PGDM, PGDM 6th Trimester
Date of submission: 18th Feb, 3:30 P.M
Increasing Pressure in Rural Markets HOW does a manager deal with a market where Iodex is used not only to ease sore muscles but also as sandwich filling, Horlicks is fed to buffaloes and hair dye is used to paint them? Believe it or not, these are only some of the innovative uses products are put to in rural markets. The last two decades witnessed many favorable happenings in rural India favorable monsoon, increase in Minimum support prices, shift towards non- farm employment to name a few. All this added to the rural prosperity and made them bigger market markets. s. More More and more more market marketers ers are venturi venturing ng this this market market with with their their innova innovativ tivee products and services. In all rural markets often tend to be very interesting and often ambiguous. Pressure cooker market in India:
The Size of Pressure Cooker industry in India is projected at INR6.50 Bn., the pressure cooker industry has been growing at a rate of 10% YOY for last 5 years. The pressure cooke cookerr mark market et in Indi Indiaa can can be broa broadl dly y divi divide ded d into into two two – outer outer-l -lid id and and inne innerr-li lid d categories. Customer preferences, for either of these, vary across different regions. Outerlid pressure cookers account for one-third of the pressure cooker market and are largely used in the southern and western regions where TTK Prestige is the market leader. Innerlid cookers are used mainly in the eastern and northern regions. Here, Hawkins is the market leader. TTK Prestige, which was present only in the outer-lid segment of pressure cookers, has now introduced a new product in the inner-lid segment. This should give it the opportunity to penetrate in the north and eastern region and increase its market share both in volumes, as well as value share. The pressure cooker industry suffers from low entry barriers. As a consequence, there is the small matter of 250 brands in the market! Hawkins and TTK Prestige, which commands over 50% share in the domestic domestic pressure cooker market.
Major Players Profile: Hawkins:
Hawkins Cookers is a low-profile company with market leadership in the pressure cooker and allied allied kitchen kitchenwar waree product product segments segments.. It was incorpor incorporate ated d in 1959 as a privat privatee company with an idea of making pressure cookers when it was virtually unknown and later converted into a public limited company on 1st Feb. 1975. Hawkins Cookers is headquartered in Mumbai, India. It has manufacturing units in Thane and Hoshiarpur. The company company produces produces a wide wide range range of other other househol household d and commer commercia ciall cookin cooking g utensils. utensils. Hawkins sells its products products under the brand name of Hawkins, Futura and Miss Mary.
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Hawkins brand has traditional pressure cookers like Hawkins Classic, Hawkins Bigboy, Hawkins Contura, Hawkins Ventura and Hawkins stainless Steel. ‘Futura’ brand has both cookers and cookware. ‘Miss Mary’ brand has pressure cookers which give trouble free service, totally safe and don’t leak properties. TTK Prestige:
TTK Prestige is a leading player in the pressure cooker market in India. It commenced manufacturing in 1959 with technical support from the Prestige Group, UK. The company deals in pressure cookers, non-stick cookware, gas stoves and domestic kitchen appliances under the brand name Prestige. It sells pressure cookers in the US under Indian-owned brand Manttra through a wholly owned subsidiary Manttra Inc, USA. It also has tie-ups with leading overseas retail chains like Macy’s, Target, Kohl, Walmart, K-mart and Sears. Prestige pioneered an entire category in the Indian market when it introduced one of the safest pressure cookers ever. Initially, when launched in the 1950s, they aroused fear and suspicion in the public mind. So long before live product demonstrations became an accepted promotional device, Prestige was already undertaking house-to-house visits allaying apprehensions and inspiring confidence in consumers. This act made Prestige a household name and their tag line “Jo Biwi se karte pyaar, who prestige se kaise karein inkaar” became immensely popular. Indeed, the familiarity with the brand generated continues to benefit Prestige even today. In its long dominance of the pressure cooker market, Prestige has been responsible for several industry innovations. It was, for instance, the company that introduced the unique gasket release system, the gasket offset device and the pressure indicator – all of which have now become industry standard. Prestige realized that urban markets were getting saturated – in fact; markets like Mumbai were having negative growth rates. Also, Prestige Popular, in larger sizes (which sell in the South) was launched in 1999, and since then the sales of this premium offering of the company has been on the decline. However, rural markets were growing at almost five times the growth of the category. This was when the company decided that rural markets were going to be a thrust area. Traditionally, Prestige was very strong in the higher population strata markets and market share declined as one came down the pop strata. Rural Markets for pressure cookers, potential and kitchen lifestyle:
Trust, transparency, innovation and knowledge are the most important factors determining the success of rural operations of any firm. Pressure cooker is possibly the first piece of cookware that a family buys, and easily the most durable. There is very little differentiation in the category - beyond inner lid and outer lid and stainless steel and Aluminium. The product itself may have to be more rugged, simpler to use, and priced cheaper - or come with attractive payment terms. The current penetration of pressure cooker in rural areas is 22.10% only. (NFHS. 2005-06)
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Cooking Fuel Used Electricity 0.10 LPG 8.20 Biogas 0.40 Kerosene 0.80 Coal 0.80 Charcoal 0.30 Wood 61.70 Shrubs/Grass 7.60 Agri Crop waste 5.40 Dung Cakes 14.40 Other 0.20
Place for cooking In the house, separate room In the house, no separate room In a separate building Outdoors Other Missing NFHS, 2005-06, Table:2
34.10 33.90 9.90 21.80 0.20 0.10
NFHS, 2005-06 Table:1
Type of fire/stove among households using solid fuels* Open fire/ chullah under a chimney Stove without chimney Open fire/ chullah not under a chimney Missing
8.20 0.10 90.80 0.80
Table: 3, NFHS, 2005-06, *includes coal, charcoal, wood, shrubs, grass, agri crop waste and dung cakes Table 1 indicates the cooking fuel used by rural population. Wood is the most commonly used fuel for cooking purposes followed by dung cakes. Poor penetration of LPG connection also hampers the growth of pressure cooker category. All the families having LPG also posses pressure cooker and there seems to be a direct relation between LPG penetration and ownership of pressure cooker. Table 2 indicates that only 33% rural households have separate room designated as kitchen while in majority of cases it is outdoor or within the house but no separate room. Urban and rural kitchens layout is different as well. In rural areas majority of the women 3
cook food in sitting posture with the chullah or stove placed on the floor, while majority of urban kitchens have platform to put the LPG stove. Similarly the cooking utensils used in rural areas are bigger in size as compared to used by urban households. The food is also cooked in larger amount as compared to urban households. The washing area may be altogether separate from the kitchen and ash/ powder may be used for washing the utensils. All the kitchen related activities are performed by females of the family only, from preparation to washing of utensils. Chullah are most popular amongst rural population and about 90% people cook food on chullahs using various solid fuels.
Innovative Promotional Strategies adopted by Prestige:
The exercise began, when the company decided to do a pilot project in the rural Mehboobnagar district of Andhra Pradesh with the help of MART, an agency with vast expertise in the field of rural marketing. The Pilot Project:
The women’s self help group (SHG) movement had been very strong in AP. Basically groups of women – around 15 a group – who save a rupee a day and the corpus so generated loan out to members of the group to help them in their work and not for meeting personal needs. The groups get a matching loan from the government on soft terms. The interest earned is ploughed back into the corpus. There are over four lakh such groups in AP. Taking advantage of the available situation; the company decided to convince these women Self – Help Groups to help sell the Prestige brand. MART and the company organized meetings of the women of the SHGs and explained the concept of pressure cooking, giving them details on the company, the brand and what they stand to gain by selling Prestige pressure cookers. All those who became dealers were given a demo pressure cooker. Meetings were organized by the dealers for potential customers, where the concept of pressure-cooking was explained. Company personnel attended these meeting so that dealers got trained on the concept of pressure cookers. Intense working of these markets for two months by a management trainee of the company along with the guidance provided by MART saw the company selling 50 pressure cookers. The company thus with its excellent strategy could enter a market (Mehboobnagar), which was one of the most backward districts of AP. A woman or a SHG can become a dealer by paying around Rs 5,000 for a lot of six pressure cookers. The company also provides one free demo cooker to the dealer. The company coordinates with the department and organizes a series of meetings involving SHG members in the districts to enlist dealers. Once a woman becomes a dealer the rural promoter of the company works with her in making calls to prospective customers. When the dealer is able to get a gathering of prospects, the rural promoter does a demo.
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The Result and The Future Plans:
After the early success in rural markets there’s been no looking back for the company. Today, TTK Prestige is working on a separate sub-brand to be sold exclusively through rural women. This will be at a much lower price point. As sales from the rural initiative are incremental, margins have been kept to a bare minimum. The product specs will not be compromised in any way. There will be some product differentiators to prevent the product from coming into the normal channel and affecting company realizations.
Whistle and Win:
Whistle and Win promotion launched by Prestige recently to mark its Golden Jubilee celebration in 2002. On buying Prestige products worth Rs 300, a customer receives a whistle, which, when blown, yields a coupon for prizes ranging from gas lighters and knife sets to washing machines and Cars. The prizes are worth Rs 3 crore, and the promo will run nationwide in 4,800 retail outlets till December 31. "We are known for pressure cookers, and they are known for their whistle," says Chandru Kalro, senior vice president - marketing, TTK Prestige. "We wanted to create excitement for the customer before, during and after the purchase."
Community Kitchens: Selling Cooking to Poor Families in India
The Hindustan Petroleum Corporation (HPCL) is a public sector undertaking of the government, which hold 51% of the equity. It is the second largest company in India and operates refineries and the whole liquid fuel supply chain involving petroleum products, lubricants and LP Gas. The supply and distribution infrastructure of the company con sists of over 6000 retail outlets, 1647 lubricants dealerships and 2200 LP Gas dealerships spread across the country, being monitored by 185 regional offices and a total workforce of 11,132 employees.. Currently LP Gas penetration in rural areas is estimated at 8% compared with 75% in urban areas. Most of the urban areas have been nearly saturated and due to relatively high inertia to brand switching, sustainable growth in future in the domestic segment is expected to come largely from rural markets where penetration levels are low. Rural households are therefore a key focus area for HPCL. Despite the challenges of rural LP Gas distribution, HPCL are confident that given the vast potential, once critical mass is achieved, adequate returns will come. In rural households, LP Gas is mainly used for cooking, although in a few cases, it is also used for lighting. The average family LP Gas usage is 7.8 kg per month.
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Despite a range of new and highly innovative supply measures for rural households, HPCL found that they were still unable to penetrate a large cross section of rural households that could not afford their own cylinders, appliances and regular LP Gas refills. They therefore pioneered an innovative scheme called the HPGAS Rasoi Ghar’, or community kitchens. This provides a common cooking platform for one village where users have to only pay for the time they use in cooking food. It is usually based on a standard hourly charge of 6 Rs per hour. This eliminates both the barriers of one time high deposit and appliance costs as well as the recurring cost of refills. HPCL now operates over 1400 community kitchens across India benefiting more than 18,000 families. Community kitchens are geared toward serving the below-the-poverty-line (BPL) families with ready-to-use cooking facilities in a common place. The space for the kitchen is provided free of charge by the village panchyat or villagers. HPCL renovates the area and provides the stoves, utensils and cylinders. Normally 10 to 12 families in a village use the community kitchen for cooking their daily meals. For taking forward this Rasoi Ghar concept, HPCL has tied up with various ground level organizations such as NGO’s, various self help groups, village panchyats, who all work alongside HPCL and carry out the preliminary survey for identifying locations and for setting up the kitchens based on local conditions. HPCL then subsequently open the community kitchens along with assistance from these various local bodies. Rural Distribution of all Sized Cylinders and a New Small Combined Cylinder and Cooker Top, “The Shesha Package”, in South Africa
Totalgaz is a privately owned company currently with an 11% share of the South African LP Gas market. They currently sell about 40,000 tonnes of LP Gas annually. They supply to all markets and their activities include bulk distribution by road and rail, cylinder refilling and local and regional (Southern Africa) LP Gas distribution. In terms of the rural residential sector, this accounts for around 35% of the company’s sales and they wish to greatly increase the current volumes of between 1000 and 1500 tons per months. Totalgaz wishes to expand their rural household market to support the socio-economic development of the poor in support of South African Government policy. As a company, Totalgaz is also a highly innovative and successful international LP Gas supply operation, with a wealth of experience in Africa and other developing regions of the world. It is this experience they have brought to the forefront in tackling the particular challenges of expanding the accessibility, affordability and acceptability to rural households. In rural areas some 80% of households live in a cluster of mud and thatch dwellings. Typically such extended families may have up to 10 or 15 members who follow a traditional lifestyle of small scale farming and animal husbandry. The South African marketplace for LP Gas is competitive with a number of different supply companies. Apart from the regulation of refinery gate bulk prices, the resale price of LP Gas is unregulated and competitive. LP Gas attracts resale VAT at 14%. Traditional fuels in rural areas include wood, cow dung, coal and paraffin which does not attract resale VAT. It is against this background that Totalgaz, following market research and consultation
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with stakeholders, developed the Shesha Package for low income households. Shesha means quick, fast and snappy. The package consists of a branded 5 kg cylinder and combined cooker top. The cylinder and combined cooker top are robust and very stable; ideally suited to the harsh rural environment. The cylinders are easily portable and rural householders use wheelbarrows, donkey carts, pick-ups and public transport to return empty and collect filled cylinders from retail outlets. Totalgaz operate on a ratio of around one retail outlet or point of sale per 100 households. In this way, close proximity and accessibility to a regular supply of filled cylinders is assured.
LP Gas Propaganda Vans for Creating Greater Public Awareness in India
The Hindustan Petroleum Corporation (HPCL) have developed a novel way to greatly increase public awareness about the availability and benefits of LP Gas in rural communities. With only a 15% penetration of LP Gas among the millions of rural households across India, HPCL have to improve public awareness of the product and benefits of this modern fuel. Potential household users also need to know where and how they can avail themselves of LP Gas. To meet this need in a cost effective manner while achieving maximum communication impact, HPCL devised what have become known as ‘propaganda vans’. The operation revolves around a ‘propaganda van’ that covers villages, haats and mandis (local village weekly markets) generating excitement and communicating the message of LP Gas. Typically the van is like a large panel van which is modified to give the look and feel of a publicity vehicle with adequate space inside to carry all the equipment and communications material. The respective local language is used in all communications. The body of the van is brightly painted with the LP Gas brand name, logo and a visual of both a gas cylinder as well as the cooking process. Important messages about LP Gas are prominently displayed all over the body of the van. The inside of the van carries a stove and cylinder, and audio visual and video equipment, with all publicity materials. In co-ordination with the respective local dealer and sales officer, the van covers 2 to 5 villages every day on a pre-determined route. It drives in and around the village with announcements being made that it will stop at a particular place in the village at a particular time and invites villagers to visit the van. To generate excitement, in between announcements, popular songs are played. At the chosen spot, the van is then set up with the following: • Banners and other display material • Video show • Stage with microphone and speakers • Actual demonstration of cooking using LP Gas.
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There is an audio visual entertainment show and in between there are LP Gas product demonstrations and communications of safety messages. This van aids the process of new connections (by collecting money and information an d issuing a receipt). In case villagers do not have adequate money on that day, the van also informs them of when and where the distribution van will be coming next. The van then moves onto the next village. The typical agenda for the propaganda vans are as follows: • How to use LP Gas and the benefits • Safety • Price structure of LP Gas (initial and recurring plus information on availability and the pricing of low cost stoves) • Finance Schemes (when available) • Where, when, and how refills can be obtained and bought • Co-ordination for release of new supply points In addition, the operation also leaves behind promotional material in the villages in the form of wall paintings, banners and tin plates. These are highly visual and low on text since literacy levels are low. They serve to reinforce the messages of the propaganda van.
Questions for discussions:
Q1: Discuss various factors which hinder the prospects of pressure cooker in Rural India? (4 Marks) Q2: Suggest some of the changes in the product (pressure cooker) desired by rural customer and reasons behind the same? (4 Marks) Q3: Suggest some methods to promote the product in rural areas in detail? Do you think organizing joint promotional campaigns may be of any help for the product (pressure cooker)? Also suggest some innovative promotional programs which may be undertaken by organizations selling pressure cookers’ in rural areas? (7 Marks)
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