HUL's sale of Annapurna and Captain Cook indicates the challenges of commodity branding in India

If commodity brands are to be housed in a large corporate entity with other bigger businesses, there is a need to ensure that the division managing commodity branding is run differently

By Ambi Parameswaran

Published: Feb 24, 2023 03:43:28 PM IST

Updated: Feb 24, 2023 04:20:34 PM IST

Unlike developed markets in India, numerous food products are still sold in an unbranded form, however, change is coming slowly. Cooking oil, which was largely a commodity category in the 1990s, is slowly and steadily getting into the branded space. Image: Shutterstock

The news of Hindustan Unilever (HUL) selling its brands Annapurna and Captain Cook caught my attention for a particular reason. I have worked on brand Captain Cook and an old history with the brand. The Captain Cook Atta ‘Farmer’ ad has also been captured as a case in my book FCB Ulka Brand Building Advertising Concepts and Cases.

The two brands Annapurna and Captain Cook had a reported sales of Rs 137 crore in FY22 and were being sold for around Rs 60 crores to a Singapore-based private equity firm.

Some of the questions that arise from this transaction is relating to why brands are built and sold. Equally, why are they bought if you can build your own brand? Annapurna and Captain Cook are interesting examples from the two ends of the spectrum.

Annapurna was a brand that was conceptualized and launched by HUL over twenty years ago; around the same time ITC launched its Aashirwad brand. Captain Cook, on the other hand, was a creation of Nitish Jain of DCW Home Products and had a successful run as a salt and an atta (wheat flour) brand before it was sold.

Why was it sold? Simply because DCW felt that it did not have the deep pockets to take on the might of ITC or HUL. Brand Captain Cook was reportedly acquired by International Best Foods (IBF) for around Rs 130 crore in the late 1990s. In an interesting turn of events, IBF was acquired by Unilever in a global deal and Captain Cook ended up with HUL in the year 2000. I wonder what they would have got as a price if they had sold the brand to the original promoter in 2000? But that did not happen. HUL decided to deprioritize Captain Cook and spent the energy for the next decade building Annapurna.

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Commodities are the next big frontier in the Indian branding terrain. What are these commodity categories? In simple terms, these are categories where the consumer is not willing to pay a hefty price premium. To operate in these markets, you need to manage your margins very well and take quick calls when commodity prices move up or down.

Regional players are a lot more nimble than national players and hence the need to be close to the market. If commodity brands are to be housed in a large corporate entity with other bigger businesses, there is a need to ensure that the division managing commodity branding is run differently. For instance, Pepsico India runs the snacks and beverages divisions with very different cost and market orientation.

There is good news for commodity players. Unlike developed markets in India, numerous food products are still sold in an unbranded form. Change is coming slowly. Cooking oil, which was largely a commodity category in the 1990s, is slowly and steadily getting into the branded space; Marico’s Saffola is reported to have crossed a sales revenue of Rs 2,000 crore; Fortune, the market leader, is probably much larger. Reliance is keenly looking at this space in its branded Fast Moving Consumer Goods (FMCG) play.

Even in the large atta category brands like ITC’s Aashirwad and Pillsbury have been able to establish a credible presence. Then why is HUL, with its legendary marketing, skills exiting the business, one may wonder. It is not as if HUL does not have in its portfolio products that are in the almost-commodity space. Tea, for one, is a very price-sensitive market with numerous national and regional players but HUL’s Brooke Bond has been able to navigate these waters well. I would like to believe that the tea business is a low-margin business for HUL compared to personal care and home care. Fortunately, HUL and Brooke Bond have a historical connection with the tea industry. In the case of Annapurna, I wonder if that was a missing piece; the ability to manage costs by creating a strong farm-level sourcing arm, something that ITC seems to have done well.

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What next for Annapurna and Captain Cook? I would like to speculate that these two brands will be sold to separate companies who see value in entering the commodity game. Captain Cook salt at one time owned the ‘free flow’ promise and its atta had the claim ‘sone jaise gehu se bana ‘(made with golden wheat)’; both claims still resonate with the 50-plus audience. Annapurna too will have takers since at one time it was a credible competitor to ITC’s Aashirwad and had spent big budgets on both ATL (Above The Line) and BTL (Below The Line) campaigns.

That said, brands that change multiple hands end up losing whatever cache they had to make them successful. So hopefully the next move will be a good one for Captain Cook.

Ambi Parameswaran is a best-selling author, an independent brand coach and founder of brand-building.com; his latest book ‘All The World’s A Stage’ is a personal branding story. Views expressed are personal.