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Kellogg plans first R&D unit in India

Times of India:  August, 2015

Chennai: World's largest cereal maker, the $14.6-billion Kellogg Company, wants to triple the size of its Indian business. Kellogg India is a roughly Rs 800-crore company, contributing 10% to the parent's Asia-Pacific revenues, making the country its fastest growing market in the region. The plan is to take this contribution to 20% in five years.

Considering that Kellogg India is growing in double-digits, the Michigan-based parent is making large investments in manufacturing and also plans to set up its first R&D facility in the country at Taloja, near Mumbai. Emerging markets like India are key to Kellogg Company, whose second quarter earnings fell 24% from a year ago, with persistent weakness in its core US cereal market.

After making an investment of $60 million in its second manufacturing plant at Sri City (Andhra Pradesh), Kellogg Company is already planning to set up a third cereal facility in India in 3-4 years. The company expects the demand to grow in the wake of changing breakfast habits in India. In an exclusive interview to TOI, John Bryant, chairman & CEO, Kellogg Company, said: "In the last 12-18 months, we invested about $100 million in India, which gives the potential size of opportunity here."

Bryant said the cereal category in India is at an inflection point with consumers looking for healthier and convenient alternatives. "We had one cereal facility for the last 20 years and we have opened a second one, and expect that in three or four years, we should be opening our third one to accelerate our growth. In the next several years, we should triple the size of the business in India," he said.

With an R&D facility in India, Kellogg Company is looking to improve upon its technical capability to make products specifically for India. The idea behind promoting Indian innovations follows the success of flavoured oats, which hinged on the insight that Indian consumers have different taste preferences, which veer towards a savoury breakfast.

Kellogg India is often critiqued for the long time it took to reach the current size since it started operations in 1994. Over the last few years, however, the pace of growth has accelerated. India got noticed as an important market when Kellogg's global board met in Mumbai — the fourth venue after the US, the UK and Canada — two years back.

Bryant, who also interacted with consumers here — and learnt how their aspirations were largely pivoted around their children — said breakfast was the hardest part to change a habit. "Once you break into the habit, you have a wonderful opportunity to drive consumption."

Besides cereal, Kellogg is also keen on bringing its snacking brands, such as Pringles, to India, a market which currently does not truly reflect the global portfolio. Globally, Kellogg is the second largest maker of cookies, crackers and snacks. "In the next several years, we could have a big footprint in snack as well as cereal. We could be much bigger in India across the entire portfolio," said Bryant.

Bryant's visit coincided with Nestle India being slapped with Rs 640-crore damages suit by the government. When asked whether Kellogg Company was worried about the turn of events around Maggi, which faced a ban in India, Bryant said: "We would never like to see a situation like this. We have a very strong programme and processes in place to absolutely safeguard on food."

Although he did not specifically comment on Maggi, Bryant said safety was a top priority for Kellogg Company globally, given that "every time our board of directors meets, I present on food safety".