"The attempt is to upgrade price points"

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: Sameer Sunejam has taken over as chief executive officer of Perfetti Van Melle (PVM). An IIM Bangalore alumnus, Suneja started his career at Colgate Palmolive. He also had a stint at Frito Lay before joining Perfetti as brand manager in 1997. Since then he has played a key role in the company’s growth in India. Under his stewardship the company has won more than 28 awards for creativity (domestic and international) and nine awards at the Effies in the past four years. In a freewheeling interview with FE’s Ruchi Kapoor, Suneja talks about how PVM plans to carry the good work forward.

Worldwide Perfetti is known as a gum company. In India it is Alpenliebe, a hard-boiled candy, which is its biggest revenue earner. In effect, Perfetti is heavily dependent on one brand. Is that desirable in a fickle market such as confectionery?

First let me break a few myths. Internationally, we are not a gum company; our largest brand across the world is Mentos. We call it a chew. We are very big with gums in Italy and with candies in Asia. Alpenliebe is big in India, China, and Indonesia. We were dependent on Alpenliebe; but that was almost six/seven years ago.

Unlike Wrigley, which is predominantly a gum company, we have mints, gums and candies. In fact, in India we have a balanced portfolio. Center Fresh is the largest chewing gum brand in India and in value terms it’s similar to Alpenliebe. We have Big Babol, Mentos, Chlormint and Happydent White. We are uniquely placed in that we have a nice mix of products, which allows us to de-risk ourselves in any given segment.

Would you say advertising played a big role in building Perfetti’s brands in India? You have been a consistent performer at the Abby’s and Effies.

It has served us well in this very low impulse category. When consumers go to a paan shop they look at the confectionary items and buy it. As a result the advertising or brand building activities play a huge role in keeping the brand top of mind. However, building top of mind recall is difficult in our category. Distribution plays a massive role because unless a brand is distributed well—and even if it is recalled—it will not be bought. It has to be distributed, visible and has to be upfront. It’s very unlikely that people will switch outlets to look for their favourite confectionery brand.

Then, as a food product, it has to taste very well and be available at the right price point. As a basket these things works together and not any one element can ensure success on its own. All said, other things being equal, advertising plays a very big role.

Can you give me your estimates on the size of the Indian confectionery market and the latest equation in terms of market shares?

As per Nielsen we are the single largest fragmented category in the country—across FMCG, durables etc—because there are so many brands and pack sizes. Thus measuring at the retail outlets becomes difficult. Our internal estimates seem to indicate that as a category, we are in excess of Rs 2,000 crore in terms of value and would be growing at a reasonable single-digit percentage. So it’s not low single-digit anymore; but I don’t think that it’s very healthy double-digit reach either because it is a very large unorganised market. There is room for growth.

How have you dealt with the changes in the tax structure, given that the confectionery market is so price sensitive?

That’s been a challenge all these years. We have been in a bit of a bind as we have had a fairly aggressive duty structure for a long time now. Also, the cost factor keeps escalating because of inflation. The cost of raw materials is high. It makes the confectionery market that much tougher to be in because you are at fixed price point.

However, Perfetti has grown aggressively on volume and the economies of scale have helped us deliver on the bottomline. Another thing is that we have been very aggressive value generators—every year we are able to find some better and sharper ways of reworking our margins. Going forward, the attempt is to upgrade price points, in terms of launching products at higher prices.

Perfetti has said it hasn’t spent too much money on consumer and trade promotions. But confectionery, as a category, depends a lot on consumer promos to create excitement among children, and trade promos to generate push. What exactly is Perfetti’s gameplan?

It varies from brand to brand. We have a wide portfolio. Take Big Babol, a bubble gum aimed at children. We may do a consumer promotion involving kids. On the other hand, Happydent is targeted at the youth. For them there will be more advertising or above the line brand building and on-ground activities. There could be another brand that may require a certain amount of push because that category has become so competitive that incentive-wise the retailer gets a bit more than usual so that you stand out from rest. It’s like horses for courses.

With well-established players like HUL and Nestle getting aggressive in the confectionery market, what sort of innovations does your company have in mind?

There are loads and loads of projects on the anvil at any point of time. We are singularly focused on the sugar confectionery unlike other companies for whom confectionery is one more category they are present in. The good thing is that we have been given a lot of flexibility by our parent company to look at local products as well. So it is not just about picking up a brand that is available in the international stable and launching it in another market. We can modify the taste and, in fact, look at developing a entirely local product. This keeps our R&D team busy. Over the years we have been the first-mover in many categories—such as Alpenliebe, Centre Fresh and Happydent White. If you are able to bring in value-added offerings before other players and if you are able to distribute and advertise them well, you get a bit of a head start.

Is there any attempt at developing more local products? Is any global R&D done here?

The answer to both is yes. We have an R&D team here in India that does a lot of things locally. Some of the stuff that we launch in India goes abroad, to other markets. For example, we had launched Creamfills a couple of years ago, which has been an outstanding success. The idea was local, for the first time the production was done in India, the brand name was done locally. Subsequently, it went to other markets—China, Poland and other countries. Similar, for Cofitos. Our parent company believes in “think global” rather than just saying it.

How does the market for sugar-free products look like in India? How big would be the size?

It’s a small niche today. It will grow only when Indian consumers start becoming more conscious about dental hygiene and obesity, which is a big thing in the West. Having said that, India is huge and there is a segment of society that is exposed to international products and for whom sugar-free works. Marketers must be aware that it will take time to build. If you expect that it to give a large volume base overnight or in the short run, it’s not going to happen. I don’t see anything shifting dramatically in the next few years.

There’s some opposition by manufacturers on the new regulations on the mandatory nutritional declarations. Comment.

We are talking to the government and the ministry. What happened is, some of the declarations they wanted are taken from the international standards. There the size of the wrapper is much larger. There are very few countries in the world where they sell mono packs at 30 paise. Everywhere they sell a stick or a box or multi packs that allows you provide maximum information. We made some dummies and saw that if we actually put all the information on a mono pack we have to knock the branding off—there is no space left. That’s the presentation we made as an industry.