Parry'S Faces Up To The Bitter Truth

As part of the revamp plan, it is dropping non-performing brands and focusing on key ones. Shubha Sethuraman reports.

On new brand launches, the company will, in a clear break from the past, not launch any new product on an all-India. basis. 'We will tightly monitor new launches. Any new brand will first be tested in a small region. And only if it is successful, Will we contemplate a national launch'

Parry's Confectionery Ltd, part of the Chennai-based Rs 3,100 crore Murugappa group, recently announced plans to restructure its business in view of increasing competition from domestic and overseas players, erosion in marketshare and poor performance by some brands.

 

As part of the revamp plan, the company will drop or recon-figure brands which are not performing up to expectations and will focus instead on managing and building key brands.

Says Sournitra Ghatak, vice-president, "We needed to take a relook at business and make some tough decisions to regain lost ground." Brands with future potential are, therefore, to be put in the "project management mode" with clear trigger Points.

The company has reason to be concerned. In 1999 alone the company's marketshare declined from 28.5 per cent to 25 per cent Sales during the third quarter of the current fiscal amounted to Rs 17.89 crore as against Rs 34.28 crore achieved during the corresponding period of the previous fiscal. The company reported a net loss of Rs 18.14 crore during the quarter.

N C Venugopal, president, attributes the drop in sales to the rationalisation measures undertaken by Parry's during the current fiscal including the withdrawal of some brands - Mr Peanut, Tryme, Anytime - and a switch from credit to cash transactions with channei partners.

The cost of restructuring has so far worked out to roughly Rs 15 crore for the company.

"Thee onetime write-off hurts but it is in keeping with our new philosophy of strengthening only the key brands. Supporting many fledgling brands nationally over a long period has proved to be a costly exercise and highly ineffective as a strategy for Parry's and its channel partners" Venugopal says.

Consequently, the product portfolio has been drastically pruned to include 12 brands as against 33 in the past. This will also enable the company to

direct its adspend at key brands. Over the last couple of years the company had been spreading its resources thin on promoting both strong and weak brands.

Parry's has earmarked Rs 9 crore for advertising this year and as part of the new promotional strategy: Coffy Bite will be aggressively pushed in new avtaars of Coffy Bite bar at one rupee and sticpack at Rs 5. Lacto King, pioneer in the lacto segment, will be relaunched in a big way. Madras Cafe is expected to establish Parry's as the leader in the coffee segment and hence will get more attention.

The market can be segmented on the basis of flavour and price. The key preferences are milk, fruit, coffee, coconut and elaichi.

Milk and elaichi are among the fastest growing segments. While fruit is growing marginally, the coffee segment has remained stagnant and the coconut segment has actually recorded negative growth.

The various price points are 25 paise, 50 paise, one rupee, one rupee plus. According to an ORG study, growth in the 50 paise segment has remained stagnant while in the 25 paise segment it has been marginal.

Over the years, direct coverage had dropped due to a lack of focus on secondary offtake. Shift of focus from secondary to primary sales, extended credit and weak merchandising were detrimental.

Ghatak is confident that the new look sales team headed by K S Venugopal (formerly of Hindustan Lever), who has recently taken over is general sales manager, which has been put in place to focus on the retail market will achieve the clearly defined targets.

Besides, being a pioneer in sugar boiled confectionery in India, Parry's has a wealth of experience in its people (900 employees in all) who will spearhead the new growth strategy.

The rural market, largely dominated by the unorganised sector, has been identified as a thrust area. "Shakthi" a malt-milk toffee priced at 25 paise has been specifically launched with the rural market in mind.

"We may not make adequate money on "Shakthi" but iL will go a long way in capturing market-share and establishing a presence for the company in the rural market," he says.

The unorganised sector is poised to grow at 33 per cent annually while the organised market is expected to register a 10 per cent growth. The organised market is currently estimated at 79,000 tonnes.

"Penetration of the rural market will form an important part of our growth strategy in future," states Ghatak.

Besides, opportunities for growth have also been identified in the northern and eastern markets. Currently, 50 per cent of sales comes from the south. However, with a reinforced distribution network in place in these, regions, he hopes to reduce its dependence on the southern market.

On new brand launches, the company will, in a clear break from the past, not launch any new product on an all-India basis. "We will tightly monitor new launches. Ary new branO will first be tested in a small region. And only if it is successful, will we contemplate a national launch," Ghatak emphasises.

In the past Parry's has burnt its fingers by taking on the national market rightaway. If the brand was slow moving their the exercise turned out to be particularly wasteful.

Besides an overhaul of sales and marketing, Parry's is also in the process of rationalising . production at its plants in Nellikuppam and Manapakkam. In this, it will be assisted by TECHNET. headed by Ashok Ganguly (former chairman of HLL). This will entail a review of manufacturing processes and cost.

With the idea of bringing in any additional resource into its business, Parry's has disinvested in group companies - TI Diamond & Chain, Cholarnandalam and Carborundum Universal. This has garnered Rs 7.8 crore.

Although the restructuring exercise emphasises sales and marketing, it covers the entire, gamut of operations. Says, Venugopal, "every aspect of business needs to be covered as they all have a role to play in improving the bottomline."