It could boast of other achievements in the country as well. In a market where price points are as low as 25 paisa, it has three brands which sell over Rs 100 crore (Rs 1 billion) each: Alpenliebe, Center Fresh and Big Babol.
And, says Perfetti India Managing Director Sameer Suneja, 37, the Indian operations, expected to scale the Rs 1,000-crore (Rs 10 billion) mark this financial year, have been profitable for some years now. (Perfetti came to India in 1994.)
Confectionery, it so happens, is an intensely competitive market in the country. There are large multinational corporations like Mars (it bought out Wrigley last year for $23 billion), Cadbury, Lotte (it acquired Parry from the Murugappa Group some years ago), Hershey (it purchased Nutrine three years ago), Nestle and well-entrenched local players like Parle Products, Ravalgaon and not-to-forget ITC which had bought Minto from Candico in 2002 and has added another brand called Candyman to its portfolio since then.
And more heavyweights are ready to test the waters. Dabur, for instance, could join the market in the not-too-distant future its brand, Hajmola, is after all the undisputed market leader in the digestive candy market. There are distribution synergies which could prove too irresistible to exploit one day. Then there are local sweatshops which churn out candies often sold unwrapped.
Little surprise then, there are innumerable brand launches every year almost 70 new brands were seen in the market place in the first half of 2009! Industry experts say not more than ten per cent of the new launches survive for more than a year. Mortality rate of brands in this business, therefore, is as high as 90 per cent. (This is still better than Japan where almost 3,000 brands are launched every year out of which not more than 90 survive!)
And the price points are fixed. Confectionaries, thanks to the intense competition, have been sold in the country at 25 paisa, 50 paisa and Re 1 for several years now. Retailers often hand out confectioneries if they run out of change.
This means that any climb in raw material prices (sugar this year and petroleum-based packaging films last year) has to be absorbed by the manufacturer. The import is clear this is not a market for the faint-hearted.
Suneja, slightly built and a peripatetic salesman, is a veteran of 12 long years at Perfetti. After he passed out of IIM Bangalore in 1994, Suneja had joined Colgate Palmolive and from there he moved to Frito Lays and finally to Perfetti in early 1997 as a brand manager. After a two-year stint in Italy, he returned in 2002 as the head of sales and marketing. Last year, he was named CEO.
The starting point in the business, says Suneja, is the product: You need the right taste at the right price. In other words, success cannot come from run of the mill me-too products. Suneja should know best. He had launched a digestive candy under the brand Chatar Patar some years ago and even gave it considerable advertising support.
But there was nothing to differentiate it from Dabur Hajmola. Chatar Patar flopped. Suneja has withdrawn the product from the market. There was not enough differentiation, says he. Delivering a flop spells trouble in another way in the business: It blocks precious space at the retailers end. So, duds need to be acknowledged and pulled out of the market fast.
Product plan
The Indian confectionery market is divided in three categories: Candies and toffees, gums (chewing gum and bubble gum) and mints.
Perfettis advantage is that it is the only company with products for each of the three categories. Thus, Mars strength is gums and Cadburys clairs and cough drops (it acquired Halls from Pfizer in 2003). Hershey, Parle Products and Lotte are strong in candies. ITC plays in the candy, clair and mint markets.
Candies and toffees, of course, are the mainstay of the market. Not so long ago, they accounted for up to 65 per cent of all confectionery sales in the country. The contribution is now down to around 45 per cent.
Traditionally, candies have had to make do with low product innovation and inconsistent advertising support, though there are in the market place strong brands like Parles Kismi, Melody, Poppins and Mango Bite, Ravalgaons Mango Mood and Pan Pasand, Lotte Coffy Bite and Lacto King, and Nutrine Maha Lacto. ITC has launched candies under the Candyman brand.
Perfetti started its innings in candies with Alpenliebe which it calls a deposited candy. The different taste was quickly accepted by consumers. It then followed with Alpenliebe Lollipop and Alpenliebe Creamfills.
These were candies with a swirl inside. The inspiration here was the success of Perfettis liquid-filled chewing gums in the country. With these brands, says Suneja, Perfetti has a share of almost 20 per cent in candies.
A criticism often hurled at Perfetti is that though it is the market leader, it does not have a presence in clairs a category dominated by Cadbury. Others in the market are Nestle, Lotte and now ITC with Candyman.
This, mind you, is not a small category it accounts for about 12 to 13 per cent of the confectionery market. To be sure, Perfetti did enter the market with Chocoliebe but it met with limited success.
This actually is a market which does not hold much promise for Suneja because, says he, the scope for innovation is limited. (The last innovation came way back in 2006 when Cadbury launched a crunchy clair.) Besides, he adds: This is a product category that does not exist outside South Asia. It is not there in the United States, Europe or Latin America. In other words, there is little he can pick from Perfettis global portfolio here.
Perfetti, says Suneja, has a share of 55 per cent in the gum market. The differentiator here, according to him, is the liquid in the centre of the gums. It has a presence in each of the three sub-segments: Center Fresh and Center Shock in chewing gum, Center Fruit and Big Babol in bubble gum and Happydent in functional gum.
Perfetti has now begun to market Happydent in Re-1 packs and is experimenting with a liquid-filled variant called Wave. It has also created space between candies and gums with Mentos a category Suneja calls chewy.
His rival here is Wrigley which has Boomer and Orbit. In fact, Orbit is the largest sugar-free chewing gum brand in the world and is endorsed by dental associations worldwide, including the Indian Dental Association.
In mint, Perfetti has Chlor-Mint, which is now endorsed by Salman Khan. This is a unique category where the consumers are not children but adults who consume it to freshen up their breath after, say, a smoke or a drink.
Industry experts say this category has become stagnant, in spite of the presence of Nestle (Polo) and ITC (Mint-O Fresh). It is also under attack from gums which carry mint properties. But Suneja says Chlor-Mint sales have grown at a fast clip.
This category could see some more competition in the days to come. Dabur feels it could have a play here because it is an essentially herbal category, which is its core brand promise.
Kickass communication
All told, Perfetti has a large portfolio of 16 brands. Of these, it has decided to actively promote ten: Center Fresh, Center Fruit, Big Babol, Happydent, Alpenliebe, Creamfills, Chlor-Mint, Chocoliebe, Mentos and Marbles. These ten fetch the company almost 80 per cent of its sale revenue.
Given the clutter in the market, the only way to create brand salience is through innovative advertising. Like in other FMCG categories, large confectioners spend 12 to 13 per cent of their sale revenue on advertising and brand promotion.
Moreover, advertisements need to appeal to consumers across age brackets and socio-economic groups. Confectionery brands cut across consumer categories.
Perfetti therefore puts humour (Mentos and Center Fresh), emotion (Alpenliebe), bizarreness (Happydent and Chlor-Mint) and fun in liberal measures in all its commercials. We do some edgy work and are willing to take risks, says Suneja. Story lines have been dropped and film shoots scrapped at the last moment, says he, to get the perfect advertisement.
One way to create a difference in the mind of consumers, Perfetti has realised, is to coin taglines for all its flagship products. Others who do that now will only be seen as following it.
Thus, there is Zubaan par rakhe lagaam (reins in the tongue) for Center Fresh, Dobara mat puchna (Dare not ask again) for Chlor-Mint and Dimag ki batti jala de (Lights up your brain) for Mentos.
These are all expressions borrowed from everyday usage of the youth the bulk of confectionery buyers are between four and 24 years. (In fact, the story goes, film maker Vidhu Vinod Chopra called his film Lage Raho Munnabhai in the hope that he could cut a deal with Perfetti which used the tagline Lage Raho for Alepnliebe Lollipop. But the deal never happened.)
So far, the idea seems to have worked. But Suneja knows it is like riding a tiger any advertisement less whacky than the previous one will backfire. A joke badly told can be disastrous. One has to learn how to control the campaign, says he.
The trick here, says Suneja, is to work with the same creative brains and film producers for long. The momentum otherwise could drop. He has thus worked with Prasoon Joshi of McCann-Erickson and Piyush Pandey of Ogilvy for well over a decade. (Perfetti has three agencies McCann-Erickson, Ogilvy and Leo Brunett , though 90 per cent of the work is done by the first two.)
Similarly, Perfetti has stuck to film makers like Abhijit Chowdhury for several years. They now look at the output in a comprehensive way and not just how the campaign has done, says Suneja.
This is the reason why, says Suneja, Perfetti has been able to stick to various themes over the years. Alepnlibe, for instance, has played on the irresistible factor in all its campaigns: It was used as a bribe, shown as something people wont share, something people will get lost in, and now give it to somebody and God help you.
Similarly, Mentos has played around with fresh ideas that can get you out of a fix. Most of the successful campaigns are further amplified on television and radio.
We go well beyond just communication support and help Perfetti with strategy as well. Often we sit together and decide which advertisement is working and which isn't.
We are always on our toes and have to keep coming up with ideas, says Joshi. Its important to know that you cant do great advertisements for a bad product. Perfetti has good products and is much ahead of the competition.
Right distribution
Some Perfetti brands, says Suneja, now have unaided brand recall in excess of 90 per cent. But brand promotion is perhaps just half the story. Confectionaries are purchased almost always on impulse they will never be found on the grocery list of households.
Most of the times, the purchase is at the behest of the kid, though almost a fifth of confectionery sale in the country is through the panwala. So, the brand ought to be placed at the level of the childs eye. Mind you, there are over 2 million confectionery sale points in India.
Thus, what any confectioner needs to ensure is that its brands are prominently visible at the outlet, preferably close to the cash counter. Naturally, given the clutter in the market, a lot of companies offer the retailers very high margins.
Though retail margins in the business are normally between 12 per cent and 15 per cent, some confectioners even offer up to 25 per cent. But if you have high promotional budgets, like Perfetti, this could erode your bottom-line in no time.
Perfetti has tackled the challenge by giving its products to retailers in plastic jars. This makes life convenient for the retailer and gives the company the opportunity to place its brands prominently at the outlet. Of course, brand visibility on a jar is better than small two- or three-gram units.
Suneja, in fact, has done another clever thing. The average confectionery retailer is a small businessman who rotates his working capital on a daily basis. If the wholesaler visits him everyday, he is likely to pick and choose from all the brands shown to him.
So, three Perfetti wholesalers visit the retailer thrice every week so that he stocks all the brands. There are simply too many pieces in this jigsaw puzzle to get the picture right.