 "Local brands Balaji Wafers, Yellow Diamond crack the taste test in India")
Two local brands, Balaji Wafers and Yellow Diamond snacks have leveraged their understanding of regional markets to take on large Indian and MNC brands in the national salted snacks market. Having established their sway over a few states to begin with, the two brands are pushing up their advertising and marketing budgets to create a national impact and footprint. Rajkot-based Balaji Wafers is present in five states and has set aside a hefty budget for branding and marketing for the coming year while Sequoia-backed Prataap Snacks has recently signed Salman Khan as its brand ambassador.
The story of Balaji Wafers, a classic rags-to-riches tale, is the stuff of marketing legend. Co-founder Chandubhai Virani started life running a canteen at one of Rajkot’s popular cinema theatres. He and his brothers would sell potato wafers and sandwiches (made by their wives at home), but soon realised that the demand for their chips was insatiable. Their stock ran out well before the end of day and their supplier was unable to crank up the volumes. This got the brothers to invest in the business and in new technology. Today, their manufacturing plants are equipped with the latest technology and are said to be competitive with the best global brands. This seems to have paid big dividends. At a time when market research agencies aver that salted snacks sales are starting to slow, Balaji Wafers has been clocking sales growth of close to 20 per cent a year for its range of traditional and western salted snacks.
Another homegrown brand, Yellow Diamond owned by Indore-based Prataap Snacks is also stepping up its game. While the brand is yet to go national, it is ruling the shelves in its home market in Madhya Pradesh. Amit Kumat, founder of Prataap Snacks, however, could not be reached despite several attempts.
Virani attributes the success of the regional brands to their ‘Indianness’. He believes that Balaji has earned the trust of the consumer by delivering authentic taste and sticking to the best hygiene standards. Today, the company has 65 per cent, 50 per cent, 35 per cent and 25 per cent market share in the states of Gujarat, Maharashtra, Rajasthan and Madhya Pradesh, respectively. Balaji’s share of the Madhya Pradesh market holds significance as it goes up against Prataap Snacks in its home state, making it a battle of the locals in the chips market.
The rise of Balaji and Yellow Diamond are in keeping with a global phenomenon, where local brands are increasingly taking over the market once owned by large diversified companies or multinationals. According to the Kantar IMRB Worldpanel Brand Footprint Report’s analysis of 9,000 local brands, nimble local players are proving better at exploiting growth opportunities than the 5,700 global brands across world markets. “Local brands are particularly strong in the food and beverage categories, catering to native tastes. In large emerging markets such as China, India and Indonesia, many consumers see local brands as not only familiar but also more affordable and widely available,” the report says.
However, local brands are a step behind when it comes to brand spends; they made up 46 per cent of sales compared to the 54 per cent from global brands. The report believes that this could be because the value of an average shopping decision tends be lower for local brands. At higher price points, consumers seem to prefer global brands. This, however, is changing and in Asian markets along with a few others, local brands saw spend increase by 6.2 per cent in 2015; nearly twice the rate of their global counterparts.
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The modus operandi for brands such as Balaji Wafers is to convert their regional markets into an impregnable fortress. Balaji did that with Gujarat and then the rest of the West and Prataap Snacks is doing the same for central and northern regions.
“Unlike some of the branded national players, these regional players are long established and consumers have gotten used to their taste,” says Prashant Agarwal, joint managing director of Wazir Advisors, a consumer products and retail consulting firm. Agarwal cites the example of Maggi to prove his point.
“When Maggi was out of action for some time, no one could actually replace it for good. This is because consumers were used to its
taste. Snacking is all about tapping the consumer cravings and taste,” Agarwal asserts. Needless to say, of the total Indian snacks market estimated at over Rs 50,000 crore, 60 per cent is formed by branded Indian salty snacks, while branded western salted snacks such as potato chips forms the rest 40 per cent.
“When we went to Maharashtra or Madhya Pradesh where Haldiram, Bikaji or Lays were already present, we didn’t change our strategy. In the markets where we lead, we have been focusing on hitting the right taste, quality and price, along with ensuring steady last mile distribution. It is only now that we will think of investing in branding,” says Virani.
He is buoyed by the brand’s growing appeal outside his home market, especially in central India and has set up a manufacturing plant in Indore, the first one outside Gujarat. Commissioned recently, the Indore plant carries an initial production capacity of 24 tonnes per day for wafers and will start producing traditional salted snack products. The company has two manufacturing units in Gujarat at Rajkot and Valsad with 38.4 tonne per day and 24 tonne per day, respectively. Balaji is investing about Rs 400 crore on the Indore project, of which the company has already spent around Rs 200 crore.