CHAPTER 1

INDIAN SNACKS

INDUSTRY

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1. INDIAN SNACKS INDUSTRY

1.1 INTRODUCTION

The project purports to decipher the satisfaction level as well as the preferences

of consumers pertaining to the various packaged fried chips. I aim to analyze

the success, marketability and future growth prospects of various packaged

fried chips. I also intend to study the popularity of different snacks.

Basically I intend to find out the perception of consumers towards various

packaged fried chips in the market and to compare with each other. Snacks as

such are a very minor part of the food processing industry because the snacks

sector is largely unorganized and consumption outside urban areas is not high.

For this a survey was conducted in Mumbai where respondents were asked to

fill a questionnaire. The data was collected and analyzed to obtain conclusions.

This report carries an introduction of the company profile, details of the

methodology followed, detailed data analysis and the results obtained.

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1.2 INDUSTRY OVERVIEW

Snacks are a part of consumer convenience/packaged foods segment. Snack is

described as a small quantity of food eaten between meals or in place of a meal.

Snack food generally comprises of bakery products, ready-to-eat mixes, chips,

namkeen and other light processed foods. According to the ministry of food

processing, the snack food industry is worth Rs. 100 billion in value and over

4,00,000 tonnes in terms of volume.

Snack food generally comprises bakery products, ready-to-eat mixes, chips,

namkeen and other light processed foods According to the ministry of food

processing, the snack food industry is worth Rs 100 billion in value and over

4,00,000 tonnes in terms of volume. Though very large and diverse, the snacks

industry is dominated by the unorganized sector According to an Apeda survey

almost 1,000 snack items and 300 types of savories are sold across India. The

branded snacks are sold at least 25% higher than the unbranded products

Savory snacks have been a part of Indian food habit, since almost ages. Though

there is no particular time for snacks, normally they are consumed at teatime.

The variety is almost mind-boggling with specialties from all regions, which

have gained national acceptance industry. he been growing around 10% for the

last three years, while the branded segment is growing around 25% per annum

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to stand at Rs 5,000-Rs 5,500 crore, due to various reasons like Multiplex

culture, snacking at home while watching TV, pubs and bars (where they are

served free). AC Nielsen's retail audit shows that the large sales volumes are

due to a marked preference for ethnic foods, regional bias towards indigenous

snacks and good value-for-money perception. Of course the branded segment is

much smaller at Rs 2,200 crore, which is what makes it so attractive to food

Companies that are looking at bigger shares and in the branded snacks market,

to get down to basics, Frito Lay commands a share of 45%, followed by

Haldiram’s at 27% and ITC at 16%. The rest is divided between a handful of

new entrants, wannabes and many regional players Of the wide range of snacks

available, potato chips constitute a sizeable segment of the Indian snack food

industry, according to India Info line. The potato chip market is generally an

unorganized industry. Nearly all potato chip snack products are manufactured

and sold locally. There is also no uniform standard for packaging, as there is in

Europe, the United States and other more developed regions. Many snack foods

are sold loose or packaged in poly-pouches, which may only be folded, or in

some cases, stapled closed. As the Indian economy continues to grow, and

production standards improve, many snack food companies are making

significant investments into plant equipment and packaging machinery.

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Pepsi Foods Ltd., now known as Frito-Lay India Ltd., produces India's largest

snack food Manufacturer’s brands, including Ruffles, Hostess, Cheetos and

Uncle Chips. Frito Lay's story is an example of how American recipes were

adjusted to satisfy local tastes. Procter & Gamble's Pringles brand of potato

crisp was launched in Delhi in 1999. Pringles is also

a baked potato crisp, unlike many other potato based Indian snack foods that are

fried. P&G currently imports the Pringles product and therefore the product has

been priced at a premium and is marketed to a micro-niche.

Though very large and diverse, the snacks industry is dominated by the

unorganized sector. According to an APEDA survey almost 1,000 snack items

and 300 types of savouries are sold across India. The branded snacks are sold at

a price that is at least 25% higher than the unbranded products. Savoury snacks

have been a part of Indian food habits, since ages. Though there is no particular

time for snacks, normally they are consumed at teatime. The variety is almost

mind-boggling with specialties from all regions, which have gained national

acceptance. The industry has been growing at around 10% for the last three

years, while the branded segment is growing at around 25% per annum. The

industry today stands at around Rs 5500 crore. This increase is due to various

reasons like Multiplex culture, snacking at home while watching TV or in pubs

5

and bars (where they are served free). AC Nielsen's retail audit shows that the

large sales volumes are due to a marked preference for ethnic foods, regional

bias towards indigenous snacks and good value-for-money perception. The

branded segment constitutes only half the market which is what, makes it so

attractive to food companies that are looking at bigger shares. In the branded

snacks market, to get down to basics, Frito Lay commands a share of 48%,

followed by Haldiram’s at 25% and ITC at 16%. The rest is divided between a

handful of new entrants, wannabes and many regional players. The wide range

of snacks available, potato chips constitute a sizeable segment of the Indian

snack food industry. The potato chip market is generally an unorganized

industry. Nearly all potato chip snack products are manufactured and sold

locally. There is also no uniform standard for packaging, as there is in Europe,

the United States and other more developed regions. Many snack foods are sold

loose or packaged in poly-pouches, which may only be folded, or in some

cases, stapled closed. As the Indian economy continues to grow, and production

standards improve, many snack food companies are making significant

investments into plant equipment and packaging machinery.

Pepsi Foods Ltd., now known as Frito-Lay India Ltd., owns India's largest

snack food brands including Lays, Hostess, Cheetos and Uncle Chips. Frito

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Lays’ story is an example of how American recipes were adjusted to satisfy

local tastes. Procter & Gamble's, Pringles brand of potato crisp was launched in

Delhi in 1999. Pringles is also a baked potato crisp, unlike many other potato

based Indian snack foods that are fried. P&G currently imports Pringles and

therefore the product has been priced at a premium and is marketed to a micro-

niche.

Figure 1.1: Potato Consumption in India

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India is the 3rd largest potato producer in the world, after China at #1 and

Russia at #2 and before the United States at #4. Potato production increased

more than 850% since 1960, due to both increased production area and yield.

The per Capita Potato consumption in India has risen from 12 kg/capita/year in

the early nineties to over 16 kg/capita now, with a slight decline in recent years

The sector developing most rapidly is the snack foods sector, including potato

chips. Market leader is Frito-lay with a 45 % market share. Haldiram's has a

27% market share. The market is far from stable: recently ITC, an IT/cigarette

company making huge inroad in the CPG market, has managed to get a market

share of 11% with its potato chip "Bingo" in just 6 month. Also a dairy

manufacturer (Amul) just announced to move into the snack market. Key

weapon in this war for the Indian snack market are the Indian flavors.

Here are a few more of the many companies operating in the Indian chips and

snacks market. Read more on the recent developments on the Indian chips and

snack market.

The development of the snack market has also created a growing demand for

dehydrated potato products, used as raw material for snacks.

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With regards to frozen potato products, India has long been handicapped by the

lack of infrastructure for the frozen food distribution chain. Nevertheless,

world's largest French Fry manufacturer McCain Foods is active in India since

1995. With the recent completion of the new McCain factory in Gujarat, the

production of French Fries in India has been brought to a new level. And for

those that want their french fries even more Indian than that: just last month

Mandeep Singh, a Punjab farmer turned french fry manufacturer, planned to

start the production of frozen fries with his company Satnam Agro Products in

Jalandar.

Intriguing aspect of the potato supply chain in India is the strong vertical

integration: ITC bought earlier this year the Australian company Technico that

developed technology for rapid multiplication and variety improvement. Also

the company Merino Industries (dehydrated potato products among many other

products) has its own tissue culture laboratories for multiplication and potato

variety development.  Although CPRI certainly has done a good job in

developing suitable varieties for processing for the Indian cultivation

conditions, the degree of involvement of processing companies in the

multiplication and further development offers a lot of promise for the future

potato processing potential in India.

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1.3 READY-TO-EAT SNACKS & NAMKEENS

According to a study by McKinsey&Co, the Indian food market will grow two

fold by 2025 with the rapidly growing Indian economy and improving lifestyles

of Indians contributing in a big way to this growth. Quoting the study by

McKinsey&Co, a report by the US Department of Agriculture stated "The

market size for the food consumption category in India is expected to grow

from US$ 155 billion in 2005 to US$ 344 billion in 2025 at a compound annual

growth rate of 4.1 per cent."

The Indian snacks market is worth around US$ 3 billion, with the organized

segment taking half the market share, and has an annual growth rate of 15-20

per cent. The unorganized snacks market is worth US$ 1.56 billion, with a

growth rate of 7-8 per cent per year. There are approximately 1,000 types of

snacks and another 300 types of savories being sold in the Indian market today.

Potato chips and potato-based items are the most popular products with more

than 85 per cent share of the salty snack market, the report said. In the

organized potato chips market, Pepsi and Haldiram's are some of the leading

players.

There is a big market for snacks in India as urban Indian consumers eat ready-

made snacks 10 times more than their rural counterparts. Indians in the western

10

regions eat the maximum amount of snacks, followed by the people in northern

region.

"Consumers are willing to pay a premium for both value-added private and

branded products, creating immense opportunities for manufacturers and

retailers,' the report stated.” There is a widespread recognition in India that

consumers are likely to replace light meals with snacks", it further added.

India is one of the world’s major food producers but accounts for less than 1.5

per cent of international food trade. Food exports in 1998 stood at US$5.8

billion whereas the world total was US$438 billion. The Indian food industry’s

sales turnover is Rs. 140,000 crore annually as at the start of year 2000.

Exports of food products can become a valuable growth driver for the Indian

food industry, leveraging the historic base and new specialty categories where

India has great potential to emerge as a strong brand abroad, according to the

latest update on the industry by McKinsey the report, released on Monday at

Foodpro 2003, the exposition organized in Chennai by the Confederation of

Indian Industry, has identified emergence of an organized retail sector, value

additions and convenience driven by consumers, India's growing acceptance as

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souring hub and continued deregulation of the food sector as the four positive

trends.

It pointed out that mass market of basic foods, value added foods and exotic

foods and their exports were the main opportunities for the Indian food industry

adding that there will also be a significant growth in terms of input providers,

logistics suppliers and retail.

Indian snack food industry comprises of many Indian as well as MNCs. The

Indian snack market reached a value of $307.7 million in 2001. It is one of the

largest snack markets in the Asia-Pacific region. Only Australia, China, Japan

and South Korea have won greater revenue from the sale of snacks. India

contributes three percent to the total Asia-Pacific snack market revenue.

1.3.1 Industry Overview

The Indian snacks food market is of the order of 400,000 tones. At a low

average price of about Rs.35-60 a kg. Largest share of this Rs.14 bn market still

remains with unorganized sector comprising of local manufacturers. There is a

wide range of product categories differentiated based on taste. This wide range

of products is categorized under Potato / Banana Chips, Namkeens & Fun-

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Foods. Around 1,000 snack items and 300 types of savories of diverse tastes,

forms, textures, aromas, bases, sizes, and fillings are sold in India1. Potato

chips and potato based products are by far the largest product category with

over 85 percent share of the salty snack market, followed by snack nuts,

chickpea and other pulse-based savory snacks. Popcorn, diet snacks (soy nuts,

bread sticks), breakfast cereals, baked & roasted snacks (biscuits, specialty

breads, chocolate coated snacks, cookies etc.) and cheese snacks are in high

demand across organized retail chains. Health foods, health food supplements

and convenient foods are also rapidly growing segments.

As per an industry estimate, the branded and organized snack food segment

dominated by major players such as Frito Lay, Con Agra, Kellogg’s, Marico,

Dabur, HLL, ITC, Parle, Haldiram’s, Nestle, Britannia, Cadbury, Bikano and

Balaji is estimated to grow by 15 to 20 percent per year; whereas the growth of

un-branded snack food is likely to grow modestly at 8 percent per year in the

near future (table 1). Product pricing for branded products are normally 15 to 20

percent greater than for the un-branded food segment due to higher overhead

expenses. Snack food packaging ranges from 35/40 gm sachets to 400 gm

economy packs. Small packs work very well in India.

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Chips market is largely dominated by the unorganized sector in India, which

manufactures potato chips with fat content ranging from 20% to 40% and

moisture content as high as 3-4%. These products are manufactured locally and

sold loose or in ordinary Polly-pouches. In the last 4-5 years, however, the

organized market has grown considerably catering to upper/ middle class

consumers in the urban areas.

The organized market for chips is estimated to be 6500 tons valued at Rs.2 bn.

The market for branded chips has been growing at a fast pace of around 20-25

% annually. Heavy promotions by branded chipmakers (like offering free gifts,

toys etc with these products), has led to a major shift from unbranded to

branded products.

As per the views of MR. L.M AGARWAL (Executive Director of SM FOODS

the manufacturers of PEPPY/PIKNIK) today the trend is shifting from

unorganized to organized. So, the overall growth in the snacks food segment is

happening between 10%-15% annually. However in the organized sector, the

growth is happening at 50%-100% annually. The market is forecasted to reach a

value of $459 million in 2006.

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1.3.2 Market Structure

Table 1.1: Overview of the Indian Snack Food Business

a) Organized Sector

Due to a relatively limited number of outlets and resultant low total sales, most

organized retailers source their imported products through distributors.

Established patterns are slowly giving way to more streamlined operations, such

as importers sourcing mixed containers directly from the country of origin and

larger retailers sourcing products directly through importers. Most distributors

have a localized distribution area limited to a large metropolitan city and

adjoining smaller cities. Typically, "Indian Super Markets" deal with more than

400 distributors or suppliers, each handling three to four products.

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b) Unorganized Sector

The unorganized sector sources most of its product from the local industry, with

the overall share of imported food products almost negligible. Imported

consumer food products are restricted to traditional outlets in the up-market

segment of the larger cities that cater to upper-middle income classes of

consumers. The main difference is that most retailers source from distributors.

A significant share of imported food products in the traditional market come s

through illegal channels. The share of imported food products currently handled

by these retailers is increasing because of the products’ higher sales margin (15-

20% vs. 6-12% for local).

c) Import Market

India’s imports of snacks/snack food ingredients rose from $10 million in CY

2002 to $30 million in CY 2006 (chart 1). Food items under the sweet snack

category constituted the major share of imports and imports rose from $10

million to $29 million (94 percent of total imports in CY 2006).

Major exporters of snack foods/food ingredients to India are the United States,

Malaysia, Indonesia, Thailand, China, Singapore, South Korea, Switzerland,

UAE, Australia, U.K., Germany, South Africa and Portugal.

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Source: Directorate General of Commercial Intelligence and Statistics, GOI.

Figure 1.2: Total Import of Snack Foods/Snack Food Ingredients in India

CY 2006

Although the share of U.S. snack food in total imports of snack foods is small,

it is growing rapidly2. Exports of U.S. snack foods to India increased almost ten

times over the past six years. The value of U.S. snack food imports rose from

$570,000 in CY 2002 to $5 million in CY 2007, while quantity grew from 347

MT to 2,374 MT.

Snack foods that registered significant growth in U.S. exports from CY 2002 to

CY 2007 were potato chips (prepared/preserved), confectionery (containing

sweetening agent instead of sugar), popcorn (microwaveable package & ex

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seed), confectionary, sweetmeats (without containing cocoa), chewing gum

(whether or not sugar coated), cookies (sweet biscuits), corn chips and similar

crisp savory snacks. In CY 2007 potato chips, confectionary and popcorn

constituted almost 68 percent of India’s snack food imports from the United

States. Imports of potato chips rose from $332,000 in CY 2002 to $2 million in

CY 2007, popcorn rose from $454,000 to $936,000 and confectionary

(sweetening agent) rose from $70,000 to $253,000.

1.3.3 Consumption Behavior

The average annual per capita consumption of commercial savory snacks is 500

gm with urban consumers consuming 10 times more than rural consumers.

Western India is the top snack consuming region, followed by the North. With

rising disposable income 3, consumer spending on food continues to increase.

According to a research study by McKinsey & Co, the market size for the food

consumption category in India is expected to grow from $155 billion in 2005 to

$344 billion in 2025 at a compound annual growth rate of 4.1%. Growing

incomes, falling poverty, changing lifestyles and companies racing to capture

India’s middle and upper middle class consumers will cause the food market to

evolve dramatically in the coming years.

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1.3.4 Opportunities and Challenges

Consumers are willing to pay a premium for both value added private and

branded products creating immense opportunities for manufacturers and

retailers. There is a widespread recognition in India that consumers are likely to

replace light meals with snacks.

Table 1.2: Opportunities and Challenges

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1.3.5 Existing Competition

The Salty snacks market in India is very diverse largely comprising of an

unbranded segment which comprises of home made namkeens, mithai shops

and loose namkeens. However the branded segment has been increasing rapidly

lead by the revolution carried out by market leaders Haldiram Foods and Frito

Lay-India. Other major players in the branded market include:

1. Haldiram Foods

2. Frito-Lay India: Its products included Leher Namkeens, Leher Kurkure

(snack sticks), Lays (flavored Chips), Cheetos (snack balls), Uncle Chips and

Nutyumz (nut snacks).

3. SM Foods: Under two main brands - Peppy and Piknik. Under Peppy, it had

sub brands such as Cheese Balls, Ringos, Hi Protein Crispies, Potato Rackets,

Hearts, Veggie Treat, Mixtures and Minerette. Under Piknik, it had Protein Pin,

Junior and Corn Puffs.

4. Mc Fills-India: Ne time, Ne where, Ne Place etc

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1.4 POTATO WAFERS AND CHIPS

According to a study by McKinsey&Co, the Indian food market will grow two

fold by 2025 with the rapidly growing Indian economy and improving lifestyles

of Indians contributing in a big way to this growth. Quoting the study by

McKinsey&Co, a report by the US Department of Agriculture stated "The

market size for the food consumption category in India is expected to grow

from US$ 155 billion in 2005 to US$ 344 billion in 2025 at a compound annual

growth rate of 4.1 per cent."

The Indian snacks market is worth around US$ 3 billion, with the organised

segment taking half the market share, and has an annual growth rate of 15-20

per cent. The unorganised snacks market is worth US$ 1.56 billion, with a

growth rate of 7-8 per cent per year. There are approximately 1,000 types of

snacks and another 300 types of savouries being sold in the Indian market

today. Potato chips and potato-based items are the most popular products with

more than 85 per cent share of the salty snack market, the report said. In the

organised potato chips market, Pepsi and Haldiram's are some of the leading

players.

There is a big market for snacks in India as urban Indian consumers eat ready-

made snacks 10 times more than their rural counterparts. Indians in the western

21

regions eat the maximum amount of snacks, followed by the people in northern

region.

"Consumers are willing to pay a premium for both value-added private and

branded products, creating immense opportunities for manufacturers and

retailers,” the report stated. “There is a widespread recognition in India that

consumers are likely to replace light meals with snacks,” it further added.

Potato is probably the most popular food item in the Indian diet and India is one

of the largest producers of potato. It is grown all over the country with Uttar

Pradesh growing the maximum quantity. Potato is a very rich source of starch.

It also contains phosphorus, calcium, iron and some vitamin C & A. The protein

calorie ratio is high. Boiling potatoes increases their protein content and almost

doubles their calcium content. It is vastly consumed as a vegetable and is also

used in various forms such as starch, flour, alcohol, and dextrin and livestock

fodder. Besides being used as a daily food item in various vegetable

preparations, potato today increasingly finds use in the form of chips or wafers

as snacks food. The potato chips and wafers are popular processed food items

that give considerable value addition to potatoes. The rise of the 'snacking'

phenomenon is now fairly well documented on an international scale, although

the rate and extent of development do vary from country to country. With the

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breakdown of formal meals, consumers are increasingly tending to eat a number

of smaller snacks during the day rather than three full meals. Furthermore, in an

increasingly fast paced financially well-off society there is growing demand for

snacks that are easy to buy, store and eat, with an increasing number being

eaten 'on the move'. With this background, the potato wafers and chips market

seems to hold good growth prospects. According to global snack market

analysis, potato chips account for an average of 35% of the total savory snacks

market. The main consumers of potato chips and wafers are families especially

in urban and semi-urban areas. Besides, hotels, restaurants, canteens, army

establishments require potato chips in significant quantities.

Potato is a highly nutritive food and the crop can be produced in 90 to 100 days.

Its wide adaptability in planting and harvesting makes it an ideal crop to grow

between two major crops. India's potato production has seen a phenomenal

increase since the 1950s, mainly due to strong demand from the processing

industry and remunerative returns. According to the Central Potato Research

Institute (CPRI), the area under potato rose by almost 547% since the 50s, while

yield rose by 267% and overall output jumped by 146%. In 2008-09, potato

production (which is a Rabi or winter crop) is estimated to be around 28 million

tonne as against 25 million tonne achieved last year. India' potato output is

likely to rise by 5.1 percent to a record 32.7 million tones in 2009/10.

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India ranks third contributing around 7.5% to the world’s production.

Production wise India has always remained in the top ten since last twenty

years. The states of Uttar Pradesh, West Bengal, and Bihar accounting for more

than 75 percent of area under cultivation and about 80 percent of total

production; Europe is the largest per capita consumer, followed by North

America and Latin America. Fresh potatoes are exported to Sri Lanka, UAE,

Mauritius, Nepal, Singapore, Maldives, and Kuwait etc.

The overall size of the snack food market is estimated at Rs 45 to Rs 50 billion.

The market is reported to be growing at 7 to 8 % annually. Potato chips are

estimated to constitute nearly 85% of India’s total salty snack food market of

about Rs 2,500 crore.  In the Rs 19 billion branded(organized )snacks market,

constituting over 40% of the market by value, Frito-Lay is estimated to

command a market share of 45%, followed by Haldiram at 27% and ITC at

16%. The branded snacks market accounted for 16% by value and 12% by

volume sales in 2007. According to a projection by Euro monitor International,

the branded snacks market would reach a value of Rs 35 billion by 2012.

The organized snacks category is sub-divided into the traditional segment

(bhujia, chanachur and the like), Western segment (potato chips, cheese balls

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etc.) and the newly established finger snacks segment, which is an adaptation of

traditional offerings in the western format.

The leading brands in the market are Lays, Bennie’s, Uncle Chips, Ruffles,

Bingos and others.

Looking to the estimated demand of nearly 50 million tonne of potato by 2020,

for a nearly 1.3 million population, the production and productivity will keep

rising. According to a study by McKinsey & Co, the Indian food market will

grow two fold by 2025 with the rapidly growing Indian economy and

improving lifestyles of Indians contributing in a big way to this growth. The

market size for the food consumption category in India is expected to grow

from US$ 155 billion in 2005 to US$ 344 billion in 2025 at a compound annual

growth rate of 4.1 per cent according to market survey. With a growing

population and rising per capita income with different lifestyles consumers are

willing to pay a premium for both value-added private and branded products,

creating immense opportunities for manufacturers and retailers in this sector.

1.4.1 Overview

In India around 12 million tonnes of potato is grown which is about 4% of the

total world production. However, the per capita consumption of potatoes is low.

Potato is probably the most popular food item in the Indian diet. It is grown all

25

over the country with Uttar Pradesh growing the maximum quantity. Potato is a

very rich source of starch. It also contains phosphorus, calcium, iron and some

vitamins.

It is estimated that 25% of the potatoes, which are spoiled due to various

reasons such as transportation, type of packing, non-availability of cold storage

capacities during harvesting season, glut in the market etc., could be saved by

making various preserved potato products. Potato wafers and chips are one such

products. Potato wafers and chips are thin slices of potato, fried quickly in oil

and then salted

1.4.2 History

According to snack food folklore, the potato chips and the wafers were the

fanciful creation of a certain chef called George Crum. He apparently invented

it in 1853 in his restaurant - Moon's Lake House in Saratoga Spring, New York.

The urban legend goes like this that George Crum was angered when a

customer returned his french fried potatoes to the kitchen for being too thick,

Crum shaved them paper thin and sent the plate back out. And thus came it

being the Potato Chips and Wafers.

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1.4.3 Market Potential

Potato Wafers and Chips are one of the most celebrated in the Ready To Eat

munchies market, relished in almost all the parts of the world. They serve as an

appetizer, side dish, or snack.

In India it is being produced not only on large scale by big firms, but also on

cottage/home scale in semi-urban and rural areas. Owing to this, there is a

number of companies from both the organized as well as unorganized sector

who are already catering to the needs of tea stalls, restaurants, railway stations,

tourist places etc. Still there is a huge demand to be met for these products in

interior and remote places in different parts of the country.

There exists consumer as well as bulk markets for potato wafers and chips even

in far flung rural areas owing primarily to the following reasons:-

Rapid urbanisation and improving standards of living

Easy availability

Convenient packaging

Affordable prices

Nutritious values

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Though there exists some international as well as national brands but majority

of the market base is under the control of local manufacturers. With proper

strategy and network, it is possible to penetrate the market.

Potato chips show no sign of declining in popularity. However, the public's

increased demand for low-fat foods has put manufacturers on a fast track to

produce a reduced-calorie chip that pleases the palate as well.

1.4.4 Production Process

For the production of good quality chips, the potatoes should have less sugar

content. Whenever, cold stored potatoes are to be used for chips making, those

potatoes should be brought to the room temperature and be used only after 24-

48 hours.

The equipments and gadgets used for the above processing are easily available

locally and they include potato slicer, peeler, blancher made of aluminium or

stainless steel, dehydrator, deep fat frier, basket sieve, pouch sealing machine

and weighing scale.

1.4.5 Manufacturing Process

The simplest chips of the kind that are just cooked and salted, but

manufacturers can add a wide variety of seasonings of herbs, spices, cheese or

28

artificial additives. Potato wafers must be manufactured in a scientific manner

and under hygienic conditions. The production process mainly comprises of the

following steps:-

Slicing and Blanching - Afterwards they are cut in the required sizes on

slicing machine. These slices are blanched in boiling water

Drying and Frying - Then the blanched potatoes are placed on drying trays

which are then put in the drying machine. Temperature of dryer is

maintained in the range of 140 to 150O F. After drying, they are fried in

edible oil to make them crisp and brown.

Washing and Peeling - Fully grown and ripe potatoes are firstly thoroughly

washed before peeling them with the help of a peeler. Then these potatoes

are trimmed and put in brine water for 30-35 minutes to prevent browning

Packaging - The fried potato wafers are then kept on the sieve to remove

excess of oil, cooled and other ingredients like salts, spicy mixture is

sprayed as per required taste. Cooled potato wafers are then packed in

polythene bag.

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1.4.6 Quality Control Process

Preventing breakage must be a primary goal of the producer and to

ensure minimum breakage companies should install safeguards at various

points of the production process

The color is compared to charts that show acceptable chip colors across

the processed food industry norms

The quality inspectors should also check the chips for salt, seasoning,

moisture, color, and overall flavor.

1.4.7 Global Perspective

The rise of the 'snacking' phenomenon is now fairly well documented on an

international scale, although the rate and extent of development do vary from

country to country. With the breakdown of formal meals, consumers are

increasingly tending to eat a number of smaller snacks during the day rather

than three full meals. Furthermore, in an increasingly fast paced financially

well-off society there is growing demand for snacks that are easy to buy, store

and eat, with an increasing number being eaten 'on the move'. With this

background, the potato wafers and chips market seems to hold good growth

prospects. According snack market analysis, potato chips account for an

average of 35% of the total savory snacks market.

30

Diversification of potato consumption was widely discussed as a tool for

avoiding situation of potato over-production. However, the Indian food habits

which account for very high proportion of potato consumption as vegetable,

was an impediment. Consequently, in early 1990s’ CPRI focussed on

developing processing varieties of potato and the results were visible in the first

decade of the new millennium.

 

Potato processing in India was negligible at the beginning of 21st century.

However, this was an inflection point when potato processing industry in India

started taking big strides. Besides several potato processors in the unorganised

sector; Frito Lay India, Haldiram, Potato King, Balaji Wafers and McCain

India were some of the big names in the organised sector that either expanded

their manufacturing capacities or established new plants.

 

With such results organised processors used to put 0.39 mt of potatoes to

processing during 2005-06. Assuming the widely accepted output proportion of

potato processing under unorganised (60%) and organised sector (40%), the

total quantity of potatoes put to processing is nearly 2.5 times the quantity

consumed by organised players.

 

31

1.4.8 Success Story

The success story of early birds tempted other players to enter the market and

Gee Pee Foods, ITC, Little Bee Impex, Merino Group and others also

decided to seize this business opportunity. Even the established potato

processors further expanded their processing capacities, with the result the

potato tuber consumption by organised processors reached 0.97 mt during

2009-10 which was slightly less than 3% of corresponding potato production in

India. The unorganised sector showed the same growth as that of the organised

one. Out of the total potato processing in India nearly 89% was consumed by

potato chips followed by 9% by the potato flakes and 2% by French fries

industry.

The world’s biggest chip foundry is Taiwan Semiconductor Manufacturing Co.,

aka TSMC, and TSMC’s decisions on where to do business are good indicators

of where the semiconductor industry as a whole is moving. (Anybody interested

enough in technology to read the Asiatech blog probably knows what a

“foundry” is, but just in case – it’s a chipmaker that produces semiconductors

not under its own brand name but for other customers.) TSMC got its start in

Hsinchu, Taiwan’s premier hi-tech park, and that helped contribute to Taiwan’s

rise in the chip industry: Today there are more fabless chip-design houses in

Taiwan than anywhere else in the world except the U.S. In the 1990s, TSMC set

32

up fabs in two other tech hotspots, Singapore and Washington State. And a few

years ago, TSMC became the first Taiwanese chipmaker to set up a fab in

China. Now China, too, has an up-and-coming chip-design sector.

So for anybody betting on India’s chances to become a player in the

semiconductor industry, the news this week that TSMC is opening its first

Indian office is very good indeed. Yes, it’s just an office, not a fab, so TSMC’s

commitment to Bangalore is hardly the sort of billion-dollar bet that it has made

on Shanghai. Still, the company clearly thinks that it needs to stay in touch

more with Indian chip designers. Here’s a comment from Sajiv Dalal, Business

Development Director for TSMC North America, in the Monday press release

announcing the move: “TSMC recognizes the potential of the region and is

opening an office as a part of its ongoing charter to develop the semiconductor

ecosystem.”

That said, there’s reason to worry that the Indian government might still mess

things up. Right now, India’s chip designers are doing well even though the

country doesn’t have fabs like those in East Asia. Such fabs cost billions and

billions of dollars and the payoff is very uncertain – TSMC makes nice profits

but not many other foundries do. Shanghai-based SMIC, for instance, lost $111

million in 2005 and analysts estimate that it lost another $60 million or so last

33

year. Yet here’s a top official in Prime Minister Singh’s government (as

reported in The Hindu), on a visit to Hyderabad, calling for Indians to devote

more resources to, sure enough, building lots of mega-expensive fabs:

‘The critical mass for the Indian semiconductor industry has been reached. The

time is now — and the place is Hyderabad’, said Prithiviraj Chavan, Minister of

State in the Prime Minister’s Office, on the concluding day of the Indian

Semiconductor Association’s Vision Summit, here. The long awaited national

semiconductor manufacturing policy is expected to be released before the union

budget later this month — and it would offer direct subsidies for qualifying

players, over and above the incentives that special economic zones or state

governments might offer, he added. He lauded the Andhra Pradesh Government

initiative to set up India’s first Fab City: `We are moving from fab-less to

fabulous’ he quipped

34

CHAPTER 2

BRANDS IN INDIAN

SNACKS INDUSTRY

35

2. Brands in Indian Snacks Industry

2.1 FRITO LAY’S

The project purports to decipher the satisfaction level as well as the preferences

of consumers pertaining to the various flavors of Lay’s a new range of savory

snacks launched by C. The aim to analyze the success, marketability and future

growth prospects of Lay’s. Basically we intend to find out the most popular

flavor of Lay’s in the market from our sample. Snacks as such are a very minor

part of the food processing industry because snacks sample. Snacks as such are

sector is largely unorganized. Here we will also look into the market For this a

survey was conducted in Mumbai where respondents were asked to fill a

questionnaire. The data was collected and analyzed to obtain conclusions This

report carries an introduction of the company profile, detail of the methodology

followed detailed data analysis and the results so obtained with

the variety of graphs along with given.

2.1.1 History

Lay's is the brand name for a number of potato chip varieties as well as the

name of the company that founded the chip brand in 1938. Lay's chips are

marketed as a division of Frito-Lay, a company owned by PepsiCo Inc. since

36

1965. Other brands in the Frito-Lay group include Fritos, Doritos, Ruffles,

Cheetos and Rold Gold pretzels. In 1932 salesman Herman W. Lay opened a

snack food operation in Nashville, Tennessee and, in 1938, he purchased the

Atlanta, Georgia potato chip manufacturer "Barrett Food Company," renaming

it "H.W. Lay & Company." Lay criss-crossed the Southern United States selling

the product from the trunk of his car. In 1942, Lay introduced the first

continuous potato processor, resulting in the first large-scale production of the

product.

The business shortened its name to "the Lay's Company" in 1944 and became

the first Snack food manufacturer to purchase television commercials, with Bert

Lahr as a celebrity spokesman. His signature line, "so crisp you can hear the

freshness," became the chips' first slogan along with "de-Lay-sious!" As the

popular commercials aired during the 1950s, Lay's went national in its

marketing and was soon supplying product throughout the United States.

In 1961, the Frito Company founded by Elmer Doolin and Lay's merged to

form Frito-Lay Inc., a snack food giant with combined sales of over $127

million annually, the largest of any manufacturer. Shortly thereafter, Lays

introduced its best-known slogan "betcha you can't eat just one." Sales of the

37

chips became international, with marketing assisted by a number of celebrity

endorsers. In 1965, Frito-Lay merged with the Pepsi Cola Company to form

PepsiCo, Inc. and a barbecue version of the chips appeared on grocery shelves.

A new formulation of chip was introduced in 1991 that was crisper and kept

fresher longer. Shortly thereafter, the company introduced the "Wavy Lays"

products to grocer shelves. In the mid to late 1990s, Lay's modified its barbecue

chips formula and rebranded it as "K.C. Masterpiece," named after a popular

sauce, and introduced a lower calorie baked version and a variety that was

completely fat-free (Lay's WOW chips containing the fat substitute olestra).

In the 2000s, kettle cooked brands appeared as did a processed version called

Lay's Stax that was intended to compete with Pringles, and the company began

introducing a variety of additional flavor variations. Frito-Lay products

presently control 55% of the United States salty foods marketplace.

2.1.2 Flavors

Except for barbecue-flavor potato chips, which were introduced no later than

1958, up until the last 20 years, the only flavor of potato chips had been the

conventional one. Despite an explosion of new flavors, the unadorned original

is still the selection of 81% of consumers.

38

In the United States, Lay's offers a number of flavor combinations, in addition

to the classic chips. Flavored products in the traditional fried varieties include

sour cream & Onion, Barbecue, cheddar & sour cream, Hidden Valley Ranch,

salt & vinegar, salt & pepper, Flamin' Hot, dill pickle, Limon (Lime) and a

thicker "Deli style" chip. Canadian sellers have a number of varied flavors, with

curry, ketchup, poutine, pizza, Fire’s Gravy, roast chicken, Smokey bacon,

salsa, wasabi, spicy Indian masala and sea salt and pepper brands available. The

marketing success of these flavors in Canada sometimes leads to a limited time

offering of a flavor to the south, with the dill pickle recently appearing in the

United States after a successful run. Interestingly the name 'sour cream' has got

Lay's into a lot of confusion in some countries. In India for instance the name

was changed to American style cream and onion after consumers reported their

discomfort with the idea of 'sour' cream In the baked products, there are classic,

barbecue and sour cream & onion varieties. The kettle cooked version includes

original, sea salt & vinegar, mesquite barbecue and jalapeño brands. Wavy

Lay's have original, hickory barbecue, ranch and Au Gratin flavors while Lay's

Stax offers original, sour cream & onion, cheddar, barbecue, ranch, pizza and

salt & vinegar. The newest variety, Lay's Natural has thick cut barbecue and sea

salt brands

39

The WOW! Brand was rebranded in 2004 as Lay's light after the olestra

formula was altered and the U.S. Food and Drug Administration allowed

removal of warnings about various health consequences of the fat substitute.

Outside North America, Lay's in Greece and Cyprus are made and packed by

Tasty Foods and Carina Snacks LTD, with Mediterranean flavors which include

Feta cheese flavor, Tzatziki flavor, Olive and Tomato, Oregano, Sea Salt &

Black Pepper and various more.

There are hundreds of sub-variations of the Mediterranean line and the

company performs Constant experimentations to create new flavors and adjust

them to each country's liking. In some countries such as Argentina variations of

the Mediterranean tastes exist include Olive Oil and Parmesan Cheese, Olive

Oil and Tomato, Olive Oil and Basil, Greek Tzatziki Cheese with onions,

Lasagna, Beef Capriccio with Parmeggiano and Smoked Manchego Cheese. In

Belgium there is a version of Cucumber and Goats Cheese. Finally in Chile

there is a version of Lemon and Cilantro (Coriander) and Sour Cream and

Onions.

In Australia, a cilantro version exists while a hot & sweet chili, sweet corn and

cotija cheese brand can be found in South America. Another flavor sold

40

primarily in southern Asia is called "Magic Masala." This flavor is very popular

in India, Pakistan, and Bangladesh. Flavors featured in Thailand include Nori

Seaweed, Basil, Squid, Spicy Chili Squid, Seafood and Mayonnaise, and Spicy

Seafood. There are a number of unique products in the United Kingdom sold

under the Walkers label, including prawn cocktail, beef & onion, Greek kebab

and Marmite yeast extract. Under the Smith's label in Australia, unique flavors

include Greek Feta & Herb and Italian Tomato & Basil. Russia has "Lay's

MAX" chips (Chicken, Sour cream & Onion, Sour cream & Cheese, and Ham

& cheese flavors) and some international "Lay's" flavors plus Russian "Lay's"

flavor - Mushrooms & Sour cream, Crab and Red caviar. In Poland the chips

flavors are: Green Onion, Mushrooms & Sour Cream, Chicken, Original,

Paprika, Hot pepper, Original, Ketchup, Forage, new potatoes with basil. Also

there is Lays Appetite which is also part of lays and has the following flavors

Kebab, Pepper and Cheese, Onion and Cheese. In parts of South America

(notably Argentina and Uruguay), Lay's flavored products are sold with the

"Lay's Mediterranean" label, and include such flavors as ham, tomato and basil,

tomato Parmesan, and oregano. Peru has "Lay's Sabores Peruanos" (Lay's

Peruvian Flavors), with flavors like queso andino (Andean cheese); also

recently was released Lay's Dips, that includes a "Peruvian Criollo Chili" sauce

sachet. In Ukraine there is crab, bacon, cheddar, and sour cream and green

41

onion, In Thailand there is Classic, Sour Cream & Onion, Cheese & Onion,

Mexican Bar-B-Q, and And Japanese Nori Seaweed. Flavors also come and go

usually with an international theme, for example: French Mayonnaise, Balsamic

Vinegar and Salt (England), Garlic Soft Shelled Crab (Hong Kong), Soy Sauce,

Salmon Teriyaki (Japan), Lobster, Bacon & Cheese (America). Also traditional

"Thai" flavors include Tom Yum, Thai Chili Paste, Thai Seafood Dip, Chili and

Lime. Popular flavors are often kept in circulation longer. There are currently

12 regular Lay's flavors in Canada, though there are more, available only in

certain parts of the country.

The flavors available nationwide are the following:

Classic (yellow), BarBQ (black), Salt & Vinegar (teal), Ketchup (dark red),

Wavy Original (red), Dill Pickle (bright green), Smokey Bacon (brown), Sea

Salt & Pepper (silver), Sour Cream & Onion (green), Roast Chicken (light

brown) and finally Lightly Salted (bright blue). Also, in select Canadian

markets (Toronto & Vancouver) Lay's has introduced international flavors such

as "Spicy Curry" and "Spicy Indian Masala" to appeal to a wider consumer

group.

42

2.2 ITC LIMITED

2.2.1 Company Overview

Bingo is a brand owned by ITC Foods Limited. ITC Limited was incorporated

on 24 August 1910 as the Imperial Tobacco Company of India Limited; the

company's name was changed to ITC Limited in 1974. It is rated amongst the

'World's Best Big Companies' by Forbes magazine. ITC employs over 20,000

people at more than 60 locations across India. ITC is one of India's largest

private sector companies with a turnover of over US$ 4.75 billion. It is rated

among the World's Best Big Companies, Asia's 'Fab 50' and the World's Most

Reputable Companies by Forbes magazine, among India's Most Respected

Companies by Business World and among India's Most Valuable Companies by

Business Today. ITC also ranks among India's top 10 `Most Valuable

(Company) Brands', in a study conducted by Brand Finance and published by

the Economic Times.

ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty

Papers, Packaging, Agri-Business, Packaged Foods & Confectionery,

Information Technology, Branded Apparel, Personal Care, Stationery, Safety

matches and other FMCG products. While ITC is an outstanding market leader

in its traditional businesses of Cigarettes, Hotels, Paperboards, Packaging and

43

Agri-Exports, it is rapidly gaining market share even in its nascent businesses of

Packaged Foods & Confectionery, Branded Apparel and Stationery.

As one of India's most valuable and respected corporations, ITC is widely

perceived to be dedicated to the nation. Chairman Y C Deveshwar calls this

source of inspiration "a commitment beyond the market". In his own words:

"ITC believes that its aspiration to create enduring value for the nation provides

the motive force to sustain growing shareholder value. ITC practices this

philosophy by not only driving each of its businesses towards international

competitiveness but by also consciously contributing to enhancing the

competitiveness of the larger value chain of which it is a part."

ITC's diversified status originates from its corporate strategy aimed at creating

multiple drivers of growth anchored on its time-tested core competencies:

unmatched distribution reach, superior brand-building capabilities, effective

supply chain management and acknowledged service skills in the hospitality

industry. Over time, the strategic forays into new businesses are expected to

garner a significant share of these emerging high-growth markets in India.

44

ITC's Agri-Business is one of India's largest exporters of agricultural products.

ITC is one of the country's biggest foreign exchange earners. The Company's 'e-

Choupal' initiative is enabling the Indian agriculture sector to significantly

enhance its competitiveness by empowering Indian farmers through the power

of the Internet. This transformational strategy, which has already become the

subject matter of a case study at Harvard Business School, is expected to

progressively create for ITC a huge rural distribution infrastructure,

significantly enhancing the Company's marketing reach.

ITC's wholly owned IT subsidiary, ITC Infotech India Limited, is aggressively

pursuing emerging opportunities in providing end-to-end IT solutions, including

e-enabled services and business process outsourcing. ITC's production facilities

and hotels have won numerous national and international awards for quality,

productivity, safety and environment management systems. ITC was the first

company in India to voluntarily seek a corporate governance rating.

The Company continuously endeavors to enhance its wealth generating

capabilities in a globalizing environment to consistently reward more than 3,

88,000 shareholders, fulfill the aspirations of its stakeholders and meet societal

expectations. This over-arching vision of the company is expressively captured

45

in its corporate positioning statement: "Enduring Value. For the nation. For the

Shareholder."

2.2.2   ITC’s Strategy in Launching Bingo

Bingo was launched in India on Mar14, 2007 during the world cup time. Main

aim of ITC Bingo Advertisement was to create buzz among customers. Most of

the advertisements of Bingo were considered vague and stupid but we feel that

was the best form of communication any marketing company has ever done.

Within a month of launch of Initial advertisement, 70% of the viewers could

recall the brand name and that was their main aim. Brand recall along with 17

flavours in three SKUs helped ITC to capture 16% of market share in just 18

months.

This is the latest advertisement of Bingo chips, though it is very early to say

that whether ITC could sustain such a growth in long term with so many

flavors. The major problem with so many flavors is that if a person doesn’t like

any of the flavors, he will not even try other flavors. So much diversification

might come in the path of ITC’s growth in the snacks business.

46

The initial offering from Bingo includes an array of products in both Potato

Chips & Finger Snacks segment. The Potato Chips offering comprise of four

innovative variants inspired by the snacking habits of different parts of the

country as well as Masala, salted and Tomato favorers. Additionally a south-

inspired dairy option has also been introduced under the potato chips offering.

The offering under the Finger Snacks segment are equally unique presentation

with innovative finger foods like the pakoda inspired Live Wires, Khakra

inspired Mad Angles and specially developed time pass snack in the form of

Tedhe Medhe. Each offering under this segment is available in two variants

making it a total of 6 products in the Finger Snacks portfolio.

The segmentation was mainly done on the basis of age if the people. The

primary target of Bingo is 18-30 year old people, who are willing to try out new

flavors more easily than the small kids. Bingo is positioned as a youthful and

innovative snack.

In a survey done by ITC, it has been found that 70% of respondents liked Indian

flavors like bhel, golgappas etc. Initial pricing of ITC bingo is directly frontal

attack on Frito lays with pricing of Rs. 5, 10 and 20. Now Firto Lays has

launched small packs of Rs. 3. Let us see whether ITC can leverage upon its

47

huge distribution network covering panwaalas to small kirana shops with a

similar small pack of Rs. 3.

The Company distributes more than 4 lakh large racks, to display the brand at

all points of sale. The racks created so much impact that even competitors like

market leader Frito-Lay’s introduced its own version of water racks. Within six

moths of launch Bingo was available in more than 2, 50,000 retailers across the

country. ITC made a strategic alliance with Future group according to which all

retail stores of Future group like Food Bazaar, Big Bazaar and Khishore

Biyani’s Fair Prices etc. will store only ITC Bingo. Bingo’s website

(www.bingonbingo.com) is a unique site with information about Bingo and its

flavors. Initially Bingo sponsored many Bingo Remix night in various clubs.

ITC with Bingo adopted a Market Challenger strategy and chose a combination

of flank and frontal attack against the market leader Frito Lay’s.

With the rise of ITC bingo in no time, Lays has revamped its branding strategy

with new promotions featuring actress like Juhi Chawla, Kareena Kapoor etc.

About 35 AC BEST buses in Mumbai and metro in Kolkata are now branded by

Kurkure. Frito Lays again launched a new consumer promotion campaign, chat

Time Achievers campaign in which consumers could send their recipes using

48

Kurkure, Now with the growth of ITC Bingo, Lays has launched Indian flavors

like Lay’s Chat street, India’s mint Mischief. Water style etc. Ravi Naware,

chief executive officer of ITC foods said “We are getting ready to lunch a

media – blitz for Bingo next month. We forayed into this sector in March 2007

and our market share today stands at 16% our goal is to capture a 50% share in

this sector “As of now Indian snack industry is about 2500 cross. Frito lays has

48% Haldirams has 25% market share and ITC bingo has 16% share, rest of the

market is dominated by few regional players like Balaji, its seems to be very

difficult goal. There seems to be potential problems like hug competition by

Frito lays and haldiram, Players like Balaji might expand into national terrority

or it could be bought over by players like lays. The other major threat could be

preference of people toward healthy snacks.

These are some of the hypothetical problems that might erupt in recent times

but as of now ITC Bingo has a happy story to state.

2.3 HALDIRAM FOODS

Over a period spanning 65 years, the Haldiram's Group (Haldiram's) had

emerged as a household name for ready-to-eat snack foods in India. It had come

a long way since its relatively humble beginning in 1937 as a small time sweet

49

shop in Bikaner, Rajasthan. In 2001, the turnover of the Haldiram's was Rs.400

Crore. The group had presence not only in India but in several countries all over

the world.

The company offered a wide variety of traditional Indian sweets and snacks at

competitive prices that appealed to people belonging to different age groups.

Haldiram's had many 'firsts' to its credit.

It was the first company in India to brand 'namkeens'. The group also pioneered

new ways of packaging namkeens its packaging techniques increased the shelf

life of namkeens from less than a week to more than six months.

Since the very beginning, the brand 'Haldiram's' had been renowned for its

quality products. The company employed the best available technology in all its

manufacturing facilities in India. Namkeens remain the main focus area for the

group, contributing close to 60% of its total revenues.

Haldiram’s has got 4 firms, based at Delhi, Kolkata, Nagpur and Bikaner

(branded as “Bikaji “) these firms are separate entities managed by 4 different

brothers, 3 of them (given below) use the same brand name - Haldiram’s. While

the Nagpur unit manufactures 51 different varieties of namkeens, the Kolkata

50

unit manufactures 37 and the Delhi unit 25 - This is due to different regional

markets, and the varying tastes.

The raw materials used to prepare namkeens are of best quality and sourced

from all over India. In our interview with the Haldiram’s Marketing

Representative at the Mumbai Office, we were informed that Haldiram’s invests

in R & D at the rate of churning out 2-3 products every 2 months. This just

show that Haldiram’s has come a long way from being the heavy-weight market

leaders, and have now realized the importance and threat of competition

2.4 PARLE MONACO SMART CHIPS

Parle Monaco Smart Chips eyeing 10-15% market share in the health snacks

category.

Parle Products, India’s largest biscuit and confectionary manufacturer, has

entered in the health snack food category with the launch of Monaco ‘Smart

Chips’. With this launch Parle is eyeing 25-30% market share in the domestic

market in next 2-3 years. Smart chips will be available in four flavors and will

be positioned as non- fried chips.

51

Parle Monaco has been a leading brand in snacks for a long time. With its new

variant ‘Monaco Smart Chips’ they have tried to fuse together the ‘do good’

(Marie, glucose biscuits) and ‘feel good’ (indulgent snacks) categories. The

company is also coming up with a huge campaign for the new launch featuring

Parle Monaco’s brand ambassador - Aamir Khan. The campaign is developed

by Vipin Dhyani, Founder & Creative Director, and Thought shop.

Speaking on the launch Praveen Kulkarni, GM, Parle Products said “Over the

last few years, we have been looking to expand the product portfolio at Parle by

introducing newer categories in biscuits as well as exploring options beyond

biscuits. The consumer today wants a product that satisfies both the needs. We

expect Smart Chips will become a significant ‘category benchmark’, driving

sales for healthy snacks within snacks categories. We are aiming to grab 10-

15% market share with the brand extension.”

Commenting on the launch Mr. Shalin Desai, Sr. Brand Manager, Parle

Products said, “The category is new and is growing at a fast pace. I am sure that

our brand will do well in the market. As per our studies, we realized that there

exists a gap with snacks which are ‘fun’ to eat and ‘healthy’ to eat. Today’s

consumers are health conscious and most of the products available in the

market are not healthy, so being an early entrant we would like to capitalize on

52

an early mover advantage. Monaco has been associated with the snack category

for a long time and with this brand extension we wanted to capitalize on the

high recall value of the brand.”

Parle has already diversified into the non biscuit snacks market with the launch

of Musst Chips and Musst Stix in mid 2008. Smart Chips, a part of the

company’s expansion plans beyond biscuits, provide foodies with an option of a

healthy snack that satiates their taste buds too. These are not fried chips and

priced at Rs 5 to Rs 10 for 25 Gms and 50gms respectively and they target a

wide consumer faction ranging from youth to family groups. Smart Chips will

be available in four exciting flavors – Macho Masala, Simply Salted, Tangy

Tomato and Crazy Chat.

The snack food market in India is estimated to be worth $3 billion, with the

branded snack market at $1.34 billion, and is growing at 15-20 per cent yearly.

The unorganized sector, worth $1.56 billion, is also growing at 7-8 per cent.

53

CHAPTER 3

RESEARCH

METHODOLOGY

54

3. RESEARCH METHODOLOGY

3.1   NEED AND SIGNIFICANCE

In the branded snacks market, to get down to basics, Frito Lay commands a

share of 48%, followed by Haldiram’s at 25% and ITC at 16%. The rest is

divided between a handful of new entrants, wannabes and many regional

players. Out of these ITC’s Bingo is a relatively new entrant in the market,

which was launched in 2007. ITC has launched Bingo in a wide variety of

flavors and formats, ranging from potato chips to finger snacks. Because of its

different and catchy advertisements Bingo has created a buzz in the market.

In a market segment that is very fragmented we wanted to find out if a

relatively new player could carve a niche for itself in the consumers mind.

Therefore, our aim was to find out consumer perceptions of Bingo.

3.2   STATEMENT OF RESEARCH OBJECTIVES

The main objectives of our research were as follows:

To find out which brand of potato chips has the highest recognition and recall.

To find which is the most preferred snack brand and which is the least

preferred.

To compare Bingo to the market leader Lays

55

3.3 RESEARCH  DESIGN:  DESCRIPTIVE

Research design is the basic framework which provides guidelines for the rest

of research process. It specifies the methods for data collection and data

analysis .In this research project we have used the descriptive research design.

We conducted a survey in Mumbai. My sample size is 80. Respondents in the

sample were asked to fill questionnaires.

3.4 ANALYSIS OF DATA

In order to extract meaningful information from the data collected, an analysis

of data was done. We have divided the analysis in two parts, qualitative analysis

and quantitative analysis.

56

CHAPTER 4

DATA

INTERPRETATION

AND ANALYSIS

57

1. Approximately, how many times in the last week have you consumed fast

food?

Descriptive Statistics

N Minimum Maximum MeanStd.

Deviation Variance

how many times in the last week have you consumed fast food?

80 0 9 3.90 2.023 4.091

Valid N (listwise) 80

Table 4.1 Analysis of times consumed fast food

From the above table, we can interpret that an average 4 times in last couple of

week respondents purchased and consumed fast food.

58

2. Please rate the following parameter that induces you in consuming fast food

over normal food.

Descriptive Statistics

N Minimum Maximum Mean

Std.

Deviation Variance

Price 80 1 9 5.27 1.961 3.847

Time Factor 80 2 10 7.15 2.117 4.484

Hunger 80 4 10 6.25 1.571 2.468

Taste 80 1 10 6.30 2.015 4.061

Quantity 80 1 8 4.50 1.883 3.544

Hygiene 80 1 9 3.20 1.845 3.403

Valid N

(listwise)

80

Table 4.2 Analysis of parameters inducing fast food over normal food

From the above data we can analyze that Time factor is the most influencing

factor among all the factors for inducing Fast Food followed by Taste and

Hunger later. Whereas Hygiene factor is the least factor to be accounted while

consuming fast food.

59

3. When it comes to eating food, please rate the following option according to

your preference

Descriptive Statistics

N Minimum Maximum Mean

Std.

Deviation Variance

Sandwich 80 1 5 3.07 1.134 1.285

Vada-Pav 80 1 5 2.85 1.342 1.800

Burger 80 1 5 3.28 1.232 1.518

Frankie 80 1 5 2.73 1.331 1.772

Packaged Chips 80 1 5 3.40 1.186 1.408

Valid N

(listwise)

80

Table 4.3 Analysis of parameters for consuming fast food

From the above data we can analyze that Packaged Chips is the most preferred

food among the above data followed by Burger and Frankie being the least

preferred food item to be consumed.

60

4. Would you prefer packaged fast food over road side items?

Count

Age

Total0-18 Years 18-35 Years 35-55 Years

Would you prefer packaged fast

food over road side items?

Yes 6 54 2 62

No 0 12 6 18

Total 6 66 8 80

Table 4.4 Analysis of preference for packaged fast food * Age Crosstab

Figure 4.1 Analysis of preference for packaged fast food * Age Crosstab

From the above data we can analyze that considering the age factor only the most preferred

age group which prefers packaged fast food over road side items is 0 – 18 age group. The

second place is age group 18 – 35 and the least preferred is 35 – 55 year old age group.

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Count

Gender

TotalMale Female

Would you prefer packaged fast

food over road side items?

Yes 28 34 62

No 10 8 18

Total 38 42 80

Table 4.5 Analysis of preference for packaged fast food * Gender Crosstab

Figure 4.2 Analysis of preference for packaged fast food * Gender Crosstab

From the above data we can analyze that both genders Male and Female prefer packaged fast

food over road side items. There is slight preference liking of females more as compared to

Male’s in the above bar chart.

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Occupation

TotalHousewife Service Business Student

Would you prefer packaged

fast food over road side items?

Yes 0 12 2 48 62

No 2 10 0 6 18

Total 2 22 2 54 80

Table 4.6 Analysis of preference for packaged fast food * Occupation

Crosstab

Figure 4.3 Analysis of preference for packaged fast food * Occupation

Crosstab

From the above data we can analyze that Housewives do not prefer packaged

fast food over road side items, Service class is more or less equal but a slight

higher on the yes side, Business class definitely prefers it and Students also

prefer packaged fast food over road side items.

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5. Please rate the reasons for selecting packaged food on the following parameter

Descriptive Statistics

N Minimum Maximum Mean

Std.

Deviation Variance

Price 80 2 10 6.27 2.135 4.556

Availability 80 2 10 6.57 1.840 3.387

Taste 80 1 10 5.73 1.896 3.594

Quantity 80 2 10 6.28 2.074 4.303

Hygiene 80 2 10 7.75 2.270 5.152

Packaging 80 2 10 6.42 2.203 4.855

Advertising

Influence

80 1 10 5.08 2.163 4.678

Brand Name 80 2 9 6.42 1.854 3.437

Valid N (listwise) 80

Table 4.7 Analysis of reasons for selecting packaged foods

From the above data we can analyze that Hygiene factor has the highest factor

while selecting a packaged fast food item, followed by Availability. Whereas

Advertising Influence and Taste surprisingly are the least factors to be

considered by people consuming packaged fast food.

6. On the scale of 1 to 5 (1-Very Bad and 5-Very Good) rate the following flavors according

to your choice? 

64

Descriptive Statistics

N Minimum Maximum Mean

Std.

Deviation Variance

Tomato 80 1 5 2.93 1.134 1.285

Cream & Onion 80 1 5 2.90 1.051 1.104

Salted 80 1 5 2.95 1.078 1.162

Spicy 80 1 5 2.78 1.263 1.594

Chilly 80 1 5 2.78 1.222 1.493

Cheese 80 1 5 2.98 1.113 1.240

Valid N

(listwise)

80

Table 4.8 Analysis of the most preferred flavour

From the above data we can analyze that flavors such as Cheese, Salted and

Tomato are the most preferred flavors whereas Spicy and Chilly are the least

preferred.

7. Have you ever tried any of the packaged fried chips?

65

Age

Total0-18 Years 18-35 Years 35-55 Years

Have you ever tried any of the packaged

fried chips

Yes 6 62 6 74

No 0 4 2 6

Total 6 66 8 80

Table 4.9 Analysis of willingness to try packaged fried chips * Age Crosstab

Figure 4.4 Analysis of willingness to try packaged fried chips * Age Crosstab

From the above data we can analyze that all the age groups have mostly tried packaged fried

chips the ratio is higher on 0 – 18 age group and lowest on 35 – 55 age group since

behavioral patterns of the higher age people.

66

Gender

TotalMale Female

Have you ever tried any of the

packaged fried chips

Yes 36 38 74

No 2 4 6

Total 38 42 80

Table 4.10 Analysis of willingness to try packaged fried chips * Gender Crosstab

Figure 4.5 Analysis of willingness to try packaged fried chips * Gender Crosstab

From the above data we can analyze that in case of gender wise both genders

have tried packaged fried chips but the ratio is higher on Male side when

compared to females.

67

Count

Occupation

TotalHousewife Service Business Student

Have you ever tried any of the

packaged fried chips

Yes 2 22 2 48 74

No 0 0 0 6 6

Total 2 22 2 54 80

Table 4.11 Analysis of willingness to try packaged fried chips * Occupation Crosstab

Figure 4.6 Analysis of willingness to try packaged fried chips * Occupation Crosstab

From the above data we can analyze that all the occupation have tried packaged

fried Chips it is only in the Student’s that some of them have not tried it.

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B rand P referenc e for P ac kag ed F ried C hipsB a la ji

5%

Ha lidra m3%

P eppy8%

L a ys42%

B ing o42%

Figure 4.7 Analysis of brand preference of packaged fried chips

From the above data we can analyze that Brand Preference is highest and equal

in Lays and Bingo followed by peppy, Balaji and Haldiram in ascending order.

69

8. Did you like packaged fried chip?

Age

Total0-18 Years 18-35 Years 35-55 Years

Did you like the packaged fried

chip

Yes 4 54 6 64

No 2 12 2 16

Total 6 66 8 80

Table 4.12 Analysis of liking towards packaged fried chips * Age Crosstabs

Figure 4.8 Analysis of liking towards packaged fried chips * Age Crosstabs

From the above data we can analyze that Age wise 0 – 18 have 50% liking and 18 – 35 have

the highest liking whereas age group 35 – 55 have the lowest liking.

70

Count

Gender

TotalMale Female

Did you like the packaged fried chip Yes 30 34 64

No 8 8 16

Total 38 42 80

Table 4.13 Analysis of liking towards packaged fried chips * Gender Crosstabs

Figure 4.9 Analysis of liking towards packaged fried chips * Gender Crosstabs

From the above data we can analyze that Gender wise the liking is on the highest side for

both Male and Females but More higher on the Female side only when compared with Males.

71

Count

Occupation

TotalHousewife Service Business Student

Did you like the

packaged fried chip

Yes 2 18 2 42 64

No 0 4 0 12 16

Total 2 22 2 54 80

Table 4.14 Analysis of liking towards packaged fried chips * Occupation Crosstabs

Figure 4.10 Analysis of liking towards packaged fried chips * Occupation Crosstabs

From the above data we can analyze that Occupation wise if we check then

Housewives and Businessmen have definitely liked packaged fried chips but

when checked in Service and Student liking is definitely there but not 100% as

seen in others.

72

9. Which branded packaged fried chip would you prefer among the following?

 Descriptive Statistics

N Minimum Maximum Mean

Std.

Deviation Variance

Bingo 80 1 5 3.60 1.074 1.154

Lays 80 1 5 2.88 1.216 1.478

Balaji 80 1 5 2.63 .973 .946

Peppy 80 1 5 2.65 1.045 1.091

Haldiram 80 1 4 1.93 .938 .880

Valid N

(listwise)

80

Table 4.15 Analysis of the most preferred brand

From the above data we can analyze that Bingo is the highest preferred

packaged fried chip followed by lays. Peppy and Balaji amounts to nearly the

same and haldiram is the least preferred among these.

73

10. Will you be loyal to your most preferred packaged fried chip?

Count

Age

Total0-18 Years 18-35 Years 35-55 Years

Will you be loyal to your most

preferred packaged fried chip?

Yes 2 26 6 34

No 4 40 2 46

Total 6 66 8 80

Table 4.16 Analysis of loyalty towards packaged fried chips * Age Crosstabs

Figure 4.11 Analysis of loyalty towards packaged fried chips * Age Crosstabs

From the above table and Chart we can analyze that in terms of loyalty with

packaged fried chip age groups does not matter much as we can see in all the

age group ranging from 0-18 and 18-35 there is no loyalty and above that i.e

35-55 loyalty is visible.

74

Count

Gender

TotalMale Female

Will you be loyal to your most preferred packaged

fried chip?

Yes 16 18 34

No 22 24 46

Total 38 42 80

Table 4.17 Analysis of loyalty towards packaged fried chips * Gender Crosstabs

Figure 4.12 Analysis of loyalty towards packaged fried chips * Gender Crosstabs

In the following case we can analyze that loyalty in terms of Gender is not

applicable since in both cases male and female one cannot see any loyalty for

the packaged fried chip.

75

Count

Occupation

TotalHousewife Service Business Student

Will you be loyal to your most preferred packaged fried chip?

Yes 2 10 0 22 34

No 0 12 2 32 46

Total 2 22 2 54 80

Table 4.18 Analysis of loyalty towards packaged fried chips * Occupation Crosstabs

Figure 4.13 Analysis of loyalty towards packaged fried chips * Occupation Crosstabs

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From the above table and figure, it can be quite clearly interpreted that House

wives are loyal to the brand, in Service it is nearly equal and Business Men are

not loyal to their respective brand of Packaged Fried Chip.

CHAPTER 5

MAJOR FINDINGS

AND SUMMARY

77

5. MAJOR FINDINGS AND SUMMARY

5.1SUMMARY

Since Bingo is a relatively new product and we wanted to gauge what kind of

recall value it has and what are consumers’ perceptions towards it compared to

the market leader Lays. We conducted the study by interviewing people using

questionnaires. The questionnaire was constructed using Likert scale and

Henry’s Hierarchy. We used the stratified sampling technique to conduct the

survey. Our sample size was 100. We have also given an overview of the Indian

snack market and described ITC’s business activities in brief and their strategy

in launching Bingo.

5.2 MAJOR FINDINGS

I have found out that of all the snack brands Bingo has the highest recall value

followed by Lays and then others. When it comes to purchase decisions, a

majority of respondents prefer Bingo while Haldiram is the least preferred, this

in spite of having the second highest recall value. Lays is the second most

preferred brand when it comes to purchase decisions. Respondents clearly point

78

out that they would not prefer Bingo when purchasing. Consumers feel that

Bingo tastes much better than Lays. On the parameters of quantity, packaging

and price they feel Bingo is as good as Lays.

CHAPTER 6

CONCLUSION

79

6. SUGGESTION AND CONCLUSION

After conducting the survey I am in a position to say that since its launch Bingo

has been able to garner significant interest. Bingo has the highest brand recall

courtesy its high decibel ad campaigns. But people who have tried Bingo feel

that although it is comparable to Lays in terms of quantity, packaging,

crunchiness and price its performance on the taste parameter is abysmal. Since

it is considered to be as good as lays on other parameters but not on taste

customers do feel like switching to it. Even though Bingo has recently increased

its quantity from 30 grams to 45 grams for a Rs. 10 pack, compared to 30 grams

for Lays it is still not perceived as having more quantity compared to Lays. We

would suggest that they advertise this fact.

If Bingo has to take on Lays then it has to focus on improving the taste of its

offering. Consumers’ perceptions of the brand will have to be altered as they

have to feel it is as good as or better than Lays in terms of taste and as a value

for money product. Their ad campaigns so far have done an excellent job in

80

creating hype around the brand has fortunately been able to live up to the

expectations.

BIBLOGRAPHY

SME rating agency of India ltd.

www.allbusiness.com

http://www.financialexpress.com/news/Just-munch-it/271873/0

www.itcportal.com

81

Annexure

82

a) Questionnaire 

1. Approximately, how many times in the last week have you consumed fast food?

0 1 2 3 4 5 More (Specify: _____) 

2. Please rate the following parameter that induces you in consuming fast food over normal food.

       Very Low Very High 

Price  1 2 3 4 5 6 7 8 9 10

Time factor  1 2 3 4 5 6 7 8 9 10

Hunger  1 2 3 4 5 6 7 8 9 10

Taste  1 2 3 4 5 6 7 8 9 10

Quantity  1 2 3 4 5 6 7 8 9 10

Hygiene  1 2 3 4 5 6 7 8 9 10 

3. When it comes to eating food, please rate the following option according to your preference

       Very Low  Very High 

Sandwich  1 2 3 4 5

Vada-Pav  1 2 3 4 5

Burger  1 2 3 4 5

Frankie  1 2 3 4 5

Packaged Chips  1 2 3 4 5  

83

 

 

4. Would you prefer packaged fast food over road side items?

 Yes  No 

5. Please rate the reasons for selecting packaged food on the following parameter

       Very Low  Very High 

Price  1 2 3 4 5 6 7 8 9 10

Availability  1 2 3 4 5 6 7 8 9 10

Taste  1 2 3 4 5 6 7 8 9 10

Quantity  1 2 3 4 5 6 7 8 9 10

Hygiene  1 2 3 4 5 6 7 8 9 10

Packaging  1 2 3 4 5 6 7 8 9 10

Advertising Influence  1 2 3 4 5 6 7 8 9 10

Brand Name  1 2 3 4 5 6 7 8 9 10  

6. On the scale of 1 to 5 (1-Very Bad and 5-Very Good) rate the following flavors according to your choice? 

Tomato    1 2 3 4 5

Cream and onion  1 2 3 4 5

Salted   1 2 3 4 5

Spicy    1 2 3 4 5

Chilly    1 2 3 4 5

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Cheese    1 2 3 4 5     

7. Have you ever tried any of the packaged fried chips

      Yes                No  If yes which one ___________________________________ 

8. Did you like packaged fried chip?

   Yes No

9. Which branded packaged fried chip would you prefer among the following?

 

       Very Low  Low      Moderate       High  Very Most

Bingo  1  2            3          4            5

Lays  1   2            3          4            5

Balaji  1   2            3          4            5

Peppy  1   2            3          4            5

Haldiram  1   2            3          4            5 

10. Will you be loyal to your most preferred packaged fried chip?

 Yes No 

Name: ___________________________    Contact: _____________________________

Age    :__________    Gender :          Male             Female

Occupation :            Housewife             Service            Business             Student 

85

Address: ____________________________________________________________

      ____________________________________________________________ 

b) List of Tables

LIST OF TABLESTable No. Title of the Table Page No.Table 1.1 Overview of the Indian Snack Food Business 15Table 1.2 Opportunities and Challenges 19Table 4.1 Analysis of times consumed fast food 58Table 4.2 Analysis of parameters inducing fast food over normal

food59

Table 4.3 Analysis of parameters for consuming fast food 60Table 4.4 Analysis of preference for packaged fast food * Age

Crosstab61

Table 4.5 Analysis of preference for packaged fast food * Gender Crosstab

62

Table 4.6 Analysis of preference for packaged fast food * Occupation Crosstab

63

Table 4.7 Analysis of reasons for selecting packaged foods 64Table 4.8 Analysis of the most preferred flavor 65Table 4.9 Analysis of willingness to try packaged fried chips *

Age Crosstab66

Table 4.10 Analysis of willingness to try packaged fried chips * Gender Crosstab

67

Table 4.11 Analysis of willingness to try packaged fried chips * Occupation Crosstab

68

Table 4.12 Analysis of liking towards packaged fried chips * Age Crosstabs

70

Table 4.13 Analysis of liking towards packaged fried chips * Gender Crosstabs

71

Table 4.14 Analysis of liking towards packaged fried chips * Occupation Crosstabs

72

Table 4.15 Analysis of the most preferred brand 73Table 4.16 Analysis of loyalty towards packaged fried chips *

Age Crosstabs74

86

Table 4.17 Analysis of loyalty towards packaged fried chips * Gender Crosstabs

75

Table 4.18 Analysis of loyalty towards packaged fried chips * Occupation Crosstabs

76

c) List of Figures

LIST OF FIGUREFigure No. Title of the Figure Page No.Figure 1.1 Potato Consumption in India 7Figure 1.2 Total Import of Snack Foods/Snack Food Ingredients

in India CY 200617

Figure 4.1 Analysis of preference for packaged fast food * Age Crosstab

61

Figure 4.2 Analysis of preference for packaged fast food * Gender Crosstab

62

Figure 4.3 Analysis of preference for packaged fast food * Occupation Crosstab

63

Figure 4.4 Analysis of willingness to try packaged fried chips * Age Crosstab

66

Figure 4.5 Analysis of willingness to try packaged fried chips * Gender Crosstab

67

Figure 4.6 Analysis of willingness to try packaged fried chips * Occupation Crosstab

68

Figure 4.7 Analysis of brand preference of packaged fried chips 69Figure 4.8 Analysis of liking towards packaged fried chips * Age

Crosstabs70

Figure 4.9 Analysis of liking towards packaged fried chips * Gender Crosstabs

71

Figure 4.10 Analysis of liking towards packaged fried chips * Occupation Crosstabs

72

Figure 4.11 Analysis of loyalty towards packaged fried chips * Age

74

Figure 4.12 Analysis of loyalty towards packaged fried chips * Gender Crosstabs

75

Figure 4.13 Analysis of loyalty towards packaged fried chips * Occupation Crosstabs

76

87