Foreign firms seek a bite of India's $90bn food market

When Kellogg launched breakfast cereal in India 14 years ago, it underestimated the stranglehold of traditional cooked breakfasts.

Cartons of cornflakes sat unsold on shop shelves. Those who ventured to buy cereal ate it with hot milk, another ritual as until recently milk was rarely pasteurised in India, and they were put off by the soggy consistency with none of the crackle and pop promised by the advertisements.

Kellogg fought back with a massive educational campaign and introduced products to suit local tastes such as Basmati rice flakes and mango-flavoured cereal for sweet-toothed Indians. It also made small packs for 10 rupees ($0.25) to encourage trial.

"It would be foolhardy for me to say Kellogg has replaced cooked breakfast ... I don't think we can ever hope for that," said Anupam Dutta, managing director of Kellogg India.

"But we've become a part of the consideration set for breakfast in many Indian homes, and that's a tipping point," he said.

Getting a foothold in India's processed foods market, estimated to be worth $90 billion, requires persistence and a willingness to adapt products to suit culinary and cultural preferences, experts say.

Culinary adaptation appears to be key. Pepsi has had a big hit with ethnic salty snacks and also sells "aam panna", or green mango nectar, along with its colas.

Nestle pushed its Milkmaid condensed milk as being ideal for traditional Indian sweets. But it tasted more success with Maggi noodles, a bold step in a nation divided between eaters of rice and "roti" (flat wheat bread).

Maggi soon became a staple in school lunch boxes, helped by the ethnic "masala" (mixed spices) flavour. A few years back, Indian and foreign firms struggled to push packaged foods. But these days it's much easier to break into the market thanks to a younger population, higher incomes, new technologies and a growing middle class, estimated at some 50 million households.

"We have a young population with higher disposable incomes, living away from the large joint families and seeking greater convenience," said Hemant Kalbag, head of consultancy AT Kearney's retail practice.

He estimates processed foods will grow at about 15 per cent annually over the next four years.

Large Indian firms are also muscling their way to the table. Top cigarette maker ITC Ltd is adding to its range of instant ethnic foods and pasta, cookies and salty snacks.

"Increasingly, Indian consumption patterns are mirroring global trends such as a preference for protein and for functional foods," said Pankaj Gupta, head of consumer and retail practice at consultancy Tata Strategic Management Group.

Foreign fast-food chains McDonald's and Domino's Pizza are adding more vegetarian and ethnic options.

McDonald's, which is doubling its outlets in India to nearly 300 this year, does not sell beef products in keeping with the sensitivity of the dominant Hindu population.

Half its menu is vegetarian, with best-sellers like the McAloo Tikki (potato patty) Burger. It also has more sit-down eateries for large Indian families and home delivery, a first. Domino's also has a dine-in option in several locations.

Nimble Indian firms are imitating these fast food giants to attract youngsters, who make up about half of India's billion-plus population.

Jumbo King, a Mumbai-based eatery is mass producing "vada pav", a spiced potato patty in a bun, using modified cookie dough machines and temperature-controlled stoves, a far cry from the hand-assembled snack sold by street hawkers.

Despite the opportunity, challenges remain: Cumbersome tax rules give smaller local firms an edge. An inadequate cold chain and storage facilities result in wastage of nearly 40 per cent of all fresh produce.

Changing lifestyles and rising prosperity are also driving the move to processed foods and Indian taste buds are becoming more adventurous.