Rapidly evolving consumer tastes and the growth of cookies as a category are fuelling the rise of India’s biscuit industry to new heights.

M A R K E T

I N S I G H T

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Until a couple of years ago, buying biscuits was not exactly the most exciting part of shopping for the average Indian consumer. Mostly being impulse-driven, the category

saw low and sporadic activity in terms of new fla-vours or brands. It was only in 2006 – with the foray of ITC into the biscuit market in India – that the predictability of the market landscape was shaken. Biscuits, which were previously associated mainly with teatime, and mostly came in the form of well-established brands, now had newfound consumption occasions and product concepts.

By Rahul ashok

The market is witnessing another wave of activity now, with the entry of PepsiCo’s Quaker cookies, Cad-bury’s Oreos, and Unibic Cookies, all of which have a relatively pre-mium positioning. This is spurring even more optimism in the Indian biscuit market, not only for domes-tic players, but also among interna-tional brands.

How the Cookie Crumbles

In 2006, the biscuit market in India was worth `70.9 mn, and Bri-tannia and Parle held over 75 per-cent share of the total market value. Five years down the line, the change is more than apparent. The market size has almost doubled to `134.2 mn, growing at a CaGR of over 17 percent. additionally, the combined market share of Britannia and Parle is down to 70 percent, owing to the surprisingly strong emergence of ITC in this space, growing from nothing to take 10 percent of the to-tal market share.

With the changing competitive landscape, the market has seen a huge increase in terms of flavour and format combinations, stock-keeping units and price-points, and ingredi-ent modifications intended to target a broader range of consumption oc-casions. Therefore, from children to the elderly, and across income groups, biscuit have emerged as one of the few categories that manage

to straddle different consumer seg-ments with ease.

With such a strong and diverse platform pushing uptake, it is no surprise that India’s `134.2-mn bis-cuit market is the seventh largest in the world, and accounted for a sub-stantial 13 percent of the total do-mestic packaged foods market value as of 2010. But in terms of per capita consumption, Indians eat only 1.9 kg per year, whereas consumers in the US and the UK get through 5.4 kg and 9.4 kg, respectively. Since the category has plenty of advantages in terms of price, nutrition, and con-venience, this leaves a lot of room to position biscuits to account for a more relevant and larger component of Indians’ dietary intake.

Creating ‘Value Niches’

as major brands scramble to differentiate their product proposi-tions and chase the elusive concept of consumer relevance, the industry is seeing increased focus on growing the non-glucose segment and, more specifically, cookies. With glucose biscuits driving volumes, the last few years have seen the launch of various cookie brands from companies such as McVitie’s, Britannia, Unibic and even Horlicks, which are creating what can be called “value niches”.

These niche markets could po-tentially help companies to work around the thin margins that they are currently operating on, because

of the slightly premium price posi-tioning that such brands are able to maintain. It makes sense for new entrants to also consider catering to such areas, as it would be impossi-ble to compete with the likes of Bri-tannia, Parle, and ITC due to their strong distribution channels, which help raise volumes while keeping profit margins in check.

The niches in the market are largely emerging with two themes – experimenting with flavour con-cepts and catering to health concerns

such as diabetes and digestive health. While the latter is seeing a lot of traction in the market lately, fla-vour concepts are still mostly based around chocolate, strawberry and vanilla, so there is a lot of room for blended concepts to be launched. In creating these mixed flavours, companies could potentially take their inspiration from the processed snacks industry, where traditional flavours have been successfully in-corporated into more contemporary product formats.

Although Britannia and Parle account for over 70% of the total Indian biscuit market value, ITC has emerged

as a significant player, over the last five years

Britannia Industries Ltd. Parle Products Pvt. Ltd. ITC Limited Others

34%

10%

18%38%

BritanniaSunfeast

Parle

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A Healthy Indulgence?

With the growing desire among Indians to manage their health concerns through dietary changes, most food and beverage manufac-turers have modified their product portfolios to include some products that cater to consumers who seek indulgence, and others for the more health conscious. In the packaged goods space, the biscuit category has been among the first categories which have managed to straddle across various points in the health-indulgence spectrum.

In this process, some biscuit brands have moved more explic-itly towards communicating their health benefits. For example, since the 1960s, Britannia has marketed brands such as Jacob’s Thin, Cream Cracker and Thin arrowroot. Prior to the late 1990s, these brands had a very staid and often vague health positioning and, as a consequence, their consumption was limited to a narrow group of consumers with special health conditions. The posi-tioning of these health biscuits was mostly curative and consumers often believed that, by eating them, they were compromising on taste in or-der to address certain specific health

issues such as diabetes and gastritis. Britannia did have several products under the NutriChoice range, but these brands were offered on a loose-ly defined health platform and did not have demarcated health benefits in terms of marketing communica-tions and target audience.

Over the last few years, though, marketing efforts to align these product propositions to consumers’ lifestyle-related needs have majorly altered shoppers’ perceptions of such brands. In fact, it has almost resulted in a renaissance for super-ingredients such as oats and ragi, which were always known for their health ben-efits, but the current generation of consumers faced challenges in terms of incorporating them into their di-ets. although biscuits containing such ingredients, and those that are sugar-free, have made inroads into the market, there remain two key challenges that manufacturers need to address to ensure demand in the long term.

Firstly, it is necessary to ensure that biscuits remain a popular mode of delivery for these ingredients, as they are being adopted by other product categories. Secondly, given Indian consumers’ inclination to consider taste as important as health,

if not more, companies have to over-come the tendency of shoppers to use these products moderately or avoid them altogether.

These challenges apart, there are immense opportunities for compa-nies to launch products that cater to other health concerns such as heart health (cholesterol-free biscuit) and bone health (calcium fortification

products), and position them for spe-cific consumer segments as well. In doing so, biscuit manufacturers can take their cue from the personal care industry, which uses professional ac-creditation to build trust in its offer-ings. Very few biscuit-makers actual-ly have a Bureau of Indian Standards (ISI) mark on their products, and consumers at times do get skeptical about claims such as “high vitamin”, “extra iron”, and so on, which come across as slightly ambiguous at times.

Marke-ting-ting-ti-ting

as brands gear up to tackle changing consumer tastes and pref-erences, it is going to become all the more imperative to have clear product propositions and marketing efforts. If executed correctly (as was done in the case of NutriChoice), innovative brand positioning efforts can actually open up new consump-tion locations and contexts, but oth-erwise they can fail miserably.

Take Parle’s Hide & Seek, for instance, which took quite some time to start using a commercial that showcased and talked about the ingredients that made the product special, rather than focusing more on the celebrity who endorses the brand. Since Indians are becom-ing more attentive towards package literature, and have greater under-standing about what kind and qual-ity of ingredients have gone into

In the packaged goods space, the biscuit category has been among the first categories that have explored the health-indulgence spectrum.

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certain types of biscuit, along with the health benefits (if any), brands that just try to establish an emo-tional connection run the risk of be-ing considered frivolous. This would further impact the performance of the brand or variant, as higher trade marketing costs would further strain already tight margins.

In contrast, Britannia’s Milk Bik-kis is attempting to cash in on the broader lifestyle changes among con-sumers, with meal-time fragmenta-tion becoming commonplace. The advertisement campaigns compare the nutritional value of the biscuit to that of milk, and also claim that Milk Bikkis is easier to eat than breakfast cereals. This is a key message for the companies looking at building ef-fective propositions (for biscuits are a good source of nutrition), cannot afford to compete against traditional Indian snacks, but embrace the fact that the competition lies in other packaged foods, such as cereal bars, processed snacks, and so on.

The Rural Cookie

The biscuit market in rural India has been growing at 30-40 percent annually, and brands such as Parle-G and Tiger get a huge proportion of their sales from rural India. Howev-er, since biscuits are a comparatively low-margin business in the FMCG space, and companies have largely absorbed the increases in commodity prices, plans to increase the focus on rural consumers have not taken off as strongly as was intended when they were formed a couple of years ago.

Furthermore, considering the huge unorganised market in rural India, which accounts for as much as 40 percent of the overall market in some cases, there is stiff competi-tion when attempting to justify the value proposition that companies wish to establish. The launch of Bri-tannia’s cookies in rural India at `5 for a pack of 10 was the first major move by a company to tap into the potential that the rural market of-fers. The marketing efforts for this are also along the lines of nutrition, rather than taste, as rural consumers’ biscuit consumption needs are very different from those of their urban counterparts. They consider biscuits to be a kind of food that should ide-ally be filling enough to satisfy for extended periods.

The key strategy for other play-ers looking at extending their reach into rural India, therefore, is to cre-ate product concepts that are built on fortification, rather than the in-clusion of more expensive flavouring ingredients. The deficiency levels of basic nutrients such as iron, calcium, zinc and vitamins among people living in these areas present an im-minent opportunity for companies to create biscuit that are among the most accessible and affordable forms of nutrition.

as the Indian Biscuits Manufac-turers association (IBMa) says, if the government were to reduce the VaT on bakery products (which includes biscuit), from 12.5 per-cent to 4 percent, it would further bolster companies’ efforts in this regard.

Healthy Growth Ahead

India is often touted as the dia-betes capital of the world, with obes-ity and other lifestyle-related health issues not being far behind. So, as more and more Indian consumers are beginning to take a proactive, rather than reactive, route towards health and wellness, they are evaluat-ing their food and beverage choices with a ‘health-filter’.

It is in this context that the bis-cuit market can leverage on the sig-nificant headstart it has with respect to formulations targeted at specific health concerns. apart from the working population that the biscuit brands have connected with over the last two years, there are possibili-ties to customise offerings to other consumer groups, such as children, women and the elderly. Especially with children, it is good to make nu-tritionally-rich biscuit a part of the dietary intake from early-on, rather than having to enter into a correc-tive-mode later on in life.

apart from innovation in for-mulation, product literature is going to dictate a lot of what becomes of brands, in the years to come. al-though nutritional labelling has been made mandatory in India only two years ago, Indian consumers have taken to it very fast, and more than two-thirds of all Indians make it a point to use the nutritional informa-tion to guide product purchases.

Biscuit companies have to, there-fore, focus on delivering messages

that elucidate the nutritional value of the product and possibly compare it with equivalent foods as well, so that consumers could benchmark it in terms of the overall value propo-sition. More importantly, although companies such as Britannia have taken efforts to make almost their product range trans-fat free, brands have not yet created a lot of engag-ing point-of-sale communication to highlight these efforts, and the tan-gible health benefits for consumers.

Don’t Stick to Domestic

although commodity price in-creases and the current taxation poli-cies are dampening the biscuit mar-ket’s growth, there is a huge export market that Indian manufacturers can cater to, if they step up the focus on setting standards for quality of ingredients and the packaging tech-niques. Currently, approximately 15 percent of the biscuits manufactured in India are being exported, and this market is growing at a healthy 12-15 percent as of 2010.

Since the plant capacity of sev-eral biscuit manufacturing units are either under-utilised, or there are re-gional manufacturers who could po-tentially deliver to a more profitable market, companies should certainly be evaluating more export opportu-nities, while not losing focus on do-mestic growth. n

Rahul Ashok is consumer markets con-sultant at Datamonitor.

The predominance of cookies in the overall biscuit market is poised to accentuate over

the next five years

0

50

100

150

200

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2006 2010 2014

Cookies (sweet biscuits) Crackers (savory biscuits)

92%

94%

95%

INR 70.9 bn

INR 134.2 bn

INR 217.3 bn

The biscuit market in rural India has been growing at 30-40 percent annually.