M   A     R    K     E     T                                     I N S I G H T                         Rapidly evolving co...
U                             By Rahul ashok                ntil a couple of years ago, buying                biscuits was...
A Healthy Indulgence?                    issues such as diabetes and gastritis.                                         Br...
certain types of biscuit, along withthe health benefits (if any), brands                                               Fur...
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"The expanding cookie jar" - Rapidly evolving consumer tastes and the growth of cookies as a category are fueling the rise of India's biscuit industry to new heights


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Article written by Rahul Ashok, (Senior Consultant, Datamonitor), published in Progressive Grocer, May 2011

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"The expanding cookie jar" - Rapidly evolving consumer tastes and the growth of cookies as a category are fueling the rise of India's biscuit industry to new heights

  1. 1. M A R K E T I N S I G H T Rapidly evolving consumer tastes and the growth of cookies as a category are fuelling the rise of India’s biscuit industry to new heights.22 • PROGRESSIVE GROCER • May 2011 aHEaD OF WHaT’S NEXT WWW.PROGRESSIVEGROCER.COM
  2. 2. U By Rahul ashok ntil a couple of years ago, buying biscuits was not exactly the most exciting part of shopping for the average Indian consumer. Mostly being impulse-driven, the categorysaw low and sporadic activity in terms of new fla-vours or brands. It was only in 2006 – with theforay of ITC into the biscuit market in India –that the predictability of the market landscape wasshaken. Biscuits, which were previously associatedmainly with teatime, and mostly came in the formof well-established brands, now had newfoundconsumption occasions and product concepts. The market is witnessing another to straddle different consumer seg-wave of activity now, with the entry ments with ease.of PepsiCo’s Quaker cookies, Cad- With such a strong and diversebury’s Oreos, and Unibic Cookies, platform pushing uptake, it is noall of which have a relatively pre- surprise that India’s `134.2-mn bis-mium positioning. This is spurring cuit market is the seventh largest ineven more optimism in the Indian the world, and accounted for a sub- of the slightly premium price posi- such as diabetes and digestive health.biscuit market, not only for domes- stantial 13 percent of the total do- tioning that such brands are able to While the latter is seeing a lot oftic players, but also among interna- mestic packaged foods market value maintain. It makes sense for new traction in the market lately, fla-tional brands. as of 2010. But in terms of per capita entrants to also consider catering to vour concepts are still mostly based consumption, Indians eat only 1.9 such areas, as it would be impossi- around chocolate, strawberry andHow the Cookie kg per year, whereas consumers in ble to compete with the likes of Bri- vanilla, so there is a lot of room forCrumbles the US and the UK get through 5.4 tannia, Parle, and ITC due to their blended concepts to be launched. kg and 9.4 kg, respectively. Since the strong distribution channels, which In creating these mixed flavours, In 2006, the biscuit market in category has plenty of advantages in help raise volumes while keeping companies could potentially takeIndia was worth `70.9 mn, and Bri- terms of price, nutrition, and con- profit margins in check. their inspiration from the processedtannia and Parle held over 75 per- venience, this leaves a lot of room The niches in the market are snacks industry, where traditionalcent share of the total market value. to position biscuits to account for a largely emerging with two themes flavours have been successfully in-Five years down the line, the change more relevant and larger component – experimenting with flavour con- corporated into more contemporaryis more than apparent. The market of Indians’ dietary intake. cepts and catering to health concerns product formats.size has almost doubled to `134.2mn, growing at a CaGR of over 17 Creating ‘Value Niches’ Although Britannia and Parle account for over 70% ofpercent. additionally, the combined the total Indian biscuit market value, ITC has emergedmarket share of Britannia and Parle as major brands scramble to as a significant player, over the last five yearsis down to 70 percent, owing to differentiate their product proposi-the surprisingly strong emergence tions and chase the elusive concept Britannia Industries Ltd. Parle Products Pvt. Ltd. ITC Limited Othersof ITC in this space, growing from of consumer relevance, the industrynothing to take 10 percent of the to- is seeing increased focus on growingtal market share. the non-glucose segment and, more With the changing competitive specifically, cookies. With glucose Sunfeast 34%landscape, the market has seen a biscuits driving volumes, the last few Britannia 10%huge increase in terms of flavour and years have seen the launch of variousformat combinations, stock-keeping cookie brands from companies such 18%units and price-points, and ingredi- as McVitie’s, Britannia, Unibic and 38%ent modifications intended to target even Horlicks, which are creatinga broader range of consumption oc- what can be called “value niches”.casions. Therefore, from children These niche markets could po- Parleto the elderly, and across income tentially help companies to workgroups, biscuit have emerged as one around the thin margins that theyof the few categories that manage are currently operating on, because WWW.PROGRESSIVEGROCER.COM aHEaD OF WHaT’S NEXT May 2011 • PROGRESSIVE GROCER • 23
  3. 3. A Healthy Indulgence? issues such as diabetes and gastritis. Britannia did have several products In the packaged With the growing desire amongIndians to manage their health under the NutriChoice range, but these brands were offered on a loose- goods space, theconcerns through dietary changes,most food and beverage manufac- ly defined health platform and did not have demarcated health benefits biscuit category hasturers have modified their product in terms of marketing communica- been among the first categories that haveportfolios to include some products tions and target audience.that cater to consumers who seek Over the last few years, though, explored the health-indulgence, and others for the more marketing efforts to align thesehealth conscious. In the packaged product propositions to consumers’ indulgence spectrum.goods space, the biscuit category lifestyle-related needs have majorlyhas been among the first categories altered shoppers’ perceptions of suchwhich have managed to straddle brands. In fact, it has almost resultedacross various points in the health- in a renaissance for super-ingredientsindulgence spectrum. such as oats and ragi, which were In this process, some biscuit always known for their health ben-brands have moved more explic- efits, but the current generation ofitly towards communicating their consumers faced challenges in termshealth benefits. For example, since of incorporating them into their di-the 1960s, Britannia has marketed ets. although biscuits containingbrands such as Jacob’s Thin, Cream such ingredients, and those that areCracker and Thin arrowroot. Prior sugar-free, have made inroads intoto the late 1990s, these brands had the market, there remain two keya very staid and often vague health challenges that manufacturers need if not more, companies have to over- products), and position them for spe-positioning and, as a consequence, to address to ensure demand in the come the tendency of shoppers to cific consumer segments as well. Intheir consumption was limited to long term. use these products moderately or doing so, biscuit manufacturers cana narrow group of consumers with Firstly, it is necessary to ensure avoid them altogether. take their cue from the personal carespecial health conditions. The posi- that biscuits remain a popular mode These challenges apart, there are industry, which uses professional ac-tioning of these health biscuits was of delivery for these ingredients, immense opportunities for compa- creditation to build trust in its offer-mostly curative and consumers often as they are being adopted by other nies to launch products that cater to ings. Very few biscuit-makers actual-believed that, by eating them, they product categories. Secondly, given other health concerns such as heart ly have a Bureau of Indian Standardswere compromising on taste in or- Indian consumers’ inclination to health (cholesterol-free biscuit) and (ISI) mark on their products, andder to address certain specific health consider taste as important as health, bone health (calcium fortification consumers at times do get skeptical about claims such as “high vitamin”, “extra iron”, and so on, which come across as slightly ambiguous at times. Marke-ting-ting-ti-ting as brands gear up to tackle changing consumer tastes and pref- erences, it is going to become all the more imperative to have clear product propositions and marketing efforts. If executed correctly (as was done in the case of NutriChoice), innovative brand positioning efforts can actually open up new consump- tion locations and contexts, but oth- erwise they can fail miserably. Take Parle’s Hide & Seek, for instance, which took quite some time to start using a commercial that showcased and talked about the ingredients that made the product special, rather than focusing more on the celebrity who endorses the brand. Since Indians are becom- ing more attentive towards package literature, and have greater under- standing about what kind and qual- ity of ingredients have gone into 24 • PROGRESSIVE GROCER • May 2011 aHEaD OF WHaT’S NEXT WWW.PROGRESSIVEGROCER.COM
  4. 4. certain types of biscuit, along withthe health benefits (if any), brands Furthermore, considering the huge unorganised market in rural The biscuit market inthat just try to establish an emo-tional connection run the risk of be- India, which accounts for as much as 40 percent of the overall market rural India has beening considered frivolous. This wouldfurther impact the performance of in some cases, there is stiff competi- tion when attempting to justify the growing at 30-40the brand or variant, as higher trademarketing costs would further strain value proposition that companies wish to establish. The launch of Bri- percent annually.already tight margins. tannia’s cookies in rural India at `5 In contrast, Britannia’s Milk Bik- for a pack of 10 was the first majorkis is attempting to cash in on the move by a company to tap into thebroader lifestyle changes among con- potential that the rural market of-sumers, with meal-time fragmenta- fers. The marketing efforts for thistion becoming commonplace. The are also along the lines of nutrition,advertisement campaigns compare rather than taste, as rural consumers’the nutritional value of the biscuit to biscuit consumption needs are verythat of milk, and also claim that Milk different from those of their urbanBikkis is easier to eat than breakfast counterparts. They consider biscuitscereals. This is a key message for the to be a kind of food that should ide-companies looking at building ef- ally be filling enough to satisfy forfective propositions (for biscuits are extended periods.a good source of nutrition), cannot The key strategy for other play-afford to compete against traditional ers looking at extending their reach Healthy Growth Ahead that elucidate the nutritional valueIndian snacks, but embrace the fact into rural India, therefore, is to cre- of the product and possibly comparethat the competition lies in other ate product concepts that are built India is often touted as the dia- it with equivalent foods as well, sopackaged foods, such as cereal bars, on fortification, rather than the in- betes capital of the world, with obes- that consumers could benchmark itprocessed snacks, and so on. clusion of more expensive flavouring ity and other lifestyle-related health in terms of the overall value propo- ingredients. The deficiency levels of issues not being far behind. So, as sition. More importantly, althoughThe Rural Cookie basic nutrients such as iron, calcium, more and more Indian consumers companies such as Britannia have zinc and vitamins among people are beginning to take a proactive, taken efforts to make almost their The biscuit market in rural India living in these areas present an im- rather than reactive, route towards product range trans-fat free, brandshas been growing at 30-40 percent minent opportunity for companies health and wellness, they are evaluat- have not yet created a lot of engag-annually, and brands such as Parle-G to create biscuit that are among the ing their food and beverage choices ing point-of-sale communication toand Tiger get a huge proportion of most accessible and affordable forms with a ‘health-filter’. highlight these efforts, and the tan-their sales from rural India. Howev- of nutrition. It is in this context that the bis- gible health benefits for consumers.er, since biscuits are a comparatively as the Indian Biscuits Manufac- cuit market can leverage on the sig-low-margin business in the FMCG turers association (IBMa) says, if nificant headstart it has with respect Don’t Stick to Domesticspace, and companies have largely the government were to reduce the to formulations targeted at specificabsorbed the increases in commodity VaT on bakery products (which health concerns. apart from the although commodity price in-prices, plans to increase the focus on includes biscuit), from 12.5 per- working population that the biscuit creases and the current taxation poli-rural consumers have not taken off as cent to 4 percent, it would further brands have connected with over the cies are dampening the biscuit mar-strongly as was intended when they bolster companies’ efforts in this last two years, there are possibili- ket’s growth, there is a huge exportwere formed a couple of years ago. regard. ties to customise offerings to other market that Indian manufacturers consumer groups, such as children, can cater to, if they step up the focus women and the elderly. Especially on setting standards for quality of The predominance of cookies in the overall with children, it is good to make nu- ingredients and the packaging tech- biscuit market is poised to accentuate over tritionally-rich biscuit a part of the niques. Currently, approximately 15 the next five years dietary intake from early-on, rather percent of the biscuits manufactured than having to enter into a correc- in India are being exported, and this 250 INR 217.3 tive-mode later on in life. market is growing at a healthy 12-15 bn apart from innovation in for- percent as of 2010. 200 mulation, product literature is going Since the plant capacity of sev- INR 134.2 to dictate a lot of what becomes of eral biscuit manufacturing units are 150 bn brands, in the years to come. al- either under-utilised, or there are re- though nutritional labelling has been gional manufacturers who could po- 100 INR 70.9 95 made mandatory in India only two tentially deliver to a more profitable bn % 94 years ago, Indian consumers have market, companies should certainly 50 92 % taken to it very fast, and more than be evaluating more export opportu- % two-thirds of all Indians make it a nities, while not losing focus on do- 0 point to use the nutritional informa- mestic growth. n 2006 2010 2014 tion to guide product purchases. Cookies (sweet biscuits) Crackers (savory biscuits) Biscuit companies have to, there- Rahul Ashok is consumer markets con- fore, focus on delivering messages sultant at Datamonitor. WWW.PROGRESSIVEGROCER.COM aHEaD OF WHaT’S NEXT May 2011 • PROGRESSIVE GROCER • 25