Grasim Industries Ltd and VSF - Expanding a Commodity Market through Branding and CRM

The announcement came as a surprise, indicating to industry watchers that Grasim had not just succeeded in arresting the decline in its sales of VSF, but was confident of future growth too. Grasim started production of fabric using imported VSF in 1950. VSF was then the cheapest available fiber and was referred to as 'the poor man's cotton'. In 1963, Grasim adopted a vertical integration strategy and started producing its own VSF. As a cost-saving measure, the company even began producing major raw materials (wood pulp and caustic soda) for VSF in-house. It also developed a more eco-friendly process for manufacturing VSF. These measures, though successful in increasing its sales, were not sufficient to reverse the gradual loss of market share of its VSF to its substitutes - cotton and polyester fibers.

In 1999, Grasim embarked on an aggressive marketing campaign to salvage its VSF business. The campaign did succeed in increasing the demand for VSF to some extent. However, in 2002, with the fall in cotton prices, demand for VSF fell again.

It was at this juncture that Grasim chalked out a strategy to reduce the impact of price fluctuations of substitute fibers on demand for its VSF, while at the same time moving to increase its share in the fiber market.

The strategy involved several product development initiatives and is believed to have helped create value for the company and its customers.