Premium Brand Dilution vs. Mass Absorption

Posted in Marketing & Strategy Articles, Total Reads: 2741 , Published on 14 July 2012
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Tangy tomato, Creamy Mushroom, Baby Corn and Spring Onion, Sweet Corn Chicken, Thai Lemony noodle, Creamy Chicken, Chicken Malai Tikka, Hot and Sour Chicken, Mixed Vegetable and so on. Well, this is no multi-cuisine menu of an eatery but a sample of the wide range of cook-up or easy-to-cook soup mixes available in the market today. Strolling down the supermarket aisles or in traditional grocery stores, one can now be flooded with choices of easy-to-cook soup mix packs, offering something to match everyone’s taste buds.


According to various estimates, soup market in India was in the range of INR 100-125 crores (USD 22 mn – 27 mn) in 2011. This segment of packaged food has been relatively under changing lifestyles, the segment has experienced growth rates of more than 20% year on year in last 5 years.

The market is primarily dominated by 3 players:

  • Knorr from HUL, having a market share of about 60-65%
  • Nestle’s Maggi  Soups
  • Capital Foods’ Ching’s Secrets

Apart from the above players, various modern retail players have come in with their own offerings (example Feasters from More) in order to increase their bottom lines.

As the consumption patterns and the processing food technology has evolved, so has the varieties and the flavours that the soups are available in.   In India the market is still at its infancy and concentrated mainly in the urban areas. Most of its early days dried soups purchase was restricted to the cooler winter months or for convalescing patients. Marketer’s grappled to increase the occasions for soup consumption which continued to be limited. Also unlike other processed foods such as instant noodles, bread or biscuits which had a large mass consumption base and suited for round the clock consumption soup remained as a premium dinner meal accompaniment restricted for niche westernized urban households.

Knorr repackaged soup as ‘essentially desi’ replacing the elitist image attached to it. The positioning of the product was also changed as a snack option before dinner rather than a meal option. HUL understood the preference of the Indian consumer for local taste and introduced their soups in flavors such as tomato chatpata (rasam), corn mast masala, vegetable hara bhara, tomato makhni, chicken malai tikka and also reduced prices to appeal to a larger audience.

The latest news is that the Knorr soup brand of Hindustan Unilever will be available at cheaper rates, Rs 12 a cup compared to Rs 30-35 for the premium varieties.

Company sources said in Mumbai that the strategy was to increase sales especially in the middle and low- end of the urban markets, and the rural market.  Branded packaged foods are gaining acceptance in small towns and villages if the price is right, market analysts say. With lower priced packs under Knorr, HUL is hoping to penetrate the soups segment in these markets.

Brands and Variants

Packaging

Price Range




HUL Knorr



Oriental range

Four Serve

30-33

Indian range

Four Serve

30-33

Continental range

Four Serve

30-33




Nestle India- Maggi



Chef


29-30

Home


29-30

Chinese


29-30




Capital’s Food- Chings’s Secret



Sweet Corn Veg

Six Serve

30

Hot and Sour Veg

Six Serve

30

Hot and Sour Chicken

Six Serve

30

Mixed Vegetable

Six Serve

30

Sweet and Sour

Six Serve

30

Sweet Corn Chicken

Six Serve

30

Manchow

Six Serve

30

Lemon Coriander

Six Serve

30

Beijing

Six Serve

30




Bambino Agro



Tomato

75g

29

Sweet Corn Veg

60g

29

Mixed Veg

70g

29




More’s Private Label- Feasters



Thick tomato

52g

23

Hot and Sour Vegetable

39g

23

Mixed Vegetable

53g

23

Creamy chicken

43g

23

Sweet Corn Vegetable

43g

23

























One of the first things while analyzing the intention behind the move and the move itself has to be its past performance and results doing the same. It has to be kept in mind that in the past as well, Knorr has tried to increase penetration of the soup category by smaller Rs 5 packets of the premium variety, under Knorr Annapurna with Soupy Snax, did not succeed to the expected levels in the market place.

However, as mentioned before, things are changing now. The purchasing power of the lower and middle classes have been steadily increasing, and the move to drop prices shall encourage the consumers to try out its products. Also the fact that the modern retail format is expanding to Tier II and Tier III cities slowly, thus increasing accessibility and promoting evolution in consumption as consumers slowly start valuing convenience and taste.

Knorr was one of the first ones apart from Maggi to promote the “Desi” version of the Snack and has been at the front of innovative products relating to this category. A price reduction would not necessarily dent its premium image, primarily because soup as a category is slowly and steadily losing its exclusivity from Metros and Tier I cities. A similarity can be seen in Shampoos which were initially present in Tier I cities and penetration was increased through the use of Sachets without losing the parent company’s exclusivity. Chik as a player benefited immensely in South India from the very same.

However, Knorr as a brand suffers from one major disadvantage that its chief competitor Maggi doesn’t: The support of a good brand name. Maggi Noodles have been credited with creating the category of instant food in India and when such a brand lends its name to a new category like Soups, the new category is bound to benefit, especially when Maggi Soups have been positioned on the Health and Wellness plank. Thus if Maggi goes ahead and follows Knorr in this step, there is a low probability of its brand being diluted, because of its brand being famous and ubiquitous across the country.  However, even Knorr should not experience brand dilution in the first place as the drivers and benefits from such a move outweigh the disadvantages.

With increasing competition coming from a host of upcoming private labels, it is imperative that the players increase the pie just as much as their share. Thus a move such as this combined with increase purchasing power in the lower segments and new products in the category (noodles+ soup) shall be beneficial for Knorr and would hopefully contribute to its food segment revenue which grew 13% in the third quarter last year.

This article has been authored by Moksha Sharma from IIFT Delhi.

Image: FreeDigitalPhotos.net


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