Mumbai: Warner-Lambert India's move to cut the price of its confectionery brand Clorets, followed by Halls now, will lead the confectionery division to post its first profit in 2001.
Close on the heels of relaunching Clorets at the psychologically crucial 50 paise price point per unit, against the earlier level of 75 paise, Warner-Lambert has cut the price of Halls by the same margin. "The decision will lead the confectionery division to turnaround and make profits for the first time by the end of the calendar year 2001. We hope to register growth levels of 20-25 per cent this year," says Warner-Lambert India director (confectionery) Mr George Thomas.
The company says that it has witnessed a volume spurt in Clorets subsequent to the pricing initiative undertaken in August this year. "Volumes are up 8 times," comments Mr Thomas on Clorets.
The company now hopes to do a repeat act with Halls whose marketshare eroded significantly after the price was raised to 75 paise in 1997. "Halls was not able to generate the kind of volumes we had predicted," admits Mr Thomas. The price mark-up led to a 40 per cent erosion in marketshare which came down to 27 per cent. "The only reason could have been pricing, as Halls did not suffer from lack of awareness. Its awareness levels are as high as 90 per cent," opines Mr Thomas.
The company has also changed the packaging of Halls to align it with international graphics and make it holographic. "Nearly 15 per cent of the brand's volumes were impacted by counterfeit products. Thus we decided to introduce Halls in holographic packs," says Mr Thomas.
Substantiating more on the pricing issue, Mr Thomas said: "Conceptually we got it wrong on Clorets. It is price that drives the market in hard-boiled sugar confectionery. The market was not quite ready for a higher price. We realised that price points still drove volumes. The critical decision thus was to get back to the 50 paise price point."
After committing mistakes in the past while dealing with the critical `P' of marketing, i.e. Pricing, it was time to rectify it. Warner Lambert has been in a phase of restructuring since the beginning of 1999, to accomplish the same.
For one, the company decided to get focused in hard-boiled confectionery and it has withdrawn the chewing gum brand Chiklets from the market. The company does not intend to get into chewing gums. "While a number of gum brands were being launched in the market and were doing well, we realised that the trick worked with kids as the target consumer. Chiklets, on the other hand, was targeted at youngsters," says Mr Thomas.
"It is a difficult balance in the confectionery market to be present in all the categories of gums and hard-boiled confectionery," states Mr Thomas. The hard decision to call back Chiklets was taken last year; hard, because the the brand drew nearly 35 per cent sales in the north.
Perfetti was an exception in this field. It is one player that is present across the confectionery category and has tasted success.
Even as Warner-Lambert bled money into the gums business, it was like pushing water uphill, says Mr Thomas. There was an urgent need to take some tough decisions.
The company also had a free hand with advertising spends in the past. In a market where the category size is not huge, a high expenditure on advertising is usually avoided.
Warner-Lambert has scaled down ad budgets from an average of Rs 17-18 crore during 1997-98, to Rs 6-7 crore now. Not only were ad costs lowered, the company also decided to call back stockists and realign its sales network. "There was no point being proud of the fact that we are a national player. We decided that it was best to get focused regionally and get the house in order," says Mr Thomas. The number of stockists has been reduced from some 2,000 odd to 600 today. The move has paid off well for Warner-Lambert. Inventory levels have come down from the earlier levels of 18-20 weeks to the present 2-3 weeks.
With back-end operations in order and running smooth, Warner-Lambert is now devoting more time to product initiatives. It is action time at the product front. There is a new brand in the pipeline, slated to be launched next year, informs Mr Thomas. Besides, a couple of new variants are waiting to hop onto the retail outlets.
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.