Kellogg to set up R&D centre this year

Cereal maker Kellogg will set up its first research and development centre in India by the end of 2015. A month ago, the company indicated it was putting India on its R&D map, without specifying timelines.

The unit, experts said, indicated India's priority for the world's largest cereal maker. This comes despite friction between the Food Safety and Standards Authority of India and packaged food companies. FSSAI is working on guidelines following the Supreme Court's ruling last month to scrap the regulator's product approval process, challenged by food and healthcare companies.

In response to e-mailed questions, John Bryant, global chairman and chief executive officer of Kellogg, said he saw the new R&D facility helping the firm take what was working in India to other markets. "Besides developing products specifically for India, it will be a lead centre for creating products for other emerging markets of Kellogg," he added.

Bryant did not provide investment details but market sources said the centre would cost at least Rs 150 crore. A third manufacturing plant in the country is also likely, though Byrant said it would take another three to four years to come on stream.

Foreign direct investment in food processing has been consistently above Rs 2,000 crore in the last three years. Investments crossed Rs 25,000 crore in 2013-14, the highest ever for the sector, according to the department of industrial policy and promotion (DIPP).

Local companies also are betting on packaged foods. ITC Chairman YC Deveshwar recently said his company would enter the dairy segment soon. Varun Berry, managing director of Britannia, said it would speed up its dairy plans.

Siraj Chaudhry, chairman, Cargill India, part of American food major Cargill Inc, said the country remained a long-term bet for most food companies. "Economic growth results in increased consumption of packaged foods. And with penetration (of packaged foods) on the lower side, this has scope to grow. In that sense, India is critical for most players," he said.

Cargill has announced its largest investment in India, a Rs 600 crore corn milling plant near Bangalore that will become operational next month.

Byrant said he saw India as a market where business could triple in the next few years. The turnover of the Indian unit of Kellogg is Rs 800 crore, according to market sources. "We have been consistently investing in emerging markets. In the next five years, we see Kellogg India contributing 20 per cent to the Asia Pacific revenue," Byrant said.