F&B giants brace for tax onslaught

The government is also considering a nationwide 'fat tax' for so-called 'junk foods'

Several food and drink multinationals and trade groups met in recent weeks to discuss how to lobby more effectively against Indian proposals for higher taxes and stricter labelling rules on fatty or sugary foods, sources familiar with the talks said.

According to officials, Prime Minister Narendra Modi’s administration has begun to look closely at policy proposals under discussion since at least 2015, raising concerns over the possible impact on the $57-billion sector.

Alarmed by rising rates of obesity and diabetes, India plans to frame draft rules within a month requiring manufacturers to display the fat, sugar and salt content of products on packaging.

It is also considering a nationwide ‘fat tax’ for so-called ‘junk foods’, a senior government official said, although that is unlikely to be rolled out in the near term.

Last month, executives from companies including PepsiCo, Nestle and consumer firm ITC met trade groups in New Delhi to coordinate efforts and urge the government to resist pressure from health advocates, according to an industry source aware of the meeting.

The attendees, who felt their efforts to push back had been too piecemeal, talked about forming a core group to unify their message when engaging the government, the source said.

PepsiCo and Nestle did not comment directly on the meeting or its outcome. ITC did not respond to requests for comment.

Trade group All India Food Processors’ Association, whose members range from street vendors to global conglomerates, said two industry-wide meetings were held in February.

Its members, who also discussed ways to offer more nutritious products, plan to send a joint representation to the government and approach health and food officials to express concerns about stringent regulations.

The stakes are high for companies such as PepsiCo, Coca-Cola, Nestle and McDonald's, which have collectively committed billions of dollars to expand in the world’s fastest-growing major economy.

India’s carbonated drinks sector is estimated to grow an average 3.7 per cent annually between 2017 and 2021, while the packaged food sector will grow by 8 per cent a year during the same period, Euromonitor International estimates. Government pressure comes in various forms.

Modi recently told PepsiCo Chief Executive Officer Indra Nooyi that her company needed to focus more on public health, an aide to the prime minister said.

Separately, the prime minister’s office asked PepsiCo to outline how it would reduce sugar in beverages sold in India, the aide added.

PepsiCo did not comment on those remarks by Modi and his office. It referred Reuters to its October 2016 global commitment “to transform its portfolio and offer healthier options”. Modi’s office did not respond to an email seeking comment.