India's biscuit industry heading towards premiumisation

Kolkata - India's Rs.150-billion ($3 billion) biscuit industry, the third largest in the world, is witnessing a major shift towards 'premiumisation' as  consumer preferences change,  fuelled by soaring disposable incomes in smaller towns and health awareness.

People with lower incomes are also upgrading from the 'affordable' glucose biscuits to mass cream biscuits and mass cookies.

The biscuit industry, which consists of economy, middle, premium and super-premium segments, is likely to grow at 20 percent annually in the next few years.

But the premium and super-premium segments, according to industry experts, are believed to be growing at a much faster rate, probably more than 30 percent on a year-on-year basis.

"Currently, economy and middle segments (mass segment) comprise about 70 percent of the total biscuit market in India. I think in the next five years, the share of the mass segment would

come down to 60 percent and the rest would be premium and super-premium segments," Parle Products group product manager B. Krishna Rao told IANS over phone from Mumbai.

Parle, which is India's largest biscuit maker with a 45 percent market share, said biscuit companies in the country are coming up with more products in the rapidly growing premium segments to tap the market.

"Competition in the economy segment is extremely difficult as it would put pressure on the bottom line (profit)," Rao said.

Explaining the reasons for the consumers' growing preferences towards the premium biscuits than the mass products, he said smaller towns were now having modern trade centres with consumers possessing more disposable incomes, which resulted in spreading of mall culture.

"Currently, there are about 40 mini metros across the country. The scenario was different a few years ago. Smaller towns like Durgapur, Asansol, Surat and Rajkot now have modern trade centres like malls. Retail chains like Big Bazaar are coming up also in tier II and tier III cities," he observed.

He said while the economy segment was likely to grow at a range of 15 percent to 18 percent annually, the premium segment was expected to clock 30 percent growth.

As a result, Rao said, a lot of companies would introduce products in the premium and super-premium biscuit segments in the days ahead.

Parle, which owns brands like Parle-G glucose biscuits and 20-20 in the mass segment, also possesses brands like Hide & Seek and Hide & Seek Milano in the premium segment.

While biscuits priced at Rs.100-150 per kg are categorised as middle segment, biscuits with an MRP of Rs.125-150 per kg fall in the premium category. Priced at below Rs.100 a kg are in the economy segment and above Rs.150 a kg in the super-premium segment.

Another biscuit major Britannia seconded Parle's observation on the consumers' preference shifts towards premium products.

"Over the last few years, the biggest shift that has been happening (in the country's biscuit industry) is the premiumisation shift," said Anuradha Narasimhan, category director, health and wellness, Britannia Industries.

"And this is best borne out by the reducing contribution of the glucose segment. The glucose segment used to contribute 33 percent by value a couple of years ago and this has dropped to 24 percent," Narasimhan stated.

According to her, people belonging to the lower income group are upgrading to mass cream biscuits and mass cookies.

She said the current trend would not just continue but grow in magnitude and people would prefer not just 'affordable delight' but seek specific benefits in food products, including health needs.

"We see the benefits of health as well as indulgence being played out - these benefits will democratise and not just be the purview of top-end audiences. Health and convenience are

primary drivers of food consumption - with the health need being very key," she pointed out.

Narasimhan said the health wave in India was being fuelled by the high prevalence of diseases such as diabetes and hypertension as well as awareness driven by the media.

"We believe the biscuit market will continue to grow in the range of 20 plus percent - with premium segments growing much faster," she added.

Britannia, which operates in both the mass and premium segments, has popular brands like Marie Gold, Little Hearts and Time Pass.