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July 3, 2000

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India a good market for food: study

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Nitish S Rele

A new study shows that size and diversity make India an attractive market for nearly every major food, beverage and agribusiness company.

The study, 'The Sub-Continent in Transition: A strategic assessment of food, beverage, and agribusiness opportunities in India to 2010,' examines the subtleties of India's food markets.

Conducted by PROMAR International, it provides insight into the nation's infrastructure, government policy and consumer behaviour that form the basis for evaluating potential investment.

"We identify a list of challenges and opportunities in the Indian market (including things such as infrastructure and government influence)... to define a set of target market segments for investment in the food and agriculture industries," a senior analyst at PROMAR International, Tara Smith, told rediff.com

As an example, the PROMAR study considers packaged milk to be an area of modest opportunity in the Indian basic foods markets based on large market size, significant market growth, several infrastructure and government bottlenecks. "We outline consumer types in the Indian market to help companies define the target consumers for specific products," says Smith.

For American companies hoping to make headway in India, the results of the study are mixed. Market entry has typically been a matter of evolution rather than revolution for American firms trying to enter the Indian market.

"For example, Kellogg's entered the Indian market after liberalization in the 1990s. The first challenge the company faced was to increase overall breakfast cereal consumption in India, where cereal was not a common breakfast food. Heavy advertising helped to grow the breakfast cereal market from 1000 metric tonnes to 3000 MT per annum." Next, the company had to adapt its flavours to Indian tastes with the Mazza line of products.

The study finds that despite all the hurdles that it overcame, Kellogg's products are still priced more than 25 per cent above its primary competitor. "So while Kellogg's has ushered in a shift in Indian breakfast habits and adapted its line of cereal flavours to meet the Indian palate, the price of the product still restricts consumption to urban centres and affluent households," says Smith.

Located in Virginia, PROMAR International specializes in strategy development for companies throughout the food value chain. Its work includes custom projects to assess markets, develop entry/expansion strategies, monitor and evaluate trends, and provide M&A guidance. For more information, check www.promarinternational.com.

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