ITC Matches & Agarbatti repurposing ad spends, 30-40% on digital: Gaurav Tayal

With the festival season officially kicking off in India, there’s one product without which any festival or spiritual event is incomplete – that’s an agarbatti (incense sticks). To understand how the ‘traditionally humble’ incense and matchbox industry is faring and gearing up for the festive season, we caught up with Gaurav Tayal, Divisional CEO - Matches & Agarbatti Division, ITC.

Starting off the conversation with how the year has panned out, he says, “For the last three to four years the industry has been growing by 6% and our overall business has grown double of the industry. The premium segment of our business is growing in triple digits and contributes 10% of revenue at overall business level. Looking from a sales channel perspective, the emerging channels – modern trade and e-commerce – is growing in triple digits and this channel lends itself well for the premium portfolio.”

Looking at the overall portfolio, it straddles across all price points, from value conscious to mass popular to premium. The agarbatti industry in India is highly unorganized, with the top six players capturing only 40% of the market, and fragmentation varying by region with the degree of fragmentation in South India lower than the rest of the country. Tayal states, “We are growing very fast in the South because the level of adoption towards the branded players is faster in the five Southern states.”

The Matchbox Story

Coming to matches, there are typically four use cases for matches – cooking, smoking, devotion and miscellaneous such as general lighting. The first two cases, cooking and smoking, have been impacted by the switch to lighters while one area complementary to this business is Puja where the notion of purity means that matches are used. However, future growth will be led by value.

Tayal shares, “The matches industry should not expect volume growth but it is value that will drive growth.” A key challenge for the industry is the price point. He explains, “This is probably the only industry where the price has remained static at ?1 for two decades.” 80% of the industry still operates at ?1 due to the high level of fragmentation. However, price points could change going ahead. He says, “We are playing the lead role and are the market leader and have a lion’s share at the ?2 price point. The matches industry size is estimated to be around Rs 3,000 crores. If the price-point of ?1 moves to ?2 at the same volume then the industry size becomes ? 6000 crores. You create value for everybody in the value chain.”

This value will be by driving innovation and premiumization in this category. The company launched "ITC Mangaldeep Dazzle" a premium matchstick brand prices at ?10. Dazzle offers longer, sleeker, easy-to-use matchsticks with bright heads in a stylish box, aiming to celebrate individuality and its aesthetics is targeted at youngsters. He says, “We can bring in a lot of excitement as there is an emotional connect that people have with this category.”

Agarbatti: Insights Based Innovations

The agarbatti industry is estimated to be around ?12,000 crore and is not ‘one big homogenous industry’ as consumers olfactory preferences varies across the country. For example, in the South there is a strong preference for jasmine fragrance while roses are the dominant preference in the North. ITC’s strategy was to segment the business as per regional preferences to bring the regional realities and cultural nuances to the fore.

The second focus is to align with the changing belief systems. Over the last decade, the North has taken up bamboo less incense sticks which offers a significantly superior sensorial experience, is convenient to use and hassle free as there were no remnants. He says, “This is the future of agarbatti as this fundamental innovation can happen in this industry. We are finding massive adoption for this and is now the fastest selling product on ecommerce and we have seen high traction across regions.”

Another insight that was brought into this category was the adoption and preference for fine fragrances. Based on this insight ITC launched a sub-brand called Scent. He explains, “It was a bold step in a category generally seen in a straight jacketed way. Scent as a sub-brand brings the proposition of getting global marquee best fragrances in the form of incense to your household. When you buy a pack of Scent, you are exposed to some of the best timeless fragrances.” This product and innovation have seen significant traction with the younger TG.

He adds, “Scent is the fastest growing sub brand in the category and has opened up the space for us to do more innovation. Innovation has to tick two boxes—consumer need and cultural relevance. On fragrances, our Fusion range pairs classics like sandalwood with contemporary notes like lavender or sage, and highlights format innovations”.

Engaging With GenZ

Tayal highlights that in today’s stressful and anxiety filled lifetsyles, GenZ are seeking calm. While the way of prayed has changed, from the older generation visiting temples to Gen Zs saying a small prayer before any occasion, the need for emotional payoff remains the same.

He says, “The industry is engaging more with the younger TG. We celebrate all ways of praying and with this positioning, you open yourself to everyone. This insight gave us the confidence that if the communication for ITC Mangal Deep starts talking about these realities in people’s lives it will be relatable to consumers. Our engagement rates are up, the brand recall is high and the sales numbers shows it is working with the consumer.”

The insight for demand for solutions for mindfulness, stress, meditation, spirituality across generation saw ITC Mangaldeep launch the brand, Prana. He states, “As Mangaldeep is a devotional brand, we launched a new brand called Prana, targeting the luxury end of the market. Prana will not restrict itself only to incenses. It is already into scented candles and we will get into diffusers and other things.”

Another innovation was ITC’s launch, Dhuno Cups - also known as a dhoop cup or Sambrani cup, which reimagined the traditional Dhunachi ritual, delivering the same devotional impact but with modern convenience. Another innovation was the Lo-Smoke range which reduces smoke by 70% while keeping the same rich fragrance. This was also backed by an insight that even if one person is allergic to smoke, then the household falls out of the category.

Evolving Distribution

For ITC Mangaldeep, general trade remains the dominant channel with 70% of the revenue, with emerging channels - modern trade and e-commerce, contributing around 30% of sales and is the preferred channel for premium products.

Tayal says, “Modern trade will grow and we will grow faster than the modern trade format where our share of shelf is going up. On q-commerce, there is more than 50% chance that you will buy ITC Mangaldeep on these platforms. That is because of our continuous evolution and working with the platform owners in understanding how consumers are behaving, what they are buying, from which pin codes, what is selling etc.”

Another advantage of using q-commerce is that it allows ITC Mangaldeep to target regional festivals and festivals celebrated in smaller pockets. He says, “We are the face of all regional festivals around the country, as by focusing on specific pin-codes, cities, have attracted consumers towards the brand. The local TG buying on q-commerce platforms will automatically start getting engaged and attracted to the brand. Q-commerce allows you to do things which otherwise are difficult through mass media or in a GT environment.”

Tayal says that ITC Mangaldeep is one of the largest ad spenders in the category. The approach has been to create a pull for the brand rather than a push through trade schemes, etc. He elaborates, “In the last six to seven years, increased resources have been allocated to digital channels as compared to mass media channels. In urban and rural – where we are a strong player - television, radio and print remain important. We have started repurposing our spends, probably 30% to 40% of our spends are on digital and in a few years this could be almost 50:50.”

Banking On Religious Tourism

The growth in religious tourism across the country has proved to a boon for the agarbatti industry. When it comes to large scale religious events such as Kumbh Mela, Jagannath Puri, etc brand ITC Mangaldeep, is “totally relevant for the occasion” and the activations have given good ROI to the brand. Tayal explains, “We do not see this opportunity as a brand activation, but look at how we can contribute and become an enabler of devotion.”

For Ram Janmabhoomi consecration, in January 2024, the brand created a fragrance corridor by innovating a five-feet tall agarbatti that lined the corridor where people stood. He highlights, “While the brand attracted eyeballs, it also created an aura before the devotee reached the temple.”

At Kumbh Mela, an important ritual is taking a dip in the Ganges, but a big challenge for women is changing their clothes post the dip. ITC Mangaldeep created an on-demand mobile changing rooms, at the ghats, attended by a female attendant. Tayal says “We started with 25 mobile change rooms, and the expanded the capacity by 4X. This was more than the brand activation as we did something that solved a problem.”

Another activation was an AR campaign targeting people who could not travel to Kumbh Mela. An AR filter was created for people to experience the festivity and a ritual was done at the ghat by the brand for all consumers who used the digital experience. The brand also created a jal bati, from alum - a natural cleanser, that was distributed free to people and ensured that the process of immersing a lit diya in the river was environmentally sustainable.

These efforts paid dividends for the brand as post Ayodhya and Kumbh Mela, a brand survey done in the state of Uttar Pradesh, showed a significant increase in brand recall.

A Look Ahead

With all eyes on the upcoming festive season, Tayal notes that consumer sentiment is positive and sees increased demand for the category as a whole with increased spends across all mediums and activations and increased business.

Looking ahead, premiumization will continue and plans are afoot to enter into aromatherapy and wellness space through the brand, Prana. For a category with a 90% penetration, growth will be driven by value which could see the category doubling in size, from ?12,000, to ?25,000 crore. Tayal states, “We will keep on taking market share and you will see more innovations from Mangaldeep. We have led on product and packaging experience. The budget for agarbatti’s is ?25 per person per month, and if consumers spend more, this category can double in size.”