It’s a ritual old-time Bangaloreans still recall fondly: a brisk walk around Lal Bagh, followed by a piping hot Udupi-style breakfast at the Mavalli Tiffin Room (MTR). And it was almost a given that no matter how early you got there, you would have to wait – sometimes for close to an hour – before you got a table. Some 50 years after the tiffin room opened, in the mid-1970s, in response to draconian Food Control Act regulations that made the restaurant business unviable, MTR’s founders, the Maiya family, launched packaged foods. They continued with the side business even after the restaurant was reopened. Until 2007, that is, when the Maiyas hived off the packaged foods business to the Orkla group. Now, the Norwegian foods company that owns MTR Foods wants to continue the breakfast tradition across the country, at your dining table, with just a three-minute wait.
In April 2017, MTR launched its range of three-minute breakfast foods — ready-to-eat, Indian vegetarian offerings that need just hot water and (as the name suggests) three minutes standing time. This isn’t MTR’s first foray into the breakfast market — in 2013, it expanded the original ready-to-cook range created by the Maiyas to include more breakfast options — and the company also has an entire range of ready-to-eat main course dishes.
But the three-minute range is the first time it has combined the two and MTR has high hopes for the success of this initiative. “This is surely our biggest bet so far,” says Sanjay Sharma, CEO, MTR. “Breakfast could be a game changer and become a Rs.1,000-crore business in seven to eight years.” In FY17, before the new range was launched, the ready-to-cook breakfast business brought in 10% of MTR’s Rs.800-crore revenue.
Ambitious? Certainly. Over-optimistic? No, declares the company. MTR’s confidence stems from the quality and convenience of its offering coupled with the fact that time is a premium for its target customer, the millennial. “There is a high level of acceptance for packaged food in that population, which will drive demand,” Sharma insists. MTR is betting on the changing demographics of India and is marking a clear shift from its traditional spices and masala businesses. Will this be a recipe for success for the company or is the company over-estimating Indian millennials’ appetite for a morning meal?
Entering a niche
Breakfast has been on MTR’s menu since 2009, when a high-powered meeting was held to discuss future opportunities. Sharma recalls the discussion vividly. “The market was completely dominated by products from the West such as cornflakes, oats and muesli. Indian breakfast had a handful of players, with a combined turnover of no more than Rs.250 crore,” he says. Terming the scenario “illogical”, he explains that was the trigger for MTR to venture into this virtually-untapped market segment.
It has taken a good eight years for the company to comb through several business plans and a mountain of consumer research before the April launch. In the meantime, MTR continued to expand its ready-to-cook breakfast offerings with healthier alternatives such as multigrain dosa, oats idli, ragi dosa and rava idli. A couple of years later, it launched promotions to promote these items as Sunday or weekend offerings in a bid to grow the breakfast market. “That gave us growth of 40-50% each year. That was not good enough since the base was too small and it was obvious we were missing out on something,” Sharma explains.
MTR undertook detailed internal research, focus group discussions and surveys of retail outlets, hotels and restaurants to understand consumer behaviour and gain critical insights. “The exercise really drove us crazy for five or six years,” grins Sharma. The findings: urban millennials had virtually no time for breakfast on weekdays. “Research showed that many people actually eat their first meal over three traffic signals,” he says. Hot, cooked Indian foods were still favoured — Sharma’s extensive travel had shown him that “99% of Indians had Indian breakfasts” — but cooking skills among the millennials was quite low. Even something simple such as a breakfast mix was impractical because it was time-consuming and called for accompaniments such as chutney, sambhar etc. The solution, then, obvious: “We had to deliver a tasty meal conveniently, by just adding hot water, and quickly, that had to be ready in three, four or, at best, eight minutes.”
It took the R&D team close to a year and a half to come up with the three savoury (upma, oats and poha) and one sweet (kesari) items that make up the three-minute range; a fourth savoury item (vermicelli upma) is being worked on. Keeping in mind the target customer and their eating habits, the products have been packaged in single use sachets (that will also encourage trials), cups for on-the-go eating and a multiple-serving box. The benchmark for pricing is somewhere in between what a basic Udupi restaurant charges and the cost of a competing, more expensive breakfast item such as cereal, muesli or oats.
The company is also well aware that breakfast foods won’t be an easy market to crack. Sharma agrees that typically, the big market opportunities lie in foods that cannot be prepared at home and are somewhat unfamiliar, including noodles, breakfast cereal and of late, pickles. “Where we play is the core of the Indian plate, which is a far more difficult place to be in.” It’s also a very small portion of the breakfast pie: the Indian breakfast market is estimated to be around Rs.400 crore, while Western breakfasts are more than four times that size, at Rs.1,700 crore. But that’s only because of the lack of options so far: given the choice, Indians will naturally gravitate towards Indian foods, believes the company. And therein lies the opportunity.
MTR is putting its money where its mouth is, with this new foray. Over the next four to five years, it will invest Rs.200 crore, of which at least half will be on the breakfast business. Around Rs.100 crore will go into enhancing capacity at its Bengaluru plant. Another 30% will be spent on machinery for these mixes. The company is also showing some serious aggression when it comes to marketing and distributing its new offering. Sunay Bhasin, CMO of MTR Foods, points out that around 75% of the annual media budget estimated for breakfast foods (estimated to be Rs.20-crore) has been spent in just two months, promoting the three-minute range. “Around one-third has gone on digital, with the rest on outdoor, radio, print and television,” he adds. That means the company has spent Rs.10 crore on just above-the-line communication or plain mass advertising.
It is also nearly doubling the reach of the new range. Currently, the products are available in around 45,000 outlets across 53 cities and towns, with the top eight cities bringing in the major chunk of the sales. The plan is to get to 80,000 outlets in the next couple of months (MTR’s other products are sold in 230,000 outlets). “The objective isn’t to just increase the number of outlets, but to do more at each store, in terms of taking more shelf space and displaying merchandise,” says Sharma. Apart from extending the existing product range and coming up with innovative products similar to its three-minute breakfast, MTR expects online sales, which at present accounts for 2-3% of the breakfast business, to increase to 10% in five years.
Even with all of this, it will still be tough for MTR to get to the projected Rs.1,000-crore revenue from breakfast. After all, the company is betting on changing consumer tastes and habits and that it is not easy to predict. Other players who have forayed into the breakfast market are yet to make their mark; the explosive growth everyone’s counting on is yet to be seen.
No doubt, the breakfast market in India is evolving significantly, forcing multinationals, too, to relook at their strategy. KS Narayanan, former head of McCain Foods and a food industry specialist, points out the marked difference between breakfast habits in the West and in India. “It is in a cold and sweet form in developed markets, which is why there is a preference for something like cereals. Indian consumers like it warm and with a taste that is distinctly savoury,” he explains.
Homegrown players such as Gits, though, already realised that. Sahil Gilani, director (sales & marketing) and a part of the promoter family at Gits Food Products, says the breakfast market is only getting extremely complicated, with the younger generation being a lot more open to international products. “That switchover obviously causes concern. But, at the same time, we are also seeing the older generation buying packaged batter mix in large quantities,” he thinks. Even with younger consumers, the issue isn’t as much one of taste as it is of convenience, says Gilani. “If we can get it right on convenience without compromising on quality, the opportunity is huge,” he maintains.
Around the same time as MTR’s new launch, Gits introduced its Wholesome Breakfast range, which offers idli, dosa and dhokla in healthier brown rice, oats and ragi variants. Prices are at an affordable 20% premium to the company’s regular breakfast variants (and at par with competitors’ products), to encourage trials among mass market consumers, even as Gilani acknowledges that “these products cater to a niche audience”. Gits is selling its new range in metros and tier I towns at upscale grocery stores and modern trade outlets, as well as online.
Even so, breakfast has been a difficult business, even for the larger players. Britannia is a case in point. In early 2011, the biscuit major made its breakfast debut with Healthy Start, a range of ready-to-cook foods such as upma, poha, porridge and oats. It came a cropper, essentially because of supply chain issues, and within two years, the company had withdrawn the portfolio, with plans to enter the business afresh. Meanwhile, global biggies such as Kellogg and PepsiCo have realised the potential in Indianised offerings. Where Kellogg now offers oats in flavours such as pudina and Chinese, PepsicCo extended its Quaker brand this year to ready-to-cook idli, dosa, upma and khichdi.
Notice something about the breakfast options offered by all these companies? They are all variants of the same three or four items – idli, dosa, poha, upma. The limited menu could be a growth deterrent, warns Ankur Bisen, senior vice-president (retail and consumer products), Technopak. “Breakfast as a business is not homogeneous in India and that limits the ability of players to offer many variants. Getting it right on all tastes and palates is impossible. But, for growth to take off, a lot more needs to be offered to the consumer.”
In such a scenario, how realistic is MTR’s ambition of growing its breakfast business more than 12 times in seven to eight years? Bhasin says there is an inherent appetite and desire for Indian food. According to him, when the market is ready, Indian food will take over western food. “Desi snacks is a case in point. There is no reason for breakfast to not take off. The challenge is convenience and not about taste. We have the advantage of being the first mover. The market is set for that explosive growth that we saw in desi snacks.” Worryingly, though, MTR’s own experience in the Indian snacks market — estimated to be around Rs.17,000 crore and growing by at least 15% a year — hasn’t been too promising. Its SnackUp range has suffered from quality issues and brings in just 2% of total revenue, six years after launch.
Bisen says there is no doubt on the potential and opportunity in the ready-to-eat breakfast segment but feels pricing will be an issue. The portion size of most ready-to-eat items (not just breakfast) is on the smaller side – which means a family meal may require multiple packets at a single sitting. “The consumer will need to be convinced to spend that kind of money – the item can be cooked or even bought at a restaurant for less than that price. Compare this with the West, where a frozen pizza at a supermarket chain is the same price or cheaper than what you will pay to a pizza chain. The reason is that years of supply chain management and product innovation have helped in controlling costs,” explains Bisen.
That’s where MTR is counting on its prior experience. According to Narayanan, the company has already demonstrated its prowess in the ready-to-cook business. “That, along with its established brand name and a sound understanding of South Indian cuisine, is a significant advantage,” he says. Even today, the ready mixes business, which includes breakfast and desserts, brings in a third of the revenue. Significantly, this foray now marks a major transformation for the company.
More ways to grow
When Orkla bought it over in 2007, MTR was a Rs.134-crore company with a presence in ready-to-eat and spices. It was a family-run entity with no serious degree of professionalism. Orkla’s deal saw the exit of MTR’s earlier owner, Sadananda Maiya, as well as JP Morgan and Aquarius Capital for $80 million (Rs.354 crore then), or 2.64x sales. When Sharma came on board the following year after a decade-long stint at Dabur, it was clear there was a lot of work to be done. According to him, there was no marketing or purchase department in the company to speak of. “The plus points were that we had a financially well-run company with a good distribution network,” he says. No brand activity had been done since 2003; it was also the year when the last packaging exercise had been undertaken. In many ways, the promoter was readying the company for a sale and was in no mood to invest. “We had a huge task in rejuvenating the brand,” states Sharma. According to him, the advertising to sales ratio when he took over was an abysmal 3%, which moved to 10% in 2012 and now stands at 16%, higher than the industry average of 8-10%. All their efforts seemed to have paid off, with the company’s revenue increasing nearly six-fold since the takeover to Rs.800 crore in FY17. (see: Steaming hot)
MTR’s traditional spices and masala business continues to account for the lion’s share of revenue (38%). With no plans to go pan-India with spices (unlike with the other lines of business), MTR will instead focus on penetrating deeper in its existing market, driving rural consumption and launching localised offerings such as a spicy sambhar powder for Andhra and a Chettinad sambhar powder for Tamil Nadu. Also on the cards is the re-launch of its snacks business next year.
MTR is making some big bets in the foods business. For now breakfast is getting all the attention. But Sharma is clear about where the company stands. “We have to look at ourselves as a culinary company and not someone just selling food packets,” he sums up. Food for thought, there.