Deals in a downturn

Posted on January 1, 2010 Updated on October 18, 2013

Value and discount deals are a recurring feature of the fast food industry, but recently, the volume of such promotions that are being offered to consumers has reached new heights.

You would be hard pressed to drive down the streets of any major city and miss a billboard advertising a glaring price point intermingled with burgers, chips, pizzas and soft drinks, enticing you to buy ‘more for less’ at lower and lower costs.

So why this intense focus on promoting value deals at this time? To begin with, Pakistan is facing an economic downturn and inflation is in double digits. Fast food is a luxury for the majority of the public, and even the upper SECs of society are feeling the compulsion, at least psychologically, to conserve, consolidate and hold back on cash. Add to this a turbulent law and order situation which has affected the number of customers visiting food outlets, and you get the full picture of the challenge facing the marketing teams in the food service industry.

Given this environment, KFC, McDonald’s and Pizza Hut testify that the value deal strategy is aimed at ensuring a steady revenue stream, even if ‘value’ and discounts mean that an added cost has to be borne for every deal offered. Strategically, all three franchises hope to offset this cost by pulling in existing customers who may be wary of venturing out, as well as new customers. However, all three franchises have taken different approaches in reaching this clientele.

KFC, which is promoting multiple value deals back to back, including the current ‘Double the Deal’ (buy a Zinger meal and get another burger and soft drink for an additional 10 rupees) aims to focus on what Fuad Hameed, Marketing Manager, Cupola (the company which owns the KFC franchise), terms the “value seekers”.

“Value seekers look for value in terms of getting a desired product at a lower cost with perceived value differing on an individual basis.”

Accordingly, this value seeking segment is more interested in finding franchises that offer the cheapest option and will switch from one to the other with relative ease.

While this group does not contribute to the majority of KFC’s sales, in these tough times they have become a key market to play to, although Hameed clarifies that they are not necessarily from the lower SECs as “spending any amount on fast food is a stretch in the prevailing economic conditions.”

The competition for this value seeking segment is particularly stiff between KFC and McDonald’s which are both positioned as quick service restaurants (QSRs) with similar offerings, while Pizza Hut maintains its positioning between QSRs and an informal dining restaurant.

To counter KFC’s value deals, McDonald’s has its own set of value offers such as the ‘Snack Time’ deal, which consists of multiple deals, all for 99 rupees. However, unlike KFC, McDonald’s aims to appeal to the lower SECs with value deals and offerings that start at a significantly low 30 rupees.

Terming it a “penetration strategy”, Raza Ali, Country Marketing Manager, McDonald’s, emphasises that “we are focusing on affordability and although a major portion of our sales come from our main menu, these deals ensure that people keep coming and our outlets remain busy.”

Pizza Hut has also been looking to grow the market with the launch of their first-ever offering for a single person, the ‘124’ deal (a small pizza and a soft drink for 124 rupees) – a big shift away from their family positioning. As Marya Khan, Senior Marketing Manager, Pizza Hut, explains:

“It was an extremely successful campaign in terms of the transactions we were able to do and the share it took up. Normally our product offering is only targeted at families.”

Pizza Hut also promotes discount deals to the family segment; their current one being the Panormous deal – two large pizzas for a discounted 860 rupees.

With so much competition and the pressure to retain existing, and attract new customers, the role of advertising has been pivotal, and none of the three franchises have held back in making their deals highly visible, with emphasis put on the price point and the dial-in number.

For all three franchises, ATL media has been the major focus, exclusive of TV, possibly due to the cost of producing/placing back to back TVCs for multiple promotions. KFC and Pizza Hut have also turned to the internet as part of their promotion strategy.

With such emphasis being placed on value deals and lower price points, will consumers ever return to an era of upsized meals and promotions featuring excess rather than savings?

While there is a school of thought which says that consumer behaviour can be permanently changed after an extended economic downturn, the marketing teams at KFC, McDonald’s and Pizza Hut are convinced that the market will bounce back to ‘splurge’ the moment the law and order situation improves and economic stability returns.

A positive indicator has been the recent launch of Hardee’s despite the prevailing environment.

The central question however, remains largely unanswered: will 2010 see a return to splurge with the promise of economic stability, or will the food service industry giants be forced to build yet another marketing calendar dotted with value promotions at ultra-low costs, battling it out like the telecom sector’s price wars?

First published in Aurora January-February 2010 issue.

Posted on January 1, 2010 Updated on October 18, 2013

There is no doubt in the fact that armed with scissor and seam, fabric and flair, the readymade garment manufacturers have won the wardrobe war; Bonanza is one of the conquerors.”

These sentiments are taken verbatim from the ‘About’ section of Bonanza’s website, and while the site itself may not be much to write home about, nobody in Pakistan would deny that Bonanza is indeed one of the conquerors of the wardrobe war and a pioneer in popularising readymade clothes in Pakistan.

In fact, prior to its launch in 1975, looking beyond tailor-made clothes was unthinkable for most people, and according to Hanif Bilwani, Director, Bonanza Garment Industries, it was only thanks to the foresight of his uncle, Haji Haroon Bilwani, that Bonanza came into being.

“My uncle travelled extensively abroad and he saw that mass-produced readymade clothes were the future, which is why we conceived of Bonanza as a brand, even though in the 70s there was no concept of readymade clothes. It was a very unorganised sector.”

So, while Pakistan was struggling to maintain its once robust textile industry (with a focus on fabrics and not finished goods), it was Haroon Bilwani who had the vision to build a local readymade clothes label – a vision that has been fulfilled by five subsequent generations of Bilwanis. The result is that for the past three decades, Bonanza has been the undisputed market leader in all its product categories (sweaters, shirts and shalwar suits), making it one of the most prominent brands of Pakistan.

The first historical stepping stone was also the defining one – sweaters. Starting out with a range of sweaters for children in 1975, Bonanza’s success in this category encouraged the company to expand into a line for adults. In 1978, dress shirts for men were introduced, followed by shalwar suits in 1991. Over this period, Bonanza saw remarkable growth, with expansion travelling north from its base in Karachi to the larger markets of Punjab – now Bonanza’s main customer base.

Although brands such as Aladin, Cambridge and Oxford, as well as the outcrop of smaller designer labels could be said to compete with Bonanza in both Punjab and Sindh, Bilwani thinks otherwise.

“None of them come even close to reaching 50% of our sales volume.”

Maintaining such a position is not an easy task, as the technology, raw material, manpower and training required to consistently mass produce quality goods at competitive prices has been, and remains, an ongoing challenge, particularly due to constant global technological innovations in the production of garments and the invasion of foreign competition into the market, particularly from China. This is one of the principal reasons why no other company has managed to make its mark in the readymade clothes sector the way Bonanza has done so far.

To give an example: a single Bonanza-made shirt goes through 28 different hands from stitching to packaging, and a single mistake by any one pair of hands will send the shirt straight into the reject pile. Yet it is this strict quality control that Bilwani attributes as the reason for the brand’s success.

Few today will deny that Bonanza is a local icon, known by all, worn by most and as Qaiser Iqbal, Advertising Manager, Bonanza Garment Industries, puts it, “part of Pakistani tradition”.

“We are able to capture every segment of Pakistani society. When someone enters a Bonanza store he/she never leaves without buying something due to the sheer variety of products we create.”

This claim is less a matter of pride and more of fact. Bonanza creates 5,000 new designs every year and these are available in over 50 stores across the country. While admittedly the bulk of the market comprises SECs B and C, the brand’s longstanding equity ensures a degree of penetration into the upper SECs as well, thus staying true to its core value: a local brand made for all and accessible to all.

The extent to which Bonanza has integrated itself in Pakistani tradition is best exemplified in Punjab, where, according to Iqbal, “When there is a wedding, it is traditional for both the bride’s and the groom’s family to give each other Bonanza sweaters as part of the exchange of presents.”

Bonanza has deliberately positioned itself as a traditional, family brand which stays clear of high fashion in order to mass produce what Bilwani calls, “the classic look” – a defining trait of the brand even today. Being (essentially) a monopoly for many decades has given Bonanza the freedom to dictate what is and is not fashion for the general public, and the classic look – i.e. traditional, non-experimental, tried and tested designs – characterise the brand’s image. However, the emergence of other local brands in the readymade clothes category and an increasingly fashion conscious consumer have forced Bonanza to revise some of its more traditional thinking.

Bilwani is resigned to the fact that “with new brands emerging from the textile industry, we have had to start to follow fashion trends more closely, especially when it comes to the young.”

Herein lies one of Bonanza’s major challenges, as selling to the fashion conscious in a market that offers many alternatives is likely to be a very different playing field from the decades-long stretch Bonanza has enjoyed as the only dominant player in its field. However, the family-oriented Bonanza of yesteryear has, to some extent, already begun producing items for the young, and targeting this segment.

According to Iqbal, “Our recent ad campaigns have a young-ish look now due to the fact that we are using younger models. Also, we usually opt for a jingle-based, desi feel in our TVCs, but this year we added a dance routine which isn’t really a part of our (conservative) culture, so that was a major shift.”

Interestingly, this ‘cool’ factor was once part of Bonanza’s appeal. Iqbal laughingly recalls the ‘hip’ image Bonanza used to have in the 70s and 80s when not only was Bonanza the only clothes brand to advertise on TV, but it also featured ‘gora’ models:

“The truth is that using gora models was not part of a strategy, but because in those days it was difficult to find Pakistani women willing to model clothes.”

The impact of Bonanza’s early advertising campaigns is perhaps best epitomised by an exhibition held by Bonanza in Amritsar in 1985, where as Bilwani recalls, the chief guest, Rajiv Gandhi, the then Prime Minister of India, commented that even he had seen Bonanza ads on PTV (the channel was viewable in Amritsar at the time).

By its pioneering efforts in readymade clothes, supported by a strong focus on advertising, Bonanza has proven that local brands can excel. The brand’s equity is a testimony to hard work and sticking to doing what one does best, which, in Bonanza’s case, is staying true to its customers’ preferences.

Looking to the future, the company strategy is focused on ensuring that Bonanza will remain a household name for the next generation of Pakistanis as well.

As Bilwani points out, “We are aiming to go into ladies lawn in the next couple of years as this market is now viable. We have begun to make a limited amount of home textile products such as bed sheets. We have recently expanded into ties, shawls, socks and scarves, and we are also looking at wedding wear; there are many options open for our future expansion.”

Which poses the more pertinent question: What will Bonanza not do in the future?

First published in Aurora January-February 2010 issue.