1

"Saffola Swasth ParivaarKe Dil Ki Dhadkan”

"Abhi to main jawan hoon"

"Aaj se Jeene Ka Andaaz Sudhariye"

“Healthy oil for Healthy people”

Guidance Team Prof P. Venugopal Gourav Agarwal 018 Himadri Sankar Singha 019

Manoj Jindal 028 Mrigank Shekhar Adhikari 030

2

In today’s fast life people hardly have time to sit down at ease and have a hearty breakfast, lunch or dinner. Thus depriving them of proper nutrition and leading to various diseases. Heart disease is one of the most dreaded diseases due to improper diet habit. Fortunately people in India especially the urban class consumers have started realizing this fact and have become very careful in what they intake including the cooking oil. This project is about one such brand called Saffola which is claimed to be Heart Friendly oil and prevent heart disease. Saffola...the Healthy Oil.

Saffola satisfying Health Needs:

All Saffola oils come with 'LoSorb Technology'. Food fried in Saffola oils

absorbs less oil and thus reduces the consumption of oil in your diet.

Saffolla, The Heart of a Healthy family

Saffola oils fats' are 'Free of trans’

Saffola encourages you to take care of your heart by following a low saturated fat diet with regular

exercise. By most of the households, Saffola is being considered as “ Dil Ko Rakhiye Jawan” edible

oil.

Its main ingredients are Rice Bran Oil and Safflower Oil.

Rice Bran Oil (RBO): Heart healthy nutrients in RBO such as tocopherols, tocotrienols and oryzanol are known for their

cholesterol lowering ability.

3

Safflower (Kardi) Oil: This has the highest levels of Linoleic acid, an omega-6-polyunsaturated fatty acid, which is well

known for reducing cholesterol levels.

Safflower oil is a colourless and flavourless edible vegetable oil extracted from the seeds of the safflower. It has a light texture, non-greasy feel, easily absorbed, and is nutritionally similar to sunflower oil. It has a long shelf life when stored in a cool dark place away from light and heat due to the presence of very high amount of vitamin E naturally, about 34%.

Health Benefits

Safflower oil is low in saturated fats and very high in unsaturated fats.

Essential fatty acids are the precursors of prostaglandins, which are hormone like substances that have a variety of functions like contraction and relaxation of smooth muscles, control of blood pressure, inflammatory response, etc. in humans and animals.

Good source of cis-linoleic acid, the omega-6 fatty acid in safflower oil is responsible for prostaglandin production.

Cis-linoleic acid is also responsible for burning the brown fat in the body for heat rather than storing as white fat. Thus, safflower also aids in weight loss and its maintenance.

5. Has a very high content of vitamin E, about 34%, which is an antioxidant that fights against free radicals and preserves the integrity of cell membranes and reduces the risk of heart diseases, cancers and other degenerative diseases.

Nutritional Information per Serving:

Serving Size 100 g of Safflower oil, oleic acid 70%

% Daily Requirements

Total Calories 884 44%

Calories from fat 884

Total fat 100 g 154%

Saturated fat 6.2 g 31%

Palmitic acid 4288 mg

Stearic acid 1915 mg

Monounsaturated fat 74.6 g

Oleic acid 74639 mg

Polyunsaturated fat 14.3 g

Linoleic acid (Ω-6) 14350 mg

Trans fat 0 g

Cholesterol 0 g 0%

4

Total Omega-3 fatty acids 0 mg

Total Omega-6 fatty acids 14350 mg

Vitamins

Vitamin E 34.1 mg 171%

Vitamin K 7.1 mcg 9%

Phytosterols 444 mg

If we go by basic marketing product concept, a company can define tangible and intangible benefits

to provide value to the customer. To start with, Marico also defined Saffola, the marketing product

at three levels:

Technical Product: Saffola cooking oil has the internationally proven formula of 80% of Rice

Bran Oil (RBO) and 20% of Safflower oil (Kardi Oil). Saffola Gold oil is made through exclusive

protection technology called LoSorb that makes the oil more stable during deep-frying. It is fortified

with natural Vitamin-E. Vitamin-E helps to preserve the stability of the oil, and thereby increases the

shelf-life.

Functional Product: Widely used by house-holds, restaurants for daily cooking, salad dressing

etc. As Saffola is extremely stable, it reduces consumption of cooking oil.

Emotional Product: Here Saffola essentially satisfies the Health Need of consumers. The

product emphasizes on Heart Protection. It focussed on urging people to adopt a healthy lifestyle.

One of the major concerns today is the occurrence of heart disease and every fourth Indian being

under threat. And adopting Saffola as your family’s cooking medium is one big step that you can take

towards safeguarding of your family.

Edible/Cooking oils could broadly be categorized into vegetable refined oil, hydrogenated oil

(vanaspati) and bakery fats. The major edible oils produced and consumed in India were groundnut,

sunflower, safflower, soya, castor seed, cottonseed, mustard and sesame seed. While pure

groundnut oil could be directly consumed or refined to have higher purity, others had to be refined

to make them edible grade. Groundnut oil was the most widely consumed oil in India. But groundnut

was a monsoon crop (Kharif), vulnerable to the vagaries of monsoon.

Background:

Climatic conditions in India favour growing a variety of oilseeds. On the demand side, a growing

population and vastly varied dietary habits have ensured a thriving market for edible oil in the

country. In fact, there is a substantial demand overhang, which is expected to continue for some

years. At present, this is offset by imports that cater to almost half of the total domestic

5

consumption. With cheap imports threatening to cripple the domestic industry, the government is

walking a tightrope between filling the demand supply gap and the political need to keep the

domestic industry in good health. Unorganized, medium and small players dominate the industry.

Hence, quality remains a concern. There is need for better regulatory control to protect consumers.

An average Indian's yearly edible oil requirement has gone up from 7.0 kg in 1996-97 to 11.8 kg in

2000-01. Despite the variety of oilseeds grown in India, the country imports a substantial quantity of

edible oil, which also works out cheaper. Allied factors contributing to imports are the higher cost of

cultivation in India and uneconomic oil extraction systems. India is one of the largest oilseed

producers in the world (9.3%). Oilseeds in India account for around 5.0 percent of the Gross National

Product (GNP) and 14.0 percent of the country's area under cultivation of crops. Castor, Groundnut,

Linseed, Niger, Rapeseed, Mustard, Safflower, Sesame and Sunflower are some of the major oilseeds

grown. India produces 10 percent of the world's oilseeds, but has a low productivity of around 850-

900 kg per hectare (compared to a world average of around 1,100-1,350 kg per hectare).

The amount of oil extracted from the seed varies with the type and quality of seed. In many cases,

the oil recovery rate is upwards of 30 % with Sesame accounting for a high 45 %. Domestic

consumption of edible oils has been growing at 4 - 5 % a year. The consumption in 2001-02 was

around 25.75 million tons. Non-packaged oils account for nearly 50 % of consumption in both urban

and rural markets. In the remaining 50 % contributed by packaged oils, branded oils constitute a

small portion of approximately 10 -15 %.

Major Source of Oilseeds:

6

Major Players:

Edible Oils Vanaspathi

National Dairy Development Board (Anand)

ITC Agro-Tech (Secunderabad)

Marico Industries (Mumbai)

Ahmed Mills (Mumbai)

Hindustan Lever (Mumbai)

Wipro (Bangalore)

Rasoi (Calcutta)

Avi Industries (Mumbai)

Market: Industry Structure:

Highly fragmented industry Over 600 oil extraction units, 166 vanaspati manufacturing units out of which only 10 edible

oil units and 8 vanaspati units have national reach Over 50% of the units - sick or underutilised due to surplus capacity Idle capacities among these units due to shortage in feedstock supply Major oil brands - - Sundrop, Dhara, Saffola, Sweekar, Postman Vanaspati brands - Dalda, Rath

Trends in Output:

Market Size:

Edible oils and vanaspathi markets - 9.6 million MT Oils market growing at 8.7 % CAGR Vanaspathi market stagnating at around 1 million MT

7

Capacities:

Installed Capacity and Prodcution

Vanaspathi Edible Oils

Capacity 2,720,000 30,368,000

Production 990,534 6, 250,000

Utilisation 36% 21%

Installed capacities and Production - in MT per year

Import:

8

Key Inputs

Inputs

Vanaspathi - Minor (solvent extracted) edible oils - Sunflower oil, Soybean oil, Ricebran oil

Edible Oils - Oilseeds such as Groundnut, Sesame, Mustard, Sunflower, Safflower and oil cakes and

bran.

Raw material

Comprises 70% of the production cost

Oilseeds - the largest cash crop

Poor productivity - 873 Kg/ hectare (global average of 2000 kg/ hectare)

Though oilseeds have 14.5% share in gross cropped area, only 25% of it is under assured

irrigation.

Technology : Refining technology freely available indigenously

Characteristics:

Oils : primarily a commodity market - Price sensitive Effective distribution chain - through a complex network of C&F agents, wholesalers/stockists &

retailers (kirana shops, supermarkets).

Oil sold in bulk (tin, HDPE containers) to institutions; In retail packs (PET bottles, cans, jars, pouches) to small customers.

Seasonal demand for oils & vanaspathi - September to November (peak season).

Regulation : Under the Edible Oils Packaging (Regulation) Order, 1998, edible oils cannot be sold loose’ but can be sold only in `packed’ form .

Oil consumption - North is largest market, followed by South, West & East zones.

Key Success Factors:

Raw material sourcing : focus on improving yields, getting better quality oilseeds , ensuring regular supplies - through symbiotic relationship with farmer

Branding essential for success (Vanaspathi - Dalda, Oils – Saffola, Sundrop) Better distribution network to improve reach Efficiency in operation - to become price competent and withstand overseas competition.

Business Concerns:

Free imports, low import duties and slump in global prices - lead to `dumping’. Domestic industries of edible oils and vanaspathi affected - low realisation and idle capacities in

oil and vanaspathi industries. Production slippages have also forced imports. Excessive (cheap) imports of oilseeds - led to unremunerative prices, locally Hence, farmers have shifted to other cash crops.

Increasing health awareness - impact of oils and vanaspati usage on individual’s cholesterol levels.

Growth:

The industry is a high volume, medium growth sector characterized by excess/idle capacities owing

to in efficient operations. Imports have been influencing prospects, leading to domestic industry

crisis.

9

Threats of New Entry

The proliferation of regional brands has been one of the key threats to the national players in the

branded edible oil market over the past couple of years. With the domestic supply of oilseeds

dwindling, operating integrated oilseed processing facilities no longer makes economic sense. Even

Agro-Tech Foods, which has made substantial investments in its integrated oil processing complex at

Mantralayam (in Karnataka) over the years, has now cut back on production at the unit and is

reportedly scouting for refining capacities near port towns where it can cost-effectively import and

package oil.

This has significantly lowered the entry barriers in the edible oils business, leading to a mushrooming of local and regional brands. On the one hand, players such as Kaleesuwari Refineries (of the Gold Winner brand), Adani Exports (Fortune) and Ahmednagar Mills (Postman, Til Raj) have been in a position to firmly establish their brands and actually glean away market share from the larger players. These brands use a combination of active regional advertising and aggressive pricing (Gold Winner, for instance, adjusts its selling prices at intervals of a week or less) to woo consumers. On the other hand, international trading houses such as Cargill Foods (Nature Fresh) have also made a foray into the market and have been actively looking to set up refining capacities within the country. These brands appear to have whittled the market share of the national brands. For instance, in 2001-02, Gold Winner, a regional brand, clocked a growth of well over 40 per cent, even as leading brands Sundrop, Saffola and Sweekar reported de-growth in volumes.

Bargaining power of Buyers The bargaining power of customers determines how much customers can impose pressure on

margins and volumes. In edible oil market, bargaining power of the buyers is likely to be high

because of the following reasons.

Customers buy a large volume, so there is a concentration of buyers.

Customers are price sensitive and can switch to other substitutes.

Substitutes are available in numbers.

Bargaining power of Suppliers The term 'suppliers' comprises all sources for inputs that are needed in order to provide goods or

services. In edible oil market, bargaining power of suppliers is likely to be moderate to low due to

following reasons.

Domestic oil seed market is dominated by many (fragmented) suppliers rather than few large suppliers.

Customers’ suppliers are not too many, so buyers’ bargaining power is moderate.

Switching cost from one supplier to another is easy.

Threat of Substitute A threat from substitutes exists if there are alternative products with lower prices of better

performance parameters for the same purpose. They could potentially attract a significant

10

proportion of market volume and hence reduce the potential sales volume for existing players.

Threat of Substitute in Edible oil market is significantly high.

Huge portion of customer is not still Brand Loyal

Switching cost is high.

Customers are highly price sensitive.

Competitive Rivalry This force describes the intensity of competition between existing players (companies) in an

industry. High competitive pressure results in pressure on prices, margins, and hence, on profitability

for every single company in the industry. In this industry, competition between existing player is

likely to be high because of the following reasons.

Except few, all players have the similar strategy.

Customers are not still Brand Loyal.

Products are not much differentiated.

Switching cost is not high.

Parameter Environment Stimulus Opportunity Threat

Response of Marico Industries

Political Overall, India had a stable government with Trade policies favourable to growth of Industries.

Opportunity Aggressive marketing strategies complemented with expanded product range to target various segments.

Political 60% of the safflower seeds were imported, The input costs depends heavily on Governments import policies and duties. (In March 2001 the import duty on crude vegetable oil was increased from 35% to 75% as a result the input cost soared)

Threat

Launched blended low priced variants. Even during period of shortages of safflower seeds Marico made sure the consumer can buy other variants.

Economic A large part of the population lived in rural areas and belonged to the low income group.

Threat Targeted the urban population.

Economic Even the urban population had lots of other options and Saffola was expensive for them as well.

Threat Launched blended low priced variants

Economic With effect from 1st April, 2008, the customs duty on crude and refined forms Soyabean Oil, Mustard Oil, Sunflower Oil, Safflower Oil, Groundnut Oil, Coconut Oil etc. reduced to zero percent and 7.5% respectively

Opportunity Launched various low price products and increased the market penetration activities

Socio Cultural

People in general are not health conscious.

Threat Opportunity

Launched various initiatives to educate the people about heart diseases.

Socio Cultural

Taste is given more priority than Health

Threat Saffola tasty blend was introduced.

Socio National Vegetable Oil Development Opportunity Participated in Program and

11

Cultural Board of India has a demand Developmental Programmes, Promotion of Oil seed Cultivation, Seed Production and Strengthening of Seed Farm, Mechanization & Processing.

more focused the advertising on educating the public.

Techno logical

Other producers had superior technology to offer better quality, colourless, odourless refined oil.

Threat Acquired vegetable oil refinery, equipped with latest technology.

Legal Poor Public Transport System. Focussed Govt initiatives to extend infrastructure in Rural and Semi-urban areas.

Opportunity Scaled up production (set-up 2nd Plant at Gurgaon) to meet demand from newer markets. This helped establishing leadership position.

Marico Industries, a well-known Indian Fast Moving Consumer Goods (FMCG) company, offers unique and ethnic Indian products. Marico was famous for its ‘Parachute’ and ‘Saffola’ brands. In a survey carried out by ‘Brand Equity’ of The Economic Times in early 2003, for India’s 100 most trusted brands, Saffola ranked 75th and Parachute ranked 29th. Marico’s brands had shown resilience against competition and maintained their market shares over the years.

MARICO: Market Share (1998-2003)

12

Product Feature Mix Recent medical studies recommend diets high in monounsaturated and low in saturated to help reduce heart disease. Monounsaturates are also preferred for superior cooking performance. Saffola is the only leading cooking oil grown without pesticides. The following analysis shows the levels of saturation and cholesterol in various oils used for cooking.

Cholesterol

(mg/tbsp) Saturated Monounsaturated Polyunsaturated Other

Canola Oil 0 6 62 31

Safflower Oil 0 9 12 78

Sunflower Oil 0 11 20 69

Corn Oil 0 13 25 62

Peanut Oil 0 13 49 33 5

Olive Oil 0 14 77 9

Soybean Oil 0 15 24 61

Margarine 0 18 48 29 5

Vegetable

Shortening 0 26 43 25 6

Cottonseed Oil 0 27 19 54

Chicken Fat 11 30 47 22

Lard 12 41 47 12

Animal Fat

Shortening 9 44 47 5

Beef Fat 14 51 44 4

Palm Oil 0 51 39 10

Butter 33 54 30 4 12

Coconut Oil 0 77 6

15

13

Brand Objectives

Achieve volume objectives

Set up a distribution network

Build a dealer franchise

Build equity with customer

Strategic Objectives To achieve leadership in the refined oils market

Set up state-of-the-art manufacturing facilities in the heart of the oil belt

Enter through a range of multibrand oils offerings

Ensure the best in quality, packaging, pricing and focused distribution

Growth Strategy o Expansion through concentration o Expansion through integration o Expansion through diversification o Expansion through cooperation

Marketing Mix Product Cholesterol is a soft, waxy substance which is an important nutrient for the brain,nerves, muscles and heart. However if too much cholesterol circulated in the blood, it can build up inside the artery walls. It can slow the flow of blood and eventually damage the heart. The body typically supplies or produces all the cholesterol it needs; therefore none is needed in the diet. Saffola oil is a superior oil.it is excellent for frying. Due to its mild flavor, it is an all purpose oil. It has no off-flavors when cooking and frying. "Grown without pesticides" means that no pesticides are used on the farm to grow the crop. In addition, pesticides are not used throughout harvesting, processing, and storage of the seed or oil. Saffola's farming methods do not pollute the crop, soil, underground water or the air. In addition, farm workers are not exposed to any pesticides while working with Saffola "grown without pesticides" crops. Price

14

This increase in market share is despite the fact that Saffola is available at a higher price point to

Sundrop. Saffola is priced at Rs 80-Rs 140 for various stock keeping units. Sundrop, on the other

hand, comes at Rs 65, going up to Rs 120.

With upbeat demand on fresh buying owing to marriage and festive season in India, edible oil prices

are expected to stay firm with imports playing a key role in keeping a check on the prices. The crop

estimation from rabi oil seed cultivation suggest a marginal drop against the previous year.

At the moment, there is a fierce battle for market share in the super-premium-refined-edible-oil

category. A C Nielsen data for the month of December ’09 shows that Saffola had a lead over

Sundrop in terms of volume share. It stood at 54 per cent for Saffola and 46 per cent for Sundrop

respectively.

Place Marico already had a very large existing distribution network. They used that network only for the

distribution and tried to place Saffola initially in High value outlets and gradually after moving to

different price categories they increased the reach of the product to general stores. But most of the

rural area is still untapped.

Supply Chain

Promotion The Saffola cooking oil, for instance, plugged the need for a product that was simply, ‘healthy for the heart’. Advertising over the years (since the early 1990s, to be precise) dwelt on what regular edible oils did to the vital organ - build cholesterol that is - eventually damaging the heart.

Used the health platform by showing testimonials from doctors in advertisements

Raw

Material Vendors

Direct Distributors Plants

RDC

Depots

Super Distributors

Retailer

Stockists

30 depots

6 RDCs (regional distribution centres)

Total > 1100

Secondary Sales Primary Sales

15

Advertisements focused on creating a strong franchise among consumers having heart, blood pressure and health problems.

Focused on reduction of cholesterol

To win the faith of high income groups they showed Saffola as a Branded oil This clever appropriation of the space with communication that played on the agony of almost losing a loved one to a heart attack did the trick. Saffola today is synonymous with preventive heart care in the country. As Harish Bijoor, chief executive officer, Harish Bijoor Consults, says, “Saffola means heart. That is the positioning in the minds of people. Ironically, allied marketers could have played up this virtue. They did not. Saffola did.”

Profits Marico’s second flagship brand, Saffola, is positioned strongly on the ‘good for the heart’ platform

and rides the trend in increasing concern around health and heart health in India. With this

increasing awareness several households have begun using Saffola, as part of their adoption of a

healthier lifestyle. The super-premium niche of the branded refined edible oils market thus

continues to expand. During Q1 FY11, Saffola refined oils recorded a strong volume growth of 17.5%

over Q1 FY10 and continued to maintains its leadership position. The higher volumes are expected

to increase the customer base for Saffola as the brand has a high retention rate.

Saugata Gupta, CEO-Consumer Products, commented, “We are encouraged by the expansion in

franchise across all major segments – especially premium refined edible oil. This sets us up to deliver

strong volume growth during the year as planned.”

Saffola: An increase in the market share with a reasonable pricing premium over the other edible oils

and the promotion of the brand on the health and wellness platform would ensure Saffola achieves

above 13% volume growth in the coming years. However, due to the recent price reductions and

promotional add-ons on the key variants, the overall value growth of Saffola would remain subdued

in Q1FY2011 and Q2FY2011.

Value Chain

Concept: The value chain categorizes the generic value adding activities of an organization. The

"primary activities" include: inbound logistics, operations (production), marketing and sales

(demand), and services (maintenance). The "support activities" include: administrative infrastructure

management, human resource management, technology (R&D), and procurement. The costs and

value drivers are identified for each value activity.

16

Profit Profit margin

Margin

Primary activities:

Inbound logistics:

These are the activities concerned with receiving the materials from suppliers, storing these

externally sourced materials, and handling them within the firm.

Here goods are received from a company's suppliers.

They are stored until they are needed on the production/assembly line. Goods are moved

around the organization.

They purchase their raw material from all around the world.

In order to maximize their availability of raw material they maintain good relationship with their

suppliers.

They use JIT (Just in Time) approach for handling of raw material.

Operations:

These are the activities related to the production of products and services. They are known for their

reliability which comes from efficient operations.

Administrative Infrastructure Management

Human Resource Management

Technology (R&D)

Procurement

Inbound Operation Outbound marketing services

logistics logistics & sales

Primary

activities

Support

activities

17

Outbound logistics:

These are all the activities concerned with distributing the final product and/or service to the

customers. They manage their Distributor and Super Distributor in different rural and urban area.

They make their product easily assessable.

Marketing and sales:

This functional area essentially analyses the needs and wants of customers and is responsible for

creating awareness among the target audience of the company about the firm’s products and

services. Companies make use of marketing communications tools like advertising, sales promotions

etc. to attract customers to their products. MARICO focuses more on TV ads and magazine for

marketing. This area focuses strongly upon marketing communications and the promotions mix.

Service:

There is often a need to provide services like pre-installation or after sales service before or after the

sale of the product or service. This includes all areas of service such as final checking, after-sales

service Like quality, quantity, packaging, weight etc.. MARICO values their customers.

Support activities:

Procurement:

This function is responsible for purchasing the materials that are necessary for the company’s

operations. An efficient procurement department should be able to obtain the highest quality goods

at the lowest prices. They aim to secure the lowest possible price for purchases of the highest

possible quality. MARICO will be responsible for outsourcing and e-Purchasing (using IT and web-

based technologies to achieve procurement aims).

Factory + Subcontractor

Distributor

Retailer

Depot

18

Human Resource Management:

This is a function concerned with recruiting, training, motivating and rewarding the workforce of the

company. Human resources are increasingly becoming an important way of attaining sustainable

competitive advantage. Employees are an expensive and vital resource. MARICO manage

recruitment and selection, training and development, and rewards and remuneration. MARICO

consider their employees as HUMAN CAPITAL. Equal support comes from our HRD team, which

expends its energies, formulating and building strategies to build a stable and high - talent

organisation. The innovations and the quest for excellence at Marico continue unabated. Even as the

success stories continue, the focus from the consumer never shifts.

Technology Development:

This is an area that is concerned with technological innovation, training and knowledge that is crucial

for most companies today in order to survive. They believe that technology is an important source of

competitive advantage and try to innovate to reduce costs and to protect and sustain competitive

advantage. MARICO implemented production technology, Internet marketing activities, lean

manufacturing, Customer Relationship Management (CRM), and many other technological

developments.

Firm Infrastructure:

This includes planning and control systems, such as finance, accounting, and corporate strategy etc.

This activity includes and is driven by corporate or strategic planning. MARICO implemented

Management Information System (MIS) and other mechanisms for planning and control in different

departments.

Environment Conscious: Saffola has taken further steps with their packaging to provide an

environmentally responsible product. Saffola purchases plastic packaging from plastics suppliers that

are taking part in voluntary recycling programs. All of Saffola's plastic packaging carries the triangular

arrow recycling symbol on the bottom of each bottle. The new retail-size bottles are made of PET

plastic and take up less shelf space, and require less packaging in their shipping cartons.

Differential Advantage for Marico over competitors in terms of Ability to design new products:

In house production – no outsourcing – high reliability suppliers – superior quality assurance.

India and foreign production location – spread benefit.

Plant location as per raw materials availability

Ability to deliver the service:

big distribution channel Ability to Market:

Various Products, Domestic and Foreign market gainer

Wide variety of product

Low company image

Low promotion

Fixed price

19

Ability to finance:

High cost capital, reserves & surplus

Cash management

Centralized payment

Decentralized collection

Ability to manage:

Human resources high calibre.

Quality management & personnel par with competition

Good personnel system

Good industrial relation with other company

Expected future strategies Brand Extension: During Q4 FY10, Saffola Arise was launched across key Saffola markets, at

invitational pricing and has been supported by insightful advertising. The initial performance has been encouraging with indications that repeat purchases are taking place. With its health positioning, the company hopes to create a sizable franchise for itself, in the rapidly growing Rs. 400 Cr packaged rice market, over the next two to three years. In line with its strategy to launch foods under Saffola, the company introduced Saffola Oats in the month of June 2010. The product is being prototyped primarily in the Modern Trade format, in select cities across India

International Business: The Company launched the Saffola brand of edible oil in international market recently and hopes to post strong revenue growth and improved profitability. Marico is confident of achieving around 20-25% growth in its international business.

Insight: Health more universal than initially defined by Saffola. Now they have started focusing on overall

a. Maintenance of health b. Family health

Problem Recognition

In early nineties, there was low brand specification at the time of purchase, meaning many

consumers simply asked for a “Cooking Oil” and did not specify a particular brand. There was no

awareness among people regarding the effect of cooking oil on their health. By the name cooking oil

customer only means that he needs oil in which he can cook. The Saffola cooking oil, for instance,

plugged the need for a product that was simply, ‘healthy for the heart’. Advertising over the years

(since the early 1990s, to be precise) dwelt on what regular edible oils did to the vital organ - build

cholesterol that is - eventually damaging the heart.

Alternate Generation

Consideration

Set

Moving from

appropriateness

to uniqueness

During this era the consideration set primarily comprised of its

key competitors such as SUNDROP, DHARA, FORTUNE etc.

Later on Saffola came out with different products to cater to

different segments.

Saffola GOLD - Saffola Gold has the unique composition of 80%

Rice bran Oil and 20% Safflower Oil.

Saffola Tasty - Saffola Tasty was the first Saffola blend. This oil

20

blend provides the benefits of two oils, thereby giving added

value to the consumer. It provides the high PUFA from Safflower

(Kardi) oil and the taste of Corn oil.

Saffola Active - Saffola Active provides Omega 3 and Oryzanol,

two important compounds known for promoting heart health.

This comes to you without odour. To get these benefits Saffola

Active is made with Rice Bran Oil and Soya bean oil. Saffola Active

also contains Vitamin E.

New Saffola - New Saffola comes with new ingredients. New

Saffola, a blend consisting of Safflower (Kardi) Oil (60%) & Rice

Bran Oil (40%), contains Vitamin E. Vitamin E is a well-known and

potent antioxidant.

Information search

Technical

and

Functional

Info

From 2005-06, SAFFOLA has become renowned for its expertise in Heart Care,

thanks to the consistent introduction of innovative product like heart healthy

cooking oil and foods. Saffola's products are the first in line of defense against heart

diseases.

During this era its image changed from a mere Cooking Oil to a responsible brand

whose philosophy is to help people get the most out of life, Saffola always promotes

the adoption of a healthier lifestyle for heart.

Evaluation

Attributes There are many players in the market and consumers had little experience and

expectations. People are basically evaluating these products based on price.

Purchase Decision

Place utility

High – Main source of the purchase of Cooking Oil for people is Kirana stores in

earlier days and now a days lot of urban consumers buy it from retail stores like

Reliance Fresh, Big Bazaar, More stores etc.

Time utility Moderate – Earlier the time utility was low but in later on the time utility picked up

due to increasing rush in busy urban life.

Form utility Medium – There were 2 variant available in the Cooking Oil. Can of 5/10/15 Litres

and 1 Litre plastic pouch. This was standard for most of the competitors.

Quality

Over the years, the brand Saffola has become renowned for its expertise in Heart

Care, thanks to the consistent introduction of innovative product like heart healthy

cooking oil and foods. Saffola's products are the first in line of defences against

heart diseases, making transition to a healthier lifestyle a lot easier. This is a clear

advantage against its competitors.

21

Buying Behaviour

During this era of health conscious people, there is a natural inclination towards taking less

cholesterol and so taking good quality of oil, but this is a case of urban India, for rural India this is

still a challenge to educate the people about the health effects due to consumption of Oil. Saffola

has taken lot of initiatives to do it. Lot of advertisements and campaigning to educate people about

the effects of cooking oil on heart. Their all the advertisement are focused towards the health

aspect. For example their tagline is “Jeene ka andaaz sudhariye”. (Improve your style of living).

Segmentation

Type of Segment State of being Suitable Product

Geographical:

Urban India (Metro

cities)

Rural India (Small towns

& villages)

Need satisfaction

Health Consciousness

Need Satisfaction

Saffola Gold, New Saffola,

Saffola Active, Saffola Tasty

Saffola Tasty

Demographic Healthy oil was preferred by educated

Housewives and not by uneducated

rural women

Saffola Gold, New Saffola,

Saffola Active, Saffola Tasty

Behavioural

Segmentation

Price

To compete with different brands

available in market, Saffola launched 4

different variants with different prices.

Saffola Gold, New Saffola,

Saffola Active, Saffola Tasty

Targeting

Targeted

Segment

Evaluation Parameters

Urban India:

Indian Upper

Middle Class

Twenty percent of the country’s population lived in urban areas or large cities

and consume11.2 Kgs of edible oil per year while the vast remainder lived in

rural areas, villages, and small towns.

Saffola focused mainly on Urban population because of its high quality product

and benefits are very difficult to explain to the rural India.

Healthy oil category was undifferentiated in the minds of rural India

Rural market was very unattractive because of following reasons:

Per capita consumption is quite low

Poor rural infrastructure & consumption habits were very different from the

urban people and were two major obstacles to enter rural markets.

22

Affordability is a great factor for the reluctant of rural people buying Saffola

which is a high premium brand.

Age group- All India’s most of the people are influenced by the western culture so they had a

good potential for healthy eating habits.

Keeping in mind about the health conscious people which are present in all age

group, Saffola has kept its uniqueness of providing a healthy oil which is less on

cholesterol and hence good for heart.

Lower Income

group

Lower income group was more or less not entertained by Saffola due to quality

product and cost cutting is not easy for them.

Educated

Youth

Saffola created awareness in youth towards the health implications of cooking oil

and launched ads to educate youth which they named as Saffola Cholesterol

Management.

Positioning

Product Type of

positioning

Strategy

Saffola Gold Perceived

Quality

Position it as a premium brand for health conscious people. A right

combination of Safflower Oil and Rice Bran Oil is more effective in

reducing cholesterol than each of the oils singly.

Saffola Gold has the unique composition of 80% Rice bran Oil and 20%

Safflower Oil.

Saffola Tasty Perceived

Taste and

Quality

Saffola Tasty was the first Saffola blend. This oil blend provides the

benefits of two oils, thereby giving added value to the consumer. It

provides the high PUFA from Safflower (Kardi) oil and the taste of

Corn oil.

Saffola New Perceived

Quality

New Saffola comes with new ingredients. New Saffola , a blend

consisting of Safflower (Kardi) Oil (60%) & Rice Bran Oil (40%),

contains Vitamin E. Vitamin E is a well-known and potent antioxidant

Saffola Active Health based Saffola Active provides Omega 3 and Oryzanol, two important

compounds known for promoting heart health. This comes to you

without odour. To get these benefits Saffola Active is made with Rice

Bran Oil and Soyabean oil. Saffola Active also contains

Vitamin E.

23

Demand Drivers

Macroeconomic factors : Population growth, per capita income, purchasing power, oilseeds

crop

Other factors : Prices - domestic/ international, Availability - oil, oilseeds

Influence of branded products - `health’ message

Growing preference for convenience foods.

With steady growth in population and personal income, Indian per capita consumption of edible

oil has been growing steadily.

Key Success Factors

Raw material sourcing : focus on improving yields, getting better quality oilseeds , ensuring

regular supplies - through symbiotic relationship with farmer

Branding essential for success (Vanaspati - Dalda, Oils - Sundrop)

Better distribution network to improve reach

Efficiency in operation - to become price competent and withstand overseas competition

Proposed Future trading in edible oils will help curtail price volatility and lend knowledge - based

assistance to farmers of eliminate unofficial markets.

Future

In the next 5 years, the market for

o Edible oils will grow by 8% to 12.65 million MT

o Vanaspati will grow to 1.5 million MT

Free imports, low import duties and slump in global prices - lead to `dumping’

Domestic industries of edible oils and vanaspati affected - low realisation and idle capacities in

oil and vanaspati industries

Currently, India accounts for 7.0% of world oilseeds output; 7.0% of world oil meal production;

6.0% of world oil meal export; 6.0% of world veg. oil production; 14% of world veg. oil import;

and 10 % of the world edible oil consumption

The demand for edible oils is expected to increase from Oil Year 2004-05 levels of 10.9 MT to

12.3 MT by 2006-07 (two years). This assumes a per capita consumption increase of 4% and a

population growth of 1.9% which translates to an overall growth in demand @ 6% p.a. Based on

the above assumptions, edible oil demand in the year 2015 is expected to be 21.3 million

tonnes.

Business Concerns

Production slippages have also forced imports Excessive (cheap) imports of oilseeds - led to unremunerated prices, locally Hence, farmers have shifted to other cash crops Increasing health awareness - impact of oils and vanaspati usage on individual’s

cholesterol levels.

24

Be More – Everyday. The Purpose of Marico is its reason to exist beyond making profit. “To transform, in a sustainable manner, the lives of all those we touch, by nurturing and empowering them to maximize their true potential.” Marico sustained its profitable growth, by attempting to maximize the potential of the multiple stakeholders in each sphere of their business, in India and overseas - be it farmers whose communities they sustain - or consumers whose lives they have endeavored to transform through wellness and beauty solutions. “Turning fallow land into a profitable business. We pressed the right buttons.” Marico continuously benefit safflower farmers by implementing various initiatives for them. They made contracts with the farmers to grow safflower – a hardy non-seasonal crop that grows in harsh conditions. Marico helped them maximize the potential of their unused land, turning their losses into thriving profitable business. “By forging win-win partnerships across every link of the supply chain, we have increased the growth and sustainability of our business, yielding winning results time after time, year after year.”

“The net sales have grown by 13% to Rs 790.15 crore. This was led by volume growth across categories. Volume growth was at 16%. Saffola refined oils recorded a strong volume growth of 17.5%” The input prices lowered by 22% with respect to previous year. Brand passed on a part of this to consumers using a strategic mix of promotions and price reductions across select packs during the year to keep the premium over other branded refined edible oils at sustainable levels. This was supported by a media campaign and other marketing efforts. Higher volumes are expected to increase the customer base of Saffola as the brand has a high retention rate. Households buying Saffola have steadily increased with the number of households estimated to have gone up by over 12% during FY10. The Saffola refined oil franchise continues to hold its market leadership position in the super premium ROCP (Refined Oil in Consumer Packs) segment. In the longer term, Saffola would like to establish itself as a leading healthy lifestyle brand. It has commenced its journey in the functional foods space and plans to have a basket of offerings that provides healthy food options throughout the day to individuals conscious about heart health. During Q4 FY09, Saffola’s key markets at an invitational price and has been supported by insightful advertising. The initial performance has been in line with expectations. With its health positioning, the company hopes to create a sizable niche for itself over the next two to three years. Saffola is encouraged by the expansion in franchise across premium refined edible oil. This sets us them to deliver strong volume growth during the year as planned. Marico's international business has had a satisfying journey over the last few years. It feels confident that it will continue to find and leverage the right growth drivers, in their quest to build a sustainable business that contributes meaningfully to the Marico Group's strategic objectives.

25

Customer Targets

Saffola is targeting busy and health conscious cooking oil consumers. Saffola is leveraging the current leaning towards the health trend, the wellness concept in an innovative manner. The busy executives and professionals who come across stresses in both professional and personal life are very much health conscious (especially heart related issues) and they prefer to use cooking oil like Saffola. Wives of professionals who are very much conscious of heart and cholesterol content of their husbands shall also prefer to use Saffola. Low absorb technology (LoSorb) used by Marico helps Saffola Cooking oil to be stable during deep-

frying. Food fried in Saffola oils absorbs less oil and thus reduces the consumption of oil in diet. So,

normal household wives who very much cost sensitive shall prefer Saffola as their cooking oil.

Saffola is still considered as a premium product. Its price is fixed at a very higher level than its

competitors. So there is already a gap for medium price ranged product from Saffola.

Also Saffola doesn’t emphasize in taste attribute. Bettering taste along with its health image can

substantially increase its market share. Saffola has already launched Saffola Tasty brand but it is still

to gain popularity.

Competitor Targets

Its competitors are targeting mainly the lower income segment of consumers as the premium charged for Saffola is high. Also competitor, like Sundrop, emphasizes on Taste of cooking oil.

Core Strategy

Value proposition

It provides certain advantages that look after one’s health condition as well as the consumption amount of cooking oil:

It focuses on urging people to adopt a healthy lifestyle. One of the major concerns today is the occurrence of heart disease and every fourth Indian being under threat. And adopting Saffola as your family’s cooking medium is one big step that you can take towards safeguarding of your family.

Heart healthy nutrients in RBO such as tocopherols, tocotrienols and oryzanol are known for their cholesterol lowering ability.

This has the highest levels of Linoleic acid, an omega-6-polyunsaturated fatty acid, which is well

known for reducing cholesterol levels.

All Saffola oils come with 'LoSorb Technology'. Food fried in Saffola oils absorbs less oil and thus

reduces the consumption of oil in your diet.

26

Product Positioning

Demographic Segmentation: Basis of segmentation is income, occupation and age as follows;

Income Occupation Age

High Income Groups Housewives 21-40 years of people

Middle Income Groups Working Professionals Above 40 years of people

Targeting: On the basis of the above matrix, Saffola will be targeted at the following segments;

Segments Key Features

Middle/High Income Group

Saffola serves the purpose of cooking oil which takes care of Heart disease. Saffola tasty serves Middle income group also. Less consumption goes well with Middle income group.

Housewives Takes care of husbands’ health.

Working Professionals Working professionals who go through a stressful ambience in office are conscious about health and especially heart. Saffola is a wise choice.

Age above 40 years This group of people are more vulnerable to Heart Disease. So Saffola is a definite choice.

Perceptual MAP for SVS

The above figure shows the perceptual map for Saffola cooking oil. SVS is to be positioned based on two parameters – Health Conscious Image and Price. It is to be rated high in health conscious image and low in price because of the following reasons:

Competition is less in this particular attribute.

It develops a Credence attribute.

HIGH

HIGH

Price

Health

Conscious

Image

Low

LOW Fortun

e

Dalda

Saffola

Saffola Tasty

Sundrop

Gold

Winner

Dhara

Gold

Drop

Sweeker

27

Integrated Marketing Communications Programs

In 1993, after a thorough analysis of heart disease patients, Marico decided to position Saffola as Good for your heart and the slogan Healthy Oil for Healthy People. Marico first created fear in the minds of people about the incidence of heart attacks and then presented Saffola as a preventive. Saffola was also prescribed by doctors, as it was low on cholesterol. Saffola was awarded the ‘Brand of the year’ in 1993 by the Advertising Club of Bombay.

In the same year, Marico launched the Saffola Healthy Hearts Foundation (SHHF), to educate consumers about heart care and healthcare. The Foundation provided easy-to-read-and understand consumer information booklets and useful reference material like emergency directories. It also conducted free heart check-up camps that provided ECG, cholesterol, sugar, blood pressure testing besides advice from eminent cardiologists.

28

The Foundation also arranged for free counselling and diet guidance from dieticians. It actively participated on important days like World Health Day, World Heart Day and Doctor's Day to spread awareness about preventive health care. Integrated Marketing Communication Program used all 4 P’s of marketing together;

Pricing strategy of Saffola

Saffola has different products to suit different customers. Marico's reasoning is that since Saffola oil commands a premium of 10 to 15 per cent over other edible oil brands, the company should be able to cater to the demand of the all the customer from different purchasing power groups. The company wants to leverage the Saffola brand equity through brand extension.

29

Their Main strategy for price discrimination is to make customer aware that the different price are associated with different products which are suitable for different needs.

Channel Strategy

Saffola is using wholesale distributors, Big Malls, Grocery stores etc. as their distribution channels to result in meeting the customer needs effectively and efficiently.

30

Saffola was using their key strength which was showing the oil as the healthy oil for people, this is their USP for selling the oil at even premium over the competitors. Even Saffola has gone to the extent of launching the website especially for the health care for the consumers. www.saffolalife.com On the brand’s homepage, the site’s colour scheme is reminiscent of the brand’s bright yellow packaging that stands out in grocery stores. Sticking to its objective, the site has all the necessary tools to effectively characterize Saffola as a “health-conscious” brand. The Eating Right section educates the reader about nutrition myths, beverages, health benefits from particular plants and other pertinent health topics The Healthy Heart link on the homepage transports the web user to a section that outlines the initiatives the brand has taken in the community. The company has organized several outreach programs, and details on such events are available online. Corporate social responsibility is an important facet of any brand today, and Saffola does an admirable job describing these initiatives on its site. Saffola had always focused on the heart. The brand’s image had suffered a setback in the early 2000s with the ambulance commercial, which portrayed that one had to rush to the hospital if he did not use Saffola. Later, Marico changed Saffola’s positioning, focusing on the health of the entire family with its Sehat se jeena hai campaign. Since the overall health positioning did not yield results, Saffola was moved from the family health positioning, once again to the original heart care positioning in 2004. In February 2004, Marico launched a fresh advertising campaign for Saffola, after a gap of two years. The campaign by Grey Worldwide had a new tagline, Aaj se jeene ka andaaz sudhariye (Improve your lifestyle today), urging every Indian to take up a healthy lifestyle. The TV Commercial focused on a little girl approaching various groups of people to pass on the message of heart care. The new campaign was based on research done by SHHF. Almost one-fourth of the country's population was vulnerable to a heart related ailment and a majority was unaware of the risks related with heart problems. In September 1999, Marico launched a website to provide information on heart care through dietary intervention. Targeted at health-conscious consumers, the website offered a personalized diet plan. The site also offered general information on heart care and healthy food habits. In 2000, SHHF launched a multi-level awareness campaign, where a select group of housewives distributed literature on heart care to friends. The friends in turn spread the initiative to their friends and so on. The motive was to convert each consumer into an agent for spreading ‘Easy to follow tips for a healthy heart’, to strengthen the association between Saffola and heart care.

Research Marico’s Research & Development center, continuously work towards incorporating the latest technological advances in all their products. This ensures that any product, which comes out from Saffola, incorporates the latest learning in the field of heart care. According to Dr. Sudhakar Mhaskar from Marico’s Research & Development Center, “We continuously strive to innovate products to improve the healthy living of the people. To achieve this target we put lot of emphasis on R & D which leads to enhance the oil’s ability to maintain a healthy level of total, LDL & HDL cholesterol in the body.” Every product from Saffola is made through an exclusive protection technology called Losorb that makes the oil more stable during deep-frying. No other oil or blend of oil in the country has this technology. When food is fried in Saffola gold, there is lesser of the unhealthy degraded compounds formed. This kind of health initiatives is the core of Saffola’s strategy and they spend a handsome amount of money in R & D to keep their product superior.

31

Financial Budgets

Marico uses the following techniques for allocating funds for promotion.

Percentage of sales method – Marico is currently using this method. In this approach the

budget is determined by taking a fixed percentage of the sales. Marico’s expenditure on

advertising and sales promotion is 13.2% of sales in 2009-2010 as compared to 10.2% in the year

2008-2009. Out of the allocated budget the ratio of advertising to sales promotion expenditure

is 40:60 and out of the 60% allocated to sales promotion, 40% is spent on consumer promotion,

50% on trade promotion and 10% on sales-force promotion.

Unit of Sales method - This method is used for highly priced goods or consumer durables

wherein a promotion budget is arrived by multiplying the units of goods sold with a fixed

amount.

Competitive parity method – In this method the budget is decided by what others are offering

in the market. This method is to use as the only information required is about the amount of

money spent by the competitors.

All-You-Can-Afford Method – In this approach to budget allocation, the amount that is left over

after all relevant allocation have been earmarked for sales promotion. This approach is generally

taken by small companies with small budget.

Objective-and-Task Method – In this method the promotion manager starts by making thorough

study of the market, the product, and competition and consumer behaviour in order to set

appropriate promotion objectives. The next step is to decide how much money will be required

to achieve the objectives. If the cost happens to be more than the money available, then either

the promotion objectives are adjusted or more funds are made available from the contingency

reserve or by reducing the budget from other promotional activities.

Marketing Metrics

Sl. No Metric(Value) Construction Considerations Purpose

1 Revenue Market Share (24%)

Sales revenue as a percentage of market sales revenue

Scope of market definition

Measure of competitiveness

2 Unit Market Share (54%)

Unit sales as a percentage of Market Unit sales

Scope of market definition

Measure of competitveness

3 Relative Market Share(54/46=1.173)

Brand market share divided by the largest competitors market share

Can use either unit or revenue shares.

Assesses comparative market strength.

32

Set up a team that would monitor operations so that problems are revealed much earlier and we can

be proactive rather than reactive. This team would monitor market place and financial results as well

as the implications of any other changes (like govt. policies, legal obligations, consumer behaviour)

and other aspects that have been identified as threats in the SWOT analysis.

We should go for a periodic review and analysis of our corporate strategies, market strategies,

pricing philosophy, positioning philosophy etc. This would just give an insight when to launch a

contingency plan.

At present we are in a very good position in the market and enjoying a virtual market leader position

in premium health edible oil category. However if in near future some competitor arises, we will

have to revisit our strategies to either develop the market barriers or to come up with the superior

products to regain our supremacy.