Published: Mar 01, 2017 | Economic Times | Amit Bapna
In the early 90s, Indore-born Amit Kumat was a young student in the US and an important part of his food-routine was a potpourri of daal and rice with Lays chips (as a replacement for the desi papad). His belief in the power and potential of snacks as a sunrise category firmed up then itself, he recalls. It was in 2004 that Yellow Diamond was launched as a home-grown snack offering by founders, Amit Kumat, MD & CEO, Prataap Snacks, along with Apurva Kumat and Arvind Mehta.
Today, the snack brand operates in three categories and has a footprint across 1.2 million outlets across the country. These include chips, namkeens and extruded snacks and they contribute 22%, 12% and 68% respectively to the total portfolio. Extruded snacks comprise potato or cereal based snacks like 'Wheels & Scoops', Chulbule, Puff and rings. The rings, in particular, have a huge following among kids thanks to a toy in every pack. Launched three years ago, the rings are at a `500 crore run-rate per year, shares Kumat. The combination of taste, flavour and toy has worked well, he adds. As per the company's annual report, the revenue generated from sale of rings products increased at a CAGR of 74.78% from 2014 to 2016.
A little-known nugget about the company: they are the biggest consumers of toys in the country with a staggering 5 million toys on a daily basis, according to Kumat.
Bullish on snacks
India has been seeing a huge movement of the unorganised snack-market gravitating to branded consumption, helped by modern trade which is spurring the growth of the Rs 500 billion Indian snacks market. Kumat recalls meeting Michael Moritz, founder of Sequoia Capital in 2013 who had said, "The food category in India is one of the best categories to invest in". They were that bullish on snacks and food industry, he adds. Sequoia continues to be invested in Prataap Snacks, the parent company of Yellow Diamond, since 2011.
Some Snacky Truths
Interestingly, while the chips market is picking up, the one that is seeing phenomenal growth is the extruded snack market. In the chips segment, there is very less scope for innovation and while brands keep launching flavours, finally just three flavours rule, says Kumat, while in extruded snacks there is a lot of scope for variation and innovation. The namkeen category is not a very big one yet for them, even though the brand has over 20 SKUs. Explains Kumat, "Namkeen is a planned purchase, and hence a tough category to penetrate, unlike the other two."
Healthy ya Tasty
Globally, colas and junk food are under a lot of pressure with increased levels of health and nutrition awareness, so does that make the going tougher?
Kumat says yes but also points out, "10-15% of consumers want something (in snacks) that is healthy. There also it is the positioning that has to be healthy, the snack may or may not be healthy." Globally, snack companies have already started reducing oil and sodium content, and it's only a matter of time before Indian consumption gets impacted as well. In Kumat's view, healthy snacks have not been very popular in India because when it comes to snacks, taste trumps real health benefits.
Big fish, small pond
Operating in a market that has dominant players like PepsiCo's Lays and Kurkure at one end with their enormous clout on distribution, marketing, and brand-loyalty and home-grown big companies like Haldirams and Balaji Wafers on the other, is likely to be a roller-coaster ride for a brand like Yellow Diamond. Then there is the journey from being regional to national while retaining relevance. Devendra Chawla, group president - Food, FMCG, Brands at Future Group, points out, "What makes a regional brand a success in a region becomes its Achilles heels in other regions, given India is many countries when it comes to food and taste." The brand also needs to figure out the 'small to big' equation. Says Seema Gupta, associate professor, IIM Bangalore, "It's important for the brand to identify focal markets and increase its market share in those markets."
The mass-brand conundrum
For a brand steeped in value-led and mass-base origins, upgrading is always a challenge. Anisha Motwani, managing partner, StormTheNorm Ventures, says, "For a large segment of people in this country, price-point is a marker of quality and aspiration, and , downgrading a brand's image from classes to masses is far easier than vice versa." Adds Dr. Rajneesh Krishna, associate dean, MICA, "When it was launched, Yellow Diamond cracked the code of Indian flavour and taste and targeted the lower SEC and succeeded, and their pricing was just right."
Now the brand is attempting to increase its reach through a slew of ATL activities, with the help of film-star Salman Khan as the ambassador. Elaborates Arun Iyer, chief creative officer, Lowe Lintas, "The task is of perception creation for the brand in the minds of the many consumers for whom it does not exist in their scheme of things - without losing out on the core consumer base's loyalty." It started out as Air Deccan and has the potential to become Indigo, says Iyer.
Will Bhai's magic work?
It would be interesting to see if Salman Khan would be able to work his fool-proof box-office appeal on the snack brand as well. Or help it get national brand status, given the ambassador's country-wide appeal, says Chawla. According to Iyer, "There was a fit in terms of the brand's tag-line 'dildaar hain hum'." The question, however, is will consumers across the country open their dils and wallets.