FICCI - Technopak Report On Indian Food Industry

LAND OF OPPORTUNITIES
The Food Industry in India

13 November, 2008

Copyright 2008, Technopak Advisors Pvt. Ltd. and Federation of Indian Chambers of Commerce and Industries. All material printed in this
publication is a joint property of Technopak Advisors Pvt. Ltd. and Federation of Indian Chambers of Commerce and Industries. No part of this
report covered by the copyright hereon may be reproduced or used in any form by any means – graphic, electronic or mechanical including
photocopying, recording, taping, or information storage without prior consent of, and acknowledgment of credit to Technopak Advisors Pvt.
Ltd. and Federation of Indian Chambers of Commerce and Industries.

This is acknowledged that this Knowledge Paper has been prepared by Technopak Advisors Pvt. Ltd. and valuable inputs were provided by
Mr. Sameer Barde, Mr. Sudhir Zutshi and Mr. Dhiraj Gyani from FICCI.

Foreword

India is one of the fastest growing economies in the world. While we are moving towards
becoming a services-led economy, agriculture still contributes 17 percent to the total
GDP and employs 60 percent of population. The income enhancement of such a large
section of society is possible only through adding value and removing inefficiencies in
the food value chain. That is why the Food Industry has been accorded a high priority
status by the government which is facilitating its growth by providing policy frameworks
and initiatives at various levels.

In the year 2006-07, the size of the Food Industry in India was estimated at around Rs
8,80,000 crores or US $ 200 billion, of which the Food Processing Industry accounts for
about Rs 3,74,000 crores or US $ 85 billion. At present, Indian Food Processing Industry is
growing at the rate of 13 percent per annum and it has higher potential to explore
particularly in the sectors such as fruits and vegetables, packaged foods, beer and wine.
Therefore, it offers tremendous opportunities for all stakeholders in the areas of
production, processing, marketing, supply chain, infrastructure development,
technology up gradation and education.

The Indian Food Industry has not yet realized its potential and there is scope for further
value creation by modernizing this sector. This report provides an understanding of the
Indian Food Industry and focuses on the investment potential in the sector. We are
confident that this publication will go a long way in demonstrating tremendous
investment prospects and attractiveness of the Food Industry in India. FICCI and
Technopak are committed to all stakeholders in developing strategic business
partnerships to revolutionize the Food Industry.

Table of Contents

Executive Summary 1

1 The Indian Food Industry: Overview and Key Segments 4

2 Key Growth Drivers 24

3 Challenges & Potential Stumbling Blocks 32

4 Growth Opportunities for Companies 36

5 Case Studies of Excellence 43

6 Recommendations for Key Stakeholders 48

Annexure: Indian Food Regulations 52

Executive Summary

This report “Land Of Opportunities: The Food Industry in India” is jointly produced
by Technopak Advisors Pvt. Ltd. and Federation of Indian Chambers of Commerce and
Industry (FICCI) to highlight potential in Indian Food Industry. The report focuses on the
potential areas of investment, key growth drivers, key challenges and opportunities for
companies. It also includes recommendations to the government as well as to
stakeholders to enhance the efficacy and trade in the sector.

The diverse agro-climatic conditions in India offer huge potential for production of a
wide variety of crops from cereals, pulses to fruits and vegetables all round the year.
Apart from the huge production base, India has the advantage of the low cost of
production, thus providing an unbeatable competitive edge in the global market place.
With a growing population of 113 crores or 1.13 billion and increasing income levels, the
demand for value added food products is rising at 13 percent1 per annum.

n Industry Overview
n
nFood
lThe size of the Indian Food
Industry is estimated at Rs Growth Rate of the key sectors
8,80,000 crores (US $ 200
billion) in 2006-07 and is Beer 6%
slated to reach Rs 1,320,000
crores (US $ 300 billion) by Buffalo Meat 6%
2015 with the increasing
share of processed food (in
Dairy 8%
value terms) from 43 percent
to 50 percent.
Fruits and Vegetables 6%
lThe Indian Food Industry is
highly fragmented and is
Marine and Fish 4%
dominated by the
unorganized sector.
Packaged Foods 30%
lThe Food Processing, being
the major sector in the Indian
Poultry 11%
Food Industry stands at Rs
3,74,000 crores (US $ 85
billion) and gives direct Wine 30%
employment to about 20
lakhs or 2 million workers.

1
Source: Ministry of Food Processing and Industries, Government of India

Land Of Opportunities -
The Food Industry in India 1

lThe organized food retailing and food services are other emerging areas growing with the
annual growth rate of 25 percent.
lFruits and vegetables, dairy products, marine and fish, meat and poultry, edible oils, staples,
alcoholic and non alcoholic beverages, breads and bakery, confectionary and packaged
foods are the key sectors in the industry, which offer tremendous growth potential and
investment opportunities.

n Growth Drivers
n
nKey
lWith changing needs and lifestyles of consumers, global as well as Indian food consumption
patterns are rapidly evolving. Higher disposable incomes have resulted in greater spending
and consumption among consumers.
lIncreased mobility, exposure, aspirations and availability of a substantially wider range and
products have also contributed to shifts in spending orientation.
lIn addition, openness to experimenting with processed and convenience food and the
increased phenomenon of organized food retailing have also led to reorientation of the
entire food business.
lOther important drivers behind Industry growth are:
o Huge production base
o Increasing organized food retailing
o Increased export opportunities
o Favourable regulatory environment and government support
o Augmented investment inflows

n Challenges
n
nKey
lThough the Indian Food Industry is growing fast yet the level of the food processing is still
lower as compared to the other countries.
lThe key challenges faced by the sector are low level of research and development, industry
academia gap, skill gap, technology gap, meeting global quality standards, higher number
of small and unorganized players and regulatory bottlenecks.
lIn addition, lack of forward and backward linkages in the food value chain, inadequate
agricultural and processing infrastructure and inefficient marketing system are adversely
affecting the sector.

n
n
n Opportunities
Growth
lThe integrated development of the entire food value chain offers many opportunities at
every level. The report highlights the potential growth opportunities for the Indian as well
as international companies entering into the Indian Food sector.
lKey segments with the largest growth potential for processing are dairy, fruits and
vegetables, wine, confectionary and poultry.
lThe demand for segments like ready-to-eat, convenience foods, functional foods, health
drinks, flavoured milk and fruit juices are growing very fast.
lDue to the rising need for quality and value added products; opportunity lies in research &
development and quality testing laboratories.


strengthening the backend of the food supply chain by investing in modernization of
agricultural technologies, farm machineries, training and capacity building, research &
development and quality testing laboratories.
lTremendous potential for investment exists in setting up agricultural infrastructure – cold
chain logistics, supply chain management, food parks and wholesale markets as well as up
gradation of the existing market infrastructure.
lOrganized food retailing and food services are the other fastest emerging opportunities,
organized food retail is expected to grow Rs. 2,33,200 crores (US $ 53 billion) by 2013.
lIndian farm produce offers a unique aroma, flavour and taste and if processed, packaged
and marketed properly, will attract global consumers. Thus, promotion and branding is one
of important areas where investment needs to be made.
lExport demand is increasing for the food products like pickles, chutneys, fruits and
vegetables (canned, frozen and dehydrated), concentrated pulps and juices, packaged meat
and marine products.
lTo realize the additional opportunity of Rs. 4,40,000 crores (US $ 100 billion) by 2014-2015,
coordinated efforts among the government, industry and farmers are required. Promotion
of Indian food items at international level by the government and the industry is essential.

n
n
nRecommendations
lThis report recommends collaborative efforts by both the government and industry to
create and upgrade the existing agricultural infrastructure, while developing greater
linkages to national and international markets. Policy level efforts should be initiated by the
government in consultation with farmer groups and the industry to minimize the prevailing
gaps amongst various stakeholders.
lThere is an urgent need to create and augment strong at production infrastructure,
processing infrastructure, distribution and market infrastructure, along with emphasis on
augmenting support infrastructure at the same time. The increased investment needs to be
seeking from the private sector for infrastructure development.
lThe amendment of the APMC should be implemented in the original spirit to reduce the
malfunctioning of the Indian marketing system. Efficient price discovery mechanism should
be evolved to safeguard the interest of different stakeholders for agricultural produce such
as web based spot exchanges - Safal National Exchange, will help in fair price discovery.
lSystematic efforts should be made to brand Indian fresh and processed food products in the
international market.
lSincere efforts should be made by the government to help the Indian players to meet the
global quality standards.

lThe enabling regulatory environment through the initiatives like Food Safely and Standard
Authority will continue to boost the pace of change in this sector. Though some initiatives
have already been taken by the government, still there is urgent need to harmonize and
standardize Indian quality standards to commonly accepted standards in the global markets.
There is further scope in lifting restrictions on exports and imports, harmonization of the
taxation system, smoothening tariff barriers and transparent merchandizing for price
discovery of food products.


The Indian Food Industry 1
Overview & Key Segments

The Indian Agriculture sector, which
contributes 17 percent to the GDP and
provides employment to 60 percent of
the population, is going through a
transformation phase. India has
successfully managed to gain self-
sufficiency in food with marginal
surplus in production. India is among
the leading global producers of cereals,
fruits, vegetables and dairy products.
The diverse agro-climatic conditions in
the country are favorable for taking up
production of a wide variety of crops
from cereals and pulses to fruits and
vegetables, rearing livestock all round
the year.
Increased income levels, cheap credit facilities, higher disposable income have resulted in
greater spending and consumption among consumers. Increased mobility, exposure,
increased aspirations and availability of a wider range and products, have also
contributed to shifts in spending orientation. In the affluent and middle class, the
percentage share of food expenditure vis-à-vis other products/ categories has dropped,
the total expenditure on foods has increased across all the classes. Initially food
expenditure was concentrated around basic food items like food grains, vegetable oils,
and sugar; there is now an inclusion of fruits & vegetables, eggs, meat, beverages and
processed food in their repertoire – contributed both by increased availability and
affordability. There is an increasing trend of a shift from food security to nutritional
security and convenience shopping in the recent past.
The Indian Food Industry, which was estimated at Rs 8,80,000 crores (US $ 200 billion) in
the year 2006 - 2007 is slated to reach Rs 13,20,000 crores (US $ 300 billion) by 2015 with
share of processed food (in value terms) increasing from 43 percent to 50 percent. The
Food Processing Industry comprises 43 percent (Rs 3,74,000 crores or US $ 85 billion) of the
Indian Food Industry and gives direct employment to about 20 lakhs workers. It is highly
fragmented and dominated by the unorganized sector with 75 percent units falling
under it. The increasing contribution of food processing sector would largely come from
the organized sector.


Indian Food Industry: Key Statistics (In Rs 000' crores)

Years 2002-03 2006-07 2010-11* 2014-15*

Food Industry Size 770 880 1,100 1,320

Food Processing Industry Size 308 374 484 660

Size of organized sector in Food Processing
Industry 57 101 162 264

% Share of Food Processing Industry in total
Food Industry 40 43 44 50

% Share of organized sector in Food
Processsing Industry 19 27 36 40

Source: Ministry of Food Processing Industries, Technopak Analysis, * Projections

Main sectors comprising of the Indian Food Processing Industry are fruits and vegetables, dairy
products, marine and fish, meat and poultry, edible oils, staples, alcoholic and non alcoholic
beverages, breads and bakery, confectionary and packaged foods, among others. In India, the food
processing level under the organized & unorganized sector is at about 43 percent in value terms,
which is much lower than most other countries. Contribution of main sectors to The Food Processing
Industry is shown below:

Indian Food Market: Sectoral Break-up, 2006-2007 (In Rs 000' crores)
1%
3% 1%
4%
11
38 24 0

Staples & Other Foods
23% 198 Fruits & Vegetables
Dairy
Fish & Marine
392 45%
Buffalo Meat & Poultry
Packaged Foods
Beer & Wine

206
23%

Source: Ministry of Food Processing Industries, Technopak Analysis

In addition to the contribution of staples and other foods (includes food grains, edible oils, pulses,
tea, coffee, spices and condiments etc.) major contributors to the Indian Food Industry in value
terms are fruits & vegetables and dairy products having share of 23 percent each. It is interesting to
note that in the last five years the packaged food sector is growing at the highest pace across sectors,
though with a small contribution in value terms.


Some of the key subsectors of the Indian Food Industry are briefly discussed below:

n
n
n & Vegetables
1. Fruits
The total market size of fruits and vegetables
was Rs 2,05,920 crores (US $ 47 billion) in the
year 2006-07 and is estimated to grow up to
Rs 3,28,516 crores (US $ 75 billion) by 2015.
Though fruits & vegetables constitute 23
percent of the overall food Industry, its
contribution to the total Food Processing
Industry is only 4 percent. The value
contribution of processed fruits and
vegetables in total fruits and vegetables
market is about 7 percent (Rs 14,202 crores or
US $ 3.2 billion). Of the total processed fruits
and vegetables, 38 percent (Rs 5,374 crores or
US $ 1.2 billion) is contributed by organized
sector and rest of the processing is
undertaken by the unorganized sector.

Value of fruits and vegetable exports from India in 2006-07 was Rs. 3,960 crores (US $ 0.9 billion),
which is growing at Compound Annual Growth Rate (CAGR) of 13 percent whereas the imports for
the stated period were to the tune of Rs. 1,760 crores (US $ 0.4 billion). Key statistics of fruits and
vegetable sector is summarized as follows -

Market Size and Composition of Fruits and Vegetables (value In Rs '000 crores)

Years 2002-03 2006-07 2010-11* 2014-15*

Market Size 146 206 260 329

Processed 8 14 58 115

Non Processed 138 192 202 213

Processed Organized 3 5 24 47

Processed Unorganized 5 9 34 68


Fruits & vegetables are being consumed in both fresh and processed form. The prominent processed
forms of Fruits & Vegetables are dried, frozen, dehydrated and canned products. The main
processed items are fruit pulp, juices, drinks, jams, squash, pickles and chutney.


Some of the major players are listed below:

Companies Key Brands Key Products

Adani Agri Fresh Farm Pik Fresh fruits

Bharti Field Fresh Fresh fruits & vegetables

Chordia Foods Product Ltd. Navin, Pravin, Toofan Ketchups, pickles, sauces

Desai brothers ltd Mother’s Recipe Pickles, pastes

Frozen & dried fruits & vegetables,
Flex Foods Chef’s Choice
frozen mushroom & herbs

Green Valley Food Corp. Frozen fruits and vegetables

Jams, squashes, ketchup, sauces,
HUL Kissan
spreads

Keventer Agro Appy, Njoi, Frooti Fruit juices

MAHA Grapes MAHA Grapes Fresh packaged grapes

Mahindra Shubhlab Service Cape Mahindra Fresh F&V

Mapro Foods Pvt.Ltd Mapro Jams, squash, syrup

Mother Dairy Safal Frozen processed F&V

Mrs. Bector Foods Cremica Ketchup, sauces, dips

Fresh and packaged fruits and
Namdhari Seed Pvt Ltd Namdhari vegetables

Nestle India Nestle Ketchup

Priya Fruits and vegetables pickles,
Priya Foods
powder

Temptation Foods Everfresh, Karen Anand, Delika Frozen fruits and vegetables

The Global Green Company Global Green, Tiffy Gherkins, pepper, corns, cherries

Source: Technopak Analysis


n
n
n2. Dairy
Dairy, one of the main contributors to the Indian Food
Processing Industry, is leading in terms of growth
prospects among various sectors. The total market size
of the dairy industry was Rs. 1,98,000 crores (US $ 45
billion) in the year 2006-07 and is estimated to grow up
to Rs. 3,66,484 crores (US $ 83 billion) by 2015. The major
value in dairy industry comes from the processed
category, which is 73 percent (Rs. I,44,681 crores or US $
33 billion) in value terms and 35 percent in volume terms.
Of the processed category, the organized sector
contributes only 24 percent (Rs. 34,556 crores or US $ 8
billion) and the major contribution comes from
unorganized sector in the form of sweets, homemade
ghee and yoghurt, among others. The organized sector
of the Dairy industry is growing faster than the unorganized sector. Dairy industry particularly
packed liquid milk is dominated by various co-operatives. Co-operatives continue to play a major
role in evolution of the Indian dairy sector. The states of Gujarat, Tamil Nadu, Kerala, Karnataka,
Punjab and Haryana have established many dairy co-operatives running successfully. Most of the
packed liquid-milk segment is dominated by the co-operatives which contributes about 70 percent
of the total revenues of the co-operatives.
In view of rising demand for processed dairy products which require huge investments and technology
support in order to meet the processing and packaging requirements. Packaged liquid milk along with
cheese, packaged paneer, khoya & other traditional dairy products are prospective areas of growth
while skimmed milk powder & casein are potential export opportunities. The export of value added
dairy products will rise if Indian dairy is able to meet global standards. Imports are small and are mostly
for premium category products like parmesan cheese, soft cheese and other varieties of cheeses.

Market Size and Composition of Dairy Products (value in Rs '000 Cr)

Years 2002-03 2006-07 2010-11* 2014-15*

Market Size 169 198 269 366

Processed 116 144 190 255


Processed Organized 25 34 56 92

Processed Unorganized 91 110 134 163



At present, India seems to be self-sufficient in meeting its requirement for milk and milk products.
However, given that demand is growing faster than supply, there could be serious issues with respect
to self-sufficiency in the near future. Farm gate prices have increased by more than 50 percent in the
last three years. The recent rise in milk product prices has forced the government to impose a ban on
skimmed milk products & reduce incentives for exports. The demand for value added milk products,
such as cheese, butter, dahi (Indian yoghurt) and probiotic drinks is increasing at a double digit rate.
There is a huge potential for processing and value addition in the organized sector, particularly in
liquid milk and ethnic Indian sweets, which are largely sold in unbranded form in the market. Milk
beverages have witnessed a huge growth as a result of growing health consciousness among
consumers. Exports of UHT (Ultra Heat Treatment) milk from India to South East Asian countries have
grown at a rapid pace. The ice cream industry, though a lucrative business, is suffering from shortage
of cold chain infrastructure and lack of interest amongst big players in India. The major players of the
dairy industry are listed as follows :


Milk, butter, cheese, Ice cream,
GCMMF Amul skimmed and buttermilk, curd,
flavoured milk, ghee, khoya

Milk, shrikhand, ghee, table butter,
Gokul Dairy Gokul skimmed milk powder & white butter

Haryana Dairy Development Flavored double toned milk, lassi,
Co-operative Federation Vita butter, ghee, dahi, packaged milk

Milk, butter, cheese, flavoured milk,
Dynamix Dairy Industries Private label ghee, khoya, dairy whitener, infant
foods
Butter, ice cream, cream, lassi, paneer,
Heritage Foods Heritage ghee, curd, milk

Skimmed milk powder, dairy whitener,
Kwality Dairy (India) Ltd. Indana, Kream, Kountry
dairy mix, ice cream mix, ghee, lactose

Milk powder, milk fat, dairy whitener,
Mahaan Group Mahaan ghee, coffee creamers

Milk powder, baby food, cheese &
Milk Foods Ltd. Milk Food other milk products

Milk, ghee, butter, cheese, paneer,
MilkFed Verka
icecream
Milk, cheese, ice cream, curd, butter,
NDDB Mother Dairy ghee, lassi, dairy whitener, flavored
milk, probiotics
Flavored milk, packaged milk, ghee,
VRS Foods Paras
dahi, paneer

Milk, lassi, paneer, curd ghee, cheese
Warana Dairy Warana
butter, shrikhand



n
n
n3. Marine & Fish
The total market size of marine & fish industry
was Rs 38,200 crores (US $ 9 billion) in the year
2006-07 growing at 4 percent per annum. It is
estimated to grow up to Rs. 52,279 crores (US $
12 billion) by 2015. The processed segment
comprises of Rs. 5,348 crores (US $ 1.2 billion)
which is 13 percent of the total marine and fish
industry size. The huge coast line of India offers
plenty of opportunities for the growth of the
marine industry. About 25 percent of marine &
fish production is exported. Processing
provides an opportunity for marine products
and exotic fish. Conventional cleaning and
cooking fish is slowly giving way to convenient
products. Spray dried products, fish protein concentrate, battered and breaded fish and fish-paste
based products are being demanded by consumers. Investments in packaged marine processing
plant would be an ideal investment option due to the vast untapped marine resource and export
potential.

Market size and composition of Fish & Marine products (value in Rs ‘000 crores)

Years 2002-03 2006-07 2010-11* 2014-15*

Market Size 34 38 45 52

Processed 4 5 7 9


Organized 3 3 5 7

Unorganized 31 35 40 45

Source: The Marine Products Export Development Authority (MPEDA), Technopak Analysis, * Projections

In view of over exploitation and mounting operational costs of the fishing industry in the country,
the focus areas are future management and conservation of resources, diversification of fishing
effort and economic utilization of fishing units. The players are required to obtain Hazard Analysis
Critical Control Point (HACCP) certification for its plants and also update the processing technology
and quality assurance in accordance with the requirements of international institutions formulating
quality systems such as Codex Alimentarius Commission.


Some of the major players in the industry include the following:


Allanasons Allanasons Pomfrets, seer fish, squids, prawns, and cuttle fish

ASF Seafoods ASF Seafoods Seafood

Bell foods marine division Bell Foods Crab, cuttlefish, shrimps, squid, fish octopus

Deep Sea Products Deep Sea Products Marine products

Fish products, surimi crab claws, crab sticks,
Gadre Marine Exports Gadre Marine shrimps, surimi crab patti, marine products,
lobsters

IFB Agro Pvt. Ltd. IFB Pomfrets, crabs, prawns & sea food

Sea Sparkle OKK Fresh Octopus, squid, , crabs& tuna

OKK Fresh Sea Sparkle Promfrets, crabs, prawns & octopus

Sumero Sumero Pomfrets, crabs, prawns & sea food


n
n
n4. Non-Alcoholic Beverages
Non-alcoholic beverages are broadly classified into
carbonated drinks, non-carbonated drinks and hot
beverages such as tea and coffee. The fruit juices and
fruit-based drinks account for Rs. 5,000 crores (US $ 1.13
billion) with the annual growth rate of 35-40 percent
and the market size of carbonated drinks is estimated at
Rs. 6,000 crores (US $ 1.36 billion) with the annual
growth rate of 10-12 percent.
India is the largest producer of tea in the world
accounting for 28 percent of the total global production,
at 956 million kgs. The total turnover of the tea industry
itself is above Rs. 8,000 crores (US $ 1.8 billion). Tea
production in India has been growing at 1.2 percent per
annum. India is the fourth largest exporter of tea in the
world. India is the fifth largest producer of coffee accounting for 4 percent of the total production in
the world and nearly 75 percent of India’s production is exported.
Energy enhancing beverages are primarily classified into sports drinks and energy drinks. The Indian
market for functional beverages is expected to reach a value of Rs. 1,518 crores (US $ 0.35 billion) in
the year 2014. In this sector enhanced fruit beverages would remain the fastest growing segment
and the prime revenue earner during the period 2008-2014.


At the same time, the packaged water industry in India is at Rs 1,500 crores (US $ 0.34 billion) and is
growing at 40 percent CAGR. The major players are “Aquafina”, “Kinley” and “Bisleri” and in the
premium segment it is "Evian", “Himalaya” and “Qua”. Out if this flavored packaged water is worth
Rs. 11 crores (US $ 0.24 million), which is dominated by the DS Group’s brand “Catch”.
India is a country that offers huge potential, even more so than China. Right now, India accounts for
approximately 10 percent of global beverage consumption. That makes beverage consumption in
India the third largest in the world, after the United States and China. When it comes to carbonated
soft drinks, the market has not been properly tapped yet. The situation is similar in the case of
bottled and packaged juices and water and PET packaging. Given its size, the Indian market is still in
its infancy; therefore the investment opportunities in beverage plants and equipment are immense.
Some of the main players in this industry are:

Companies Brands Products

Minute Maid Pulpy Oange,
Coca Cola, Georgia, Thumsup, Juice, carbonated drinks,
Coca Cola ltd Kinley, Sprite, Limca, Fanta, bottled water
Maaza, Kinley

Real, Real Active, Coolers, Fruit juice, fruit drinks
Dabur
Lemoneez

Gatorade Gatorade, Propel Energy drink, fitness water

Godrej Jumpin, XS Fruit drinks, fruit juice

Hindustan Unilever Brooke Bond, Lipton, Bru Tea, coffee

Nestle Nescafe, Nestle Mild, Sunrise Tea, coffee, milk

Bailey, Frooti, Appy Classic,
Parle Fruit drinks, bottled water
Appy Fizz

Bisleri International Bisleri Mineral water

Tropicana, Tropicana Twister,
Pepsico International Pepsi, Dew, Mirinda, 7-Up, Juice, carbonated drinks,
Slice, Aquafina bottled water

Red Bull Red Bull Energy drink

Instant drink, milkshake mix,
Rasna, Go Fruit, Shake Up,
Rasna International soft drink concentrate, energy
Body Fuel
drink, syrup

Tata café, Himalaya Packet tea, bulk & instant tea,
Tata
filter/ instant coffee



n
n
n5. Alcoholic Beverages
Beer and wine is an emerging sector in the Indian Food
Industry. While the consumption of beer is growing at
7 percent per annum, wine consumption in India is
witnessing high growth of 30 percent in last few years.
The total market size of the beer and wine industry
was Rs. 10,000 crores (US $ 2.3 billion) in 2006-07 and is
expected to grow up to Rs. 23,955 crores (US $ 5.4
billion) by 2015. India is a net importer of wine though
some wine export has been initiated.

Market Size and Composition of Beer and Wine (value in Rs ‘000 crores)

Years 2002-03 2006-07 2010-11* 2014-15*



The alcohol industry is witnessing the two way flux wherein many foreign players are targeting
India, while their Indian counterparts are nurturing international ambitions. The industry is being
fiercely competitive & dynamic, raising cost pressure on manufacturer & marketer. While price cut is
being done to ensure the consumer loyalty by established brands, the imports are being replaced by
setting up local production facility. Traditionally in bottles packing, the industry has started
experimenting with alternate & attractive packaging. United Breweries has launched its four major
brands in Tetra pack which is being leveraged on time, anywhere' benefit and infusing it with a
young and trendy image. Liquor manufacturers are also bullish on promoting high-end brands
through premium packaging or limited-edition gift packs.
Some major players in the alcoholic industry are as follows:


Cobra Bite, King Cobra, Cobra Light,
Cobra Beer Cobra Zero %, Cobra 5.0%premium Beer

Grover Vineyards La reserve and Sauvignon Blanc Wines

Vinballet, Hammer, Vino Sparkling,
Indage Wines
Riviera, Ivy, Figueira, Bellingham, Trio
Rum, beer, whisky, gin,
Mohan Meakin Ltd Old Monk, Golden Eagle
vodka

Radico Khaitan Magic Moments, 8 PM Whisky, rum, vodka, gin

Haywards 5000/2000/ Black, Knock Out,
SAB Miller Beer, whisky
Royal Challenge, Castle Lager and Fosters

Sula Vineyards Sula Wines

Bagpiper, McDowell's No.1,Director's Special,
United Breweries Rum, brandy, whisky, beer
Kingfisher


n
n
n6. Buffalo Meat and Poultry Products
The total market size of buffalo meat and poultry
products was Rs. 24,382 crores or US $ 5.54 billion (Rs.
9,422 crores or US $ 2.2 billion for buffalo meat and Rs.
14,960 crores or US $ 3.4 billion for poultry products) and
is expected to grow up to Rs. 49,860 crores or US $ 11.3
billion by 2015. Since buffalo meat is not consumed on a
large scale in India, it is processed and targeted for
exports. Total export in this category is Rs. 3,520 crores or
US $ 0.8 billion, which mainly comprises of buffalo meat.
Investment in buffalo meat processing industry is required primarily to tap export opportunities. There
is a great scope for processing of poultry meat for domestic consumption as well as for export markets.
For speedy realization of export potential, traceability standards need to be implemented. This will
improve control and response time to frequent outbreaks of diseases like Avian Influenza that have
adversely affected the poultry industry in the recent years. Similarly, Food and Mouth disease is very
evident in cattle in India. Despite being hampered by the outbreak of Avian Influenza, the poultry
industry is estimated to grow at healthy pace in view of the favorable conditions like falling prices,
rising income, increasing domestic demand from young and urban population. Indian poultry sector
has the potential to be a major player in the global market, given the competitive edge it has. But so far
its participation has been negligible. On the price front, poultry prices were declining, they were still
higher than those for pork, beef and buffalo meat. Modernization of abattoirs, cold chain facilities and
efficient implementation of quality & hygiene standards will give further impetus to the industry.
The market size and composition of this sector is given as follows:

Market Size and Composition of Buffalo Meat and Poultry Products (value in Rs ‘000 crores)

Years 2002-03 2006-07 2010-11* 2014-15*


Processed 3 5 11 21

Non processed 11 19 24 29



Al Kabeer Exports Limited Al Kabeer Frozen mutton, beef, chicken

Allanasons Allanasons Frozen halal buffalo meat

Frigo Refico Allana Allana Frozen buffalo and other meat

Yummiez, Godrej Real Good Animal feeds, branded chicken,
Godrej Agrovet
Chicken innovative agricultural products & oil palm

Innovative Foods Ltd. Sumeru Frozen Foods Seafood

Suguna Poultry Farm Suguna Broiler chicken, value added eggs

Processed chicken, poultry feed,
VH Group Venky’s
egg powder


n
n
n7. Packaged Foods
Packaged food products are penetrating the large
potential presented by Indian population. The
demand has been rising at a good pace and there is
enough latent market potential waiting to be
exploited through developmental efforts. This
demand for ready-to-eat meals has captured a large
amount of the food retail market in India. Major
factors driving the change are changing lifestyle,
eating and cooking habits, increasing young
population. The market for packaged food has grown from Rs. 4,005 crores or US $ 0.9 billion in
2002-03 to Rs. 11,440 crores or US $ 2.6 billion in 2006-07. It is expected to grow ten times its current
size in the coming decade.
Globalization has been the primary catalyst for the growth of the Indian food which is set to witness
many more changes with newer offerings being available. The international markets have shown a
positive response to Indian cuisine with Non-Resident Indian (NRI) communities and foreigners
expecting to grow this market in the years to come. Another observation is that consumers are on
the lookout for RTE foods that are offered to them in hygienic, nutritional and attractive packaging
at an affordable cost. Great care is needed during their packing, so that they remain prevented from
impurities. Among the emerging trends is that the consumer is looking for innovative flavors and
new tastes, which is a big challenge for the food industry. The RTE foods industry has witnessed a
growth in recent times with new combination of foods.
Going hand-in-hand with the RTE food and mix and eat products, there is a major presence of the
small players who are engaged in preparation of ready to eat foods like chapattis, parottas, rice
rotis, ragi rotis, appams to name a few. With lack of time and fast paced life in Indian metros, the
ready to eat foods and mix and eat food segments will only hold potential for even new entrants.
The Packaged food could be basically classified into two categories - shelf stable packaged food and
Frozen packaged food.

Market Size and Composition of Packaged Foods (value in Rs ‘000 crores)

Years 2002-03 2006-07 2010-11* 2014-15*

Market Size 4.0 11.4 43.9 91.1

Organized 3.1 9.2 37.3 82.0

Unorganized 0.9 2.2 6.6 9.1





Banana chips, mixtures & chivdas,
American Dry Fruits
snacks, bhel, dry fruits

Bindra Agro Range of 'Ready to Eat' Dr. Bindra's
Industries Corp. Dr Bindra’s curried veg and non veg dishes

Ready to eat, sauces, chinese
Capital Foods Chings’ Secret, Smith & Jones
ingredients

Savouries, meals, desserts, biscuits,
GITS Food Products Gits
cookies

Haldiram’s, Taka Tak, Range of ready to eat, packaged
Haldiram’s Bolletos, Chips chaats

Range of ready-to-eat
ITC Kitchens of India
cuisines

Ready to eat curries, meals,
cooking pastes, cook-in sauces,
Kohinoor Food Ltd. Kohinoor spices & seasonings, frozen Indian
breads & snacks and basmati rice

Curries, gravies, rice, snacks, soups,
MTR MTR Foods spices, pickles

Potato chips, cheese snacks,
Pepsico Ltd. Frito Lay’s , Cheeto’s, Dorrito’s
tortilla chips

Ready to eat curries and dishes
Priya Foods Priya from south to north Indian, pastes,
pickles, instant mix

Curried vegetables (ready-to-eat),
Vadilal group Vadilal Quick Treat ready-to-cook (frozen), canned and
frozen vegetables, ice cream

Namkeens, Sweets, Papad,Syrups,
Bikanerwala Bikanerwala, Bikano Panipuri



n
n
n8. Staples and Other Products
India is self sufficient in grain production
with an annual production of about 2170
lakhs tons in 2006-07. The major food
grains produced are paddy, wheat, maize,
barley, jowar, bajra and ragi. India is the
second largest producer of the wheat and
rice in the world. Wheat and rice together
constitute for the major staple diet of the
entire population of the country. About
50 percent of the maize production is
utilized for poultry feed purpose; the rest
of production is either consumed as the
staple food or for producing starch and
starch based products. Therefore, the rice
and wheat processing is the most
important activity in food grains processing. More than 65 percent of the wheat is converted into
wheat products such as atta, together by organized and unorganized sector. Rice is consumed
primarily in the form of polished rice, parboiled rice, parched rice and flaked rice whereas the
demand for branded rice (particularly basmati rice) is increasing in both the domestic as well as the
export market.

India is the second largest producer of sugarcane with a production of 185 lakhs tons and has also
ranked at no. 1 position for white crystal sugar. The sugar industry is one of the leading agro
processing industries, with an annual turnover of Rs 14,960 crores or US $ 3.4 billion, with more than
450 sugar factories located throughout the country.

Being the second largest importer and third largest consumer of edible oil in the world, India is a
leading player in this sector. The major consumption includes the palm oil and soybean oil followed
mustard and ground nut oil. It includes the consumption of both branded and unbranded oil; the
consumer demand for edible oil is growing at a CAGR of 7 percent, whereas the demand for
branded edible oil is rising faster at 8 percent and estimated to increase in the years to come.




Agro Tech Foods Ltd. Sundrop, Act II, Sudham, Crystal Cooking oil, popcorn

NDDB-DOFCO Dhara Refined oil

Baggry’s Baggry’s Muesli , breakfast cereal

Capital Foods Agro Pure Flour, lentils, besan

HUL Annapurna Wheat flour

ITC Aashirvaad Wheat Floor

Kellogg’s, Keebler, Pop-Tarts,
Eggo, Cheez-It, Nutri-Grain, Snacks, crackers, cereals, frosted
Kellog’s
Rice Krispies, Famous flakes, corn flakes
Amos, Carr's, Ready Crust

Kohinoor Foods Kohinoor Rice

Marico Limited Saffola Refined oil & salt

Rajdhani group Rajdhani Besan, pulses, maida, sooji

Shakti Bhog Foods Wheat flour, rice, gram flour,
Shakti Bhog
Ltd. corn flour, pulses, porridge

Indian rice, sugar, soybean meal,
Shri Lal Mahal Shri Lal Mahal tea, wheat grains, salt ,
corn/yellow maize , sesame seeds
Surya Food & Agro
Surya Rice
Ltd

LT Overseas Daawat, Heritage, Orange Organic, flavored rice

Tilda Tilda Basmati rice


Thus, this segment offers tremendous growth potential and investment opportunities in marketing
of branded food grains as well as grains processing.


n
n
n9. Bakery & Biscuit Sector
The bakery in India is one of largest segment
of the food processing industry in which the
annual turnover in value terms is
approximately Rs. 3,960 crores or US $ 0.9
billion. The total bakery production is
estimated at 15 lakhs tons in bread and 11
lakhs tons in biscuit production, whereas the
cake industry is estimated at 4 lakhs tons.
The bread market is estimated to be
growing at around 7 percent per annum in
volume terms and the biscuit industry at
around 8-10 percent per annum. In the
biscuit category, cream and specialty biscuits
are growing at faster pace at 20 percent per annum. Breakfast palates at households, constitute
bakery products that mainly consist of bread which is a growing preference not only in metros but
also in Tier II cities. The fastest growing products in the bakery segment include pizzas, burgers, and
pastries such as mousse cakes, fresh cream pastries, croissants, flavored muffins and flavored breads
which are catching the fancy of people. Going by the growth of the bakery industry, there is need
for lots of flavor enhancers, gluten enhancers and binders which give out softer or more flavored
versions of the products.

Higher disposable incomes and the willingness of consumers to try new brands have attracted a
number of players to the bakery & biscuits industry, both at the national & local level and have
generated intense activity in the marketplace. The market for branded biscuits grew around 15-16
percent last year.

The confectionery industry is segmented into sugar-boiled confectionery, chocolates, mints and
chewing gums. The sugar boiled confectionery is consisting of hard-boiled candy, toffees, accounts
for the largest segments. The confectionery industry has a current capacity of 85,000 tons and the
growth rate per annum is 10 -15 percent.


Some of the key players in the industry are mentioned below:


Tiger, Good Day, 50 -50,Treat,
Britannia Industries Milk Bikis, Marigold, Little Biscuits, soft rolls, breads, cake,
Pvt Ltd. Hearts, Pure Magic, Tiger rusk

Biscuits, breads n bun, ice creams,
Cremica Cremica spreads, dips, salad dressing,
dessert topping, jams

Cream Magic, Marie Break,
Sweet Glucose, See Saw, Salt
Dukes Foods Biscuits, chocolates
Kiss,Waffy Wafers, Big Bite,
Meltz, Coffee Drive, Jadoo

Sunfeast, Golden Bakery, Biscuits, cookies, candy
ITC Ltd.
Candyman, Mint-o

Monaco, Hide n Seek, Milk
Shakti, Melody, Mango Bite,
Biscuit, snacks, cookies, drinks,
Parle Products Kismi, Monaco Bites &
toffee, candies
Cheeslings, Parle- G, Krack Jack,
Melody, Poppins,

Surya Foods & Agro Priya Gold, Treat Biscuits

Alpenliebe, Happydent, Chlor-
Perftti Vanmelle Mint, Center Fresh, Marbels, Candy, chewing gum, mouth
Mentos, Cofitos, Big Babol freshener

Dairy Milk, 5 Star, Perk,
Cadbury Celebrations. temptations, Chocolate, chewing gum, candy
Eclairs, Gems, Bubbaloo, Halls

Kitkat, Munch, Milkybar, Polo,
Nestle Chocolate, candy
Eclairs, Bar One, Tang

Lottegum, Scotch Candy,
Lotte Confectionery Gummy Jelly, Soft Candy, Ghana, Chewing gum, candy, chocolate
Crunky, Sunfuns,



nFunctional Foods
n
n10.
India is at the threshold of a new phase in
the functional food industry. Functional
foods are foods designed to provide a
specific and beneficial physiological effect
on health, performance and well-being
extending beyond the provision of simple
nutrients. This industry is said to comprise of
functional beverages and teas, fortified
cereals and breads, soya foods, functional
snacks foods like cholesterol lowering
enriched foods. The growth in the economy,
coupled with a strong desire among the
consumers to maintain a healthy lifestyle
and the growing awareness of functional ingredients such as herbs, minerals, vitamins, omega fatty
acids, and probiotics is driving the functional foods market.

From today’s trends in food consumption it can be predicted that functional foods are likely to gain
popularity and demand due to their specific health benefits. In India the functional food industry
has earned revenues of more than Rs 1,166 crores or US $ 265 million in 2007-08 and with an
estimated growth rate of 43 percent, it will reach Rs. 14,080 crores or US $ 3.2 billion in 2014-15
(Technopak Analysis).

Some of the major players in this industry are:


GlaxoSmithKline Boost, Horlicks Energy drink

Godrej Sofit Soy milk

Nestle Nestle, Milo Milk maid, fun shakes

Roti mix, meal mix (sugar &
Marico Saffola Functional Foods cholesterol management)

Yakult Yakult Probiotic products – milk drink



nIndian Food Ingredients
n
n11.
The various basic food ingredients used
across all food and beverages are
antioxidants, antimicrobial, color and
flavor, enzymes, emulsifiers, stabilizers and
probiotic, and sweeteners. This sector has
witnessed a sharp growth over the past few
years. To attract more players and investors
towards this sector, the government should
change its policies keeping in mind issues
like safety, traceability and procedural
hurdles for exports and imports.

Consumer trend shows that there is an
inclination towards natural foods with high nutritional value. The lifestyle of most of the urban
population, in India as well as abroad, has led to an increasing demand for convenience and health
of foods, with improved longetivity, shelf life and stability. The growth rate of this industry is 9
percent. The food ingredients market is increasing with a rapid growth rate, as consumers
increasingly demand bigger, bolder tastes, foods that are healthy and ingredients that are natural
or sustainable. Consumers are becoming more sophisticated and want more upscale flavors and
ingredients. Such ingredients include essential oils and oleoresins, herbs, natural colors and flavors,
natural gums and resins, spices, vegetable saps and extracts. These are used in the production of a
range of food and beverage products. Currently, going by the demand in the industry, emulsifiers,
lactose and lactose syrup, molasses, seaweed extracts pectin and starches, tapioca, sago, arrowroot
starch, rosin products, chickpeas and broad & horse beans, kidney beans, onions, tomatoes, garlic,
carrots and olives, vegetable saps and extracts, are showing good growth.


Some of the key players in this industry are


CornSweet, NutriSoy, Acidulants, baking aids and mixes, cocoa
NovaLipid, Fibersol-2, and chocolate, emulsifiers, texturants,
ADM
Novasoy, NovaXan, stabilizers, flours, nutrition ingredients,
Ambrosia, Merckens oils and fats,protein products, sweeteners

Citrates, dry corn ingredients, flour products,
food starch, lecithin, malt products, oils &
Cargill Foods Cargill
shortenings, soy protein, sweeteners,
emulsifiers, stabilizers

Cultures, functional blends, enzymes and
Chr Hansen Chr Hansen test kits , natural food colors, food
microbials (probiotic ingredients)

Antioxidants, betaine, colors, cultures,
Danisco Danisco emulsifiers, enzymes, fermentation media,
fibers, flavors & fragrance, food microbials

Degussa Feed additives , exclusive synthesis & catalysts

International Flavors Flavors and fragrances
and Fragrances Inc. IFF

Kerry Group Kerry Ingredients & flavors

Sonarome Sonarome Oleoresins, essential oils, flavors, fragrances

ROHA Dyechem Natraco, Idacol, Idalacol Synthetic food colors

DSM DSM Antioxidants & antimicrobials, food colors

Novozymes Enzymes

Cadila Healthcare Sweeteners



Key Growth Drivers 2

With changing needs and lifestyles of consumers, global as well as Indian food
consumption patterns are rapidly evolving. Change in consumer demand, influenced by
increased awareness levels about national and international food categories, brands,
cuisine and openness to experimenting with processed and convenience food has also led
to reorientation of the entire food business. Apart from the demand aspect, the
production capacities and government support are the other important drivers behind
Industry growth. Some of the key growth drivers are identified as follows –

n Production Potential
n
nHuge
The diverse agro-climatic conditions offers
huge potential for production of a wide variety
of crops from cereals, pulses to fruits and
vegetables all round the year. India is the
producer of various agricultural crops and
varieties like basmati rice, alphonso mango,
cumin, cardamom, tea, coriander, cashew, a
range of vegetables and curries, among others
that are popular world over. In addition, India
has the advantage of the low cost of
production, which provides an unbeatable
competitive edge in the global market place.

n
n
nChanging Consumers
lRising Income Levels – In India, the per capita income has crossed Rs. 44,000 or
US $ 1000 per annum. The top 20 Indian cities, accounting for only 10 percent of
the country’s population are generating as much as 60 percent of its surplus
income and 31 percent of its disposable income. The consistent rise in the middle
class income has resulted in a consuming class with change in ‘basic lifestyle’,
increasing life aspiration and higher disposable income. The huge population size
of approximately 113 crores or 1.13 billion people are an added advantage that
provides a large consumer market.


lChange in Food Habits – Rise in disposable incomes coupled with the boom in Internet,
mass media and increased exposure to lifestyle in developed economies have significantly
impacted consumer habits. With increasing inclination towards convenience shopping,
increased awareness of balanced diet and health consciousness is resulting in a new
generation of consumers with changing food habits. Indian consumers testify to the fact
that they have become more sensitive to the health quotient of food consumed as compared
to a couple of years ago. Moreover, consumers have started to demand safe food and abide
by the maxim “No More Unsafe Food.”

Change in Food Habits over the last couple of years %
Become more health conscious now, regarding food consumed 51
Eat more junk food now 15
Eat less often at roadside eating joints or carts 15

Eat more food now 14

Eat out, at hotels more often now 5

Eat western cuisine more often now 5

Source: Technopak Research

lEating Out Behaviour – Traditionally, eating out has been a phenomenon more popular in
metros, larger cities and towns. Lately, the demand for eating out options has been
percolating down to smaller cities and towns as well. Service providers in non metros are
now getting bold enough to venture into these unexplored markets. Cheaper real estate is a
natural pull e.g. Chokhidhani in Jaipur. Higher disposable incomes of consumers and mature
service providers, with a better feel of the consumer pulse entering Tier II and Tier III cities,
will be contributors to increased incidence of eating out in the near future.
lExperimenting on Cuisines – While the core is still rooted to their local cuisine and
cooking styles, a select group of consumers – the younger generation - is experimenting with
new tastes. Preferences and tastes are getting diffused across geographies. Hence, regional
cuisines are preferred all over India. ‘Indian Chinese’ food is most popular and among other
regional cuisines South Indian cuisine is hugely popular in all parts of India. Preference for
multiple cuisine is reflected not only when people go to eat outside but also in the kitchen.
Pan-Indian cuisines as well as cuisines from other countries have also found their way into
people’s kitchen across the country.
lGrowing Need for Convenience – Increased income levels, urbanization and a greater
proportion of urban working women in India is leading to increased convenience-seeking
behaviour of Indian consumers. Due to busy schedules and unavailability of time on
weekdays and recreational plans on weekends, the Indian society is looking for the
convenient options to fulfil basic needs. This has generated increased demand for
processed& convenience foods such as in ready-to-eat, ready-to-cook, ready-to-serve and
ready-to heat categories.


n
n
nOrganized Retail and Food Retail
India is marking a strong “footprint” on the world both as a producer and a consumer. The overall
growth driver has been the strong GDP growth in the past few years, which has fuelled both the
industry and consumption. Grocery sales are a close reflection of the food retail sales (refer to the
graph below).
Share of grocery retail sales in total retail sales (value in net per captia)

5000
Rs in '000 crores

4000

3000

2000

1000

0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Consumer spending Retail sales Grocery retail sales

Source: Planet Retail and Technopak Analysis

Shopping habits of Indian consumers, shopping priorities, decision-making approach and decision
makers are changing. Riding on this phenomenon, consumers are shifting from traditional kirana
stores (mom & pop stores) and street side vendors to malls, supermarkets and hypermarkets.

The organized form of food retail accounts for less than one percent of food consumed in India.
Organised food retailing has grown 25 percent per annum for last two years and the momentum is
likely to increase with the entry of large corporate and possible relaxation in the Foreign Direct
Investment (FDI) policy. The proliferation of
organized retailing in India is also altering food
consumption patterns, promoting imported
foods, branded foods, processed foods and a
wider assortment. Indian organized retail
accounts for around 4 percent of the overall
retail. However, in the coming years organized
retail is projected to grow at a CAGR of around
30 percent and is estimated to account for 13
percent to the total Indian Retail by 2012. Some
of the major players in urban retailing are as
follows


Companies Key Brands
Aditya Birla More
Express Retail Services Pvt. Ltd Big Apple, Big Apple Fresh
Future Group Pantaloon Retail, Big Bazaar, Food Bazaar,
Chamosa, Brew Bar

Reliance Reliance Mart, Reliance Super
RPG Group Spencer’s Retail, Spencer’s Super, Spencer’s hyper,
Spencer’s Fresh’ Spencer’s Express

Subhiksha Trading Subhiksha

Vishal Retail Ltd Foodmart

Wadhawan Food Retail Spinach


Apart from this, food chains, restaurants, gourmets with novel delivery formats of food retails are
also growing at a fast pace in the Industry.

n
n Opportunity
nExport
While global markets have started witnessing
pressure in food supply, Indian production
systems are not only witnessing continuous
growth, but also increased marketable surplus.
This surplus is here to stay, especially in high
value sectors like fruits and vegetables, dairy
products, fish and marine (processed).
Increasing exposure of Indian exporters to the
global market and frequent increasing
interactions with global importers has
increased the awareness and capability of
Indian producers to produce quality food
produce. Increasing willingness of Indian
farmers and exporters to embrace global
standards like CODEX and Global GAP, adoption of new technologies like irradiation, government
focus through National Horticulture Mission, is further strengthening India’s case as processed food
exporter. India has witnessed an increase in exports of fresh produce like grapes and mangoes and
processed food - marine, buffalo meat and poultry products in the year 2006-07. Vegetables like
gherkins, broccoli and coloured capsicum are cultivated exclusively for export value. As quality
standard procedures and certification processes are observed with strict stringency, these products
usually are accepted widely in foreign countries. Thus, it can be rightly said that the potential for
producing and having the capacity to be able to obtain produce, process and export according to
approved protocol and quality standards have changed the face of Indian exports.


n
n
nFavourable Regulatory Environment and Government Support
The Ministry of Food Processing Industries (MOFPI) is the nodal agency responsible for the
development of the Food Processing sector, while the Agricultural and Processed Food Products
Export Development Authority (APEDA) and Marine Products Export Development Authority
(MPEDA) are responsible for facilitating the domestic and international trading of food and food
products. The Government has declared food processing a priority sector introducing a number of
policy incentives and progressive measures to set up and modernize food processing units, create
infrastructure, enhance investments, support research and development and human resource
development. The government is inviting private participants and also encouraging private public
partnerships to promote the growth of the processing industry.

Government - Key Initiatives
l National Horticultural Mission (NHM) to promote the production, post harvest management
of horticultural crops. It also focuses on promotion of processing of horticultural produce and
value addition by providing incentives for setting up of horticulture processing industries and
food parks in potential areas and provides linkages between the markets, the horticulture
producer/produce and the processing industry. e.g. Rs. 149.6 crores or US $ 34 million kept for
viability gap funding to private sector in setting up Modern Terminal Markets for Perishables
under the National Horticultural Mission (NHM)
l Programs like National Horticulture Mission, Oilseed Mission, Food Security Mission etc. are
aimed at increasing the efficiency and quality in production, incentives for setting up
infrastructure like warehouses and cold chain
l Food Parks, Modern Terminal Markets for perishables, up-gradation of Quality control
Mega
labs have resulted in increasing investment and processing capacity creation. The
Government is also developing 30 mega food parks with the total investment of Rs 100-150
crores or US $ 22-35 million for each park in Public Private Partnership mode
l Creating a favourable investment and regulatory atmosphere by controlling a single window
clearance system - Food Safety and Standards Authority (FSSA)
l Amendment of the Agricultural Produce Marketing Committee (APMC) Act to facilitate
better marketing facilities
ladditional central scheme i.e. Rashtriya Krishi Vikas Yojana (RKVY) has been announced in
An
the year 2007. It targets a total investment of about Rs 25,000 crores or US $ 5.68 billion for the
XI Five Year Plan to incentivize states to increase public investment in Agriculture and allied
sectors
l Increased level of institutional crediting provided by banks and Financial Institutions
l government has decided to give a boost to research and development e.g. setting up the
The
National Institute for Food Technology and Management in collaboration with Cornell
University of the USA


Policy Initiatives & Incentives2

Apart from these initiatives, the government has taken several policy measures with regard to
regulation & control, fiscal policy, export & import and taxation to high priority industries. Some of
the important policy changes are as follows:

lper extant policy FDI up to 100 percent is permitted under the automatic route in the food
As
infrastructure (Food Park, Cold Chain/ warehousing)
In so far as food retail is concerned the FDI policy does not permit FDI into Retail sector except
l Brand Product Retailing. This policy is uniform for all retailing activity
Single
l policy for manufacture of items reserved for the SSI sector is uniform for all items so
FDI
reserved and a separate dispensation for items in the food processing sector is not
contemplated
l up to 100 percent is permitted for distillation of alcohol though the automatic route
FDI
subject to licensing by the appropriate authority
l industrial license is required for almost all of the food & agro processing industries except
No
for some items
lto a maximum of 24 percent foreign equity is allowed in SSI sector
Up
l of foreign brand names are now freely permitted
Use
lMRTP (Monopolies & Restrictive Trade Practices Act) rules and FERA (Foreign Exchange
Regulation Act) regulations have been relaxed to encourage investment and expansion by
large corporate
l of the items can be freely imported and exported except for items in the negative lists
Most
for imports & exports. Capital goods are also freely importable, including second hand ones in
the food processing sector
l & Import duty rates have been reduced substantially. Many processed food items are
Excise
totally exempt from excise duty
lCustom duty rates have been substantially reduced on plant & equipments, as well as on raw
materials and intermediates, especially for export production
lCorporate taxes have been reduced and there is a shift towards market related interest rates.
There are tax incentives for new manufacturing units for certain years, except for industries
like beer, wine, aerated water using flavoring concentrates, confectionery & chocolates
l trade zones (FTZ) and export processing zones (EPZ) have been set up with all
Free
infrastructure. Also, setting up of 100 percent Export oriented units (EOU) is encouraged in
other areas. They may import free of duty all types of goods, including capital foods
lCapital goods, including spares up to 20 percent of the CIF value of the Capital goods may be
imported at a concessional rate of Customs duty subject to certain export obligations under
the EPCG scheme. Export linked duty free imports are also allowed
l in EPZ/FTZ and 100 percent Export oriented units can retain 50 percent of foreign
Units
exchange receipts in foreign currency accounts
2
Source: Ministry of Food Processing Industries, Government of India


l50 percent of the production of EPZ/FTZ and 100 percent EOU units is saleable in domestic
tariff area
l profits from export sales are completely free from corporate taxes. Profits from such
All
exports are also exempt from Minimum Alternate Tax (MAT)

n of Foreign Direct Investment (FDI)3
n
nInflow
The Food Processing Industry in India is on an
assured track of growth and profitability for
the next five years. It is estimated that food-
processing market in India will attract a
phenomenal investment, in the form of capital,
technology and finance of over Rs. 3,667 crores
or US $ 83.34 million by 2014-15.This has
increased from 2002-03 (Rs.177 crores or US $
0.02 million) at a CAGR of 35 percent. In the
past decade, the government of India has
approved 27,273 foreign collaboration
(technical & financial) proposals, with a
corresponding Foreign Direct Investment of Rs
26,896 crores or US $ 6.1 billion. Out of this, the
total number of approvals for Food Processing
Industries have been of the order of 960 (3.52 percent of the total approvals) with an equity
participation of Rs. 9,826 crores or US $ 2.1 billion.

Flow of FDI in INDIA - Food Sector on the Rise

4000
3500
3000
Rs in '000 crores

2500 Food Processing Industry
2000
Drugs & Pharmaceuticals
1500
1000 Chemicals(other than fertilizers)
500
0
2002-03 2006-07 2010-11* 2014-15*
Source: Department of Industrial Policies and Promotion, GOI and Technopak Analysis

Given the policy thrust and conducive investment framework by the Indian Government in the last
few years, it has resulted into an increased inflow in FDI, thus the sectoral growth with an achieved
participation of various national and international companies entering into the sector.
The top investing companies in Indian Food Processing Industry are mentioned as follows:

3
Source: Department of Industrial Policies and Promotion, GOI and Technopak Analysis


Name of the collaborator Country

Artal Foods Belgium
C.P. Aquaculture Business Group Thailand
Cerestar Holdings B.V. Netherlands
Coca-Cola South Asia Holding Inc USA
Groupe Danone France
Heinz Italia, SPA Milan Italy
Hindustan Coca-Cola Holdings USA
Kellogg India P. Ltd USA
Y.F. Asia Ltd. Mauritius

Indian companies in Food Processing Industry to have received FDI inflows are Cadbury India Ltd,
Metro Cash & Carry India Pvt., Balarampur Chini Mills Ltd, Nestle India Ltd, Kellogg's India P. Ltd,
Cargil Foods India Ltd, and Britannia New Zealand Food P. Ltd. Moreover, there are many
international companies which are in the process to get their steps in Indian Food Industry.


Challenges & Potential 3
Stumbling Blocks

Growth potential of the Indian Food
Processing Industry cannot be disputed;
however, we need to overcome certain
challenges in order to unleash this
potential. These challenges include
addressing current gaps in the value chain
as well as leveraging on various
advantages the country provides. Investors
in the sector need to be aware of these
factors and build required capabilities in
their business to ensure success. Some key
challenges are mentioned below –

nnn Research and Technological
Development
l ak We Research &
Development (R&D) – Research
and Development is required in
Food Processing to enormous
magnitudes - beginning from
varietal improvement, to the
technology & machinery and
production process till the stage for
packaging and labelling. Latest
developments in food science and
focus on innovations in food
technologies, nanotechnology and
biotechnology; novel food concepts
like functional foods, health food, innovative packaging are all a product of exhaustive
R&D.

Though, many government institutes like Indian Council of Agricultural research (ICAR),
Central Food Technological Research Institute (CFTRI), Defence Food Research Laboratory


(DFRL), various State Agricultural Universities (SAUs) and other government bodies are doing a
considerable amount of research on varietal improvement, procedure and machinery for
processing, scientific and chemical research for preserving, manufacturing processes and new
product development, but still there is a huge gap in this area which needs to be addressed. Some of
the main food companies that invest heavily on their R&D requirements are Marico, ITC, Nestle and
Cadbury, among others.

l Processable Produce and Irregular Supply – Indian Agriculture is still dominated by
Lack of
the practice of production driven market supply instead of market driven production, which leads to
inconsistency in quality of produce and supply. Varietal improvement is yet the prime area that
needs to be given attention to reign supreme with relation to export markets. Varieties with
preferred traits must be developed through the use of conventional techniques and by the aid of
biotechnology to affect a larger and more diverse germ plasm in crops. There is a need to focus on
processable variety of produce with the year round supply. Moreover due to non-grading of
produce, the table purpose produce is mixed with one that is suitable for processing. This increases
the price that processing sector has to pay. With the growth of processing sector a market for ‘B’ and
‘C’ grade fruits and vegetables will be created thus paving the way for grading that would fetch
higher price for table purpose ‘A’ grade produce. This will also boost the varietal improvement
programme which is more suitable for processing sector.

l Technology and Equipments - India has been practicing various methods of food processing
such as sun drying, pickling & fermentation. The quest is on for newer methods, technology and
machinery of food processing with least change in sensory qualities. Therefore, the technological
progress in emerging processing sectors, development and diffusion of quality-enhancing as well as
yield-increasing technologies remain the key challenge to be addressed.

n
n
n Global Standards of Quality
Meeting
Though Indian growers and exporters have now been able to match up to global standards,
meeting these standards with up-scaled production will be big challenge. The challenge becomes
much bigger where there are differences in standards and consumer preferences across potential
markets. The issues of traceability in fresh produce and poor hygiene generated infections in
packaged foods need to be addressed.

n Gap
n
nSkill
At each level in the value chain, there are strong deficiencies in technical knowhow and support. In
comparison to the amount of research carried out in this field, there is still a gap in the transference
of this from the laboratory to the industry. In addition, knowledge flows from the academic circles
or centers to the commercial centers of manufacture of primary or tertiary processed food. While at
the farm level, farmers are not aware about the types and timing of crops to be taken, chemicals to
be used, channel managers are not aware of managing storage conditions and handling of the
ultimate produce at the customer end. This gap needs to be bridged by finding the right balance
between applied research, capacity building, training and development of policy and regulatory


frameworks, ensuring a strong, public-private partnership, identifying additional resources to
support the initiative and by making technologies more accessible to farmers, i.e. moving them out
of the laboratory and onto the field.

n
n
nInadequate Infrastructure and Supply Chain
Non-availability of core infrastructure like high tech controlled production facilities, grading,
packaging, cold chains, logistics, warehousing; integrated processing units; inefficient supply chain;
poor transportation and erratic power supply are the major concerns in the country across the food
value chain. While India is the leading producer of many of the crops in the world, nearly 25-35
percent of this production is spoiled due to the lack of inadequate supply chain and poor
infrastructure. Lack of specialized distribution companies for perishable produce/ processed food
products is yet another problem that the sector urgently needs to address. Such specialized
companies will provide refrigerated transport and warehouse facilities, along with timely
distribution of products.

n Regulations4 and Taxation Issues
n
nFood
The food sector in India is governed by a multiplicity of laws under different authorities. The
following food laws prevails in the country -

i. Prevention of Food Adulteration Act 1954
ii. Essential Commodities Act, 1955
iii. Fruit Product Order, 1955
iv. Meat Food Products Order, 1973
v. Milk and Milk Products Order, 1992
vi. Agriculture Produce (Grading & Marking) Act
vii. Standards of Weights and Measures Act, 1976
viii. The Warehousing (Development and
Regulation) Bill, 2005

The Indian Food Industry and the processing industry are governed by multiple legislations.
Dealing with an array of food laws & governing bodies is also a challenge. The government has
realized the need for a single regulatory body and an integrated food law, by establishing a new
authority - the Food Safety and Standards Act (FSSA), a new food law merging 8 separate acts and a
new clarification of the relevant ministries’ responsibilities. The Food Safety & Standard Authority
has already come into existence this year; the implementation of this progressive act remains a big
challenge for the Government.

In India, there is no uniformity in the taxation system across the states. Though many initiatives
have already taken by the government, there is still need and scope for harmonization of taxation
norms and systems across the country.

4
For more details on food regulations refer Annexure


n Market Linkages
n
nPoor
The food value chain in India is highly fragmented and dominated by a large number of
middlemen. This leads to increased inefficiencies in the marketing system, due to which production,
processing and marketing of produce suffers from under investment. The poor forward integration
has resulted into poor quality, lower price and increased wastage of produce at the farm level. Lack
of adequate market place and market infrastructure such as weighting, auction platform, storage
and packaging, among others have increased the complications of the problem. Improvement in
the marketing infrastructure and also identification of new export markets for their produce are
the two major issues faced by the government. Institutional mechanisms such as reforms in
agricultural marketing and warehousing facilities coupled with increased participation from banks
and extension agencies would go a long way in reducing the problems that a farmer faces in his
business today.

n
n
n of SMEs
Growth
Since Small and Medium Enterprises (SMEs) provide the essential link between the agriculture and
industrial segments of the economy by enhancing the value of agricultural production, thereby
ensuring better remuneration for farmers and larger employment opportunities. The main
challenges faced by SMEs are increasing quality standards to be met from the export markets,
shortage of technical grade manpower and lack of production and process knowledge. In addition,
the SMEs are facing the survival challenge under the highly competitive market environment. Most
of the SMEs are unable to deal with the need for product specific technology, availability of
automated machinery & equipment and continuous availability of power in sub-urban & rural areas
which have resulted into poor performance and non survival of these SMEs.

For the success of the food industry, it is imperative that the small scale industries and unorganized
sector should be developed. To achieve this, special arrangements need to be made to provide these
sectors with access to efficient technology, knowledge of market and soft credit. Measures should
be taken to ensure remunerative prices for farm produce, infrastructure development with
emphasis on post harvest management, processing, transportation, marketing and exports.
Developing efficient technologies for small scale, tiny & unorganised sector remain the key
challenge for the government.


FICCI - Technopak Report On Indian Food Industry

FICCI - Technopak Report On Indian Food Industry

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