After consumer electronics, F&B emerges as a sunrise sector for Japanese majors

India's growing population, higher disposable incomes is what is driving Japanese majors to consider investments here...

Interest by Japanese companies in India's processed foods & beverages (F&B) market is growing as a slowing economy in their home turf prompts players to look at investments abroad.

In the last few months, companies such as Kikkoman, (maker of soya sauce, seasonings, flavourings, etc), Nissin Foods (maker of Top Ramen Noodles),  and brewers such as Suntory are looking to step up their investments in India, say investment bankers in the know.

Besides these players, new names such as Asahi Breweries, also a large player in the alcoholic beverages space in Japan, Calbee Foods, Japan's biggest producer of potato chips and shrimp crackers, Acecook, a prominent Japanese noodle maker, Hanamaruki Foods, a popular Japanese traditional foods maker, Kagome Co, a leading manufacturer of tomato ketchup and juice in Japan and Ezaki Glico, a confectionary maker in Japan,  are all eying India either through joint ventures or acquisitions, investment bankers in the know said.

India's processed foods & beverages market, pegged at Rs 3.85 lakh crore, is growing at 15 to 20 per cent per annum. In the last few years, local as well as international food companies have augmented their presence in the country as higher disposable incomes prompt Indians to change food-eating habits.

"India's consumption story has been relatively stable in the last few years which makes it exciting for Japanese companies to invest here in high-growth areas such as food & beverages," says Anand Ramanathan, associate director, KPMG Advisory.

Kikkoman, Japan's largest domestic producer of soya sauce, for instance, set up an India office last year and has been looking to grow its presence in the country for some time now.

Nissin Foods, an early entrant, which stepped into India way back in the 1990s, is said to be contemplating expanding its F&B presence beyond noodles as the market for processed foods expands in the country. Suntory, meanwhile, has been looking at acquisitions in the alcoholic beverage space in a bid to expand its footprint in India.

Last year, Suntory had acquired a controlling stake in Narang Connect, a subsidiary of Narang Group, to enter the non-alcoholic beverages sector in India.    

F&B interest driven by success in consumer electronics

Merchant bankers say that the interest in processed foods & beverages is also driven partly by the success Japanese companies have tasted in India in consumer electronics. Companies such as Sony, Panasonic, Sharp, Canon and Nikon may be struggling abroad, but have all done well in India as appetite for their products continues to grow despite stiff competition from Korean rivals LG and Samsung.

The rivalry between Korean and Japanese brands can be seen in F&B as well. In the last few years, for instance, Korean snack food giants Lotte and Orion have aggressively expanded their footprint into emerging markets such as India on the back of ethnic products such as Choco-Pie, which is a chocolate covered two-layered cake filled with cream in between.

Lotte, which acquired Parry Confectionary in 2004 to enter India, began domestic production of Choco-Pie in 2010. Orion Choco Pie, in contrast, is imported and distributed in the country. Both brands are priced competitively, available for as low as Rs 15 to Rs 18 for a pack of six.

Experts say that Japanese players will have to be nimble-footed if they have to compete with their Korean rivals for a share of the Indian consumer's wallet.