Boston, MA -- (SBWIRE) -- 03/07/2013 -- In September 2012, in what might be in time remembered as the most significant global retail event of 2012, India finally opened up its retail industry to foreign investors, potentially paving the way for the likes of Carrefour, Tesco and Walmart to enter what is potentially an outstanding retail opportunity. The new legislation has been met very favourably by the pro-business lobby, which has largely grown frustrated at how long it has taken India to pass this legislation, especially after some false hopes, including most recently in late 2011 when the government reversed its decision to allow foreign retailers to invest in controlling stakes. We believe Walmart to be the strong favourite to lead investment in India over the next few years, ahead of Carrefour and Tesco who, as we have argued previously, are preoccupied with sorting out their domestic businesses.

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Headline Industry Forecasts (local currency, INR)

- 2013 food consumption growth = +7.0%; compound annual growth rate (CAGR) 2012-2017 = +7.2%
- 2013 alcoholic drink value sales growth = +13.2%; CAGR to 2017 = +13.0%
- 2013 soft drink value sales growth = +19.0%; CAGR to 2017 = +16.9%
- 2013 mass grocery retail sales = +18.5%; CAGR to 2017 = +15.1%

Key Company Trends

Diageo Continues India Push With United Spirits Stake: In November 2012, UK-based multinational drinks firm Diageo agreed to purchase a majority stake in United Spirits, India's largest spirits producer. Diageo will pay INR11.7bn (US$2bnn) for a 53.4% stake in the business, which in our view will put the firm in a strong position to drive growth within the Indian spirits sector. Previous discussions between the two firms broke down in 2009. However, with United Breweries Group currently under pressure owing to the struggles of the group's airline business, Kingfisher, a deal has now been successfully brokered.

General Mills Eyes India: In September 2012, US food giant General Mills said that it is looking for acquisitions in India to cement its exposure to the world's most attractive emerging markets. In an interview with the Financial Times, the firm's CFO suggested that exposure to the Indian market would complement its strong growth in China and improved position in Brazil following the acquisition of Yoki.

Risks To Outlook

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