Kurdola: Product Portfolio Decision

Company Background

MOMCO was a leading Indian group operating in consumer products, aesthetics services and global ayurvedics ¹ businesses. MOMCO’s FY 2011–2012 sales was almost ₹ 9 billion (USD 180 million) from 12 brands. MOMCO’s brands and their extensions occupied leadership positions in respective categories like the edible oil and hair nourishing oils. Every month, MOMCO sold over 76 million consumer packs to about 100 million consumers. MOMCO had leveraged four core sources of competitive advantage, namely, branding, distribution, cost management and innovation, to set up a fast growing franchise of new products and businesses, whose share in total turnover had moved up sharply from 3 per cent in FY ² 2008–2009 to 18 per cent in H1 ³ FY 2011–2012.

MOMCO group’s history could be traced back to 1882 when Ramji Loharji, started a small trading business in Mumbai. The family set up the Ramji Oil Industries Ltd (ROIL) in 1950 with manufacturing facilities in Mumbai for coconut oil extraction plant, vegetable oil refinery and a chemical plant. ROIL soon became one of the leading players in industrial chemicals. Over the years, ROIL expanded and diversified through fully owned subsidiaries.

MOMCO was incorporated in 1995 to take over the then 45-year-old consumer products business of ROIL. The division was engaged in marketing of coconut oil, edible oil, instant starch, branded processed fruit, etc. ROIL retained fatty acids and chemicals division. MOMCO made its initial public offer for equity shares in March 1998. Earlier Kurdola and Parachute brands were owned by Ramji Oil Industries Limited and MOMCO was given access to use these brands for perpetuity. In FY 2005–2006, the brands were transferred to the company for a consideration of ₹ 500 million.

MOMCO had factories located at Thane near Mumbai city, Sarang near Pune city and Jalgaon district in Maharashtra, Palakkad district in Kerala, and Ponda in Goa. It also got its products manufactured through suitably located subcontractors.

MOMCO had a well-established distribution network of 27 depots, 3,800 distributors, 25,000 wholesalers and 1.9 million retailers in 2012. MOMCO had entered into distribution alliances with a number of companies for distribution of their products to exploit its distribution reach and clout.

Kurdola: The Initial Days

Kurdola, a premium cooking oil, was launched in 1975 by Ramji oil Industries Ltd. Kurdola was essentially oil made from ‘Kardi’ seed, popularly referred to as Kardi oil (KO) and hence named as Kurdola. KO contained high level of PUFA, which was proven by medical research to be good for the health of the human heart. KO was mostly imported and hence considerably costlier to produce.

During the initial period of launch, edible oils were viewed as a commodity and not much marketing initiative was taken. So, whatever little branding was done was based on ‘better quality’ to justify the premium price that the product charged. There were no serious marketing initiatives by the manufacturer on differentiating their product (for example: based at the heart care platform; which was inherent to the product formulation). The awareness level of the people other than Kurdola consumers for heart care was also low. Kurdola being healthy for the heart was not communicated to the consumers very effectively. The brand was marketed in north and western part of India. It was doing well as per the company’s expectation and enjoying a year on year growth based on the natural expansion of the market.

Over time, gradually the Kurdola brand was marketed by leveraging the health benefits, via a product story—‘Good for your heart; Good for your family’s health’. The basic differentiators used here were heart care, product features (high PUFA content, low saturated fat content) and doctor endorsements. There was not much of a marketing effort exercised on the part of organization in tapping the mass market. The company continued to focus on markets in North and West India, and the product was priced at 20 per cent premium over all the other cooking oils available in the market. Sales volume by the end of 1990 was 250 kilolitres per month (klpm).

The company continued with this strategy till middle of 1990s, by that time the volume had increased to 350 klpm—essentially driven by the greater consumer awareness about Kurdola through word of mouth propagation, recommendations of medical practitioners and a general trend towards consuming healthy products.

The Evolution of Kurdola

By the middle of 1990s, the consumer products market in India witnessed a few discernible changes. Notable among them were, increasing purchasing power of the family, shift of decision making power to the wives, greater overall awareness of heart diseases and definite link of heart problems to cooking medium. This opened up a window of opportunity for Kurdola. Market research was conducted with potential consumers, which concluded that concern for heart was mainly due to the shifts in consumer demographics. The numbers of nuclear families were increasing and ‘aware’ educated wives were making purchase decisions. The Indian economy was also growing and middle class was burgeoning, increasing the natural target group of the product.

In order to orient itself to these changes and reap benefits from it, the company went for sustained marketing initiatives which included use of mass media like television advertising to promote Kurdola, positioning it as a heart specialist. It introduced strong emotional payoffs in the edible oil category (see Exhibit 1, which gives an example of their print communication). Though the creative execution of most of the Kurdola brand communication was based on use of fear, it consolidated the heart platform with a clearly focused target audience of heart patient and their families. Thus, it could enjoy higher premium in its price of ₹ 77 per liter (while other products like sunflower oil were priced in the range ₹ 50–60), and yet doubled the sales to 800 kilolitre per month by the year 2003. A part of the growth could be attributed to increased distribution effort of the company which made the product much more widely available. Distribution network for MOMCO’s branded oil category increased from about 0.5 million retail outlets to about 1.2 million retail outlets on an all India basis during this period.

To track consumer response to the products and brand communications, research was regularly conducted. Such researches consistently revealed that the focused positioning and the product attributes of Kardola had definite advantages, but also had associated limitations. The taste of KO was not appealing to majority of consumers, affecting consumer acceptance. Since it was recommended by doctors and there was no real choice. Heart patients used it diligently and sometimes their family also shifted to a common cooking medium. The second limitation was the sharp positioning on patients with heart problems, which was significantly limiting the target consumer base. The company did not make much modification to the product offer. The strategy was continued and sales grew steadily to a volume of 900 klpm by 2005.

Though the brand was growing, two significant changes were of concern to the management. The increased acceptance of premium sunflower oil in the market making it grow very fast, while MOMCO was absent in the segment. Though the data in the category was not very reliable, it was conservatively estimated that in the last three years the growth had been 37 per cent on a year on year basis, and the share of sunflower oil in the branded edible oil segment had increased from 3 per cent to 6 per cent in the last three years. Thus, compared to the rest of market, Kurdola was losing share and the rate of growth of Kurdola was tapering off. The possible reasons for the same were analyzed to be:

The target segment was too narrow and hence the product was reaching its peak sales volume and stagnating there.

The company tried to address the first issue by extending the target group from patients to whole family, focusing on families that were concerned about keeping their heart healthy. This was achieved only by making suitable changes in their consumer communication (see Exhibit 2 for their revised communication). The sales showed immediate increase in 2007, but it could not sustain the same growth rate and finally stabilized at 1100 klpm by the middle of 2008.

So far the company had only modified product offer involving no change in the composition of the product, but only changes like packaging, communication and promotions, etc. They were effectively using marketing communication by expanding the appeal of the product from ‘heart patient’ to ‘people who want to have a healthy heart’. The growth in sales could be mostly attributed to the marketing success and the increasing consumer concern for healthy heart. It was becoming clear that some steps were needed to be taken to sustain the growth of Kurdola in the increasingly competitive branded edible oil market of India.

The composition of the packaged edible oil had to be prominently put on the product livery, as per the statutory requirements. Most consumers did not specifically refer to the composition during their purchase, and did not expect any change either. The consumers were however keen about the product price and the date of manufacturing and expiry, which they checked almost every time they made any purchase. The distributors, retailers and the doctors (who specifically recommended specific cooking medium), were however aware of the composition and valued the superior heart care properties of KO oil. Sometimes, they recommended the specific formulations that were good for the health of the patients. Overall, 50 per cent of the consumers could be considered to have referred to the composition of the oil, sometimes or other.

The Changed Regulatory Scenario—Article 43H

Change in legislation (Article 43H of Prevention of Food Adulteration [PFA] Acts and rules) in 2006 restricted the strong usage of heart in the communication and labels by the oil marketers. In a single stroke of legislation, the most potent marketing tool available to Kurdola was rendered ineffective.

So the company was faced with the problem of sustaining growth while not being able to use the well established, tightly focused positioning it had created in the consumer’s mind. The dilemma was—‘what to do?’ In case it decided to advertise Kurdola, there was a need to dilute the heart platform (to comply with legislation), which would have created dissonance in the consumer’s mind and risked all the accumulated brand franchise. The other option was to stop advertising Kurdola, but this entailed the risk of the brand losing its presence in the consumer’s mind; especially in light of the powerful advertising by the poly saturated fatty oils (PSFO—like sunflower oil), brand erosion and a time bound loss in sales. None of the choices looked attractive or prudent.

Developing a new product seemed to be the only way out. The challenge was to develop a new product offer, which provided the company the following:

The ability to advertise within the ambit of Article 43H of PFA rules.

However, the above was a prima facie overall need for the market, it needed to be much more detailed and adequately validated for taking any decision on new product offer. The company thus commissioned a very detailed new product development process, which was followed.

New Product Introduction (NPI) Process at MOMCO

Formal NPI process was followed for minimizing risk of failed introduction and associated techno-commercial losses. The process was built on encouraging dissent, to capture the alternate points of view, which minimized the risk of not considering all the options and was one of the core values in the process. The steps were:

Understanding the consumer need: Research was conducted by professionals outside the agency to precisely measure the consumer’s needs from cooking oils and how they were met.

The product development brief was developed. The use of multifunctional team was enriched by consciously discussing with the consumer as well as other influencer groups like doctors, FDA in informal as well as formal manner.

The Genesis of ‘Yummy Blend’

The abovementioned NPI process resulted in the development of Kardi Oil + Corn Oil blend (KOCO). The new product was able to address the basic concerns in the following manner:

The core value of Kurdola brand, ‘good for heart’ was retained as it was a KO based blend. ⁴ It allowed the company to retain the well-established communication platform.

Marketing for Yummy Blend

The new product offered a potential winner in the market; it could expand the sales, drive volume growth, increase overall profits, etc. The challenge was to convert the potential to sales figures and profits. The marketing challenge was to increase the consumer base, retain and build on the Kurdola franchise (though sufficiently differentiating it from Kurdola, so that there was no confusion in the consumer’s mind), meet the limitation imposed by the legislation and take on the growing presence of the PSFOs.

The retention of the brand franchise was achieved through the line extension on the Kurdola brand by naming the KOCO formulation as ‘Kurdola Yummy Blend’. To expand the consumer base and gain wider acceptance, which the ‘taste’ platform provided, ‘Kurdola Yummy Blend’ seemed to be an appropriate choice. This was priced at a much lower price, that is, ₹ 70 per litre, which allowed the product to address a much larger consumer base including those who wanted to use Kurdola but could not afford Kurdola because of the high price (at ₹ 87 per litre), while maintaining an acceptable gross margin of 40 per cent ⁵ for MOMCO.

The taste and health benefits were combined in the communication to consumers. It retained the core value of ‘good for heart’ but expanded the positioning by moving from curative to preventive position, which targeted a much larger consumer segment. However, the commercial did not work as desired, so it was changed, with a tag line ‘sehat se jeena hai, mujhe rehna hai swasth’ (I have to live healthy and retain good health)—refer to Exhibit 3 for a copy of one such communication. However, the changes did not result in the desired result and the sales did not take off as planned. Further research was conducted, which attributed the failure to lack of linkage to ‘heart’ in the communication. The marketing strategy was hence changed, to drive home the core values of the Kurdola brand through consumer experiences. This initiative was rolled out as a mix of doctor detailing, heart check up camps, formation of Kurdola healthy heart foundation and web led programmes (websites). The product remained the same; however, the overall consumer offer (product + marketing mix) required considerable refinement to establish the revised marketing plank and initiatives.

The company was fully aware that in case of unprecedented success of the ‘Kurdola Yummy blend’, the company risked a lot. Since the new product had lesser contribution margin compared to KO, it involved the risks of converting consumers from high contribution product to low contribution. There was danger of confusing the consumer and losing sharp positioning and franchise of Kurdola KO, the mother brand (resulting in huge potential loss of contribution in present as well as future). Sales figure for Kurdola KO & Kurdola Yummy blend KOCO are given in (Exhibits 4 and 5 respectively).

Exhibit 4

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Kurdola KO Sales Figures

Year	Sales Volume (in kl per month)
1999–2000	400
2000–01	500
2001–02	400
2002–03	600
2003–04	800
2004–05	950
2005–06	1000
2006–07	1200
2007–08	1000
2008–09	1100
2009–10	1175
2010–11	350
2011–12	500

Source: Author’s research.

Exhibit 5

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Kurdola Yummy blend (KOCO) Sales Figures

Year	Sales Volume (in kl per month)
2007–08	1000
2008–09	1150
2009–10	1400
2010–11	1575
2011–12	1575

Source: Author’s research.

Yummy blend managed to carve out a significant position for itself in the market. The success of the Yummy blend was able to address the overall concern for the business volume and profitability. However, the gain in sales for Yummy blend was at least partly at the cost of the Kurdola KO and that was of considerable worry for the mother brand.

The Stumbling Blocks of 2010: Increase in Import Duty and KO Shortage

Year 2010 witnessed two major setbacks for the Kurdola. The duty structure on Kardi Oil increased from April, which increased the raw material costs significantly. To be able to retain its original contribution margin, it had to be marketed at a price of ₹ 105 a litre, and the price change was implemented. The market did not support the new price point, resulting in considerable consumer shift to other products. Only the staunchest of Kurdola loyalist continued.

While the company was grappling with the commercial and marketing challenge, there was a shortage of KO in the international market. There was no short-term solution for the same. The only option was to wait for the supply conditions to improve which was expected to take one year. During this crisis, in the first year the sales went down from 1,175 klpm to 350 klpm. However, the increased price was not perceived to be a temporary problem, which would get corrected on resumption of supplies, as there was more or less a considerable price increase which looked irreversible.

The supplies improved in 2011–2012, so did the sales, but it only reached a level of 500 klpm even with increased marketing initiatives. Something apparently irreversible had happened with the KO sales. The consumers had shifted to other products and were not reverting back. Something needed to be done. Market research highlighted the following problems:

The majority of consumer, who shifted away from Kurdola KO, did not attach any significant benefit to KO, so as to return to the old brand. Thus, only marketing initiative with the existing products of Kurdola would possibly not be able to reverse the tide.

So the company had to look for an alternative whereby the KO component could be reduced, lowering the risk of the company from the vagaries of international prices, government regulations and supply conditions. It was time to look for new consumer segments also. In effect a successful new product introduction was an imperative.

Development of the ‘Healthy Tasty Blend’

It was analyzed by the MOMCO marketing team that Kurdola was present in the super premium edible oil category with very sharp positioning ‘as a heart specialist’ with a price insensitive loyal customer base.

MOMCO was also present in the growing segment of the ₹ 70 per litre price (in the year 2010) band, which was also straddled by the PSFOs, by virtue of Kurdola Yummy Blend. The positioning was strong enough with ‘good for your family’s health’ platform. The new product had to be positioned distinctly, so as not to confuse the existing customers, reduce cannibalizing existing Kurdola customers and gain new consumers.

The new product introduction process developed at MOMCO (explained earlier) was once again followed rigorously. Thus they developed a new blend of KO with Rice Barn Oil (RBO). The blend was launched as ‘healthy tasty blend’. The formulation accorded the following consumer benefit: healthy heart (high PUFA due to KO), good taste and economy (RBO), which enabled appealing to a large consumer base. The following were the details of the Kurdola Healthy Tasty blend which was launched in 2010:

Was priced at ₹ 55 per litre. This allowed Kurdola to enter potentially huge marketplace of popular edible oils. Essentially a low margin (30 per cent gross margin), high volume segment.

Now the Kurdola product portfolio included KO, KOCO (Yummy blend), KORBO (Healthy tasty blend). The marketing initiative for ‘healthy tasty blend’ was to do an extensive mass market campaign, generate trials and retain the customers. The promotional effort involved trials, free offers (popular pack of instant noodle), etc. The sales figures of healthy tasty blend are in Exhibit 6.

Exhibit 6

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Healthy Tasty Blend Sales Figures*

Year	Sales Volume (in kl per month)
2010–11	5500
2011–12	5000

Source: Author’s research.

Note: *Figures are from April 1, Year1 to March 31, Year 2.

In light of the new medical research published in 2012, the challenges before the company were the following:

What to communicate to the existing, loyal base of the Kurdola consumers? If they do not inform them that this was not the best product for their heart, they would belie the consumer trust that they have garnered over a long period. What alternative to provide?