Page 182 - DECO405_MANAGERIAL_ECONOMICS

Unit 11: Monopolistic Competition

Notes

Caselet Market Entry and the Vanilla Syndrome

n most categories of consumer products, there is one dominant segment; glucose in
biscuits, cola in soft drinks, vanilla in ice creams. These are good categories, but the
Isame thing can be extended to other product categories.
Now the tendency is that when a new player wants to enter an established product category,
he automatically looks at the dominant segment first. The MD and CEO, Ashok Jain,
Cadbury Schweppes Beverages India Private Limited, calls it a "Vanilla trap". He explains
this as follows:
“A trap because you, as the new entrant, can never come close to challenging the dominance
of the biggest player in that vanilla segment. So what you get into is a syndrome: "Can I
get two-to-three per cent market share in that segment?” The segment spells sheer volume,
so this share would be larger than 15 per cent of some other segment in the category.
That's where the trap is. The segment's Goliath is so big, you'll get routed, like it or not.
So what do you do instead? I suggest the "blackcurrant route". A route where you take
something else and make yourself dominant there, while getting a foot into the dominant
segment as well (you can't afford not to).
And what'll happen? While people will come for your blackcurrant, they will buy your
vanilla. Your volumes will still come from your vanilla. But for top-of-mind consumer,
the trademark blackcurrant is what will identify you. This is theory. It's happened. I'll
give you three examples.
When Cadbury India decided to extend to biscuits, it started off by challenging Parle in
glucose, a segment where Parle's strength is unmatched. Cadbury didn't succeed. By the
time it launched chocolate biscuits, it was too late.
There was a lesson here, which was extended to ice creams, the next category Cadbury
entered. The brand, Dollops, harped on its blackcurrant ice cream, didn't talk vanilla at all,
but the volumes came from vanilla anyway.
Then take Britannia. For years, it tried to break Parle's dominance in glucose biscuits, with
little success. It then went in for a number of branded products that gave it an aura and
gained it respect and attention. Little Hearts was so different, it gave Britannia distinction.
And then, the company launched Tiger, a glucose biscuit. Tiger is now a very large brand
in the glucose segment.
You've got to have something that's very specially your own. Otherwise, the consumer
won't pay you much attention and the trade won't want to stock your products – why
should it? The retailer looks Cadbury Schweppes' way because of Crush and Canada Dry.
Our largest volumes come from Sport Cola. The brand sells much more than Crush.
Proves my point, doesn't it?
I say again: you can't fight the dominant guy in the dominant segment. Get into his
segment's volumes indirectly, instead.”

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