Speak to the executives of India’s largest food companies and they confess a sense of disappointment. For although India is the world’s third largest food producer (Exhibit 1), the combined turnover of its ten largest food companies is only $2 billion—one-tenth the sum turned over by Nestlé’s operations in Europe. In a country of one billion people, it seems that the size of the potential food market might have been overestimated.

The truth is that the markets for the products on which India’s food companies have concentrated—higher value-added items such as breakfast cereals, jams, and sauces—are indeed small because these products are aimed at an elite. The big, and so far largely untapped, opportunity lies with mass-market products—packaged wheat flour (atta), biscuits, poultry, and liquid milk—which could eventually account for more than 80 percent of the total market. In some of these categories, hundreds of millions of customers will be added over the next few years: by 2005, more than 140 million Indians will consume packaged atta, for example, and 300 million packaged milk. This growth in consumption means the overall market for value-added foods will treble from $21.4 billion today to $62.5 billion by 2005.

Changing consumption patterns...