India is the worlds largest biscuit consuming nation and Indians are now in an experimental mode. The immense growth potential is attracting big and small players to grab a share of the bite.
A few years ago a biscuit brand in India made headlines when it became the worlds largest selling brand.But the story was a tad different it stated the obvious. India, the worlds second most populated nation, was also the largest biscuit consuming country in the world. So, the recognition perhaps came in a trifle late. But that may not hold long enough. The biscuit market is buzzing with new players. At stake is a 10,000-crore business,which is still growing. And every year, big and small players are queuing up for a share of the bite. In the last one-year,two international companies have made an entry UKs United Biscuits and GlaxoSmithKline.A few more including Pepsi and Kraft Foods are planning to make a foray.
Kraft has a wide basket of products across the world, including biscuits. Which of these will be introduced formally in India is currently under dialogue, says Anand Kripalu, managing director, Cadbury India. Kraft had taken over Cadbury in a $19.5 billion deal in February 2010, creating the worlds largest confectioner. Industry sources though say that Kraft has already signed a deal with a local biscuit manufacturer and its entry into the Indian biscuits market should happen much earlier. Pepsi, on the other hand, is in the process of developing a low-cost nutritional food product, which could also be a biscuit product. The companys spokesperson, however, denied it.
The per capita consumption of biscuits in the country has grown from a paltry 400 grams about ten years ago to 1.5-2 kg today.While this is a huge change,India still lags behind other countries like the US and UK where it is more than 10 kg and even behind many South East Asian countries where it is 4.25 kg.It is this gap that is the opportunity for new companies eying the Indian market. For United Biscuits, India was a key,high consumption market where it did not have a footprint.This is what made it a natural choice to enter, says Jayant Kapre, president of United Biscuits India, which entered the Indian market last year.What helped the company was also the fact that here it was just not volume growth but also higher value growth.
Over the last few years,players like Parle, Britannia and ITC have moved into the cookie and high value segment to capitalise on the high growth and higher margins. Even though glucose biscuits still sell much more in terms of volumes than any other segment, its share in the overall pie has gone down. The share of glucose biscuits has dropped from 70% to 50% in about five years. Parle, which was dependent on the glucose segment alone with Parle G, moved into this segment with its chocolate chip cookie brand Hide & Seek in 1996. We didnt want to depend on just one or two brands, says Praveen Kulkarni, marketing manager at Parle Products, which today has close to 40% market share in the Indian biscuits segment. Britannia is a close second with 38%.
The margins in this segment are at least 30-40 % higher than in the glucose segment, which is mainly because consumer preferences are changing. There is so much space at the top today as disposable incomes are increasing, says Nikhil Sen, managing director of Unibic India, an arm of Unibic Australia, which entered in India in 2005-06. The companys strategy was to look at the top end of the market. The average growth rate in the premium segment is over 25% today while that in the glucose segment is about 10-12 %.
Consumers in India are upgrading from unbranded to low-cost branded products to higher value products today as a result of higher disposable incomes.With companies looking at selling their higher value products in smaller packs, adoption as improved.And its not just in the big cities.Small packs of high-end products are also moving well in rural markets, says Amnish Agarwal,analyst, Motilal Oswal. For players like United Biscuits,it was also heartening to see that while biscuit consumption was clearly a very well formed habit with clear and strong consumer preferences,yet there was a willingness to try new products, be it in higher order indulgence products, or in the rapidly evolving health and wellness space. 
The small local players in the market are playing their own game,creating a new middle segment in the biscuits market and expanding pan India. The market is now moving into the mid-price segment as people want to upgrade from glucose biscuits, says Anup Bector, managing director of Mrs Bectors Food Specialties, the flagship company of the Cremica group. Local players like Priyagold and Cremica are now matching the products of larger companies and selling them at a lower price as they are regional and have lower overheads. Priyagold, which has primarily concentrated on the north is now looking at expanding its footprint to south and east of the country as well,says BP Agarwal, managing director of the company.We are improving our grip offering a great price and quality combination, says Agarwal.
