The Confederation of Indian Alcoholic Beverage Companies (CIABC), a lobby representing the liquor industry, has communicated with the Ministry of Consumer Affairs. In their communication, they advocate for brand extensions to be allowed advertisement rights under the condition that such promotions are free from misrepresentation or misleading information that could suggest the product to be different from what it actually is.
The development comes days after the government issued a directive to alcohol manufacturers, instructing them to submit a list of products sold as surrogate extensions within 15 days. Additionally, they have sought information on revenue generated from brand extensions, which include water, soda, music festivals, payments to celebrities, and other related items.
Liquor manufacturers market packaged water, music CDs, playing cards, soda, and various other products using brand names that are identical to their alcoholic beverage brands, since advertising the alcohol itself is not allowed. Nevertheless, advertising for these associated products remains widespread despite the regulations.
In a letter signed by Vinod Giri, the Director General of CIABC, addressed to Anupam Mishra, Joint Secretary at the Ministry of Consumer Affairs, Food and Public Distribution, it was stated: “The regulatory emphasis on alcohol should prioritize the development of quality brands, promoting responsible behavior, and minimizing health risks.”
Sula Vineyards, Allied Blenders & Distillers, Mohan Meakin, Radico Khaitan, Devans Modern Breweries, Globus Spirits, Jagatjit Industries, and Amrut Distilleries are among the members of CIABC.
“Brand extensions are valid initiatives. Due to past limitations, companies have mitigated risks by establishing parallel businesses. Given that introducing a new brand name is costly, companies often opt to extend existing brand names familiar to consumers, even across different product categories, as this familiarity enhances credibility,” as stated in the letter on behalf of the alcobev companies.
Following the pandemic-induced surge in e-commerce, the momentum of business digitalization continues to grow. Companies are increasingly utilizing digital tools to streamline operations, understand market dynamics, and engage with customers. In India, the fast-moving consumer goods (FMCG) sector is placing greater emphasis on digital advertising to connect with consumers. Analysts at Dentsu report that in 2023, nearly half (47%) of the FMCG industry’s advertising expenditures were directed towards digital media platforms.
Marico‘s Chief Marketing Officer, Somasree Bose Awasthi, said, “The digital realm offers unparalleled opportunities for personalised targeting, real-time communication, and measurable outcomes.” “As customers increasingly shift towards online content consumption, prioritising digital advertising becomes vital to uphold relevance and accessibility to our target demographic.”
The surge in ad spend on digital media coincides with another digital trend, where major legacy FMCG companies have been acquiring small D2C (direct-to-consumer) businesses and introducing their own digital-first brands and omni channels.
In the last few years, a number of well-known FMCG businesses have made investments in DTC digital-led startups that acquired popularity among consumers during the Covid-19 epidemic, including HUL, ITC, Marico, Emami, Reckitt, Wipro Consumer, and Colgate Palmolive.
Many FMCG companies like Hindustan Unilever, ITC, Emami, and Marico have also launched their own microsites. Despite modest sales on these individual platforms, FMCG firms leverage their microsites as launchpads to gather consumer data, foster loyalty, and subsequently expand into larger channels for increased volumes, or direct consumers to scalable platforms such as Amazon or Flipkart.
Traditional FMCG companies cannot afford to overlook the emerging wave of digitalization. However, in this era of digital advancement, these legacy companies must grapple with new realities that may diverge from conventional business practices.
Traditionally, profitability in the market has been driven by factors such as economies of scale, bargaining power, and strong brand perceptions, leading to a correlation between market share and profitability. However, recent research suggests that this connection may weaken for digitally transformed companies. Being bigger may not necessarily guarantee profitability in the digital landscape.
According to a recent study conducted by researchers at Kuehne Logistics University in Germany, there exists no theoretical or empirical evidence supporting the notion that a high market share inevitably leads to high profitability for digitally transformed companies. Analyzing over 6,000 cases spanning approximately 800 US companies across diverse sectors, the findings convey a significant message for FMCG companies embarking on digitalization initiatives, as well as their digital-only counterparts. This insight holds relevance especially within the context of India’s rapidly expanding retail market, driven by the surging trend of e-commerce.
The study suggests that digital transformation could diminish the significance of market share. For instance, it may lower online distribution costs, enabling firms with smaller market shares to compete profitably while reducing the efficiency advantage of larger firms. Additionally, the increased accessibility of online information, such as product reviews and ratings, has diminished the relevance of market share as an indicator of product quality. This, in turn, has mitigated the risks associated with purchasing from lesser-known (i.e., lower market share) companies.
The investigators found that “Organisations can improve profitability regardless of a small market share by embracing digital transformation.” “Our research findings suggest multiple possible drivers behind this development, including efficiency gains like faster knowledge transfer as well as more viable offshoring, greater competitive advantage through easier access to global distribution as well as sourcing, and improved quality assessment facilitated by more conscious consumers and electronic word of mouth (eWOM).”
An illustrative instance is digital transformation, which offers opportunities for automation, replacing learning effects previously dependent solely on market share.”
The research highlighting the diminished correlation between market share and profitability in digitalized companies presents a challenge for legacy firms that have historically dominated with large market shares and thrived on their market dominance and power.
Although market share has traditionally served as an indicator of quality and a barrier to entry for smaller competitors, the research suggests that the digital age has the potential to undermine the dominance of larger players.
“Digitalization is diminishing the influence of market leaders; customers now have the ability to swiftly and effortlessly compare prices online,” explains Alexander Himme, one of the researchers. “This scenario renders it increasingly challenging for the ‘big players’ to maintain a profitability advantage over their ‘small’ competitors, who are also empowered to compete on a global scale due to the presence of e-commerce platforms and fulfillment service providers, and can pursue multichannel sales strategies.”
“The key takeaway is that perpetual growth isn’t necessarily the optimal route for every company,” remarks Alexander Himme. “Moreover, it underscores that the benefits of digitalization vary depending on a company’s size. Smaller companies with a lesser market share often stand to gain more.”
The major FMCG companies with substantial market shares are currently facing a dual challenge posed by the expansion of local brands and the emergence of direct-to-consumer (D2C) brands.
In recent times, there have been frequent reports of local brands chipping away at the market shares of prominent consumer product companies, particularly in categories such as soaps, detergents, hair oil, tea, and biscuits. However, disruptions caused by the pandemic and subsequent inflation in essential raw materials compelled many of these brands to either cease operations or reduce their scale. Nonetheless, the subsequent decline in commodity prices rejuvenated these brands. According to a Kantar Worldpanel report from last year, local brands experienced a volume growth of 12.7% between April 2022 and April 2023, outpacing the 8.2% growth observed among national brands.
While the rise of local and regional brands could be cyclical, as they emerge when input costs are low, digital brands present a constant threat to huge corporations. In the e-retail space, more than half of all sellers currently come from seven cities: Delhi-NCR, Bengaluru, Hyderabad, Kolkata, Jaipur, Mumbai, and Surat. This information was reported in a research published by Bain and Co. in December of last year. Still, smaller cities are currently producing the majority of new sellers.
The Bain and Co. report highlighted that in 2022, twice as many sellers were added compared to 2021, with two-thirds originating from Tier 2+ cities. Furthermore, “three-fourths of these sellers operate within the lifestyle, home, and electronics categories,” stated the report. “Insurgent online-first brands have emerged as a rapidly expanding seller cohort, experiencing more than threefold revenue growth from 2020 to 2022. These brands particularly resonate with Gen Z consumers.”
The resilience of digital-first brands will likely increase, as highlighted by the new research, indicating that the absence of significant market share may not hinder them. Simultaneously, major companies, leveraging their dominance in traditional distribution channels, are also acquiring emerging D2C brands. Digitalization has led to a democratization of the market, where dominant players may not necessarily sustain profitability or retain the ability to hinder the entry of smaller brands.
IPO-bound foodtech giant Swiggy is reported to have recorded a loss of $207 million (INR 1,730 crore) in the first nine months of the financial year 2023-24 (FY24).
In contrast, according to MCA filings, the decacorn posted a net loss of INR 4,179.3 crore in FY23.
According to a source cited by Reuters, the company is anticipated to decrease its net loss for the fiscal year ending March 2024 through reduced marketing expenditures and employee costs.
As per the report, the Bengaluru-based startup generated a revenue of $1.02 billion (approximately INR 8,505 crore at current exchange rates) from April to December 2023. The startup’s operating revenue for the entire FY23 was INR 8,264.4 crore.
This aligns with a recent report indicating that the Invesco-backed company is on track to report nearly INR 10,000 crore in revenue for FY24, driven by a surge in Instamart orders, platform fees, and increasing popularity of its dining-out business.
Sources indicated that Swiggy’s revenue from the food delivery and quick commerce vertical, Instamart, reached INR 4,735 crore in H1 FY24.
The latest report comes after a year of extensive restructuring efforts at Swiggy, marked by significant layoffs, spending cuts, and operational streamlining aimed at reducing cash burn. From partnering with IRCTC to deliver pre-ordered meals to train passengers to merging its premium grocery vertical, InsanelyGood, with Instamart, the startup has implemented various measures to bolster revenue and mitigate losses.
This development coincides with the company’s preparations for its upcoming mega $1 billion public listing later this year.
In the meantime, Swiggy has focused on boosting its daily orders and implementing platform fees (currently ranging between INR 3 to INR 4 per order) to diversify revenue streams and enhance overall revenue performance.
The push for profitability comes at a time when an increasing number of modern tech companies have become profitable despite the current funding downturn and challenging macroeconomic conditions.
Additionally, profitability is a vital factor for Swiggy as it aims to make its stock market debut, joining other companies like Ola Electric, MobiKwik, Digit, FirstCry, and ixigo, all of which are also planning their IPOs in 2024.
Despite this, the foodtech behemoth is seeing some encouraging trends. Its backer, US-based asset management firm Baron Capital Group, raised the startup’s valuation to $12.16 billion by the end of December 2023.
Swiggy was valued at $10.7 billion during its last fundraising round in 2022.
It’s worth noting that Swiggy’s listed competitor, Zomato, has become a favorite among investors. Unlike Swiggy, the Delhi NCR-based startup has reported profits in all three quarters of the current fiscal year.
Zomato’s net profit reached INR 176 crore in the first nine months of FY24, driving its shares to surge by over 200% in the past 12 months.
Honasa Consumer, the parent company of D2CunicornMamaearth, has ventured into the color cosmetics segment with the launch of a new brand called Staze.
The company stated that the introduction of the new product line aims to address a “critical gap” in India’s color cosmetics market.
The listed D2C unicorn revealed that the new brand will target Indian women in the age group of 18-24 and offer “quality” products at accessible price points. It further claimed that the products in the new line have an average price of less than INR 300.
According to Honasa, Staze has been developed by a team of 43 beauty professionals, comprising product specialists, dermatologists, and influencers. The company plans for Staze to be a digitally-focused brand, accessible through its own website as well as various marketplaces such as Nykaa, Purplle, Amazon, and Flipkart.
It was clear that there was indeed a gap in the industry because the colour cosmetics category had an impressive 12% CAGR and a sizeable INR 15,000 Cr market. Honasa Chairman and CEO Varun Alagh stated, “These factors paved the way for Staze, which serves as a strategic move for Honasa’s unique house of brand strategy to break into the colour cosmetics market.”
Adding her perspective, Ghazal Alagh, Co-founder of Mamaearth and Chief Innovation Officer at Honasa, commented, “We strongly believe that Gen Z consumers are actively pursuing value and innovation, and Staze is uniquely poised to not only meet but surpass their expectations.”
Staze marks the newest entry into Honasa’s portfolio of brands, joining established names like The Derma Co., Aqualogica, Ayuga, BBlunt, and Dr. Sheths. This launch follows closely on the heels of the company’s recent expansion into the personal wash sector with the introduction of moisturizing lotion soaps.
Within the realm of color cosmetics, the company is now poised to compete with industry giants like L’Oréal, Lakme, and SUGAR.
Established in 2016 by the couple Varun and Ghazal Alagh, Honasa entered the public domain last year. The company reported a net profit of INR 25.9 Cr in the quarter ending December (Q3) FY24, marking a notable increase of 264% from INR 7.1 Cr in Q3 FY23. Operating revenue also saw a substantial surge, rising by 28% year-on-year (YoY) to INR 488.2 Cr during the same period.
Based on these positive financial results, brokerage firm Citi Research initiated coverage on Honasa in February, issuing a ‘BUY’ rating with a price target of INR 550.
Honasa Consumer’s shares concluded Thursday’s (March 28) trading session 1.54% higher, reaching INR 402.00 on the BSE.
Chai Sutta Bar, a popular tea chain, has ventured into the premium café market with the launch of its new brand Kaffee-La, as reported by the Economic Times.
CSB opened the first Kaffee-La store in Indore, in the state of Madhya Pradesh.
Spanning 4,500 square feet, the store provides a variety of premium teas and coffees. This expansion marks CSB’s entry into the upscale market segment.
The company is leveraging a franchise model for the expansion of Kaffee-La, echoing the strategy of its successful CSB format.
Co-founder Anand Nayak stated that discussions are underway to open additional outlets in the cities of Jalandhar and Delhi.
CSB has recently made its foray into the fast-moving consumer goods sector with its exclusive tea brand, Maatea.
The brand is distributed via the company’s website, e-commerce platforms, and neighborhood grocery stores. Nayak expects Maatea to generate a turnover of INR 500 million ($5.9 million) by March 2025.
CSB presently boasts revenues of INR 1.5 billion and sets its sights on doubling this amount by the end of the fiscal year 2025.
Nayak also detailed plans to expand the network of CSB outlets, with a specific focus on the South India market.
The brand’s international expansion is underway, with intentions to inaugurate 20 new franchise stores in Canada in 2024. This expansion supplements its current international footprint in Nepal, Oman, and Dubai.
Subko Coffee, a contender in the specialty coffee and cocoa market, recently raised $10 million in Series B funding at a valuation of $34 million.
The investment round saw contributions from NKSquared, which is supported by Zerodha co-founders and existing investors.
In March 2024, Blue Tokai Coffee Roasters achieved a significant milestone by inaugurating its 100th café in Kolkata, West Bengal. Situated in the Ballygunge neighborhood, the café offers a meticulously curated range of premium beverages.
Bikano, India’s leading packaged snacks brand has launched its latest offerings – the ‘Madras’ and ‘Kerala’ Flavor Mixtures. This expansion into the flavors of southern India signifies a major milestone for Bikano, as it aims to cater to diverse regional preferences and tap into new market opportunities.
Manish Aggarwal, director of Bikano, Bikanervala Foods, shared his enthusiasm about Bikano’s expansion into the southern market, saying, “The launch of our newest offerings, ‘Madras’ and ‘Kerala’ Flavor Mixtures, represents a significant step for Bikano as we venture into the diverse culinary traditions of southern India. These innovative products highlight our commitment to creativity and our pledge to adapt to the changing preferences of our valued customers. By broadening our product portfolio and exploring new markets, we aim to strengthen our position as a key player in the snacks industry. These products will be available not just across India, but also in international markets.”
Kush Aggarwal, head of Marketing at Bikano, emphasised the growing demand for mixes in the snacks category, noting, “The market demand for mixtures continues to soar, with a steady annual growth rate of 25%.” As a market leader in traditional snacks, we are convinced that our new items will help us grow even more. In terms of Bikano’s overall market strategy, we presently have a 5-6% market share in the snacks business, which we hope to raise to 8-10% in the near future. The introduction of our new goods is consistent with our larger objective of extending our market presence and providing quality snacks to customers in India and beyond.”
With high expectations, Bikano aims to secure a significant market share of 2-4% in the southern Indian snacks segment through the introduction of the ‘Madras’ and ‘Kerala’ Flavor Mixtures. Initially offered in a convenient 200gm pack size, these products are competitively priced to ensure accessibility to a wide consumer base. The company intends to expand its product range by introducing additional pack sizes in the future. Geared towards a target audience aged between 25 and 55 years, Bikano’s ‘Madras’ and ‘Kerala’ Flavor Mixtures are expected to appeal to a diverse demographic, ensuring widespread popularity across various age groups.
Bikano plans to employ tactics like online advertising, direct marketing, and product sampling to promote the new offerings. These approaches are designed to reach a wide audience and build excitement around the products. The company anticipates attracting 1 lakh customers per month for these two new products.
Looking forward, Bikano remains committed to growth and innovation. With a positive outlook, Bikano is determined to achieve its ambitious turnover target of 1800 crores by FY 2023-24. Through strategic initiatives like expanding manufacturing facilities and exploring the potential of frozen products, Bikano aims to strengthen its global presence. On the international front, the company is targeting a notable 40% year-on-year growth in export sales, highlighting its commitment to sustainable growth practices. In FY 2023-24, Bikano saw an impressive 20% increase in sales and expects a further 20% growth in sales for FY 2024-25.
Starbucks has announced a notable 22% year-over-year sales growth in the UK for the 12 months ending on 1 October 2023, amounting to £547.7 million ($693 million).
The company also experienced a 15% increase in gross profit, reaching £149 million ($188.5 million).
This growth is credited to a significant rise in loyalty membership in the UK, now totaling 1.2 million members, as well as an increase in cold beverage sales.
The UK continues to be Starbucks’ leading market in Europe, the Middle East, and Africa (EMEA region), with the coffee chain recording a 31% sales growth in 2023, amounting to $425.4 million.
This expansion was fueled by new store launches, resulting in a 37% increase in EMEA gross profit to $321.7 million and a remarkable 72% surge in operating profit to $125.5 million.
Starbucks successfully met its goal set in March 2023 to inaugurate 100 new stores in the UK within the upcoming fiscal year.
After substantial investment in its drive-through infrastructure, the company concluded the period with 1,168 stores in the UK and has subsequently grown to 1,260 outlets across the country.
Starbucks has revealed intentions to launch an additional 100 stores, prioritizing drive-through facilities and prime city center locations with high foot traffic. Presently, the company manages 340 drive-through sites in the UK.
Starbucks named Darren King as director of retail development in the United Kingdom in March 2024. King, a commercial and real estate specialist, will be in charge of the acquisition, design, and construction divisions as part of the company’s ongoing expansion.
Starbucks’ expansion in the EMEA region is anticipated to be spearheaded by the brand’s licensing partners, Alshaya Group and Alsea.
In October 2023, John Hadden, the CEO of Alshaya Group, revealed plans to launch 250 net new Starbucks stores each year, aiming for a total of 3,000 outlets by 2028, up from the existing 2,000. The Alshaya Group manages stores across several Middle Eastern countries.
Based in Mexico City, Alsea manages 576 Starbucks outlets across various European countries.
In March 2024, Alsea earmarked 25% of a proposed €329 million ($356 million) investment to enhance its footprint of Starbucks outlets in Europe.
The President of Starbucks Europe, Middle East, and Africa (EMEA), Duncan Moir, said, “We are happy to have opened over 100 new stores in the UK this year, fulfilling our new store opening commitments.”
“Despite navigating through challenging market conditions, we are enthusiastic about collaborating with our partners to further expand our presence in the region.”
McDonald’s USA has entered a partnership to offer Krispy Kremedoughnuts at its fast-food outlets starting in the latter half of 2024.
The partnership will bring three Krispy Kreme varieties to the fast-food chain’s menu: the classic glazed doughnut, the chocolate iced doughnut with sprinkles, and the chocolate iced doughnut with cream filling.
Each morning, fresh items will be delivered to McDonald’s outlets. Customers can choose to purchase them individually or in a pack of six.
The decision to expand Krispy Kreme donut availability across the fast food chain comes after a successful trial in 160 Lexington and Louisville, Kentucky outlets.
As the nationwide rollout continues, the pilot restaurants will continue to offer the products.
Tariq Hassan, the Chief Marketing and Customer Experience Officer of McDonald’s USA, stated, “Our fans have a deep love for Krispy Kreme, and we’re excited to make it even more convenient for them to indulge their sweet cravings at McDonald’s locations nationwide.”
Josh Charlesworth, the President and CEO of Krispy Kreme, commented, “Every day, the most frequent request we get from consumers is: ‘please bring Krispy Kreme to my town.’”
“Teaming up with McDonald’s on a national level will offer our fans and doughnut enthusiasts unparalleled daily access to fresh doughnuts and the happiness that Krispy Kreme brings.”
In February 2024, Krispy Kreme entered a joint venture with AmPm Comestíveis to enter the Brazilian market.
The partnership will feature a blend of Krispy Kreme outlets and AmPm convenience stores, providing fresh doughnuts to consumers in Brazil. Market entry is targeted for the end of 2024 to early 2025.
Papa John’s, the pizza restaurant chain, has announced plans to shut down 43 of its underperforming locations in the UK by mid-May 2024 to minimize operational losses.
The decision was taken after a thorough business review. The closures will be carried out following consultations with the impacted staff members.
The pizza chain did not reveal the number of employees impacted.
The affected restaurants are located in Barnsley, Upminster, Coulsdon, Eastbourne, Lancaster, Middlesbrough, Penge, and St Helens.
The company describes the targeted venues as “underperforming locations that are no longer financially sustainable.”
Chris Phylactou, the managing director of Papa John’s UK, stated, “Our foremost concern is for our team members, who will receive complete support during this transition. We aim to collaborate with affected staff to explore redeployment opportunities wherever possible.”
“We understand the impact this is going to have on our employees and are dedicated to helping them throughout this period. The closures enable the company to reinvest in other locations, fostering long-term growth.
Last month, the company revealed “strategic closures with the goal of reallocating funds towards investment while enhancing profitability at its remaining UK outlets.”
H&M, the second-largest publicly traded fashion retailer globally, surpassed first-quarter operating profit projections, aided by a smaller decline in sales than anticipated.
The Swedish company reported an operating profit of 2.08 billion crowns ($196 million), a significant increase from 725 million, surpassing analysts’ expectations of 1.43 billion in an LSEG poll.
Sales experienced a 2% decline, which was better than what analysts had anticipated. However, at the beginning of its second quarter, sales increased by 2%, indicating heightened demand for its clothing and accessories.
“The sales for the quarter saw a gradual improvement throughout February, particularly with the positive reception of our Spring collections, indicating that we are moving in the right direction,” stated CEO Daniel Erver, who assumed the role two months ago.
Erver’s challenge will lie in demonstrating H&M’s ability to increase profit while also restoring sales growth.
H&M has announced its goal of achieving a 10% operating profit margin by the end of this year.
The company, famed for its $19.99 jeans and $15 dresses, also sells leather trousers for more than $300 and coats for up to $1,190 under its Cos brand.
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