Crunch Time

It was Kellogg’s who brought cereal boxes to India. It was one of the many flavours Indians got exposed to after the government opened the gates to foreign brands in the ’90s. But the world’s largest breakfast cereals company, which entered the country, hoping to westernise Indian breakfast habits, has changed track and is trying to give its products the Indian twist, a full two decades later. 

“Kellogg’s has not only made products to suit the Indian palate, but has invested time and resources to understand Indian culture and context,” says Sangeeta Pendurkar, MD, Kellogg’s India.

The outcome has been many a local flavours. In the ready-to-eat cereals segment, Kellogg’s has introduced variants such as Mango to build up its portfolio. Besides, it has forayed into the hot cereals category, acting on a fundamental insight about Indian eating habits. “Globally, breakfast is consumed cold and sweet, in India it’s opposite,” explains Pinakiranjan Mishra, partner, retail and consumer products, Ernst and Young. 

This is probably why the company entered the savoury oats segment too. “We have stayed true to the consumers’ need for local flavours and launched savoury oats in flavours like ‘Simply Pongal’. Kellogg’s Daliyumm (Dalia)takes just five minutes to cook and Kellogg’s Ragi Chocos has brought back the ancient grain in a new avatar,” Pendurkar says of the brand’s efforts. 

Savoury not sweet 
The overall breakfast category stands at Rs.1,400 crore, according to Euromonitor. It is divided into ready-to-eat cereals like cornflakes, choco flakes (dominated by Kellogg’s, with 47% market share) and muesli, and the hot cereals segment comprising of oats. While PepsiCo, with 37% market share, leads the plain oats category, spicy oats is dominated by Saffola, which holds 70% market share.

PepsiCo, in fact, was the prime mover in the hot cereals space, introducing its Quaker range of oats back in 2006. It’s a fast growing category, considering the youth today are “struggling to strike a balance between nutrition and convenience,” says Deepika Warrier, vice president, nutrition category, PepsiCo India. “In the morning rush hour, breakfast solutions that offer such benefits along with taste and variety are a big draw with the growing numbers of working women, who are committed to being perfect homemakers too,” she adds. 

Although oats is still a nascent category in India, Warrier says, “It has overtaken the popularity of cornflakes.” However, she adds that within the packaged breakfast category, the ready-to-cook (RTC) segment has been gaining significant traction over the past two years. The RTC segment that Warrier mentions was created by Marico about four years back, with its Saffola masala oats. 

“We thought health foods need not be punishing on the palate and breakfast is just one of the occasions to consume a healthy snack,” says Anuradha Aggarwal, chief marketing officer, Marico, explaining why the company positioned savoury oats as an all-day snack, which could be had in place of, say instant noodles. 

EY’s Mishra though, attributes the success of savoury oats to taste more than the “health” peg. “Taste and price are the factors that decide the fate of a food product in India. Saffola had extended its health brand earlier with little success, but this time they took care of taste,” he says. 

Whether it was positioning, taste or affinity to snacks, oats have definitely worked for Marico. Saffola oats is a Rs.100-crore brand today. “Masala oats have grown over 50-60% during the last 12 months and we enjoy 70% market share in this category,” shares Aggarwal. No wonder then that almost everybody from Kellogg’s to Quaker to Bagrry’s has either launched a savoury oats version or is planning to soon.  

The home of muesli
When it comes to Muesli, a mixture of nuts, berrys and flakes, the segment is dominated by Delhi-based Bagrry’s. Influenced by Mahatma Gandhi’s ideas on consuming more fibre, Shyam Bagri started experimenting with health foods in the early ’90s. “We started off selling wheat bran as a hobby but later turned it into a serious business,” says Aditya Bagri, director, Bagrry’s. It is a Rs.100-crore company today and the only homegrown breakfast cereals brand. 

“The majority of the breakfast category in India is cornflakes and choco flakes (around 60%). But oats and muesli are the fastest growing categories. In the US and UK, cornflakes as a category is already de-growing, as people now know they are not as healthy (and have no fibre),” says Bagri, who like competitors is looking to tap Indian flavours.  

Bagrry’s has introduced ‘Oats for India’ selling aata, suji, and poha, the daily staples, made from 100% oats. The idea, Bagri says, is to offer both health and taste. “To get true health benefits, you need to have 70-80 grams of oats each day. 70 grams of porridge means two bowls, which few will eat. Oat biscuits hardly offer two grams of oat. And people have this taste barrier with eating oats as porridge.” Launched in 2014, based on these insights, the oat-based staples are still picking up. 

Flavour burst
Across segments, players though are mindful of the fact that changing the eating habits of Indians is no easy task. So, instead, they are willing to change themselves. Realising that unlike Westerners, Indians were not going to be attracted to plain boring grain just because of the health pitch, Quaker tried to incorporate flavours in its offerings. “We had the first mover advantage…in fact, we are the only player to offer a range of flavored oats with real fruits such as strawberry with apple, kesar with kishmish as well as tomato,” says Warrier. 

PepsiCo though is not looking to change its core strategy. “Quaker has been built on a strong nutrition platform. This continues to be the bedrock. We will continue on this plank and bring new formats and innovations that are customised to the Indian palate,” says Warrier. Saffola, meanwhile, has launched different flavours for North and South markets.

To instil the ‘cereal habit’ into Indians, advertising campaigns have excessively focused on creating new flavours and popularising use cases i.e. how their cereals can be consumed and cooked in a variety of forms. Where ‘Kellogg’s wale Guptaji ki family’ campaign provided different ways of preparing cornflakes-based breakfast items as sitcom-style web films, Pendurkar says, “This year, we aim to build the customisation platform further by giving consumers an opportunity to co-create recipes under ‘The Kellogg’s RealChef campaign’. ” PepsiCo, in similar vein, has its ‘Bring your tastiest bowl’ consumer campaign and has roped in chef Vikas Khanna. 

Building a habit
But despite these efforts, the overall penetration of cereals remains low, as the Indian spread has much entrenched alternatives. “There are so many alternatives at a lower price point, which are healthy (like poha). Unlike the West, India doesn’t have a packaged food culture. Even in offices, there is street food available,” says Mishra. 

Price is also a big deterrent, being on the higher side for most Indians. While companies have taken the smaller packs route to address this, Mishra says, “The problem is not of unit economics, but of overall economics.” Kellogg’s Pendurkar though disagrees. “Driving accessibility and affordability have certainly helped drive category growth. We have launched single-serve packs for Rs.5 and Rs.10, and recently launched the Kellogg’s ‘To Go’ range of breakfast pouches that people can consume out of home,” she adds. 

Despite the price point, Mishra feels that the category can grow. “Tastes are slowly changing, India is a vast market, and the category’s base is low,” he says. Some trends in this direction are already visible. Bagri says, “The segment is growing from a purely urban phenomenon to a semi-urban phenomenon. People don’t find it an alien concept there. And modern trade will play a significant role in expanding it.”

Kellogg’s is a case in point. Wading through all its challenges, the company has grown two-and-a-half-times in the past five years. “We have doubled our distribution and the number of employees in the last five years, and we reach 93% of the urban population in India,” says Pendurkar. 

Besides, the company, which already has two manufacturing facilities in the country, recently inaugurated a new R&D centre here, its first outside the US. The centre will develop breakfast products for India and other emerging markets. Considering that the brand has suffered a de-growth in its home market, the US, where sales fell 1.2% in the last quarter, its persistence with India is likely to pay off now. 

Rising urban population, which is growing increasingly health conscious, spells good news for all cereal makers. And with most willing to Indianise themselves, the bowl is about to get bigger.