Nirdosh Case Study

Analysis on Bhavsar’s Herbal Smoking Device- NIRDOSH

Submitted By:
Group 7, Section A, PGP-I (2010-12)
Bhavinkumar Parmar
Deepak Yadav
Jaswant Jonnada
Kishore Basa
Kunal Thakur
Prakhar Gupta
Sudhir Ambekar

1. Executive Summary:
“NIRDOSH”( a unique non-tobacco smoking device) branched out from the family business of Mr. Natwarlal Bhavasar who was into bidi manufacturing business. The main reason behind this was Mr. Bhavasar desired to introduce this new herbal product for a healthy cause. As of year 1989 he had a turnover of Rs 5 lacs and was looking to expand further into Gujarat and Maharashtra. He was also contemplating entering into the overseas market and had sent samples for approval to the regulatory authorities abroad. His targeted consumers are those who are looking towards quitting smoking. He also intends to capture the market share of people who begin smoking as a lifestyle.
2. Situation Analysis: The Nirdosh case study is analysed using the 4 C method.
2.1 Customers: The customers targeted are, from the 2 major cities – Bombay, Ahmadabad during the initial stage. Nirdosh is entering 7th year of sale and has major expansion plans. We are planning to target a consumer base across the two states. Nirdosh is an healthy alternative to smoking and will appeal to those looking to quit and need an alternative as well as people who take up smoking as a lifestyle choice.
2.2 Competitors: There are established brands in the cigarette industry namely ITC, VST, GTC, and others. But our primary focus is targeting people who recently have moved into smoking, who think smoking is a lifestyle choice and those people who are looking to quit smoking. This is an innovative product in the health conscious lifestyle segment of smokers, and has no close competitors. Nirdosh has a competitive advantage on the front of herbal raw material procurement and composition. As of now it is a small scale operation that has potential of expansion by venture funding. With the increase in sales, production capacity will also be up scaled, firstly by increasing the number of workers in current facility or adding a similar facility based on requirement.
2.3 Company: Maans product, Ahmadabad (India), is a Bhavsar family owned proprietary organization. It was running since two decades. It is having experience of six/seven year of developing the product “NIRDOSH”. Nirdosh a unique non-tobacco smoking device was developed in 1982.Its made from 14 herbs which were turned into granular form and rolled into tendu leaves in the shape of cigarette. The sales of the company till 1988 were between 1.2 lacs and 1.5 lacs. In 1989, through packaging change and door to door campaign, and increase in price, took the revenue to 5 lacs. The promoter of the company is working on developing this product with great devotion.
2.4 Context: The cigarette market in India is growing year on year. Nirdosh is also getting popular in the market, as a substitute to the cigarette. The increased awareness of this product and anti-smoking campaign run by various organizations gives a major advantage for Nirdosh in the market. The product is also got positive feedbacks for its benefits. It can also be used in curing certain ailments such as cold, cough, fever, asthma, tonsillitis, graying of hairs, insomnia etc.
3. Market Opportunities:
Being a unique non-tobacco smoking device, Nirdosh can target the customers who all are willing to stop smoking and also to those young customers who all want to enjoy the smoking cigarette as part of lifestyle without getting addicted to it. Because of its competitive and prominent growth in 1986 to 1989 as per the below statistics, Nirdosh can be distributed in other city also.
Targeted Brand Manufacturing cost per packet Sales( No. of Packets) Sales ( .Rs)
1986 2.12* 60000 1,40,000
1987 2.24 60000 1,40,000
1988 2.35* 60000 1,50,000
1989 2.47* 96,000 5,00,000
*considering 5% inflation rate year or year during 1984-1990.
As per Exhibit III given in case, total consumption in the year 1985 is 9000 Crs. So assuming the total consumption will remain same as per the up down trend given in Exhibit III table 2.
Assuming that Nirdosh’s target customer would be 2% customers who all want to stop smoking and assuming that 1% are the new customers from the total market, Nirdosh can achieve target customers who are having consumption of 270 Crs cigarettes, so even if only 2% of these potential customers will become Nirdosh’s consumers then it would be 5.4 Crs across India. As Nirdosh is only focusing on two cities, so the market available is of 54 lacs cigarettes approximately assuming the consumption of cigarettes in these two cities and secondary cities in the states is around 10% of total consumption.
Assuming that 50% of the sales are through retailers and other established channels. The total margin of retail channel including transportation and wholesales is 30%. Based on these figures we will now calculate the margin for the manufacturers.
• Cost per pack 2.47 rs. (In year 1989)
• Margin of distribution channel per pack 0.75 rs.
• Total cost of promotions 2 lacs (as discussed and detailed under Section ‘promotion’). This comes to around 0.37 rs per packet
• So total cost per packet coming around 3.59 rs (2.47 + 0.75+ 0.37) approx. Selling price would be 5.00 rs so profit of 1.41 rs per packet
• Expected sales is about 5.4 lacs packets, generating profit of 7.16 lacs and turnover of 27 lacs in the year to come.

4. Marketing and promotional strategies:
4.1 Product:
Nirdosh is packaged in a set of 10 ‘bicets’ per pack. The package is rectangular in shape, covered by a cellophane covering. Nirdosh would benefit by an appealing promotion tagline on the carton to stand out as a healthy alternative to smoking, as the product is being primarily aimed at consumers who are giving up smoking due to health issues. Also consumers who are taking up smoking as a lifestyle choice will be willing to consider a healthy alternative. Some of the taglines could be ‘Choose to smoke without compromises’, ‘Smoke for a healthy lifestyle’, ‘Healthy Dhoompan’, ‘Alternate smoking- Dhoompan’.
The insert which is put into the packet is also too elaborate to interest the customer. It should be brief and precise stating the ingredient herbs and also mentioning the certifications the product has from different vaidyas, doctors and institutions.
4.2 Price:
The product will be priced attractively at rupees five per pack domestically. Mr. Bhavsar is also looking to export large quantities of Nirdosh and he can look at a possible pricing differential from the domestic market.
Bulk exporting will demand larger production capacity with hygienic conditions. With revenues coming in he can open another centre for rolling Nirdosh. With a favourable international market, the revenue stream will be boosted and there is a scope to get some machines to achieve the purpose.
4.3 Place:
The product will be marketed under the Nirdosh banner and will be distributed only in Gujrat (Ahemdabad) and Mumbai. We have brought on Mumbai as another hub for promotion due to large consumer base and proximity to Ahemdabad. The network of distributors will only span across the two cities with retailer penetration going further.
For effective marketing he has to develop an effective distribution channel. He can open his outlets in few cities and in other he can use the VPP mechanism he is currently using. For the outlets also he can consider two options. First, using the existing stores and second, he can open his own specific outlets catering to Nirdosh specifically. For now we are looking at the former option.
He will have to keep some margins aside for distributers and transportation costs.
4.4 Promotion:
Nirdosh has a three prong promotional strategy consisting of print media(newspapers) and bus panels in major cities and hoardings in secondary cities. This can also be backed by a visit to major retailers to boost market interest. The marketing will be undertaken by the youngest son who has prior experience.
1. Newspapers are the preferred print media because people smoking in the price range of Nirdosh are statistically of ‘white collar occupation’ and read newspapers over other print media. The newspaper ads will be released in both Gujarat and Maharashtra to attract customers and retailers.
Cost of Advertisement:
• Two speculative ads in the month of launch to generate public appeal.
• Times of India(Bombay): 2x12000=24000
• Gujrat samachar:2x10800=21600

Follow up ads every four months for the year to sustain the brand name, and follow up plan for ads depending on market captured.
• TOI:36000
• Gujrat Samachar:32400

Total expenditure for the first year for newspaper ads comes to about 1.14 lacs

2. The other form of ads is through bus panel which will be launched simultaneously with the newspaper ads. The ads will be in Mumbai and Ahmedabad for 2 months in the first year.
• Mumbai: 225x50x2=22500
• Ahemdabad: 415x20x2= 16600

3. Hoarding costs:
We are targeting 10.5 lacs + populace cities in both states for one month.
Cost: 600x10x5=30,000
Thereby total cost on promo for the first year comes to Rs 2 lacs including contingency cost.
Pamphlets emphasizing the certifications the product has from various medical fraternities should also be distributed and also displayed at the distributer’s to make the people aware and increase trust in the product emphasizing its reliability. These pamphlets can also be distributed and made available at local retailers like paan wallas.
5. Positioning:
Nirdosh will be considered as a distinguish herbal healthy product which will be helpful to all the consumers who wants to leave the habit of injurious smoking and still want to enjoy the benefits of smoking.