Premium food brands boom in India

10 December 2012

NEW DELHI: Major retail companies such as Future Group, Godrej and Metro are introducing high-end food brands in India, reflecting the changing tastes of the country's consumers.

According to Technopak, the consultancy, the gourmet food market in India will increase in size from $1.3bn in 2012 to $2.7bn by 2015, a compound annual growth rate of 20%.

"The gourmet retail space has witnessed rapid expansion in the last five years and is expected to grow manifold over the next few years," Pratichee Kapoor, associate vice president at Technopak, told Knowledge at Wharton.

Future Group, the conglomerate, has launched two premium Foodhall stores, in Mumbai and Bangalore, and plans to open ten more in the next two years. At present, some 30% of its customers are actually foreign shoppers residing in India.

"We are also trying to make the consumers aware about subtle differentiators," said Avni Biyani, the concept head of Foodhall. "It may not be right to say that the palate of Indians has changed, but we can safely say that it is evolving."

Godrej, another conglomerate, now has 24 branches in its Nature's Basket chain, each offering 5,000 to 10,000 fresh, gourmet and similar food items. It too is hoping to add further outlets going forward.

"Some stores have done fabulously well from the first quarter onward but on average most stores tend to break even in the seventh to eighth quarter post launch," said Mohit Khattar, managing director of Nature's Basket.

Legal complexities, high real estate prices, importing restrictions and a lack of good storage facilities pose obstacles, as does the "low awareness regarding specialised food", presenting several challenges to "growing the industry manifold", Khattar continued.

Organic Haus, which imports organic products made by over 20 brands from Germany and Austria has invested $3.6m in building four Indian stores, and is looking at opening a fifth in Bangalore.

The firm is considering running "shop-in-shops", launching franchises and introducing an ecommerce platform, as well as adding more lines, such as baby food, snacks, gluten-free lines and milk substitutes.

Metro, the German retailer operating cash and carry outlets in the country, also recently created an international food section hosting 2,000 gourmet items in three of its 12 wholesale branches.

"As the Indian palate is being increasingly exposed to global cuisines, the demand for international and gourmet foods is growing significantly," Rajeev Bakshi, managing director of Metro Cash & Carry India, said.

Data sourced from Knowledge@Wharton; additional content by Warc staff