After taking over the reins of the India business in February, Prashant Peres, managing director, Kellogg South Asia, has battled not just increased competition in the breakfast category, but also runaway rise in inflation and heightened cost-consciousness among consumers. Having reported a 14% growth in revenue for the financial year 2022, and with a new product — Pro Muesli — on the shelves, Peres talks to Alokananda Chakraborty about the emerging opportunities. Excerpts.
You took charge as MD in February this year. So what were the primary challenges in the aftermath of the Covid pandemic?
The challenge of any new role is always thrilling but more so when it is a legacy brand such as Kellogg. I step into this role when consumers are looking for nutritious offerings. There is a fantastic set of opportunities ahead of us. The pandemic saw consumers’ consumption patterns evolve. It changed the way people eat, and they are more inclined to make healthier choices than ever before. This definitely resulted in an increased demand for our cereals.Post-Covid, the challenge was to keep up the momentum and continue to build category penetration. We could do that successfully in the past nine months.
However, we have seen some new challenges emerge, including inflation at a scale we have never seen in quite a few decades. We have also seen heightened competition in the breakfast category. Happy to say that the resilience and agility we built as an organisation during Covid have helped us respond to these challenges well.
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Kellogg has a much wider portfolio than that available in India — such as items like frozen foods, and noodles. Why haven’t you brought them to this country?
Since we entered India, we have been serving locally relevant food in innovative formats that save our consumer time and effort and provide morning nutrition. We are constantly working in the larger food and snacking space, looking at evolving consumer preferences, however, we always look to play in segments where we can provide genuinely differentiated offerings at the right value to consumers but also have the right profit profile internally. When we see an opportunity that successfully meets both criteria, we will make a play in a new segment.
We are strong market leaders in the ready-to-eat cereal (RTEC) category and the task at hand is always growing the category, which is still under-penetrated. Over the past three years, we launched Kellogg’s Chocos Fills, granola and muesli, now established categories in themselves. Muesli-granola is growing at a 60% CAGR vis-a-vis year ago.
The next few months will see an enhanced focus on innovations that deliver nutrition, convenience, and value. We have just announced the launch of Kellogg’s Pro Muesli, with 100% plant protein. One serving of the 100% natural plant-based protein breakfast option with milk provides more than 1/4th of an adult’s daily protein requirement. Simultaneously, beyond RTEC, we play in premium snacking with Pringles. The brand has witnessed strong growth for the past couple of years, driven by a stronger distribution push and focus on flavours that appeal to Indian consumers.
Did the pandemic and the inability of people to eat out bring about any lasting changes in the eating habit of Indian consumers? Did that necessitate any changes in your strategy in the country?
During the pandemic, the in-house consumption of packaged foods grew across categories. Almost Rs 4.5 trillion worth of home consumption moved in-home during this phase. With more people at home, the role of high quality packaged food has increased manifold and that is the primary reason we have seen a spurt in demand across markets.
The cereal category in India was no exception and has grown faster than most other categories within the food industry. The reason for it was the heightened affinity towards nutritious food options. We saw a surge in demand for our cereals during that time, and our health and wellness offerings , the muesli and granola sub-segments, outperformed the rest. More and more consumers recognise it as the simplest way to get a nutritious and convenient breakfast in just one bowl.
Recent price increases have hit Indian consumers hard. What cost reduction measures have been undertaken in recent months?
Internally, we are assessing all our processes to look at ways to reduce costs without compromising the quality of the food we serve. The past year has been challenging in terms of inflation pressures. India has always been an inflationary economy, but this year, it is not just one or two raw materials, but costs are increasing across the board. While one has to pass on some of the cost increases to the consumers at this stage, we understand their budgets are stretched and thus, we are trying to do the same responsibly. Our products are made available at various price points, allowing consumers to continue to access the brand at prices they are more comfortable with. We are also working with our various suppliers to reduce costs and keep them under control, especially as this may continue the next year.
Kellogg Company announced in June that it will split from a single conglomerate into three independent companies. How will that affect the conglomerate’s India operations?
The announcement made by Kellogg’s Global CEO, Steve Cahillane, on the company’s transformation journey will unlock the full potential of our entire portfolio. This transformation will enhance performance and increase long-term shareholder value by positioning each business to pursue its distinct strategic priorities.
While the current targeted transformation is intended to be completed towards the end of 2023, it remains business as usual for Kellogg India. The India business falls under the AMEA region (Asia Pacific, Middle East & Africa) and will come under the Global Snacking Co, headquartered in Chicago. The Global Snacking Co’s extensive global footprint will account for over 80% of Kellogg’s business, approximately $12+ billion. It will encompass all the categories and brands we currently operate in India and AMEA. We will continue to strengthen our leadership in the two categories we operate in – breakfast and snacks.
India is expected to emerge as the second fastest growing market for gluten-free foods and beverages in Asia-Pacific after China. What sort of opportunities do you see in this area?
This segment is witnessing new product developments along with elevated demands. We have successfully launched gluten-free cornflakes in some of our markets like ANZ and SEA, and we are actively scoping the opportunity to bring the same benefit to India.
However, a far bigger and more mainstream need in India is the protein in our diet. The big advantage of our recently launched Pro Muesli is that it’s been formulated to deliver the nutrition promised but also offers great taste and thus, it allows consumers to access a full portion of protein with no compromise on taste.