Monday, July 26, 2021

Impact of COVID-19 on Private Label Food & Beverages

Covid-19 has changed the scenario of every industry and the food & beverage industry is no different. People were locked up in their houses during the lockdown and one of the main things that were missed by them was restaurant & street-side foods. To satisfy their taste buds, almost everyone started trying out those dishes at home. Everyone started baking and cooking all the exotic dishes at home and this saw a rise in the sale of bakery items, ready-to-cook & ready-to-eat products, snack items etc.

In this second part of the six series webinar that was conducted during the CMPL Expo, WOOB presents how the scenario for the food and beverage industry changed, the new rules & regulations that came in and will be followed going forward and how the future looks for this sector.

Benz Thomas, Regional Head, BRCGS was the moderator for this session and the esteemed panellists were Sunit Sharma; Director G Brand; Grofers, Anantha Padmanab; National Quality Head – Staples & Private Label; Big Basket, Umair Siddiqui; Manager – Own Brands; Star (TATA Group), Dr. Nitin Shankar Nagrale, Founder & CEO; HPMF, Gaurav Gambhir; Chairman & Managing Director; Shubh Foods and Saurabh Bohra; Founder; Nova Satum.

Sharing his first hand experience of private label, Benz said that his first private label experience was a big retailer who had just come into India a few years ago. They were trying to do tea and it was the blind tea testing that they were doing to understand how well it met the market leaders’ acquirements.

If I go back to my experience of walking into a retail store in the UK before Covid-19, Benz said that he just walked into a retail store and saw a lot of private label brands especially in the food sector.

Products of 2021 & beyond

Talking about the products that were trending during the pandemic, Sunit said, “While we entered this pandemic people were crazy to buy anything and everything. But by the end of April onwards people started shifting from regular stuff because they were aware that these are the things that are now available. At the same time, there were things which were not available in the ecommerce or modern trade which were bakery ingredients, because consumers were quite dependent on the restaurants for all these things. There was a time, when people were searching flavours, choco chips etc and these were hitting the highest number of searches in the ecommerce platform.”

While people were cautious about the health, snacks is something which has seen 4x growth, informed Sunit. “Biscuit and cookies were one of the parts of breakfast needs because there was nothing else to eat. It has seen around 600% growth. Pasta, noodles, fries, all these products which were available in the restaurants, people were preparing at home and these items had seen 6x growth. During the lockdown it gained traction and now it is losing the traction, but the base that we had created by that time, servicing to the consumers as per requirement, that trend is going to stay there. Earlier it was 4x and now it has gone to 2x. Baking ingredients emerged as a new segment in the ecommerce, modern trade which is again sustaining at 2.5 to 3x.

Coming to the beverages, Sunit said that green tea saw 400% growth. There are certain new beverages that came up in the market during Covid-19 like turmeric-based beverages, tulsi, aloe, basils etc and they all have seen good business and as per the studies, it is expected to be growing by 20% CMGR. This trend is going to continue because now people understand that such pandemics are going to be repeated often. So, we need to build our immunity and be health conscious.

Sunit asserted, “We have added close to 100 products during the Covid-19 period and have added 20 odd suppliers too. For this industry, that period has been a boon.”

Virtual meetings & onboarding of suppliers

Private label introduction specially in the food segment is very critical, said Anantha. “It is not just another brand. The scale in which we operate pan India, it is equivalent to any national brand. A failure in any of the products will have a cascading effect on all the other products that we sell on ecommerce. So, we have our own set of processes defined for the introduction of private labels.”

The pandemic was a completely unprecedented time period that everybody had faced, so we were no different, Anantha said. Initially we had some problems, but we had our team in every region. Only the initial few days were troublesome with regards to travelling, but we used to do things virtually. We introduced close to 20-25 supplies in all the categories. We used to get all the information over the mail and had a virtual audit.

We do about 1000 audits in India & 30000 globally and during the pandemic, we introduced remote audits, informed Benz. We deal more with the food & beverages industry and we are an essential requirement. We were able to do audits and what we saw during those audits was a change in – when we do our audits, we take out information from it, take a look at what is happening in the industry and understand all of that. I was pulling up some data and we saw– premises and equipment hygiene, which never used to be in the top 5 of the non-conformances moved up. Earlier, people were not effectively focusing on equipment hygiene, maintaining them, cleaning them etc. Maintenance was another issue, so all that we saw cropping up.

Key factors while onboarding suppliers

Speaking about the key factors you consider while onboarding a supplier, Sunit said, “First thing should be what kind of certification a manufacturer is having. Second is the capacity, what kind of unutilised capacity is lying so that any scale of business that we give them, we are having sufficient scope to grow with that particular supplier. Third is business ethics and responsibility and that comes when you talk and gel with the partner and then you understand what their thought process & psychology is around the business.”

Sharing his opinion on the same, Anantha said, “To start with any private label, the supply should be having a product range which actually interests us, it should be different from the regular ones. Second thing is whether a supplier is having their basic infrastructure and resources in place. Third is the intention of the supplier to earn the certification and not to get the certification.”

Agreeing to Sunit and Anantha, Umair said that apart from all these points, the vendor should be honest with himself. If you are honest with yourself then whatever the issue is, we can always find a solution. The problem arises if we don’t know what the problem is. If the vendor doesn’t know the problem then eventually you will land up in a mess. It is very important for them to be honest and transparent about where they stand currently. Second is the willingness to change. One of the key decision factors that my Quality Head looks for while doing the audit is the attitude of the vendor. If the attitude is correct then you can change a lot of other things.”

Adding new brands & retailers in lockdown

We did collaborate with a couple of new brands and also worked with Barbeque Nation and Zorabian food chain, said Gaurav.

Talking about his experience with the onboarding process during the lockdown period, Gaurav shared, “We are GFSI certified company. We have videos of our factory, have our own lab in the company. So, we track the samples and convince them. Working for 20 years in this industry, people are aware of what we do and deliver to a company. We also have virtual audits, so it was well managed.”

Introducing F&B private label

According to Saurabh, “To develop a new product, you need to fall in love with that category. If I don’t like aerated beverages or snacking, I am not going to be a part of product development at all. If I am a vegan, I am not going to participate in product development of sausages. The entire team should have passion or love for the product which is being developed. Every product which is developed by a retailer or FMCG company, they do benchmark with respect to what is present in the market within those respective categories.”

He explains with an example that if Grofers wants to develop a ketchup, they will do the benchmarking of what are the ingredients present in the competition? Who are the competitors? Kissan is a competition, so we will do a serious benchmarking around their ingredients, packaging, pack sizes, what are the highest selling pack sizes etc. Pack size identification is very critical. For that you should not only believe in your internal data or reference data, rather the guy should go visit the markets, do a proper benchmarking not only of super markets but also in mandi and bazaars as the actual consumers lie there. If you are trying to develop a brand or a product, it has to be an entry level product with respect to superior quality and value offering. Once you have decided on your pack size and packaging, you need to create the pack design according to the current trend. It could be a nasty brand name like Naughty Nuts. It has to be catchy, said Saurabh. Once you have decided on a brand, make sure the brand reciprocates the category.

Continuing further, he said the next step is to decide on the packaging. Again, you have to do a benchmark in packaging – what are the colour combinations, creatives, elements on the pack size which are prevailing in the market today. Once you have done that then you need to approach the vendor. You need to identify vendors who not only have ethical practices but are also scalable. Once you identify the vendor, you need to finalise the product recipe. To finalise the product recipe, you should always have a secret ingredient. You also need to have a reliable and ethical packaging material vendor. After all of these, you need to start the pre-launch activation and accordingly you need to identify your marketing channels and create your advertisement for the product.

Ethical sourcing

The lineage we have as part of the TATA Group has been instrumental in us ensuring that ethical sourcing is the cornerstone of any business that we do, stated Umair. “The pressing that you have on ethical sourcing – I would like to split into 2 halves – one is ethical sourcing which clearly means the social impact in terms of the people that are involved & the ways of working. Second part is the environmental impact. Both of these are essential components of ethical sourcing.”

We have something called the TATA Code of Conduct which is a comprehensive way of life which governs every TATA company in the group, informed Umair. We have more than 150 companies and every single company is running their value system based on the TATA Code of Conduct and not just the companies that we are part of, even all our partners regardless of how small or big they are.

Our audit check list which is derived from the BRC and is a joint effort by TATA and Tesco Group which again is highly renowned for the ethical practices they follow in the UK and everywhere else, asserted Umair. The basics are there, so all certifications based on wages, factories etc has to be taken care of, which is a pre-condition that we have for any of the vendors regardless of the size of business that we do with them.

I think hygiene policies should be stricter and also you need to create awareness amongst the workers telling them if they are sick, they should stay away, asserted Anantha.

Lockdown scenario

For the hospitality industry, last year and the start of this year has not been good. Though there is growth since the last three months, the industry is still lagging behind. It will take at least one more year to get back to the pre-Covid-19 scenario, said Nitin. “Covid-19 has brought in a lot of changes in our lives. We have understood that having knowledge, products or business is not enough, you need to have good relationships, you should know people and also understand the requirements of people to be more successful.”

Covid-19 brought in a lot of hygiene, safety and sanitization, said Nitin. “People started realising that to be successful and even to be present in the business, one needs to leave all those practices which they were doing earlier. All of this created a food safety manual. We developed a checklist for ourselves and created an audit checklist for ourselves and we reached a level wherein now we are able to call ourselves as safe food handling organizations. Today, the product quality and the reliability of the supplier has become an important aspect in the hospitality industry.”According to Benz, “Quality and food safety go hand in hand but one of the things that we have seen is a ‘chalta hai’ attitude. If things are moving then we will not work on improving it and that is where a lot of things need to change.”

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