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Business – Sugar takes its own sweet time to enter the branded space

Ajay Modi

Sugar, unlike commodities like salt, tea and milk, has failed to achieve a successful transition from loose sale to a branded commodity.

Branded sugar has failed to become a household item despite the long presence of some leading sugar producers like Dhampur Sugars, Triveni Engineering, Simbhaoli Sugars and Mawana Sugars in the branded space. Even for these companies, branded sales account for 1 to 2 per cent of their total sales. However, for Simbhaoli branded segment accounts for 7-8 per cent of sales since the company is also into sugar cubes and sachets. The total value of branded sugar is about Rs 600 crore, not even a per cent of the total sugar sales, now valued at nearly Rs 90,000 crore.

Sanjay Tapriya, director of finance at Simbhaoli which sells sugar under the brand Trust, says branded sale is growing at a rate of over 25 per cent per annum. “Organised and large-format retail is driving the sales of branded sugar,” he says, adding that branded sugar is now getting into markets beyond the metropolitan cities into Tier-II cities.

The size of the branded sugar market is small, it also gives lower margins to the companies. “It is a low-margin business. The Rs 4-5 a kg premium that is charged goes primarily into packaging and distribution. Margins are similar to that of bulk sales, and at times, even lower,” says Tapriya. This explains why the country’s biggest producer, Bajaj Hindusthan, has stayed away from the branded segment. Its closest competitor, Balrampur Chini, exited after a brief experiment with branded sugar. Other major producers like Renuka Sugars and DSCL have also preferred to stay away from the branded market.

“The size of the business is small to attract all players. There are no immediate gains,” adds Tapriya. This is the reason behind the low focus on promoting branded sugar by the existing players.

While branded sugar sells at a premium of Rs 4-5 a kg compared to the sugar sold by kirana stores, many consumers do not find any value in paying the premium. “Unlike sugar, all other branded commodities have distinctive value-propositions that justify the premium prices,” says a commoditiy analyst. For instance, branded flour ensures a consistent quality every month and helps avoid the tedious process of selecting wheat from stores and visiting the local mill to grind it.

For salt, iodine is the value-add that scores. In the case of basmati rice, the distinctive aroma justifies the premium.

Most players think the boom in retail will help sale of branded sugar. “There will be a greater acceptance of branded sugar with a shift in retailing from kirana stores to organised retailers”, says Nikhil Sawhney, executive director, Triveni Engineering, which sells sugar under the brand Shagun.

“Our branded sugar, Dhampure, has been well accepted in the Northern states. However, we have not been able to step up sales due to our supply commitment to bulk and institutional buyers,” said Gaurav Goel, managing director, Dhampur Sugars.


January 11, 2010 - Posted by | Uncategorized |

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