The LAAL Sherbet Mystery A case study on Rooh Afza
Submitted To: Mr. Masood Shah
Submitted By: Rabail Sh Shaikh 0611167 Hina Muneer 0611155 Asif Hussain 0611149 Paras Akbar 0611165 Khizra Mir 0611159 Dated: 17th May 2009
About Hamdard Hamdard laboratories (WAQF) Pakistan started its operations in Delhi in 1906 as an herbal shop by Hakim Hafiz Abdul Majeed. After the partition of India in 1947, Shaheed Hakim Mohammed Said, the younger son of Hakim Abdul Majeed, migrated to Pakistan and established Hamdard Pakistan in 1948. Since then, Hamdard is a household name in Pakistan and millions of people of last three generations have been benefited by the wide range of herbal products and services offered by Hamdard. In 1953, 1953, Hakim Hakim Mohamm Mohammed ed Said Said declare declared d Hamdar Hamdard d Labora Laborator tories ies a Waqf Waqf (Islam (Islamic ic Irrevocable Trust) in which the entire profits of Hamdard Pakistan were made over for the trust to use in the development of health, education and similar nation building and philanthropic fields. In 1964, Hamdard Foundation Pakistan was created to manage these ali funds. [Type the company name] Hamdard's Hamdard's central structure structure is based in Karachi, Karachi, Pakistan, where all the herbal products products [Pick the date] are manufactured in modern plants. Apart from Karachi, its manufacturing units are in operation in other big cities of Pakistan to meet the growing demand. Currently, Hamdard offers a wide variety of six hundred (600) herbal products. The produc products ts includ includee Rooh Rooh Afza, Afza, Safi, Safi, Nauneha Naunehall Herbal Herbal Gripe Gripe Water, Water, Suduri Suduri,, Miswak Miswak Hamdar Hamdard d Peelu Peelu Toothp Toothpast aste, e, Sualin Sualin,, Carmin Carmina, a, Mastur Masturin, in, Sharb Sharbat at Faulad Faulad,, Tunsuk Tunsukh, h, Joshina, and others. Over the past years, Rooh Afza has become the identity of Hamdard and is considered as synonymous with Hamdard. The drink has performed tremendously in the local as well as the international market and has high potential of growth; but to what extent the management is willing to make the drink survive the problems, that depends on the strategies of the management of the organization.
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DISCLAIMER
All characters illustrated in this case are pretended and do not bear any similarity to anyone in the management of the organization. The circumstances are imaginary and based on assumptions from the analysis gathered through our findings of the case study. The identified problems and symptoms in the case depict the true picture of the problems at Hamdard; and for true understanding of the readers, they are presented in the form of a hypothetical/ self-created situation that has occurred to the management. Any statement, comments expressed are not meant to hurt the feelings of readers.
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Characters in the case
Ms. Sadia Zuhaib as the Chief executive officer (CEO) MR. Waqar Zaki as the Functional Department Head MR. Shehriyar Pasha as the Marketing Manager Mr. Bilal Ahmed as the Sales Manager Mr. Raza Latif as the Manager Production department Mr. Qureshi as the Researcher from an outsourced marketing research agency
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“But it’s not me alone…Everyone is equally responsible for this situation, I did everything I could…aahh! This quarter is also lousy…but I don’t know the reason for this…like anyone else here of course…and neither does my company pays me enough to take this extra effort huhh!”, Bilal was talking to himself while driving back home on a rushing evening of Karachi.
2011 has been a very depressing year for Hamdard; the top management at the organization is upset on the waning past records of its most famous drink “Rooh Afza”. The sales figures from the past 4 years have been shocking; the sales have come down to almost 30 percent; moreover, the records for the first quarter of the current years also imply that the sales trend is expected to remain slow in the year as well. The management is wondering what has gone wrong and why they did not see any indicator for such poor sales records. The CEO and the managing director are both annoyed upon the negligence shown by the managers and functional heads and they have had a meeting together.
2nd June, 2011 (10:30 am, PST):
“Mr. Waqar, would you please clarify to me the cause for such a poor performance of Rooh Afza”, Sadia inquired with a groan face
“This is depressing for me as well, Ms. Sadia; we have constantly been maintaining the quality of the product since years; our distribution system is strong enough…there have been no issues in the production as well… I don’t understand where we are mistaken”, Waqar explained confidently
“But why such poor performance if the management has done all the homework, have taken all the measures…Mr. Waqar, we all know very well that this is the most profitable product of Hamdard; a major chunk of the revenues from Rooh Afza is further given for other charity purposes…we can not afford such a sharp decline in the profits Mr. Waqar.”, Sadia sounded worried
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“Ms. Sadia, as I explained we can not get a hint for the cause of declining sales, not from any side. I suppose we all should sit together in the next meeting with the marketing, sales and production department managers to find out the cause”, Waqar replied in procrastinating tone.
“I suppose you and Mr. Waqar need to talk to the managers; sit with them and find out the problem…I will see you in next meeting then”, Sadia concluded
“OK”
Hira grabed the chirming phone on forth bell. Hira: “Hello! Good Afternoon” Waqar: “Good Afternoon Hira! Is Shehryar around?” Hira: “He has left for the day Mr. Waqar” Waqar: “left for the day? But it’s only 2 P.M” Hira: “Yes sir, he has an offsite meeting with our ad agency media-slash today, he has gone there” Waqar: “Ohh I see! Some new campaign for Rooh Afza I guess” Hira: “Not actally, he is up to discuss some ideas for our new herbal product” Waqar: “Ahan! Please ask him to call me back” Hira: “Alright Mr. Waqar, have a nice day”
14th June, 2011 (11:00 am, PST):
Functional directors are at the meeting with the managers of sales, marketing, production and trade department. The directors are angry and frustrated since even they were not informed about the situation from the staff.
Everyone was almost sweating in an air-conditioned room, BSU managers were looking at each others faces with unsaid questions. Everyone knew about the agenda of the
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meeting and the gravity of the problem but hardly anyone knew the answers to these questions.
“There should be some reason for the poor sales figures Mr. Bilal…I wonder why we both were not informed of the low sales figures…this is summer season, the peak period of our sales in the market and the sales are still thin…and I have just came to know that industry size is getting larger and total industry sales are increasing”, Waqar sounded angry.
“As you know sir, we were so busy with the launch of our new herbal product that we could not keep track of the quarterly sales. All of us from sales and marketing department were busy in the promotion of the new product.”, Bilal responded in a justifying tone.
“But Mr. Pasha, we all are aware of the importance of this product; all the budget allocation to other welfare things goes from the revenues of Rooh Afza…I wonder what has gone wrong”, Waqar worriedly said while taking sip from the glass of fizzy drink usually served in their meetings.
“Sir may be the competition…” , Raza interrupted
“We have no competition Mr. Raza, red drinks has its own market, we are the oldest and largest energy drink, and we have been the leaders in that market since beginning…few small competitors cannot take our share so easily, we have been consistent in quality, have been exporting abroad, we have a huge market…Even we buy few hours of airtime on top tier TV channels every week on our peak seasons”, the other functional head comfortably said.
The meeting finished without any clear conclusion or action plan.
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Raza and Bilal decided to get a smoke break after being bombarded with fiery questions in the meeting.
“Yaar!! I can not just go and tell the retailers to sell the syrup on the gun point”, Bilal cried while lighting up his cigarette.
“I know mate…but it is a different market we are living now, life is fast and so are people’s changing preferences. How long a brand can be a brand if it is not taken care of properly and not modified with changing consumer choices…”. Raza was trying to draw a picture.
“True! But are you trying to say that life got fast in last couple of quarters”, Bilal jokingly said.
“No…I want to say that we all need to challenge our stature on the superiority of our product. We have strong competitors in the market now, retailers and distributors are incentivized by them to sell their product, a huge budget is invested every year for the branding, positioning, and marketing of the brands in our competitor companies, they get easy access to nooks and corners of urban and rural markets…do you see anything like that here??? Jo dikhta hai wo bikta hai mere dost…”, Raza concluded with a puff of his cigarette.
“hmm…”, Bilal gave an understanding hum after crushing his cigarette bud with his toe.
18th June 2011 (14:30 pm, PST): The middle management (marketing, sales, production and trade department managers) tried to look for any of the causes for this situation. They talked to the distributors in different areas but the responses from them did not show any sign of a problem. The production plant manager was contacted and inquired the problem from there side but no response. So the functional directors had nothing much to say to the CEO and MD when they saw them this time:
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1st July 2011 (14:30 pm, PST):
“So, it’s been a month that we had our first meeting, I believe we would reach to some conclusion today”, Sadia initiated with determination.
“Ms. Sadia, we have been in constant touch with the managers, we have had two meetings and we have all discussed the possible causes for which the sales might have been affected, but we have not come to any conclusion…the distribution seems to have no problem, neither have production; no problem with the industry figures…I don’t understand…We can not just drop by at outlets and ask every retailer if they are selling the drink, do people ask for it or not, or what are their problems. We can not go and ask consumers why don’t they buy the drink. We do not have sufficient resources for that and our middle management is responsible for other products and ventures too”, the functional director said.
“Hmmm…I also don’t think we need to do that. I think we need to wait for things to get better then; but in the meanwhile, please keep on checking with the monthly sales records…this is a peek season for demand of Rooh Afza, let’s be hopeful that things go well”, Sadia said with indefinite hope
“Ok…”
5th September, 2011 (10:30 am, PST): Results of the 2nd quarter are again discouraging; the demand has declined for some indefinite reasons that the management is not able to find out. A board meeting of the Mr. Waqar with the managers has been arranged; the situation is worrisome, but nobody knows what to do:
“I don’t understand…we are the pioneers of energy drinks in the Pakistani market, we are here since half a century unlike any other drink in the country…this is Hakeem Saeed’s formula…we have a high customer base…we have never had reach and access problems…the rural market, which consists of the greater population in the country, has
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a high customer loyalty towards the brand, we don’t have any tough competition in the market…we have been winning the best export quality award for the consecutive three years…still…”, Waqar roared
“We have had our inquiry within the organization sir…there is nothing wrong with the product…we have had enough discussions, and we believe that this problem can be resolved if we look for the cause outside the organization…”,Shehryar broached a new question
“Hmm…what is the option then…”, Waqar asked with curiosity
“We can either increase marketing and promotion of the product to create more demand, or we can hire an external marketing research agency to find out the actual cause of the problem; we think…”, Shehryar explained
“You think! You mean you still not sure”, Waqar was sarcastic
“We are not even sure yet about the problem sir…solution is something far apart, Rooh Afza looks great inside Hamdard premises, what happens to it after its loaded in distributors pick up vehicle…no one knows”, Raza advocated
“hmm…Mr. Shahriyar, you know that research would be very expensive for the company…Ms, Sadia would not agree to spend so much of the budget, we cant afford it…”, Waqar tried to look at everyone while saying this.
“I know sir but if we have to know the problem, we would have to do that, otherwise sales would keep on declining and we would never know the cause. Competition is tough and we are continuously loosing our pie. We are already very late sir... ”, Shehryar replied with twists of worry on his forehead.
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“Hmm…you are right Mr. Shahriyar, we need to take the step before its too late…..ok then, you all prepare the report for these alternatives, and I would suggest them to the top authorities”, Waqar said in agreeing tone.
20th September (2011): It was a pleasant morning, but the meeting with the upper management was not very pleasant; the ideas were proposed by Mr. Waqar but they did not get much of the acceptability from the top management. There was no clue of what will be the end result of this meeting:
“we can not proceed with any of these ideas because we know how much the research is going to cost us…sales are steeply decreasing, profits are very low, do you think the idea of investing into a product which is not giving us proper returns is good?”, Sadia was not convinced at all.
“But…”, Waqar wanted to give details.
“May be the market for the drink is saturated…may be we should focus on the other markets and start exporting more…”, Sadia interrupted Waqar and tried to reach a solution herself.
“But Ms. Sadia, I believe we still have a big opportunity for growth in Pakistan….the Ramzan now comes in summers, the summer season itself now takes longer in Pakistan, we can not deny the growth potential we have…and the industry is growing too ”, Waqar said with sparkling eyes
“Hmmm…but the research may not give the true reasons Mr. Waqar, we can’t just rely on what others say about our product, we know our product more than any research firm does…distribution, production, marketing, product quality…we know about everything ”, Sadia said with usual affirmation
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“I understand! But we have tried ourselves; we have been unsuccessful so far… I don’t think we have any other option…”, Waqar said in desperate sound
“Ok I believe I need to think about it, please leave these reports here…you keep me updated with the sales figures and all”, Sadia concluded with uncertainty
2nd November 2011: In the morning the management finally approves the idea for conducting the marketing research; Shehryar broke the news to other managers. A renowned marketing research company has been assigned the task; all the details have been given and the requirements have been clearly mentioned. Since the research takes time, the company has asked for the minimum of two months time. Meanwhile, the operations at Hamdard are as they usually were, everyone has diverted the attention to the other tasks.
February 2nd, 2012: The results of the research have finally come, the representatives of the research company are supposed to come the next day.
“Well…as you had said, we have conducted our research in the Karachi market, we interviewed the retailers, discussed with distributors, we interviewed the individual consumers of your product; those who were coming to the stores for your product or competitor’s…we interviewed people from all ages and classes…we also had some prior research conducted on the red syrup drinks and since yours is an expanding industry, we had ample data about your industry to cook and reach some discrete conclusions…I felt this would be the appropriate time…”, the researcher started his presentation
“That would be fine…”
“Well…..Pakistan has a big market for the energy drinks; there is a huge potential of growth in this sectors but so is the potential of growth of severe competition. Energy drinks already have a lot of competition, so Rooh Afza has competition not only in the syrup drinks but with all the other forms of drinks that are being offered, since they are
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substitutes of each other. And this is where you as the management have been mistaken. Our results show that the management has failed to realize the competition and has only focused on sales figures as an indicator of growth; whereas there are some other factors that have majorly affected the profitability of Rooh Afza.
Everyone saw Sadia and Waqar’s rising brows after hearing this.
As the society has changed gradually, the concept of collectivity has faded away from our society; the traditions and values now have little say in the family decisions and people treat themselves as individuals; this has also affected the family decisions regarding purchases. You can not say that a certain drink is a “family drink” as the concept of this family now is also changing. The research that I was talking about that we did for red syrup drinks also resulted that the concept of red-drink is fading away and the market for red syrup drinks is shrinking. Red drinks are more associated with the tradition and people don’t want to remain traditional. The young generation, for say, in particular wants to be ‘hip’ and they would not like to associate with a “daadi amaan” type of drink anymore. They look down to it. Rural-market is a big market for these drinks but since more competition has come up, even there the preferences are changing.
Rooh Afza is the first ever energy drink
in the Pakistani market, it maintained its
position well and had a lot of sales and still has; but the two major areas where Hamdard has not given importance are the competition and the changing people’s preferences; our interview with the customers and retailers also infer that Rooh Afza has not been adaptive to this change
We happened to interview the retailers from different areas and tried to find out what actually was the problem. They were not happy with the progress of the drink. They complain that the stock does not arrive on time to the store; they have to get and buy it themselves from the open market, earning lesser margins and incurring costs of keeping it in the store. Few of the others said that the distributors do come to distribute the drink but they are not very friendly and behave in a monopolistic way, since there are very few
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distributors of Rooh Afza. Moreover, we also got to know that the cap of the bottle is such that the syrup gets leaked from the bottles; and when the distributor does not give any incentive to the retailer in terms of exchanging the bottle; they have to bear with the loss themselves. Moreover, even if Rooh Afza is not available on the store, the customers are not bothered about it and they go for Jame-e-sheiren or any other energy drink. Unlike Rooh Afza, other drinks have spent a lot on the promotion of the products and the modifications; since there is a lot of option, the marketers have increased the budget on the promotion; whereas Rooh Afza has only focused on the loyal base that is shrinking nowadays.
Therefore, both the micro as well as macro environmental factors have affected the drink; it is a fact that the organization have not realized those changes; and even if few of them have been realized, they are being focused so narrowly that other major factors have affected the sales”
Mr. Qureshi again started after a pause, “I have given you the documents where we have complete details of the summary that I have just presented. I appreciate if you see the comments of retailers and consumers in the last part of the report and please let me know if there is any help required...”
“Ok…thank you for the valuable input Mr. Qureshi…I will definitely take the things into consideration”, Sadia appreciated.
The CEO and the managers were surprised and unhappy on the results; they could not believe how they could not detect such major changes…they only focused on the opportunities and neglected the threats. They were all into the dominance of Rooh Afza. They all opened their files and reviewed the comments of retailers and consumers which go like:
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Retailer Comments:
Retailer 1 – North Nazimabad : “We don’t get regular distribution of the drink; the
distribution only get regular in Ramzan. When the product is not available in the store and a customer asks for it, he doesn’t mind getting Jame-e-sherien in exchange.”
Retailer 2 – Clifton: “I had some customers on the store and the distributors of Rooh
Afza came in and started putting the cartons in the front instead of putting them at the back of the store; I just asked him to put them at the back of the store but he ignored… sales of Rooh Afza have definitely declined; they think they still have the monopoly, but they don’t…when you are not pleasant with the retailer, why do you expect us to do you any favor.”
Retailer 3 – PECHS: “Customers think that the quality of drink has declined….now they
think they have to add more syrup content; this is not the case with other drinks…I don’t know what the management is up to, they are not realizing the changing consumer demands…Hamdard now needs to wake up and do something”
Consumer Comments:
Mr. Ghaffar Ahmed, 64, Rtd govt. official: “I love the taste of drink but I don’t drink it
because its too sweet for me; I am old now and people at my age generally like less sweeter drinks; Rooh Afza doesn’t come in sugar free formula and that is the reason that I can not have it”
Mrs. Ahsan,38, teacher and mother: “My kids like it when I mix the syrup in milk, they
love the taste…but if I give them the option of having Rooh Afza or Pepsi, and they would definitely go for Pepsi…I don’t know what could be other possible uses of the syrup so that I can get my children used to drinking it”
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Shehzad, 42, Banker: “Rooh Afza is a very refreshing drink but there are other drinks in
the market that are refreshing as well; my purchases depend on my children’s choice, and since they have more and more options now, they want more varieties and they have different demands than what we used to have”
Zaid, 19, student: “When I am out of home and I want something refreshing, I would
randomly go to a shop and get some juice or a any other cold beverage; I don’t have the convenience of getting a ready made Rooh Afza drink on the shop and I obviously not go home just to drink Rooh Afza”
There was silence in the board room… Waqar just closed the file and kept on starring the glass of cold drink placed in front of him. He might have never come to know that this was his product’s competition too. Shehryar noticed expression of surprise on Sadia’s face while she w as reading the report. Raza whispered in Bilal’s ear “are we done?” “No…we actually din’t start”, Bilal chuckled.
There was nothing to say or discuss; the only thing that was in their minds was that if this is an end to the success chapter of their mature brand or it is a new beginning of their labors for re-positioning their brand?
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Statement of Contribution Asif Nizamani (0611149)
For solution: •
Helped with deciding the topic
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Went to Hamdard to interview (car used)
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Helped in finding out the minor and major problems
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Formatted the solution
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Wrote analysis of a matrix
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Attended almost all meetings
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Gave suggestions to minor problem solutions
For case: •
Discussed the topic with group members
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Proof read the case
Hina Muneer (0611150)
For solution •
Attended all the group meetings for the making of metrics
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Went with the group members for taking interview from the brand manager
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Edited the solution
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Gave suggestions on minor and major problems
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Described supply chain management and 4ps in the solution.
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Used car for going for interview
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Went to near by retailers for taking retailer’s interview
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Gave recommended strategies for major and minor problems
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For case: •
Discussed the topic with group members
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edited the final case
Khizra Mir (0611159)
For Solution •
Worked on all the matrices with group members.
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Wrote the topic of introduction of Hamdard
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Described the Hamdard Management/departments and operations topic in the solution.
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Helped identify the major and minor problems
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Gave recommended strategies for major and minor problems
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Visited different retailers to know the Rooh Afza’s current market situation
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Printed the report
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Went to the near by retailers for taking retailer’s interview
For case: •
Discussed the topic with group members
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Proof read the final case
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Wrote the disclaimer
Rabail Shaikh (0611167)
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For Solution •
Wrote the current marketing situation, performance review and future outlook
in the solution. •
Used car for visit to the Hamdard office.
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Helped identify the minor and major problems in the case.
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Helped find out the major and minor problem solution
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Wrote explanation of the competitor analysis matrix.
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Gave suggestions to the recommended strategies of Rooh Afza
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Went to different retailers and customers for determining current marketing
situation.
For Case: •
Suggested the idea of the case writing style.
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Wrote the case.
Paras Akber (0611165)
For Solution •
Went to Hamdard laboratory for taking the interview of brand manager of Rooh Afza along with the group members.
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Went to take retailer’s and consumer’s interview at certain commercial areas along with the group members
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Attended group meetings taking place time to time for the making of matrices
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Shared ideas in finding out minor and major problems
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Described ideas and views shared in making of recommendation, future outlook, and financial management.
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Went to the near by retailers for taking retailer’s interview
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•
Helped in editing the final solution.
For case: •
Discussed the topic with the group.
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Made the executive summery for the case.
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Printed the case.
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