Can I have more choice please? Significant and relevant brand investment is what India needs right now

India is the world's largest producer of milk (nearly 100 million tonnes per annum), yet the biggest dairy company in the country, Gujarat Co-operative Milk Marketing Federation (GCMMF), has sales of merely Rs 2,894 crore. It is the second-largest producer of rice; shockingly, there is not even a single national brand in the category. A miniscule under 2 per cent of the entire fruit and vegetables produced in the country is processed here; globally the business is already worth over $40 billion (Rs 1,76,000 crore). Well, we can go on and on, but surely you get the point?

"Food calls for long-term investments, more so in India's highly fragmented market. We have no real national player in foods," says Nikhil Vora, Vice President (Research) at Mumbai-based brokerage firm, SSKI Securities. Vora's telling remark is in a way an affront not to the market's potential, but more to the existing marketers' capabilities. A recent acnielsen Global Services study on 89 food and beverage (F&B) categories across 59 countries, titled What's Hot Around The Globe: Insights On Growth in Food & Beverages 2004, is therefore an eye-opener, a wake-up call for F&B marketers in India. For even though it puts growth in the Rs 22,513-crore Indian F&B market at 5.5 per cent, a good 1.5 per cent higher than the global average, there's hardly any reason to celebrate.

Averages conceal more than they reveal, and the real story is in comparing like-with-like. Take non-alcoholic beverages, a classification that includes bottled water, tea, coffee, and carbonated and non-carbonated soft drinks. The category grew by nearly 8 per cent in Asia-Pacific and emerging markets, 6 per cent in Latin America, but just by a per cent in India, much lower than even the global average of 5 per cent. Even the much-touted bottled water category saw growth tumble by 1.5 per cent in India, even while it grew by 6 per cent globally.

What explains India ducking the global, even Asia-Pacific, growth trend in categories such as tea, bottled water, even chocolates, chewing and bubble gum? "Creating new food categories and getting them to levels of critical mass require deep pockets, and significant and relevant brand investments," says Utpal Sengupta, President of food major Agro Tech Foods. Well, he may have hit the nail on the head, for very few marketers in India have had the courage or insight to stay the course on food and not chicken out at the first instance of market stress. And that includes some of the marquee names in the Indian food market, Hindustan Lever Limited (HLL), Nestle India and Kellogg's.

Bottom-line sensitive HLL withdrew resources from the atta business when the going got tough two to three years ago, when what was needed was a sharper value addition at the product level and resources for aggressive marketing-led brand differentiation. Nestle too exited the bottled water business a year ago, unable to cope with what it termed 'unprofitable price-points'. Ditto for Kellogg's India which withdrew from the Rs 4,000-crore (organised plus unorganised) biscuit market, although its nutrition-based product was very different from other products. "Look at HLL. Its sales from food has more than halved now compared to a few years ago," adds SSKI's Vora.

It is not all gloom though, what with players like ITC Foods making a concerted play in the market, right from staples such as atta and rice, to value-added ready-to-eat meals and biscuits. The company seems to be willing to fund the business for the long term, and has already met with some success, cornering almost 5 per cent of the biscuit market with its total food business bringing in around Rs 700 crore. The 11-million- tonne market for edible oils and fat is also a picture of hope, with a very healthy growth of 18 per cent for packaged edible/cooking oils.

With just about 7 per cent of the total edible oils and fat market being packaged at the moment, there is huge potential for growth. No wonder then, the segment is attracting players, with Bungee Foods recently evincing interest in acquiring edible oil major Ruchi Soya. The snack food category of biscuits, chips, and the like is also on a hugely positive trajectory with very strong double-digit growth. Essentially, competition and the concomitant cost-efficiencies have helped narrow the price difference between packaged branded and loose offerings, thereby enabling consumers to upgrade. Out of the Rs 4,000-crore biscuit market, almost three-fourths is already accounted for by organised players such as Britannia, Surya Foods, Parle and ITC Foods (the market is growing at 15 per cent plus).

The study also points to the convergence of Indian and global trends regarding health, convenience and private labels (regional brands in India) in foods. With ready-to-drink non-carbonated beverages, essentially juices, growing at a scorching 29 per cent in India, it is little wonder that the category is about to witness heightened activity very soon. "We're looking at launching juices, what with good availability of fresh foods in India," says Shekhar Agarwal, Director of the Rs 300-crore biscuit company Surya Foods.

And Surya intends doing a Priya Gold in juices, what with Agarwal's promise of re-defining the existing value equation (Rs 15 for 200 ml) in the market. Dabur India and PepsiCo India, who dominate the market currently with their Real and Tropicana brands respectively, better watch out. Even the hugely successful personal products company, the Chennai-based CavinKare is planning a major foray in foods with spices, pickles, and ready-to-eat meals.

Though the absence of infrastructure (such as cold chains), processing capacity for fresh produce, low purchasing power and ingrained food habits are significant barriers to growth, marketers would do well to study other favourable societal trends as well. For instance, the grain on food consumption in India, at least with the 100 million-odd affluent middle class, is fast moving away from merely private to the public domain. Umpteen formats of eating out, fast-food chains, coffee/tea bars, and beverage vending machines are virtually exploding across Indian cities big and small. This is an epochal change that many a marketer has ignored at his own peril, and it surely impacts consumption of tea, atta, rice, coffee and just about anything else at home. Hot soups in vending machines is just one of the few examples of innovation that one has seen from marketers intent on catching the tail of this trend. We need hundreds if the Indian F&B market were to get to healthier hues.

COLUMN/SUJIT DAS MUNSHI The Share-Of-Appetite Concept

Share-of-mouth seems an outdated concept; a more apt concept would probably be share-of-appetite. Not that the Indian appetite is insatiable, but it certainly isn't inflexible either. A more illuminating view attacks fundamental preconceptions like "Indians are unlikely to eat anything other than traditional food on a regular basis". This heralds the birth of an Indian palette that is infinitely adaptable. The Indian brand F&B market grew by over 5 per cent. This outpaces the global average of 4 per cent. If one looks specifically at the categories present in India that can be compared with what is available across the globe, it is clearly a case of aggregates camouflaging the scorching growth rates experienced by individual pro-duct categories. In line with global trends, the need for convenience and a greater desire for healthier product alternatives is precipitating growth in categories like convenience foods, impulse foods and non-carbonated soft drinks. External developments and environmental factors too have a large part to play. For instance, in light of the controversy that affected chocolate sales, consumers are likely to have compensated for them with other impulse foods. Likewise, for bottled water sales. Demographically, 'pester-power' of kids too has spurred sales of impulse foods. Categories like biscuits, snacks and chips have witnessed robust double-digit growth rates. The trend towards out-of-home consumption has arrived in India. Even categories like tea and coffee, though appearing to plateau in terms of sales through retail channels, are reaching many more consumers through a focus on the out-of-home market for beverages. The apparent paradox in consumers' motivations for purchasing impulse foods despite a greater desire for 'healthier' alternatives is because in the Indian context, 'cleanliness and hygiene' too tend to denote healthier options. Impulse foods with superior packaging technology satisfy these criteria. Confectionery, another impulse food, appears to be indicating a slowdown. As traditionally large segments like hard-boiled candies make way for more innovative product formulations at similar price points, their sheer size tends to depress aggregate growth. These newer products are growing positively and over time may acquire the critical mass needed to carry the category into positive territory. The dynamics of the confectionery category serve as a good analogy for the entire retail branded F&B market in India. As marketers and retail formats innovate, the inflection point for faster growth will occur once these investments coincide with rapidly changing consumer attitudes. The Global View Three key trends can be seen: Continued focus on health: Categories that represented healthy staples as well as healthier product alternatives showed high growth. One of the most popular weight loss approaches is the high protein-low carbohydrate diet. Its popularity has been significant in both the strong growth of meat, fish and eggs, and the slower growth of non-sweet carbohydrates. Need for convenience: The growth of "refrigerated complete meals" could be directly related to the ease with which the busy consumer can prepare such meals. Growing impact of private label: Where private label was already present, growth was driven by the development of that presence; where private label was relatively new, growth was driven by the expansion into new areas. The message to both manufacturers and retailers is clear. There is a definitive need to acknowledge and address the consumer's requirement for healthy and convenient products. However, since consumers are willing to purchase both private label and branded products, finding healthy products that are both convenient and provide value is the true challenge. Sujit Das Munshi is Executive Director, ACNielsen South Asia