FMCG companies expand into adjacent categories that offer high growth

The brand is already established in people's mind and these companies already have distribution in place, Rajat Wahi, partner at Deloitte India explained

Godrej Consumer Products is test marketing its liquid detergent under the brand name ‘Fab’ in South India. While this is not the company’s first move in detergents, the launch is expected to give it a bigger play in the category, especially with a competitive price point of Rs 99 a litre. The company already has Godrej Ezee for winter wear wash. 

Some other fast moving consumer goods (FMCG) companies are also entering new categories which are allied to their current businesses. Companies are chasing low-penetrated categories which offer high growth both in terms of revenue and margins, according to analysts.

For instance, Parle Products, known as a biscuits manufacturer, has re-entered the wheat flour (atta) market. Earlier in 1996, it had launched packaged wheat flour but exited the segment as the demand failed to pick up. “Now, the demand is much higher for packaged wheat flour,” Mayank Shah, senior category head at Parle Products, told Business Standard while explaining the re-entry into the category. The company already procures wheat flour in bulk for biscuits and therefore packaging and selling it also makes sense for us, Shah pointed out.

Known for its snacks and namkeens, Bikano Bikanervala Foods has entered the Indian spices category under the sub-brand ‘Swad Anusar’. It came as a natural progression for the company.

“The top masala companies have either established or expanded their position in the sector over the past year, which is believed to account for up to 36 per cent of India’s entire Rs 70,000 crore spice industry,’’ Manish Aggarwal, director, Bikano, Bikanervala Foods, said. The remaining 64 per cent of the market is disorganised. ‘’We believe it’s the right time to invest in the spices category and foresee growth in this dynamic segment,” Aggarwal added.

The brand is already established in people’s mind and these companies already have distribution in place, according to Rajat Wahi, partner at Deloitte India.

“As long as these are adjacent categories, the company can easily leverage the existing distribution and also target new customers. These categories are typically low penetrated categories which offer high growth and are fragmented due to regional brands being present, thus giving them a better opportunity to enter these categories,” Wahi said. 

Brand expert Devangshu Dutta, founder at Third Eyesight, also believes that companies can easily use their existing distribution strength while expanding into related categories. "There has been a broad-based consumer growth over the years in these categories. Also, large companies find it difficult to grow after a point when present only in a certain categories,’’ Dutta said while explaining the significance of group synergies in  launching new products.