Atta is an emotional subject with Indian consumers and the quality of chappatis determines the mood around the dining table. "If you have won that round, you are in business" says Ravi Naware, divisional chief executive of ITC foods division in an exclusive interview.
Three years into the Indian foods market and ITC Foods is already challenging heavyweights like Pepsico, HLL and Britannia in three different segments simultaneously. While deeper pockets certainly help, ITC is clearly gunning for a bigger pie of consumer spends on food in the next few years. The launch of Bingo snacks was ITC Foods’ fifth line of foods business after staples, biscuits, ready-to-eat and confectionery businesses.
Three years in business and ITC Foods can take stock of its performance now. Consumer response to your offerings show a better success ratio.
True, we have a clear connect with consumers in an otherwise tough market. To get the fundamentals right, ITC foods segmented consumer needs and identified gaps in the market. Product development must answer the gaps thrown up by consumer research.
Also, any food business plan has got to be backed by a robust supply chain and effective distribution to ensure consistency in supply and quality. And then the communication and brand have got to cut through the advertising clutter and define clearly the values associated with the product. Celebrity advertising with Sunfeast biscuits, for instance, helped quick recall in a segment where it competed with old established brands. Success in foods requires a keen understanding of the supply chain for farm produce. A robust distribution network across India is also a big plus.
How did ITC manage success with Aashirvaad atta in a market which has felled several heavyweights in the past?
We didn’t quite realise that atta is an emotional subject with Indian housewives. The quality of the fulka or roti determines the mood around the dining table. The challenge in the atta market is to offer consistency in quality.
That’s where Aashirvaad scores over competitors who could not offer that quality consistency. Foods business needs a strong, quality-oriented and dedicated supply chain. Buying wheat from the open market would mean different quality at different times.
That’s where we had immense support from ITC’s e-choupal that ensured consistency in wheat quality. The biggest certificate for Aashirvaad atta is that sales picked up substantially purely on word of mouth from satisfied consumers. These consumers are our biggest ambassadors and advertisers. The pricing too has been competitive. Our consumer tracks on conversion levels from traditional atta market (where consumer purchases wheat and grinds it) shows a 35% shift to our packaged brand.
Is India a tricky market for foods given its fragmented nature and several regional tastes?
India is not a one foods market. You have to play it carefully. There are not only regional and localised preferences and tastes, you also need to ensure that your offering is seen as authentic. We worked for two years on the Bingo launch. Our team walked up and down the country figuring out consumer preferences. For instance, when we launched ‘mustard sting’ Bingo, it was a big hit in Kolkatta but it was not the first choice in Mumbai.
Similarly, tandoori paneer taste was a big hit in the north but was not liked widely in Kolkatta. Based on this consumer learnings and tastes, we launched Bingo in 16 flavours at one go unlike our competitors who work on staggered launches.
Did a war chest help in addition to product quality and innovation?
It certainly does. When we launched Bingo, we understand the adspend of our immediate competitors quadrupled. So we can match that. But a war chest cannot work in isolation. We stress on quality in capital letters. I have seen competitors play with quality. They launch products with an initial product promise that is not consistent over a period of time. Every single product that we have launched has retained its quality. At any point of time, if required, we may hike prices but never tone down quality to manage costs.
As an organisational philosophy, ITC is understood to invest heavily in consumer research.
It is not enough to identify a category, innovate and launch products with a message that says, look here’s a good product that we have launched for you. We see consumer research as the backbone of our business. The idea of Sunfeast pasta came from consumers. All our launches are tested initially by ITC hotel chefs. Several times, these chefs have helped create the prototypes. Our hotels are a good testing ground for our spices, ready-to-eat mixes and other food launches. And mind you, chefs can be very, very finicky. And so if the product gets their approval, we know its ready to be launched.
ITC had announced plans to acquire brands when it entered the market. The last acquired brand was Mint-O from Candico. Has the focus shifted to building your own brands?
At ITC, while we are always open to opportunities for inorganic growth, it must be an economically viable proposition for the buyer. We will not want to pay very high prices for the sake of inorganic growth.
Did ITC offer competitive pricing as an entry-market strategy?
We do not believe in undercutting at any level. Some of the players see that as an easiest strategy to get initial growth. Product differentiation, brand superiority and merchandising superiority are critical to be noticed by consumers. Fighting on price is a no-brainer. It will get market shares initially, but sustaining growth on that strategy will be difficult. Undercutting kills the whole market and industry profits with it. ITC did not undercut in atta and biscuits which are some of the most competitive markets. Food companies have to ensure that the quality offered is consistent throughout. Quality consistency, safety and hygiene and innovation are critical success factors.