Photo: Priyanka Parashar/Mint
Photo: Priyanka Parashar/Mint

Opinion | How home-grown consumer firms tasted success

Today, MNCs no longer shape the narrative. Home-grown firms are clearly calling the shots

India’s consumer packaged goods (CPG) industry has changed. An increasing number of people are rejecting traditional chemical-filled brands in favour of natural ones. However, our preference for natural brands is neither new nor unknown.

Think ayurveda or the prevalence of our grandma’s beauty treatments such as amla-, reetha- and shikakai-based home-made shampoos, or the multani mitti-, turmeric-, gram flour- and milk-based face packs. The demand has always been there.

Even about a decade ago, nearly one-third of Indian consumers preferred to use natural products, according to a survey done for Mint by Chrome Data Analytics & Media (Chrome DM), a primary research and data analytics company.

However, the number now is significantly higher at 77%. What has led to this growth and how has it changed the narrative?

The change can perhaps be credited to Patanjali Ayurved Ltd. The Baba Ramdev-led company, says Damodar Mall, customer strategy officer of Reliance Retail Ltd, and author of Supermarketwala: Secrets To Winning Consumer India, proved that it’s possible to build a natural brand of size and scale to the industry.

The segment hitherto had a number of local companies in every district and region, but they were confined to that region, were largely unorganized and their quality was suspect.

Moreover, even the larger companies with roots in naturals, such as Dabur India Ltd, The Himalaya Drug Co. and Bio Veda Action Research Co., brand owners of Biotique, were aligning themselves to sell and market like the multinational companies (MNCs), said Santosh Desai, managing director and chief executive officer at branding services and consulting company Future Brands Ltd. These companies are now benefitting from the opening of the naturals floodgate.

Today, MNCs in the CPG segment no longer shape the narrative. Home-grown companies selling natural brands are clearly calling the shots.

Natural brands are growing at three times the non-natural segment. Moreover, the natural space is dominated by Indian companies that account for 81% of the segment, according to insights provider Nielsen.

Also, MNCs selling traditional or chemical-filled products haven’t been able to emulate the success of their Indian peers with core brand extensions.

For instance, Colgate Palmolive (India) Ltd, which has a majority share in the oral care segment with its flagship Colgate and Cibaca brands, has failed to find its way back into the consumers’ basket even with the launch of natural variants such as Colgate Swarna Vedshakti and Cibaca Vedshakti.

In financial year 2018, the company reported a decline in its toothpaste market share to 53.4% from 55.1% a year ago.

Likewise, the natural variants of Fair and Lovely, a 2,000-crore brand of the country’s largest CPG company by sales Hindustan Unilever Ltd, lags in growth compared to brands whose origins are natural.

Core natural brands, mother brands with natural proposition, account for nearly four-fifths of the naturals market, and are growing at two times the rate of natural extensions, according to Nielsen.

What’s causing this distinction? Why have MNCs not been able to replicate the success of Indian companies in the naturals space, given that most of them have been around longer and can probably be passed off as Indian companies? Is it an organizational problem? Is it that the temerity that they have shown over the last couple of decades is now coming home to roost? Or is it just about consumer fatigue to the claims and super claims that they have been making?

There are plenty of examples of India-specific innovations by MNCs which have won hearts.

There is the McAloo Tikki burger from McDonald’s India, Maggi noodles from Nestle and even Wheel from Hindustan Unilever.

Yet, these examples are just about a handful. Perhaps the need is to invest more in this market to build brands ground-up. Maybe companies need to go back to their drawing boards. Maybe they need to listen more to the consumer.

After all, consumers world over are choosing to use less toxic and more natural products whenever they can.

In India’s case though, the consumer is much more assertive. She will have her way.

Shop Talk will take a weekly look at consumer trends, behaviour and insights.

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