Soulfull, a millet-based breakfast cereal and snacking brand acquired by Tata Consumer Products Ltd., is ramping up healthier offerings when consumers are most likely to experience guilt after the Diwali eating binge.
“The festive season has been good so far, but we are yet to see real offtakes,” Prashant Parameswaran, managing director and chief executive officer, Tata Consumer Soulfull Pvt., told BQ Prime. “But that’s primarily because health as a category is still a small percentage of festive sales.”
He expects strong sales in the November-January period as shoppers get back to eating healthy after Diwali season’s increased calorie and carb intake and also after Christmas “when the New Year resolutions fire up consumers leading to habitual change”.
Tata Soulfull, a relatively new entrant in the kid-snacking and breakfast cereals market, sees room for growth as health food share in total packaged foods is still low. It competes with Kellogg’s, Bagrry’s, PepsiCo (Quaker Oats), Marico (Saffola Oats) and Hindustan Unilever (Horlicks Oats). Euromonitor International expects the breakfast cereals market in India to reach Rs 4,010 crore this year.
Soulfull is among the new engines of growth, Sunil D’Souza, managing director and CEO of Tata Consumer Products, said in a recent post-earnings conference call. It is on a “very strong” trajectory growing 50%, he said, and “this 50% number has been consistent over the last few quarters”.
The Tata group acquired Kottaram Agro Foods Ltd., the owner of Soulfull brand, for an enterprise value of around Rs 155.8 crore in 2021. In FY20, pre-acquisition, Soulfull had a turnover of around Rs 30 crore.
Parameswaran estimates healthy portfolio to be 20% of packaged foods. The deadly Covid-19 pandemic accelerated growth exponentially, he said.
While healthy food is no longer a niche category, Soulfull will focus on reinventing millets in a modern format. Soulful has introduced millet-based health drink ‘Smoothix’ and Millet Muesli. It is looking to expand the current basket of ready on-to-go snacks and breakfast cereals made from millets into other offerings in the health and wellness portfolio as consumers look beyond staples such breads (rotis).
And it’s not going to get into biscuits, bhujia, chips and anything equivalent. “We have to figure out our own strategy on snacking to ensure that we are creating a space which is not competitive … which has decent margins, we have the ability to scale it, it is a category which is growing fast,” Parameshwaran said. “It is work in process. We are assessing a number of categories, but I don’t think we will be playing in it with something like chips or biscuits.”
He feels the government’s push to declare 2023 as the ‘International Year of Millets’ will further popularise the grain, driving sales.
Tata Soulfull also forayed into Masala Oats category in July this year. And the company has already clocked close to double-digit market share.
“We are seeing this growth despite not launching the product pan-India yet. The most beautiful part is this is not a Bengaluru-Mumbai-Delhi phenomenon,” he said. Non-metros, according to him, accounts for a bulk of the revenue. “Kerala, the rest of Tamil Nadu, Odisha, Bihar, the western part of U.P. and Punjab are some of our top markets contributing to sales.”
Avendus Capital estimates the number of health-conscious consumers in India to rise from 10.8 crore in 2020 to 17.6 crore in 2026. Being accessible, expanding distribution and entering new categories are key for the next phase of growth as Soulful eyes a slice of the burgeoning demand pie.
Prior to integration with Tata Consumer Products, Soulful was mostly a metro-focused brand. However, Tata Consumer expanded into mass markets with multiple price points. The company is also “significantly” investing in advertising, said Parameswaran.
“The bigger strategy is how we make our products mass and affordable. At the same time, we are on a mission to make millets mainstream,” he said.
“But we can’t do that by just selling in metro markets. Our market research has shown that people want to start [choosing healthy food] with low-unit packs, especially in tier 2 towns and beyond.”
Tata Soulfull’s pack prices range from Rs 15 to Rs 400 to cater to a wide spectrum of consumers.
From metros contributing 95% sales, non-metros now account for 35-40% of overall sales. The company has aggressively ramped up its distribution network. It now has a reach in around four lakh outlets, up from just 15,000 last year.
It plans to tap the parent company’s 1.4 million vast distribution network spread across the country.
Soulfull has a manufacturing capacity of 36,000 sq. ft of value-added millet processing facility. “We also have three more facilities that we contract manufacture with,” said Parameswaran, adding that the company is at the brink of maximising capacity utilisation and is evaluating locations.
E-commerce also continues to be a strong pillar of growth. The channel contributes little less than a quarter to sales.
“We see e-commerce being a nice piece of business and we do a lot of our launches on D2C and e-commerce platforms first, followed by modern trade and general trade,” he said. “And the trend is here to stay as the channel is constantly evolving.”