Britannia plans price cut for super-premium biscuits
Price reduction is part of Britannia’s wider strategy of premiumization the biscuit market, which also led to it kicking off 2018 by launching a super-premium biscuit called Pure Magic Deuce
Bengaluru: Britannia Industries Ltd is looking at reducing prices for some of its super-premium biscuits in order to attract more consumers and boost business, a top executive said. This is part of the company’s wider strategy of premiumising the biscuit market, which also led to it kicking off 2018 by launching a super-premium biscuit called Pure Magic Deuce.
Biscuits account for around three-fourth of Britannia’s total sales and the company’s strength lies in selling premium varieties of the product over regular glucose biscuits, which are viewed as mass products.
Biscuits cost around Rs100 per kg on average and Britannia sells super-premium biscuits - those that cost Rs400 per kg or more—under its Pure Magic and Good Day brands.
“We are strong in 60% of the market, which is premium. But what we’ve realised is value could be a large source pool from which we can upgrade consumers into our premium products. In some cases we’ve even realised that our pricing is possibly higher than we should charge consumers, and if we democratize some of those brands slightly we could see a significant upside in business,” said Ali Harris Shere, Britannia’s marketing head.
Shere did not reveal details on the exact amount of price cut. But he said Britannia will not shy away from doing what is required. For example: if the price for some brand needs to be lowered to Rs400 per kg from Rs500 a kg, then that’s what the company will do.
Even for its newest product, Pure Magic Deuce, Britannia had initially test-marketed selling four large biscuits for Rs30. But when it finally launched Deuce on 2 January, it went with six biscuits to a pack to optimise the ratio of number of biscuits to price.
“We are seeing companies trying to get the Indian middle class to upgrade their choice of biscuits by smaller packs as well as attractive pricing where a premium range gets perceived as affordable. This could open up a new set of customers who are currently treating biscuits as one option for a tea-time snack or a children’s snack,” said Sreedhar Prasad, partner at KPMG in India.
Indeed, Britannia’s plan to lower prices is partly based on the company’s previous success in launching smaller packs, for Rs5, of its Good Day and Marie Gold premium brands to attract consumers, especially in the rural markets.
Biscuits as a category grew at a 10.6% compounded annual growth rate (CAGR) between 2012 and 2017 and is led by Britannia, Parle Products Pvt. Ltd and ITC Ltd, according to data from research firm Euromonitor International. But the market is expected to grow at a significantly slower 2.3% CAGR between 2017 and 2022.
“It is a price sensitive category by and large. But is it as price sensitive as it was, say, five or ten years back? No. You’ve seen the consumer upgrade and shift from a 50% glucose market to a struggling and almost non-existent glucose segment today. What you have to look for is value for money. If the consumer feels that you are giving proper value, then he will pay that premium,” said Nikhil Sen, managing director at premium cookie maker Unibic Foods India Pvt. Ltd. Unibic has experimented with smaller packs to increase market penetration rather than go for price cuts.
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