FMCG Firms Target India’s Rural Markets, Metro Rail for New Cities Ahead of Elections – India Market Watch

August 21, 2017 Posted by India Briefing Reading Time: 4 minutes

Rural India key for Mondelez new investments

Consecutive bad monsoons and recent government policies – demonetization and the introduction of the goods and services tax (GST) – have resulted in declining sales overall for India’s fast-moving consumer goods industry.

Regardless, India’s economy is picking up the pace, and the overwhelming verdict by analysts point to faster growth rates registered in rural India than urban centers.

For instance, Mondelez India Foods Pvt. Ltd, who is the maker of Cadbury chocolates, Tang powdered beverage, and Oreo biscuits – is actively investing in its rural distribution networks in the country.

The company is now selling its products to 40,000 villages up from 20,000 in 2016. Backing this up are aggressive investments in its 12 manufacturing plants, including in Sri City in Andhra Pradesh state. Since the GST has categorized a number of its products in the higher tax bracket – Mondelez is also renovating its low-priced products targeting rural markets by increasing the content in low-priced chocolate bars or introduction of more premium ingredients.

These strategies showcase how FMCG firms are responding to India’s growth trends, and the challenge to maintain margins while expanding market share.

McDonald’s terminates franchise agreement in India

McDonald’s India subsidiary has terminated its franchise agreement with Connaught Plaza Restaurants Pvt. Ltd (CPRL), which is the north and east India licensee of McDonald’s.

The outcome comes out of an ongoing legal battle between Vikram Bakshi (managing director of CPRL) and McDonald’s India Pvt. Ltd (MIPL), which went in for arbitration at the London Court of International Arbitration. Previously, CPRL shut down 43 of 55 McDonald’s restaurants in Delhi, following its failure to renew their licenses.

McDonald’s will now seek a new developmental licensee partner for north and east India. While the company may be able to successfully rebuild its brand over the long term, international rivals such as KFC, Dominos, Dunkin Donuts, and Taco Bell stand to gain great advantage in India’s hugely competitive fast-food segment.

New cities to be added to India’s metro network by 2019, BJP in campaign mode

The federal government (led by the Bharatiya Janata Party or BJP) announced it will double India’s metro rail network in the next 18 months – a transparently election-oriented promise as Gujarat heads for state elections end of this year, and parliamentary elections are due in May 2019.

New additions to the metro map include the cities of Lucknow, Ahmedabad, and Nagpur – all of which are in BJP-ruled states. Metro networks in Delhi and Hyderabad will also continue to get extended – by 28.4 km (17.4 miles) and 28 km (17.6 miles), respectively.

By March 2019, just ahead of the general elections, 19 new sections in nine cities will be commissioned – adding 313 km (194.5 miles) to the 370 km (230 miles) metro network.

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