Tobacco and hospitality giant ITC Ltd’s big-bang entry into the foods segment has begun shaking the dominance of market leaders across categories. After taking away 15-16% share from multinational snack foods giant Frito-Lay, ITC has now overtaken MNC confectionery leader Perfetti Van Melle in the cough lozenges segment, as per AC Nielsen data for the July-September ‘07 quarter.
In value terms, ITC’s Mint-O Fresh brand has captured a 17% share of the segment, as opposed to Perfetti Van Melle’s Chlormint which logged a 14.3% share. Both brands — positioned as adult mint candies — occupy identical price points of 50 paise a unit.
This is for the first time that Perfetti Van Melle has conceded its market leadership position in cough lozenges (as classified by AC Nielsen) to a rival brand. However, Perfetti — the wholly-owned Indian subsidiary of Italian major Perfetti Van Melle SpA — continues to dominate the overall confectionery sector with share in excess of 30%.
Analysts tracking the sector say ITC has leveraged its distribution muscle to big advantage for both snack foods and confectionery. Cigarette shops, for example, account for about 30% of confectionery sales — a channel where ITC has huge distribution clout.
When contacted by ET, ITC Foods division CEO Ravi Naware said: “A combination of distribution muscle, aggressive trade-level activity and consistent marketing efforts have helped us gain substantial share in the segment.” Perfetti Van Melle officials declined to comment on the matter. ITC, which entered the confectionery segment in 2002, has two mainstay brands — Mint-O Fresh and Candyman. In absolute value terms, Candyman is a bigger brand than Mint-O Fresh.
The tobacco-to-FMCG company does not have a presence in gums as yet, a segment where Perfetti leads with a share of close to 50%. Leading brands in the Rs 600-crore Perfetti Van Melle’s portfolio include the flagship Alpenliebe, Mentos, Center Fresh, Big Babol, Happydent White and Chlormint.
ITC sources confectionery through three third-party manufacturing facilities – in Ahmedabad, Nagpur and Hyderbad. The domestic confectionery category operates on perhaps the lowest margins within the FMCG space and has been under further pressure in the past couple of years because of increasing raw material costs.
The other problem has to do with 50-paise coinage. The only way companies can hike prices is by doubling price points from 50 paise to Re 1, which would mean giving unorganised players huge price advantage. Excluding chocolates, the sector is estimated at Rs 1,600-1,800 crore.