Britannia-The Road Ahead

8/13/2019 Britannia-The Road Ahead

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Britannia 1

Britannia:EntryintoSnacksIn October 2011, Atul Sinha, the Vice-President for new businesses at Britannia Industries

Limited was seriously contemplating about Britannias entry into the Indian snacks market.

Britannia is one of Indias leading biscuits manufacturers and off late, it has been diversifying

into a variety of foods businesses including breads, health drinks and cheese based products

owing to new opportunities in these markets. Also, one more reason of entering into new

businesses is the increased competition in the biscuits industry from existing players like

Parle as well as new players like ITC and numerous regional players. The fact that Britannia

CEO Vinita Bali expressed that they are in the food business and not just biscuit making

support this rationale of entering into newer avenues.

The entry into snacks came up as a natural extension to Britannias current line of biscuits

and other healthier options like cakes and rusks. Also, industry players like Parle who were

primarily in biscuits business were now diversifying by entering into the snacks market. Atul

Sinha has his task cut out to assess the feasibility of Britannia entering into the Indian snacks

industry.

CompanyBackgroundBritanniawasstartedintheyear1892withaninvestmentofRs.295. Initially,biscuitswere

manufactured inasmallhouse incentralKolkata.Later, thebusinesswasacquiredby the

Guptabrothers

and

operated

under

the

name

of

V.S.

Brothers.

In

1918,

CH

Holmes,

an

Englishbusinessman inKolkatawastakenasapartnerandTheBritanniaBiscuitCompany

Limited(BBCo)was launched.TheMumbaifactorywassetup in1924andPeekFreans,UK

acquiredacontrolling interest inBBCo.Biscuitswere inbigdemandduring theperiodof

World War II, which gave a big boost to the companys sales. The company name was

changedtothecurrentBritanniaIndustriesLimitedintheyear1979.

In recognition of its vision and accelerating graph, Forbes Global rated Britannia as one

amongst the Top 200 Small Companies of the World, and The Economic Times pegged

Britannia as India's 2nd Most Trusted Brand. In the year 2009, Wadia Group acquired stake

holdings from Group Danone and became the single largest shareholder in Britannia.

The case is prepared by Prof. Sanjay Patro and Srikanth , XLRI Jamshedpur for class room discussion only. It is

not to illustrate either effective or ineffective handling of a business situation


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Britannia 3

International Co. LLC andOman based Al Sallan Food industries company SAOG. These two

companies are key regional players in the biscuits, wafers and cookies segment in the GCC

marketsandexporttheirproductsacrosstheworld.

OneaddedadvantageinsuchastrategicmovewasthefactthattheIndianpeoplelivingin

theMiddleEastalreadyhaveasenseof familiaritywith thebrandBritannia.Again, in the

latter part of 2008, Britannia has launched its biscuits range in the neighbouring island

nationofSriLanka.SomeoftheBritanniaproductslaunched intheMiddleEastareshown

in theexhibitnumber3.On thedairybusiness front,Britanniaacquired theNewZealand

basedFonterraFoodstogiveaboosttoitsdairyportfolio.

Inanefforttobolsteritsinternationalpresence,Britanniahasbeencontinuouslysearching

fornewermarketsoutsideof Indiawhere itsproductscanbe launched.AtulSinhaas the

headofNewBusinesseshadbeengiventheresponsibilitytolookfornewgeographiesand

assessthefeasibilityofBritanniaenteringintoanewcountry.

IndustryOverviewThe Indian snacks industry has seen a variety of developments in the last decade largely due

to the changing consumption patterns of the Indian people and their lifestyles. Its burgeoning

middle class with busy lifestyles and increasing disposable incomes has led to increase in the

preference for ready to eat foods. Exhibit 4 shows the increase in disposable incomes of the

nation in the last 5 years from 2005 to 2010. The percentage of income spent by Indian

people on various products and services in the last few years is also shown in exhibit 5.

It is this phenomenon that has also led to increasing spending on snack foods. Combined with

it is the increasing awareness of health among the Indian populace that has led to the people

opting for healthier snacking options. Also, branded foods are perceived to be healthier than

the unbranded snacks.

The packaged food industry in India is expected to reach a staggering $21.7billion by the year

2012. It is expected by more than 2/3rds from the year 2008 to 2012. The snacks market is apart of the packaged food market.

The Indian snack market is valued at $3 billion out of which branded snacks comprise $

1.34bn, growing at an annual rate of 15-20%. On the other hand, the growth of the $1.66bn

unorganized snacks players is 7-8% per annum. On a per capita basis, the per capita


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packaged food spending is expected to grow by 56.5 per cent to US$ 18.06 or Rs.900 by

2012. There are close to 1000 types of snacks and 300 types of savouries being sold in the

Indian market. Western India has the highest amount of snack consumption in the entire

country.

One interesting trend is that the growth in the market is being driven by healthy, low-fat, low-calorie snacks, while snack foods positioned as trans-fat free are also likely to soar in

popularity.

A growing percentage of the global population, in both developed and developing countries,

is replacing light meals with snacks. Convenience foods manufacturers have therefore been

trying to market some of their products as snacks for more market share. The savoury snacks

industry guide suggests that among all the BRIC nations, India is the fastest growing snack

market that grew at a CAGR of 17.5% over the period 2004-2008. Combined with it is the

fact that the market for health and wellness foods is poised to reach Rs.55,000 crores by the

year 2015 up from the Rs.10,150 crores now.

The current size of the savoury snacks market in India is Rs.3182 (2009 Euromonitor

Research data) crores which is growing at a rate of 11.6% per annum and is expected to reach

a value of Rs.5504 crores by the year end 2014. The savoury snacks comprises of Chips and

Crisps, Extruded variety, other savoury, Nuts and Popcorn. The market share of each of these

types of snacks is shown in exhibit 6.

A percentage break-up of the market shares of various competitors in the different types of

snacks as mentioned above has been provided in the exhibits 7 to 9.

The Indian consumers have an immense variety to choose from when it comes to snacking.

Every region has got its own special snacks which are famous. At the same time, some

regional snacks have found a liking among all the consumers in the country. Traditional

Rajasthan snacks likeBhujia and Sevare very popular all throughout India. Exhibit 10 shows

the mapping of the Indian market into the 4 regions and the most common snacks consumed

in each region.

ClassificationofSnacks


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The savoury snacks comprises of Chips and Crisps, Extruded variety, other savoury, Nuts and

Popcorn. Each of them can be defined and understood from the Indian perspective as

mentioned under:

Chips/Crisps: These are the most commonly available type of snacks and are predominantly

made up of potato. Potato chips comprise more than 86% of this entire category. This

category is mainly dominated by Frito lays from PepsiCo which has its flagship Lays brand

that has been recently launched in different tastes and flavours that would appeal to the Indian

taste bud. This is a very popular category in snacks and there is immense competition among

various players. Recently, Haldiram and Future Group (under the Big Bazaar brand) have

launched their own version of potato chips to cash in on this very popular product type.

Extruded Snacks: Extruded snacks include all those snacks, the shape of which has been

modified rather than being just a plane chips snack. Extruded snacks are mainly corn based or

in some cases are potato made too. This category is gaining immense popularity as the

consumer is looking for variety in snacks and this category has the maximum of that. This

category is mostly dominated by the branded players, Frito lays is again the market leader

with its Kurkure brand. This is also the fastest growing snack in the entire snacks industry.

Other Savoury: This category consists of all the Indian snacks such as Bhujia, sev, Dal

Moth, Chana Chooretc. and is very popular among all the age groups in the country. This

market is dominated by local snack manufactures and the neighbourhood halwaiwho have a

relationship of sorts with the people in their area. There is only one branded pan India player:

Haldirams and some regional brands like Garden, Sarthak, Balaji among other smaller

regional players.

Nuts: This is a very small market in comparison to the three dominant varieties as mentioned

above. There is only one branded player in this category, that is Hadirams which offers nuts

like Badam, Cashew, Pista in both plain as well as salted versions. GSK (Glaxo Smithkline)

also has a groundnut based chocolate bar called Nutri-Bar but it has not been able to garner

consumer preference.

Popcorn: This is also a very small market in comparison to the top three varieties and there is

only one branded player in this category which is the popular Act-II brand from the North

America based ConAgra Foods. Other than this, Popcorn is mainly sold on Indian streets

across the country by street vendors. Popcorn in India is mainly consumed when people go

out to a shopping mall on a weekend or to a movie theatre.


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CompetitionThe Indian snacks industry has seen a sea change in the last decade with a slew of players

entering into the Snacks and ready to eat foods space. At the forefront of the Indian snacks

industry are major players like Haldirams and PepsiCo. Some of the major players in the

Indian snacks market and their products have been mentioned below:

1. PepsiCo: PepsiCo entered into the Indian snacks market in the year 1995 with itsLays range of potato based snacks and since then has been hugely successful in all

parts of the country. Apparently, Lays is also the worlds largest and favourite snack

brand. PepsiCo has tweaked its product offerings for the Indian market keeping in

minds the Indian consumers tastes and preferences. Some of the products they offer

under the Lays brand in India have been shown in exhibit number 11.

It also launched the spicy snack called Kurkure in the year 1999 especially for the

Indian market which has been hugely successful since then. Again, as a large

percentage of Indian population is vegetarian, Lays has kept its entire range limited to

vegetarian snacks only. Off late there has been a visible thrust on the health aspect of

the snacks that are being offered as the company realises that the modern day Indian

consumer places a greater importance on health. The company has come up with a

new snack called Aliva which is primarily positioned as a healthy biscuit based snack.

2. ITC: Established in the year 1910 and formerly known as the Imperial TobaccoCompany, ITC has diversified into many new businesses including foods, paper,

clothing and fast moving consumer goods. This diversification can be attributed to

mainly two factors:

A. To create a new identity for itself from the perceived image of a cigarettemaker and manage the ever increasing ban on cigarettes advertising and

selling.

B. To leverage its already existing strong Pan India distribution network forlaunching new products.

ITC entered into the Indian biscuits market in the year 2004 with its Sunfeast range of

biscuits. After the impressive foray into biscuits, it entered the Indian snacks market


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with its unique range of Indian flavoured snacks under the Bingo brand. And within 2

years of its launch, it had as high as 8% of the total market share in branded snacks.

The uniqueness of the Bingo brand lies in the fact that they are not purely potato

based like Lays of PepsiCo and are more akin to the Indian consumers preferred taste

of traditional Indian flavours. Also, the distribution network for snacks was already in

place for ITC which helped in faster penetration of the products across the country.

It has positioned its snacks on the Indian aspect of its taste and zero MSG and low fat

content. Again, this move falls in line with the increasing awareness of health among

the Indian consumers. Some of its products in the snacks category are shown in

exhibit 12.

3. ParleBased out of the Mumbai, the financial capital of India, Parle has been one of the most

prominent biscuit makers of India. Its glucose biscuits under the Parle-G brand are

also the worlds largest selling biscuit and this alone contributes to more than 60% of

its total annual sales. It is an Rs.2000 crores brand as of year 2010.

Parle has entered into the Indian snacks category under the name Musst Stix, Smart

Chips and Hippo. Musst Stix and Smart Chips fall under the extruded snacks category

where as Hippo is a bread base snack. The snacks products from Parle have been

shown in the exhibit 13.

4. HaldiramsStarted in 1937 in a small town in the western India called Bikaner, Haldirams is a

manufacturer of traditional Indian snacks and is the only player in the category of

branded Indian snacks who has got a national presence. It has expanded rapidly in the

last 3 decades and now exports to many countries including the US and Europe where

there are considerable chunks of Indian population.

It also offers packaged Indian sweets in tin packed containers that can be carried easily

from one place to another. One interesting fact about this company is that it achieves

more than 50% of its annual sales during the popular festival of lights called asDiwali.

Haldirams started as a predominantly Indian snack manufacturer but off late it has come

up with almost all kinds of variety of snacks like Potato chips and other extruded snacks.


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Also, Haldirams has started a series of eat in as well as take away restaurant across

major cities of India which serve fresh Indian snacks and sweets to customers. This has

also been a successful concept as more and more people are finding their way into one of

these Haldirams eat-in restaurants. As of 2009, Haldirams is a 4 million dollar brand

that has a multi-national presence and is available in major stores like TESCO,

CARREFOUR among other hypermarkets.

5. Local Snacks playersApart from all the branded snacks manufacturers, India has a huge market when it comes

to locally manufactured unbranded snacks. They are extremely popular throughout the

country and they also command supreme brand loyalty among the consumers. However,

the trend is changing and there is an increasing preference for branded snacks. There are

a multitude of reasons so as to why there is still such a huge market for unbranded

snacks.

The local snacks manufacturers hold many advantages over the branded players. The

biggest of them all is that they offer more than twice the amount of snacks for the same

price point as the branded players. Moreover, people have a relationship of sorts with the

local namkeenwaalah (Indian term for the local neighbourhood snacks maker). Most of

the local snacks manufacturers existed in India long before any branded snacks entered

into the Indian market. Generations of families have brought their snacks from thenamkeenwallah and it is very difficult to convince such consumers to shift to branded

snacks.

In case of local snacks the consumer can see as well as taste the snacks that are on sale.

This is a very big factor as the option of product experience is available in case of local

snacks. Another factor that goes against the branded players is the fact that their

packaging. The average Indian consumer feels that he is being cheated by the fluffy

packaging of the branded players which is in fact intended to keep the snack fresh inside

the pack.

It is in this regard that the branded players in India have positioned their snacks on the

health and hygiene factor, both of which are usually absent in case of a local snacks

manufacturers. Still, there is a large population who prefer to go to the local snacks shop.


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Information about some of the most common pack sizes of snacks and their respective

price points as offered by both branded as well as unbranded snacks players has been

shown in exhibit number 14.

NewProductLaunchesThe increasing demand for different varieties of snacks has given a huge opportunity to

the snacks manufactures (both branded as well as unbranded) to come up with new

innovative products that will appeal to the Indian consumer. Increasingly, branded

players are coming up with the Indianized version of the western snacks. Thus, a mix of

Western and Indian styles is the present trends in this market. Given below are the

product introductions in the last 2 financial years classified as per the category of the

snack:

Chips/Crisps: In the chips category, the latest introduction has been from Parle which is

being launched under Parles popular Monacco brand. The product is being named Parle

Monacco Smart chips. These chips are being positioned as non-fried chips indicating that

they are a healthy snacking option. This is in sync with the common consumer perception

that all the chips are fried and oily, hence not good for health.

Haldiram has also recently launched its own brand of chips under the name halke pulke

with more grammage than Lays and a price point of Rs.15. Also, there are small players

like the Globe Group that have forayed into this business with new type of chips. Globe

group has launched a corn based chips called as Cornitos.

Other Savoury : In the other savoury category also Parle has come up with its own new

snack called Hippo, which is being positioned as a healthy snack with a puncline-

Baked,Not Fried. The snack has gained popularity due ti its attractive packaging as well

as the health benefit positioning. However, there are some issues with its taste especially

during the summer season when it is reportedly giving a foul smell. Again, in this

category also, there are local regional players coming up with their own brands. For

instance, Neelam foodland (a famous snack shop in the posh Khar Danda area of

Mumbai) has recently launched diet Namkeen for the health conscious consumers who

are willing to pay a premium for healthy snacking options.

Extruded: This is the most exciting category of all the three and also has witnessed the

maximum product launches in the last 2-3 years. Some of the notable product


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introductions include Hatke Jhatke from ITC,Peepy Heatrz from SM Foods,Crunchy

Munchy from the Future Group (Big Bazzar brand) and Musst Stix from Parle. All thses

snacks are being positioned in one unique way or the other. For instance, the Big Bazzar

(a home grown retail chain) brand Crunchy Munchy says that it has zero fat, zero MSG

and zero cholesterol.

Consumer research carried out also indicates that it is these buzz words of cholesterol and

fat that are in the minds of consumers while eating a snack which contains oil or is fried.

TheChallengesAheadBritannia has been the market leader in the biscuits industry in India for the last several

years. It product portfolio consists of highly successful brands which are known for their

quality and command a healthy price premium in the market. But, off late, Parle which is

Britannias biggest competitor in this space, has come up with a series of product

launches that have threatened Britannias dominance in this space. Traditionally, Parle

and Britannia had targeted different segments and thus were catering to two exclusive set

of customers. Britannia was primarily earning all of its revenues from its premium range

of biscuits whereas Parle was strong in the category of glucose biscuits which has the

Parle-G brand, which is also the single largest selling biscuit brand in the world. Parle-G

continues to enjoy unusually high levels of patronage from the Indian customers.

It is in this regard that Britannia has ventured into other businesses such as breads,

cheese, packaged milk and health drinks. Now, it sees an opportunity in the Indian snacks

market where Haldirams is the only pan India branded manufacturer of Indian snacks.

The increasing preference of Indian consumers for healthy snacks and ones that are

branded also provide Britannia with an opportunity as Britannia as a company stands for

healthy snacking. Recognizing the changing global trends & health benefits of removing

transfats, Britannia is the first Bakery brand in India to remove transfats from its products.

But, the crucial question before Atul is whether the market is big enough and is it feasible

for Britannia to enter this space and into what type of Indian snacks. Much water has

flown in the Ganges since then. He has to present his strategy and road map to the Board

of Directors in Februray ,2013.


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Exhibit

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Britannia-The Road Ahead

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