It may not reach the levels of the Pepsi vs. Coke “Cola Wars” of the 1980s, but the signs of a major skirmish in the making are clearly visible in India’s food sector. 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.

Devendra Chawla, business head for private brands at the Future Group, one of India largest retailers, puts it succinctly: “The instant noodles market [in India] is set to grow from Rs. 1,300 crore (US$288 million) at present to around at least Rs. 3,000-3,500 crore (US$666 million to US$776 million) by 2015 and therefore all the big FMCG [fast moving consumer goods] 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,” Chawla notes. He should know. Tasty Treat, a private label from the Future Group, is one of the contenders in this space.

Instant noodles have been around for over half a century on the global menu card. They are believed to have been invented by Momofuku Ando, the founder of Nissin Food Products in 1958 in Japan. Packaged under the brand name Chikin Ramen, they were priced around six times that of traditional Japanese noodles and were considered a luxury item. 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.

Ready for More

So what is different this time round? What makes the current crop of new entrants a more formidable competitor to Nestle’s Maggi? Industry analysts say that it’s a combination of factors. The Indian consumer is a lot more open to the “instant food” categories and far more demanding of more choices now than he or she ever was before. And the current players have both the brand and muscle power: All of them are known for their strong marketing prowess.

Brand consultant Harish Bijoor, CEO of Harish Bijoor Consults and visiting faculty at the Indian School of Business at Hyderabad predicts that the noodle wars will become more apparent, “especially with ITC — known for its ‘in the eye’ kind of advertising campaigns — launching its version of the product…. With Indians more amenable to changing their eating habits, instant meal categories like these are set to witness a lot of action.”

Shubhajit Sen, executive vice president for marketing at GlaxoSmithKline (GSK) concurs. In an interview with the daily newspaper, The Economic Times, 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 (launched in December 2009) is “much higher than GSK’s expectations.”

Like GSK, which is riding piggyback on the Horlicks brand equity and the health plank, Hindustan Unilever (HUL) is using the strength of its Knorr brand — already popular for its soups range — to muscle its way into the instant noodles category.

Market estimates put the instant noodles sector in the country currently at around Rs. 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 at 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. 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.

Changing Social Ethos

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.”

According to Sahni, 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,” Sahni adds.

Take the fast food chain KFC from the U.S.-based Yum! Brands. When KFC first set up operations in India in 1995, it not only raised hackles because the chain’s use of monosodium glutamate (popularly known as MSG, a flavor-enhancing ingredient) was three times more than was permitted by the Prevention of Food Adulteration Act, 1954, but also because its offerings simply failed to tickle the Indian palate. KFC then went in for a makeover and now offers more options, including many vegetarian items crafted specifically to suit Indian tastes. “We expect KFC to be the rank out-performer among all our brands [other Yum! brands in India include Pizza Hut and Taco Bell] and of the 1,000 outlets planned [by Yum! in India] by 2015, KFC will constitute half,” notes Sandeep Kataria, chief marketing officer for Yum! Brands in India. Yum! currently has 400 outlets in India, of which KFC accounts for 107.

At the U.S. chain McDonald’s too, localization has been a key mantra in India. Its McAloo Tikki (potato patty) burger is the hottest selling item among McDonald’s customers and the sandwich sells more than three times the Pizza McPuff, its closest rival from the within the company’s own offerings.

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 and joint-venture partner for McDonald’s India (North & East), “Given the kind of penetration that we have achieved in markets like Delhi, the NCR [National Capital Region], 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. Adds Wazir’s Sahni: “McDonald’s already has a significant presence in these regions and there are a large number of people in this territory who would rather eat out than cook. It’s a step in the right direction for McDonald’s to bring in customers during its non-peak hours and increase its revenues.”

The first global player to try to change the way Indians eat their breakfast was perhaps the U.S.-based cereal major Kellogg’s, which came to India in the early 1990s. But it soon found that getting a place on the breakfast table was no cakewalk. Indians traditionally prefer a hot breakfast and pouring hot milk on cereal simply made it soggy. But Kellogg’s persisted, and in recent years has been steadily gaining acceptance in Indian homes.

“Each of the brands in our portfolio has been witnessing double digit growth,” notes Sangeeta Pendurkar, managing director of Kellogg’s India. “Innovation and appropriately tailored products,” have played an important role in Kellogg’s growth in India, Pendurkar adds, including the positioning of the Chocos K Pak as an evening snack for children, and Special K as a means of weight management for women. Mid last year, Kellogg’s also launched its Heart-to-Heart Oats in India. With this product, Kellogg’s is not only looking to tap into the growing awareness among Indians of the importance of a healthy breakfast, but also to cater to their preference for a hot one.

Getting the Mix Right

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. But like Kataria, Bakshi too maintains that despite these constraints, the business in India is profitable. In fact, according to Bakshi, “The McDonald’s operations in India are the most profitable on a percentage basis in the entire Asia Pacific, Middle East and Africa region.”

Of course there have been some non-starters too. For instance, HUL had introduced readymade chapattis (wheat pancakes) in the country in the early 2000s. But it had to soon withdraw its product due to poor sales. Similar was the case with soup cubes launched by Nestle. But HUL has recently reintroduced the readymade chapattis. “There is no one formula for success,” Sahni says. “An idea will take time to develop and settle itself in the people’s minds.”