India’s food processors simply targeting the wrong kitchens

Experts advocate that the Indian domestic kitchen is the one to target. The middle-class Indian is earning more, buying more. He wants to try new food products, experiment, get new tastes going at home. His fatter wallet and bigger grocery bags are the fundamentals on which the modern food processing industry will chart a high growth path for itself. Well this, at most, is partly true.

Understanding Indian demographics is important here, especially for new entrants and multinationals. In the West, there is a demographic called the Baby Boomers—the people born in the post-WWII period up to 1964. Then there was Generation X, which came after the Baby Boomers, right up to the late 1980s.

In most Western nations, like Australia and the US, Generation X saw the most growth in their incomes and lives—in relation, the Baby Boomers had to work much harder for the same living. Moreover, they didn’t leave much in the way of a bright future for Gen Y—kids born after them, right up to the 2000s.

Now India has its Baby Boomers too. In most middle class homes, these are heads of households who lived through a dreary, minimalist and socialist economy where the necessities were often luxuries. They lived on meagre incomes, and did so conservatively but never desperately. They always knew when a spend became a splurge and they still remind their later generations about this. I still get whacked on verbally when I buy a pair of Rs3,000 ($60) Nike shoes by my parents.

Importantly, for food processors, this group still decides on what is being cooked in a household’s kitchen. As such, most middle-class households still have modest spreads with local cuisines and local legacy products. The latter represent value to them; it’s what they would buy during the tough times, and now they stick by them in these better times. That is why Borges Olive Oil will not replace Dhara Sunflower Oil anytime soon, no matter the health benefits. For them, value comes first, and value is not something new entrants and multinationals can easily fight entrenched Indian legacy brands on.

This is not very good news, but it’s also just half the story. While Baby Boomers might be conservative and corner the kitchen at home, Gens X and Y are much more flexible and they show this flexibility outside the home.

Cue the food service market. On the back of conducting many interviews, it comes as a surprise to me how not enough food processors talk of the Indian food service market hopefully and encouragingly. Even through tough times, it has been growing by almost 11%, rising from US$4.5 billion to US$7.4 billion by 2014, according to a report by the National Restaurant Association of India.

Quick-service restaurants and casual dine-in formats account for nearly three-quarters of this, with cafes (12%) and fine-dining outlets, pubs, bars, clubs and lounges making up the rest. I don’t know about the West, but burger joints and coffee shops in India are not populated by the 50-plus.

Sure, the restaurant industry in India is still marred by licensing and taxes, as well as high rental costs, but it is healthier now than it was 10 years ago, and it is bound to be better from here on. With global brands like Starbucks and others, the supply chain is getting better as well, with procurement becoming more streamlined and rational. And then again, this is a segment where young Indians are ready to try something new, something different and something expensive.

This is the sweet spot for new entrants into India’s food processing industry: the kitchen behind the cafe, and not the one in the high-rise home.

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