The sweet spot

A mix of quirky advertising and practical distribution strategy has worked to Perfetti Van Melle India's advantage.

Quick, which company won the Advertiser of the Year Award at Goafest earlier this year? Not sure? Try this: which brand won two Lions "" a silver and a bronze "" in the Sweet Foods and Snacks subcategory at Cannes in June? Can't recall? Okay, here's your last chance. Which mint product bagged the Yahoo! Internet Advertising Award recently?

Prakash Wakankar knows all the answers. And no prizes for guessing why: he is the managing director of Perfetti Van Melle India (PVMI), which won all the awards in question.

Wakankar asserts that the Rs 700-crore Indian subsidiary of the Italian confectionery company Perfetti Van Melle has a "fantastic" communication strategy.

Marketing Head Sameer Suneja adds, "In the past two years, our brands have picked up at least 60 awards in India and elsewhere."

So much so that the company's counterparts in Asia Pacific want the Indian subsidiary to create campaigns for their markets, too. But that's not the only sign that the PVMI is doing something right: it is also the leader in the sugar confectionery and gum market. (In case you were wondering where Cadbury India figures, it tops the chocolate confectionery market.) The

Indian operations are Perfetti's second largest in the world, after China. Also, in India,

PVMI claims to be two and a half times larger than its nearest competitor.

Is this success driven purely by advertising strategy? Or is there more to PVMI's ascending sales graph than its whacky ads? the strategist chews over the matter.

Sweetening the pie
You would think that selling sweets and gum to a nation of youngsters would be like, well, taking candy from a child. You would be wrong. Confectionery is a low-margin, low involvement and highly fragmented market. It is impulse-driven and highly sensitive to price.

That hasn't changed much in the dozen-odd years PVMI has been in India. The organised market is estimated at Rs 2,000 crore while the unorganised sector accounts for another Rs 1,500 crore.

When PVMI entered the Indian market, it was chock-a-block with rivals: Nutrine, Ravalgon, Parry and Parle among domestic players as well as multinationals such as Nestle, Wrigley and Spain's Joyco. ITC and Hindustan Lever, too, soon joined the fray. There's been some consolidation since then: Korea's Lotte bought out Parry and Wrigley took over Joyco, but PVMI has retained its leadership.

How? Last year, PVMI Sales Head Milind Pingle presented the company's success story to the Indian Institute of Management, Ahmedabad.

One slide made the audience sit up: Perfetti's growth is linked purely to rise in sales volume. In the past 12 years, the company has not revised its prices "" ever. "Our growth is real. It has come from volume and not price hikes," Pingle says.

It's not by choice, though. The entire confectionery industry is stuck at low price points "" 50 paise and Re 1 for the most part, although some courageous players are now experimenting with Rs 2. The biggest reason for the price stickiness is a simple one "" the relevant currency units, 10- and 25-paise coins, are no longer available.

"And a jump from 50 paise to Re 1 per candy could be too high for both, the consumer as well as retailer," explains Madhav Gupta, executive director, Candico India.

Which explains why volumes are so overwhelmingly important. To ensure it got its share (and then some), PVMI offered consumers greater choice. Where closest competitor Wrigley India has eight brands (including Boomer, Orbit, Doublemint and Solano), Perfetti boasts of nearly 20: the diverse portfolio of gums, toffees and lollipops includes market leaders such as Centre Fresh, Chlor-mint and Alpenliebe. Add the variants and flavours and PVMI's basket increases to about 40 products.

Reaching out
Of course, getting the products on the shelves was only half the battle. Given the low level of customer involvement with confectionery brands, PVMI opted for a high-decibel media and advertising campaign that would build brand recall and break through the clutter. It brought on board McCann-Erickson and Ogilvy & Mather and the result was a happy one.

McCann's city lights commercial for Happydent won rave reviews everywhere for its surreal appeal while O&M's fun-filled series on Mentos (Dimaag ki batti jala de) pushed sales. "The Mentos film helped grow our market share and volumes. We beat [Nestle mint brand] Polo last year," claims Suneja. In fact, with sales increasing at 30 per cent a year, Mentos is now PVMI's fastest growing brand.

Rivals point to PVMI's sizeable ad budgets as the reason it has cornered market share. "If you can splurge on advertising, you will succeed. Few Indian companies in the category can afford to spend Rs 60-70 crore on advertising," declares Candico's Gupta. PVMI disagrees. "We are not heavy advertisers," says Suneja. "We are clever advertisers."

That essentially means smart buying of TV time. Forward buying television spots and advertising on weekends rather than weekdays (when rates are higher) has helped the company get better deals without compromising viewership. It advertises extensively on Doordarshan to reach out to a wider audience.

Also, from 2002, PVMI has focused its advertising around cricket series involving India, working on the premise that this way it can address all its target customers "" children, young adults and adults "" in one go.

Even the latest Alpenliebe and Chlor-mint commercials were launched during the ongoing India-England cricket series. "Perfetti believes in impact planning. Good creatives coupled with clever buying creates a multiplier effect," agrees C V L Srinivas, an independent media specialist and former head of Maxus.

The ad efforts have been recognised, but what's less talked about is the many promotions PVMI has initiated. Ground events get only about 7-8 per cent of the total marketing budget, but it's money well spent since it is focused.

So while it launched joint events and schemes with Disney and Cartoon Network for Alpenliebe, Air Action Centrefresh promotions moved to more adult surroundings: pubs. For Mentos, the action shifts to college festivals and mobile operators. PVMI's strategy here is clear: tie up with a partner who understands your target customer.

The paanwallah paradox
A large chunk of the confectionery retail trade is made up of paanwallahs with limited access to cash. To tap these small retailers, PVMI has created a multi-tiered distribution system that, ironically, is inspired by consumer goods giants like Hindustan Unilever and ITC. Here's how it works: the product range is divided and clubbed under three heads, depending on the brands and the geographies.

The three categories have different distributors, each of whom visits retailers once a week. Other confectionery makers' distributors also visit retailers weekly, but add up PVMI's category distributors and it makes for three company visits a week.

Pingle explains the logic: "The paanwallah has limited working capital. But if he's visited thrice a week, he will pick up some stuff." That's especially true when the retailer is confronted by the wider variety of brands and flavours PVMI offers: when replenishing supplies, retailers tend to pick up new variants.

Not surprisingly then, PVMI is way ahead in distribution: its nearly 5,000 distributors service 700,000 outlets across the country and are now setting their sights on new retail options such as juice corners, fruit stores and vegetable vendors.

Compare that with rivals who have about 2,500 distributors, on average, reaching out to 400,000 outlets. "Forty per cent of our volume comes from towns with population under 100,000. Not many companies have dug so deep," says Pingle.

Now the company is reaching out to modern trade. PVMI will begin by offering multi-unit packs at supermarkets and organised retail outlets where customers buy in bulk and are willing to pay a little extra.

That's also in keeping with international trends where multi-unit packs are the norm, rather than the monopacks that sell more in India. The company is also looking at stocking the checkout counters at supermarkets, tapping into impulse buyers and harried parents giving in to pester power.

A slight souring?
Of course, PVMI doesn't have a free pass to future success as well. For one, Wrigley hasn't really flexed its muscles yet after taking over Joyco. Now its Rs 25-crore advertising business has just moved from Grey to Mudra, so expect some action there. Meanwhile, Candico, too, has ambitions of taking on PVMI, albeit in the modern retail sector "" it has already set up kiosks in 12 malls and multiplexes across the country, with more planned soon.

There are the industry-wide issues as well. "Managing costs is the biggest challenge today," says Wakankar. Sugar accounts for nearly 60 per cent of input costs and its price has surged from Rs 13 a kg three years ago to Rs 25 now. There's also a talent crunch, which means skyrocketing salary costs.

Then there's steep taxes and a new notification on packaging "" getting all the relevant information down on the small pillow packs appears an insurmountable problem for all confectionery makers, at present. "The declarations simply cannot fit on the limited surface area of the packages," says Wrigley's Arun Hegde.

Will PVMI still hit the sweet spot in spite of these bitter notes? The business is clearly nowhere near saturation: Per capita consumption of confectionery in West Europe is 15 kg; in India it is barely 75 gm.

Says marketing consultant Jagdeep Kapoor, "In confectionery which is an impulse purchase, it is important to have a few abilities: Notice-ability, visibility, availability, affordability and even unpredictability. Also, memorability. Perfetti managed all these abilities for its brands." For Wakankar, those words of praise must be equal to another award.