Japanese companies' interest in India's processed foods & beverages (F&B) market is growing, as a slowing economy in their home turf prompts them to look at investments abroad. In the last few months, companies such as Kikkoman (maker of soya sauce, seasonings, flavourings, etc) and Nissin Foods (maker of Top Ramen Noodles) and brewers such as Suntory have been considering stepping up investments in India, say investment bankers in the know.
New companies such as Asahi Breweries, a major player in the Japanese alcoholic beverages space; Calbee Foods, Japan's biggest potato chips and shrimp crackers producer; Acecook, a Japanese noodle maker; Hanamaruki Foods, a popular Japanese traditional foods maker; and Ezaki Glico, a confectionary maker in Japan, are eying a foray into India, either through joint ventures or acquisitions, merchant bankers say.
A few companies have already taken major steps in this direction. Kagome, a leading tomato ketchup and juice manufacturer in Japan, recently entered into a joint venture with agro & branded foods major Ruchi Soya and trading company Mitsui to launch premium tomato purees, sauces, ketchups, etc, by June 2014. Ruchi Soya has also announced a proposal to set up a joint venture company with Toyota Tsusho Corporation and J-Oil Mills, an edible oil maker in Japan, to manufacture edible oils. It had also approved the sale and transfer of its soya processing business to the joint venture, said Dinesh Shahra, Ruchi Soya's managing director.
Sumikazu Umeda, president and chief executive, J-Oil Mills, said, "The main purpose of this investment was to start our first business activity abroad in a promising country such as India. The company feels India is a vast and fast-growing market. It plans to establish itself as a leading company in high-quality value-added edible oils."
Hidenori Nishi, president, Kagome, said, "Kagome Group supplies food and beverage products in about 50 nations. This new venture is a strategic fit for our global expansion plan."India's processed foods & beverages market, pegged at Rs 3.85 lakh crore, is growing at 15-20 per cent a year. In the last few years, domestic, as well as international food companies have augmented their presence in the country, as higher disposable incomes prompt Indians to change food 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 F&B," says Anand Ramanathan, associate director, KPMG Advisory. Kikkoman, for instance, set up an office in India last year and has been considering increasing its presence in the country.
Nissin Foods, which stepped into India in the 90s, is said to be contemplating expanding its F&B presence beyond noodles, as the market for processed foods expands in India.
Suntory, meanwhile, has been looking at acquisitions in the alcoholic beverage space to expand its footprint in India.
Last year, it had acquired controlling stake in Narang Connect, a subsidiary of Narang Group, to enter the non-alcoholic beverages sector in India.
Merchant bankers say the interest in processed foods & beverages is partly driven by the success of Japanese companies in the Indian consumer electronics space.
Though companies such as Sony, Panasonic, Sharp, Canon and Nikon may be struggling abroad, they have fared well in India, despite stiff competition from Korean rivals LG and Samsung. The result?
Not only F&B players, but companies in the cosmetics, male grooming and stationery sectors, too, are making a beeline for India.
Two years ago, Japanese major Kokuyo made a dramatic bid for iconic Indian brand Camlin, taking majority control in the Mumbai-based company for Rs 370 crore.
Japanese male grooming brand Gatsby has just said it would step up investment in India, ten years after it entered the country through the import route.
Katsuya Sogo, managing director and chief executive of Mandom Corporation India, owner of the Gatsby brand, said the company's plans included setting up a production facility in the country in the next three years, adapting its products to local needs, increasing advertising and marketing spends and improving retail reach. "We have appointed actor Varun Dhawan as our brand ambassador. Last year, we set up our India office and merged our zonal distribution companies in the country into one entity called Gardenia Cosmocare," he added.
A FAR EAST MENU
- Kikkoman, Japan's largest producer of soya sauce, and Nissin Foods (pictured), maker of Top Ramen Noodles, are some Japanese F&B companies looking to step up investments in India
- New names such as Calbee Foods, Japan's biggest producer of potato chips and shrimp crackers, and Hanamaruki Foods, a popular Japanese traditional foods maker, eyeing India either through joint ventures or acquisitions
- Japanese firms face stiff competition from Korean companies like Lotte and Orion in India
