RECKITT BENCKISER

&

MDI - GURGAON

PRESENT

Cherry Blossom Shoe Polish
Case Analysis Contest

Reckitt Benckiser India Ltd: Cherry Blossom Shoe Polish
Introduction

In June 2006, the Brand Manager of Cherry Blossom, looked back with some degree of satisfaction to the positive uptrend in the last couple of years to various initiatives taken by the brand team to recoup some of the lost ground. Despite his pre-occupation with the "100 shining years" celebrations going on for this life-touching brand that had for long added an early morning glimmer to shoes, he was keenly working towards finalising the strategic shifts in the marketing strategy of the brand to take it to the next orbit.

The journey of Cherry Blossom (Cherry) as a brand had begun a hundred years ago and had seen many ups and downs. For a long time till mid 1990's, it was the dominant category leader, with virtually no competition, and a market share of about 75%*. Market environment changed when Kiwi emerged actively as one of Sara Lee India's core brand. The changing shoe care habits of consumers and growing popularity of new shoe types further changed the market environment for Cherry. By the end of 1990's, Cherry was losing its shine. The brand had lost its market share steeply from 1999 onwards, and by 2002 it fell to a low of 61% - a drop of 12% in market share. A series of measures helped Cherry to fight this serious erosion to its leadership position, and the slide was arrested in 2003. From there onwards, many active efforts helped the company regain some of the lost ground, and gradually, Cherry’s market share inched up to above 65% in 2005. The brand team’s endeavor now was not just to redefine the brand but also re-evaluate all the elements of its marketing strategy and set the direction for the brand for the next few years while utilizing the limited resources and marketing effort judiciously for maximum effectiveness to further consolidate the position of Cherry as a brand.

____________________________________________________________________ * Unless otherwise stated, all market share figures refer to trade channel tracked by AC Nielsen
This case is prepared by Professor Vinod Kalia, Management Development Institute, Gurgaon. It is not intended to serve as a source of primary data, or effective or ineffective management. The author would like to thankfully acknowledge inputs from the brand team of Reckitt Benckiser India Ltd.

Copyright ©: Reckitt Benckiser India Ltd.

About The Company Reckitt Benckiser plc, world’s no.1 company in household cleaning came into being with the merger of Reckitt & Colman plc with Benckiser NV in 1999. The company had operations in 60 countries, sales in 180 countries and had net revenues in excess of $5.5 billion. Reckitt Benckiser India Ltd (RBIL) was a fully owned subsidiary of Reckitt Benckiser Plc. It manufactured and marketed a wide range of household and personal products in categories of Pest control, Shoe care, Antiseptics, Lavatory care, Floor care, Fabric care, Dishwashing, Air care. etc Amongst its many well known brands were, Dettol, Mortein, Harpic, Eazy Off Bang, Vanish, Lyzol, Veet, Disprin, Robin powder, Collin glass cleaner etc. Most of these brands were either number 1 or number 2 in their respective categories in India. RBIL’s sales revenues in 2005 were about Rs.1000 crores.

The Shoe Care Market

Cherry was introduced in India in early 1900’s and practically created the market over all these years. Many generations of consumers had grown up with the brand touching their lives closely. In the early years, Cherry was the only major brand in this category. Much later in the 1970’s Kiwi, a brand from the Household care products of Sara Lee, entered Indian market, but it really became active only in early 1990s in India. The market expanded radically during the 1980’s and early 1990's. Between them, Cherry and Kiwi, held between 85 to 90% of the Indian market in value terms over these years. In terms of volume, however, these two players accounted for about 70 to 75% of the market. The remaining market was accounted by a number of regional players like Robin, Billi, and many others. Many of these local/regional brands offered products at very low prices and were active in localized markets only.

After the steady growth of the 1980’s and 1990’s, the shoe care market witnessed reversal of this trend in the 2003 -2005 period in volume and value terms (Annexure 1).

In 2005 the total market was estimated to be about Rs. 91 crores, which included sales through trade channel and shoe shops channel. Cherry was the market leader by far in the trade channel (Annexure 2) while Kiwi had domination in the shoe shops channel.

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Shoe Polish Formats Shoe care market primarily consisted of polishes, creams, shampoos, whiteners, brushes etc. In India, this market had been traditionally dominated by polishes for leather footwear, which accounted for almost 90% of the total shoe care market in 2005, and were predominantly sold in wax format or liquid format. Products like creams, shampoos, whiteners, brushes etc. were categorized as other formats and were used for leather or non leather footwear.

For most part of the last century, shoe polishes were almost synonymous with the wax polishes. The wax polish was sold in round flat tins and had to be applied on shoe using a brush. Next the shoe had to be brushed vigorously to bring the shine to the leather surface. Sometimes a piece of cloth and shoe cream would also be used to get an extra shine. The considerable personal effort required to be made by the polish user would be rewarded by the shine on the shoe. While the polishing effort meant close personal involvement by the user, on the other hand the infrequent purchase of polish (a tin would usually last a long time, even upto 6 months) limited the customer involvement with the brand.

Till the early 1990's, the polish usage in India was predominantly that of wax polish. In 1991-92, Cherry introduced the liquid shoe polish format in its range. It was a convenient format, with a simple nozzle to apply the polish straight on the shoe to give it instant shine. The liquid polish format held great promise and was expected to appeal to the changing life styles of the Indian consumers. Kiwi also introduced its range of liquid polishes in India around the same time and made it a key component of its marketing strategy since Kiwi had been finding it tough to challenge Cherry in the wax polish format where Cherry had built such a stronghold.

In the initial years of its introduction in the Indian market, the liquid format showed good growth. However, despite its unique appeal to the convenience seekers, the growth rate of liquid polishes started to taper off by the end of 1990’s. After 15 years of launch, the liquid polishes could grow to about 21% of the category by 2005, waxes continued to be the dominant format with a share of 70% and other formats accounted for the rest.

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Consumer research among polish users revealed a major reason for the liquid format not living upto its promise. There was a perception amongst consumers that the liquid 'dried' the leather, making the shoe surface harder with time, and did not provide the nourishment that leather needed.

An attitude study showed that amongst the serious shoe care consumers, liquid shoe polishes were not very popular. Such consumers preferred wax polishes and did not generally switch to liquid polishes and also tended to be more loyal towards the brand, while other users were not so committed to any format.

In 2004, Cherry revolutionized the market by introducing the Quick wax polish format. This new formula combined the dual benefits of convenience the consumer was looking for and the nourishment of leather that wax polish provided. Its easy-to-apply brush was inbuilt in the bottle cap and user could just open the bottle and straightaway apply the semi liquid wax to the shoe surface. In a new swanky packaging, Quick wax polish reached out to the consumers as a new platform altogether and provided an opportunity to RBIL to rejuvenate the brand and also emerge as an innovation leader (Annexure 3). 35 gm pack of Quick wax had a retail price of Rs. 40 as against Rs. 27 for a 40gm tin of wax polish. In 2006, it was already a major sku in the Cherry’s portfolio with sales running at about 5% of wax products**.

Sara Lee was also active in this period in building its product portfolio and had launched a number of products. In 2004, it launched a new instant shoeshine sponge with a liquid level indicator (the Kiwi express shoeshine sponge) priced at Rs.40 at retail. Another product Sara Lee launched in the same year was the shoe freshener Kiwi Fresh Force, to deal with the problem of shoe odour, and towards end of 2005, it also launched its easy wax product against the Quick wax.

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** Sales of Quick wax/Easy wax were clubbed with wax polishes in A C Nielsen data

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Players in the market

Cherry had long been the category leader of the shoe care market in India. In 1990’s, significant changes had taken place in consumers’ preferences and habits. Leisure had
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become fashionable and shoes originally designed for sport were becoming fashion

statement even in work and casual occasions. In the backdrop of the growing customer acceptance of non-leather shoes and changing shoe care habits, the shoe care market started to stagnate in late 1990’s. Kiwi started to offer aggressive consumer promotion schemes at this time and Cherry started to lose its market share.

A series of measures in 2003 helped to arrest the slide in market share with the brand gaining 1% share. From then onwards, a flurry of activities were undertaken by Cherry in terms of new product launches, improved packaging, new promotional schemes etc. Kiwi Shoe Polish, the 2nd largest shoe care player in India and the major competitor of Cherry in the world, was a brand of the multi-national Sara Lee Corporation. Its 100 per cent subsidiary in India, Sara Lee Household & Body Care India (SLHBCI) manufactured Kiwi range of shoe care products, Brylcreem range of shaving gels, creams, foams and after-shave in the men's toiletries range and also Kiwi metal polish for silver and brass, Kiwi Drainex and Kiwi Kleenflush.

In 2005, SLHBCI had a sales turnover of approx. Rs.50 crores, more than half of which came from Kiwi shoe care products. The other major contributor to revenues was the Brylcreem range of products, categories in which the company held over 85 per cent market share. All the products of the company were distributed by Sara Lee TTK, a joint venture with TTK Healthcare. Kiwi Shoe Polish was a late entrant in the Indian shoe care market sometime in the 1970’s but actually became active only in early 1990’s. Kiwi was also an important brand of SLHBCI and enjoyed unbridled support and investment from Sara Lee. India had been designated as the South Asia hub for innovation, hence SLHBCI had been very

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prompt to come out with many new product innovations and packaging innovations. It had quickly built a wide product portfolio of more than 50 SKUs with extensive variety in wax, liquid and other formats and accessories like sponge shiners, shampoos, and even brushes (Annexure 4 a & b). In a bid to expand the market, Kiwi introduced polish for suede and white shoes, which were almost non competitive categories.

Kiwi projected itself as a brand for the young, with its international packaging and positioning accordingly. The brand had also been considered very aggressive in media and brand promotion. Kiwi, though the smaller player in the Indian market, clearly outscored Cherry on the brand visibility front. Early on in 2002, it established an arrangement with Bata to be present at all its outlets. Although Kiwi's overall market share never reached anywhere close to Cherry’s share, Kiwi was historically a much stronger brand in the southern states of the country where it built its market share to 42%.

The prices to consumer of Cherry and Kiwi products in different SKUs were quite similar (Annexure 5).

Shoe polish usage

According to an independent research in 2005, around 63% of the shoe owners were shoe polish users. However, the use of polish did not appear to be tilted towards specific gender with about 60% amongst males as well as females using shoe polish, in their respective groups. It was also observed that in age-wise categorization, 25-44 year olds were the highest shoe owners, out of which around 62% used shoe polish. The research indicated that shoe polish usage across socio-economic classifications varied quite a lot, with a high of around 80% of shoe owners using polish amongst the SEC A groups, and a low of almost 50% shoe owners using polish in SEC C group. The study also revealed that the total shoe owners increased from 50.42 million to 50.82 million between 2003 to 2005, while the polish users grew from 30.10 million to 31.86 million in the same period (Annexure 6).

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The research also indicated wide variations in the frequency of shoe polish usage amongst different groups, but no patterns could be seen in the same. In many cases, a shoe polish tin would last six months or one year to a customer.

Trends in Footwear Market

Besides the shoe ownership trends, another important factor determining the growth of the shoe care market was the introduction of new types of shoes and shoe materials in the Indian footwear market. With the multinationals entering the Indian market in the 1990’s, the popularity of the sports shoes/sneakers among men was growing at a fast pace. Especially amongst the male population, growth in the number of people buying sports shoes was twice the rate of growth for leather shoe buyers as per trends in the footwear purchase during the years 2003 and 2005 (Annexure 7).

Because of the footwear market and shoe care trends stated above, the shoe care market could be best described as sluggish, and showed a remarkable decline in volume terms from 2002 to 2005.

Distribution Channel

RBIL distributed all its products through its common distribution channel which had a wide and deep reach in the markets and was a key strength for the company. The channel was managed by a well structured sales force, responsible for achieving company’s sales of entire product portfolio of more than 150 SKUs.

The shoe care range of products was distributed through Trade channel and Shoe shops channel. In the Trade channel, Cherry had much deeper penetration and was present in more than one million outlets across length and breadth of the country. Northern India was the biggest market for shoe care products followed by Western India and these markets contributed above 50% and about 22% to the category sales respectively. The rest came equally from the eastern and southern markets. While Cherry had been present across more than 75% of the all type of outlets (e.g. kirana, grocers, chemists, modern retail stores etc.) stocking shoe care products, Kiwi had much less distribution

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penetration and was present in about 4 lakh outlets. The deep distribution reach of Cherry had consistently been there even during the slowdown years. Of the total trade sale by value, only close to 15% of category sales came from the rural markets, and the rest was from urban markets. Quest for Growth: 2003 Onward With the strong support of RBIL’s management, the entire brand team of Cherry swung into action to rejuvenate the brand and identified key growth drivers. These drivers, constituting the marketing mix of the brand, helped the company to bring back Cherry on an encouraging growth path and sustained leadership.

These strategies addressed the following key drivers:
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Reintroduction of Advertising through media in place of consumer promotions Enhancing the reach and the visibility of the brand by driving up its presence and placement in the channel

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Pacing up the innovations and becoming the pioneer of new products and usage formats in the shoe care market

Branding and Promotion Mix Traditionally, Cherry had not been using media to build its brand equity and was off air from late 1990’s to 2002. It was a conscious decision, now, to include media as an integral part of equity building measures. Hence it was decided to use the pull created by advertisements and other media support as a supplement to the push activities through trade promotion, and consumer promotion schemes were discontinued.

Especially the centenary celebrations were to be used as an occasion to leverage media promotions to generate a lot of public interest, and bring the Cherry brand into limelight. It was believed that the boost to such brand building initiatives would be the best defense against a competitive attack and would help in building long term brand equity also. The target was to achieve the highest possible share of voice and share of market.

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The brand, which for long had been associated for its Cherry Charlie ad campaigns, stood for success, honesty and hard work. It had earlier positioned itself as the No. 1 shoe polish for well-groomed adults. Now, after a long gap, Charlie was brought back into the advertisements in 2003, and the new message was "Cherry's shine is far superior to that of other brands". In 2005, a new positioning plank was used when the brand tried to bring back the convenience and fun in polishing shoes and offer value for money in a category that was largely driven by product promotions.

Sara Lee had been very liberal in deciding the media spends for its Kiwi advertisement campaigns and used it well to support the launch of many innovating products it brought to the Indian market in these years. The visibility of the brand got a strong boost when Kiwi launched its new advertisement campaign in mid 2006 featuring the new hero of the Indian cricket team M S Dhoni.

Kiwi’s high aggression was not just in media spends but also in trade spends where it came out with numerous schemes from time to time to drive up its sales. While Kiwi was already giving higher retail margin than Cherry, it was also very actively trade promoted with very high additional discounts. It was estimated that Cherry’s additional trade spends were very limited and did not exceed more than half of Kiwi’s trade spends. Kiwi was highly consumer promotion driven too with more than 75% of all its products under some consumer promotion or the other. However RBIL decided that it was unnecessary for the market leader to match up the trade margins offered by the challenger brand, and no consumer promotions were considered necessary to be offered.

Presence and Placement (Visibility)

These two measures were core ingredients of the new marketing mix initiatives undertaken by the brand team to enhance Cherry’s reach across geographies and visibility inside the retail outlets. The number of retail outlets that Cherry reached increased significantly to almost 1.20 million in 2005 (Annexure 8). To drive the volumes of sales at the retail outlets, Cherry decided to use placement tools to execute a mega

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visibility drive in 2004. Shelf talker, wall dispensers, hangers etc. were placed well before the season to boost the sales through out the season. Innovation – Drives business and growth Many aspects of the shoe care industry had undergone tremendous change over the last 5-6 years. According to industry research, these changes in the product users profiles, product forms and usage patterns, shoe care habits and competitive scenario had changed the environment where innovation was not just a choice but a strategic imperative.

It was believed that the innovation dynamism would not just help build durable brand equity among the consumers but also enable the company drive up its market share by deriving higher value per usage. This strategy had seen RBIL introduce Cherry's international range in 2003 which included products from their global portfolio, with an improved packaging for the first time in Indian markets.

In 2004, Cherry came out with the new format of Quick wax. Again in 2005, to drive consumer benefit of keeping the shoes looking new for longer, Cherry changed the formulation of wax polish and introduced wax with a special oils for leather (anti-ageing polish).This innovation was supported by promotions for “100 shining years” celebrations of Cherry (Annexure 9).

Since the implementation of these initiatives over 2003-2005, the brand started to reap the benefits, and was on a growth path despite market stagnation, and attained a market share level of almost 67% in first half of 2006.

Exploring New Avenues

With 100 years of rich history and strong presence in the Indian market, Cherry Blossom was well on the recovery path after the turmoil of the mid 1990’s and early 2000’s.

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The brand team was evaluating different ways to expand the markets and increase the growth rate, while at the same time remaining committed to keep the profitability of the brand intact and also ensuring to guard itself from any share losses similar to the ones that had occurred earlier.

Realizing that initiatives couldn't be taken in all directions at one time, the team wanted to use the creative ideas and innovative minds of the young business managers of the future, to help formulate new avenues for growth and chalk out the future of this endearing hundred year strong ‘Cherry Blossom’ brand to a new level. The brand team expected the young analysts to also do primary research of market segments, consumers and competition etc that they considered necessary to come out with strategic recommendations.

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Annexure 1: Shoe care Market (Volume & Value)
Volume MT/KL Formats Wax Liquid Others Value Mio Rs. Formats Wax Liquid Others Total

2001 1307 445 390 2001 588.89 188.05 68.20 845.14

2002 1344 485 384 2002 633.36 200.72 73.80 907.87 2002 33.43 6.27 1.25 14.76 18.09 73.80

2003 1219 398 328 2003 592.49 172.63 63.94 829.05 2003 32.93 5.20 0.51 15.59 9.71 63.94

2004 1040 374 322 2004 555.16 163.23 71.66 790.05 2004 33.61 4.02 0.12 24.90 9.01 71.66

2005 945 348 322 2005 546.39 160.60 79.10 786.09 2005 36.13 2.73 0.14 29.87 10.24 79.10

H1 05 498 182 151 H1 05 281.76 83.18 38.21 403.16 H1 05 16.55 1.40 0.06 14.71 5.48 38.21

H1 O6 478 182 154 H1 O6 293.12 91.19 44.61 428.92 H1 O6 17.36 2.29 0.26 18.77 5.92 44.61

Other formats value break up Other Formats 2001 Canvass Cleaners 33.49 Shoe Creams 8.93 Sneaker Cleaners 0.95 Sponge Shiners 11.36 Suede Cleaners 13.47 Others total 68.20

Source: AC Nielsen (AC N does not track CSD & shoe shops)

Volume in tonnes. Value in MLC(Million Local Currency)

Annexure 2: Shoe care Market Shares
Value Market Share

Formats
ALL SHOE RB SHOE KIWI SHOE ALL WAX RB WAX KIWI WAX ALL LIQUID RB LIQUID KIWI LIQUID ALL OTHERS RB OTHERS KIWI OTHERS
Source: AC Nielsen

1999
100% 73.16% 16.14% 71.7% 74.9% 12.5% 21.0% 73.6% 24.8% 7.2% 55.1% 27.5%

2000
100% 71.53% 18.54% 70.1% 73.8% 14.0% 22.6% 68.5% 29.6% 7.3% 59.6% 28.2%

2001
100% 65.70% 22.63% 69.7% 69.8% 15.8% 22.3% 60.4% 36.6% 8.1% 45.1% 43.5%

2002
100% 61.12% 25.87% 69.8% 66.0% 18.2% 22.1% 54.9% 39.6% 8.1% 36.3% 54.0%

2003
100% 62.10% 26.34% 71.4% 66.5% 18.5% 20.9% 54.9% 44.2% 7.7% 41.4% 50.5%

2004
100% 65.14% 25.36% 70.3% 69.4% 17.9% 20.7% 61.4% 37.5% 9.1% 38.3% 55.4%

2005
100% 65.6% 26.2% 69.5% 72.6% 16.5% 20.4% 56.3% 43.1% 10.1% 36.5% 59.0%

YTD Jun 06
100% 66.7% 24.9% 68.5% 72.9% 15.9% 21.1% 60% 39.7% 10.4% 39.5% 54.5%

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Annexure 3: Cherry Blossom Quick Wax

Annexure 4 (a): Cherry & Kiwi range in shoe care

Range Comparison
Segments Waxes Wax 80 gms Waxes 40 gms Waxes 15 gms Easy Wax Liquids Liquids 75 ml Liquids 40 ml Others Suede Cleaners Canvass Cleaners Sneaker Cleaners/ Shampoos Sponge shiners Brushes Aerosols Combi Packs Polish Kits Total . Cherry Kiwi 0 2 2 3 3 0 0 1 0 1 0 0 0 0 12 3 7 7 1 6 3 4 2 3 4 3 2 5 3 53 14

Annexure 4 (b): Kiwi range in shoe care

Annexure 5: Retail Prices

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Annexure 6: Shoe ownership & polish usage data

Figures may not total due to rounding off errors

Annexure 7: Trends in footwear buyers

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Annexure 8: No of retailers for Cherry

Annexure 9: Cherry’s Product Innovation & Range

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