Abstract
This case depicts the growth and decline of Kurdola, the flagship brand of MOMCO. The case also highlights the introduction of new blends to retain the existing customers and enlarge the user segment.
The case can be analyzed based on the decision dilemma in the following areas (provided at the end of the case text):
Communication strategy of Kurdola (KO) in the changed regulatory scenario. How to leverage the benefits of Healthy tasty blend (KORBO) and push it to the premium range? How to position Yummy blend (KOCO) in case of any change in marketing of KO and KORBO?
Since KO was the flagship product of MOMCO for a long time, let us analyze the present alignment of this product with respect to MOMCO and the edible oil market.
MOMCO has a strong distribution network with 1.9 million retailer reach in 2012. However, KO has a territorial restriction to north and west of India with no communication strategy (relied only on word of mouth and doctor’s recommendations) to start with. In mid-1990s the following factors (case facts) contributed significantly towards the volume growth and the sustained ability of KO to command a premium of ₹ 20 per litre.
Increasing number of nuclear families.
Increasing purchasing power of the family.
Shift of decision-making power to aware and educated wives.
Increased awareness of heart disease.
Increased awareness of correlation of heart problems to cooking medium.
Brand communication around ‘fear’.
Subsequently KO had lost significant market share with tapered growth rate which can be attributed to following case facts:
Poor taste vis-à-vis other edible oils especially sunflower edible oil. Restricted segment because of sharp positioning (heart patients). Acceptance of premium sunflower oil (PSFO). Share of sunflower oil in branded edible oil segment doubled (3 per cent to 6 per cent) in last three years with volume growth of 37 per cent on a year on year basis. Consumers refer to price and expiry date, but rarely refer to composition at the point of purchase.
Moreover, four major external factors (not in control of MOMCO) which resulted (or likely to result in future) in irreversible decline of sales volume of KO are:
Medical research finding published in January, 2012, that edible oil with a combination of poly unsaturated fatty acid (PUFA) and mono unsaturated fatty acid (MUFA) is better for heart than pure PUFA-based edible oil. KO is PUFA based. Change in legislation (Article 43H of Prevention of Food Adulteration Acts and Rules) restricted strong usage of heart in communication and levels by the oil marketers. Heart platform has been the Unique Selling Proposition (USP) for KO (for which consumers tolerated its bad taste). Increase in duty structure on KO resulted in increase of input cost. The price point of ₹ 105 per litre (cost plus original markup pricing) was untenable in the market. Shortage of KO in the international market for one year resulting in shrinkage in production and drying up of the market. The existing consumers have shifted to competing products.
Hence, the company was forced to take up new product development to counter the negative environmental scenarios. Analysis of Exhibit 4 speaks of declining sales trend for KO.
Case facts also indicate that KOCO formulation which was certified after extensive New Product Introduction Process at MOMCO is priced ₹ 70 per litre and is catering to wider consumer base. KORBO with a low price point at ₹ 55 per litre with a market penetration strategy (high volume low margin to enhance market share) is now catering to price sensitive customers who wished to have good health but could not cross the price threshold of KO. Table 1 presents a comparison for sales volume of KO, KOCO and KORBO for the years 2010–2011 and 2011–2012 (a comparative extract from Exhibit 4, Exhibit 5 and Exhibit 6 of the case).
Comparative Sales Volume of Kurdola Product Portfolio
Even though the new blends added the consumer base, the ‘cannibalization’ of KO by KOCO and KORBO cannot be ruled out.
Analysis of Marketing Communication
Content analysis of print advertisement of Kurdola (Exhibit 1 and Exhibit 2) clearly indicates the shift from heart platform fear based message to more diluted health platform. KO has the USP that it is the most ideal for heart patients. The focus dilution is forced by the new communication legislation about which MOMCO has no option other than to comply.
On the contrary, KOCO print advertisement content (Exhibit 3) has the following:
Pictorial depiction of corn indicating blend. The text highlights presence of 89 per cent unsaturated components which reduce cholesterol. Text also highlights good taste of corn.
Hence, communication clarity is relatively blurred in case of KO vis-à-vis KOCO.
Analysis of Kurdola Product Portfolio along BCG (Boston Consulting Group) Strategic Framework
With the above case facts and interpretation of all exhibits, let us superimpose three SBUs in the Kurdola portfolio, namely, KO, KOCO and KORBO, onto BCG relative market share versus market growth matrix. Figure 2 depicts the framework with the recommended action plan for each cell.
KO still has the brand loyal consumers (especially heart patients) who shall buy, if the product is available. It can be considered to be ‘Cash Cow’ moving in the direction of ‘Dogs’. Hence, KO can be retained around for some more time despite dwindling sales, because it was the base product for MOMCO and has the ability to maintain the profitability without major marketing support. MOMCO can effectively ‘milk’ this ‘cash cow’ brand KO by capitalizing on its brand equity.
Hence, the communication message on health platform needs to continue (MOMCO does not have other option because of changed legislation) without any substantial increase in marketing effort. In the long run MOMCO can decide on withdrawing KO in phased manner when KORBO has gained substantial market share and emerge as ‘star’ in a high growth edible oil market. MOMCO can review the supply trend of Kardi Oil and its import viability along with its impact on the price point of KO while deciding to divest. Such decision will result in less dependence on critical raw material and switching onto cheaper substitutes. This will also help MOMCO to cater to the wider price sensitive segment where product differentiation is not significant and commanding a premium is extremely difficult.
For KORBO Rice Barn oil injected good taste and economy. This enabled MOMCO to cater to hitherto market untapped by Kurdola. The high volume in the range of 5000 kl of month indicates it is well accepted in the market by operating at a lower price point. For KORBO which is a ‘question mark’ moving in direction of ‘star’ MOMCO has to enhance its marketing effort till KORBO attains ‘volume leadership’ in price sensitive health conscious segment (which is quite substantial). In the initial phase KORBO can act as ‘traffic builder’. In the long run when demand increases at an increasing rate vis-à-vis supply/production, MOMCO can initiate the price point lift of KORBO to ‘trade up’ customers to command a premium. An enhanced value proposition (benefit/cost) for KORBO can be devised. Currently it is having the twin benefit of good taste and good health. The low price point is increasing the value ratio by decreasing the denominator. However, in future MOMCO should focus on increasing benefits (both actual and perceived) through its integrated marketing communications. This will enable MOMCO to command a premium for KORBO.
Analysis of Exhibit 4 speaks of KOCO (Yummy Blend) sales trend.
With the meticulous new product introduction process at MOMCO, after Consumer Usage Testing (CUT), KOCO is well accepted in the market with high volume sales and decent growth. It addressed the following issues:
Masked the unfavourable taste of KO. Lowered the price point by reducing the raw material input cost. Retained the perceived health benefit.
In this context KOCO should target price sensitive taste focused segment with sustained marketing focus. The print advertisement (Exhibit 3) has lot of clarity in conveying the above message and should continue. In the long run when KO shall be phased out, KOCO can cater to the vacant segment (pure health conscious and KO brand loyal), while KORBO can focus on volume leadership.