SUNFEAST ( AN ITC INITIATIVE)

TO BISCUITS

FROM

CIGARETTES

ITC was incorporated on August 24, 1910 the Company's multi-business portfolio encompassing a wide range of businesses - Cigarettes & Tobacco, Hotels, Information Technology, Packaging, Paperboards & Specialty Papers, Agri-business, Foods, Lifestyle Retailing, Education & Stationery and Personal Care .

In July 2003, ITC forayed into the Biscuits market with the Sunfeast range of Glucose, Marie and Cream Biscuits. Sunfeast’s brand essence, "Spread the Smile" connotes happiness, contentment, satisfaction and pleasure. The mascot Sunny reinforces the emotional aspects of the brand.

ITC has now moved seamlessly from the role of master blender who creates new cigarette flavours to master chef, using its expertise to create a veritable feast, or should we say "Sunfeast", for the biscuit consumer.

The Sunfeast umbrella brand, powered by Sunny the mascot, is intended to "spread the smile", given the new product innovations of Orange Marie and Butterscotch Cream biscuits aimed at the young members of the Indian households.

He said growth in the biscuits market had risen from five per cent earlier to 12 per cent in 2002, and was obviously an attractive proposition right now, given the company's distributive and marketing strengths.

These are the most liked biscuits in India for their better taste and rates.

FINANCIAL STATISTICS

ITC Ltd. concluded yet another year of strong performance with Gross Turnover at Rs.21356 crores reflecting a growth of 10.7% over the previous year. Net Turnover at Rs.13948 crores increased by 14.7% driven by the handsome 49% growth of non-cigarette FMCG businesses and a healthy performance by the Hotels and Paperboards, Paper & Packaging segments. .For the fourth quarter, Net Turnover registered a growth of 16.7% to touch Rs. 3934 crores while

The Board of Directors recommended a dividend of Rs. 3.50 per Ordinary share of Re.1/- each (Previous year: Rs.3.10 per share). This will entail a total cash outflow of Rs. 1543 crores, comprising proposed dividend of Rs. 1319 crores and income tax on the proposed Dividend of Rs 224 crores.

HOW SUNFEAST WAS SUCCESSFUL:

Can a cigarette manufacturer succeed in marketing Biscuits? What do management thinkers say about unrelated diversification? Unrelated diversification will succeed if it is based on the core competency of the firm. So What is the core competency of ITC that is being leveraged when it decided to enter the Foods market. ITC relies on three core competencies

The depth of distribution

Its brand building capabilities.

The ability of Quality outsourcing.

Sunfeast has been a success because of these three competencies of ITC which made them e a

serious FMCG player from its position of Tobacco products leader. ITC had the advantage of

the well entrenched distribution setup which is matched only by HLL.

SUNFEAST- AN OVERVIEW:

"Sunfeast" - The umbrella brand name introduced in the Glucose, Marie and Cream segments

"Sun" mascot - The brand ambassador reinforcing the positioning of the brand "Spread the Smile"

Product Innovation - Two unique and new flavours - for the first time in the India market- Orange Marie and Butterscotch Cream biscuit

"Sunfeast" - To be launched nationally in phases in over One million retail outlets across the country.

"Sunfeast", with the Brand Essence "Spread the Smile" connotes happiness; contentment, satisfaction and pleasure one would derive from great tasting and high quality biscuits. The brand positioning and imagery is reinforced by the Sun mascot conveying the emotional and gratifying aspects of the product.

"Sunfeast" range of biscuits is competitively priced and would include two new product innovations - Orange flavoured Marie and Butterscotch flavoured Cream biscuits launched after 12 months of product research and development and extensive sampling across 14,000 consumers across all POP for the first time in the Indian market.

DIFFERENT PRODUCTS

Various products offered by Sunfeast are Sunfeast milky magic, Sunfeast Marie light- Sunfeast Marie light original; Sunfeast Marie light Orange, Sunfeast golden bakery, Sunfeast dark fantasy, Sunfeast Glucose, Sunfeast dream cream – strawberry cream; bourbon; orange cream; butterscotch cream, Sunfeast snaky, Sunfeast sweet’ n salt, Sunfeast nice, Sunfeast benne vita flaxseed biscuits, Sunfeast special- special cookies and special creams, Sunfeast pasta treat- pizza style; chicken; tangy tomato.

COMPETITORS:

Major players in biscuits who dominated the industry long back were Parle and Britannia. With that there were smaller brands in various regions. Instead of all this ITC took a bold step to hit on these biscuit mammoths making 82% of industry in 2004.

Let me enumerate some reason why ITC entered into this product category.

1. In developing markets, the above percentage is as high as 95%. So looking into

future, India’s will have more organized and branded food product categories. It will

lead to dual effect: Increase in base of biscuit segment and Increase in % of branded

food categories.

2. ITC has a great scope to be a branded player.

3. Branded Biscuits industry come out to be around Rs. 4000 crores .

4. Increasing at the rate from 12% to 14% p.a.

5. Synergies with ITC core competencies (value addition to wheat with Aashirwad Atta

brand).

6. Biscuits as a segment positively affect the bottom line.

REASON FOR ENTRY INTO BISCUITS

1. Innovation: Findings revealed that consumers wished to taste new and innovative

products. The company decided that this could be its biggest point of attack. In 2003,

ITC launched Sunfeast with six ranges along with that, it also launched innovations

such as orange-flavoured Marie, Marie light and butterscotch-flavoured cream

biscuits. In 2004, Sunfeast followed this up with the launch of Milky Magic. More

recently Sunfeast Snaky and Sunfeast Golden Bakes.

2. Distribution: In biscuit category, distribution and visibility is extremely important

and in this regard, Sunfeast did not stumble. The main credit goes to tobacco business

– its understanding and deep grasp in distribution. The company says the brand is now

available in nearly 1.8 million outlets compared to Britannia’s -

3.3 million Outlets and Parle’s - 1.5 million outlets.

3. Promotion: In August 2003, a month after its launch, the company undertook a major

sampling exercise to promote the product. For two years then, the brand did all the

usual rounds - riding behind buses, blocking television spots, corner space in

newspapers.

4. Pricing: The biscuits industry now has two clear models. Parle products play the low

price game. Britannia and Sunfeast look at a two-pronged strategy. High margins in

cream variants and volumes from the Marie and Glucose segments. Biscuit consumer

is willing to pay more only when he sees a clearly differentiated product.

FUTURE PERSPECTIVE:

Sustain ITC's position as one of India's most valuable corporations through world

class performance,

Creating growing value for the Indian economy and the Company’s

stakeholders,

To enhance the wealth generating capability of the enterprise in a globalising

environment,

Delivering superior and sustainable stakeholder value.

QUESTIONS BASED ON THE CASE STUDY:

Q1. Which of following is the right strategy to follow?

a. To retain the present products and increase their reach and salesb. To keep on innovating and evolving the products and its varieties being offered.

Justify the statement and suggest a method with appropriate reasoning?

Q2. Brand building for sunfeast has incurred at a substantial chunk of investment, how should they recover it without heavily affecting its M.R.P? Justify the answer?

Q3. How is sunfeast successful i.e. after a huge diversification of ITC from cigarettes to biscuits?