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"Snacks food industry in India is competitive & evolving"
Monday, 09 January, 2017, 08 : 00 AM [IST]
Prataap Snacks Limited is one of the top six Indian snacks food companies in terms of revenue in 2015, and among the fastest growing companies in the Indian organised snacks market between 2010 and 2015. The company started its operations a few years back and in a short time established its brand Yellow Diamond. Prataap Snacks is one of the fastest growing home-grown snacks food companies, which has achieved more than Rs 750 crore in revenues. The Yellow Diamond brand is manufactured in production facilities spread across India. In an email interaction
Amit Kumat, MD & CEO, Prataap Snacks Ltd, spoke to Ashwani Maindola
about the company. Excerpts:
Tell us about your company and brand Yellow Diamond. Elaborate on the brand since its inception.
Prataap Snacks started its operations a few years back in 2009 and in a short time, it has established its brand 'Yellow Diamond' as a strong player in the snacks market. As per the FS report, Prataap Snacks was one of the top six Indian snacks food companies in terms of revenues in 2015, and among the fastest-growing companies in the Indian organised snacks market between 2010 and 2015. In fiscal 2014, fiscal 2015 and fiscal 2016, the company’s revenues from operations (net) were Rs 4,456.15 million, Rs 5,588.07 million and Rs 7,571.90 million, respectively.
The company is present in three major savoury snack food categories - extruded snacks, chips and namkeen in India and all the products are sold under the Yellow Diamond brand. This diversified product portfolio enables the company to cater to a wide range of taste preferences and consumer segments, including adults and children. The products in the extruded snacks category are primarily targeted at the youth and children while the potato chips and namkeen category of snacks are for all consumer segments.
The companies brand philosophy emphasises delivery of maximum value to consumers and this is reflected in the marketing campaign “Dildar Hain Hum.” The brand equity has increased over the years, driven by product innovation and cost efficiencies in production and distribution operations, and offering superior value proposition for consumers, through a wide range of consumer-driven flavours, and providing relatively high grammage, i.e., a relatively high volume to weight ratio, for products.
What are the major challenges that you faced while setting up the business? Highlight the diversified product portfolio of the company.
The snacks food industry in India is highly competitive and evolving. Consumers are always tempted to shift their choices and preferences whenever new products are launched or various marketing and pricing campaigns of different brands are introduced. These competitive factors in the snacks food industry were a challenge for us while setting up the business. Established players in the market have substantially greater financial resources, wider distribution tie-ups, larger product portfolio, technology, research and development capability, and greater market penetration. In this scenario, for a new player, matching up to the aggressive marketing and distribution initiatives becomes a challenge.
As far as the product portfolio of the company is concerned, the company is present in three major savoury snacks food categories - extruded snacks, chips and namkeen in India and all the products are sold under the Yellow Diamond brand. The Yellow Diamond product range includes Potato Chips, Chulbule, Rings, Puff, Namkeen, Wheel and Scoops. This includes a wide range of snacks foods, flavours and SKUs, thereby effectively addressing a large consumer base. As of June 30, 2016, we had 25 flavours of chips and extruded snacks; and 23 varieties of namkeen in the market. The portfolio also includes traditional Indian snacks as well as Western snacks. Our capacity to develop innovative snacks products, effectively supported by our strategically located manufacturing and distribution network, enables us to launch and market new products aligned to evolving consumer preferences.
The competition in the FMCG industry is growing rapidly, considering that are you planning expansion of your product portfolio? Which target audience do you cater to? And which are the best selling products in your product portfolio?
The diversified portfolio of Prataap Snacks caters to wide range of taste preferences and consumer segments, including adults and children. The products in the extruded snacks category primarily target youth and children while potato chips and namkeen are for all consumer segments.
The company will continue to expand the product portfolio and distribution reach, focus on increasing sales volumes, and strive to provide differentiated offerings to the consumers. To cater the demand for healthy snack options, we intend to launch a new variety of healthier savoury snacks under the “better for you” segment. We also intend to foray into the chocolate-based confectionery snacks business. We will use our currently established distribution network to cover the new products that we plan to introduce. Rings under the extruded snacks category is the best selling product in our product portfolio which grew at a CAGR of 138.98% since its launch in fiscal 2012 to fiscal 2016 and we became the market leader in this product segment in fiscal 2015 (source: FS Report)
Comment on your manufacturing facilities. How many production facilities/plants do you have, the technology that goes in and what is the production capacity of your manufacturing plants?
We own and operate three manufacturing facilities across India - one located at Indore, Madhya Pradesh, and the other two are at Guwahati, Assam. In addition, we also engage two facilities on contract manufacturing basis, one located in Bengaluru, Karnataka, and other one in Kolkata, West Bengal. As of August 31, 2016, the aggregate estimated installed capacity for these owned and operated manufacturing facilities was 79,100 MTPA. Our manufacturing facilities are strategically located, near our key markets and raw material supplies, thereby ensuring cost-efficiencies in procurement of raw material as well as transportation of finished products through super stockists and distributors, and enabling us to leverage economies of scale.
What is your existing market share and what are your targets for future, are you tapping foreign markets as well? If yes, which are the key markets?
In India, the demand for overall snacks foods grew at a CAGR of 16% from 2011 to 2015. (Source: FS Report). Our revenue from operations (net) has grown at a CAGR of 47.92% from fiscal 2012 to 2015. We have also been gaining market share in the snacks food market over the years. From 2010 to 2015, our market share increased from 1% to 4% (Source: FS Report). The revenue from sale of our Rings product grew at a CAGR of 154.73% from fiscal 2012 to fiscal 2015. We became the market leader in Rings in 2015 (Source: FS Report). Our Potato Chips, Rings and Chulbule products currently generate revenues of over ? 1 billion. Although, we began our operations only in fiscal 2009, we have established a strong presence geographically across different regions in India. We are one of the leading players in the East Zone with a strong presence in the North and West Zones and are increasing penetration in the South Zone as well. (Source: FS Report).
While continuously reinforcing our position in India, we plan to explore select market abroad, such as South Asia, to expand our sales in these regions and enhance our brand recognition internationally.
You have recently signed actor Salman Khan as the brand ambassador, what is the rationale behind it? Are you expecting some positive increase in demand through this initiative?
Salman Khan is the perfect brand ambassador for us, as he has a pan-India appeal that a brand like Yellow Diamond endeavours to stand for. He is the man for the classes and masses just as Yellow Diamond is a brand for all. We believe that this association with Salman Khan will give more visibility to our brand and it will take our brand philosophy “Dildaar Hain Hum” to new heights.
Elaborate on your marketing and advertising initiatives. What is your marketing budget for this year and how much are you planning to spend on advertising and marketing activities in the coming years?
We have, in the past, launched a multimedia campaign “Dildaar Hain Hum” that was intended to increase brand awareness and strengthen the recall of the Yellow Diamond brand. Other successful campaigns include tie-ups with popular children’s television channels and programmes to promote our products through select cartoons, programmes and movie marketing. We have also recently engaged Salman Khan, an actor in the Hindi cinema industry, to be our brand ambassador for a period of two years. To further increase the brand awareness, we intend to leverage the Yellow Diamond brand, and advertise all products in savoury snacks portfolio under the Yellow Diamond brand. We have spent ? 241.92 million on advertising our products in fiscal 2016 across kids’ channels and general entertainment channels.
What trends and challenges do you foresee for the retail sectors in India in the coming years?
With a large population, the food market in India is seeing large investments. The current Indian foods market is estimated at ?2,700 billion and is expected to grow at a CAGR of 11%. The food industry has received FDI of about US$6.7 billion in the last 15 years with a further potential to receive over US$33 billion in the next 10 years. Additionally, the food processing industry in India contributes about 14% to the GDP, while accounting for 6% of all industrial investments. The per capita food consumption in India is three to four times lesser than that of developed economies. The low per capita consumption and the shortage of food in certain pockets offer tremendous opportunities for food companies. This has been recognised by many companies, including the global ones, which are increasingly investing in India.
The Indian snacks market is characterised by a large number of unorganised players across all product segments. This stems from each type of snack being very specific to each region, and hence, many small companies cater to that market. These players have a slim portfolio of products, usually of a single category and in many cases only provide traditional snacks items. They also operate in a small geographic range confined to a single state or city. Apart from this, there is a large presence of players that supply fresh products in chips and traditional Indian snacks categories. The organised snacks market has been witnessing high growth over the last few years. This is because of the overall growth in the processed foods segment, followed by the moving trend towards consolidation of markets. Some of the traditional Indian snacks have fared better than Western snacks.
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