Finance Minister Arun Jaitley's announcement of allowing 100 per cent FDI in the retail of domestic food products in Budget 2016 could see the proliferation of a plethora of branded food products across categories in the shop shelves.
This move will not only incentivise global biggies to make and sell in India, but will also see the emergence of more regional food brands.
HIGHLIGHTS:Union Budget 2016
Making a bowl of dal out of a ready-to-cook pack or having oats may be an urban phenomenon, but rural India is equally savvy when it comes to packaged food. Walk into one of the far-flung villages in rural Maharashtra, where biscuits may be synonymous to Parle G and noodles may sound absolutely alien, but when it comes to consuming namkeens, one will seldom find any takers for loose stuff.
There may be no takers for national brands such as Lays or Bingo, however, local brands such as Euro Chips and Suder Moong Dal, which have a distinct price advantage, work well extremely well here. The people find it hygienic to consume a packaged namkeen.
Similarly, in places in and around Bhimavaram and in parts of East and West Godavari districts of Andhra Pradesh, Meena Bakery, a local brand of biscuits give national brands such as Parle and Britannia stiff competition by virtue of a 15-20 per cent price advantage.
FULL COVERAGE:Union Budget 2016
There indeed is a lot of opportunity for food brands pan India. Even the likes of Ramesh Chauhan (Chairman, Bisleri), who after selling Thums Up and Limca to Coca-Cola India way back in 1993-94, has once again entered the aerated beverages market. The reason he cites for this is that more than 80 per cent of India is still underserved.
"Food and feeding a population of 1.2 billion is the biggest challenge for any Government and this can't be achieved without private sector investment," says Debashish Mukherjee, Head (Consumer and Retail Practice), AT Kearney.
With the Government allowing 100 per cent FDI in the retail of domestic food products Mukherjee expects lot of investment happening in staples and proteins (dairy, poultry, meat etc). "I expect a lot of global capital and technological know-how coming into the country. One will get to see a lot new technology being introduced to serve Indians high quality packaged food."
According to R.S. Sodhi, MD, Amul, this announcement is a huge incentive for the agri-processing industry.
"The will lead to make in rural India initiative and in the long run benefit the farming community."
However, Sodhi's advice to the corporate sector wanting to invest in rural India is to have patience. "This will be a long gestation business and the companies shouldn't expect immediate results and lose patience."