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India's economy is booming

India's economy is booming and looks set to continue its strong growth, with real GDP growth accelerating from 7.0% to 7.8% in the coming fiscal year. This in turn will financially empower more and more citizens thus creating an ever-growing middle- and upper-class consumer base which will drive up food, drink and mass grocery retail (MGR) sales in the country. As a result a number of the country's food and drink manufacturers as well as its retailers announced investments in Q210 as they seek to take advantage of the opportunities presented by India's sustained economic growth; these are discussed in BMI's recently published India Food and Drink Report for Q310.

US beverage behemoth PepsiCo is one such company seeking to exploit the favourable demographics and strong economic growth formula that buoys India's fast-moving consumer goods industry, announcing in April that it is to form a soft drinks joint venture (JV) with local major Tata Tea. At present both parties have only signed a Memorandum of Understanding and specific details of the JV are still to be announced. However, if the JV goes ahead it will go some way towards improving PepsiCo's ability to compete with fierce rival The Coca-Cola Company (TCCC), with Tata Tea being able to provide a strong local brand name and all-important local market knowledge as well as a vast distribution network. Soft drink sales in India are forecast to increase an impressive 66.1% to 2014 and PepsiCo will want to ensure it is in a strong position to take advantage of this, so a JV with Tata Tea should only benefit PepsiCo.

Elsewhere, in the country's alcoholic drinks sector reports started circulating in February 2010 that SABMiller, the country's number two brewer, was reconsidering its emerging markets priorities and placing investments in Latin America, China and, in particular, Africa, above investments in India. The brewer is said to have become increasingly frustrated by an ongoing supply dispute with the authorities in the high-consumption state of Andhra Pradesh, which has seen the firm lose market share to its rival United Breweries in recent months. However, while India may no longer be one of the brewer's major priorities it will remain on its long-term radar thanks to low existing consumption levels and rapid economic and population growth.

Meanwhile, India's mass grocery retail sector continues to receive a lot of interest, not surprising given its present state of immaturity and the growth opportunities this presents, the strongest growth is anticipated in the hypermarket sector, with sales set to grow by an explosive 342.5% to reach INR314.6bn in 2014. In seeking to take advantage of this sales growth Spar International and Aditya Birla Retail both announced in Q210 that they planned to increase the number of hypermarkets in their networks.

by S. C.
19 june 2010, World News > Asia

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