Local brands rise as Indians flirt with newbies

• Local brands are making a comeback after their pandemic lows, and are now competing with national brands in categories like detergents, noodles, masalas and more.
• HUL CEO said in an earnings concall that they have seen a market share dip in certain mass categories.
• The number of homes that buy over 4-5 brands of the same product are growing, says a Kantar report.

In Karnataka, many stores now have ‘1 To 3 Noodles’ on display along with Nestle’s 2-minute Maggi, the category leader. Apart from a stellar 35% penetration in the state, this local brand is catering to local tastes with a desi twist to instant noodles that comes with more masala.

Similarly, North India-based Vasant Masala is catering the specific spice needs with its Awadh Garam Masala. There are more such examples of local brands that concentrate only on specific states — that are making a headway into the retail shelf space as well as the consumer’s homes, if not hearts.

“Local brands live up to the local tastes better,” K Ramamkrishan, MD South Asia of Kantar tells Business Insider India.

Moreover, these brands are bringing value onto the table beyond price points by capturing the specific preferences of the states and relationships with retailers. So much so, now they’re threatening the national brands sold by FMCG behemoths.

“Local brands are no more brands that have basic packaging with a brand name. They are innovating, have brand ambassadors. Today local brands are only limited by their presence not their ambition,” said Ramamkrishan.

He says the speed of decision making in local brands is high, and their agility allows them to capture dynamic trends in shopping habits faster.

Back from pandemic lows

Kantar’s Consumer Connections 2023 report says that there has been a resurgence in local brands that had faced troubles during the pandemic. Curtailed by their inability to raise prices, over 12 brands have shut shop during the pandemic. Many more couldn’t source raw material during the high inflationary period, or bear the costs, Ramamkrishan explains.

With the pandemic over, the troubles have decreased and local brands are back with a vengeance. FMCG major HUL also admitted in its recent quarterly announcement that regional brands have curtailed the price growth in the sector.

Rohit Jawa, CEO of HUL said that it has seen dips in market share in the mass segment due to small and regional players. “There has been a resurgence of small and regional players in select categories due to softening commodity prices – many of whom had vacated the market during the peak of inflation,” he said in an earnings concall.

Most of the local brands tend to categories that are already high in penetration such as food and beverage, detergents, spices, washing powders, hair oils etc. “For example they won't be in face washes where the penetration is low,” Ramkrishnan explains.

Kantar has picked a few brands like — Reflect Dishwash in Maharashtra, Saras Detergent Bar in Gujarat, Challenge Detergent Bar in Tamil Nadu, Sastry Balms in Andhra Pradesh, Supreme51 in Madhya Pradesh as some of the single-state brands that have exhibited double or even triple digit growth in the last one year, along with extensive penetration in the state of their choice.

Flirting with many brands

While consumers are pivoting towards local brands, they’re not shedding their loyalty to national brands either. The complex Indian consumers are more tuned to experimenting more. Ramkrishnan calls it ‘flirting with multiple brands’.

The number of shopping trips or purchase occasions for Indians are growing at a rapid pace, says Kantar. An Indian makes 152 shopping trips in a year – which breaks it down to one in every 58 hours. This also includes e-commerce shopping.

It indicates that people are buying only as much as required, and household consumption levels are not back to normal in spite of signs of revival. But a few others also prefer frequent shopping for reasons like freshness, accessibility and more.

More shopping trips means more experimenting. The homes that buy over eight brands of biscuits/cookies rose to 34% in 2023 from 24% in 2022. The percentage of homes that buy over three brands of washing powders and liquids came in at 47%, going up by 6% in a year. And, 43% of homes bought over six brands of soap bars in 2023, rising by over 5%.

Experimenting Indians are also giving a fillip to direct-to-consumer brands that have national ambitions buoyed by PE and VC investors who are betting big on them — all indicating rising competition in the sector.