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VOLUME 03BEACON ISSUE 05MAY 2015

ContentsABOUT US

OUR TEAM

INDUSTRY ANALYSIS

COMPANY ANALYSIS

BRAND ANALYSIS

CONCEPT OF THE MONTH:BALANCED SCORECARD

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OUR PRESENCE

ABOUT US

VISION

The SIMCON - SIMSREE consulting club is an initiative started in 2012 for those students in pursuit of excellence in management consulting and strategic management. Aimed at creating awareness among the students about consultancy as a discipline, the club strives to maintain strong relations with top consultancy firms and provide platform to craft highly skilled & competent consultants from SIMSREE. The club is a resource for information about consulting and a place for students to obtain real-world consulting experience.

SIMCON provides an avenue of interaction among faculty, students and alumni through competitions, live projects, guest lectures, and conclaves. For this purpose the club has also been publishing its monthly newsletter – BEACON (BE A CONSULTANT) and maintains a FACEBOOK PAGE where latest news and development in the consulting industry are posted.

MISSIONTo create awareness amongst the students about consulting industry & its latest trends.

To maintain strong relations with top consultancy firms.

To provide platform to craft highly skilled & competent consultants from SIMSREE.

To provide exposure to students via competitions, live projects, guest lectures & conclaves.

Contributions invited:To make this feature a successful effort, we seek continued involvement and contribution from our readers, that is YOU. We invite articles, research papers, and trivia on themes related to consulting. Be it industry news, consulting trends, a joke, a cartoon or feedback, we are eager to hear from you. So go ahead, do your research, pen down your thoughts and mail your entries to simcon.simsree@gmail.com.

Best Regards,SIMCON - SIMSREE CONSULTING CLUB

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OUR TEAM

SANANDAN DESHPANDE

NIKHIL RAO

AMEYA MAHABAL

CHITRA WANI

deepesh jethwani

krishna nain

prathamesh indani

Sushil Gurav

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PHARMACEUTICAL INDUSTRYINDUSTRY ANALYSIS

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IntroductionThe Indian Pharmaceutical sector has seen rapid growth in the last few years. Many industry reports show that the pharmaceutical sector has been growing at the rate of 13-14% every year since the last five years. The previous financial year was challenging on the domestic front and witnessed sluggish growth mainly because of strong competition from unlisted players.

There has been a huge shift in the attitude of people in India towards healthcare. Exponential rise in cases of cardiovascular problems, diabetes, nervous system disorders and many other diseases as well as disorders has created more awareness in the growing population about the need of improvement in medical sector. Hence, there is a great need for pharmaceutical companies to invest their time and resources in research and development of new cost effective drugs.India has its own organized pharmaceutical market and it is being considered as a potential partner by other countries. The Pharmaceutical Market in India is ranked 3rd in terms of volume and 10th in terms of market value. Indian pharmaceutical companies are also proving to be global leaders in production of generics and vaccines.

Market SizeAccording to India Ratings (a Fitch Group company), the Indian pharmaceutical industry is estimated to grow at a compound annual growth rate of 20% over the next five years and is expected to reach USD 55 billion by 2020.

India's biotechnology industry encompassing pharmaceuticals, services, agriculture, industry and informatics is growing at an average rate of about 20% and may reach the USD 7 billion mark by the end of FY15. Bio-pharma which comprises of vaccines, therapeutics and diagnostics is the largest sector contributing about 62% of its total revenue, amounting to over USD 2.03 billion.

Besides the domestic market, Indian pharmaceutical companies also have a large chunk of their revenues coming from exports. Some are focusing on the generics market in the USA, Europe and semi-regulated markets whereas others are focusing on custom manufacturing for innovator companies. With increased focus on patents, Indian pharma companies have raised their R&D expenses. The companies are spending more to establish niche product portfolios for the future.

Consolidation has increasingly become an important feature of the Indian Pharmaceutical Market. The recent deals which include Sun Pharma acquiring Ranbaxy, merger between Wyeth and Pfizer, Strides selling its injectables arm and so on are the classic cases.

Revenue share of Indian pharmaceutical sub-segments:

Indian pharmaceutical market segments by value:Others

Anti diabetic

Pain/analgesic

Respiratory

Vitamins, minerals

Gastro-intestinal

Cardiovascular (CVS)

Anti-infectives

11%

8%

29%

7%

13%

16%

7%

9%

Porter’s 5 Forces Analysis1. Bargaining Power of Suppliers:

Low because there are many suppliers and the cost of switching suppliers isn't very high. Raw materials/chemicals constitute a major cost and suppliers cannot opt for higher margins as there are many alternative options in the market.

Patented Drugs

OC Medicines

Generic Drugs

72%

19%

9%

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2. Bargaining Power of Buyers:

Medium as the buyers (patients) of the pharmaceutical products are directly dependent on the influencers (doctors in this case) for the brand of pharmaceutical product that they have to buy. However, the Government has National Pharmaceutical Pricing Authority which keeps a control on the pricing.

3. Competitive Rivalry:

High because it is a Very fragmented industry where the top 300 of 24,000 players involved in manufacturing account for a large portion of sales. Top 20 companies account for 60% of sales in the Indian Pharmaceutical Industry; which is an indicator of a skewed market.

4. Threat of Substitutes:

Low as the substitutes that exist are alternative medicines and treatments particularly prevalent in the eastern culture are of poor quality and their effectiveness is not well established. Within the industry, biotechnology could prove to be a threat to synthetic pharmaceutical products.

5. Barriers to Entry:

High as it is impacted by factors like licensing issues, distribution network, patents, high initial investment, getting approval for setting up plants by regulatory authority, etc.

Government InitiativesThe new Government has led initiatives such as the Jan Aushadhi, Pharma Vision 2020 and making India the Drug Discovery and Global Pharma Innovation Hub by 2020, which has yielded a positive impact on the sector.

In the domestic market, generic drugs are expected to fuel growth in this fiscal year in support from the 'Jan Aushadhi' campaign. As part of this initiative, the Government will make low cost generic drugs available from 1st July, 2015. It intends to procure these medicines in bulk from public and private drug manufacturers and rebrand it as 'Jan Aushadhi'.

The Government of India has come up with the 'Pharma Vision 2020' program which aims to make India a leader in end-to-end manufacturing of drugs. It has reduced approval time for new facilities to boost investments. It has also put in place mechanisms such as the Drug Price Control Order and the National Pharmaceutical Pricing Authority to address the issue of affordability and availability of medicines.

On 1st February 2015, 100% FDI was allowed through the automatic route for the medical devices segment. The updated FDI policy covers medical instruments, diagnostic tools & products and any technology and products including clinical implants. This initiative is expected to boost the manufacturing of medical devices,drive Mergers & Acquisitions and even collaboration to develop new technologies.

The Department of Pharmaceuticals has assigned 2015 as the 'Year of Active Pharmaceutical Ingredients’ in order to emphasize the importance of the sector.

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Challenges in the industryIntellectual Property Rights (IPR)IPR in the Pharmaceutical space has always been a bone of contention across the globe. Initially, India was not in much favor of strong IPR protection as it would have made healthcare unaffordable for the masses because of lower household income. As per Indian Patents Act of 1970, only processes and not products could be patented which meant that a rival company could make the same product using a different process.With time though, the Indian authorities have realized the importance of strong IPR protection for the overall development of the pharmaceutical industry. This lead to an amendment to the Indian Patents Act in 2005 which allowed to patent processes as well as their products.

Compulsory LicensingUnder Indian patent law, there are certain conditions for issuing Compulsory License are intended to prevent a scenario where health of the general public gets prejudiced by the exclusivity which is granted to the product that is being patented.Although compulsory licenses have been viewed as a necessary evil in the developing world countries, they have also caused concerns in the industry because of the revenue loss that they tend to cause.

TrademarkIf there is a degree of resemblance between marks from a design side, or performance side or by sounding phonetically similar to goods of rival traders, it could lead to buying issues – especially with purchasers who are likely to buy goods looking at these factors rather than the exact name.

Rising customer expectations:The commercial environment is getting harsher for the pharmaceutical companies, as healthcare payers continue to impose new cost constraints on healthcare providers and scrutinize the value that medicines offer. The demand for new therapies that are economically and clinically better than the existing alternatives is always increasing, together with real-time results that back any claims about a medicine’s superiority.

InvestmentsThe Union Cabinet in India has given its approval to amend the existing FDI policy in the pharmaceutical sector covering medical devices. It has allowed up to 100% FDI under the automatic route for manufacturing of medical devices subject to specified conditions.The drugs and pharmaceuticals sector attracted

cumulative FDI inflows worth approx. USD 12.8 billion between April 2000-December 2014, according to statistics released by the Department of Industrial Policy and Promotion.Prime Minister Narendra Modi’s ambitious ‘Make In India’ campaign has pharmaceuticals as a key focus area.Here are some of the main investments that have happened/announced in the Indian pharmaceutical sector:• Apollo Hospitals plans to add around 2,000 beds

over the next two financial years at a cost of around USD 24 million

• UK’s development finance institution CDC has invested around USD 48 million in Narayana Hrudayalaya hospitals who will now expand to provide affordable treatment in western, eastern as well as central India.

• Piramal Enterprises has acquired Coldstream Laboratories based in the USA for USD 30.6 million in an all-cash transaction.

• Torrent Pharmaceuticals has got into an exclusive licensing agreement with Reliance Life Sciences for marketing three its biosimilars in India.

• Indian Immunologicals Ltd. (IIL) intends to set up a new vaccine manufacturing facility in Pondicherry with an investment of USD 48.53 million.

The Road AheadThe Indian Pharmaceutical Market is expected to grow to around USD 55 billion by 2020. This growth expectation in Indian domestic market would be a result of increasing consumer spending, rapid urbanization, Government initiatives, raising healthcare insurance and many other factors. Moving forward, growth in domestic sales would depend on the company capabilities to align their product portfolio towards therapies for diseases such as cardiovascular, diabetes, depressants and cancers. New SMEs (small and medium enterprises) are also likely to play a substantial role in the growth of India's pharmaceutical sector. Global players could explore opportunities in India by outsourcing research-based capabilities, licensing to establish a common platform to create a complete therapy range, franchising and joint ventures to associate with domestic players and use local talent and expertise to get quick government approval and function better.

ReferencesBrand India Pharma, IBEF, Equity Master, PWC, Financial Express, Make in India, DNB, Pharma Biz

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SUN PHARMACOMPANY ANALYSIS

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Company OverviewSun Pharmaceutical Industries Ltd is a multinational pharmaceutical company incorporated in 1983 as a partnership firm by Mr. Dilip Shanghvi & his family. Headquartered in Vadodara, Gujarat, Sun manufactures and sells APIs (Active Pharmaceutical Ingredients) and pharmaceutical formulations. It has a highly complementary and diverse portfolio of generic and specialty products that target various segments like cardiology, neurology, ophthalmology, oncology, psychiatry and various others. Sun Pharma has a market share of 9.1% and sales growth of 13% versus the average industry growth of 10%. The recent acquisition of Ranbaxy has made Sun Pharma the largest pharmaceutical company in India and 5th largest generic company globally.

Journey Of The Company

Top ManagementName DesignationIsrael Makov ChairmanDilip Shanghvi Managing DirectorSudhir V. Valia Executive DirectorSailesh T. Desai Executive DirectorHasmukh S. Shah Non-Exec Ind DirectorKeki M. Mistry Non-Exec Ind DirectorAshwin Dani Non-Exec Ind DirectorS. Mohanchand Dadha Non-Exec Ind DirectorRekha Sethi Non-Exec Ind Director

Shareholding Pattern

Others

Private Corporate Bodies

Banks/ Financial Institutions

General Public

Foreign Institutions

Promoters

64%

22%

5%4%

3% 2%

(As on 31st March, 2014)

Competitor Analysis (All figures in Rs billion as on 31st March 2014)

Name Market Cap

Revenue Net Profit

Total Assets

Sun Pharma

2273 166 31 294

Lupin 730 114 18 102

Dr. Reddy's Labs

598 98 19 120

Cipla 552 103 14 134

Aurobindo Pharma

395 81 12 95

Competitor Profiles1. Lupin• Founded in 1968 and headquartered in Mumbai,

Lupin is a transnational pharmaceutical company ranked 3rd largest (by revenue) in India that produce wide range of generic formulations, biotechnology products, APIs.

• Lupin showed a growth of 40% in profits in the year 2014 as compared to profits of Rs 13141.6 million in 2013.

• It has recently announced acquiring 100% stake in Medquímica, a Brazilian pharmaceutical, which marks its foray into the Brazilian markets and had also acquired Laboratories Grin in Mexico last year.

2. Dr. Reddy’s Labs• It is a Hyderabad based multinational

pharmaceutical company that provides medicines and services in Europe, North America and emerging markets of South America, Asia and Africa.

• Generic formulations being their biggest business, they also offer APIs, pharmaceutical services, biosimilars and proprietary products.

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• It has recently launched Somazina in India, used for treatment of stroke or cerebral infarction.

3. Cipla• Incorporated in 1935, Cipla has over 1500 products

in various therapeutic categories and presence in over 150 countries. It is the largest manufacturer of antiretroviral drugs in the world and had launched World's first oral iron chaletor in 1994.

• In 2014, its revenue increased by about 22% but witnessed a drop in profits by 10% as compared to the previous year.

4. Aurobindo Pharma• Founded in 1986, Aurobindo Pharma has its

presence in therapeutic segments like anti-retrovirals, neurosciences, anti-diabetes, cardiovascular, gastroenterology, etc. It exports its products to over 125 countries and generates around 70% revenue from International operations.

• In 2014, its consolidated revenue increased by 38.3% and made a profit of Rs.11729 million showing a growth of about 300% over the previous year.

Business Segment Analysis1. US Generics• Revenues from this segment showed a growth

of 59% in the year 2014 which was mainly due to full year consolidation of the DUSA and URL acquisitions and increased contribution from Complex Generics.

• Revenue contribution increased to 60% in 2014 compared to 54% in 2013.

• The strong pipeline of 134 ANDAs will be a key contributor to future growth.

2. India Branded Generics• In spite of implementation of new pricing policy,

revenues from India branded generics witnessed a growth of 25% from Rs. 29657 million in 2013 to Rs. 36918 million in 2014.

• Revenue contribution from India reduced over the past year from 26% to 23% because of remarkable growth in the US business and favorable currency that helped boost the export revenues.

• It is the 2nd largest domestic drug maker by market share and launched 16 products in FY14.

3. International Generics (Except US)• Revenues increased to Rs 19084 million in 2014

showing a growth of 25% compared to 2013.

• Segmental revenue contribution declined marginally from 14% in 2013 to 13% in 2014 despite good overall growth because of strong US revenues which increased the US contribution remarkably.

• Sun supplies its products to 48 international markets and plans to replicate its product portfolio in emerging markets as well.

4. Active Pharmaceutical Ingredients (APIs)• Revenues from this segment witnessed a growth

of 6%, from Rs. 7549 million in 2013 to Rs. 8148 million in 2014. Revenue contribution from this segment fell to 5% in 2014 as compared to 7% in 2013.

• Sun Pharma manufactures over 170 specialty APIs and scales up over 25 processes annually. The API business provides competitive advantage to the company's formulations business, especially for the US market.

Swot Analysis

Key FinancialsThe consolidated revenues for the year 2014 grew to Rs. 162 billion showing a growth of 42% over the previous year while the EBITDA grew by 45% to Rs. 71 billion. As per Sun Pharmaceuticals Industries Ltd Annual Report 2013-14, this strong performance was a result of increased contribution from complex generics, strong profitability at Taro and favorable pricing of some products. The acquisition of Ranbaxy is likely to enhance the performance of Sun Pharma in the key markets.

• Global footprint- Products sold in over 150 countries across 5 conti-nents• Expertise in relatively complex generic pharmaceuticals • Low cost generic portfolio• Brand recognition in emerging markets• Successful add-on acquisitions• Sales and marketing force of 12000+

• Limited presence in European countries• Implementation of the new pric-ing policy and related trade channel disruptions.

• Further increase their growth by leveraging on the acquisitions• Increasing health awareness in both rural and urban India • Growing health insurance cover-age and rising spend on health care- Health expenditure was 2.67% of GDP in 2011 which increased to 4.1% of GDP in 2014

• Stiff competition in generic mar-kets from other low-cost rivals like Lupin, Dr. Reddy's Labs, Cipla that allow limited market share growth• Exposed to foreign currency fluctuations- Sun being an exporter of pharmaceutical products, its profitability could decline because of adverse currency movements

Strengths Weaknesses

Opportunities Threats

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Particulars FY11 FY12 FY13 FY14Net Profit (in Rs m)

18161 26567 29831 31414

ROCE (%) 20.3 23.8 26.7 27.6ROE (%) 21.0 23.8 25.7 30.9EBITDA Margin (%)

34.1 40.6 43.7 44.5

D/E Ratio 0.04 0.02 0.01 0.13Dividend (in Rs m)

2847.3 3523.7 4401.2 5175.4

Dividend payout ratio

0.1568 0.1326 0.1475 0.1647

EPS (in Rs) 17.5 25.7 28.8 15.2

As can be seen from the graph, there is a consistent improvement in the gross margin which reflects the company’s ability to manage its operations in an effective manner. This performance is also visible from the increasing EBITDA margin.The dividends paid have increased over years which is a sign of the company’s strength and that the management has positive expectations for the future earnings. Earnings per share decreased in 2014 as compared to the previous year in spite of increase in PAT since the company issued bonus shares to the shareholders in the ratio of one equity share of Re. 1 for every share held.

New Developments• Sun Pharma bought Ranbaxy from Daiichi

Sankyo, the 2nd largest pharmaceutical in Japan, for $3.2 billion in April 2014 and as a part of the deal, Daiichi Sankyo got 8.9% stake in the new entity. Recently, Daiichi Sankyo has decided to exit from Sun Pharma by selling entire or part of its stake for around Rs. 18000 crore in block trades at the stock market. After this sale, Daiichi Sankyo will no longer remain a major shareholder in Sun Pharma but its existing business partnership with Sun will remain the same.

• After the acquisition, Sun Pharma is reportedly considering an investment of about $300 m in R&D this year and that the integration would deliver synergies of worth about $250 m.

• According to bankers and analysts, Sun Pharma is most likely to opt for a biomedical deal as it lags behind in this field as compared to its domestic rivals Dr. Reddy's Labs and Biocon Ltd.

• Sun Pharmaceutical Industries Ltd and the Technion- Israel Institute of Technology have formed a research collaboration for developing new class of oncology drugs. This step is one of the many initiatives that Sun Pharma has taken in order to enhance its specialty pipeline

• Sun Pharma announced in March'15 of buying GSK's Opiates business in Australia. This acquisition is a part of their strategy towards building their portfolio of opiates and also to access strong capabilities in this segment.

ReferencesSun Pharma, NDTV Profit, Economic Times, Annual Reports - Sun Pharma; Lupin; Dr. Reddy's Labs; Cipla; Aurobindo Pharma, Sun Pharma Press Releases, Hindustan Times, Asian Scientist, IBEF

0

10

20

30

40ROE ROCE

FY14FY13FY12FY11

20.3

23.8

26.7

30.9

21.0 23.8

25.727.6

The upward trend in ROCE shows that the company is effectively and efficiently using the employed capital as compared to the previous year. The increasing ROE should make the company more lucrative for stockholders.Margin Comparison (%)

0

10

20

30

40

50

60

70

80

90

FY14FY13FY12FY11

34.1

79.581.5 82.6

74.4

40.643.7 44.5

31.7 33.2 31.235.4

Gross Margin

EBITDA Margin

Net Pro�t Margin

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KELLOGG'SBRAND ANALYSIS

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Kellogg’s was the outcome of a failed attempt at making granola bars. Today, after more than a century, the brand still stands tall, amidst all the competition, leaving a significant mark in the breakfast & packaged foods industry, with a $23.5BN market capitalization(as of May 2015.)

Kellogg’s Origin & Growth Over The YearsIn 1989, W.K.Kellogg along with his brother, Dr. John Harvey Kellogg was attempting to make granola bars. This led to the invention of flaked cereals through flaked wheat berry. Consequestly this laid the foundation for W.K.Kellogg’s constant endeavor to flake corn, & thus was created Kellogg’s Corn Flakes.

In the year 1914, Kellogg’s expanded its base beyond the United States boundaries & stepped into the neighboring Canada. Kellogg’s were able to succeed well in both US & Canada, despite stiff competition from many other cereals available back then. It was during this time, when Kellogg’s steered away from the trademark Corn Flakes, & ventured into making Bran Flakes, followed by Kellogg’s All Bran.

During 1920’s it started supplying flakes to England & built a plant in Sydney, Australia as well. It was during the 50s & 60s that the company launched multiple cereals such as Kellogg's Corn Pops, Kellogg's Frosted Flakes, Kellogg's Honey Smacks, Kellogg's Cocoa Krispies, Kellogg's Special K, Kellogg’s Froot Loops, Kellogg’s Apple Jacks, Kellogg’s Frosted Mini-Wheats, Kellogg’s Bran Buds, to name a few. These years also were the expansion years with Kellogg’s expanding into Mexico, New Zealand along with opening facilities in South America, Canada, Scandinavia, Europe & Asia. (Click here to watch one of the first few TV commercials circa 1964)Through the 80s, 90s & 2000s, the brand grew leaps & bounds to reach around 180 countries, with manufacturing facilities in 18 countries.

W.K.Kellogg: Inventor & Founder of Kellogg’s

Around 1906, the company was founded by the name of “Battle Creek Toasted Corn Flake Company”, & along with 44 hired employees, the first ever batch of Kellogg’s Corn Flakes was created. Brand Portfolio

With over a century behind it, the brand has multiple Brand Extensions & Line Extensions to its credit. The Below image shows the current brand portfolio of Kellogg’s across the globe:

One Of The Original Packages of Kellogg’s Corn Flakes

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Positioning:1) In India, Kellogg’s has not been positioned as a mass product. It appeals to cater to the upper middle class & the upper class, especially the working adults or the two-working parents & two children family.2) It was initially positioned as a breakfast item, but never clicked in India to that extent. Eventually it found a place in the Indian home & has been trying to positioning itself as an evening snack for children when returning from school or a healthy alternative for hunger pangs.

Marketing by Kellogg'sKellogg’s has traditionally been using TV & print for spreading word about its products. Listed below are a few different methods adopted for marketing their products along with ATL & BTL activities undertaken:I) Kellogg’s Special K:Despite being in the market for a long time, Kellogg’s Special K seemed to have lost its touch with the younger generation. In order to reach out to the new generation & renew Special K as a significant “diet cereal”, Kellogg’s reached out to women around United States. The brand wanted to go beyond being a brand that promoted certain body figures & aimed at making women realize the significance of a nutritious diet. The Ads were shown to various women & it was very well received & globally launched. (Click here to watch 2 ads showing special K).

II) Crunchy Nut Restaurant:In 2012 & 2013, Kellogg’s decided to open a Crunchy Nut Restaurant in Manchester Arndale Shopping Centre in UK. In 2013, the restaurant served 9,049 consumers over a 12 day period. Most of the stuff was free & around 8000 50% off coupons were distributed. Customers were invited to leave a feedback on social media channels (Click here to learn about the same).

0

3000

6000

9000

12000

15000

2010

Brand Value Kellogg’s($Mn)

2008 20092007 2011 2012 2013 2014

9431 971010428

11041 1137212068

12987 13442

Kellogg’s has spread across from packaged breakfast flaked corns, to snacks & frozen food. Though all the above mentioned products are not available across the globe in various countries, they are spread out depending upon the geographical region. Currently Kellogg’s is ranked at rank 32 for the year 2014 by Interbrands. Its brand value can be seen in the graph:

STPSegmentation: 1) Kellogg’s, although a standard product across United States, in India, is viewed as an Upper Middle class or Upper Class product owing to its price range. The company thus, does not have multiple product options within each product. 2) Though across the globe, Kellogg’s was available in small package SKUs, it was launched years after its entry into India.

Targetting: Kellogg’s has distinctly divided the Indian audience as below:1) Children: With products like Chocos & Fruit Loops, the target audience was children.2) Working Adults : For most working adults, breakfast being the crucial meal which is always taken on the run, Kellogg’s launched many a flavoured variety of Kellogg’s( such as Strawberry, Vanilla+Chocolate) etc. to cater to the Indian sweet tooth.3) Special K: With the younger generation moving towards a healthier lifestyle, Kellogg’s launching Special K as a product to replace staple food as a healthy meal came as a good move. The target audience was shown to be the young working generation.4) Oats & Muesli: This product caters to the health conscious & is the alternate for cornflakes as provided by the company.

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III) Crunchy Nuts Granola 2-Stage Door-Drop Sampling Campaign:In 2013, the Crunchy Nuts Oat Granola product was promoted in UK using a 2-stage door-drop sampling campaign. The first stage consisted of door-drop of branded bags to 907435 targeted homes in 1014 postal sectors (carefully selected as to target an audience of 18-45 age group). These bags offered the consumer a free pack of CNOG, and to accept they had to tick a box and leave the bag on their door-step for the following morning. The second stage of the campaign consisted of filling the bags (of households who had chosen to opt-in) with a free full-size packs of Crunchy Nut Oat Granola. The campaign was a success with the below figures justifying the same: 6.4% repeat purchase by existing customers, £155.500 of extra sales & 64.800 in units.

Social Media PresenceKellogg’s has been using Twitter, Pinterest & Facebook profusely for promotions & campaigns. On Facebook, Kellogg’s has multiple pages for multiple of its products, rather than a single page for the brand. Hence it uses the various pages to achieve its sales and promotion.

On Twitter & Pinterest Kellogg’s has been running various campaigns. A few successful & a few which had to be retracted. Listed below are a few of the campaigns.

A) Pay For Eats With Tweets:Kellogg’s Tweet Shop was opened in SoHo in London. It sold Special K Cracker Crisps. The shop employed girls dressed in the same red colour dresses as the ones shown in the advertisements, thus keeping with their brand consistency. The catch here was that the customers didn’t have to pay for the crisps with cash. They could tweet one out the three tweets listed below in return for the crisps.

Tweet 1: Guilt-free snacking with new, moreish Special K Cracker Crisps. Only 95 calories per bag #tweetshop #sponsTweet 2: Special K has gone savory! 3 flavors to try: sea salt and balsamic vinegar, sweet chili, sour cream and chives #tweetshop #sponsTweet 3: Love new Special K Cracker Crisps- everything you want from a crisp, nothing you don’t #tweetshop #spons(Click here to view the video).

B) Open For Breakfast Campaign: (Click here to view the video)Kellogg’s launched the Open for Breakfast campaign in the US earlier this year.The company describes the initiative as an "open forum in the digital and social media space to hear what’s on peoples’ minds and share stories about Kellogg’s branded food, its commitments to communities around the world and its pledge to care for the environment."

The company is inviting consumers to engage with the brand by asking questions through social media & openforbreakfast.com. The company is also using this platform to highlight facts & statistics about the nutritional benefits of their products.

C) “Kellogg’s Waale Guptaji Ki Family” Campaign:The campaign has a series of short videos displaying 100+ customized recipes that use Kellogg’s Corn Flakes. It caters to various dishes, in turn catering to various audience & customer age groups. It incorporates the ability to customize cereals into any recipe & eventually find a niche spot in the Indian breakfast menu. It is a 360 degree digital campaign leveraging Youtube, Facebook & Twitter. These ads are also showcased in digital TVs such as Tata Sky, thus increasing the outreach. (Click here to view various videos for this campaign).

Kellogg’s In IndiaWith the GOI opening India for foreign investments in India around 1992-93, in 1994 Kellogg’s invested $65 million to tap into a completely untapped market of 250 million middle class population. It was said back then by Bhagirat B Merchant (the then director

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0.0

0.5

1.0

1.5

2.0

2.5

3.0

2010

Brand Philanthropy Kellogg’s($Mn)

2011 2012 2013 2014

2.9

2.5

2.1

2.6

2.1

are equipped & trained to hand sanitizers & scissors to the customers too. The campaign was a huge hit owing to the combination of Right Target Audience, Right Intervention & Right Partnership.

Kellogg’s Failed AttemptsApart from the well-known debacle of Kellogg’s in India in its initial years, one of the most talked about failure for the brand is of “Breakfast Mates”. Trying to hitch a ride on the packaged easy combo meals in 1998, Kellogg’s decided to launch Breakfast Mates, a portable cereal+milk combo. Breakfast Mates were small boxes of 4oz servings of Milk in an aseptic box along with cereals & a plastic spoon. The principle behind this was to improve convenience for kids to fix breakfast all by themselves. With $30million spent on ads (both TV & print), the product was launched. (Click here to view the breakfast mates ad ).

The product ad left many unanswered questions. It didn’t speak about the milk being warm if kept outside (US, unlike India, preferred cold milk with its cereals as it was that which kept the cereal flake crispy longer), how does it fare compared to regular cereals, etc. The ad showed kids making the breakfast at home & not on the run or at school, thus sending out mixed & wrong messages in their ad. Thus Kellogg’s could never market Breakfast Mate as a convenience product.

Social ResponsibiltyMentioned below is the Brand Philanthropy as stated as by the Kellogg’s Corporate Resposibility Report:

of Bombay Stock Exchange & an Indian Economic Expert) that, “Even if Kellogg’s has only a two percent market share, at 18 million consumers they will have a larger market than in the US itself.”

With a big media launch, initial sales portrayed a promising image for the company. But these turned out to be novelty purchases & didn’t result in repeat purchases. The idea of eating a cold breakfast without any vegetables etc. was completely new in India. Apart from this, the price being exorbitantly over the regular grocery purchase cost lead it to be a one-time buy with no repeat purchases. This along with cultural unacceptance of a cold & bland breakfast left Kellogg’s to ponder its India strategy.

In 1997, Kellogg’s finally grabbed the Indian pulse & launched Frosties (sugar coated sweet cereals). Even the company was taken aback with dismay at the sheer change of its sales. After this, Kellogg’s reduced the prices along with introducing wider SKUs to cater to the customer needs. Apart from this, the brand decided to reposition itself as a regular fun breakfast choice rather than the previous niche, premium product. It tried to cater to the difficult Indian palette by suggesting accompaniments such as yogurt & pistachios, almonds etc. for the cornflakes. This lead to Kellogg’s customizing the century old product to cater to Indian tastes and consumers.

With a near about market share of 70% & growth rates of nearly 30%, Kellogg’s has established itself as a major cereal manufacturer in India. Presently it sources all its raw material, including the packaging materials all from India itself. In order to give a fight to international competitors like Dr. Oetkar & PepsiCo in India, Kellogg’s has expanded its distribution network by nearly 50%.

Over a span of years, owing to the changing trend of people to move towards reduction of carbohydrates & sugars, Kellogg’s has reduced the sugar content in its products in comparision to their original formulations to an average to 20-25%.

ReferencesForbes, Warc, Kellogg's CSR, Business Insider, TranslateMedia, UIOWA, About Kellogg's, Kellogg's History, BusinessCaseStudies - Kellogg's Marketing Mix, Kellogg's New Product Development, MediaPost, MainStreetHost Blog, InsideIIM

Recently in collaboration with Meru cabs, Kellogg’s launched “Anaaj Ka Nashta” campaign. This was a BTL activity run only through cab advertising. It was a free anaaj ka nashta packs for any cab pick-up between 5AM till 9AM. The pack consists of a Kellogg’s Muesli packet along with 100 ml milk carton. The cab drivers

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BALANCED SCORECARDCONCEPT OF THE MONTH

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IntroductionToday businesses are in a mode of transition as they transform themselves for information based competition. In such a scenario, a firm’s ability to exploit its intangible assets has become more decisive than its ability to manage & invest in its physical assets.

Balanced Scorecard is a framework which is used for tracking vital components of a firm’s strategy as well as facilitating organizational improvement or change. The balanced scorecard framework was created so as to supplement traditional financial measures with certain criteria’s that measured performance of three perspectives in addition to the financial aspect – • Performance of customers• Performance of Internal business processes• Performance of Learning & Growth By measuring metrics other than the typical financial metric, the framework helps companies to keep focus on long term strategic goals and spot problems before they appear in the financial statements. The scorecard

is not a replacement for the traditional financial measures but is its complement.

Companies are using Balanced Scorecard for – • Clarifying & updating strategy• Communicating the strategy throughout its

workforce• Aligning the individual & team’s goal with the

strategy• Linking strategic objectives to annual budgets &

long term targets • Identifying & aligning strategic initiatives• Conducting regular performance review, helping

in improving the strategy

The managers who use the balance scorecard do not have to rely on short term financial measures as the only indictor of their firm’s performance. The scorecard enables them to introduce four new processes of management that, in combination as well as separately, contribute to linking short term actions with long term strategic objectives.

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Translating The Vision• The first process helps the manager to build a

consensus around the company’s strategy & vision. • Despite the best of intentions of the key decision

makers in a firm, lofty statements like becoming the ‘number one’ or ‘best in class’ does not easily translate into operational terms that can provide useful guide to action at the local level.

• These statements must be expressed as a set of measures & objectives that describe the long term drivers of success

Communicating & Linking• This process lets managers communicate their

strategy across the organization as well as link it to individual & departmental objectives

• The scorecard gives managers a way to ensure that the long term strategy is understood by all levels of the organization and the individual objectives are aligned with the long term strategy

Business Planning• This process enables companies to integrate their

financial and business plans. Majority of the organizations have a variety of change & training programs for senior executives. But the executives find it difficult to effective integrate these diverse initiatives to achieve their strategic goals

• However, when managers use the ambitious goals set for the scorecard measures as the basis for setting priorities and allocating resources, only those initiatives which take them towards their long term strategic objectives can be undertaken by them.

Feedback & Learning• This process gives capacity for strategic learning to

the companies• With this scorecard at the centre of the management

system, monitoring short term results from tree additional perspective — customers, internal business processes, and learning and growth— can be done by the company & it can evaluate its strategy with respect to the recent performance

• Thus the balance scorecard enables companies to modify strategies to reflect real time learning.

Today, with the evolution of the balanced scorecard, companies have started employing it as the foundation of an integrated & iterative strategic management system. Few of the renowned companies which use Balanced Scorecard are Philips Electronics, Wells Fargo Bank, UPS, Ricoh, amongst others. It enables a company to align its management processes and focus the entire workforce on implementing the long term strategy. The balanced scorecard gives us a framework for effectively managing the strategy’s implementation at the same time allowing the strategy itself to evolve in response to the changes in the organization’s competitive, technological & market environments.

ReferencesHBR: July-August 2007, Harvard, Bain