Grain Co-operative – Brand Launch

On asking the questions, the following data can be provided:

• Number of households in MeGrain’s target market – 10million
• Average annual consumption of grains per household – 2 quintals
• In the consumer surveys, it was found that most of the customers purchasing branded products and enquiring about the branded grains make their purchase at the supermarkets.
• The survey also found that the customers are value-conscious and hence not willing to pay more than a 10% premium for branded products.
• % of households purchasing the grains from supermarkets – 50%
• What are the brands currently operating in the Grains market – there is no grain brand in the grain market in India yet.

The candidate should be inferring the following things:

In the 4 regions that MeGrain operate in they gave 50% market share

• Half of the customers are buying grains from supermarkets where they are consuming a branded variety of other FMCG products. If MeGrain, which has half the market is able to convert a sizable chunk of supermarket grain buyers to buy their branded grains, it is a big enough market opportunity
• Customers are price sensitive, being branded does not mean we can charge a huge premium. MeGrain needs to keep that in mind while investing in activities related to product branding.

Share Exhibit 1 with the candidate.

This is a brainstorming question. A good candidate should cover most of the following points:

A co-operative that sells non-branded grains to retailers to launch their own brand is going to be a significant transition for MeGrain. Some areas they need to invest in are:

• Creating appropriate brand identity ( appropriate to MeGrain’s price and quality positioning)
• Customer education ( to educate them on the advantages of branded products)
• Product packaging ( to ensure superior packaging, appropriate branding on the packaging, etc.)
• Product marketing ( marketing on mass media to inform the customer about the branded product launch, in-store marketing in supermarkets)

Upon asking, the candidate should be provided with the following information:

MeGrain foresees that in an initial couple of years, branding will increase the cost per quintal of grain by $11.

The candidate should analyze that the average price of Rice and Wheat is $100 or less. Even if MeGrain gets maximum premium on price, they can achieve the price of $110/quintal. If the cost of branding is $11/quintal, launching branded Rice and Wheat will not be profitable.

For Maze, the average price last year was $120/quintal. If MeGrain gets a 10% premium on pricing due to branded products, it can command the price of around $132/quintal. At this price, they can still afford to spend $11/quintal on branded product-related expenses without losing money in the process.

So, MeGrain should start with launching branded Maze.

Our advice would be to launch the branded grains, starting with Maze.

• A significant portion of Indian consumers are adopting branded FMCG products, so there is surely a market need
• The operational overhead and branded product premium will take care of each other, initially in the case of Maze. Hence, we will not lose money in the process

As a next step, we suggest that MeGrain analyses its capability to do capital investment in this project.

They should also explore the feasibility of sampling branded products in mom and pop stores to get an idea of the adoption of that market segment, so as to increase the target market for a branded product.