US soft drinks giant PepsiCo this week announced it would invest $5.5 billion (nearly Rs. 34,358.5 crore) by 2020 to expand its operations in India, becoming the latest multinational giant to bet big on India.
Its key rival Coca-Cola, chocolate maker Cadbury and consumer goods giant Unilever had announced big investment plans in India over the past couple of years, even as the Indian economy has slowed.
Coca-Cola last year said it would also invest $5 billion (nearly Rs. 31,235 crore) in the country.
Cadbury India, part of the US-based biscuits and chocolates maker Mondelez is investing Rs. 1,000 crore to set up a manufacturing plant in Andhra Pradesh.
Coca-Cola officials say the money is being spent to increase bottling capacity in India, expand distribution and also for brand-building.
Last month, it opened its 58th bottling plant in Chatta, Uttar Pradesh.
“We believe we have only scratched the surface of the long-term growth opportunities,” said Indra Nooyi, Pepsi’s chairman and CEO, said.
Indeed, consumption of fizzy beverages in India, for instance, is far low at less than 20 servings a year, compared with the international average of 94 servings.
Analysts say the packaged foods market in India is growing over 15% each year and will top $30 billion (nearly Rs. 1.87 lakh crore) by 2015.
“Consumer companies see it as a strong market to be in the long term, given that consumption levels are low, penetration levels are lower…Despite the slowdown, most consumer companies have grown reasonably 15-20%, and that is driving fresh investments by companies,” said Pinaki Mishra, head of consumer goods and retail practice at Ernst & Young.
India’s rural market accounts for of around 840 million people, and analysts say rising income levels and aspirations is increasingly driving demand there. Over 2009-10 and 2011-12, rural consumption per person grew annually at 19%, according to National Sample Survey Organisation data (NSSO).