Tuesday, July 6, 2010


The food industry landscape in India is dominated by a few multinational companies are their subsidiaries which have more than 60% of the share of business in the organized sector. Nestle India which is the subsidiary of the Swiss giant Nestle is a dominant player with a range of products that can be the envy of any established company working in the food area. The Maggi noodles which was introduced about 2 decades ago to a population totally alien to this products is to day a house hold product with practically every child hankering after it and no competition has been able to touch the preeminence it enjoys in the Indian market, though adults identify the company more for its Nescafe brand instant soluble coffee. With many competitors nibbling away its market share during recent times, Nestle seems to be looking for diversification for increasing its business volume with its parent concern pitching in with more investments to expand the operations in the country. Here is a take on Nestle's strategic thinking on Indian operations.

"Currently, Nestle India's products are Maggi noodles, Nestle Yoghurt and Kit Kat chocolates. Nestle India Ltd's announcement comes after a previous announcement last week by its parent company that it would be undertaking a $1.4 billion investment in Brazil, Russia and India from 2010 through to 2012, but Waszyk would not divulge on how much of that amount had been spared for Indian investment acquisitions, rather stating that the company was taking measures to counterbalance the effects of high input costs on profitability.
According to Waszyk, the company's chairman and managing director, Nestle India Ltd has its strategies, namely to reduce costs and increase prices according to category, he said in an interview, noting that, whereas the company had increased prices of dairy products, it had not increased prices for products made out of wheat and sugar. Costs have gradually increased with an increase in the prices of milk, sugar and wheat, subsequently resulting in a net profit for the first 2010 quarter, ended March 31st to rise by a slow 2.5% on year to peak at $43.5 million. Thus, according to Waszyk, whereas Nestle India Ltd will seek to grow its sales volume in India via investments and new products launch, it will try maintaining an operating margin by reducing production costs. For more information visit The Indian subsidiary of the Swiss Food Giant is estimated to have a net worth of about Rs 5,150 crore and with the announcement, its chief target is to ensure that India's contribution to global sales, currently at record lows, increases considerably".

What concerns impartial observers is the plan for acquisition of successful Indian firms which can only lead to stifling the competition and raising consumer prices eventually. India presents a paradoxical situation to the multinationals as there are hundreds of traditional foods popular in the country and many of these companies have no clue regarding the expectations of the indigent population vis-a-vis their flavor and taste preferences. Earlier attempts by some large companies to acquire some of the industries dealing with Indian snack products were not successful as many of the local companies are owned by families with third and fourth generation owners unwilling to sell their operations on sentimentality. Major acquisitions like Parle soft drinks by Coco Cola and Uncle Chips by Pepsi were done long ago and it is doubtful whether Nestle's plans are going to succeed this time.

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