PepsiCo targets India’s booming ethnic snacks sector with another strategic move

Building on its recent announcement to potentially acquire a minority stake in Indian snacking giant Haldiram, PepsiCo has unveiled a new collaboration with Tata Consumer Products Limited (TCPL).

This move aligns with the company’s bold ambitions in India. During an investor call to report its results for the second quarter 2024, Laguarta stated, “India is a big growth space for us and is an investment area for sure. The opportunity is massive – if you take a decade perspective … we’re putting infrastructure on the ground and investing in brands [to] make sure that we build the scale to capture what is going to be, I think, a high demand market for many, many years.”

The remark also highlights PepsiCo’s strategic pivot in the region, shifting its focus from beverages to the rapidly expanding snacks segment. In 2010, PepsiCo partnered with Tata Global Beverages (now TCPL) to form NourishCo Beverages Limited, aimed at developing non-carbonated, ready-to-drink beverages. A decade later, TCPL acquired PepsiCo’s 50% stake, following “extensive deliberation between the JV partners”, according to TCPL’s MD and CEO Sunil D’Souza.

Fast forward to today, and PepsiCo has re-forged its partnership with Tata, this time focusing on India’s booming snacks market. By leveraging Tata’s expertise in food and PepsiCo’s dominance in the snacks segment, the collaboration aims to tap into evolving consumer tastes and capitalise on the growing demand for innovative offerings.

India’s snacks market presents a significant growth opportunity. Estimated at ₹42,695 crore ($5.12bn) in 2023, it is expected to nearly double to ₹95,522 crore ($11.46bn) by 2032, according to IMARC Group. Factors such as urbanisation, a young demographic with rising disposable incomes, and increasing demand for accessible, affordable snacks are driving this expansion, making it a key focus for PepsiCo’s growth strategy.

The company has capitalised on strong international performance, achieving double-digit revenue growth in its snacks division. However, challenges persist in North America, where rising inflation and tightening consumer budgets led PepsiCo to lower its annual sales growth target in October 2024. With regions like Latin America and AMESA (Africa, Middle East, and South Asia) continuing to deliver robust results, the company is increasingly reliant on emerging markets like India to offset slower growth in mature economies.

Strategic partnerships

To strengthen its presence in India, PepsiCo is forming or seeking to form strategic alliances with local producers, including a refreshed collaboration with Tata to launch a new Kurkure flavour infused with Ching’s Secret Schezwan Chutney.

This partnership is viewed as a strategic move to test consumer response in the growing fusion snacks segment, blending Indian flavours with global snacking trends.

PepsiCo has already showcased its ability to adapt products to local preferences, with innovations like Kurkure Green Chutney Rajasthani Style and Lay’s Magic Masala – both of which have resonated strongly with Indian consumers. These products highlight PepsiCo’s understanding of India’s cultural and culinary diversity, further solidifying its presence in the market.

However, while the Lay’s and Doritos maker holds a strong lead in India’s western snacks category, the ethnic snacks sector presents distinct challenges. Dominated by regional giants like Haldiram, Bikaji, and Pratap Snacks, this space is deeply rooted in traditional Indian flavors and marked by competitive pricing that appeals to loyal consumers. Adding to the complexity, the ethnic snacks market is highly fragmented, with a significant share still controlled by small-scale producers and street vendors who cater to hyper-local tastes and preferences.

PepsiCo’s recent interest in acquiring a minority stake in Haldiram Snacks underscores its determination to dominate the ethnic snacks market. With FY24 revenues exceeding ₹12,800 crore ($1.55bn), Haldiram leads the segment with an extensive portfolio of over 500 products, ranging from namkeen to sweets.

These partnerships reflect PepsiCo’s strategic pivot toward capturing India’s diverse snacking audience. By collaborating with established Indian brands like Tata and potentially Haldiram, the company aims to diversify its portfolio, tapping into the rapidly growing ethnic snacks category and gain a stronger foothold in the one of the world’s fastest-growing snack markets.