"Snob value is important even for a candy brand."

From a small-scale unit manufacturing only candies in the early sixties, Nutrine Confectionery has grown to be a multi-product, multi-market player, which is recognised as the largest manufacturer of confectionery products in India today. At the helm of affairs is Siva Mohan Reddy, who has been in the industry for over two decades now. As the executive director of Nutrine Confectionery Company, Reddy has pretty much figured out what works and what doesn't in this segment. In this interview to Shamni Pande of agencyfaqs!, he explains how to sell to children and why corporate branding is inevitable even if one is looking at six-year-olds for driving sales. Here are some excerpts from the interview:

Edited Excerpts

Today's kids are certainly calling all the shots! And this is visible across industry segments. Very often, families actually consider buying a certain car because the kids have managed to impress upon their parents that their friend's father drives the same car. There has been a major change in the way we view parents. Earlier, the 'father' was an authoritative figure and controlled all purchases and expenses completely. This has changed today. The father is a friend, hero and a relatable figure in the family. With this change in relationships, kids are certainly getting to exert their influence more.

I may have to disagree on this. Nutrine is a name that most of us have grown up with. It was set up in 1953 by the late BV Reddy and, to this date, the company is run by the Reddy family. Though run by the family, we have been catering to our target group pretty effectively. This is evident from our volumes. For some, anything new is exciting. But the proof of the pudding is in the eating and we have been doing well even during the toughest of times.

One reason for the image problem we have may be that we are not present in chocolates, the most exciting of confectionery products. But our chocolate Eclairs brand is growing well. Another product we launched recently - Honeyfab at Re 1 - has picked up good volumes.

The growth of our Kokonaka and Honeyfab brands as well as our Eclairs has given us a lot of hope. Give us a couple of months and we will come up with one or two winners.

According to ORG-Marg, in value terms, the market is around Rs 990 crore. In volume, it stands at 1.1 lakh to 1.3 lakh tonne per annum. Of this, the unorganised sector accounts for 53 per cent. Our overall market share is 25 per cent. The individual brands stand like this: Maha Lacto has 12 per cent, Eclairs has 16 per cent, Aasay has 6 per cent, and Kokonaka 5 per cent.

Totally, we have around 19 products in the market at various price points. Some of these are available nationally, while others are regional brands. In fact, our greatest strength has been the ability to impact the market at the critical 50-paise price point with good brands. The other is our ability to create regionally strong brands.

For instance, we launched the Naturo fruit bar (priced at Rs 4) nationally last year. In the Re 1-slab we have Honeyfab, Doublehit and Nutrine Lollipop. In the 50-paise category, we have Maha Lacto, Kokonaka, Eclairs, Mango Crème, Nutrine Gold (available in the markets of the east), Caramella, Aamras, Gulkand, Wild Koffy (available in the markets of the south), and Kokonut Crunch (which was relaunched recently). In the 25-paise category, there is Aasay (in the southern markets), Dishum (for the northern and western markets), Lacto Bon Bon (southern market), Orange Candy (south and western region), and Coconut Bon Bon (southern region).

We have to fight clutter not just in media, but also at the wholesale and retail level. Ever since the Budget 2000, which saw the excise duty go up from 8 per cent to 16 per cent, the share of the unorganised sector has actually grown from 50 per cent to 65 per cent. Hence, there is a fight to grab space at the level of the stockist, who in turn gives it to those manufacturers that can afford higher margins.

So far as visibility is concerned, we start right from the level of shelf-space attention. Thus, media for us starts with the laminated printed pouches. We were the first to do this way back in 1998, at the same time that Alpenliebe began grabbing attention. Hence, our efforts start right at the shop floor with attractive jars, point-of-purchase displays etc. Also, we have figured that the unorganised sector operates strongly only in rural areas, the peripheral towns. This segment is not too strong in shops and department stores. Hence, in rural regions, our strategy has been to counter unorganised players with low-priced products. In urban areas, we counter it with quality products and attractive packs and by using media that reaches children.

Television is the media that reaches my target audience most effectively. We also use children's magazines such as Chandamama and Funworld occasionally. Even in television we go for channels that attract my target audience and their families. We rely heavily on direct interaction with children. We have reached nearly 3,500 schools nationally by sponsoring quizzes, dramas, inter-school competitions etc. We sponsor sports events for children too.

For products such as the Naturo, where we are looking at teenagers, the approach is slightly different. We try to reach them through friendship clubs and the usual youth hangouts. For Honeyfab, we also look at adults, as they are the people who are aware of the taste and goodness of honey. But then, all activities do not happen at the same time. They are spaced out according to the requirements and their respective sales performances.

After much thought and analysis on this, we realise that product differentiation is the real key to hold consumers. Taste and the ability to deliver consistent quality are absolutely crucial to the success of any product.

I will give you an example. We have Maha Lacto, the largest selling brand. Then there is Lacto King from Parry's Confectionery; Lacto No 1 from Joyco; Super Lacto and Lacto Luv from some other organised player. Besides, there are innumerable look-alikes, duplicates and wannabes. What makes us No 1 is our consistent taste, which is the key differentiator for our brand.

After product differentiation comes pricing as most confectionary products are sold at the 25 paise, 50 paise or Re1 slots. In betweens don't work. Among other factors are technology to improve the product, and promotions that help keep up the level of excitement etc.

Our target audience falls in the 6 to 14 age group. It is true that kids actually go out to buy products that have some unique promo or collectible on offer. But we find that this phenomenon is temporary and eventually they tend to settle back to the taste they like most.

For a six-year-old kid it doesn't really matter whether he eats a Nutrine or a Parry's or any other brand. The child is experimenting at this stage and will continue to do so for the next two years. However, after that they figure out what their preference - in terms of taste - is. While they do experiment, most of the time they get back to the taste they are habituated to. In this regard, the slightly older kids - say nine-years plus - are actually driven by what their peers consume and what they think are perceived as cool and acceptable.

Absolutely! Snob value is just as important to a candy brand as it is to any other product. Kids should feel that they are consuming something that other kids also want and consume, especially in group situations, such as birthdays etc.

I have an interesting finding to share. The category of chocolate Eclairs has been growing phenomenally in the last three years. We found that there is great demand for chocolate Eclairs in the rural areas and in small towns. There, kids regard the words chocolate and Eclairs as things that are superior and unique. In fact, without any effort on the part of any player, this segment is growing for everyone.

There are two issues here. One is the investment on promotions and how we gauge its efficacy. Take the example of our own product Aasay, which is retailed only in the three southern states of Andhra Pradesh, Tamil Nadu and Karnataka. After the excise duty changes in the year 2000, we were forced to increase its price from 25 paise to 50 paise. To keep consumers interested in the product we introduced the change in price with some interesting promotions involving free gifts. The product was recording sales of 600 tonne in March 2000 and this was maintained for the next few months. But the moment we withdrew the promotional offer, our sales dipped. Hence, a company has to weigh every penny it spends on promotions and check if the investment is justified by a proportionate, if not additional, growth in sales.

The second issue is, when does one launch a promotional activity? At times it is a pro-active effort to boost the tonnage performance and spread awareness in the market. At other times, the action is purely defensive and done to counteract competitors' moves.