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Biscuits market – Price-sensitive, eager for new offerings
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Tuesday, 16 April, 2013, 08 : 00 AM [IST]
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Anupam Saluja
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fiogf49gjkf0d Overview
The bakery sector in India is worth $69 billion. It is one of the fastest-growing segments in the food sector. Changing demographics and globalisation have led to this segment becoming one of the fastest-growing segments within the sector. Bread and biscuits constitute about 82 per cent of the entire segment.
India is ranked third after USA and China in the production of biscuits. Biscuits are a mass-consumption product in India. They enjoy universal appeal and are consumed by all sections of the society.
Despite being a mass-consumption product in India, the per capita consumption of biscuits is 2kg. This is fairly low compared to the per capita consumption of over 10kg in the US and the UK and over 4.5kg in the South-east Asian countries (Hong Kong, Singapore, Thailand, etc.)
However, industry experts believe that this segment is set to grow at the rate of 15 to 20 per cent over the next few years. There is a huge untapped opportunity for growth in this segment.
The biscuit segment in India is extremely price-sensitive and highly competitive. The penetration of biscuits in urban and rural markets is 85 and 55 per cent respectively. Andhra Pradesh, Karnataka, Uttar Pradesh, Maharashtra and West Bengal are the key markets for biscuits. The consumption is highest in these states.
Glucose biscuits have been the most popular category of biscuits consumed for many years now. However, the volume of sales in the glucose category has been falling steadily.
While it still remains the most consumed category of biscuits, companies (domestic and international) have begun focussing on flavoured biscuits and other categories like cream biscuits and premium cookies in keeping with the consumer demand. This category also provides higher margins.
Trends
The industry is seeing a dramatic shift in the preferences of consumers. Consumers in India are now reaping the benefits of globalisation – they are far more discerning about quality and taste.
While traditional Indian snacks continue to enjoy widespread popularity, the Indian middle-income consumer is always eager to sample the offerings of restaurants and cafes that offer interesting and authentic international food.
In addition to tried and tested products, companies have had to come up with innovations that go beyond packaging, designs and promotions. They have had to innovate at the product level, launching new and exciting variants in flavours that tease and tempt the consumers’ taste buds. These innovations are not restricted to large national or international companies.
In fact, neighbourhood bakeries and cafes and home-based specialty bakers are another emerging segment that have begun offering high-quality products in flavours that range from classic with a twist to downright quirky. From burgers and pizzas to muffins and cupcakes, there are several astonishing inventions that people have come up with to keep up with finicky customers.
Changing lifestyles and consumption habits of middle-income and upper middle-income groups have led to a greater demand for healthy options. Cookies and biscuits as a snack can quite easily be made more nutritious and biscuit manufacturers have begun taking this into consideration.
Though the health segment is currently a very niche segment, several national and international brands have launched healthy variants containing no added sugar, no trans-fat, higher fibre content, etc. Cookies containing muesli, oats, whole-wheat, multi-grain and ragi are found in supermarkets in cities across the country.
The premium cookie market
The premium cookie market in India is around Rs 100 crore, a very small percentage of the overall biscuit market. However, industry experts believe that this segment is poised to grow at 30 per cent over the next couple of years.
Several international brands from countries like Australia and America have been operating in this segment for a couple of years. In the recent past several Indian companies have launched cookies in this segment. The consumers' response to premium cookies has been extremely good.
In fact, some premium international brands have their own exclusive stores across the country. Upscale supermarkets and airports across metros and tier-I cities in India stock well-known premium imported cookies.
In the premium segment, consumers seek gourmet and exotic flavours. Companies have begun manufacturing premium cookies with ingredients like high quality chocolate chips, dark chocolate, white chocolate, macadamia nuts, hazel nuts, apricots, pralines, etc.
Challenges in the premium cookie segment Demographics
The Indian market is a complex market. It is highly-fragmented and diverse. In this scenario, one rule does not apply to all. It is challenging for marketers to obtain data on consumers. A lot of trial and error is required to get the formula right.
Location and reach
Being stocked/located at outlets that attract the right mix of target consumers is critical for premium cookies.
Currently the availability of premium cookies is limited to select upscale stores at malls, central high-street shopping locations and airports. It is important to increase the number of outlets/stores that stock these cookies so as to be able to reach as many customers as possible.
Expansion to smaller cities and towns will be a huge challenge for new entrants in this segment. Most premium brands are available only in the top 20 cities in India.
Quality and taste
Brands will need to consistently maintain a high quality and superior taste in order to stay on top. Customers will demand cookies that are flavourful and fresh.
Packaged cookies will need to maintain the perfect texture with the right amount of crunch and moistness. Even when customers seek healthier options, they are unlikely to compromise on taste and flavour.
Rising costs
Higher input costs, taxes, rising cost of retail and inflation will lead to higher prices. Several companies, boutique cafes and bakers import high-quality baking ingredients like cocoa, chocolate, flavouring agents etc. to ensure that their cookies taste authentic and premium. These costs are naturally passed on to the consumer.
With so many products available at various price points, it is critical for manufacturers to price the products right. Consumers will continue to base their buying decisions on products that offer value for money.
Packaging
Premium products require a certain kind of packaging. Packaging solutions and options in India are currently limited and expensive. Brands in this segment will need to come up with packaging solutions that are cost-effective and ensure that their products stay fresh.
Technology, infrastructure
Companies will need to adopt better baking/manufacturing technology to stay on par with global brands. Some international cookie brands in India use imported and proprietary oven technology to maintain international quality standards.
In fact, these ovens are used at their stores to enhance the customer experience and serve cookies that are fresh–off-the–oven.
Development of infrastructure will help companies expand to smaller towns and cities. It will also hugely improve supply chain logistics, which is critical to the effective expansion and functioning of companies.
Competition
The entry of so many players in this segment will raise customer awareness and grow the premium segment. However the competition will be intense.
Price, quality and customer experience will play an important role in the success of a product. Certain brands in this segment have been allowing extensive sampling of their products at their stores malls and super markets.
They encourage customers to try their products for free to build awareness as well as to reach out to as many potential customers as they can.
Manpower
Rising manpower costs and availability of skilled manpower will be a challenge that companies will have to tackle.
Clearly this is an exciting time for manufacturers/brands in the premium segment in India. Several new varieties will be launched in the next couple of years. Consumers will see many interesting product and packaging innovations. They will be spoilt for choice and will benefit from increased competition and better tasting products.
(The author is chief executive officer, Australian Foods India Pvt Ltd)
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