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Leading From The Front


It is the single largest customer for marketing companies. The Canteen Stores Department (CSD) accounts for 20 per cent of total VIP Industries sales, 10 per cent of Lakme sales, 10 per cent of Colgate Palmolive turnover and four per cent of Hindustan Lever sales. The purchase point for the defence personnel and run by them under the aegis of the defence ministry is a hot ticket with fast moving consumer goods and white goods players. And whats more, those who are not part of this roster are ready to offer massive discounts on their selling price.

What makes this outlet interesting is its sheer size. CSD covers a population of 40 lakh people. These include personnel from the armed forces, paramilitary forces and ex-servicemen. And this core audience patronises the CSD for their big and small purchases, where goods are substantially cheaper than the civilian markets. And in its golden jubilee year, CSD which stocks 2,800 items continues to be a major outpost for almost all the 500 companies registered with it.

Says Major General Jagdish Chander, general manager under deputation at CSD, I have a clientele which is two per cent of the countrys total population. It is an audience nobody should ignore. Adds Sanjeev Aga, managing director of Blowplast, the makers of VIP luggage,

With CSD, we can access a section of the population and outlets we cannot reach. We have economies of scale dealing with them.

For VIP Industries, the marketing arm of Blowplast, notches up Rs 80 crore with CSD. But unlike fast moving items, VIP suitcases are packed in only 1000 of CSDs total 3,500 outlets. Thats where the offtake is better, reveals Aga.

However, the largest player in the CSD sweepstakes is Hindustan Lever (HLL). Of the groups Rs 6,600 crore turnover, the 1996-97 CSD offtake was more than Rs 300 crore. Brooke Bond alone notched up over Rs 36 crore. Another major player is Colgate Palmolive with CSD sales of Rs 80 crore.

On the product front, HLLs panoply of brands are star players. With sales of Rs 44 crore, the Lux range of beauty soaps is the largest selling CSD brand. Surf powder brings in Rs 31 crore followed by Rexona with 11.5 crore. Bournvita with sales of Rs 11.5 crore is the main grosser for Cadburys total CSD turnover of Rs 13 crore.

With 120 product categories selling under the defence umbrella, soaps and toiletries, liquor and white goods together account for 56 per cent of CSDs 1996-97 turnover of Rs 2060 crore. Of the 55 million liquor cases sold, more than seven million are bought at CSD stores. While Scotland-headquartered Seagrams has penetrated the CSD stronghold,

International Distillers India (IDI), the makers of Smirnoff vodka and Gilbeys whiskey is waiting for a toehold in the chain. I am missing out a large consumer base, but I would like to enter that market on my terms, says Deepak Roy, managing director of IDI.

Just how different CSD is from other cooperative units and institutional buyers like Apna Bazars and Sahakari Bhandars is evident from the sales. Marketers claim that sales from other institutional players is only one-fifth that of CSD. Again, unlike other outlets, CSD has a wider geographical reach. Not just major metros, its stores fan Leh in Tibet to the politically sensitive hinterlands of the northeast. Delhi continues to be the grosser for CSD with monthly sales of Rs 12 crore. This is followed by Jalandhar and Meerut with Rs 10 crore each,

What began as an offshoot of the Army Canteen Board of England to service British soldiers in India since 1912, CSD in its current form was set up exactly 50 years ago. Its main aim is to ensure that consumer items of vital importance to the soldier, sailor or airman reach him in good condition at the right time, right place and in the right quantity.

Playing a pivotal role in the life of the jawans who constitute almost 90 per cent of CSDs client base, it tries to fulfil the aspirations of its steadfast consumers in far flung areas.

Even so, Chander says that at any given time, consumer satisfaction levels do not exceed 85 per cent. As companies grow bigger, they are not able to supply many of the products we want at our rates.

In fact, pricing is a major issue between marketers and CSD officials. That is the single most

disadvantage of working with CSD, says a marketing manager of a leading white goods company. Depending on the product, purchases under CSD are cheaper by 25 to 40 per cent. Being a government of India undertaking, sales under CSD are exempted from the mandatory sales tax and octroi.

There is also CSDs penchant for striking bargains. For instance, if a company offers a 10 per cent margin to its other dealers, the CSD margins could vary from 12 to 15 per cent. Little wonder then that liquor brands with sales of Rs 400 crore cost 40 to 50 per cent less under CSD!

Another bone of contention is the price hike. For example, when a company increases the price of its product, civilian consumers feel the impact within a week or two.

In the case of CSD, the case could take from six to 18 months, reveals a marketing manager. By the time they get around to finally selling for more, its time for another hike, he adds.

Thats because, like most government organisations, any increase in retail price raises the bureaucratic hackles at CSD. It is like taking the matter to a high court, quips a vice-president marketing at a major soaps and toiletries company. With the various committees and boards looking into the matter, the final outcome could be tiresome. As Chander points out, the procedure was put in place to mainly escape any artificial price rigging by companies. To check the veracity of the hike, CSD officials conduct a survey and compare notes with civilian dealers across the country. Being extremely rigid and bureaucratic, we are not easy to deal with. As a result, there are motives attached to any deals we strike, he says.

A common grouse with marketers is that the products meant for the CSD canteens filter into civilian markets. While there is no way that CSD can monitor such movements, Chander has this to say, As long as Indians remain Indians, leakage will continue. But this has not stopped companies from making a beeline for CSD.

And in keeping with its premier position in the distribution trade, CSD officials are investing time and effort to educate consumers. In the fiftieth year, Chander has been visiting each of his depots and addressing battalions of servicemen to find out their requirements.

With satellite television showing all kinds of products, aspirations levels in the service base have gone up. And like most other consumers, the armed forces too are clamouring for the latest goods. In keeping with the effort, CSD has begun issuing newsletters to its various depots highlighting companies below-the-line activities and possible product debutantes.

For instance, a soldier up north said that he would like to retire to his farm. So a tractor and not a Maruti 800 could help him.

The demand today has put tractors on the CSD shopping list. As Chanders says, We want to improve our credibility all round.

First Published: Thu, June 05 1997. 00:00 IST