Mumbai: Biscuit makers are sinking their teeth into the creamy layer of the market, as India’s urban households develop a taste for premium and health biscuits.
On Thursday, Britannia unveiled Nutrichoice Heavens, priced at ₹ 50 for a 100 gram pack, or 60% above the cost of its premium Nutrichoice range. Earlier this year, ITC Ltd’s foods division launched Sunfeast Farmlite, entering the competitive health biscuits segment.
“More and more products like this (NutriChoice) are going to come. There will be more launches in the premium segment. There will be launches in the mid and value segment as well. But the focus (and) the research on the premium segment is disproportionate," said Varun Berry, managing director of Britannia Industries, which has a wide range of biscuit brands including Good Day, Bourbon and 50-50.
In the past six months, Parle Products Pvt. Ltd has unleashed premium and super premium brands such as Hide & Seek Black Bourbon, Milano Centre Filled Dark Cookies and Happy Happy Dual Cream biscuits to take on ITC Ltd’s Sunfeast Dark Fantasy and Mondelez India Foods Ltd’s Oreo biscuits.
“We have launched more products in the premium category than in any other segment," said Pravin Kulkarni, general manager at Parle, which also sells the Parle G, Monaco and Hide & Seek biscuit brands. Kulkarni expects the share of premium category in overall revenues to more than double in the next three years from 7% to 15%.
It’s a similar story at the foods division of ITC, which makes a range of biscuits including Dark Fantasy and Delishus under its Sunfeast brand. “In the next few years, we expect the premium category to be between 20-25% of our overall revenues," said Chitranjan Dhar, chief executive officer of ITC’s food division. He says the firm is focusing on this segment, as it is growing faster than the overall market. But he did not disclose the share of premium biscuits in its overall biscuit segment revenues.
While NutriChoice targets the urban customer, Nutrichoice Heavens is aimed at SEC-A, the most desirable category of consumers, said Berry. According to Berry, products like this cost a lot of money and if the target customers adopt them, they will not settle for anything else.
“Nutrichoice accounts for 6-7% of Britannia’s overall revenues and within the next three years, it will account for 20-25% of the company’s overall revenues," said Berry.
According to industry estimates, India’s biscuit market is worth ₹ 23,000 crore and growing at the rate of 8% per annum as of September. The premium category accounts for 25% of the overall biscuits category and is growing at 17% per annum.
The focus on premium and health biscuits comes amid a slowdown of the category growth from mid-teens over two years ago to single digits. The slowdown in rural areas was even sharper. “The slowdown that happened in rural demand is a lot more than urban demand," said Berry. However, the rural growth rate is still higher than urban, he added.
Analysts are not convinced that premium is the way to go. “Leaving the mass market is not the right thing to do from a long-term perspective. The mass market opportunity is much larger than the premium. Also, the premium category is more competitive with MNCs," said Prashant Agarwal, founder and managing director of Wazir Advisors Pvt. Ltd, a consulting firm focused on retail and consumer sectors.
However, marketers are convinced that the trend of premiumisation will accelerate.
“Across segments, consumers will uptrade and buy better. In a few years, we see the rural consumer also buying NutriChoice, at least the digestive biscuits," said Berry.
To be sure, not much has changed in the short-term. Biscuit volume has not picked up yet. “Consumer optimism hasn’t yet not translated into uptake, into spends," said Berry, who is hopeful that 2015-16, consumption habits will change and growth will come back.
“We are seeing signs of recovery. But it will be 8-10 months to get back to the 14-15% that we had a couple of years ago," said Dhar.