outlets like Big Bazaar, Food Bazaar stocking only ITCµs Bingo

HORECA (Hotels, Restaurants and Cafes), Local betel shops are all

being used to distribute Bingo to a wide range of audiences





by SMART CHIPSby SMART CHIPS

(The Market (The Market NIChERNIChER))



Product strategy

Parle Monaco recently entered the chips segment with itshealthy variant called ́ Smart Chipsµ. Realizing the recent

market trend of being more ¶health conscious·, Parle, through

Smart Chips has carved out its own niche. Highlighting it·s USP

of being baked rather than friend. Smart Chips comes in 4

different flavors:

Simply Salted

Tangy Tomato

Crazy Chat

Macho Masala

Marketing Strategy of Parle¶s Smart Chips

Among its competitors, Parle has had a tough timegaining a considerable market share for its snack

offerings. Must Bites & Must Sticks together accountfor 5-7 percent of the total organized wafer chipssegment



Pricing strategy

Similar to competitors, Smart Chips comes in two SKU·s. Rs. 5 for a 25

gm pack and Rs. 10 for a 50 gm pack


The ad campaign, handled by Thoughtshop Communications,

features Aamir Khan advocating the benefits of baked chips over the

fried ones taking a subtle shot at competing brands

The ad highlights the USP of the product in a humorous way

without sounding to preachy or serious, which enables it to stand out

from the clutter.

Distribution strategy

Being a veteran player in the food and snacks segment, Parle

already has a well-established framework of distribution through its

biscuits and other snack offerings. This has enabled Parle to distribute

Smart Chips effectively, reaching millions of retail outlets.

Thus, with the advent of Smart Chips, Parle has carved out a small

niche for itself aimed at the health conscious snack-lovers. However, it

remains to be seen how this product performs in the long run.

Marketing Strategy of Parle¶s Smart Chips



Frito-Lay's Success Mantra ± Right Strategy at the Right Time

Respond to Competitor·s threats

When Bingo started eating into Fritolay·s market share, the company proactively responded by launching it·s own versions of Indianized flavours spread across all it·s brands. Taking a cue from its competitor in terms of increased audience interaction and

online marketing, Fritolay expored new mediums of advertising which lead to the launch of the massive ́ Chala Change Ka ChakkarCampaignµ

Consistent Communication

Fritolay·s communication is one of its key strengths. It has managed to create a distinct image for all its brands ² Kurkure, Laysamong others. Any launch of a new variant/line extension is supported by a 360 degree marketing campaign to create awareness

and induce trials.

If you·re not the first in the market, compete head on and if possible acquire the competitor

Being first in the market, in 1992, Uncle Chipps enjoyed tremendous success. When Fritolay entered India in 1996 with its brand´Rufflesµ, it went head on with Uncle Chipps but still couldn·t gain significant market share. However, post 2000, it bought out

Uncle Chipps for an undisclosed sum, thereby wiping out its sole competitor in the branded wafer market.



Learning¶s from the competitors.

A well-planned full frontal attack on the leader maysometimes yield fruitful results (Bingo)

A thorough analysis of the leader·s offerings will revealmissed opportunities (Smart Chips)

Once a USP over the leader and other competitors isidentified, it must be communicated in simple and clearterms (Smart Chips)

Innovative advertising and communication, if done right,helps stand out from clutter and reach the target audience.

If there is no significant product or distributiondifferentiation, focus on the other 2P·s namely Price andmost importantly promotion.



WEB-BASED REFERENCES

1) http://www.imagesretail.com/support_jan_suplychain.htm

2) http://www.televisionpoint.com/news2009/newsfullstory.php?i

d=12448143713) Official Websites of Fritolay, Parle, Balaji, Bingo among other

brands

4) http://www.afaqs.com/perl/news/story.html?sid=20324

5) http://www.moneycontrol.com/news/business/frito-lay-loses-

snack-mkt-share-to-itcs-bingo_300325.html

6) http://www.bizdewz.com/parle-monaco-smart-chips-vs-lays-or-aliva/

7) http://www.afaqs.com/perl/news/story.html?sid=25651

8) http://economictimes.indiatimes.com/news/news-by-

industry/cons-products/food/Balaji-Wafers-a-name-to-reckon-

with-in-Gujarat-snacks-market/articleshow/5367599.cms

REFERENCES

TEXTUAL REFERENCES

1) Marketing Strategy ² Walker, Mullins, Boyd

2) Marketing Strategy & Plans ² Michael Vaz3) Class Handouts ² Prof. Dr. Amit Rangnekar



THANK Y OUTHANK Y OU

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