How the 'wellness generation' spurred growth of packaged foods market

Hailing from a remote village in Kerala's Wayanad district where his father was a daily-wage labourer, Musthafa P.C.'s family had struggled to make ends meet. Breakfast was a luxury in those days for the family.

Fast forward to the present, Musthafa is the co-founder and CEO of Bengaluru-based food startup iD Fresh Food, a familiar name in the kitchens of Bengalureans.

At a time when unbranded ready-to-cook idli and dosa batter started flourishing the markets of Bengaluru, Musthafa wanted to provide the same items without the use of any preservatives. “Our aim has been not to replace a homemaker, but to assist a homemaker. At the same time, it is important not to spoil the natural look of a food product. For instance, a chapati is always round and you cannot change the shape of the chapatis as it is universally accepted in a round form,” he remarks.

From humble beginnings, Musthafa went on to achieve big in the Indian food industry. Started with an initial investment of just Rs 25,000 in 2005, the company has come a long way from making idli and dosa batter out of a 50-sqft kitchen in Bengaluru to having established its presence in 24 cities across India and the UAE. iD Fresh Food's resounding success has even become a case study at Harvard University.

The company is funded by PremjiInvest, Azim Premji’s investment arm, and Helion Venture Partners. The startup makes 55,000 kg of idli and dosa batter every day and delivers it to more than 21,000 retail outlets. iD Fresh Food's goal is to become a Rs 1,000-crore company over the next three to four years.

The company's success should also be credited to the innovation it has brought in the idli and dosa batter business. As the business took off, Musthafa bought a machine grinder customised to their requirement from Germany. “To be successful in this business one has to invest in the right machinery and ensure high-quality service availability. We have focused on a zero inventory model and we have run low-cost campaigns and instead, want to spread our message through social media. Also, one thing I have realised in the Indian food market is that Indian people do not want to pay for items for which they are not used to (paying). For instance, they do not want to pay separately for chutney and sambhar with idli and vada,” Musthafa told THE WEEK.

His success lies in the fact that he was able to rightly identify the gap in gen-next family kitchens for trustworthy Indian ready-to-cook food items, without compromising on quality and taste.

And, the market is a promising one. By the year 2020, packaged food sales in India is expected to reach 47 million tonne, catapulting the country to become the third biggest market in the world for packaged food by 2020, after China and the United States, as per the forecasts of Euromonitor International. It is expected that more and more products and innovations from different firms like ITC Foods, Britannia, Nestle and even some smaller players are likely to hit the Indian markets, thanks to a rising demand from the millennials.

Sunay Bhasin, Chief Marketing Officer at MTR Foods Private Limited, feels that with an increase in income and discretionary spending, there is a requirement of convenience and quality in food which is driving most of the packaged food industry. He says the Indian food is perceived to be cumbersome to make and yet it is the preferred food for consumers in India. "At MTR, our aim is to take the time-factor out of the cooking occasion, making Indian food convenient and easier to prepare as well as delicious to consume. For instance, in our 3-Minute Breakfast Range anyone can access quintessential breakfast dishes of India such as poha by just adding hot water without losing out on taste. Such on-the-go product formats are what that attract millennials who are currently the driving force behind redefining India’s consumption story," Bhasin told THE WEEK.

Undoubtedly, even the larger players like Nestle are targeting the working millenials and nuclear families aid the growth of this industry. “We strive to continuously develop a better understanding of the changing lifestyles of India and anticipate consumer needs to provide tastier and nutritious product offerings, which are of high quality, safe and affordable for all life stages. The urge to be healthy has led to a major shift in the buying behaviour of consumers. They don’t just look at taste and price, they look at nutritional values as well. And they are aware of the health implications of their choices. As a consequence of this, healthcare and wellness is becoming a dynamic segment and will witness rapid growth in the days ahead, throwing up ample opportunities to innovate,” says a Nestle India spokesperson.

Nestle is striving to work towards reducing sodium, sugar and saturated fats, and add healthful ingredients like whole grains, vegetables and micro-nutrients to make food and beverages more nutritious. The company has pledged to reduce, in relevant product categories, an average 6 per cent of added sugar, 10 per cent of salt and about 2.5 per cent of total fat, by 2020. “For instance, we have reduced the salt and sodium content in MAGGI noodles and are looking at further cutting down on sodium content across relevant product categories by 10 per cent by 2020. We relaunched Milkybar for enhancing nutritional offering with 8 per cent more milk and 10 per cent reduced sugar content, which makes it a confectionery that has more milk than sugar,” the spokesperson explained.

At the same time, Nestle has also forayed into gourmet dip and spread segment with the launch of MAGGI Dip and Spread. The low-fat yogurt-based dip and spread contains almost 80 per cent yogurt with less than 3 per cent fat. “We are also addressing under-nutrition through micronutrient fortification. For instance, Nestlé A+ Milk fortification with Vitamin D and Vitamin A, and MAGGI Noodles with Iron fortification. Our breakfast cereal, NESPLUS has whole grains of wheat, oats and the traditional Indian millet, jowar and and offers Vitamin D, Calcium, B-Vitamins, Iron, folic acid and fibre,” added the spokesperson.

Nestle, despite, being an MNC is also focusing strongly on localising its offerings in India to suite the requirements of the local population. “In 2018, we launched MAGGI Special Masala Noodles that has 20 Indian spices and herbs. Similarly, the MAGGI Dip and Spread two flavours—Cheese Garlic and Jalapeno Salsa have been specially created for the Indian palate. In 2018, we also introduced one of India’s first baked noodles. Baked technology locks the taste of sweet corn as it bakes it into every strand of noodles. Broadly, the objective is to offer more choices to our consumers who are seeking options that resonate with their evolving tastes and preferences,” said the Nestle spokesperson.

Another biggie in the food market, ITC Foods Division, is also eyeing the market with diversified offerings and differentiated products. “Today's consumers are influenced by rapid globalisation and with increasing purchasing power, are seeking superior nutritional and taste benefits, better hygiene and convenience. Demand for value-added and differentiated processed foods is on the rise. Increasing awareness of health and wellness is also generating demand for a wider variety of grains. This calls for a fundamental transformation for the farmer from selling whatever is produced to producing what the consumer wants. Such demand-driven value chains can bring enormous benefits to the agrarian economy as well as the country’s food-processing sector,” said Hemant Malik, Divisional Chief Executive, ITC Foods Division.

Keeping in tune with the requirements, the company has developed sustainable, inclusive and competitive agri-value chains to empower the farmer. “Lying at the intersection of agriculture and manufacturing, the food processing sector creates value addition for farmers, while reducing the country’s agri-wastages and generating large-scale sustainable livelihoods. This calls for investment in product specific climate-controlled infrastructure as well as branded products that can win consumer franchise,” added Malik.

The ITC foods division also has brands like Aashirvaad, Sunfeast, YiPPee!, Bingo!, B Natural, Kitchens of India that have been created over the last decade. “In early 2000, ITC developed an agri back-end by launching its e-choupal, which has provided a competitive edge to its foods business and also empowered around 4 million farmers in the country. This competitive value chain has enabled us to offer identity preserved superior food offerings to the consumers,” remarked Malik.

Interestingly, ITC’s foods division is a major growth driver for the company's FMCG business and has a very large share in the FMCG pie. The foods business of the company is expected to contribute in a major way to the goal of achieving a turnover of Rs 100,000 crore in the new FMCG businesses by 2030, as envisioned by its Chairman Y.C. Deveshwar. “This goal can be achieved given the huge opportunities that lie in every foods segment and the GDP growth rates that India will be witnessing over the years. We have forayed into multiple categories in recent years, including luxury chocolates under the Fabelle brand, coffee under the Sunbean brand and the dairy segment with brand Aashirvaad Svasti. We have also been able to leverage the institutional strengths of the ITC group including agri-sourcing, cuisine expertise of ITC Hotels chefs, packaging and manufacturing etc. In terms of annual consumer spend, our brand Aashirvaad is today over Rs 4,000 crore; Sunfeast over Rs 3,500 crore; Bingo! over Rs 2,000 crore, YiPPee! is over Rs 1,000 crore and Candyman is over Rs 500 crore,” explained Malik.

ITC foods division has also invested in building an 'innovation engine', which is at works round the clock. The aim of the 'innovation engine' is to recognise the need to develop Indian food products that address health, wellness and nutrition-specific issues relevant to the Indian population. The company has also set up the ITC Life Sciences and Technology Centre (LSTC) in Bengaluru that has a team of over 350 qualified scientists that have already filed over 750 patent applications. “The B Natural 'not-from-concentrate' range of fruit juices and special variants such as Jamun Masala, Phalsa Masala, Sunfeast Dark Fantasy Choco Fills biscuits, Yippee! Mood Masala are some examples of the differentiated offerings that are aimed at creating accessibility, catering to regional preferences as well as enhancing health and wellness,” Malik told THE WEEK.

Another focus area for ITC is in the health and wellness category with offerings of ‘good for you and better for you’ range of products. The B Natural ‘not-from-concentrate’ range of fruit juice falls in this category. Similarly, Aashirvaad Sugar Release Control atta, Farmlite All Good Digestive biscuits is made from Aashirvaad atta and has no added sugar.

The company is also investing in building manufacturing assets to strengthen the competitiveness of its operations. Currently, the company is developing 20 Integrated Consumer Goods Manufacturing and Logistics facilities, to ensure proximity to markets, superior freshness of products and cost efficiencies. The company has already begun commercial production at its integrated facilities in Uluberia and Panchla in West Bengal, Guwahati in Assam and Kapurthala in Punjab.

“We are witnessing a new and exciting phase in India, characterised by an emerging class of wealthy single urbanities who are distinguished from other demographics in their life outlook, aspirations and belief systems. These bunch of promising youngsters are confident, hard-working, wealthy and are a perfect assortment of self-indulgence and responsible self-care. Because of their hectic schedules, these urbanites are vulnerable to several lifestyle-related complications, yet they never compromise on health, neither do they let go of their share of fun and luxury. We are very much confident in the future of the agri-food sector in India and are investing over Rs 10,000 crores in the food processing sector, in developing an integrated and competitive agri-food value chain including 20 foods manufacturing facilities across the country,” said Malik.

Similarly, MTR Food's Bhasin said that there is an increasing number of consumers who face health issues and hence, the company strongly focuses on healthy eating, and launched their multigrain breakfast range in accordance with this requirement. "The recently launched 'Eat Right Movement' by FSSAI is a great example of the industry and the government coming together to improve the consumers health and well being. This movement has come at the right time and is all encompassing, in that it takes into account not just the packaged foods industry but also food services and puts the consumer right in the centre of it. At MTR, we have pledged to reduce salt and sugar by 6 per cent and 5 per cent respectively, by 2025,” added Bhasin.

Fresh food players such as the Bengaluru-based Licious, a full-stack meat brand, is also tapping into the huge potential of the market. Abhay Hanjura and Vivek Gupta, its co-founders, wanted to build a consumer brand that could solve the challenges and everyday pain points of quality, hygiene, freshness and convenience of daily food items for consumers. “After having a thorough deliberation and deep market understanding, we thought of starting a venture in the meat and seafood sector which despite its size ($40 billion) and consumption levels (over 70 per cent Indian populace are meat eaters) is still 92 per cent unorganised, leaving it severely unaddressed. Commodities such as milk, masalas, flour and even water is labelled, but the meat category has the highest food safety risk and has no quality standards. We wanted to bring in the transformation to the meat ecosystem as a whole and thus, built Licious,” Hanjura and Gupta told THE WEEK.

The co-founders said that a substantial percentage of their customers are gen next Indians and they have to cater to their distinctive tastes and preferences. “Innovation in our ready-to-cook and ready-to-eat range of fresh products has been curated for millennials who are pressed on time, but seeking for fresh, tasty and high-quality food which is also convenient to buy and consume. We currently have over 30 rotating Stock Keeping Units (SKUs) in our portfolio,” said Gupta.

These entrepreneurs feel that the time is opportune for brands who want to provide fresh, safe, consistent and quality-driven food products to its consumers in India. “All our raw meat and seafood products, including our ready-to-cook range and cold cuts have a shelf life of 2-3 days. With our cold-chain management, we ensure that all our products are maintained at a temperature between 0 to 4 degrees Celsius, till it reaches the consumer. Product freshness and quality consistency is extremely critical for our brand,” explained Hanjura.

Due to the short shelf life of its products, Licious has a complex inventory management as it requires a high degree of control over demand forecasting. To address this challenge, the company relies heavily on technology and own the entire back-end supply chain and has stringent control over cold chain to ensure consistency, quality and freshness.