The Hindu Business Line : The captain of crunch

Taking the old, making it new. FritoLay, the largest player in the savoury snacks market, is betting on innovation to keep growing, says this snack food major's Managing Director, Manu Anand.

THE brand ambassador's the same but it's the unlikely garb of veshti and angavastram that grabs attention. The Tamil commercial for Lays is set amidst a wedding and its sidelights, with Saif Ali Khan orchestrating the beginnings of a romance between his friend and a guest with the chips doing their bit, of course. It may be a while before we get to hear of what happened to that relationship but the upshot of it is that FritoLay, the manufacturer, got some orders to supply Lays chips at a few weddings.

That's one phase of the company's plan — localised connect — says Manu Anand, FritoLay's Managing Director. This division of Pepsico, which makes a variety of chips and other namkeens (salty snacks, which are sold under the Lehar brand name), is set to enter a phase in which it will "sharpen its innovation" for the local markets with global technology.

With its share of the Rs 1,800-crore, 1-lakh-tonne organised snacks market between 40 and 50 per cent, FritoLay is the largest player in the segment. Competitors present and imminent include Haldiram, ITC and Rasna, which have made/announced their entry into the segment, and a clutch of others with a sizeable presence in one region or the other. Some of them are MNCs such as Kellogg and ConAgra. Of course, the unorganised market and local players comprise two-thirds of the total salty snacks market, but the market has really expanded.

Consolidation is a word that crops up quite often in Anand's interview to Catalyst. And, indeed, FritoLay is busy with that. Having made its mark in the North and the West, which are its largest markets, the company is consolidating its business in the South with its three big brands Lays, Cheetos and Kurkure. It opened its third plant in West Bengal earlier this year. It has two plants in Pune and Punjab in which it is expanding capacity - in a year, it will go up to 80,000 tonnes annually from 60,000 tpa. And its R&D division is busy developing more local snacks with more international technology.

According to Anand, FritoLay is trying to grow the market with localised flavours and products. So will it look at outsourcing or acquiring local players who will have a better understanding of the local taste?

"Well, we might pick up flavour ideas and innovate around that. It becomes a tough model — too much localisation and too much outsourcing. The question is how to get a model that takes care of local innovation. In India, `local' is 10 different cuisines. In Chaat Street, for instance, there are different local connects. A golgappa is very much a North Indian taste, bhelpuri is more Western Indian, and papdi chaat is a little more universal."

Kurkure spearheaded this "local" initiative and the Chaat Street range in Lays followed. There are more innovations to follow. FritoLay has a two-pronged approach: adding excitement to existing categories and creating new categories. "Lays could have been just another potato chip but became an exciting range with flavours. Chaat Street - we catered to the demand for local taste. And it's an innovation with a difference - chaat is not a unidimensional flavour, so we gave multiple flavours with technology on one side and consumer insight on the other."

In fact, Kurkure is one of the real big success stories in Pepsico, says Anand. Conceptualised, created and launched by FritoLay in India, it was a total innovation against an unstated need, traditional-tasting but different in form." Exports are gaining pace - from entering the neighbouring countries, it is now ready to move further, to countries where there is a large Indian population, says Anand.

To cater to the Southern market, FritoLay has just brought out a new variant in Kurkure, called Hyderabadi Tamatar.

The South is the fastest growing market for the company, and in the current phase of consolidation, distribution has been stepped up to cover 1.8 lakh outlets from 50,000 earlier in the region. The market has taken to traditional snacks like kachoris and samosas being packed and sold. Brand strategy specialist Harish Bijoor says these snacks will need to maintain the taste, but offer product variants that are different. For instance, hard dough items that taste like chaat but keep longer. "The USP of this category is all about hygiene and consistency in taste delivery," he observes.

What has been making the news, though, is Frito Lay's intended foray into low-fat snacks. Showing Anand a copy of a report from the US which mentions FritoLay's onward march continues despite its "portfolio from hell" makes him grimace. Even in health-conscious USA, low-fat snacks account for just about five per cent of the product mix. And in India, that venture is nascent. ITC introduced some baked, low-fat snacks, but they were withdrawn, so what would FritoLay's chances be? "It is an indulgence category so the product has to taste good, we can't sacrifice taste because people are eating out of choice, indulging. So we are going slow. The lower fat Cheetos are doing well in limited markets and that has given us confidence we'll do well with this range. Soon we'll introduce low-fat namkeen, not baked, but low-fat bhujiya, mixtures."

He says the company began addressing various concerns - "consumers did not want MSG (monosodium glutamate) and we made sure none of our products had it, even though the jury is still out on whether it's healthy or not; then, even though it wasn't mandatory, we began nutritional labelling on our packs. Now fat is a big concern and we will address that. What about low-fat chips? Anand says it's a challenge to get low-fat with the potato chip technology available right now, but still, FritoLay has just introduced low-fat chips, made from reconstituted potato flakes, called Lays Stax, in select outlets across the country.

But what potential lies in the healthy snacks market? Says Bijoor, "There is a possible market for the baked savoury, just as long as it is not advertised as baked. The moment you do that, there is alienation. Consumers know a low-fat crispy is good for the heart but really don't prefer it, unless advised by the doctor with a threat."

FritoLay introduced another "healthy" product from the PepsiCo stable recently, which may well herald its move beyond savoury snacks in India - Quaker Oats. Rival Haldiram has moved into pasta. Does Anand see a fit in that? Yes, if it's differentiated sufficiently, he says. FritoLay sells only savoury snacks throughout the world, except in Mexico, where it also sells biscuits, says Anand. Even with the oats, says he, the habit has to be tested, consumer connect established and observed and only then, can that portfolio be expanded. FritoLay is open to acquisitions but it has to be the right brand, right company and should offer the strategic fit, says Anand. Like Uncle Chipps, which was acquired in 2000, because it was a good "geographical and portfolio opportunity", now with a dominant presence in the North and East and flavours very different from Lays. For now, it's innovation and consolidation that are the company's priorities and it doesn't mind being slow and steady.

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