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Q-commerce has been a great thing for frozen foods: Ashu Phakey, ITC Ltd.

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Ashu Phakey, vice president and business head for ITC Ltd.’s frozen, fresh and packaged goods on the category’s growth, its potential and myths surrounding frozen food

Ashu Phakey is the vice president and business head for ITC Ltd.’s frozen, fresh and packaged goods, a category that is rapidly growing for the Kolkata conglomerate. Phakey talks to IndiaRetailing about the category’s growth, its potential, challenges and myths surrounding frozen food items. Edited excerpts:

You have an exciting portfolio of packaged and frozen foods at ITC. How is growth in that segment and what is its potential?

There are three parts to our business: Frozen, ready-to-eat and fresh, which is small at the moment. The first two parts are really large. We started the frozen segment in 2018 and we cater to both retail and food services customers. The idea was to offer consumers a variety in hot snacks that they could consume in between meals and also as an accompaniment with meals. So, it was about giving great-tasting hot food in a most convenient manner which was also nutritious. That was how we approached it because India is a large snacking market. There’s snacking in packaged food in the ambient category and QSRs (quick services restaurants). Samosa, for example, is a big snacking product.

The frozen category itself is new in retail. It came in about 2005-2006 when brands like McCain and Godrej set up their retail business. It has grown in the last 10-15 years with a market size of about Rs 2,500-3,000 crore if you put together both HoReCa (hotels, restaurants and catering businesses) and retail. Now, it is an exciting space in terms of potential. But there were multiple challenges as well.

Could you elaborate?

The first has to do with the supply chain and there are two parts to it: One is from factory to distributor and retailer and then retailer to the consumer. The first part is kind of taken care of in India with a good quality supply chain in place. The part from the distributor to the retailer has evolved in the last 5-6 years.

These days, you find refrigerators even at kirana stores.

What about the second part—from retailer to customer?

The challenge was accessibility and capacity at retail. Let’s talk about accessibility. If you wanted to buy frozen or have a hot snack, you had to look for a retailer to order from. One out of 15 grocers in a neighbourhood had a refrigeration facility. Which means the ability to penetrate a larger neighbourhood was small.

The second was capacity. The neighbourhood retailer had one freezer which he used to store green peas, ice cubes, ice cream and snacks among other things. This would make it difficult for a consumer to identify the snacks.

The third is discoverability—how does the consumer know what kind of snacking range is available? Between 2007-2019 consumers were used to what they got in QSRs—fries and nuggets and that is how the category grew.

How did ITC address these?

We identified three sets that we thought could be great areas to work in: First is we wanted to go beyond potatoes although potatoes as a base is important as Indians love eating potato-based snacks. But they also love variety beyond that.

Second, we said it should have some nutrition elements but be tasty as well…If it is not tasty, nutrition doesn’t matter.

And third, we said we will have to go after fixing discoverability and capacity in the retail—how do get it to consumers? If you look at our portfolio, more than 70% of varieties are non-potato. While the industry is still skewed towards potato, we are slowly making that change.

How are the consumers responding to that?

It’s been a good run for us. We have also launched products like lentil-based falafel kebab: Indians love it. It is made of chana dal, it has protein and tastes great. We have also launched regular veggie-based product like beetroot kebab, harabhara kebab, which you don’t see normally.

Then we got into region-specific products like Mumbai vadapao. Then we launched mini samosa and paneer pakoda. We also have a robust non-vegetarian portfolio which includes crispy fried chicken.

The other interesting thing we did is convenience. Our convenience number 1 was frying: take it out of the freezer, put it in the pan, it’s ready fried. Our convenience number 2.0 is the health quotient.

So, 90% of our portfolio does not need to be deep-fried. We have a range of 26 products in retail vegetarian, non-vegetarian, lentil-based, cheese-based that can be just put it in the air-fryer or in the microwave. It’s ready. You want to deep fry it? You can do that. It’s your choice.

There is a perception that frozen food is not healthy…

I will give you some interesting data points. We don’t use added preservatives because freezing in itself is a preservative. What we do is we cook the product the way it should be cooked and put it in a freezer. We do IQF (individual quick freezing) which ensures each item is frozen at minus 18, put into a pack, which goes to a customer’s home and there’s not an element of added preservative. When we tell this to consumers, they don’t believe it. They’re like, how can these products have 18 months of life or 12 months of life and have no preservatives?

A lot of things have been changing in your favour lately. Be it the logistics and cold chain development, be it social media, e-commerce and the quick commerce.

Absolutely. We’ve been happy with that. Quick-commerce has been a great thing for the category because what you would, otherwise, not find, you can now find on quick-commerce sites. You can discover the product, order it and it is home in 10 minutes. So, the hygiene of the product is maintained, temperature is maintained. We are also working with quick-commerce teams and trying to help them with their last mile/10 minutes so that the experience is only getting better.

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