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Business

Frozen pizza chefs eye lucrative Chinese and Indian markets

Frozen pizza sales helped Dr. Oetker get through 2010. The international food producer wants to build up operations in China and India, but logistics and social issues may keep frozen food from catching on there.

A frozen pizza

Frozen pizza has yet to catch on in India

For food giant Dr. Oetker, a household name in Germany when it comes to prepared foods like pizzas and pudding, or blancmange, sales outside its home market helped lead the way during 2010. With turnover from some 40 countries outpacing its domestic business, the company is working to gain a toehold in developing markets like China and India.

Dr. Oetker's domestic turnover increased 5.6 percent in 2010, bringing it slightly above 2008 levels. Internationally, growth was nearly twice as high, at 10.3 percent, with consistent growth since 2008.

Although Dr. Oetker reduced international investment by 10 percent in 2010, it slashed domestic investment by a full 68 percent. That's because it's coming off the tail-end of major investments during recent years, according to the company.

The company also acquired Simplot Australia's frozen pizza business in January, and is now building a factory in China, which it expects to complete by the end of 2012. Its total 2010 investment of 61 million euros was primarily into production capacity and logistics networks.

Cultural and logistical hurdles

An Indian boy reaches for a pot

Logistics, price and cultural traditions stand in the way

Dr. Oetker spokesman Jörg Schillinger said the company has started small in India with a range of products including pizza toppings and pasta sauces. Frozen Dr. Oetker pizzas imported from Germany have been available in a handful of Chinese cities since 2008, but the company has needed to adapt to the nuances of the Indian market.

Two years ago Dr. Oetker began sending scouts to India to study eating habits there, and bought two small companies. It now has some 350 employees in the country - headed up by a German-Indian - and is building an additional factory.

"We quickly realized we wouldn't get ahead with our normal pizzas and puddings," Schillinger told Deutsche Welle. "At the moment we're selling more on the Indian market than we can produce."

The company's Indian operation sells various sauces, spreads and dips for Italian, Mexican and Asian foods under the name "Dr. Oetker Fun Foods." It also sells condiments like mustard and mayonnaise, cake mixes and dessert drinks.

It's a small step to begin establishing a foothold in a region which will grow into a prime market, Schillinger said. "Growth in the world's population will take place in Asia in the future, and not so much in Western or Eastern Europe."

Long-term potential

Dr. Oetker pudding

Pudding, or blancmange, is one of Dr. Oetker's specialties

Still, Asian markets present formidable challenges to any Western food company. Bob Goldin, of Chicago-based food industry consultant Technomic, said the market in India, for instance, is still "very early on."

"It's still an ingredient-based, low value-added market," he told Deutsche Welle. "There are issues of affordability, but more importantly, there are supply chain restraints. It certainly will develop, but it's going to take a long time."

According to Andreas Chwallek, an editor at German trade publication Lebensmittel Zeitung, China has just begun to reach the point of being a lucrative market for frozen foods.

"In China it has become the case that in urban centers, every household has access to a freezer," he told Deutsche Welle. "I think anyone who gains a foothold there will start by concentrating on the population centers where there are developed logistics networks. The potential is in the distant future."

Dr. Oetker has 9,655 employees worldwide and is linked with the Dr. August Oetker KG holding group, which in addition to food and beverages deals in shipping, banking, hotels and chemicals.

Author: Gerhard Schneibel
Editor: Nicole Goebel

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