Nestle has announced that it will open a research and development centre in India as part of a wider plan to harness the growing economy and young population of the country. This move reveals the current trend within larger Western companies to focus on India as a gateway to the emerging economies of the East.
Although India currently only makes up one percent of Nestle’s global sales, the fact that Indian sales increased by almost twenty percent in 2009 suggests that this may not be the case for much longer. The increasing youthfulness of the population means that Nestle faces a broader consumer base in India than it has ever seen before. This opportunity has not been missed by other companies, such as Kraft and Coca Cola, who have also increased their Indian investments in recent years. However Nestle is a key example of how this opportunity has been captured because of its distinctly personal and local angle to approaching the market.
Nestle will invest fifty million dollars in the research centre, which it aims to have completed by 2012. In addition it is further building two new factories, one of which will solely cater for its ‘Maggi noodles’ (a line that is very popular within India). These bases will be predominantly staffed by Indians and therefore economically important to the communities they are part of. This local employment is just one aspect of Nestle’s plan to make products that will both appeal to traditional Indian tastes and be affordable for local consumers. The plan is decidedly ‘local’ in that aims to listen to what its customers say; “we have to understand the consumer” says Klaus Zimmermann, Senior Vice President of Nestle. The company has already achieved popularity in India with the introduction of its Thrillin curry two-minute noodles and Sweet Chilli Sauce, now it plans to expand these ranges to provide nutritionally-enhanced foods that will appeal to the lower income market.
Nestle benefits from taking this localized approach in that through understanding the needs of its local market it also increases its global hold over the emerging economies of the East. Moreover this duality is vital in ensuring that Nestle retains the position it has established for itself in India. A. Helio Waszyk, Chairman and Managing Director of Nestle India, states that the company must “work harder to keep our presence and position”.
Indeed the position of companies within India is just part of the wider business competition over a network of ‘emerging economies’. Nestle alone predicts that fourty-five percent of its sales by 2020 will come from this emerging network. In this way Nestle’s localized approach to business doubles as a strategic way to break into these new international markets.
On a domestic level India is also the ideal place for expansion because of its history of innovation and inexpensive workforce, for example scientists in the country earn less than ten percent of the salaries of their Western counterparts. Taking into account all these factors it is not surprising that companies are investing in India, however the question is whether they will invest as locally and specifically in the needs of the country’s people as Nestle have done with this new venture.