Fitness enthusiasts enlarge the peanut butter jar

Creamy. Crunchy. Sweetened and unsweetened. Chocolate and dark chocolate. Today, peanut butter is available in all these formats. But a decade back, the product itself was hard to find on store shelves.

While brands like FunFoods, Veeba and Sundrop were the ones to introduce the product to the Indian audience, today the market is flooded with many D2C brands like Pintola, MyFitness and The Butternut Co. With its increasing popularity, FMCG majors like Saffola, in March 2022, Amul, in 2021, and Kissan, in 2020, also entered the scene.

Dr Oetker (FunFoods) recently emerged as a market leader in the category with about 30 per cent market share of the Rs 390 crore market. According to a release, the peanut/ choco spreads brought in a net revenue of Rs 81 crores, larger than all competitors.

While peanut butter is a popular item in the US, it is a relatively new concept in the Indian market. It entered India in the late-2000s. Until then, only imported brands like Skippy and American Garden were sold in select stores. It has grown a lot since then.

Reasons for the rising interest

Peanut butter’s early adopters in India used it as a bread spread, largely as a breakfast or snack item. Shashank Mehta, founder and CEO, The Whole Truth, says the large growth in the category has come as a result of peanut butter replacing other bread spreads like jams and chocolate spreads.

“These are significantly higher priced than jams, but are also significantly healthier than them. Jams are 70 per cent pure sugar. Even parents don’t want their kids to consume such sugary stuff. So, they are also offering peanut butter as a replacement. Consumers today are aware of the health risks of eating sugar and are shifting their spread usage from jams to nut butters.”

But not all peanut butter is entirely healthy, as some brands add artificial sweeteners and preservatives. As people began looking for healthier alternatives, there arose a wave of natural peanut butter brands that make peanut butter with jaggery or dates. Apart from the many D2C brands taking this route, there is also Marico’s Saffola that is selling on the healthy plank.

But its rising popularity can also be attributed to it becoming the go-to option as a high protein product for bodybuilders, gym-goers and fitness enthusiasts. It provides an alternative to whey protein and protein bars for this audience. MyFitness is one of the peanut butter brands that has positioned itself in this space.

Such is the importance of this audience segment, that Dr. Oetker and Sundrop intend to soon release special products catering to their needs. In its release, Dr. Oetker announced the launch of new products, including high protein Peanut Butters, all-natural Peanut Butter and all-natural Peanut Butter sweetened with organic honey. Sachin Gopal, MD, Agro Tech Foods, in its Q4 2022 financial results call, announced that Sundrop will be launching a high protein variant in quarter two of this year.

Aditya Sanghavi, founder and CEO, Snackible, says the growth has been fuelled by this protein-seeking audience and includes even vegetarians.

“India has a high vegetarian population. They get their proteins from dairy products and pulses. But many are lactose intolerant and pulses don’t provide enough protein to the body. So, peanut butter helps fill that gap.”

Moreover, as working professionals' mornings get busier, they don't have the time to make breakfast, and peanut butter offers a quicker alternative.

Beyond being a breakfast or snack item, Indians today also use it in smoothies, salads and some oriental recipes.

Entry of big players

Mehta of The Whole Truth says that big brands are showing keen interest, as it's a high growth category. Industry estimates quote a 30 per cent CAGR. But he believes that their entry benefits everyone because everyone's marketing and category building efforts expand the pie.

“It's such a small category right now that more entrants benefits everyone, and more people get introduced to peanut butter. We are very far from a share gain situation, where the category is not growing and one can grow only by eating into each other’s share. There is more than enough headroom for all brands to grow.”

On Amazon, Gujarat-based Pintola is the highest sold peanut butter brand. Launched in 2015, it ranks fourth in the grocery section on the e-commerce platform. Sai Singaraju, senior marketing manager, Pintola says the brand aims that in the next 6-7 years, every household should have peanut butter. Though it gains equal revenue from online and offline, it is in the retail stores that it competes with these big brands. Here they face a challenge of shelf space.

“Our aim is to be available on all platforms, both online and offline. Retail is very important for us. The main problem we face here is that brands buy out shelf space and gain prominent displays by offering higher margins. This ruins the market for all the players in the category. Its murder," he says.

Sanghavi of Snackible says brands like Pintola will always have an edge over Saffola and Kissan because they have built their brands around peanut butter. “People will always choose them over a large FMCG brand, which is doing it just as one of the added products.”

However, he insists that brand building is really crucial, as it's a highly commoditised market. “If one blindly tastes peanut butter from different brands, it will be difficult to tell one from the other. They all taste the same.”

Kalyan Karmakar, a leading brand consultant and blogger at Finely Chopped Consulting, says the bigger brands must have felt confident to enter in this category after seeing the success of the smaller ones.

“When a big brand introduces a category, the costs involved are pretty high. So, they might not have wanted to take the risk, but now they have, after seeing its popularity. Over the last couple of years, people are experimenting with different categories, types of dips, spreads and breads. So, they are looking at things to go with them.”

“Also, there’s also a lot of talk about the value of peanuts. Earlier, peanut butter used to be very dense, but now, with newer flavours, it is more appealing to the tongue. So, the category is getting accepted. The typical big brand behaviour is to see a potential emerging and to capitalise on that, especially if there's a sync with the existing products or overall brand promise.”

However, Karmakar believes that the category doesn’t have much potential to grow. Comparing it to the popularity of mayonnaise, which also was an alien product to the country, he says brands will have a dual task- to create a taste for the product and then interest in the brand.

“We do not have an equivalent for a peanut butter taste apart from maybe a peanut chutney in Maharashtra. People need to find it versatile and relevant, like cheese and butter. So it's going to be a long haul and I don't see it becoming a big volume in the immediate future. Today, people don’t see mayonnaise as alien because it's widely used in street food. So even peanut butter can drive demand through restaurants and street food,” he adds.

Online to offline

The peanut butter market is swamped with online D2C players. A 2020 Euromonitor International report for the American Peanut Council, lists down the major producers of peanut butter across countries. Amongst the six Indian brands that are mentioned, four are largely D2C players - United Foods (Nutty), Pintola, Alpino and The Butternut Co. The larger producers mentioned are Dr Oetker India (FunFoods) and Agro Tech Foods (Sundrop).

Mehta says the product has high demand in the online market and is making deeper inroads into retail spaces only now. The two-year-old The Whole Truth, which gets at least 25 per cent of its revenue from peanut butter, has been largely selling its product online. Over the last couple of months, it has begun expanding into retail and is now available across 1,500 outlets in 18 cities.

“This category was not established by big players, but by young companies and they started selling online first. But I believe it will soon gain more prominence on retail shelves also. The demand is coming into retail and, hence, brands are quickly moving into these outlets.”