FMCG giants ready for Indian growth

24 June 2009

MUMBAI: Major consumer packaged goods companies like Hindustan Unilever and PepsiCo are heightening their activity in India, in anticipation of a rapid expansion in the size of the country's FMCG market over the next few years.

Hindustan Unilever, the local unit of the Anglo-Dutch consumer goods giant, is aiming to increase the revenues earned through its food arm to 20,000 crore rupees ($4.1bn; €2.9bn; £2.5bn) in the next ten years.

This figure is only slightly below the company's entire annual turnover in 2008, and is eight times greater than the total food and beverage sales its posted last year, which reached 2,642 crore rupees.

Its biggest-selling beverage brands include Brooke Bond and Lipton, while Knorr and Kissan are among its main processed food products, and Kwality Walls is a leading player in the ice cream category.

Shrijeet Mishra, executive director of Hindustan Unilever's food division, estimates that "processed foods contribute to less than 5% of India's food consumption" at present.

However, he predicted that this sector will increase in value by 44%, to $90 billion by 2012, with the packaged food market growing by 68%, to a net worth of $22bn, over the same period.

Similarly, the FMCG company forecasts that the average per capita level of expenditure on packaged goods will increase by 57%, to $18, in India by this date.

Abheek Singhi, a partner at The Boston Consulting Group, argued that "Indian consumption habits will not change that much over the next ten years."

As such, he encouraged Hindustan Unilever to focus on core products such oils, and "staples like dals and atta," in order to drive growth.

PepsiCo also plans to make a $150m investment to support its Frito-Lay brand in the country, as it seeks to capitalise on the growth of the "salty snacks" market, which is currently worth 3,000 crore rupees a year.

The company has also recently launched a new biscuit brand, called Aliva, in India, which has four different flavours that are tailored to local tastes.

Gautham Mukkavilli, president of PepsiCo India, said the new brand was in development for "a couple of years" and will "create a new category of its own."

ITC, which manufactures products like Fiama di Wills shampoo, Bingo crisps and Sunfeast biscuits, has also invested heavily in the seven years since it entered the market.

It predicts that the food category will expand in value by at least 15% in the short-term, and aims to "grow at a higher rate than the market."

This is according to Chitranjan Dar, coo of its food operations, who added that ITC is "exploring new segments and new product extensions."

Data sourced from Economic Times; additional content by WARC staff