Growth of Healthy Snack Brands in India: Analysis for a Layman
Source: ET Bureau article published Feb 12, 2024 on the growth of healthy snack brands like The Whole Truth, Open Secret, Yoga Bar in India.
Analysis for a Layman
Multiple premium packaged healthy snack brands are seeing massive 125-300% revenue growth as Indian consumers become more health-conscious.
Growth is driven by rising gym-goers and fitness enthusiasts focusing on protein intake and overall diet. Health influencers on social media also play a significant role in guiding consumer behavior.
However, these niche brands face challenges in scaling up profitably across India, mainly due to limitations in online sales.
Impact on Retail Investors
- Stock Prices: Listed firms like ITC, Marico, Tata Consumer Products have invested in these niche brands, potentially benefiting their stock prices from premiumisation and new revenue streams.
- Caution Needed: Very high valuations mean retail investors should be cautious of lofty growth expectations. Regulatory filings should be scanned for realistic pictures. Additionally, analyzing FMCG majors’ base snacks portfolio can provide insights. Upside may still be larger in mass segments.
Impact on Industries
- FMCG: This growth could open up a new high-growth packaged food segment beyond biscuits, chips, etc., but competitive intensity with small brands will be high.
- Agri: Higher demand is projected for healthier ingredients like millets, oats, dry fruits, etc., which may lead to better realizations for farmers.
- Ecommerce/Retail: Brands are looking at offline stores, modern trade to scale up across India after the initial online buzz. More variety is expected in stores.
Long Term Benefits
- Premiumisation Theme: Part of the larger India premiumisation theme, where rising disposable incomes are spent on health and wellness.
- Global Brands: Opportunity to create homegrown global health food brands if ethos catches on globally as well.
- First-Mover Advantage: First-mover advantage for companies that spot these trends early.
Long Term Negatives
- Mass Market Accessibility: Unproven if expensive health foods can penetrate the mass market, posing a price barrier for smaller towns.
- Unit Economics: Online-first brands may struggle with unit economics, making it difficult to achieve profits at scale.
- Limited Appeal: Health positioning may only resonate with the urban elite and affluent professionals so far.
Short Term Benefits
- Investor Interest: Buzz around the sector is attracting investor interest and talent.
- Marketshare Gains: Early movers may experience market share gains in the near term within niche segments before competition enters.
Short Term Negatives
- Brand Churn: High churn with many brands failing to scale up and achieve product-market fit after the initial burst.
- Margin Pressure: FMCG majors may face margin pressure to respond with competing offerings targeting the segment.
Impact of Growing Healthy Snack Market:
Disclaimer: This analysis is based on the provided information and may not capture all potential implications.
Indian Companies Gaining:
- The Whole Truth: Strong revenue growth (125%) and VC backing indicate potential for further expansion. Market sentiment likely positive due to investor interest and growth prospects.
- Open Secret: Revenue nearly tripled with strong VC backing. Expanding product range and focus on profitability could improve market sentiment.
- Yoga Bar (acquired by ITC): Gaining access to ITC’s extensive distribution network could fuel significant growth. Positive sentiment due to established brand and strong backing.
- Tata Consumer Soulfull: Strong revenue growth (88%) shows brand traction. Continued focus on innovation and expansion could solidify market position and improve sentiment.
- Marico’s True Elements: Consistent growth (24%) indicates brand potential. Leveraging Marico’s resources for wider reach could boost performance and market sentiment.
Companies to Watch:
- Other established FMCG players: Companies like Hindustan Unilever, Britannia, and Kellogg’s might respond by launching healthier snack options, potentially impacting smaller players.
- Smaller healthy snack brands: Scaling profitably remains a challenge. Success depends on effective marketing, distribution strategies, and product differentiation.
Global Companies:
- Ingredient suppliers: Growing demand for healthy snack ingredients could benefit global suppliers catering to the Indian market.
- Global healthy snack brands: Increased competition in the Indian market might put pressure on existing players, but also presents opportunities for expansion.
Overall Market Sentiment:
- Positive for the healthy snack sector: Growing health consciousness and investor interest indicate potential for continued growth.
- Individual companies’ sentiment depends on their specific strategies and execution.