Food and Retail Sector

December 6, 2019 India INC

Food and Retail Sector

With Indian palate going continental and Indians’ penchant for new products assuming newer dimension, Indian food and retail sector is all poised to grow further. According to experts, food and grocery retailing present the biggest opportunity for growth in India. In fact, organised retail recently registered growth rates of almost 40 per cent over the last three years. It’s further expected to grow to about Rs 35,000 crore in 2005, and close to Rs 70,000 crore in 2010. India also happens to be the world’s second largest producer of food next to China, and offers immense opportunity for large investments. Dairy and food processing, alcoholic beverages and soft drinks are some of the fastest growing segments. Health food is another product which is gaining vast popularity amongst the health conscious Indians. In fact, India registered sales turnover of Rs 140,000 crore annually as at the start of year 2000. And leading the pack are firms like Nestle India, Kellogg’s, Coco-Cola, Pepsi who have made huge impression in the Indian market. Nestle has been among the leading branded players in the country with a broad based products like instant coffee, infant foods, milk products and noodles, it has strengthened its position in chocolates, confectioneries and other semi processed food products too. No doubt, its domestic sales grew by 14.1% to Rs 16.11 bn with exports contributing to 16% of total turnover. Although Kellogg’s entry into India was as late as 1994 with an initial offering of cornflakes, wheat flakes and Basmati rice flakes, it has been able to carve out its own clienteles. According to a report published by the Centre for Monitoring Indian Economy (CMIE) in August 2001, breakfast cereal volumes in the country have increased from 1,090 tonne in 1994-95 to 4,380 tonne in 1999-2000. And Kellogg’s enjoys a substantial 65 per cent share of the market. In fact, the four-fold jump in volumes in five years — in a food category that is not Indian reinforces the fact that Kellogg’s has played a key role in creating this market. The Rs 5,000-crore carbonated soft drinks (CSD) market is another area in which Coco Cola and Pepsi have left a lasting imprint. The affordability strategy of Coca-Cola and Pepsi led to a 10 per cent increase in the size of the beverage market. It further managed to expand the consumer-base from 160 million in 2002 to 240 million in 2004. And giving boost to the sector has been Govt of India, which recently announced FDI to be allowed in the food-retailing sector. To begin with, the government plans to allow up to 26 per cent FDI for the first two years and later increase it to 49 per cent and then to 74 per cent. With the kind of support in the offing and bullish market ahead, the food and retailing sector has more success to taste in days to come.