White Paper: 'Hungry for Familiar Foods'

The paper was 'Highly Commended' at WPP's Atticus Awards 2014

White Paper: 'Hungry for Familiar Foods'
Packaging local food ideas offers MNC’s in India the opportunity to unlock new sources of revenue and reach new audiences. 
 
“Think global, act local” has been a classic marketing mantra for multinational companies trying to extend their brand to new countries and cultures. Nowhere is this more obvious than when it comes to food. Food is inherently culture specific. Indian food is strongly rooted in demography, local cultures, religion, geographical location and economy. In a country where taste preferences change every 200 kms, MNCs have struggled to find acceptance for their products. 
 
Yet, apart from exporting global brands to India wholesale or adapting a global brand to Indian tastes, few foreign companies have created a uniquely Indian brand that is culturally specific to India. By merely localizing western food constructs by tinkering with flavours are they missing out on the larger opportunity to package local ideas? Are they confining themselves simply to the organized market? Are they guided by an arrogant attitude that sees India simply as a large market of would-be consumers hungry for modern goods and services? 
 
By pitching their products to small segments of relatively affluent buyers, who most resemble the prototypical Western consumer, are they missing out on the very real opportunity to reach much larger markets further down the socio-economic pyramid? 
 
Those that have defied convention have reaped the rewards. Home grown brands in particular are better places to tap the larger market opportunity and package local ideas because they are unconstrained by global dictats and can seize opportunities faster. 
 
Success in the food category in India requires more than simply developing greater cultural sensitivity. It requires a deep and unbiased understanding of the unique characteristics and needs of people. For multinationals, such time is well spent. Not only will it unlock new sources of revenue, it will also force big companies to innovate in ways that will benefit their operations throughout the world. 
 
This paper offers five principles on what it takes to be a successful food brand in India. 
 
1. Don’t impose a western cultural construct. 
 
Food is inherently rooted in local culture— in the way it is prepared and consumed. Yet food and beverage brands—both foreign and homegrown—often impose western cultural constructs rather than create brands that are more culturally rooted. Moreover, when these constructs are applied wholesale they come up against well-entrenched cultural habits that are hard to break. 
 
Take juice for instance. For decades, orange juice has been part of the breakfast ritual for millions of households in the West. It is a good source of vitamin C, perfect for moms with fussy kids who’d rather drink the juice than eat the orange. 
 
The marketing world of juices currently in India is in the sanitized, health space. Brands like Saint, Tropicana, Real, Minute Maid so far have borrowed from western codes i.e. purity, breakfast, compensation or physical fitness. These brands target an affluent, westernized audience for whom health and wellness has become an aspiration. And at $ 1.60 for a 1 litre carton, it’s out of reach for most. 
 
Yet, the size of the unorganized juice market is said to be $ 2.5 billion—seven times the size of the packaged juice market (which includes 100% juice and nectars), according to Euromonitor. How is the real juice culture in India different from the way brands have seen it? 
 
For starters, it is not typically consumed out of a carton for breakfast. Juice is not seen as a replacement to fruit but refreshing nourishment. It is always consumed fresh—whether at home or from street vendors. Juices are rarely had plain. It’s always spiced with sugar, mint, sour lime, ginger or coriander for that sweet-sour taste. It is full-bodied and chunky. 
 
Out of home, juices are consumed on the go. Street vendors situated outside crowded marketplaces, railway stations, hospitals and near tourist attractions prepare them fresh. The juices themselves are colourful and multi-sensorial. They provide respite from the afternoon heat. And at 16 cents a glass it is affordable to the man on the street who finds it tastier and cheaper than the packaged alternative. So for any player trying to make a dent in the unorganized juice market, the challenge is to create a brand that recreates the out of home experience of drinking juice in packaged form. A brand with Indian values, wholesome flavours and textures that are close to the Indian heart. This requires a rethinking of sensorial codes in taste, texture and packaging. The cultural coding of the brand needs to be familiar rather than alien to break down barriers to purchase such as accessibility, taste preference, affordability. 
 
2. Take on the unorganized market. 
 
The real competition in the food category is often home-made food or nimble unbranded players. This is because buying habits for most consumers have still not changed. People prefer to buy most of the fruits and vegetables on a daily basis from vendors or local markets. Consumers like the touch, smell and feel of commodities like grains or flour they purchase. Indian consumers have a strong preference for freshly cooked food over packaged food mainly attributed to dietary patterns, poor electricity supply, low penetration of refrigerators and microwaves and a family structure where one of the primary roles of the housewife is feeding the family. 
 
According to AC Nielsen, 60% of a consumer’s shopping bag is for unbranded food products and growing sharply. There is also an impact on the basket size because of non-availability of personal transport facilities, due to which consumers prefer to buy smaller quantities from mom and pop stores conveniently located near their homes. These stores also stock regional specialties, for instance, Gujarati, South Indian, Mangalorean or Keralite items in areas dominated by people from these regions. 
 
One of the reasons for the slow growth of branded food is because organised retail in India is still in its infancy. It serves a tiny section of the population--the top 14 million households by income, mainly concentrated in India’s major cities. According to McKinsey, organized food retail will amount to only 5 to 15% of total food retail by 2015, limited by its inability to match kirana (convenience) stores in providing fresh goods on a daily basis, offer home delivery and be located close to home. 
 
PepsiCo early on realized that its biggest competition comes from local, unbranded players with low costs, low overheads, and none of the high-profile branding that its colas and Lay's brand take for granted. One of the company’s first experiments was in the snacks category. The Indian consumer has an enormous appetite for indigenous salty snacks and beverages. The total salty snacks market is estimated to be around $ 2.3 billion, with more than 70 per cent market share being held by unorganised players. 
 
When Frito Lay India (a subsidiary of PepsiCo) launched Kurkure in 1999, it helped create a bridge category between Indian namkeens (salty snacks typically had with tea) and Western offerings like potato chips. The focus was on developing hot and tangy flavors that suit regional taste palettes. Kurkure drew inspiration from Indian spices and condiments. It is available in pan-Indian flavors like Masala Munch and Red Chili Chatka and regional flavours like Tamatar Hyderabadi Style and Green Chutney Rajasthani Style. Kurkure’s batter is made with lentils and rice which are staples widely cultivated in India. 
 
Kurkure has gone on to become a blockbuster success with sales (it is already a $116 million brand in India) rapidly tick-tocking to as far as West Asia. By contrast Lays (Pepsico’s flagship chips brand) rakes in $ 150 million annually. 
 
Of course, taking on the unorganized market may seem like a huge risk. However, by confining themselves to the organized market, multinationals are not only limiting the scale of their ambitions, they are also limiting innovation. 
 
3. Identify viable markets. 
 
Entering a new market requires a huge investment in supply chain, manufacturing, distribution and marketing. That’s why it’s more important than ever to identify viable markets. 
 
Kellogg’s made a simplistic assumption of who would want its products. When Kellogg’s first attempted to enter the Indian market in the early 1990s, the logic behind its decision appeared to be unassailable. India was home to 950 million possible new consumers. If Indian consumers would eat as much cereal, on average, as Americans, then just 2% of the population would generate more revenue than the entire U.S. market. Surely, Kellogg could capture 2% of this vast group with a little bit of innovation. 
 
Buoyed by this optimism, Kellogg invested $65 million in establishing an operational and marketing presence to launch Corn Flakes, Wheat Flakes, and its "innovation" — Basmati Rice Flakes — throughout the country. "Our only rivals," declared the managing director of Kellogg India, "are traditional Indian foods like idlis and vadas." 
 
Unfortunately, these rivals turned out to be formidable. The company's significant investment failed to gain Kellogg much of a foothold in the Indian breakfast market and, 12 months later, by April 1995, it could claim to have less than 0.01% of those 950 million potential consumers. Over the years, Kellogg continued to invest in the market — repositioning products, launching new brands of ready-to-eat cereal, and marketing heavily. But by 2013, Kellogg had managed to capture considerably less than 1% of the population, generating revenues of only $80 million. 
 
How is it possible that Kellogg could envision building a $ 3 billion business in India, invest $ 65 million in the first year alone, and end up, 19 years later, with only $ 80 million in annual revenues? 
 
Kellogg's mistake (admittedly easier to see in hindsight) was that it had taken a far too simplistic approach to identifying its "huge" market, merely looking for people who might want its products. What it needed to do was to take a more sophisticated approach to identifying viable markets, a process that comprises three broad steps: gaining the right insights, counting the right people, and envisioning the right innovations to serve those people. 
 
4. Be the access brand for value-conscious consumers. 
 
Most multinational companies have tended to gear their products and pitches to small segments of relatively affluent buyers—those who, not surprisingly, most resemble the prototypical Western consumer. But that’s lazy marketing. They have missed, as a result, the very real opportunity to reach much larger markets further down the socio-economic pyramid i.e. underserved, low income populations who live in rural villages, or urban slums and shantytowns and are hard to reach via conventional distribution, credit, and communications. The quality and quantity of products and services available to them is generally low. 
 
Smart domestic entrepreneurs have often seized opportunities to target this segment by being “access brands”. These brands offer benefits similar to premium international brands, but at an affordable price for the mass market. Successful Indian access brands are not just copies of existing global brands, but stand for value and consistent delivery. Many of them dominate the market today because of their strategies and execution. 
 
For instance, Balaji's strategy of marrying aggressive price and local flavours with distribution has ensured that it is able to withstand intense competition from bigger players like PepsiCo or Haldiram’s. In their home market Gujarat, Balaji has a 90% share of the wafer market and 70% of the namkeen market. Its masala wafers or "khatta meetha" namkeens cater to the Gujarati sweet tooth, for Maharashtra the focus is on "chaat masala" and for Rajasthan it's been a spicy portfolio of snacks. 
 
These products then ride on a network of 700 distributors, 800,000 stockists and 400 farmers who supply potatoes to the company through contract farming across three western states to maximise its reach. Balaji sells more than 7.5 million packs a day for as little as 1 and 5 rupees. That's an unbeatable proposition for value-conscious consumers, for whom it is a household name. 
 
Prakash Snacks is another company that has an interesting marketing and distribution strategy. It sells chips and namkeens under its Yellow Diamond brand. The company doesn’t advertise but clocks revenues of $ 100 million. It believes that packs of chips and namkeens strung on shops are the best advertising one can ask for. Its unique distribution strategy focuses on retailers in SEC (socioeconomic classification) C and D class outlets which for years have been neglected by Indian consumer goods companies. These are usually in low-income neighbourhoods and slums where consumption is less. The company has managed to clock a growth rate in excess of 50 percent every year since it started in 2003. 
 
Access brands are typically created by Indian entrepreneurs with deep insight into the Indian consumer behaviour. They are not “first mover” brands. They take advantage of the image created by the leading brand in the category and spend little on advertising and promotion. Although value is almost always a critical part of access brands, it’s more than selling things cheap. It’s about placing the same quality and experience within the consumer’s reach. 
 
5. Co-opt local alternatives to your brand and innovation process. 
 
McDonald’s has always been heralded as the poster boy for foreign brands succeeding in a tough market like India. It did several things right: it established local supplier partners six years before it opened its first restaurant; it adapted to cultural and religious sensitivities; it observes strict taboos on the mingling of vegetarian and non-vegetarian foods in the same kitchen or on the same table; all food is cooked in vegetable oil; it ditched beef and introduced the Maharaja Mac, made with chicken patties; it even introduced the vegetarian McAloo Tikki, a burger made from potatoes and peas. 
 
While it has invested heavily in India and has taken the time to understand the market, it has missed tempting opportunities to co-opt popular street food burgers such as the vada pav, omlette pav, kheema pav or kachchi dabeli to its menu and innovation process. 
 
Smart entrepreneurs have realized that it’s possible to package local street food and create popular brands. Jumbo King is perhaps India’s answer to McDonald’s. It’s been successful simply by packaging the vada pav (a street food snack popular in Mumbai that is essentially a spicy potato burger). Unlike McDonald’s outlets which are situated on national highways or malls, most Jumbo King outlets are close to railway stations. For commuters a vada pav is often breakfast or dinner. 
 
The difference between Jumbo King and street stalls is that it is hygienic. Starting in 2001 with one store in Mumbai, today, Jumbo King has 45 outlets in Mumbai, Bangalore, Aurangabad and select parts of Gujarat. It plans to extend its presence to 27 new cities over the next 12 months. The company has set itself an ambitious ten-fold increase in turnover to $83 million this decade. 
 
Innovation doesn’t always have to mean starting from scratch. It’s about recognizing opportunities and co-opting them to the innovation process. Moreover India’s rich and diverse cuisine offers ample opportunities to package local ideas. 
 
Who can package local food ideas best? 
 
For Indian companies, the influx of multinational brands often appears to be a death sentence. Accustomed to dominant positions in a protected market, they suddenly face foreign rivals wielding a daunting array of advantages: substantial financial resources, advanced technology, superior products, powerful brands, and seasoned marketing and management skills. Often, their very survival is at stake. 
 
However, local companies also enjoy certain advantages. They aren’t burdened by global market-entry dictats. They can seize opportunities by recognizing gaps in the market because they have a more nuanced understanding of culture and consumers. They understand that the larger market opportunity is to reach out to the mass market value-conscious consumer with the right product at the right price. 
 
With sales slowing down or static in the West, multinationals need emerging markets like India to deliver strong growth. They need to take strategic calls on how they want to approach India. Do they continue to target emerging affluent and affluent consumers with their existing brands or do they reach out to the millions currently not served by their brands? The latter necessitates a complete shift in thinking on everything from innovation to marketing. 
 
PepsiCo’s success with Kurkure has given the company the impetus to try out different experiments to reach the masses. It’s created an amorphous entity called Value Foods Organisation (VFO) which encompasses PepsiCo's burgeoning value snacks and value beverages portfolio. For the first time in PepsiCo's 24-year stay in India, it senses it has hit upon a high-growth engine that could cater to millions not served by its existing products. In the best case scenario, it could be the disruptive force to fuel the growth-starved company’s emerging-market strategy. 
 
In allowing regions free will to create, acquire and launch new brands, multinationals can sidestep a common problem that larger companies tend to have—the inability to take risks. Furthermore, the strategy of distributed development makes sense. Not only will it unlock new sources of revenue, it will also force big companies to innovate in ways that will benefit their operations throughout the world. 
 
(Sonya Misquitta is senior planning manager, Grey and Dheeraj Sinha is chief strategy officer, Grey, South and South East Asia) 
 

 

Source:
Campaign India

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