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February 21, 2024
Sharleen D’Souza, Business Standard
Mumbai, 20 February 2024
Over the past year, Amul has undergone a transformative journey, evolving from a dairy-centric entity to a comprehensive foods company.
Since 2022, PepsiCo India, too, has embarked on extensive launches in the food category.
Not to be left behind, ITC, which has been introducing an average of 100 fastmoving consumer goods (FMCG) products across categories every year, has also launched a number of packaged food items.
The shelves in stores are packed. The options on e-commerce platforms are dizzyingly aplenty. The consumer is spoilt for choice. Which flavour of oats to go for? What packet of chips to pick? Should one reach out for those mouthwatering frozen snacks or think healthy and opt for atta (wheat flour) cookies?
Companies are pulling out all possible goodies in the form of packed food.
It is a strategic shift initiated during the pandemic and which has proven to be a lasting trend. During the pandemic, when other businesses were curtailing expenses, food companies started launching new products as consumers turned to packaged food.
Amul identified a growing preference for purity during the pandemic, and realised that this preference was here to stay. The company aggressively expanded its product range, venturing beyond dairy into items such as organic dal, atta, and basmati rice.
“We noticed that consumers were moving from unbranded to branded products, and were increasingly seeking out those that would boost their immunity,” says Jayen Mehta, managing director, Gujarat
Cooperative Milk Marketing Federation. Even later, as the world moved out of the pandemic, the preference for packaged foods continued.
Convenience foods, which had gained prominence during the pandemic, sustained their popularity. The widespread adoption of modern retail formats, including brick-and-mortar, e-commerce and quick commerce, proved to be further growth enablers for packaged foods. These formats facilitate the display of entire product ranges to a larger consumer base, says brand expert Devangshu Dutta, founder at Third Eyesight, and that helps.
Growing platter
Today, while Amul’s flagship product, packaged milk, is recording double-digit growth, Mehta says the company is also focusing on premiumisation by introducing artisanal cheese and products such as
Amul High Protein Buttermilk, high protein lassi and shakes, and whey protein.
ITC’s diverse launches, meanwhile, include lump-free Aashirvaad Besan, frozen breads, Dark Fantasy centre-fill cookies, and a variety of Master Chef frozen snacks such as paneer pakoda and onion rings, B
Natural fruit juices, Aashirvaad Svasti ghee, and so on.
Last year, as the focus turned to millets, and 2023 was declared International Year of Millets, the Kolkata-headquartered conglomerate saw a healthy business opportunity. It launched ITC Mission Millet with
an array of millet-based products: Sunfeast millet cookies, Aashirvaad millet mixes, YiPPee! millet-based noodles, Candyman Fantastik chocsticks with millets, and more.
“The company will continue with its focus on consumer-centric innovation and product launches across its portfolio,” says Hemant Malik, executive director, ITC. A finger on the consumer’s pulse, product research and development through ITC’s Life Sciences and Technology Centre, and an extensive omnichannel distribution infrastructure are helping the game.
PepsiCo India, too, is in the race to capture a growing share of the packaged food market. How serious the company is about this can be gauged from the fact that since 2022, its launches in the packaged food category have been the highest since it entered the food space in 1995.
It is not even two months into 2024 and PepsiCo has already launched three flavours in oats: masala magic, herby cheese, and mixed berries.
Last year, it had four launches and introduced seven new flavours in Doritos and Kurkure. And in 2022, it launched five new products and eight new flavours in Doritos, Quaker Oats and Lay’s.
In Lay’s, it went premium and launched Lay’s Gourmet.
Sravani Babu, associate director and category lead at Quaker Oats, says while the category is nascent compared to other FMCG segments, it is growing in double digits. So, the three new flavours were a
considered call.
While “basic oats continue to be the leading segment in the category,” she says, with these new flavours, the company is looking at oats as not just something one eats for breakfast. With PepsiCo keen on broadening the oats portfolio, the bowl is expected to see even more variety in the time to come.
Food in a jiffy
Quick commerce, which promises deliveries within 10 minutes, has also accelerated in-home consumption trends, said Saumya Rathor, category lead of potato chips at PepsiCo India, in an interview.
Consumer habits, she said, take decades to evolve, but the pandemic hastened that shift. So, the convenience-driven traction for packaged foods has persisted. E-commerce and quick commerce have only expanded packaged snack penetration across the country.
In response to the growing demand, PepsiCo India has announced its first food manufacturing plant in Nalbari, Assam, with an investment of Rs. 778 crore ($95 million). Scheduled to be operational in 2025,
this expansive facility spans 44.2 acres and underscores the company’s desire to make the most of the rising consumption trends in the foods sector.
Other food companies, including ITC and Amul, have also embraced an assertive stance, launching products strategically.
The trajectory indicates a promising future for India’s packaged food sector. The shelves are set to overflow.
Size of the packaged foods market: In 2022, India’s packaged food market size was $2.7 billion and it is projected to reach $3.4 billion by 2027
(According to Statista)
(Published in Business Standard)
admin
October 13, 2023
Anand JC, Economic Times
13 October 2023
Once the butt of jokes in Dalal Street circles, 113-year-old ITC has turned a new leaf in recent years, as its strategy to derive higher revenue from its consumer business is bearing fruit, bit by bit.
Registered in Calcutta as the Imperial Tobacco Company, the FMCG major has always relied on its cigarettes and leaf tobacco business for a major chunk of its revenues. ITC’s true diversification move might have begun with the launch of its hotel in Chennai in 1975, including a failed attempt at the financial services business, but it wasn’t until August 2001 that the tale of the FMCG behemoth came to be.
Having relied on its cigarette business since 1910, ITC has increasingly sought to earn more from its ‘cleaner’ consumer goods products. In a 2018 interview, CEO Sanjiv Puri admitted that while the journey to diversify the company started a long time ago, it only got traction around 2008. Under Puri’s first term as the ITC chairman, the company embarked on the ‘ITC Next’ strategy. The first decade was focused on preparing the company for the transition, he said. ITC now can innovate products, create brands and allow “pro-neurs” or professional entrepreneurs to build businesses in FMCG.
The plan has worked
ITC, a darling of dividend-led investing lovers, has always been a long-term growth story in the making. Nearly two decades after entering the food business, the company holds a leadership position across categories.
As per the company’s latest annual report, it holds the leadership spot in the branded Atta market through Aashirvaad, cream biscuits segment via Sunfeast, bridges segment of snack foods via Bingo!, notebooks via Classmate and dhoop segment via Mangaldeep. Its Yippee noodles trails Nestle’s Maggi, as the latter continues to lead in a highly consolidated market. However, Yippee has managed to gobble up Maggi’s share at an enviable pace. Capturing these positions, this quickly is no easy feat either.
One of the things that worked for ITC is their understanding of the distribution of products, stemming from their strength in the tobacco business. ITC started exploring aggressively diversifying away from the tobacco business around the 90s, says Devangshu Dutta, head of retail consultancy Third Eyesight.
ITC’s foray into the food business was supported by its presence in the hotel business. “Some of the marquee products that used to be served in their hotel restaurants, packaged dal and so on, they packaged and sold but it was not a humungous success. It was marginal at best.”
“But they started understanding the distribution aspect because those were sold through traditional distribution channels,” Dutta says.
ITC also put in a lot of financial muscle behind the brand building, given no dearth of resources, Dutta says. This helped them grow rapidly in product categories in which they didn’t have a presence earlier on.
“Starting from scratch, particularly on the foods side, ITC has been one of the most successful companies in the last 15-20 years. Their overall revenue this year has been roughly Rs 19,000 crore, out of which Rs 15,000-16,000 is purely from foods segment,” Amnish Aggarwal, Head of Research, Prabhudas Lilladher told ET Online.
“For a company which started this business, maybe, say, two decades back, this is a very big achievement,” he says.
Unlike its commanding position in its cigarette business, ITC’s ‘other-FMCG’ ambitions faced stiff competition from local and national companies in categories including soaps, shampoos, atta, snacks, biscuits, noodles and confectioneries.
Supporting ITC’s ‘other-FMCG’ ambitions is its core competency, the cigarette business. ITC’s consumer business’ growth has weathered storms, in part, thanks to the cash flows generated by its cigarette business which has helped it create stronger brands, an essential part of any consumer-centric business. Through its cigarette business, ITC also gets unparalleled access to a network of brick-and-mortar stores that have a diverse presence across India.
Also complimenting its growth is ITC’s agri-business, a segment which has also grown in strength over the years. From 10 per cent in FY14, the agri-business in FY23 contributed around 24 per cent to the company’s revenue from operations, as per ET Online’s calculations. ITC over the years has invested in building a competitive agri-commodity sourcing expertise. Some of these structural advantages have facilitated the company’s sourcing of agri raw materials for ITC’s branded packaged foods businesses, be it towards its atta, dairy or spices.
Like its peers, ITC too has given a fair deal of importance to its digital push, with more and more companies launching their D2C platforms. These platforms help customers buy products directly from the company website without the hassle of dealing with channel partners, and at the same time, the companies get their hands on first-party data. Such access can help the company market its offerings better. ITC, like some of its other peers, has also been investing in start-ups to diversify its product portfolio. It recently invested in Yoga Bar and Mother Sparsh.
The numbers behind ITC’s consumer business behemoth
Built to engage in the tobacco business, ITC got into cigarette packaging nearly 100 years ago. Another intent in recent decades has been to focus more on the non-cigarette business.
Puri saw it coming.
Upon being asked about the FMCG business overtaking cigarettes, Puri had said “We do not give guidance. But it will certainly happen because the other businesses are growing faster.”
After contributing nearly 62 per cent to the overall revenue in FY14, the cigarettes business in FY23 contributed only around 37 per cent.
ET Online calculations show that the other-FMCG business contributed 17 per cent to the overall revenue in FY14, which grew to 25 per cent in FY23.
Data confirms the claims made in the above segment. ITC’s non-cigarettes businesses have grown over 31-fold and currently form over two-thirds of its net segmental revenues. The company’s other-FMCG business didn’t start turning consistent profits up until FY14. Since then, it has gone from strength to strength.
ITC’s Other FMCG segment (the second largest contributor to sales) is also witnessing strong earnings and growth momentum, unlike most consumer staples peers.
The segment clocked a revenue of 19 per cent YoY while Nestle and Britannia saw 21 and 11 per cent growth each. FMCG EBITDA performance was even better, with the margin expanding by 430 bps YoY to 13.3 per cent & EBITDA growing 2.1x YoY.
Laughing stock no more
For years, the cigarette business has funded the growth of ITC’s other businesses like non-cigarette FMCG products, sometimes to the ire of shareholders who weren’t happy with the slow growth in financials and scrip value.
A slower growth in scrip value meant that for years ITC was also the laughing stock among social media circles. The stock often remained elusive during market rallies in the previous decade, offering poor returns in comparison to FMCG peers. Between 2014 and July 2022, ITC rose with dividends rose 53 per cent while Nifty50 rose 200 per cent, as per moneydhan.com, a SEBI RIA. ITC’s shares trailed the Sensex for five out of eight years through 2020.
“In the last ten years, HUL has done far, far better than ITC. And if you look at other companies in the same universe, say Dabur, it has also given superior performance. ITC has actually underperformed many of the large consumer names,” Aggarwal said.
But fast forward to 2023, not only is it among the best performers within the benchmark index, ITC has even trumped it. While Nifty50 has gained around 17 per cent in the last year, ITC has grown nearly 40 per cent. The ITC scrip in July crossed a market capitalization of Rs 6 lakh crore, beating HUL to become the largest FMCG company.
Sin stock
Prompting a move away to other segments is the nature of the cigarettes business. Tobacco is toxic, and investors are increasingly recognising it as such. Sin stocks are shares of companies engaged in a business or industry that is considered unethical or immoral.
While Environment, Social, and Governance (ESG) investing may be at a nascent stage in India, it is a serious parameter for global investors. Asia’s largest cigarette maker ITC cannot ignore it.
“The company sustained its ‘AA’ rating by MSCI-ESG –the highest amongst global tobacco companies– and was also included in the Dow Jones Sustainability Emerging Markets Index,” Puri noted in the company’s 2022 sustainability report.
Cigarettes, a bitter but essential overhang
For all the accolades for its gains in its other-FMCG business, ITC is nowhere close to ending its love for cigarettes, not that we are claiming it wants to. The Gold Flake-maker currently controls nearly 80% of the cigarette market.
The numbers in recent years suggest that the segment is flourishing more than ever before.
On an annualized basis, the return on depreciated cigarette assets is approaching a staggering 240%, three times the level two decades ago, as per a Bloomberg report. The entire legal cigarette industry was bleeding in the recent past due to punitive and discriminatory taxation on cigarettes. Taxes on cigarettes in India are multiple times higher than in developed countries viz. 17x of USA, 10x of Japan, 7x of Germany and so on, data shows.
But, companies are now recovering due to stable taxation. ITC’s three four-year cigarette sales CAGR are at their best levels since FY15 despite the company not taking material price increases over the last 13-14 months, as per a Motilal Oswal report.
ITC, which accounts for three out of every four cigarettes sold in the white market in the country, is currently seeing its best growth levels in over a decade, and is far superior to the flattish volumes of the past ten and twenty years.
(Published in Economic Times)
admin
July 24, 2022
By Aishwarya Ramesh
Tata Consumer Products has rolled out ready-to-cook mock meat products under the brand name Simply Better.
Tata Consumer Products (TCPL) is the latest company to enter the plant-based meat segment in India. TCPL has launched a brand called Simply Better – which includes range of ready-to-cook (RTC) products, made of plant-based meat.
The RTC range is a mix of snacking dishes and traditional Indian dishes. It includes plant-based chicken nuggets, chicken fingers, chicken burger patties and Awadhi seekh kebabs. All these plant-based products are currently available on Amazon Prime and Flipkart.
TCPL’s Simply Better products as seen on Amazon.
When it comes to multinational companies, ITC has a play in this (RTC) category. Its Master Chef range includes a plant-based burger patty, priced at Rs 630 for 300 grams. The range has both vegetarian and non-vegetarian frozen snacks and kebabs. The Incredible range also has plant-based chicken nuggets, priced at Rs 475 for 300 grams.
ITC’s IncrEdible plant-based RTC range
Compared to ITC’s offering, Tata’s Simply Better line is priced slightly differently. 270 grams of plant-based chicken nuggets costs Rs 390 and the plant-based burger patty is priced at Rs 450 for 300 grams.
According to a report by Research and Markets, the Indian meat substitutes and mock meat market is estimated to reach over USD47.57 million in value terms by the end of FY2026 and is forecast to grow at CAGR of 7.48% during FY2021E-FY2026.
Devangshu Dutta, chief executive and founder at Third Eyesight, a specialist consulting firm, mentions that the presence of Tata Consumer Products and ITC could help in increasing adoption of the category over time, since both are large players intending to scale with mainstream customers.
“However, both companies will be advertising and targeting the same cohort of customers. Additionally, the two will also be competing against the multiple D2C brands in the category,” he added.
The plant-based meat market, or smart protein market, includes D2C brands. Some of these brands are also backed and endorsed by celebrities and athletes. The Good Dot is endorsed by Olympic athlete Neeraj Chopra, cricketer Virat Kohli and his wife and actress Anushka Sharma have invested in Blue Tribe and actor-couple Riteish Deshmukh and his wife Genelia Deshmukh have invested in plant-based meat startup Imagine Meats.
Anchit Chauhan, AVP – planning, Wunderman Thompson, mentions that the plant-based industry has been built by a set of startups, and now Tata has decided to enter the segment – somewhat late.
“If you look at the e-commerce segment too, Tata entered late with Tata CLiQ, almost 10-12 years after the e-commerce category had been built by the likes of Amazon and Flipkart. But the advantage Tata has is that the trust factor will always be associated with it. It will be able to leverage that brand equity and create success out of it.”
Dutta points out that for years, the most popular plant-based meat product had been Ruchi Soya’s product – Nutrela’s soya chunks and granules (soya chunks available at Rs 499 for 200 grams and granules at Rs 250 for a kilogram). Soya chunks have been available in India since the 1980s and Dutta calls it the ‘poor man’s meat replacement’.
He says that Indians already get protein in their diet through lentils, pulses and beans, and even those who consume non-vegetarian food don’t do so on a regular basis.
“They may eat it once or twice a week. Some people who convert from non-vegetarian to vegetarian, don’t miss the taste at all. Protein isn’t a huge selling point for these products either. So, this specific faux meat segment in India is a niche market.”
Both analysts (Dutta and Chauhan) opined that Tata’s entry into the segment would not have significant impact on the way the products are priced in this category.
According to Chauhan, India is mostly a vegetarian country and the consumers who may opt for plant-based products are ones who may do so out of concern for the environment, love for animals or an overall healthier diet.
Reasons for turning to plant-based meat
“Plant-based products are essentially for non-vegetarians, who have a certain taste but are willing to give it up because they feel for the environment or animals. But that’s a very urban niche right now. If you’re a ‘woke’ urban consumer, the price point of the products may not matter,” says Chauhan.
“One of the factors for this segment to grow in India is availability. Whether it is a startup or a company as big as Tata or ITC, it has to have financial muscle to sustain growth and must be easily available to consumers. Visibility and user trials are important, especially to attract consumers who wish to make a lifestyle switch in their diet. That’s why modern retail is an important channel for these products,” Dutta adds.
Different brands in the segment right now
Dutta explains fundamental consumer behaviour and calls expansion in this market ‘tricky’, since it is difficult to get people to change their behaviour.
“This is even more the case in smaller cities and towns, where people may have a more traditional mindset. Take the example of Kelloggs – it has been in the country for almost 30 years and there hasn’t been a mass behaviour switch as far as breakfast meals are concerned.”
Chauhan adds that it is not just plant-based meat, there is now demand for alcohol-free products – which taste the same as alcohol but do not have any of the side effects that come with drinking alcohol.
Dutta mentions that people in Tier-II and III cities may not be aware of plant-based meats. This is a tricky category that requires a lot more development. “It’s possible that plant-based meats will remain an urban phenomenon for a long time.”
Source : afaqs.com
