Small food firms chart big growth plans

Small domestic food companies continue to be bullish about India's consumption story, despite inflation and interest costs eating into discretionary spends.

With packaged foods penetration in India at five per cent, many say there was enough potential to expand the market and investments are the way forward.

Sample this: Mumbai-based Capital Foods, maker of Smith & Jones and Ching's brand of noodles, is looking to launch a range of products from ready-to-cook, ready-to-eat, snacks and beverages. While Ajay Gupta, managing director, Capital Foods, declined to give a definite time frame for the launch, he indicated that the products will be rolled out in the next few months.

 

The scenario was no different with Gurgaon-based LT Foods, which markets the Daawat basmati rice. The firm is looking to roll out a range of products in the ready-to-cook and ready-to-eat space, says Vijay Kumar Arora, managing director of the company. “We have made a start with rice-based snacks such as rice cakes and chips. We are exploring other food segments.”

Mumbai-based ADF will mark it re-entry into the Indian market with he launch of its pickles, chutneys, sauces and pastas range by November. The firm marketed the popular Mother's Recipe brand of pickles a few years ago, which it subsequently offloaded to focus on its international business.

Bimal Thakkar, managing director, ADF, said the time was now ripe for its entry back into the domestic market. “We have been test-marketing a range of Indian pickles and ready-to-cook products for the last one year. We will now roll it out by November in Mumbai and Pune and gradually expand to other parts of the country.”

Thakkar said his company was investing Rs 50 crore in the next three years to push its food range in India. Capital Foods’ Gupta, on the other hand, said the new launches will entail an investment of roughly Rs 100 crore. Kishore Biyani's Future Ventures has a 40 per cent stake in Capital Foods. Arora of LT Foods, however, declined to indicate the investment amount for the company’s new product launches. He, however, indicated it will be a sizable amount, given that the company was looking at a significant play.

Archrival Kohinoor Foods, which markets basmati rice under the same name, has already taken a lead with a range of ready-to-eat, spices & seasonings, frozen foods, sauces and cooking pastes. The firm recently got into a joint venture with US-based spice & seasonings major McCormick, which will now market both its basmati rice and ready-to-eat-and-cook products in India, besides launching its own proprietary products.

Arora said the domestic food space is getting exciting as Indians open up to new food habits. “That is what is driving this interest in the food sector.” “I remain bullish about India's long-term consumption story, though inflation and interest costs appear to be taking the sheen off discretionary spends at the moment.”

India's food inflation has been hovering in the region of 9-10 per cent for a year now, while lending rates have moved up by at least 200 to 250 basis points.