Nature of industry India is the worlds second largest producer of food next to C hina, and has the potential

of being the biggest with the food and agricultural sector. The food processing industry is one of the largest industries in India-it is ranked fifth in terms of production, consumption, export and expected growth. Though the industry is large in size, it is still at a nascent stage in terms of development of the country's total agriculture and food produce, only 2 per cent is processed. The total food production in India is likely to double in the next 10 years with the countrys domestic food market estimated to reach US$ 258 billion by 2015. With a huge agriculture sector, abundant livestock, and cost competitiveness, India is fast emerging as a sourcing hub for processed food. The Indian food processing industry accounts for 32 per cent of the countrys total food market. The food industry in India has been attracting a lot of attention from foreign investors as the country is close to the markets of Middle East, Africa and South East Asia. The Ministry of Food Processing Industries (MOFPI) is making all efforts to encourage investments in the sector, incentives for cold chain development and also grant-in-aid for setting up laboratories that are equipped for testing food products.

Food processing is a large sector that covers activities such as agriculture, horticulture, animal husbandry and fisheries. It also includes other industries that use agriculture manufacturing of edible products. The Ministry of Food Processing, Government of India indicates the following segments within the Food Processing industry:

plantation, inputs for

The Indian food processing industry stands at $135 billion and is estimated to grow with a CAGR of 10 per cent to reach $200 billion by 2015. The food processing industry contributed 7 per cent to Indias GDP. The industry employs 13 million workers directly. Value addition of food products is expected to increase from the current 8 per cent to 35 per cent by the end of 2025. Fruit & vegetable processing, which is currently around 2 per cent of total production will increase to 25 per cent by 2025. The highest share of processed food is in the dairy sector, where 37 per cent of the total produce is processed, of this only 15 per cent is processed by the organized sector. Processed Foods Scenario with respect to Specific Sectors As the Indian market matures and consumers become more quality and brand conscious, the organized sector is poised to grow and gain prominence. 1.2.1 Dairy In the dairy sector, most of the processing is done by the unorganized sector. Though the share of organized sector is less than 15 per cent, it is expected to rise rapidly, especially in the urban regions.

Among the milk products manufactured by the organized sector, some of the prominentones are ghee, butter, cheese, ice creams, milk powders, malted milk food, condensed milk and infant foods. The market size and growth rates of some of the products in organized dairy and consumer food segments are shown in the graph below. A few corporate players, including Multi National Corporations are now focusing on this market. For example, Nestle and Britannia have forayed into emerging segments such as Ultra Heated Treatment (UHT) and flavored milk. Ultra Heat Treated (UHT) milk is becoming popular and the market is estimated at US$ 33.4 million (Rs1.5 billion). 1.2.2 Fruits and Vegetables Fruit and vegetable processing in India is almost equally divided between the organized and unorganized sectors, with the organized sector holding 48 per cent of the share. While products like juices and pulp concentrate are largely manufactured by the organized sector, the unorganized sectors foothold is in the traditional areas of processed items like pick les, sauces and squashes. 1.2.3 Grains India produces more than 200 million tonnes of different food grains every year. The major grains such as rice, wheat, maize, barley, and millets like jowar (great millet), bajra (pearl millet), & ragi (finger millet) are produced in the country. About 15 per cent of the annual production of wheat is converted into wheat products. There are 10,000 pulse mills in the country with a milling capacity of 14 million tonnes, milling about 75 per cent of annual pulse production. 1.2.4 Meat and Poultry India has a livestock population of 470 million, which includes 205 million cattle and 90 million buffaloes. Processing of meat products is licensed under Meat Food Products Order, (MFPO), 1973. Total meat production in the country is currently estimated at 5 million tonnes annually. Only about 1-2 per cent of the total meat is converted into value added products. The rest is purchased raw and consumed at home. Most of the production of meat and meat products continues to be in the unorganised sector. Some branded products like Venkys and Godrejs Real Chicken are, however, becoming popular in the domestic market. 1.2.5 Fish Processing India is the third largest fish producer in the world and is second in inland fish production. The fisheries sector contributes US$ 4.4 billion to the national income, which is about 1.4 per cent of the total GDP. Processing of fish into canned and frozen forms is carried out almost entirely for the export market. It is widely felt that Indias substantial fishery resources are under-utilized and there is tremendous potential to increase the output of this sector. The units in the fish processing sector are largely small scale proprietary/ partnership firms or fishermen co-operatives. In the past ten years, the corporate sector has increased its operations in preservation, processing and export of coastal fish.

1.2.6 Consumer Foods Consumer food industry includes packaged foods, aerated soft drinks, packaged drinking water and alcoholic beverages. 1.3 Packaged or Convenience Foods This segment comprises bakery products, ready-to-eat snacks, chips, namkeens (salted snacks and savouries) and other processed foods/ snack foods. The market size of confectioneries is estimated at US$ 484.3 million growing at the rate of 5.7 per cent per annum. Biscuits have a market of US$ 373.4 million, growing at 7.5 per cent per annum. Other products like bread, chocolates are also growing at a significant rate. There is a demand for Indian snack food (Ready-To-eat) in overseas markets. 1.3.1 Aerated Soft Drinks Two of the biggest global brands in this segment are well established in India. Soft drinks constitute the third largest packaged foods segment, after packed tea and packed biscuits. Penetration levels of aerated soft drinks in India are quite low compared to other developing and developed markets, an indication of further potential for rapid growth. 1.3.2 Packaged Drinking Water Trends such as shortage of drinking water in the large metropolitan cities, changes in consumer lifestyles leading to demand for convenience and availability of various packaged sizes to suit different needs have led to a spurt in growth and these trends are expected to continue to fuel demand in this sector.

1.3.3 Alcoholic Beverages India is the third largest market for alcoholic beverages in the world. The demand for spirits and beer is estimated to be around 373 million cases per annum. There are 12 joint venture companies producing grain based alcoholic beverages that have a combined licensed capacity of 33.9 million litres per annum. 56 units are engaged in manufacturing beer under license from the Government of India.

Key Players

Coca-Cola plans to foray into India's dairy segment in the coming season with its milk-based drink 'Maaza Milky Delite'. The beverage made from milk and mango pulp will now be rolled across the country in 200 ml tetra packs. Everest Spices plans to set up spices processing units in the East African country Zanzibar at an investment of about Rs 100 crore (US$ 16.73 million), said Mr Sanjeev Shah, Executive Director, Everest Spices. The firm has entered into a memorandum of understanding (MoU) with the Government of Zanzibar for the same.

Cadbury brand owner Mondelez International is investing heavily in sales and route-to-market expansion in India. The company has increased sales infrastructure with one lakh visicoolers in the market and it took big strides by expanding into rural India and reaching seven states in 2013.

Capri-Sun AG has entered into a franchise agreement with SDU Beverages, an Indian beverages firm that currently produces packaged water and soda under the Kingfisher brand and RC Cola.

Hardcastle Restaurants, master franchise for west and south India operations of McDonald's Restaurants, plans to bring its coffee retail format McCafe to India. More than 150 McCafes are expected to be set up in the next five years.

Investments The total inflow of foreign direct investment in the food processing sector has been around Rs 52.7 bn (US$ 1.2 bn) between 1991 to November 2006. During the last five years, FDI witnessed an inflow of over Rs 24 bn of foreign investment. The highest investment in a single year was in 2001-02 amounting to Rs 10 bn. Maharashtra was among the front-runners to receive the highest share of FDI in food processing during the last five years. The dairy and consumer industrise received FDI worth Rs 2.7 bn each as foreign investment. Nearly 30 per cent of FDI in the food processing sector comes from EU countries such as Netherlands, Germany, Italy and France. Perfetti, Cadbury, Godrej-Pilsbury, Nutricia International, Manjini Comaco are some of the successful ventures from EU countries. Major Food Processing Companies in India

The entry of multinational companies has increased competition in the food processing industry. At the same time, these companies are facing tough competition from strong Indian brands. This level of competition has increased innovations, facilitating a sustained growth of the sector and also improve global competitiveness. The emerging new growth phase of the sector is just in its initial stages with the potential for India to emerge as a leading food supplier to the world. SWOT Analysis of FoodProcessing Industry Strengths

Abundant availability of raw material Priority sector status for agro-processing given by the central Government Vast network of manufacturing facilities all over the country Vast domestic market

Weaknesses

Low availability of adequate infrastructural facilities Lack of adequate quality control & testing methods as per international standards Inefficient supply chain due to a large number of intermediaries High requirement of working capital. Inadequately developed linkages between R&D labs and industry. Seasonality of raw material

Opportunities

Large crop and material base offering a vast potential for agro processing activities

Setting of SEZ/AEZ and food parks for providing added incentive to develop greenfield projects Rising income levels and changing consumption patterns Favourable demographic profile and changing lifestyles Integration of development in contemporary technologies such as electronics, material science, biotechnology etc. offer vast scope for rapid improvement and progress Opening of global markets

Threats

Affordability and cultural preferences of fresh food High inventory carrying cost High taxation High packaging cost