Multinationals spice up desi food market

CHENNAI: Rosemary and rasam powder came together in a major deal a few days ago as global spices giant McCormick bought a 26% stake in Kerala-based Eastern Spices. And this is one of the many deals — like MTR Foods-Orkla, United Biscuits-SS Food Industries, Godrej-Hershey — that are creating a buzz in the Indian food products section of the FMCG market.
Despite the deterring diversity of the Indian palate, the sheer size of the market is alluring enough for MNCs to bite into a slice of the pie.
Each deal in this space has been unique. When Orkla bought out MTR Foods in 2007, it decided not to tamper with the brand or its offerings. As far as the consumer is concerned, the brand has remained unchanged. "It takes 20 to 25 years to build a brand that is a household name, so Orkla did not see any point in tampering with the brand or product offering," says Sadanand Maiya, former chairman of MTR Foods. "What they brought in was funds required for upgrading technology and marketing expertise which boosted sales."
United Biscuits — UK-based makers of McVitie's, Hoola Hoops and Jacob's Cream Crackers brands — bought a facility of SS Food Industries (SSFI) that makes biscuits for exports to Africa and West Asia, to launch McVitie's in India. Godrej Hershey's, a JV formed in 2007, between the Hershey Company (USA) and Godrej Group and GHL operates in multiple categories such as confectionery, beverages and grocery items. McCormick entered the Indian market through a JV with another Kerala-based spices company AVT in 1994.
India enjoys 48% in volume and 44% in value share in the global spice trade. "MNCs enter the Indian market through various deals depending on their short and long term goals. While immediate goals could be to boost profits due to robust sales or understanding the Indian market through a successful local player, the long term goal is to introduce their products in the Indian market," says M Vinod Kumar, director of Veda Corporate Advisors.
A McKinsey study said that the market size for the food consumption category in India is expected to grow from $155 billion in 2005 to $344 billion in 2025 at a compound annual growth rate (CAGR) of 4.1%. While KPMG said that the Indian snacks market is worth around $3 billion, with the organised segment taking half the market share, and has an annual growth rate of 15-20%. The unorganised snacks market is worth $1.56 billion, with a growth rate of 7-8% per year.