Missing a beat

“Our price premium versus the market average had increased a lot and secondly, we hadn’t given the consumers a new reason to buy the brand,” says Anuradha Aggarwal, chief marketing officer, Marico. That more or less summarises what has been inhibiting volume growth of the country’s best known health edible oil brand. Saffola means heart for most consumers – thanks to almost two decades of advertisement and positioning around the heart. The buyer looked no further, when it came to buying healthy cooking oil during these decades. But during the past two years, volume has declined and growth has clogged up for the premium oil market leader.

Aggarwal doesn’t yet accept that the brand is under pressure but instead says that growth has been rather flattish. However, analysts are not so forgiving and say that Saffola has been under constant stress during the past year. “Except for Sundrop, it has always been at a premium. When you are at a price premium, and the consumer is under pressure, it will reflect on the brand. Saffola is blended oil and consumers are getting comparable options at a cheaper price,” says Amnish Aggarwal, research analyst, Prabhudas Lilladher. The 16% volume growth in FY11 tapered to 7% in FY13, and to 6% in FY15.

Rice bran oil has been the villain feels Pankaj Sharma, head of equities, Equirus Securities. Saffola fared well when the rice bran wasn’t present in a major way. “In its first year, rice bran overtook Saffola in many markets as both are promoted on a similar health platform but the price differential is significant,” he says. Kamani Oil’s Riso was the first rice bran oil and was later followed by biggies like Adani. Being made from rice husk and not requiring any imports, the government has also promoted rice bran oil. 

Analysts also feel that Saffola has been inflexible on pricing. While the rest of the industry operates on a 10-12% gross margin, Saffola has been making twice that. On top of that, alternatives like palm and soya have fallen in the past two years, widening the pricing differential vis-à-vis Saffola. Aggarwal downplays the threat from rice bran. “The edible oil market is a very large ocean and various brands will try to garner share. Saffola has been around for a very long time and it has a very unique equity and standing in the market, so we don’t see the emergence as a threat”.

That said Marico is actively following a multi-variant strategy by segmenting Saffola. The three major variants are Total (at the upper end targeting people with heart concerns), Gold, and Active at the bottom (positioned for proactive usage). In south India, it has a mid-brand called Tasty, priced lower than the other three to compete in the mid-price market. As an extreme measure, Marico was reported to be mulling over a dual pricing strategy, i.e. different price for same product to perk up sales in weaker markets. But it hasn’t employed that strategy yet.

The strategy of doing different variants in different parts of the country has been around for a while, “but the very sharp benefits segmentation as well as differential pricing, and the focus on Saffola Tasty in the south & Saffola Active in the rest are recent. It is only this year that we have followed this strategy,” says Aggarwal.

Upgrading to reality

Olive oil is another spoilsport that has slithered on to grocery shelves in a big way. The irony is that Saffola created the premium health category and olive oil has piggybacked on it. But Aggarwal rules out olive oil as a serious threat. “Olive oil category growth has started leveling out because there is resistance to high price. Also, Indian consumers don’t realise that the olive oil that they use for Indian cooking is not the one to which heart benefits are attached to.” Analysts too agree that being sold at least ₹450 per litre, olive oil can’t dent Saffola’s customers. “Saffola Total, the most expensive sells at ₹180 per litre,” says Prabhudas Lilladher’s Aggarwal. Though, it dismisses olive oil as a threat, Marico is doing everything to guard its perch. Its recent advertisements claimed its oil to have better benefits than olive oil. This was immediately challenged by olive oil exporters in courts. However Aggarwal states, “our claims are backed by clinical studies and scientific research.”

The other leg of the company’s strategy to guard two decades of hard work is extensions. Not succeeding with Saffola low sodium Salt, Saffola atta for diabetics, Saffola rice, and Saffola zest salty snacks from 2009-10, it hit a silver spot with oats. Company claims that it holds a value market share of 21% in oats category, and 61% in oat as a snacks category, which it created (i.e. flavoured oats category). “We have broken away from the norm of positioning oats as a breakfast cereal. I think we have been successful in selecting the right category and tweaking it to suit Indian tastes,” says Aggarwal.

Oats is still a narrow category with the company doing ₹80 crore-business but companies are working hard to develop it. Sharma of Equirus Securities finds an analogy from the biscuits world. “McVitie’s was the first to enter and start with organised retail. Because they did not have a distribution reach, Britannia ate into that market. Similar thing has happened here. Kellogg’s and Quaker can’t match Marico’s distribution muscle.”  

“We think masala oats can be a growth driver and a big play for us,” add Aggarwal. That sounds promising but Saffola is dealing with a growth challenge. And Marico needs to find a way out. As Aggarwal herself points out, it needs to make sure “that we are at relatively smaller premium versus the rest of market so that consumers can upgrade to Saffola more easily and grow the franchise.”

Analysts feel that with subdued growth in the oil category, Saffola hasn’t been able to upgrade consumers significantly (upgradation being a central plank of their strategy). Going forward, if they don’t climb down a little on pricing, the volume stress could sustain. So, are Aggarwal and her company ready to experiment with a new pricing strategy in the near future? “I think we have a stable mechanism right now. So I can’t really tell you what experimentation we’ll have to do but we have our eyes and ears close to the ground and we will constantly keep a lookout for how our current portfolio is doing and we will be flexible enough to make changes if necessary,” she says. That sounds like a yes and no and one has to wait to see what’s inside their heart.