One needs to strike the right balance between jugaad, and systems and processes: Stefano Pelle

Stefano Pelle tells Rohit Nautiyal that improvements in packaging and supply chain can enhance margins

A majority of rural consumers in emerging markets like India are still not part of the consumption cycle. What steps should marketers take to tap this segment?
Rural India has immense potential. Some companies have started exploiting it also through new technologies and this is certainly commendable. The value of the products Perfetti Van Melle (PVM) sells does not justify an own distribution model in the rural areas. To reach this audience we have set up a large network of sub-stockists that has grown during the last few years and now yields a sizeable percentage of our sales. This is for us the most effective and efficient way of starting to scratch the surface of that vast consumer base.

In the chapter 'Chalta Hai', you have spoken of jugaad in India. Have you applied this concept to drive innovation at Perfetti Van Melle?

I have seen jugaads in our factories but over the time I have tried to minimise them and follow straighter processes. However, at time the ideas behind some of these jugaads did translate into technical innovations and were even implemented in manufacturing set ups outside India. Some examples of jugaad at PVM are small devices on packing machines that increased the speed of packing by 15 per cent and devices that helped remove candies from the moulds so as to reduce the number of defects. Another fantastic example is using fans to blow away the empty packs. Therefore, one needs to strike the right balance between creativity and systems and processes to exploit the potential of the Indian people.

Besides entering new categories, how can FMCG companies increase profitability as margins continue to shrink?
PVM had to find ways to enhance margins, having operated for decades at the same price points (50p for the mono-piece candies and Rs 1 for gums). We did a lot of product and packaging re-engineering and supply chain improvements. In some cases we offered fiscal incentives. After that we had to start looking at increasing prices. Indian consumers are indeed price sensitive, but they do realise that all costs and prices are going up.

Examples of packaging innovation were the value re-engineering of jars used to display our products at the outlets. Shapes were changed to enable us to reduce the weight by 2 gm across different categories of jars. This resulted in large savings. We also introduced a tooth-shaped jar for our sugar-free products, which fetched us an innovation award. In primary packaging we changed the laminate structure as well as optimised the size of wrappers without compromising the barrier properties and the machine speed.

In your book you have talked about how Indians take deadlines casually. How was your experience dealing with local executives at PVM India?
I did experience such issues in the beginning with the management team members. Some minor examples were late submissions of documents, expense statements delayed by months (in some case even years). The appraisal process and the salary increments used to happen often just during the very last days of the agreed deadline. Over the years things have improved but I cannot say they are perfect. We revised some HR policies, such as those relating to travel and leaves; created manuals that provided clarity on responsibilities; introduced the concepts of vision and value as well as abiding by an established code of conduct.