Aug 9 (Reuters) -

India has become the next big bet for PepsiCo ( PEP ), Unilever ( UL ) and

other packaged goods giants looking to fill the growth vacuum

left by an uneven recovery in China.

With India's economy expanding at the fastest pace among

major emerging markets, companies are trying to serve its

diverse palette by launching new flavors and size variants aimed

at attracting the country's vast population and untapped rural

market.

"While the last decade had companies focused on selling

into China, the next decade is about selling into India," said

Brian Jacobsen, chief economist at Annex Wealth Management.

"You have to go where the demographic and economic tailwinds

are at your back."

Major consumer goods companies based in India, the world's

most populous country, are expecting higher government spending,

a better monsoon season and a resurgence in private consumption

to help consumer spending recover in the coming quarters.

That is expected to boost the combined market share of the

top five multinational companies - Coca-Cola, P&G, PepsiCo ( PEP ),

Unilever ( UL ) and Reckitt - to 20.53% in 2023 from 19.27% in 2022,

mainly in the baby care, consumer health, cosmetics, beverage

and household categories, according to research firm GlobalData.

Their total market share in China is forecast to shrink to

4.30% in 2023 from 4.37% in 2022, the data showed.

"China went through a long and extended COVID ... they

even went through a brief period of negative growth, and after

this, growth has been very sluggish. In comparison to that, the

growth rate in India hovering around 4% seems like a healthy

growth for total fast-moving consumer goods," said K

Ramakrishnan, Managing Director, South Asia, at Kantar's

Worldpanel Division.

Both the urban and rural segments in India have seen growth,

but rural has fared a little better, he said.

Consumer goods companies have also been pumping money into

India with launches like PepsiCo's ( PEP ) Kurkure Chaat Fills,

Coca-Cola's packaging upgrades to increase the shelf-life of its

products and Nestle's plans to introduce its premium coffee

brand Nespresso at year-end.

As a result, Coca-Cola's household penetration in India

increased by 24% for the 12 months ended June, PepsiCo's ( PEP ) by

12.7%, Nestle's by 6.7% and Reckitt's about 3.8%, data from

Kantar showed.

Mondelez International ( MDLZ ) is partnering with the Lotus

Biscoff cookie brand to sell its products, and plans to launch

new Oreo pack sizes this month. The company reported a

mid-single-digit percentage growth in the chocolate category in

India in the second quarter.

Coca-Cola also posted double-digit volume growth in

India, while Unilever ( UL ) recorded sequential improvement

in the country. PepsiCo's ( PEP ) Africa, Middle East and South

Asia region reported a rise, with the company expecting India to

be the "big growth space" there.

The results contrast muted volume growth in the region last

year for most of these companies.

On the flip side, China has seen feeble demand.

KitKat maker Nestle reported a fall in total sales

in the Greater China region in the latest quarter and said

overall economic and consumer sentiment there was "clearly

weaker than expected".

"China has always been considered kind of the darling of

growth for investors, but as we have seen that bloom is off the

rose there," said Don Nesbitt, senior portfolio manager at F/m

Investments.