The Big Debate that is going on with Indian Retailers is to test stocking of the Processed Foods – Ready to Eat Food. We assign a low probability for significant success of the processed foods business in India (in the organized sector). Achieving scale will be a huge challenge, considering that, within the country, consumption patterns change practically every few hundred kilometers. From north to south (India), the culture, traditions, food habits, etc, are very different, and thus so are consumption patterns (e.g. fish is more popular in the coastal areas, wheat is more popular than rice in the north Indian plain lands).
Therefore, to launch packaged staple foods in India to cater for the entire audience might not materialize. We believe there are three key reasons why processed foods may take a long time to take off as a category.
- Unlike in the developed markets, frozen food is considered stale in India, and the preference is for fresh food.
- Availability of cheap labor in India (for cooking) is another hindrance to packaged foods as a category to become popular.
- Taste preferences, as discussed above, can change dramatically from north to south. To manage to formulate a product equally accepted across the length and breadth of the country is an extremely difficult task, if not impossible. We believe Nestlé’s Maggi noodles are the only creditable exception and, according to some industry experts, it required extensive trials (over 10 years) to perfect its taste (of the largest-selling Masala variant).
We highlight the example of Haldirams (a sweet and snacks chain in India), which is run in different regions in India as a decentralized operation. This likely gives it the option to customize offerings specific to the particular region according to local taste preferences.
This is probably the reason why ready to cook has not really taken off in Indiadespite aggressive launches by leading consumer companies like HUL, ITC and Nestle. The other exception to the norm is snacks – biscuits, chips, fruit juices, etc, which tend to be universally accepted.