Home Food Service Christmas Turns ‘Merry’ for Kerala Entrepreneurs

Christmas Turns ‘Merry’ for Kerala Entrepreneurs


Baking hopes put Rs 800 cr in oven

Making the entrepreneurs merry, trade sources have said that the Kerala cake industry would achieve a turnover of Rs 800 crore this Christmas season. Increase in domestic sales and the huge demand for Kerala-baked cakes in Europe and the Gulf regions would contribute the major portion of the revenue.

Around 10,000 bakery units function in Kerala and these employ more than one lakh people both directly and indirectly. Most of the consumers buy cake one-week before Christmas in order to avoid last-minute rush. The sales will be at peak on December 23 and 24.

Brisk Business Season

“The response from the domestic as well as the international consumers is very promising. The consumers are showing huge interest towards premium cakes baked with excellent quality. The exporting of cakes has also doubled this season. Regular customers book huge orders and ship them to the Europe or the Gulf. One kg of plum cake in the US would cost Rs 700. Hence, it is cheaper to ship a Rs 220-cake from Kerala,” said P. M. Sankaran, President, Bakers Association of Kerala (BAKE).

Branded cakes of Kerala are exported to countries like USA, Canada, Australia, Middle East countries etc. Kerala Cakes are also marketed in several other States in India, especially Tamil Nadu and Karnataka. With entry of new manufacturers in branded sector this segment is steadily growing. There is an increasing preference for branded cakes.

Promote Local Brands

However, there is a misconception among the public that branded cakes are better in terms of quality and health. “Most of the consumers are inclined to the branded products. This mindset is alarming and it would affect the future of the local cake products,” said P. M. Sankaran.

Be Health Conscious

Vijesh Viswanathan, Director, Best Bakery Group, Kochi, pointed out that the cake available at the bakeries normally lasts only for two or three days. “Bakeries won’t use preservatives or colour essence to increase the longevity of cake. They bake cake in hygienic conditions,” he said.

World-class Facility

P. M. Sankaran highlighted that the BAKE has launched numerous ambitious programmes to make the bakery industry truly world-class. “Emphasis is on baking quality and hygiene products. The association has also started ‘BakeFIT’, a bake friendly inspection team which inspects all kitchens of the bakeries,” he said.

The BAKE also conducts exhibition on products and bakery machinery which would help the small scale bakery units to know and learn the modern techniques used in the industry.

To cash in on the huge Christmas market, leading branded companies, Kerala-based branded and the local companies are weaving innovative marketing strategies to attract more customers. Most of them have introduced various varieties of cakes such as Fresh Cream Cake, Butter Cream Cake, Chocolate Cake, Honey Cake, Date Cake and Plum Cake with new recipes and new flavours to make this festive season a memorable one for their customers.Biju Joseph, Managing Director, Navya Bake Shop, said that Christmas business is the result of one-year service, goodwill and the loyal customers.

Branded companies which enjoys 35-40 per cent market share expect a sales of Rs 300 crore this season. But, bakery outlets which have good sales, strong market presence and loyal clients are targeting Rs 800 crore.

No Price Hike

Thrissur-based Elite Foods, the largest manufacturer of plum cakes in South India, is not going to hike the price of cakes though the production cost has increased.

Echoing the same view, Vijesh Viswanathan said that the price of cakes has not been hiked despite the increase in the cost of the raw materials.

“Compared to last year, the cost of cakes has not increased that much. For 900-gm of plum cake, we charge Rs 250. Fresh Cream Cake which dominates the market with 60 per cent may cost around Rs 400 to Rs 650,” Vijesh said.The price range of Butter Icing and Icing Cake is between Rs 300 to Rs 500. While special cakes may cost around Rs 700 to Rs 800.Numerous companies have started corporate booking from December first week onwards, including orders for the ‘special’ plum cakes he said.

Branding Strategies

Apart from presenting two new specialty cakes, 400-crore Elite Foods had launched ‘Cake on Wheels’ initiative to enable the consumers to see the brand’s various products available in market during this season. The road show will visit various districts during 18 days.

Vijesh said that the bakery outlets don’t have to rely much on marketing strategies to get customers. “We enjoy good rapport with our clients. To woo more customers, we do advertisements through FM Radio and Print Media which is very effective.”

Being low technology ethnic product and presence of innumerable players, competition is intense for this product. Organised manufacturing companies who do not have benefit of own retail store have to operate with very thin margin due to high marketing cost. Unlike bakeries with own retail outlets to sell their product only, organised manufacturers depend on other stores to sell their products where the buyer select from number of brands available in the store. So getting a market share for the product is expensive proposition involving brand building, advertisement and other sales promotion techniques s like trade schemes, innovative packages, discount schemes, free offers etc which eats away from thin margins.

Profit Margin Down

P. M. Sankaran who is also the Managing Director of Fresh Products, Cheranellore, said that trust and goodwill of the brands are very important. “Owing to the rise of production cost and raw material, the margin of profit has come down. However, being committed to our customers, we provide quality products and intend to build a loyal clientele,” he said.

Policy Change Must

Brand building and brand management is most vital part of business growth and brands form greatest asset of any business; it also happens to be a very expensive process taking several years to create brand awareness, quality , standard and hygiene in manufacturing practices, tax compliance, employee welfare etc.

However, the Kerala Government’s decision to impose a 14.5 per cent tax on trademark registered products has been a big blow to the industry said P. M. Sankaran. Of the total 50,000 bakeries in the state, only 5-10 per cent are in the organised sector and the rest are all micro units. “The bakery industry in Kerala has been performing well for the last 50 years well without government support. The recent tax hike would affect the industry badly. Goa still charges only four per cent for branded bakery products.”

Owing to the tax hike, branded cake manufacturers and other food processors in Kerala had to de-register or abandon registered brand name, resulting in no brand building activity for processed foods in Kerala and consequent decline of growth.
Kerala bakery items known for its unique taste have a huge market abroad. If they maintain that unique taste and quality, the world would rely on Kerala bakeries.