INDIAN INSTITUTE OF MANAGEMENT TIRUCHIRAPPALLI

POST GRADUATE PROGRAMME IN BUSINESS MANAGEMENT

Term III | PGPBM 2019-21

MARKETING MANAGEMENT

PROJECT REPORT

On

MARKETING PLAN

for

GROUP 1- Team Members

• J Mohanapriya (1903025)

• Gurunathan (1903015)

• Vignesh (1903047)
 • Karthikeyan (1903019)

• Chandrashekar (1903016)

1.0 Executive Summary

Auro is the oil that XYZ. plans to introduce into the edible oil industry market. XYZ plans to introduce this as
two variations (Auro-U & Auro-R) into two different segments with similar composition with the major
difference in the packaging to cater to the needs and expectations of the consumers. Auro’s ‘One Drop’ is a
boutique-quality Oil made from the combination of Sunflower, Canola and Soybean Oils. Formulated by top
professionals in the industry, it provides Omega-3, 6 & 9 in perfect ratio. Edible oil industry is a mature yet a
fast-growing industry in terms of the growing consumption needs in households, food processing and restaurant
industries. Hence Auro-U’s potential lies in tapping the needs of urban consumers who are becoming health
conscious and rely on good packaging in the tier-2 & tier-3 cities. Auro-R targets its segment in the rural
households who endorse and accept the traditional oil making.
The primary marketing objective is to achieve a market share of 2 % in the edible oil industry dominated by
pioneers like Sundrop, Saffola. The major objective is to introduce the product at a penetrating price with the
parent company absorbing the fixed costs of production in the first 2 years. Furthering on this strategy, Auro is
expected to break even at the end of 3 years and make a net gross profit of 40 million on both the variations.

2.0 Situation analysis

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
common diseases due to improper diet habits. Fortunately, people in India have started realizing this fact and
have become mindful in what they intake, including the cooking oil and preference has shifted towards health-
based trans-fats free oil for consumption.
Consumer preferences and needs
• Oil accounted for one of the highest monthly cash outlays in a typical household.
• Consumer was extremely price sensitive.
• Brand loyalty is low.
• Desired tangible attributes: Taste, Quality, Health and Value for Money.
• Intangible Expectations: Healthy Family, Affection, Loving Mother, Great Cook
Based on the demographics, behavior pattern, the needs of the consumers can be segmented broadly into 4
categories including income, region, taste & odour and usage.

Segmentation
 Income

 High – catering to highly health conscious market segment. Eg. Premium branded vegetable oils like
sunflower oil, soya bean oil, PUFA oils
 Medium – blended oils like sunflower & soya blend. Eg. Raag refined soya bean oil
 Low- oil sold in loose. Eg. Bulk oil manufactured by local payers

 Region

 North-Mustard, rape
 South – Groundnut, coconut
 East – Mustard, rape
 West - Groundnut

 Taste & Odour

 High pungency mustard oil. E.g. Kachi Ghani

 Nutty flavour – E.g. Groundnut oil
 Coconut oil

 Usage

 As salad oil – used in Mayonnaise, salad dressing. E.g. Fortune refined cotton seed oil
 For deep frying – E.g. Refined groundnut oil
 For preservatives and traditional flavour – E.g. Mustard oil
 For frying – E.g. Fortune Fryola especially used in hotels
 The oil production within India is not able to meet the growing demand for its consumption, hence a
significant percentage of the oils is imported. It’s also clear that the consumption quantities have an increasing
trend in these years.

Domestic Edible Oils Production, Import & Consumption

Source: Indian Edible Oils Demand & Supply and Outlook for 2016-17, Govind Bhai G. Patel

2.1 Market summary

The edible oil industry is primarily dominated by the unbranded bulk segment that mainly constitutes loose oils
catering to the commercial units and the rural population. It accounts for around 80 percent of the total edible
oil consumption. The shares of crude oil, refined oil, and vanaspati in the overall edible oil market are estimated
at 35 percent, 55 percent, and 10 percent, respectively. Unorganized, medium, and small players dominate the
industry. Hence, quality remains a concern. There is a need for better regulatory control to protect consumers

Major Edible Oils Consumption – Yearly

 Others: Sesame, Safflower, Copra, RBO, SE Oils, Domestic Palm Oil & Misc. Edible Oils

Source: Indian Edible Oils Demand & Supply and Outlook for 2016-17, Govind Bhai G. Pate
2.1.1. Industry Structure:

 Highly fragmented industry

 Over 600 oil extraction units, 166 vanaspati manufacturing units out of which only ten edible oil units
and eight vanaspati units have national reach
 Over 50% of the units - sick or underutilized due to surplus capacity
 Idle capacities among these units due to the shortage in feedstock supply
 Major oil brands - Sundrop, Dhara, Saffola, Sweekar, Postman
 Vanaspati brands - Dalda, Rath

2.1.2. Market Size & growth:

 Edible oils and Vanaspati markets - 9.6 million MT

 Oils market growing at 8.7 % CAGR

Indian Edible Oil Market , 2014 -2024

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Retail Food Processing Food Service Bakery

Source: Directorate of Vanaspati, Vegetable oil and Fats (DVVOF)

  Vanaspati market stagnating at around 1 million MT

Installed Capacity and Production

Vanaspati Edible Oils

Capacity 2,720,000 30,368,000

Production 990,534 6, 250,000
Utilization 36% 21%
Installed capacities and Production - in MT per year

 With 300 million Indians today falling in the age group of 18 to 36 years, a vast growth potential exists
for value-added healthy oils.

 India’s Soybean production has increased in the last 10 years at CAGR of 1.41 percent.

 Groundnut production is estimated to be 8.22 Million tons in 2017-18 as compared to 7.46 Million tons in
2016-17 showing a growth of around 10%.
2.2. SWOT Analysis

PEST – C Analysis

Paramete Opportunity/
Environment Stimulus
r Threat
Overall, India had a stable government with Trade policies favorable to growth
Political Opportunity
of Industries.
60% of the canola seeds were imported, the input costs depend heavily on
Governments import policies and duties. (In March 2001 the import duty on
Political Threat
crude vegetable oil was increased from 35% to 75% as a result the input cost
soared)
A large part of the population lived in rural areas and belonged to the low-
Economic Threat
income group.

Even the urban population had lots of other options and Oil is expensive for
Economic Threat
them as well.

Increase (decline) in Tariff increases the price and decreases (increases) the
Economic Threat
consumer surplus
Low capacity utilization. The installed capacity is only 36 million tons annually,
Economic Threat
but utilization is only 40%

With effect from 1st April 2008, the customs duty on crude and refined forms
Economic Opportunity
Soybean Oil, Mustard Oil, Sunflower Oil, Safflower Oil, Groundnut Oil,
 Coconut Oil etc. reduced to zero percent and 7.5% respectively
Cultural People in general are health conscious. Opportunity
Certain segments of people are inclined towards Company’s Sustainability
Social Opportunity
Initiatives
Social People in general are health conscious. Threat
Socio -
Taste is given more priority than Health Threat
Cultural
National Vegetable Oil Development Board of India has a demand
Social Developmental Programs, Promotion of Oil seed Cultivation, Opportunity
Seed Production and Strengthening of Seed Farm, Mechanization &Processing.
Social Increase in per capita income and population Opportunity
Other producers can have superior technology to offer better quality, colorless,
Techno Threat
odorless refined oil.
Poor Public Transport System. Focused Govt initiatives to extend infrastructure
Legal Opportunity
in Rural and Semi-urban areas.
Strengths (Internal)

 Socially Sustainable Point of Difference - Our PEST (C) analysis of the market revealed that we have a
Unique Selling Point through our socially sustainable approach to business. 10% of profits made from
the sale of ‘AURO’ will be donated to an Education Trust to run programs for disadvantaged children in
India.
 Oil is well known for its health benefits - Our PEST (C) analysis of the market revealed that Indians are
becoming increasingly health conscious and are aware of the benefits of using Canola/Soy oil in their
diet. These health benefits include:
 higher levels of “good cholesterol” (HDL)
 lower levels of heart-unfriendly oxidized LDL’s.
 reduced DNA oxidative damage which in turn is related to a reduced risk of some cancers.
 reduced incidence of hypertension.
 improved glycemic control, which is particularly advantageous to diabetics.
 Boutique bottles strengthen our image of quality. 47% of those surveyed felt the packaging (the bottle)
created a classy image which matches our decision to enter the Boutique Oil market and our decision to
possibly partner with Big Bazaar in the future, Big Bazaar sells the ‘best local products’. The bottles are
a high cost to the business at Rs 40 each and our initial run of 1000 bottles requires us to pay Rs 40000
for bottles
 Ethical business practices. In carrying out a PEST (C) we were challenged to think about how we can be
culturally sustainable. We decided that the production of ‘AURO Oil’ needed to reflect good ethical
 business practices. Our first area of ethical practices is the care of real estate in which crops are
cultivated. Every Agri- staff will undergo intensive training on maintaining the best in class crops and
oil seeds. Therefore, even though Supplier Power (Porters 5 forces) is strong, we can keep our costs low
and improve on our profits.
 High Return on investment. If we sell 5000 bottles at Rs 100 each as predicted, we will make 150%
return on our initial investment. Our fixed costs are relatively absorbed by the parent company for the
first 5 years. This high return on investment will encourage investment by our parent company for our
2nd year production run of 10000 bottles.
Weaknesses (Internal)

 Low brand profile: ‘AURO Oil’ is a new product in the Boutique Olive Oil market with no profile, we
therefore consider ourselves to be a Question Marks on the Boston Matrix. This implies low market
share but huge potential for growth and our corporate target of 10% market share of the boutique olive
oil market by the end of 2024 would mean we have achieved that significant growth potential.
 High Research and Development costs: A ‘Question Mark faces high fixed costs incurred early in the
product development stage and needs to take action where possible to cover these costs innovatively. If
not, the risks associated with these high costs will mean that ‘Auro Oil’ is not sustainable. Research and
development costs are needed to develop a new blend of oil to set AURO apart from its competition.
This problem has been overcome by working with the industry experts from other countries.
 High Marketing costs: Even though we have enough finance to produce our first run of ‘AURO Oil’ we
do not have access to enough finance to promote on mainstream media as used by the big players in the
boutique oil market. This will make our task of raising customer awareness of ‘AURO Oil’ difficult. We
also need to consider the significant cost of informing 10% of the target market about the launch.
 Capturing Rural market: FSSAI mandates that edible oils be sold in packaged form, but in rural areas
these oils are being sold in smaller quantities from opened packs. For people earning their wages daily,
it is difficult to afford oil packages of larger quantities. Under GST it will cost more for producing
smaller quantities. We must absorb the cost until a differential duty on smaller packages is brought into
force.
Opportunities (External)

 Possible future distribution partnership with Big Bazaar Supermarkets. The goal of Big Bazaar
Supermarkets is: “to bring you the best local and international produce at the best price”. ‘AURO Oil’
is produced locally and will be a high-quality Oil at an affordable entry price. This business partnership
would enable us to create an innovative marketing channel with a strong supermarket brand in India
  Favorable weather conditions for Oilseed Growers. With respect to environmental factors of there is a
long dry summer in India. These ideal growing conditions mean the surplus stock at farms is high and so
the quantity we could manufacture can easily cover the 500 bottles targeted for our 2020 production run.
Threats (External)

Competition from other Oils with established brand profiles. With respect to competitive rivalry ‘Saffola’ sells 1lt oil
packet at Rs 150. This price is average for our other competitors too. AURO will sell at Rs 100 for a 1ltr bottle. Thus, if
the market considers the product to be equal or better quality than the competition it is likely that AURO Oil would be a
good value quality product and achieve the aim of raising customer awareness.

Competitors may also decide to promote Social Responsibility. Also, with respect to competitive rivalry
(Porters 5 forces) there is a risk that other competitors may also find a social cause to support. This may make
one of our Branding strategies less effective as a promotional tool in the market place. If this did happen, we
may lose our Education Trust customers. This is not likely though as this small niche of donators are obviously
focused on this one cause (Education Trust) more than others that competitors may come up with.
Some Indian supermarkets do not stock Boutique Oil. Our analysis revealed that there are many supermarket
chains in India. However only few of these supermarket chains - are prepared to sell boutique oil in bottles. This
restricts the number of possible distribution partnerships that we can establish.
Impact of the Financial Crisis. The continued impact of the Indian recession has put the squeeze on boutique
items like meaning that some customers are buying cheaper substitutes instead like less quality cooking oil and
Vanaspati.

2.3. Competitor analysis

Major Players:

Edible Oils Vanaspathi

National Dairy Development Board (Anand) Hindustan Lever (Mumbai)

ITC Argo-Tech (Secunderabad) Wipro (Bangalore)
Marico Industries (Mumbai) Rasoi (Calcutta)
Ahmed Mills (Mumbai) Avi Industries (Mumbai)
On segmenting the existing market based on health and price in the map, the competitors are placed as below
and Auro intends to place its products in the high health conscious , medium price segment among the
competitors which is the market that is untapped in the edible oil industry.

HIGH
SAFOLLA
AURO
AURO SUNDROP
-U
-R

GOLD
FORTUNE
GOLD DROP WINNER
LOW HIGH

SWEEKER
DHARA

DALDA

LOW

PRICE

2.4. Product offering

Auro has two variations of its premium health product, one catering to the needs of rural sentiments and one to
the sentiments of the urban households by the names Auro-U and Auro-R. The 2 products are necessarily the
same by composition but only differentiated by its packaging and hence the change in pricing between the 2
products.

2.4. Distribution
 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.
AURO already had a very large existing distribution network. We can use that network only for the
distribution and try to place AURO Oil 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. The local distributers/agent approach would be used in the rural areas for increased
distribution
3.0. Marketing strategy
3.1. Objectives:

 The primary marketing objective is to achieve a market share of 2 % in the edible oil industry dominated
by pioneers like Sundrop, Saffola.
 The major objective is to introduce the product at a penetrating price to capture the untapped market
share with the parent company absorbing the fixed costs of production in the first 2 years.
 Furthering on this strategy, Auro is expected to break even at the end of 3 years and make a net gross
profit of 40 million on both the variations.

3.2. Target markets: Auro’s strategy is based on targeting health conscious consumers. 21-44 years old,
modern, aware, educated housewife using refined branded groundnut oil, concerned about family well-being.
For

3.3. Positioning:For individuals looking for high-quality oil, Auro is a perfect blend of cold pressed cooking oil
that delivers healthy living so that everyone enjoy the natural flavor and aroma of any recipe because AURO is
a product of meticulous refining process that is carried out on carefully selected oilseeds.

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

Fat or oil Fat grams Monounsaturate Saturated fat Polyunsaturated

d fat grams grams fat grams
Olive oil 14 grams 10 grams 2 grams 2 grams
 Canola oil 14 grams 8 grams 1 gram 4 grams
Sesame oil 14 grams 6 grams 2 grams 6 grams
Palm oil 14 grams 5 grams 7 grams 2 grams
Corn oil 14 grams 4 grams 2 grams 8 grams
Soybean oil 14 grams 4 grams 2 grams 8 grams
Sunflower oil 14 grams 3 grams 2 grams 9 grams
Flaxseed oil 14 grams 3 grams 1 gram 10 grams
Safflower oil 14 grams 2 grams 1 gram 11 grams
Coconut oil 14 grams 1 gram 12 grams 1 gram
Peanut oil 14 grams 7 grams 2 grams 5 grams
Cottonseed 14 grams 3 grams 4 grams 7 grams
oil

Sources: USDA Nutrient Database for Standard Reference (Release 14), the National Sunflower Association and theFlax
Council of Canada. Note: Numbers were rounded.

Pricing: 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.

Now, there is a fierce battle for market share in the super-premium-refined-edible-oil category.

Variable costs per bottle are Rs 65, this covers bottle and production costs. As previously mentioned, our only
fixed cost will be observed by our parent organization for the first 5 years. Our promotional costs will be
minimal as we seek to use innovative promotional methods and leverage our social sustainability practices and
healthy lifestyle practices to keep costs in this area low. Thus, we conservatively estimate, if aiming to sell 500
units of ‘Unique Drizzle’ by October 2020, our cost per unit will be 75 per unit.

Market feedback would support a premium price of Rs 150 per unit. However, given the fact that ‘AURO
Oil’ is at the start-up phase of the product life cycle and has no market presence it would appear more
logical to start off at a RRP of Rs 100 per unit. This would indicate that our supermarket customers will
have a large degree of control over decisions like pricing, so we feel an RRP of Rs 100 would be less
aggressive and would indicate we realize the power they have in negotiations.

For the rural market where we would be making use of tins/cans and plastic bottles the cost per each bottle
come down to Rs 100 for 200 one ltr bottles. The RRP set for rural population initially would be Rs Rs 60
per ltr. Cost per unit for Rural would Rs 35 which includes the variable production cost, promotional cost
and packaging cost. This would provide us an profit of Rs 25 per liter (of which we expect to lose Rs 10 for
agent/distributors)
Given our cost per unit is Rs 75 and our RRP is Rs 100 (of which we expect to lose Rs.10 to the supermarket)
our profit will be 15 per bottle. This will provide Rs 75000 donation to Education Trust which whilst small
ensures awareness is achieved and sets us up for 2025 where we aim to sell at 10% of the market and donate
more to the trust

Distribution: AURO already has a very large existing distribution network. We can use that network only
for the distribution and try to place AURO Oil 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. The local distributers/agent approach would be used in the rural areas for increased
distribution

Marketing communications:

 Direct campaign by salesmen, goodwill from doctors and dieticians

 Advertisements in TV, radio and newspapers focused on creating a strong franchise among consumers
having heart, blood pressure and health problems.
 Direct marketing in retail stores, shop in display and giving sales promotions through coupons,
discounts.
 Partnership with restaurants, celebrity endorsements to brand the credibility associated.
 Public relations through cookery contest and walkathons.
 Digital marketing through social media channels and ads.
3.5. Marketing mix:

Auro has a marketing budget of $1,00,965 .00 allocated for the first year of its entry which it will spend across
the months in various campaigning modes such as National marketing, Local marketing, Public relations,
Content Marketing, Social Media, Online, Advertising, Web, Market research, Sales campaigns and others.
3.6. Marketing Research:

Using research, we will identify the better composition to reduce fat and cholesterol and density of oil to cater
to the young adults who are fighting lifestyle habits. Feedbacks from first time users will be recorded for
improvements and surveys floated through restaurants will be collected for taste, consistency and desirability.
Brand awareness needs to be tested by understanding the reach among the customers who were experimental
with the new product in the market.

4.0. Financials
Total sales revenue for the Auro oil is expected be at 450 million, with an average wholesale price of INR 150
per unit and variable cost of 65 for unit sales of 1,000,000. First year budget spend of 75,00,000 on marketing
and loss is anticipated. Break even analysis indicate that Auro will become profitable after the sales volume
exceeds 1,76,47,058.82352941 during the product’s third year. The fixed cost is assumed at 85 x 1,000,000 and
will be absorbed by the parent company to allocate a higher marketing budget to position and seal the product in
the planned segment.

5.0. Controls
Controls are being established to cover implementation and the organization of marketing activities.

5.1. Implementation: Auro will place highest priority to meet the mandatory regulation standards set for the
industry, in addition to striving it to make it a less dense, trans-free oils. Presales campaigns and experts in the
fields will be requested to test the product and share the problem/ pain points. Immediate actions will be taken
to finetune the product before it enters the market.

5.2. Marketing organization: A separate dedicated marketing team headed by chief marketing officer and
market analyst will drive the program and takes full accountability to see the implementation of all marketing
activities on time.