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Developing tastes

Last updated on: January 28, 2008 11:44 IST

A few months ago in Punjab, as grain farmers set fire to harvested rice fields to clear their land, Jagroop Singh spent the afternoon reflecting on his good fortune farming cows. Singh, a tall Sikh who tends his herd in a white tunic and pale pink turban on a farm near the north Indian village of Aliwal, owns 60 somewhat bony brown animals, which he keeps in an open-air shed on the edge of the fields behind his house.

Keeping cows, like farming wheat, has been an immensely profitable business during the past year, because Singh gets paid a lot more for his milk than he used to. He receives about Rs15 a litre -- a third more than two years ago -- from Nestle India, which collects the milk and blasts it through machines at a nearby factory, evaporating the water and creating a fine white powder.

"The prices are very good, we are very happy," says Singh as he looks over his herd. He's planning to build a new shed soon, as he's running out of room to house his cows. By this time next year, he aims to have 150, which would be exactly 148 more than he owned a decade ago.

Not far away, another Sikh farmer, Jatinder Singh, is equally optimistic about the future. He started his farm a decade ago with just one cow but today has 65, which are kept outdoors in concrete-paved yards and dirt paddocks. Over the next few years, he plans to breed cows and double his milk production.

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But what's good for the farmers is hard on consumers. In India, where milk has traditionally been bought fresh every day and boiled to make tea and curd (this stops it going bad in a country where electricity is intermittent and many people do not have refrigerators), people are now paying around Rs24 a litre - Rs3 more than six months ago.

And milk is not the only basic foodstuff rising rapidly in price, nor India the only country in which people are spending more money on food. Bread, pasta, eggs, coffee, chicken, pork and beef - it is difficult to find a staple food that has not become more expensive over the past year, or a country in which food prices have not gone up.

British food producers increased prices by 7.4 per cent last year -- the biggest annual increase since the country's National Statistics office began tracking them 15 years ago -- due to big jumps in the cost of producing bread, butter, eggs, milk and meat. In Russia, prices went up so sharply -- milk rose by some 30 per cent and bread went up 22 per cent - that the government froze prices towards the end of the year. This month, China warned it may take similar action after food prices soared 18 per cent last year.

The speed at which food prices rose in 2007 has shocked not just farmers and consumers, but also governments. "Rarely has the world witnessed such a widespread and commonly shared concern on food price inflation," the United Nations' Food and Agriculture Organisation says.

Why are food prices going up so fast all over the world? For a start, the world's stocks of grain have been falling, partly thanks to droughts in Australia and Ukraine (both countries are among the world's-biggest wheat exporters). This has helped push up prices. Higher grain prices make food derived from animals -- such as poultry, pork, eggs and milk - more expensive, because farmers who buy grain to feed their animals pass on the extra costs.

Meanwhile, biofuels are also having an effect. As global demand for non-oil-based sources of energy rises, some farmers are choosing to turn their crops into biofuels rather than food.

But the biggest cause of higher food prices is not biofuels or the fall in grain stocks: it is the remarkable changes occurring in the kinds of foods people eat, particularly in the fast-developing nations of India, China, Russia and Brazil. These changes are so big - and so swift - that their impact is being felt all over the world.

This is particularly acute in India, as is clear at New Delhi's Khan Market branch of Cafe Coffee Day. Khan Market is a dusty group of shops, boutiques and restaurants on the south side of the city that attracts affluent locals and foreigners, and Cafe Coffee Day is one of the most popular places to meet.

On a Thursday morning in October, a group of men and women in their early twenties sit outside on the cafe's balcony smoking, while inside, an older couple ignore the flat-screened television on the wall and talk over a glass-topped table. Other customers sit on cane lounge sets and read the paper or talk on their mobile phones. As the Cafe Coffee Day chain has expanded (there are now almost 500 in India), it has developed an extensive food menu. Along with a cappuccino, patrons can now order a chicken burger, a teriyaki chicken ciabatta, nachos with salsa, fish and chips, Greek salad, pasta in Alfredo sauce, apple pie, a blueberry muffin or dozens of other savoury and sweet snacks.

A few years ago, such a diverse menu would have been rare. But as Indians have become wealthier, they are travelling abroad and eating out more often, which exposes them to a wider variety of food.

"People have a lot more money to spend and people are a lot more adventurous," says Naresh Fernandes, editor of Time Out Mumbai. "Until 20 years ago, we had rationing and food shortages. Going out to enjoy yourself didn't exist until recently."

Every fortnight, two or three new independent restaurants open in Mumbai, charging between Rs 500 and Rs 1,000 per person for a meal; Indians can increasingly afford these prices because incomes are rising quickly. About a third of India's population live in cities. During the next 15 years, three-quarters of these are expected to earn enough money to join the country's middle class, each earning between Rs200,000 (2,600 pounds) and Rs 1m per year, according to the McKinsey Global Institute, the economic research group. Only 10 per cent of urban Indians earn this much today.

This means that by 2025, India's consumption of food and other products will quadruple to $1,500bn, creating the world's fifth-biggest consumer economy after the US, Japan, China and the UK (India now ranks 16th, trailing Spain, Canada and Italy).

The new shopping mall Select Citywalk, a concoction of steel and glass in south Delhi, shows how closely the consumption habits of Indians are starting to mirror those of people in more developed countries. Inside the mall, which is so vast that it is impossible to see from one end to the other, most of the shops are expensive international brands such as Tissot, Espirit, Lancome, Mac, Mango and L' Occitane.

Familiarity with fashionable clothing brands and restaurants is being encouraged by new magazines such as Vogue India, which declared India's "arrival" on the global fashion scene when it launched its first issue in September, and Time Out, which

has a Delhi edition as well as a Mumbai one and shortly plans to start publishing in Bangalore.

Meanwhile, restaurants are now doing so well that many are opening up branches in different cities. Some are fast-food chains that have emulated McDonald's, which has been in India for more than a decade and is one of its most established foreign restaurants. It remains a popular destination: in the evenings its restaurants are full of families queuing for Chicken Maharaja Macs, McAloo Tikki burgers and Paneer Salsa wraps -- now made with "multi-cereal" bread for the health-conscious diner.

But these days McDonald's is facing more competition. Newcomers include Jumbo King, which has taken a popular street food called vada pav, a spiced potato patty topped with chutney and served in a bun, and created a fast food chain around it, and Yo! China, which markets itself as "Chinese food, Chinese prices".

Rachna Singh, a 34-year-old doctor who lives in Delhi, is one of the new generation of Indians who eat out regularly. She and her husband, who works in IT, go to restaurants three or four times a week and prefer non-Indian food when dining out, particularly Thai, Chinese, Middle Eastern and Italian. On weekends, Singh gladly drives for an hour to eat at her favourite Thai restaurant. But she restricts her three-year-old daughter, Avaka, to once-weekly sessions of junk food such as chips.

New food that was unheard of until recently has also found its way into Singh's home. "We didn't know what a kiwi was two or three years ago," she says. She has also taken to buying foods that her mother would have made when she was growing up. Indian families traditionally make roti (round flat bread) by hand with a small rolling pin. But Singh buys frozen roti and parantha, another type of bread. She swears they taste like homemade ones. "They are excellent! You can't tell the difference." But she admits: "My parents think I am crazy."

Singh often dines with her parents, Dipak and Anju Khannee, in their home in the south Delhi neighbourhood called Greater Kailash I. On a recent evening, they sat at a long dining table laden with typical Indian dishes. Big bowls were filled with kali dhal (black lentils), paneer (Indian cheese in sauce), rasala (a salad of cucumbers, red onions and coriander); chicken, raita (a type of yogurt) and roti.

The meal is traditional, but there are some new twists. Singh's parents spoon pickle on to their plates from a store-bought jar. Singh's mother used to make this tangy condiment of peppers herself but now finds it is easier to buy it.

Does Singh ever make pickle? "Me? No!" she shakes her head. "In our generation, no one would know how to make pickle. I'd rather buy 10 different kinds. It's impossible to make a small amount."

A glass dish of butter slices sits on the table, and Singh spreads some on her roti. A generation ago her mother would have made butter at home, but these days the family buys it too. "No one has got time or inclination to do so much stuff," she says, even though both she and her parents employ housekeeping staff.

Indians have typically bought their fruits and vegetables in outdoor markets, and packaged foods in small stores with limited selections of products. But supermarkets, where young professionals such as Singh can find rare fruits like kiwis and chilled foods like butter, are now popping up around the country. In Gurgaon, the booming business district on the outskirts of Delhi, where cows wander along dusty streets between newly built office blocks, shoppers walking into a Spencer's supermarket will find a pizza stand, Chinese food "X-press" and shelves filled with many of the same brands that they would see in London or Paris.

Lurpak butter, Red Bull energy drinks, and Tropicana orange juice are just some of the foreign brands available, and there is an entire aisle dedicated to foods such as peanut butter, pancake syrup and cranberry sauce beneath a sign saying "Taste America at Spencer's". Every month, 40 new Spencer's supermarkets open around the country.

India, which is still trying to lift millions of people out of poverty, is having problems satisfying its appetites. One of the reasons the Punjabi dairy farmers are doing so well is that demand for milk, and milk-derived products, is increasing so quickly that farmers can't keep up. India, despite being the world's largest producer of milk, temporarily halted exports of milk powder last summer to try and stop domestic milk prices from rising too fast after some dairy farmers were tempted by record high global prices and sold their product to exporters rather than local food producers.

Milk isn't the only hot commodity. After restarting wheat imports in 2006, for the first time since the late 1990s, India banned wheat exports last year. The country can, of course, try and produce more food. But Ajay Shankar, a government secretary in the ministry of commerce and industry, says that while India wants to increase its agricultural yields (which are low compared with the rest of the world), expanding the amount of land farmed is difficult in a country already struggling to support more than one billion people. In Punjab, the state that produces a hefty chunk of India's wheat, rice and milk, decades of intensive farming and heavy fertiliser use have taken a heavy toll on the land, and water tables are falling sharply.

Although India's economy is expanding at about 9 per cent a year, its agricultural sector is slowing, with growth declining from 4.7 per cent between 1992-1997 to just 1.5 per cent between 2002-2006.

If India can't produce enough of its own food, it will have to import more. Shankar says it is unclear how much more food India will need, but acknowledges that significant increases in imports would affect the global economy. "If we become a major importer of food grains as some fear, clearly it will have an impact on global prices," he says over tea in his Delhi office.

And India is not the only country expected to import more food in coming years. Over the next decade, per capita income in China is expected to triple, which means the Chinese will be eating more - and better. They are already each eating twice as much meat as they were in 1990 and the country now accounts for one third of all meat eaten in the world, according to research by Goldman Sachs.

Even in India, with its large vegetarian population, people are eating 40 per cent more meat. In Brazil, the amount of meat eaten by each person has risen by more than one third over the past 15 years. Brazil is better placed than most countries to meet its own needs due to its fertile soils and vast land mass, but many other countries will need to find more arable land if they are to satisfy the appetites of their citizens.

For dairy farmers such as the two Singhs, the implications of these global shifts are good news: after a decade of poor returns, farming appears to have a bright future. For everybody else, it's a different story: get used to paying more for what you eat.

Jenny Wiggins is the FT's consumer industries correspondent. Additional reporting by Amy Yee.

Jenny Wiggins/FT