Parle takes war for choco-cookies to the low end

Parle Products, the maker of Parle-G glucose biscuits and 20-20 Cookies, is now launching a low-cost chocolate-chip cookie to gain further dominance in the Rs12,000 crore biscuit market where it competes with Britannia Industries and ITC.

The over Rs6,000 crore biscuits maker is launching ‘Happy Happy Choco-Chip Cookies’ that will be more than 60% cheaper than Hide & Seek, the comparatively premium offering from the company, Shalin Desai, group brand manager, Parle Products said.

Where an 82.5 gram packet of Hide & Seek commands Rs20, Happy Happy will be sold at Rs5 for a 45 gram pack.

“The cookie segment is growing strongly both at premium and mass end. We saw an opportunity for a low-cost offering to strengthen our presence in the mass end of this segment,” said Shalin.

Britannia already has a similar product, Tiger Krunch Chocochip, priced at Rs5. According to industry estimates, the cookie category is growing in excess of 15-20%, while the staple glucose biscuit category, which accounted for over 60% of the biscuit market till a few years ago, has shrunk to as much as 29%, while cookies, crackers and cream biscuits have gained share.

But in a market where premium cookies are growing rapidly with the entry of firms like Kraft Foods and ITC, and the significance of glucose biscuits is abating, why are Parle and Britannia fighting over the Rs5 price point?

First, Rs5 is a popular price point that helps consumer goods companies add new consumers and volumes. It is a coinage where consumers buy products with easy change. It is also a price point that gives companies easy access to the low-income and rural consumers. While both Britannia and Parle are building brands to tap the more profitable premium segment, a large volume still lies in the mass-end of the market and a lot of first time buyers of biscuits start with lower price points.

Consumers, however, are looking for more indulged options like flavoured, creams and cookies than just plain glucose.

Anuradha Narasimhan, category director, health and wellness, Britannia Industries had told DNA in November 2011 that the Rs5 price point is a significant part of the company’s growth, contributing 20% to the biscuit business.

“Britannia has leveraged the Rs5 opportunity through two routes - one route is to provide access and affordability through cream biscuits and cookies at Rs5. The other route is to provide delightful products for the impulse consumption moment which we have largely done through Britannia Bourbon and Britannia Treat.”

The Rs5 price point for Britannia has helped it widen its distribution base in the last two years where it now sells its low-cost cakes and cookies through a channel of pan-shops.

According to analysts tracking Britannia, however, the company’s market share has declined from 47% in FY00 to 31% in FY10. In FY11, the maker of Good Day cookies and Tiger biscuits, once the market leader, had a 28% volume market share and 32% value market share. Parle’s market share, on the other hand, has increased over the same period with current volume market share being 42% and value market share at 35%, as per research firm Nielsen’s estimates.

While Parle developed the low-cost cream and cookie market, Britannia has also tried plugging the gaps, but has largely been successful in the premium segment through brand NutriChoice.

Industry observers say Parle has been able to rapidly increase its production capacity by setting up small manufacturing units and increasing third-party units across the country than relying on large and fewer units.

It has increased distribution reach to 4.7 million outlets from 3.5 million outlets a year ago. There are approximately seven million outlets in the country that sell biscuits and the company plans to cover them all over the next four years.