Sitaram Textiles Ltd

Group 9 Ankita Kage[246] Nishant Bagade[272] Swapna Pandharpatte[273] Parichita Kapoor[275] Shifali Sashidharan[286 ] Jaison J babu[261 ]

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Introduction

Government owned company located in Kerala Integrated textile mill with spinning, weaving and processing Outsources weaving due to stiff competition from small power looms of Tamilnadu Product Mix: yarn and cotton fabric Product lines: Grey calendared cloth, beached mulls, bleached poplins, dyed cambric, dyed casement, drill and printed variety in cotton Uses traditional channel of agents

Total sale value Large dealer Small dealer

Rs.100m 10-20m

Percentage Sitaram share share

3m 0.5-1m 3.00% 5.00%

% Awareness of Sitaram Wholesalers Retailers Agents Distributors

50% 25% Direct sales by agents made Sitaram preferable Not only quality

Competitors (Umed , Western India)

used used 2

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Issues

Company running into losses from 1993 to 1996

Need to push existing items in product line

Insufficient demand for company products

Demand of Poplin decreasing Low capacity utilization for processing cloth

Geography wise less demand

Drop in demand from agent in AP No large accounts and demand in South Kerala

Stock accumulation due to low sales of poplin Increase in competition from organized[brands] and unorganized[price] sector Decline in production of cloth by 61% in entire mill sector with increase of 317%in Powerloom and handloom sector Channel arrangements for effective distribution Less awareness about quality in type of fabrics in retailers and customers Entry into blended fabric Consumer preferences are changing; Managing variety
Capability of Looms to variety with low cost in caparison to mills Need to change the current economic strategy

10/29/2013 Increasing awareness

about brand in dealers

Categorization of issues

Short term

Long term

Need to push existing items in product line Demand of Poplin decreasing Low capacity utilization for processing clot Drop in demand from agent in AP

No large accounts and demand in South Kerala Increase in competition from organized[brands] and unorganized[price] sector Channel arrangements for effective distribution

Stock accumulation due to low sales of poplin Less awareness about quality in type of fabrics in retailers and customers

Need to change the current economic strategy

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Sitaram : Existing Product Line

Domestic Revenues (in lakhs) 1994-95 1995-96

Yarn

Cotton Products

Product Preference
Cotton Preferred for Both Inner & Outer Wear Poplin Major product of Sitaram Mills Highly Demanded in the market Mainly Consumed in Petticoats & Pyjamas

454.59 651.79

632.70 662.71

Poplins Mulls Cambric Casement Calendared Cloth Drill Printed Fabric

Locational Advantage

Presence of Manufacturers in Kottayam & Ernakulam Ernakulam was a center for Garment Manufacturers

Importance of Quality
Kerala Consumers preferred quality products from Mills

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Sitaram : Competitive capability

Processes: Quality of fabric is recognized by SITRA Good capacity utilization of Yarn Quality preferred by Kerala customers, Mangalore: recognized for high sales Appropriate quality standards taken care in processing and dyeing facilities Extra capacity of cotton processing which can be utilized in future

Preference for Products: Poplin is gaining popularity in the market and Sitaram is leveraging the market demand Customers are also preferring half-bleached mulls for lungi product segment hence Sitaram can gain profit from it

Competing products[1/2]
Attribute/ place

Product

Mulls

Competition Low cost[due to low labor and better productivity]

Firms

Price

replacement

supply/ demand

Century mills, Umed mills Western India with low price Cotton Mills( 1.5% poplins and discount for rs.15 Poplin (medium blends in MH, lakh and above), North Kerala, 24.50+duty% price) Gj and TN Sitaram Mangalore [Also 19-20] Seenivasa All Procesing,Westernregion[mostly in Poplin (low price) India Cotton Mills south Kerala] 18-19%

Poplin (high price)

Decrease in demand Polyester viscose Demand for better or (PV) 1.1 m quality poplin and replacing poplin of 1.5m width increased 1.5 m width In 38.40+10% 0.9m . Price of PV else other quality Ernakulam duty is 22-27/m poplin decreased

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Inferences: Sitaram present in Medium price poplin, mulls Increasing demand for high quality 1.5m poplin Demand decreasing for mulls

Competing products[2/2]

Products

Competition

Firms

Price

Supply/ Demand

Material

Brassier Bed sheet and lungies

Nighties

Limited competition Ram kumar mills (irregular mills), from low cost hindustan spinning & weaving mills Erode (low cost)

Ram Kumar (28-31)shifting Poplin used, PV of to high price Shortage of 40s combed 1.1m also used cotton fabric; supplied in Karnataka (23-27/m) High price Demand high of bed sheet High demand for Microsoft item @ 27.5, poplin nightie demand increased

PV (1.1m, 1835/m)

Uniform shirting
Uniform Suiting High quality dhotis Petticoat

Process house- 20 Umed and Morarjee mills, and above and Swiss davangeree(preferred) and hindustan cotton (24spinning and weaving mills ltd 25-27.5 +20% 30)[Substitute] (preferred) duty Davangeree and premier mills 20 below the High for products from mills mills and process house

Blends

Low priceStrong brand loyalty towards century national dhotis Limited demand for cotton mill's param sukh, premier mills from Mumbai dhotis, awareness present Supplied for urban areas

(Premier mills)chiffon and blend

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Inferences
Demand for various products:
Unmet Demand of 40s poplin for brassieres; competition by Ram Kumar textiles Lucrative areas of demand are uniform shirting[blends] with stiff price competition Bedsheets segment can be entered with low price than higher priced competitors with brand awareness through advertisements High demand for blends and 1.5m poplin in underskirts[10-40% share] Variable demand in Chudidar; Blends are preferred with less demand for polyester and cotton Not much demand for nighties Strong competitors brand preference in Dhoti; Demand is also decreasing Uniforms: For uniform skirts, PV and PC is preferred For uniform trousers PV is preferred Cotton is preferred for uniform of industrial workers High competition by low cost Surat and Ithchalkaranji products

Consumer Segment: Women in kerala who wear sarees are customers of underskirts For uniforms, School administration are major customers Private schools and missionaries for fabric
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Breakeven Analysis
Aim-> to find the capacity utilisation of cloth Insights: Increase of 40% in price of yarn from 1995 to 1996 Increase of 22.33% in price of cloth from 1995 to 1996 The revenue from service charges of grey cloth has decreased Determination for target capacity utilization of cloth Assumption already high capacity utilisation of yarn (maximum) , assuming capacity utilisation would not be decreased for yarn Breakeven value (in L) value
77.50 651.79

products

1994-95 value per value quantity unit (Rs.00,000) quantity

1995-96 value per unit

1900[given] 651.79 1248.21

Value from yarn Value from cloth

yarn (lakh kg)

8.21

55.35

454.49

8.41

cloth (lakh m)

42.42

14.91

632.7

36.32

18.24

662.71

Volume of Cloth (L meters)

Capacity utilisation required Current capacity utilisation Increase in capacity required

68.4084851 6

1994-95 Total value (mn)

108.719

1995-96
131.45

57.01%

Total sales including service charges (mn) Service charges

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37.86%

115.992 7.273

133.047 1.597

19.15% 10

Future Options for Sitaram

Option 1

High quality Poplin of 1.5m width, 40s combed, 60s count[2*2] Increase capacity of polyester yarn ;Spin off cotton processing Polyester cotton; polyester viscous

Option 2

Option 3

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Option 1

Advantages: To tap the overall market of cotton which is 54% Sitaram can leverage capacity of poplin production by changing mix of product variety[low quality poplin]to high quality [1.5 m poplin, 40s, 60s ]which has high demand

Disadvantages: Burden of increased distribution in urban and rural markets to tap entire 54% market Sitaram has to forgo market for polyester which is 76% in urban areas If current resources are used for entering into high priced cotton, then it will be too late for Sitaram to enter growing polyester market

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Option 2

Advantages: Leverage the existing capacity of yarn to produce polyester yarn in addition to poplin Can cater to increasing market of cotton as well as polyester Spin of under utilized cotton processing to concentrate on yarn

Disadvantages: Can not cater to increasing demands of blends Company can go out of business in long term Can not leverage the advantage of processed quality cotton

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Option 3: Blends
High quality difference between blends from mills and looms Price difference of 30% between blends of mills and looms Increase in Purchase in Urban area of Polyester by 40% PC by 39% CV by 36 %

Advantage: 1. Benefit from low cost weaving of powerloom and handloom sector 2. Sitaram textile to utilize the processing capacity from obtained weaved cloth Increase Capacity utilization of cloth 37% currently target 57% breakeven) 3. Utilization of distribution channel for entering into blends with dealers, and traditional agents Disadvantages: 1. Sitaram may not obtain low cost blend to compete with that of Maharashtra, Gujarat and Tamil nadu 2. Changing tastes of Salwaar Kameez segment, hence an eye on market needs to be kept

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Blends: Determination of target market

Uniform shirting

Cons: Competition from davangeree and hindustan spinning for brand and price Cons: Limited demand for cotton dhoties and brand loyalty towards param sukh Gradual shift away from wearing dhoties Pros: Good market for blends with 40% blends of total underskirt market. Quality and finish needed, can be obtained from our processing capability Can utilize the dealer and wholesaler chain of Sitaram as channel Pros: blends preferred to other material Demand of blends is not high Blend od polyester and viscose and PC for skirts Demand of blends for trousers Positioning and branding needs to be done as known brands were preferred

High quality dhoties

Underskirts

Salwaar Kameez Nighties

Uniform (skirts, trousers)

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Recommendations: Option 3
Reasoning for entering into blends:
1. 2. 3. High demand for blends: Medium price poplin face competition from blends and low price poplin. Hence before other competitors take Sitarams poplin share by blends, Sitaram itself should enter into blends All India CAGR by of 18.49% for blends; 27.87% in Urban; 11.89% in rural by value Scaling: By large scale production of blends for different market segments, low cost production can be obtained to compete in market

Plan of Action:
1. 2. 3. 4. Enter into polyester yarn making: Partial replace capacity of poplin with polyester Outsource weaving of polyester with viscose and cotton to make blend as increase in PC by 28% Not possible to enter into weaving in short term because of first mover and low cost advantage of looms Service processing of gray cloth should be promoted to utilize the capacity of servicing

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Recommendations: Option 3

Distribution Channel:
1. 2. 3. 4. 5. 6. Sitaram has only 5% share in total sale of small dealer and 3% share in large dealer more dealers need to be contacted Dealers for specific product segments skirts, trousers, Salwaar Kameez, underskirts Pushing blends in urban area through dealers Enter into uniforms for skirts and trousers Dealers need to form contracts with schools administration Enter into underskirts wholesale and dealer chain to be made efficient forward information of trends from agents needs to be gathered for entering into Salwaar Kameez For 40s Poplin used in brassieres from long term contract with branded manufacturers as only one branded competitor is present

Advertising for Increasing Awareness:

1. 2. The awareness of Sitaram among retailers is only 25% which needs to be increased Quality of Sitaram needs to be communicated to retailers through agents

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Thank You

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