Visionary Mr Mineka Wickramasingh Essay

Brief background on CBL (Munchee) It was the visionary Mr Mineka Wickramasingha in 1960 who wanted to expand his family business from the chocolate market. It was at the same time that CARE looked at sources of nourishment for the poverty stricken. It was a substitute of a biscuit that Mr Wickramasinghe proposed looking to expand on those lines. At that time the market leaders were Maliban. They were the ones who were awarded the contract. Due to lack of space, CBL was first launched at Dehiwela in his own premises to produce a high protein biscuits for schools. From this footing Munchee, has marched forward to capture 80% of the market of the local market. For over 40 years the brand has developed a certain nostalgia that is irreplaceable by any other brand. The taste is enjoyed young and old alike. There vision is to become the number one biscuit in Asia. Product portfolio CBL now produces various food items which have become house hold names in Sri Lanka. CBL expansion is not only with biscuits to which consumers are more familiar, they also have chocolates under brand name ‘Ritzbury’ since 1990s. The other brands are Tiara and Lanka Soy. There are numerous subcategories under each product. There are jellies, soya base products, cereal products, herbal porridges, soups and much more. Sub Categories under the Munchee brand Sweet biscuitsCrackers Puffs Savory Biscuits Cream Biscuits Marie Cookies Assorted HerbalWafers These are premium and hand-moulded chocolates. They come in boxes and slabs. Can be as a coated biscuits or wafers or beans or candy bars. It is in different flavours, type, and size. Sub Categories Chocolate Coated Biscuits Chocolate Slabs Miniature Caterers RangeChocolate Coated Beans Chocolate Coated Balls Chocolate Coated Candy Bars Specialty ChocolatesChocolate Coated Wafers Soft sponge cake made to perfect texture and taste Layer Cake Portion Cake Butter Sponge Cake Swiss Roll Company performance Ceylon Biscuits is of undisputable quality. CBL has shown a growth both in sales and profit for the last 5 years. Revenue had doubled from Rs.1.9 to Rs 5,2 Billion by 2005. Group turnover grew by 48% that same year. Net profit that year was Rs.533 Mio. This was the highest recorded profit for this company. CBL profit gradually grew, as it caught on to an international market. By 2011 sales revenue has grown by 25% in comparison to 2010. The overall profit margin was around 9% for the recently past five years. If ever the company saw a small decline it was due to industrial unrest. This biscuit is spread over 95,000 retail outlets all around Sri Lanka. CBL exports to 36 international destinations. It has been able to spread it’s fame in South Asia as well. Some of the countries of export are USA, Canada, Australia, UK, Hong Kong, China, India, Maldives and even the Middle East countries. The annual export revenue is about US $ 4 to 5 million. CBL has many awards for its entrepr eneurship. These awards are Exports in the Gold Category, Product Brand of the Year for four consecutive years, Anugu International Food Fair award. The daily production is around 150 tons. The annual production is around 45,000 tons. The company’s labor force is about 3,500. Company sustainability relies on strict norms on quality, texture and taste. For this it uses the latest technology, innovative marketing, research and development. The three C analysis There are three phases that need to be carefully scrutinized in order get a total overview of the product. Customer analysis Of the main brand Munchee, the customer analysis will be done on a sub category -Marie widely known as â€Å"Tikiri† Marie –or Munchee Tikiri Marie. It is a small sized biscuit. The market segment chosen were children. Presently it is packed in a ‘keep fresh pack’ sold at a economical price. The advertisement that was done on a range of media was presented in the most attractive way, backed by lyrics that set a smile on the lips of any child. It was later that Maliban put a Marie range into the market. But by then Munchee Tikiri Marie had taken the market by storm. Competitor analysis There has been great potential for a children’s biscuit in the market. CBL had limited resources, especially in production technology which restricted revenue. It was the consumer preference that motivated CBL to keep producing the Marie Biscuit. At one point in time 50% of the production was Marie. Yet, the company was unable to raise profits. Maliban held strong to its position. No advertising, trade promotions or merchandising was able take over the market share that Maliban held. Maliban Marie has an unique flavor that was unmatchable. Volume market share (Total Biscuit Market-February 2005) Communication analysis This is a (B2C) nature of business. The company has used campaigns such as Tikiri Marie scholarship program.-Munchee Tikiri Shishyadara. Expansion programs worth Rs. 500 million – Rs. 300 million for state of the art plant. It was known as â€Å"Plant 6† from Italy. CBL went to war using all types of media from TV, newspaper, radio, magazines, even websites to introduce a new Marie. There was a series of advertisement for Tikiri Marie- from ‘Kohomada Tikiri Mole’ to the first day in school. All campaigns had been embarked under their corporate moto-‘A crowning success’. This was CBL communication approach of tacking Maliban. Target market for Munchee Tikiri Marie The brand â€Å"Munchee† has not only spread over domestic market but also the export market. Munchee is now exported to over 36 countries. Munchee can be seen in Gourmet Shops in Australia, supermarket like Wal-Mart, K-mart worldwide in countries like UK, Germany , Italy , Middle-East , Canada and Japan. South East Asian region is spread over 11 countries. When Munchee is target marketed in this area, it must be the same target market as of the other South Asian countries. It is the high quality, texture and taste that captivate any child in any country. Because of this CBL must ensure that they do not loose the perception of ‘a biscuit for children.’ As it is not being partnered by any company as it was in UK the brand name can prevail. Here CBL needs to position its product, thus no private label will be needed either like NTUC of Singapore and Supreme brand in China. Segment for Marie Geographical segmentation-South Asia, Europe, America, UK Demographical Segmentation – Age, taste, texture, income Behavioral segment- instant, nutritious Product positioning of Marie Brand Identity vs. Competition (Source- AC Neilson) Premium quality, Innovative and value for money brand available at arms length of desire. Scope of this Integrated Marketing Communications Plan It looks in to objectives, strategies, and tools in communication used to successfully bring about integrated marketing. The plan will discuss ways to launch a program to communicate product. Marketing objective Increase the sale of Munchee Buiscuits. CBL is looking to increase sales by 5% within the next two years. With this to increase the market share by 5% at the end of the second year. Increase the company profile while enhancing the product among the target market. Munchee also wishes to strengthen Brand image among South East Asian countries as a healthy, nutritious biscuit. Communication Objective Awareness program to reach 20% of target market through television, newspaper advertising and web promotions. At least 5% the target market must purchase the product. Issues and Challenges The target market may have other preferences in biscuits. This entirely depends on texture, flavor, taste, shape and size. Thus the promotions/advertising will have to be attractive, creative and innovative in order to reach the hearts and minds of South East Asian Children. Situational analysis Current problem facing product * The target audience may not be reached. * They may prefer other biscuits. * Difficult to build brand loyalty in the food industry. Identifying target * The target market is chosen taking taste and nutrition in to consideration. * Targeting people who looks for low price but has to be of quality. Selecting a Market to Target South East Asia Geographic segmentation Children of the age 1-16 , Middle class Demographic segmentation Target market Instant, nutritious Behavioral segmentation The target market that has been chosen is of the geographical location of South East Asia region among a demographic target of children between the ages of 1-16. In modern South East Asia food in freely available for purchases for people who are one the move. This biscuit provides nutrients that are good for children and is an easy snack in a keep fresh pack. It is instant food for hungry youngsters. Positioning through Marketing Strategies * Introductory price * Chance to taste Competition Product Comparison There are companies like DIMOs that offer discounts to Government servants but no company has offered it to Bankers. AMW is the first to get into this program. Barriers to Entry * The awareness in low. * Banks have tied with other automobile companies, on a separate basis for their leasing requirements and the staff gets their vehicles also leased through those companies. * Buyers may go for second hand as the economic situations are tough. Competitor Differentiation | Chery QQ| Micro Panda| Features | Small hatch back with comfortable interior, Three Cylinder – DOHCMPI – 12V – Petrol 812 CC engine ‘Chery’ is imported from China and marketed in Sri Lanka by David Peiris Motor Company| Micro car, Volvo tech, 1300 cc engine. Made in Sri Lanka. Comes with and without air bag.| Target Market| Working professionals| Working professionals| Strengths | Low price, Brand backing | Made in Sri Lanka| Weakness | Small range of customers, No discount| Small range of customersNo discount| Consumer Behaviour – problems faced in addressing communication message There is nothing extraordinarily attractive about the AMW Maruti. But the interior is appealing. It is economical on the fuel. There is a one year warranty on the car. These are some of the aspects in regards to the car that a consumer will look at. Then the consumer is going to look at the company that selling the car. Associated Motor Ways Ltd is one of the oldest automobile conglomerates in Sri Lanka. They are the sole distributors of Suzuki vehicles in Sri Lanka and are affiliated with several brand names in the motor industry such as Nissan, Yamaha, and Goodyear. Addressing the problems with the vehicle such as no extra ordinary beauty about the vehicle or that there is fume emission from the vehicles which is hazardous to the external environment, what AMW concentrates on is the interior of the car and how economical it is. The Maruti is good on fuel. The size makes it easy to handle. This car is val ue for money. Branding Bankers are likely for a discount program where the vehicles are leased giving a bank loan. Maruti is likely to stay in the minds of the buyer due to features of the vehicle, the interior and the engine capacity in relation to the other brands of this same model which where given under competitor analysis. The Maruti is a more durable and dependable brand. Position statement This promotion is available only for bankers that are permanent in their jobs and the loan facilities are available. Any other financing will not be permitted. The discount is available for all colours of Maruti. Promotion The promotion is done within Colombo and its near suburbs. For this promotion 50% of the budgeted funds are allocated. This was first circulated to family and friends, for the word of mouth is the cheapest and the best way of promoting a discount program. Gradually as the awareness starts to increase it will be circulated among banks, first on a personal basis to call whose contacts can be acquired. Then the leasing managers or the staff managers in charge of staff leasing will be approached. Depending on the geographical location, banks will be approached in regards to the promotion. Once the approval has been obtained by the management, posters will distribute to main branches. These are known as power position advertising. The dealership logo will be indicated in the poster. A list of the eligible staff members will be collected and a web based mailer will be sent out to them. Permission will be acquired to post the promotion on an intranet facility that is accessible only to the relevant bankers of the targeted bank. A car may be sent out to the main branch for display. Once the initial promotions have been done in and around the main branches where web may not be the best promotional attribute a news paper advertisement will be posted. The news paper will carry a pictureous depictation of the car with a Brand Ambassador. The Brand Ambassador can be a cricketer or any other sportsman who is working in a bank indicating that this is the best leasing offer ever. These adds will have to run every often and it must be made sure that the adds are not too small to see. It may be preferable to advertise in a Sinhalese paper when thinking of promoting the discount program among the suburbs. There has to be creativity, innovation and an even flow for an advertisement to catch the eyes of the reader. A Saturday or Sunday paper is preferable as people have more time than on a weekday to read the paper. Television can be used as last resort. This is expensive but can be the most influential method of advertising. This is a sure a way of information gathering for viewers. The television adds usually have a lasting impression on the viewer. This is a sure way of assuring results for IMC. There are many highly watched channels of those the cheapest but the most effective can be used. The TV add can play between programs. The programs after which the add will be aired will have to be carefully chosen. It will need to depend on viewer’s discretion. The advertisement can go on for a period of 6 months at least. The web based marketing is another method by which advisement can be done. This is the most modern method. Some of the websites frequently visited by banke rs are Facebook, ESPN, Google, YouTube, Digg.com, Myspace, and Perezhilton.com. The most popular of them all is Facebook, Google, and Youtube. All these websites focus on online advertisements. Websites like Facebook taps a large audience. This not only enables promoting to bankers but also lets others know the car sale. This is a good way to get other companies to tie up with the dealership of AMW. Communication Tactical Calendar | Jan| Feb| Mar| Apr| May| Jun| Jul| Aug| Sep| Oct| Nov| Dec| Poster| | | | | | | | | | | | | News paper| | | | | | | | | | | | | TV| | | | | | | | | | | | | Web| | | | | | | | | | | | | Display| | | | | | | | | | | | | Budget The largest potion that is 50% of the budget is for promotion. Of the 50% promotional budget 30% will be allocated for television commercials, the remainder 20% for news paper, posters, display and web. The remainder 50% will be allocated for Brand Ambassador and miscellaneous expenses. The total allocation for the budget is Rs. 2,000,000/- Measurement system Implementation Controls Monitoring, review and control will be done by the dealership company with the collaboration with the bank that is leasing the vehicle. The review to be done on a monthly basis. Progress against targets to be analyzed. For this a marketing plan has to be drawn out. A target market needs to be chosen and a pilot project done before, the discount program is advertised. Once the dealership feels that this can be a successfully implemented then monitoring has to be undertaken. This has to be done carefully. Gap analysis done on a regular basis. Correction actions need to be taken if there is no progress within the first three months of advertising. Dealership may go back to the drawing board and redo the marketing plan again. Quality Assurance Around this time the company was receiving a number of complaints regarding its biscuits – breakages, poor taste, quality etc. Rather than ignore the issue, CBL decided to place an emphasis on investigating the cause of the complaints, and took corrective action, including formula changes, to reduce the high number of returns at the time. Setting up better procedures for packing, product handling and transportation, the company prepared for its future growth. It conducted daily taste tests of its own products and organized regular taste panels to compare its products with those of its competitors’. It also methodically documented the specifications of all products being manufactured – knowledge that had previously been passed on through practice and word of mouth. As the demands on the Quality Assurance department began to rise, the company decided in 1996 to seek ISO certification Today, quality assurance remains an area of particular pride for Munchee. The depa rtment plays a critical role in product testing and development of production process controls and systems. High hygiene standards for toilet habits and hair, together with regular swab tests of employees are strictly enforced. Every shipment of incoming materials is tested for quality and those that fail are rejected. Following a complaint, products are collected from customers and subject to laboratory analysis. In 2004, CBL received HACCP certification for food safety together with SLS certification for its biscuits23.. With these in hand CBL became the only confectionary company in Sri Lanka to acquire all relevant quality certifications for its line of business i.e. SLS, ISO 9001:2000, ISO 1400124 and HACCP. Product Development Product development also became an area of increased focus. While CBL had begun operations with a line of distinctive biscuits, along with some generics. However, in the recent years the push for higher turnover had resulted in innovation playing a secondary role. Some of the biscuits that had made Munchee distinctive, were neglected in favor of more mass consumer products. CBL began formulations and potential improvements to flavor and quality. The company also began to actively investigate and keep up with new technologies and machinery by participating regularly at trade exhibitions and through membership in industry associations. Distribution Around this time CBL took the decision to rethink its methods of distribution and undertook to overhaul its sales and distribution efforts in favor of a much bolder plan. Up to this point the company had depended almost completely on wholesalers to sell its products as a hassle free means of managing its distribution efforts. As a result, while CBL had the logistic and cost advantages of maintaining a lean sales team, the company suffered due to its dependence on the enthusiasm of its wholesalers to push its products. CBL decided to bite the bullet and invest heavily in its sales force. It expanded its distribution reach, increasing its number of distributors, changed the demarcation of sales regions into much smaller areas for more intensive sales efforts and recruited the regional and senior sales personnel required to cope with this new direction. 5.4.4 Customer Intimacy With the changes to its sales force, CBL was forced to face up to the fact that it was very removed from its consumers. The company recognized that it had been paralleling the moves and decisions made by Maliban rather than acting on real consumer insights. CBL’s focus had been very much â€Å"product centric† – concentrated on improvement of its formulation and production technology. It developed its products in isolation and once developed attempted to market them. Little attention had been paid to market research, even on an informal basis. Moreover, CBL began to understand that its customer was a new, youthful generation whose tastes and style were very different from the consumer of the previous ten years. Beginning in 1996, the Board itself acknowledged this changed attitude by beginning to go to the field on a regular basis to a top down attempt to gauge market perceptions and trends. The newly developed sales force provided feedback from consumers and distributors and the company took the further step of setting up a separate subsidiary to plan its marketing activities and to become more responsive to market needs an gaps. The holding company became primarily responsible for improving product quality and procedures. 5.4.5 Image Building CBL also recognized that in order to grow it had to become a better known name as a company. Partly as a result of its multiple brand names, CBL itself was relatively unknown as a corporate entity. Embarking on a campaign to raise the profile of the company, CBL engaged the services of a consultant, and set out to gain greater corporate recognition for itself among both consumers and the business community. The public’s lack of knowledge of the breadth of the company’s activities was hindering its activities as a holding company, particularly for purposes such as tapping the capital market. With the help of its consultant, CBL set about establishing a public image for itself. This was done primarily through the print media. Every week or so, an article regarding the company and its various corporate activities and Latest initiatives, including its export plans and CSR, appeared in the newspapers. Competitiveness Behaviour The Biscuit Wars Around 1995, CBL had hit a wall in terms of increasing its turnover. Limited by its existing production technology and consumer tastes, t its highest growth opportunity lay in the Marie biscuit market. While CBL’s Marie25 biscuits now made up 50% of total production, the company was unable to meaningfully increase its sales and market share of the Marie category. It had attempted a variety of marketing activities including extensive advertising, merchandising and trade promotions, but was still not able to take sufficient market share away from Maliban. The Munchee Marie biscuit was at this time essentially a knockoff of Maliban’s Marie and used very similar packaging. However, despite much effort and testing, eBL was not able to exactly reproduce the Maliban Marie flavor. Although market share was a (then) respectable 10% and despite fervent urgings from its own sales team to the contrary to be more like Maliban, CBL decided that the time had come to change tactics and be different in order to try to break through the turnover barrier. The Tikiri Marie Campaign Munchee hit on the winning concept of launching its own Marie as â€Å"Tikiri† Marie – a petit sized Marie biscuit – using an aggressive campaign entitled â€Å"Tikiri Mole†, to bring the little biscuit to the attention of consumers. The campaign targeted children with the use of attractive advertising and proved a real turning point in Munchee’s growth and image. The biscuit was so successful that the smaller sized Tikiri Marie became the number one Marie biscuit in the Sri Lankan market, with a phenomenal 50 per cent of Marie market share and eventually forced the giant Maliban to acknowledge Munchee as a significant market player by playing copy cat and resizing its own Marie. 7 Part of Munchee’s success with Tikiri Marie stemmed from Maliban’s complacency and its failure to react to this attack on the Marie category. The Tikiri Marie campaign brought into effect other changes at CBL such as the introduction of Munchee’s â₠¬Å"keep fresh pack, which ensured better product freshness. Following its success with Tikiri Marie CBL expanded the use of the fresh pack to the entire Munchee biscuit range. The company also commenced a Tikiri Marie scholarship program for school children in 1997 entitled Munchee Tikiri Shishyadara which it continues to this day. Now in its eighth year, the program provides 120 deserving children with scholarships of Rs. 1000 per month for one year with fresh applicants being selected annually. By 1998, the cumulative effect of the changes made through the 1990’s, resulted in CBL achieving a 30% market share of the biscuit market (up from 20% at the start of the 1990s) and topping the Rs. 1 billion turnover mark. This was a major milestone for CBL, both internally and externally. The company was becoming better known, both to consumers for its brands and quality products and to the industry for its investments in good technology. CBL reinforced this reputation by committing to a Rs. 500 million expansion program – Rs. 300 million of which was spent on a large state of the art plant from Italy. â€Å"Plant 6† as it was known, was CBL’s largest capacity plant thus far with five lines that could handle both hard and fermented dough. This action by CBL sent a strong message, to its staff and associates, about CBL’s optimism and confidence in the company’s future growth commercialization of this new plant, CBL planned to introduce a new range of biscuits to tackle Maliban head-on. 6.1.2 The Lemon Puff Battle CBL’s next strategic attack on Maliban came in 2001 with its Lemon Puff. The Munchee Lemon Puff had a solid 30% market share but as was the case with Marie, failed at growing sales further as a â€Å"me too† product. CBL decided to re-Launch Lemon Puff, by promoting it as a sandwich biscuit with a higher quantity of lemon cream. The campaign was heralded by an intensive television campaign directed at capturing the attention of a new market. What the company did not reveal in its advertising was that the cracker itself had been vastly improved, through a new formula and upgraded technology. It was in fact a noticeably better overall sandwich biscuit than Maliban’s Lemon Puff rather than just being a look alike with more cream. Going against the advice of its advertising company, Munchee replaced the traditional yellow packaging, synonymous with the Lemon Puff category, with a white wrapper. The superior moisture and odour barriers of the new metalized wrapper com bined with the new pillow pack technology, which used only two seals to achieve increased air-tightness, better preserved the crispness and freshness of the sandwich biscuit. This had been a problem that had plagued both companies’ puffs for decades. Consumers who tasted the Munchee Lemon Puff for its extra cream (not enough cream was a complaint associated with both Lemon Puffs for years) were pleasantly surprised and rapidly switched loyalty to the Munchee Lemon Puffs. Thus Munchee demonstrated that it was in touch with tastes of its consumers and used their feedback to improve its biscuits. The impact of the product changes were felt immediately. Munchee’s market share in puffs went up from 30% to over 50% within a mere four months following this relaunch, and grew the entire puff category from 12 to 16%. As a result, Maliban’s share of Lemon Puff which had been a staggering 70% plummeted to 29%. By now Munchee had 45% of the local biscuit market and was vyin g with Maliban for market leadership. CBL’s next big challenge was clear – take on Maliban in the cream cracker market. Despite Munchee’s success at growing its sales, Maliban still had nearly 75% of the lucrative cracker market while Munchee was at a meager 23%. The Maliban cream cracker was well accepted and entrenched in the market. CBL had to find a way of breaking through with an innovative cream cracker to take on this market. 6.1.3 The Cream Cracker Assault The following year, in 2002, CBL re-Iaunched its cracker as a â€Å"Super† Cream Cracker, enriched with vitamins in a bold campaign, with live broadcast of two music shows held simultaneously in Colombo and Anuradhapura before massive crowds As they had done with the Lemon Puff, CBL used a new metalized pillow-pack with a contemporary look to break away from the traditional solid red â€Å"Maliban† packaging synonymous s with cream cracker and re-formulated the cracker to deliver a crisper and tastier product. The Munchee strategy of delivering a superior quality product that convinced consumers to switch brands proved a success and the results were phenomenal. Cracker sales grew, expanding its own market not merely taking over competitor share. Growth in sales nearly tripled and Munchee’s market share in cream cracker immediately doubled to 40%, reaching 50% the foHowing year. Today, of the total cream cracker category, which makes up 20% of the total domestic b iscuit market, Munchee owns a 60% share. Super Cream Cracker accounts for 30% of the company’s turnover, with a profit margin of over 25%. Munchee continues to fight aggressively for market share. Its most recent marketing campaign entitled â€Å"Podi Badaginne† targets the large 500 gm pack market, previously serviced by loose crackers. The focus is to use the cracker as a substitute for a full meal for chummary factory workers who are already provided with two meals from their work place. The company has again demonstrated its knowledge of customer needs and changing trends and lifestyles in Sri Lanka as the record 128% growth of this heavy use pack from 2004 to 2005 shows. Business Expansion Beginning from the 1990’s, CBL began looking at other areas in the food and confectionary industry to expand its businesses activities. 6.2.1 Ritzbury One of the first areas CBL explored was one naturally complementary to its existing line of business: chocolate. At one time, the company had produced chocolate for Nestle and had some exposure to Nestle’s chocolate operations. Launched in 1991, Ritzbury chocolates began with chocolate coated (enrobed) biscuits. The company went through much teething pain in developing the right quality chocolate for its use. It struggled to develop a workable formulation – one that tasted good while withstanding the melting and rancidity caused by the tropical Sri Lankan weather. Ritzbury gradually developed its market by first growing its range of coated biscuits, then expanding to chocolate candies and hand made chocolates, and only recently moving into the traditional â€Å"slabs† – the largest market category. The company’s strategy is to provide innovative eye-catching products to its consumers and thus differentiate from its competition. Ritzbury’s first entry was Chunky Choc (chocolate covered biscuits sandwich with butterscotch cream filling), followed by Chit Chat (chocolate coated wafer with hazelnut cream) and Chocolate Fingers (chocolate coated â€Å"finger† biscuit). A nother innovation for Sri Lanka was Pebbles (brightly colored, sugar coated chocolate candies). The Ritzbury range includes Nik Nak, (chocolate coated vanilla cream wafer), Go Nuts (colored chocolate coated peanuts), Choosy (liquid chocolate stick) and Choco-La individual nuggets. Although it started out originally as a poor number four, Ritzbury recently beat Kandos (Ceylon Chocolates) to the number two spot in the chocolate market. However, at 21 % vs. 42% Ritzbury has only half the market share of market leader Edna and a long way to go to become number one. Further, Edna has itself shown to be very aggressive and quick in bringing out innovative products to the chocolate market. Ritzbury for its part, offers over 60 differentiated items, at the full range of price points and with a dedicated sales force certainly provides its consumers affordability and access. Despite being a small local brand, it offers consumers a complete range of chocolates and chocolate coated products and for other products frequently provides comparable alternatives to more expensive imported products. Examples are Pebbles as an alternative to Smarties, Chit Chat to Kit Kat and Go Nuts to M&Ms. Yet, apart from the hand molded specialty chocolates and coated biscuits products, the company has yet to fully convince local consumers that the quality of its slab range is on par with that of imports or Kandos. By 1997, following its first biscuit war and having grown its market share in the biscuit market to a respectable 30%, CBL began to focus on sales of Ritzbury. One hindrance to improving growth CBL realized was the then single chain of distribution it used for both biscuits and chocolates. In practical terms what this implied was that once a retailer had gone through purchases of the more established Munchee list of biscuits they would have little money left for Ritzbury chocolates. Ritzbury sales were materially affected and it became evident that an alternative would have to be sought out. One option was to increase the breadth of the CBL range in order to afford to maintain a second line of distribution. 6.2.2 Pancho Snacks With this in mind, CBL decided to enter the snack food market in 1998 under Ritzbury. Named Pancho, this snack range was made up primarily of extruded snacks. However, despite the company’s sustained efforts with Pancho and the separate sales force, the impulse buy snack market proved a disappointing arena for CBL. Despite the introduction of two products under a new line named Catch Me together with a re-Launch of Pancho in 2000, the company found that it could only succeed in this market with a near continuous stream of promotions. Although CBL persevered in snack foods for nearly five years, it was eventually forced to close up this operation and admit failure. With the aim of an expansion of its range still in mind, CBL next entered a completely unfamiliar food market. In 2000 due to its own financial difficulties, Yanik Incorporated, an investment bank, was selling its 79% stake in Soy Foods (Lanka) Limited, a public listed company manufacturing textured vegetable protein (TVP) nuggets. Soy Foods was a loss making number four player in the market but had pioneered a number of soy products under the brand Lanka Soy. CBL seized this opportunity to expand its range, encouraged by its present Managing Director who had experience in the soya area. CBL purchased the stake in Soy Foods at Rs.9/share and took over operations in September 2000; by 2002 the company had been successfully turned around and had become a viable entity. This was the success story that CBL had been searching for. The Soy Foods line allowed CBL to maintain a dual distribution network, one for its biscuits and another for chocolates and soy. The effects of this isolation of chocolate sales from biscuits were immediate and notable. By 2002 Ritzbury had made impressive inroads into its competition and grown market share to over 15%. 6.2.3 Lanka Soy In 2000 when CBL bought over management of Soy Foods (Lanka) Ltd. from Yanik it was a loss making company. Despite being the pioneer in the local soy market, Lanka Soy was at the time selling only 50% of the volumes of the market leader Raigam, with a 15% market share. The company’s growth was stagnating in a rapidly growing market, and many smaller competitors were cashing on its market with lookalike products. The ambitious strategy set out for a turnaround of the company was to aim to make it not merely profitable but the market leader. CBL decided that not only was it necessary to grow Lanka Soy’s market share, through a fresh look and product, it was going to grow the total product market through a change in positioning. Thinking very innovatively, the company decided what was needed was to position soya not just as a vegetarian food, but as a more economical substitute for the protein content of a main meal. Touting advantages such as convenience, price and the lack of freezer requirements together with newly introduced catchy features suc h as interesting shapes and flavors, a whole range of new branded soy products were launched under the Lanka Soy umbrella. Given that at the time, chicken flavored soya was the most popular soya product the company decided it would introduce interesting flavors to accompany new presentation efforts. In order to take the competition head on, it improved the taste of its traditional range, while also increasing its product range. It developed not one but a range of chicken flavors, under the brand Chikosoy, consisting of tandoori, masala, roast and chilli chicken flavors. For the traditional vegetarian market, it introduced the Vegesoy range a further four flavors of mushroom, hot and spicy, Chinese chop suey and Indian rasam. But its piece de resistance was a completely new entrant – Malusoy. This range of not merely fish but also seafood flavors truly tapped into a very strong local preference for seafood. Malusoy comprised spratts, devilled prawns, cuttlefish and ambul thiya l flavors. Packaging for the four new sub brands was done using a range of appealing eye-catching colors, with a unique logo designed for each. Advertising again interestingly was carried out individually on a sub brand basis. For example, Malusoy used a two column poster conveying the advantages over canned fish. The company also took the extra step of providing a sauce sachet to provide a one step cooking process. Emphasis was placed to introduce the cooked product to consumers by way of cookery demonstrations and street promotions. In particular, Malusoy was aimed at areas with little coastal access. Sales efforts were overhauled, re-demarcating a network to reach 35,000 outlets with designated representatives for supermarkets, catering and restaurant sectors. The results were strong. By early 2002 Lanka Soy’s market share had jumped to 25% hitting 30% and market leadership a year later. Malusoy to eBL’s surprise turned out to be Lanka Soy’s front runner in sales. The strategy to offer consumers, as a household, their daily main dish at a price less than half the price of canned or fresh sea food was highly successful. Within 24 months Malusoy sales exceeded 500,000 packets a month, making up over 14% of the total soy market. Due to the sudden launch of many interesting products at the same time Lankasoy established itself as trend setter and frontrunner of the soya product market. 6.2.4 Tiara Cakes eBL’s next expansion was within the local confectionary business -the lucrative Rs. 4 billion plus local cake market. eBL’s main biscuit and chocolate operations had traditionally taken place at its home factory located along with its head office in Pannipitiya. However in 2002, the company invested Rs. 1.5 billion to set up eBL Foods International (eBL Foods), a Board of Investment (BOI) approved company in Rannala, about one hour away. Awarded a 10 year tax holiday, eBL Foods has a mandate to manufacture bakery products and chocolates – the former includes a new line of cakes under the brand name Tiara. The new venture commenced operations in September 2004 with a new line of â€Å"portion cakes† – individually wrapped sponge layer cakes, marketed under the Tiara sub brand Okay, The product line also includes swiss rolls. CBL Foods boasts a state of the art plant intended primarily for cakes and a â€Å"Clean Room,,33 to guarantee freshness for a shelf life of up to eight months. Due to production constraints faced elsewhere however the 110,000 square foot modern facility also includes manufacturing and packing for chocolates, wafers and biscuits – the latter including both hard and soft dough. CBL expects that its group tax slab will come down to 32.5% as a result of CBL Foods’ tax advantaged status and the shifting of these manufacturing of chocolates, wafers and biscuits, which previously came under Ceylon Biscuits’ tax slab. The company uses a formula to determine profit and is taxed at the preferential rate of 15% on its export. 6.2.5 Other Snacks In 2004, CBL invested Rs. 50 million to acquire a 60% stake in Cecil Food (Pvt) Limited (Cecil Food) – an organic manufacturer of dehydrated fruit products, fruit juices, desiccated coconut and cashews primarily for the export market. Though the company had been in existence for 10 years and exported to 20 countries, it was facing financial difficulties. CBL brought to Cecil Foods the financial strength and management experience that it needed, while the founder retained a 25% stake. CBL’s main interest in Cecil Food was its exposure to rural agriculture and its export and local market potential. The company presently exports to countries including the US, UK, Germany, Taiwan, Australia, New Zealand, Malta, UAE, Saudi Arabia, Qatar and Bahrain. Armed with CBL’s financial backing the company has overcome its working capital needs. CBL’s infusion of capital has enabled the purchase of new equipment and is now looking at expanding sales to tap the local marke t. Cecil Foods also has a 100% owned subsidiary Cecil Fruit Canneries which concentrates on natural fruit juices for both the domestic and export markets. CBL intends to launch this range to the domestic market by introducing a line of fruit juices in novelty pouches. Export Markets CBL has also set its sights on growing its revenues through tapping sales in overseas markets. Although CBL had been exporting biscuits from inception, around 1997, the company began to export regular container loads to the United States, Canada, Australia and India, while also investigating at lucrative export markets such as the Middle East. India became a particular focus, with the company beginning its own marketing effort there. By 2000 CBL was also exporting to the US, Canada, Australia, UK, Sweden, the Middle East, Hong Kong, Mauritius, Fiji Islands and the Maldives. Although the export sector took a long time to stabilize, export orders now go out to 36 countries, exceeding Rs. 110 million in value (USD$ 1 million) in 2004/5. Exports to the UK, Middle East and Canada are mainly to the so called ethnic markets catering to the Sri Lankan diaspora, but in other countries demand is slowly establishing into in the established biscuit market through chain distributors. While most e xports are under private labels – that it, outsourcing for foreign biscuit companies – CBL has managed in some instances to establish its own brand. This is particularly the case in Australia where the company has taken the additional step, as it did in India, of setting up its own marketing effort by establishing a company representative as market manager. Australia is now the main export market for CBL, having overtaken the United States. CBL also enjoyed some recent success making inroads into western Africa. 6.3.1 Entry into India There are four accepted methods for a company to enter a foreign market: exports, licensing, joint ventures and direct investment, which often represent an evolution in the degree of interest the company develops once it is present in the market. Beginning with straightforward exports from the mid 1990s and early exports of containers to India in 1999 CBL took the next step in developing the Indian market by investing Indian Rupees 3.6 crores (36 million) to purchase Parry’s Confectionary based in Pondicherry, about an hour from Chennai. Setting up a 100% owned subsidiary Ritzbury India, CBL began manufacturing operations for the first time outside Sri Lanka. The acquisition provided CBL with a six line 350 ton a month manufacturing plant. The company entered the Indian market with the Munchee and Ritzbury brands, for distribution in Tamil Nadu and Kerala. While the chocolates were manufactured in Sri Lanka, most of the Munchee range was baked in India. CBL produced nine varie ties of biscuits including Marie, Glucose biscuits and several creams at the Pondicherry plant. This manufacturing base in India proved to be both a blessing and a distress to CBL. On the one hand, it became a strong negotiating tool for CBL at a time of labour unrest. CBL was able to take a tough stance, threatening closure and the moving of its entire manufacturing operations to its base in India. However, on the other hand, distribution arrangements provided by Parrys proved to be less than satisfactory. The company began a losing battle in trying to distribute its products. Revenues were far below expectations and Ritzbury India further faced a number of detrimental tariffs in South India. Despite a Free Trade Agreement with India, and a reduction of duty to 3%, the state sales tax in Tamil Nadu was increased by 8% for imported goods effectively nullifying any duty concessions. Following a second acquisition in India, CBL decided to completely dispose of its Chennai operations a t a loss, dissolving Ritzbury India. In 2003 CBL heard about the sale through court auction of Bakemans, once the third largest biscuit manufacturer in India with a market share high of 13% of the total Indian market. Outbidding its Indian competition in July 2004 CBL successfully acquired the assets of Bake mans at a cost ofRs .. 300 million. Along with the premises the company also gained six biscuit lines from the acquisition, two of which it chose to bring to Sri Lanka for installation at CBL foods to allay its present capacity constraints. Based in Patiala in the state of Punjab, CBL set up CBL India with plans to commence commercial production in the near future, using one biscuit line. Having recruited Bakemans former CEO, who had been directly involved in the company’s rise to its one time number three position, CBL has ambitious plans for India and its manufacturing operations there in the future. Tentatively speaking of a â€Å"Munchee-Bakemans† brand name, CBL aspires to become number three in India within two years of operations and have the same type of success at retail that Dilmah has achieved in India CBL’s challenge in I ndia is to find a mass consumer line of biscuits similar to Marie and Cream Cracker in Sri Lanka. Glucose biscuits are an area that the company will have to examine, given their present popularity in India, but to compete with established players such as Parle-G and Britannia, CBL will need both a reliable distribution network and an attractive proposition for the Indian consumers to give it a try. The use of the Bakeman name, which would certainly aid the latter, is presently an issue. If CBL is able to use the Bakeman brand name in some form it will cut down market establishment time considerably. CBL’s strength is that it has the innovation to develop a product to suit this market and it has proved in Sri Lanka that it has the quality and taste to convince consumers to switch to its brand. What remains to be seen is whether it will have sufficient insight into the Indian market to correctly select what that winning product and distribution strategy should be. Other Indian Ventures In 2004 CBL entered into an agreement with Ferrero of Italy to distribute and undertake manufacturing on Ferrero’s behalf. Ferrero is the world renowned producer of Nutella, Tic Tac and Ferrero Rocher and Mon Cherie brands of chocolate and another family owned business. Presently the agreement entails the manufacture of boxes for Tic Tac, Ferrero’s signature mini mint, intended to be extended to the manufacture or finishing of the mint pill also. CBL distributes Ferrero Rocher’s foil wrapped boxed chocolates, Nutella and Tic Tac for Ferrero in Sri Lanka and India. Manufacturing commenced in August 2005, packing pills imported from Australia into the boxes. Distribution is intended for Sri Lanka, Africa, India and Pakistan. The linkup with Ferrero is another example of CBL’s chairman’s dynamic personality and relationship building skills. Following initial contact in India, CBL’s directors visited Ferrero’s head quarters in Alba, Italy, which Ferrero reciprocated with a visit to Sri Lanka. The company has expressed an interest in using Sri Lanka as a base for South Asian activities, moving its present activities from India, convinced of CBL’sabilities as a business partner. CBL in turn hopes the association will expand its knowledge base through contact with the 60 year old Italian family business. Business Unit Contribution Biscuits Turnover from Munchee biscuits, the biggest contributor to group turnover, grew 30% in the financial year 2004/5 and early results for 2005 show this trend continuing. Past years sales have grown at a similar overall pace, although specific products have shown even higher growth rates at times of changes and innovation. Profit margins on biscuits range from 20-25% with products such as Super Cream Cracker, Tiffin and Chocolate Puff being the most profitable. Biscuit sales are presently constrained primarily by production capability, with demand strong and the company intending to increase its production lines in 2005/6. To try to keep up with demand, CBL has brought down two lines already from its recent acquisition in India and plans to import a new 2 ton per hour machine from Italy, expected to be installed in early 2006. Group Performance While CBL’s overall growth has been strong over the past five years with revenues more than doubling from Rs. 1.9 to Rs. 5.2 billion over the period, profit increases have been even higher due to various tax benefits. In 2005 CBL’s group turnover grew 48% to Rs. 5.2 billion and net profit after tax grew 63% to Rs. 533 million, the highest ever in the company’s 36 year history. Sales surpassed the previous year across all areas of biscuits, chocolates, Soya and exports. The tremendous bottom line growth clearly indicates the contribution accrued from CBL Food’s tax advantaged status. In comparison the 2004 figures were 11% top line and 23% bottom line growth. On average, overall profit margin has been near 9% over the five year period. This is taking into account FlY 200112 which differs due to both the industrial unrest that CBL faced for two months of that financial year as well as the exhaustion of the tax benefits afforded by the 1988 Investment Tax Allowance. The company’s latest earning per share figure (EPS) is an astonishing Rs. 53.12 and more impressively has grown from Rs. 36.75 in 2003. This EPS figure reflects the extraordinary growth that CBL has experienced over the last 10 years. EPS in the late 1990’s was actually in the Rs. 3000 range on the company’s original ordinary share capital of Rs. 390,000 (made up of 39,000 Rs. 10 shares). Path Forward Ceylon Biscuits faced with production capacity constraints for its biscuits, as demand has grown well beyond forecasts. It has adopted the following three pronged approach to increase capacity: a) bringing down two biscuit lines from India from its Bakemans operation for immediate capacity expansion, b) importing a brand new large capacity plant from Italy and c) future capacity expansion of its Indian manufacturing operations. CBL’s future growth will come from increasing exports of its established products and diversifying by leveraging its domestic logistics and distribution capabilities to market its other products. The company is also increasingly open to looking at new opportunities, an example being manufacturing for Italian chocolate maker Ferrero. The company’s core competencies for the future will be investment in technology, financial strength, sales and marketing competency and focused management. Key challenges will be dealing with its production restrictio ns and becoming able to compete on a global basis by 2007. CBL’s greatest test will be when the Indo Lanka FTA final phase permits Indian biscuits to be imported duty free beginning 2007. CBL intends to examine becoming listed on the Colombo Stock Exchange over the next few years. Since the desire for listing does not seem to be driven by financial needs only, it is still unclear what CBL will gain from this step. The company wishes to formalize its procedures in order to firm up its financial transparency and professionalize its organization structure and operations to ensure future continuity and success. There is a sentiment that going public will enforce the discipline required to ensure this. CBL is well poised with a business model to ensure ongoing value creation. It has spent time building strong brands that have future earnings potential. The brands have proven their competencies in that they have been replicated across new markets with success. However there are some concerns that need to be explored. Managing export markets Export marketing could be more aggressive – the model adopted by Munchee for Australia of establishing a marketing office seems the proven route to establish and develop key markets. We see some amazing possibilities for synergies for CBL in inviting someone of the caliber of Merrill 1. Fernando Chairman Dilmah to its board, perhaps even offering Dilmah some equity in an export division or forming a separate export company, who could help with establishing relationships with some of Dilmah’s retailers and distributors in Australia. One way or another, the use of a different model to fast track export market expansion is advisable. 5. Managing Indian market entry This is the second greatest challenge facing the company. India is an amazingly dissimilar market to Sri Lanka despite certain cultural similarities. It is fragmented with over 15 million retail entities, the largest number in the world. The organized retail sector in India is only 3%. However, over 51 % of its population is under 25 years of age and the fastest growing sector is the retail high-end supermarkets -expected to grow over three fold in the next five years (from US$8 billion to US$25 billion). Beginning with three malls in 2003, India had 25 by 2005 and is building 200 more. The pace of change is phenomenal. It makes sense to enter this high-end retail Focus on core competencieslRefocus on Sales and Marketing CBL’s passion for quality, capacity to build brands and technological and production innovativeness are great competencies to be retained. Skills like marketing and sales are always unstable. Such skills are in demand, pressures are great and often new challenges are looked for in different cycles of growth. No proper product management system or category management is in place. It is important to have some depth to the marketing department. And while CBL’s success speaks volumes for the capabilities of its current Director of marketing there is a need for a diversity of approaches and opinions so that marketing efforts do not grow stale. Key mid level appointments need to be made. Customer intimacy! Product leadership / Managing brand TOM In spite of CBL making all the right moves, and succeeding in achieving higher scores than Maliban in most of the consumer research categories (see chart below), Munchee is still behind in brand Top-Of-Mind (TOM) recall. This is despite Munchee having strong market noise levels in share of voice and especially with the competition making so many mistakes. Part of the gap between Munchee and Maliban in â€Å"top of mind recall† can be explained by the long history of Maliban as a market leader, and that it was the dominant player for a very long time. Part of the gap between Munchee and Maliban in â€Å"top of mind recall† can be explained by the long history of Maliban as a market leader, and that it was the dominant player for a very long time.