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Case
Study
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key states where the mushroom brands are thriving are
Gujarat, Maharashtra, Rajasthan and Karnataka. |
Competition
Glucoenergy: Glucoenergy is the market leader with around
65 per cent market share as mentioned above. The total
sale of Glucoenergy in terms of volumes was around 9000
tons. The brand is sold in 3 SKUs of 100g, 200g and
500g. There is an orange variant of the product that
is also available in the same sizes. The orange variant
accounts for roughly 10 per cent of the total sales.
The positioning of the brand is as an instant energy
drink with the brand proposition being ‘Nothing energizes
you faster than Glucoenergy’. In fact, the brand has
become so popular that the brand name has now become
a generic term. Real: Real is the third-largest player
in the market with a market share of 6.5 per cent. It
sells its product under the name ‘Glucose D’. However,
the brand is confined to the northern and western parts
of the country where it has an average market share
of 20 per cent. It is also available in SKUs of 100g,
200g and 500g. Until last year, the brand was targeted
at the rural consumer and had gained a significant market
share in a relatively small period of time. The positioning
has now been changed, and Real is now targeted at the
urban consumer with the brand proposition being ‘Non-Stop
Energizer’. It has been able to penetrate the market
largely because of its aggressive pricing strategies.
Local Brands: There are a host of small operators throughout
the country who sell the product under the generic name
of ‘Glucose D’. These brands are collectively known
as mushroom brands, and they command a nationwide market
share of around 20 per cent, which is growing at a rate
of 14 per cent (compared to a market growth rate of
around 4 per cent). These brands are typically sold
through the ‘push’ strategy by offering high margins
to the trade. Although the MRP of these brands is equivalent
to the national brands, the margins offered to the trade
are significantly higher, with retailers getting up
to 150 per cent margins. Such high margins also give
the retailer an incentive to charge a lower price from
the consumer. Also the product does not have any perceptible
quality difference. These brands typically have SKUs
of 100g, 200g and 400g. The pack size of the 400g pack
is equal to the pack size of a 500g national brand,
thereby confusing the consumer. These brands make most
of their profits in this SKU as the packing cost/unit
is less and they reduce the weight of the product competitively.
Also, the look and feel of the pack design is similar
to Glucoenergy and many of the consumers are led to
believe that they are actually purchasing Glucoenergy.
In effect, they take advantage of the ignorance of the
consumer or, to put it bluntly, they deceive the consumer.
These brands are particularly strong in the states of
Gujarat, Maharashtra, Punjab, Haryana, Karnataka and
Andhra Pradesh. .
What we commonly know as glucose is essentially dextrose
monohydrate and is used for mainly two purposes: therapeutic
and for casual rehydration. Convalescing patients, growing
children and sportspersons are the primary users of
the product. The product is mainly sold through chemists,
general stores and groceries, with chemists accounting
for more than 50 per cent of the sales. .
Energee: Energee is a glucose powder brand of
Foodcorp and has a market share of 8.5 per cent. It
is quite prominent in the southern part of India where
on an average it has a market share of 25 per cent.
It is the most profitable brand of the company, contributing
about 35 per cent of the gross profits.
For quite some time the company has been making efforts
to increase its market share, particularly in the North,
West and East zones, but the results have been disappointing.
This is largely due to competition from Glucoenergy
and the mushroom brands and also due to the rather limited
advertisement spends of the company. The company has
been doing limited sales promotion activities and even
their results have largely been disappointing. In fact,
during the past one year the market share has declined
by one percentage point. The Road Ahead The writing
on the wall is quite clear to the company. On the one
hand, the market leader Glucoenergy is squeezing its
share and on the other hand the mushroom brands are
growing at a rapid pace. The future of the brand and
the product depends upon whether it can sustain and
increase its market share. Over the years, the company
has realised that the only way to increase market penetration
is to rely more on the trade channel and use push strategy
by giving higher trade margins. Gain in market share
seems to be the only survival strategy. One of the alternatives
is to alter the margin structure of the existing brand
Energee and give higher margins to the trade. However,
the flip side is that it will seriously hurt the profitability
of a brand. Since Energee is the bread-and-butter brand
for the company, such a move will seriously affect the
bottom line. A second alternative could be to offer
different margin structures in different markets. The
brand could be sold on the present terms in markets
where it already has a sizeable presence. Higher trade
margins can be offered in markets where the presence
of the brand is negligible. However, cross-border flow
of goods is a problem in this case. The product has
a high price/weight ratio and hence the transportation
costs are very little. So the market can easily exploit
this differential pricing and hence defeat the purpose
of differential pricing. A third alternative could be
to launch a second brand of glucose powder at a different
price point, on different trade terms and through a
distribution channel which is different from the existing
Foodcorp distribution channel. The idea is to have two
brands, each operating in different markets without
any danger of cannibalisation. This would take care
of the problems encountered in the first two alternatives.
However, operational difficulties come to the fore for
implementing such a move. Preparing the marketing mix
with respect to product, brand, pricing, positioning
and packaging, designing the distribution channel and
promotional strategies will in fact be a duplication
of effort. Also, the new brand may not be able to sustain
the additional personnel requirements (in marketing
and sales). The possibility of cannibalisation cannot
still be ruled out. There is a fourth alternative too.
The company can tie up with a suitable pharmaceutical
company for distribution purposes as the bulk of the
sales of the product come from chemists. So the distribution
strength of the pharmaceutical company can be leveraged
to achieve a higher penetration. However, success of
such a strategy depends on whether a suitable partner
can be found. The imperative is on bargaining for suitable
terms and conditions for the partnership to be a success.
However, there is a growing perception in the company
that the days of high profit margins in the industry
are over. The high gross profits of the industry are
giving an opportunity to the mushroom brands to eat
away into the market share of the bigger brands. So
it is essential for the company to counter this threat
now for its survival in the market place. |
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