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Pulse candy turnover 2019

29/12/2020 Client: saad24vbs Deadline: 7 Days

W18319


PULSE CANDY: SUSTAINING THE BRAND DIFFERENTIATION1


Ritu Mehta and Mayank More wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality.


This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com.


Copyright © 2018, Ivey Business School Foundation Version: 2018-06-01


By April 2017, within two years of its launch, Pulse, a raw-mango-flavoured, hard-boiled candy, had reached ₹3.26 billion2 in sales and become the leader in the hard-boiled candy segment, beating leading brands like Parle Products Pvt. Ltd. (Parle)’s Kaccha Mango Bite and Perfetti Van Melle Group B.V.’s Alpenliebe.3 Pulse sales were even higher than those of multinational brands Oreo and Mars, which had been in the Indian market since 2011.4 Pulse achieved this astounding success with hardly any promotion or advertising for the brand.


The journey for Pulse began in April 2015 when the Dharampal Satyapal (DS) Group, a diversified conglomerate operating out of Noida, India, launched Pulse in three states in India as test markets.5 In the very first year of its launch, sales of Pulse exceeded ₹1 billion.6 With its stupendous success, the brand was launched in other states, and by January 2016, the company had a pan-India presence.7 Within two years, Pulse had surpassed ₹3 billion in sales and the company was able to meet only 60–70 per cent of the demand.8


Eventually, competitors launched similar products, and cheap imitations started to be sold at roadside kiosks. In view of these developments, the DS Group needed to consider how it could keep up with Pulse’s sales momentum. Should it extend the Pulse brand to other formats and flavours? Should it focus on meeting the domestic demand or should it explore overseas markets? These were some of the options the company could explore to sustain Pulse’s competitive advantage.


COMPANY BACKGROUND


The DS Group was founded by Lala Dharampal (the “D” in DS) in 1929. He started with a small perfume store in Chandni Chowk, Delhi, and eventually launched chewing tobacco in 1948. He was later joined by his son, Satyapal (the “S” in DS), who earned the title of sugandhi (perfumer) as a result of his profound knowledge of perfumes. He used this knowledge to innovatively blend tobacco with various fragrances. Under Satyapal’s guidance, the company launched its flagship brand, BABA, the first branded chewing tobacco. The brand took the country by storm and since then, the company had engaged in launching a host of innovative products, including the famous chewing tobacco brand Tulsi9 and Rajnigandha pan masala, a betel nut product.


For the exclusive use of p. chauhan, 2019.


This document is authorized for use only by pankaj chauhan in BADM533 Marketing Management taught by Stephanie Thacker, University of the Cumberlands from Aug 2019 to Feb 2020.


http:www.iveycases.com

mailto:cases@ivey.ca

Page 2 9B18A032


The DS Group slowly diversified into non-tobacco businesses. It entered the food and beverage industry (F&B) in 1987 by introducing Catch, a branded salt packaged in tabletop rotary dispensers—the first of its kind in India.10 The DS Group eventually launched a portfolio of spices and beverages under the brand name Catch. In 1999, the DS Group also entered the confectionery segment with the pioneering launch of a herbal mouth freshener called Pass. The DS Group further diversified its offerings, making its presence felt in the hospitality, dairy, agro forestry, and printing and packaging industries.


With the government tightening regulations on the sale of smokeless tobacco products, the company’s focus in the consumer goods segment, especially F&B, increased over the years. The DS Group launched Chingles, mini chewing gums, in 2012, and in 2013 it expanded into dairy products under the Ksheer brand. Pulse was the latest brand in the confectionery segment, launched in 2015 under the umbrella brand of Pass Pass.


The company’s revenues and profits in fiscal year (FY) 2012/13 were ₹33.6 billion and ₹2.9 billion, respectively.11 The F&B segment contributed approximately 22 per cent to the firm’s turnover, which was reported to be around ₹77 billion in FY 2015/16.12


THE CONFECTIONERY MARKET IN INDIA


The per capita consumption of confectionery in India was among the lowest globally, providing a great opportunity for growth.13 With the country’s economic boom and increase in customer spending, several domestic and multi-national companies expanded their operations in the Indian confectionery market, and the per capita consumption of confectionery items increased.


The confectionery market was broadly divided into three categories: chocolate, gum, and sugar confectionery. Within the non-gum, non-chocolate, sugar confectionery market, hard-boiled candies formed the largest segment and showed promising growth.14 The hot climate in India led to a preference for hard-boiled candies over chocolates, which would quickly melt in the high temperatures, especially in summers. Gum was seen by the Indian middle class as a luxury item and was mostly consumed in urban markets.


Although the margins were larger in high-end chocolates, about 40 per cent of the confectionery unit sales came from candies priced at ₹0.5.15 Most of these sales were through unorganized retail, comprising small kirana (mom-and-pop) stores and roadside kiosks, and the candies were sold as single units rather than multi-unit packs or bulk purchases. The purchases were frequently made on impulse, and children were the primary consumers. Many of the shopkeepers used low priced candies instead of coins to provide change to customers.


Since entry and exit barriers in the hard-boiled confectionery segment were low, many small local manufacturers also operated and sold through unorganized retail. Thus, success in the low-priced, low- margin hard-boiled confectionery segment depended largely on volumes. However, customers’ brand loyalty was low and whatever little loyalty they exhibited was toward a particular flavour, such as mango, orange, or coffee. Mango flavour (24 per cent) and the raw mango flavour (26 per cent) constituted 50 per cent of the hard-boiled candy segment, followed by caramel (20 per cent) and orange flavour (16 per cent).16


Companies that dominated the hard-boiled candy market included Perfetti Van Melle India Pvt. Ltd. (PVMI), Parle, and ITC Ltd. PVMI was the leader in the confectionery market. It had entered the Indian market in 1994 with its brand Center Fresh in the gums category; it gradually expanded its portfolio to include approximately 15 brands across different sub-categories.17 PVMI’s revenues in the confectionery segment surpassed ₹20 billion in FY 2014/15.18 Some of its leading brands included Alpenliebe, a mix of


For the exclusive use of p. chauhan, 2019.


This document is authorized for use only by pankaj chauhan in BADM533 Marketing Management taught by Stephanie Thacker, University of the Cumberlands from Aug 2019 to Feb 2020.


http:2014/15.18

http:sub-categories.17

http:cent).16

http:growth.14

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http:2015/16.12

http:respectively.11

http:India.10

Page 3 9B18A032


caramel, milk, and butter; Mentos, a chewy mint candy; and Chlormint, a breath-freshener candy. PVMI was known for its quirky and clever television commercials that appealed to and connected with a wide audience. Some of its notable taglines were “dimag ki batti jala de” (lights up one’s brain) for Mentos, “dobara mat puchna” (dare not ask again) for Chlormint, and “zubaan par rakhe lagaam” (keeps one’s mouth shut) for Center Fresh.


PVMI enjoyed a strong distribution network, comprising nearly 5,000 distributors and approximately 10,000 sub-stockists that made PVMI’s products available to small towns as well.19 The company created a multi-tiered distribution system, dividing the products into three categories based on the brands. Each category had a different distributor, each of whom visited the retailer once every week. Thus, PVMI managed three visits to each retailer per week while the rivals’ distributors paid the retailers a once-weekly visit. The kiosk owners who found it difficult to buy multiple product types at one time because of limited working capital would end up buying some of PVMI’s products during every visit. This led to an increase in the volume of sales of PVMI’s candies in these outlets.


The other dominant company was the homegrown, Mumbai-based Parle, known for its Parle-G biscuits, the largest selling biscuit brand in the world. The company participated in different categories of the confectionery market. Its best-known brands included hard-boiled candies Mango Bite and Kaccha Mango Bite;20 Melody, a caramel candy with chocolate interior; and Kismi, flavoured caramel bars. Kaccha Mango Bite was Parle’s largest selling candy. It was advertised as “kacche aam ka Xerox” (an exact copy of raw mango) with actor Amitabh Bachchan as an endorser of the brand.

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