INDIA: Hindustan Lever’s take-over of Modern Foods remains newsy

The jury is still out on whether the privatization of government-owned Modern Foods was the right move, but the signs are good. The company was sold to Hindustan Lever (an affiliate of Anglo-Dutch Lever Bros ) for US$22.7m, the first divestment from a series of "non strategic" shareholdings owned by the Indian Government. Gaining control of Modern Foods suited Hindustan Lever beautifully, guaranteeing a market share in many staple foods; including flour, salt and more recently bread. The latter does not fit well into Indian lifestyle: most Indians make their own bread from (mainly wheat) flour ground at home or in the neighbourhood mill. But Hindustan Lever has a track record of changing Indian food habits to its advantage. Decades ago it convinced an entire generation to abandon milk-derived fats in favour of hydrogenated vegetable oil, and the bread brand is already doing well. Sales in Jaipur are doubling and at the company's 13 bread units more than seven currently work at full capacity, while the Delhi factory, renowned for labour indiscipline, works to one-fourth capacity. Increasing productivity encouraged the Union to raise concerns over the treatment of employees, but with the recent suspension of three officials, Govind Yadav, V K Narang and Ganesh Thakur, for manhandling another employee, it seems that treatment, as well as discipline, has also improved.