WHY BRAND NEED TO FOCUS ON HORECA CHANNEL ?


 

WHY BRAND NEED TO FOCUS ON HORECA CHANNEL ?

Nielson, in a recent report, mentions that only 31 out of 15000 product launches succeed every year. The reason why the rest of the brands fail is the lack of an all-pervasive distribution strategy. It is interesting to know that the best FMCG companies manage to penetrate only 30-40% Kirana stores with their top brands stagnating at a penetration level of not more than 50%. However, HORECA as an alternate model and independent segment has gathered immense focus owing to its contribution that is higher than retail. In addition to traditional Kirana stores, Modern Trade, and General Trade, FMCGs are building a strong focus on the HORECA channel as well.

WHY BRAND NEED A HORECA MARKET?

India becoming the world’s fifth-largest destination in the retail sector, this segment also takes up 75% sales against retail. Global FMCG players show confidence in the Indian markets due to robust household demands. By driving the growth, the fast-moving consumer goods and online retail companies are looking for opportunities to go beyond traditional trade channels to increase revenue while gaining clear entry into the Indian HORECA market segment. the Business-to-business (B2B) market place, mostly catering to HORECA sees a significant uptick compared to the regular Kirana store market place. It explains the potential the industry holds.

What could be the reasons that set the pace for this new industry across the commercial ecosystem? Well, the propensity to travel by nuclear families has become a way of life. This implies having favorite meals in the comfort of a third home. Owing to the higher spending capacities of a metrosexual Indian, the likelihood of having meals outside the home has gained frequency. This also explains the discovery of food apps that has suddenly gathered momentum. Thus, delivering premium quality raw material is a pre-requisite for brands to thrive in the HORECA segment since the returns here are significantly attractive than retail. In fact, a leading food brand explains that Quick Service Restaurants and HORECA channels have registered a higher use of convenience products as compared to the fine dining restaurants. In a nutshell, they present a huge market that is still nascent and untapped in India.

OPPORTUNITY FOR PRIVATE LABELS

HORECA customers are present on many scales, small to big. It presents a unique opportunity to introduce private labels in the market. When it comes to papad, tomato sauce, vinegar, Hakka noodles, or juice, Horeca Marketing customers are least bothered about the brand. Hotels, restaurants, and cafes sign fixed-price contracts to manage their food costs, and it becomes an opportunity to introduce good quality private labels. The price of such labels that HORECA customers get is almost half the price of other brands, which ultimately reduces food costs and creates a win-win situation.

OPPORTUNITY FOR BRAND TO SUPPLY CLOUD KITCHEN

Cloud kitchen is a restaurant that doesn’t have any physical space for dine-in. It works in the delivery mode only. I must say it is a very convenient option for catering to people across demographics. Cloud kitchen start-ups are coming up throughout the country, and in the next few years, few of them are going to operate on a large scale. As they grow their customer base, they will also need to source their raw materials. Here it presents a new segment of clients for FMCG companies. Localized distribution channels will come in handy while serving these clients. The needs of cloud kitchen business owners will be different from traditional players. A dedicated team of salespeople dealing with such clients will be beneficial in the long term as well.

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