Large food firms start biting back to win market share from smaller players

Large food companies are winning back market share by making their offerings more affordable in order to compete with smaller players.

Small players typically enter the market when the commodity cycle enters into a downward territory and offer stiff competition to larger players with similar offerings at lower prices.

According to data by NielsenIQ, in the January-March quarter, small companies' volume growth was -4 per cent compared to larger companies who witnessed a volume growth of 8 per cent.

“In the food sector, smaller companies face challenges in maintaining price stability and consequently slower volume growth,” Roosevelt Dsouza, head of customer success - India, NIQ told Business Standard.

He also added that in non-food categories, “Despite the overall robust performance of these major players, smaller manufacturers have notably outpaced them in volume growth within non-food categories. This divergence is primarily driven by price dynamics.”

He explained that in non-food categories, smaller manufacturers are capturing higher volume growth. This could possibly be due to a shift in consumer behaviour, with more options to choose from in key homecare categories such as laundry and cleaners, allowing smaller players to carve out a competitive edge.

Adani Wilmar said that once edible prices came off from its peak, it’s been able to win back market share from smaller players since then.

“Overall commodity prices have come off from their peak levels and consumers now find these prices comfortable and good brands are doing better. Local brands aren’t performing as well,” Angshu Mallick, managing director at Adani Wilmar said.

He explained that in foods, the question of purity also comes up which is not the case in non-foods as consumers opt to buy non-branded or smaller brand products as well.

Mayank Shah, senior category head at Parle Products also said that in biscuits, companies have been taking price cuts since July of last year.

In the July-September quarter, the industry initiated a price cut of up to 7-8 per cent and a similar price cut was taken in the quarter ended December as well.

“Despite taking these steep price cuts for two consecutive quarters, companies were not able to win back market share. The industry then resorted to taking another price cut to the tune of around 6-7 per cent and we have started to see market share come back largely in the ongoing quarter,” Shah explained.

Britannia Industries also said in its release post its March quarter results that its market share has rebounded as the year progressed due to strategic pricing action.

“Our market share rebounded as the year progressed as a result of strategic pricing actions to maintain competitiveness and intensified investments in brands, supported by distribution expansion,” Varun Berry, vice chairman and managing director at biscuit major Britannia Industries said in its results release.