There are some situations which are known as marketing opportunities. Now, these opportunities could be created and exploited but, many a times it so happens that these opportunities are already there, and the brands only need to spot them. Sometimes these opportunities knock the door in a weird way, and it becomes quite interesting to read about them as a third person. Because the brands which are involved in such situations have to make decisions which could make them or break them at that moment.
Here, we are not trying to give you a marketing lesson but explaining the situation leading food company Parle Products is going through. The sales of Parle-G biscuits broke all records of sales for the last eight decades during the lockdown. Does that mean that people were feeling nostalgic during the lockdown about the glucose biscuit that made their childhood memorable? Maybe not. There’s a different story behind this altogether.
How did this happen?
You may be surprised to know but most probably the record breaking sale of Parle-G biscuits during the nationwide lockdown happened due to panic buying. While the people were busy stocking their pantry during the pandemic, they bought Parle-G biscuits readily. And, due to this Parle Products was able to gain a substantial 5% market share in the highly competitive biscuits segment. And, there’s more to this.
Parle-G was the preferred choice of Government agencies and NGOs while distributing food packets for relief work. And, of course the economic proposition (Rs. 2 only for a packet) worked in its favor. Parle-G was always the world’s largest selling biscuit but, Parle Products on the whole was struggling in the market. Some news reports had also cited that the company was nearing bankruptcy. But, the pandemic turned it around.
Coming back to where we started from, Parle-G has found marketing opportunities during crisis situations in the past as well. According to a senior official of the company, the sales had risen during Tsunami and earthquake as well. It’s a bit weird but crises suit the sales of this biscuit. What brand campaigns couldn’t do, pandemic did! But whatever it is, it will be interesting to see the future marketing strategies of Parle Products.
SBI Cards and Payment Services Limited (SBI Cards)
The second largest credit card issuer of India started in 1998 as a joint venture between SBI and GE capital corporation with 60:40 partnership. In 2017, GE capital sold 14% shares to SBI and 26% to CA rover holdings (an affiliate of Carlyle Group) resulting in the holding of SBI risen to 74% and of CA rover holdings to 26%. SBI Cards is registered as a non-banking finance company (systemically important non-deposit taking company).
It is aimed to offer Indian consumers access to a wide range of world-class, value-added payment products and services by issuing, marketing, and distributing credit cards.Under project Shikhar, it has tapped the vast SBI customer base by offering pre-approved cards to SBI customers which proved to be one of the masterstrokes by the company.
It continued a similar approach and partnered with many other players from different sectors (travel, fuel, fashion, and healthcare, etc) offering various benefits and rewards to loyal customers. This co-branding initiative has promoted SBI Cards at large levels helping in reducing costs on advertisements.
Because of this diversified customer acquisition, it was able to offer tailored credit cards for different sectors generating a satisfied customer base. This also helped SBI Cards in charging nominal annual fees ranging from ₹ 0 to ₹ 4,999 as per customers' requirements. Its 95-97% of cards are charged fees which is more as compared to its peers generating better revenues and thereby income.
The two major sources of revenue are interest income and income from fees and services whereas expenses include advertisement and transaction fees to payment networks (Visa, MasterCard, and RuPay). The revenue stream has observed a continuously increasing trend and the expenses margin has seen a declining trend contributing to an increase in profits. Total revenue increased at an annualized rate of 43.15% for the last 3 years and net income grew at 44.84% during the same period.
In terms of the number of cards distributed, the share of SBI Cards stood at 17.6% in FY19 which increased to 18% by Q2FY20 whereas credit card spends increased to 17.9% from 17.1% during the same period contributing to increase in earnings of the company. Credit cards spend grew at a CAGR of 35.6% for industry whereas it grew at 54.2% for SBI cards.
Almost 80% of India’s population has bank accounts but only 3.4% have credit cards. This can be proved to be a huge opportunity for the 2nd largest credit card issuer to tap into and grow substantially. The company is expected to focus on tapping customers from Tier II, Tier III, and smaller cities gaining growth opportunities from SBI and its vast customer base. Also, being an under-penetrated market in terms of credit card usage and the government’s focus on digital transactions further provide opportunities for the growth of the company’s business.
The unsecured loan market in India was ₹ 5 trillion (approx.) in FY19 which is comprised of personal loans ( 73%), credit cards (22%), and consumer durables (5%). This market has been the fastest growing segment in the retail category with a CAGR of 28% during FY14-19. Credit card penetration is just 3.4% in India as compared to debit card penetration of 65% as of FY19. There are 74 players in the industry of which HDFC Bank, SBI Cards, ICICI Bank, and Axis Bank dominate the market with 78% and 75% of market share in terms of cards outstanding and total spends.
Credit card spends has grown at an annualized rate of 32% over the last 5 years with spends of ₹ 6 trillion in FY19 which is expected to rise up to 15 trillion by FY2024. The average annual spending per credit card stood at ₹ 1,44,000 and the number of cards issued was 47 million by the end of FY19. The number of cards issued has grown at 20% CAGR over the last 5 years.
There are certain factors that can affect the company’s business negatively. It is mostly dependent on SBI and 100% unsecured lending without collateral may have severe impacts during and after this ongoing COVID-19 pandemic. Gross NPA was 2.47% during the first 9 months of FY20 as compared to 2.44% in FY19. Also, any regulatory changes in the merchant discount rate can disrupt the business of SBI cards.