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ACRJ
Asian Case Res. J. 2006.10:219-247. Downloaded from www.worldscientific.com
by INDIAN INST OF MANAGEMENT KOZHIKODE on 03/26/16. For personal use only.
Sainand Beedis
This case was prepared by
Professor
Sanal
Kumar
Velayudhan of the Administrative Staff College of India,
Hyderabad, as a basis for
class discussion rather than
to illustrate either effective
or ineffective handling of an
administrative or business
situation.
Please address all correspondence to Professor Sanal
Kumar Velayudhan, Administrative Staff College of
India, Khairatabad, Hyderabad-500 082, India, E-mail:
sanal_kumarv@hotmail.com
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peak season sales. The sales during the peak season of 1993
touched 140 bags per month. The sales, however, dropped
to about 105 to 110 bags per month during the lean season
and did not recover even in January 1994. In February 1994,
Sainandish introduced a consumer promotion scheme for a
period of three months. The word Sainand in Telugu (the
local language) was to be formed by consumers by collecting
letters placed inside the packs. Each pack had a letter and
if the consumer could form the word Sainand in Telugu
the consumer gets a 5 gm silver coin. Forming the word
Sainand Beedilu in Telugu the consumer gets 10 gm of
silver. The sales regained the level of 140 bags per month by
March 1994.
A distributor was appointed at Cherla and another
at Bhadrachalam in 1995. This improved the servicing of
wholesalers and retailers in these markets. The distributors
were required to deposit Rs.75,000 each. They were given
15-days credit on the condition that they extend a oneweek credit to wholesalers. The Bhadrachalam distributor
was given space to stock beedis in the building owned by
Sainand beedis. This distributor covered about 60 villages
around Bhadrachalam. The distributor in Bhadrachalam used
the van owned by Sainand beedis for servicing the market.
The distributor paid for the fuel and employee costs of the
van. Cherla was located about 65 km from Bhadrachalam.
The territory covered by the distributor in Cherla was
compact and therefore did not require a van. This distributor
in Cherla had a place for stocking beedis.
In 1998 there was an increased supply of duplicate
(counterfeit) PVS Beedis in the market. The image of PVS
Beedis suffered because of the duplicates. Some consumers
shifted to Sainand Beedis and as a result its sales increased
by about 10%. The following year, Sainandish perceived
a threat from S beedis (a brand that had acceptance in
the adjacent markets). He expected S beedis to enter the
Bhadrachalam market. The S beedis were longer beedis
and therefore called as big-sized beedis. In addition to its
greater length the leaves in big-sized beedis were thicker
and this gave stiffness to the beedis. The big-sized beedis
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CURRENT SITUATION
Market: The market for beedis in India was about Rs.120
billion in value (Chennai Interactive Business Services (P)
Ltd. 2004) and in units it was 700 billion sticks. The number
of beedi smokers was estimated at 100 million in the
country (International Labour Ofce, 2003). The market for
Sainand beedis included parts of the districts of Khammam
and Hyderabad, in the state of Andhra Pradesh. (A state
was divided into districts, which was further sub-divided
into mandals for administrative purpose. A mandal had
within its territory a few towns and a number of villages.)
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PRODUCTION
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COMPETITION
The industry was highly fragmented with no beedi manufacturer having a share of more than 5%. Most brands had
about 1% share. Major beedi manufacturers included Pataka
Beedi Manufacturing Company Limited manufacturing
100 million beedis a day with their leading brand called
502 Pataka Beedi, Bharat Beedi Works manufactured
60 million beedis a day and their leading brand was called
Thirty Brand Beedis, Kerala Dinesh Beedi Workers
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CONSUMERS
In India tobacco was consumed in different forms and
included chewing products and smoking products. Smokers
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the beedi was smoked. The ash had a dark color when the
quality was not proper.
A beedi was not consumed at once but in installments
and therefore beedi consumption was of much longer
duration than a cigarette. Some beedi consumers also
smoked cigarettes. Reasons for preferring beedis were:
Studies on smoking habits also provided an understanding of a consumer of beedis. The average smoker
smoked 4 beedis a day (Table 5). Compared to the younger
generation it was the older generation who preferred beedis.
One of the reasons for taking up beedis smoking by young
boys working in agriculture was because of peer group
pressure. Another reason for taking up smoking was that
employers in shops gave beedis to young boys to attract
them to work in their shops. Gossip groups that were
common in rural areas were also conducive to smoking. In
rural Andhra Pradesh it was observed that friends of young
boys who do not smoke, coax these boys into smoking.
Many young boys believed that smoking while watching
a play or movie added to the fun of watching it. Fellow
workers told young boys who went to work that to relax
one needed to smoke (Cecil Ray, et al., 2003).
PRODUCT
Beedi was a hand-rolled, leaf-wrapped country cigarette.
It had blended tobacco wrapped in tendu leaves, cut to
size, tied up with a thread, roasted in an oven to remove
moisture and given avor (Chart 1). The skilled worker
rolled the beedi, at at the smoking end and round at the
other. It was tied at the at end with a cotton thread of a
particular color chosen to identify the manufacturer. The
quality of a beedi was inuenced by the quality of the
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tobacco, the curing process and the quality of the leaf. The
poor quality of tobacco or leaf affected the taste of the beedi.
The quality also depended on the blending of tobacco and it
was as such treated as a trade secret.
Beedis were manufactured and sold in two sizes, bigsized beedis and normal-sized beedis. In addition to the
size the blend used and the strength of the tobacco varied
by brands. Sainand beedis was sold in only one form. It
was sold in normal size with medium strength tobacco. The
product came in a pink pack with the picture of the founder
Satyanarayana along with the name Sainand Beedi.
Twenty beedis tied with a thread were wrapped
inside a pink color paper wrap with distinctive markings to
make the basic pack. 20 packs in a separate color wrapper
denoting the brand name made a bundle. 10 bundles tied
with a jute thread made a unit of 4000 beedis. 10 such units
of 40,000 beedis were put in a jute bag, sealed and stenciled.
As the blend of tobacco was important Sainandish specied
the blend. Sainand beedi had a blend of about 70% high
quality tobacco and 30% tobacco of slightly lower quality.
This blending allowed to maintain quality comparable to
the leading competitors brand and at the same time to sell
at less than the competitors price. Sainandish tested the
blend quality himself and also checked the same by offering
to others including visitors and distributors. This method
of testing was given considerable importance when a new
blend was tried out.
Sainandish considered the option of having on each
stick of beedi a paper ring (sticker) with the brand name
printed on it and also a second option of introducing a small
pack of beedis. The use of a paper ring with the brand name
had the advantage of improving the appearance. As beedis
were purchased loose, the ring would identify the brand
and prevent duplicates of the brand. The cost of paper
and of labor for sticking the ring was approximately 3.6%
of the sales price. The second option of reducing the pack
size was not possible with paper packing as the workers
found it difcult to carry out the operation for less than 20
beedis. The option then considered was the use of a plastic
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CHANNEL
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PROMOTION
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ISSUE
Sainandish, the proprietor was keen to enter the markets
in Palawancha mandal and Kothagudam mandal. In
Palawancha (about 20 km from Bhadrachalam), Sainand
beedi sold about 2 to 3 bags a month while the market
potential was about 35 bags a month. In Kothagudem
mandal, the potential was double than that of Palawancha
but Sainand beedis was not present. Sainandish had put in
effort to improve sales of Sainand beedis in the Palawancha
and Kothagudam markets but this had not yielded the
desired results. Personal selling to retailers (pan shops) and
offering credit were part of the effort. Audio promotion
and cinema slides were also used to promote the brand to
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REFERENCES
1. Chennai Interactive Business Services (P) Ltd., 2004, Worlds rst
non-tobacco Biri (accessed 5 January 2005) [available at http://
www.chennaionline.com/health/homearticles/2004/03vardan.
asp]
2. International Labour Ofce, 2003, Making ends meet: Bidi workers
in India today: A study of four states, Geneva.
3. Government of Andhra Pradesh, District-Khammam (accessed
20 June 2004) [available at http://www.aponline.gov.in/
Quick%20links/apfactfile/info%20on%20districts/khammam.
html ]
4. Department of Collectorate, Khammam, Demographic Prole
(accessed 20 January 2005) [available at www.khammam.com]
5. Zora Milenkovic, 2004, Bidis continue to dominate Indian tobacco
market... (accessed 20 January 2005) [available at http://www.
euromonitor.com/article.asp?id=4250]
6. Cecily Stewart Ray, Prakash Gupta and Joy de Beyer, 2003, Research on tobacco in India: An annotated bibliography of research on
use,health effects, economics, and control efforts. The World Bank.
Washington, D.C.
7. ERC Statistics International Plc (1998), India, in World Cigarette
Report, 1998, pp. 138.
8. Eenadu ETV(Telugu)-Tariff (accessed 4 February 2005) [available
at http://www.eenaduinfo.com/reach.htm]
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Table 1. Potential and Sales in the Market Served (excluding Hyderabad) by Sainand beedis
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Location
Distance from
Bhadrachalam
(km)
Potential
(bags/month)
Sales of
Sainand
(bags/month)
Competition
Bhadrachalam
180
150
PVS
Cherla
65
70
65
PVS/Kismat
Manuguru
45
60
35
Dost/PVS/S beedis
(equal share)
Palawancha
25
35
PVS/S beedis
50:50
Kothagudam
45
60
PVS/S beedis/Dost
50:30:20
Table 2. Package Size and Price per Bundle to Retailer for Different Brands
Sl. No.
Brand
Type
Pack Size
Price (Rs.)
1.
Sainand
Normal
Size
40.80
2.
S. Beedi
Big
Size
Pack = 20 beedis
Bundle = 2 packs
Bag = 48 bundles
65.60
3.
Dost
Big
Size
Pack = 20 beedis
Bundle = 20 packs
Bag = 70 bundles
37.60
4.
PVS
Normal
Size
Pack = 25 beedis
Bundle = 20 packs
Bag = 100 bundles
61.60
5.
Kismat
Big
Size
Pack = 18 beedis
Bundle = 20 packs
Bag = 70 bundle
32.00
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PVS
S-Beedi
Dost
Kismat
Sainand
Price to wholesaler
60.40
64.80
36.60
31.00
39.80
Price to retailer
61.60
65.60
37.60
32.00
40.80
Price to consumer
72.00
72.00
48.00
40.00
48.00
Item
Users (mn)
% to Total
Beedis
125
50
Chewing
77
31
Cigarettes
88
19
Bidis
Total
197072
170
840
1010
198082
180
1130
1310
199092
150
1220
1370
199698
170
1350
1520
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5 bundles
1 steel glass
25 bundles
5 gm silver
100 bundles
1 ask
Cat - III
Cat - IV
Cat - V
Cat - VI
Rs.9,500
Rs.6,500
Rs.4,500
Rs.3,000
Source: www.eenaduinfo.com
Programme
Category 1
400
Programme
Category 2
250
Programme
Category 3
180
Source: www.eenaduinfo.com
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Percentage of
Population (%)
> 10,000
0.5
5,000 to 10,000
0.5
2,000 to 5,000
1,000 to 2,000
30
Below 1000
60
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Annex 1. (Continued)
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Mandal Mandal
Mandal Mandal
Mandal Mandal
Code
Name
Code
Name
Code
Name
WAZEED
16
PALAWANCHA
32
KALLURU
VENKATAPURAM 17
KOTHAGUDEM
33
THALLADA
CHERLA
18
TEKULAPALLE
34
ENKURU
PINAPAKA
19
YELLANDU
35
KONIJERLA
GUNDALA
20
SINGARENI
36
KHAMMAM URBAN
MANUGURU
21
BAYYARAM
37
KHAMMAM RURAL
ASWAPURAM
22
GARLA
38
THIRUMALAYAPALEM
DUMMUGUDEM
23
KAMEPALLE
39
KUSUMANCHI
BHADRACHALAM 24
JULURPAD
40
NELAKONDAPALLE
10
KUNAVARAM
25
CHANDRUGONDA 41
MUDIGONDA
11
CHINTUR
26
MULAKALAPALLE 42
CHINTHAKANI
VARARAMACHAN 27
ASWARAOPETA
43
WYRA
DRAPURAM
28
DAMMAPETA
44
BONAKAL
13
VELAIRPAD
29
SATHUPALLE
45
MADHIRA
14
KUKUNOOR
30
VEMSOOR
46
YERRUPALEM
15
BURGAMPADU
31
PENUBALLI
12
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Item
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Percentage of Sales
Normal Size
King Size
1. Labour
45.16
39.79
2. Leaf
16.29
19.93
3. Tobacco
9.00
10.37
4. Paper (packing)
4.52
4.78
5. Labour (packing)
0.91
0.80
1.58
1.48
Sub-total
77.46
77.15
7. Ring (sticker)
3.56
77.46
80.71
Total
There are certain other taxes that are variable and also
overhead expenses. Though the prot varies with volume
it is approximately 7% on sales for the current volume.
This does not include additional expenses on promotion
that varies from year to year depending on the competitive
situation. The time spent by household members and
Sainandish is also not included in the cost.
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Year
Approximate Sales
(Beedies in billions)
198990
28.1
199091
28.5
199192
27.6
199293
27.7
199394
28.0
199495
25.6
199596
25.7
199697
25.4
199798
24.4
199899
23.6
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