Monday 15 July 2019

Indians dislike modern breakfast cereals. A startup wants to change that — with a 4,000-year-old grain. It's a market that has frustrated giants like Kellogg's. But Bengaluru-based Soulfull, which sells ragi-based products, believes it has found a way to win: Eschew the ‘breakfast cereal’ label altogether.

You know an industry desperately needs to hit reset when there's a demand to change its very name.

“I wish it wasn’t called ‘breakfast cereals’,” says Prashant Parameswaran, the young founder and managing director of Bengaluru-based Kottaram Agro Foods. “This is a snacking… a 4pm solution. The larger trend in India is snackification. It’s the on-the-move, on-the-go space. There are different time zones (read mealtimes) for this [product].”

The thing is, the product that Parameswaran talks about in such fashionable terms — and with which he wants to disrupt breakfast cereals — is the antithesis of trendy. It is part of an ancient food group, by one reckoning over 4,000 years old.

But Parameswaran — who got a crash course in farming courtesy a family friend in Chandigarh, followed by an MBA from the entrepreneurship-focused Babson College in Boston — knows if there was ever a time millets could break out of that stodgy identity, it is now. And his ragi brand Soulfull deserves credit for orchestrating some of that.

Behind Soulfull's genesis lies the long struggle of the world’s biggest breakfast-cereal maker, Kellogg’s. The American giant, and several others in its wake, has been trying to get Indians to start their day with cornflakes, wheat flakes, muesli, granola, and more recently, oats.

Alas, Indians bred on hot paratha, dosa, or chai-toast have shown boxed cereals and cold milk little love.

India’s breakfast-cereal market was a measly INR2,447.89 crore as of calendar year 2017, estimates market-research firm Euromonitor. Although the category grew at a 21.4% compound annual growth rate (CAGR) between 2012 and 2017, it's likely to crawl at only a little over 10% from now until 2022.This is one of the reasons not too many new, independent brands have shown enthusiasm for the breakfast-cereal segment at a time when they are flooding everything from tea, juices, and dairy to baked goods and dry staples. Soulfull stands out because it took a punt in this unpopular segment — even though, as Parameswaran says, it is wary of associating itself with its lethargic image.

FY18 was an important year for the brand, with sales growing and losses falling significantly compared with the previous year. In March, Kottaram raised a Series A round worth INR35 crore from early-stage fund Aavishkaar.The money is almost exclusively earmarked for, yes, marketing and category creation, so that people understand that ragi isn't just another breakfast cereal.

“We wanted to bring grains you know in a form that is convenient to you,” Parameswaran says. “The question is, how do we make bajra, jowar, ragi a regular part of the Indian palate?”

Indianising a foreign category
Globally, there's a mega shift under way in what people eat. Millets, once derided as bird feed or food for the poor, are becoming hip, as consumers search for the holy grail of healthy, tasty, and convenient food.

It helps that they are a farmers’ favourite. In India, ragi, for instance, is one of the most widely cultivated crops because it needs little water and contains higher protein and micronutrients than other grains.

Soulfull's flagship products — Ragi Bites — are little ‘pillows’ of ragi filled with cream flavoured with chocolate, vanilla, strawberry, mango and the like. And the target is children. The packs are branded with a googly-eyed monster, and the flavours are meant to sell a ‘healthy’ yet tasty snack to the most finicky of consumers.

“Breakfast cereal is just the form,” Parameswaran says. “People want something Indian to eat.”

This is at the heart of his simple hypothesis: Indians want food customised to their tastes, and no one is adequately doing that with breakfast cereals.

He means the big guys in India’s breakfast-cereal market, who are almost all multinational corporations. The leader, with 56% market share, is Kellogg’s.

“We take Indianisation as an inspiration for our products. Everyone knows grains like ragi or bajra,” he says. The challenge is to incorporate them into cereals like muesli or even in a snack-time drink with powdered grains. Soulfull recently figured out that problem with a product called Smoothix — a mixed-grain powder to be dissolved in milk and had as a healthy, filling snack.

Snacking is a far, far larger market than breakfast cereals in India. Euromonitor expects just savoury snacking to be worth INR45,000 crore by 2022. But it is also a notoriously difficult business, dominated by namkeens, chips, and biscuits, especially if you want to push a healthy alternative. The country’s largest snack maker continues to be Haldiram’s, with 12% market share in 2017, as per Euromonitor. Then there's the long tail of regional companies.

Soulfull picked breakfast cereals, rather than, say biscuits, because it has room to grow, even if slowly. “The penetration of cereals in India is low, still at 10%,” Parameswaran says. “On the other hand, in biscuits we would have to fight a lot for market share.”

Hooking the kids
This isn’t Parameswaran’s first time running a business. He had several years of practice with managing retail divisions for his Kochi-based family company, the Kottaram Group, which distributes everything from crockery to home appliances. But Parameswaran seems to have left those adult categories far behind: His WhatsApp profile photo is a sketch of him, his wife, and two children farmers’ — popping out of a box of Soulfull Choco Fills.

Soulfull has married breakfast cereals with snacks for a core consumer that is loyal and underserved in this category — children.

“The child is our core consumer,” Parameswaran says. Soulfull’s first TV ad campaign, launched last week, is tailored to kids and airing on all kids’ channels (Pogo, Cartoon Network) across the country.

That children (and their mothers — 30-plus female consumers are their second-biggest base of buyers) are paying attention to Soulfull is clear from their highest selling SKU (stock keeping unit) — the bouquet. Soulfull sells a combo pack of six small packets of Ragi Bites, two of every flavour.

“It becomes something for the child for a whole week,” Parameswaran says. “We have begun selling a snack box along with the combo pack, so the mother can pack the packet for the day in the box and send it with her child to school.” The combo sells for INR99.

It makes sense to go after children, because growth in breakfast cereals is coming from ‘snackification’, and children are lapping up the trend.

“[There is the] evolution of breakfast with product offerings such as organic, gluten free, and others (though this is a very small percentage of the entire breakfast cereals market),” says Dilip Radhakrishna, Euromonitor analyst for food and nutrition. “Product diversification within breakfast cereals [is also happening], like flavoured cereals as snacks for children and promoting muesli as a snack that could be consumed directly out of the box.”

Adults tend to eat cereals more when they’re on a diet or have little time for an elaborate breakfast. It’s the reason why PepsiCo with Quaker Oats and Marico with Saffola Oats feature young adults pressed for time in their advertising. Marico has also been setting up Saffola Oats vending machines in offices across the country.

Hooking the retailers
Soulfull began like most new, urban brands do — with modern trade. It currently sells in 6,000 general trade stores. By the end of this year, Parameswaran says, the brand will be in 20,000 stores across India. It is also available on online platforms like Amazon and BigBasket.

Modern trade plays an important role in getting new brands and categories to consumers with higher disposable income and more willingness to experiment with their food. But the challenge is that it makes up only 10% of India’s consumer packaged-goods retail.

For Soulfull, another big problem was that retailers immediately associated breakfast cereals with Kellogg’s.

“Even today there are retailers who have reservations,” says Parameswaran. “It is about constantly going back to them and showing them the proof in the pudding. Earlier, a lot of our efforts were in the sampling at the stores. We would tell them — why don’t you taste the product? Let’s leave everything else aside.”

Two of the first retailers who stocked Soulfull were Nature’s Basket and Hypercity. Both started out with the Bengaluru region.

“We did not say, hey, it’s the same thing, just in a different brand,” Parameswaran says of his early pitches to retailers. “Then I think the reservations would have been much, much stronger. What is also interesting is that it was a good time for us because there was a whole Indian wave. The entire thing of ‘Let’s promote Indian companies, let’s promote Indian ingredients.’

“Even today, the challenge for our teams is to go to retailers and convince them [to stock us]. What they’re also seeking [to figure out] is if the brand is here to stay.”

Some of that suspicion will only go with slow, toilsome customer education. In Karnataka and Maharashtra, millets like ragi are a well-known part of the traditional diet. But in markets like Delhi, getting consumers to understand what ragi is takes a lot of effort.

Now, the government is lending a helping hand. After patronising rice and wheat for decades, it has declared 2018 the National Year of Millets. Millets will be pushed through the public-distribution system, and even included in mid-day meals in schools. And, more relevant for urban brands like Soulfull, they will be reclassified under the more glamorous “nutri cereals” from the current “coarse cereals”.

Despite its desi moorings, Soulfull keeps its advertising “modern”. “When you go fully into the [desi] space, consumers get a very earthy feel,” Parameswaran says. (Think Patanjali.) “But we’re talking to a modern, urban consumer. How do you make them feel they are eating something aspirational?”

One of Soulfull's recent launches, Desi Muesli, is an attempt at cracking this challenge. While the concept and even name is desi, the packaging has pastel block colours, with clean design and a “retro” look, says Parameswaran.

The bottom line
Soulfull's journey and philosophy holds a key lesson for brands old and new attempting to grow the breakfast-cereal market: The category needs to be reimagined for those who are pressed for time, meaning the target meal-time doesn't have to be breakfast at all.

While Kellogg’s realised some of this back in 2010, when it introduced snack packs of its bestselling products at INR10, it has struggled to become even an INR1,000 crore brand. As per latest company records, Kellogg India Pvt Ltd had a top line of a little over INR800 crore in FY16.

The lesson for new biggies — like Nestle’s recently launched NesPlus — then is also to focus on children when turning a cereal into a snack. Getting adults away from impulse, unhealthy snacks made by the likes of Haldiram’s and PepsiCo might be a taller order than convincing parents to feed their kids something healthy, tasty, and trendy.

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