Business - Retailing the king of nuts

Year 1978: Giridhar Prabhu starts selling cashew in small packs to customers who come to his cashew factory at Bunder, the market area in Old Mangalore.
Year 1983: Considering the demand from people for small packs of cashews, the factory opens an outlet by name Phalguni Cashew Centre at Hampankatta, the first retail outlet of its sort in the central business district of Mangalore.
Year 2008: In the silver jubilee year of his first cashew retail outlet in Mangalore, Prabhu sells cashews of all kinds and sizes in his spacious retail outlet at Hampankatta. And now he boasts more than 25 types of speciality cashew in his outlet.
While Prabhu sells a variety of dried fruits, this year the sale of cashew has been outstripping all others. . Says Prabhu: “Apart from new customers we have lifetime customers who have been visiting us for the past 25 years.” Along with Prabhu’s traditional outlet , cashew is now being retailed in Mangalore in the larger retail chains such as More and Big Bazaar.
Cashew, the king of nuts, and a hot export commodity, is now finding an eager consuming class within the country itself. India is the largest producer (5 lakh tonnes), exporter (1.14 lakh tonnes), importer (6.05 lakh tonnes) and processor of cashews and is now emerging as the largest consumer of the commodity as well. One of the main reasons for this growth could well be the arrival of organised retail and modern retail formats.
Availability of better shelf space in the retail chains, introduction of value-added products from the producers, introduction of smaller packs of cashew kernels, and increase in the income levels of people are pushing up the sales of cashew through such retail chains.
To get an overview of the industry on the penetration of cashew among retail chains, BrandLine caught up with some of cashew processors who market cashew to major retail chains in the country.
According to K. Prakash Rao, President of the Karnataka Cashew Manufacturers’ Association (KCMA), domestic consumption of cashew has received a major impetus on account of the retail boom of the last three years.
Annual Indian consumption, which was estimated at 80,000 to 90,000 tonnes till recently, has increased substantially to about 1.25 lakh tonnes as per the industry estimates.
B. Rahul Kamath, Partner of the Karkala-based cashew processing firm Bola Surendra Kamath & Sons, believes the domestic consumption of cashews is going up due to the increased income levels of people. “The retail chain has only made availability easier. The consumption would have gone up even otherwise, maybe to a lesser extent,” he adds.
“There may be 1,000 chain stores in India. They sell, maybe, 2-3 kg of cashew a day. So around three tonnes of cashews are sold a day. This works out to 700 tonnes per year. Compared to Indian consumption of more than 1 lakh tonnes, this figure is not very significant as of now,” he says.FACTORS FOR GROWTH
However, KCMA’s Prakash Rao, who is also a supplier to some retail chains, thinks the domestic market here was not serviced properly as there were hardly any good retail points where household consumers could pick good quality cashew. With the emergence of many retail chains, much shelf space is now available for cashew. Besides, several value-added and flavoured products have made it to the shelves, giving them a wide choice and boosting consumption.
According to Giridhar Prabhu, Managing Partner of Achal Industries, and a leading cashew exporter from Mangalore, retail chains have the benefit of merchandising and creating value for customers by providing consistency and availability.
Purchases become standard instead of being a speciality when it is bought in affordable packs. Retail chains can offer smaller packs for consumption by the middle-class, while specialities offer larger packs for the highest income classes.
H. Ganesh Kamath, Partner of the Kasaragod-based Vittal Cashew Industries, says cashew sold in small pouches in retail outlets afford everyone an opportunity to buy unlike earlier when cashews were available only in dry fruit shops. Added to this, recent research has found cashews to be free from cholesterol. All these factors put together are increasing volumes of cashew sales.
Factors such as quality, food safety and easy availability push the growth of the sales in retail outlets, says Rahul Kamath. BRAND
However, the customers are yet to be aware of the brands in cashew, as marketing through retail chains is a relatively new phenomenon. As of now there is hardly a pan-India brand in cashew when compared to other commodities.
Prabhu of Achal Industries says there is no accurate study on how people buy cashew. It depends on how the cashew is used, whether eaten as a snack or in a curry.
Some of the major retail chains pack cashew in their own packs and sell under their own store label, while some others allow cashew processors to sell in their own brand name. Rahul Kamath says brands will attain more recognition over the next two to three years.
Prakash Rao’s brand of cashews is sold as Kalbavi Cashews, Rahul Kamath’s company sells it as R u Nutz while it is Vittal’s Balaji from Vittal Cashew Industries. These firms also supply cashew to retailers for their store brands.
On the advantages cashew suppliers have in modern retail chains, KCMA’s Rao says it creates the opportunity to market good brands through their shelves. The retail boom assists the industry in building their brands and gives it the chance to provide attractive offers to the consumers when the markets are dull.
The retail chains are now sourcing directly from the manufacturers and therefore the consumer enjoys the benefit of lower rates too. He estimates that most retail chains work on 12 to 15 per cent margins, and therefore this route can provide cashew much cheaper than the normal value chain of manufacturer–wholesaler–semi-wholesaler–retailer–consumers. PREFERENCE
Plain cashews have a major share in retail chains, as value-added products such as roasted, salted and masalas have their own limitations. Ganesh Kamath says plain cashew kernels are more in demand as they can be used as an ingredient in sweets, curries and confectionery. He finds regional preferences strong in the case of value-added cashews in retail chains. According to him, people in Andhra, for instance, always like a spicy, masala kind of cashew. CONSUMPTION DEMAND
Traditionally north India is the main consumer of cashews in retail packs. However, the increase in the number of middle class and disposable income groups, has pushed up the consumption demand in metros also.
According to Ganesh Kamath, North India sees people consuming a lot of cashews during winter, and they also have dry fruit shops in most shopping areas. He finds that in southern India the concept of a dry fruit shop has just developed, even as consumers buy cashews from retail chains also. Rahul Kamath indicates that Bangalore, Chennai and Hyderabad have the most number of modern retail outlets fuelling the demand for cashew. Ganesh Kamath attributes the demand generated from the middle class to the smaller packs in retail stores. A middle class family can easily afford to buy a small pack in a retail chain, unlike a purchase from a dry fruit shop where the minimum quantity sold is 1 kg or 500 gm. POTENTIAL
All the cashew processors who supply the product to retail chains believe the potential for cashew is bound to grow. Prakash Rao says the retail segment may constitute nearly 40 to 50 per cent of the total domestic consumption in the next four to five years. The retail chains have the capacity to market over 20,000 tonnes a year, he adds. Both Ganesh and Rahul Kamath believe the increase in the number of retail stores in the years to come will definitely push up the volumes in the newer retail formats. And, cashew consumption may be commonplace by then!