Kellogg India posts worst sales growth in a decade, profit down too

American cereal maker The Kellogg Co is struggling with low sales growth and profit in India, a market that prefers traditional or savoury breakfast to its ready-to-eat corn flakes and muesli alternatives.

In FY19-20, Kellogg posted decade-low sales growth of 4% to Rs 1001 crore while net profit fell 16% to Rs 22 crore, as per Registrar of Companies filing sourced from AltInfo, a data insights firm. In a pronounced deviation from its earlier strategy of globally relying on western style breakfast options, the company has now launched Indian options including upma in select markets, hoping to widen its consumer base.

“Indian taste palate is very different from western world and consumers prefer freshly cooked, hot and savoury options as their first meal of the day. Indians have not yet adapted to cold breakfast cereals. (There has been) some success with hot milk though,” said Devendra Chawla, managing director at Spencer’s Retail and Nature’s Basket chains. “Even within processed food, packaged breakfast options are the most resisted category by Indians households compared to lunch or dinner.”

Kellogg India did not respond to an email query.

In India, Kellogg started its first manufacturing plant way back in 1994. However, its second unit opened after a gap of 22 years in 2016, followed by a research and development centre to develop breakfast products for India and other emerging markets in Asia Pacific region. The company expanded between 17-30% between 2010 and 2016 but growth tapered off significantly since then to 4-7% annually with steady decline in net profit over the past three years.

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Analysts feel Kellogg is one of the last entrants in the segment that has seen multinationals including Nestle and Hindustan Unilever launching similar traditional products. For instance, Nestle, popular for its noodle brand Maggi in India, launched poha and upma last year, while HUL extended its natural brand Ayush into South Asian breakfast options such as khichdi, upma and pongal two years ago, but later withdrew or scaled them due to low demand.

When making a choice, Indians have always preferred health to taste. With products such as corn-flakes hit by the convenience and lifestyle trends, there is also a growing competition within western breakfast. Nestle has recently launched a product combining corn flakes and oats.

“Traditional packaged breakfast makers have an advantage of people shifting from unorganised market to packed ones, which is not possible in our case since the overall market itself is nascent,” said Aditya Bagri, director at Bagrrys that sells muesli, oats and corn-flakes. “As a company, our focus on nutrition has worked well with products like oats atta, which can be used to make idli or parantha or our high protein muesli that is crunchy in warm milk.”

Over the past few years, companies including MTR, ID Fresh, PepsiCo and Marico have driven the breakfast market as consumers switch to healthier options such as oats and whole grain meals.



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