Instant Noodles Market In India

Wed, 18 May 2011 18:08 PM

.R.K. Tomar

    The instant noodles market in India, which has long been dominated by Swiss giant Nestle with its brand Maggi, has been seeing a flurry of activity with new entrants stocking the shelves in recent months. Be it GlaxoSmithKline’s Horlicks Foodles, Hindustan Unilever’s Knorr Soupy Noodles, or ITC’s Sunfeast Yippee, each is out to grab a share of the consumer’s palate and wallet. “The instant noodles market is set to grow from `1,300 crore (US$288 million) at present to around at least `3,000-3,500 crore by 2015 and therefore all the big FMCG players have their eyes set on it.” With producers spending far more money on the category than they are earning from it, “marketers can safely assume that the noodle wars have begun.” In India, they were made popular by Nestle, which introduced its product here under the brand name “Maggi” in 1984.

Maggi Noodles came with a tantalizing promise - ready to eat in just two minutes. The combination of convenience and taste proved to be potent. Over the years, other brands likes Top Ramen from Indo Nissin, Ching’s Secret from Capital Foods and Wai Wai from CG Foods also wooed the space. But all of them played a distant fiddle to Maggi and could not make a dent in its overwhelming 90% plus market share. Shubhajit Sen, executive vice president for marketing at GlaxoSmithKline (GSK) concurs. Sen said GSK decided to enter the segment because “consumers were looking for a choice in instant noodles; combined with that, the equity of Horlicks is leading to a lot of trials.” Foodles comes with the punch line of “Noodles without the ‘No’: Available only in the multi-grain and wheat variant, the product is being promoted as having higher nutritional value compared to other popular brands. The main unique selling proposition (USP) of Foodles is the vitamin-packed health-maker sachet that comes with the pack. According to Sen the initial response to Foodles is “much higher than GSK’s expectations.”
Market estimates put the instant noodles sector in the country currently at around `1,300 crore (US$288 million) and growing at around 15% to 20% annually. According to news reports quoting market research firm on an all-India basis across urban markets, Maggi has been steadily losing market share to the new entrants. From a 90.7% market share in December 2009, Maggi slipped to 86.5% in July oflast year. Nestle, of course, is not keeping quiet and has upped its tempo. It has been widening its product range with new flavors and new variants. While its hot-selling variant continues to be of refined wheat flour, Maggi too has jumped onto the health platform with whole wheat and multi-grain offerings. Also, unlike earlier, when Maggi was wooing primarily children, the product is now being positioned as a snack for all age groups. Future Group’s Chawla says that this was inevitable. “The category boundary is set to be re-drawn. From a snack food targeted at children, the instant noodles category has evolved as a mainstay meal even for grown-ups.” Chawla adds that the Future Group too is “betting big” on this category. It has increased the number of Tasty Treat instant noodles variants from two to five in the past 12 months and is planning to further increase the number to seven.noodle
 
The growing interest and action in the instant noodles market is not an isolated phenomenon, but is in fact reflective of a deeper change in the India social ethos. Powdered soups, cooking pastes and purees (US$33 million), instant pasta (US$22 million) and ready-to-eat meals (US$17 million) are other recent examples. What’s more, it’s not just food habits within Indian homes that are changing. Bijoor estimates that “from a single meal eaten in a restaurant in a month a decade ago, the average urban Indian in the top eight metros is now consuming 7.8 meals a month in restaurants.”
 
According to Pradeep Kumar, there are several reasons for this change in Indian food habits: the country’s young demographic profile, increasing family income, accelerating urbanization, the cosmopolitization of major urban centers, unprecedented interstate migrations, increasing number of working couples, time constraints, shortage of household help, global travel, increasing exposure to global cuisine and so on. “The localization of cuisines to match customer tastes regionally has
played a major role in the acceptability of different cuisines in the country,” he adds.

In keeping with India’s changing food habits, McDonald’s has recently embarked upon its most ambitious plan in the Indian market. Globally, breakfast contributes to around 25% of McDonald’s revenues; it now plans to tap the breakfast market in India. According to Vikram Bakshi, managing director of  McDonald’s India (North & East), “Given the kind of penetration that we have achieved in markets like Delhi, the NCR, Mumbai, Calcutta and Bangalore, we are now in a position to offer this breakfast menu in a major way.” The chain has around 200 restaurants in the country and plans to offer its breakfast menu in 70% of its outlets in the next three years. McDonald’s breakfast items include items like wraps, muffins, eggs and sandwiches.  ”Our primary target is youngsters with the craving for Western cuisine and young families that would rather enjoy a relaxed weekend morning together [instead of] slaving over the hot stove,” says Bakshi.

Of course, getting the right mix is not an easy task, nor does it come cheap. McDonald’s, for instance, took 12 years to become profitable on a per store basis and 13 years to achieve overall breakeven in India. “When we entered this business we knew we were in it for the long term,” Bakshi of McDonald’s says. According to Kataria of Yum! Brands, the company has “till date invested US$100 million in the country, and to achieve the target turnover of US$1billion, we plan to invest a similar amount till 2015.”

Apart from getting the taste right, what are the other challenges of selling in the Indian market? “The biggest is that our costs, including realty and equipment, tend to be first-world costs, while our prices [to the consumers] are essentially very low,” says Kataria. He is quick to add that despite this, Yum! is a profitable brand in the country. McDonald’s Bakshi notes that in India, one needs to invest significant amounts of money in infrastructure - including power backup, reverse osmosis plants and pressured water equipment - which is not necessary in some of the chain’s other operations globally. Kitchen equipment costs, Bakshi says, are double here as the company maintains strict separation of the vegetarian and non-vegetarian items at all times.

Market estimates put the instant noodles sector in the country currently at around ‘1,300 crore (US$288 million) and growing at around 15% to 20% annually. According to news reports quoting market research firm Nielsen, on an all-India basis across urban markets, Maggi has been steadily losing market share to the new entrants. From a 90.7% market share in December 2009, Maggi slipped to 86.5% in July of last year. Nielsen was not willing to share more recent data with India Knowledge@Wharton, but industry watchers like Harminder Sahni, managing director of Wazir Consultants, a firm that focuses on brands and the retail space, say that it is likely that Maggi’s share would have fallen further in the recent months.

Nestle, of course, is not keeping quiet and has upped its tempo. It has been widening its product range with new flavors and new variants. While its hot-selling variant continues to be of refined wheat flour, Maggi too has jumped onto the health platform with whole wheat and multi-grain offerings. Also, unlike earlier, when Maggi was wooing primarily children, the product is now being positioned as a snack for all age groups. Future Group’s Chawla says that this was inevitable. “The category boundary is set to be re-drawn. From a snack food targeted at children, the instant noodles category has evolved as a mainstay meal even for grown-ups.” Chawla adds that the Future Group too is “betting big” on this category.

The growing interest and action in the instant noodles market is not an isolated phenomenon, but is in fact reflective of a deeper change in the India social ethos. Powdered soups (estimated market size: US$55 million), cooking pastes and purees (US$33 million), instant pasta (US$22 million) and ready-to-eat meals (US$17 million) are other recent examples. What’s more, it’s not just food habits within Indian homes that are changing. Bijoor estimates that “from a single meal eaten in a restaurant in a month a decade ago, the average urban Indian in the top eight metros is now consuming 7.8 meals a month in restaurants.”

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