Saturday, May 28, 2005

…Bottles’ necks : Juicy Losses..

Last part in this series. After bottlenecks in the Airline Industry, we have a different kind of bottlenecks in the Juice Industry. Following data is taken from different sources:

Of course, the biggest P is omnipresent. No one likes to part with it too easily ;-)
Price: Pricing is one of the major worries. Says Executive Director (New Business) at Pepsi Foods, Subroto Chattopadhyay, "Price is a barrier to this category because when you give fresh juice, packaging becomes critical. So, what the industry is now trying to do is offer different packaging to suit different price points while simultaneously working on ways to offer better quality and improved taste."
Packaging: This is an interesting one. The costs need to be controlled to keep the prices low. Currently, PET bottles are another reason for the high prices. On the other hand, with the increasing number of health conscious consumers, there is more demand for better and safer packaging. This is reiterated in a report on Packaging, and I quote verbatim:
Health consciousness drives demand for liquid cartons
• Indians of all ages are becoming health and calorie conscious, showing a preference for healthy beverages like fruit/vegetable juices that contain no preservatives, no colour and no flavour additives. Moreover, in an effort to differentiate the image of juice drinks away from carbonates, these products were introduced in liquid cartons.
• Liquid cartons are being favoured since the packaging allows long shelf life, allows preservation of the original taste and flavour and also allows the juices to be stored without refrigeration. Liquid cartons also make it possible to transport the perishable products across long distances, and juices of seasonal fruits can be made available to the consumer throughout the year. Therefore, the growth rate of liquid cartons has been impressive during the review period, and is expected to grow further in the coming years.

Excise : Though the future of this industry is luring, there are apprehensions about the government planning to levy eight per cent excise on food products including packaged fruit juice. This would entail revaluation and resetting the goals and targets for the juice Majors!

Tax Structure: According to Business Line, Pricing is also the downfall of fruit juice importers. Says A. V. Bhaskar, CEO, Adluri Foods, which distributes the Australian brand Berri in the South, "It is difficult to make inroads into the middle class as it finds the prices prohibitive. Sales tax on imported products is not uniform across the States. In Tamil Nadu, it is 21 per cent, much lesser in Andhra Pradesh and Karnataka." So a one-litre bottle of Berri costs Rs 110 while a Tropicana is in the Rs 75 range. This obviates any international presence in the market, wherein the Global players don’t have an option but to enter thru the Franchisee model.

Looking at the future, certain core issues can be addressed, that would drive the growth of the market:
Forward and Backward integration – This is one aspect that producers have recently started tackling, and has become imperative as a cost-control measure
Price – Offering different price points to cater to different sets and tastes of the customers. For instance, a 125 ml pack of fruit drink Maaza from Coca-Cola India at just Rs 5 and a 500 ml Tropicana blend for Rs 25.
Promotion – Health and hygiene would be the linchpin of the campaigns in the future. A retail owner in Chennai opines on the organized players, “They are more hygienic than roadside fruit juices and are a big hit with yuppies. Also, non-sugar variants find favor with fitness freaks.”
Niche Markets – According to me, this is one aspect very particular to the juice market. For this segment, since the consumers have specific needs from the products, be it – Impulse purchases, health conscious buyers, seasonal purchases, regular servings, nutritional values or medicinal prescription, they become more apprised on the specifics and attributes of the product they are looking for. Down the line, the producer and in turn, the marketer needs to be very clear in terms of the content that he is producing, and selling to the customer, and consequently, the customer who is ready to buy that. Specific products for Specific consumers – that’s the key!


Disclaimer: I have not covered Milk variants, and other drinks in the non-carbonated drinks segment. Even the syrups and concentrates have not been covered. I believe they are not a part of the Juice Market! :-)

Pulp Fiction ..

Having spoken about the Industry and it’s Avant Garde, there are others also, who are expanding the pie, and demarking particular dimensions from it

Leh Berry
Compact International promoter D. K. Mittal was to meet the Director of the Defence Research and Development Organisation (DRDO) one fine morning in Ladakh in connection with a tender for setting up some shelters for army personnel. During the meeting, the Director offered Mittal a drink made of an unheard of herb called seabuckthorn. A little sceptical at first, Mittal took several sips before gulping down the entire glass. And he asked for more. This chance encounter with the wonder plant seabuckthorn was the reason Ladakh Foods was set up as a separate company in 2002 to manufacture and sell seabuckthorn juice as Lehberry.
Hoping to break even in 4 years, the company commands a market share of approx 10%.
Ladakh foods enunciated an interesting brand history - Legends about the nutritive and energy-giving properties of the berry date back to ancient Greece, according to the InternationalSeabuckthorn Association. The association says that Mongol conqueror Genghis Khan used the fruit to improve the fitness and stamina of his armies. Closer to the present, Russian cosmonauts have used them in space to combat cosmic radiation and as an oxygen supplement.
This has also reflected in the Marketing Strategy of the seabuckthorn juicer, the only juice having a tie up with the defense canteens. Unfortunately, harping on medicinal properties is not what lured the consumers. Taste and thirst-quencher is what they look for in a juice, primarily. That’s why the juice failed initially. A relook at the brand portfolio for variants and diversification is imperative.

Safal
According to Adclubbombay.com, Mother Dairy India Ltd (MDIL) relaunched its Rs 165-crore , fresh and frozen vegetable brand Safal, with focus on the juice market.
The company has launched packaged fruit juices under its flagship brand, Safal. Starting from Delhi, the product is scheduled for launched on a nation-wide scale in the months to come. The company says that having pioneered the marketing of fresh and frozen vegetable products backed by a modern produce handling and processing facility, Safal is now ready to take on the packaged fruit juices category.

Tropicana
According to Rajeev Bakshi, in an article in ET on 25th April, Juices is one category Pepsi is pushing hard and is one of its thrust areas. Though the sales are relatively low, the brand still manages to record a growth rate of around 45% to 50% every year. Over the next two years, this will become a big category, especially when one adds Tropicana, and other fruit-based juices like Slice and Mangola.
I read a nice analysis of the consumer mindset on juices, by Mr. M. G. Parmeshwaran on ETstrategicmarketing.com
“ Let me talk about the experiences of Tropicana orange juice in India. We did some very interesting mood and mind web studies to identify our challenges. India is a country where we don’t eat too much fruit and don’t drink anything out of a pack, since it is supposed to contain colours and additives. Moreover, Indian consumers prefer to drink sweet juices and Tropicana orange juice is not sweet but slightly sour. Thus, we had manifold problems on hand. We decided to carry the taste as the differentiating factor and called it ‘the taste of good health’. The taste of good health isn’t necessarily delicious. Go ahead and enjoy it. This worked wonders, and Tropicana is doing extremely well. This idea suited Indian consumers, who prefer things fresh. Thus, while carving out the strategy for Tropicana, we had to overcome a lot of cultural barriers. Nowhere else in the world is Tropicana marketed as ‘the taste of good health’.”
Variants of the brand - Tropicana Tropics Mango Nectar (from mango pulp sourced from India), Tropics Litchi and Tropics Guava.

Maaza
The packaged mango juice market is estimated to be worth around Rs 400 crore annually, with Maaza claiming a 29% share, followed closely by Frooti (24%), PepsiCo’s Slice/Magnola (20%) and Dukes, among others.
The Mango flavour accounts for 60% of the total packaged juices market in India.

Launched in ’76 by Parle, Maaza was acquired by Coca Cola India in ’93
Coke is aggressively promoting its flagship mango drink has plans to push sales by at least 50% in ’05. This has entailed a massive packaging strategy with introduction of 1-litre glass bottles for home consumption, along with promoting its 125 ml, 200 ml-and 250 ml packs. Bulk of the mangoes comes from Chitoor in Andhra Pradesh and Ratnagiri in Maharashtra.

According to a press release by Coca-Cola, Coca-Cola India’s Maaza, the country’s largest and favourite fruit drink with more than 30% market share, is back this summer with two new variants– Maaza Pineapple and Maaza Orange - in 125ml packaging (single serve) to tap the rapidly growing juice drink market in India. The Company has launched the pineapple and orange variants of the brand after extensive R&D and test-marketing of formulations, created especially to cater to the Indian palate and taste preferences.
The tetra-packs, popularly known as Chotu Maaza, are being promoted as a lunch accompaniment for school-going children and will be available with Donald Duck, and Pluto puzzles.

There are many new Entrants also in the market

Morton
Birla's New Juice, priced at double the price of the market (25/-) comes in a nicely packed tinned package, in 6 different flavors – Pineapple, Guava, Orange, Grape, Tomato and Mango.
It is manufactured and marketed by Allahabad Canning Co., Bamrauli. Not sure if the premium the manufacturer is charging is for the “Birla” tag or for the tin packing! The Canned juice company cannot compete with the rest of the market, since consumers would still go for Tetra packs at cheaper rates, than canned juice at double the cost! Juices are an impulse purchase most of the times, and entail low-cost environment.

XS
According to the April issue of Brand Reporter, Godrej Industries’ food division relaunched its fruit juice brand XS. Priced at Rs 15 for 200 ml & Rs 65 for 1 litre, it comes in exotic flavours - Kiwi Kraze (Kiwi-Apple-Lemon), Berry Blast (Strawberry-Cherry-Black Currant) and Triple Tickle (Apricot-Peach-Apple).

Miruna Yo
Manufactured by B Natural ( Balan Natural Food Limited)
According to Domain-b the bangalore-based company launched butter-milk and low-fat yoghurt drink in tetra packs, at low-price points, under the brand name “B Natural” and “Miruna Yo”.

Juice Zone
Indian counterpart of US-based Juice Zone, which entered into an Indian Franchise last year.
According to the website, “Last year the brand also established its first master franchisee in India, with the licence awarded to a very prominent Indian company which has laid out plans to open over 100 Juice Zone franchises across the country over the next five years.” The company has 3 stores so far – 2 in Delhi and one in Gurgaon.

Berri
Adluri Foods tied up with the Australian firm - Berri Ltd. 2 years back. What began as a distribution arrangement for Berri's products in the state of Tamil Nadu alone has now grown into a complete marketing association for all the 4 southern states - Tamil Nadu, Karnataka, Kerala and Andhra Pradesh.
Business Line says
“Taking advantage of the health consciousness pervading the market, Adluri Foods has introduced cranberry juice (something that the local brands also have done) and is testing a mixed vegetable juice and a cocktail of apple, carrot and orange in the market.”

This might not be an exhaustive list, per se, but then there is always scope for more. For instance, let me explicate this market as a field for research
Study of the juice market has been quite a favorite for the Researchers, not only nationally, but globally.
A research conducted by Mindbranch, which costs $350, says that one of the apprehensions of the consumer is the health content and preservatives & added flavors in the packed juices. The juice market definitely is younger to the drinks market, but big brother, beware. The kid is sure growing fast ! Whereas the drinks market grows at rought 20-25% every year, the juice market has recorded close to 40-50% annually.
Then, there is a research done on Fruit and Vegetable Juices
In case you want to compare facts, you can refer to a detailed study of the Soft Drinks market in India or try this link. For a specific study, the Asia-Pacific Region has also been researched on,

That’s it. Good enough? Then, lets move to the “Bad” guys then … next one coming up, literally !

Summer Sensation.. "P Lo!"

This one took a little longer to compile, than I anticipated. An Overview of the players in another exciting market – The Packaged fruit juice market in India
Let me start with the specifics:
Total Size: 182 Million Liters Juice Market, 19mn packaged.
Annual Growth Rate: 40-50%
Major Players: Dabur, Pepsi, Leh Berry, Mother Dairy
Driving Forces: product innovation, expanding market and increased consumer preference for healthy foods
Current Market: Rs 110-crore
Future Projections: Expected to reach Rs. 170 Cr by next year.
"Even when the fruit juice/nectar market is projected to grow at a scorching pace of 40 per cent, a Tetra Pak study has found that a whopping 86 per cent of the fruit juice market is still lying untapped."
This market essentially covers products which contain 100 per cent fruit juice. Let me cover this article in 3 parts – This one would cover the products of the market leader. In the next article, I would cover the other players in the market. Finally, I would cover the Achilles heel of this industry – the bottlenecks that Juice Market is constrained with.

Speaking of Juice Market, and not speaking of Dabur …”Real-ly?”
Ask Dabur Foods CEO Amit Burman where he thinks his company will be in the next few years and pat comes the reply: "We will be a Rs 200-crore company by 2006-07. And a large chunk of this growth will come from the Real brand of fruit juices, since Real contributes as much as 85 per cent to the company's topline. It will continue to be an area of focus."

Real has effected the overall image of the company over the years, though the marketing campaigns have been specific to Real products. In fact, Mr. Burman avers that overall strategy of Dabur Foods is “to offer consumers a healthier juice and the widest choice possible”

Well, “real”-istically speaking, er.. yes!

A nice case-study on Dabur has been published by ICFAI
Being the leader in this segment, Dabur has the following products in this segment
Real
Real Activ
Coolers
Lemoneez

RealThe CEO of Dabur, Amit Burman had the following specifics on “Real”, when asked in an interview

Target Segment: The Real fruit juice is targeted towards the housewife and kids, and the Real Active juice is targeted towards the young adults between the age of 24 to 35. We are very clearly focused on the in-home segment and soft drink is more out- of- home impulse purchase.
P-Speaks: Incidentally, the Real Juice home page does not reflect anything pertinent to housewives, and there is no marketing being done, based on my limited knowledge, on this particular segment.
In fact, the segments for Real as well as Activ are the same. What one needs to do is to capture the target consumers and lure them to Real, make them “Real” loyal. Subsequently, the sub-brands can be marketed, and consumers scaled from Real (65/-) to the appropriate price-points: Health-conscious users up-graded with Activ (78/-), while casual drinkers down-graded with Coolers (50/-)!
Market Research : When we launched 'Real', we didn't do much of market research, as we clearly saw there was a gap in the market. And looking at the Indian consumers, and there are so many juicewalahas in the market, so juice was not something Indian consumers had not seen before. So, we felt if we give them juices in a packaged form, which is more hygienic, it should do well.
According to the Marketing officers, Real Marketing has been the leader and the driving force for Dabur. Much of Dabur Foods’ youthfulness comes from Real. The money that has been put behind its advertising has created a perception that has boosted the company’s overall image, say observers. (Currently, more than two-thirds of Dabur Foods’ Rs 12-crore ad budget is spent on Real; the rest goes into Coolers.)

According to the Brand Reporter
Real now has nine flavors straddling nectars and juices (cranberry, grape, guava, litchi, mango, mixed fruits, orange, pineapple and tomato, and two brand extensions - Real Activ (launched in 2002) and Real Junior (launched this May).

'Real' was recognized as the 'Fastest growing brand' for 2001-02 in the first ever beverage industry seminar in India. Real Fruit Juice is a market leader in packaged fruit juice category commanding more than 55% market share.
Real Activ
Market Research: Real was in the markets, but was catered to a niche market, wherein the kids and the housewives were targeted primarily. A new market had emerged – the new Health-conscious consumer. Consequently, Dabur enhanced its portfolio by launching `Activ' as a 100 per cent juice variant of the Real fruit juice that contains no sugar.
It started as the sugar-free version, but after receiving consumer feedback that it was perceived as another flavour of Real, not a sugar-free juice option, Dabur repositioned ‘Activ’ as health-savvy drink and subsequently, investments and promotions were scaled up to cater to the new campaigns. Even the packaging was new - called prisma packs - Activ has attached healthy living on it's website, to promote its association with Health benefits.
In 2003, as is published in one of the press releases made by Dabur that year, Dabur created a new category – vegetable-fruit juice combination, with the launch of Real Activ Orange Carrot Juice.
Priced at 70/- initially, “the nutritional powerhouse” as the release calls it, was again an after-effect of a concerted Market Research
This strategy is an outcome of an innovative product development plan that combines product ideation and extensive consumer feedback. On Real Activ Orange Carrot, the company's research showed that consumers were looking at an orange+ option i.e. a way of making the all-time favourite orange juice more nutritious and healthy.
Coolers
4 variants – Aampanna, Watermelon, Pomegranate and Jamoon
To ensure that the company does not lost out on any segment interested in the juice market, and to focus the brand communication for its flagship brand, Dabur has catered to the pulp concentrates market by launching fruit drinks - drinks where the fruit pulp concentration is only about 20 per cent - in typically Indian flavours of aam panna, watermelon and pomegranate. And having realised that price is still an entry barrier for a vast majority of the consumers, Dabur has priced Coolers about 15 per cent lower than Real.

Lemoneez
Not much information on this, except that I bought this yesterday, courtesy this research. The message on the cover says “Natural Lemon Juice”, and I admit, it tastes yuk! Need to study the Market Research behind this product…definitely there is something amiss in the brand communication specific to this product.

This is about Dr Burman's acronym - Dabur Products. For the rest of the markets, follow up.

Monday, May 16, 2005

Another A of Airlines ….its Achilles Heel !

Yes, the 5th A of Airlines
Till now, I spoke about the Marketing Strategies and the cost-control measures adopted .
But, all is not goodie goodie about this industry. There are certain soft points, weaknesses, and loopholes, that have not been addressed, or are a side-effect of the cost-control measures.
Air Deccan, which is part of helicopter charter specialists Deccan Aviation, started it’s operations in 2003, with an initial effort to connect the non-metros over a short-haul period. Once it commanded the southern region, it ventured into the metros, and expanded its fleet from 2 to 15 within a year. It now plans to take it to 36, by the end of fiscal year 05-06.
But, somewhere, in this expansion process, certain areas were overlooked:

Being a low cost airline, the employee strength is minimal, and thus, coordination and procedures take their toll.
In Speaking at “Synergising ATC-Airports-Airlines to meet Contemporary
Challenges in Civil Aviation
” held at New Delhi on November 1 & 2, 2004, Capt. G R Gopinath, MD, Air Deccan, whose topic was “Economics of low cost travel in India”, elaborated the capacity handling constraints of aerodromes, particularly in respect of Delhi and Mumbai. Because a low cost airline banks upon the factor of optimum uses of the aircraft and that can be achieved only if you have a quick turn around time at the Airports.
Delay in flights is a major bottleneck for Air Deccan, and has started hampering the brand value of the airlines gradually.
I can narrate one personal experience. I had to go from Bhopal to Delhi once on Air Deccan, and the flight was scheduled for departure at 6.40 pm from Bhopal.
The flight which was to take me, started the day with Delhi-Bombay, Bombay-Delhi, then Delhi-Jaipur, Jaipur-Delhi, and then Delhi-Bhopal, and Bhopal-Delhi, as far as I remember ( might have missed out a destination maybe).
It so happened that the first flight from Delhi got delayed due to fog over the capital, by an hour. And there the story started, with the aircraft facing landing problems at virtually every airport subsequently.
Finally, I managed to start from Bhopal at 8 pm, and it was a pretty decent time for the take off, according to the Airport authorities ! The Airport incharge for Air Deccan told me that it was a regular affair for Air Deccan to delay its flights, and would certainly be a part of the W in Air Deccan’s SWOT Analysis.

This is reiterated by Sucheta Dalal, in one of her articles for Indian Express


operators like Air Deccan, which have no back up aircraft, are continuing to break the hearts of summer holiday travellers, many of who are trying to take advantage of its low fares to fly to holiday destinations for the first time. On Friday last, the airline cancelled its flights to Coimbatore and other destinations due to engineering problems.
She also criticizes the airline with few other concerns, rather as they say in business lingo, AoIs:


its call centre was clogged. We were told it was because its three phone lines were being used by the staff to inform passengers about the cancellations. Curiously, the airline which has a modern on-line booking facility, is funded by private equity and hoping to go public, does not have the presence of mind to announce its cancellations through its website. And the ‘‘full refund’’ that it offers passengers is meaningless because a transfer to another airline is probably thrice as expensive. Ms. Mulchandani, a victim of Friday’s cancellation had cautiously purchased a ‘‘back up train booking two days later’’, which will be cancelled if she gets to fly. No-frills flying surely cannot work if it needs a train back up. It is probably a matter of time before consumers start dragging the airline to court to demand proper compensation.
The first flight in September 2003 did slap an embarrassment for Air Deccan, as is covered by Atimes in one of its articles. Since it is quite an old issue, I don’t want to discuss that. But, what one can infer from this is that, it emerged out of this crises in a commendable way, to be one of the most preferred brand, due to its business strategy. An aggressive campaign had been launched that time, else Mr. Gopinath would have had to pack his bags. Now, with its massive expansion plans, I guess, a similar effort needs to be taken to instill trust in its customers, to retain the loyalty they have earned over the past 2 years.

Few other areas which need attention:
(a) Attrition: The fierce competition among airlines has affected the operations of Air Deccan too. Several airhostesses of the airline had left for jobs with foreign airlines while 15 co-pilots have joined Indian Airlines. The airline currently has 200 pilots, 100 engineers and 150 airhostesses. According to estimates, the airline would require 700 more pilots once the fleet acquisition is completed.
(b) Airport Infrastructure: The findings of the Naresh Chandra Committee report, A Roadmap for the Civil Aviation Sector paints a dismal picture of airport infrastructure. In all, there are 122 airports which are managed by the Airport Authority of India (AAI). Of these 94 are civil airports (including 11 international) and 28 are civil enclaves at defence airfields. Out of the 400-odd airstrips and airfields in the country, only 62 are in use. Dispersal of traffic simply hasn't happened, with over 40 per cent of traffic being between Mumbai and Delhi. The four gateway airports account for 42 per cent of revenue. Only 10 airports made a profit in 2001.
There is a large number of airports where full infrastructure is available, but only operate one to two flights a day.

(c) Competition:
Kingfisher started its operations with value-added services at low tariffs.
Though the segment targeted is different, and the routes do not clash for time being, it sure promises competition in future.
Others aiming for the skies are - Spice Air, Go Air, Indigo, Indus one, Air One, Yamuna Airways, Arab Express, Jagson Airlines, Air Arabia, Air Asia and Tiger Airways ( Taken from Domain-b, Business World and Business Week )

(d) CRM – They do not have any customer loyalty programs, and the customer databased is not being utilized to it potential. An established CRM would definitely be an add-on.

(e) Supply Chain : This is going to be the most important parameter for the low cost airlines in the coming future. The processes at the airport, the coordination system between the various centres, 24by7 support at the call centres with better infrastructure, minute-by-minute information flow and updates, and the passenger loyalty programs – as the airline grows, these issues also need to be addressed, to ensure a streamlined airline, with its objectives clear, and armaments in place, ready to take up the road ahead .. rather ..the sky ahead !

Before Air Deccan becomes an overkill, will wrap it up for the time being. But, surely, this industry seems to be a very promising one, and the more one studies about it – the Indian interface, the more one realizes that there is scope for more… much more….
Come one, come all … fix the price, and ..let the consumers have a Ball !
With its inviting gestures, it does beckon, this naughty little plump fellow, Mr. Air Deccan !
But don’t worry, we have a lot of space in the sky, so come quickly .... and grab your share of the pie

Till then, enjoy the beauty of the stars and the moon, cause the way I see it, they are gonna be out of our sight pretty soon !

Costing (of the) Couch …

As the Virgin Group founder Richard Branson once famously said: "The safest way to become a millionaire is to start as a billionaire and invest in the airline industry."
In the previous post , I discussed what exactly is the business strategy of Air Deccan. One of them is to keep the costs low, and in turn, passing the savings to the customer.
The biggest P of Marketing, Price, is in fact, the biggest driver for the entire Low-cost airline.
Covered in Business Line Air Deccan operates a low-cost, no-frills, point-to-point service. Air Deccan has benchmarked its fares against first-class rail fares. The company wants even blue- collar workers to fly.

But, how does Air Deccan go about cutting costs and passing it on? More analysis follows (some of them indeed are pretty interesting !)

(a) Ticketing is done largely through the Internet to avoid travel agency costs. Air Deccan passengers can print out their tickets and exchange them for a boarding pass when checking in
(b) The agents are asked to pay upfront through Cash or credit card, thereby reducing the capital locked within the system itself.
(c) A cabin crew that consists as a rule of a single, polite flight attendant who wheels a trolley selling cookies, munchies and non-alcoholic drinks. It has first-come-first-served seating, neither business class nor frequent flier mileage bonuses.
(d) no-frills airlines enjoy frills such as the Airports Authority of India offering discounts to aircraft below 21 tonnes. It helps slash their landing, navigation and baggage charges by 50 percent
(e) The pilots are instructed not to apply breaks earlier. They should go to the end of exit and only then turn, thereby increasing the longevity of tyres.

(f) Air Deccan turned its six leased aircraft into billboards to draw revenue. The Sun Microsystems logo gleams on the fuselage. NDTV has also been one of the big advertisers.

(g) More utilization of its aircraft, and flying them more than the others. As long as they are maintained properly, the costs would reduce and the cash inflow per aircraft would be more.
Air Deccan flies its aircrafts for 11 hours on an average, in comparison to the industry-wide 9 hour practice.

Personally, I have experienced a few points, wherein Air Deccan cuts costs, that is,
(i) The Air hostesses are mostly from the North-east, thus reducing the salaries one needs to pay,
(j) The airport staff taken at non-metros comprises College students, especially for the post of the front-line exectives.
(k) Air Deccan has a tighter restriction on the Baggage allowed per ticket, over which, an extra charge needs to be paid.

(l) It has its own reservation system, created through HCL, using the current optic network.
(m) It has one number per state to connect to its call centre in Bangalore. This reduces the costs further as the connectivity is routed through a single channel from each state.

(n) The model on which Air Deccan works is a point-to-point service, than a hub-and-spoke model followed by the Big As of the industry. So, while changing flights, one has to check out the baggage, and then check in again for another destination. This reduces the operational and logistics costs.
A paper in Marketing Mastermind covers the cost-aspect of LCCs ( Low Cost Carriers) pretty well, and there is a case study on Air Deccan itself in the March issue of Marketing Mastermind. Haven’t read it so far, since I purchased it last night only. Will add in case I missed out something.
Of course, a case published in Harvard Business Review is recommended to read. ICMR also has published a case on Air Deccan .
There are other ways also, whereby the Airlines works on wafer thin margins, but has still managed to come in black just after 2 years of its service, which is commendable. The business model has definitely been a success, and is catching everyone’s interest gradually.
But, is everything in place for Air Deccan? No red signals, no pitfalls, no loopholes in the whole process? Can the Business Model be replicated in its entirety?
Let me take this in the next post …

Simply Fly?

Talk of Air Deccan to Rajeev Pratap Rudy and Venkaiah Naidu, and they would get terrorized recollecting Sep 26’03
Talk of Air Deccan to Capt Gorur Ramaswamy Gopinath, and he is full of enthusiasm and determination;
Talk of Air Deccan to Vijay Mallya or Mr. Thulasidas, and he would scoff at the idea of Air Deccan reaching the top 3 in a couple of years;
But then …talk to a common man, and you would see the glow on his face, the dream-come-true hope reflecting on his expressions, the eagerness with which he would inquire about the availability of next Rs. 500 (now even Re 1) tickets.
No wonder, “Common Man” has been selected as the Brand Ambassador for the 2 year-old airline

India’s low cost airline Air Deccan said on Wednesday that it will sell some of its tickets at Re 1 and named renowned cartoonist R.K. Laxman's `Mr Citizen' as the brand ambassador of the airline.
"The vision of Mr Laxman and that of the airline matched and that's why he agreed to let us use his creation to promote our airline," the Managing Director, Air Deccan, Capt Gorur Ramaswamy Gopinath, told a news conference.
Introduction to the DynaFares is just one of the promotional strategies that the airlines has ventured into, and as is evident from this count from their home page, it SURE was not a bad campaign!

In addition to this, Air Deccan plans to sell tickets by mobile vans and at petrol pumps to tap the middle class segment, with a tie up with Hindustan Petroleum Corporation Ltd (HPCL) to sell tickets at its Club HP petrol pumps.


In a trial run, airliner Air Deccan will sell its air tickets by mobile vans at three places in Bangalore - M G Road, BDA Complex, Koramanagla and outside Woody's on Commercial street.
Maruti vans hired by the travel agency installed with web-enabled services will serve as mobile ticketing counters to sell tickets six days a week (Monday to Saturday) and payments could be made in cash or by cards. The mobile ticketing centers will be connected to a central reservation system to enable providing confirmation of the tickets.

The bulk of the customers at petrol refueling stations were the middle class, the very segment that Air Deccan wanted to tap. The proposal is a win-win situation for both, since the cash earned by the petrol pumps could be rolled over due to the sale of tickets.
But what is it that is driving the 450-odd strong organization, that makes it the second-best brand in the 9th Brand Derby, a survey conducted by Business Standard a couple of months back, which illustrates the brand awareness and the recall value that the brand enjoys !

Consolidated primarily from excerpts from a Businessworld Cover Story and the web-version,
The Managing Director, GR Gopinath avers that his airlines is the Udupi Hotel of the airlines business.
The Business Strategy included:
(a) Quick turnaround, taken from the pages of Ryanair, and Southwest, implying that the aircraft are utilized more thereby reducing the capital and crew costs, apart from the hangar and finance costs.
(b) Target Segments - the travel segments are corporates (middle-level employees), small and medium enterprises (SMEs), anyone who wants to go on leisure, and those visiting friends and relatives (VFR).
(c) They did not connect with the metros initially. They entered the regional areas, which were disconnected, but promised capacity traffic.
(d) They took a leaf from Virgin Blue, thereby relying on another factor – frequencies of flights plying between 2 cities, thus ensuring customer loyalty (It operates 22 flights a day on the Sydney-Melbourne route, the highest number of flights between any two cities. There's a flight every 15 minutes a day, and this has helped Virgin increase occupancy. The business traveler thinks if he misses one, he can take the next one as there are flights every 15 minutes, or the one after that).
(e) Its strategy for East-India expansion was to focus on the long-journey-connectivity, than the 1½ hour connectivity it followed for the other regions ( As covered by Outlook ).

BBC says Air Deccan has modeled itself on European no-frills carriers Ryanair and Easyjet and believes the market for cheap fares in India could be huge. Thus, the USP for Air Deccan, like any other LCA, is the biggest 'P' of marketing.
Industry experts say price remains the biggest part of travel and even though Air Deccan offers no frills it does offer television shows and recorded music to make the journey pleasant. Also in a two-hour journey most travellers don't need more.
What are the ways in which it is controlling costs? Is this system fool proof, or are there loopholes present, which are still unaddressed?
Check out the next post !

Sunday, May 15, 2005

Low-Cost Airlines – Look down, there goes the fare !

Plan to write a paper on the Low-cost airlines, provided I get a good mentor soon. The more I read about it, the more it interests me.
Intend to cover the specifics of various airlines, the highs and lows, and the “Yes” and “No”s of this diverse Industry. Am not aware of the financials involved, so would need guidance on that too.

As of now, this is what the Contents Table of the paper would look like::
- Specifics of the Low-cost Airlines Industry
- LCA market in US, Europe and India – an insight into the past, present and future of the markets operating in different time zones
- **Difference in the Consumer Behavior in these markets
- Cost-cutting efforts followed globally, the ifs, buts, cans and shoulds behind these efforts
- Case-Study: South-west Airlines
- Case-Study: Air Deccan
- Case-Study: Ryanair / Easyjet
- Marketing Strategies for various Airlines
- Comparison: India and US Airlines Industry of the 60s
- India – Scope for Expansion and Market offerings
- **Areas of Improvement – the misses so far, and future roadway suggestions

Might include a few more, as and when thoughts flow in. Have researched on a few aspects of the above.
Will take up a slight analysis of Air Deccan and South-west Airlines subsequently

But, before I take up that, there is this exciting analogy with Marketing that I read about, pertinent to the Airlines industry – THE 4 “A”s of Airlines …;-)
ATC (Air Traffic Control)
Airports
Airlines
DGCA (government or regulator)

The presence of all 4 elements is sine qua none for the success of any player venturing into this area!

Tuesday, May 10, 2005

Zee Network ..Neat work ?

Effective Mar 28, '05 – Zee Network has had a makeover.. at least their logo has, if not the content. The letter 'Z' breaks out of the frame and is in the shape of a diamond. Zee Network has been through with this before, the makeover stuff.
Mentions Brand Reporter -
In August 2001, Zee TV had a new look, and in 2004, Zee Cinema's logo was also changed.
The re-branding initiative was taken for all 20 channels

According to Media 24 by 7, . On the cards is a change in the on-air packaging, logo, graphics and music of the channels.
The designs have been done by FCB-Ulka to give them a global look that can connect with all sets of audience. Is it a case of old wine in new bottles? Guess, what the viewer demands today is not so much of the top right screen, than what appears in the rest of the screen!
According to Ashish Kaul, VP, corporate brand development, Essel Group, "over a period of time" the re-branding initiative would extend to the content of its channels… Wow.. so they ARE considering it, aren't they ;-) ?

Mr Kaul averred that "the re-branding is aimed at adding the extra zing and edge which reinvents the spirit of the brand and brings it closer to our younger audience"
Sure, it "really" connects with us Mr Kaul. but ... just am wondering .... which part ?

According to Business Standard,
" As a part of this exercise the three English channels of the Zee will be renamed as well. Fashion and lifestyle channel Trendz is now Zee Trendz, Zee English is Zee Café and Zee Movie Zone (ZMZ) has become Zee Studio.
Also, Smile TV is now Zee Smile. The regional channels network of the group is also being given a new identity and branding. The regional Alpha channels are now renamed as Zee Marathi, Zee Bangla, Zee Gujarati, Zee Punjabi and Zee Telegu. "
Central Chronicle has reiterated the same thing... verbatim..

This move by Zee Telefilms comes at a time when the Indian broadcasting sector is seeing a sudden rush of channels and broadcaster are trying to give a distinct identity and feel to their
properties.

By the way, I was wondering where in the world did ZMZ come from, and this is what I could gather. Supposedly, ZEE MGM was renamed to ZMZ from October 1 last year!

Whether Zee group is contemplating the launch of a new English movie channel, following the buy-out of its current partner Metro-Goldwyn-Mayer by a group headed by Sony Corp, is not forthcoming. But the latest is that starting 1 October, Zee MGM is being renamed as Zee Movie Zone (ZMZ).
Incidentally, the website of Zee Telefilms still reflects the old channels only !!
Though, the index page has been corrected..the international site is still not updated !

Also, surprisingly, no press release was made for this change..

By the way, speaking of Zee Network also reminds me of a continual debate over one thing - Is Zee Telefilms an FMCG company? It is already one of the 30 in the list of items on the BSE, but is it part of the FMCG index also? Will find out more on this later, for the time being, have a look at this discussion . Discusses if Zee Telefilms is a media or a consumer stock!

Monday, May 09, 2005

I am what I am !

Nopes, it is not a rigid male-chauvinistic I-care-balls-about-the-world kind of attitude reflection, but the latest global big-budget campaign launched by Reebok, alias Rbk, to communicate the attitude the brand reflects, and subsequently endorsed by the featured celebrities – that of an Assertive and confident individual, and their real life behind the cameras.
Launched on 7th Feb’05 , the biggest campaign to be launched by Reebok, it signifies authenticity and individuality. Says the Chief Marketing Officer of Reebok, Dennis Baldwin “Through this campaign, we hope to encourage young people to find their own voice by celebrating contemporary icons who have accomplished their dreams by being true to themselves and following their own unique path to greatness."

BW further adds (Business World dated 2nd May’05) that the big budget campaign has been met with criticism in the UK and Malaysia, with anti-gun protests over 50 Cent’s 60-sec commercial. The commercial features Curtis Jackson of 50 cents counting from one to nine, referring to the number of times he was shot in NY in May 2000, and then talking about how he survived that to become a successful singer. Accused of “promoting the Gun Culture”, the Ad has been pulled off from the UK and the US media.
Incidentally, as mentioned in the magazine, the band has a big fan-following in India, and so the Ad would be featured here, according to Subinder Singh Prem, MD of Reebok India (a Rs. 250 Cr enterprise), along with basketball player Allen Iverson and rapper Jay Z.
Also, different versions of the Ad are customized for the Indian consumer, featuring Indian cricketers – Rahul Dravid, Harbhajan Singh, Yuvraj Singh and Irfan Pathan – endorsing their own story and using this campaign as a forum for self-expression and the brand in the print version of the brand!
The campaign has been made by McCann Erickson, under the patronage of the creative director, Prasoon Joshi.
The website, http://www.rbk.com/, can be used to create your own “I am what I am” Ad, or recommend someone, who is worth the shot !
Wanna check it out? ;-)

Namaste Wal-mart.. Retail Indian Inc.

As anticipated, when there is so much activity going on in the biggest retail market in the world, how can the champion stay behind?
As soon as the proposal of opening FDI in Retail has taken weight, the president of Wal-mart is planning on an Indian visit soon.
A few days back, Wal-mart had spoken to the major FMCG firms sourcing to the retailers in India.

Speaking of the Indian Retail industry, a latest whitepaper produced by FICCI and ICICI jointly gives out the figures for India:

Total Retail Industry: Rs. 9,30,000 Crores
Unorganized Sector: 97%, with approx 5% annual growth
Organized Sector: 3%, worth Rs. 28000 Crore, but growing at 35% annually. It is projected to touch 10% at Rs. 1,00,000 Crore by 2010.

FDI currently is allowed only in the groceries, and lately, infrastructure development, like construction of the Retail outlets, etc.
Commerce Minister Mr. Kamal Nath mentioned a couple of months back that the proposal would be to the effect that the traditional mom-and-pop stores are not effected, and the retailers, the giant ones, would be given space outside the city itself.
I have the specifics with me, will post them soon.

Also, the paper mentions that the main reason for FDI not being entertained in India is the capital being taken by the multinationals from the local resources, and not foreign capital being pumped in the economy. (Will get hold of the paper. Seems to be interesting!)
I don’t quite agree with this point, since though, there wont be any inflow of funds, but definitely, this would streamline the processes and the functioning of the entire industry altogether. One area where we lack expertise in, is the Supply Chain Management, and that is a competency which can be considered to be a foreign “intellectual” and “process” capital being brought in!

The local retailers would not get effected, since the fixed costs for the local kirana shops are so low, that to break even, there is not much that is desired.

There was an article in Business Standard long back, which mentioned 3 main advantages of Retail in India, and I quote:
(1) Modern technology
(2) Transparency in dealings
(3) Best practices
Couldn’t agree more….

The paper further mentions that allowing foreign capital would boost the GDP of the country, since Retail contributes 10% to the GDP currently, and is the largest private industry in the country.

The 7th KSA Retail Summit 2005 held in Delhi in March’05 reiterated the same points, adding that the spending pattern of the Indian Consumers has changed over the time, going from regular spends to the Lifestyle spends

Anyway, guess there can be a long discussion on the Retail industry, since I get carried away sometimes. Will take a separate entry for this later.

Brand-age!

A nice article came in March on branding at brandchannel.com.
It emphasizes on the significance and relevance of branding in the market.
"Branding is about making your product or service known to as many potential
customers as possible, consistently, with the most effective use of your time
and money. Branding is about repeat business. Branding is about effortless
referrals. "
A set of questions need to be asked, to introspect your brand strength and worthiness, according to Kim Castle.

1. Am I really passionate about what I am doing with my business, service or product?
2. Do I have a big vision of my business, service or product? One should have a plan for the near future, but make sure that the sum of parts is the long-term perspective of the entire business. Achieving small targets is not your goal, it is just a means to achieving the goal !
3. Is my product or service a real benefit to lots of customers? Is the target customer of critical mass?
4. Am I prepared to surround myself with a team or the knowledge to accomplish the business success that developing my business as a brand delivers?
Apart from this, there could be a few more pertinent questions -
5. Is there a "differentiating factor" or a USP in my business, service or product, compared to
a) the rest of the brands in the same category? (I am not aping an existing product or idea, and there is an element of originality also!) and
b) in the entire ambit of products. business or services around it? ( I could be manufacturing a whole set of fast-moving goods, but communication to be sent is intended for a specific product only)
6. Is there a message which my business, product or service can connect with, and which can be "effectively" communicated to the consumers?
7. Does the message/communication cover the entire set of products/services I plan to include, without any particular set being overlooked or overemphasized? Also, make sure that the message follows my work, and not my work follows the message !



Sunday, May 08, 2005

Happy Wal-Marther's day....

Long time since I posted something. Had planned to update the blog after completing INS 23, but somehow, couldn’t fish out time to post. Or maybe, the paucity of resources could also be one of the major reasons ;-). Net blocked on my terminal... so no more R&D at speedy leisure !
:-/

Anyway, plan to cover a few important areas I had thought of. To start with, a little update on... the Big wee .... .

Wal-mart has something with Mother's Day again! I read this on the wal-mart Blog Alwayslowprices.net
An eight-by-eight foot card, signed by supporters to honor women and mothers, would be sent to Lee Scott.
A social message and request has been attached with the occasion, vis-à-vis discrimination against women being implicitly practiced by the giant!

In fact, some parties have proposed a mothers' day boycott to Wal-mart....
A group of community leaders have urged the New Yorkers to join the "Love Mom, not Wal-mart" campaign launched by WakeupWalmart.com !

A little bit of statistics, taken from the same source which Kevin of alwaysprices.net referred to :
"Approximately 700,000 women work for Wal-Mart which makes the company the largest private sector employer of women in the United States... Wal-Mart is currently part of the largest gender discrimination lawsuit in U.S. history. Over 1.5 million former and current female employees are suing the company for pay and promotion disparity. At every level, from cashiers to senior executives, Wal-Mart pays its female employees less than their male counterparts. An analysis of Wal-Mart payroll records done in 2003 showed that despite making up 72 percent of the hourly workforce, women only accounted for 33 percent of managers and only 15 percent of store managers."
I wonder if there is so many vindictive opinions on Wal-mart, how is it able to sustain its command over the market? How is it able to retain its position?
Is it that no matter what policies Wal-mart follows, no matter what kind of practices it promises, no matter how hard and rigid is the mindset of the management in Wal-mart, it still manages and commands to be the best and the biggest Employer in the world?