Ready to Eat Food Failure in India

They would rather order in or take out food, as companies such as ITC Foods, MTR Foods Pvt.

Ltd and Heinz India Pvt. Ltd are discovering. It is a discovery that has caused them to reconsider expanding their ready-to-eat food brands. Growth in the ready-to-eat segment—a small part of the total Rs 87,770 crore packaged food market—is slowing. Global information and measurement company Nielsen Holdings NV estimates the category grew 28.

1% in 2011 to Rs 506 crore, a decline from 44. 9% in 2010.Of this, noodles and pasta remained the leaders, growing 32. 1% with sales of Rs 304 crore, says Roosevelt D’Souza, executive director, Nielsen India. And those aren’t strictly ready-to-eat because they require some amount of work in the kitchen.

“The category is yet to pick up in India and there could be a lot of reasons. In India, consumers having a huge amount of convenience in terms of ordering (food) has been a big deterrent,” says Chitranjan Dar, chief executive officer of ITC Foods.The ready-to-eat segment, comprising noodles and pasta, snack and dessert mixes and meals and curry pastes, is targeted mainly at an increasing number of busy working women looking for easy-to-cook options. Products in this category include ITC’s dal bukhara, MTR’s chana masala, Priya Foods’ palak paneerand Heinz India’s Amritsari chole. ITC made its entry into the foods business in 2001 with ready-to-eat preparations under the brand name Kitchens of India. The brand offers ready-to-eat products using the experience of the popular Bukhara and Dum Pukht restaurants at its hotel chain.

The segment makes up a mere 1% of the company’s food business ITC Foods. Interestingly, Kitchens of India sells six times more in the US than it does in India, reflecting a trend common to all companies in the business, and one which is easily explained: Customers (including Indians) in the US (or in other countries) do not have the easy access to Indian food as customers in India do. MTR, the Bangalore-based market leader in the category, made its debut in the ready-to-eat business around the same time as ITC.The company, owned by Sadananda Maiya, was bought by one of Norway’s largest food company, Orkla, in 2007. Orkla continued with the MTR brand name and its ready-to-eat food segment that contributes about 5% to its overall business which is also largely (60%) driven by exports.

The company’s revenue drivers still remain spices and so-called mixes. Ready-to-eat products are “not a category that will give you quick gains and consumers are still not ready to outsource their main meal,” says Vikran Sabherwal, vice-president of marketing at MTR Foods.Indeed, several companies have either gone cold on or scaled down their ambitions for the category. US-based Heinz launched Kitchen Klassics in 2009 but the products, which were being tested in Mumbai, are now unavailable. Earlier, Hindustan Unilever Ltd had planned to launched ready-to-eat chapatis, but the product didn’t make it past the sampling stage.

Dabur India Ltd was also keen to enter the business, but those plans are now on the back burner and the company would rather focus on its cooking pastes, said a company official.This person, who did not want to be identified, said growth in the sector may be slowing as consumers sample ready-to-eat foods but return to their favourite restaurant for take-out meals. HUL said it could not comment on growth numbers as it does not report financials for the segment separately. “Also, we will not be able to give any comments on future business plans or guidance on growth due to competitive reasons and disclosure norms,” HUL said in an email.Heinz, in an email response, declined to share any information at this point as its “experience in the segment is limited”. “Companies are trying to be chefs, but a woman wants the last mile of cooking to belong to her which is why she’d rather hire a cook,” explains Damodar Mall, customer director of Future Group, which runs large-format retail stores under the Big Bazaar brand name that stocks ready-to-eat brands.

Another deterrent to the growth of the category has been the limited number of modern retail outlets.Kitchens of India is distributed across 7,000 modern outlets within the country. Though organized retail has grown, kirana shops, or neighbourhood grocers, still account for 90% of $590 billion retail trade value. “The category will really take off once modern trade grows,” says ITC’s Dar. Price too is a constraint, says Sreekanth P.

V. S. , an analyst at Angel Broking Ltd who tracks the consumer goods sector. “Typically, a product like this costs over Rs 50 and serves two; at that price consumers do not find it worth it especially when other options are available.

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