INDIA: Healthy ambition in evidence as Frito-Lay reveals its agenda of expansion

PepsiCo snack foods subsidiary Frito-Lay, which produces Lays chips, Cheetos cheese puffs and the Lehar Namkeen range in India, has released details of a major programme of expansion, which is designed to capture more of the domestic market.RS 25 crore has been invested in a new potato chip factory in Pune, a second plant to complement its manufacturing facility currently situated in the north at Punjab. Two more plants are planned to cater for the southern and easterly regions. This, the company explained, "can lead to a reduction in freight costs." It can also improve the distribution network and increase output by at least 50%, with the Pune plant producing 3,000 tonnes a year on top of the Punjab plant's 6,000 tonnes.In a further ambitious attempt to command more market share, Lays is strengthening its contact with farmers through an initiative that should provide their entire quota of 40,000 tonnes of high solids potatoes by 2004. Previously, the chip manufacturers have only been able to gain around 20% of its requirement from farmers, and a company spokesperson was pleased with the new initiative: "We are strengthening our backward linkages with farmers which will help bring uniformity and healthy potato chips into the Indian market." This display of confidence is evidence of the growth of Lays,which has had two name changes since entering the Indian market in 1991 and struggled against a consumer base which was initially unreceptive to premium, branded potato chips. Analysts predict that this confidence is justified however, and expect that the expansion will cause real competition to the Delhi-based Uncle Chipps. The organised snack food market in India is valued at about RS 300 crore and a spokesperson from Lays anticipates the company will be worth RS 150 crore by the end of next year.