Civil services aspirant, Santosh Kumar Rai has become the talking point of Allahabad, a town in Uttar Pradesh. No, he has not qualified the civil services examination yet and neither has he bagged the lead role in a Bollywood film. Instead, the 20-something Rai is basking in his moment of glory because he won a C-class Mercedes Benz by purchasing biscuits worth Rs 25 lakh.
In Allahabad, a city with about eight Mercedes on the roads, this prize means a lot. Even for Surya Food and Agro, the Noida-based maker of the Priya Gold brand of biscuits, there is no better way to get attention. Hence, the promotion launched in April 2005 offers other prizes such as Maruti Alto, Compaq's laptops and jewellery from Tanishq.
True, similar contests have been run by other biscuit manufacturers such as Britannia, to capitalise on events like the cricket World Cup. But B P Agarwal, chairman and managing director, Surya Food and Agro has a different gameplan for the promotion "" he claims that it is the right opportunity to make Priya Gold a name to reckon with across the country.
Up until now, Surya Food and Agro has been present only in northern and western India, of which 85 per cent of the company's distributors were located in the north. In the east it was a company policy that prevented the company from expansion plans in that region "" the biscuit brand Priya, owned by Agarwal's brother, is sold in that region.
The company had only one region left to cover "" the south. The dynamics of the biscuits market explain why the southern market is important for the company. It accounts for 28 per cent of the Rs 2,500-crore organised segment of biscuits, according to the Federation of Biscuit Manufacturers of India. This makes the southern markets the second-largest biscuit market in the country after the north (30 per cent).
Then, the western region, which Priya Gold entered in 2000, has been difficult to break into. One reason is Parle, which has been present in the market for nearly 75 years and has a dominant presence.
Agarwal agrees, "The west has been difficult to enter because of the dominance of Parle and Britannia." But he also confesses that his company failed on certain issues such as convincing the distributors, lack of manpower and so on.
Agarwal's strategy is to lead from the front by personally doing the rounds of distributors "" something he did not do in the west. He claims that his products are being accepted much faster in the south as compared to the west. But it might not be that easy. An industry expert warns, "Consumers in the south are far more loyal."
Then, Britannia, Parle and now ITC's Sunfeast have already set base in south India. "Southern customers prefer milk biscuits, a category where Parle is strong," says the industry expert. Agarwal does not deny this, but he adds that there is also an opportunity for tangy and spicy biscuits that are being catered by local manufacturers from Hyderabad, Bangalore and Kerala.
Priya Gold plans to capture this niche by offering variants like cheese biscuits, Tangy Tomato and so on. The company is even looking at mint flavoured biscuits. The choice factor will be Priya Gold's differentiator since the brand has an assortment of 25 variants. However, Butter Bite remains the leading brand and contributes to 8-10 per cent of the volume.
Then, promotions help the consumers get familiar with the assortment of brands. For the "Priya Gold Khaao Aur Khelo" promotions that offer fancy prizes, the company is investing 30 per cent of its Rs 10-crore advertising budget on a series of six such promotions. Plus, the company has been buying the prizes (rather than enter into a barter deal with the manufacturer).
This means, just to recover the cost of the top prize (the Mercedes Benz), the company will have to sell 12.5 lakh biscuit packets assuming that Priya has a Rs 2 margin (a significant 20 per cent) on a pack of biscuits that costs Rs 10. Add to it the publicity spends for promoting the promotion.
Competitors, on the other hand, fear that Priya Gold might face the same fate that Bakeman's encountered in the 1990s "" the brand had also spent a lot of money on ads and promos and then disappeared. Agarwal laughs it out: "Well, this is my rivals' imagination. Let time decide that."
Right now Agarwal clearly has south India as his priority. Out of the 70-odd distributors that the company has in the south, 50 have been added in the past two months.
"The next six months will see many more distributors. We may also have a manufacturing unit either in Karnataka or Andhra Pradesh to cater to the market," says Agarwal. When that happens, it will help the company save on transportation costs by 5-7 per cent.
Meanwhile, Surya Food and Agro is also looking at closing the current fiscal with sales over Rs 500 crore, nearly 70 per cent more than its turnover of Rs 300 crore in 2004-05. "We have grown by 25-30 per cent in terms of sales in the past two years," says Agarwal. The company feels that the promotions will add about 5 per cent to sales volumes.
Rival biscuit companies, however, are not impressed. "Even today Priya Gold sells mostly through wholesalers in the south. The company has a lot to do in establishing a conventional or formal distribution network," says Mayank Shah, senior product manager, Parle Industries.
With a marketshare of 8 per cent in the Rs 4,000-crore biscuit industry (according to ORG figures), Priya Gold will take long to catch up with Parle, which has 43 per cent marketshare and Britannia with 32 per cent in volume terms.
"Based on these statistics, aspiring for the number three position at an all-India level is far fetched," says a senior executive working with a rival biscuit manufacturer.
Agarwal agrees that so for he has remained a regional player. "But earlier we made no special efforts to make an all India presence. This is our first attempt in southern markets," he justifies.
At the same time, Priya Gold needs to watch out for ITC's foray in biscuits with its Sunfeast brand. Simply because ITC has a readymade distribution network that it can build upon. Agarwal, however, is undeterred.
"We are offering 25 different kinds of biscuits," he asserts. Will Agarwal's dream of selling Priya Gold through kiosks in the Andaman's become a reality? The customers will decide that.
