Case Study on Monopolistic and Restrictive Trade Practises

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  • Topic: Juice, Orange Juice, Nectar
  • Pages : 6 (1998 words )
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  • Published : November 21, 2008
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Onjus - Squeezed Out
"Onjus is to 100% fruit drinks what Cadbury's is to chocolates and Fevicol to adhesives." In May 1997, Onjus, a 100% orange juice was launched by Enkay Texofood Ltd. (ETL)1 in the niche market of fruit juices and virtually created a new product category.

By 1999, Onjus gained a 19% share (Refer Table II) in the tetra-pack fruit beverages market (Refer Exhibits I and II). However, the success of Onjus seemed to be short lived.

In 1999, the Director General of Investigation and Registration (DGIR)2 lodged a complaint with the Monopolies and Restrictive Trade Practices Commission (MRTPC),3 against Onjus being sold as a natural fruit juice.

As a result, Onjus was not sold in the market for sometime.
Meanwhile, the competition in the market had heightened with the launch of PepsiCo's Tropicana. Further, ETL's textile division, which was making losses4 (Refer Table I), owed around Rs.870 million to Financial Institutions (FIs) that asked the company to pledge the Onjus and Life5 brands against the loans.

To avoid the impending closure of its textile division, ETL channeled the cash flows from the food business into the textile business. This didn't go down well with the FIs and they decided against investing in the foods business, leading to the shutdown of both the divisions in early 2001.

ETL, then called as Enkay Synthetics, was started as a textile company in the early 1980s. The company was involved in making, bleaching, and dyeing of polyester yarn.

During 1988-89, with competition becoming fierce in textiles, Tulsidas Goyal (Goyal), Managing Director of the company identified agro-processing as a focus area.

In 1990, Goyal set up a plant in Vapi in Gujarat state, to process guavas, mangoes and bananas into puree and concentrates.

Enkay Synthetics was merged with the fruit-processing unit and renamed as Enkay Texofoods Ltd.

The company was successful in the export markets (Europe and the Middle East), and some of its clients were Nestle, Unilever, Pepsi, Coke and Heinz

ETL's fruit-processing plant was approved by the US Food and Drug Administration (FDA).6 Juicy Prospects
In May 1997, ETL launched Onjus on a natural taste proposition. It was launched as an 'on the move drink' in a 250 ml straw pack for outdoor consumption, with a tagline – 'Squeezed to please'. ETL had done some preliminary research before the launch of Onjus. Based on the findings from their research, Onjus was given a sweeter taste compared to the imported juices. But at the same time, an element of bitterness was retained to emphasize on the naturalness. Onjus used oranges from Florida and Brazil adding the Indian mandarin to suit Indian taste buds. The pricing was also based on the market research study, which showed that volumes came from the Rs.5-Rs.9 segment.

Goyal decided to concentrate on volumes and priced a 250ml pack at Rs.9. Through Onjus, ETL planned to drive the shift from carbonated drinks to natural juices. Natural juice was considered healthier than carbonated drinks. But, the quality of raw materials at the juice outlets prevented people from trying out natural juice. Thus, the frequency of consumption was limited. ETL saw in this a business opportunity. Onjus was an instant success and this was partly attributed to its first-mover advantage. Its success was attributed to the ATA model of 'Availability, Taste and Affordability', and to its distribution network. The network spanned 302 towns across general stores, supermarkets and departmental stores. In April 1998, Onjus doubled its capacity from 80,000 to 1,60,000 packs per day. By 1998, Onjus had become a Rs.600 million brand and had also penetrated the household segment with its 1-litre tetra-packs. In the same year, ETL increased the price of the 250ml pack to Rs.12. The 1-litre pack was sold at Rs.44. In early 1999, Onjus entered the institutional segment and was available in military canteens, hotels and clubs....
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