New Delhi: Food and beverage maker PepsiCo India Holdings Pvt. Ltd says it is working on an “affordable” nutritious food product that would help reduce malnutrition while strengthening the company’s business in India’s rural and semi-urban markets.
Social initiative? Sanjeev Chadha. Harikrishna Katragadda / Mint
“The product has to be affordable for the bottom of the pyramid, those who are poor and suffer from malnutrition. So, we have ball-parked a range of Re1 or Rs2,” Sanjeev Chadha, chairman of PepsiCo India, said at the World Economic Forum on Sunday.
Chadha did not specify the nature of the product nor is the price yet final. “It should take another 18-24 months for the product to come out in the market,” he claimed. During her visit to India in September, Indra Nooyi, chairperson and chief executive officer of PepsiCo Inc., had talked about a similar initiative but gave no details.
The initiative is in line with the United Nations’ Millennium Development Goal to eradicate extreme poverty and hunger by 2015. At least 6,000 Indian children below 5 die every day due to malnourishment or lack of basic micronutrients, according to the National Family Health Survey (NFHS-3) conducted between December 2005 and August 2006.
“We are looking to leverage our existing distribution as we are already present at one million outlets across India. We could also look at other business models such as public-private partnerships to sustain its (the product’s) use,” Chadha said. “It is a near break-even proposition. We are aiming (at) profitability in the longer run for only sustaining the initiative.”
PepsiCo, which recently announced a $500 million (Rs2,475 crore) investment in India over the next three years, aims to triple revenue here in the next five years.
Some experts note PepsiCo would have to compete with companies such as Parle Agro Pvt. Ltd and Britannia Industries Ltd, besides other regional players across India that are already selling basic nutrition products mainly as biscuits, for this business.
Pepsi’s product initiative is expected to benefit the company in the longer run in terms of both revenue and brand building. “According to our estimates, the total number of rural households is expected to be around 153 million by 2009-10, and these markets are still not very well penetrated,” said Sumit Chopra, head of consumer markets research and consulting at Data Monitor India.
Rural areas account only for 30-35% of the sales of consumer products in India, he said.
Industry observers say it’s unlikely the company will market the new product under the Frito-Lay portfolio, which includes snacks such as potato chips.
“Creating a brand takes a lot of time,” said Anil Rajpal, vice-president, consumer goods and retail, Technopak Advisors Pvt. Ltd. “If the product is good and priced fairly, it will definitely build more awareness about the company and create brand equity.”