Posted in Marketing & Strategy Articles, Total Reads: 1980
, Published on 21 April 2015
ITC Ltd’s acquisition of Balan Natural Food and their decision to reintroduce B Natural as an ITC brand has been followed closely by professionals in the branded foods sector. The decision in itself was not surprising, after all ITC CEO Y.C. Deveshvar has left little doubts about the fact that he wants to see ITC at the top of the FMCG pile even without the reliance on their tobacco business. An entry into the branded juices sector was one that fit right into ITC’s long term strategy. But the decision to go the ‘acquisition route’ was a bit different from the organic brand building that ITC had done over the last 10 odd years.
Perhaps the company saw the brand’s DNA a natural fit with their current portfolio or perhaps the perception about the brand in its existing market matched what ITC had sought to do at a national level with their own offering. This article is an FMCG industry following student’s attempt to see if the juices category is a right pick for ITC. It also attempts to evaluate the merits of acquiring a pre-existing brand with an established brand image over building an in-house product.
The Indian fruit-based beverages category has grown at a CAGR of over 30% over the past decade. At present, the Indian packaged juices market is valued at INR 1100 crore and is expected to continue growing at a fast pace. (Source – Technopak report on the Indian Juices Industry). Dabur is the market leader with over 50% of the market share but it gets stiff competition from PepiCo’s Tropicana brand which has close to 30% share. Coca-Cola’s Minute Maid brand has also emerged as a contender chipping away at the market share of other players but is yet to make a major dent on the top two. A number of regional and small players also have importance in different regions. Incidentally, a local player is exactly what B Natural was. Yet with the increasing number of players, there is still a pie big enough for everyone because of the growing tendency among urban populace to prefer juices over carbonated drinks. The primary reason for the same is that even after their presence in the market for so many years, they are still seen as unhealthy options. The pesticide controversy from a few years ago hasn’t exactly helped matters in this regard. On the flipside, juices as an industry has a readymade health plank with it. Most juice companies have clear ideas on how they want to sell their product; health and taste are always the two topmost selling propositions. Yet, Real definitely has the top of the mind recall on that front and Tropicana has been positioned a bit differently even if the health benefits are at the front and center of their marketing communication.
Herein lies a potential roadblock for ITC. B Natural, right down to the name, is being built on a health benefit pitch. But in a market which has such a large amount of clutter focusing on a primary benefit or in the very least alluding it, it will be difficult to break through on a ‘health and taste’ pitch. Plus going the tetrapak route, a tried and tested packaging for juices, also puts it in direct crosshairs of both Tropicana and Real. The visual similarities between the packaging of latter and B Natural though very superficial, might still be cause of concern because of the very high brand equity Dabur’s Real enjoys in the category. Minute Maid though not a major player at present has the advantage of being visual different from its competitors. That said, going the can route is unfeasible from a monetary point of view and the tetrapak has traditionally been the packaging of choice even in the fruit based drinks category with products like Appy, Jumpin and Frooty. Could B Natural have gone the PET bottle route? Perhaps but the brand already has visibility in certain Southern Indian markets as a tetrapak product and alienating present customers to rejig the product far too much does not make immediate business sense. So, has ITC backed itself into a corner by acquiring the product instead of building a new one? They have after all spent a considerable amount of time and energy into ‘improving’ the product post acquisition in terms of both taste as well as the packaging design.
If we look at the company’s pedigree though, it definitely doesn’t seem like doom and gloom for them. They have traditionally shown an ability to differentiate their products from the crowd. Be it the round Yippee Noodles or the innovative flavors of Bingo, they have shown that a smart product proposition spread through an integrated marketing campaign can work. They are not in a business of selling ‘me too’ products. We can rest assured that once the communication for the same starts flowing all over the country, we will see them differentiate themselves smartly. Their distribution network which is amongst the best in the country coupled with the trust and the goodwill they have generated over the years ensures that not only will their products get decent shelf space, consumers will also be willing to try them at least once. To be specific to B Natural, the use of previous Balan Foods flavors like Jamun, Brahmi etc mean that in terms of flavors at least they have something that the Reals and the Tropicanas of the world don’t – a unique flavor offering. This offering at an expected competitive price unlike Hector Beverages’ niche offering Paper Boat, means that they will be able to further intrigue the customers and make their health pitch even stronger. Furthermore, these flavors have been supplemented with the other smartly named regular flavors means that the product has the potential to go beyond just a novelty purchase.
Building a new brand isn’t easy but the kind of market disruption that an in house brand can achieve is difficult with an acquisition. But if there is synergy between an acquired brand and the company, as there seems to be in this case, then the acquisition can become a force in its own right. Balan Foods brings extensive category knowledge and that coupled with ITC’s traditional strengths can be a winning combination. ITC’s decision to focus on regional flavors as well as allowing the product to grow further in its traditional market before launching it nationally, also seems like a smart strategy. The signs are pointing in the right direction and this FMCG enthusiast will not be hasty enough to pass judgment on the product until a full blown integrated marketing campaign is there to educate us further. Till then, it shall remain a waiting game even if the pros seem to outweigh the cons for B Natural at this juncture.
This article has been authored by Jayant Yadav from FMS, Delhi