FRITO-LAY CHALLENGED

Will Frito-Lays hold Over Snacks Market Continue?

4PS B&M analyses Frito-Lays Strategy to Maintain Leadership in The Highly cluttered branded snacks market, as Local Snacks up their Brand Quotient
Issue Date - 30/06/2011

After spending a decade on Indian soil and creating a market for branded snacks in India, PepsiCos food division, Frito-Lay, is now attempting to hold on to its market share of over 50% in the particular segment. And its all because of a flurry of both past and new entrants like Haldirams, Balaji, Parle, Perfetti, and of course, ITCs aggressive posturing with Bingo, a brand which is growing almost on a daily basis. At the same time, competition from the local players too has intensified manifold raising the big question: Can Frito Lay sustain its supremacy? Experts value the Indian snacks market at around $3 billion. And branded segment makes up for roughly 50% (Rs.6,000 crore approximately) of this pie. But what makes the segment most attractive for both local and branded players is its double digit growth rate that is well supported by rising income and changing consumption patterns in the country. Thus, while the competition is on rise, this space, with approximately 1,000 snack varieties vying for consumers palette, is gradually getting cluttered, increasing the worries for branded players, especially for the market leader Frito-Lay. To break the clutter and to position itself above others, as said by Indra Nooyi, Chairman and CEO, PepsiCo, Frito Lay had strategised a high-quality products positioning approach. The strategy helped the company to a large extent in the last decade. But once the local players sensed the growth potential of the market and started organising themselves, Frito-Lay found itself in the middle of an issue with its market share falling from 66% in 2008 to 58% at present in the Rs.2,500 crore potato chips segment. More so for the regional players understanding of the regional tastes. Players like Haldiram, Bikanervala (Bikano brand), and Balaji Wafers have turned the game on Frito-Lay by improving their packaging and marketing. Nevertheless, Frito Lay still sounds confident as Vidur Vyas, Director Marketing, PepsiCo Foods India, says, We welcome competition. It is always healthy. Moreover, we are confident about our plans. We have the capability to out-innovate the competition. And we will continue to stay on our growth path. Meanwhile, Frito-Lay is adopting a multi-pronged approach to ward off competition and maintain its market share. The company is betting big on innovation on every front, right from R&D to pricing to marketing to pack sizes and distribution. Currently Frito-Lay reaches almost one million outlets, mostly in urban India. But then, players like Parle and Haldiram are already much ahead in this department with a presence across 2.5-3 million retail outlets. However, determined not to leave any stone unturned, Frito-Lay is now in the process of making its presence felt in the rural market. To cater to the same, it also launched smaller pack sizes of Rs.3 and Rs.5 of Kurkure and Cheetos for the semi-urban and rural consumers. But thats not all.

Under the Leher Namkeen brand, it has recently launched chips priced 40% lower than that of the premium Lays brand in Gujarat and Maharashtra taking the Balaji brand head-on, a brand which controls a majority share in these markets. The basic idea behind the move is to protect its urban turf without diluting the premium equity of in the potato chips space. The company is also betting big on Kurkure to break the rural market. Certainly, a sound strategy, at least considering Kurkures very Indianised taste, which can go well with rural consumers. To add to the offerings, the company has also launched three new variants of the brand, made from daal. At the same time, the snack maker is also upping its premium positioning by targeting the health conscious consumers with its Quaker Oats brand. Targeting super-premium and expat consumers, it has also started test-marketing its Rs.550 priced Lays packets in select stores in metros. Vyas says, We want to offer consumers choice from health to enjoyment. Like Quaker Oats caters to the health segment, while Kurkure and Lays are for enjoyment. Not content with that, Frito-Lay is taking the international route too, and doing feasibility study of taking its India-developed brands like Kurkure and, may be even Aliva, to international markets, where theres a large Indian diaspora. If accepted, this may offer some catchy returns to the company as local Indian brands still dont have the wherewithal of going global. But then, as we said, if accepted. The reason is simple: Although both Kurkure and Aliva have matched up to required Indian tastes, they still have international flavours attached to it, and not necessarily the ethnic flavours that the diaspora may want. Moreover, Frito-Lay is also planning to enter the lucrative Rs.11,000 crore biscuits market in the country, a category growing at roughly 20% annually. It has already started test-marketing an oats-based premium cookies under Quaker brand. The idea is to occupy the high-end space. If successful, it will surely open a new stream of revenue for Frito-Lay India, but the competition there will be no less in any form. However, while Frito Lay is busy in avoiding a fate like Nokia in the Indian mobile handsets market, Anand Ramanathan, manager, KPMG Advisory, says, Frito- Lay can minimise the loss by increasing manufacturing capabilities, and widening its distribution network to reach every nook and cranny of the country. But then, even that may not solve all problem, as the snacks business is quite frivolous in nature, and dominated by strong regional tastes and flavours developed over centuries. Besides, flavour and taste fatigue sets in easily, leading people to try out different products. The key will be dominating the regional taste and food habits. Thats one art Frito-Lay will have to master and quite speedily. For now, the Kings speech will continue to be given by Frito Lay. What about the future? Well, well cross that bridge when we come to it.

This simple mantra rocked and changed the definition of chip world. Winning the heart by quality and great taste and distributing sufficient dealer margin is a winning strategy of Balaji Group. Its 'Value for money' strategy enables even a kid to buy fresh & healthy food in small prices. Indeed in a neck to neck competition ear one must implement new ideas and balaji group has developed the think tank who continuously update strategy in the right direction. Think win-win & Stay ahead with us.

he following are very generic comments for companies focused on rural market. 1. Focus: The company/organization must focus on a single service unlike Drishtee or n-logue or Akshaya. However after achieving success with a product/service you may broaden your portfolio. 2. Training: Training is essential for all the stakeholders in the company - employees, customers, vendors, etc. Why? Because in rural India, you have an abundance of raw talent that must be aligned to your requirements. In fact, sometimes you may have to start from creating the whole ecosystem before actually scaling up your operations. 3. Adjusting to local needs: Rural India represents varied cultures, traditions, languages etc. So your model should be sufficiently flexible to adapt to local needs. 4. Technology for masses: Use technology wherever is possible. 5. Processes: Standardize operations in order to create scalable business processes. Actually, this paves the way for more technology adoption. 6. Word of mouth advertising: In rural India, people love to be your brand ambassadors and talk about all good things about your product/service if they like it. 7. End-to-end service delivery: You need to make sure that the consumer gets service-as-a-whole delivered. For example, if you just collect a resume and charge the customer rupees twenty for feeding into computer- this may not be scalable. However, if you collect a villagers resume, provide him a job earning him rupees 5000 a month and collect rupees 20000 for your efforts - this would definitely work with rural people. 8. Emotional Attachment: Rural people place their trust in your product or service - so you must live up to it. It is not just a commercial transaction that you engage in with them but more an emotional agreement between you, the marketeer and your consumer. 9. Communities: Rural people live as communities or extended families. You need to align with local communities following the trick, trust is transferable. 10. Efficient distribution: Rural India is sparsely populated and so it is obvious that the distribution costs are high. Hence, you need to innovate to bring down these costs.

19. Marketing Strategy adopted by Frito-lay (The Market Leader) 20. Marketing Strategy of Frito-Lay Product Strategy:- Frito-Lay's product strategy aims at differentiating among its own brands in terms of product taste, design, packaging and target audience.

21. Marketing Strategy of Frito-LayPricing Strategy The pricing strategy for Lays is consistent with other competing players. As this market is driven by high-impulsive buyers of snack foods, there is very little dichotomy in the pricing strategies of all major players. Lays and Kurkure, the two popular choices, come in different SKUs priced at Rs.5, Rs, 10 and Rs. 20, similar to Bingo and Haldiram. Recently, however Fritolay launched a Rs.3 SKU for its Kurkure brand in a bid to compete more aggressively.

22. Marketing Strategy of Frito-LayPromotional strategy Realizing the direct threat posed by Bingo to its market share, Fritolay revamped its branding strategy for all leading brands. For

Lays, the company signed on ambassadors Saif Ali Khan & MS Dhoni. Indianized versions of Lays were also launched after Bingos success with Indian flavours. These included Chat Street, Chala Change Ka Chakkar the largest ever brand promotional strategy undertaken by Fritolay aimed at bringing all its flagship brands under one roof. This massive umbrella campaign would allow chosen customers to live the life of a Bollywood Indian celebrity for a day. Chai Time Achievers a Kurkure centric campaign was aimed at the housewives in India. The Idea was to promote heavy audience interaction by sending recipes for new flavours. The winning family would then have the opportunity to have their photographs on one million Kurkure packs Aside from JuhiChawla, the company also signed on KareenaKapoor for the Desi Beats version of Kurkure. Other initiatives include posters at unconventional retail points such as cyber cafes and telephone booths, a tie-up with South-Western Railways, known as Kurkure Express to increase brand visibility.

23. Marketing Strategy of Frito-LayDISTRIBUTION STRATEGY Being first in the market through its acquisition of Uncle Chipps, Fritolay already has a well-established network of distributors and retailers pan-India. The brand loyalty enjoyed by Lays was leveraged during the launch of Kurkure, Cheetos and the recently launched Aliva Frito-Lay has a distribution network of 30 CFAs and 2 RDCs who service 800 distributors who sell to 4 lakhs retailers. Fritolayboasts of reaching more than 1 million retail outlets countrywide covering 100 towns. The Company, with its manufacturing plants in Punjab and Pune, aims at investing 20 crores to extend distribution facilities to improve coverage and increase product shelf life by 120 days.

24. Marketing Strategy adopted by Bingo (The Market Challenger) 25. Marketing Strategy of Bingo Product strategy Bingo positioned itself as chips with an Indian twist. The 16 flavors introduced at launch were carefully developed through R&D. The initial offerings were a mix of potato chips and finger snacks. The Potato chips segment includes variants like masala, salted, tomato inspired by the snacking habits of the Indian consumer The offerings under Finger Snacks include the pakoda inspired Live Wires and Khakra inspired Mad Angles These offerings were further differentiated by providing SKUs at Rs. 5, Rs.10 and Rs. 20

26. Marketing Strategy of BingoPricing strategy The main objective for ITC was to compete effectively with players who were already there. Hence, it launched a direct frontal attack by introducing similar priced SKUs. ITC already enjoyed cost advantage over competitors through its e-choupal initiative. This also facilitated timely supply of raw materials. ITCs printing and packaging business also lead to high-quality, cost-effective and innovative packaging.

27. Marketing Strategy of BingoPromotional strategy Bingo was strategically launched at the time of world cup to cash in on the popularity of snacks among the cricket lovers of the country. The advertising strategy revolved around slapstick humor and irrelevant themes to hold eyeballs, garner attention and interest, and stand out from the clutter. ITC booked 10 to 15 spots per channel per day, 20 spots on radio stations supported by 1000s of hoardings advertising the product. According to industry estimates, the total advertising spend in the initial 6 months were roughly 100 crores. While its competitor Fritolay focuses on celebrity endorsements, Bingo chose a different route. It didnt have an ambassador! As the product is aimed at the youth, digital media was heavily used. For instance, the Bingo National Gaming Championship across 4 cities

with more than 25,000 participants Bingeonbingo.com and Mad Angles Twister Application (Facebook) were other initiatives in online media.

28. Marketing Strategy of BingoDistribution strategy ITC already had a well-established distribution network through its cigarette and tobacco-related offerings which was leveraged in case of Bingo. Further, the company distributed 4 lakh racks across all retailers to display the brand at all Points-of-sale. Within 6 months, Bingo was available across 2,50,000 retailers across the country. A crucial alliance with Future group which lead to all future group retail outlets like Big Bazaar, Food Bazaar stocking only ITCs Bingo HORECA (Hotels, Restaurants and Cafes), Local betel shops are all being used to distribute Bingo to a wide range of audiences

29. Marketing Strategy adopted by SMART CHIPS(The Market NIChER) 30. Marketing Strategy of Parles Smart ChipsAmong its competitors, Parle has had a tough time gaining a considerable market share for its snack offerings. Must Bites & Must Sticks together account for 5-7 percent of the total organized wafer chips segmentProduct strategy Parle Monaco recently entered the chips segment with its healthy variant called Smart Chips. Realizing the recent market trend of being more health conscious, Parle, through Smart Chips has carved out its own niche. Highlighting its USP of being baked rather than friend. Smart Chips comes in 4 different flavors:Simply SaltedTangy TomatoCrazy ChatMacho Masala

31. Marketing Strategy of Parles Smart ChipsPricing strategySimilar to competitors, Smart Chips comes in two SKUs. Rs. 5 for a 25 gm pack and Rs. 10 for a 50 gm packPromotional strategy The ad campaign, handled by Thoughtshop Communications, features Aamir Khan advocating the benefits of baked chips over the fried ones taking a subtle shot at competing brands The ad highlights the USP of the product in a humorous way without sounding to preachy or serious, which enables it to stand out from the clutter. Distribution strategy Being a veteran player in the food and snacks segment, Parle already has a well-established framework of distribution through its biscuits and other snack offerings. This has enabled Parle to distribute Smart Chips effectively, reaching millions of retail outlets. Thus, with the advent of Smart Chips, Parle has carved out a small niche for itself aimed at the health conscious snack-lovers. However, it remains to be seen how this product performs in the long run.