With Perfetti Van Melle completing 25 years of operations in India, Rajesh Ramakrishnan, Managing Director, Perfetti Van Melle India tells us how the company plans to capture 25% of the Indian confectionery market and maintaining sustainable and profitable growth in the coming years.
‘Hila ke rakh de’, ‘Dimag ki batti jala de’, ‘Zubaan pe rakhe lagaam’ – these are just a few taglines from advertising campaigns that are now part of the pop culture in India. What’s common to the above taglines is that they are all for products from Perfetti Van Melle, India (PVMI), the Italian Global confectionery major which recently completed 25 years of operations in the country. Now, PVMI is aiming to capture 25% of the Indian confectionery market in the coming years. This is on the back of innovative products, “massive” distribution network, price point starting from ` 1 for mono-packs and creating value pack formats at higher price points.
The first product, launched in 1994, was the centre-filled chewing gum Center fresh. Recapping the journey so far, Rajesh Ramakrishnan, Managing Director, Perfetti Van Melle India, says, “We’ve managed to significantly delight the consumers through innovative and differentiated products. In the last 25 years, we have built a massive distribution footprint and are available in over four million outlets. Last, but not the least, we have great talented people who work with us. We have managed to grow a good sizable business, which has resulted in us becoming a market leader and remaining on top over many years.” Today, PVMI’s portfolio has seven core brands – Centre fresh, Centre fruit, Alpenliebe, Juzt Jelly, Chupa Chups, Mentos and Happydent – with variants under each mother brand.
In 2016, de-monetisation and the implementation of GST in the following year, impacted the entire FMCG industry, and PVMI was no exception. The company recorded flat growth during this period, and last year PVMI went through “a lot of transformation”. “The last couple of years were challenging, and last year we went through a transformation. We tried to get our route to market in place. We worked on driving efficiencies in the system. We are now seeing a healthy double-digit growth, somewhere in the mid-teens,” says Ramakrishnan.
Building efficiency, the focus was on revamping the sales network, with the intention being to increase the number of outlets that PVMI directly targets. Ramakrishnan adds, “The whole idea was to pick up different aspects of the business, whether operations, supply chain, manufacturing, etc, and see how we could build efficiency by taking an outside-in approach: What are the opportunities for driving productivity? What are the best global practices that we can implement in India? There were a host of projects that were done to improve the margins and to reduce the costs.”
Raising The Price Point
Operating in an intensely competitive and fragmented category, PVMI competes with not just national and local players, but also hyper-local players who operate at a price point as low as 50 paise. On its part, PVMI has over the last few years worked on upgrading the price-points across its portfolio, with a single mono unit pack now priced at ` 1. What has helped move up the price point has been innovation, both in terms of the product offering as well as pack formats. The company is also betting big on multi-unit packs, with PVMI’s two-pronged strategy being to use the ` 1 price point to drive higher penetration, particularly in the semi-urban and rural markets, while in the urban markets the push is on the loyalist consumers who have an affinity towards the brand, to upgrade to the higher price points. An example of the upgrade is Alpenliebe Juzt Jelly, which was introduced in the bag format to promote on-the-go and in-the-home consumption. Today, almost 25%-30% of revenues within the jelly category come from the bags portfolio. Even the mints category now sees a large part of the contribution coming from the higher price points. Says Ramakrishnan, “Ultimately, it’s all about the value you provide to the consumer – it could be in the form of convenience, instant reach, or multiple pieces.”
The Variant Game
In terms of product differentiation, the company is focussed on its seven core brands, with variant brands under each mother brand. For example, the company recently launched Centre Fresh Mints, an extension of the gum brand Centre fresh – that stands for fresh breath – into the mint candy category. Elaborating on this, Ramakrishnan says, “It’s about trying to find that sweet spot between what the consumers are familiar with, and combining it with something aspirational, for an experience that they have not had before.” He further explains, “For instance, chewing gum is a Western concept, and Indian consumers seek flavours which are familiar, like a chatpata flavour, in a chewing gum. Or putting a spicy guava flavour in a jelly. It’s about finding such unique experiences that we can offer the consumer.” When asked on whether the company would look to introducing new brands – home-grown or bringing down a brand from PVM’s global portfolio, Ramakrishnan says, “In terms of brand assets, we have seven very strong assets, so I don’t think we need to get more brands in at this point of time. What’s important is how do we further build on these brands, what’s the architecture for the brand, and what are the various things that the brand can take under it. The more brands you get and proliferate, supporting them becomes a big challenge. I don’t think we need more brands. It’s about growing the current brands in our portfolio, making them bigger and getting them to scale.”
The Indian confectionery market is estimated to be around Rs 12,000 crores, with PVMI garnering more than 20% share, and with the immediate game-plan of cornering 25% of the market. When asked on how the company is looking to achieve this, Ramakrishnan says, “It’s about understanding the consumers’ needs. We’ve got iconic brands, so how do we leverage these brands to make them more meaningful to consumers? How do we leverage and combine our global expertise and strong local understanding in creating our products? How do we continue to build on the distribution? How do we continuously up skill talent? The fundamentals don’t change, it’s a question of continuously reinventing ourselves on the fundamental pillars and driving growth.” As for launches, expect to see more new products from the PVMI stable hitting the shopping aisles in Q3 and Q4.