Jul 31, 2008

Business - ITC's paper trail

Good wishes are always in demand, but what with the Internet and SMS delivering us from what is often perceived as the hassle of having to go to the store, buy a greeting card, write it in, address it and post it, they make for a shrinking industry ( Rs 300 crore in 2000, Rs 100 crore now) that few are willing to nurture. Paper, however, has not lost its attraction, and stationery is where the rewards may be. ITC’s greeting card and gifting business has been re-branded as the education and stationery business to reflect its new focus.
Chand Das, Chief Executive, ITC-Education & Stationery Products Business, says the Rs 9,000-crore stationery market comprising notebooks (for the larger part), copier and printing appear, writing instruments and scholastic products such as geometry boxes, sharpeners and erasers holds much promise for turning what are mostly commodities into brands. Notebooks, especially.
A Rs 3,000-crore market, only 15 per cent of it lies with the organised sector, Das says. While ITC claims it has the largest share of the market at 8 per cent (as against Navneet Publications’ 5 per cent and Ballarpur Industries 2 per cent), Navneet says there can be no claims to the top brand as there are no authentic figures. “We’re the first national brand in paper stationery and have top-of-mind recall,” says Shailendra Gala, Vice-President (Stationery Division), Navneet Publications, even as he points out the need for players in the organised market to collectively grow that sector. “There is an opportunity to progressively transform even the notebook market into a branded notebook market. The process has begun and is powered by us,” says ITC’s Das.
Despite the higher prices that branding results in, ITC and Navneet are bullish on this business. According to Das, in the last three years, ITC’s notebooks business has grown 100 per cent, though admittedly, on a small base. The segment is growing at 9-10 per cent every year and at this rate, it will double in about 6-7 years, he predicts. The reach of the conglomerate’s sales and distribution network account for Das’ optimism. “We can leverage ITC’s back-end (paper) and front-end capacities (sales and distribution) to do well in the business,” he says.
Navneet’s Gala says the prospects for the stationery segment are bright as there is much focus on education, even at the government level. “That will increase consumption,” he says. But how would that directly translate into a growth for the branded stationery players, and how involved a category is it? “People may not think much about a branded notebook vs an unbranded one but once they experience the writing pleasure, they will be converted,” avers Gala. “There are many advantages a branded notebook has over an unbranded one – good quality paper, better binding, more pages, no spoilage in transit and such.” As for price differences between the various brands, he says the organised market follows the MRPs Navneet puts out every year and hence there is hardly any difference. Navneet too has forayed into non-paper stationery but its focus remains students, unlike ITC, which also has adults and executives as its targets.
ITC has two brands of notebooks, Classmate and Paperkraft, aimed at students and executives, respectively. In fact, most of its products for students are called Classmate and while its printer and copier paper is branded Paperkraft. The challenges are different in different segments. In notebooks, it involves turning a commodity into a brand; in printer and copier paper, a Rs 1,800-crore market, it’s to achieve supremacy over the other players who include JK Paper, BILT and Tamil Nadu Newsprint. ITC has also just launched its first product to complement notebooks – a geometry set. Some of these products will be imported and some outsourced locally. Between October and December2008, ITC will launch pens (the majority of the market lies between the Rs 5 and Rs 20 price point) and pencils (the latter a Rs 400-crore market) that straddle the low-end, mid-range and premium segments of this category. Das says. “We want to have the major share of the schoolbag,” he says.
ITC markets its Classmate range through school contact programmes, point-of-sale promotions, and through the Classmate Young Author Contest, a major effort whereby it contacted, in the previous year, one million students across 5,000 schools in 34 cities. The business unit has, over the years, set up a separate distribution chain to market its stationery products.
The marketing doesn’t stop with stationery. The notebooks also serve to send out the message that ITC is an environment-conscious company as it manufactures ECF (elemental chlorine-free) paper and carry information on its corporate social responsibility programmes. In fact, for every two Classmate Notebooks sold, the company contributes Re 1 to its rural development initiative that supports, among other things, primary education in villages. Sunfeast, ITC’s biscuit brand, also finds place on its notebooks. Notebook manufacture is reserved for the small scale sector and ITC has tied up with 15 vendors across the country. As with the rest of its businesses, it aims to be self-sufficient – “from seed to smoke, farm to plate and (now) trees to textbooks”, the company’s paper division has invested in a Rs 500-crore machine that will manufacture and supply the paper for its business. However, the company does not intend to get into publishing now as it needs different competencies, though it has a few products for pre-school children, such as books of nursery rhymes and fairy tales, as they are outside the purview of prescribed syllabuses.
Das expects the education and business products unit to cross the Rs 1,000-crore turnover mark in five years from now. The business unit ended 2007-08 with a turnover of Rs 180 crore; that figure is expected to double by the end of the current fiscal

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