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Saathi to help ITC enter mass notebook market
Business Standard - 07 Apr 2014

ITC is headed for the mass market when large multinationals are making a beeline for a share of the stationery industry

After a decade in notebooks and stationeries, ITC is entering the hinterlands such as Tier-II cities with a new mass brand Saathi. It is testing it in eight states and plans to expand to the rest of the country in 12-18 months.

The Rs 43,000-crore conglomerate expects to close the financial year with revenue of around Rs 800 crore from its education and stationery products business that includes the sales of its premium brand, PaperKraft, and the largest, Classmate.

Banking on its quality as the differentiator, ITC wants to enter the mass market with Saathi and claim share from the unbranded segment. The Saathi notebooks would be priced 10-15 per cent lower than Classmate.

"We see a huge opportunity in the mass market, which is beyond Tier-II cities. Generally, companies don't actively go down and service this market because it is expensive. But we will be looking at this as an opportunity," says Chand Das, CEO. ITC would look to keep costs down by sourcing from suppliers within a 100-200 km radius of the target market. With Saathi, ITC would be going to locations with a population between 2,000 and 50,000.

ITC, which has a formidable footprint in FMCG outlets including paanwalas, is looking to leverage the overall two million-outlet network for Saathi. The stationery business reaches 100,000 outlets.

Traditionally, stationery firms sell products to wholesalers. ITC is tracking retail sales, too. "We have 1,000 distributors across the country and each one has to service retail outlets. One can't do business sitting at one place," says Das. ITC sources notebooks from small-scale manufacturers.

ITC is headed for the mass market when large multinationals are making a beeline for a share of the Rs 8,000-crore stationery industry. With around 230 million students going to school between kindergarten and standard-II alone, India has the largest school system in the world.

After stationery, other than notebooks, were dereserved five years ago, players such as Japan-based Kokuyo, German Faber-Castell and French writing instruments brand BIC Group have entered.

Majority shares of the 80-year-old Indian company, Camlin, with around 300,000 distribution outlets, was acquired by Kokuyo in 2011 for Rs 365.9 crore, while that of Cello Pens, which is one of the largest manufacturers and distributors of writing instruments with approximately 28 per cent of the domestic pen market, was acquired by the BIC Group in 2013. In 2011, Italian firm FILA acquired 18.5 per cent in RR Group's Writefine Products, owners of the Doms brand of pencils. Japanese firm Mitsubishi Pencil, in 2012, picked up 13.5 per cent stake in writing instrument maker Linc Pen & Plastics, which is expected to help the company establish its pen brand Uniball. Faber-Castell is setting up its own operations.

Das says of the Rs 8,000-crore stationery market, notebooks comprise 50 per cent, pens 35 per cent, and the rest include pencils, geometry boxes and art stationery. Even in stationery, branded share has gone up from six-seven per cent to 35 per cent, with retail margins that account for 25-30 per cent (making the effective consumer spends amount to Rs 13,000 crore).

To stave off foreign competition and yet make its mass market foray click, ITC is investing in brand-building. "Ultimately it the brand power that will help you to sustain and grow," says Das. It would concentrate on point of sale visibility, instead of having a brand ambassador, even though earlier it had cricketer Yuvaraj Singh as an endorser. ITC is now associating with schools and their contact programmes to drive brand recall among the students.

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