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McCain increases India investment as it struggles to meet demand

By RJ Whitehead , 17-Jan-2013

Faced with rapid growth which it is struggling to meet, McCain Foods’ Indian subsidiary has announced plans to invest a further US$69m to introduce a third manufacturing line at its potato processing plant in Mehsana.

The sum, which will begin to roll out in October, is almost double the initial investment the company made in the facility, which is located in the western state of Gujarat. And since the plant opened in 2006, McCain has subsequently invested a further Rs14 crore (US$25.5) in production.

McCain currently leads the fast-emerging Indian market for frozen French fries and other potato products. In the six years since the Mehsana plant opened, the company has captured nearly 80% of the market, and its current output of 43,000 tonnes of potatoes a month is still a long way behind demand.

Changing tastes

McCain’s rise has come on the back of changing consumer tastes and increasing adoption of frozen snacks by households. Consequently, these increasingly Western palates have driven the growth of international fast-food chains such as KFC, McDonald’s, Pizza Hut and Subway across India, and these companies are big consumers of McCain products.

McDonald’s alone accounts for one-third of the Mehsana production. In addition to institutional customers, McCain has a thriving retail business selling not only fries but other frozen potato products, such as Potato Bites with Chili Garlic and its spicy Aloo Tikki mashed potato croquettes. They are sold directly to consumers across 70 cities while hash brown potatoes are exported to South Africa.

Vikas Mittal, the company’s regional MD, said that McCain has to keep up with demand: “McCain is driving the growth of frozen snacks in India and this growth is resulting in the need for capacity addition. The Indian frozen snack market is on the rise and we expect the pace of growth to continue and, hence, even more investment is expected in the short- to medium-term.”

Employment growth

Currently, the company works with around 1,200 contract farmers across 4,000 acres in Gujarat to cultivate processed quality potatoes for the plant. However, to meet increased plant capacity, McCain will have to double its acreage. For this, it intends to grow its workforce by 50%

Mittal added that the company had not been tempted to open a new plant elsewhere the country. “For a variety of reasons, including agro-climatic conditions, a strong base of skilled farmers and infrastructure, Gujarat will continue to be our preferred destination,” he said. 

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