Consumer Private Limited

_________________________

Indian Institute of Management                                                     Mar 147

Ahmedabad_______________

CONSUMER PRODUCTS LIMITED

In January, 1997, the marketing management of the Washing Products Group of Consumer Products Limited was discussing the various ways of dealing with the latest developments in the market situation.

Consumer Products Limited, a public limited company, was set up in 1940.  The company has an authorized capital of Rs.40 crore.  The company is a leading marketing organization in the country and is engaged in the manufacturing and marketing of all kinds of consumer products of household use.

Consumer Products Limited is a professionally managed company and has a profit centre organization.  Marketing is the coordinating function in this organization and the marketing management has the profit responsibility for a particular product / product group.  Washing products is the major profit centre of the company.

In Exhibit 1 is given the breakdown of the total turnover and contribution to profit of the major profit centres of the company.

The company’s main entry in the washing powders market, “Dazzle” accounts for one-third of the profits made by the Washing Products Group.

The fabric washing market consists of 02 product groups, washing soaps and washing powders.  More than three-fourths of the washing soap volume is contributed by units in the small-scale sector which are basically operating in very small localized areas in the country.  These small-scale manufacturers do not have any national distribution and their products are generally sold within a radius of a 100 miles of the plant location.  They mainly sell inferior quality washing soaps at a substantial price advantage.

_____________________________________________________________________________

This case was prepared by Lalbhai Bhandari and Arun Nanda, Alumni of Indian Institute of Management, Ahmedabad.

Case material of the Indian Institute of Management, Ahmedabad is prepared as a basis for class discussion.  Cases are not designed to present illustrations of either correct or incorrect handling of administrative problems.

Copyright (c) 1970 by the Indian Institute of Management, Ahmedabad.

:: 2 ::

Mar 147/IIMA

On the other hand, the production of washing powders is entirely located in the organized large-scale sector of the industry, requiring sophisticated technical know-how.

The growth of this market since the introduction of the first brand, Dazzle, 10 years ago has been shown in Exhibit 2.  Although, in size the washing powders market is one-tenth of the washing soap market, it compared favorably in terms of profitability with washing soaps because of its better margins.

The usage of washing powders is restricted to the urban population and within the urban population it is concentrated in large towns.  Although the potential for growth for washing powders is high in small towns, the market in the largest towns is highly competitive.  Difficulties of distribution and the high cost of going to the smaller towns does not allow the manufacturers of washing products to employ their own distribution systems in these towns; they have to leave the transportation of stocks to the smaller markets to wholesale trade channels.

There are 04 main brands in the market, viz. Dazzle, Bright, white and Spark.  Dazzle is the leading brand which until September, 1996 enjoyed a market share of 80% of the total washing powder market; Bright had a 10% share, followed by White with 7% and Spark with 3%.  While Dazzle, Bright and White were sold in similar carton sizes, Spark was sold only in bulk until September, 1996.  Exhibit 3 gives the pack sizes and the prices of the various brands.

Technically, Dazzle had a superior formulation and was accepted as a superior product by the consumer (as shown by consumer research).  In terms of quality, Bright and White were practically in par; Spark was of the lowest quality with a technically inferior, and hence much cheaper, formulation.  The margin after variable cost for the different brands is shown in Exhibit 4.

Dazzle, Bright and White, as part of their marketing, spent heavily on theme advertising and on some consumer promotion.  The consumer promotions run by these brands were mainly gift packets in which some other company product was given away free to the consumer along with the washing powder.  These promotions were generally on the large pack and the expenditure incurred was around Rs.0 per tonne as cost of the gift.  The gift pack promotions were generally limited to a single carton of the large pack, which accounted for over 50% of the sales of all the brands.  Exhibit 5 shows the level of advertising and promotional expenditure incurred by the 03 major brands.

In September, 1996 the company manufacturing Spark in bulk packing launched Spark in 02 carton packs identical in weight, size and price to the large and small cartons of the other 03 brands.  The large carton was supported by an extremely heavy consumer promotion.  The promotion was on 06 cartons of the large pack, for which the consumer received a plastic tub worth Rs.6/- free, although the cost of the tub to the company was much lower due to bulk buying.

The offer was a redemption offer.  On each large carton of Spark a gift coupon was printed.  Six of these gift coupons could be exchanged at the retail store of the free gift.

:: 3 ::

Mar 147/IIMA

The launch of Spark in cartons did not involve any change in the product formulation; the same product which went into the bulk pack was put into the cartons.  This promotion cost the company Rs.700 per tonne in terms of the gift alone.  As a consumer offer, this was the most generous ever given for washing powders by any manufacturer.  The market share held between the 4 brands altered drastically over a period of 4 months.  Exhibit 6 shows the market share of the various brands between September and December 1996.