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8/7/2019 More Cash but Few Spends by Sunil Sir
http://slidepdf.com/reader/full/more-cash-but-few-spends-by-sunil-sir 1/27
1
More Cash But Few Spends
Question staring at FMCG
companies :
How does one grow
consumption?
8/7/2019 More Cash but Few Spends by Sunil Sir
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Background
People are buying , demand obviously there
:but consumption not going up. Top line stagnating
Salaries are going up- yet no growth in
conventional consumption of products !...
Result - With focus on efficiency-a decent
bottom line ±but a poor top line.
8/7/2019 More Cash but Few Spends by Sunil Sir
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Company Scenario-Then..
Managed good penetration Multi price points
More outlets ±better service«
All the above worked earlier «not now !
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Company Scenario- today«
My Brand available in every possible retail shop
Yet demand not growing«
Sales are not happening !
8/7/2019 More Cash but Few Spends by Sunil Sir
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Reason : Outlets driven Sale
New outlets coming up ± does not mean demand isgrowing.
1990 :12000 outlets in Chennai
1998 :16000
Deeper examination shows: Original 10000 outletsgrowing at 5%: Head office seeing 20% growth
«.due to additional stocks in new outlets ! New small shops not growing«
Reason : Sales shift to large retail formats!
8/7/2019 More Cash but Few Spends by Sunil Sir
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Stocks : Large vs small retail outlets
Large outlets like Food world have better
inventory planning - stock up less ! Small outlets carry more inventory than small
outlets.
In the interim : Channel stocks increased
Leading to ambitious growth targets of 20%.. Effectively therefore : there was only a
demand shift ± but no real growth !!!
8/7/2019 More Cash but Few Spends by Sunil Sir
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Growth strategy of Gerrico
Make products available at different price points.
Enter new categories. But now seeing cannibalisation of own brands.
Consumer spending of Rs.4000/-
Earlier : On 7 categories of goods & services
Now : On 14 categories !... Even if spends growing at 15% - it is by adding new
products to his portfolio
8/7/2019 More Cash but Few Spends by Sunil Sir
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Competition from New Categories
Not just Sunsilk, Nyle or Dove Competition now from : durables, vacation
products, entertainment«..
Question to address : What is the plan to get
larger share of wallet ?
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Questions
How to retain my customer in the category ± if not in
the price ranges ? Where is the spend going from the increased
surplus?
Some Answers
Teacher earlier using bus : now has Maruti-financeoptions ; takes away major chunk in EMI«.
Finance options ±VCD players, PCs, home fitness
equipments, heating facilities, ACs, foreign holidays
8/7/2019 More Cash but Few Spends by Sunil Sir
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Conventional Categories suffering
Soaps, detergents, shampoos : no
perceptible up gradation to premiumproducts.
Consumers moving in newer categories ±and fast.
Foods : McDonalds, Pizza Hut and other options have affordability with fun ! Takingaway spending from conventional food items,edible oils breads etc«.
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Consumer Behaviour
Large ranges to choose from
Become indifferent to price and quality asdifferentiators.
Reason: almost all products now available at
the same technology level & even price«
Buying more than ever before: but not basic,
daily use, routine stuff: since they don¶t
provide any excitement.
8/7/2019 More Cash but Few Spends by Sunil Sir
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Consumer Behaviour
Consumer now spending more , eating more : but«.outside the home !
Spends on groceries reducing but purchases of all
new products has increased«.
Some of the increase has come thru substitution.
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Strategy Paradigm Shift
Research on consumer behavior must be
redeveloped. Examine what is the consumer buying today
which she was not buying earlier.
Allow her to buy new products and she will
not buy conventional stuff«. As income goes up- consumption of
conventional products will actually drop !
8/7/2019 More Cash but Few Spends by Sunil Sir
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Paradigm shift
Some of the things will not change
Like attitude : Mobile phones not changed till they break / get lost !
Washing machines & refrigerators are not upgraded
with fuzzy logic- if working fine!....
Solution lies in moving away from low excitementcategories to new ones- like the consumers !
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Conclusion
In a rising disposable income scenario,
consumption of conventional products seemsto be declining.
Environment is now forcing companies to do
a complete re-jig of their strategy«
Inaction can lead to fast depletion in market
shares, losses and company closures.
______
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End of Case Study
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Category Collides
T ime to shift focus
From ³Category market share´to
³Consumer share´
-using the µCategory collide framework¶.
.
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Category Collide
I dentify the opportunity - focus on wallet share.
- For edible oil manufacturer ±sell olive oil
thru drug stores«.
- Sell edible oil positioned as µgood for heart¶
± thru drug store !
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Category Collide
Al ternate channel devel opment
- Kirana vs Paan shops.F ashion finite l ife cyc l e products
-Fall collection of Brooke Bond Tea.
Only those companies who dare will grab thisopportunity !
_______
8/7/2019 More Cash but Few Spends by Sunil Sir
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Enhance Value
Background
Belated realization regarding fragmentation of consumer spends.
Slow down in industrial growth and first signs of
recession.
Coping up measures Cost cutting«
Layoffs & retrenchments
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Coping with recession
Business leaders work differently
Make changes in business processes. Seek revenue generating opportunities
Upgrade consumers
Satisfy latent need that consumer is unaware of
Quantum leap thru innovation«. Innovation could be new technology, new products,
new services.
8/7/2019 More Cash but Few Spends by Sunil Sir
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Actions by Business leaders
Continuously increasing satisfaction levels ensures
Consumer interest
Involvement in category
Investment in category«
Leading to loyalty
8/7/2019 More Cash but Few Spends by Sunil Sir
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Growth ?
Where will growth come from ?
Line extension New segment of an existing product category
Helps get over taste and flavor fatigue«
Increasing the share of consumer food basket
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How to combat recessionary conditions?
In recessionary times
Consumers postpone purchases
This impacts depth of consumption
Gerrico should introduce incentives, discounts,promotions to heighten consumer interest
Co-promotions
Banded packs, large value packs, smaller packs withsmall unit value-to attract new users«
Brand relaunch can energise the brand
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Steps by Gerrico
Extend the portfolio of brands to other categories
Average companies live in the present: visionary cosplan for future.
Visionary cos ventured in rural markets, introduced
shampoo sachets, fuelled further growth thru media
boom
As changes happen successful cos realign their
marketing mix and service strategy, to exploit these
changes.
Eg. Rural market development by ITC & Shopper¶s
Stop !
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Finally
Gerrico needs to make a fundamental choice :-
Demonstrate intellectual foresight and join the
leaders who drive the market
OR
Get led all the way to the corporate graveyard.!!!
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Thank You