The food processing and manufacturing sector may attract at least Rs 14,000 crore investment in the next two years, according to Antonio H. Waszyk, chairman and managing director, Nestle India Ltd, and chairman of the food processing committee of industry lobby Federation of Indian Chamber of Commerce and Industry or Ficci.
Processed food is a $40 billion market in India, accounting for just 12% of the overall $330 billion food market. It’s expected to swell to $300 billion or 35% of the food market by 2020, a Ficci-Boston Consulting Group report has said. Growth prospects have drawn investments from international and domestic companies.
Earlier this month, Coca-Cola India Pvt. Ltd announced a $2 billion investment in India over the next five years. In October, Ferrero Group opened a new plant in Baramati, some 100 km from Pune in Maharashtra, to manufacture Kinder Joy eggs and Tic Tac mints, using locally sourced raw materials and offering employment opportunities to 1,300 people.
Earlier this year, Nestle India announced a Rs 1,700 crore investment in India over the next two years to double its manufacturing capacity.
In an interview on Wednesday, Waszyk spoke about growth and opportunities in India. Edited excerpts:
Is it possible for the industry to sustain 20% growth projections for the next 10 years?
In general, I think it is possible; yes. If you look at food processing companies in India, they have been doing well for quite sometime. The average growth for the food industry has been 20% for many, many years. Some categories are doing even better than that. This is the pace and I don’t see a change in that in the near future.
The companies are investing. Those who have R&D (research and development) and technology expertise will be the winners in this journey. The more relevant point is that this industry has become very attractive for other companies. You have seen quite a number of food companies coming to India.
Look at chocolate — few years ago you had basic Cadbury and Nestle. Today, Ferrero and Mars are very active here. All of this is very beneficial for the consumer as he has variety of choices and can fulfil his aspirations which is growing.
What has changed in the food processing industry to attract such large investments?
The market is in its infancy and it is the beginning of a journey. There is so much to do. The processed food market is not about going after a market share. That’s a very short-term mentality. It’s really about baking a new cake.
There is an opportunity for everyone who knows flavour, has good taste and can attract appetite. Anyone who comes here and has that will succeed, because consumers will pay if they see value.
Which are the categories that have higher growth potential?
There are plenty of categories where there is just one player which has a very high market share and therefore will attract other players. It’s like what happened with personal care many years ago. There was one toothpaste player; now there are two or three.
There was one Maggi Noodles, now there are two or three. Like chocolate… This is a natural movement.
How does this benefit the company?
I keep repeating, the benefit at the end of the day is for the consumer. For the existing company, competition which comes with differentiation, good communication, and quality helps the category due to better penetration and more credibility.
When very respectful competitors like Danone, Ferrero or Mars come to the market, they bring their technology, competencies, quality, guarantee of food safety and these help the whole food processing category.
From Nestle’s perspective, we have to work hard to maintain the leadership of where we are. From the consumer and industry perspective, it is positive.
Where do you see growth -- in urban or rural India? What is driving the consumption story in India?
There are so many people who will come into the consumption cycle. When we look at the consumer, we always talk of a pyramid. In Nestle, we don’t talk of a pyramid -- we talk of a diamond. In India, the base will start to shrink, the people are moving one step up at a time. The shape now is a diamond.
Where is the growth coming from?
The growth will come from higher penetration — which is selling the same product that we have now to new consumers. It is going to come from new categories and multi-tiers—top, mainstream, low tiers. The growth will come from new categories that will cater to these different tiers.
The global Indians who go abroad and see products want them here. Most importantly, the frequency of consumption of some of the products is still very very low, giving us a huge opportunity.