Corporate: Moulding Blow Plast Into Shape

CORPORATE: MARKETING
Moulding Blow Plast Into Shape

Managing Director A.G. Warey needs to increase volumes, push sales in the premium segment, and slash costs to combat competitors.

By Nita Jatar Kulkarni

One would expect a luggage maker to find it easy to pull a few tricks out of its bag. A.G. Warey, the 51-year-old CEO of Blow Plast isn't. India's first organised sector player in the moulded luggage market-VIP Industries, its sister company, is the manufacturing arm-Blow Plast has been losing marketshare to new competitors like Samsonite. At the lower-end of the moulded luggage market, there are hordes of cheap imitators, who have an unfair price advantage, manufacturing as they do in the unorganised sector. Still, the 51-year-old Warey is optimistic: ''Our growth has slowed down, but we are going to change that.''

Warey's multi-pronged strategy includes increasing volumes in the low-end, popular and economy segments to take on the unorganised sector, cutting costs to slash prices to achieve that, and take on its main competitor-Samsonite-in the premium segment. In fact, this has become inevitable since Blow Plast has consistently lost marketshare-which has dropped from 65 per cent in 1996 to 60 per cent in 1999-since Samsonite entered the market. The bottomline has been starving too: net profits have come down from Rs 12 crore to Rs 7.5 crore in the same period.

Playing the Volumes Game

Blow Plast has decided to mark its presence in the A-to-Z of the moulded luggage mart. That's because the company is caught in a Catch-22 situation. For one, the capacity utilisation in the four manufacturing units in Maharashtra-owned by VIP Industries-was 85 per cent in 1999-2000. To derive benefits from economies of scale-that will help reduce prices-it has to push volumes. But that is possible only if Blow Plast reduces its prices, since the competition in the Rs 280-crore economy segment is from the unorganised sector. Then, there is the question of quality even for the low-end buyers.

Warey says that his company ''will offer value-for-money products to such customers.'' However, while better moulds and materials might attract a few buyers, durability issues like unbreakable handles and good-quality locks are critical too. And Blow Plast cannot provide the latter if it sticks to its strategy of economy pricing. Explains Jagdeep Kapoor, 39, Managing Director, Samsika Marketing Consultants: ''Blow Plast should maintain the quality of its products, otherwise its brand image could get eroded. I would rather that it fights on value, and not try to reduce prices to fight the unorganised sector.''

But, for Blow Plast, volumes have become crucial. The company is expanding its distribution network to cover all towns with a population of over 50,000. At present, it covers only 70 per cent of such towns. Simultaneously, a rural advertising blitzkrieg is in the offing, in which traditional media will not be used. Another plank to grow volumes is exports, which stood at Rs 15 crore in 1999. However, that is easier said than done. As Warey himself admits: ''Neither are we a strong brand abroad nor do we have enough warehousing facilities or distribution network there.''

Playing the Premium Game

In the Rs 70-crore premium segment, Blow Plast has several advantages over its competitors. A strong brand-VIP-established over a period of 30 years. A brand that straddles the entire moulded luggage market. A brand that, in several surveys, has been rated among the top five in the consumer durables category. Still, Samsonite, which has a 13 per cent of the total market, has already grabbed half of the premium segment. In fact, Blow Plast, which has the other half, did not even look at it seriously before Samsonite entered the Indian market in 1997.

Explains Suresh Menon, 44, Director (Sales & Marketing), Samsonite: ''To grow you need competition. And Samsonite is used to it-globally.'' That logic also holds true for Blow Plast, which now wants to make further inroads into the premium segment through new launches, as well as a massive retail expansion. With premium brands like Concorde, Cosmos, Elanza, and VIP Polaris, the company is planning to lure customers through competitive pricing-8-10 per cent below Samsonite's-and aggressive advertising. Its adspend, at 5 per cent of sales, is higher than those of its competitors.

Blow Plast also plans to open 1,000 VIP Lounges, which will be the retail platforms to push its premium products. ''We firmly believe that Blow Plast has maintained its leadership position in all the product lines through innovation, sustained brand-building, and commitment to customers,'' says Dilip Piramal, the 52-year-old chairman of the company. But competition is likely to hot up in this segment. Especially as the French luggage giant and world's number two company, Delsey, is planning to enter the Indian market next year. And Samsonite too is gearing up to launch a variety of designer luggage, which is targeted at the young and trendy customers, this year, to counter any new threat.

Playing the Cost Game

Despite such efforts, lower costs will prove to be the key to Blow Plast's and VIP Industries' success. For, if the Piramals have to play the price and the volumes game, they can only do so by reducing expenses. Especially as margins are on the decline, even as the topline growth is nearly stagnant. Between March, 1996, and March, 1999, Blow Plast's turnover increased by a bare 5 per cent to Rs 266 crore, while its profitability crashed from 4.7 to 2.8 per cent in the same period.

Agrees Anuraag Dabral, 29, Senior Consultant, KPMG: ''While cost reductions will have an immediate impact on the bottomline, what is more important is to see how it will affect the overall strategy. For, what Blow Plast needs today is brand differentiation to fight competition in various segments.''

In fact, competitors like Samsonite have already begun outsourcing in a bid to lower costs, even while importing critical items like unbreakable handles and locks, to maintain quality. Warey too hints at outsourcing, adding that ''it's only a long-term strategy.'' If true, that could mean that the Piramals are planning to sell off some of VIP Industries' manufacturing facilities. That, probably, is a better way of moulding the company's growth and profits. But that would also mean that the Piramals simply pack their bags and go.

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