India has been a key priority market for confectionery major Perfetti Van Melle. It is now its fourth largest market by revenue and the largest market by volume. The company, which is known for brands such as Centre Fresh, Happy Dent, Mentos, Alpenliebe and Chuppa Chups, now sees nearly 30 per cent of its business coming from premium offerings that are priced more than ₹1. Nikhil Sharma, Managing Director, Perfetti Van Melle India, spoke to businessline on urban consumption trends, the company’s premiumisation bet and strong focus on innovations. Excerpts:
What is your view on the overall macroeconomic situation, especially with regard to urban slowdown? How was CY 2024 for Perfetti Van Melle India? Where does India stand in the global scheme of things for the company?
I think the bigger FMCG players saw the slowdown a little bit before we did and they are also seeing the recovery in rural areas a little bit before us. We are still finding that our wholesale demand is muted and there is still some work to be done in rural regions. In urban areas, our focus has been on premiumisation with the addition of new innovations, SKUs and higher price points. So we are perhaps a little better there.
We have been among those players that have managed to grow in 2024 despite the challenges. India is among the top four markets for the group globally with US, China and Italy being the top three markets. India has been a priority market for the group for a long time. By volume, India is the number one market for the group.
The premium portfolio indeed is growing much better than the base portfolio for now. We expect government measures such as income tax benefits and other factors to aid the recovery of consumption trends. As that happens, we expect the base portfolio, which includes wholesale products such as Centre Fruit and Centre Fresh, to begin seeing stronger growth but it will take some time.
Of course, commodities remain a key monitorable especially because we cannot raise prices like other FMCG categories. For us, prices of commodities such as sugar remain a key concern.
How has the premiumisation journey been for the company ?
We began the premiumisation journey in 2017-18 and we have been strongly focusing on innovation to back it up. We started with the introduction of the jelly category which was unknown to India. Our strategy has been introducing value-added propositions which give us the ability to charge higher price points.
From about 5 per cent in 2017 , premium products’ contribution is now at 30 per cent. These are products priced at over ₹1. We expect the contribution of the premium segment to continue to grow rapidly .
Recently, we have launched the Mentos Pure Fresh Chewing Gum in the nano bottle format priced at ₹30. Mentos is a key priority brand for us globally and we believe this strategy will help accelerate the growth of the brand.
Are you looking to get into white spaces or bring other brands from the global portfolio to India ?
There is a lot of innovation that can come to India. But products being sold abroad can’t simply be brought to India and need to undergo a development cycle due to factors such as the Indian weather. As the market leader, it’s our job to launch offerings that are relevant for our consumer. We thrive on innovation. We focus on multiple new launches in a year whether in terms of flavours, formats, SKUs or price points. We have also been focusing a lot on ethnic flavours. Already we have done four new launches this year and more will come. Confectionery is an impulse category and the new launches help us provide excitement to consumers and ensure the core portfolio continues to get the impetus.
What strategies have you been adopting to manage growth during this consumption slowdown ?
We have multi-pronged strategies in place. We continuously look at our cost structures and focus on bringing in more efficiencies in production and overall system to strengthen profitability. We have also been looking at fast-tracking premium propositions and putting more focus on parts of the portfolios that continue to see strong growth. That said, these are just ebbs and flows of the business cycle. We strongly believe in the long term growth opportunity in India and it is a matter of time before we see consumption recovery and we need to be in pole position when that happens
With the emergence of quick commerce how is the channel dynamics evolving ?
The whole e-commerce piece for the confectionery industry is still small. It is still more of an impulse purchase category and Indian consumers are still not in a habit of buying it as a household stocking item. General trade remains the largest channel for us. So the emerging channels’ contribution to our business is in the range of 3-4 per cent, of which E-commerce and quick commerce is about 1.8-2 per cent. But we are leveraging on it strongly as a growth driver. E-commerce channel allows us to test market our premium products and gauge consumer response. So while for established players like us, e-commerce and quick commerce channels’ contribution remains small, it remains a key focus area for us.
What are your plans to ramp up distribution ?
Our products are being sold across nearly 6 million outlets and we have direct distribution across 1.2 million outlets. Our ambition is to widen the number of SKUs being sold in these 6 million outlets. That will be the key distribution focus for us. We will keep making incremental gains in terms of direct distribution but at the end of the day there is also a cost to direct distribution and we have to weigh our strategies.