Luxor Writing Instruments Private Limited - Marketing

Pens in India
Introduction
In 2002, Luxor Writing Instruments Private Limited (LWIPL) had emerged as the market leader
in the premium pens segment in India, with a market share of 60%. The company held a 10%
share in the writing instruments industry, next only to the market leader, Reynolds that held 12%.
LWIPL had been in the pen industry for nearly four decades. The company adopted innovative
marketing strategies that had made it one of the most popular pen manufacturers in India.

LWIPL offered a widest range of pens with leading brands including Luxor, Pilot, Papermate and
Parker. In December 2002, LWIPL launched the world renowned 'Waterman' brand of premium
pens in India. This was possible after LWIPL's acquisition of a 50% stake in the Indian
operations of Newell Rubbermaid3. The company planned to sell imported 'Waterman' pens for
the next couple of years and then start indigenous production for these pens. The price of these
pens ranged between Rs.3,500 to Rs.50,000 and was made available in nine sub-brands. LWIPL
planned to sell these pens to corporate customers.

Commenting on the prospects of the 'Waterman' brand, DK Jain, Chairman of LWIPL said,
"Because of its price and brand name, Waterman will certainly have an edge over other premium
brands in India." The company planned to launch an international advertising campaign for these
pens. LWIPL was known for its heavy spending on advertising its products. It had entered into
several tie-ups with multinational pen companies that helped in leveraging its current position in
the industry.

The fact that LWIPL was a debt-free company was another significant achievement. However,
with the rising competition and negligible presence in the faster growing gel pens segment,
analysts felt that LWIPL had an uncertain future. Analysts also feared that LWIPL's decision to
diversify into the hospitality and packaged foods business in 2001-02, might lead to a loss in
market share in its core business.

Background Note
The pens industry in India had passed through various phases with the changing tastes and
preferences of customers. Till the late 1970s, only two categories of pens existed in the Indian
market - fountain and ball point pens. During that time, people preferred writing through a pencil
rather than a pen. Moreover, people preferred fountain pens, as it was perceived to write better
compared to the ball point pens.

Apart from domestic manufacturers, who manufactured fountain pens on a small scale and sold
them at cheaper rates, branded fountain pens manufactured by leading international players such
as Monte Blanc, Cartier and Parker were available in India through the grey market.
However, owing to their high prices, not many people could afford to buy them. Camlin Limited
was among the noted fountain pen makers in India during that time. By the late 1970s, fountain
pens started loosing their popularity as people found it cumbersome to refill the ink regularly.

The 1980s witnessed an increased acceptance of ball point pens and Wilson Jotter was
considered to be the market leader in this segment. The pens manufactured by Jotter were
popularly called Jotter pens. The market for ball point pens was also dominated by domestic
players in the unorganized market. With the increase in demand, existing players started
expanding their capacities while many new players began entering the market.

In 1982, Deepak Jain, managing director of Luxor Pen Company (Luxor) entered into an
agreement with the Pilot Corporation of Japan to officially launch Pilot pens in India. In 1984,
Suraj Mal Jain5 started a manufacturing unit for ball point pens and refills in Kolkata and named
it as Linc Writing Aids Private Limited. The company launched new varieties such as disposable
pens into the market.

In 1986, the French pen company, Reynolds entered the Indian market through its subsidiary,
GM Pens International Limited by setting up a manufacturing plant at Chennai. It used the latest
technology to make pens and refills of better quality and offered them at an affordable price. The
Reynolds 045 pens became very popular among the regular pen users; especially among the
school and college students.

Until the late 1980s, not much importance was given to the promotion of pens and there were
very few recognized brands in the market. Companies did not consider it worthwhile to invest
large amounts of money on promotional activities. The focus was more on pricing and
distribution. Pens were manufactured in large volumes, and were priced competitively. By 1990,
90% of the market share in India was held by unorganized players.

In the late 1990s, the pen industry witnessed several developments. The varieties of pens
available in the market increased significantly. The new range of pens introduced included Fibre
Tip Pens, Gel Pens, Roller Pens and Marker Pens. A marked change was also noticed in the
attitude of people, and they became increasingly brand conscious.

By early 2002, some of the most popular brands in the Indian pen market comprised of domestic
brands such as Reynolds, Luxor, Cello, Rotomac, Kores, Today's, Montex and Add pens and
foreign brands such as Mont Blanc, Flair (with Pierre Cardin), Uniball and more. Consumers
now had a wider choice, both in terms of different variety and the number of brands available.

Gradually, the competition among different pen brands intensified, which in turn, prompted
these companies to increase their spending on promotional activities. According to the 2001-
2002 figures, the writing instruments industry in India was worth approximately Rs.15 billion
Studies on the industry had revealed that there were around fifteen organized players, which
included both domestic and international companies and more than 600 unorganized players.

Though, in the past, unorganized players accounted for a sizable share of the industry, their
share had decreased significantly from around 90% in 1990 to just 20% in 2002. The huge
potential that the industry offered prompted existing companies to expand their manufacturing
facilities and encouraged new companies to enter the industry. This had led to intense
competition in the industry. The studies also revealed that the companies in the organized
sector were putting efforts in offering good quality products at competitive prices. At the
same time, impetus was given to increase the visibility of their products in the minds of target
customers.

Established in 1963, Luxor had emerged as one of the leading companies in the pen industry.
According to analysts, Luxor's marketing mix helped it to capture a sizeable share of the
industry. They also felt that Luxor's 50-50 joint venture with Gillette Company in 1996 helped it
to strengthen its position in the industry. After entering into the joint venture, Luxor was
renamed as Luxor Writing Instruments Private Limited (LWIPL).

The Marketing
LWIPL had launched its first brand in 1963 - the 'Artist' fountain pen. However, owing to its
small scale of operations during that time, the pens were made available only in Delhi and
surrounding areas. During the late 1960's, the Artist brand was renamed as 'Luxor.' In 1982,
LWIPL launched Pilot 05 microtip pens with needle point technology.

Priced at Rs.10, this was the first model of Pilot pens to be officially launched in India. The pens
were manufactured at the Delhi plant of LWIPL. Though Pilot pens were available in India prior
to the launch, they were available only in the grey market. LWIPL invested heavily to upgrade
its technology to manufacture microtip pens.

These pens were launched with the intention of bridging the gap between ball point and fountain
pens. Microtip pen was similar to a ball point pen, with the ink filled within. This turned out to
be a unique selling proposition for Pilot pens and they were quite successful as they were
considered to be an ideal substitute for fountain pens.

LWIPL was able to sell 1,00,000 Pilot pens in the very first year of their launch. However, the
Pilot pens launched initially were not refillable. Due to the price conscious nature of middle class
people in India, the concept of disposable pens was not cherished for long. This prompted the
company to launch a new, refillable variant of these pens.

The new product was well received by the middle class consumers as well as school and college
going students, teachers, middle and senior level executives, resulting in a huge surge in demand
for these pens. Within four years of launch, the annual sales of Pilot pens had increased ten fold
to one million pens. Buoyed by the success of Pilot pens, in 1990, LWIPL decided to launch
another product under the 'Pilot' brand name, Luxor 0.5 mm Pilot V5. Priced at Rs.45. each,
these pens were targeted at the middle and senior level executives.

The attractive design of the pen and the superior technology (it had a liquid ink feeder system)
used, contributed to the success of the brand. By 1995, the annual sales of Pilot pens had crossed
10 million. LWIPL decided to go for further brand extension in 1997, and launched the Pilot V7
which wrote bolder compared to V5. LWIPL's pricing strategy was determined by factors such
as the demand for products, their brand image and the nature of the target audience. When Pilot
05 was launched in 1982, it was priced at Rs.10, and it was considered to be expensive at that
time.

However, in 1990, eight years after its launch, when the demand for these pens reached its peak,
Luxor sold them at Rs. 25 each. The price continued to remain the same till early 2003,
indicating the stagnant nature of its demand. On the other hand, Pilot V5 was priced at Rs.45 at
the time of its launch. These pens were priced high due to its superior technology and the brand
image that Pilot pens enjoyed. However, after 12 years of launch, the price of these pens had to
be reduced by Rs.5.

In 1996, LWIPL launched Parker pens in India. Though Parker pens were popular in India, they
were available only in the grey market. Parker pens were primarily targeted at the upper middle
class consumers, senior level executives and bureaucrats. The initial range of Parker pens
launched included Sonnet, Rialto, Frontier, Vector and Parker Classic. The most crucial decision
for LWIPL was pricing. At the time of the launch, the prices ranged between Rs.90 to Rs.10,000.

Priced at Rs.90, the "Vector" brand of pens was the cheapest in the range. Within four years,
"Vector" became the largest selling Parker brand in India. During the corresponding period, the
price was increased to Rs. 140. In 1999, LWIPL launched the 'Papermate' brand of pens in India.
Papermate was the largest selling brand in the US during that time. The brand strengthened the
presence of LWIPL in the low priced pen segment.

These pens were primarily targeted at the school and college students and were priced in the
range of Rs 4 to Rs 13. The specialty of this product was that they possessed the Lubrigude ink
technology15, which ensured that the ink did not leak, thereby offering a comfortable writing
experience. In order to penetrate the Indian market, the company offered these global brands at
lower prices. For example, the Parker Vector roller pens were launched at $3 compared to $9 in
Europe.

The Parker refills were priced at a rate of Rs.35 compared to $3 in Europe. Similarly, LWIPL
launched the Papermate pens at nearly 1/3rd of the price in the US. In 2000, LWIPL launched the
Parker Beta range, with prices ranging between Rs.50 to Rs.75. Targeted at the youth, the
company sold around one million pens within a couple of months of its launch.

In 2002, Parker pens were available in three broad price categories (Refer Table I). By that
time, the Parker range of pens had emerged as the largest selling brand in the LWIPL pens
portfolio, contributing 40% of its revenues. LWIPL also launched a series of innovative
products in order to mark certain occasions. In January 2000, the company launched the
"Millennium series" of Parker Vector roller pens.

These pens had the world map inscribed on them and their unique design enabled people to
determine the time difference between countries. Priced at Rs.250 each, these pens became very
popular. In November 2001, LWIPL launched 'Special Moment', a gift pack consisting of
Parker Vector and Parker Beta pens, which had the signature of the brand ambassador, Amitabh
Bacchan inscripted on it.

These pens were primarily targeted at pen collectors, who were fond of Parker pens. In
February 2002, Parker launched the 'Black and White' range of Parker Vector ball pens which
were priced at Rs.145.each.

In mid 2002, the company launched the 'Football Legends World Cup edition' of Parker Vector
pens in order to cash in on the popularity that the event enjoyed. The pens had photographs of
famous football stars such as Maradona, and Pele inscribed on them. These pens were primarily
targeted at avid football fans, who would be interested in collecting pens bearing photographs of
their favorite players.

In December 2002, LWIPL launched the "Gajgamini" range of Parker Sonnet fountain pens. The
limited edition of pens (only 500 pens were released) was named after the paintings created by
noted artist MF Hussain and also had his signature inscripted on them. LWIPL priced these pens
at Rs.5000 each.

The Future
According to analysts, the major reason for LWIPL's success was its focus on offering superior
products to its customers. However, in spite of LWIPL's current leading position, analysts felt
that the company would face tough competition in future from other leading brands such as
Reynolds, Rotomac and Today's

According to analysts, LWIPL lagged behind in tapping the full potential in certain categories.
For example, in the ball point pen category that contributed to around 50% of the total sales in
the pen industry, LWIPL had just 5% share. Moreover, in the fast growing gel pens segment,
the company had negligible presence.

Analysts also felt that excessive dependence on the Parker brand, which primarily catered to
the premium segment of the market, may not be fruitful for the company in the long run. But
most importantly, analysts seemed concerned about LWIPL's decision to diversify into the
packaged food and hospitality industry.

In 2001, LWIPL established Hazel Foods Pvt. Ltd. with an intention to enter the packaged
foods segment and launched dry fruits and spices under the 'Hazel' brand. In 2002, Luxor
Hotels and Resorts Pvt. Ltd. along with the Hyatt group acquired Qutub Hotel in Delhi from
the Indian Tourism Development Corporation (ITDC).

The company also had plans to launch packaged water and enter into the convenience foods
segment. For packaged water segment, LWIPL planned to tie up with an international company.

Explaining the rationale behind these moves, D.K.Jain, MD of LWIPL and Vice Chairman of
Luxor Hotels and Resorts Pvt. Ltd. said, "Investments in categories which show promising
potential for growth and family interests" prompted this move.
Analysts felt that these industries demanded a different set of expertise and a totally different
type of customers to be catered to. They felt that due to unrelated diversification, it would be
difficult for LWIPL to focus on the writing instruments business, where its core strength lay.