Several forces are transforming Indians’ consumption of food and drink products, creating an attractive market for international brands. In particular, factors such as rising incomes, a growing preference for convenience food, a greater willingness to explore new tastes, and the increasing penetration of D2C channels are playing a critical role. However, foreign players eyeing the India opportunity must still overcome a number of challenges to ensure a profitable entry into the shopping baskets and stomachs of the Indian consumer.
The presence of global brands in India goes back on a history spanning more than 150 years. For example, a number of European and American brands that entered India in late 1800’s and early 1900’s includes the Lever Brothers (now Hindustan Unilever), GlaxoSmithKline (now GSK), Nestle, Imperial Tobacco Company (now ITC), Cadbury (now a part of Mondelez) among others.
Some remain their respective category leaders while others failed to attract consumer’s attention. One such name is Danone. This multinational European company marked its entry into the Indian market in 2010 and offered products like flavoured smoothies and yogurts at premium prices. It later realised the merit of having one’s own milk procurement and set up an infrastructure in Punjab. But despite making all the right moves Danone didn’t succeed in India, and left in 2018.
One also remembers the name of Dunkin’ Donuts, a popular American multinational coffee and doughnut company. In 2012, Jubilant Food Works opened its first Dunkin Donuts in India and eventually expanded to 77 stores across the country within a short time. However soon after, their stores went down from 77 to 37. Initially, the concept of doughnuts was welcomed especially by young adults. But unlike Americans, Indians did not prefer doughnuts for breakfast since they were and still are a little biased towards their traditional fare such as paratha, idly, dosa, bhakri, ragi balls, among others.
Then we have our very popular Kellogg’s brand from the US. Kellogg’s tried to enter the Indian market after realising that the market in the US was more or less saturated back in the 90s. While it was a seemingly good business opportunity, Kellogg’s made a few mistakes and misjudged the correct way to advertise their offerings. As a result, the brand did not click with the consumers. Eventually, they repositioned themselves as an evening snacks brand and captured the market, sitting now at a good 60 per cent market share.
Despite these examples right in front, we saw many new international entrants into the Indian market in 2021-22. While India represents an attractive opportunity for imported food and drink products, foreign companies must take heed of the particular challenges of the Indian market if they are to avoid potential falls.
“The overall geopolitical landscape after the pandemic has acted as a catalyst for foreign investors to set up businesses in India, as the case for investment diversification across multiple geographies became stronger”, said Mohit Bhasin, Partner and Head – Economic Development Advisory, KPMG India.
New players wow the market
One of the most influential changes in the behaviour of food consumption that we are coming across is from the ‘K culture’. Thus we see a lot of Korean foods becoming popular in India. Leveraging on this opportunity, South Korea-based confectionery company Orion has invested Rs 200 crore to set up a 17,385-square-metre manufacturing facility for the production of Original ‘Choco-Pie’ cookies locally and the soon-to-be introduced product portfolio in Bhiwadi, Rajasthan as part of its growth drive. The new plant will also cater to local taste preferences and is producing a 100 per cent vegetarian range of Choco Pies.
“Given the annual confectionery market of around $15 billion for a 1.3 billion population, there is a huge scope for a player like us. Orion has partnered with confectionary specialist Mann Ventures for the production of Choco-Pie locally. In the coming months, Orion plans to add more ‘Made in India’ products to its offerings and will be introducing more global offerings to Indian consumers”, said Saurabh Saith, Chief Executive Officer, Orion India.
Another big investment plan which is pushing plant-based trends in India is coming from Japanese startup Next Meats. It has teamed up with an Indian food-tech startup Vegan Meat India to launch meat-free alternatives. The company, which is listed in the American Stock market, is planning to expand its product assortment by introducing plant-based cakes, vegan cheese, tuna, egg and soya milk especially for their consumers in India in the price range of Rs 250- 400. The products will have their online retail presence in five cities including Delhi/NCR, Bangalore, Hyderabad, Pune and Mumbai.
“As our modern lives have become more convenient, it has taken an inconvenient toll on our environment. Thinking things through from the perspective of our planet’s well-being, led to our discovery of plant-based meats. Now we know we can’t shift our global eating culture of meat-based diets overnight. But if we focus on delivering the best tasting plant-based products, we believe it will lead us to a future where people will make a choice that is better for them and our planet. India is the biggest consumer market in the world. Our products are high in protein, low in saturated fats with no added flavors and cholesterol. These items are just apt for people suffering from diabetes and blood pressure. We are excited to cater our Indian consumers,” said Ryo Shirai, Founder, Next Meats.
Up next is the Dutch food production system Tempeh that has been recently launched in India by Netherlands-based Schouten Food. The company is introducing an innovative way to produce food in a sustainable and healthy way using protein-rich Tempeh that is locally produced in high-tech small fermentation units (SFU). The company hopes to have at least 100 SFUs in operation in India by 2025.
“Tempeh is an ancient vegetable protein source based on soy and made by fermenting soybeans. The process occurs through the influence of a fungus (Rhizopus oligosporus), which binds the soybeans into a whole. It is completely plant-based, contains about 22 grams of protein per 100 grams and is rich in B vitamins, iron, minerals and fibre. Tempeh can also be made with other types of beans or chickpeas. We hope to eventually produce a total of 10,000 tonnes of Tempeh a year in order to give the Indian diet a healthy and sustainable protein boost”, said Henk Schouten, Chief Executive Officer, Schouten Food.
Then there is the entry of the Australian food group, Simplot Australia, with the launch of its Leggo’s pasta and pizza sauces in India, last year. Leggo’s joins a growing band of Australian food producers that are marketing brands in India, including via e-commerce platforms.
E-commerce is proving an effective route to market for Australian food brands in India. Exporters say it allows them to test markets and then branch out to offline retail. To date, 35 Australian exporters have used the ‘Australian Store’ on Amazon India to enter and test the market. Additionally, Austrade is helping Australian businesses expand into India through the Australia India Business Exchange (AIBX) programme.
“India is obviously a developing market. Consumers in India are willing to try new and different things. We investigated the market and sensed the timing was right to give it a try. If we went early, we could build our brand and give it some heritage before global competitors arrived. Also, lockdowns in India accelerated trends towards home-cooking, so demand rapidly increased in early 2020. Austrade fast-tracked our entry into India by making vital connections to reliable distributors”, said David Malone, International Sales and Marketing Manager, Simplot Australia.
Adding to this list is the entry of two new international food service brands that have stepped into the market in 2022- Figaro’s Pizza and Popeye’s. While American QSR restaurant chain serving Italian cuisine, Figaro’s Pizza has announced their expansion in the Indian market in association with FranGlobal, Jubilant Foodworks has launched the US fried chicken brand Popeyes in India with the first restaurant opening in Bengaluru.
“In the next four years, we plan to open 250 stores across major cities through exclusive development franchise partners. Our team will be working with Figaro’s team for menu and product development. We have already started working with real estate developers for initial key locations”, said Venus Barak, Chief Executive Officer, FranGlobal.
Sharing his views on the various strategies to be considered by the foreign players before entering the Indian market, Shubh Karman Singh, an angel investor, said “For a successful entry in the Indian market, international food brands should focus on getting three key pieces of their strategy right – target consumer profile, pricing strategy and market entry channel. The decision to enter the market organically versus forming local partnerships is key. While organic entry may translate to better control over the brand and product as well as higher margins, tying up with a local partner can provide access to local know-how to ease the market entry and help mitigate unproductive and costly mistakes.”
Choosing the right partner is one among the many factors that the international brands must consider before entering a new territory. Further, the foreign brands should carefully juggle between brand loyalty and brand awareness while launching their products. Whether it’s the confectionary of Cadbury’s or Horlicks’, these products have won over the hearts of generations of Indian consumers. But recent surveys indicate that the jump in brand awareness has not been matched by a corresponding leap in brand loyalty. Thus focusing on key aspects of Indian life i.e. traditional and contemporary, will go a long way to securing sustainable growth for the international players.
“Products should have some differentiation, ’Me-Too’ products enter into a price war. Proper positioning and identifying the target group is very important. The 140 crore population can be segmented based on income levels, geographic locations etc, and placement of products in Modern Retails, General Trade, E-commerce should be worked out”, concluded Nilesh Lele, President, Chamber for Advancement of Small & Medium Businesses.
Ila Kaushik