A snack attack like never before is playing out in Indian homes, with consumers and companies jamming the party in sync. A record number of packaged snack brands are making strategic forays in the segment, with many of these reporting growth in high double-digits amid heightened investor interest. “The pandemic made us realise that the ‘working snacks’ or ‘snacks between Zooms’ category has grown. Hence, something that served instant craving in the form of ready-toeat was a must,” says Sagar Daryani, co-founder and chief executive, Wow! Momo Foods, which extended its franchise to packaged in-home snacks this summer. In a category once led by Lay’s, Kurkure, Bingo, Haldiram’s, Bikano, Too Yumm!, Crax and Yellow Diamond, at least a dozen newer ones are staking a claim, although on a smaller base. From start-ups such as BRB, True Elements and Slurrp Farm, established foods companies like LT Foods and Analysts say sustained profitability would be a long haul for many newcomers, but point out the demand-supply gap that companies can leverage. The growth curve “Coming back to India after a stint at an investment bank in London, I was surprised to see the lack of new-age and better-for-you alternatives. This gap got me started on my entrepreneurial journey,” notes Anuj Krishan, cofounder of Forbidden Foods, which launched BRB Popped Chips a year ago. The organised Indian packaged snacks market is estimated to be around Rs. 45,000 crore by most industry analysts, within which the potential market opportunity for affordable premium snacks is around $1 billion, he adds.
“We are seeing an almost 200% increase from existing stores over the last few months,” says Ashwani Arora, MD at LT Foods, which, through its Japanese joint venture partner Kameda Seika, launched Kari Kari salty snacks in January 2020. The brand has expanded its portfolio of rice, pulses and other kitchen staples. “We are elevating consumer activations. In the next 12 months, we plan to take our product to a minimum of 7,000 outlets in top cities,” he says. Puru Gupta, co-founder and chief executive at healthy snack foods maker True Elements, notes two key trends which emerged amid the lockdown. “The purchases were largely for bigger packs, as customers were stacking up. Secondly, there was more openness to ‘healthy’ promises, which entailed a deluge of brands promising immunity and strength.” His company reported 2.5x year-on-year growth through the peak pandemic year. The scale-up is happening both online and offline for most brands, in response to customer offtake.
“Our sales are growing at a compounded 40% month-over-month rate,” says Krishan. Forbidden Foods is planning expansion from 1,500 retail stores across 10 cities presently to 20,000 stores in the next two years. Number crunching Executives say the shift in consumer buying behaviour is here to stay, mostly as a result of people working and shopping from their homes. “We feel ready-to-eat is rapidly changing the snacking culture of consumers. The segment rightfully sits between craving and convenience. This vacant slot cannot be filled by a restaurant or a QSR alone,” says Daryani. The chain is clocking a revenue of close to Rs. 75 lakh per month on the packaged food business, with plans to expand this vertical aggressively next financial year. An industry already growing at 12-15% pre-pandemic in 2018-20, is seeing growth catapult to over 20%, says Krishan. Overcoming challenges Yet, the newbies are waging a battle with the deeply-entrenched names on almost every front — from scaling up distribution, to building long-term consumer trust, to creating brand recall. The main challenge for new players, say executives, is to create differentiated product offerings that are compelling enough for the consumer to switch from existing large brands on a regular and frequent basis. “In the packaged snacks industry, it is relatively easy for any new player to induce initial trials but very difficult to establish repeatability and trust,” says Krishan. “This requires the right combination of product USPs, pricing and availability. Retail distribution is also a major challenge. Most new-age players tend to focus on online and D2C models and shy away from the retail channel.” “Consistency comes with a scalable brand and local supply chains,” says Gupta of True Elements. The brand, that reported a turnover of Rs. 40 crore in FY21, says it is cash profitable and estimates to double turnover to Rs. 75 crore in FY22. With the packaged and healthy snacks market teeming with so many labels, brands are attempting to break the clutter by straddling the indulgenceversus-health balance. So ‘no chemicals or preservatives’, ‘baked instead of fried’, and ‘no added sugars’ have turned the key buzzwords to bring in consumers. Arora says that rice flour-based snacks adapted to Indian tastes and “guiltfree snacking” are yielding big numbers. “We don’t compromise on ingredients. Our repeat rates of over 65% would be among the highest in the industry,” says Gupta. Entry-level pricing to bring in the volumes, of course, is playing its role. “We want to democratise the better-for-you category with healthier snacking at an affordable premium positioning,” says Krishan. BRB’s packs, for example, retail at Rs. 20-40. The marketing push is another factor that’s playing out in different ways, from free sampling at stores to alternate consumer outreach channels. “As a startup with limited budgets, we focus on guerrilla marketing tactics to scale our brand. We have been partnering with several local sports, cultural and lifestyle events to sample our products with consumers and tell our story,” says Krishan.
Source: ETBrandEquity
