The Hindu Business Line : ‘It’s a fallacy that in India it is always about low price’

It’s very much an urban phenomenon: We have biscuits in jars like you would chocolate – I remember my days in Cadbury when we put éclairs in jars and saw the sales fly. Same thing in biscuits, we saw the sales fly.

Is it a question of affordability or convenience?

Both. You see, if you’re out of home, and we sell a lot at railway platforms, and bus terminals, and you’re looking for something substantial to eat, and you buy a pack of biscuits, you would get 17-18 biscuits – you wouldn’t want to eat so many, what would you do with the rest? That’s why people were not buying those packs which were designed to be take-home packs. So one is the accessibility of a product like Good-Day at a Rs 5 price point, the other one is I am spending Rs 5 for two biscuits which is enough for me to have with a cup of tea. And feel satisfied in terms of a healthy snack. In a country like ours there are more people at a Rs 5 price point than a Rs 50 price point. It’s the frequency and velocity; a lot of people buying a little at a time, which adds up to a lot. But you also have to develop a business model which can sustain that.

But, did a lower price point make biscuits more than an urban phenomenon?

Depending on the biscuit. In Tiger, 50:50, Marie, the urban-rural split is almost equal. I don’t know how it will shape up going forward, but last year the rural consumer had more disposable income. In fact, at times, they end up paying more per unit than urban consumers. I believe it’s a fallacy in India that it is always about low price. I think consumers are very smart. If they feel they are getting something which is good for them, they are willing to pay the price. Cell phones are an excellent example – once prices became affordable and accessible, demand was not a problem at all.

What are the other broad consumer trends that you are seeing?

The big trend is that consumers all across are saying loudly - give me value and I will buy. When markets explode, it’s about accessibility and affordability. For example, in my father’s generation; they bought the cloth, the tailor would come to the house, measure and stitch the shirt. Today, if you don’t like somebody, give them a piece of cloth because you can’t find a tailor to stitch the shirt (laughs heartily). At Rs 150-200 you get good shirts and trousers. Even in women’s clothes, you can go to Westside and pick up a kurta off the shelf. What is happening is there is lot more variety at play. Prices across the board have come down. According to me, that is the mantra: affordability, accessibility and relevance. The question is not price but how much is it worth to me; if you make it worthwhile, I will buy it. We are in a business where you can buy a pack of biscuits for as little as Re 1. We also have biscuits in a nice tin for Rs 250 for gifting. That’s what India is, there is a market at every segment and there is a business opportunity in every segment.

The other part of our product portfolio which is doing well is the rusk, it was a sleeping beauty as far as I am concerned. Now some prince discovered this sleeping beauty and this year we are expanding our capacity for it; right now we don’t have enough rusk to sell, we are creating more capacity for rusk in the South.

We’ve seen what you’re doing with your biscuits at the mass end. What are you doing with your biscuits at the premium end?

We have just re-launched Pure Magic in a new packaging format. The other magical brand is Little Hearts, which is hugely differentiated. For Valentine’s Day we created interesting opportunities around that; we see the brand growing in high double digits. If you see the NutriChoice 5 Grain and those with jeera and ajwain, they are also at the premium end.

Would you use biscuits to get into premium foods and into wafers and other extensions?

Our companies in West Asia make wafers and they are being imported to India under a brand called Nutro, available in modern trade and doing well.

Could you elaborate on your power brands strategy? You’ve brought NutriChoice under your power brands as well?

The idea of power brands is that it’s not about a single offering for every power brand. By definition they are brands that build a large franchise around them. For example, in NutriChoice we had Cream Crackers and Thin Arrowroot. We added Digestives, 5 Grain, then jeera and ajwain. So it ends up becoming not one brand, but a brand that stands for something, under which there are several product offerings. Take Tiger. It was a glucose biscuit, then we added Tiger coconut, Tiger banana, Tiger Chota in a pouch, fortified with iron, Tiger creams, and so on, so from being a glucose biscuit it now stands for something which is more than just a product form. The power brand strategy recognises that we can have multiple product forms under these mega brands and it also becomes more efficient from a communication point of view. Then there are totally differentiated brands such as Little Hearts, which stand on their own.

From a branding point of view we transferred (the concept of Daily Fresh) from dahi to breads – if dahi is daily-fresh so is bread. The whole idea of daily-fresh is a very important thought when you talk of perishables. We created this whole franchise for products with short shelf life. What that has also caused us to do is change the way we go to market. We now segment our channels on the basis of customer profile and product profile.

Do you see commodity costs easing up?

On what basis? The sugar season is starting now; in wheat flour they have increased the price, the new season is not going to come till February.