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 & T obacco, Hotels, Information Technology, Technology, Packaging, Pac kaging, 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 sa y "Sunfeast", for the biscuit consumer. The Sunfeast umbrella brand, powered by Sunny the mascot, is intended to "s pread the smile", given the new product innovations of Orange Marie and Butterscotch Cream biscuits aimed at the t he 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 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 Direct ors recommended a dividend divi dend of Rs. 3.50 per Ordinary Ordinar y share of Re.1/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? 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 y
The depth of distribution
y
Its brand building building capabilities. capa bilities.
y
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 ha d the advantage of the well entrenched distribution setup which is matched only by HLL.
SUNFEAST- AN OVER VIEW: "Sunfeast" - The umbrella brand name na me introduced in the Glucose, Marie and Crea m segments "Sun" mascot - The brand ambassador reinforcing the positioning of the brand " Spread the Smile" Product Innovatio n - Two unique and new flavours - for the first time in the India marketOrange Marie and Butterscotch Cream Cr eam 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 t he 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 t he first time in the Indian market. market.
DIFFERENT
PR ODUCTS
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 , Sunf Sunfeast east 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 r eason 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 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 F OR 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 Gol den 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 availa ble in nearly 1.8 million outlets compar compared ed 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, t he brand did all t he 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 two-pronged strategy. High margins in cream variants and a nd volumes volumes from fr om the Marie and Glucose segments. Biscuit consumer is willing to pay more only when he sees a clearly differentiated product.
FUTURE PERSPECTIVE: y
Sustain ITC's position position as one of India's most valuable corporations through world class performance,
y
Creating Creati ng growing growing value for the Indian economy and the Company¶s stakeholders,
y
To enhance the wealth generating capability capability of the t he enterprise in a globalising environment,
y
Delivering superior and sustainable stakeholder stakeholder value.
Q UESTIONS UESTIONS BASED ON THE CASE C ASE STUDY:
Q1. Which of following is the right strategy to follow? a. b.
To retain the present products and increase t heir reach and sales To keep on innovating and evolving the products and its varieties being offered.
Justify the statement and suggest a method with appropriate r easoning? Q2. Brand building for sunfeast has incurred at a substantial chunk of investment, how should they recover it without heavily hea vily 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?