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Parle aims to increase lead over Britannia in biscuits category

The company plans to double its distribution network and increase the number of its manufacturing units; wants to replicate success in potato chips segment by taking on Frito-Lay India and ITC.

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The Rs6,000 crore biscuits major Parle Products, which has pilfered Britannia Industries Ltd’s market share, is looking to maintain its leadership in the branded biscuits segment.
Parle claims to hold a market share of 40% in volume and 32% in value terms in the branded biscuits segment. At present, Britannia has a market share of 28% in volume terms and 32% in value.

Analysts estimate Britannia has lost about 4% volume share in the last three years, whereas Parle has gained the same.
Going forward, the company plans to double its distribution network and increase the number of its manufacturing units.

B Krishna Rao, group brand manager, Parle Products, said the company is looking to increase its distribution reach to 7 million outlets within five years. Currently, Vijay Chauhan-led Parle reaches through 3.5 million outlets and so does Nusli Wadia-led Britannia.

To cater to the demands of a particular region, the company is planning to spread manufacturing capabilities to newer locations.

“If one of my brands is doing well, say in Tamil Nadu, it makes sense for me to set up a manufacturing unit there. The costs will be less when compared to shipping (products) from Mumbai or Delhi,” Rao said.

In three years, from a single manufacturing unit, Parle Products has spread its manufacturing footprint across 15 locations, besides 80 contract manufacturing units in its network.

The company has factories in Mumbai, Rajasthan, Haryana, Bangalore, Uttaranchal, Gujarat, Maharashtra and Kolkata.

He said the company has also entered into long-term branding partnerships with retail giants such as Future Group, Spencer’s and Aditya Birla Retail’s More to garner share in modern trade.

This move gives the maker of Parle-G, Hide & Seek, Magix, and 20-20 Cookies more visibility through pillars, trolleys and signposts at over 100 organised retail stores.

Vinita Bali, managing director, Britannia Industries, said she did not want to comment on the competition.

Meanwhile, Britannia’s glucose biscuit brand Tiger has also lost its market share to Parle-G, analysts said.

Till a decade ago, Britannia enjoyed monopoly in several biscuit categories like cookies under its Good-Day brand. Post 2005, Parle introduced cookies and cream biscuits at ¤5. ITC, which entered the market in 2003, became aggressive both in mass and premium segments, putting pressure on Britannia.

“Parle’s entry into categories like creams and cookies intensified competition for Britannia which can be attributed to its fall in market share. Competition in the biscuit space is only going to aggravate as we have multiple players in the industry today,” Amnish Aggarwal, analyst at Motilal Oswal Securities Ltd, said.

Biscuits is the largest processed food category in India and its market is estimated to be over Rs12, 000 crore in size. As per industry estimates, in FY11, the per capita consumption of packaged biscuits in India was 1.5kg per year, much lower than some of the Southeast Asian and developed nations.

Now, Parle wants to replicate the success of biscuits in the snacks segment, too. Parle entered the snacks segment in 2008 with brands such as Musst Chips, Musst Stix and Musst Bites but found little enthusiasm.

Last year, it relaunched the snacks portfolio under different names - Parle’s wafers and FullToss. “We are aiming to snatch about 20% share in the wafers category by December this year,” Rao said.

The Nielsen Company’s data suggests, in Q1FY11, PepsiCo India’s Frito-Lay has a 58% share in the potato chips segment, Balaji Wafers and ITC have 14% and 9% market share, respectively. Parle’s market share in the segment is currently around 5%, similar to that of Haldiram’s.

In FY09, Frito-Lay’s market share stood at 66%. Parle believes, at present, the category is growing at a healthy 25% year-on-year compared to 40% during 2007 when Frito-Lay was the single largest player in the category. ITC entered wafers segment in 2007-08 with brand Bingo.

Given that Parle slackened in this segment, it will be expanding its snacks portfolio considerably over the next three to five years.
“We are looking at a much larger play in snacks. In next five years, we expect to be a significant player in this category,” Rao said.

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