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Britannia 1
Britannia:EntryintoSnacksIn 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.
CompanyBackgroundBritanniawasstartedintheyear1892withaninvestmentofRs.295. Initially,biscuitswere
manufactured inasmallhouse incentralKolkata.Later, thebusinesswasacquiredby the
Guptabrothers
and
operated
under
the
name
of
V.S.
Brothers.
In
1918,
CH
Holmes,
an
Englishbusinessman inKolkatawastakenasapartnerandTheBritanniaBiscuitCompany
Limited(BBCo)was launched.TheMumbaifactorywassetup in1924andPeekFreans,UK
acquiredacontrolling interest inBBCo.Biscuitswere inbigdemandduring theperiodof
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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Britannia 3
International Co. LLC andOman 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.
OneaddedadvantageinsuchastrategicmovewasthefactthattheIndianpeoplelivingin
theMiddleEastalreadyhaveasenseof familiaritywith thebrandBritannia.Again, in the
latter part of 2008, Britannia has launched its biscuits range in the neighbouring island
nationofSriLanka.SomeoftheBritanniaproductslaunched intheMiddleEastareshown
in theexhibitnumber3.On thedairybusiness front,Britanniaacquired theNewZealand
basedFonterraFoodstogiveaboosttoitsdairyportfolio.
Inanefforttobolsteritsinternationalpresence,Britanniahasbeencontinuouslysearching
fornewermarketsoutsideof Indiawhere itsproductscanbe launched.AtulSinhaas the
headofNewBusinesseshadbeengiventheresponsibilitytolookfornewgeographiesand
assessthefeasibilityofBritanniaenteringintoanewcountry.
IndustryOverviewThe 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 apart 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 $1.66bn
unorganized snacks players is 7-8% per annum. On a per capita basis, the per capita
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Britannia 4
packaged food spending is expected to grow by 56.5 per cent to US$ 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, low-calorie 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 likeBhujia and Sevare 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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Britannia 5
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 Chooretc. and is very popular among all the age groups in the country. This
market is dominated by local snack manufactures and the neighbourhood halwaiwho 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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Britannia 6
CompetitionThe 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 itsLays 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 TobaccoCompany, 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 cigarettemaker and manage the ever increasing ban on cigarettes advertising and
selling.
B. To leverage its already existing strong Pan India distribution network forlaunching 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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Britannia 7
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. ParleBased 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. HaldiramsStarted 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 asDiwali.
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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Britannia 8
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 playersApart 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 thenamkeenwallah 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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Britannia 9
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.
NewProductLaunchesThe 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 puncline-
Baked,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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Britannia 10
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.
TheChallengesAheadBritannia 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
Exhibit
1
2
Britanni 11
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Exhibit
Exhibit
Exhibit
3
4
5
Britanni
12
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E
Exhibit
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Exhibit
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Exhibit
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Th
Snacks f
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om ITC u der the B
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name
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The ra ge of pric s as show above co ers all the
B i i
market players
18