GOLD FLAKE
CHAPTER V
Branding of Gold Flake
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GOLD FLAKE
1) Building the brand image:
To create a brand image of Gold Flake the company started branding of the
product since it was launched in 1970. In those days India was a country of the
genteel rich. The product offered the user the sense of belonging to the upper
class.
For creating a brand image; the advertisements of Gold Flake launched by
the company in the seventies was as per the consumers taste and preference. The
first advertisement was the balcony ad “For the Gracious people”, “A touch of
Gold” and “A tribute to the gracious people”.
But after few years this advertisement became stale as average age of the
consumer of Gold Flake had fallen and it also affected the sales of the company
because the young smokers did not emphasis with the brand. The brand did not
stand for success and respectability because the liberalization and globalization
had changed the consumer needs and mindset.
To overcome this problem the company followed a brand repositioning
strategy. The brand was still positioned as a premium cigarette but the target
consumer had changed. Gold Flake then targeted adult as well as young
smokers. It extended beyond SEC ‘A’ and included SEC ‘B’ as well. The
product still differentiated itself on purity and quality of its experience. The
advertisement “for the Gracious People” was continued with another slogan
added to it “Celebrate the Feeling” to encourage the young smokers.
2) Branding Strategies:
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GOLD FLAKE
Two brand strategies were applied by the company. The first brand strategy is
more qualitative in nature and is concentrated on increasing market share and
loyalty while the second strategy refers to the more quantitative aspects of
increasing bottom line profits. The brand extension strategy has also been
mentioned.
A) “Honeydew smooth” campaign
At a time when sales were stagnating, the tangible and identifiable USP of
being honeydew smooth was associated with Gold Flake by revolving all ad
campaigns around it. It was meant to be unique and durable. It attempted to
reignite loyalty among its consumers. The honey drop icon in everything
connected with the brand which signified the identifiable characteristic of the
brand. Unlike the previous campaigns, the USP was not derived—it was a
tangible offering to the consumer. The honey drop icon was designed to be
recognizable, simple and powerful. With this, the campaigns also focused on
slogan “The world of Goldflake. Always mellow, Always smooth.”
With this, the brand was positioned as a premium cigarette targeting young
and adult male smokers from the SEC A & B categories in the twenties. The
consumers were projected to be young, upwardly mobile and contemporary and
had achieved a smooth balance between the various facets of their lives.
The results were visible within a single quarter. Sales had increased. The
Indian male identified with the brand and Gold Flake was on the path to success.
In 2002, the No. 1 spot in Brand Equity’s first listing of India’s 100 biggest
FMCG brands went to Gold Flake. Gold Flake remains India’s biggest FMCG
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GOLD FLAKE
brand for the year 2003. It continues to be twice as big as its nearest competitor
(in terms of sales) and has even grown by almost 8% in the year 2002-03.
B) “Price hikes”
In the month of October 2001, the company (ITC) increased prices of its
cigarettes by 10-18%. The move was welcomed in the market and there was a
14% jump in the stock price (from Rs.718 on Oct 10th to Rs. 819 on Nov 2). The
jump was solely on the reason that ITC is so strong in the market that such a
hike will not affect its volumes or market share.
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GOLD FLAKE
Gold Flake (20 stick filter) price was increased from Rs. 46 to Rs. 48 (4.3%
increase). In addition to this, the government imposed a 15% natural calamity
on all cigarettes. The entire domestic cigarette industry was also suffering from
a robust grey market of smuggled cigarettes (growth rate 20% p.a. based on
price differentials). There was also a removal of quantity restrictions on
importing cigarettes which would make all international brands more easily
available in the market.
In such a scenario, the company took another bold step by increasing the
price of all its filter brands again (this time in the range of 10-30%). Price of
Gold Flake (20 stick filter) now increased from Rs. 48 to Rs. 53 (10.4%
increase)
Thus the total increase is from Rs. 46 to Rs.53 which is 15.2%. The brand
commands a premium in the market and hence the company has been able to
pass on the excise hikes onto the consumers. This is because a high degree of
brand loyalty exists.
The no. of sticks sold by the company has been decreasing continuously for
the past 3-4 years but, an increasing focus on the premium segment and passing
on any hike in excise on to the customers has helped in increasing the sales in
value terms.
ITC is also following a brand extension strategy. It is extending the name
of “Gold Flake” to greeting cards. During Financial Year 2000, the company
extended its Gold Flake brand to other tastes and flavors. The brand equity has
also been stretched into products like leather and fashion accessories. (Brand
Stretching)
In 2002 and 2003, Gold Flake has retained the No. 1 spot in Brand Equity’s
first listing of India’s 100 Biggest FMCG Brands in terms of sales. It has sales
worth Rs. 3900 crores, while Wills Navy Cut has sales worth Rs. 1500 crores.
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GOLD FLAKE
Today the prices offered are Rs 34 and Rs 28. Thus the prices are being lowered
by the company.
3) Fall of the Brand Image:
Gold flake positions itself as a brand which inspires the customer to aspire
for fine living. This brand image has been developed over the years, and the
consumers are accustomed to the particular blend of tobacco and the particular
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GOLD FLAKE
level of filter. The resulting smoothness is what distinguishes Gold Flake from
the ITC brands, such as India Kings, Gold Flake, Wills, Scissors, Capstan,
Berkeley and Bristol.
But due to the ban on advertisements by the government in 2002 it affected
the brand image of the product. Gold flake was not affected up to the core
because the company had already stretched to other product categories like
leisurewear and accessories, categories. ITC suffered a loss of 40 crores which
was invested in advertisement of Gold Flake. The advertising amount
constitutes very small proportion of the total sales value of the brand i.e. 2 – 3 %
of the total sales. It was not a big deal for the company as far as investment was
concerned.
After the ban the brand was not in the eyes of the consumer, so the
promotion of the product was done by ‘Word of Mouth’. The other means for
the promotion of Gold Flake was through advertisements in magazines and
sponsorship for different events and sports. The brand was also promoted
through celebrities like ‘John Abraham’ smoke Gold Flake cigarette in
‘DHOOM’ and also many other stars for its promotion.
The positive point of Gold Flake was that it was harmless, affordable,
quality, smooth and it also had different categories like Gold Flake Hard, Gold
Flake Filter, small size gold Flake and large size Gold Flake. Because of the
exceptional attributes of the brand the sales of Gold Flake were not affected. As
in 2004 it was at number one position in FMGC, products people continued
smoking the same brand as they needed the same type of quality, stress buster,
smoothness and affordable price.
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4) Management and Marketing objective for maintaining brand image:
The management objective of the company in fiscal year 2004 was to
emphasize on maintaining and reinforcing the brand image of Gold Flake. This
serves the purpose of retaining the huge customer base, and avoids
cannibalization of the other products from the same company.
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GOLD FLAKE
In spite of the ban on cigarette advertisement in 2002 and 2003, Gold Flake
has retained the No. 1 spot in Brand Equity’s first listing of India’s 100 Biggest
FMCG Brands in terms of sales. It has sales worth Rs. 3900 crores, while Wills
Navy Cut has sales worth Rs. 1500 crores.
In Financial Year 2004, Gold Flake had a target growth rate of 8% and
projected earning exceeding Rs. 4200 crores of sales. While the cigarette
industry is expected to grow at 3%, Gold Flake is projected to grow at 8%. Gold
Flake enjoys the status of a ‘start’ product in the BCG matrix. Last year, it
earned Rs. 3,900 crores of sales; double that of its nearest rival.
Since the company is dealing in the habitual buying category, ITC (Indian
Tobacco Company) is confident of growing market share of 8% in spite of a
price hike. The hike will also cover the cost of VAT. For the maintaining the
brand image the company also had to concentrate on the prices as per the
fluctuating demand of Gold Flake. The demand fluctuates because of the prices
of other brands and changing habits of the consumer.
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