FMCG cos sweeten R&D efforts

Written by Lalitha Srinivasan | Mumbai | Updated: Jan 12 2014, 06:23am hrs
FMCGIn a tough market, industries, especially the FMCG sector, are betting big on innovation to grab the customer?s eyeballs and money (Reuters)
In a tough market, industries, especially the FMCG sector, are betting big on innovation to grab the customers eyeballs and money. In order to have new products on the shelf, the Rs 1,85,000-crore Indian FMCG industry is going all out to step up its research and development (R&D) projects, with special hiring and increased spends.

While Britannia Industries has appointed Pascal Ville, a French national, to head its R&D and quality control projects, Parle Agro, maker of the Frooti brand, has increased its R&D spend by 30% to introduce new products this year.

Arch rivals Coca-Cola India and PepsiCo India are sharpening focus on product innovations with fresh investments in R&D projects. Similar is the case for Parle Products, makers of the Parle-G biscuits, which is increasing investment in R&D projects by as much as 15% to launch new products.

Innovation seems to be a key differentiator in competitive markets to lure consumers. Realising this, companies are betting big on innovative products and marketing strategies, said an analyst based in Mumbai.

Elaborating on Britannia Industries plans, chief executive Varun Berry said, Ideally, we would like to get at least 6-8% of our revenues per year from innovations. That figure averaged about 4% in recent years. We have just hired Pascal Ville to head our R&D projects to create innovative products.

As per Berry, Britannia Industries key strategy is to create innovation within the existing categories instead of foraying into new segments. As we go forward, consumers will see a lot of innovation in our product ranges. We are looking at innovative ways to increase our distribution, too, he added.

Like Britannia Industries, PepsiCo India is planning to expand the range of foods and beverages in its portfolio to woo a diversified target audience. India currently represents one of PepsiCos largest markets globally. PepsiCos R33,000-crore investment is expected to further strengthen and expand its capabilities in the companys strategic areas, which include innovation, said a spokesperson from the company. Recently, PepsiCo announced plans for the company and its partners to invest R33,000 crore in India by 2020.

With an annual turnover of $1.6 billion, Tata Global Beverages (TGBL) is relying on innovative products and communication strategies to sustain its leadership in the branded tea sector in India. TGBL MD & CEO Harish Bhat said, Innovation will continue to be a key growth driver for TGBL. We focus on innovation by leveraging consumer insights and trends in the beverages industry. This helps TGBL develop innovative tea, coffee and water products for consumers across the globe.

The company has increased investments in R&D by 30% in FY13-14. In 2012-2013, the Tata Group spent R13,223 crore on R&D.

This is roughly 2.5% of our total turnover. This number in rupee terms constituted a growth of 22.5% over the spend in the previous financial year. In dollar terms, it constituted a 7% growth, Tata Sons brand custodian and chief ethics officer Mukund Rajan said during a media interaction in Mumbai recently.

Coca-Cola India is investing in its R&D projects to innovate on portfolio, products and equipment to meet consumer needs, said a spokesperson from the company.

A lot of our innovations are also around cooling equipment (solar coolers), productivity, leveraging technological innovations, and market execution and packaging, among others. Our spends will certainly be in keeping with our road map to achieve the 2020 vision, the spokesperson added.

Meanwhile, Parle Products is planning to increase investment in its R&D project by 15% to launch new products. We are increasing our investments in R&D and advertising budget by 15% in the next few months, said Parveen Kulkarni, general manager of the company.

According to Parle Agro joint managing director Nadia Chauhan, innovation through product differentiation and category creation has been a part of the core value system of Parle Agro. Owing to the upcoming launch of Cafe Cuba (coffee fruit drink), there has been a growth of almost 20-30% in our R&D spends in the past two months, she added.