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Breakfast Cereals Market In India

Breakfast cereals consumption is rising upward due to changing habits of Indian households. It secured USD 157 million in 2013 and promises the double-digit growth over the next five years

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Definition / Scope

Breakfast cereals consumption is rising upward due to changing habits of Indian households. It secured USD 157 million in 2013 and promises the double-digit growth over the next five years. Rapid growth is observed mainly in two categories-hot cereals and muesli.[1]

Breakfast Cereals - Classification

The broad classification of breakfast cereals consumed in India can be seen as below.[2]

Ready to eat cereals:This category consists of cereals that can be consumed without cooking. They can be consumed solely or along with accompaniments like milk, fruits and water. It includes Cornflakes, wheat flakes, multi-rain flakes, granola bars, puffed and pulverized cereals like murmura and popcorn, cereals made from soy or bran, and squeezed-type cereals made from grain flour or powder.

Ready to cook: Cereals that have to be cooked in milk, water or oil belong to this category. It includes instant and quick cooking oats, oatmeal, farina, porridge and muesli. Depending upon the taste preferences, one can add sugar, salt, dried vegetables, fruits and spices to enhance taste of this cereal meal.

Precooked/Processed cereals: The consumption level of these cereals is maximum among breakfast cereals. They again can be divided into ready to cook and ready to eat subcategories. Ready to eat food here include cereal-/malt-based food/beverage and/or pulse and crisp snacks, and dessert-type cereals products.  Ready to cook cereals include fermented/ non fermented products, enriched products, such as poha,upma, idli, vada, dhokla, khandvi etc., other such pre-cooked products. Cereal or grain pellets and all varieties of malt also belong to ready to cook sub category.

Ready-made/ Breakfast Mixes: These are dry or liquid mixes of other whole, flaked or ground cereal or grain with other ingredients. Idli or dosa batter, upma or poha mix are some examples. Instant mixes can be prepared with minimal effort and don’t require afurther ddition of ingredients.

Market Overview

  • Processed grains, which are consumed as first meal in the [[Building With Brains + Buildings With Brains = Sustainable Future|morning]], fall under the category of breakfast cereals. They are rich in nutritional content like vitamin minerals and fibers.
  • Indian consumers are moving towards convenient and healthier life style thus making the breakfast cereal as important category in food and beverage industry.

Executive Summary

  • Breakfast cereals witnessed growth of 25% in 2014.[3]
  • Growing demand is witnessed due to changing lifestyle and preferences of Indian consumers.
  • Success of breakfast cereals is riding on wheels of health and convenience.
  • Products like Flakes have enjoyed popularity among majority households, followed by oats. New entrants in this category are ready-made mixes.
  • Market leader Kellogg India Ltd cornered market share of 37% in 2014 making it the most relished brand. Breakfast cereals concept was familiarized by this company.[3]
  • Other products like muesli, are also received well and is foretasted to grow in coming years by CAGR of 17% at constant 2014 prices.[3]
  • Barring few weaknesses, this category is observing enormous product innovations and improvements.
  • Challenges like product awareness, consumer’s usage and attitude and reach need to be overcome.

Key Metrics

Metrics Value Explanation
Base Year 2016 Researched through internet


Market Risks

Competition: Breakfast cereal market is dominated by leading food giants like Kelloggs, PepsiCo, Marico, etc. Apart from these brands, local players are also cause of concern as they have strong reach and distribution.

Market penetration: Consumers of breakfast cereals are urban consumers belonging to high and middle income groups. To ensure category penetration in low income group, smaller packs at affordable prices need to be placed using various distribution channels. Economical prices of products from regional players pose a threat to new entrant.

Inflation: Rise of cost of raw materials leads to an increase in cost of production which in turn leads to increased product price. In order to avoid the impact of inflation on consumer’s pocket, company is forced to bear limited profit margins. If price of product is increased, consumers may switch to other brand or product options.

Top Market Opportunities

Rising disposable income: India is an unsaturated and attractive market. It is one of the fastest budding economies in the world. The economy is expected to grow at the rate of 9-9.5 percent during the 12th Five Year Plan period (2012-2017) as stated by Planning Commission. Better the economic growth, higher the disposable income.[4]

Emerging Middle class: Economic growth has given rise to an emerging middle class – with new consumption patterns and has moved millions out from the clutches of poverty. They will be a primarily responsible for rise in consumer spending and will account for 59 percent of the country’s total consumption by 2025.[5]

Snowballing Health Awareness: Aware of the flaws of traditional breakfast, consumers are now purchasing food products post scrutinizing the ingredients section on the pack. People are turning their heads towards balanced and healthy diet to keep control on life style diseases. Better health awareness, higher sales of breakfast cereals like oats, muesli and flakes.

Noodle ban: Ban on Nestle's Maggie instant noodles, have put other brands in this category, under scanner. Instant noodles offered easy to cook options for homemakers, but the ban has provoked them to look for other breakfast options. Rise in sales of masala oats and ready-made mixes is already observed.

Market Drivers

Convenience: Consumer lifestyles are always changing. Along with other priorities in their mind, they are preferring the breakfast options that are easy to cook and healthy. Convenience seeking consumers like to have breakfast on the way to their destination. This need gap is filled by breakfast cereals like flakes, oats and muesli, thus urban consumers were responsible for 96% of breakfast cereals value sales in 2016 . Flakes have already captured half a market share in this category and oats along with muesli have also received a warm welcome due to ease in their preparation.[1]

Health: Increasing literacy rate is creating awareness about benefits of a healthy diet among consumers. Multinationals are taking initiatives to highlight the importance of breakfast. As these breakfast cereals are high in nutrient content, consumers are moving towards them by laying off their traditional breakfast platters. Growing incidences of lifestyle diseases in urban households have further pushed consumers towards these nutritious and low fat breakfast cereals.[1]

Time poverty: Time is a valuable asset today. Breakfast cereals provide fast and healthy options to middle income group. By reducing preparation time, these delicious products have now enabled consumers, especially mothers, to spend time in other activities.[1]

Trust: With brand comes the trust. As these breakfast cereals are branded, they have gained the trust among the consumers. Kellogs, Saffola, MTH, Quaker’s, Bagrry’s, Britania and Gitz are some leaders in this category

Industry Challenges

Lack of freshness: Since these breakfast cereals have vegetables or fruits in dried form, freshness cannot be sensed. Indian consumers have strong belief in fresher is healthier notion. Hence, further addition of vegetables or fruits is requisite.

Lack of taste: Some consumers who seek for healthy breakfast options do not like bland taste of flakes, oats or muesli. To overcome this situation, different flavors of breakfast cereals are now flooding in retail market.

Inflexibility: Ready to cook and ready to eat do have some flexibility like consumers can add vegetables or fruits along with sugar or salt whatever preferred but the content of ready-made mixes cannot be altered. Since ready-made mixes already include all required ingedients, further addition of spices or vegetables results in distasteful food. Also, recipe of these ready-made mixes is standardized and is balanced as per majority consumers hence leaving a limited scope for customization.

Other Key Market Trends

  • Consumer’s changing mindset and behavior is the ultimate driver of economy. Let’s take a look at some important trends which are observed in Indian breakfast cereals market.
  • Nestle’s Maggie recently has suffered a huge setback all over the world. After detection of high amounts of lead and monosodium glutamate in Maggie samples taken in various parts of India, Food Safety and Standards Authority of India (FSSAI) have banned Maggie and have asked to cancel the license.[6]
  • Nestle has withdrawn all of its Maggie noodles from sale across India following the ban erupted due to food panic. This has led to sales of other convenience food products such as frozen ready-to-fry and instant foods have risen.[7]
  • Consumer offers like discounts and ‘Buy-3-get-1-free’ are triggering sales of breakfast cereals in retail shops like Reliance Fresh etc. Since, homemakers are looking for convenient and healthy options, breakfast cereal brands are entering new households.[8]
  • Sahil Gilani, director (sales & marketing), Gits Food Products said that now other processed food categories are filling empty shelves of Maggie, trade inquires for Gitz mixes and ready to cook meals have increased.[8]
  • According to Reliance Fresh, brands of instant poha, upma, oats and fries are catching eyes of consumers seeking instant breakfast options.[8]
  • Yummiez’s ready to eat products, is growing consistently in the range of 20-25% over last few years as said by Arabind Das, COO, Godrej Tyson Foods.[8]
  • In period of just 2 years, the Oats category has gained 26 percent of the Rs 720 crore breakfast cereal market in urban India.[9]
  • Marico's Saffola oats has emerged as the second largest product in the category with a value market share of about 12%. However, PepsiCo India's Quaker is ahead with 40% share.[10]
  • Chemists are new entrant in the distribution channel.[10]

Market Outlook

There is no doubt that breakfast cereal market has great potential for growth. Factors like growing urbanization, health consciousness and prevalence of lifestyle diseases like diabetes, hypertension, and heart attacks are encouraging consumers to switch to healthy breakfast choices. Players have to constantly innovate and improve their products to continue to tempt the Indian consumer’s appetite.

Competitive Factors

Multinationals are going an extra mile to lure their consumers. Like consumer habits, media and distribution channels are also evolving. Market mix needs to be revamped to enhance market penetration and expansion.

Product: Flexibility in product packaging should be followed. Smaller packs initiate more trials. As consumers are seeking health and convenience, pack should clearly indicate the cooking process and ingredients in the product.

Price: Consumers are encouraged by availability of healthy products at economic prices. This provokes the high and middle income group for trials. Also, affordable prices aids into penetration to lower income groups.

Promotion: Advertising needs to deliver right messages to right audiences at the right time. Companies are now following integrated marketing mix. Consumer involvement, free diet advises and health checkups are some new initiatives followed. Promotional mix ideally should contain both pull and push strategies.Where on one hand electronic, print and social media will provide the pull, point of sale push is also required. Various consumer offers also attracts new and repeat purchases.

Distribution: All above strategies remain ineffective if product lacks appropriate distribution. Optimum utilization of various channels of distribution is vital for sales. Though, consumers are moving to organized retail outlets for grocery shopping, local kiranas are still playing important role in retail market.

References

  1. 1.0 1.1 1.2 1.3 http://www.technopak.com/Files/breakfast-cereals-market-in-india.pdf
  2. http://www.fssai.gov.in/portals/0/pdf/INDIAN_FOOD_CODE(25-06-2012).pdf
  3. 3.0 3.1 3.2 http://www.euromonitor.com/breakfast-cereals-in-india/report
  4. http://www.boaoreview.com/perspective/2012/1125/38.html
  5. http://www.cgdev.org/doc/2013_MiddleClassIndia_TechnicalNote_CGDNote.pdf
  6. http://www.themangonews.com/business/ban-on-maggie-noodles/
  7. http://www.theguardian.com/world/2015/jun/05/maggi-withdraws-all-noodles-in-india-after-state-bans-and-lead-scare
  8. 8.0 8.1 8.2 8.3 http://timesofindia.indiatimes.com/business/india-business/Noodles-out-moms-shop-for-new-snacks/articleshow/47636798.cms
  9. http://www.nielsen.com/in/en/insights/reports/2014/trendcasting-tuning-into-the-indian-consumer-in-2014.html
  10. 10.0 10.1 http://timesofindia.indiatimes.com/business/india-business/Saffola-is-the-second-largest-oats-brand-after-9Quaker/articleshow/14315352.cms


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