Sweet and Savoury Snacks in
India- Market Report
Headlines
·
Sales of sweet and savoury
snacks are expected to grow by 17% in 2008, to reach Rs27.8 billion.
·
More options are becoming
available in snacking, ranging from local flavours to healthy options.
·
Extruded snacks are set to post
the fastest growth in 2008, at 21%.
·
Unit prices have risen due to
higher input costs.
·
ITC has made a dent in
Frito-Lay India’s share with the launch of Bingo!
·
Sweet and savoury snacks
expected to grow at a 13% CAGR in constant value terms over the forecast
period.
Trends
·
Sweet and savoury snacks
manufacturers continued to provide more options to consumers in terms of
flavours and low-fat products in 2008. Manufacturers are using a two pronged
strategy, using flavour extensions on one hand and an increasing focus on
health and wellness on the other, to provide consumers with healthy and tasty
snacking options. The leading player in sweet and savoury snacks, Frito-Lay
India introduced trans-fat free chips in 2007, while ITC launched zero MSG
content products in its Bingo! range. Smaller regional players are also following
suit, by introducing similar variants of successful formats, like Kurkure, or
trying out with new flavours which are specific to local regions, such as
khakra and papri chaat, as well as international flavours and formats, such as
corn chips.
·
The growth rate of sweet and
savoury snacks in 2008, at 17%, has been faster than the review period average
growth rate, of 14% due to a combination of factors, including greater
marketing and advertising spend on sweet and savoury snacks by manufacturers,
the entry of new players, such as ITC in 2007, and the expanding operations of
regional players. This has been coupled with the rise of modern format retail
outlets, which provide a substantial platform for manufacturers to enhance the
visibility of their products, which has also helped boost sales of sweet and
savoury snacks in 2008. Further, an expansion in the range of flavours and
healthier snacking options has helped increase sales of sweet and savoury
snacks.
·
Almost all types of sweet and
savoury snacks have seen double digit growth in 2008. However, extruded snacks
registered the fastest growth, due to the impressive performance of brands such
as Mad Angles and Kurkure. Extruded snacks have benefited especially from ITC
Ltd’s entry in March 2007. The entry of this cash-rich tobacco major, which is
looking at expansion into non-tobacco businesses, has not only affected
competitors but has also expanded the sector overall, and has eaten rapidly
into the unorganised market, as well as sales of local brands.
·
The average unit price of sweet
and savoury snacks increased in 2008, as a result of higher input costs. Prices
of raw materials, such as flour and oil, increased during the year, as a result
of higher commodity prices globally. However, retail unit price points have
remained stable, as the impulse purchase market for sweet and savoury snacks is
a price point based industry, with Rs5 and Rs10 points being the most common
ones. Manufacturers have effectively raised prices by reducing package sizes.
Regional players which are looking to gain share generally offer higher weight
packages at a given price point than those of established international
manufacturers, such as Frito-Lay.
·
Microwaveable popcorn accounts
for a minuscule 5% of total sales of popcorn in India, as retail sales of
popcorn are dominated by packaged ready-to-eat popcorn sold at cinema counters.
There are two variants available – microwaveable packs and packs of loose
popcorn which can be made in pressure cookers or vessels at home. Since the
penetration of microwaves in India is very low, most popcorn eaten in the home
is prepared in pressure cookers.. The flavours available in the market include
butter, caramel, lime and masala.
·
Bhujia is the single largest
type of “other” sweet and savoury snack. While, typically, bhujia is made out
of chickpea flour, it can also be made from potato, and has a number of
variants, depending on the spices and condiments used. As well as bhujia, there
are a variety of other local savoury snacks, such as khatta-meetha or
“sour-sweet”. Moong dal, which is flavoured with various condiments and spices,
is also popular. There are a number of other snacks, such as papads and
chikkis, which are popular in different regions of the country.
·
Extruded snacks in India mainly
consist of corn-based snacks, with Kurkure and Cheetos accounting for the
overwhelming majority of sales in this type of extruded snack. Potato-based
snacks are also common, in the form of Pringles, Piknik, Peppy and some Bingo!
variants. The remainder of sales is made up of other types of product, like
processed rice, processed soy, etc.
·
The main competition that sweet
and savoury snacks face in India is from home cooked snacks, such as samosas,
pakodas and foodservice sales of snacks, especially from independent street
stalls/kiosks across the country. Since both sweet and savoury snacks and
biscuits are considered to be more filling than confectionery or ice cream,
they face only a small degree of competition from such products. Further, the
consumption of ice cream is quite seasonal, whereas sweet and savoury snacks
are consumed throughout the year. However, since biscuits and sweet and savoury
snacks are both commonly eaten with tea, they compete with each other.
·
Rising health and wellness
concerns among consumers are spurring manufacturers to introduce low-fat sweet
and savoury snacks. Frito-Lay introduced its sweet and savoury snack brands
with zero trans fat and no added monosodium glutamate (MSG) in 2007, and ITC
also launched its Bingo! range of sweet and savoury snacks with no added MSG in
the same year. Haldiram’s has launched some variants of other sweet and savoury
snacks with zero trans fat.
Competitive Landscape
·
Frito-Lay India is by far the
largest player in sweet and savoury snacks, with a share of 47% in 2007. The
company has multiple brands present across all formats of sweet and savoury
snacks, such as Lay’s and Uncle Chipps in chips/crisps, Kurkure and Cheetos in
extruded snacks, Lehar Nutyumz in nuts and Lehar variants in other sweet and
savoury snacks. Haldiram Foods is a distant second player, with a share of just
under 21% in 2007. The company is mainly present in other sweet and savoury
snacks, where it has a number of variants, including Bhujia and Khatta Meetha.
ITC Ltd is a new entrant in the sector but has grown rapidly to garner a 7%
share of the market in 2007.
·
ITC Ltd made a big dent in the
shares of Frito-Lay with the launch of Bingo! in chips/crisps and extruded
snacks in March 2007. Bingo! was the most successful launch in the packaged
food market in that year. In less than one year, Bingo! grew at a tremendous
pace to account for 7% of sector sales in 2007. Launched in 16 variants,
incorporating indigenous snack flavours from various regions of the country,
Bingo! was well supported by an attention-catching advertising and promotional
campaign, backed by ITC Ltd’s distribution muscle. The company pushed sales of
Bingo! through independent small grocery retailers, gaining higher margins than
its rivals, and partnered with retailers to provide better visibility to Bingo!
through custom-made racks.
·
ITC Ltd’s strategy of launching
its Bingo! range in 16 different flavours, incorporating local regional cuisine
of different states in the country proved successful in 2007, as the vast range
of flavours directly competed with snacks that people prepare at home to be
consumed with tea. Further, the company’s massive push on distribution, coupled
with dedicated display stands, which were made from moulded plastic in an
amphitheatre-shaped tray design, offered enhanced visibility to Bingo!, which
worked in its favour. However, not to be deterred, Frito-Lay India responded
with consumer promotions of its own, seeking closer interaction with consumers.
The company launched a Tea Time Achievers campaign, where consumers could send
in recipes using its brand Kurkure, of which 25 winners were selected and
featured on the packs, along with their recipes. Towards the end of 2007,
Frito-Lay also relaunched its sweet and savoury snacks with zero trans fat and
40% lower saturated fat, by switching to rice bran oil, which helped arrest its
fall in share to some extent.
·
Parle Products is also a recent
entrant in sweet and savoury snacks. The company had earlier launched Parle
Musst Bites, which was a flavoured cheese biscuit, but its latest launches,
Parle Musst Sticks and Parle Musst Chips, will directly compete with
chips/crisps. Frito-Lay India also launched Kurkure Extreme, a limited edition
variant in the flavours Electric Nimbu and Risky Chilli, made available in
small and medium packs priced at Rs5 and Rs10, respectively.
·
The most aggressive advertising
in 2007 and 2008 was undertaken by ITC Ltd for its new launch, Bingo! Since
this was a new brand in the market, it needed an effective advertising campaign
to ensure high brand recall. With a number of variants and flavours, the Bingo!
range has a number of different advertisements, with all of them having a
common theme of humour. While Lay’s and Kurkure advertisements use celebrity
endorsements from cricketers, movie actors, etc , Bingo! has stayed away from
celebrity endorsements but has still managed to create a strong impact.
Frito-Lay India launched a new advertising campaign entitled “Chala Change ka
chakkar” or “the phase of change has begun”, where it brought together all its
snack brands and their brand ambassadors under one umbrella, and undertook
numerous promotions which enabled consumers to win various prizes ranging from
cars to spending a day with the celebrity brand ambassadors.
·
The sweet and savoury snacks
sector in India is marked by extremely competitive pricing. Thus, premium
brands are few and far between, and typically come in superior packaging, such
as Pringles and Lay’s Stax. Most other brands are standard ones, such as those
of Haldiram Foods, Frito-Lay and ITC. Economy brands are largely present in the
regional market, with a region-specific presence.
·
Private label in sweet and
savoury snacks accounted for just over 5% of value in 2007, with retailing
giants such as Pantaloon’s Retail snack brand, Tasty Treat, being popular among
value-conscious buyers in chips/crisps and extruded snacks. A large number of
private labels are present in other sweet and savoury snacks and nuts. Overall,
Pantaloon Retail is the leading player in private label sweet and savoury
snacks, with its Tasty Treat brand, available in its Food Bazaar supermarkets
and Big Bazaar hypermarkets. Discount schemes are commonly used for private
label, as well as strategic placement in stores to ensure consumer attention.
·
With the exception of Frito-Lay
and ITC Ltd, almost all the other players in sweet and savoury snacks are
domestic players. Frito-Lay remained the sector leader through the review
period, with wide national distribution and innovation being key to the company’s
strong position. Haldiram Foods, has a strong presence in North, West and East
and Northeast India, with South being the weak link. Other players, like Garden
Hygienic Snacks Pvt Ltd and SM Foods, also have only pockets of regional
strength, with Garden concentrating on West India and SM Foods concentrating on
the North.
Prospects
·
Sweet and savoury snacks
players are expected increasingly to introduce products using natural
ingredients, with no added MSG, low-fat options, products which are baked instead
of fried and low-sodium snacks in the forecast period. As consumers become more
health conscious and the sweet and savoury snacks sector gets more crowded with
new brands and players, manufacturers are expected to position their brands as
healthy snacking options in order to differentiate themselves beyond just
flavours. The relaunch of Frito-Lay India’s brands in lower fat content
versions is expected to lead other manufacturers to introduce similar products.
·
The year-on-year growth rate in
sweet and savoury snacks forecast period is expected to slow down, as the
sector is growing at double-digit rates, and it is unlikely that the sector
will witness accelerating growth rates, given the already high rate of growth.
That said, growth rates will still be quite impressive, with extruded snacks
and chips/crisps leading the way. Driven by an increase in low-fat snacks and
new flavour innovations, the sector is predicted to expand by a 13% CAGR in
constant value terms over the forecast period. The growth in modern retail
outlets will also give a boost to the expansion of the overall snacks category.
·
Threats to growth in branded
sweet and savoury snacks could arise from the artisanal sweet and savoury
snacks which are easily available in small restaurants and through street-side
vendors.
·
ITC Ltd is likely to establish
itself as a leading player, with substantial sales of sweet and savoury snacks
in the forecast period. The company’s strategy of using local tastes as
flavours and the advantage of its distribution might, with an expanding FMCG
portfolio, will stand it in good stead. The company is expected to introduce
more local flavours in 2008 to add to its existing range. Meanwhile, Frito-Lay
India is looking at capacity expansion of its existing manufacturing plants,
and is likely to set up an additional new manufacturing plant to cater to
domestic and export demand.
·
The unit prices of sweet and
savoury snacks are expected to increase over the forecast period. With per
capita consumption of branded sweet and savoury snacks still being rather low
in India, manufacturers have scope to increase sales significantly. However,
they are unlikely to move away from the established price points of Rs5 and
Rs10, as they generate the largest amount of sales. Manufacturers are likely to
impose price increases through reducing the pack weight of smaller packs at the
Rs5 and Rs10 price points, while increasing prices of packs of 100g and upwards
as means of raising the average unit price.
·
Amongst new product launches of
2007 and 2008, Bingo! is expected to continue to its rapid sales growth through
new flavour launches and a continued emphasis on advertising and broad
distribution. Parle Products, which is also a relatively new entrant in sweet
and savoury snacks, may, however, struggle, as its new launches – Parle Musst
Sticks and Parle Musst Chips – compete directly with the likes of Kurkure,
Lay’s and Bingo! without much advertising and promotional support. Frito-Lay
India’s limited edition launch of Kurkure Extreme is expected to help
invigorate the parent brand, with its new sharper flavours.
·
The competition between sweet
and savoury snacks and biscuits is expected to increase in the forecast period.
Most domestic biscuit manufacturers, like Britannia Industries Ltd and Parle
Products Pvt Ltd, are looking at increasing the consumption occasions of
biscuits by providing them in bite-sized portions, similar to savoury snacks,
and packing them in pouches instead of the flexible packaging which is common
in biscuits. The impact on sweet and savoury snacks could be significant if
biscuits were launched in various flavours, on the lines of sweet and savoury
snacks.
·
With rising health and wellness
concerns, urban consumers are increasingly expected to opt for lower fat
content products. The rising health consciousness in the forecast period will
enable the erstwhile niche category of health-oriented snacking to become more
mainstream. Products like low-fat snacks for weight watchers and low-salt items
for those with high blood pressure are expected to increase in popularity in
the forecast period.
