Warc, 3 September 2014
NEW DELHI: India's regional food and drink brands are growing faster than national and international brands and gaining an increased market share at the expense of big names like Hindustan Unilever, Nestlé and Dabur.
A recent study of FMCG businesses by research firm CRISIL found that over the past five years these so-called tier II players had grown at almost twice the rate of the leading companies, at 28% against 16%.
At the same time their market share had increased from 20% in 2007-08 to 30% in 2013-14 and was predicted to continue this rise to 40% by 2019.
The particular strength of regional players, according to Anuj Sethi, director at Crisil Ratings, has been their ability to combine innovation and affordability.
"Their innovations revolve around offering product variants that are new to the market, delivering region-specific tastes and differentiating with their packaging," he explained to the Economic Times. "These have enabled tier-II players to hold their own against much bigger peers."
Certainly the fact that they are closer to their customers has helped. "We have built our strength around understanding what the working Indian woman needs to make kitchen work more convenient," said AD Padmasingh Isaac, chairman and managing director, Aachi Masala Foods, a 20-year-old food manufacturing business based in South India.
Retailers have also made the connection, according to Damodar Mall, CEO of Reliance Value Retail, who said: "As sons of the soil, we are better than multinationals in understanding Indian culture."
And one of the points about Indian food culture is that it varies widely across the country – it's 20 to 30 different countries in that regard says one observer – so brands that can cater to local preferences are better positioned for growth. At the moment international food groups may be constrained by their western brand portfolios.
Mall elaborated on the behaviour he had observed among his customers. "They are buying more branded sabudana [tapioca] and besan [gram flour], and not necessarily the heat-and-eat kind of food," he said. "So they will buy all kinds of Indian snacks like namkeens and shakarparaand matthi, but they won't pick up Nestlé cup noodles."
Data sourced from Economic Times; additional content by Warc staff