Packaged food transforms 'mithai' shops

Around Diwali last year, neighbourhood mithai (sweet) shops in cities looked different. Traditional Indian sweets still abounded, but gift packs of Ferro Roche, Cadbury’s and Nestle were equally ubiquitous. Some media reports even said sales of dairy-based Indian sweets —- it is a Rs2,500-crore annual market — dropped 30%, something unthinkable even at the beginning of this century. Then, traditional sweet shops would erect oversized counters to meet festival demand. Now, a transition to packaged sweets is on, which is somewhat quickened by widespread adulteration in dairy-based sweets.

Urban consumers fancy alternatives to traditional sweets. This change in preferences will have both a profound impact on local mithai shops and significant implications for FMCG companies and retailers. Two interesting trends characterise the sweets market now:

Consumers will migrate to new habits
This is not a new inference. Consumers have not stopped eating mithais altogether, but the urge to savour or gift chocolates is growing increasingly stronger. For instance, Cadbury’s gift packs have successfully challenged the dominance of mithais during the festive seasons. Biscuits, cookies and savouries are also gaining in popularity.

Imagine a new India of 700 million consumers gradually accepting this trend. It will spawn a huge market indeed. Processed cheese could replace cottage cheese which we call paneer. People will likely drive in for a slice of pastry rather than for a gulab jamun. Bakers could replace mithaiwalas. People might start exchanging gifts of latest flavours of organic tea, not barfis made of khoya (milk food made of either dried whole milk or milk thickened by heating in an open iron pan). The coming decade may offer a big opportunity for under-penetrated food categories.

Packaged food sales will soar
Quality of packaged food products may be perceived as better than that of local dairy offerings. Such a perception will shape the consumer response at two levels. One, consumers will reduce their spend on local dahi (curd), paneer, cream and khoya.  This does not mean that the need for these food categories will get extinguished. It will become dormant. The consumer will actively seek alternatives in safe, reliable and trustworthy options. Perpetual shortfall of Amul’s milk products and Nestle curd on retail shelves is a sign of this emerging trend.

Mithai shops can be broadly divided into two categories, and these trends will play out differently in each of these categories. The first category is a ‘destination shop’. These shops have had a long history. Every major city or town usually does have one such shop. These shops have built a strong reputation and an unprecedented staying power. Such shops will survive and even thrive.  Some such shops will take a branded route. Das of Kolkata and Pulla Reddy sweets in Hyderabad are two such examples. Others will augment their shelf space or introduce quick-service restaurants. Haldiram’s and Bikanerwala have both done this.

The second category is the ‘neighbourhood shop’. These shops sell mithais and local dairy products but offer limited product differentiators. Consumers patronise them for accessibility. These shops will undergo a complete makeover in the next decade. Signs of this trend are already beginning to emerge. A visit to any such shop will reveal that a significant proportion of shelf space is assigned to non-mithai categories. But consumers are also confused about the positioning of these shops. They still think it is a mithai shop. But when they visit these shops, they end up buying packaged savouries, beverages or chocolates as an afterthought.

This is an interesting situation laden with challenges and opportunities. On one hand, Mithai shops are searching for a unique position in the market. On the other, they offer unique last- mile delivery advantages. This is an exciting opportunity for packaged food, processed food, health food, beverages and kids food.

The ongoing transformation of mithai shops will unearth hidden opportunities for many categories to grow and overcome infrastructure challenges. These categories can aspire to associate with existing mithai shops and open up vast areas of readymade retail shelf space.

— The writer is associate director at Technopak Advisors and
can be contacted at Ankur.bisen@technopak.com