A Cigarette manufacturer, a Dairy producer & a Biscuit baker walks into a bar..
What do they have in common?
What can a cigarette company, a dairy products company and a baked products company have in common?
An year ago, answer might have been “nothing”; but today, there is one commonality – Atta (or flour). Yes, you heard that right!
“Amul atta to hit market soon” – June,2020
“Parle Products enters wheat flour market” – June 2021
The branded atta space is dominated by ITC Limited which has the lion’s share of the market and sells under the Aashirvaad brand, with other players like the Godrej Group which retails Pillsbury and the Adani Group which sells atta under the Fortune brand.
With giants like these owning the packaged atta segment, what made this market attractive to Amul and Parle-G?
If you are a sales person, the answer is: an INR 20,000 crore market growing at a CAGR(Compounded Annual Growth Rate) of 21%! According to the IKON’s (a market research firm) estimates, if the growth trajectory remains the same, the market of packaged wheat flour may likely to be more than double the current size by FY 2024-25 itself.
If you are a marketing person, the answer is: Changing Customer Behaviour. 75-80 per cent of the people in India who buy atta either get it milled, or purchase unbranded loose atta. Buying packaged atta is an urban phenomenon with the urban market occupying more than 90% of the total market. This represents a huge untapped market for new players! And with widening market penetration by the leading market players; the rural markets are already seeing the steady growth in demand of packaged wheat flour in India. This is evident from the fact that ITC’s Aashirvaad became an INR 6000 crore brand in 2020, growing from an INR 4000 crore brand in 2018!
Who would not want to have a bite of this chapati growing in size every day?!
However, looking at the basic competencies of Amul (a dairy company) and Parle G (a bakery essentially), atta market seems to be far-fetched, right? Hold that thought!
If we move away from the product portfolio of these two companies and look at the supply chain portfolios, we seem to be standing on the edge of a goldmine! While Amul will no doubt leverage its pan India network of 10,000 distributors and one million retail outlets; Parle G has a robust network 1500 wholesalers, catering to more than 425000 retail outlets directly or indirectly.
Talking of procurement scenarios:
Since many dairy farmers are also wheat growers, and Amul has a connect with 3.6 million farmers, it could forge partnerships with them to procure wheat. Parle G has a similar network for wheat procurement, which is evident from the high volumes of wheat it procures annually – around 7-7.5 lakh tonnes (Fun Fact: This is equivalent to almost 5% of Punjab's annual wheat production).
Moreover, Amul and Parle G are both household names in terms of brand trust and quality. So, customer acquisition costs can be considered within reach & decent, if not low. According to a recently released Kantar’s Brand Footprint report, among all fast-moving consumer goods (FMCG) brands in India, Amul was only second to Parle biscuits! Co-incidence much?
Interestingly, the scale of these companies is such that Parle G produces 40 crore units per day; and Amul has a milk handling capacity of 35 million litres per day.
Fun Fact: the distance between Earth and Moon can be covered if all the biscuits produced by Parle-G till date are laid side-to-side.
But Diversification is an addiction that we have talked about many times before at FnM, & Amul and Parle G are the new addicts in town. What seems to be seen is the impact that these two giants create in terms of bringing convenience and quality to customers, in a market dominated by many national players. But hey, if people can trust a cigarette making company with the quality of atta, then why not Amul and Parle G? What do you think?
Drop a comment or message to let us know. And hey, don’t forget to share with your friends!
By: Anmol Gupta | Isha Garg