As profit margins come under increased pressure, fast-moving consumer goods (FMCG) companies are diversifying into new product categories that have better profitability.
Most of these variants are either in niche or premium range categories, where competition is less and margins are fatter.
Dabur, maker of Real juice and Chyawanprash, is planning to enter the high-end aroma products such as car fresheners and aroma candles under its popular Odonil brand.
The company, which is present in the beauty care market with Fem brand, is now looking at launching a slew of high-end professional grooming products, such as facial kits.
“We tested waters a few months back with a single product. This marks our first big foray into the professional grooming market with a slew of launches,” Sanjay Singhal, marketing head (skin care), Dabur, said.
The company is also planning to launch a range of products targeted specifically at spas, beauty salons and beauty centres.
“We are looking to grab about five to 10 per cent share of the professional grooming market in two years with these introductions,” Singhal added.
To begin with, the company has introduced a range of facial kits – Fem Gold Professional Facial Kit and Fem Queen’s Pearl Professional Facial Kit, which it will sell only through beauticians in beauty parlours and salons. The company has also signed on Sonakshi Sinha as the brand ambassador for the Femcare products.
Another company Marico, which has presence in the hair care market through Parachute oil plans to foray into body lotions and other beauty products. “We are looking at premium product categories like anti-ageing beauty products. In the coming years there will be more launches in this category,” a senior marketing executive from Marico told Mail Today.
Another consumer goods company Reckitt Benckiser has launched a premium variant of the popular Dettol brand, called No Touch Hand Wash System. It is a battery operated gadget, which detects the hand movement and automatically dispenses just the necessary amount of soap.
Even Britannia is planning to foray into niche health food category like healthy snacks and is also ready to move into the healthy breakfast cereals segment to increase its profit margins.
“We have test-marketed oatmeal in Mumbai and recently in Tamil Nadu. We are also testmarketing Poha and Upma in these two markets. In the next three months, we expect to take these products to other parts of the country, possibly in phases,” Anuradha Narasimhan, director (health and wellness), Britannia, explained.
According to the companies, it is the higher profitability that encourages them to look for these niche categories. In these sectors, growth too, is better.
For example, the breakfast cereal market is a Rs 200-crore category but it is growing at an annual rate of around 25-30 per cent, which is good enough to attract giants like PepsiCo.
“Companies cannot go on increasing the price of products always as it directly hampers sale. This is a highly competitive market. So, we are looking at product categories where growth is good. Premium products give the company wider margins to accommodate commodity price fluctuations,” the Marico executive pointed out.