Biscuit wars
From cream crackers to market leadership
Maliban, one of Sri Lanka's largest biscuit manufacturers has launched a new cream cracker targeting the youth of this country.
Chairman A. G.R. Samaraweera told reporters on Wednesday that the cream cracker segment comprised 40% of Sri Lanka's total biscuit market valued at Rs. 14.4 billion and growing both in volume and in monetary terms.
However, the market leader in the cream cracker industry is Munchees with an 80% share, while Maliban currently has only a 15% market share in this segment.
Maliban, once the overall market leader in the country's biscuit industry with a 70% share, has since been relegated to second place with a 28% market share, while the new leader Munchees has twice that number-a 56% market share, with the balance 16% shared by a number of other players in the market.
Several factors had led to Maliban losing its leadership position, not least a six month strike that took place three years ago, where the company lost Rs. one billion in income.
The strike also affected its exports, which currently contribute around Rs. 150 million to its top line.
This resulted in the company's market share going down to 15%, but which decline it has since recouped, to go upto 28%.
"We have got over this problem with all the bad eggs, some 800, having allegedly left us last year," Samaraweera told The Sunday Leader. "Now we outsource our labour requirements."
Samaraweera said that the company which was in the red for several years was now in the black, with this transformation taking place last year.
"But I don't know how we will fare this year," Samaraweera referring to the country's current economic crisis said.
But Maliban's Marketing Head Ms. Kumerini Candappa assured Samaraweera that this year would be good.
The company's strategy is to regain lost market share, said Nirosh De Silva, the company's adviser.
He however set no time frames to achieve this goal, but added that they had a 42% market share at the time of the strike and said that they plan to regain this status quo in two years.
Candappa said that their new cream cracker has no preservatives nor animal fat and comes in a new package and is available in various weights.
The company, other than water and salt, has to import all the other raw materials such as wheat flour, sugar and cooking oil for its biscuit manufacture, with the cost of these raw materials escalating in the world market.
Samaraweera said that though Prima had reduced the price of wheat flour by Rs. 4 a kilo, that was insufficient to bring in a price reduction in biscuits. He alleged that this reduction was made because Prima's competitor, Serendib Flour, a subsidiary of the Dubai based Al Ghurair Group, had reduced their prices. He said that Serendib was expected to reduce their prices further.
Of the possibility of exporting their products to India, De Silva said that it was difficult to compete with Indian biscuits given the fact that wheat, sugar and cooking oil were cheaper in India than in Sri Lanka, with imports of the latter products being zero rated, while there was a duty on cooking oil imports to Sri Lanka. Further, advertising in India is costly, he said. A 30 second TV commercial would cost US$ 20,000. On trying to gain market share in niche market in India, because allegedly Munchees and Maliban were superior in quality compared to the Indian biscuits, he said that that would be in the second stage of their operations. "Sri Lanka's biscuit consumption is some 2.3 kg per capita, whereas in the UK it was 32 kg, so there is room to grow locally," said De Silva. A company note said that as the country grows, its per capita consumption of biscuits would increase to 10 kg in the medium term.
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