With little or no advertising, a whole host of local chips/wafers brands are quietly eating into the market share of their swankier multinational counterparts.
For long, chips and wafers have been the most preferred snacking option on varied occasions (and, well, even non-occasions). The road to how each snacking variant was developed and distributed (largely by multinational companies) across markets has been exciting. But what takes longer is for a multinational to innovate and provide localised flavours — an opportunity that local chips manufacturers have latched onto in India. Slowly and steadily, local brands have made their place on the store shelf — and eventually, the kitchen shelf. And the distribution is something to speak of — from kiosks and carts at railway stations to the neighbourhood paan-wala, local chips brands are everywhere.
Euromonitor’s report Savoury Snacks in India (December, 2016) estimates that savoury snacks are likely to register a constant value CAGR of 12% over 2016-2021, with sales reaching Rs 445 billion. The Indian chips market, sized at Rs 7,000-7,500 crore according to Euromonitor, has been growing at a robust pace of 15% over the past five years and going forward, is expected to grow at a similar pace. Growth will come from rising disposable incomes, changing lifestyles, product innovations and strengthening of distribution to have better selling opportunities in lower-tier cities and rural areas, the report goes on to state.
Parle Products’ Parle Wafers has strategically-located manufacturing facilities, one each in Bahadurgarh, Indore, Madurai and West Bengal with each facility catering to a particular zone. Parle Wafers is a relatively new and smaller player in the overall snacking segment, currently with six wafer variants. B Krishna Rao, category head, Parle Products, notes, “Despite being a company with a huge distribution network, there are challenges. Reaching a higher number of outlets is definitely challenging, but we have still been able to carve a niche for our products,” he states.
There are typical outlets where there is exclusive availability of Parle Wafers, which becomes a big strength. On a comparative scale, while the exclusive retailing opportunities are beneficial, the company finds its sales comparatively reducing by 10% when it retails via multi-brand outlets. For Parle Products, snacks contribute 3% to its total revenue. Within this, wafers bring in 1-1.5%. The goal now for Parle Wafers, Rao reveals, is to increase footprint and visibility at the outlet level.
CavinKare acquired Garden Namkeens in 2009. In 2013-2014, wafers were introduced. With production for wafers based in Bhiwandi, the target market for the brand is Maharashtra, Karnataka, Tamil Nadu, Delhi-NCR and parts of Gujarat. TD Mohan, JMD, CavinKare provides that the intention is to keep introducing one or two variants every six months to a year. To this purpose, the development and marketing teams get consumers involved through sampling to figure out the new flavour/s. Chips and wafers together bring in 35% in revenue. The overall communication expenditure for Garden Namkeens as a whole, rarely exceeds 5%. Mohan feels that top of mind recall will eventually follow. “Quality and freshness are very important for us. We try to provide the best volume,” he says. “Once the consumer is satisfied with the quality of the product, they remember the brand identity well.”
Chandubhai Virani, whole-time director, Balaji Wafers, speaks of expanding at a calculated rate across the country rather than blindly and prematurely following the ambition of being a national player. The company has manufacturing units in Rajkot, Valsad, Indore and Uttar Pradesh. It counts Gujarat, Maharashtra, Rajasthan, Goa and Madhya Pradesh as its markets. The company spends 5-10% towards communication, only if the need arises. There is no compulsion, Virani says, to add the communication layer at a determined frequency when their products are seeing traction organically. Balaji Wafers shares the cost of the stands it provides to retail outlets. For example, if a stand costs say, `500, 10-20% of the cost is borne by the store, and about the same percent by the dealer.
The remaining is borne by Balaji Wafers. Given that it is an impulse driven category, merchandising support such as racks, stands and aerial hangers, is a huge prerequisite generally for snacks and more so for the chips/wafers category. Mumbai-based Chheda Specialities manufactures three variants of potato chips and five variants of banana chips at its Manor unit in Maharashtra. The chips contribute 60% towards revenue which also includes exports. Its CEO Ashok Chheda notes that the marketing initiatives at local levels draw about 4% ad spends.
“We provide offer-based promotions to outlets like D-Mart, Reliance Fresh or Big Bazaar,” Chheda says. Haldiram’s retails chips in commonly known flavours as well as exotic ones like Thai Chilli. On the export front, the company’s products are available in the US, the UK, Middle East, East Europe and parts of North Africa. Prataap Snacks’ Yellow Diamond is one of the few brands in the space to have appointed an actor — Salman Khan, as it brand ambassador.
The local flavour
Harminder Sahni, founder and MD of Wazir Advisors, notes that domestic players start from a very low base, which gives them many opportunities and a lot of ground. With many people joining the consumption fold, maintaining taste and variety are very important. The category in itself has a lot of potential owing to higher disposable incomes and increased consumer awareness.
David Abikzir, chairman, Nymex Consulting shares that what tips the scale in the favour of local brands are consumers and them being convinced of the product being of a certain quality. “Indian consumers have also started to benchmark locally manufactured snacks against those that are imported,” he observes. “For example, increased western influences through the availability of imported potato chips have made Indians more aware of product concepts and attributes like packaging.” Product innovation, branding and packaging have provided an added impetus for these products. With domestics snacks manufacturers willing to experiment with flavours and providing the best value for money to customers, there are promising times ahead.