Parle-G to atta — How Parle Products is morphing into a foods company

The century-old home-grown biscuit and confectionery company, Parle Products, is turning into a complete foods company. Manufacturer of the iconic Parle-G and Monaco biscuits, Parle entered the staples business earlier this year, with the launch of Parle-G atta and has more recently forayed into breakfast cereals with Hide & Seek Fills. Its journey into becoming a larger food company started way back in 2008 — when it entered the salted-snacks category first with the launch of western snacks, such as potato chips, extruded snacks and eventually namkeens. Thereafter, it also forayed into bakery products and launched cakes and rusks.

Today, biscuits and confectionery contribute a lion’s share of the ₹12,000-odd crore company’s revenue, and the plan is to ensure that at least 20% of its revenue is generated from its newer categories. The biscuit major, however, is a late entrant in both staples and breakfast cereals — which already has strong incumbents such as ITC, Adani Wilmar, Kellogg’s and Tata Consumer Products. Mayank Shah, Senior Category Head, Parle Products, admits that his company, indeed, doesn’t have the first-mover advantage, but also he says that a category like atta, for instance, is a ₹1,20,000-crore market opportunity, of which barely 20% is organised. “I don’t believe that we are late, as the action in the branded atta category is just about picking up. Consumers in the pandemic era are increasingly opting for packaged staples, unlike a couple of years ago when they preferred buying loose.”

Parle Products was also test-marketing other staples such as pulses, but it eventually chose to go ahead only with atta. “Dal has a lot of regional nuances. Toor dal from Gujarat is different from what is available in Latur or Hubli. It is difficult to buy in one place and sell it across India. We test-marketed, saying that we need to do something which appeals to a larger mass. Atta has more mass and the potential is higher,” explains Shah.

In breakfast cereals, the company is trying to exercise its distribution might. Though Kellogg’s is surely the pioneer, its distribution is largely restricted to urban markets, while Parle’s distribution reaches a network out to 8.2 million stores. Krishnarao Buddha, Senior Category Head, Parle Products, says that the company wants to take Hide & Seek Fills to every corner of the country, and has hence launched the product in ₹10 packs. “We want consumers to first sample the product. In case the breakfast proposition doesn’t appeal to them, they could also consume it as a delicious sweet snack.” Buddha says that it would launch larger packs only after the product gets accepted by the masses.

He is confident that Hide & Seek Fills would have enough takers as he claims that the product is tastier than competing products. “We realised that the quality was not up to the mark, despite all the excitement in the category. We thought there was an opportunity to bring a delightful chocolate product to the consumer, so we increased the chocolate filling percentage infills by 50%, as opposed to competition products which have 30% filling. It is an expensive proposition, but we want to give a fantastic product to our consumer,” he elucidates. Breakfast cereals are a ₹3,000- crore category, of which fills is a ₹60-crore category.

In biscuits (a ₹40,000-crore market), Parle Products, having 31% share, is neck and neck with arch-rival Britannia.

No to D2C

Unlike its peers, who are putting together their respective direct-to-consumer strategy — where they are creating premium brands — Parle has no such plans. “The unit economics doesn’t make sense,” says Shah. He says that e-commerce companies incur a cost of ₹130 (in warehousing, packaging and delivery) for every delivery they make. “Unless your order value is not above ₹1,500, it will be difficult to incur these costs. An e-grocer, whose average bill value is between ₹400 and ₹500, despite delivering in a scooter or a bike incurs a cost of ₹70-80. D2C is commercially unviable unless one has scale,” Shah further explains.

Parle Products is known for taking prudent moves. Despite talking about evolving into a complete foods company way back in 2013, it has taken close to a decade to turn into one. However, during this period it has been continuously experimenting with new categories — one of them being luxury chocolates which didn’t pay off. Both Shah and Buddha say that the company is in no hurry to expand. “We will wait for these categories to penetrate deep enough and achieve scale, only then are we going to consider adjacencies or even venture into newer categories,” says Buddha.