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How to innovate to make your brand a big hit

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The food and beverage industry in India is currently on the verge of momentous trends that are both transformative and disruptive. The most pronounced of these trends is buoyant growth of the consumer packaged goods (CPG) industry over the past quarter century, which has been nothing short of exhilarating. Riding on the crest of success, CPG companies have launched innovative products to meet an ever-growing array of consumer needs and desires.

While product launches have been taking place at a fast clip, companies have also had to constantly innovate to differentiate their products from others. Indeed, innovation is key when it comes to addressing the challenges in the F&B sector. These include having to cope with rapidly changing consumer needs, shortened product life cycles, margin pressures, and rising technological advancements. Innovation-led new product development, thus, plays an important role and acts as a growth driver for the industry.

Innovation is viewed as the application of better solutions that meet new requirements, unarticulated needs of consumers, or existing market needs. This is accomplished through better products, processes, services, technologies, or business models that are readily available to markets, governments and society. Innovation is a wide concept which aside from creating, launching and marketing new products also includes improving shopping processes, providing consumers with a range of tools to purchase products and ensuring that the entire organization is focused on the singular goal of improving the customer’s overall experience. As Indian consumers become more global in their aspirations and desires, as they travel abroad and are exposed to global products, their appetite to consume products in their home market will only increase.

Newer players are faster on food innovations

As the consumption of processed food in India is on an upswing, the demand for healthy, safe, hygienic and convenience driven food is slated to increase at an even more significant pace in the future. Thus, food and beverage offerings that are healthy, value added, safe and hygienic and provide value for money, are the order of the day. A large number of companies are coming up with offerings in the healthy snacking category, including roasted makhanas in numerous flavors, dry fruits/nuts with a twist, vacuum fried vegetable based snacks (palak, okra, kale snacks), freeze-dried fruits, smoothies, juices, certified organic ingredients-based snacks, indigenous ingredient-based products, millet based cookies/snacks and traditional Indian flavor-based candies.

To cope with the whirligig of change in the food industry, manufacturers and retailers are adapting to emerging consumer trends to stay relevant and afloat in times of widespread disruption of conventional business models. In particular, larger and more established companies find themselves encumbered by less agile innovation processes as they struggle to launch winning innovations. This is evidenced from their growth contribution to the category, which has been systematically waning in recent years.

Category growth, which occurs when game-changing products attract new buyers to the category or prompt current buyers to accept higher pricing, is a strong indicator of innovation success – and major manufacturers are only driving a small portion of it, according to various market reports. A Nielsen study finds that the top 25 food and beverage companies are able to generate only 3-5 percent of total category growth, despite accounting for 45 percent of category sales. In other words, despite maintaining an enormous piece of the pie, these large manufacturers can only take credit for a minuscule share in sales from new growth.

In contrast, hordes of new players and startups are joining the fray and upending the game of innovation with new ideas and propositions in the food domain. It is easy to see the buzz and excitement in the food start-up space. For starters, the big fast-moving consumer goods companies are expanding to reach out to rural markets. As they go in for economies of scale, the consumers at the top of the pyramid are not being addressed. This top-of-the-pyramid consumer is more attuned to spending on processed food. Sensing this gap in the market, start-ups are throwing their hats in the ring.

Take the case of Nascens Enterprises Private Limited, which operates baby food brand Happa Foods. Just a year underway in its journey as a baby food maker, the brand has set out to be a game-changer in the baby foods industry by offering organic fruits and veggies blends as healthier alternatives for every stage of a child’s dietary plan.

“The baby food industry in India is dominated by milk and grain-based products with very few options emphasizing on the need to include regular fruit and vegetable intake in babies. Our focus, on the other hand, is on a range of fruit and veggie blends that are easy to consume and carry and need no preparation time. We differentiate our products on two levels: Good for your baby products comprising of all organic fruit and vegetable purees, which are free of pesticides and other toxins in a blend that aids in the age specific growth of babies and good for the planet products, which are ethically sourced and do not generate industrial waste. Our products have no preservatives, additives, chemicals, salt and sugar. We have made our packaging ‘on-the-go’, so active parents at a daycare, on an airplane or at a wedding venue, don’t have to compromise on nutrition for their child,” says Pankaj Prakash, Founder & CEO, Nascens Enterprises Pvt. Ltd.

Emerging consumer needs and demands fuelling food innovation

Visit any modern trade outlet today and you will see a plethora of new brands in the chilled/frozen foods section, on snacks shelves or in the sauces area. Customers are now more aware about global cuisines and are gradually moving towards global palates. Companies need to continue to keep up with the trends in terms of flavors and product range as supermarkets today stock a gamut of products in each category, including the ones with global themes.

However, health seems to be the biggest trend globally and is getting big in India as well. New entrants and start-ups are riding this trend as well. It resonates with consumers looking for food that is healthy, organic, low calorie and preservative-free. Consumers need to be sure that what they’re eating is good for them. They should trust the brand that they bring home. This is the kind of requirement that food companies need to meet.

Brands and retailers that can understand and navigate these trends will be able to secure a vantage perch and reap the benefits of the highly attractive and fast growing Indian food market in the longer run.

“The aspiration levels of customers are going through an upward evolution. More and more customers are becoming aware of themselves, of what they consume and the impact of the products they buy on their health and the world. This is changing the way they look at their lives and what they consume,” says Rajeev Krishnan, Managing Director and CEO, SPAR Hypermarkets.

The evolving needs and preferences of consumers and their growing aspirations have set in motion a deluge of new product launches, new food concepts, trends in convenience and customer personalization and a growing awareness of the health & wellness range – organic, fresh and natural products. Brands, retailers and marketers need to regularly review all their categories to look for new and fun areas to expand into, innovative ideas to recreate what they already have and, of course, maintain high standards in what does well in a dynamic marketplace.

Health & wellness, convenience, lifestyle, food formats, home, millennial and fresh are all the areas that producers and retailers need to look into to bring differentiation within. Food operators need to move fast to ride on the strong demand for natural, clean label ingredients. Consumers globally and in India are demanding products that have ingredients which they can understand. They are skeptical of ingredients that sound like they are manufactured in a plant with no basis of natural origin. In India, consumers are increasingly looking at ingredient panels to make informed choices.

“Consumers are actually starting to focus on health-related products, reading labels and spending a lot of time on product images,” notes Hari Menon, Founder & CEO, Bigbasket.

Building trust in products through their functional benefits

Ingredients with positive, functional benefits are more desirable: Consumers are selecting products that have functional benefits. This is amply demonstrated by the rise of value-added dairy, protein mixes, cold pressed juices and products with perceived holistic ingredients like aloe vera, turmeric, ashwagandha and several ayurvedic ingredients. In short, consumers are looking for higher protein, low fat, low calorie and benefits like antioxidants, vitamins, etc. Food and beverage marketers need to think beyond product innovation and look at how they will market products that offer new potential benefits and help to boost consumer perceptions around food and beverage products that contain specific vitamins. As of now, these trends are certainly more prevalent in SEC A and B but the buying tendency, sooner or later, will percolate down to all consumer segments eventually.

What is also obvious is that recent scientific breakthroughs about the potential of vitamins to prevent and alleviate serious health conditions can open doors to innovation for food and beverage companies. For example, while consumers may traditionally link vitamin D to bone health, there is mounting evidence that vitamin D may have a positive impact on a wide range of health issues, including heart disease, cancer and diabetes, to name a few. It is, therefore, imperative for food and beverage marketers to stay on top of the latest breakthroughs in health and wellness in the scientific community, and then find ways to translate these breakthroughs into viable innovation and communication platforms.

What manufacturers and retailers should seek to address are the issues around consumer education, reasons to believe in the functional benefits of the product in question and preservation of the fundamental attributes of taste and convenience. There’s also the issue of how the competitive set for products with added vitamins and nutrients will evolve over time. Will such products continue to compete with other products in the category, as they do today, but with the added proof of delivery of enhanced health benefits? Or will there come a point when health benefits become the key driver of choice, and the product itself is just a carrier for these benefits? In the latter case, we can expect to see products with added vitamins become substitutes for each other over time, even when the products are from different categories.

Market analysts believe that there are opportunities to market different nutrients and supplements to different consumer segments. For example, the perceived importance of vitamins and protein in one’s diet decreases with age; on the contrary, the perceived importance of Omega-3 and antioxidants increases with age. Differences between countries exist as well. Protein is more important to consumers in China, India, Japan, South Korea and Turkey than to consumers in other countries. Minerals like calcium, potassium, zinc, and iron are more important to consumers in Argentina, Hungary, Poland, Russia and Saudi Arabia than to their global counterparts. It is therefore important for companies to look at demographic segments when innovating in the area of functional foods. Consumers have different needs based on their life stage, culture and environment as well as the nutritional products currently available to them.

Innovating to meet the challenge of demographic diversity

India’s diversity is very well-known and the food habits of its people vary from region to region. For this reason, it is very interesting to see how the food and beverage sector will take on these distinct challenges. To meet the challenges arising out of differing tastes, needs and other preferences cutting across the demographic diversity, companies should embrace smart innovation and customize products for younger consumers. This approach can help suppliers and retailers to cater to the evolving taste buds. At the same time, it’s also important that the food industry innovate on the foods that were there in the olden days and make them palatable for the consumers of today by using technology. For instance, turmeric can be used as a medicine as well as food. Depending on how to use it, the product can become food or medicine. What should be understood is that the more we delve into what solutions we have to offer to the food industry, we will be able to find the solutions to a lot of challenges. An important consideration for food companies is that they must innovate without disrupting how consumers think about food and meals.

Today, consumers are looking for authenticity – they want to ensure that their extra virgin olive oil is from Greece or the balsamic vinegar from Modena in Italy. In food, it is all about the place of origin, how it is grown and processed to give you the real experience. Although it is a small trend in India right now, it looks like it will gain momentum and become a big opportunity in the future.

“Consumers want the affordability, abundance and access of the existing system, but they also want authenticity; food that has been the fruit of labor, and that ties into the culinary traditions of the past as well as offering new ideas,” writes Teresa Novellino in the New York Business Journal.

Food is such an important part of culture and social interactions that straying too far from the traditional can be overly disruptive and inhibit consumer adoption of products and services. Players who want to be successful with their new products need to tackle this challenge by creating a balance between innovation and tradition. Many companies have come up with interesting brands and positioning strategies, and are trying to revive the old traditions of India in a new format, packaging and taste, which the younger generation appreciates.

One of the key ingredients necessary for achieving the strategic goals of a company and, more so, for the food sector, is to have a beaver-like focus on product innovation. As new lifestyles, higher incomes and consumer awareness create consumer demand for a year-round supply of high quality, diverse and innovative food products, food players have no choice but to press the pedal harder on innovation. That could help companies achieve sustainable growth and profitability. So, companies that align innovation initiatives with changing consumer preferences and demands and deliver effectively on innovation initiatives – be it high quality ingredients, innovative packaging, flavor, etc. – will get the right products to the market with speed, be able to tap new markets, increase sales and establish a significant competitive differentiation.

Jamshed Daboo, MD, Trent Hypermarkets, foresees a paradigm shift in the determinants of food habits and consumption decisions. He says that the 20th century and the early part of 21st century food habits and decisions have been driven largely by the strengths of distribution and advertising, which the packaged food industry leveraged to increase consumption and penetration.

“The package, the noise, the availability are not going to be key drivers for consumers to take decisions. The key driver is going to be the authenticity and personalization of the product itself,” believes Daboo.

“Today, with the penetration of Modern Trade and, more importantly, with the penetration of online retail, the access paradigm that earlier was driven by the clout of distribution is going to change. And once big segments of consumers start gaining access to products, the nature of products now available to them will not be driven by accessibility but by authenticity,” adds Daboo while drawing attention to the rapid changes happening in the consumer landscape and how in the next ten years the brand-product landscape of the country will undergo a sea change.

There is also a need for a new breed of Indian entrepreneurs that is willing to push the boundaries to innovate on Indian food so as to make a huge impact on our palates or in order to launch products abroad.

“For a long time now, we have been taking samples from abroad and making them in India. That has to stop. I believe there are a lot of Indian products that we can take abroad and sell it large profitable markets. The challenge is to innovate in the lab with that product to create a balance between taste and health and for that we need to attract the best brains and brightest youngsters into the business to find answers to the challenging question of ‘how to innovate’”, says Piruz Khambatta, CMD, Rasna.

He adds that finding uniquely Indian solutions to the challenges of flavor and texture can unlock latent growth in the market.

How do we stack up on the innovation challenge?

Fortunately, the food industry in India is rising to take on the innovation challenge, spurred on by not only the big and established players but also by several new entrants and start-ups. Their new innovations are already beginning to disrupt the industry and are helping to serve the aspirations of the millennials, which have an increasingly different outlook on consumption than the previous generations. Millennials place increased focus on consuming less junk and demand healthful foods that are also appetizing. Companies are increasingly engaged in devising a host of ways to cater to their demand. These trends are presenting enormous opportunities for food and beverage companies to leverage their prowess in product innovation and surmount the challenge of ever intensifying competition in the sector. Take the case of plant-based meat alternatives like those introduced by quite a few companies in recent years. Plant-based protein like pea, lentils and cricket flours (yes) are addressing the demand for clean label and health-conscious foods. Interestingly, quite a few large companies have decided to go for bolt-on acquisitions or equity stakes to access not only the success but also the entrepreneurial culture of innovative and niche companies.

Product development focused on promoting natural ingredients and formulations; innovation to localize the products’ taste profiles with the aim of winning over urban Indian consumers by embracing ayurvedic ingredients; innovating on traditional juices to tap into the expanding consumers’ preferences for more of juice drinks over fizzy drinks are some of the innovations that manufacturers are already experimenting with. Understanding the importance of technology, brands have decided to use it extensively to offer insights into the medicinal properties of products and to provide curated content and consultation as well as sell the products on the website.

“It’s all about having an appetite for risk; if you don’t have that appetite, I think you will keep struggling as far as innovation is concerned,” opines Menon of Bigbasket.

As a highly attractive emerging market in the throes of major changes, brands and retailers today are more than willing to adapt and react to the changes on the ground. Adaptation requires not only an innovative approach to both products and the business model but also a radical transformation in marketing. It requires partnering with suppliers and customers who invest in sustainability, regulator and consumer listening, as well as understanding trends before they become trends in order to capitalize on them better than their competitors.

“I think the decade in focus will be marked by how food is farmed, created, marketed and consumed to bring a fresh perspective and help food industries capitalize on the seismic market changes to better serve today’s discerning customer,” observes Sadashiv Nayak, CEO, Future Retail.

His words find ready acceptance with manufacturers and retailers who agree that new brands and products are key components of the growth strategy. The need of the hour is to keep their focus on developing new partnerships at micro and macro levels and sourcing locally and regionally besides finding new ways that can help redefine the customer experience. One must innovate before it becomes a necessity.

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