Kannan Sitaram is a pure vegetarian, but words like chicken and pork sausages, fish fingers and fillet roll effortlessly off his tongue. As CEO of Innovative Foods Ltd, which markets the Sumeru brand of frozen foods, Sitaram is seeing the market for non-vegetarian snacking foods take off in a big way. The foods company, taken over by private equity fund India Equity Partners (IEP) over three years ago, is preparing to ride this wave.
The ₹1,800-crore market for frozen foods has been growing at about 20 per cent a year. “The retail market used to be largely frozen vegetables like peas and sweet corn till five-six years ago. Now, snacks such as chicken sausages, French fries and other potato products, kebabs, breaded products like burger patties and pops, are becoming very popular. The new segment taking shape is gourmet foods such as pork and seafood and also chicken-based fine foods,” explains Sitaram. The market comprises three key components: Retail at ₹600 crore, food service, which includes supplying to quick service restaurant (QSR) chains and hotels - ₹800 crore, and exports of ₹400 crore. Of this, retail is growing the fastest, he says, with the spread of modern retail and more cold storage facilities in the new stores.
Till recently, Indian consumers were wary of pork. But, now, says Sitaram, “We have a line of imported pork. It’s more expensive, but if consumers want to eat that quality, they are willing to pay the price.” Sitaram, a former CEO of Dabur India, took over as CEO of Innovative Foods soon after the PE fund acquired the company in early 2011. The company, which expects to finish FY-2015 with ₹100 crore in sales, needs an infusion of ₹25-50 crore for its growth. If IEP does not bring in fresh investments, the company could look at bringing in a new investor. IEP has a longer time-frame for its investments than most PE funds which, typically, look at a six-year period to exit a company.
Sumeru’s expansion plans over the next two-three years will see it expanding its portfolio of snacking and fine foods, which has been growing at over 30 per cent. “There’s a general premiumisation trend in India; we’ve seen it in chocolates, in olive oil. So, today, there are enough consumers for fine foods,” says Sitaram.
When Sitaram joined the company he looked at Sumeru’s offerings from an outsider’s perspective. “I said people are not buying frozen foods per se but buying snacks or fine foods. So, the challenge was to create a brand architecture that could cater to different segments.”
Last year, the company hired an Australian designer, with whom Sitaram had worked at Dabur, to revamp the portfolio into three distinct segments: the staples such as peas and corn as Classiques; the snacking foods as Wassup and fine foods as 5 Senses, all with different packaging. “Sumeru is the only major brand to have a strong presence in veg and non-veg foods and will benefit significantly from the emerging market trends,” he adds.