Food Companies Struggle To Find Right Breakfast Recipe For India
Samyuktha R, 24, mostly has upma or poha for breakfast. Not freshly made at home but the packaged instant-mix bought off-the-shelf from the local supermarket. It tastes decent, said the MBA undergraduate from Bengaluru, and is convenient as she just has to pour hot water and wait to have it on-the-go. But she prefers it to corn flakes or muesli or even instant noodles.
“I have been living in a hostel for two years and have my classes early in the day,” she said. “I need something quick.”
Samyuktha underscores the challenge makers of packaged breakfast food face in India. From parathas in the north, to idli, dosa or vada in the south, and poha in the west, or the ubiquitous puri-bhaji, Indians like their first meal of the day piping hot and fresh. While bread, butter and spreads have found acceptance, cold cereal is rarely the first choice.
More than two decades after Kellogg Company entered India, the cereal market is worth Rs 2,579.5 crore, according to data by Euromontior International. Growing at an annualised rate of 10.7 percent. But it’s still tiny compared with India’s Rs 5.1-lakh-crore packaged food industry. Companies like MTR Foods Pvt. Ltd. and iD Fresh Food (India) Pvt. Ltd. hope to change that, offering a range of ready-to-eat and pre-mix options. Still a nascent segment worth Rs 240 crore, according to data shared by MTR Foods, but growing at a 12 percent annualised rate.
Cereals in India are primarily sold in urban areas and having it without milk is not a filling meal, Dhanraj Bhagat, consumer and retail partner at consultancy Grant Thornton India, said. That will cause the growth of this category to be slower than other food categories.
Fragmented Cereal Market
The cereal market, dominated by the multinationals, has turned highly competitive. No. 1 Kellogg’s revenue rose at 7.6 percent in the year ended March 2018, slower than the industry’s pace. That’s because it faces a challenge from second-placed PepsiCo’s Quaker-branded cereal and oats, and Bagrry’s, founded by Shyam Bagri, said retailers and distributors BloombergQuint spoke to in Mumbai on the condition of anonymity as they didn’t want to risk any backlash from companies.
Even Nestle has jumped into the cereal market with NesPlus.
Pricing determines the demand for cereal. Consumers are conscious about the pricing and go for options which are cheaper or offer discounts, retailers said. According to them, families whose bill amount is 30-40 percent higher than the average value usually buy breakfast cereals.
A Kellogg’s 900-gram cornflakes pack costs Rs 380 and NesPlus 500-gram packing comes for Rs 195. In comparison, Bagrry’s has priced its 880-gram—including 10 percent extra— at Rs 290.
Kellogg Company and PepsiCo India have yet to respond to BloombergQuint’s emailed queries on competition and growth.
Distributors and retailers said consumers typically buy cereals and ready-to-cook and instant breakfast items from hypermarkets and supermarkets. At the local mom-and-pop stores, they said, demand for ready-to-cook and ready-to-eat packaged meals largely comes from the South Indian community, which both iD Fresh and MTR largely cater to.
The Next Big Opportunity
MTR Foods, the maker of ready-to-cook sambhar to idli powder, and idli-vada batter maker iD Fresh sniff an opportunity.
Indians either skip breakfast or stick to the local fare, MTR Foods said citing findings of an in-house survey. And they don’t like to experiment with breakfast and look for familiarity at the start of the day, Sunay Bhasin, chief marketing officer at MTR Foods, told BloombergQuint. He expects younger Indians to drive growth in the Indian breakfast market, which he said will keep getting bigger with time.
iD Fresh also offers ready-to-eat Malabar parotha and poha. Idlis will be the breakfast for generations to come in southern Indian homes, PC Musthafa, co-founder of iD Fresh, said. “They are not ready to buy a ready-to-cook idli from outside.”
Even in the north, the company has found customers who love idlis and dosas but can’t make the batter at home. “That’s my first target in that region,” he said. But Musthafa acknowledged that iD Fresh will have to launch parathas, the standard northern Indian breakfast.
Marico Ltd., the maker of Parachute coconut oil, sells its Saffola-branded masala oats for the Indian palate and so does PepsiCo with its Quaker brand. Even Nestle India, Managing Director Suresh Narayanan told BloombergQuint recently, is exploring the Indian breakfast category.
Still, it’s not easy to succeed. Indian families don’t usually rely on ready-to-eat or instant packaged food. Instant noodles, now synonymous with Nestle’s Maggi, may be the most they try. Hindustan Unilever Ltd. realised that. India's largest consumer goods maker piloted Lever Ayush-branded upma, khichdi and pongal breakfast mixes. But it’s reviewing the strategy.
“It didn’t meet our action standards,” Srinivas Pathak, chief financial officer of HUL, had told investors in a conference call after the October-December results. The company, he said, is looking at what different it can offer.
Bhagat said packaged breakfast options will only cater to individuals on-the-go as Indians typically like their breakfast to be served fresh. While the shift will take place, according to him, it will be gradual and among the urban population at a time rural consumption drives bulk of the sales.
Mustafa doesn’t think that should deter breakfast-focused companies. Larger consumer goods makers won't be able to capture the Indian breakfast segment as it’s a micro-managed business that has to keep local tastes and preferences in mind, he said, as it’s not a mass-production model.
That is why a company like iD Fresh has done well with the sale of its batter for idlis and dosas, Arvind Singhal, chairman of retail and brand consultant Technopak Advisors, said. Even the young working people will also opt for freshly-made breakfast, even if it's at a small outlet near the workplace, he said.
A reason why consumers like Samyuktha won’t remain hooked to ready-to-cook or instant mixes forever. “I'll not say that the taste of these packaged breakfast items is unique,” she said. “I eat them to save time.” Samyuktha would any day prefer to sit and have a fresh and piping hot idli or upma.