The food standards agency of the United Nations, Codex Alimentarius Commission (Codex) has framed new norms for melamine contamination in food items. Though the norms are applicable to exported Indian foods, it may not have much impact, as melamine is not common in India.

Melamine contamination had created great furore recently in China when baby milk powder was found to have high levels of melamine in it. It resulted in over 10,000 children falling sick and four dead. Earlier, pet foods made in China were recalled from the US market following detection of dangerous levels of melamine.

Presence of melamine in food is unavoidable, as it comes by contact from the containers used to store food items. However, traces of melamine present in foods do not pose health hazards. Only when the levels of melamine reach high concentrations, it is toxic. Codex has specified the maximum melamine levels permissible in food items. For baby foods, it is 1 mg/kg, while for all other food items, it is 2.5 mg/kg.

Melamine is a hard synthetic substance used mainly in making kitchenware, tableware, can coating and countertops. Even when melamine-coated containers are used in the manufacturing of food items, the melamine content in the food won’t reach toxic levels. This happens when melamine is added deliberately to foods to make them appear thicker. When melamine is added to watery milk, it will look richer and full of protein. Unfortunately, usual tests cannot detect the presence of melamine and would tag it as protein.

When consumed in large concentrations, melamine can cause renal problems. Hence it is banned all over the world.

Martijn Weijtens, chair of the Codex Committee on contaminants in foods said, “Establishment of maximum levels will help governments differentiate between low levels of unavoidable melamine occurrence that do not cause health problems, and deliberate adulteration – thereby protecting public health without unnecessary impediments to international trade.”

Codex has also specified maximum levels of aflatoxins, carcinogenic fungal toxins in foods and has given a code of practice to prevent contamination.

India has become a lucrative market for multinational food companies. With India being the second fastest growing economy, companies do not want to miss this golden opportunity to take a share in this boom. Companies are accelerating investments, pushing distribution and fine-tuning strategies to capture the huge middle income population. Major companies such as Unilever, Nestle, Procter & Gamble, GlaxoSmithKline, Kellogg’s and Yum! Foods have named India as a critical market as sales from US and Europe have been stagnant.

Frits van Dijk, Nestle SA’s head of Zone Asia, Africa and Oceania announced in an investors’ conference that the company would invest about 1.5 billion Swiss francs ($1.35 billion) in India, Brazil, Russia and China between 2010 and 2012. Nestlé touched over 2.2 million Indian customers last year. It plans to set up a new research and development centre in India in 2012.

Yum! Brands Inc, which owns KFC, Pizza Hut and Taco Bell restaurant chains, plans to invest $100 to $120 million in India. The company said they plan to open 1,000 restaurants employing around 50,000 people by 2015. The company expects a profit of $100 million from India by 2015.

World’s largest cereal maker Kellogg’s international business head Paul Norman said, “India was set to become the capital of heart health and diabetes over the next decade and the company would use its brands to build its presence in India, France and Mexico.”

P&G plans to target one billion new customers by 2015 from India and China. One of the company’s spokeswoman said, “The bigger picture here is that there are almost seven billion people in the world today and we reach only half of those. As we strive to serve the remainder of the world’s consumers, India becomes an important destination.” GlaxoSmithKline Consumer Healthcare plans to invest over Rs.270 in India over the next 3 years. Unilever also plans to focus on the Indian market.

Soft drink companies registered double-digit growth this summer with the new lemon category surpassing in sales out of all the other categories. The annual consumption for this category is estimated to be around Rs.100 crore. Higher advertising spending by companies like Coca-Cola India and Parle Agro has enabled this noncarbonated soft drink category to be the highest grosser this season with 26 percent growth. According to Nadia Chauhan, joint managing director & chief marketing officer, Parle Agro, the company grew faster than the market, registering a 30% growth this season.

Coca-Cola India, also witnessed consecutive growth for the last 15 quarters. According to Coca-Cola India spokesman, “If one looks at our latest Q1 2010 growth numbers, Coca-Cola India’s unit case volume grew by 29%. It involved share gains across key beverage categories –both in sparkling and in stills.” According to an independent beverage industry report, about 120 billion litre of beverages gets consumed in India annually, out of which 55 percent of sales comes during the summer.

Beverage companies are shifting focus to noncarbonated drinks because of an increase in health consciousness among consumers. Lemon has emerged as a favorite flavor this season with 49 percent share in the juice market. According to Chauhan, “The lemon drink category presents a huge untapped opportunity. Our brand LMN has been performing well. We aim to grow LMN and make the brand as big as Frooti,” For Coca-Cola, Minute Maid Pulpy Orange has enabled them to be a leader in the juice segment as the company claims that Minute Maid is the largest selling orange juice drink in the country.

Increase in packaging costs has put pressure on FMCG companies which are already working with low margins. Prices of packaging materials such as kraft paper, adhesives for corrugated boxes, aluminum foil and packaging plastics have increased to 25 percent in the last three months. This has put pressure on companies to either increase the price of processed food and some other products or to absorb the cost which would affect their margins. FMCG companies are already working with low margins because of the raw material price increase and higher logistic costs due to fuel increase. Last year FMCG companies absorbed these costs, but if packaging prices increase further some companies are considering increasing their product prices.

These increases are expected in the second quarter of this year. FMCG companies are considering innovative packaging and hedging materials to retain profitability. According to Dabur, “the company has absorbed higher packaging costs so far, it may increase prices in some categories if costs rise further”. Currently, FMCG companies have an option to reduce internal costs, cut down on promotional advertising and promotional expenses to accommodate the increase in packaging cost without passing it on to the consumers. Packaging costs typically account of 8-10% of the total costs in a FMCG company. The prices of corrugated boxes have increased 25-30% in last quarter because of low availability of kraft paper.