Tata Consumer Products plugs portfolio gap with healthy cereals brand Soulfull

In a latest addition to its foods portfolio, Tata Consumer Products (TCPL) recently announced the acquisition of homegrown cereals brand ‘Soulfull’. Soulfull was launched in 2013 by Bengaluru based foods company Kottaram Agro Foods.

The brand currently offers a bouquet of on-the-table and on-the-go millet-based products targeted at convenience-seeking and health-conscious consumers. It offers a range of snacks, cereals and healthy beverages such as Ragi Flakes, Ragi Bites, Millet Muesli and Smoothix. The brand also entered the ready-to-cook (RTC) segment with dosa mixes.

Soulfull brings in ‘healthier’ competition within multiple product categories. While flakes and muesli compete in the western breakfast segment, with brands like Kellogg’s, Saffola and PepsiCo Quaker, Ragi Bites competes with snack brands like Too Yumm, among others.

Similarly, Smoothix, a beverage mix positioned as an alternative to unhealthy quick snacks, could compete with existing HFDs like Horlicks, etc. The product portfolio caters to a wide TG – from kids to adults. However, these are inclined towards urban consumers and have, for long, been limited to select urban markets in South, West and North India.

The young player has been ticking all the right boxes to be a ‘future-ready’ food brand. It fits snugly in the food routine of hectic city lifestyles (too busy for Indian preps). It has latched on to millet, which is emerging as the desi super-food (like quinoa).

The brand has built itself around the proposition of health. Apart from offline distribution, it also boarded the D2C e-commerce train in April, last year. And it even has a subscription model, where the customers can choose to get products delivered every month without ordering.

The western breakfast segment has had the presence of brands like Kellogg’s, Bagrry’s India, PepsiCo Quaker, Saffola, etc., for many years. The market was reportedly valued at Rs 1,400 crore in 2019. As per Euromonitor, the segment witnessed a major boost in consumption globally during COVID-induced lockdown/quarantine. Brands have also been trying to offer RTC Indian breakfasts like Upma, Khichdi, Dosa, Idli among others.

The breakfast cereals market has been dominated by Kellogg’s, with corn flakes as the dominant product type. It is followed by other cereals like oats and muesli, which are growing faster due to a focus on health.

However, the segment has seen interest from many major food brands recently. ITC’s flagship staples brand Aashirvaad launched ragi flour and multi millet mix flour under the umbrella of Aashirvaad Nature’s Superfoods in July 2019. Mondelez India entered the cereal market with Bournvita Fills in August 2020. Nestle also entered the breakfast cereal segment in 2018 with its brands Koko Krunch and NesPlus.

The Tata Group has been actively uniting its food and beverage interests under TCPL. The company’s product portfolio includes tea, coffee, water, salt, pulses, spices and RTC offerings. The latest addition gives it a say in previously unexplored areas.

KS Narayanan, food and beverages industry expert (formerly with McCain Foods, Unilever) says that the move adds up from Tata’s viewpoint of becoming a complete food and beverage business.

“There are certain gaps in Tata’s portfolio. Say, they already had the tea-coffee beverages in the breakfast segment, but the breakfast was missing. Soulfull fits the bill perfectly. It also has the right products since looking ahead, because of the health focus, etc. the portfolio is likely to grow further.”

Narayanan adds that with the distribution experience of highly penetrated categories like tea, salt, spices and dal, Tata should be able to scale Soulfull up significantly. There could even be opportunities to export Soulfull products into Tata’s network in other emerging/mature markets globally.

TCPL’s food portfolio includes brands such as Tata Salt and Tata Sampann and the company claims to have a reach of over 200 million households in India.

Ankur Bisen, senior VP, retail and consumer products, Technopak Advisors, says that the acquisition seems early, since Soulfull is a young brand. But he also points out that it is timely. He mentions that the ‘packaged’ story for large FMCG companies has been largely limited to packaged snacks and beverages, i.e., namkeen/on-the-go snacks and aerated/non-aerated beverages.

The RTC space, condiments and spices have not been on the radar for many reasons, like, small market size, consumers not being ready, etc. "Lately, we have seen how some of these companies have scaled up, with a lot of experiments with products trying to occupy niche market segments. Hence, the big companies are going for acquisitions, instead of greenfield innovation.”

Bisen equates Tata’s move with ITC’s acquisition of spices brand Sunrise (July 2020). “Large companies acquire innovation and then grow them. For an independent company trying to play the market on its own, Soulfull has done a reasonable job. But it needed funds to grow. It could either be PE (private equity) investment or a strategic acquisition.”

Vidur Vyas, founder, NorthSide (a strategic business and brand marketing consultancy), says that while Soulfull will give TCPL incremental consumer occasion spaces to go after, it will need to invest significantly in marketing and R&D to grow the brand.

“With the acquisition and the Tata muscle, the category space will grow further, but gaining market share will prove to be tougher and more expensive,” Vyas adds.

Speaking about in-category competition, Narayanan says that the existing players (in the larger breakfast segment) are less likely to worry about competition. “Overall, the whole segment will grow… There would be a larger thrust towards processed breakfast foods and presence of packaged foods in the segment is likely to increase. As a segment, breakfast isn’t very big, it is going to be a big fillip.”

From a consumer behaviour standpoint, Lubna Khan, brand strategy consultant (former head of strategy at Wieden+Kennedy), says that Tata’s move is a recognition of an emerging category of consumption – healthy indulgence.

She points out that while over the last several years, indulgent foods have become ‘better for you’ and healthy foods more palatable, most brands are still clearly demarcated in one camp. The concerns about health and the desire for at-home indulgence have both accelerated in the last year. And, the brands that can satisfy both these needs are poised for healthy growth.

“A brand like Soulfull, which is powered by the superfood millet, but tastes as good as any sugar/fat laden alternative, is, therefore, a smart addition to a portfolio. I think we will now see a host of innovative offerings in the market from competitor brands, dialling up both nutrients and flavour,” Khan signs off.