Riding the health food wave, Godrej Foods is foraying into the Rs 400 crore breakfast cereals market, a segment dominated by multinational Kellogg’s.
To be launched initially in the North as part of a pilot plan, the cereals will be promoted under the health food brand Sofit. Godrej hopes to make a dent in the unexploited market with its ‘affordable pricing’, Godrej Foods executive vice-president sales & marketing MY Verma told FE.
Currently growing at about 10% per annum, the breakfast cereal category in India has been a tough one to crack. The segment, which includes products like cornflakes and daliya has been a laggard despite aggressive promotion campaigns by Kellogg’s, Mohan’s and Bagry’s.
According to analysts, one of the prime reasons for the lacklustre growth is that Indian consumers’ breakfast habits are diverse. Also, price sensitivity, they felt, was one major issue companies have not been able to tackle.
“The category is largely unexploited and a tough one to crack. Even players like Kellogg’s took several years to get it right here,” an industry analyst said.
Godrej, however, thinks it has worked out all these. To start with, the company is launching a ‘soya-based’ product, which it claims gives a dual benefit of soya and wheat, strengthening its positioning as a ‘health food’. “The challenge is to make health food tasty,” Mr Verma said.
Secondly, on the pricing front, the company is taking competition head on. A 200-gm Godrej Sofit will be priced at Rs 30 as against Kellogg’s Rs 70. “If you have the pricing right, there’s potential to grow,” added Mr Verma.
The products are currently being outsourced from a contract manufacturer called Savour India. According to Mr Verma, the company may consider having its own manufacturing facility once it goes national. The product will initially be launched in the Northern cities such as Delhi, Chandigarh and Ludhiana, as the region accounts for almost 40% of the entire breakfast cereal market.
“When we go national, we would like to have most of the production under our own control,” Mr Verma said. The company plans to invest Rs 2.5 crore to promote the brand in the year 2005, and is targeting to sell about 400 tonne in the first three months of the launch.
A prominent player in fruit beverages and edible oil categories, Godrej Foods, is currently a division of Godrej Industries.
The division which posted a sales turnover of Rs 196 crore during 2003-04, is hoping to achieve Rs240 crore turnover this fiscal.
The foods division of the FMCG behemoth, whose 80% sales comes from edible oils business and 20% from the processed food section, contributes about 35% to Godrej Industries’ topline.