ITC targets the schoolbag

The FMCG major is confident of a four-fold increase in revenue from its Classmate and Paperkraft brands in 3-5 years.

Education and stationery products can make big money indeed. Ask FMCG major ITC, which is targeting Rs 1,000 crore (Rs 10 billion) revenues from these products in three to five years, from Rs 280 crore (Rs 2.8 billion) now.

If that sounds ambitious, consider this: just five years back, that figure was just Rs 20 crore (Rs 200 million).

The challenge, ITC says, is to establish its brands (Classmate and Paperkraft) in a segment that is still dominated by unorganised players.

The effort to progressively transform the notebook market into a branded one explains the company's announcement last week to appoint cricketer Yuvraj Singh and film actor Soha Ali Khan as the brand ambassador for the Classmate brand of notebooks for students.

Experts estimate the size of the Indian stationery market comprising notebooks, copier and printing paper, writing instruments and scholastic products such as geometry boxes, sharpeners and erasers at Rs 10,000-crore (Rs 100-billion).

Of that, school notebooks alone account for Rs 4,000 crore (Rs 40 billion), but only 25 per cent of this is catered to by the organised, branded players.

That makes the stationery products business in India fiercely price competitive and, therefore, ITC's products are just up to 5 per cent more expensive than its nearest competitors.

"We have priced our geometry boxes at Rs 75, same as that of Camel which is the market leader in the category. Our gel pens are priced at Rs 5, same as the competitors," says Das.

Going forward, ITC expects 80 per cent of its stationery products revenues to come from the Classmate brand which is being aggressively promoted through school contact programmes, point-of-sale promotions, and the Classmate Young Author Contest.

The Classmate range has over 300 variants: notebooks, graph books, drawing books, practical notebooks, reminder pads and more.

Classmate even provides personalised stationery with school emblems. ITC currently has close to 12 per cent market share in the writing material segment, which is pegged at Rs 4,000 crore (Rs 40 billion).

Chand Das, chief executive of ITC's education and stationery products, says the four-fold increase in revenue shouldn't be difficult as ITC intends to launch a new range of geometry boxes, pens and pencils, and other stationery products.

"Classmate is mainly aimed at students and thus we have launched ballpoint and gel pens under this brand. PaperKraft is targeted at executives and thus we are using the brand for markers and highlighters," Das says.

"We are looking at expanding our product range in each category. For instance, we are looking at introducing a range of pencils - from 2B to 8H versions -- and similar expansion in stock keeping units of geometry boxes for school children," says Das.

The company will also double its distribution network in two years. Currently it has 900 distributors who make the products available in over 70,000 outlets in India.

Breaking into the market, however, wasn't easy as distribution of a mass product like notebooks can be an expensive proposition, which partly explains the lack of national players.

But ITC had an advantage which its competitors didn't: Classmate and Paperkraft could leverage ITC's back-end (paper) and front-end capacities (sales and distribution).

At a corporate level, ITC has announced close to Rs 5,000 crore (Rs 50 billion) investment in paperand paperboards business.

"This will help us increase our volumes significantly. While we supply the paper, the manufacturing is carried out by small scale industries," Das says.

While Navneet is reported to be the market leader in the notebook segment (somethingITC doesn't agree to since there are no authentic figures), the FMCG major has another crucial advantage.

While Navneet's focus remains students, ITC through its Paperkraft brand of products caters to institutional consumers as well. That's the segment where it competes directly with JK Paper, BILT and Tamil Nadu Newsprint.

The notebooks also serve to send out the message that ITC is an environment-conscious company as it manufactures elemental chlorine-free paper and carry information on its corporate social responsibility programmes.

In fact, for every four Classmate notebooks sold, the company contributes Re 1 to its rural development initiative that supports, among other things, primary education in villages.

ITC is talking to companies with its promise of green technology backing its paper. It is now providing the entire office stationery requirements of groups such as the Tatas, Wipro, IBM, HSBC and ICICI Prudential and is looking to step up such institutional sales.

At the end of it all, the company's game plan is simple: Das says ITC wants to have a major share of the schoolbag. Going by the growth, that may not remain a tall claim for long.