MARCH 3, 2002
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Stanley Fischer Unplugged
He has the rare distinction of having advised through the half-a-dozen economic crises of the 90s. But now economist Stanley Fischer is calling it quits at the International Monetary Fund, and joining Citicorp as Vice Chairman. In India recently, Fischer spoke on IMF, India, and the global recession.
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The Case Of Free Sampling
What went wrong with India White's ambitious strategy to make up for shrinking urban sales with a sweep in hinterland? Sanjiv Kumar, CMD, Candico India, and Alok Shanker, CEO, Blackstone Market Facts India debate.

The tea didn't help. Nor had he expected it to. Vivek Dani, the Chairman and Managing Director of India White Limited, one of the country's largest fast moving consumer goods companies, couldn't still put his finger on why the four-year-old back-to-basics strategy of getting more consumers to try his company's products and following that up with a channel onslaught to increase their availability hadn't paid off.

Sipping milk-less lemon tea (yes one of his own brands), on a bright Sunday afternoon at his south-Mumbai penthouse, Dani mulled over the statistics, once his most potent weapon in persuading the board to give its go-ahead to Operation Hinterland, the name his core team had conjured up for a massive sampling exercise across rural India.

The rationale was straightforward: 70 per cent of India's population lived in villages, around 6 lakh of them; and 85 per cent of this rural population lived in villages with a population less than 2,000. Even with 50 per cent of its sales coming from rural areas, there was still a huge base of potential consumers out there that had never used any of India White's products.

Consumers in these smaller-than-small villages were using either natural substitutes (neem twigs instead of toothpaste and toothbrushes) or at best, cheap local-made products. Getting these non-users to try, and then become regular users of the company's products had seemed like a great idea.

Dani remembered how hard Ashok Khanna, the company's then marketing director, now on a prestigious assignment with India White's parent in Europe, had argued to get the project through.

''If we can address issues of awareness and availability and back it up with overcoming prevalent attitudes, primarily through introducing the consumer to our products, via free sampling, we can capture virtually the entire shift in consumption from unbranded/natural alternatives.''

Every word had seemed plausible. Dani had just taken over as chairman and managing director from his illustrious predecessor, inheriting an enviable 20 per cent plus top-line growth, quarter-on-quarter. And like any new CEO, he had wanted the company's future path to bear his own, unique, successful signature.

Khanna's recipe looked perfect, and it helped that agricultural growth and income was on the upside, for the eighth year on a row.

What followed had been a marketing man's dream come true. India White had literally painted the hinterland red.

Every manager, down to the lowliest management trainee, had gone out with the sales force, and the company had managed to round up a huge army of gram sevaks, distributing free samples of soaps, toothpowder, toothpaste, detergents, and tea. Not content with just distributing the product, this batallion of frontline pros had also sold the benefits of the products they were trying to sell to rural consumers.

Dani remembered how on several occasions he had himself rolled-up his sleeves and scoured dusty rural roads in as many as six states, accompanied by India White's head of finance Venkatesh Raman.

He also remembered how Raman had irritated him with repeated questions concerning the returns on the tens of crores the company was investing in the promotion.

A year into Operation Hinterland, the results on penetration, product usage, and top-of-mind awareness in the targeted villages, had given Dani enough reasons to cheer.

The company's performance had improved 100 per cent on all counts. The top-line had looked healthier, growing at over 25 per cent.

Raman had warned Dani that dividends would have to be pruned as a result of the huge investments in Operation Hinterland that hadn't really started paying off. ''We'll sell the story of how we're investing for future profits, and we already have growth to show.'' Dani remembered how he had silenced Raman with that one remark.

Khanna, of course, had become a star. At a bash thrown in late 1999 to celebrate the success of the project Dani had announced a much-sought-after European assignment, for him.

Then, in 2000, things had started going wrong. The year had started normally, but by June, it had been evident that the urban markets were in recessionary mode.

Dani had quietly congratulated himself for having invested in rural markets-for these had held out the promise of growth. By end-year, though, it had become clear that the promise wouldn't be delivered on.

India White's growth rate had more than halved to 10 per cent. And a cursory analysis of the numbers had shown that Project Hinterland hadn't done what it was expected to: urban demand had remained low, and rural demand, which Khanna had been so sure would kick-in and grow India White's turnover, hadn't.

The following year, 2001, had been worse. The rural markets, which had at least held their own in 2000, went on a downward spiral. Growth had dropped to single-digit levels, and while Raman had managed to squeeze out consistent improvements in profits through aggressive cost cutting and process-improvement techniques, Dani had realised that they would need more than that.

Most importantly, the markets targeted by Operation Hinterland had simply refused to react to India White's overtures.

In contrast, the company actually managed to increase its marketshare across categories in shrinking urban markets-a fact that had prompted Khanna's replacement, Ashish Kumar to come to Dani recently with a Project Hinterland-like sampling campaign targeting the urban market.

By the time Dani finished his third cup of tea and four years worth of rumination, it was late evening, and he could see the beautiful orange-red aura of the setting sun all over the Arabian Sea.

He had made up his mind on a course of action: One, he would speak to Khanna, now somewhere in Belgium, and grill him on the finer aspects of Operation Hinterland-something he should have done in those heady days of the late nineties, but hadn't.

Two, he would listen to what Ashish Kumar had to say on a new sampling exercise in urban markets. And three, he would never again miss the routine Sunday-evening walk because of work.

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