Sharleen D’Souza, Business Standard

Mumbai, 7 July 2024

In 2023, after more than two years of development and testing, Mondelez India launched a version of Bournvita that delivers about half the recommended daily allowance of key micronutrients for children, including iron, iodine, and zinc, as well as vitamins A, C and D. All this while having 15 per cent less added sugar.

“Prior to this and around two years ago we also introduced Bournvita 50 per cent less sugar variant to provide an option for consumers. We have made adaptations to our portfolio products like Bournvita biscuits, which now have 15 per cent less sugar, and our most loved Oreo chocolate variant has also seen a 5 per cent decrease in sugar content,” the company said in an email.

This drive is not confined to Mondelez. Other multinational companies, too, such as Coca-Cola, PepsiCo, and Nestle India, have been working on bringing down the sugar, salt, and sodium content. They could be patting themselves on the back for doing this. Not only has the Indian consumer become more health conscious than ever — with all the talk going around that salt and sugar are two of the monsters in your kitchen (the third being maida) — but also the country’s food regulator has swung into action.

On Saturday, the Food Safety and Standards Authority of India (FSSAI) approved a proposal that information about the sugar, salt and saturated fat content on labels of packaged foods and beverages should be bolder and bigger. “Along with empowering consumers to make healthier choices, the amendment will also contribute towards efforts to combat the rise of noncommunicable diseases and promote public health and wellbeing,” the FSSAI said in a statement.

Earlier, the regulator advised ecommerce platforms to ensure that dairy-, cereal-, and maltbased beverage mixes were not available under the “health drinks” or “energy drinks” categories. The recommended sugar intake is 20 grams a day for adults and 25 grams a day for those below 18. Not more than 5 to 10 per cent of a person’s total energy intake should come from sugar. Children under two are not supposed to consume any added sugar. However, these guidelines are often breached because people tend to consume packaged foods.

Therefore, experts and activists have been calling for a different labelling, which would announce out loud what lies inside.

Eating right, drinking right

Some multinationals had already been working on reducing the salt and sugar content. For instance, Coca-Cola removed more than 900,000 tonnes of added sugar globally since 2017, and 19 of its top 20 brands offer reduced-sugar or zero-sugar options. In India, Coca-Cola’s Minute Maid Honey Infused drinks offer added dietary fibre for healthy digestion in three flavours.

“In 2022, approximately 68 per cent of our global beverage portfolio contained less than 100 calories per 12-ounce serving (350 ml), with 246 low- or no-sugar options launched,” Coca-Cola India said in a statement to Business Standard.

The company added that it prioritised transparency by placing calorie information on the front of all its packaging worldwide and did not market its products directly to children under 13.

Nestle India joined the FSSAI’s Eat Right movement and signed the pledge to reduce an average of 6 per cent added sugar, 10 per cent salt, and 2.5 per cent fat in its relevant product categories. “The company has achieved these commitments,” it said.

Varun Beverages, PepsiCo’s India bottler, told its investors on a conference call that its gross margins improved significantly, rising by 385 basis points to 56.3 per cent — and sugar had a role to play in it.

“This increase was largely driven by our focus on reducing sugar content and the light-weighting packaging material, incidentally, also meeting our sustainability initiatives along with the benefits from reduced PET prices which contributed to this improvement,” Raj Pal Gandhi, chief financial officer of Varun Beverages, said on the investor call.

Approximately 46 per cent of the company’s reconsolidated sales volumes, he said, came from low-sugar or no-sugar products. The no- or less-sugar trend is working for the company as it optimises its cost structure and enhances its overall efficiency.

“These efforts have had a tangible impact on our financial performance with EBITDA increasing by 23.9 per cent to the level of Rs. 988.76 crore year-on-year, and the Ebitda margin improving by 240 basis points to the level of 22.9 per cent in quarter one of 2024 (January-March),” Gandhi said. Ebitda, a widely accepted benchmark of profitability, is short for earnings before interest, tax, depreciation, and amortisation.

“So, we are developing more and more — Gatorade, we mentioned a new launch which PepsiCo has given us formulation with zero sugar. So, effort is there, and constant effort is there to reduce the sugar content,” Gandhi said. PepsiCo India said in an earlier statement it had initiated trials of a blend of sunflower oil and palmolein oil in certain parts of its portfolio last year, thus becoming one of the few players in the food industry in India to do so.

Rush of junk

Experts say the standards for food and beverages vary across the world and India should have its own. “There should be thresholds for healthy and unhealthy and, in my view, this should be labelled boldly on the front of the pack,” says Arun Gupta, convener, Nutrition Advocacy for Public Interest (NAPi), a think tank.

A report titled The Junk Rush, jointly brought out by the Breastfeeding Promotion Network of India and NAPi, said: “India faces a severe public health crisis of obesity and diabetes.” In 2022, a group of public health experts, consumers, lawyers, and patient groups had called upon the government of India to check the soaring consumption of junk food among the country’s youth.

“Certain countries are more stringent than others. Even global brands have the same product, but the ingredients differ across countries and continents,” says Devangshu Dutta, founder of Third Eyesight. He explains that India still has some road to travel on food safety, alleging that some ingredients benefit companies more — such as by providing a longer shelf life — than the consumer.

“The Indian regulator is still very new to the game. If you look at processed foods, it is a newer market and the regulator needs to pick-up pace,” Dutta says.

On Saturday, the FSSAI picked up pace.

(Published in Business Standard)

When American fast food standard bearers McDonald’s and Domino’s Pizza stepped into India in the mid-1990s, the market was just ripe enough for take-off.

McDonald’s and later Domino’s Pizza can be credited with not just growing the consumer appetite for fast food but also for fostering an entire food service ecosystem, including fresh produce, baked goods, sauces and condiments, and cold chain technology.

India has been typically difficult for business models driven by scale, replicability and predictability. The customer is price sensitive, operating costs are high and non-compliance of business standards is a frequent occurrence. In this environment, these brands have reinvented the meaning of meals, snacks and treats.

Their growth has set the stage for other international players and also set business aspirational standards for Indian food entrepreneurs and conglomerates alike.

Product experimentation has also been an important part of their success; it keeps excitement in the brand alive and help improve footfall. However, how far a product sustains and whether it becomes a menu staple can’t be predicted accurately. New products also need significant investment in both supply chain and front-of-house changes in standardisation-oriented QSRs, so the new product launch cannot be undertaken lightly. This is one reason these successful QSR formats don’t overhaul their menus drastically but make changes incrementally.

For these market leaders, future scale and deeper penetration is only feasible with higher visit frequency. For growth in middle-income India, they need to become a significantly cost-competitive option to be seen as more than a ‘treat’ or celebration destination.

So, while both McDonald’s and Domino’s Pizza have invested significantly in Indian flavours and menu offerings, perhaps it’s also best for them to reconcile with the fact that there will be a significant part of the consumer’s heart, stomach and wallet that will remain dedicated to indigenous offerings.

In a global environment that’s turning hostile to fast food, India isn’t a quick-fix growth market, but it’s certainly one to stay invested in, for the longer term.

And I have no doubt that as much as these companies aim to change India, over time India will also change them.

(Also published in Brand Wagon, The Financial Express)

As the debate over FDI (even for single brand retail) continues, over 250 international brands in the food service and fashion and lifestyle sectors alone continue to service the Indian consumers. Interestingly more than half of them are present in the Indian market through the franchising route.

Franchising has been a preferred entry strategy especially in case of the food service sector. Many of the international food brands have opted to give the master franchise to an Indian partner who can use the international brand’s name but is responsible for sourcing the ingredients and maintaining the international quality standards for food and service. One such example is Dominos, which incidentally is also the country’s largest international food service brand. Of course, as FDI liberalisation seems nearer the finish line, brands such as Starbucks are choosing to join hands with an Indian partner while others such as Denny’s Corp are planning to tie up with regional licensees.

In case of the fashion sector, in the early years of liberalisation few international companies chose franchising. Instead some chose licensing to gain a quick access to the Indian market at a minimal investment. Others set up wholly owned subsidiaries or entered into majority-owned joint ventures to have a greater control over their Indian business operations, product sourcing and supply chain and brand marketing.

However, at the turn of the last decade, many international fashion brands chose franchising owing to favourable business environment. An environment conducive for growth of franchising was created by reduction in import duties under WTO agreements, the absence of a wide network of multi-brand retail platforms, the need for using exclusive branded outlets as a marketing tool to create a full brand experience and the simultaneous growth of real estate investors who were potential master franchises ready to invest capital and real estate.

The question is how the liberalisation of FDI norms will impact the choice of market entry strategy for the international brands. Would franchising continue to remain the preferred entry mode as we set into the liberalised FDI regime? The change in foreign investment norms has already led to some brands (in particular those in the fashion and lifestyle sector) transitioning their existing licensing or franchise partnership into a joint venture or wholly owned subsidiary while the new entrants are actively considering ownership routes rather than franchising.

Certainly, the ideal scenario for an international brand would be to have complete ownership and control over the operations in a strategic market like India, but direct investment does also increase their risk and the investment is not financial alone. Amongst other choices licensing offers the least control, and while joint venture may be preferable for some brands, for many franchising still proves to be the practical choice for some time to come.

Franchising may potentially be quicker way to launch with higher chances of the retail business being successful. As it is an “entrepreneurship” model of business, the franchisee’s motivation to make the venture a success is high. The international brand has an assured income by way of royalty on the license agreement and could expand more rapidly in the market. Having a local partner with a closer understanding of the market and the ability to adapt to the changing needs of the consumers also helps to ensure that the international brand’s offering is tuned in to consumers’ demand.

Further, unlike more developed markets where brands have sizable networks of large-format store as a launch and growth platform, in India there are still limited choices to simply “plug-and-play” using department stores or any other large-format retail network. Partnering with a franchisee who has access to retail real estate can be a quick way to reach the target consumers. On his part the franchisor needs to ensure that the business model is well thought through in terms of the team and infrastructure required and is scalable.

For a successful relationship it is vital that the franchisee has an entrepreneurial mind-set. The essence of the brand needs be well understood, and the franchisee must have operational involvement rather than a “passive investment” approach.

If both partners understand their respective responsibilities, franchising can truly be a win-win business model.

Global quick-service restaurant brands are expanding their footprint in the quickly evolving Indian market. But some are also falling by the wayside.

Here are some perspectives from the industry (ET Now telecast video – about 6 minutes):

Click here

Most of the people reading this would be familiar with fast food, and think of it as a cheap, tasteless, “throw-away” excuse for food. You may think of it as a deeply penetrated product category, close to being ubiquitous.

Here’s a picture that tells the other story.

For these kids, who are clearly not able to afford the products, the fries, burgers etc. are aspirational and exciting. For them, McDonald’s is clearly not open early enough (in their lives).

It’s a different perspective when you look through the other side of the glass, I guess.