The cookie mart is heating up in the premium segment

The war of the cookies is getting more intense, with a host of new players entering the fray and the older ones ramping up presence.

The latest to storm in is chocolate maker Cadbury India, a wholly owned subsidiary of Kraft Foods Inc. The company is launching Kraft’s global brand Oreo, which will be manufactured in India and priced at Rs5, Rs10 and Rs20 — significantly cheaper than the Oreo biscuits available through importers so far.

The biscuits market in the country is valued at Rs11,500 crore.

Anand Kripalu, president - South Asia and Indo China, Kraft Foods and managing director, Cadbury India Ltd, said the company will use Cadbury’s wide distribution network to market the biscuit, and focus on the premium biscuits market, which is growing in excess of 20% a year.

Oreo, which is available in 11 variants globally and has sales of over $1 billion annually, has initially been launched in vanilla cream flavour, Kripalu said, adding that some of the other variants will be launched over time.

Kraft’s focus points to the rising buzz at the premium end of the market — typically, the Rs10-30 bracket.

While nearly 50% of the market is still in the glucose biscuits segment, the players are increasingly looking to grow contribution from more profitable segments — cookies, cream biscuits, crackers and niche products on the health platform.

Among others, cola maker PepsiCo has started rolling out its global Quaker Oats brand of premium cookies at a price point of Rs30, even as Nusli Wadia-run Britannia Industries Ltd, Parle Products Ltd and cigarette maker ITC Ltd are all looking to launch more premium offerings.

ITC Ltd recently launched two products under its Sunfeast brand —- Dark Fantasy Choco Fills and Dark Fantasy cream biscuits — priced Rs30 and Rs20, respectively.

Britannia too launched a cream biscuit brand, Treat-O, recently. It was sued by Kraft Foods over infringement of trademark and copyright of Oreo. In the last few months, Britannia has also launched premium products like Diabetes Friendly Essentials and Chocodecker.

One reason for the rush to the premium end is the pace of growth — the glucose segment has been growing at a sluggish 8-10% compared with the premium segment’s 25-30%.

The players also have their eyes set on consumers’ craving for variety and their growing propensity to spend.

Then there is heightened competition from international players.

Interestingly, in the last five years, Parle Products and Britannia, and more recently ITC, have also made some premium category offerings such as cookies and cream biscuits affordable for consumers by launching them at price points as low as Rs3 and Rs5.

Also forcing a shift to the premium segment is the fact that the biscuit business has become a challenging one over the last two years, with the prices of key raw materials — wheat, sugar and milk — doubling and the volumes dwindling.   

Yet, at the lower end of the market, there is lesser scope for the players to pass on the hike and protect their margins.

“Premium (segment) is where the margins are. Biscuits is a commodity-led business and a highly-penetrated one in India. Naturally, nobody wants to grow the glucose segment except for players like Parle or Britannia for whom it is a matter of life or death,” Gautam Duggad, equity research analyst, Prabhudas Lilladher said. “Going forward, the market will be driven by premium offerings.”

Mayank Shah, group product manager, Parle Products said that for consumers entering the biscuits market, glucose segment is the access point, beyond which there are better formats —- cookies, creams, salted, non-salted, crackers. “While glucose is growing, premium biscuits are growing faster. For newer players in the biscuit market, it only makes sense to tap the premium market,”

According to Shah, Parle dominates 75% of the glucose biscuits market with Parle-G.

The biscuit market in India is expected to grow at a minimum 12% a year over the next 3-5 years, driven by the premium segment.

Representing the premium biscuits market are players like Unibic India that sells cookies, United Biscuits India that sells McVitie’s digestive biscuits.

Regional players like Priyagold, Dukes and Cremica that are doing well in rural markets with their value-for-money offerings.

As per a Nielsen study, the overall biscuit category grew 17% in 2010, with cream biscuits leading overall growth.

Parle Products, the maker of Parle-G, Hide & Seek, Magix, and 20-20 Cookies, is the market leader with 40% market share, followed by Britannia that has a 31% market share and sells brands like Tiger, NutriChoice, Good Day, Marie Gold, Treat and 50-50. Britannia’s share has fallen from 47% in 2000.

ITC, which entered the biscuits market in 2003 with Sunfeast, has an 8% market share.

GlaxoSmithKline Consumer, which sells biscuits under the Horlicks brand, has over the years managed to garner 1% market share.

“The biscuit market has evolved to become larger and with a bigger set of competitive players. A large number of new entries are, however, me-too entries, contributing to the sea of sameness,” a Britannia spokesperson said, adding that the company plans to drive profitability by superior innovation and differentiated offerings at all price points.

The penetration of biscuits in India used to be 60% four years ago, said Shah of Parle.

“Today, it is 75%. In urban markets alone, the penetration is up 90% now from 75% earlier,” he said.

This leaves existing players to bank on driving volumes and increasing the per capita consumption of the category.

“Per capita consumption of packaged biscuits has increased from around 0.4 kg per year 10 years ago to around 1.5 kg per year currently.

This is lower compared to 2.5 kg in Southeast Asian countries and over 5.5 kg in developed nations like the US and Europe. Also, per household spend on biscuits is still low at Rs55 per month. Hence, increase in per capita consumption continues to offer significant scope for growth,” analysts Sanjay Singh and Pratik Biyani of Standard Chartered Research wrote in their report in January.