Despite Nestle's woes, food companies continue to bet on India

Nestle's tussle with India's food regulator does not seem to have dented the confidence of multi-national firms in India's lucrative packaged food market. American food major Kellogg, the world's largest cereal maker, on Monday announced it would set up a research & development (R&D) centre and a manufacturing facility in India - its third in the country.

This is the second major announcement by a multinational food company after American chocolate maker Mars International's announcement in March this year that it would set up its first chocolate factory in India at Pune, entailing an investment of Rs 1,000 crore.

While Kellogg did not indicate how much it was looking to invest in its third plant and R&D facility in the country, industry estimates peg it at around Rs 500 crore. Kellogg's second manufacturing plant in Andhra Pradesh (at Sri City) was set up at an investment of Rs 360 crore. The R&D facility could take up another Rs 150-200 crore, say sources.

Over the past three years, foreign direct investment into domestic food processing has been consistently above the Rs 2,000-crore-mark, pointing to the growing investor and corporate interest in the sector. In 2013-14, investments crossed Rs 25,000 crore into the sector, according to data sourced from the Department of Industrial Policy & Promotion.

Not only international majors, domestic food companies, too, continue to bet on packaged foods. ITC chairman Y C Deveshwar had recently said his firm would get into the dairy space soon, a segment where it has been running pilots for a while now. Varun Berry, managing director of rival Britannia, has hinted it will rush its dairy plans and strengthen presence in biscuits, both growing categories in the country.

Siraj Chaudhry, chairman, Cargill India, part of US food and agri major Cargill Inc, says India remains a long-term bet for most food companies, given the potential it has. "Economic growth results in increased consumption of packaged foods. And with penetration (of packaged foods) on the lower side, this has scope to grow. In that sense, India is critical for most players.” Cargill had announced its largest investment in India to date - Rs 600-crore corn milling plant near Bengaluru - which will become operational this October. The announcement was made last year, indicating Cargill's growing involvement with India, a market where it started operations in 1987.

It is only in the past few years that Cargill has been rapidly ramping up its food play with a series of acquisitions, notably in branded edible oils.

Syndey-based food and beverages company Flavor and Life (FAL), also announced its intention to enter the Indian market with branded coconut water under the name Coco Joy, juices, vitamin water, and nutrition bars. Cricketer Vivian Richards, Coco Joy's global brand ambassador, was in Mumbai for the launch.

India's packaged or processed food market accounts for 30-32 per cent of the country's total food market - the world's sixth-largest - which is slated to touch $482 billion (about Rs 30 lakh crore) by 2020. It is currently pegged at $250 billion (about Rs 15 lakh crore).