A Good Time to Check in on the Indian Consumption Story: Key Trends Shaping the Indian Packaged Food Landscape

Rural consumers’ spending ability has improved, helped by normal monsoons, farm loan waivers, higher minimum support prices, Direct Benefit Transfer (DBT), and a rural development-focused 2018 budget. From a supply perspective, food companies are expanding their presence in rural areas and generating awareness of their brands among consumers. This has been aided by the growing penetration of smartphones, enabling cost-effective digital marketing. That being said, as income tends to vary significantly per rural location, an estimated 800+ million rural population does not necessarily equate to as many consumers. Food companies that are still developing scale, and which do not have a rural-specific product, would be wiser focusing on the seven mega-cities – with a population of over 10 million – or the 69 cities that will have more than a million people by 2025.

At the lower end of the income pyramid, consumers are trading up from unpackaged and unbranded products to brands, while at the top there is a growing demand for branded, premium, and luxury food. The middle, with an estimated 600 million people and comprising a wide income range, is where the churn is most common, albeit not uniformly for all products. Trading up is most evident in edible oils and dairy products where there is steady, ongoing conversion from unpackaged, loosely-sold edible oils to packaged oils and value-added dairy. Pulses are the most recent product to witness this trend, with food companies and private labels offering branded pulses. Consumers, however, are yet to be convinced that they should replace a commoditised product with a brand, purely based on the promise of hygiene and better quality.

The awareness and understanding of the concepts of wellness, nutrition, and health has grown leaps and bounds among Indian consumers, thanks to media. The Indian concept of health has traditionally revolved around staples such as dairy, pulses, vegetable, wheat, and rice consumption, with not much attention paid to calorie intake or a balanced diet. This perception is evolving in urban areas with health-consciousness being manifested through more people taking to exercise, a greater demand for natural food and ingredients, and a desire to reduce fat and sugar consumption.

Although Indian consumers are yet to forego their sweet tooth, savoury snacking is growing at the expense of sweet. Consumers have accepted packaged savoury snacks better than sweets due to better availability, and the perception of packaged savoury being fresher than packaged sweets (most of which in India are dairy-based and have a poor shelf-life). Media discussion has also focused on excess sugar and not salt intake, resulting in a negative perception of sugar but not for salt.

Domestic food companies have done exceedingly well during the past three to five years and are growing faster than their multinational counterparts. Innovation, access to finance and technology, better packaging, competitive pricing and nimbleness in strategy have helped Indian companies to perform better than their long-established multinational rivals. Local companies seem to be getting their product and flavour formula better suited to the Indian consumer palette, whether they be traditional Indian flavours or ‘Indianised’ versions of international flavours such as kimchi, wasabi, or peri-peri. As these local companies grow and establish scale, action on the strategic investment front through partnerships, mergers and acquisitions is expected.

Author: Umesh Madhavan