Executive Summary
This report is intended to recommend an entry strategy for FIL into
Indian Ghee market. This report has evaluated three different
options of entry incorporating quality standards and price as its
components. These options were evaluated using Cost, Customer
Acceptance, Adherence to market standards, and Possibility to be
unique in the market. After carefully evaluating all options against
each criteria and taking into consideration the characteristics of
external environment of Indian Ghee market, this report suggests to
launch a branded ghee with codex standards for quality along with
CERC standard 9 or above for sensory characteristics of texture.
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Foodcraft India Ltd
Situation Analysis
India is an expanding consumption economy. Being a diary-based
food Product Company, Foodcraft India Limited (FIL) would like to
ride this growth wave and tap the potential of growing consumer
market in India. Ghee seems to be a lucrative segment for to enter
into in India with potential to earn good margins to the tune of 50 to
70% (Exhibit - 1). From the case facts, it is clear that both rural and
urban markets for ghee are un-tapped and there exist scope for
capturing the un-explored markets of India. A gap analysis shows
the need to come up with a variant of Ghee which is priced above
market benchmarked price but offering something superior in nature
to all the current competition brands (Exhibit - 2).
Problem Statement
What Quality Standard should FIL follow while launching new Ghee
in India, so as to maximize the market potential?
Options under consideration for FIL
From the detailed analysis of case facts, it was recommended to
launch branded product (Exhibit - 2). This recommendation shuts
the door for FIL to launch loose ghee in Indian Market. The report is
of the opinion that, even in the urban market, which is dominated by
branded products, penetration is only 31% and hence there is
enough scope to penetrate the market and create larger market for
FIL brand.
Option: 1 - Introduce a Branded Ghee which satisfies Codex
standards with better texture than any other brand in Indian market
Since there exist thee branded players in the market which satisfies
codex standards, if FIL are going to compete in the quality aspect, it
needs to be adhering to the existing best competition's standards.
Looking at the sensory data for those brands that satisfies codex
standards, it was evident that none of them score well with the
sensory character of texture. This was the logic behind creating this
alternative.
Option: 2 - Introduce a Branded Ghee satisfying Indian standards
with better texture than any other brand in Indian market
This option will be a via media approach on quality to give best
possible price point to the customer. As it was evident that most of
the brands in India are only following Indian standards and Ghee
being an experience good, it makes logical sense to be following
Indian standards and creating a differentiation in texture which none
of the competitors was rated high by the sensory tests.
Option: 3 - Introduce a Branded Ghee satisfying Indian standards
with lowest price point
Attractiveness of this option comes from its focus on lowest pricing
strategy. As Indian market is considered to be highly price sensitive.
FIL might be able to penetrate faster and capture market share.
Criteria of evaluation
Criteria -1: Cost
Here, this cost of production of ghee is taken into
consideration. Assumption is that, higher the quality of ghee,
higher will be the cot incurred by FIL to produce it. This is due
to the technology cost involved in refining ghee to a greater
quality, which will be meeting all international standards.
Criteria -2: Customer Acceptance
Here, this degree of acceptance from customers is given
importance. In the case it was mentioned that, majority of the
customers mainly look at the sensory characteristics of Ghee
for acceptance, while other quality standards only appeal to a
small minority.
Criteria -3: Adherence to market standards
Here, this report gives more importance to the legal issues of
quality adherence in an Indian context. Indian laws only
require the product (Ghee) to be in adherence with
AGMARK/PFA/BIS standards. Anything over and above the
prescribed quality standard adhered by FIL could be used as a
potential thread for marketing campaigns.
Criteria -4: Possibility to be unique in the market
Here, this report concentrates on the potential for FIL brand
to stand out in the highly cluttered Ghee market of India.
Analysis of Options
Option - 1 & Criteria - 1
When we take into consideration the technical superiority of Ghee
production process required to satisfy this option, Cost of production
will go high. But, it was clear that the marketable price of Ghee
would be able to cover this added cost. "Moderately Favorable"
Criteria - 2
Since our target is the urban consumer, he/she will be able to
appreciate the quality and favorable texture. "Highly Favorable"
Criteria - 3
FIL will be a notch above most of its competition and on par with 3
of the existing brands. "Highly Favorable"
Option - 1 & Criteria - 4
FIL will be able to stand unique as it follows international quality
standard and also gives a better texture which none other
competing brands have. "Highly Favorable"
Option - 2 & Criteria - 1
Since cost will not be noticeably higher to adhere to Indian
standards, "Highly Favorable"
Criteria - 2
Customer is not very keen on analytical attributes, but the sensory
ones. "Highly Favorable"
Criteria - 3
Since FIL will be adhering to all legal standards of India, "Highly
Favorable"
Criteria - 4
No specific and unique message to be communicated to the
customer. Texture may attract some customers, but highly unlikely
to drive business on its own. "Not Favorable"
Option - 3 & Criteria - 1
Since FIL will be competing on price, it will be difficult to extract
margin, which will sustain the business. At the same time cost
cannot be cut below a certain level without compromising on quality
standard. "Not Favorable"
Criteria - 2
Since, India being a price conscious market, customers will accept.
"Highly Favorable"
Criteria - 3
Since FIL will be adhering to all legal standards of India, "Highly
Favorable"
Criteria - 4
Price will be the main message to the customers. But, for urban
customers, quality also matters. Hence "Moderately Favorable"
Recommendation
After thorough analysis of the facts and Indian market environment
regarding the decision of FIL to enter into Indian Ghee market
(Exhibit -3), this report recommends FIL to launch a branded
Ghee, which adheres to Codex standards, and also has a
better texture characteristics (CERC standard between 9 &
10)
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Exhibit - 1: Earning Potential Calculations for Ghee in India
Total consumption of Ghee = 900,000 tons
Market size of Ghee = Rs 85 billion
Cost per kg of Ghee ~ Rs 94/-
Average selling price of a kilo Ghee ~ Rs 150/-
Margin potential ~ 43% (Sufficiently high to look at
entering the business)
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Exhibit - 2: Gap analysis of Ghee brands
Exhibit - 3: Comparative analysis of Options and Criteria
Criteria - 1 Criteria -2 Criteria - 3 Criteria - 4
Moderately Highly Highly Highly
Option - 1 Favorable Favorable Favorable Favorable
Option - 2 Highly Favorable Highly Favorable Highly Favorable Not Favorable
Moderately
Option - 3 Not Favorable Highly Favorable Highly Favorable
Favorable
