FDI in food processing to push local sourcing

Also, companies are expected to step up their research and development effort to accommodate local produce in their products

The Budget has given a thumbs-up to domestic food processing, with the proposal to permit 100 per cent foreign direct investment in the marketing of food products made in India.

First mooted by the Union food processing minister, Harsimrat Kaur Badal, it is expected to goad manufacturers to utilise local produce in their products even more. Most food & beverage makers utilise local produce for only some of their products.

For instance, PepsiCo India does contract manufacturing of potatoes in Punjab for its potato chips. It is now stepping up focus in getting processable citrus  fruits from local farmers for its juices under the Tropicana brand. In a recent conversation with this newspaper, D Shivakumar, chairman, PepsiCo India, said the first of  its products using local citrus fruits, called Tropicana Mosambi, had come out of its unit at Nanded in Maharashtra.  “There will be more such products, tailored to local tastes with locally produced fruits,” he’d said. The company had also signed an agreement with the Maharashtra government  to promote citrus fruit farming, beside driving joint investment with partners in the area.

Similarly, rival Coca-Cola, which has been working with farmers in the Chitoor district of Andhra Pradesh to improve the processable variety of totapuri mangoes used in its Maaza mango drink, now proposes to take this initiative to oranges.

The  bottling arm of Coca-Cola recently signed an agreement with the Maharashtra government, with partner Jain Irrigation, to set up an orange juice manufacturing facility with the specific objective of sourcing locally-produced oranges.

Venkatesh Kini, president, Coca-Cola India and South West Asia, had said at the time of the announcement that the endeavour was to expand its 'Make in India' footprint.

And that they were looking to stitch more partnerships for local sourcing, while seeking to expand the portfolio of products. Currently, the company sources mango pulp locally and a small portion of guava and litchi pulp. The plan was to expand all of this, he said.

Parallely, companies are expected to step up their research and development effort to accommodate local produce in their products. This, say experts, could be a game changer for the domestic food processing business, which could have a cascading impact on local farming.

For instance, Coca-Cola took almost a year to develop a formulation that used 10 per cent juice in a fizzy drink. The product was launched at the Make in India week recently. The fruit pulp, said company executives, for the product was sourced locally.