Friday, October 20, 2006

Dinesh Beedi : Smoked Out

Brand : Dinesh Beedi
Company: Kerala Dinesh Beedi Cooperative

Brand Count: 145

Dinesh Beedi is one of the regional players in the Indian Beedi market. Manufactured from the district of Kannur in Kerala state( Gods Own Country), this brand is facing the dark prospect of extinction.
Beedi's are Indian cigarette prepared by rolling tobacco wrapped in Tendu leaf and secured with colored thread at one end. This is the cigarette of the poor. But in recent years, this product category is facing a crisis.

Dinesh Beedi is the product of Kerala Dinesh Beedi Cooperative which is the largest "worker owned cooperative " in the world. Besides It is also the largest women owned cooperative in the world. Run by the communists, this society came into existence in 1965 following a bitter fight between the beedi workers and owners. The fight led to the formation of a society that offer good management practices and owned by the workers.

The Indian tobacco market is huge and worth around Rs.10,000 crore .Predominantly this market is dominated by Beedi's. It is estimated that beedi contributes 70-80% of Indian tobacco market.
The beedi market is highly fragmented and there are regional players catering to respective markets.There is no one major player in the Indian market and no more than 5% marketshare is held by a single player.

The beedi industry is faced by a myard of issues. Although this industry employs 44 lakh workers, there are rampant cases of exploitation of workers, poor working conditions, child labour etc. With the governments banning tobacco promotions and also the ban of smoking in public places been enforced, this industry has been put into death bed.Along with the rising input costs, labour issues, taxes has virtually removed all possibilities of profitability.While large cigarette manufactures passing on the tax burden to the consumers, beedi manufacturers cannot do it because of price sensitiveness of the market.
Dinesh beedi was the brand that was affected to the maximum. Once a profitable company, this society is now in deep finacial trouble. With diversification projects failing, the livelihood of thousands of workers are at risk.
While private players in the beedi industry can afford to reduce costs either by mechanisation or reduced labour costs, Dinesh Beedi could not do that because it has been constituted to give workers a decent life. With the Government trying to demarket the entire category , the brand does not have a chance to survive.
The possible option before the company is to restructure the entire process and eliminate costs, raise the prices to bring in profitability.
While Dinesh has tried to diversify into unrelated foods category, what could have been more marketable is to venture into low end cigarette category although you will be competing with the likes of ITC. There has been cases of failures in upmarket diversification, but Dinesh had its competence in the tobacco industry .Hence any tobacco related products in the like of chewing tobacco could have benefited the company more ( I am not touching the ethical part of selling tobacco). Like Liqour market what ever demarketing that government does , this is a market that is not going to die and there is a good potential for players like Dinesh had it taken due care in ensuring profitability.
Source: Indiatoday,businessline,cess.edu,wikipedia,businesstoday