Segmentation – Kellogg’s Choco Biscuit - India
...d for a steady and sustained rise in prosperity. Some numbers: the NCAER forecasts that by 2007, ‘upper-class’ (annual income between Rs 45,000 and Rs 2.15lakh) and ‘very rich’ households (annual income above Rs 2.15 lakh) will outnumber those with less than Rs 45,000 per year. By extension, personal products and value-added food products should also grow. The rural story. Rural markets represent another growth opportunity. Over 70 per cent of Indians live in villages. That is a vast market, and the removal of excise duty on processed foods should spur a fresh wave of penetration in this highly price-sensitive territory. Moreover, the number of individuals between 10 and 30 years old–the sweet spot for FMCG companies–is expected to grow by 50 million, to 450 million in 2011. On the other hand, lower income groups (households earning less than Rs 45,000 a year) account for nearly 60 per cent of the consumer products market, so pricing will be key to gain market share. The next growth driver. The foods business represents a big opportunity, but it is also pretty demanding–changing food habits is not trivially simple. So, companies that launch products cateringspecifically to Indian tastes will see the biggest growth. The food processing business has not yet lived up to its potential, but now that the excise duty on processed foods has been removed, the industry aims to increase its capacity utilisation from the current 40 per cent to 70 per cent in 2001-2002. There are two broad categories in the foods business–high-margin, value-added products like canned foods, and low-margin mass market foods (staples). Food accounts for a good 50 per cent of the average Indian’s expenditure, so it is clearly a huge market. That fraction has become smaller with the increase in expenditure on transport, recreation and medicines, but in absolute rupee terms, expenditure on food is on a definite rise. The size of the market is not a concern; rather, it’s distribution, procurement and brand awareness that will determine the winners in this business. These strengths are particularly important for companies that hope to replace low-margin mass-market products (like flour, for instance) by branded products. Most food products have actually shown a decline in terms of share of consumption expenditure. Milk products, in contrast, have actually grown their share of consumption as a percentage of total expenditure. India is the largest producer of milk, spices and groundnut, the second largest producer of fruits and v...