FMCG cos bank on speed to win

Cut Time To Market Amid Downtrading Fears During Slowdown

Mumbai: Fast-moving consumer goods (FMCG) companies are using speed as a competitive weapon to win in the market place, especially when talks of a slowdown bring the possibility of downtrading into sharp focus.

Growth in the FMCG Industry has not lost steam even as other sectors have slowed down, but there is concern about a possible impact considering a deficient monsoon this year. The industry believes there is one weapon which can help companies win, and that is speed.

A Boston Consulting Group (BCG) report, ‘Speed To Win’, says increased agility can solidify a competitive position, boost profitability and reduce risk. It says for standard new product development, a seven months time to market can separate the best in class from average players. But would it also work in a slowdown? “In slowdown situation it is even more important as the consumers typically start to change their consumption patterns and it is important to refine the offerings (in terms of price pack architecture, composition and packaging) to ensure alignment with the consumer requirements,” said Abheek Singhi, partner & director, BCG.

A company can outpace its rivals by increasing its market share, boosting its negotiating leverage towards trade and positioning itself as an innovator and the mantra is: standardize, prioritize and mechanize. Take the case of Nivea lipcare. Speed helped the company redefine this category with the trade in terms of merchandising and distribution. The category was treated like an “impulse confectionery” and not like a traditional skincare category. “Our actions have followed out thoughts and results are there to be seen. We have been quicker than most of competition in developing the premium lipcare category for Nivea. All our initiatives have hit before competition, be it variety/price points/distribution. This has given us leadership,” said Rakshit Hargave, MD, Nivea India.

With compressed product life cycles, especially in some of the newer categories, being quicker to the market is a great advantage. “Speed to market is important, not just with new product development but also with reaching out to the consumer and ensuring that even the remotest of corners of the country get the products in a short period of time,” said Sunil Duggal, CEO, Dabur India.

Dabur integrated its consumer care and consumer health businesses and this was the genesis of ‘Project Speed’, which was designed to help the firm cope up with challenges by leveraging the power of its combined product portfolio through a unified sales & distribution structure. Dabur has also put in place an initiative to double its rural reach. The company is hopeful that this would enable it to have a direct access to 3,000-population villages across 10 states that account for 72% ofthe rural FMCG potential.

Some other examples are brands from mid-sized companies like Paras and Emami which were successful in gaining share as their product development times were shorter than others in the sector. When Emami conceived the idea of a men’s fairness cream, it knew it had a winning concept. What was important, however, was to ensure that it was put into market at a speed before others. “We were able to go to market within just under a year from the time the idea was conceived. This requires great agility. It took our established competitors by surprise as elements of marketing were in place within the short time,” said N Krishna Mohan, CEO, sales, supply chain and human capital, Emami. As a result, Emami enjoys market leadership in the category.

“Empowered companies with flatter and decentralized decision making structures can outpace its rivals in speed to market. This, when accompanied by stronger local consumer insights can develop into a potent competitive advantage,” said Saugata Gupta, CEO, consumer products division, Marico.

Menicon to Acquire W.I. System, Major Contact Lens Retail Chain in Japan

NAGOYA, Japan, Dec 09, 2011 (BUSINESS WIRE) — Menicon Co., Ltd. announced today an agreement with W.I. System Inc. that will turn one of Japan’s leading contact lens retail chains into a wholly owned subsidiary of Menicon on December 8th. Terms of the acquisition were not disclosed. Tokyo area-based W.I. System with annual gross sales of USD 130 million ranks fourth in contact lens retail sales in Japan.

The acquisition will significantly bolster Menicon’s retail presence in greater Tokyo, the world’s largest metropolitan area, and will expand opportunities for Menicon to reach users who do not currently use Menicon products. W.I. System stores will continue to provide a broad array of lenses and lens-related products from Menicon and other manufacturers to meet the diverse needs of Japan’s contact lens wearers.

Menicon believes that by striving to satisfy its newly expanded customer base as a result of the acquisition, the experience ultimately will strengthen the company’s and the industry’s capabilities for developing and marketing lenses and lens care products that meet diverse needs in the broader global market.

“W.I. System strives to provide highly satisfying customer experiences when people in need of vision correction visit any one of our many conveniently located shops throughout the greater Tokyo area,” said W.I. System president Keizo Takahashi. “As a new member of the Menicon group, we look forward to expanding and strengthening our customer relationships over the long term.”

“I have great expectations that this integration between our well-known companies will encourage more people to experience the joy of wearing advanced lenses, and allow us to further contribute to eye safety and comfort in Japan, and ultimately in markets around the world,” said Menicon president Hidenari Tanaka.

About W.I. System W.I. System operates 68 Tokyo-area retail stores and one franchise store that do business under the name Ace Contact or Ekicon. The stores offer primarily contact lenses, and also sell eyeglasses, hearing aids and nutritional supplements for pets. Established in 1989, W.I. System recorded sales of JPY 10.3 billion (USD 130 million) in the fiscal year that ended in May 2011.

About Menicon Headquartered in Nagoya, Japan, and represented in over 40 countries, Menicon is a global contact lens company dedicated to every aspect of the field from material development and lens design to manufacturing of lenses and lens care solutions. Menicon offers an expanding portfolio of innovative lenses, packaging and related products that maximize user comfort and convenience. 2011 marks Menicon’s 60th year in business. For more information, please visit http://www.menicon.com

SOURCE: Menicon Co., Ltd.

ITC bites off 11% of biscuit market

THOUGH ITC is nearly synonymous with tobacco, it has in no way stopped people from munching ITC’s biscuits. The company has managed to corner nearly 11% of the national biscuit market.

Since the Rs 9,000-crore biscuit market witnessed a growth of 20% last year and is slated to sustain its growth this fiscal, ITC is looking at enhancing its biscuit manufacturing capacities by at least 15-20%, primarily to manage supply chain costs and improve profitability. “We plan to set up additional capacities in such areas where we have developed a significant front-end scale, but are limited by proximate capacities. Attempts are being made to create new biscuit variants in segments that are relevant to the consumer. The positioning of the marketing mix is also being worked upon to drive consumption by creating convenient price points or by differentiating product propositions,” Mr Chitranjan Dar, chief operating officer, ITC Foods Division, told ET.

For starters, ITC plans to drive growth by vitalising its brand ‘Sunfeast’ through product innovation, contemporary packaging and targeted brand communication. A huge investment is also being planned for brand building and product development. At the same time, the company is looking at investments in building trade loyalty across channels and markets.

Elaborating further, Mr Dar said, “while ITC per se has no plans to rationalise its biscuits portfolio, we review the basket from time to time. Additions or deletions takes place on the basis of the market feedback and actual sales. The idea is to strengthen the winners and replace the average performers with potential winners from the biscuits stable. As of now, there is no product which does not contribute positively to the overall pool of contributions.”

Incidentally, a large proportion of the growth in the biscuits segment is coming from the mid-price offers growing at 35%. The mid-price offers is the non glucose segment and includes cookies and sandwich cream products.

“There are clear indications that consumers are upgrading to mid-price offers in line with the growth of packaged foods in the country. Since consumers are ready to pay for good quality and tasty products, we find a growing value for product quality and hygiene. Hence, our capacity additions will partly be in line with these requirements Mr Dar pointed out. The basic product glucose, however, continues to be largest category in terms of volumes.

ITC picks up Nokia’s global packaging deal.

IT HAS remained a well kept secret for a while. ITC is now the principal supplier of value-added packaging material and box cartons for every Nokia cellphone that gets shipped to as many as 50 countries from the Finnish telecom giant’s Chennai factory. Nokia has silently inked a bulk purchase agreement with the $4.75-billion plus cigarettes-to-hotels conglomerate, wherein ITC is now the prime vendor of packaging material and customised microfluted cartons for all Nokia phones and accessories manufactured in Channai.

When contacted, both Nokia India and ITC confirmed the development. According to a Nokia India spokeswoman: “The decision to enter into a global purchase pact with ITC for packaging cellphones manufactured in Chennai is part of Nokia’s global sourcing strategy, wherein the packaging
material and box cartons are procured from a local supplier near to its handset manufacturing plant. We can’t share commercials but such international purchase agreements are reviewed periodically.”

As Nokia phones shipped from Chennai hit several global retail points in 50 countries, ITC has to manufacture boxes that meet the Finnish player’s stringent quality standards. “Since all sales boxes and the larger shipping cartons supplied by ITC will carry the Nokia brand and hit several of our international retail points, quality consistency is critical. The boxes will also need to have very high grade image graphics and texture,” said Mr Josh Foulger, who is Nokia’s national sourcing head for India.

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