'A premium product portfolio will help increase bottom lines for Parle' - Dr. Ashita Aggarwal
Parle Platina will help save marketing and distribution costs, writes Sangeeta Tanwar.
Taking a leaf out of carmaker Maruti Suzuki, which set up Nexa showrooms to launch premium vehicles and lure modern buyers, biscuits and confectionery company Parle too has unveiled its new premium products division. Parle Platina will house premium products such as Cheeslings, Milano and Magix. The key objective is to reach out to the consumer who is well-travelled, has evolved tastes and is ready to try out new product formats. The company plans to bunch all its existing premium offerings and new launches under Parle Platina with an eye on saving marketing and, to an extent, distribution costs.
Over the years, Parle Products has grown to more than 40 brands. Besides running up a bill for creating the brands, this leads to escalating costs for promoting and marketing the brands too. “If one can identify brands with common traits and purpose, then one can bring in efficiency in building and marketing such brands. Platina brands like Hide & Seek and Milano come with certain core values. These products are exotic, futuristic and innovative. Also, with a large product portfolio it is critical for us to ensure we do not end up investing sub-critical amounts in building brands,” says Mayank Shah, category head, Parle Products.
Premium brands account for 15 per cent of Parle’s sales. Over the next two years, the company plans to raise this to 25 per cent. Given the intense competition, experts point out that setting up an independent portfolio for premium products is likely to help Parle Products to break away from its “economy” perception and build an assortment for which people are ready to pay more.
“The staple glucose biscuits and Monaco have been under margin pressure due to increasing raw material cost and resistance from consumers to absorb price increase. The profit margins for the company are hence diminishing. The cut-throat competition in this segment, coupled with movement of population up in the SEC hierarchy, is making market share defence more difficult. In such a scenario, a premium product portfolio will help increase bottom lines for Parle."
- Dr. Ashita Aggarwal, Associate professor and Head, Marketing department, at S.P. Jain Institute of Management and Research.
An independent department is likely to help the company look at the important aspects of packaging, product innovation, retail placement etc to ensure consumer acceptance. Parle Products is going to have a separate distribution team and have key account managers for pushing its premium product portfolio. Focusing on urban markets, Parle Platina products would be sold through a large number of convenience stores including business-to-business and business-to-consumer networks.
In terms of reach, Platina products will be targeting million-plus towns. Products like chocolates that are priced at ~200-~400 per kg will only be targeted at towns. In urban markets, a select few products will be made available in 22 metros or towns with population of over one million. For example, brands such as Milano and Hide & Seek Black Bourbon are niche products that will be retailed only in the top 20 metros.
Even as retail footprint for Platina products will differ from that of Parle mass products, distribution channels would overlap in case of a few products. This is because the Indian retail landscape, unlike in western countries, is very complex and underdeveloped. Globally, companies have access to different types of retail infrastructure with distinct channels of distribution for mass and premium products.
Shah says on the face of it, modern formats are the ideal place to sell premium products. “But we must remember people also buy their convenience products from the same store. A buyer will pick up ~50 Milano cookies from a modern retailer and at the same time she will also pick up a family pack of Parle G biscuit priced at ~100. With such buying patterns, it is not financially viable to have two completely separate distribution networks.”
According to Aggarwal, Parle Products should rely on shared distribution to push its premium products. Indian consumers still look for convenience and in case of FMCG they want brands close at hand. Therefore, whether it is Parle Glucose or Hide & Seek, consumers want to see them at both the kirana store and modern outlets.
Price alone is not going to dictate the product offering under Platina’s portfolio. It is the values of the brand and the profile of the target audience that will entitle a new product to join the Platina division. For example, the company’s health range is not the highest priced but is still part of Platina as it targets early adapters — consumers who believe in healthy snacking and appreciate innovation.
Parle is a mass brand known for its “glucose biscuits” the most. The category is mass, value for money and bought by SECs across. These associations also rub off on the Parle corporate brand.
Originally published at: Business Standard (May 22, 2017) Page 14