ITC is using every strategic resource it has in his arsenal to make a mark in the snack foods business. ANGSHUMAN PAUL takes a look
In the late 1980s, ITC was unsure about its future. It realised that if the then-ongoing excise case went against it, its thriving cigarette business would be in trouble. As years went by, it was clear that even despite the legal problems, it would be difficult to grow the cigarette business due to pressures from the civil society to clamp down on smoking. It was then that ITC’s strategists decided to focus on exports, and the company started an international business division to achieve this objective. Unfortunately, the project bombed, and resulted in a public scam. By the mid-1990s, it was apparent that the excise case was likely to go against the company; in 1997, the tax tribunal imposed a penalty of over Rs.8 billion. It was clear that the government would impose a ban on smoking in public places. So, when Y.C. Deveshwar took over as the chairman in 1996, he had to think out-of-the-box to ensure future growth.
He decided to use ITC’s strong marketing and distribution network (including tens of thousands of paanwallahs) to become a consumer products player. It proved to be a masterstroke. Beginning with tying up the back-end through e-Choupals’ procurement of raw materials, ITC slowly got into apparel, foods and personal care. However, its most successful launch has been that of snack food Bingo, which comprehensively proved that ITC had got it right. B&E analyses how Bingo disrupted a sector that was ruled by global giant, Frito Lay.
Tactic No 1: Research, research, research
ITC never launches a product, unless its potential is backed by research. Bingo rolled out in 2007, but work began 3-4 years ago with primary research by AC Nielsen, and in house studies to pinpoint lucrative segments. “Our team of 500 people is dedicated. For example, we plan to launch frozen corns and a specific team is already doing primary research of its own,” reveals Ravi Naware, Divisional CEO, Foods Division, ITC. Due to this, the Bingo brand has managed 10 variants within a year, while competitor Kurkure, too, has 10 variants despite being in the market for four years.
“Instead of launching a ‘me-too’ product and competing with existing players, we launched a different product,” says Naware. Be it Bingo or Aashirvaad organic spices, ITC has never believed in competing directly with existing products. Only after the brand is established does the company resort to direct attacks on competitors. Affirms Naware, “If you are competing with similar products, it has to be very different from rivals in terms of packaging and you need to be present in all the possible areas.”
In the late 1980s, ITC was unsure about its future. It realised that if the then-ongoing excise case went against it, its thriving cigarette business would be in trouble. As years went by, it was clear that even despite the legal problems, it would be difficult to grow the cigarette business due to pressures from the civil society to clamp down on smoking. It was then that ITC’s strategists decided to focus on exports, and the company started an international business division to achieve this objective. Unfortunately, the project bombed, and resulted in a public scam. By the mid-1990s, it was apparent that the excise case was likely to go against the company; in 1997, the tax tribunal imposed a penalty of over Rs.8 billion. It was clear that the government would impose a ban on smoking in public places. So, when Y.C. Deveshwar took over as the chairman in 1996, he had to think out-of-the-box to ensure future growth.
He decided to use ITC’s strong marketing and distribution network (including tens of thousands of paanwallahs) to become a consumer products player. It proved to be a masterstroke. Beginning with tying up the back-end through e-Choupals’ procurement of raw materials, ITC slowly got into apparel, foods and personal care. However, its most successful launch has been that of snack food Bingo, which comprehensively proved that ITC had got it right. B&E analyses how Bingo disrupted a sector that was ruled by global giant, Frito Lay.
Tactic No 1: Research, research, research
ITC never launches a product, unless its potential is backed by research. Bingo rolled out in 2007, but work began 3-4 years ago with primary research by AC Nielsen, and in house studies to pinpoint lucrative segments. “Our team of 500 people is dedicated. For example, we plan to launch frozen corns and a specific team is already doing primary research of its own,” reveals Ravi Naware, Divisional CEO, Foods Division, ITC. Due to this, the Bingo brand has managed 10 variants within a year, while competitor Kurkure, too, has 10 variants despite being in the market for four years.
“Instead of launching a ‘me-too’ product and competing with existing players, we launched a different product,” says Naware. Be it Bingo or Aashirvaad organic spices, ITC has never believed in competing directly with existing products. Only after the brand is established does the company resort to direct attacks on competitors. Affirms Naware, “If you are competing with similar products, it has to be very different from rivals in terms of packaging and you need to be present in all the possible areas.”
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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