KUMAR FOOD CORPORATION: PRODUCT AND MARKET GROWTH

STRATEGIES
Case Study

• Kumar Food Corporation (KFC) is a processing, packaging and distribution company of Pickles, Papad
and Spices.
• It was a partnership firm founded by Neeraj Kumar in 2010 in the state of Maharashtra, India.
• Kumar had worked in Multinational food processing company after quitting his job he started his own
venture with an investment of Rs. 1 million and in the year of 2017 its revenue reached to Rs.50 million.
• With the aim of reaching Rs.200 million target revenue by end of the year 2018, he invested another Rs. 50
Million.
• There is a cutthroat competition with the existing player added with the Government initiative for
development of entrepreneurship.
• With the restrained budget for marketing and communication, Kumar could take any or all of the routes to
fulfil his growth ambitions such as: enhance product category, add new markets, or increase distribution
channels.

1 ₹ = INR = Indian rupee; US$1 = ₹67 in

2017
What is Entrepreneurship
and its major Functions ?
 Brand Management Brand Building in a food Processing Industry

Distribution strategies/channels that businesses can adopt to reach their end-

Distribution Management consumers.

Marketing Management Market and Category Development strategies

Distribution Channels
• After production, a product or service must follow a predefined track before it reaches the end-user.
• At times, Small- budget producers do not have the money and related resources to distribute their products
on their own.
• KFC followed a hybrid channel to distribute its products. Retail or wholesale partners use their experience,
expertise, and skills to provide customers with the desired products, and thus act as important channel
partners in the distribution system.
 
 Current Distribution Channels for
KFC ?

?
Future Distribution Channels for KFC ?

Traditional channel partners’ role in any distribution

system ?

Channel partners’ when a company is low on budget and cannot

afford in-house resources to reach wider markets ?
Current Distribution Channel

Kumar Food
Corporation

Strategic
Distributor Distributor Retailer Distributor
Suppliers

Modern Trade Direct to

Retailer Canteen/Mess
Retailers households
Added Distribution Channel (During the winter Season in India

Kumar Food
Corporation

Strategic Seasonal
Distributor Distributor Retailers Distributor
Supplier Suppliers

Modern Trade Direct to

Retailers Canteen/Mess Customer
Retailers households
 Suggested Distribution Channel

Kumar Food
Corporation

Strategic
Distributor Distributor Retailers Distributor Chicken Shop Online Retailers
Supplier

Modern Trade Direct to Direct to

Retailers Canteen/Mess
Retailers households Customer
SWOT ANALYSIS
Strength Weakness
•Quality of products •Limited to below-the-line (BTL) advertisements
•Local flavours (banners, stickers, billboards)
•Low pricing •Lack of automated machines
•Hybrid distribution channel •Low penetration
•Limited presence in then on-vegetarian category
•Lower repeat purchases

Opportunities Threats
•Growth in the packed pickles and spices •Existing market leaders
categories •Emerging local competition
•Heavy demand in the ready-to-use segment for
spices
•Heavy demand for easy-to-carry pickles (during
travelling and in lunch boxes)
•Growth in online retailing
•Untapped traveller segments

Source: Prepared by the case authors.

Market Development V/S Category Expansion
ANSOFF MATRIX FOR KFC

Existing Products New Products

Source: Adapted from “What is the Ansoff Matrix?,” Ansoff Matrix, accessed November 20, 2017,
Market Penetration Product Development
Existing Markets

•₹2 and ₹5 pickles sachets, tie-in with •Sauce (green chili, tomato)
chicken and mutton shops, for selling
₹5 sachets of spices

Market Development
•Jharkhand Diversification
•Rajasthan •Sachets of pickles in Rajasthan
New Markets

•Mumbai •Online distribution channel

www.ansoffmatrix.com/1965
•Travellers to schools, colleges, and
offices, for small packs of pickles
•B2C: sweet shops and restaurants
providing take-away and home delivery
services, for selling pickles and sauce
sachets
Increasing Risk
MARKET DEVELOPMENT
According to the Ansoff matrix, market development is one of the four alternative growth strategies to sell a
product in the existing market.
There area variety of ways to achieve this:
Expand into New Geographical Markets
• This strategy comes to the fore when an organization wants to sell its products outside the current market,
for example, in a new country, region, or continent.
• In this case, KFC added a few distributors in Mumbai City to expand into a new geographical market. An
option could be for KFC to start its operation in Jharkhand (Kumar’s home state) to increase its
geographical presence.
Adopt New Product Dimensions or Packaging
• This strategy involves repackaging the products to attract a new market.
• In this case, packaging in the form of a sachet or a special value pack can be designed to target the bottom
of the customer pyramid or to serve the restaurants in the city, respectively. Both strategies would incur an
additional cost.

2 Philip Kotler and Kelvin Keller, Marketing Management, 14th ed. (Hoboken, NJ: Prentice Hall, 2012), 437.
3 Ibid, 440.
Expand into New Distribution Channels
• Selling products online could be an option.
• Grocery online retailers are increasing in the Indian market. Companies like BigBasket and Grofers are two
of the leading online retailers that are preferred by Indian consumers.
• The company may also consider expanding distribution of its spice products to chicken and mutton shops.
Some of the big chicken retailers have a distribution of over 600 franchises in Maharashtra. This would
provide wider visibility to the Shagun brand in a different distribution channel.

Adopt Different Pricing Policies to Create a New Market Segment

• KFC has an option to experiment with its pricing policies to create a new market segment.
• A pickle sachet with new pricing could be considered to create a new market segment for those who buy
spices from chicken shops or who travel long distance by train or bus. Later, this experiment could be
applied to papads as well.
CATEGORY EXPANSION
• The company’s recent focus has been on category expansion. This means it has added some new products,
including ketchups and instant-mix products, to its product line.
• Kumar wants to use his existing distribution channels to promote his new product line.
• The logic behind adding more products to the line is that the market is known, the brand is accepted by
customers, and the company can generate revenues faster by adding new lines than by performing new
market development.
• To undertake market development, the company will need to develop strategies that are applicable to the
region and market, and this would require more research, time, and cost.
• Kumar shared the following assumed figures during the time he was deciding whether or not the company

would go for category expansion and how the existing category and new category would help the firm to

achieve the 200 million mark.

Total Sales (₹)

Pickles = 15million
Papads = 20 million
Spices = 15 million
New category = 5 million
Total = 55 million
How to Improve KFC’s Online Presence

• All companies want to have an online presence, but it could be challenging to sell products like
pickles, papads, and spices online.
• Distribution companies selling through paid websites would not be able to generate profits for KFC,
although in this case, a value pack—a bundle of a few products—could be designed and sold through
online websites.

4 PTI, “Mobile Internet Users in India to Reach 371 million by June 2016,” Indian Express, February 4 2016, accessed April 13, 2016, www.indianexpress.com/article/technology/tech-news-technology/mobile-internet-
users-in-india-to-reach-371-mn- by-june-2016/.
BUSINESS MODEL CANVAS

0002-business-model-canvas-diagram-v2-1100px - SlideModel
BUSINESS MODEL CANVAS FOR KFC

Key Partners Key Activities Value Proposition Customer Customer

 Jain Food  Food processing  High-quality, Relationships Segments
Products (papads & tasty products  Professional  Homemakers
 Shri Rajlaxmi pickles)  Hygienic  Mass  Tourists/
Agro Products products customization Travellers
 Distributors  Hybrid with added  Canteen/ Mess
 Suppliers of raw distribution traditional Indian  Restaurants
material channels touch
Channel Shops Home
Key Resources  Large
 Food-processing  Distributors
number of  Retailers
plant
SKUs  Strategic suppliers
 Raw materials
 Canteen/Mess
Employees
Modern trade
retailers

Cost Structure Revenue Streams

 Equipment cost (machines and plant)  Papads, Pickles, Sauces
Transportation cost
 Marketing cost

Source: Prepared by the case authors.

Customer Value Proposition
• Kumar saw a huge demand for spices, pickles, and papads and ventured into this business; to differentiate his
products from the competition, he focused on local flavours for pickles and traditional Indian flavours for papads.
• The company aimed at providing delicious and safe products to its customers to retain their loyalty and thus
create strong goodwill and brand value.
Technology and Operations Management
• To maintain the quality of KFC’s products, Kumar should upgrade and maintain the equipment used in
production.
• In the partnership with Jain Food Products, the manufacturing of various stock keeping units (SKUs) was
outsourced to Jain’s factory.
• Employees should be trained to reduce wastage and maintain and promote a hygienic environment in the
production and packaging plants.
• Because the company was expanding at a good pace, Kumar could also consider using the Internet to sell KFC’s
products to customers across the country. With insights from the data on online transactions, Kumar could decide
his next course of action and make his supply chain more efficient.
Go-to-Market Plan
• KFC followed a hybrid distribution model that is, the company had specifically assigned distributors for various
channels.
• The company was spending a lot of money and effort in building its Shagun brand by using creative marketing
content, but it was investing mostly in below-the-line (BTL) advertising and seeking feedback from loyal
customers. BTL advertising has some limitations, for example, it consists of very specific activities for a targeted
group of consumers, which help in sales but do not build the brand.
• As the next target was the state of Jharkhand, Kumar would have to spend on resources beyond BTL advertisement,
brand building tools, and market research to determine the customer acquisition cost.
Profit Formula
• Kumar could lower costs based on the economies of scale and scope.
• He could lower costs by using a mass production strategy to achieve economy of scale and simultaneously focus on
selling SKUs to create a product portfolio to achieve economy of scope.
• Currently, KFC’s total addressable market is limited to Maharashtra and Jharkhand.
Conclusion

• KFC was ready to launch its new product category in the market.
• It concluded a major recruitment for salespeople to distribute products to various parts of Maharashtra.
• The company also added one stockist at Jharkhand to distribute KFC’s products across cities, starting from the
capital city, Ranchi.
• The company also signed on with one of the largest chicken retailer franchises to distribute Kumar Food
Corporation products across various locations in Maharashtra.
RELEVANT READINGS

• Philip Kotler and Kelvin Keller, Marketing Management, 14th ed. (Hoboken NJ: Prentice Hall, 2012),
263–273.
• J. N. Kapferer, The New Strategic Brand Management: Creating and Sustaining Brand Equity Long Term,
4th ed. (London: Kogan Page, 2008), 28–32.
• Ranjay Gulati and Alicia De Santola, “Start-Ups that Last,” Harvard Business Review, March 2016, 3–
• 9. Available from Ivey Publishing, product no. R1603C.
• Wong Ho Yin, Kylie Radel, and Roshnee Ramsaran-Fowdar, “Building a Marketing Plan: Chapter Nine:
Planning For Distribution Channels and Market Logistics,” Harvard Business Review, January 2011, 2–18.
Available from Ivey Publishing, product no. BEP123.

SUPPLEMENTAL MATERIALS

• Government of India, Ministry of Food Processing Industries website, accessed November 14, 2019,
http://mofpi.nic.in/.
• MOFPI, Investment Portal, Nivesh Bandhu, Focus Sectors, accessed November 14, 2019,
http://foodprocessingindia.gov.in/.
Thank You