Thursday, February 25, 2010


Liberalization of Indian economy, started in early nineties of last millennium has brought to India many multinational food processing giants from around the globe, most visible being from the US. International leaders in the beverage sector like Pepsi and Coca Cola who made their entry early have been able to capture substantial market in this segment allowing them to expand into other product portfolios like fruit juices, snacks, fast foods, pizza etc. Later came many other American Companies like Yum's India, McDonalds, Domino Pizza and others hotting up the competition.

One of the adverse impacts of foreign investment in the food sector is the marginalizing of many local grown Indian processors as Multi National Companies (MNCs) have much deeper pockets and greater resources to sustain initial losses till the business is firmly established. Most MNCs work on a long time frame work spanning 10-20 years and against such formidable forces native processors can do very little to stave off the inevitable-either close down or sell off. The most celebrated case in the history of Indian food Industry is the great "sell off" by the Thumsup giant Parle to Coca Cola Corporation which entered India when Pepsi was dominating the beverage market. Most recent case is the "sell off" by MTR Foods, the pioneer ethnic food giant to Okla, Norway.

While subduing an Indian player is fairly easy if one has ample funds, what about competition between MNCs to corner bigger chunk of the market?. Yum's India which operates about 72 out lets catering its world famous Kentucky Fried Chicken (KFC), seems to be gearing itself to push out another American player McDonald's to gain upper hand in the Indian market. The big population, increased prosperity amongst middle class consumers, increased eating out activities and greater exposure to western foods seem to be the catalytic factors, causing this stampede. Yum's India currently lags its big U.S. rival McDonalds Corp.which operates 170 outlets in India. Similarly in the Pizza field Yum's India has just 158 Pizza Huts where as its arch rival Domino's Pizza Inc. has 274 stores. How ever this may be a part of history if Yum's plans to expand into a behemoth of 1,000 restaurants in India by 2015 materializes, generating about $1 billion in annual revenue. Probably its record in China where it operates 3500 restaurants gives enough optimism for achieving its goal in India.

Probably heavy competition in Pizza, French Fries, Fried Chicken etc may not have any relevance to Indian catering sector as most of them deal with ethnic foods in which MNCs seem to be least interested at present. Ethnic foods are native to India, very little scientific data is available on their preparation, preservation and quality and no mechanized gadgets of reliable design exist for large scale manufacturers to achieve adequate economy of scale. These factors may be responsible for lack of interest in these foods amongst MNCs. There is some risk in the long term that Indian ethic foods may become extinct if the overwhelming marketing strength of MNCs attract more and more consumers, especially from the younger generation. The health risk for future Indian generation from consuming these foods, rich in calories, fat, sugar and salt cannot be brushed away easily resulting in a society of plumb, over weight, obese and morbid population with a multitude of life threatening health disorders. A wiser course would be for the Indian food industry, GOI and food scientists to raise the image of ethnic foods to bring them on par with the so called modern foods of western origin.


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