Brand Failures: Carona Shoes
Group 2
Name Roll No
Mayur Bhat 2
Tushar kambli 6
Yogesh Redkar 10
Manish Tripathi 14
Carona Ltd: Company Profile
Earliercalled as “Carona Sahu Company”
In 1984, the company was acquired by
Khataus and the name was changed to
“Carona ltd”
Key Executives
◦ Mahendra K Khatau , Chairman
◦ Anil K Khatau , Managing Director
◦ P R Ruparel , Director
◦ A K Basu , Director
Operations and competencies
The company used to manufacture canvas
/rubber footwear of all kinds.
Manufacturing facilities in Mumbai,
Aurangabad and Ahmedabad
Strong distribution network across the country
The company’s strategy was to cater mass
market with a price range of 50 to 400
It became the second largest footwear
company in India
Technical Agreement with Puma
With giants like Nike, Reebok, Adidas
entering Indian Market, in 1989, the
company entered into a technical
agreement with Puma AG Rudolf Dassler
Sport, Germany, to manufacture sports
and special application shoes.
Public issue in Jun 1989 to set up a unit in
Aurangabad to manufacture the sports
shoes
Downturn of Carona
1995, there was a reshuffle in the management
because of a split in the Khatau family
Strong competition from unorganized sector for
rubber and canvas footwear
In 1995, it disposed off its Mumbai (Jogeshwari)
plant where operations were partially suspended
since Mar 1994. 800 of its 1200 workers were
relieved through a VRS scheme
1999, the company was registered as a sick
company under SICA (Sick Industrial Companies
Act) 1985
Contd..
In 2003, BIFR (Board for Industrial &
Financial Reconstruction), while noting
that the promoters of ailing Carona Ltd
are not serious in rehabilitating the
company nor are they resourceful enough
to mobilize the funds required for this
purpose, confirmed its prima facie
opinion of winding up the company.
Reasons For Carona’s failure
Head on competition with Bata
New launches by Bata to cater high end
segments :
Contd…
Carona counteracted by a technical
agreement with Puma
Trouble: Wrong Market to Enter
The Segment was not sizable for a company like
Carona (constituted a mere 5 to 10 per cent of the
footwear market in India)
It did not gel with their distinctive competence
It could not provide the volumes that Carona was used
to at the mass end
It couldn’t give high volume essential for Carona for
having a healthy bottom line.
Misdirection: Top end of the market suddenly became
the main focus of the company and it forgot its bread-
and-butter shoes that had given the company its identity
Wrong pricing Strategy
Preliminary market research done by Carona
indicated that the top-of-mind brands were
Nike and Reebok.
Adidas came on promptly, while Puma
figured almost nowhere.
Carona took the plunge nevertheless with a
shoe priced at Rs 600.
This was considerably higher than Bata's
Power which, retailing between Rs 200-300,
defined the market.
Contd…
The company felt that the Indian consumers will fall
for the global brand.
The consumer, who had little brand recall for Puma,
saw no justification in paying a premium for an
ordinary product.
The bottom line: Puma was a big flop in the Indian
market because of wrong pricing.
Thus, ‘A brand success or failure depends to a
large extent on price. But price is really dependent
on both product and positioning. At the end of the
day, you have to give value for money.’
Competition at both the ends
At the lower end, smaller competitors
attacked its mass range in canvas shoes,
school shoes and Hawaii chappals
Brands like Liberty, Action, Lakhani etc
began to corner the market with new
designs and fashion.
Foreign brands like Nike, Reebok and
Adidas began to market aggressively which
further worsened the position of Carona.
Contd…
The environment changed drastically during late
90's with the market opening up. All the footwear
companies faced the issue of tough competition and
increased costs. The cost was primarily attributed to
the heavy workforce that these companies had.
Bata was able to sustain itself by launching new
models at affordable price ranges. But Carona was
not able to excite the market with new launches.
Somewhere the company lost its control over the
costs. It failed to understand the competition and
respond to it.
Measures Taken by Management
In 1997 Carona Ltd management came up
with an idea of an infusion into its equity
The promoters were looking out for
prospective buyers for their stake
At the same time Carona was also looking
at strategic alliances for its distribution
network as well as its brand.
Had a little success in finding a suitable
strategic partner.
Cashing the Brand value
Carona was looking at cashing on its brand
value to bring in much needed funds into the
company, the aim was to increase the product
line.
Carona had offered to sell out its distribution
network but was not willing to shed its
equity.
At that point of time, a few companies
including Liberty Shoes had held discussions
with Carona.
Contd…
The company could have found a buyer
for its equity at an earlier point of time.
But in 1997 it wasn’t possible, more so
since the market had got crowded and the
value of the Carona brand had eroded
considerably over the years with several
other brands coming into the market.
Indian Footwear market*
India’s domestic footwear market is estimated to be
over Rs 15,000 crore in value terms and has grown
at the rate of 8.8% over the last couple of years
While men's footwear is the biggest target category
(contributing almost 48%), children's (11%) and
women's lifestyle footwear (41%) is not behind in
the race.
About 37.8 percent of Footwear retail is the
organized segment, which qualifies it as the second
most organized retail category in India, next only to
Watches.
Economic factors
The average spend on the footwear by urban
consumers is Rs 240/annum,
Consumers in rural areas spend just about Rs
100/annum.
The annual domestic consumption of
footwear is approximately 1.1 billion pairs per
annum, and top 20 cities contribute about 450
Million pairs/annum.
Major part of the demand is met by the
unorganized sector
Customer Segments
Segment wise classification of price
ranges in the men’s footwear segments
Segments Price Ranges in Rs % of growth
Mass market 185 – 700 60% (Liberty Bata)
Economy market 700- 1000 30% (Bata Liberty)
Sports market 1000 – 3000 7% (Nike Adidas)
Premium leathers 3000- 5000 5% (Charles and Keith)
Luxury 10000- 50000 1% (Gucci Louis Vuitton)
Contd..
Segment wise classification of women
footwear segment:
Segments Price Ranges in Rs % of growth
Traditional footwear 699 – 999 5%
Designer Footwear 599 – 799 10%
Formals 299 – 699 40%
Casual Wear 499 – 799 25%
Sports Shoes 500- 699 20%
Contd..
The kid’s footwear segment is one of the fastest
growing segments in India.
The Indian kid’s footwear segment is highly
fragmented and dominated by the unorganized
sector.
The branded kid’s footwear segment has a big card
to play as India has the world’s largest child
population.
The overall kid’s segment has a robust margin of
20 – 25 % which is huge potential opportunities
for branded footwear players.
Strategies for Revival of Carona:
Cost management and effective marketing
are key to survivors in domestic markets.
Determinants of Carona’s success can be,
◦ a) Location
◦ b) Product focus
◦ c) Enterprise-wide IT
◦ d) Pricing model
Explanation in brief
Location:
◦ High street selling with Multi brand outlets
and exclusive franchisees.
◦ Advantages:
Avg cost/sq feet = 40% of malls
Higher footfalls of a particular segment
Responding to trends and fashion becomes easy
Product Focus
Segments Price Ranges in Rs % of growth
Mass market 185 – 700 60% (Liberty Bata)
Economy market 700- 1000 30% (Bata Liberty)
Sports market 1000 – 3000 7% (Nike Adidas)
Premium leathers 3000- 5000 5% (Charles and Keith)
Luxury 10000- 50000 1% (Gucci Louis Vuitton)
Contd…
Segments Price Ranges in Rs % of growth
Traditional footwear 699 – 999 5%
Designer Footwear 599 – 799 10%
Formals 299 – 699 40%
Casual Wear 499 – 799 25%
Sports Shoes 500- 699 20%
Since Carona’s core competency was to manufacture
rubber and canvas shoes, it can also enter into the kid’s
school shoes segment which is largely dominated by
local players.
Scaling Up
Contd…
Enterprise-wide IT
Carona should also look for IT investments
such as POS and ERP. It can use IT to
understand the models of the seasons, price
ranges, store performance, etc.
Pricing model
Floor pricing should be used to penetrate into
markets, premium pricing can be targeted
towards the middle high and high income
group people.
