5(h) ATM Business | Profitability

Your client has been the market leader in soya chips category in India for the past ten years. However, recently, their market share has declined from 60% to 20%. You are asked to evaluate the potential reasons for the decline and suggest measures. I would like to begin by asking a few preliminary questions about the company and the market. Sure, go ahead. Which area does the client service, and what customer segment does it cater to? The product operates PAN India and caters across customer segments. I would like to evaluate the potential macro-environment variables that may have caused the market share decline Ok So, has there been any disruption in the supply chain impacting our production & sales?

No How does our pricing stand compared to the competitors and have there been any changes in the previous year? There has been no differentiation when it comes to price. Has any new player entered the market? Yes So, I assume the change in market share is due to the new players entering the market. Is this a fair assumption? Yes So is the market share captured by a single player, or is it fragmented across multiple companies?

ConQuest, IIM Shillong

Let me help you with some data based on which you can proceed forward. In 2019, our client sold 12,000 units, and the rest of the market consists of two players A & B. In 2020, the 9-month sales of our client are 10,000 units, and the A & B grew their volume by 10%. Ok, let’s calculate the market structure in 2019. Since our client sold 12,000 units which represented 60% of the market share (by volume), this implies that the total market was 20,000 units. So, how is the balance of 8,000 units split between A & B? They are split equally.

Ok, so that implies the market structure in 2019 was Our client: 12,000 units A: 4,000 units & B: 4,000 units. Now, moving to 2020, 10,000 units sold by our client represents 20% market share. So this implies if we take it on an annual level, the client will sell 13,333 units this year, and the total market volume shall be 66,666. You can round off the figures to 13,000 and 65,000, respectively Ok, now considering the growth rate of A & B. They will be selling 4,400 units each this year. So, how is the balance volume of 43,200 units distributed? A single-player captures it. Since a new player has been able to capture a significant share of the market. Can you provide me with the details of the company and its product offering? The competitor has come with a healthier variant of soya chip, gaining a significant demand amongst the customers. Ok, so can we imply that the decline in our client’s market share is attributed to the market entry of a new player who has developed a healthier variant of soya chips. Yes, that’s correct. You can now proceed to suggest possible solutions.

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We observe that the customer preference for our market has changed, and they have now preferred a healthier variant of snacks. So, I would break down the potential measures into short term and long-term actions. In the shorter term, the company should try to regain some of its lost market share by a promotional campaign and by offering discounts or benefits on our existing SKUs. While this can be piloted in the near term, in parallel the company should focus on analyzing the healthier variant market of soya chips. They should focus on developing a healthier variant of soya chips and come up with different flavors. In the end, have a promotional campaign for its launch. What is the timeline you are expecting for these actions? We can expect the short-term action to pilot in a couple of months, whereas the longterm action can be piloted end-to-end in the next 12 months. Ok, can you think of any other measure? We can think of acquiring the other company. Ok, so can you, in brief, tell me about the factors you will consider before the acquisition? During the acquisition, we must first consider the synergistic capabilities of the combined entity and the strategic advantage the company brings on board. The factors in evaluating these could be the manufacturing capabilities, product portfolio, supply chain partners, market reputation and lastly, the valuation of the acquiree. Thank you, that was helpful. Any questions that you have about BCN?