Pravin Singh

Pleasing the health-conscious customer March 10, 2009

The modern Indian consumer is increasingly turning health-freak and demands for products that are healthy and low fat. This post deals with what the companies ‘should’ and ‘should not’ do to deal with this change.

The Indian food & beverages industry is witnessing a new change in consumer preference these days: Increase in the demand of “healthy” food. The consumer is slowly shifting from regular bread to “brown bread”, from normal tea to “green tea” and from chocolates to “nutrition bars”.

This is a natural and expected phenomena in any growing economy. With economic growth comes easy money, which leads to bad food habits and lousy lifestyle, which causes obesity and poor health, which in turn makes people more health-conscious. They try to change their lifestyle and their eating habits, although in most of the cases the change is cosmetic. They enroll for a gym where they never go, they wait for the new year to make a resolution to quit smoking which they never quit; and since they can’t cut their junk food intake (that would be too difficult), they search for junk food which is “low calories”, “no fat” and “zero cholesterol”. Moreover, they don’t mind paying a little extra for this “healthier” product.

This trend, though causing a negative impact on the regular F&B products, creates a whole new market for the so called “healthy” products. Now it’s up to the companies as to how they plan to cope with this change (and possibly make a profit from this). We have four interesting case studies in this regard and each of these companies followed a different strategy.

Case 1: Nestle (Maggi Noodles)

Noodles are a favorite among kids and since parents are always against anything that’s their kid’s favorite, they oppose noodles too. In this case the reason is that noodles are made of white refined wheat flour (maida), which is low in nutritional value and is less fibrous.

Nestle, leader in the noodles market with its brand Maggi, knew this too well. So they came up with a range of new products: Maggi Vegetable Atta noodles, Maggi Daal Atta Noodles, Maggi Rice Noodles etc. which they claim is made from whole grain wheat flour and real vegetables. This is a good example of how companies can change their product recipe to satisfy the health-aware consumer.

Case 2: Pepsico (Tropicana)

Pepsi, a leading brand in aerated soft drinks market, has been doing well in India. But now, the modern health-conscious consumer, aware of the harmful ingredients of the soft drinks, is looking for some healthier alternatives, like fruit juices, lassi etc.

So Pepsico, as in the example of Nestle, could have thought of either making its Pepsi “healthy”, or launching Pepsi fruit juices. As for the first option, not much can be done (Diet Pepsi is already there in the market and doing reasonably good), Pepsico decided to go with the second option, but it knew that for the consumers, Pepsi is synonymous with soft drinks and in turn, synonymous with ‘junk’. So they could reject even the fruit juices that are sold with the name ‘Pepsi’. So Pepsico came up with a different strategy, they created a new brand altogether, called Tropicana, for their fruit juice offerings. On the packets of Tropicana juices, one can not find the slightest hint of its association with Pepsi, except for a small place where it says: Marketed by Pepsico. This example shows that if the brand name itself has become too associated with the junk food, company should consider launching a new brand for the healthier product range.

(Coca-Cola, facing the same challenge, has been a bit reluctant and in place of creating a whole new brand with different juice offerings, they just launched an orange juice called Minute Maid along with its earlier offering of Maaza mango drink.)

Case 3: KMF Nandini (Good Life)

The case of Karnataka Cooperative Milk Producers’ Federation Limited  (KMF) is very interesting and unique. KMF already had two varieties of its milk product ‘Good Life’: Good Life, which is regular pure milk, and Good Life Slim, which is homogenized, skimmed milk. Since they use the skimmed cream to make other milk products, they were selling Slim at a price Re.1 lower than Good Life.

But when KMF saw the shift in consumer preference and that all other companies were pricing their healthier, low fat products higher than the regular ones, they also decided to follow suit and they interchanged the pricing of Good Life and Slim i.e. now Good Life became Re.1 cheaper than Slim. This move ended up in a fiasco and was totally rejected by the consumers. While Good life consumers rejoiced that they were getting it for a lesser price, Slim consumers felt cheated because they were paying extra for the same product. So they moved to other brands.

KMF authorities then realized their mistake, and confused about what to do, they made the prices equal. So now Good Life and Slim both sell at the same rate. This example shows that things become a lot more complex and sensitive when you already have a “healthier” option but wrongly priced. Just increasing the price without any value addition will most likely backfire. You better launch a new product or do some value addition to the existing product to justify the price hike.

Case 4: Domino’s Pizza

Pizza has been traditionally considered to be one of the most unhealthy junk foods.  Domino’s, being the largest pizza company in India, will be most affected by this change in consumer preference. So Domino’s should come up with some variety of low fat, low calories pizza or consider selling some other low fat products complimentary to its product range. But it turns out that Domino’s is either unaware of this change, or has decided to completely ignore it, because so far it has done nothing. In fact, it is doing the exact opposite: Domino’s recently launched Cheese Burst pizza, containing extra amount of high saturated fat cheese. Only time will tell whether they were right in doing so or I was in criticizing them for it.

In these four cases we found some valuable business lessons about how to retain your customers who are increasingly turning health-freak:

• If you can tweak your existing product recipe to make it healthy, do so. It is the easiest way out. Plus you can charge extra for this tweaking.
• If it is almost impossible to make your product healthier and consumers are shifting to some other product, consider selling that other product yourself.
• If your brand name has become too associated with unhealthy products, think of launching a new brand for your healthier product range.
• If you already have a healthy product offering but priced wrongly, just promote it. Don’t change the pricing without any justification.
• Ignoring the change (or worse, resisting the change) will not help. History shows that companies who adapted to the change thrived and those who resisted it faded into oblivion.