Shalini Jalan and Ashok Sinha, Director & Promoter and India Business Head, respectively of Neo Foods, spoke to Progressive Grocer about the company’s push to add more products to its range and transform from a pickled vegetable company to a leading packaged food company.
Tell us about your company and its products.
Shalini Jalan, Director & Promoter Neo Foods: Adarsh Jalan and I started Neo Foods in Bengaluru in 2005. Neo Foods is among the top two growers and packers of pickled vegetables from India. It follows the contract farming model wherein we give all the inputs like seeds, fertilizers and technical knowhow to the farmers. We buy back the produce from them at a pre fixed price, then process and pack in our factories near Bengaluru and supply all over the world. We cover more than 6,000 acres per year under contract farming, which is spread all across southern India.
Neo is exporting to UK, Germany, France, USA, Australia and other countries. We, at Neo, have a very wide range of products. We export gherkins, jalapeno, baby corn, red capsicums, red paprika, relish in jars, tins and pouches. These are all ready- to-eat products. For the Indian market, our range varies from pickled vegetables like gherkins, jalapeno, paprika, silver skin onions, baby corn, carrot, zucchini, red and yellow capsicums, olives, mushrooms; relishes including gherkin, onion and jalapeno relish, pastes like ginger paste, garlic paste, green chilli paste, vinegars including white, apple and balsamic; canned fruits like pineapple, fruit cocktail, lychee, cherry and peaches and products like baked beans and prunes.
Being focused on horizontal growth, parallel to vertical growth, we are also fast transforming as an organization from a pickled vegetable (jalapeno, gherkins, burger chips, etc.) company to a leading packaged food company by constantly adding new category and products to our range.
How would you describe your product’s competitive USP and differentiators?
Shalini Jalan: We understand the need and taste of the consumers and are constantly innovating and adding more product range in our basket. Our passion and commitment towards providing good food made with good ingredients makes us the leading player in our category. We are sensitive towards the needs of our customers and to stay in sync with our new generation of customers, we have launched smaller packs of our range to make our products more affordable. This has led to an increase in our customer base. We have a strong agricultural and processing background and are one of the few companies with an integrated agricultural, processing, packing and distribution operations (farm to fork).
What is your retailing strategy?
Ashok Sinha, India Business Head, Neo Foods: Since most of our products fall under niche/ semi-niche category, we are clear who our customers are and where we should make our products available. To increase the customer base and hence sales, we are focusing on retail, range selling, product visibility, wet sampling, cross promotions and ensuring excellent service to the stores. We have recently launched our products in a new look and packaging. The new logo and design language harmonizes a more solidified vision for the brand as a whole. The new packaging and identity increases shelf throw. It helps in establishing logic behind the colors and types of products represented. This will aid in easy and quick recognition and differentiation between the kinds of products. The primary goal of this re-branding exercise is to establish ourselves as a bold, confident, modern and recognizable brand.
What is your products’ sales contribution from Modern and General Trade?
Ashok Sinha: For us, Modern Trade covers national and leading regional food retail chains and General Trade includes the stand-alone supermarkets. Modern Trade contributes to approximately 30 per cent and General Trade 70 per cent of our business. We are today directly present in 46 cities and 2,000 hyper/ supermarkets across India with aggressive plans for growth. We are seeing tremendous growth for Neo range and we are excited about the future.
What are the main underlying consumption trends that you see for your line of products?
Ashok Sinha: Based on recent industry trends, food is the biggest expense for an urban and rural Indian household, constituting 38.5 percent and 48.6 percent respectively of the total consumption expenditure of households. The niche and exotic processed food category penetration is also increasing at a higher rate. Consumers are getting health-conscious but at the same time are now also very adventurous and ready to try out new foods. With the scarcity of time, consumers are also looking for fast food and convenience. We are quite focused to these needs of the consumer and hence have launched our products in small packs – the latest being baked beans in a 200 gm can.
With consumers becoming more health-conscious, what impact is it having on the sales of your products? What innovations and steps are you taking to make your products healthy and better for you?
Shalini Jalan: Our products are vegetable and fruit based and produced in our factories, which have all the highest grade certifications in place. We follow good manufacturing practices (GMP) and ensure that our products are made with the highest quality ingredients. We adhere to international food safety norms and understand the importance of ethical farming practices. Our range of products is young, eclectic and enjoyed by consumers of various age brackets. We follow sustainable agricultural practices and USFDA and European Union Food safety norms for pesticides management in farm practices. We have a traceability system in place by which you can trace every product to the farm it has come from. We are continuously taking steps to reduce preservatives in our products.
What is the growth rate of your products and your future plans for expansion?
Shalini Jalan: We have been growing consistently year on year. We are continuously doing investments to upgrade our facility. We take up programs to educate and to provide technical know-how to our farmers. We are in constant touch with our consumers and invest in innovation, market understandings and consumer insights. We are increasing our capacity by setting up our third unit, which will be operational by end 2018, resulting in significant growth from 2019 to meet our growing customer demands. Our product range has seen exponential growth in past few years and our market share continues to grow at an aggressive rate. We are also seeing an entry of a good number of new firms in our category segment. This will, at the retail level, help to grow the category and will require retailers to allocate more shelf space and give more weight to the category.
As a manufacturer, how do you look at the challenges in the market and what solutions have you embraced to score your goals?
Ashok Sinha: We only see three major challenges:
Share of Shelf – With growth in our categories, many new players will enter. This will help to increase the space allocation at the retail stores but at the same time there will be the challenge to maintain your share of shelf.
b) Crop failure – Since our company does contract farming and our end consumer products are dependent on the crop, any crop failure will impact us. To overcome this, we have in the last couple of years reduced our dependency on these products by adding many new products, which are manufactured in house and not dependent on contract farming. We are also now importing products like prunes, vinegar, olives, canned mushrooms, etc. from various countries. Some third party manufacturers have also been developed in India who are manufacturing and packing food products as per our quality specifications.
c) Rupee devaluation in relation to USD/ EURO – This will lead to an increase in import cost and hence the end consumer price.