India Heterogeneity: g y The Product Customization Challenge

PepsiCo - A Global Powerhouse

In our field of p play y And on the FMCG landscape p

A Portfolio Promise Of Refreshment, F Fun &N Nutrition t iti

A spectrum of beverages delivering fun and refreshment

Snacks offering plenty of good food and 'good fun'

Dairy Tropicana, the best of fruit The Quaker range of healthy food choices

Re-hydration and sports nutrition expertise

A Culture Of Excellence That Builds Powerful T d Trademarks, k While Whil Incubating I b ti Innovation I ti

PepsiCo India: A Force To Reckon With

9 # 3 FMCG Business 9 #1 F&B Business

# Basis overall system turnover

Powered By A Portfolio Addressing A Range Of Beverage And Snack Needs

Beverage Need States
Refresh

Snack Need States

Refresh

Hydration

Enjoyment

Sustenance

Enjoyment

Health

Indulgence

Health

Indulgence

Nourishment

Transformation

Nourishment

Enhancement

Energy

Energy

Driven By y Muscular, , ConsumerConsumer-Preferred Brands

Our Key Enablers

Entrepreneurial p Culture Intuitive, Insight driven Insight-driven Marketing
Communication Prowess

Robust GTM Systems

Operational E Excellence ll

5Th Best Marketing Team 2009: Brand Equity

Empowered Culture Drive for Results Values Oriented Visionary

Best PepsiCo Intl Beverage Marketing Team 2009

14,800 routes Reach > 1MM O/Ls Weekly frequency Leaders in Modern Trade

Another Key Enabler: Agile Response To A Changing M Macro Environment E i t And A d Business B i Dynamic D i
FROM FROM
Talking Only To Teens

TO FROM
Addressing Cohorts

Fun And Refreshment

Range Of Need-States

Short Term, Equity Driving Innovation Only

Equity + Needstate Based, Value l Accretive Innovation

Our Building g Blocks

1

RELEVANCE

INNOVATION
How we craft our portfolio to be

How our brands integrate into consumers lives

Resonant with their values, attitudes, lifestyle Reflective of their physical and emotional needs, today and tomorrow Integrated into their daily rituals

Aligned with consumers beverage and food need-states Appropriate for the occasions they consume us in Cognizant of their concerns on Value, Health &Wellness, Affordability

Our Most Iconic Brands and Enduring Growth Stories Have Been Built On These Pillars Of Relevance & Innovation

Communication Relevance P Pepsi i The Th V Voice i Of Youth Y th

The secret to Pepsis continuing relevance? No holy cows cows

Not Cricket Indias Religion Neither Celebrities Indias demigods Not even the product

Commemorative flavors

My Pepsi My Can

PepsiCo global formulation adapted for AP palate preference

Flavor Relevance

Converting Consumer Franchise Into Brand Evangelists

The Magic and Emotions Of Bollywood in a Bag Cracking Indian street t t - snack k codes d Growing the Tribe

Indian flavors are 30% of mix

Occasion Relevance
Anchoring h i Tropicana i i in our consumers lives li
Occasion Based Marketing
Anchor Tropicana in the breakfast occasion, , rooted in product functionality

Product Innovation
The Indian habit of Street Fruit Juice is well developed Mixed Fruit one popular p of the most p flavors Tropicana Mixed Fruit Juice developed exclusively for India Portfolio Mix: 25%

Driving Relevance Via Subverting an Existing g Habit Kurkure - The Code Code-Breaking Indian Snack
Kurkure has always driven relevance by breaking existing codes

Brand role: Transformation Catalyst

The Great Indian Family and Tea-time are two enduring themes challenged and reinvented by Kurkure

Innovation pipeline
Leveraging regional palate preferences

Product as hero
Product sensorials deliver a unique and wicked twist on familiar Indian Namkeen codes. The Namkeen experience experience, but as a delicious, delicious twisted finger snack

Ingredient As Relevance Driver Mood M d Ko K do d Lemon L K Ka Lift!

Cultural Significance of Lemon
Zesty, yet cooling Sharp sensorials transform a bland experience Catalyst and Problem Solver

Values it transfers to Brand 7 UP

Mitigates category barriers of Artificiality Differentiates 7 Up in a Clear/Water-like category

Relevance Via Cultural Codes

Baked crackers with an Indian heart
Culturally Relevant Ingredients Locally Relevant Stimulating Flavors

The Indian preference for Chai and Chatpata

Globally Too, PepsiCo Is Driving Greater C Consumer T Traction ti Via Vi Local L l Relevance R l
Evoking food codes, memories and emotional benefits anchored in local food rituals
Mexico Thailand Europe

Rediscovering the best of tradition

Re-framing existing snacking rituals

Russia

Poland

z z

Natural ingredients Made 100% with olive oil

Case Study Issue Executive Summary

Category Trends: Fundamentals are robust, huge headroom for growth.

As the h PepsiCo i portfolio f li of ff foods d and db beverages evolves, l the h k key consumer cohort will continue to be Youth. Two other cohorts will assume increased significance: Women, and Base of Pyramid consumers

Consumer Trends: Buoyed y by y strong g macros, , the Indian consumers

aspirations, interests and symbols of upward mobility are converging at a national level

We are also witnessing a celebration of regionalism

F &B Trends: Experimentation, convenience, wellness, rise of regional

cuisine, renewed belief in traditional ingredients, value-seeking, strengthening franchise of regional brands

Outlook:
Affordability, Access and Relevance will be key drivers Local relevance is a potent growth levercan unlock consumer demand,

particularly i l l if it i also l hits hi the h sweet spot on Affordability Aff d bili

4th Largest Economy In PPP

12.3

By 2032 India will be among the

8.1

GDP (PP PP) US $ Trill lion

three largest markets in the world Bric Report Goldman Sachs

India is among g the three most

4.1 3.6 2.5

attractive FDI destinations in the world AT Kearney

US

China

Japan

India

Germany

India has among the highest

US Department of commerce

returns on foreign investment

Source: World Bank, 2007

Key Drivers of Consumer Change

Ideas that have arrived
Affluence / Economy / Globalization

Ideas that will progress

Education

Ideas to Anticipate
Higher Acceptance to Technology

Demographic Dividend

Urbanization

Environment
Growing concern on Ecology

Technology

Infrastructure

Culture / Media / Politics

The Indian Consumer Is Coming g Of Age g

Leapfrogging technology and becoming more global in his aspirations The emergence of a consumer who expects a resolution of all contradictions Taste v/s Health,
Value v/s Premium experiences Convenience v/s Cost

The convergence of desires, aspirations across

demographic divides

Youth And Women Are Key Consumer Cohorts Of the Future and Their Physiological y g and Emotional Needs Will Guide Business Strategy For Many Categories

Youth

Segment size:

302 mn ( U+R); 43 mn ( SEC ABC)

Between 03 and 50, India will add 250 mn to its labour pool @ 14 mn/year. By 2020, 78 mn Indians or 61% of India will be < 35 years

Women

130 mn (Urban); 80 mn ( Literate women) 107 mn ( Working women)

Working women are expected to be 20% of the workforce by 2020

Source: Segment size numbers - IRS Round 2, 09

302 Mn Youth In India

98 Mn youth in Urban India 145 Mn married youth

23 Mn metros, 75 mn non-metros

62 Mn college educated youth

43 Mn in Sec ABC,31 mn ABC non-metros

128 Mn working youth

73 Mn youth students

Source: IRS Round 2, 09

Indian Youth: Breathe Globalization, Live Technology, Grapple With Unlimited Choices
Self-obsessed, materialistic, but looking for a cause DreamChasers, Risk takers Family as anchor, and Friends as Family

Staying ahead on the style curve is very y important p

Challenging the mainstream, but high need to belong

Technology is the great enabler

Hunger to expand horizons; fear of being g left behind

Money is the barometer of success; Real joy lies in spending

This is broadly true both of Metro Youth, as well as Youth in Non-Metros

The Urban Indian Woman Is Evolving On All Developmental Metrics Education, Education Employment Employment, Social Development

Across Demographic Segments, The Indian Woman E hibit Core Exhibits C Traits T it
Increasing concerns about Health, tho little action Family comes fi st first Conflict between self and role of caregiver

Very Focused about b seeking ki value

Increasing need to celebrate i di id lit individuality, sexuality

Defers Gratification, guilty about selfindulgence

Looking for Convenience, but couched in rationality

Stressed by the challenge on Multitasking

Additionally, Base Of Pyramid Consumers Are Beginning To R fl Reflect Consumption C i Patterns P Similar Si il To T Those Th At A The Th Top T
All India
56% of the fmcg spends spends* from BoP Top of Pyramid (ToP)
SEC A, B, C, SEC R1, R2 % Contr. of Spends ToP BoP 44%
(Urban 24%, Rural 32%)

**Avg. Spend in Rs/HH/Yr Rs.7861 Rs. 5577

36%

56%

Base of Pyramid (BoP) ( o )

SEC D, E,

64%
Urban 15% Rural 48%

SEC R3, R4, R5

With very similar i il fmcg f spending di patterns tt

18% 12%
18% 13%

19% 14%

19% 15%

17% 11%

18% 12%

Personal Care Home care Food & Beverages

140 MN HHs/ 700 MN individuals

70%

68%

67%

66%

72%

70%

2008

2009

2008

2009

2008

2009

All

ToP

BoP

* 22 fmcg categories considered

Source: IMRB HH Panel

Demographic distinctions (Metro v/s Non Metro, SEC) are becoming less relevant today, as motivations, interests, symbols of success become more congruent

SIDS WORLD

BUNTYS WORLD

Yet, The Indian Consumer Has A Gemini Soul

Western Aspiration Indian Soul

T lki Talking H Health lth

W lki Walking Indulgence I d l

Splurge

Save

National Identity

Regional Pride

Pizza

Tadka Maar Ke

Unified As We Are, By A Singular National Identity A dC And Convergent t Aspirations A i ti

Our Regional roots exert strong influence, particularly on issues were we re emotional about, like
1

Festivals

Rituals

Family

 And Food
4

Food

Driven as much by our taste buds, as by our cache of childhood memories

Consumer Attitudes Towards F&B Are I Increasingly i l B Being i Driven D i B Four By F Factors F t
1 Indulgence

F i Fusion
Experimentation Natural

2 Functional

Experience R i Regional l Lifestyle cuisine Exclusivity

3 Grow-ityourself y

Health Obesit
y
Wellness SnackyMeals 4

Convenie nce Provenance

Womens nutrition Sustaine d energy

Organic

Sustainability

Traditions Slow food treasure Therapeutic chest Nutrition

Downsizing
B Brands Small Packs

Value

For The Purpose Of This Case, We Will F Focus On O These Th Two T

1 Indulgence

F i Fusion
Experimentation Natural

Functional

Experience R i Regional l Lifestyle cuisine Exclusivity

Convenie nce Provenance
Grow-ityourself y Organic

Health Obesit
y
Wellness SnackyMeals 4

Womens nutrition Sustaine d energy

Sustainability

Traditions Slow food treasure Therapeutic chest Nutrition

Downsizing
B Brands Small Packs

Value

Lets First Talk About The Experiential Aspect Of Food F d

1 Indulgence

F i Fusion
Experimentation Natural

Functional

Experience R i Regional l Lifestyle cuisine Exclusivity

Convenie nce Provenance
Grow-ityourself y Organic

Health Obesit
y
Wellness SnackyMeals

Womens nutrition Sustaine d energy

Sustainability

Traditions Slow food treasure Therapeutic chest Nutrition

Downsizing
B Brands Small Packs

Value

Indulgence, Exclusivity, Convenience Are Big Trends

So Is Regional Cuisine

Regional - The New National

A resurgence of regional pride. A desire to go back to ones p with roots and also experiment our regional flavors and foods.

Key Drivers
Rise in domestic tourism, eating out In Calcutta, Andhra Food is big, Chennai is experiencing a growth in Kerala cuisine and the South Indian Dosa is now considered Indias national dish

Increasing Experimentation with tastes, textures, flavors

Stress, lifestyle-related diseases triggering a return to ingredient logic, the do-good value of the food we grew up with

The quest for Natural, Fresh, Authentic

A culinary osmosis between regions is tingling many palates. Our broadband dining category of Mughlai and Madrasi is fast blurring. blurring Today, more than ever, there's a steaming exchange of cuisines criss-crossing state borders, and foodies are savouring the barter. - Outlook India

A mouthful of India http://www.outlookindia.com/printarticle.aspx?229806 Bharat ke Bhoj http://www.outlookindia.com/article.aspx?263519

Regional Fusion

The

to adventurous.

desire

experiment

and

be

The desire to hold on to or rediscover our

regional cuisine.

The end result: A melting pot of ingredients, flavors, textures and a possible

reinvention of what is our our food.

India Is A Culinary Smorgasbord

Zone wise broad differences

North : Ostentatious
Taste Palate: Wheat, Lentils Food Flavours: Spicy,Masala Snacks :Light crispy, Multi Texture Beverages Consumed: Thick Milk, Milk Sweet& Sour Fav Beverages: Tea, Sherbets, Lassi.

East : Hypchondriacal yp
Taste Palate: Rice, Potato, Lentil Food Flavours: Chilly, Mustard, Poppy Snacks :Crispy, Soft fillings Beverages Consumed: Thin Thin, Bitter Bitter-Sweet Sweet, Salty Fav Beverages: Leaf/Black tea, Sugarcane

30%*

24%*
West : Egalitarian
Taste Palate: Wheat, Rice,Gram Meal Food Flavours: Tomato, Sweet&Spice Snacks: Thin crust, Dual Texture g Consumed: Thick & Thin, , Beverage Sweet & Spicy Fav Beverages: Milkshakes, Aamras, Sugarcane * % Of India Population

23%*

South : Strong Sensorials

Taste Palate: Rice, Lentils Food Flavours: Coconut, Curry leaves Snacks : Hard Crunchy Beverages Consumed: Thin, BitterSweet Sour Sweet, Fav Beverages: Rasam, Dust tea, Filter coffee,Coconut water

23%* 23%

Much of the experimentation with food is an urban phenomenon. While some degree of the the eating eating out out culture culture is percolating down to lower town classes, their food habits tend to be a lot more entrenched, and affinity with traditional food habits is even higher eg Lassi in Punjab or Kokum Juice in Maharashtra highereg Maharashtra.

Second, The Indian Consumers Traditional V l Value O Orientation i t ti Has H Sharpened Sh d

F i Fusion
Experimentation Natural Functional

Indulgence

Experience R i Regional l Lifestyle cuisine Exclusivity

Convenie nce Provenance
Grow-ityourself y Organic

Health Obesit
y
Wellness SnackyMeals 4

Womens nutrition Sustaine d energy

Sustainability
Regional players

Traditions Slow food treasure Therapeutic chest Nutrition

B Brands

Downsizing
Small Packs

Value

Trial Packs, Value, Wallet Wallet-Friendly Are Key Trends

Private Labels Kitkat single finger McDonalds menu offering has become more value-meals heavy 2 rupaye mein 2 laddoo!

Trial packs retailed as singles

LUPs low unit packs

Regional Players Have Driven Salience Via Local Market U d Understanding t di and d Geographic G hi Focus F

Non-food Non food categories mostly dominated by strong national brands. Within Food category, regional brands far more salient: e g In the cooking medium e.g. segment, there are strong national brands like Fortune, Dhara, Sundrop or Dalda. However strong regional brands too: TN - Gold Winner; Gujarat Tirupati; Maharashtra - Star.

Source: AC Nielsen Data, 2007

The Retail Landscape Remains Highly Fragmented; Organized Retail At Only 5%, Though Projected To Grow To 3 Times Current Size By 2014

A predominantly Traditional retail landscape provides leverage for operating models of regional players

Regional Players - Some Success Factors

Conversion of Unbranded to Branded

Regional Relevance

Affordability & the Value Proposition p

Value Is Driving g Penetration and Growth

Absolute Value
Price
Rs. 1 2

Price Points
Entry price points
8 10 15 20

Rs.2 Rs.3 Rs.5

Rs.5

Rs 5 Rs.5

For the value value-conscious conscious Indian consumer, consumer Value will always remain a big driver driver. According to a Sept 09 Datamonitor survey on Impact of the Global Crisis on Consumer Attitudes and Behavior in India 69% of respondents based their decision for food and beverages on the basis of value or cost.

Value continues to g grow and is here to stay y

Progression of Value market
Contribution of Value Player to Western Salty (Rs)

Value play is a reality

Contribution of Value Player to Categories (Rs)

27% 23% 19% 12% 14%

23% 15%

41%

Toothpaste

Toilet Soaps
Premium P i vs Others

Cream Bisc
Britannia B it i vs Parle

'06

'07

'08

'09F

'10F
Price Index Yrs In Market

Colgate C l t vs Anchor

Small Pack Transactions Transactions 95% vs 65% PI

1.7 +12 12

1.4 +25 25

1.4 +12 12

Source: Nielsen Retail Audit

Today Value Is A Significant Mix Of FMCG Business & Is Projected To Grow

% of Revenue from Value portfolio

Biscuits

Detergent g

Soaps p

Tea

Salty S k Snacks

Bev.

The Lower SEC Business Opportunity pp y

Lower SEC Opportunity
B Brands driving conversions on the back of value

Aspiring for More

India Shining has changed their li lives and d aspirations i ti

From

To

% Volume share gain from Unbranded to Branded

A Brands

68% B Brands

32%

Si ifi Significant t Spends S d on Aspiration A i ti

Total % SEC A % SEC B % SEC C % SEC D/E %

Groceries

28.7 4.3 3.9

21.8 3.7 3.2

25. 25 6 3.9 3.1

28.0 4.4 3.2

35.0 4.7 5.3

Unbranded

Medical Grooming Investmen ts/ Savings

8.6

11.1

9.4

8.9

6.4

Source: HH Panel Branded Shift( 08/06), SEC D/E, 6 Metros

For BoP Consumers, Large Size Aspirations Are Being Accommodated In Small Pack Sizes
Growing Spends On FMCG brands
ToP
SKIN CARE SHAMPOOS GLUCOSE POWDERS LRBs DISH WASH TOILET SOAPS DETERGENTS/W.SOAP COFFEE WASHING POWDERS TALCS COOKING MEDIA ORAL CARE TOILET/BATHROOM C MILK FOOD DRINKS INSECTICIDES JAMS TEA 25 21 16 31 28 15 20 7 28 4 1 4 2 7 -1 -4 1

Increasing move towards Premium brands

Non Premium Premium Growth in Growth in Avg Spends Avg Spends

BoP
37 30 30 28 24 20 20 19 18 14 10 10 6 5 4 4 3

DETERGENT CAKES / WASHIN TOILET SOAPS ORAL CARE COFFEE NOODLES TEA HAIR OILS SALT

-2 8 1 -5 -19 0 -1 -7

66 4 3 7 15 3 8 5

However, Pack Size and Price Critical

Small pack penetration % value growth (small packs)

Source: IMRB HH Panel

DETERGENT CAKES/ WASH TOILET SOAPS SHAMPOOS ORAL CARE COFFEE BLUES/ WHITENERS TEA DISH WASH HAIR OILS

30.8 67.0 84.0 28 2 28.2 12.4 17.1 27.9 23.1 15.4

11 12 9 10 5 30 15 40 7

The Implications For PepsiCo

Given The Relatively Lower levels Of Penetration, O Our C Categories t i H Have H Huge H Headroom d F For Growth G th
However, H overcoming i these th category t barriers b i will ill be b key to accelerating growth Affordability Access Relevance

Regional Relevance Could Be A Key Enabler

For food and beverage brands where taste and flavors are key, regional relevance not only recruits new consumers, but also gives brands a chance to innovate and connect. However, the key to profitably sustaining a regionallyrelevant proposition, is a fundamental change in the operating business model. All elements of the value chain must be re-engineered to deliver a consumer-relevant proposition that balances local relevance l with ith a sound d value l proposition. iti

Regional Relevance Could Be A Key Enabler ( contd.)

Truly y unlocking g Local relevance will mean

Going beyond flavor-based innovation Leveraging the flavors flavors, textures textures, formats formats, food codes and rituals unique to each region

Your Challenge

Drive D i greater t regional i l leverage l for f PepsiCos portfolio of Foods and Beverages by y recommending g a locally y relevant p product proposition that delivers business growth

Your Playing Field

UTTAR PRADESH WEST BENGAL ANDHRA PRADESH

TAMIL NADU MAHARASHTRA

Your Tools
Undertake a deep dive on your chosen state.

Macro and socio-economic trends, penetration trends across categories

Consumer outlook, lifestyle and attitudes.

For your chosen state, track the business strategy of any brand that has successfully leveraged local relevance Illustrate ll their h i building b ildi bl blocks k of f success

Shadow a successful example of local relevance

Category and Consumer Understanding

Study PepsiCos Make-Sell-Deliver model - Foods/Beverages ( Appendix A) Undertake your secondary research on the foods and beverages category Esomar paper on discriminating values of the 4 regions ( Appendix B)

Your Deliverable

Craft C ft a business b i model d l for f a packaged k d food OR beverage product that delivers a sustainable g growth opportunity pp y via local relevance and differentiation

Your Output Must Encompass

Macro Environment, Industry Trends, Relevant Consumer Energies with respect to the State of your choice Product Strategy Overview, Segmentation, Targeting, Packaging, Core Proposition, Potential Brand Positioning Size Si of f Prize P i Competitive Overview Competitive landscape, Source of competitive advantage Go To Market: S&D Overview, Channel Strategy Financials: Pricing Strategy, Cost Structure, Revenue Streams

Thank You

Reference Material

Appendix A The PepsiCo Make Make-Sell Sell-Deliver Model

Advantaged g Operating p g Systems y

Strong Supply Chain Network
45 plants across India
16 Company owned; 29 franchise

Varied manufacturing platforms

Coldfill, hotfill, hybrid, asceptic, ambient PC, random & schaff extrusion, baked RBS Pioneers in contract farming 10,000 10 000 farmers Seeds to storage
Franchise owned Company C owned d

Mini tuber facility Oats, corn & juices

Beverages MakeMake -Sell Sell-Deliver

The e Business us ess Pepsi makes and supplies pp concentrate

Company Owned Bottling Operation

Franchise Owned Bottling Operation

Pepsi
makes, k sells, ll & delivers product

J V

Local Bottler
makes, k sells, ll & delivers product

Pepsi & Partner

make, sell, & deliver product

Supply Chain Master Flowchart

RAW MATERIALS PRODUCTION WAREHOUSING, DISTRIBUTION DISTRIBUTION, AND RETAIL

Concentrate Packaging Innovation Water

Supply Chain Planning Syrup Making Package Handling Filling

Product Freshness Sensory Quality

Carbon Dioxide Sweeteners Sensory y Quality

Measuring Performance Quality Sensory

Go-To-Market Strategy differs depending on Market dynamics and trade structure

PLANTS AS&D

PCE DISTRIBUTION CENTERS

Wh/in Plants Or Separate DCs

AS&D RETAILERS MOD. TRADE KEY ACC. W.S. AS&D

DIRECT DELIVERY

INDIRECT DELIVERY

RETAILERS

WS W.S.

Channel Segmentation
IN HOME On Premise OUT OF HOME On The Go

Modern Trade
Hyper (> 40) S Super (4-40) (4 40) CVS (< 4) C&C Discounters

Traditional Trade

TT - OP
Convenience

O - OP
F d Service Food S i
Club/ Pub SS Cinema Office Education

Grocer

Restaurant

Leisure Catering g Institutions

Leisure Trvl & Trspt

Food Services
QSR s F/Court Casual Dine Fine Dine Caterer

Leisure
Multiplex Airport Amu Park/ FEC Airlines 5* Hotels

Railways

Foods MakeMake -Sell Sell-Deliver

Distributed Manufacturing Footprint

Plants / Co-packs

Distribution Centers (DCs)

Channo

Distributors
Kolkata

Retailers

4 Copackers:
Pune

Faridabad F id b d Erode Rajkot Barabanki

Consumer

Manufacturing Equipment

RANDOM EXTRUDED LINE

State of Art Machines Latest Technology

POTATO CHIPS LINE

PACKING MACHINES

Win-win Self Sustaining Contract Farming Model

Agri Companie s Govt program s

Quality based fixed buyback Pay for Performance systems to drive quality and continuous supply Advantaged Seed
Seed Companie s Locally evolved Farmers Organization Directly with the Farmer

Banks

Farmer

FRITOLAY

Govt

Input Companie p s 3P Services

Provide technical support pp and extension services for chip grade farm practices.

Program P support

Partners in Progress Model

Advantaged GTM Width Via 3rd Party DSD Model

GTM Split Loading
GTM DB DSD WS / SS

~ 3 Plants ~ 4 Co-Packs Model Company DC

Selling
Cust. DC ~ 150

~ 35 ~ 100 ~ 1900 Distributor ~ 0.1 MM WS / SS

Distributor RSA (3P)

~ 4600

Delivery
Advantages: PI Pioneer in Out of Store Merdising A Store outside the store Distribution i ib i reach h

Store

~ 1.3 Mn

Advantages: Retailers Merchandising and Stock rotation Incremental volumes Driven i by b PI products

Merchandising

Traditional Trade: The organization structure at field level is based on 3rd party model- i.e i e the distributors, distributors who run routes routes, which are supervised by company sales officers.

ASM/Territory / y Head (2 ( nd Level) )

Factory DC

Sales Executive (1st Level) Route Trainers (3rd Party) RSA (Frontline) 3rd Party

Distributor Route Retailer Rack

Area Manager

The structure in Modern Trade at field level is based on Accounts i.e the Chains, which are supervised by company sales officers.
Key Accounts Manager + Zonal Sales Manager

MT ASM/Territory Head (2nd Level) MT Sales Executive (1st Level)

Factory

DC

Merchandisers (3rd Party)

A/C Chain Warehouses

MT Stores

S&D Value Chain

(Value Chain)

Costs%

(Direct Business)

DB

(Direct Store Del.)

DSD

WS / SS 10%-12% 7%-8%

Retailer Margin Distributor Margin Trade Spends

17%-18% -

10%-12% 5%-6% 5%-6% 5% 6%

( (Including l di Expiries) i i )

4%-5% 4% 5%

3%-4%

Route Cost

2%-3%

1.5%-2%

Supervision Cost Total

2%-2.5% 25%-28.5%

1.5%-2% 23%-28%

1%-1.5% 21%-25.5%

Operating Model
1
Local and Distributed sourcing g to leverage g Distributed Manufacturing g Footprint Agro: Benefits of Contract Manufacturing

Sourcing & RM
2

Manufacturing & Operations

3

Self owned facilities for Capital Intensive lines (Potato Chips / Crackers) Outsourced manufacturing: for Traditional Category (Namkeens / Oats) De-centralised manufacturing for Inbound and Outbound Freight Benefits

Sales & Distribution

4

Strong 5K Route Infra across the Country Pioneers in Out of Store Merchandising (Racks) Differentiated Margins for Different Channels

Advertising & Marketing

Powerful Brands A&M Investments for Brand and Category Growth

The Four Regional Zones

Discriminating Values Appendix B

Source: ESOMAR Paper Patchwork Quilt by Sangeeta Gupta, Abhijeet Patwardhan, Seemeen Khan

Authors foreword Our Our approach has been to examine the four zones on discriminating values, to highlight the most meaningful characteristics that each part of the country t is i unique i about, b t based b d on our considerable id bl experience across categories and brands. g diversity` y exists at While we are aware that `regional levels much finer than just zonal, at a state, district and even further, we choose to draw slightly wider boundaries only to help actionability which which, from a marketer`s perspective is easiest with a zonal perspective.
Source: ESOMAR Paper Patchwork Quilt by Sangeeta Gupta, Abhijeet Patwardhan, Seemeen Khan

Tangible improvement in experience Strong

Bright

Sensory Stimulation

Hot

Techy careers

Technology

Striking

Sharp

The South Indian Fiber

Innovations

Safety

Patience Compliance

Rationality
Evaluative

Diligence

Hard work

Steadiness

The South exhibits a distinct need for stronger sensorial stimulation

Taste
The everyday cuisine of sambars, fried chilies, tamarind, red chilly gunpowder, the Andhra custom of green chilly accompaniment etc
AI p of Dust Proportion Tea to Total
Source RSA 2003

North East

West South

AI

North East

West

South

35

15

46

80

Penetration of Gels
Source NRS 2002

5.5

5
AI

3.4

4.7

7.5

AI Penetration of Filter Coffee

Source NRS 2002

North East

West

South
Mango Fav. Flavor in t i toffee ff candy d

South

62 6.2

02 0.2

01 0.1

09 0.9

21 7 21.7

11

23

Source Sweet tooth Confectionary U&A 2003

Smell
The largest market for incense sticks sticks, the almost universal practice of flowers in the hair, the preference for sandalwood and jasmine in talcs, soaps etc
AI North East West South
Penetration of Shampoos
Source NRS 2002

AI

North East

West South

Penetration of Deos
Source NRS 2002

1.4

0.8

1.5

1.4

23.4

19.3

24.9

15.4

34.2

The South exhibits a distinct need for stronger sensorial stimulation

Sight
The riot of colors from the lungis and saris, to the rangoli and kathakali, and even the temples The color, vibrance and titillation of cinema

AI Cinema Regular
Source NRS 2002

North 3.9

East 8.6

West 7.5

South 20.9

9.9

Touch
AI Proportion of Talc (face)
Source NRS 2002

North

East

West

South
Massaging is good for baby's skin

AI

North East

West South

19.6

3.2

8.3

22.4

48

34

16

36

37

62

Source Baby Care Study 2001

The custom of weekly oil massages, the interesting belief that skin benefits most from babies massage v/s the Northeners belief that it is the bones; the marked preference for topical medication for headaches and backaches

Techy y is good g

The DiligenceSt di Steadiness Ethi Ethic

High propensity to think rational and be stringently evaluative A study t d of f investment i t t behavior b h i in i this thi region i indicates a low risk market, with the highest preference for savings in the post office (NRS2002) It is not immediate success that is so captivating here, but a strong belief in working hard and waiting for the fruits of their labor to come to them over time, unlike the North and West where the young desire immediate success That patience is a virtue to this populace was also seen in a study done on home loans - people wait till they are older before they look at property acquisition, unlike the North.

Products that have a technological edge are believed to deliver a tangible, discernible advantage. From two wheelers to paints, one has seen the South quickly upgrade to technologically superior products. Nerve center of the IT revolution
North East Share of flat CTVs in the AI pie i
Source GFK 203

West South

Age of recent home-owners 25 - 35 years

Delhi 76 22 2
AI

Bangalore 38 46 16

22
AI

22

25

30

36 - 45 years 46 - 50 years
Source Study on Home loans 2003

North East West South

Correct recall of software celebs Like to pursue professional course Accessing the Internet
Source Youth Study 2001

North East West South

29

25

20

26

41

21 17

15 14

19 14

18 18

29 23

Agree to statement "Want to be successful asap"

Source Youth Study 2001

63

68

62

72

51

Internal not so imp Location

Need to influence others

Outward Seeking Orientation

Size

Status

Deference

PowerServility

Aggression

Need to make a statement

The North Indian Fiber

Dominance

Straightforward

Subordination of women

Direct Chauvinism
Simple, i l Easy Weaker position of women

Societal approval is a pivotal value for the North Indian

Social approval is derived from the respect others give you due to your possession of wealth, glamour and power. Large cars, Location of house, large size packs/SKUs, large sizes in durable purchase
North Large front loading washers/Total front loading washers Big Screen Flat CTVs/Total Flat TVs
Source GFK 2003

East

West

South

53

39

36

30

10

This `outward drive` is further borne out in the youth study, wherein the North Indian youth clearly wants a glamorous profession, quite unlike the south.
All India North South

Agreement with statement t t t "Want "W t a career in a glamorous profession"

Source Youth Study 2001

10

13

Aggression D Dominance i
The North Indian is also high on the needs of dominance and influence over others. He tends to be an extrovert, is more pushy and demanding of others when h h he can b be Prevalence of the Power-Servility syndrome Pronounced concept of Ji Ji Hazuri Hazuri Dominant culture of deference, ingratiation and servility to people in power

Abla Nari The attitude t towards d Women W

y different The north is characteristically over other regions in the manner that it relates to and treats its women Women here seem to be under greater male subordination and at the receiving end of a lot more male chauvinism

A more literal example of the subordination of women is seen in a study on sexual habits

AI
Largest concentration of the Power Seeker segment (mystery shopping exercises) Brands positioned on macho, aggression, dominance values do well

North East 60 52

West South 52 42

Man on Top (%)

Source Sexual Habits Study 2003

53

Attracted to special health products d

Evolved genres of humor

Into fitness Poor Hypochondria health and exercise conditions High claimed suffering

Self Intellectualism actualization

The East Indian Fiber

Spurn Materialism

Emotionally vulnerable

Confident Assertive

Child Protective Centric

Achievement Focus

Strong Women

Sensuality

The Health Neurosis

Whether rooted in inadequate nutrition, a genetic lactose intolerance, or whether it is `just-all-in-the-mind` ` ` the Bengalis are certainly hypochondriacal in their practices and beliefs regarding health. The East zone complains of the most severe of pain suffering. They also believe they are the more severe acidity sufferers. (17% claiming very severe in the east compared to a 2% to a 12% elsewhere). Not surprisingly, Calcutta had the highest number of men who did some form of exercising, even if it is only a morning walk.
North Figures in % Very Severe Suffering
S Source OTC U&A 2001

Mishti Baby y
While motherhood is revered across the country, the Bengali focus on the child takes on an altogether new meaning. The attention, pampering and du ge ce received ece ed by t the e indulgence children of Bengal finds little match elsewhere in India. An insight neatly leveraged by p and Junior brands like Complan Horlicks. A study on childrens` policies for an insurance company found that Kolkatta was clearly more oriented towards planned savings to meet specific needs of the child such as education, marriage, medical expenses etc unlike another center (Delhi) which was more excited by family oriented benefits.

East

West

South

6
AI

18

17
West

13
South

North East

Men Into Exercising

Source Wallet Watch 2004

34

33

40

34

24

Women Power
Quite different form her northern sister, the eastern woman has an inherent streak of self confidence; she is assertive, outspoken and enjoys a fair amount of significance in society. society I think the Bengali middleclass women have greater security than the northIndian woman Pradip Sinha, Historian Media has oft lauded her for her sensuality, sensuality her love of romance and the arts. arts
A small hint of this sensuality was evident in our study on lingerie. While the rest of the country preferred the subtler shades of white, cream and beige, the Bengali woman proclaimed her preference for red. red
Figs in % Own Red bras Own Red panties
Source Lingerie U&A 2002

Delhi 1 5

Kol 26 36

Mum 1 17

Chen 1 43

Red in the Bengali culture stands for a sign of luck, emotion, fortune and copulation. Bengali women are also more involved in current affairs and actively participate in societal events. In fact, there were more Bengali women freedom fighters than women freedom fighters from the rest of the country. This woman strength perhaps has roots in the fact that the society is a staunch worshipper of many Goddesses - Durga, Kali and Saraswati and hence respects the many forms of the woman.

The Idealistic Eastern Male

Poles apart from the dominant, aggressive, status seeking northerner, the Eastern Man is idealistic, argumentative, lazy, romantic and a dreamer. Over the years we have witnessed the excellence of the East in the area of thought, thought literature and culture. The intellectualism that this zone has inherited is very much a part of their culture and tastes even today. Combine this with the frustrations of low incomes and a lack of economic achievements, the male here displays strong ideological tendencies (often socialist), and is quite cynical. He consciously avoids overt status symbols , and is happy at his `addas` addas with much friends and `faff faff ! !` Studies in the paints category indicate that while all the other zones admit to getting their homes painted to impress others, this zone is the exception.

Findings from Hercules, a qualitative study on the Indian male

this is really our favorite past time ..we spend a lot of time debating such issues. It's a great way to spend time. Not only do we keep up with what is happening around us but also its nice to figure out who is the more intelligent intelligent There is work around its not that we can`t find any work, but I want work that can challenge me intellectually. No point doing something that is dull Biharis are looked down everywhere in India, we need to fight this image.. Weve to show the rest of the country t what h t weve done d in i the th past t and d what h t we are capable bl of f In the evenings when friends meet, we very often sit and discuss culture and history.. it makes us feel very good about ourselves

Independent Open -ness

Enjoy Seeing Money G Grow

Respect Democratic Traditionality f for Women Healthy parent-child relationships

Joy of Money

The West Indian Fiber

Guileless

Simplicity
Humble

Travel & leisure

Democratic & E lit i Egalitarian

We observe here a far more `equalrights` ` society, there is a high degree of respect for people across socioeconomic classes. This is evident in the professional ethic, cutting across hierarchies. Our cook is called Maharaja, because nobody can cook like him, He is the master of the kitchen and we all respect him like an elder of the household. Women in this part of the country are independent, empowered and actively encouraged to manage a variety of outdoor jobs, even go out and work. The large number of women on two wheelers is evidence of this.

The Attitude to M Money

Money y is important p to p people p here. Money for moneys` sake! They like to see their money grow and building money is an end and achievement in itself. In the west, people enjoy just In counting money as it grows! The north, on the other hand, sees money as a means to power and status in society and it is something to be flaunted to get recognition. Hence, the practice of spending money on the most coveted, most expensive assets. For the south money is a means to safety and something to fall back on in times of need. The east, almost looks down on the concept of money and materialism as being inferior to their main pursuit , th t of that f intellectual i t ll t l actualization. t li ti

Paiso Vadhe ane Paiso Vasool

Simplicity & Frugality

This value is best expressed through the Maharashtrian principle of Sadhi rahani ani uccha vichar translated as simple living and high thinking. This zone is characterized by simplicity and humility of the people. Excessiveness, immoderation and extravagance are certainly antithetical to western sensibility, both in thought and living. The other dimension of this simplicity is prudence. Prudence and a matter- of fact approach towards material comforts characterize the western outlook. This has percolated the very way of living, from the simple weddings to the home dcor, which may be elegant, but often borders on the minimalist and functional. To one used to the grandeur of north Indian weddings, attending a Maharashtrian wedding can be an education in itself itself. The ceremony is simple simple. Both parties contribute equally to the wedding expenses. The traditional dowry consists of a few fixed items and is, by no means, a lot. The wedding 'feast' is simple, consisting of the traditional puri-aloo and shrikhand served on steel thalis from which guests partake. The cocktails and drinks night preceding the actual wedding have not percolated the Maharashtrian wedding routine. routine Extracted from secondary source The west is also known to be frugal in its habits. Particularly famous is the Ahmedabadi's miserliness.
Lko Incidence of Gifting(%) Average Spent ( Rs)
Source Wallet Watch 2004

Kol 38 474

Ahd 3 343

Cochin 25 584

47 490