The humble dal, chawal and roti have never been as fashionable as they are today. Right from Bollywood icons to celebrity chefs to dieticians, everyone, it seems, is talking about the goodness of traditional Indian food. Nowhere is the trend clearer than in a modern retail store where you nowadays see "disproportionate" shelf space being dedicated to Indian staple food such as wheat, pulses and rice. The Rs 25,00,000 crore Indian staples business is certainly gathering steam as branded staples make their way into consumer homes.
Future Group, for instance, sells as many as 100 varieties of rice from Kolam and Sona Masoori to Govind Bhog and, of course, Basmati. Its wheat brand, Desi Atta Company, has close to 57 varieties of flour. Similarly, Godrej Nature's Basket has created a premium staples brand called Healthy Alternatives which has 13-14 rice varieties ranging from brown to black and even red rice. Each pack mentions the sourcing story of that variant and why it is good for you.
Even cash & carry retailer Metro Cash & Carry, which mostly caters to kirana retailers and institutions such as hotels and restaurants, has three staples brands - Arrow, an entry-level brand, Fine Life, which is premium, and Fine Life Bio, which claims to be organic and pesticide free. It competes with other premium organic brands such as Health Mantra. "We have people who are experts at buying different varieties of rice relevant to local tastes. The importance of good quality, pesticide-free products across the value chain is growing," says Arvind Mediratta, Managing Director, Metro Cash & Carry.
The modern Indian consumer is well travelled and has had the opportunity to try various cultures and cuisines and get influenced by different cooking styles. But now, there is a trend of coming back to the roots, say food industry executives. They may be inspired by keto diets and food cooked in cold pressed olive oil but very much want the good old dal, roti and sabji as they believe this is where nourishment comes from. "They want food fresh from the farm which is authentic and pure. There is an opportunity for people who genuinely deliver that," says Richa Arora, COO (Consumer Division), Tata Chemicals.
Ashni Biyani, Managing Director, Future Consumer Products, wonders why none of the food majors have focused on staples, also called the centre-of-plate food. "Barring ITC, companies have made very little effort to brand the centre-of-plate food. We may have branded namkeen, chips and beverages but little effort has gone into branding the centre-of-plate food."
Building the Category
Biyani says building habits and branding staples isn't easy. "However, once cracked, the opportunity is so much larger. For us, food is all about nourishment and finding everyday purpose, which cant happen without the centre-of-plate being served and serviced."
Branded staples is a tough business as it is about branding commodities dependent on agricultural cycles. The margins are wafer thin too, in lower single digits. ITC, for instance, took close to 10 years to build its Aashirvaad brand of atta. "We had to first ensure that the price-value equation was right as the concept of buying branded atta didn't exist. Thereafter, we had different strategies for North and South. In northern markets, it was about convincing the consumer to buy a product that was more hygienic and clean than the chakki atta but not expensive. In the South, the focus was on building the category, as consumers didnt know how to use atta in their diet," says Hemant Malik, CEO, ITC Foods.
Tata Chemicals' tryst with branded staples started in the 80s when it partnered with the government of India by launching branded iodised salt. The idea was to address iodine and other micro nutrient deficiencies. Today, 80 per cent of salt available in the country is branded. The company has followed a similar route with its Tata Sampann brand of pulses and spices which claims to address the problem of protein deficiency.
"We have identified Tata Sampann as a brand under which we will build a portfolio of products. The core is nutrition. Pulses are one way of offering protein. We have also launched chila mixes, which are protein-rich products," says Arora of Tata Chemicals. The company is also planning to launch other ready-to-eat products rich in protein. "There is an opportunity to create genuine propositions around health," says Arora.
Branded staples is about value addition and not so much about just packing and selling rice, dal or atta. Mendiratta of Metro says the fastest growing staples brand at his stores is organic Fine Life Bio, which he claims is pesticide free. However, a large segment of his customers still prefers buying loose, the only difference being that it is much more quality conscious than before.
"There is so much more you can do with flours and other staples," says Biyani of Future Consumer. She sells a brand called 90/10 Atta, which has 90 per cent atta and 10 per cent oats. "Indians dont just buy the regular atta. There is nachni, jowhar and bajra atta; one can value-add by making them gluten free, protein enriched, and so on."
Still, the fact remains that it is a low margin, low profit business. "The margins are too low to build brands through advertising and marketing, especially at low scale," says Debashish Mukherjee, Partner, AT Kearney. But the companies are getting attracted by the huge scale of the segment. "The per person consumption of staples is far higher than that of biscuits or dairy products," he says. ITC's Aashirvaad is already a Rs 4,000 crore brand, while Future Group's Desi Atta Company has become a Rs 300 crore brand in a span of three years.
So, how are companies managing profits and margins? Is premiumisation the key? "One cant make money by just being premium. The staples business is a supply chain story," says Malik of ITC Foods. "It is all about how competitive I can be and that's where our e-Chaupal and agri business come in. We not only get the best price, we are also efficient and innovative in reaching manufacturing locations," says Malik. Instead of the farmer delivering wheat to the manufacturing location, ITC collects from the farm and transfers it to the factory on a trailer. "Every paisa makes a difference. This gives me scale."
With raw material accounting for close to 80 per cent cost, backward integration and sourcing become crucial. "Sourcing efficiently is one part of the game. More important is market-linked pricing. When commodity rates go up and down, it is important to have market-linked pricing, so that you don't miss out when the market is high and can be tight when the market is low. You need ears on the ground, knowing what farmers are sowing and being with the farmers during harvest time," says Arora of Tata Chemicals.
The company has created a system where 25-30 per cent volumes are coming from direct distribution instead of total dependence on clearing & forwarding agents. "This is faster and fresher. You are able to manage your premium position in the market to the extent you want to. These are the things which, in terms of scale, matter," she says.
Apart from the national players, companies such as Shakti Bhog and Double Horse are happy with their region-specific play as they understand their market well enough. "The business needs huge investments. It will need the money power of a large corporate to do it," says Mukherjee of AT Kearney.
The business of branded staples is surely a longer term play. "One needs to believe in it and keep at it. It needs an Indian company to understand these nuances," says Biyani of Future Consumer. The companies, it seems, are certainly making the right moves.