‘E-commerce and q-commerce generate 18% of our India revenue’

The rice market in India is unique, with 98% of consumption being for regional varieties and only 2% for basmati. In the premium segment of basmati rice, approximately 65% of the market consists of the loose variety. Packaged players like India Gate hold the remaining 35% of the market, and converting consumers from loose consumption is a key marketing task. 

In this insightful interview, Kunal Sharma, the chief marketing officer of KRBL, delves into the evolving landscape of the basmati rice market in India. With e-commerce and quick commerce now contributing a significant 18% to the company's revenue, he discusses the challenges and opportunities of expanding market reach and the importance of brand health. 

Among other things, he also shares his thoughts on the role of advertising in fostering long-term brand associations and the increasing significance of digital media in their marketing strategy.

Excerpts:

Sreekant Khandekar: Could you give me an overview of the rice market and how marketing a brand here is unique?

Kunal Sharma: I've worked on many other categories, such as skin care and supplements, especially honey. There are nuances in those categories as well, but they are not as pronounced as in the rice category. Here, the way in which rice is consumed changes every few hundred km. 

As for basmati, in the North, it is an item of daily use. In the south, it is used in biryani or, say, dry variants such as lemon rice or coconut rice. 

As a category, rice is simply humongous. Now, 98% of the consumption, by volume, is for regional rice varieties, and only 2% is basmati, which is grown in north India. Even within a premium segment like basmati, about 65% of the market is for the loose variety.  Packaged players such as India Gate have the other 35%.

As leaders, we are basically growing our business by converting consumers from loose consumption. Getting consumers to do that is the big challenge. It’s also a huge opportunity.

In Atta, 50% of the consumption is packaged; in spices, about 40% is packaged. Converting people from loose basmati is a key marketing task.

Sreekant Khandekar: If only 35% of the basmati sold is packaged, what would be the share of brands in the larger rice category?

Kunal Sharma: There is no syndicated data for the larger rice market, but my guess would be that only 5-10% would be branded because it is a price-sensitive market.

Sreekant Khandekar: Is it worthwhile trying to convert people from packaged rice to packaged basmati?

Kunal Sharma: Getting consumers to move from non-basmati is a fundamental behavioural change which may or may not happen. Moving them from loose to packaged basmati is the easier of the two. 

Sreekant Khandekar: A basic question: who is your competition? Is it a brand, or is it loose basmati?

Kunal Sharma: Loose basmati is our primary source of competition. Actually, in the branded space, we compete with different brands in different states. So, there is no single No 2 brand we are competing with all over India. 

Also, with a high market share of about 40% in general trade and 45% in modern trade and e-commerce, getting more consumers into the packaged space is our task. As they convert, they are most likely to come to India Gate. 

Sreekant Khandekar: It is great to dominate a market. But the onus of market expansion is on you since you own almost half the market anyway. Market expansion is expensive. So my question is: does the premium you can charge more than make up for the cost of expanding the market?

Kunal Sharma: True. So, one of the things we keep as a guardrail in our business is the kind of premium that we want to charge for our brand. That’s why it is important to keep a sharp eye on our brand’s health scores. We need to keep our brand in the pink of health at all times.

Packaged basmati is available in only about seven lakh outlets out of the total 1.2 crore. So, my attempt to increase physical availability is a big lever of growth for us.

Sreekant Khandekar: What stops you from expanding faster? 

Kunal Sharma: When you start directly servicing a retail outlet, there’s a certain cost of servicing. You have to gauge that against the potential revenue from the outlet. 

Some of our traditional thought processes have been challenged in the last couple of years. We never expected a category like basmati, where purchase is planned, to get the kind of traction that it has today.

Sreekant Khandekar: What’s the breakup of your revenue from general trade, modern trade, e-commerce and q-commerce? I’m asking about q-comm because all kinds of unexpected categories are finding traction there.

Kunal Sharma: That’s a very interesting piece. Some of our traditional thought processes have been challenged in the last couple of years. We never expected a category like basmati, where purchase is planned, to get the kind of traction that it has today; quick commerce and e-commerce contribute to about 18% of our revenue, which is huge. It was only 3–4% when I joined three years ago.

Sreekant Khandekar: So, you are getting more than Rs 700 crore of your Rs 4,000 crore in domestic revenues from online commerce. That is amazing for a category like basmati. It defies logic, doesn’t it?

Kunal Sharma: I have a hypothesis about this. The typical trigger to buy something on q-commerce is, say, a home running out of shampoo. But since these platforms have a minimum order level, consumers tend to add other items to reach that basket value. That’s how items like dals, basmati, and poha end up in q-commerce.

Sreekant Khandekar: That seems like a plausible theory. Coming to your advertising: what would you like it to perform for you? Also, tell me about your choice of media.

Kunal Sharma: Earlier, we looked at advertising from purely a brand lens. In the last couple of years we have pivoted to consider its role more in the business growth agenda. We want it to drive behavioural change in consumers over three to five years. Advertising should have a long-term impact.

Because of the way in which this category has been traditionally advertised, consumers don’t have clear brand associations such as those in soft drinks like Coke and Pepsi, for example. We want to build that kind of distinctiveness for India Gate over the next four to five years in what is a low-involvement category.

We have recently done a whole, purposeful packaging revamp with (design agency) Landor. 

There are so many variants that consumers are unable to navigate the category. Because they can’t decide what it is they should buy, they look at price as a surrogate to choose their basmati. 

We’ve made the packaging exciting and integrated a QR code to increase engagement. We are looking forward to having a more meaningful impact in the category. 

Sreekant Khandekar: What about the choice of media?

Kunal Sharma: A large part of it is TV to help us cut through HSM (Hindi Speaking Markets). But we are increasingly seeing a role for digital, considering that we have a growing contribution from e-commerce. It is our second most important channel.

Sreekant Khandekar: How high do you expect the share of e-commerce in revenue to rise?

Kunal Sharma: I would see it growing to at least 25% in the next two years. The growth is coming because these platforms are expanding into new towns. 

Sreekant Khandekar: Last question – would you have any tips or suggestions for young people who are entering the marketing function?

Kunal Sharma: There are many opportunities for management graduates today. But going by my experience as a management trainee at ITC, I’d say that while everyone may aspire to get into the office and get a brand role, it would be better if you spent two years in sales. You will be able to really appreciate what the power of a brand is and what the kind of levers you have are. Dirty your hands in sales for a couple of years, and it will stand you in good stead in the long run.