Cooking lessons

What three big branded players have learnt about the Indian convenience foods market

In the early 1990s, convenience foods was considered a concept only for the rich and trendy. Today, it is a Rs 200-crore market in which some big industry names "" General Mills, ITC, Godrej and Hindustan Lever "" have taken a substantial bite.

"With time-pressured consumers on the rise, there are more takers for such products," says Susil Dungarwal, chief operating officer, Lakewood Malls, of which Haiko food store is part.

At Haiko, says Dungarwal, sales of ready-to-serve meals have grown by over 50 per cent in the last year alone to account for 5 per cent of the store's turnover, up from just 1 per cent three years ago.

For all that, the failure rate has been high, and companies have had to alter their recipes frequently before they hit the sweet spot. Here is what three big branded players have learnt.

When General Mills sketched its entry strategy for India in the mid-1990s, the

$11.5-billion foods giant kept its famous ready-to-serve (RTS) goodies like Big G cereals, Pop-Secret micro-wave popcorn, Betty Crocker desserts and mixes and Häagen-Dazs ice-cream in the larder.

Instead, it launched its global brand for dough-based products "" Pillsbury. But the product was an India-specific one "" chakki atta (pounded wheat flour).

The move was in line with McKinsey's advice: Go basic. Branded atta accounted for just 1 per cent of the market then, and there were no entry barriers.

"The launch of Pillsbury atta allowed us to build critical mass in terms of brand awareness and penetration," says Gayatri Yadav, marketing director, General Mills.

But huge overheads and high distribution and promotion costs translated into a 10 to 20 per cent price premium over unbranded players. Little wonder that the Rs 700-crore branded atta market has now grown to account for only 3 per cent of the market.

So General Mills needed to move up the value chain. Explains Yadav, "The very nature of food marketing is 'repertoire marketing' or providing consumers with a variety."

But the company has stayed away from the heat-and-eat category, opting instead for products that combine convenience and some amount of garnishing or cooking.

"The Indian home-maker takes justifiable pride in her role. The key is to design products that still allow her to add her special touch," says Yadav.

So Pillsbury first tried its hand at RTC products with oven cake mixes in 1999. Naturally, it didn't sell among consumers who didn't own ovens.

In 2000, it relaunched the cake mixes as "cooker cake mixes" backed by advertising that emphasised that these cakes could be made in pressure cookers. Food store managers vouch for an increase in repeat purchases since then.

In 2002, Pillsbury launched Pan-Fresh Pizza "" a half-baked dough base and some sauces. "The learning is the strong need for local content, even in foreign foods," explains Yadav.

For Pillsbury pizza, General Mills developed a shelf-stable kit that can be cooked in a pan or tawa, not just ovens. Also, local flavours like "masala" were launched, followed by a "Chinese" pizza in 2003.

The persisting challenge, however, is to increase repeat purchases. "Ideally, at least 30 per cent of the trials should translate into repeat. But it's difficult for a new food product to reach that level," says Yadav.

Though atta provided a good base to launch value-added foods, it isn't making much dough. To differentiate itself from competitors, the company relaunched Pillsbury in July 2004.

The new brand proposition, endorsed by the Heart Care Foundation of India, proclaims Pillsbury atta as 100 per cent whole wheat flour that is "good for your family's heart".

Why the wellness platform? A 2003 consumer survey covering 1,000 consumers tested 13 attributes that Pillsbury could stand for. Health ranked as the leading concern, apart from softness and value-for-money. The brand accounts for 8.3 per cent of the branded atta market as of June 2004, but the company expects the relaunch to boost market share.

Like General Mills, Godrej Agrovet tried to brand a commoditised business. The company's Rs 8,000-crore broiler business triggered a natural extension into processed and chilled chicken meat.

In 1999, Godrej Agrovet launched an RTC chicken brand, Real Good, in Mumbai and Pune and later in Chennai and Delhi. But as Balram Yadav, general manager, Godrej Agrovet, points out, "Managing the RTC business is like being on a razor's edge."

One major challenge has been the retail environment. First, with the visi-coolers the company has had to supply to retailers, distribution costs are high as 25 per cent. The other problem is shelf life. Packed chicken, if stored at an even temperature of four degrees Celsius, can stay fresh for seven days.

But even a minor fluctuation, common in India, can reduce shelf life. Also, many retailers tend to turn off the power when they close shop. "We've deliberately reduced the shelf life to three days as a measure of abundant caution," says Balram.

A shorter shelf life requires a shorter time-to-market. Currently, the company claims that the time taken for the cut and packed chicken to reach retail shops is 12 to 14 hours, down from two days previously.

This has been possible owing to the creation of a hub-and-spoke distribution model since 2002, which has reduced the number of intermediary vendors. The company also plans to create a processing plant near every market in which it sells.

But there's one area the company still needs to fine-tune "" forecasting demand. For one, meat consumption is still governed by region-specific religious customs.

So, the company has developed an in-house forecasting model with a basic sorting software that forecasts weekly demand from city to city based on variables that the company has been able to factor in, like fasting days, day of the week and so on.

Accordingly, Godrej runs promotions or local advertising in areas where the model suggests that meat consumption is likely to be high. "The chances of error are less than 10 per cent now against 40 per cent a year back," says Balram.

Thanks to better forecasting, the company claims to have reduced wastage at retail outlets to 2 to 3 per cent from an alarming 20 per cent earlier.

Godrej also makes sure the shops it supplies are a minimum distance of 400 to 500 metres apart in a city like Mumbai. This ensures that each retailer sells at least 500 kg of chicken a month and pockets around Rs 36,000.

"If retailers are ensured a catchment area, their willingness to follow storage procedures is also high," explains Balram. It took Godrej nearly three years to get its location criteria right, which is why the company has not expanded presence beyond four cities.

In August 2001, ITC launched a premium RTS brand Kitchens of India (KOI), an assortment of ready-to-serve gourmet signature recipes created by master chefs at ITC's Welcomgroup hotel chain. The price (Rs 150 for vegetarian fare and Rs 200 for non-vegetarian fare) ensured that the KOI was not a mass brand.

In line with this, distribution was limited. One of the logical retail routes were ITC's restaurants. But when it came to mass retail, the company initially focused on a select set of "modern format" retail stores that consisted of mostly the "dry fruit" stores. That followed the assumption that the tins would be bought for gifting, especially corporate gifting.

Although KOI is a Rs 3-crore brand today, ITC has large unutilised capacity at its Bangalore plant. Faster growth has been restricted by the packaging and pricing. Consumers tend to be wary of tinned food, nor does the package encourage sampling. Plus, from the company's point of view, tin added at least Rs 25 to the cost per pack.

To tackle the problem of unutilised capacity, ITC clearly needed to launch a mass market product. But it could not risk diluting an established premium brand. Instead, it extended its Aashirvaad atta brand to affordable RTS meals.

Aashirvaad meals cost Rs 25 to Rs 55 for a 285 gm pack. In June 2004, the company re-introduced KOI in 285 gm flexi-pouches at new prices of Rs 68 (vegetarian) and Rs 98 (non-vegetarian).

"The re-pricing has nothing to do with making KOI a mass brand. KOI is the gourmet brand and Aashirvaad will remain the popular brand," says Ravi Naware, divisional chief executive, ITC, foods division. The strategic lesson thus far? Variety is the spice of the foods business.