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PREMIUM OFFERINGS NOW IN A BIG WAY
Are
You Being Served?
Why
are brands from giants like HUL to the more modestly sized Cremica
launching premium offerings?
Why
some ice creams and finger food now cost an arm and a leg
While
discussing Nestle's annual results at its Vevey headquarters, chief
executive Paul Bulcke shared an important focus area for the Swiss
behemoth: "The nice thing about premiumisation is this is not only for
the big mega cities in the developed world, but is also working very well
in the developing world with an emerging middle-class."
A few months ago Bollywood actress Kareena Kapoor
Khan joined the likes of Eva Longoria and Liv Tyler as a Magnum pleasure
ambassador when Unilever launched it’s ice-cream in India. Globally
present in over 35 markets, Magnum currently sells across five
cities: Mumbai, Pune, Hyderabad, Bangalore and its launch market Chennai.
Says Geetu Verma, executive director - Foods, HUL, "India is upgrading
and we are finding faster growth in the middle and upper middle profile
with increasing levels of affluence. If you were to take the top 5% of the
consumers in the metros, it's a pretty large base for products that deliver
on a promise of indulgence and great taste."
The overall consumption of snacks in India is
amongst the lowest globally, leaving room for all growth levers;
premiumisation for the affluent, higher frequency for the middle segment
and enlistment into the category for aspirants. Siddharth Mukherjee, director,
chocolate category & media, Mondelez India, cites the success of
Cadbury Dairy Milk Silk as testimony to the potential of premium. Marketers
argue there's space for both a regular and premium offering, often
appealing to the same consumer. Says Ashik Hamid, vice president,
Hypercity, "Both segments, mass and premium coexist." Hypercity
shares some data to elucidate the point from its stores. Pringles, launched
recently by Kellogg's has picked a 40% share in potato chips, Sunfeast Dark
Fantasy, which caters to the premium cream cookie segment has 11% of the
total cream biscuits segment while its competition Golden Arc from Parle
has taken 13.5%. Parle's Milano contributes around 10% to cookies while
Sunfeast's Delishus accounts for 11%.
Premiumisation is being driven by a consumer who
craves new experiences and is even willing to make compromises elsewhere to
pay for them. It's a sign that society is embracing indulgence without
guilt and religious or cerebral excuses, says Dheeraj Sinha, chief strategy
officer, South & South East Asia, Grey. The quest for indulgence
replaces the consumer's obsession with vitamins and minerals; feeling good
is now as important as eating healthy. "Marketers and retailers have
to fire the consumer's imagination by launching innovative products and
tastes," says Devendra Chawla, CEO, Food Bazaar, Future Group.
A big catalyst has been the coming of age of modern
trade, with a larger spread encouraging customers to experiment more. Says
Piyush Kumar Sinha, professor in retailing and marketing, IIM - Ahmedabad,
"With almost 50% of the primary shoppers being men, unplanned and
impulse purchase has increased." A study at different hypermarkets
showed that the basket size increased by almost 25% when men were
coshoppers, he adds.
The rise of shelf spaces committed to premium
products in existing modern trade along with dedicated retail formats like
Future Group’s Foodhall, Godrej Nature's Basket, Trent’s Gourmet West, Le
Marche is working well in exposing the consumers to exotic flavours. Their
imported gourmet offerings sold in the uber chic retail environment are
providing the perfect backdrop for the category’s growth.
Brands realise there's more to this than a name and
a price tag. They have to be extra careful about where they spend and what
on. For instance, Magnum eschewed a TV blitz for focused advertising across
outdoor. HUL realised that focusing only on TV would mean reaching a
segment that was not the target audience. For phase 2 of its outdoor campaign,
Magnum threw in an online store locator, confident its consumers would most
likely be internet if not smartphone savvy.
Convincing consumers to fork out cash is another
challenge. For instance, consumers in Magnum's test market complained that
at 75, it was too expensive. However says Verma, "Over time, as we
reiterated the Belgian chocolate credentials, the immaculate crafting from
perfect bean to the first bite, and of course when consumers experienced
the product, they started saying 'This is truly worth what we are
paying!'"
Pegged as India's first cottage style potato
crisps, Opera from Cremica is available in flavours like cheese jalapeno,
Italian herbs and salt & black pepper. "There is an increased
demand for a differentiated offering and with Opera we want to set a
benchmark", informs Akhilesh Bector, chief tasting officer, Cremica
Group. The brand is seeing a lot of aggression from smaller towns and
metros. It's gunning for annualised sales of 20- 30 crores by the end of
its first year (2014).
A premium product often requires a reworked
distribution strategy. Considering Indian weather conditions, Magnum is
transported in a cold van with distinct compartments so when a carton is
taken out, the others don't lose their temperature and moved from van to
store via cold bags. All so that the crunch and the flavour do not get
diffused. But what's this hard work adding up to? For several brands
premiumisation is not an option but inevitable. With input cost rising and
pressure on margins, brands are left with no option but to change the mix
or reduce grammage eroding product experience. Says Shekhar Banerjee,
senior vice president & head of Madison Pinnacle; "You can break
this vicious cycle without impacting volumes via a premium option."
The key is also placing a premium offering at arm's
reach. It needs to be sweet-spotted in terms of pricing, taste,
availability and imagery. Rahul Saigal, president, Geometry Global
explains: "A convenient location scores as high (and sometimes higher)
than product assortment as criteria for store selection. Marketers would do
well to select stores basis location and access to affluent shoppers and
not necessarily only on the basis of their size."
This may well be the beginning of a new revolution as consumers embrace
indulgence. It represents a change in the value equation: a hefty price
tag's only benefit can now be experiential and indulgent. Nutrition be
damned.
Amit Bapna and Ravi Balakrishnan ETBE 140514
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