Campaign India caught up with Nadia Chauhan, joint managing director and chief marketing officer, Parle Agro, on how brands in its portfolio are faring, impact of brand ambassadors, trends in consumer preferences, launch of Cafe Cuba, and more.
How is each segment – beverages, water, confectionery and snacks - contributing to the reported revenue of Rs 2,000 crore?
Beverages continue to be our largest category. It is the highest contributor followed by foods. Foods are a fairly new business for us and it is only three years that we have been in this category with only two ranges as such. Next few years we will see a lot happening over there as well. Considering how new it is, it’s still got a long way to go to be as large as our beverage business.
Each of the segments we are operating in - whether its water, foods or beverages - is growing at a very aggressive growth pace. Almost across all verticals we are at two digit-growth rate.
Within each segment, how is each Parle Agro brand faring?
Appy Fizz is a carbonated apple soft drink and it doesn’t really have competition in the market as we launched it and created a new category altogether. It holds more than 98 per cent market share as it is the only product in the category. While there have been many others who entered the category there have been not too many who have continued. It is one of our fastest growing products and has grown at a 100 percent plus growth rate this year.
Frooti and Appy both operate in the drinks category. Appy has a 65 per cent market share in the apple drinks segment.
Frooti is our oldest and largest brand. It holds almost 80 per cent market share within the category of mango drinks. We have recently ventured into the returnable glass bottle formats for a few of our products (Frooti, Appy Fizz), which opens up a larger market for us because the glass bottle category per se is far more penetrated than other packaged format categories.
We have recently launched Café Cuba and a few products which are available specifically only in glass bottle formats as of now.
We also have Hippo which is our foods brand. It is first-of-its-kind and happens to be the only product in the non-potato and baked snack foods category. As part of the entire snack category, we have around five to seven per cent market share because we are operating in a very niche segment.
We are also present in the water category with our brand Bailley and we have across 50 manufacturing plants across the country currently which we plan to scale up to 85 in the next few years. We have been growing year-on-year because of the innovative business model approach we opted for a few years ago. It was very important for Bailley as a national brand to play a local game. As per our estimates, Bailley has around 33 per cent market share.
You have also said you hope to garner Rs 1,000 crore from Cafe Cuba in 12 to 18 months of launch (in Jan/Feb 2014). Is this correct?
A Rs 1,000 crore turnover in a Rs 40,000 crore category is a very small share of the market; that’s what we are looking for at this point of time, being our first year in the carbonated soft drinks category. Café Cuba is a very new and innovative product altogether. The launch of it is going to be quite aggressive in terms of sales and distribution plans as well as advertising and marketing plans to get this tiny percentage of market share that we are targeting currently. It is the big game changer for us and we need to be prepared for it. It is simply going to be driven by the fact that we are boosting our sales and distribution for this product by almost 70 to 80 per cent and our advertising and marketing is going to back this in a very large way to achieve the growth that we have set. The growth will be coming in from across the country.
It was reported that Rs 50 crore was earmarked for the promotion of Frooti this year. The same amount has been allotted for the promotion of Cafe Cuba. Would it be enough to launch a completely new category? Will it be targeted at a more narrower audience segment?
Yes, it definitely will be enough. Rs 50 crore is a very healthy marketing budget to be able to drive the kind of vision that we have currently set for the brand. We are talking to the SEC A category, who are in the 15 to 30 year-old age group, who are consumers of carbonated soft drinks. The product will be launched across the country and in every State that we are present in.
A lot of campaigns today – including those for Appy and Frooti – break out on the digital media and then are released on TV. What percentage of the marketing budget is allocated for digital today? How is this growing? Which categories are more digitally inclined?
In spite of the fact that within the beverage category, we are quite aggressive on the digital front, if you look at it from a percentage perspective the number is still very small. It would be in single digits. We look at the spends on the basis of the campaign and the objective we wish to achieve with it and how much of it will be effectively driven by digital. So digital spends vary from campaign to campaign. There is no thumb rule that we follow. Digital as a medium is not as seasonal as TV. It is a medium that requires you to be present and alive on through the year. It’s the entire concept of ‘always on’, unlike television where you have big, defined campaign periods. Hence, the approach is very different. We have been driving things a lot more through social networking sites as compared to just traditional advertising on digital and that has resulted in a lot more consumer engagement for us and a lot more excitement. Mostly, all our brands that are youth-oriented are more digitally inclined. So Frooti, Hippo, Appy Fizz and Cuba are very active online.
Within digital, where do you see maximum focus – search / display / social...?
We see maximum focus on social networking sites.
How do you measure the RoI on advertising and marketing spends in digital? To what extent would you link it to sales?
I don’t think you can link it to sales, especially for our industry. It’s more towards larger and broader marketing objectives. We use the platform more in terms of engaging with consumers, generating positive word of mouth and so on. We use it differently. So for example, for Cafe Cuba perspective, we use the medium more for sampling purpose, for Hippo we used it for ‘inventory tracking model’. I don’t think you can directly attribute a certain sales growth to the spends on digital sphere.
And as we are usually focussed on social networking sites in digital media, our costs are extremely low.
What are the challenges in competing with MNCs like Coca Cola and Pepsi in the beverage market today? In the carbonated drinks space in particular, do you see a challenge in getting a presence in stores and eateries, with exclusive tie-ups being prevalent?
As an organisation today, we are very happy to have large competitors within the categories we operate in. It obviously means that the categories have that much growth in them. The main challenge is that we are competing with larger spends - your competition ends up investing a lot more at times. The one factor that enables us to tackle competition is that we invest in extremely innovative approaches. So irrespective of our spends being may be a little bit less than theirs, we have managed to stand out because we have approached our marketing and advertising in a very unique manner.
Currently, exclusive tie ups are not as dominant as it was in the past. Even if it is, I think it would have been an issue had we been a cola. We are in a completely different product category; our product is not in competition with Coke and Pepsi. Hence, I don’t think we should have an issue. We have already gained presence through our test marketing and have not faced any such issue.
There are the clearly positioned ‘healthy’ snacks – and there are other snacks. What is Parle Agro’s view on the Indian consumer base – is it moving towards health conscious choices in the snacking category? Is this reflecting in sales?
Two major things are happening in the Indian market - consumers are looking for greater variety than before, they want to try new flavours, formats and they are really enjoying the variety that brands are giving them. Secondly, people are getting a lot more health conscious and there are various brands trying to drive that. It’s a niche segment yet but we are seeing rapid growth year after year in this ‘good for you’ product category space.
You recently appointed SRK as brand ambassador for Frooti, and Appy has had Saif for a while. What increased revenues do you see from getting a celebrity on board?
I don’t think one gets on a celebrity on board only for revenues. There are multiple aspects or implications on the brand. No one factor can be singled out for growth in revenues. For example, after getting SRK on board, Frooti has grown but it cannot be attributed only to SRK but to whole host of things that worked in line to be able to achieve the increased growth. It could vary from brand to brand, from product to product, from a 20 per cent to a 100 per cent increase.
In an earlier interview, you said that you expect Frooti to grow at 50 per cent this year with SRK. How has the brand fared so far?
The campaign that we had for Frooti this year has been extremely successful and is one of our best campaigns. It has achieved quite a few objectives that we have laid out for the brand including the fact that it cut across multiple age segments. In terms of business performance, we have grown in accordance with expectations even though we were hit by a very bad monsoon this year across markets.