Britannia:EntryintoSnacks

In October 2011, Atul Sinha, the Vice-President for new businesses at Britannia Industries Limited was seriously contemplating about Britannias entry into the Indian snacks market. Britannia is one of Indias leading biscuits manufacturers and off late, it has been diversifying into a variety of foods businesses including breads, health drinks and cheese based products owing to new opportunities in these markets. Also, one more reason of entering into new businesses is the increased competition in the biscuits industry from existing players like Parle as well as new players like ITC and numerous regional players. The fact that Britannia CEO Vinita Bali expressed that they are in the food business and not just biscuit making support this rationale of entering into newer avenues. The entry into snacks came up as a natural extension to Britannias current line of biscuits and other healthier options like cakes and rusks. Also, industry players like Parle who were primarily in biscuits business were now diversifying by entering into the snacks market. Atul Sinha has his task cut out to assess the feasibility of Britannia entering into the Indian snacks industry.

CompanyBackground
Britanniawasstartedintheyear1892 withaninvestmentofRs.295. Initially,biscuitswere manufactured in a small house in central Kolkata. Later, the business was acquired by the Gupta brothers and operated under the name of V.S. Brothers. In 1918, C H Holmes, an English businessman in Kolkata was taken as a partner and The Britannia Biscuit Company Limited (BBCo) was launched. The Mumbai factory was setup in 1924 andPeek Freans, UK acquired a controlling interest in BBCo. Biscuits were in big demand during the period of World War II, which gave a big boost to the companys sales. The company name was changedtothecurrentBritanniaIndustriesLimitedintheyear1979. In recognition of its vision and accelerating graph, Forbes Global rated Britannia as one amongst the Top 200 Small Companies of the World, and The Economic Times pegged Britannia as India's 2nd Most Trusted Brand. In the year 2009, Wadia Group acquired stake holdings from Group Danone and became the single largest shareholder in Britannia.
The case is prepared by Prof. Sanjay Patro and Srikanth , XLRI Jamshedpur for class room discussion only. It is not to illustrate either effective or ineffective handling of a business situation

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The case is Britannia is one of Indias leading biscuits manufacturers and its product categories are on the rise by the day. In its quest to become Indias leading food business player, it has diversifiedintoproductslikerusks,milkbaseddrinksandcakes.Itisinthisregard,Britannia plans to enter the Indian snacks market which is mainly unorganized and there is a lack of branded players in this category barring Haldirams (the leading manufacturer of Indian snacks). In the biscuits category, Britannia has the highest market share followed by Parle which is apparently Britannias biggest competitor. Following these two are numerous players prominent among which are ITC, Anmol, PriyaGold. Parle has been dominating the Western marketsofIndiaforlongwhereasBritanniahasbeendoingwellintheEastandtheSouth. In its quest to tap new opportunities, Britannia has entered into new food categories and one of them is the cakes business. In this area, it has also come up with a vegetarian range of cakes to cater to the large vegetarian population of India. Another area where they have venturedofflateisintothedairysegmentwhichincludescheese,butterandpackagedmilk. While the cakes business has been a big success for them, the dairy business has not been abletoappealenoughtotheIndianconsumer.Thedairybusinesshaslongbeendominated by a home run concern called AMUL which enjoys supreme loyalty for its range of dairy products.TheSwitzerlandbasedNestleisalsoacompetitorofBritanniainthedairyspace. Exhibits1and2showstheperformancetrendsofthecompanyintheyears2005to2010in termsofsales,PAT,operatingprofitsandEPS.

InternationalExpansion
Britanniahasexpandedintonewergeographiesmainlywiththeintenttocatertothetastes and preferences of people of Indian origin who are living abroad. In this endeavour, in the
year2007,BritanniaanditsAssociatesacquiredasignificantstakeinDubaibasedStrategicFood

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International Co. LLC and Oman based Al Sallan Food industries company SAOG. These two companies are key regional players in the biscuits, wafers and cookies segment in the GCC marketsandexporttheirproductsacrosstheworld.

One added advantage in such a strategic move was the fact that the Indian people living in the MiddleEast already have a sense of familiarity with the brand Britannia. Again, in the latter part of 2008, Britannia has launched its biscuits range in the neighbouring island nation of Sri Lanka. Some of the Britannia products launched in the MiddleEast are shown in the exhibit number 3. On the dairy business front, Britannia acquired the New Zealand basedFonterraFoodstogiveaboosttoitsdairyportfolio. In an effort to bolster its international presence, Britannia has been continuously searching for newer markets outside of India where its products can be launched. Atul Sinha as the head of New Businesses had been given the responsibility to look for new geographies and assessthefeasibilityofBritanniaenteringintoanewcountry.

IndustryOverview
The Indian snacks industry has seen a variety of developments in the last decade largely due to the changing consumption patterns of the Indian people and their lifestyles. Its burgeoning middle class with busy lifestyles and increasing disposable incomes has led to increase in the preference for ready to eat foods. Exhibit 4 shows the increase in disposable incomes of the nation in the last 5 years from 2005 to 2010. The percentage of income spent by Indian people on various products and services in the last few years is also shown in exhibit 5. It is this phenomenon that has also led to increasing spending on snack foods. Combined with it is the increasing awareness of health among the Indian populace that has led to the people opting for healthier snacking options. Also, branded foods are perceived to be healthier than the unbranded snacks. The packaged food industry in India is expected to reach a staggering $21.7billion by the year 2012. It is expected by more than 2/3rds from the year 2008 to 2012. The snacks market is a part of the packaged food market. The Indian snack market is valued at $3 billion out of which branded snacks comprise $ 1.34bn, growing at an annual rate of 15-20%. On the other hand, the growth of the $1.66bn unorganized snacks players is 7-8% per annum. On a per capita basis, the per capita

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packaged food spending is expected to grow by 56.5 per cent to US$ 18.06 or Rs.900 by 2012. There are close to 1000 types of snacks and 300 types of savouries being sold in the Indian market. Western India has the highest amount of snack consumption in the entire country. One interesting trend is that the growth in the market is being driven by healthy, low-fat, lowcalorie snacks, while snack foods positioned as trans-fat free are also likely to soar in popularity. A growing percentage of the global population, in both developed and developing countries, is replacing light meals with snacks. Convenience foods manufacturers have therefore been trying to market some of their products as snacks for more market share. The savoury snacks industry guide suggests that among all the BRIC nations, India is the fastest growing snack market that grew at a CAGR of 17.5% over the period 2004-2008. Combined with it is the fact that the market for health and wellness foods is poised to reach Rs.55,000 crores by the year 2015 up from the Rs.10,150 crores now. The current size of the savoury snacks market in India is Rs.3182 (2009 Euromonitor Research data) crores which is growing at a rate of 11.6% per annum and is expected to reach a value of Rs.5504 crores by the year end 2014. The savoury snacks comprises of Chips and Crisps, Extruded variety, other savoury, Nuts and Popcorn. The market share of each of these types of snacks is shown in exhibit 6. A percentage break-up of the market shares of various competitors in the different types of snacks as mentioned above has been provided in the exhibits 7 to 9. The Indian consumers have an immense variety to choose from when it comes to snacking. Every region has got its own special snacks which are famous. At the same time, some regional snacks have found a liking among all the consumers in the country. Traditional Rajasthan snacks like Bhujia and Sev are very popular all throughout India. Exhibit 10 shows the mapping of the Indian market into the 4 regions and the most common snacks consumed in each region.

ClassificationofSnacks

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The savoury snacks comprises of Chips and Crisps, Extruded variety, other savoury, Nuts and Popcorn. Each of them can be defined and understood from the Indian perspective as mentioned under: Chips/Crisps: These are the most commonly available type of snacks and are predominantly made up of potato. Potato chips comprise more than 86% of this entire category. This category is mainly dominated by Frito lays from PepsiCo which has its flagship Lays brand that has been recently launched in different tastes and flavours that would appeal to the Indian taste bud. This is a very popular category in snacks and there is immense competition among various players. Recently, Haldiram and Future Group (under the Big Bazaar brand) have launched their own version of potato chips to cash in on this very popular product type. Extruded Snacks: Extruded snacks include all those snacks, the shape of which has been modified rather than being just a plane chips snack. Extruded snacks are mainly corn based or in some cases are potato made too. This category is gaining immense popularity as the consumer is looking for variety in snacks and this category has the maximum of that. This category is mostly dominated by the branded players, Frito lays is again the market leader with its Kurkure brand. This is also the fastest growing snack in the entire snacks industry. Other Savoury: This category consists of all the Indian snacks such as Bhujia, sev, Dal Moth, Chana Choor etc. and is very popular among all the age groups in the country. This market is dominated by local snack manufactures and the neighbourhood halwai who have a relationship of sorts with the people in their area. There is only one branded pan India player: Haldirams and some regional brands like Garden, Sarthak, Balaji among other smaller regional players. Nuts: This is a very small market in comparison to the three dominant varieties as mentioned above. There is only one branded player in this category, that is Hadirams which offers nuts like Badam, Cashew, Pista in both plain as well as salted versions. GSK (Glaxo Smithkline) also has a groundnut based chocolate bar called Nutri-Bar but it has not been able to garner consumer preference. Popcorn: This is also a very small market in comparison to the top three varieties and there is only one branded player in this category which is the popular Act-II brand from the North America based ConAgra Foods. Other than this, Popcorn is mainly sold on Indian streets across the country by street vendors. Popcorn in India is mainly consumed when people go out to a shopping mall on a weekend or to a movie theatre.

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Competition

The Indian snacks industry has seen a sea change in the last decade with a slew of players entering into the Snacks and ready to eat foods space. At the forefront of the Indian snacks industry are major players like Haldirams and PepsiCo. Some of the major players in the Indian snacks market and their products have been mentioned below:

1. PepsiCo: PepsiCo entered into the Indian snacks market in the year 1995 with its Lays range of potato based snacks and since then has been hugely successful in all parts of the country. Apparently, Lays is also the worlds largest and favourite snack brand. PepsiCo has tweaked its product offerings for the Indian market keeping in minds the Indian consumers tastes and preferences. Some of the products they offer under the Lays brand in India have been shown in exhibit number 11. It also launched the spicy snack called Kurkure in the year 1999 especially for the Indian market which has been hugely successful since then. Again, as a large

percentage of Indian population is vegetarian, Lays has kept its entire range limited to vegetarian snacks only. Off late there has been a visible thrust on the health aspect of the snacks that are being offered as the company realises that the modern day Indian consumer places a greater importance on health. The company has come up with a new snack called Aliva which is primarily positioned as a healthy biscuit based snack.

2. ITC: Established in the year 1910 and formerly known as the Imperial Tobacco Company, ITC has diversified into many new businesses including foods, paper, clothing and fast moving consumer goods. This diversification can be attributed to mainly two factors: A. To create a new identity for itself from the perceived image of a cigarette maker and manage the ever increasing ban on cigarettes advertising and selling. B. To leverage its already existing strong Pan India distribution network for launching new products. ITC entered into the Indian biscuits market in the year 2004 with its Sunfeast range of biscuits. After the impressive foray into biscuits, it entered the Indian snacks market

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with its unique range of Indian flavoured snacks under the Bingo brand. And within 2 years of its launch, it had as high as 8% of the total market share in branded snacks. The uniqueness of the Bingo brand lies in the fact that they are not purely potato based like Lays of PepsiCo and are more akin to the Indian consumers preferred taste of traditional Indian flavours. Also, the distribution network for snacks was already in place for ITC which helped in faster penetration of the products across the country. It has positioned its snacks on the Indian aspect of its taste and zero MSG and low fat content. Again, this move falls in line with the increasing awareness of health among the Indian consumers. Some of its products in the snacks category are shown in exhibit 12.

3. Parle
Based out of the Mumbai, the financial capital of India, Parle has been one of the most prominent biscuit makers of India. Its glucose biscuits under the Parle-G brand are also the worlds largest selling biscuit and this alone contributes to more than 60% of its total annual sales. It is an Rs.2000 crores brand as of year 2010. Parle has entered into the Indian snacks category under the name Musst Stix, Smart Chips and Hippo. Musst Stix and Smart Chips fall under the extruded snacks category where as Hippo is a bread base snack. The snacks products from Parle have been shown in the exhibit 13.

4. Haldirams
Started in 1937 in a small town in the western India called Bikaner, Haldirams is a manufacturer of traditional Indian snacks and is the only player in the category of branded Indian snacks who has got a national presence. It has expanded rapidly in the last 3 decades and now exports to many countries including the US and Europe where there are considerable chunks of Indian population. It also offers packaged Indian sweets in tin packed containers that can be carried easily from one place to another. One interesting fact about this company is that it achieves more than 50% of its annual sales during the popular festival of lights called as Diwali. Haldirams started as a predominantly Indian snack manufacturer but off late it has come up with almost all kinds of variety of snacks like Potato chips and other extruded snacks.

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Also, Haldirams has started a series of eat in as well as take away restaurant across major cities of India which serve fresh Indian snacks and sweets to customers. This has also been a successful concept as more and more people are finding their way into one of these Haldirams eat-in restaurants. As of 2009, Haldirams is a 4 million dollar brand that has a multi-national presence and is available in major stores like TESCO, CARREFOUR among other hypermarkets.

5. Local Snacks players

Apart from all the branded snacks manufacturers, India has a huge market when it comes to locally manufactured unbranded snacks. They are extremely popular throughout the country and they also command supreme brand loyalty among the consumers. However, the trend is changing and there is an increasing preference for branded snacks. There are a multitude of reasons so as to why there is still such a huge market for unbranded snacks. The local snacks manufacturers hold many advantages over the branded players. The biggest of them all is that they offer more than twice the amount of snacks for the same price point as the branded players. Moreover, people have a relationship of sorts with the local namkeenwaalah (Indian term for the local neighbourhood snacks maker). Most of the local snacks manufacturers existed in India long before any branded snacks entered into the Indian market. Generations of families have brought their snacks from the namkeenwallah and it is very difficult to convince such consumers to shift to branded snacks. In case of local snacks the consumer can see as well as taste the snacks that are on sale. This is a very big factor as the option of product experience is available in case of local snacks. Another factor that goes against the branded players is the fact that their packaging. The average Indian consumer feels that he is being cheated by the fluffy packaging of the branded players which is in fact intended to keep the snack fresh inside the pack. It is in this regard that the branded players in India have positioned their snacks on the health and hygiene factor, both of which are usually absent in case of a local snacks manufacturers. Still, there is a large population who prefer to go to the local snacks shop.

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Information about some of the most common pack sizes of snacks and their respective price points as offered by both branded as well as unbranded snacks players has been shown in exhibit number 14.

NewProductLaunches
The increasing demand for different varieties of snacks has given a huge opportunity to the snacks manufactures (both branded as well as unbranded) to come up with new innovative products that will appeal to the Indian consumer. Increasingly, branded players are coming up with the Indianized version of the western snacks. Thus, a mix of Western and Indian styles is the present trends in this market. Given below are the product introductions in the last 2 financial years classified as per the category of the snack: Chips/Crisps: In the chips category, the latest introduction has been from Parle which is being launched under Parles popular Monacco brand. The product is being named Parle Monacco Smart chips. These chips are being positioned as non-fried chips indicating that they are a healthy snacking option. This is in sync with the common consumer perception that all the chips are fried and oily, hence not good for health. Haldiram has also recently launched its own brand of chips under the name halke pulke with more grammage than Lays and a price point of Rs.15. Also, there are small players like the Globe Group that have forayed into this business with new type of chips. Globe group has launched a corn based chips called as Cornitos. Other Savoury : In the other savoury category also Parle has come up with its own new snack called Hippo, which is being positioned as a healthy snack with a punclineBaked,Not Fried. The snack has gained popularity due ti its attractive packaging as well as the health benefit positioning. However, there are some issues with its taste especially during the summer season when it is reportedly giving a foul smell. Again, in this category also, there are local regional players coming up with their own brands. For instance, Neelam foodland (a famous snack shop in the posh Khar Danda area of Mumbai) has recently launched diet Namkeen for the health conscious consumers who are willing to pay a premium for healthy snacking options. Extruded: This is the most exciting category of all the three and also has witnessed the maximum product launches in the last 2-3 years. Some of the notable product

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introductions include Hatke Jhatke from ITC,Peepy Heatrz from SM Foods,Crunchy Munchy from the Future Group (Big Bazzar brand) and Musst Stix from Parle. All thses snacks are being positioned in one unique way or the other. For instance, the Big Bazzar (a home grown retail chain) brand Crunchy Munchy says that it has zero fat, zero MSG and zero cholesterol. Consumer research carried out also indicates that it is these buzz words of cholesterol and fat that are in the minds of consumers while eating a snack which contains oil or is fried.

TheChallengesAhead
Britannia has been the market leader in the biscuits industry in India for the last several years. It product portfolio consists of highly successful brands which are known for their quality and command a healthy price premium in the market. But, off late, Parle which is Britannias biggest competitor in this space, has come up with a series of product launches that have threatened Britannias dominance in this space. Traditionally, Parle and Britannia had targeted different segments and thus were catering to two exclusive set of customers. Britannia was primarily earning all of its revenues from its premium range of biscuits whereas Parle was strong in the category of glucose biscuits which has the Parle-G brand, which is also the single largest selling biscuit brand in the world. Parle-G continues to enjoy unusually high levels of patronage from the Indian customers. It is in this regard that Britannia has ventured into other businesses such as breads, cheese, packaged milk and health drinks. Now, it sees an opportunity in the Indian snacks market where Haldirams is the only pan India branded manufacturer of Indian snacks. The increasing preference of Indian consumers for healthy snacks and ones that are branded also provide Britannia with an opportunity as Britannia as a company stands for healthy snacking. Recognizing the changing global trends & health benefits of removing
transfats, Britannia is the first Bakery brand in India to remove transfats from its products.

But, the crucial question before Atul is whether the market is big enough and is it feasible for Britannia to enter this space and into what type of Indian snacks. Much water has flown in the Ganges since then. He has to present his strategy and road map to the Board of Directors in Februray ,2013.

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Exhibit t1

Exhibit t2

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11

Exhibit t3

Exhibit t4

Exhibit t5

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12

Exhibit t6

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Nuts N ,66.4Cr r.

Popc corn,76.2C Cr.

Ex xtruded, 1 1030Cr.

Ot therSavour ry, 991Cr.

Chips,101 18Cr.

Valuewisebreak up u oftheInd dianSnacks sindustry

E Exhibit 7

Exhibit 8

Market ValueMarketSharesinChip ps

Market M Value eshareinEx xtruded

Exhibit t9

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MarketValue V sharesin Other Savoury Snack ks

Exhibit t 10
Mapping themarket

Wh hatdotheyeat? e
West
No orth
Se ev Puri Faafda Go olbade Alo oo Bhujia Kh haakhra Sw waahili Pa aapad Til l Chikki Pa armal Sev Gh haantiya Parantha Sandwich Chhole aara Namak pa Samosa Matthi Pani Poori i Breadbutter Swaahili Aloo Lachha Bhaajia Misri Mawa Ghev var Gujia a Chan na Choor Bhujia Sev Mixture Kach hori Jaleb bi Magg gi Makke roti Chaa at Saboo vada BreadPakora Rusk Vegtikki Paneer tikka Dhokla Pani Poo ori Paav Bha aaji Sev Bhujia Chhole Bature B Namak Paara P Breadbu utter Mathri DalMot th

Poha Vada Paav Fariali Khaman Kothimbir Vad di Thalipeeth Raggda Pattice e Cornflakes Sandwich Bhel Puri

East
Ghugni Roti Samosa Gol Gappa Momo Sandwich Nimki Chana Choor Aloo Parantha a Sattoo Chicken rolls Eggrolls Churmuri Litti Pittha Kachor ri Upma Chooda a Jalebi Kachree Chaat ChumChum C Chhenn na Poda Moodi Mix xture Maggi Pak koda Ros ssogolla MilkSweets Mis shti Doi Idli Dosa Murukku Utthapam m Vada Puttu Bonda Upma Chegodi Karaboondi Chakkilam m

South
es Pastrie StuffedBread Raagi Maalt Getti Pakoda P Banan naWafer Sev Jantika a Laddo oo Maggi i Peasarattu Bonda a Bajji Kajjikai Burfi MysorePak ad Masalabrea Nuchinnund de VegPuttu Paniyaram

Source:Primary data from429 retail outle ets and 38con nsumerDIsacr ross7cities

Exhibit t 11

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Exhibit t 12

The e Snacks fr rom ITC un nder the Bi ingo brand d name

Exhibit t 13

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The snack T ks range fr rom Parle

Exhibit t 14

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The ran nge of price es as shown n above cov vers all the market players

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