Double-edged sword in ₹5 price point; how Prataap Snacks learnt the hard way

The Covid-19 lockdown last year was a windfall for snack and biscuit manufacturing behemoths like Britannia and Parle Products. As people were forced to stay indoors and were unable to go to restaurants and food courts, they indulged in salted snacks and biscuits. However, Indore-based snack-maker, Prataap Snacks, wasn't as lucky. For the first time, the company's sales dipped to ₹1,200 crore in 2020 from ₹1,400 crore the previous year. The reason for this was the company's over 85% dependence on ₹5 price-point products. The company has always focused on impulsive consumption with its Yellow Diamond chips, extruded snacks and namkeens, which largely happens out of homes. With mobility getting limited and schools, colleges and offices remaining closed, impulsive consumption took a huge hit.

The biggest learning for Amit Kumat, MD and CEO, Prataap Snacks, has been not to keep all his eggs in one basket. The company is now trying hard to reduce its dependence on the ₹5 price point to 60% (over the next three years) by launching bigger pack sizes priced between ₹10 and ₹30. Kumat says that competition (likes of Haldiram and Bikano) benefitted not because they were not overly dependent on smaller packs, they also benefitted because of their larger portfolio of Indian snacks such as namkeens. "Around 60-70% of their revenue comes from namkeen, which people consumed a lot during the lockdown. In our case, only 12-14% of our revenue comes from namkeens," Kumat explains.

The lockdown and the disruption thereof also led to a lot of companies tightening their costs and Prataap Snacks was no exception. The snack company in the past year has improved its bottom line by 5%-6% by revamping its distribution, as well as cutting costs in production. The company has not just started supplying directly to its distributors and has completely eliminated super stockists; it has also consolidated its number of distributors. In a market like Delhi, for instance, the company had one super stockist who supplied to as many as 70 distributors. It now has 17 large distributors and has let go of several smaller distributors. "Earlier, we used to have such a large network so that we were able to reach out to more retail stores, but it wasn't a cost-efficient model," Kumat elucidates.

After rationalising its distribution force, the company has partnered with a third-party retail tech company to ensure that it reaches out to more outlets. "The retail tech company helps us to take orders from retailers through their app or on the phone, and we directly deliver to those outlets. In a market like Indore, where we covered 2,000 outlets, we are now able to cover 6,000. We have reduced our dependence on physical go-to-market methods and our coverage has increased by over 50%," Kumat says.

Apart from the pandemic-related disruptions, last year has also seen an unprecedented rise in inflation and commodity prices. Edible oil prices, Kumat avers, went up by almost 100% and the company had no option but to look at process optimisation. From tweaking the recipe of its products by using new ingredients; lesser oil to optimising packaging cost; and also reducing the grammage of its products, the company has made a series of corrections in its factories. "Our biggest challenge was to tweak recipes without compromising on tastes. We did a lot of work over there."

Kumat says that the growth momentum is back and he hopes to touch its pre-pandemic revenue of ₹1,400 crore by end of the 2021-22 fiscal.