Western companies eyeing India's $90 billion processed food market

taking on another time-honored tradition, while French rival Danone, along with Yakult Honsha, launched yogurt probiotic drinks.

A few years back, Indian and foreign firms struggled to push packaged foods, but these days it is 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 percent 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. “So companies can choose to go after the mass market or focus on niche segments which are also viable now,” he said.

Foreign fast-food chains McDonald’s and Domino’s Pizza are addding 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. “We wanted to give the vada pav a modern look,” said Dheeraj Gupta, head of Jumbo King, which also has a whole-wheat option. “Our inspiration is clearly McDonald’s and Subway,” he said.

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 percent of all fresh produce. “We need stronger legislation on food safety, more robust supply chains and improvements in the cold chain,” Kalbag said. The government as well as modern retailers are addressing these issues, with new laws on packaging and labeling, as well as greater investments in the supply chain. Changing lifestyles and rising prosperity are also driving the move to processed foods and Indian taste buds are becoming more adventurous. So products such as Unilever’s Make a Meal in a range of flavors including one with a Chinese bent are filling supermarket trolleys alongside traditional favorites such as packages of tender coconut water and spiced buttermilk. “The market’s constantly evolving and creating demand for products that you never thought would have had a chance,” said Kellogg’s Dutta.