Foreign firms seek a bite of India's $90 billion food market

By Rina Chandran

MUMBAI (Reuters) - When Kellogg launched breakfast cereal in India 14 years ago, it underestimated the stranglehold of traditional cooked breakfasts.

Cartons of cornflakes sat unsold on shop shelves. Those who ventured to buy cereal ate it with hot milk, another ritual as until recently milk was rarely pasteurized in India, and they were put off by the soggy consistency with none of the crackle and pop promised by the advertisements.

Kellogg fought back with a massive educational campaign and introduced products to suit local tastes such as Basmati rice flakes and mango-flavored cereal for sweet-toothed Indians. It also made small packs for 10 rupees ($0.25) to encourage trial.

"It would be foolhardy for me to say Kellogg has replaced cooked breakfast ... I don't think we can ever hope for that," said Anupam Dutta, managing director of Kellogg India.

"But we've become a part of the consideration set for breakfast in many Indian homes, and that's a tipping point," he said.

Getting a foothold in India's processed foods market, estimated to be worth $90 billion, requires persistence and a willingness to adapt products to suit culinary and cultural preferences, experts say.

Rising incomes, more working women, modern stores and greater culinary adaptation are helping food giants such as Pepsico, Nestle, Unilever, McDonald's and Yum Brands get a piece of the market.

"Every company that wants a share has to invest heavily, localize extensively and be very patient," said Jayanta Roy, at consultancy Frost & Sullivan, which estimates that only a third of the processed foods market is in the hands of large Indian and multinational firms. The rest is controlled by regional firms.