Confectioners To The Nation

Sanjiv Kumar pulls a black suitcase onto his desk. This is my entire office, says the soft-spoken chairman and managing director of Candico (I) Ltd. He unlocks it and takes out 10 or 15 sheets of paper, each marked confidential. These, he explains, are status reports on future product launches. Each carries the brands proposed name, its present status, the product category and the date of launch. The most futuristic? June 1998.

In all, there are 89 products being worked on in Candicos laboratory. A December launch is taking shape in the form of a Re 1 bubble gum and a chewing gum, among other things. Launches in the company are becoming a bi-monthly affair. October saw three new launches, and the two months before that saw three new offerings.

Too ambitious? So would you be if you were a seven-month, Rs 65-crore company aiming to end the century, which is just three years away, with revenues of Rs 200 crore. That too, in a market caught in the midst of hectic competition from new and old multinationals in this Rs 1,000-crore industry (see table Panning The Market).

The point is whether a company with a turnover of less than Rs 100 crore, with a marketing team of six people and a Rs 7 crore budget can sustain the pace that Sanjiv Kumar has set. And whether it needs to.

We have to keep the market vibrant, explains Kumar, who created Candico out of a division of Bakemans, the company he and brother Rajiv inherited from their father Sham Lal. His reasoning: No product can stay untouched in confectionery for more than five years.

Kumars need to agitate the market stems from experience. Mint-O, the first major launch (in 1990) when the confectionery business was part of Bakemans, started showing results only after ad agency Ambience suggested alterations in the pack. The agency also recommended that the product be pitted against Nestles Polo mint. So it was relaunched by Bakemans in 1995 with its now well known line The Mint without the hole, some months after Polo (launched in 1994) opened wide the market.

Yet the problem with Bakemans was that it was primarily a bread and biscuits company. Even Mint-O was something of a misfit. Since biscuits were doing well, everything else was neglected, recalls Kumar.

This is partly true of the entire Indian confectionery industry. As Kumar explains, it was owned by sugar barons who were more interested in high-return goods rather than confectionery. Indian players were sitting complacent, says he. Secondly, toffees and gums were reserved for the small-scale sector, freed only in 1986.

Activity in this impulse-buy market picked up only three years ago with the gum segment, estimated by the Indian Confectionery Manufacturers Association at Rs 200 crore today, seeing a virtual flood of new-age multinationals -- Wrigleys, Perfetti, Agrolimen. They drove industry ad spends to annual growths of 70-80 per cent, recounts a media planner in a large ad agency.

More encouragement followed early this year when a study by McKinsey and Co. on the food processing industry was released. Tucked under the high volume, high growth segment -- or simply put, the area of greatest potential -- was confectionery. FAIDA (Food and Agriculture Integrated Development as the report is titled, projects the Rs 1,000-crore confectionery market to grow six-fold in eight years. It was an eye-opener, admits Kumar.

Candicos assumptions for growth are simple. It cites a report by the National Council for Applied Economic Research (NCAER) which put the confectionery penetration in the urban-rural combine at just 14 per cent. And the countrys per capita confectionery consumption? Only 168 gm.

FAIDAs projections rest on growing incomes, a growing middle class and a growing youth ever ready to experiment. According to FAIDA, 80 lakh households earning above Rs 20,000 a year were added to the Indian middle class between 1990 and 1994, while the addition among the poor is decreasing. Over the next 20 years, 75 crore young Indians will begin to exert their influence on Indias food consumption patterns.

The societal shifts were already visible. After-dinner delicacy had moved from gur to chocolates, explains Pradeep Kant, vice-president, Ambience Advertising. People are now seeking instant gratification and are ready to put their money behind this search.

According to a senior executive in a Delhi-based ad agency, the industry ad spends now stand at a figure over Rs 40 crore (including chocolates). But consumers are highly price-sensitive too in value-added foods. FAIDA notes that sales of noodles more than doubled in some months when unit price dropped from Rs 7 to Rs 5 in 1993.

Kumar knew he could end their search at the right price points. He had major strengths: active products in four segments - candies, bubble gum (Big Bubble -- now withdrawn), mints and chewing gum ball (Jumbo Gumbo) - generating sales of approximately Rs 55 crore (bakery was Rs 120 crore);

one of the top four distribution networks in the industry (with more additions, it is now up to 700 distributors and 200 direct employees serving 1.3 lakh outlets spread over three-fourths of the country, in addition to an unaccounted for strong wholesale route); and

an excellent plant at Nagpur (installed capacity: 30,000 tonnes per annum).

April, when Candico (short for the candy company for those who havent guessed) was formed, Sanjiv Kumar was aiming to fill in the gaps. Because the market either has local players with cheaper, and at times, unexciting products or MNCs with slightly premium products. And there was hardly a company offering everything at every price point. Parrys and Nutrine are sweets and candies, Cadbury is chocolates, Nestle is mint, candy and chocolate. There are either low-price volume players or premium sellers, explains Kumar.

He is clear that he cant be one up on low-priced players. So he sells candies and toffees at a minimum of 25 paise apiece. Instead, I am looking at price points where MNCs dare not come, like 50p bubble gums, he says. The key: I may market 4.4 gm of Loco Poco (a 50 p bubble gum) while an MNC brand would give 5 gm for Re 1. He is ensuring international quality by importing gum base and polishing waxes from Eurobase of Belgium and flavours from Curt Georgi of Germany.

This is his way of providing value for money. The idea is to attract the child who now has pocket money by way of a birthright and make sure that no parental guidance is needed for him to make the purchase, explains Kumar. Not that Candico isnt hitting the top end of the price spectrum. It has to, as it strives to cover the entire spectrum. Mint-O matches Polos price (Rs 4). And chocolates are yet to come. Not before another three-four years, muses Kumar.

What he wants Candico to do is span every possible need, and more importantly, continue the same pace. Which explains the emergence of a new category of what he calls pan products -- a sugar coated saunf that should appear as Mr Krunch, coated peanuts (Monkee Nuts), among others -- besides a presence in all other segments.

A K Khaneja, Candicos senior manager, brands and relationships, expects pan products, a category the company says it pioneered, to grab a 2-3 per cent share of the market, volume-wise, in a year, year and a half. Presently, this segment isnt even a blip on the screen (see pie-chart Slice Of

Everything).

Innovation isnt only limited to pan products. Candico is enthusing its rank and file with ideas for newer things every two months. The novelty could come as even a different product form. Like Rock Candy - candy broken into small granules - which was launched with some funky space-age advertising. It could even be a packaging innovation as can be seen in the Rs 3-convenience pouches of Jumbo Gumbo, where three differently coloured packs form one string.

Packaging innovations are needed more than ever now, explains Khaneja, because retailers have started feeling the need for Rs 5 or Rs 10 price points. And having an entire range of products, he says, raises the shopkeepers need for your company.

While some sceptics dismiss pan products as mere product-fiddling, Kumar insists that product differentiation is the key to growth in a impulse purchase-led market. Kumars strategy of finding a different route dates back to the Bakemans days. In 1994 we survived elder brothers Britannias and Parles punches by moving into smaller towns and avoiding direct confrontation, says Kumar, adding, many others like Ampro and Dalmia faded.

No wonder enlisting ones target audience as consultants could only have been Kumars idea. It is another simple recipe for new marketing ideas. Even before the companys formation was officially announced, half-page ads were released to a prospective readership of 3.2 crore asking children in the age group of 10-16 years to enrol as brand and relationship managers on an honorarium of Rs 24,000 a year.

Kumar claims to have received 3 lakh applications, of which 20,000 have been retained for processing. Of this, only 12 children will be selected by January next year to represent a national sample. The rest are being sent polite refusals along with gifts. This exercise is costing us about Rs 23 per head, explains Kumar. Thats a petty amount compared to the relationship he is forging with his audience. And the access he now has to a vast, lucrative database. Not to forget the goods that he would have sold in the entire exercise that was based on questions revolving around Candico products.

These young consultants, as they are being referred to, help Candico design and re-engineer products and at times, even suggest a marketing approach. Also, they are the guinea pig for testing company communication. We knew we had the right film when we heard them cackling says Ambiences Kant, of the ad film for Americano candy balls.

Kumar also frequently invites foreigners to come and work for some time. Often, it results in a product idea being borrowed from the western market.

Combined with this innovative zeal is the aggressive pace at Candico. It can be best seen in the lead time - time from conceptualisation to market entry - of new products. Ideally it should be 2 years but I am giving them three months, says Kumar. He cites the instance of Rock Candy. It came out at 5 pm and my men supplied me the first sample at 7.30 p.m. at the airport.

This is a big edge. One reason why Kumar can afford to be obsessed with rapid growth without other concerns is the lack of public obligation. We arent concerned with increasing shareholder value. We are lean (there are only two layers of management under him); we are young, aggressive, determined.

One of the biggest advantages of a frenzied pace is that product replicas cant come up as fast. Shifting production to a new line is very difficult, explains Khaneja and no one will keep unutilised machinery in anticipation of competition for long. Candicos plant is running at 55 per cent of its capacity, giving it ample scope for rolling out new products. Kumar says the machine and equipment, bought in 1986 and last valued at Rs 75-80 crore, is enough to meet its needs for the next four-five years.

What about the cost of launching products every two months? The major cost, explains Khaneja, is on the TV spend, which comes to around Rs 75 lakh-1.25 crore. This is spread mostly during July-August when schools open, tapering towards April and subsiding during summers. Kumar says he is ploughing back enough money to spend on new launches (sales averaging 1,200 tonnes a month). Plus, he is going for institutional loans. But no public money, he insists.

In any case, not every launch demands a TV boost. We did not do it for Drumbeat or for Frutti Tutti. In the case of the latter, Splash, another brand we launched earlier, did the spadework for us, says Khaneja. This is what makes things cheerful at Candico, and at rival companies too. That there is room for all. And if one advertises or attacks the other, the excitement generated only helps the category. As it happened in mints. Then there will be cases of low sales which will be promptly withdrawn, promises Khaneja. He doesnt specify any but maintains that the withdrawals are also sorted out.

Even otherwise, Kant of Ambience feels at home with short lifecycles. He hasnt released any anti-Polo ads for quite some time now. My purpose is served. Now whenever people see Polo, they certainly think of Mint-O. Mint-O is now believed to have 40 per cent of the 300-tonnes-a-month mint market, around 10 per cent less than Polo. A new campaign for Mint-O Fresh, a blue variant, has hit the air even as Candico prepares to launch more varieties of mints.

To sustain the pace that it has set for itself, Khaneja agrees that Candico needs a weighted average growth of 45-50 per cent in volumes. He sees it coming from every segment - about 10-15 per cent for candies, and nearly 75 per cent for mints. The most, of course, from pan products.

But even if Candico achieves its projected sales of Rs 90 crore for 1997-98, it would only mean a 38 per cent growth. It knows it has to accelerate to reach its year 2000 target. Is it going about it in the right way? Given below is an expert opinion on the issue.