Nothing sweet about branding sugar

Price-sensitive customers thumb-down branded sugars. Mohini Bhatnagar reports.

The recent withdrawal by India's largest sugar manufacturer, Balrampur Chini Mills, of its branded sugar under the brand, 'Pyaar-Dulaar-Sanskaar' from the market holds lessons for marketers of branded commodities. The company's sugar brands, launched in 2003, just did not set its cash registers ringing.

Branded sugar was first launched in 1992 by Mavana Sugar Mills in Northern India. Parry's launched its Parry's refined sugar in November 2004 and plans to offer other branded sugar variants like sugar cubes, brown sugar and sugar syrup by targeting different price-points. At present EID Parry, Dhampur, Tirveni and Simbhaoli are some of the other branded sugar manufacturers in the country.

Balrampur Chini launched its brands in 2003, priced slightly above the cost of loose sugar. The company justified the price on the grounds that packed sugar was cleaner and purer than loose sugar over which there was no quality control. However, with consumers giving the product the thumbs down, Balrampur Chini decided to stop marketing its products in the branded packet form.

For all branded sugar marketers the logic of marketing branded sugar lay in the fact that if commodities like atta, salt and oil could be turned into successful brands, so could sugar. The feeling was that consumers would accept the value-adds if an established company gets into branding. For instance, Parry's and Dhampure refined sugar brands are claimed to be sulphur-free and absolutely clean unlike the normal sugar available in the commodity market. This is possible, the companies say, because they use the latest technology to process sugarcane.

Analysts say factors like transportation costs are loaded against the success of marketing branded commodities like sugar. Perhaps, as a result, sales have tended to be either localised or have found acceptance among institutional buyers like upper segment hotels. For instance, Parry's 'Pure refined sugar' is only available in the South as the company says sugar is a freight sensitive product.

Branding can be successful only if the product offered across price-points and sugar manufacturers should offer value-adds to commodity sugar without increasing its price since the sugar market is extremely price sensitive. In recent times the price of sugar has been hovering around Rs20 and above which takes the price of branded sugar up to Rs24 or more.

The biggest challenge for the branded players is to bring in more value-adds to convince the consumer of the superiority of a branded product. They say commodities like edible oil and atta incorporate a huge amount of value add-ons. Edible oil for instance needs high technology refining and hygienic packaging while atta makers offer premises of convenience and hygiene while the difference between loose sugar and branded sugar is not really visible to the naked eye.

Balrampur Chini's experience with branded sugar reveals that consumers are indeed unconcerned about the impurities in the sugar and were not eager to pay that premium for the branded product.

According to company executives, Balrampur Chini's branded sugar business generated 1 per cent of the company's total turnover of Rs930 crore for the year ended March 31, 2005.

According to industry experts the consumption of sugar in India is about 180 lakh tonnes annually, the highest in the world. The retail segment accounts for sales of 45-lakh tonnes, while 20 per cent of the total sugar produced is used by large industrial consumers like manufacturers of soft drinks, chocolate and confectionary, biscuits and so on. The remaining 55 per cent is consumed by unorganised bulk consumers, such as sweet shops. Hence the branded sugar market is small and is estimated to be in the region of one or two-lakh tonnes.