ITC's Naware: Building brands, consciously

It's a story that has been repeated any number of times in the corporate world: an unchallenged market leader rests on its oars; competition emerges out of the woodwork; and almost at the blink of an eyelid, swamps the champion from all sides. That's precisely what's happening to the Rs 1,587.5-crore Britannia Industries. To be fair to the company, it is still holding on to its market leader status, but only very tenuously. Over the last couple of years, Britannia, which was once considered a generic name for biscuits, has seen its share of the Rs 4,500-crore per annum market fall from 48 per cent to 40 per cent.

Britannia's loosening grip on the market has allowed challenger Parle to come within striking distance of its crown (Parle, in fact, is the market leader by volume, but still trails Britannia marginally in value terms); and given smaller players like Bisk Farm, Priya Gold, Anmol, Marico and Duke space to carve out regional satrapies all over the country. The year 2003 marked the inflexion point for the biscuits industry. That was when ITC entered the market with its Sunfeast brand and grabbed an 8-10 per cent market share, Parle increased its market share from 34 per cent in 2003 to 38 per cent now and regional brands and the unorganised sector together wrested about 10 per cent. All this while, the market grew at a rate of 10 per cent per annum even as the market leader's share dwindled. Britannia brushes aside any suggestion that its position is under siege. "We believe that more activity in the biscuits market creates more opportunities for us, and we are very well placed to tap it. Britannia leads the overall market in terms of value and, in fact, our brands lead in six of the eight market segments," says Vinita Bali, CEO of the company.

Meanwhile, the challengers are using different strategies to consolidate their positions. For Parle, it's price. "The market for biscuits is extremely price-sensitive," says Kunal Motwani, an analyst at Equitymaster.com, a Mumbai-based research firm. "With Parle holding the price of its 100 gram pack of glucose biscuits at Rs 4, no competitor can afford to increase prices by even 25 paise. This is putting pressure on margins and affecting growth," he adds. Glucose biscuits account for 57 per cent of the Indian biscuit market and Parle G commands a 50 per cent share of this segment. Incidentally, the brand, which sells 4,000 tonnes per annum, is the world's largest by tonnage. So how does it cope with rising costs? A senior Parle executive avoids a detailed explanation, saying: "We are a (comparatively) smaller player and, hence, have better control over expenses and overheads." Britannia is "also trying to cut costs," says a spokesperson, but declines to flesh out the details.

Sachin, Rahul's choice: Britannia trying to piggyback on their popularity

Regional players-Priya, Anmol and Bisk Farm in the east, Priya Gold in the north and west, Anmol and Bharat in the north and east, and Duke in the south-are also consolidating and expanding their reach. The east, in particular, is where Britannia's market share has eroded the most: its sales have dropped from 8,000 tonnes a month to 6,000 tonnes over the last five years. The beneficiaries of this loss: Priya, Anmol and Bisk Farm. Says Vijay Singh, Managing Director, Bisk Farm: "Since Britannia outsources sizeable volumes to local manufacturers, its quality often varies. But, we can offer uniform quality as our entire output is manufactured in-house."

Priya Gold is growing very fast in the north and the west, where it enjoys a market share of 12 per cent. Priya Gold Chairman B.P. Agarwala is upbeat about the future. "We are in the process of setting up four new plants in Guwahati, Dehradun, Ranchi and Nagpur," he says, adding that this will help him "take on mighty competitors like Britannia and Parle." His brother, S.N. Agarwala, who runs Priya Biscuits, which focusses on the east, is trying to expand the market by creating new segments. "We are the first branded player in the cookies segment in eastern India; and the response has been extremely encouraging," he says.

All the players-old and new, big and small-are consciously building their brands. "The biscuits market, in both urban and rural India, is extremely brand-sensitive," says Ravi Naware, Chief Executive, ITC Foods, which has launched a dozen sub-brands, at different price points, from basic to premium, under the Sunfeast umbrella. Last year, ITC reportedly spent Rs 16 crore on promotions. The company has signed on Bollywood superstar Shah Rukh Khan as its brand ambassador. Britannia and Parle, too, pulled out all stops in their brand-building efforts. According to sources, these two accounted for more than 50 per cent of the Rs 50-crore that biscuit companies spent on ads last year. The former is trying to piggyback on the popularity of cricketers-it has signed on Sachin Tendulkar, Rahul Dravid and Virender Sehwag to promote its products.

Anmol's Sen: Innovative brand promotions is the key

The smaller companies, unable to outshout the big boys, have adopted innovative ways of reaching out to their customers. Anmol recently signed on popular Bengali band Dohar and soccer star Bhaichung Bhutia to promote its family pack, a hitherto non-existent segment in the industry, in West Bengal. "Our brand promotions have enabled us to grab market share from the unorganised sector," says Mrinal Sen, General Manager, Anmol. It also offers its dealers all-expenses-paid trips to various exotic locations in Europe and south east Asia based on their performance, thus, ensuring a well-greased distribution channel. Anmol has recently set up a factory at Noida, which will cater to the markets of Uttar Pradesh, Delhi, Haryana, Punjab, Rajasthan, Uttaranchal and Jammu & Kashmir, and hopes to have a pan-Indian footprint by 2007. Bisk Farm, on the other hand, is betting on new and emerging segments like sugar-free cream crackers and diet biscuits to fuel its growth.

Analysts expect the market to grow exponentially in the years to come. Per capita consumption in India is only 2 kg compared to 16 to 17 kg in the developed markets. Adds Britannia's Bali: "Value Added Tax on biscuits is considerably higher than on comparable products like chips, snacks and tea. A rationalisation of this rate will result in a surge in growth." That will give all the existing players sufficient room for expansion-and provide space for new players to walk in. Hindustan Lever (HLL), which had entered the biscuit market in 2001 only to beat a hasty retreat three years later, is now planning a comeback. An HLL spokesman declined to divulge its plans, but market sources say its biscuits could be on shop shelves within the next four to six months. Britannia is ready for the battles ahead. Company sources say it has lined up exciting new products that will carry the fight into rival camps. "We recently relaunched our largest brand, Tiger, with a significantly superior product. This is going to be followed up with innovative new products and variants every couple of months," says a spokesperson.

All the national and regional players are looking forward to fast growth over the next few years. And one thing seems certain, at least for the foreseeable future. The days of single company monopoly are over. India's cookie market will continue to be ruled by many kings.

-additional reporting by Ritwik Mukherjee