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Businesses need to set themselves clear aims and objectives if they are going to succeed. The Kellogg Company is the world’s leading producer of breakfast cereals and convenience foods, such as cereal bars, and aims to maintain that position.

In 2006, Kellogg had total worldwide sales of almost $11 billion [...]]]> Introduction

Businesses need to set themselves clear aims and objectives if they are going to succeed. The Kellogg Company is the world’s leading producer of breakfast cereals and convenience foods, such as cereal bars, and aims to maintain that position.

In 2006, Kellogg had total worldwide sales of almost $11 billion (£5.5 billion). In 2007, it was Britain’s biggest selling grocery brand, with sales of more than £550 million.

Product lines include ready-to-eat cereals (i.e. not hot cereals like porridge) and nutritious snacks, such as cereal bars. Kellogg’s brands are household names around the world and include Rice Krispies, Special K and Nutri-Grain, whilst some of its brand characters, like Snap, Crackle and Pop, are amongst the most well-known in the world.

Kellogg has achieved this position, not only through great brands and great brand value, but through a strong commitment to corporate social responsibility. This means that all of Kellogg’s business aims are set within a particular context or set of ideals. Central to this is Kellogg’s passion for the business, the brands and the food, demonstrated through the promotion of healthy living.

The market

The company divides its market into six key segments. Kellogg’s Corn Flakes has been on breakfast tables for over 100 years and represents the ‘Tasty Start’ cereals that people eat to start their day. Other segments include ‘Simply Wholesome’ products that are good for you, such as Kashi Muesli, ‘Shape Management’ products, such as Special K and ‘Inner Health’ lines, such as All-Bran. Children will be most familiar with the ‘Kid Preferred’ brands, such as Frosties, whilst ‘Mum Approved’ brands like Raisin Wheats are recognised by parents as being good for their children.

Each brand has to hold its own in a competitive market. Brand managers monitor the success of brands in terms of market share, growth and performance against the competition.

Key decisions have to be made about the future of any brand that is not succeeding.

This case study is about Nutri-Grain. It shows how Kellogg recognised there was a problem with the brand and used business tools to reach a solution. The overall aim was to re-launch the brand and return it to growth in its market.

The product life cycle

Each product has its own life cycle. It will be ‘born’, it will ‘develop’, it will ‘grow old’ and, eventually, it will ‘die’. Some products, like Kellogg’s Corn Flakes, have retained their market position for a long time. Others may have their success undermined by falling market share or by competitors.

The product life cycle shows how sales of a product change over time.

The five typical stages of the life cycle are shown on a graph. However, perhaps the most important stage of a product life cycle happens before this graph starts, namely the research and development (R&D) stage. Here the company designs a product to meet a need in the market. The costs of market research – to identify a gap in the market and of product development to ensure that the product meets the needs of that gap – are called ‘sunk’ or start-up costs.

Nutri-Grain was originally designed to meet the needs of busy people who had missed breakfast. It aimed to provide a healthy cereal breakfast in a portable and convenient format.

1. Launch – Many products do well when they are first brought out and Nutri-Grain was no exception. From launch (the first stage on the diagram) in 1997 it was immediately successful, gaining almost 50% share of the growing cereal bar market in just two years.

2. Growth – Nutri-Grain’s sales steadily increased as the product was promoted and became well known. It maintained growth in sales until 2002 through expanding the original product with new developments of flavour and format. This is good for the business, as it does not have to spend money on new machines or equipment for production. The market position of Nutri-Grain also subtly changed from a ‘missed breakfast’ product to an ‘all-day’ healthy snack.

3. Maturity - Successful products attract other competitor businesses to start selling similar products. This indicates the third stage of the life cycle – maturity. This is the time of maximum profitability, when profits can be used to continue to build the brand. However, competitor brands from both Kellogg itself (e.g. All Bran bars) and other manufacturers (e.g. Alpen bars) offered the same benefits and this slowed down sales and chipped away at Nutri-Grain’s market position. Kellogg continued to support the development of the brand but some products (such as Minis and Twists), struggled in a crowded market. Although Elevenses continued to succeed, this was not enough to offset the overall sales decline.

Not all products follow these stages precisely and time periods for each stage will vary widely. Growth, for example, may take place over a few months or, as in the case of Nutri-Grain, over several years.

4. Saturation- This is the fourth stage of the life cycle and the point when the market is ‘full’. Most people have the product and there are other, better or cheaper competitor products. This is called market saturation and is when sales start to fall. By mid-2004 Nutri-Grain found its sales declining whilst the market continued to grow at a rate of 15%.

5. Decline – Clearly, at this point, Kellogg had to make a key business decision. Sales were falling, the product was in decline and losing its position. Should Kellogg let the product ‘die’, i.e. withdraw it from the market, or should it try to extend its life?

Strategic use of the product life cycle

When a company recognises that a product has gone into decline or is not performing as well as it should, it has to decide what to do. The decision needs to be made within the context of the overall aims of the business.

Strategically, Kellogg had a strong position in the market for both healthy foods and convenience foods. Nutri-Grain fitted well with its main aims and objectives and therefore was a product and a brand worth rescuing.

Kellogg’s aims included the development of great brands, great brand value and the promotion of healthy living.

Kellogg decided to try to extend the life of the product rather than withdraw it from the market. This meant developing an extension strategy for the product. Ansoff’s matrix is a tool that helps analyse which strategy is appropriate. It shows both market-orientated and product-orientated possibilities.

Extending the Nutri-Grain cycle – identifying the problem

Kellogg had to decide whether the problem with Nutri-Grain was the market, the product or both. The market had grown by over 15% and competitors’ market share had increased whilst Nutri-Grain sales in 2003 had declined. The market in terms of customer tastes had also changed – more people missed breakfast and therefore there was an increased need for such a snack product.

Extension strategies

The choice of extension strategy indicated by the matrix was either product development or diversification. Diversification carries much higher costs and risks.

Kellogg decided that it needed to focus on changing the product to meet the changing market needs.

Research showed that there were several issues to address:

1. The brand message was not strong enough in the face of competition. Consumers were not impressed enough by the product to choose it over competitors.
2. Some of the other Kellogg products (e.g. Minis) had taken the focus away from the core business.

1. The core products of Nutri-Grain Soft Bake and Elevenses between them represented over 80% of sales but received a small proportion of advertising and promotion budgets.
2. Those sales that were taking place were being driven by promotional pricing (i.e discounted pricing) rather than the underlying strength of the brand.

Implementing the extension strategy for Nutri-Grain

Having recognised the problems, Kellogg then developed solutions to re-brand and re-launch the product in 2005.

Fundamental to the re-launch was the renewal of the brand image.

Kellogg looked at the core features that made the brand different and modelled the new brand image on these. Nutri-Grain is unique as it is the only product of this kind that is baked. This provided two benefits:

• the healthy grains were soft rather than gritty
• the eating experience is closer to the more indulgent foods that people could be eating (cakes and biscuits, for example).

The unique selling point, hence the focus of the brand, needed to be the ‘soft bake’.

Researchers also found that a key part of the market was a group termed ‘realistic snackers’. These are people who want to snack on healthy foods, but still crave a great tasting snack. The re-launched Nutri-Grain product needed to help this key group fulfil both of these desires.

Kellogg decided to re-focusinvestment on the core products of Soft Bake Bars and Elevenses as these had maintained their growth (accounting for 61% of Soft Bake Bar sales). Three existing Soft Bake Bar products were improved, three new ranges introduced and poorly performing ranges (such as Minis) were withdrawn.

New packaging was introduced to unify the brand image. An improved pricing structure for stores and supermarkets was developed.

The marketing mix

Using this information, the re-launch focused on the four parts of the marketing mix:

• Product – improvements to the recipe and a wider range of flavours, repositioning the brand as ‘healthy and tasty’, not a substitute for a missed breakfast
• Promotion – a new and clearer brand image to cover all the products in the range along with advertising and point-of-sale materials
• Place – better offers and materials to stores that sold the product
• Price – new price levels were agreed that did not rely on promotional pricing. This improved revenue for both Kellogg and the stores.

As a result Soft Bake Bar year-on-year sales went from a decline to substantial growth, with Elevenses sales increasing by almost 50%.

The Nutri-Grain brand achieved a retail sales growth rate of almost three times that of the market and most importantly, growth was maintained after the initial re-launch.

Conclusion

Successful businesses use all the tools at their disposal to stay at the top of their chosen market. Kellogg was able to use a number of business tools in order to successfully re-launch the Nutri-Grain brand. These tools included the product life cycle, Ansoff’s matrix and the marketing mix. Such tools are useful when used properly.

Kellogg was able to see that although Nutri-Grain fitted its strategic profile – a healthy, convenient cereal product – it was underperforming in the market. This information was used, along with the aims and objectives of the business, to develop a strategy for continuing success. Finally, when Kellogg checked the growth of the re-launched product against its own objectives, it had met all its aims to:

• re-position the brand through the use of the marketing mix
• return the brand to growth
• improve the frequency of purchase
• introduce new customers to the brand.

Nutri-Grain remains a growing brand and product within the Kellogg product family.

Alcoholic beverages market, especially beer market in India is growing with leaps and bounds. The beer market in India is estimated to be over Rupees 3000 corers. Annual consumption of beer is over hundred 10 million cases. CAGR of beer industry in the year [...]]]>

Alcoholic beverages market, especially beer market in India is growing with leaps and bounds. The beer market in India is estimated to be over Rupees 3000 corers. Annual consumption of beer is over hundred 10 million cases. CAGR of beer industry in the year 2008 is 14.3%, much higher than most of the countries. Rising income the Indian consumer, change in age profile and lifestyle as well as a reduction in beer prices are major factors pushing this growth. Traditional beer markets like Europe and USA are either flat or in a state of decline whereas consumption in the BRIC countries increased by almost 50% during 2002-2007. In India, beer sales grew at nearly 90% compared to, less than 60% growth for other alcoholic drinks and according to industry sources Indian beer market is expected to nearly double itself to 23.3 million hL by 2012 from 12.5 million hL at present. Another interesting fact is among non-Islamic countries India has the lowest per-capita consumption of beer.

For these reasons international beer companies are coming to India almost every quarter. Three big international brands Budweiser, Carlsberg and Heineken entered India in last 12-15 months. In February this year, Anheuser-Busch, makers of the legendary Budweiser, that calls itself the king of beers, announced its India entry through a 50:50 joint venture with the Hyderabad-based Crown Beers. Three months before that, Carlsberg, the beer brand for soccer fans, announced operations in India through its venture, South Asian Breweries. Last year, the Singapore-based Asia Pacific Breweries picked up a 76 per cent stake in Aurangabad Breweries, paving the way for the launch of Heineken into India. There are others like NRI entrepreneur Karan Bilimoria, who created waves in UK’s Indian restaurants by marketing Cobra, a less-gassy beer, also eyeing the market. Even the big three brands have siblings. Apart from Heineken, Asia Pacific Breweries (APB) sells Canon, Baron’s and Tiger; Crown Beers India unveiled Armstrong; while South Asia Breweries has introduced Pallone.But Indian beer market is highly saturated and difficult to break into. More than 80% of the market is controlled by the two players, UB and SAB Miller. While UB with brands like Kingfisher, Zingaro and Kalyani Black has a 48% market share, SAB’s bouquetof acquired brands- Haywards, Royal challenge, Knock Out and Foster’s deliver a combined market share of 37%. According to market analysts international brands excepting Foster’s have made little impression in India till date but according to these new entrants Indian beer market just started to evolve and has a huge growth potential. Till now the new entrants are looking at encashing equity with a premium pricing strategy and they cater to only 30% of the market- the mild beer segment. For remaining 70% market this players launched multiple new brands that are competitively priced. However some of the consultants are not confident about the success of this marketing mix since Indian scenario is widely different from other growing markets because of its immense and diversified geography, huge variety of social and cultural setup, differential tax regime across states, are to name a few. Taxes imposed on alcoholic beverages are very high which make the competition tougher for new entrants. Currently spirit manufacturers trying to push forward a policy change which will exempt beer (especially mild variety) from high alcoholic tax regime and accept it as normal refreshment beverage but in Indian socio-cultural and political scenario this proposal has only a few takers.

Classification of beer: Lager: It is stored for a specified period before being bottled or canned. Pilsner: A type of lager beer, it is light with 3.0 – 3.8% alcohol and has a medium hop flavor. Ale: Top fermented, this kind of beer has distinct hop aroma. The alcohol content is around 4 – 5%. Stout: Dark with burnt flavor and strong malt aroma; it is heavily hopped and contains 5 – 6.5% alcohol. Porter: This is less dark than stout, even less hopped and is somewhat sweet. Alcohol content is around 5%. Creamy Ale: A highly carbonated beer that is produced by a combination of Ale and Lager. Malt: A strong flavored, high alcohol content beer that ranges in flavor and colors.

Classification of Beer : –

1. Lager: It is stored for a specified period before being bottled or canned.
2. Pilsner: A type of lager beer, it is light with 3.0 – 3.8% alcohol and has a medium hop flavor.
3. Ale: Top fermented, this kind of beer has distinct hop aroma. The alcohol content is around 4 – 5%.
4. Stout: Dark with burnt flavor and strong malt aroma; it is heavily hopped and contains 5 – 6.5% alcohol.
5. Porter: This is less dark than stout, even less hopped and is somewhat sweet. Alcohol content is around 5%.
6. Creamy Ale: A highly carbonated beer that is produced by a combination of Ale and Lager.
7. Malt: A strong flavored, high alcohol content beer that ranges in flavor and colors.

Methodology: Due to lack of time and resources collection of primary data has not been done and the entire project depends on the secondary data’s collected from different web pages, online research papers, etc.Analysis and others parts are done on the basis of these secondary data and knowledge collected from the marketing lectures and text books.

Analysis:

Marketing Mix Analysis:

Kingfisher History: Parent company of Kingfisher, United breweries was established in 1857 with the name Castle breweries. It was renamed to United Breweries in 1915 and started manufacturing beer from the year 1944 under the label Exports Beer. UB group started exporting beer to Middle-East from 1974 and in the year 1978 it launched Kingfisher brand.

Market Position: It is the largest selling brand in India and commands more than 30% share in the beer market. In 2005-2006 it recorded 28% growth.

Target markets: Kingfisher has two different products for different market segments.

Product : –

1. No. 1 selling product in its segment.
2. Good quality raw material is used to maintain the quality standards.
3. Consistency of product quality is high.
4. Always tastes fresh due to good quality and well developed distribution network.
5. Hangover due to heavy consumption is very mild.

Place : –

1. It is available throughout India, and is dominant particularly in South and West India.
2. UB has 16 company-owned breweries apart from nine contract breweries in 20 different locations across the country.
3. Kingfisher also has a presence in 60 countries.
4. Kingfisher also has an online marketing system. Any consumer can go to www.Kingfishernetshop.com and get their beer- a mini mum of six bottles home delivered. This move has been a big draw with info tech professionals and district women drinkers.
5. It also has some sixteen hundred shops apart from pubs and bars. Better retailing outlets are also to be opened under the Kingfisher Brand.
6. Kingfisher also has tie-ups with large department stores like ‘Foodworld’ for retailing its Beers.
7. Kingfisher also has association with number of Very Classy, Up-market & Stylish bars & lounges which goes hand in hand with its brand image.

Price : –

In both mild and strong beer segment Kingfisher uses competitive pricing strategy.

Promotion : –

1. Kingfisher tagline ‘King of good times’ is one of the most popular and most successful tagline in India.
2. Since advertising of liquor is banned in India, Kingfisher uses surrogate advertising methods like using mineral water and sodas.
3. Aggressive advertising at Outlets & Pubs.
4. Recently it also started merchandizing sports goods and trendy clothing and accessories under Kingfisher brand name.
5. Each year Kingfisher brings out new calendars featuring top models in swimwear.
6. Kingfisher also promotes itself by sponsoring events like fashion shows, sportspersons like Narain Karthikeyan, East Bengal soccer team. UB promoter also acquired a Formula- One team (Force India).
7. Kingfisher also deals in sports merchandising starting with an ad featuring Sourav Ganguly and Ajay Jadeja in 1997.
8. With the launch of Kingfisher airlines combined promotion is possible which helps the brand promotion a lot. Kingfisher also ventured into other businesses with same brand name making the brand more visible and publicity easier.
9. Kingfisher recently tied up with NDTV for their new lifestyle channel NDTV Good Times for five years
10. And finally the Sultan himself, Dr. Vijay Mallya, the Big Daddy of all brands, the flamboyant Czar of the liquor industry who is the youth icon of a million hearts. His sole presence outweighs all other competitors taken together.

Foster’s

History: Foster’s was established by two brothers W M and R R Foster’s in the year 1986. SAB Miller is the parent company which runs Foster’s group, a premium global multi-beverage company delivering a total portfolio of beer, wine, spirits, and cider non-alcohol beverages. In the 70s Foster’s started exporting to USA and UK and entered the Indian market in a 1998. Foster’s is considered as a consumer driven brand.

Market Position: Foster’s belongs to the SAB Miller stable which is the second largest beer company in India, in terms of market share. Till now it is the only international beer brand which successfully captured a significant share in the Indian market.

Target markets: The main target markets of Foster’s in India youth. But targeting strategy of Foster’s can be presented as

Product : –

1. Premium Lager beer
2. Fresh taste
3. Among the two sizes (330ml and 650ml) pint size (330ml) is more aggressively promoted and
4. 70% of Foster’s sales today come from the pint-sized market
5. The product is a light beer – highly carbonated with low bitterness and no aftertaste. It has fewer calories and lower alcohol content.

Price : –

Foster’s unlike Kingfisher follows a premium pricing strategy for its products. The prices of widely available Foster’s product are

Place : –

1. SAB Miller has 10 breweries in nine states and contract manufacturers in two other states.
2. Foster’s has 24 distributors serving over
   5,000 outlets, including over 2,300
   outlets in Mumbai.

General distribution structure of Foster’s is shown here-

Promotion : -

1. ‘Australianness’ is the essence of Foster’s brand image is promoted in every market in the world. All Foster’s lager theme advertising is consistent with an Australian positioning
2. The overseas advertising of the product often focuses upon the Australian connotations of the beer, e.g. with reference to stereotypical Australian imagery such as kangaroos, exaggerated accents, and hats with corks on strings
3. Since direct promotion is banned in India Foster’s use surrogate advertising method using mineral water of the same brand name
4. Fosters promoted its brand by sponsoring various sports like cricket, to enter the Indian market. Afterwards it withdrew from cricket and started promoting sports like football, rugby, motorsport etc.
5. Foster’s is deeply committed to promoting responsible consumption.
6. While Foster’s does not provide medical advice, nor attempt to advise individuals on important and complex medical issues, the Company is committed to ensuring that consumers access the best available information regarding alcohol and their health.
7. Steeping into Men’s Fashion apparels collections for better brand visibility.

Brand repositioning of Indian brand in presence of international brand:

The term “positioning” is widely used within the marketing and advertising communities today. Positioning is often used nowadays as a broad synonym for marketing strategy. Positioning should be thought of as an element of strategy, a component of strategy, not as the strategy itself. The term “positioning” is, and should be, intimately connected to the concept of “target market.” That is, a brand’s positioning defines the target audience. The correct positioning of a brand is basic and fundamental to its success; an incorrect or suboptimal positioning can doom a brand to underperformance or failure.

Kingfisher, since its origin proved to be the marketing savvy brand. Even though it was the largest selling beer brand, but when Fosters entered the Indian market, Kingfisher sniffed possible competition and invested heavily in brand visibility and positioning. During 2003-04 Kingfisher again repositioned itself by changing the logo.

Instead of the sitting kingfisher bird, the picture of a flying kingfisher was used during creation of new logo because the company wanted to promote itself as an aspirational brand which always wants to go high. This change was made mainly to maintain the distinctive positioning and to create a stronger emotional bond with the aspiring Indian youth.

This repositioning was so successful that even today Kingfisher uses this logo. After the entry of international brand Fosters, Kingfisher repositioned itself into a lifestyle brand adopting jingles like ‘Oola la le lo’ and tagline ‘King of good times’. Kingfisher tried to position itself as a brand for the successful and professional individuals who are always ready to take a break, have a party or just chill out. This positioning was promoted using Indian cricketers such as Ajay Jadeja and Sourav Ganguly, West Indies cricket team (At that time Kingfisher was the official sponsor of WI cricket team) and various other means. The notable thing during this repositioning process is that during this process Kingfisher kept the original message of the brand intact while adopting strategies (including advertising, logo designing, etc.) to communicate better with the consumers and to create a stronger emotional bond with them.The strategies of Kingfisher paid off well and as a result Kingfisher maintained the leadership position and added more dimensions into the brand making it stronger than before.

Brand Extension : –

Kingfisher is one of the most recognized brand in India and SAB Miller’s foster’s has also positioned itself as a unique brand so extension of both brands is possible without much hassle.

Kingfisher : -

Kingfisher is widely known among large number of consumers and its brand presence increased after diversification into airlines business. Kingfisher brand can be extended in following ways-

Line Extension:

Ultra Premium Beer: Though Kingfisher has a huge presence in both light and strong beer segment but from the beginning it followed strategic pricing policy and that made the brand very popular. But with the increasing income level of the Indian youth and the entry of international spirit majors like Carlsberg, Budweiser, etc. Kingfisher should introduce a high-priced premium beer that would compete against these brands effectively. In this way the company could extend its customer base and their strategy would also help the company to tap the high income aspiration group and since company could apply ‘skimming the cream’ policy for this segment, it could be assumed that revenue generation would be high enough to maintain profitability. This move may also help the company if it wants to transform itself into a legendary brand not only in India but also across the globe.

Category extension:

Energy drinks: Kingfisher always maintained itself as a lifestyle brand and associated the brand image with the youth. With the increasing per-capita income and westernisation of the Indian society, people are getting ready to spend more and more. On the other hand they are more conscious about health issues. Energy drinks are very popular in Western countries and some of them also entered into the Indian market but they failed to make an impact. If a company like Kingfisher with huge brand popularity and strong self and distribution network introduce energy drinks it could be a success. It will also go hand in hand with the current image of the brand.

Film production and distribution: Every year Indian film industry release a lot of movies and it is the largest film industry in the world considering the number of release per year. Still in India same production and distribution has not reached professional level. Only a few companies at present do things in a methodical way. But international production majors are entering in the Indian cinema space and Indian multinationals are also taking interest in this field. Kingfisher as a lifestyle brand always maintained a close relationship with the film fraternity and also has a presence in the television space in a joint venture with NDTV. So it would be a natural extension for the brand to start a movie and television production house. With this move Kingfisher would bring in its corporate expertise and financial muscle. This will also help the brand to increase the brand visibility. And just like Adlabs Kingfisher will have the opportunity to create its own multiplex chain and it will also help the current lifestyle apparels and accessories business a lot.

Apparels and accessories retailing: Even though Kingfisher is already present in the apparel and accessories space but its presence is very limited. According to industry estimates organised retailing is the next big thing. In this scenario Kingfisher could easily use its huge brand presence and popularity by investing more into theapparel and accessories retailing. In this way Kingfisher could transform itself into a complete lifestyle brand and that would open new horizons for the brand.

Fosters

Fosters always maintained its Australian identity throughout the ups and downs of the spirit industry. It is the only well-known international spirit brand in India and Foster’s can use this very easily to extend the brand

Line extension:

Low-price beer: From the beginning Foster’s maintained high pricing strategy and that helped the brand to grow. Now since the brand is already popular they could introduce a localised version of the brand in lower price. That would help Fosters (SAB Miller) to strengthen its market presence and to compete against Kingfisher. This new brand will be a unique mixture of Australian characteristics of Foster’s and local characteristics and the target segment will be the Indian youth with low disposable income. Using the current infrastructure and distribution network, SAB Miller would make the process easy and less costly and that would increase the profitability of success.

Category extension:

Sports merchandising: Foster’s always maintained its position as the Australian brand and Australia is a multisport country where most of the sports are very popular and as the country Australia is very successful in these sports. Fosters previously maintained its relationship with cricket and other sports and is now also responsible for different sporting events. So they could use this to enter sports merchandising business in India using cricket as the entry point and then extending into other sports. They could also use the Australian image to relate the sporting fraternity of India and Australia and by this way they could popularise the currently unpopular sports like boxing, shooting, etc. If this strategy could be implemented properly it would make Foster’s unique and give the brand a head-start.

Limitations:

Our study is based on secondary data, mainly from newspapers and websites and we had no access to primary data. As a result the report may not contain the latest data about the present market scenario which could otherwise have made it far better and relevant.

Findings:

Traditional beer markets in Europe and USA are either flat or are in a state of decline, whereas India still has a huge untapped market. For these reasons international beer companies are coming to India almost every quarter. Kingfisher, since its origin proved to be the marketing savvy brand and even though it was the largest selling beer brand but when Fosters entered the Indian market Kingfisher sniffed possible competition and invested heavily in brand visibility and positioning. Kingfisher changed its logo and adopted a new logo and tagline, sponsored the West Indian cricket team and also used the Indian cricketers to sponsor its product. It went into airlines, lifestyle and even started a television channel with NDTV. From our study we have also suggested some brand extension methods under, line extension and process extension.

Conclusions:

India is a growing economy and its market is opening up. The per capita income of the people of the country is rising daily and so is the beer consumption rate. The stigma associated with the consumption of alcoholic drinks has also gone down; as a result the beer companies are trying to get more associated with everyone’s life.

India is the world’s second largest producer of food next to China, and has the potential of being the biggest with the food and agricultural sector contributing around 26% of India’s GDP. The total food production in India is likely to double in the next ten years and there is an opportunity for [...]]]> INTRODUCTION

India is the world’s second largest producer of food next to China, and has the potential of being the biggest with the food and agricultural sector contributing around 26% of India’s GDP. The total food production in India is likely to double in the next ten years and there is an opportunity for large investments in food and food processing technologies, skills and equipment, especially in areas of Canning, Dairy and Food Processing, Specialty Processing, Packaging, Frozen Food/Refrigeration and Thermo Processing. Fruits & Vegetables, Fisheries, Milk & Milk Products, Meat & Poultry, Packaged/Convenience Foods, Alcoholic Beverages & Soft Drinks and Grains are important sub-sectors of the food processing industry. Health food and health food supplements is another rapidly rising segment of this industry, which is gaining vast popularity amongst the health conscious.

As a result of several policy initiatives undertaken since liberalisation in August 1991, the industry has witnessed fast growth in most of the segments. As per a recent study on the food processing sector, the turnover of the total food market is approximately Rs.250, 000 crores (US $ 69.4 billion) out of which value-added food products comprise Rs.80, 000 crores (US $ 22.2 billion).

Since liberalisation in Aug’91 and up-till Feb 2000 proposals for projects of over Rs.53, 800 crores (US.13.4 billion) have been proposed in various segments of the food and agro-processing industry. Besides this, Govt. has also approved proposals for joint ventures, foreign collaboration, industrial licenses and 100% export oriented units envisaging an investment of Rs.19, 100 crores (US $ 4.80 billion) during the same period. Out of this, foreign investment is over Rs. 9100 crores (US $ 18.2 billion).

Processed food exports were at over Rs.13, 500 crores (US $ 3.2 billion) in 1998-99. Out of these exports, rice accounted for 46%, whereas marine products accounted for over 34%.

Primary food processing is a major industry with lakhs of rice-mills/hullers, flourmills, pulse mills and oil-seed mills. There are several thousands of bakeries, traditional food units and fruit/veg/spice processing units in unorganised sector.

In the organised sector, there are over 820 flourmills, 418 fish processing units, 5198 fruit/veg processing units, and 171 meat-processing units.

Facts & Statistics

• India is one of the world’s major food producers but accounts for less than 1.5 per cent of international food trade. This indicates vast scope for both investors and exporters. Food exports in 1998 stood at US$5.8 billion whereas the world total was US$438 billion.

• The Indian food industry’s sales turnover is Rs 140,000 crore (1 crore = 10 million) annually as at the start of year 2000.

• The industry requires about Rs 29,000 crore in investment over the next five years to 2005 to create necessary infrastructure, expand production facilities and state-of-the-art- technology to match the international quality and standards.

• The office of the Agricultural Affairs of the USDA / Foreign Agricultural Services in New Delhi says that one of India’s proudest accomplishments has been achieving a tenuous self-sufficiency in food production and that the country produces a wide variety of agricultural products at prices that are at or below world values in most cases.

• The Indian palate is accustomed to traditional foods, mostly wheat and rice-based, rather than potato and corn-based western palate. In marketing perspective, this is considered an important factor for foreign marketers.

• India’s middle class segment will hold the key to success or failure of the processed food market in India. Of the country’s total population of one billion, the middle class segments account for about 350-370 million. Though a majority of families in this segment have non-working housewives or can afford hired domestic help and thus prepare foods of their taste in their own kitchens, the profile of the middle classes is changing steadily and hired domestic help is becoming costlier. This is conducive to an expansion in demand for ready-to-eat Indian-style foods.

Reasons for Investing in Indian Food Processing Sector

• It is the seventh largest country, with extensive administrative structure and independent judiciary, a sound financial & infrastructural network and above all a stable and thriving democracy.

• Due to its diverse agro-climatic conditions, it has a wide-ranging and large raw material base suitable for food processing industries. Presently a very small percentage of these are processed into value added products.

• It is one of the biggest emerging markets, with over 900 million population and a 250 million strong middle class.

• Rapid urbanisation, increased literacy and rising per capita income, have all caused rapid growth and changes in demand patterns, leading to tremendous new opportunities for exploiting the large latent market. An average Indian spends about 50% of household expenditure on food items.

• Demand for processed/convenience food is constantly on the rise.

• India’s comparatively cheaper workforce can be effectively utilised to set-up large low cost production bases for domestic and export markets.
• Liberalised overall policy regime, with specific incentives for high priority food processing sector, provide a very conducive environment for investments and exports in the sector.

• Very good investment opportunities exist in many areas of food processing industries, the important ones being: fruit & vegetable processing, meat, fish & poultry processing, packaged, convenience food and drinks, milk products etc.

SECTORS COVERED UNDER THE INDIAN FOOD PROCESSING INDUSTRY

India’s food processing sector covers fruit and vegetables; meat and poultry; milk and milk products, alcoholic beverages, fisheries, plantation, grain processing and other consumer product groups like confectionery, chocolates and cocoa products, Soya-based products, mineral water, high protein foods etc.

Promising sub-sectors are, Soft-drink bottling, Confectionery manufacture, Fishing, aquaculture, fish-processing, Grain-milling and grain-based products, Meat and poultry processing, Alcoholic beverages, Milk processing, Tomato paste, Snack food, Fast-food, Ready-to-eat breakfast cereals, Ice-creams, Food additives, flavours, Food packaging, Refrigerated food handling, Supermarkets, etc.

Fruit and Vegetable Sector

Horticultural crops in India are currently grown in 12 million hectares, which represents 7 percent of India’s total cropped area. Annual horticultural production is estimated at 100 million metric tonnes, which is over 18% of India’s gross agricultural output- India is the second largest producer of fruits, after Brazil. In vegetables India’s production is exceeded only by China.

India’s share of world trade in this sector is only around one percent. India’s major exports are fruit pulps, pickles, chutneys, canned fruits and vegetables, concentrated pulps and juices, dehydrated vegetables, and frozen fruits and vegetables. This sector has attracted a total investment of US$ 1954.2 million since the initiation of the liberalisation process, including foreign investment of US$ 219.7 million.

The number of fruit and vegetable processing units, the installed processing capacity and production of processed items are going up steadily. The country’s share in the world trade of processed fruits and vegetables is still less than one percent. As such, abundant investment opportunities are there in the expanding domestic market and export arena. An increasing acceptance of new products with market development efforts is seen.

Changes in export-import policies and exchange rate adjustments have helped improving the export potential. There is a good international demand for certain fresh fruits as well as processed fruits products. Fresh fruits identified as having good export potential are: mango, grapes, banana, lichee and exotic fruits like sapota, ber, pomegranate, custard apple and other tropical fruits.

Among vegetables, the items identified as having good export potential are: onion, potato and green traditional vegetables like: okra, bitter gourd, green chillies and other seasonal vegetables.

Many non-traditional vegetables mainly processed mushrooms & gherkins, and other like: asparagus, celery, bell pepper, sweet corn, green and lima beans and organically grown vegetables are also increasingly being exported.

According to latest official statistics, India exported processed fruits and vegetables worth Rs 5240 million in 1997-98. The horticulture production is around 102 million tonnes. Foreign investment since 1991, when economic liberalisation started, stood at Rs 8,800 crore.

Products that have growing demand, especially in the Middle East countries include pickles, chutneys, fruit pulps, canned fruits, and vegetables, concentrated pulps and juices, dehydrated vegetables and frozen fruits and vegetables. India is the second largest country in world producing fruits and vegetables. However, the processing of such products is less than 2% as against 70% in European countries. The 1% share of export of such processed foods from India in the world indicates that there is lot of scope of developing agro-based industries. The agro – based industry, is considered as high risk industry and therefore, the entrepreneurs are not coming forward to establish such type of industries. The risks involved are:

• It is seasonal industry.

• It has to depend upon natural functioning and vagaries of nature.

• The raw material is perishable and shelf life of finished product is limited.

• Inconvenient location of industry.

• Non-availability of trained managers and operators.

• Lack of incentives from the government.

Fishing and Fish Processing Industry

With its over 8000 km. of coastline, 3 million hectares of reservoirs and 1.4 million hectares of brackish water, India has vast potential for fishes from both inland and marine resources. India has the seventh largest marine landing in the world with an extensive coastline of 7500 km, an exclusive economic zone of 2 million sq.km, a 29,000 km stretch of rivers and canals, 1.45 million hectares of reservoirs and 0.75 million hectares of tanks and ponds. Over the last decade or so, the organized corporate sector has become involved in preservation and export of coastal fish. The fishery resources of India are grossly under-utilized.

Marine fish found in India include prawns, shrimps, tuna, cuttlefish, squids, octopus, red snappers, ribbon fish, mackerel, lobsters, cat fish and countless other varieties. Processing of produce into canned and frozen forms is carried out almost entirely for the export market. In all, there are 258 freezing units with a capacity of 2170 tonnes, 23 canning units with a capacity of 84.5 tonnes, 131 ice-making units with a capacity of 1820 tonnes. 24 fish meal units with a capacity of 419 tonnes and 297 cold storage units with a capacity of 20,348 tonnes.

Fisheries are an important sector.  There is growing canned and processed fishes from India. The marine fish include prawns, shrimps, tuna, cuttlefish, squids, octopus, red snappers, ribbonfish, mackerel, lobsters, catfish etc. In last six years there was substantial investment in fisheries to the tune of Rs. 30, 000 million of which foreign investments were of the order of Rs. 7, 000 million. The potential could be gauged by the fact that against fish production potential in the Exclusive Economic Zone of 3.9 million tones, actual catch is to the tune of 2.87 million tones. Harvesting from inland sources is around 2.7 million tones.

Meat and poultry processing sector

India has the world’s largest number of livestock and ranks first in the cattle population and comprises about 50 percent of the buffalo population and one-sixth of the total goat population of the world. Such a large livestock population clearly presents a challenge to retain existing traits of productivity by application of modern science and technology. Rigorous efforts are therefore, being made to improve vast population of livestock by providing basic infrastructure and adopting latest levels of technology.

Approximately 70% of the Indian population consume meat and/or poultry products. The growth rate of meat is estimated to be about 10%. Currently, only about 1% of the meat produced is converted into value added products and most meat is purchased by the consumers in the country in the fresh/frozen form and converted into various meat products at homes, restaurants, etc.

The current level of exports of meat and meat products from India is US$ 215 million, the major destinations being the countries in the Middle East and South East Asia. India ranks fifth in world egg production and produces about 30.000 million eggs every year. Yet the per capita availability is very low. Over the past 30 years, egg production has shown an average annual growth rate of 16% while that for broilers is higher at 27% per annum. During this period, Indian poultry industry has made spectacular progress transforming itself from backyard farming into a dynamic and sophisticated agro-based industry.

There are five modern integrated poultry processing plants functioning in the country. Besides, there are a good number of small plants, although not very modern, working in the country. These plants are producing dressed frozen chicken and cut parts. While the poultry industry is gradually taking shape, poultry dressing and processing is still in its infancy in this country.

There are about 15 pure-line and grandparent franchise projects in India. There are 115 laver and 280 broiler hatcheries, both in the private and the Government sector, producing 1.3 million-layer parents and 2.6 million broiler parents which in turn, supply about 95 million hybrid layer and 275 million broiler day-old chicks. In India, five egg products plants have also been established to produce whole egg yolk and/albumen powders. The demand for egg powder is increasing every year. Each project will process about a million eggs daily.

There is a large potential for setting up of modern slaughter facilities and development of cold chains in meat and poultry processing sector. The market has not been taken tapped tally for ready-to-eat and semi-processed meat products in the domestic market as well as for exports to neighbouring countries especially to the Middle East. Buffalo meat is surplus in the country and has good export potential. Poultry production and egg processing industries have come up in the country in a big way and are exporting egg powder, frozen egg yolk, albumin powder to Europe, Japan and some other countries. Meat products have a growth rate of 10% whereas the growth rate of eggs and broilers are 16% to 20% respectively.

Most of the production of meat and meat products continues to be in unorganised sector. However, some branded products have also come up in the domestic market. At present, poultry export from India is mostly to Maldives and Oman. Some other markets can be explored for export of poultry meat products like Japan, Malaysia, Indonesia and Singapore.

Grains sector

India produces about 200 million tonnes of different food grains every year. All major grains –paddy, wheat, maize, barley, millets like: jowar (great millet), bajra (pearl millet) & ragi (finger millet) are produced in the country. The country is self sufficient in grain production and is the second largest rice producer in world, with a 20% share.

With the popularity of branded rice and flour among urban population, the investment scope in the field has increased. Also, there is very good demand of Indian basmati and non-basmati rice in export markets and a lot of export has been taking place.

Packaged and convenience foods sector

This comprises of product groups like confectionery, chocolates and cocoa products. Soya-based products, ready-to-eat foods, mineral water, high protein foods etc. This sector has been successful in attracting substantial investment of about US$ 3212.6 million since liberalization, of which foreign investment is about US$ 1264.1 million.

The production of confectionery items other than chocolates is reserved for the small-scale sector. However, there are several large companies with established market presence and brands in both the cocoa and non-cocoa based confectionery product markets. Confectionery output grew at the compound rate of six to seven percent in recent years. Chocolate production is growing at the rate of 10 to 15 percent per annum.

In ready-to-eat products sector, the total installed capacity in the organized sector is 33,400 tonnes for manufacture of pasta products like noodles, macaroni, vermicelli, etc. Besides, there are 10 units with annual capacity of 9.340 tonnes for cornflakes, oat flakes, and pearl barley.

The convenience foods segment, growing at a rate of 20%, offers the greatest potential.

Export of soya based products like: soyameal, deoiled cake and other value added products, are increasing at a rapid pace.

Technological revolutions in processing and packing of food products, coupled with fast growing inland and export markets presents a very good potential for further investment in this sector.

Milk and milk products sector

India, having a large livestock population and the most important constituent of it being milch cows and milch buffaloes, has emerged today as the largest milk producer in the world. Dairy development in India has been acknowledged the world over as one of modern India’s most successful developmental programme. India is the world’s largest producer of milk at 74 million tonnes; it is over three million tonnes in excess of what is produced in the U .S. The per yield per cattle in India is around three litres a day. Surely, a far cry from 30 litres per day in America. Further, in the U.S., nearly 70 percent of dairy items produced are value added products and the balance is sold as milk. In India, the situation is quite the reverse.

Currently, consumption of liquid milk accounts for about 46% of the total production of milk. The remaining 54% is utilized for conversion to milk products. Of this, the share of the organized sector is less than 10%. The production or milk product is increasing at the rate of about 5% yearly. Among the products manufactured by the organized sector are ghee, butter, cheese, ice creams, milk powders, malted milk food, condensed milk, infant foods etc. Of these, ghee (clarified butler) alone accounts for 85%. Industry has also introduced a number of new products such as casein, lactose, and dairy whiteners. Different varieties of cheese etc. And is exporting certain milk products.

At the present rate of growth, India is expected to overtake the US in milk production by the year 2000, when demand is expected to be over 80 million tons. Industry profitability has been good and there is very good potential for introduction of new value added products and their export.

Being largely imported, manufacture of casein & lactose has good scope in the country. Exports of milk products have now been decanalised and export in 1995-96 is estimated at Rs.30 crores (US $ 8.33 million).

Beer and Alcoholic Beverages

In earlier years the policy of the Indian government was to discourage the consumption of alcoholic beverages. This even went so far as to involve total prohibition in some states. However, the resulting problems of illicit distillation, the leakage of government excise revenue and the problems involved in enforcement, led to a review of this policy.

The importation of potable alcohol is subject to government licensing. Alcoholic drinks carry a very heavy tax burden, which is itself a major source of revenue for state governments.

Liquor manufactured in India is categorised as beer, country liquor and Indian Made Foreign Liquor (IMFL). IMFL production includes wines, whisky, rum, vodka, gin and brandy. Draught beer has been recently introduced and has done well in the places in which it has been introduced. Canned beer is an even more recently introduced new beverage.

Production of Alcohol drinks from non-molasses sources is very small in the country compared to the total production of Alcoholic drinks. It is in this context that Government of India encourages foreign investments as well as up gradation of technology in the field of non-molasses based alcoholic drinks and beer provided the Indian partner is in possession of a valid Industrial License under Industries (Development & Regulation) Act, 1951.

Packaged drinks

Soft Drinks

The production of soft drinks has increased from 5670 million bottles in 1998-99 to 6230 million bottles in 1999-2000.

Range & Scope Of Products

These major product groups are non-alcoholic flavoured/sweetened beverages; Cola, Orange & Lemon are some of the accepted, tasted in India. Currently it is estimated that 65% prefer non-alcoholic drinks. FPO governs manufacture of Packaged drinks.

Major Players

Some of the major manufacturers are:

• Parle (Exports) Pvt.Ltd.

• Pepsi Foods Ltd.

• Coca-Cola.

• Pure Drinks (New Delhi) Ltd.

GOVERNMENT INITIATIVES

The government has accorded it a high priority, with a number of fiscal relief’s and incentives, to encourage commercialisation and value addition to agricultural produce; for minimising pre/post harvest wastage, generating employment and export growth.

The Government of India has established a full-fledged ministry, especially for the food processing industries along with export promotion councils for agricultural processed products and marine products. Exclusive commodity boards have been established for the promotion of milk, tea, coffee, cashew and spices. A good number of industry associations are also active in the country to represent the requirements of the industry.

Special schemes have also been advised for 100 percent export oriented units located in the export processing zones enabling duty free import of capital goods and raw materials and other inputs, full convertibility of foreign exchange earnings at market rate, tax holiday for 5 years and the facility for selling 50 percent in the domestic tariff area.

However, Indian food processing activity is still largely based on primary processing, which accounts for almost 80% of the value-addition estimated at a level of US$ 20.8 billion. From the experience that we have gathered from other countries, the share of processed food in the total consumption will increase rapidly. This would necessitate moving into more sophisticated secondary and tertiary processing. This is where India looks up for necessary technology and investment.

The food processing industry ranks fifth in size in the country and employs 1.6 million workers, which constitutes 19 percent of the country’s industrial labour force. It accounts for 14 percent of the total industrial output with only 5.5 percent of total industrial investment and contributes 18% to the GDP. The turnover of this industry is estimated to be US$ 36 billion.

National Level Organisations

In order to promote the food and allied industries within the country the Government of India has established, a few national level organisations, which in one way or the other support the industry. These institutions either do fundamental and or applied research or undertake some developmental activity like boosting production of raw material required for the industry, developing new varieties, developing physical infrastructure to reduce post-harvest losses and measures to promote exports. They also offer Consultancy services. The names of some important institutions:

• AGRICULTURAL AND PROCESSED FOOD PRODUCTS EXPORT DEVELOPMENT AUTHORITY (APEDA), N. DELHI.

• CONTAINER CORPORATION OF INDIA.

• CENTRAL FOOD TECHNOLOGICAL RESEARCH INSTITUTE, MYSORE.

• NATIONAL SEEDS CORPORATION.

• INDIAN COUNCIL OF AGRICULTURAL RESEARCH.

• INDIAN AGRICULTURAL RESEARCH INSTITUTE.

• EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD.

• INDIAN DIPLOMATIC MISSIONS.

• INDIA INTERNATIONAL MARKETING CENTRE.

• NATIONAL HORTICULTURE BOARD.

• INDIAN INSTITUTE OF SUGARCANE RESEARCH, LUCKNOW (UP).

• SUGARCANE BREEDING INSTITUTE, COIMBATORE (TAMILNADU).

• CENTRAL TUBER RESEARCH INSTITUTE, TRIVANDRUM.

• NATIONAL RESEARCH CENTRE FOR CASHEWNUT, PUTTUR.

• NATIONAL RESEARCH CENTRE FOR MUSHROOMS, SOLAN (HP).

• PROJECT DIRECTORATE OF VEGETABLE RESEARCH, VARANASI (UP).

• NATIONAL DAIRY RESEARCH INSTITUTE, KARNAI (HARYANA).

• NATIONAL CENTRE FOR TRADE INFORMATION.

FOREIGN DIRECT INVESTMENT IN FOOD PROCESSING INDUSTRY

Areas in which RBI grant investment

Any proposal involving Foreign Investment earlier required approval of the Government of India. However, as part of the liberalization process, the approval procedures have been very much simplified decentralized and streamlined. Accordingly, automatic approval by Reserve Bank of India (RBI) would be granted for investment in the following areas:

Automatic Channel

• New Investment in High Priority Industries

Automatic approval will be given by the Reserve Bank of India for direct foreign investment up to 51 per cent foreign equity in high priority industries.

• Trading (Super Star Trading House, Star Trading House, Trading House and Export House)

To provide access to international markets, majority foreign equity holding up to 51 per cent equity will be allowed by the Reserve Bank of India to trading companies primarily engaged in export activities. Such trading companies will be treated at par with domestic trading and export houses in accordance with the Export/Import policy of the Government. The Company shall have to register itself with the Ministry of Commerce (office of the Director General, Foreign Trade) as registered Exporter/Importer.

In case of existing companies already registered as an Export House, Trading House, Star Trading House, or Super Star Trading House, the Reserve Bank of India will give automatic approval for foreign investment up to 51 per cent equity, subject to the provision that the company passes a special resolution for preferential allocation of fresh equity to the foreign investors.

• 100% Export Oriented Industries

In the case of 100% Export Oriented Units (EOU) and Units in the Free Trade Zone/Export Processing Zone (EPZ), foreign participation may go up to 100 per cent of equity. Automatic approval for the 100% EOUs will be granted by the Secretariat for Industrial Approvals (SIA), Department of Industrial Development, Department of Industries, and Udyog Bhawan subject to the fulfilment of certains norms (Appendix V).

In case of the units set up in Free Trade Zone (FTZ)/ Export Processing Zones (EPZ), automatic approvals will be granted by the respective Development Commissioners located in each state.

Non – Automatic Channel

• Other foreign investment proposals, including proposals involving 51 per cent foreign equity, which do not meet the foregoing criteria, need prior clearance of the Government. All such proposals except for the units set up in the Free Trade Zone (FTZ)/Export Promotion Zones (EPZs) are considered for approval by the Foreign Investment Promotion Board (FIPB).

• The FIPB is located in the Prime Minister’s Office.

• The non-automatic channel approval decision is conveyed by 45 days.

Transfer of Foreign Technology

Automatic approval will be granted by RBI subject to the conditions that the lump sum payment does not exceed Rs. 10 million (net of taxes), royalty does not exceed 5% (net of taxes) for domestic sales and 8% (net of taxes) for export and that the total payment of lump sum and royalty does not exceed 8% of the sales turn over in a period of ten years from the date of agreement or seven years from the commencement of commercial production granted by the Reserve Bank of India.

Applications for automatic approval in the above cases should be submitted in FC (RBI) form to the Reserve Bank of India, Bombay.

All other proposals including those, which do not meet any, or all of the above parameters will require the approval of the Government. For such cases an application in form FC. (SIA) is to be submitted to the Secretariat for Industrial Approvals, Government of India, Ministry of Industry, Udyog Bhavan, New Delhi-110 001.

Extension of foreign technology agreements including those which have received automatic approval in the first instance require the approval of the government for which applications should be submitted in form FC (SIA) to the Secretariat for Industrial Approvals, New Delhi.

Licensing

• The new Industrial Licensing Policy of the Government of India has exempted all industries from the requirement of obtaining industrial license except those reserved for the Public Sector

• Substantial expansion of existing units will be exempt from licensing, provided the item of manufacture is not included in schedule I, II, or III, to the Notification dated the 25th July, 1991 of the Department of Industrial Development. However, substantial expansion will be subject to the locational conditions. Existing units may manufacture any new article without additional investment if the article is not otherwise subject to compulsory licensing. An industrial undertaking with a valid registration granted to it prior to the 25th July, 1991 is not required to apply for a license, even if the item of manufacture is one which compulsory licensing.

• In respect of new projects for the manufacture of not covered by compulsory licensing or their substantial expansion, the only requirement is that the industrial undertaking should file, a memorandum to the Secretariat for Industrial Approvals. Another memorandum in the prescribed form is to be filed with the secretariat for industrial approvals when the unit commences its commercial production.

Repatriation

Foreign Capital invested in India, profits and dividend earned in India can be repatriated after payment of taxes due on them. However, units operating in a limited list of Consumer Goods Industries are subjected to dividend balancing with matching export earnings for a period of seven years.

Disinvestment

Reserve Bank of India permits transfer of shares with regard to disinvestment proposals from foreign investors on a near automatic basis. Applications in this regard in form ST-I along with the necessary documents should be submitted to the Controller, Reserve Bank of India, Bombay.

Investment Protection

Bilateral Investment Protection and Promotion:

• The first Bilateral Agreement has been signed with U.K. on 14th March 1994.

• It’s broad intent is to promote and protect investment from either countries. Investment is defined broadly as every kind of asset established or acquired in accordance with the national laws of each country in which the investment is made and, in particular, includes intellectual property rights, goodwill, technical assistance and know how in accordance with the relevant laws of the country in which the investment is made.

Taxation

Income derived by foreign companies as dividend, interest, royalty of technical fees, is taxed at a rate lower than that applicable to domestic companies. While the rate of tax for domestic companies is 40% plus a surcharge of fifteen percent if total income exceeds Rupees seventy five thousand, in the case of foreign companies and non-resident assesses the rates are as follows:

• Dividend income and interest – 20 per cent.

• Royalty and fees for Technical service – 30 per cent.

The rates applicable to the non-residents and foreign companies may be less where agreements for the avoidance of double taxation exist between India and the country of which the non-resident or the foreign company is a resident and the agreement so provides.

In the case of the NRIs, the rate of tax is 20% on income from foreign exchange investment as arising from:

• Shares in an Indian Company.

• Debentures issued by or deposits with an Indian Company, which is not a private company.

Important Facts

• Foreign direct investment of around US$1 billion has already been approved in India’s food processing industry since 1991.

• Changing lifestyles, breakdown of the joint-family system, increasing number of working wives and Western influence (via TV channels) in the urban areas are fuelling a demand for packaged foods.

• India already has all the requirements for a head start in the food-processing industry. Basic materials such as food grains, pulses, vegetables and meats (non-beef) can be sourced locally or easily imported if local availability is inadequate.

• Foreign investors can own 100 per cent equity in plants they set up. However, it is advisable to take a local partner.

• Many Indian firms are eagerly seeking foreign partners for joint ventures to avail of their technological advantage.
• Supermarkets are just beginning to appear in India’s big cities and this is the time for international chains to set a foothold. Competition will only increase with time.

• There has been some civilised resistance from ultra-nationalistic quarters of opinion to foreign food products. This resistance will be less if a local partner is involved.

• India’s liberal intelligentsia is gradually building the opinion that foreign investments in the processed food sector will benefit rural agriculture, thus beating the nationalists with their own slogans. The liberal intelligentsia is gradually prevailing.

PROSPECTS OF FOOD PROCESSING INDUSTRY IN INDIA

India has all the makings of an agricultural super-power. From the stage of struggling 10 taking care of basic food requirements of its burgeoning population during the independence, it has come a long way towards visualizing The tremendous potential for commercial and export oriented agri-business. Exploitation of this potential can bring about an era of prosperity with the right mix of employment generation and profits. India has a strong competitive advantage in food processing, being blessed with unsurpassed natural advantages. India has 169 million hectares of arable land and enjoys a wide range of agro-climatic conditions ranging from hot tropical to temperate, with rainfall varying from less than 13 cm in some parts to about 600 cm in others. This makes it possible to grow all possible varieties of agricultural products. Further, India’s geographical situation gives it the unique advantage of being at the centre of the most prosperous economies of the Eastern World, that is, the Middle East in the West and the far East in the East, including countries like Iran, Iraq. Japan, Singapore, Thailand, Malasiya, Korea etc. This gives India the competitive edge for linking these markets as the third country export centre.

India’s food production today ranks next only to China’s and is equal to that of the U.S. It is a $70 billion industry now and by 2005 this is expected to double. The value added food segment will grow at a faster rate, rising from $20 billion to $60 billion during this period. Higher agricultural yields will raise incomes and open up new markets and job opportunities. The food processing industry (FRI) is likely to grow three-fold in the five years.

The burgeoning market opportunities in the wake of liberalization of the economy since 1991 have encouraged the growth of the FPI. There are over 27,500 units, large and small, operating in the food-processing sector. According to a study made by the Confederation of Indian Industry (CI1) and the management consultants, Mckinsey & Co., India can be the “world’s largest food factory”. Food proces-sing activity is poised for rapid expansion. The green revolution in food grains, the white revolutions in milk and the blue revolution in fish and other marine foods have laid the foundation for rapid expansion of the FPI.

Immense growth potential

The food processing industry will be one of the hinges of the Indian economy in the next century. India is among the leading producers of sugar, tea, milk, fruits and vegetables. Agricultural production and food processing account for 30 percent of India’s GDP and employ more than 70 percent of its workforce. Yet the country’s yields in milk, fruits and vegetables are only 40 percent of the world’s best. About 40 percent of the fruit and vegetable output is wasted. The sector is caught in a vicious cycle which is typified by inefficiencies, wastage and value loss of the order of Rs. 50.000 crores.

This anomaly can be corrected by channelling more investment towards the farm sector and related agro-based industries. The need is to adopt an integrated approach to agriculture, procurement and food processing. The study conducted by McKinsey for the Confederation of Indian Industry (CII), entitled Food and Agriculture Integrated Development Action (FA1DA) suggests that, over the next 10 years, agriculture and food processing will need an investment of about Rs. 1,40,000 crores. This huge investment will be attracted by market opportunities but will materialize only with a conducive policy framework.

At present, about 35 percent (Rs. 120,000 crores) of the total food market comprises some form of processed food. According to the Food and Agricultural Organization’s FAO) definition, processed foods can be of three types: primary, secondary and tertiary. Primary processed foods involve basic cleaning, grading and packaging, examples of which are product-like packaged atta or branded tea. Secondary processing means modification of the basic product to a stage just before the final preparation at the consumer’s kitchen, like tomato puree or roast and ground coffee. Tertiary processing leads to high value-added ready-to-eat products like bakery products, ice cream, instant noodles or culinary products like sauces and jams.

The Indian processed foods industry, growing overall at about 15 percent, straddles all three categories, which individually are at different stages of development. For example, the packet tea market size is of about 2,500 crores, the packaged oils and vanaspati market Rs. 2.000 crores, packaged atta Rs. 2.00 crores, ice cream Rs.450 crores and ketchup Rs. 60 crores.

CONCLUSION

As companies respond to these opportunities, they will invest in the upstream element of the food chain agriculture and procurement. They will give farmers access to appropriate technology and inputs to raise yields. They will help develop the necessary cold storage and transport infrastructure, ensuring that the output is scientifically stored and transported to the markets and customers in good time.

This will reduce both wastage and intermediaries between the farmer and the consumer, now six to seven compared to two or three in the U.S. The integration will have two benefits. Consumers will gel more hygienic and value added packaged products at affordable prices; the farm sector’s advantage will be higher income from assured and captive markets. The additional gain for the country, as a whole, will be the potential for cost-competitive exports, based on natural advantages of agricultural resources.

However, this beneficial cycle will largely depend upon a conducive policy framework. The key need is to adopt an integrated view of the food chain. Issues pertaining to agriculture and food processing now come under the ambit of three different Ministries of Agriculture, Food and Food Processing. Their linkage under a broader umbrella would ensure greater focus continuity and quicker decision-making through a unified policy regime. The agriculture sector must be quickly liberalized. The emphasis should be on mobilizing large investments in roads, power, irrigation and farm equipment, rather than on subsidies. It also entails a pragmatic approach to land reforms to attract capital to actual farm activities.

BISLERI

HISTORY OF PARLE BISLERI: –

M.R RAMESH CHAUHAN is the vintage boss of the 250 crore PARLE BISLERI LIMITED. The brand has some 18 manufacturing locations spread across the country. The mainstream competition is in the form of coca-cola India’s Kinley, Acquafina from Pepsi foods and nestle India’s pure. Bisleri [...]]]>

BISLERI

HISTORY OF PARLE BISLERI: –

M.R RAMESH CHAUHAN is the vintage boss of the 250 crore PARLE BISLERI LIMITED. The brand has some 18 manufacturing locations spread across the country. The mainstream competition is in the form of coca-cola India’s Kinley, Acquafina from Pepsi foods and nestle India’s pure. Bisleri continues to lead in the Rs 700-1,000 crore organized, packaged water market with an estimated 40 per cent market share, followed by Kinley at 28 per cent and Aquafina with an 11 per cent share. In terms of volumes, the North and West remain Bisleri’s biggest performing markets, despite the brand’s sustained national-level presence.

OPERATION OF BISLERI: –

The Bisleri bottled water range comprises the conventional 500 ml, one litre, 1.2 litre and two litre bottles; five litre and 20 litre jars for the home segment, and smaller packs sizes of 250 ml cups and 330 ml bottles, though in very limited numbers for now. Among all pack sizes the brand straddles, it is the one-litre non-returnable bottles priced at Rs 10 each, and the 20-litre jars for Rs 40 aimed at the home segment that are Bisleri’s bestsellers at present. While the 20-litre jar comprises about 40 per cent of overall Bisleri sales, the one-litre bottles account for approximately 25 per cent brand sales. The main source of water is bore wells from where they get thee water. Then the raw materials required for the bottle is PET i.e. poly ethylene terephatalable. There are 250 workers working in mumbai and 3000 all over India. The production process adopted by bisleri is batch production. The time taken to fill one bottle is approximately 5 minutes. The workers work in 3 shifts which comprises of 60-70 workers per shift. The maintenance of the machines is done every month and every 45 days there is sanitation and cleaning of the machine.

BISLERI

Visit Analysis:

A)

1. Research & Development Dept:

The R & D Dept of this company starts planning 6 months in advance. The R & D Dept conducts market survey for 2-3 months for modification of the shape of the bottle.

2. Market Survey:

The different design is shown to a special group of customers & dealers and according to the demand, the design is chosen by the company.

B)

PRODUCTION CYCLE:

There are mainly three stages in the production cycle:

1. Disinfection: In this stage, water is collected from bore wells which are then disinfected using chemicals.

2. Filterization: In this stage, water is passed through different filters to kill the bacteria present in it. Then, the water is passed on to the next level for filling up.

3. Filling: In this stage, the bottles are ozonated and then the water is filled in the bottles.

C)

PRODUCTION PROCESS:

1. Quality Management of Water:

Raw water which is collected from the wells is stored in a tank which has a capacity to store 1 lakh liters of water. Then the water is chlorinated to kill the bacteria present in the water which is passed through 20 micro arcal filters. Then it is passed through carbon filter which is used for removing activated carbon and odor and also acts as chlorine remover. Then it is passed through 10-micron filter. Then it goes through REVERSE AUSMOSES PLANT, which contains semi-pomitable membrane which removes dissolved solids and bacteria of size 0.001 micron. It is passed through 1 micron and 0.5-micron filters. T hen the water gets ozonated and passed through SS 316 MACHINE. Water is stored in 10000 liter tanks.

2. Blowing of Bottles:

The bottles in this factory are given the desired shape by the use of blowing machines. These machines blow at a temperature of 300 degrees Celsius. The machine used for the blowing purpose is known as the AOKI MACHINE. This machine has a blowing capacity of 10 bottles per minute.

3. Filling of Bottles:

There are three types of filling machines, which are used for the filling purpose. The different sizes of bottles that are filed are of 500ml, 1liter, 1.2liters and 2liters respectively. First the bottle gets ozonized when it is passed through JET MACHINES. In this the bottle gets integrated and disintegrated, it gets rinsed, and then the water is filled into the bottles.

4. Filling of Jars:

The different sizes of jars are 5liters, 10liters and 20liters. The jars are cleaned manually by soap and water. Then it is cleaned with sodium hypo-chloride and virosin, which are disinfectors. When jars are passed through washing machine first it is rinsed with hot water, then disinfected and then it is ozonated. Then jars are passed on to jar fillers where it gets filled and the packing of sealed jars into boxes is done manually.

5. Laboratory Testing:

Every hour samples of water that are filled in to the bottles are taken and various testing is done. First it is checked for odor if any, presence of alkanity, chlorine and calcium. The water is also checked in machines like PH METER, TDS(TOTAL DISSOLVE SOLIDS) METER, NEPHLOMETER, SPECTROPHOTOMETER AND MEASURING OF TUBILITY. They also do aerobic  microbial count and pathogen testing.

FUTURE PLANS: –

Bisleri have been the market leaders in India as far as mineral waters are concerned. Every time their bottle and waters are checked and rechecked for its purity. Their main aim is to stay ahead of the main rivals i.e. Pepsi and Coca Cola. Their raw material comes from reliance industries limited who are their main suppliers of the raw material i.e. PET.