Multinational Food Companies Target Indian Market
Ratna Bhushan
Economic Times
June 28, 2010

NEW DELHI: India is at the centre of attention of consumer products multinationals such as Unilever, Nestle, Procter & Gamble, GlaxoSmithKline, Kellogg’s and Yum! Foods, who have all recently named the country a critical market at various investor meets as sales have stagnated in traditional markets like the US and Europe.

They are accelerating investments, pushing distribution and fine-tuning strategies, with their sights set on the country’s huge middle-class population.

“With annual per capita income crossing the inflection point of $1,000 and India now the second-fastest growing economy, no consumer company can afford to miss India’s consumption boom,” says Anand Mour, FMCG analyst at broking firm Indiabulls Securities. Frits van Dijk, Nestle SA’s head of Zone Asia, Africa and Oceania, last week told an investors’ conference that successful price point management in India is a key pillar of growth for the world’s largest food company.

He also announced an investment of 1.5 billion Swiss francs ($1.35 billion) in India, Brazil, Russia and China between 2010 and 2012. “Emerging markets such as these and popularly positioned products are accretive to our growth and will enhance topline and bottom lines,” Mr Dijk said in a presentation.

The Rs 5,129-crore Nestle India, which makes Maggi instant noodles and KitKat chocolates, said it reached over 2.2 million Indian customers last year. It plans to set up a new research and development centre in India in 2012.

Yum! Brands Inc, which owns KFC, Pizza Hut and Taco Bell restaurant chains, expects profits from India to reach $100 million by 2015, riding on solid same-store sales growth and expansion.

The Kentucky-based company plans to invest an additional $100-120 million in Indian operations by then, senior vice-president Tim Jerzyk said at an investor meet last week. Niren Chaudhary, India MD of Yum! Restaurants, told ET: “Our goal is to become a 1,000 restaurant company employing at least 50,000 people by 2015. We plan to grow five times in the next five years.”

At a Deutsche Bank Global Consumer Conference on June 15, world’s largest cereal maker Kellogg’s international business head Paul Norman said India was set to become the capital of heart health and diabetes over the next decade. A third of Kellogg’s turnover comes from outside North America, and the company said it would use its brands to build presence in India, France and Mexico.

The Cincinnati-based P&G is targeting one billion new customers by 2015, mostly from India and China. “The bigger picture here is that there are almost seven billion people in the world today and we reach only half of those. As we strive to serve the remainder of the world’s consumers, India becomes an important destination,” said a spokeswoman of the maker of Pantene shampoo, Tide detergent and Pampers diapers.

Paul Polman, global CEO of Unilever, said at an analyst presentation post-2010 first quarter results that the consumer product major’s “focus of disproportionate attention” was India. “There is still much to do in India but we are confident we are doing the right things,” he said.

GlaxoSmithKline Consumer Healthcare, which makes Horlicks and Boost milk-based health drinks, will invest over Rs 270 crore in its Indian arm over the next three years — the fastest growing market for its international division (excluding the US and Europe).

Anand Mour of Indiabulls Securities says that opportunities exist across the pyramid for these consumer firms, from unpenetrated markets to premiumisation opportunities riding on rising aspirations.

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