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PepsiCo’s Indian growth scheme must consider localised differences: Analyst

By Kacey Culliney , 02-Jul-2012

PepsiCo is pumping more than 50 new products into India’s dynamic and surging snacks sector but it needs to be sensitive to localised differences to secure stable growth, according to an analyst.

India’s sweet and savoury snacks market pulled in US$1.4bn in 2011 and is forecast to surge at 14% CAGR (compound annual growth rate) between 2011-1016, according to Euromonitor data.

PepsiCo already holds the largest market share in India’s sweet and savoury snacks sector but it has shown continued commitment with more than 50 new product launches set, all at various testing stages to market. The snacks hulk already launched 16 new pack sizes and variants between April and June 2012.

Ildikó Szalai, senior company analyst at Euromonitor International, told BakeryandSnacks.com that firm has shown “increased urgency and aggression in terms of product development and innovation,” in India’s snacks market.

This sector has a “very dynamic growth rate to exploit with an enhanced portfolio,” Szalai said.

However, she detailed that if PepsiCo is to secure solid, increased market traction, it “needs to remain sensitive to localised differences in demand.”

New and local competition

PepsiCo eats up the lion’s share of India’s snacks market – with retail sales at $477.1m in 2010 - and is a considerable way ahead of second placed Haldiram Foods International ($270.7m).

However, second-tier local players, namely Haldiram Foods International, Balaji Wafers and ITC Group, are “aggressively competing” with PepsiCo, Szalai said, particularly in the lower price segment of the snacks market.

These firms are also dedicated to Indian-centric flavours which help differentiate their offerings from established brands, she said, although PepsiCo has followed suit with its lentil/dal-based extruded snacks.

Similarly, new market entrants are also working in direct competition against India’s number one snacks firm, such as confectionery giant Perfetti Van Melle, that entered India in 2011 with a new product line of ready-to-eat (RTE) salted snacks.

However, Szalai said that while competition exists, there is no real threat for PepsiCo, or at least “not in the near future as the scale of their operations in the category is currently way behind PepsiCo.”

Snacks surge

The surging snacks sector is underpinned by a demand for ‘convenience’, Szalai said, fuelled by rising disposable incomes and the habit to frequently snack between meals and at coffee time.

The growth outlook is very positive, she added, due to expected increases in urbanisation, busy schedules, changing eating habits and increasing influence of children in the purchase of packaged food items.

Economy offerings remain popular, she said, as “snacks are usually positioned as everyday food, hence affordability is important to consumers.”

She detailed that the rural market will become increasingly important and “as consumers are becoming more health conscious, niche products like low-fat, sugar-free, low-salt, non-friend or roasted snacks are expected to gain popularity.”

PepsiCo has made clear its plans to tap into this forecast health-trend in the snacks arena, Szalai said, which will prove invaluable should it want to compete with “dynamic local companies.”

“Health and wellness is an overarching trend in the global packaged food market and health credentials of any products are crucial to long-term success,” he said.

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