Annapurna Swadisht Eyes Britannia's And Nestle's Turf

Annapurna Swadisht Ltd. is actively pursuing a multi-pronged growth strategy, with a focus on the noodles and biscuits categories in the tier-2 markets and beyond, hoping to double its revenue this fiscal.

This could put pressure on the likes of Nestle India Ltd. and Britannia Industries Ltd., which are already struggling to defend their market share, amid stiff competition from regional players.

Annapurna's strategy involves strengthening of distribution footprint to widen the penetration of its newly added categories—noodles and biscuits—and upping marketing spends to push sales, the company's Joint Managing Director Gajanan Prasad Sah, told BQ Prime in an exclusive chat.

Sah was recently roped in by Annapurna Swadisht to steer the company onto its next phase of growth. Prior to that, he was the global chief executive officer of the FMCG division of CG Corp. Global—the makers of Wai Wai noodles.

The Kolkata-based packaged snacks, food and beverages company is also building its own product research and development team. "We believe that we have now reached a scale where we can afford to set up a dedicated department for product development, instead of outsourcing it," Sah said.

These measures combined are expected to aid Annapurna Swadisht to grow its revenue to Rs 300 crore this fiscal, from Rs 160 crore a year ago, according to Sah. For the half year ending September, the company reported a nearly 100% year-on-year jump in its revenue from operations to Rs 131.1 crore, as against Rs 65.6 crore for the same period last year. Factors like new capacity addition, penetration into newer geographies, and better penetration in few of its existing markets drove the top line growth, Sah said.

Annapurna's aggressive penetration-led growth is in sync with the marked shift in India's fast-moving consumer goods space, where smaller players have been making deeper inroads to take on the big boys in the industry.

Acknowledging the phenomenon, Britannia Industries' Vice Chairman and Managing Director Varun Berry told analysts in a recent earnings call that the company has "to be vigilant going forward", as smaller companies are eating into market share. The stronger brands are losing out because of price play and grams of biscuits they sell in each packet.

A recent Kantar report also highlighted how regional and local brands across categories—such as noodles, biscuits, detergent powder and spices—have gained volume at the expense of inflation-hit established players.

In the biscuits space, for instance, the volume of Jaya Biscuits jumped 18% and Priya Gold grew 16%, as compared with the category growth of 9%.

Balaji Wafers Pvt. has also launched Gippi masala noodles, consciously making it sound similar to ITC's Yippee. It is priced at Rs 10 for a 70 gm pack, which is also cheaper than ITC Ltd. and Nestle's equivalent packs that come for Rs 14-15. With penetration at 30%, the Gujarat-based noodles maker has grown 58% in April over the last 12 months, according to Kantar.

Annapurna is a relatively new entrant in the biscuits and noodles space. The categories currently comprise 20-25% of the company's overall sales.

Broadly, the biscuits market is worth Rs 50,000 crore, while the noodles segment is now worth Rs 12,000 crore, according to Sah.

"These are very big and highly competitive categories with the presence of several established national and regional players... But both have significant untapped potential given their low per capita consumption," he said.

The company primarily caters to towns with a population of over 5,000 and less than 20,000. It also plans to extend its presence in the urban markets, as according to Sah, "Urban presence helps create aspirational value among rural masses." Currently, the company operates in Bihar, Jharkhand, West Bengal, Assam, Odisha and Uttar Pradesh. It has a portfolio of 10 categories, including fryums, namkeens, snacks, candy and cakes.

"At the moment, however, we aren't actively focusing on the confectionary business, as the focus is on noodles and biscuits," said Sah.

Annapurna has close to 550 distributors and more than 115 super distributors. It has a total production capacity of 126 metric tonne per day and its products are available across over six lakh retail touchpoints.

About 75% of the company's revenue comes from snacks, according to Sah.

However, he remains wary of the persistent macroeconomic headwinds that could pose a challenge to Annapurna's growth. Inflation-led slowdown in rural demand remains a concern, he said.

"Farm income remains under pressure, as even though the prices of daily essentials have skyrocketed, the gain is yet to reach the farmers. And this lag seems to be stalling rural demand." Hit by higher costs and lower income, the consumers curbed spending even during the festive season, said Sah, hinting that rural demand would recover with a delay.

"Our sales were down 10% this Diwali over the previous year. We now expect it will take at least six more months for demand to normalise."