India spices up the performance of global food, beverage companies PRASAD SANGAMESHWARAN
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By 2018, food and beverage industry likely to touch $66.3 billion In 1993, the consumption of aerated beverages in India was a meagre three servings, per person, per annum. Cut to 2013, industry estimates cite that Indians have a per capita consumption of 14 servings. While that’s small when you compare the global average of 94 servings, India, because of the sheer weight of its population, is a huge force to reckon with for the world’s leading food and beverage corporations. Despite its low per capita consumption of aerated beverages, India figures high on the priority of leading global beverage corporations PepsiCo and Coca-Cola. For example, India is now the seventh largest market for Coca-Cola globally from practically nothing in 1993 – Coca-Cola re-entered the Indian market only 20 years ago, after it left it in 1977. And the country is also delivering the numbers where it matters. For instance, when Coca-Cola recently announced its third quarter results for 2013, it reported a spike of 22 per cent in volumes of Coca-Cola in India. A company statement said that volumes have been growing continuously over the last 29 quarters with the growth in double digits in 19 of them. But to be sure, the progress has not been without its shares of setbacks. For instance, a McKinsey article on ‘How MNCs can win in India’ highlights the fact that “For multinationals, the key to reaching the next level will be learning to do business the Indian way, rather than simply imposing global business models and practices on the local market”. BIG CHALLENGES
Citing the example of a leading beverage company, the article points out that this company “entered India with a typical global business model — sole ownership of distribution, an approach that raised costs and dampened market penetration. The company’s managers quickly identified two other big challenges: India’s fragmented market demanded multiple-channel handoffs, and labour laws made organised distribution operations very expensive. In response, the company contracted out distribution to entrepreneurs, cutting costs and raising market penetration”. Probably why, when Kraft Foods, now Mondelez took over the operations of Cadbury in India, it chose to not reinvent the wheel and decided to push the already well established Cadbury’s range of products in India rather than rides on back of their portfolio and launch its own portfolio. Though Mondelez has since launched its own products such as Oreo biscuits and Tang beverages, the new introductions have not come at the cost of the existing bestsellers such as Cadbury’s Dairy Milk. That’s a mistake that even MNCs such as Hindustan Unilever committed in the past when it took over the range of Kwality ice-creams but soon replaced it with its own international brands. The business went through tough times, but is now on a comeback trail. However, while food companies have been reporting handsome growth in India, growth in the recent past has been sluggish primarily due to rising competition, slower consumer spending and increasing competition. Companies such as Nestle that grew its topline from Rs 2,600 crore in 2005 to over Rs 8,500 crore in 2012 in India believe in the long-term potential of the Indian market despite seeing a 4-5 per cent decline in domestic volumes in recent times. That’s because by some industry projections, by 2018, India’s food and beverage industry is expected to grow at a rate of 18 per cent to touch $66.3 billion, up from $40.3 billion at present. No wonder the world’s largest food and beverage companies are all looking at India with aggressive plans. But consultants feel that MNCs still have some way to go in India. email@example.com...
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