Parle Agro has announced its re-entry into the carbonated soft drinks category with Café Cuba, a coffee-based beverage. We spoke to joint MD and CMO, Nadia Chauhan, about the what, how and why of this move.
Food and beverage player (F&B) Parle Agro has introduced a segment called 'coffee rush' within the carbonated soft drinks (CSD) category, with the launch of Café Cuba, a coffee-flavoured beverage priced at Rs 20. A few minutes into my conversation with Nadia Chauhan, joint managing director and chief marketing officer, Parle Agro, three things became clear.
League of its own
"It is not a cola," says a soft-spoken yet firm voiced Chauhan, admitting that prior to the launch of Café Cuba, her team was afraid it would be called 'a cola brand'. This launch marks the company's re-entry into the CSD segment, 20 years after the group sold its soft drinks portfolio comprising Limca, Gold Spot, Citra and Thums Up (which continues to be the largest selling cola brand in the country), among other brands, to Coca-Cola for Rs 180 crore.
"When I joined the organisation, I remember talking to journalists, almost all of whom would ask 'Will you return to colas?' Back then, I said we would come back into the CSD space but not through a cola," says Chauhan.
We wonder whether the creation of 'coffee rush', a self-contained category within the CSD zone, has anything to do with the fierce, pre-existing competition in the cola segment. "If you are a tea, chocolate or caramel product, would you like to be called a cola? So, when you're a coffee product, why would you want to be called anything other than that?" Chauhan counter questions, insisting it has nothing to do with competition.
Rather, it has to do with making sure consumers are clear about what the product is. "Chances are, the only 'black liquid drink' people have ever seen has always been a cola. So we need to ensure people don't mistake it for one," she elaborates. The CSD industry -- the largest category within the Indian beverage industry -- is where Chauhan expects the largest set of conversions to come from.
Observation over research
No structured, documented research was done prior to the launch of Café Cuba. "As an organisation, none of our launches has been an outcome of research. Research just tells you what you want to hear! You're taking consumers out of their natural environment and grilling them to give you the answers you want to hear," says Chauhan. So then, sans research, how did she know the market was ready for a product like this?
The answer lies in informally observing and mingling with the TG. "Today, even at my position, I travel around and spend a lot of time in the market. As a culture, we ensure that those even remotely related to marketing/sales spend a bare minimum number of days in the market. For instance, we give a group of collegians a new beverage and just drink with them, listen to them, chill with them, feel with them and just be one of them," she says, citing this technique as her gateway to the mind of the Indian consumer. And interestingly, it includes more than just observing members of the TG; her team also listens in on what retailers, salespersons and other middlemen handling the brand have to say.
"We've been getting a lot of people to try it and respond to it. The product has been at my house far before we even did the test launch. I'd see how people who come over react to it; that was my research," she adds about her unconventional ways.
This is how Chauhan can state with confidence that over the years, the market has opened up. "Over the years, we've seen a lot of flavours beyond the traditional ones (namely, mango in non-CSD and colas in CSD) starting to come up," she says. Carbonated apple drink, Appy Fizz, with a 100 per cent YOY growth rate, is testament to this. In fact, in several markets such as South India, Appy Fizz is doing even better than the company's mango-based beverage, Frooti.
Speaking of Southern consumers, any apprehensions that a carbonated coffee beverage could be seen as a brand 'messing around' with their favourite beverage? "It's not meant to replace or compete with hot coffee," Chauhan answers, insisting it is meant to deliver what a carbonated soft drink does, thereby ruling out existing milk-based cold coffee drinks as competition.
"In fact," she adds, citing the example of toffee brand Coffy Bite, "since people in the South are passionate about coffee, having a product with coffee at the core is a big opportunity for us in this market."
Positioned as a 'powerful, bold, on-the-go refresher' meant for impulsive consumption, Café Cuba targets consumers between 18-30 years, who have "more evolved tastes". Does this mean people who are well-travelled, open to experimenting or those who come from wealth? Chauhan tells us that around seven to ten years ago, while this description may have been the answer, it is not the case today.
"Today when we talk about those with 'evolved tastes', we're simply referring to people who're looking to try something new. And the proportion of this kind of consumer has increased tremendously of late. In fact, this is the reason behind the success of a lot of new products in the F&B segment," Chauhan says, citing the example of Hippo, Parle Agro's baked wheat snack brand, launched in 2008.
Non-CSD to CSD: What's the challenge?
At a thought process level, for a marketer, what does a shift from non-CSD to CSD entail? Some category observers liken the shift to a move to the proverbial 'dark' side, what with all the health pundits and anti-aerated drinks revolutionists waiting to pounce on the next entrant. Surprisingly, for Chauhan, the biggest change is in terms of the scale.
"It's a move from a category worth Rs 4,000 crore to a category worth Rs 40,000 crore," she shares, highlighting the enormity of the CSD industry. Within CSD, Café Cuba is targeting a size of almost Rs 1,000 crore to start with. While this may seem like a very small market share, it's the larger picture that's important. Presently, Parle Agro has a turnover of Rs 2,000 crore. With its re-entry into CSD, the target is Rs 5,000 core.
When asked what made now the right time to re-enter the CSD space, Chauhan answers with a single word: infrastructure. "The timing has everything to do with us having to reach our optimal size, from an infrastructure perspective, to be able to take on a launch this large," she shares. While Parle Agro's factories remain common across its product categories, this launch called for an investment of almost 100 per cent additional infrastructural capacity.
Prakash Chauhan, chairman and managing director, Parle Agro, stated in a recent interview with Business Standard that the company has invested Rs 150 crore to increase capacity at 14 of its plants across the country, apart from increasing its sales and distribution infrastructure.
In broad strokes, there are two sides to infrastructure, namely, factory and production capacity; and sales and distribution. Explaining the difference between the two, Chauhan says, "with factories, it's almost like signing an investment cheque and putting up your line, but when it comes to distribution, it's far more than that. You have to grow it, gradually. For any FMCG company, especially in India, the challenge always is sales and distribution, and being able to establish a robust network."
With the launch of Café Cuba, Parle Agro is looking to expand its distribution from the current figure of eight lakh outlets to 1.5 million.
The product will be available across metros, mini-metros and rural markets. Already present in the general trade/retail segment, it will be made visible in modern trade outlets, corporate and college canteens, multiplexes, airports, bars, clubs and restaurants soon.
Accompanying the final roll out of the product, the 360 degree marketing campaign (for which Rs 50 crore has been earmarked) will be visible in February next year.