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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
n
nFood Industry Overview
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
n
nKey Growth Drivers
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
n
nKey Challenges
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
nGrowth Opportunities
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.

Land Of Opportunities -
The Food Industry in India 2
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.

Land Of Opportunities -
The Food Industry in India 3
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.

Land Of Opportunities -
The Food Industry in India 4
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.

Land Of Opportunities -
The Food Industry in India 5
Some of the key subsectors of the Indian Food Industry are briefly discussed below:

n
n
n1. Fruits & Vegetables
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

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

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.

Land Of Opportunities -
The Food Industry in India 6
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

Land Of Opportunities -
The Food Industry in India 7
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

Non Processed 53 53 79 112

Processed Organized 25 34 56 92

Processed Unorganized 91 110 134 163

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

Land Of Opportunities -
The Food Industry in India 8
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 :

Companies Key Brands Key Products

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

Source: Technopak Analysis

Land Of Opportunities -
The Food Industry in India 9
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

Non Processed 30 33 38 43

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.

Land Of Opportunities -
The Food Industry in India 10
Some of the major players in the industry include the following:

Companies Key Brands Key Products

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

Source: Technopak Analysis

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.

Land Of Opportunities -
The Food Industry in India 11
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

Source: Technopak Analysis

Land Of Opportunities -
The Food Industry in India 12
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*

Market Size 7 10 15 24

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

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:

Companies Key Brands Key Products

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
Source: Technopak Analysis

Land Of Opportunities -
The Food Industry in India 13
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*

Market Size 14 24 35 50

Processed 3 5 11 21

Non processed 11 19 24 29

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

Companies Key Brands Key Products

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
Source: Technopak Analysis

Land Of Opportunities -
The Food Industry in India 14
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

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

Land Of Opportunities -
The Food Industry in India 15
Some of the main players in this industry are:

Companies Key Brands Key Products

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

Source: Technopak Analysis

Land Of Opportunities -
The Food Industry in India 16
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.

Land Of Opportunities -
The Food Industry in India 17
Some of the main players in this industry are:

Companies Key Brands Key Products

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

Source: Technopak Analysis

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

Land Of Opportunities -
The Food Industry in India 18
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.

Land Of Opportunities -
The Food Industry in India 19
Some of the key players in the industry are mentioned below:

Companies Key Brands Key Products

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,

Source: Technopak Analysis

Land Of Opportunities -
The Food Industry in India 20
n
n
n10. Functional Foods
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:

Companies Key Brands Key Products

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

Source: Technopak Analysis

Land Of Opportunities -
The Food Industry in India 21
n
n
n11. Indian Food Ingredients
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.

Land Of Opportunities -
The Food Industry in India 22
Some of the key players in this industry are

Companies Key Brands Key Products

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

Source: Technopak Analysis

Land Of Opportunities -
The Food Industry in India 23
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
n
nHuge Production Potential
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.

Land Of Opportunities -
The Food Industry in India 24
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.

Land Of Opportunities -
The Food Industry in India 25
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

Land Of Opportunities -
The Food Industry in India 26
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

Source: Technopak Analysis

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
nExport Opportunity
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.

Land Of Opportunities -
The Food Industry in India 27
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 Mega Food Parks, Modern Terminal Markets for perishables, up-gradation of Quality control
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
l An additional central scheme i.e. Rashtriya Krishi Vikas Yojana (RKVY) has been announced in
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 The government has decided to give a boost to research and development e.g. setting up the
National Institute for Food Technology and Management in collaboration with Cornell
University of the USA

Land Of Opportunities -
The Food Industry in India 28
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:

lAs per extant policy FDI up to 100 percent is permitted under the automatic route in the food
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
lSingle Brand Product Retailing. This policy is uniform for all retailing activity
lFDI policy for manufacture of items reserved for the SSI sector is uniform for all items so
reserved and a separate dispensation for items in the food processing sector is not
contemplated
lFDI up to 100 percent is permitted for distillation of alcohol though the automatic route
subject to licensing by the appropriate authority
lNo industrial license is required for almost all of the food & agro processing industries except
for some items
lUp to a maximum of 24 percent foreign equity is allowed in SSI sector
lUse of foreign brand names are now freely permitted
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
lMost of the items can be freely imported and exported except for items in the negative lists
for imports & exports. Capital goods are also freely importable, including second hand ones in
the food processing sector
lExcise & Import duty rates have been reduced substantially. Many processed food items are
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
lFree trade zones (FTZ) and export processing zones (EPZ) have been set up with all
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
lUnits in EPZ/FTZ and 100 percent Export oriented units can retain 50 percent of foreign
exchange receipts in foreign currency accounts
2
Source: Ministry of Food Processing Industries, Government of India

Land Of Opportunities -
The Food Industry in India 29
l50 percent of the production of EPZ/FTZ and 100 percent EOU units is saleable in domestic
tariff area
lAll profits from export sales are completely free from corporate taxes. Profits from such
exports are also exempt from Minimum Alternate Tax (MAT)

n
n
nInflow of Foreign Direct Investment (FDI)3
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

Land Of Opportunities -
The Food Industry in India 30
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.

Land Of Opportunities -
The Food Industry in India 31
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 Weak 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

Land Of Opportunities -
The Food Industry in India 32
(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 Lack of Processable Produce and Irregular Supply – Indian Agriculture is still dominated by
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
nMeeting Global Standards of Quality
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
n
nSkill Gap
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

Land Of Opportunities -
The Food Industry in India 33
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
n
nFood Regulations4 and Taxation Issues
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

Land Of Opportunities -
The Food Industry in India 34
n
n
nPoor Market Linkages
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
nGrowth of SMEs
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.

Land Of Opportunities -
The Food Industry in India 35
Growth Opportunities 4
for Companies

The integrated development of the entire


food value chain offers a plethora of
opportunities at every level. The following
areas have been identified as potential
growth opportunities while developing
the Food Industry in India:

n
n
n1. Food Processing
Indian Food Processing Industry is growing
faster and it has immense potential to
explore particularly in the sectors like fruits
& vegetables, packaged food sector and
beer & wine. There are immense promises
at each stage from procurement to export. There is an abundance of produce; in the form
of raw material available for processing. The level of food processing is significantly low
at 43 percent5 (both in the organized & unorganized sector as compared with other
developing counties. There exists a whole gamut of opportunities for the food processing
industry in India to explore and develop. Given the production potential and significant
variations in food habits and culinary traditions across the country translate into immense
processing opportunities for small to large players.
Moreover, the need for machinery, technology and infrastructure for processing the
food, of any kind would be a good prospect. Organizations, offering facilities like
packaging, labeling, transporting of bulk in processed and unprocessed forms, have
immense scope. There is also scope for those who may not be involved with processing as
such, but may play the role of distributors or wholesalers, exclusively.

5
Source: Technopak Analysis

Land Of Opportunities -
The Food Industry in India 36
Sectors Key Opportunities

• Canned fruits and vegetables


• Frozen F&V products
• Ready to cook vegetables
Fruits and Vegetables
• Dehydrated F&V products
• Paste and powders
• Jam, jellies, pulps and concentrates

• Ready to eat/ ready to serve


Packaged Foods • Energy foods
• Snack foods

• Beer and wine – canned and non molasses based


• Fruit juices, ready-to-drink
Beverages • Health drinks and energy drinks
• Flavored drinks
• Ethnic drinks
• Ethnic Indian products – clarified butter, khoya, paneer, curd, whey
Dairy • Western dairy products – cheese, yoghurt, packaged milk, flavored
milk and frozen desserts

• Packaged, semi processed meat and poultry


Poultry and Meat • Processed ready-to-eat products
• Intermediate products – egg powder, albumin, protein, egg yolk powder

• Frozen and processed sea food


• Packaged and processed products
Marine
• Fish paste, fish oil
• Ready-to-eat products
• Post harvest and prevention technologies
• Packaging technologies and material
Technology • Integrated abattoirs-cum-meat processing units
• Cold storage facilities
• Bulk storage and transportation

n
n
n2. Organized Food Retailing and Food Services
Currently, the total retail industry is Rs. 18,04,000 crores or US $ 410 billion, which is expected to
grow up to Rs. 27,06,000 crores or US $ 615 billion by 2013. Modern retail is estimated at Rs.
79,200 crores or US $ 18 billion; out of which Food & Grocery constitutes 17 percent i.e. Rs. 13,200
crores or US $ 3 billion and it is estimated to grow up to Rs. 2,33,200 crores or US $ 53 billion by
2013. Organized food retailing has grown at about 25 percent per annum for last two years and
the momentum is likely to increase with the entry of large corporates. The proliferation of
organized retailing in India is also altering food consumption patterns, promoting imported
foods, branded foods, processed foods and a wider assortment. Apart from this, food chains,
restaurants, gourmets with novel delivery formats of food retails are another fast growing sector
in the Industry.

Land Of Opportunities -
The Food Industry in India 37
By 2020, India is expected to become the 4th-
largest food retail market in the world.
However, the industry is highly fragmented
and dominated by traditional retailers
operating small, single-outlet businesses.
Partial liberalization of Foreign Direct
Investment (FDI) in retail has led to increased
participation by foreign players.

The Indian retail industry is gearing up for


massive structural changes on both the urban
and the rural front with participation of
global players. The retailers in India are still in
the experimentation phase and coming up
with the different and innovative formats.
For instance, the Reliance ranger farms which
is a new format for sale/distribution of agricultural products, focuses catering small retailers
(kirana stores), push cart sellers, bulk buyers and any other buyer in the catchment. Some of the
major players in urban retailing are Aditya Birla (More), Wadhawan Food Retail (Spinach), Future
Group (Food Bazaar), Express Retail (Big Apple), Subhiksha, Reliance and RPG Group (Spencer’s
Retail), among others. Though, the rural retail industry is still in its formative years, many
companies venturing into the rural market have significant agribusiness interests. Some of the
prominent players in the rural retail sector are DCM Shriram, Tata Chemicals, Mahindra
Subhlabh, Future Group (Aadhar Retailing), ITC, Triveni and Indian Oil Corporation, among
others. However, it is important to note that multinational players like Wal-Mart and Tesco have
already tied up with their strategic Indian partners or stakeholders.

There has been a significant increase in private label brands in the recent years in India. They are no
longer saying “buy us because we are cheap”, instead today; they are saying “buy us because we are
the best”. By offering high quality products, many private labels have started charging more
than regular manufacturers. Some of the major examples of the private labels in India are Reliance’s
‘R-Select noodles, milk, paneer and ketchup, Food Bazar’s ‘Fresh & Pure’ mango drink and
Vishal’s ‘Vfresh’.

Food services such as food chains, restaurants, gourmets are another fast growing sector in the
Industry. India currently has more than 1000 fast food restaurants and coffee joints in year 2006, and
is likely to see the addition of at least 2000 restaurants, fast food outlets and coffee joints in 2007-08.
In the recent past, many food-services companies like Pizza Hut and McDonald’s have invested
heavily in developing back-end operations in tandem with opening outlets. This is likely to stimulate
change among modern food retailers as they, too, become competitive and reap the benefits of
disintermediation.

n
n
n3. Sourcing Hub
Today, multinational companies are betting on India as a source to feed the world. Large investors
and corporations, both Indian and international are capitalizing on the Indian agribusiness as an
emerging market with twin opportunities – i) to cater to the growing Indian middle-class and ii) to
export premium processed food. India with its strong agricultural production base, easy availability

Land Of Opportunities -
The Food Industry in India 38
of raw materials and the growing food processing industry is strategically poised to capitalize on the
global Food processing market.

An excellent example of this would be Pepsico, who has made India a sourcing hub for juices to
other international markets such as the Middle East and Asia. They have planned to procure and
process fruits and vegetables like oranges, tomatoes, melons and carrots, which would help in
cutting down imports and also make India a sourcing hub. Similarly many other players are
capitalizing Indian advantages of being hub of many activities form sourcing, manufacturing
and marketing.

n
n
n4. Marketing and Branding
Despite being the world's second largest producer
of food, India accounts for only 1.6 percent of
international food trade. The Government has
targeted increasing this share to 3 percent in the
coming few years. As per the Ministry Of Food
Processing, the sector is envisaged to attract an
additional investment of Rs. 80,000 crores or US $
18.1 billion in next 3 years. Fish products, cereals,
spices and processed food have immense potential
as the key contributors to India’s exports. Edible
oils, pulses, tea, cereals & fruit and nuts are the
potential India’s import items.

Marketing and branding is the one of the


opportunity that would help India to differentiate
its produce from the other countries given the
favorable image with relation to the produce that it has established in the consumer’s mind over the
years. Branding would help in identification of the produce from that of the other countries and
hence would help in lower marketing costs and a better distribution mechanism as against the
effort required to market several smaller brands to different areas.

n
n
n5. Opportunities in Strengthening the Back End of Food Supply Chain

Modernization
l of Agriculture, Agri-Technology, Farm Machinery – There are
increased investment opportunities in the sector due to the rising need for quality and
value added products. Indian Agriculture is in the process of upgrading its farm sector, and
is seeking massive investments in production technology i.e. farm inputs, plant nutrients,
cattle feed & feed supplements, farm machinery and equipments, among others. Hence,
modernization of agricultural farms & practices, hi-tech technologies of production need
to be adopted to increase the production and improve the quality of the produce in the
limited land available.

India presents tremendous potential for agri-technology to include - advanced and


computerized milking and feeding systems, cooling systems, milk processing equipment,
new high-yielding disease resistant varieties of crops, advanced methods of production –
protected cultivation, means and treatment for lengthening shelf life and advanced farm

Land Of Opportunities -
The Food Industry in India 39
equipments and machineries.
Foreign companies can also offer a
lot to their counterparts in India
with regard to latest farming
methods, cropping patterns and
equipments & technologies like
biotechnology & genetic
engineering and nanotechnology.
Global and Indian Investors can
also play a constructive role in the
increased Indian corporate
investment in agriculture and
farm-to-market systems through
strategic partnerships and joint
ventures. For instance, FieldFresh
(a joint venture between Bharti Enterprises and Del Monte Foods) is engaged in
manufacturing and sales of processed fruits & vegetable products. Field Fresh has made
significant investments towards introducing advanced farm technology and creating
modern farm infrastructure such as protected cultivation and pack house in Punjab.
It helps companies serve their customers better in domestic as well as international markets.

Contract
l Farming – Contract farming is rapidly gaining popularity and is being
increasingly practiced across the country. Leading industrial houses are coming forward
for integrating their supply chain of agriculture produce with processing functions, which
have evinced significant interest in the contract farming model. With a well established
agriculture practice, India presents vast opportunities in the domain of contract farming.

Seed multiplication, organic foods, processable varieties of vegetables & fruits, aromatic,
herbal and medicinal plants, floriculture and exports specific crops are key opportunities
that can be tapped under the sector. In India, contract farming is successfully practiced for
the production of the crops such as potato, tomato, maize and gherkins, among others.
Some of the examples of the companies, which are successfully practicing this practice in
India, are Pepsico, McDonald, ITC, Cargill India, Ion Exchange EnviroFarms, The Global
Green Company, Ken Agritech and HLL, among others.

Agricultural
l Training and Capacity Building – Training and capacity building in the
Agriculture sector continues to play a key role in rural development and sustainable
agricultural production. The worldwide agricultural scenario is changing fast with
improved and efficient technologies of production and processing. Knowledge remains
the main growth driver behind the development of the Agricultural system in India. Key
opportunities lies in the establishment of well equipped practical training centers for
providing practical training to farmers as well as trainers, both from public and private
sector. There exists tremendous scope for training in institutions as well as at corporate
levels for capacity building in many key areas like modern farm production techniques,
development of post harvest protocols to handle the produce from farm to retail shelf.

Cold
l Chain Logistics - Even though India is the second largest producer of food in the
world, the facilities required for food storage and refrigerated transportation

Land Of Opportunities -
The Food Industry in India 40
infrastructure are grossly inadequate. Poor infrastructure leads to reduced shelf life and
poor quality of produce. Tremendous potential for investment exists in the areas of
procurement and delivery systems, pre-cooling facilities, refrigerated vehicles, cold stores/
CA stores, warehouses and traceability issues, among others.

The cold chain in India is poorly-existent with an isolated 21.7 million MT (only 15 percent
of the total production of horticultural crops) cold storage facilities operational. Of the
available cold chain facilities
specially used for seasonal
storage of potato, multipurpose
cold chain facilities need to be
installed. The size of the cold
chain industry is estimated
approximately Rs. 8,800 crores or
US $ 2 billion with an annual
growth rate of nearly 20 percent
and the total investment in cold
storage is likely to increase to Rs.
13,200 crores or US $ 3 billion in
the next three years.
Fragmentation of cold chain has
also discouraged the growth of
cold chain logistics for perishable
horticulture produce. However, the development of domestic retail market has
demonstrated some successful utilization of captive end-to-end chains such as reefer
transportation. The government envisages creating an additional of about 9-10 million MT
of storage, pack house and ripening chamber facility by 2012, while also aiming at up
gradation of existing potato cold storage.

Some of the key players in this sector are Snowman (integrated logistics), RK Foodland
(integrated logistics), Fresh Express (storage and transportation), Chaitanya Cold Storage
(storage and transportation), Kausar (transportation), Western (refrigeration equipments
& storage services) and Frick India (refrigeration equipments & storage services).

Supply
l Chain Management - For achieving growth targets in the sector, it is critical to
have an efficient supply chain. The food supply chain in India is fragmented with the
existence of numerous intermediaries. Almost 50 percent of the value is whisked away by
intermediaries. While this is partly due to the way trade is organised in India - allowing
intermediaries to make high commissions - it is also because of high logistics costs and
wastage in the Indian food supply chain. This presents a great avenue for international
companies as they can enter and capture great value by bringing in efficiencies, which are
currently absent.

Food Parks - In order to boost the food sector, the Government of India is working on agri
l
zones with the concept of Food Parks. In India, 30 such mega parks are planned in different
parts of country to attract Foreign Direct Investment (FDI) in the food processing sector.
These food-parks will create an integrated value chain from the farm gate to the consumer
and will envisage complete backward and forward linkages along with common
processing facilities.

Land Of Opportunities -
The Food Industry in India 41
processing facilities. The investment requirement for establishing each park is Rs. 100-150
crores or US $ 22-34 million. These food parks are being developed on the basis of public-
private partnership or special purpose vehicle mode. The government will provide a grant
of about Rs. 50 crores or US $ 11 million per project, while the rest will be contributed by
the private partner. These food parks will have various facilities such as sorting, grading,
processing, cold storage, packaging and quality control and R&D laboratories, among
others. Five food parks have been already identified by the government in the states of
Maharashtra, Andhra Pradesh, Punjab, Jharkhand and one in the North-East region.

Wholesale
l Markets - Agricultural Marketing in India is undergoing a significant
metamorphosis in view of policy reforms and infrastructure development. In order to
provide dynamism and efficiency into the marketing system, large investments are
required for the development of post harvest and storage infrastructure near farmers’
field. There is a need for a modern innovative marketing system, which will reduce vested
interests of a large intermediary chain, create competition, assure quality and modernize
operations with IT applications in handling of food crops and could replace the existing
system. The policy amendment facilitates private investment in setting up wholesale
markets – Modern Terminal Markets - in the country along with encouraging procurement
of agricultural commodities directly from farmers’ field and to establish effective linkage
between farm production and processing industries and retail chain. These markets will
have state-of-the-art infrastructure such as packing, sorting & grading, auction, ripening,
cold storage and logistics support.

Land Of Opportunities -
The Food Industry in India 42
Case Studies of Excellence 5

Some case studies of companies who are making success in the industry through
innovation of technology, product, channel and process, are highlighted below:

n
n
n1. Making Success through Leveraging Strengths of Joint Venture
Partner and Strong R&D: Agro Tech Foods Ltd. (ATFL)
This case study shows the successful leveraging of strengths of joint venture partner in
processed food sector in India. ATFL has demonstrated how use of technology can be used
to translate consumer needs into successful food brands.
In the year 1997, ConAgra Foods (US) with 34.3 percent and Tiger Brands (South Africa),
with 17 per cent had acquired a 51.3 percent stake in ITC Agro-Tech, which was renamed
as Agro Tech Foods Limited (ATFL) in July 2000. ITC Agro Tech was primarily into crushing
and refining of edible sunflower oil. Post merger, it started diversifying its business into
other value added products and processed products like popcorn and frozen peas. Some
of the popular brands of the company are Sundrop, ACT II, Swiss Mess, Healthy World,
Crystal, Rath and Sudham. The company has leveraged the emerging opportunities in
Indian Food Processing industry and tapped the market potential through adopting
appropriate business strategies in time. The foreign collaboration with Conagra was the
added advantage to it that provides the superior technology and innovative value added
food products. Moreover, its extensive market and product research provides ATFL a
competitive edge over other players.
The joint venture appeared to be taking a turn for the better and reported a net profit in
2000-01 after reporting the net losses for three consecutive years. In 2006-07 the
company reported profit after tax of Rs 16.06 crores or US $ 3.65 million which is 63
percent higher than previous year. It is continuously harnessing the potential of the food
processing industry through Conagra’s expertise and its strong R&D facility that helps the
company in understanding the needs of the Indian consumer and delivering preferred
products and by constantly adding value to the existing range of the products through
product, process or packaging innovations.

n
n
n2. Right Product Mix for Developing a Brand: Haldiram’s
The Haldiram's Group (Haldiram's) had emerged as a household name for ready-to-eat
snack foods in India. The group has presence not only in India but in several countries all
over the world. Haldiram's had many 'firsts' to its credit. It was the first company in India
to brand 'namkeen’. The group also pioneered new ways of packaging namkeens.

Land Of Opportunities -
The Food Industry in India 43
Its packaging techniques increased the shelf life of namkeens from less than a week to more than six
months. It was also one of the first food companies in India to open restaurants offering traditional
Indian snack food items such as "panipuri," "chatpapri," and so on, which catered to the needs of
hygiene conscious non-resident Indians and other foreign customers. The company faced tough
competition not only from sweets and snack food vendors in the unorganized market but also from
domestic and international competitors like SM Foods, Bakeman's Industries Ltd, Frito Lay India Ltd.
(Frito Lay) and Britannia Industries Ltd. Products. However the company could beat the competition
due to its efforts to launch wide range of product portfolio & then mixing it with right product mix.
Haldiram's offered its products at competitive prices in order to penetrate the huge unorganized
market of namkeens and sweets. The company's pricing strategy took into consideration the price
conscious nature of consumers in India. It developed a strong distribution network to ensure the
widest possible reach for its products in India as well as overseas. Its product promotion had been
low key until competition intensified in the snack foods market. Consequently, attractive posters,
brochures and mailers were designed to enhance the visibility of the Haldiram's brand. Haldiram’s
annual turnover was Rs. 400 crores or US $ 90.9 million in 2004 and crossed the Rs 1000 crores or US $
227 million turnover mark in 2005. Currently, about 75 percent of their manufactured produce is
exported and they plan to foray into the biscuit segment.

n
n
n3. Strengthening Supply Chain through Partnership: SAB Miller India
SABMiller India is a wholly owned subsidiary of SABMiller plc, the second largest beer company in
the world. SABMiller’s India sojourn began in 2000 and in just a few years, it has cornered nearly one
third of the Indian beer market with brands such as Haywards 5000, Haywards 2000, Haywards
Black, Knock Out, Royal Challenge, Castle Lager and Fosters. SABMiller has established ten world-
class breweries strategically located across India. However in the early years it faced challenge with
regard to supply of good quality barley from which beer is made. Realizing the need to improve the
quality of the barley supply chain, SABMiller India envisioned & initiated, the "Progress through
Partnership" (Saanjhi Unnati) program in
the State of Rajasthan in 2005. It’s a unique
initiative that involves working closely
with farmers for providing certified seeds,
agriculture input supply, agriculture
infrastructure, good farming practices,
technology & purchase of crop for higher
yield and higher quality of Barley. The
farmer also benefits in terms of better
rate, accurate weight, proper grading and
immediate payment when dealing with
SABMiller Collection Centers. The program
distributes government certified seeds at a
subsidized rate and educating existing
barley farmers on best practices to help
them improve their quality and yields. The program has gained significant momentum and from a
beginning at about 4000 acres during 2005-06, the program is extended to about 13,000 acres
during 2007-08 under quality barley cultivation. Member farmer base has increased to 6020 across 5
districts. Awareness of certified seeds has spread across more than 70 villages through more than
3500 household surveys capturing social need felt at grass root level. Procurement of barley for the

Land Of Opportunities -
The Food Industry in India 44
last fiscal was to the tune of 15,000 tonnes, which was about 18 per cent of SABMiller total
requirement. The company intends to scale up the program in future so that the major portion of its
total requirement would flow through this channel.

n
n
n4. Contract Farming, Engaging Farmers by Companies: Pepsi Foods Ltd.
Launching its agro-business in India with special
focus on exports of value-added processed foods,
Pepsi Foods Ltd. (‘PepsiCo’ hereafter) entered
India in 1989 by installing an Rs. 22 crores or US $ 5
million state-of-the-art tomato processing plant at
Zahura in Hoshiarpur district of Punjab state.
Though, initially, the company intended to
produce aseptically packed pastes and purees for
international market, the company recognized
that investment in agro-processing plants would
not be viable unless the yields and quality of
agricultural produce to be processed were
improved to international standards. PepsiCo
followed the contract farming method, where the
grower plants the company’s crops on his land, and the company provides selected inputs like
seeds/saplings, agricultural practices, and regular inspection of the crop and advisory services on
crop management. The PepsiCo model of contract farming, measured in terms of new options for
farmers, productivity increases, and the introduction of modern technology, has been an
unparalleled success.
PepsiCo has been successfully emulating the model in food grains (Basmati rice), spices (chilli) and
oilseeds (groundnut) as well, apart from other vegetable crops like potato. Realizing the immense
advantages of contract farming practice, leading industry players are keenly sizing the opportunity
spectrum across various states in the country. Presently, leading corporate players such as Reliance,
ITC, Godrej and Pepsi are leading the contract farming initiatives in the country.

n
n
n5. Rural Retail Marketing Providing One Stop Solution: Hariyali Kisan Bazaar
The genesis of the retail venture goes back to 1997 when DCM Shriram (DSCL) initiated an
agricultural extension program, Shriram Krishi Vikas Guides, in northern India where the guides
were trained agronomists posted in rural areas to address needs of farmers and solve agricultural
based problems such as seed quality, irrigation techniques, fertilizer usage and crop yields. At this
point the company found that farmers were asking for a host of quality agriculturalproducts at
reasonable prices. Today, there are 125 rural centers spread across the north, west and south of the
country. Its one-stop shops provide farmers with a range of agri and non-agri products, latest farm
technology, farm fuels, and output buyback of farmers' produce. These centers are also IT-enabled
and provide farmers critical data relevant to them, inputs and access to weather forecast, market
prices and other technical knowledge. Moving ahead, the company wants to experiment retail on
the output and input side. On the output side, Hariyali is mulling on being an "instrumental link" in
the retail value chain, to supply large urban retailers with fresh fruits, vegetables and grains
procured directly from the farming community.

Land Of Opportunities -
The Food Industry in India 45
n
n
n6. Customized Distribution & Logistics Services is Way Forward:
Radhakrishna Foodland (RFPL)
Foodland provides Customized Distribution & Logistics services encompassing the entire supply
chain, such as storage, handling and distribution solutions to various clients. The services are tailor
made to suit each client’s requirements, which includes organizations such as McDonald's and
Radhakrishna Hospitality Services (RKHS). RFPL is the only integrated provider of broad line food
distribution solutions in India. The model combines dual business benefits of outsourcing with those
of a single window approach. Known as the broad line food distribution model, this single window
approach for sourcing all food, beverages and operating supplies is followed across the world as it
helps in streamlining the entire supply chain and avoiding inefficiencies that exist therein. It helps
manufacturers and suppliers route their products through a single distribution platform, which
helps them get better penetration, thereby increasing sales, reducing logistics and distribution costs
and ensuring integrity of the product. It is a win-win for all - the manufacturer/ supplier, the broad
line distributor and the customer. Radhakrishna Foodland has its own state-of-the-art food
distribution facility at Kalamboli, Navi Mumbai. This facility built over 33,000 sq. meters, has been
designed by international experts and maintains international food safety USDA, HACCP and
CODEX standards.

n
n
n7. Automation & Quality Up gradation leading to Competitive Edge:
Gadre Marine Export Limited
Gadre Marine Export Limited (GME) is a premier exporter of processed and frozen fish cakes.
Hundred percent export-oriented unit (EOU) is a market leader in the segment and has earned an
excellent reputation for its expertise, stability and strength. In fact, the company is considered a
visionary in the industry. Traditionally, the seafood processing industry in India has used manual
manufacturing processes. GME became a pioneer when it fully automated its processes. Its
improved quality and hygiene standards won the company the coveted HACCP accreditation
(Hazard Analysis & Critical Control Point; similar to ISO 9002 accreditation for the processed food
industry). GME posted an audited turnover of approximately Rs. 66 crores or US $ 15 million in the
last financial year.

n
n
n8. Technological Breakthrough in Product: Hindustan Unilever Limited
Hindustan Lever Limited introduced a major technological breakthrough that prevents the loss of
iodine from salt. HLL’s breakthrough technology has been patented in India as well as several other
countries. This new technology encapsulates iodine in a manner that it not only prevents its loss
during storage and transportation but also during Indian cooking. Loss of iodine from iodized salt is
a major concern affecting all iodized salts in the country. One of the main problems in iodized salts is
the loss of iodine under conditions of storage and cooking. Even government PFA regulations
recognize that up to 50 percent of iodine may be lost in storage and transportation alone. In
addition, there are losses arising in Indian cooking, which further reduces the actual intake of
iodine. Iodine deficiency is a serious health issue in our country. Iodine deficiency not only leads to
goiter but also has an impact on the mental development of growing children. HLL has incorporated
this technology in its brand of salt names Annapurna, which makes it the only salt in the market that
does not lose iodine. Annapurna salt was the first salt to be endorsed by ICCIDD. Annapurna is one
of the leading brands of iodized salt in the market and is now further consolidating its leadership
position with the launch of stable iodine salt.

Land Of Opportunities -
The Food Industry in India 46
n
n
n9. Transformation of Business through ICT: ITC e-choupal
ITC is one of India’s leading companies in agri-
business. Its International Business Division created in
1990 as an agricultural trading company; now
generates Rs. 880 crores or US $ 20 million in
revenues, annually. The company has initiated an e-
choupal effort that places computers with Internet
access in rural farming villages; the e-choupals serve
as an e-commerce hub. What began as an effort to re-
engineer the procurement process for soy, tobacco,
wheat, shrimp, and other cropping systems in rural
India has now grown to create a highly profitable
distribution and product design channel for the
company — an e-commerce platform that is also a
low-cost fulfillment system focused on the needs of
rural India. The e-choupal system has also catalyzed
rural transformation that is helping alleviate rural isolation, create more transparency for farmers,
and improve their productivity and income.
Farmers trained by ITC, can use the computer to access daily closing prices in local mandis, as well as
to track global price trends or find information about new farming techniques. They also use the e-
choupal to order seeds, fertilizers, and other products such as consumer goods from ITC or its
partners, at prices lower than those available from village traders; the Sanchalak typically
aggregates the village demand for these products and transmits the order to an ITC representative.
During harvest season, ITC offers to buy the crop directly from any farmer at the previous day’s
closing price; the farmer then transports his crop to an ITC processing center, where the crop is
weighed electronically and assessed for quality. The farmer is then paid for the crop. In this way, the
e-choupal system bypasses the government-mandated trading mandis. Farmers benefit from more
accurate weighing, faster processing time, and prompt payment, and from access to a wide range of
information, including accurate market price knowledge, and market trends, which help them
decide when, where, and at what price to sell. Farmers selling directly to ITC through an e-choupal,
typically, receive a higher price for their crops than they would receive through the mandi system,
on average of about 2.5 percent higher (about Rs 264 per ton). In areas covered by e-choupals, the
percentage of farmers planting soy has increased dramatically, from 50 to 90 percent in some
regions, while the volume of soy marketed through mandis has dropped as much as half. At the
same time, ITC benefits from net procurement costs that are about 2.5 percent lower (it saves the
commission fee and part of the transport costs it would otherwise pay traders who serve as its
buying agents at the mandi) and it has additional direct control over the quality of what it buys. The
system also provides direct access to the farmer and to information about conditions on ground,
improving planning and building relationships that increase its security of supply. The company
reports that it recovered its equipment costs from an e-choupal in the first year of operation and
that the venture as a whole is profitable.

Land Of Opportunities -
The Food Industry in India 47
Recommendations 6
for the Stakeholders

Indian Food industry is poised for phenomenal growth in the years to come. One hand,
India is continuously witnessing the increase in production in food grains, fruits and
vegetables and fresh produce production, simultaneously increasing demand on the
consumption front is ready to support the development of entire Food Value Chain.
Serious efforts of stakeholders in the past have laid a strong foundation; following may
be the recommendation to bring in required traction to bag the additional Rs. 440,000
crores or US $ 100 billion opportunities by year 2015.

n nn 1. Create New Infrastructure and Upgrade the Existing


Infrastructure
There is urgent need to create and
augment strong Infrastructure to wipe off
wide spread inefficiencies in the food
value chain. The core infrastructure
required for Food Processing Industry is:
Production
l infrastructure – like
germplasm and seed
multiplication facilities,
agricultural inputs (seeds, plant
nutrients and plant protection
chemicals), irrigation,
controlled production facilities,
farm mechanization etc is
required to increase production
of processable produce at lower cost and to make it available in required
quantity round the year.
Processing infrastructure – like farm level post harvest facilities – cool chambers,
l
grading and sorting facilities, pack houses for the back end support; integrated
industrial processing units for processing and value addition
Distribution
l infrastructure – There is a need to establish an integrated supply
chain like warehousing, cold chain and transport from farm gate to the food
plate for strong backward and forward integrations. Supply chains are to be
created in such a way that they can be utilized round the year for multiple
commodities to increase the efficiency of utilization.

Land Of Opportunities -
The Food Industry in India 48
In addition to the above agricultural infrastructure directly required by Food Processing
Industry, basic support Infrastructure like - road, rails, communications, power etc. is also
to be strengthening at different places. Some quick milestones can be achieved by up
gradation of existing infrastructure like APMCs, Quality Control Labs (QC labs), cold
storages, processing plants etc, initiatives for which has already been taken by MoFPI and
others.

n
n
n2. Successful Implementation of FSSA
There is an urgent need of successful implementation of FSSA in its original spirit, protecting the
interest of all stakeholders. In addition, harmonized rules and transparent implementation
mechanism needs to be placed. Appropriate infrastructure and capacities in terms of scientific
resources, pool of scientists, analytical laboratories need to be created to support the scientifically
conducted risk analysis implementation of FSSA.

n
n
n3. Increase Public Private Partnership
Development of infrastructure duly supported by hi tech interventions requires huge investment
from the private sector. Government needs to take all possible steps for the incentivisation of
private sector to invite investment in creating the agricultural infrastructure possibly by viability gap
funding through public private partnerships. This will not only ensure the optimal utilization of
resources but will also utilize the advantages of new technologies and human skills of private sector.
Public Private Partnerships should be encouraged in the sectors of joint infrastructure projects, R&D,
capacity building, information sharing, international branding etc.

n
n
n4. Market Demand Driven Production
The Indian production system is still largely “supply driven”. A paradigm shift is required in the
production system from “supply driven” toward “market demand driven production”. It would
require collective endeavors of all the stakeholders’ right from the R&D organizations, extensions,
market players and the govt machinery. Farmers will have to play active role in adoption of new
technologies shared by the public and private extension system.

n
n
n5. Meeting Global Standards of Quality
All possible efforts are required to be done by technology interventions, training of various
stakeholders to produce the world class processed food products in India. The output should be able
to meet the global standards like Global GAP, Codex Alimentarious, HACCP standards etc.

n
n
n6. Technological Knowhow and Support
Looking at industry and users’ demands it would appear that steps need to be taken to further
nurture high quality institutions in this field. An apex institutions could be established which would
inter alia provide for world class graduates and research programs; carry out cutting edge research;
provide for a framework for constantly updated curricula to sister institutions, assist and provide a
linkage to regional institutions in their activities.
a. Capacity building on quality standards: The apex institute can also be created by upgradation
of institutes State Agri Universities and various other central research institutes in closed tie up
with private organizations and other world leaders in the similar sector.

Land Of Opportunities -
The Food Industry in India 49
b. Technology transfer, capacity building and skill up gradation: Strong linkages are to build
to transfer the technologies developed in isolations at different public and private research
organization to their targeted beneficiaries. While the farmers are to be linked to the agri
research companies and research organizations, the processors are to be linked to the post
harvest research centers. The extension workers should not only be trained about
increasing the production but should be educated about saving the post harvest losses
through value addition.

n
n
n7. Market Promotion and Branding
The Indian consumer’s demands are still dominated by consumption of fresh. Packaged and
processed foods are readily not accepted in the larger portion of consumers due to various reasons.
Government and industry should run sustained campaigns to create awareness for increasing
acceptance of processed food. It is equally for all the stakeholders in production and distribution to
ensure availability of quality processed food at affordable prices. It is more important to handle the
challenges of non homogeneous food habits of India and varied cultural diversities.
Branding of India as processed food basket to the world market is equally important to tap the
opportunities in overseas markets. This will require holistic efforts from government, export
promotion bodies, business chambers and associations on a long term basis.

n
n
n8. SME Support
Due to the low investment capacity of SMEs, sectors reserved for SMEs and SSI are to be empowered
with suitable support in terms of skill up gradation, assistance for certification, capacity building
and connecting them to the markets.

n
n
n9. Market Research Based Offerings
Focused studies on Indian customers and markets are required to design appropriate marketing
strategies for processed food in Indian markets. The industry should share the responsibility of
product innovations by offering “value for money proposition” and designing customized products
to be readily accepted by the Indian household.

n
n
n10. Promoting Entrepreneurship and Innovations
Policy level efforts need to be initiated by the government in consultation with farmer groups,
cooperatives and entrepreneurs to promote Producer Group Companies and contract farming. Help
from the NGO, private sector should be taken for the recognition and reward of innovative
technologies and recipes. This will not only be a step towards farmer’s empowerment, but will also
ensure supply of quality raw material to the industry.

n
n
n11. Organized Retail as a Key Driver
Like developed countries, organized retail has come up as a key driving factor in the development of
packaged and processed food through its innovative methods of marketing. Clarity on the policy
front from the govt on FDI in retail, regulatory framework facilitating backward integration would
further strengthen the development of food industry in India.

Land Of Opportunities -
The Food Industry in India 50
n
n
n12. Linking Farmers to the Markets
Linking farmers to the markets by allowing them to directly connect with retailers, processors,
aggregators etc. The amendment of APMC should be implemented in the original spirit so as to
increase buyer-producer interaction.

n
n
n13. Single Window System
Various initiatives taken by central and state governments to incentivize the investors are not being
properly communicated and do not reaches to the target beneficiaries due to complexity in roles
and channels. There is urgent need to bring all the investor and industry incentive policies,
regulatory policies under single window. This will not only remove the undesired confusions for the
investors but will also increase efficiency in the execution.

Conclusion
This report has presented the potential, dynamics, market size and the opportunities of the Indian
Food Industry. It has analyzed the growing segments like fruits and vegetables, dairy, marine
products, meat and poultry, beer and wine and packaged foods. The fast paced growth of this
industry is expected to generate additional Rs. 4,40,000 crores or US $ 100 billion opportunity by
2014. It has indicated the need for Rs. 2,20,000 crores or US $ 50 billion capital investment, a big part
of which will go towards plant and machinery. Although Rs. 44,000 crores or US $ 10 billion will
come from government support, the rest is industry’s opportunity.

The Indian domestic market has a great unmet demand which is one of the main drivers of this
sector. While a majority of this market will be met through indigenous production, imports will also
rise many fold. Imports of fresh produce, wine, packaged foods, cheeses etc. are just a few such
examples of big opportunities. On the other hand, export of packaged foods, buffalo meat, marine
products, fresh and processed fruits and vegetables, wine etc. are the export opportunities.

This industry, which has been waiting for the change of consumer preferences and buying habits for
long, has suddenly undergone a major change. A preference for convenience and health foods,
supported by increasing income is throwing up unprecedented opportunities. The enabling
regulatory environment is further boosting the pace of change towards processing of food. In a
nutshell, it can be said that the Indian Food Processing industry is on the cusp of a revolution, and
there are definite first mover advantages for the early investors.

Land Of Opportunities -
The Food Industry in India 51
Annexure:
Indian Food Regulations

n
n
nPrevention of Food Adulteration Act and Rules, 1955
The Prevention of Food Adulteration Act was enacted in 1954 to strengthen the system
for preventing adulteration in articles of food. The Central Government framed rules
known as the "Prevention of Food Adulteration Rules, 1955". Under sec.23 of the Act the
responsibility of implementation of Prevention of Food Adulteration Act and Rules
framed there under vests in the State Governments and Union Territories. Each State
Government and Union Territory has created its own structure/organization for
implementation of the Act.

n
n
nProcedure of Standard Setting

To review the provisions of PFA Act, Rules and Standards in consultation with the Central
Committee for Food Standards, a statutory Advisory Committee under the Act and its 12
technical Sub- Committees and groups were formed like Food Laws and Legal Advisory
Sub-Committee, Nutrition, Foods for Special Dietary Uses Sub-Committee, Food Additives
Sub-Committee etc. There are various roles of the committees as formed above, some of
these encompasses:
l
To conduct examination for the Chemists for their appointment as Public Analysts
l
To organize training programs for various functionaries (viz. Senior level Officers,
Chemists, Food Inspector and Consumer Organizations) under the Act

To approve the State PFA Rules


l

To examine and approve the labels of Infant Foods


l

To evaluate
l and monitor the progress of implementation of the Act in the
States/UTs by collecting periodical reports and spot visits

To liaise with National & International Food Quality Control Organizations


l

To ensure quality of food imported into India, under the provisions of the Act
l

To create Consumer Awareness and to augment the Food Testing Laboratories


l

Land Of Opportunities -
The Food Industry in India 52
Enforcement of the regulation is under the control of state ministries. Food inspectors in each
district collect samples from manufacturer’s site as well as market to ascertain its safety and
conformance to quality. These samples are analyzed at state food laboratories and Central Food
Laboratories. Four Central Food Laboratories have been established under the Act, which work as
appellate laboratories for the purpose of analysis of appeal samples of food articles lifted by the
Food Inspectors of States/UTs and Local Bodies. The two Laboratories viz. (i) Food Research and
Standardization Laboratory, Ghaziabad and (ii) Central Food Laboratory, Calcutta are under the
Administrative control of the Directorate General of Health Services and the other two viz. (i)
Central Food Laboratory, Pune and (ii) Central Food Laboratory, Mysore are under the
Administrative control of Government of Maharashtra and Council of Scientific and Industrial
Research, Government of India, respectively.
There are 72 State Food Laboratories under the administrative control of States/UTs Governments
and Local Bodies.

n
n
nStandards of Weights and Measures Act and Rules

The Standards of Weights and Measures Act, 1956 was the first enactment by which the uniform
standards of weights and measures, based on the metric system were established. Salient features of
the Standards of Weights and Measures Act, 1976 are as follows:

lEstablishment of the weights and measure based on the SI units, as adopted by the CGPM
and recognized by the OIM
lProvides to prescribe specification of measuring instruments used in commercial
transaction, industrial production a measurement involved in public Health and Human
safety. The specifications are given in the Standard of weights and Measures (General)
Rules 1987
lRegulation of inter-state trade and commerce in weights and measures and commodities
sold, distributed or supplied by weights or measures
lRegulation of pre-packed commodities sold or intended to be sold in the course of inter-
state and commerce
lApproval (before manufacture) of models of weights and measuring instrument intended
to be manufactured after the commencement of the proposed legislation
lControl and regulation of export and import of weights and measures and commodities in
packaged form
lEstablishment of an Indian Institute of Legal Metrology to provide training in legal
metrology to inspectors and others
lSurveys and collection of statistics for facilitating planning and enforcement of the
proposed legislation
lInspection of weighing and measuring instruments during their use to prevent fraudulent
practices

Land Of Opportunities -
The Food Industry in India 53
lPowers of inspectors to search, seize and forfeiture of non-standard weight or measure

lPower to file case in the court for prosecution

lPower to compound certain cases before or after the institution of the prosecution cases

lAppeal provisions

lPrescribe fee for various service rendered

lPower to make rules for implementing the provisions of the Act

n
n
nStandard Weights and Measures (Packaged Commodities) Rules, 1977
When commodities are sold or distributed in packaged form in the course of Inter-State trade or
commerce, it is essential that every package must have:
lPlain and conspicuous declaration thereon showing the identity of the commodity in the
package
lThe net quantity in terms of the standard units of weights and measures and if in nos., the
accurate number therein
lThe unit sale price of the commodity and the sale price of that particular package of that
commodity
lThe names of the manufacturer, and also of the packer or distributor, should also be
mentioned on the package
In this regard the Packaged Commodities Rules were framed in 1977. These Rules extend to the
whole of India and apply to commodities in the packaged form which are, or are intended or likely
to be sold, distributed or delivered or offered or displayed for sale, distribution or delivery or which
are stored for sale, or for distribution or delivery in the course of inter-state trade and commerce.
Administration and Enforcement
The responsibility in relation to weights and measures is shared between the Centre and the States.
Matters of national policy and other related functions such as, uniform laws on weights and
measures, technical regulations, training, precision laboratory facilities and implementation of the
International Recommendation are the concern of the Central Government. The State Governments
and Union Territory Administration are responsible for the day to day enforcement of the laws.
The weights and Measures Unit in the D/o Consumer Affairs, being the central authority for dealing
with the subject, is required to handle all the matters falling within the purview of the Central
Government. In addition, it has to guide, co-ordinate and supervise the enforcement activities of the
state enforcement machinery.

Land Of Opportunities -
The Food Industry in India 54
n
n
nFruit Products Order, 1955
Fruit and Vegetable processing sector is regulated by the Fruit Products Order, 1955 (FPO), which is
administered by the Ministry of Food Processing Industries, Government of India. The order has
undergone minimal amendment since its inception to incorporate new developments in the area.
However, recently Ministry of Food Processing Industries has floated the document for
comprehensive review and amendment. The document is open for comments from all stakeholders.

Also, with the implementation of Food Safety and Standards Act, the clauses under the FPO will be
merged into the new set of rules to be drafted under the Act. The existing structure under FPO and
manpower will also be rationalized and integrated into the FSSA structure.

Administration and Enforcement

Current clauses under FPO have the following main requirements:


lNo person shall carry on the business of a manufacturer except under and in accordance
with the terms of an effective license granted to him under this Order in Form B and shall
not use the License number on labels of non-fruit products.
lA license shall be in force for such period as may be specified therein, usually for three/five
or ten years. For the renewal of a license application shall be submitted at least one month
before the expiry of the period of the license. The licensing Officer may by order refuse to
grant a license to any applicant giving a brief statement of doing so. The manufacturer
may appeal to the Central Government against such refusal within a period of thirty days
of the receipt of the order and the decision of the Central Government shall be final.

Every
l manufacturer shall manufacture fruit products in conformity with the sanitary
requirements and the appropriate standard of the quality and composition specified in
the Second Schedule of this Order.

Every container in which any fruit product is packed shall bear the label as approved by the
l
Licensing Officer
lThe bottle shall be so sealed that it cannot be opened without destroying the license
number of the special identification mark of the manufacturer to be displayed on the top
or neck of the bottle or in case of tin, barrel or other container the license number shall be
exhibited prominently on the side label of such tin or be embossed thereon.
lThe label should not contain any statement, claim, design or device, which is false or
misleading in any particular concerning the fruit products etc.
lEvery beverage should contain at least 25 percent of fruit juice in its composition otherwise it
will be treated as synthetic and it shall immediately precede such name the name of the
product and in case of artificial flavours the words 'Artificially Flavoured' shall also be added.
lThe licensing officer or any officer may with a view to securing a compliance with this
Order can inspect the premises or any raw or final material or any account books,
documents or other relevant evidence connected with manufacture of fruit products in
respect of which he has reason to believe that a contravention of the Order has taken
place, he can also seize or detain such things, on giving a proper receipt.

Land Of Opportunities -
The Food Industry in India 55
lAccording to clause 7 and 10 the place, where fruit products are manufactured, shall
comply with the sanitary requirements, as laid down in the Factories Act 1934, of a fruit
products manufacturing unit.

lOther than these specifications the order also lays down specific requirements in regard to
the following:
l Containers and Labeling Requirements
l Limits of Poisonous Metals in Fruit Products
l List of Permissible Harmless Food Colours
l Limits for Permitted Preservatives in Fruit Products
l Other Permitted Additives

n
n
nMilk and Milk Products Order, 1992
Milk & Milk Products Sector is regulated by the Milk & Milk Products Order, 1992 (MMPO), which is
administered by the Department of Animal Husbandry & Dairying, under the Ministry of
Agriculture, Government of India.
Administration and Enforcement

Every person engaged in the business of handling, processing or manufacturing milk or any milk
product, shall, in regard to the items of milk or milk product manufactured and the packing,
marking and labeling of containers shall comply with the following:

lThe product related to those items should be certified by the Officer authorized.

lWhere certificate is issued to any person in relation to any item, such person shall be
authorized to place an emblem of certification on the packaged goods

lThe label on the packaged goods shall not contain any statement, claim, design or device
which is false or misleading in any manner concerning the milk or milk product contained
in the package or about the quality or the nutritive value or of the place of origin of the
same

lA holder of registration certificate shall not pack milk or any milk product other than
those processed or manufactured by him or, those obtained from any other person
holding a registration certificate.

According to Rule 5 of this order no person or manufacturer shall commence or expand the business
without obtaining registration/permission from the Registering Authority. Registration can be
obtained by making an application in the form specified in the first schedule of this order along with
the prescribed fee. The terms and conditions of the registration under this Order shall cover
sanitary, hygienic conditions, quality and food safety as specified in the Fifth Schedule of the order.
No person shall undertake business in milk and milk products unless the dairy establishment has
complied with the hygienic and sanitary requirements' specified under fifth schedule.

The order requires no permission for units handling less than 10,000 litres of milk per day or milk
solids up to 500 tons per annum (TPA). Thus, the largest share of the market, the small-scale
indigenous or unorganized sector, remains unregulated. This allows the continued free hand of that

Land Of Opportunities -
The Food Industry in India 56
sector, enabling it to continue to build on the large role that it played during the growth period of
the 1970s and 1980s, and to provide most of the market linkages while the formal sector grows in
importance. The MMPO prescribes state registration to plants producing between 10,000 to 75,000
litres of milk per day or manufacturing milk products containing between 500 to 3,750 tons of milk
solids per year. Plants producing over 75,000 litres of milk per day or more than 3,750 tons per year of
milk solids have to be registered with the Central Government. The MMPO also specifies that the
registering authority must enforce the sanitary and hygienic regulations to ensure the quality of the
production process.

An annual inspection exercise (to be alternated between the two inspecting agencies) is to be
carried out by each milk-producing unit registered under MMPO. Ministry of Agriculture has
notified EIC (Export Inspection Council) and NPC (National productivity Council) to carry out the
inspection. The inspecting authority carries out annual inspection of any premises, vehicle, any
material, sample of milk etc. in which manufacture or process, or business in milk or any milk product
is carried on, with a view to ensuring compliance with the provisions of this Order.

The stringent regulations, government controls and licensing requirements for new capacities have
restricted large Indian and MNC players from making significant investments in this product
category. Most of the private sector players have restricted themselves to manufacture of value
added milk products like baby food, dairy whiteners, condensed milk etc.

All the milk products except malted foods are covered in the category of industries for which foreign
equity participation up to 51 percent is automatically allowed. Ice cream, which was earlier reserved
for manufacturing in the small-scale sector, has now been de-reserved. As such, no license is required
for setting up of large-scale production facilities for manufacture of ice cream.

Subsequent to de-canalization, exports of some milk based products are freely allowed provided
these units comply with the compulsory inspection requirements of concerned agencies like:
National Dairy Development Board, Export Inspection Council etc. Bureau of Indian standards has
prescribed the necessary standards for almost all milk-based products, which are to be adhered to by
the industry.

Under the Milk and Milk Products Order (MMPO), the requirement for registration with the MMPO
and the renewal of licenses every three years was a major problem. However, the requirement of
renewal of registration after three years was abolished in August 2001, which was a positive step
towards the liberalization of the India dairy sector.

Since its inception the order has undergone 6 major amendments, the last being on 26th March 2002.
Now with the enactment of Food Safety and Standards Act, the order will be resumed as Milk and
Milk Products Regulations under section 99 of the FSSA.

Land Of Opportunities -
The Food Industry in India 57
n
n
nMeat Food Product Order, 1973
Processing of meat products are licensed under Meat Food Products Order (MFPO), 1973 which was
hitherto being implemented by the Directorate of Marketing and Inspection (DMI) has been
transferred to Ministry of Food Processing Industries with effect from March 2004.The order has
undergone 11 amendments since its inception. The last amendment was done on 25th October
2005, the main amendments being:
lFish and fish products are included under the MFPO purview

lFrozen meat covered

lChilled meat producers can procure MFPO license on voluntary basis

Currently, there are about 280- 300 licensees under MFPO. With the Food Safety and Standards Act,
the order is due for integration into the central FSSA structure.

Administration and enforcement

Under Rule 4 no person shall carry on business as a manufacturer without the license under this
order. Application for obtaining the license should be in Form "A" set out in the First Schedule
accompanied by a treasury challan evidencing the payment of the fees as specified in sub-clause (3).
A licensing authority may refuse to grant a license providing a brief statement of the reason for such
refusal. For the purpose of this order, there shall be three categories of manufacturers as specified
below paying the corresponding license fee payable by each category:

Category "A" - Manufacturer who makes meat food products exclusively from meat of animal (s)
slaughtered and dressed in his factory- If the quantity of meat food products manufactured is more
than 150 tons per annum then the license fee is Rs. 5,0001- per annum and if less than that than Rs.
2,5001- per annum.

Category "B"- Manufacturer who makes meat food products exclusively from meat of animal (s)
slaughtered and dressed in a recognized slaughter house and whose factory is situated in close - If
the quantity of meat food products manufactured is more than 150 tons per annum then the license
fee is Rs. 2,5001- per annum and if less than that than Rs. 1,0001- per annum.

Category "C” Manufacturer who makes meat food products exclusively from poultry and/or pig
meat at places where author/zed slaughter houses do not exist and the total quantity manufactured
is less than 30 tons per annum - The licensee fee is Rs. 1,000.

The registration certificate issued under this Order shall be valid for a period of one year from the
date of issue and should be renewed thereon. Every application for renewal of registration
certificate shall be made to registering authority in the form 'A' given in First Schedule at least sixty
days before the expiry of the period of the registration.

The licensee shall manufacture meat food products in conformity with the sanitary and other
hygiene requirements specified in second and third schedule of the order. Every licensee shall
comply with the requirements regarding packing, marking and labeling containers of food products
and also any other additional requirements specified from time to time.

The licensee who slaughters animals for the purpose of manufacturing meat food product shall
manufacture meat food product in conformity to the sanitary and other hygienic requirements

Land Of Opportunities -
The Food Industry in India 58
specified in second and third schedule of the order. Every licensee shall comply with the
requirements regarding packing, marking and labeling containers of food products specified in the
fourth schedule and also any other additional requirements specified from time to time.

The registering authority or any other officer authorized by order, may carry out periodic inspection
of any premises, vehicle, any material, sample of raw meat etc. in which manufacture or process, or
business in meat or any meat product is carried on, with a view to ensuring compliance with the
provisions of this Order. The Officer may seize or detain raw materials, documents, account books or
other relevant evidence connected with the non-compliance of the Order.

Any person aggrieved by an order of the licensing authority may, within thirty days from the date of
receipt of the copy of the statement of the reasons for the refusal to grant the license, appeal to the
Central Government for its decision. Provided that before passing an order rejecting the appeal, the
Central Government shall give a reasonable opportunity of being heard to the persons likely to be
affected by such order.

n
n
nExport Inspection Council (EIC)
Export Inspection Council (EIC), the official certification body of India, was set up by the Government
of India under Section (3) of the Export (Quality Control and Inspection) Act, 1963 for sound
development of export trade of India through Quality Control and Inspection and for matters
connected therewith. It is an advisory body to the Government of India on measures relating to
quality control and inspection. It carries out the role of supervision of the activities of the established
and designated Conformity Assessment Bodies (CAB), which provide services of inspection and
certification for exports. It also carries out administrative and financial control over the Export
Inspection Agencies (EIAs), located at Delhi, Mumbai, Kolkata, Chennai and Kochi with a network of
38 sub-offices including laboratories equipped with the required logistic support and testing
facilities at major ports and industrial centres in India. EIC, either directly, through Export Inspection
Agencies (EIAs), or its recognized CABs, renders services in the areas of:

Certification of quality of commodities (both notified and non-notified) for exports through
l
consignment-wise inspection and installation of quality management & assurance systems
(In-process Quality Control and Self-Certification) in the exporting unit.

Certification
l of quality, health and safety of food items for export through installation of
Food Safety Management Systems in the food processing units

lIssue of various types of Certificates such as Health, Authenticity, non-GMO to exporters


under various schemes for export products.

Issue of Certificates of Origin to exporters under various preferential tariff schemes for export
l
products.

Laboratory testing
l

Training
l to the industry in installation of Quality and Safety Management Systems based on
principles of Hazard Analysis Critical Control Point (HACCP), ISO-9001: 2000, ISO: 17025 and
other related areas.

All these functions of EIC facilitate worldwide access for Indian exports and instill confidence in
importers as well as importing governments about quality and safety of Indian products.

Land Of Opportunities -
The Food Industry in India 59
Notified Commodities

Nearly 1000 commodities have been notified under Export (Quality Control & Inspection) Act, 1963
and EIC/EIAs are mandated to carry out pre-shipment inspection of these.

With liberalization, compulsory pre-shipment inspection was waived off in 1991 for specified
categories of exporters like Export Houses, Star Trading Houses and those having firm letter from
overseas buyers that official pre-shipment inspection was not required. However, the Central
Government once again introduced mandatory export certification, based on internationally
accepted Food Safety Management Systems in six broad product categories including meat & meat
products (1993), marine products (1995), egg products (1997), dairy products (2000), honey (2002)
and poultry meat and meat products (2002) to address the concerns of India’s major trading partners
like USA, Japan and EC who have installed import control system in the above areas. In other areas,
certification continues to be carried out on voluntary basis on requests from exporter, importer or
importing country based on their requirements. For example in the area of basmati rice, EC gives
duty benefits only if certified by EIC, and in the case of black pepper, USFDA allows EIC certified
products direct entry without mandatory detention.

International Recognitions - Under the provisions of WTO Agreements, especially the SPS & TBT
Agreements, several of India’s trading partners have imposed import control systems based on
international standards, particularly in the food sector. These Agreements provide for recognition
of the export control systems of member trading partners provided these meet the requirements of
their import control. As the official export certification body of India, EIC’s certification has been
recognized by several of India’s trading partners, while with others, dialogue for seeking
recognition is presently in process.

EIC’s certification is currently recognized by the following countries like EU, USA, Australia, Korea,
Turkey, Sri Lanka, Singapore, Japan, Italy, China, Israel, Nepal, Saudi Arabia, Mauritius and SAARC
countries.

n
n
nFood Safety and Standards Act
The food sector in India was governed by a multiplicity of laws under different ministries. A number
of committees, including the Standing Committee of Parliament on Agriculture in its 12th Report
submitted in April 2005, had emphasized the need for a single regulatory body and an integrated
food law. The Food Safety and Standards Authority of India has being constituted and is starting to
become functional.

The Food Safety and Standards Act aims to integrate the food safety laws in the country in order to
systematically and scientifically develop the food processing industry and shift from a regulatory
regime to self-compliance. As part of the process of consolidation, the Act proposes to repeal eight
existing laws related to food safety.

The main objectives of the Act are:

To introduce a single statute relating to food, and


l

To provide for scientific development of the food processing industry


l

Land Of Opportunities -
The Food Industry in India 60
Highlights of the Act:
The Food
l Safety and Standards Act, 2006 consolidates eight laws governing the food sector
and establishes the Food Safety and Standards Authority (FSSA) to regulate the sector.

FSSA
l will be aided by several scientific panels and a central advisory committee to lay down
standards for food safety. These standards will include specifications for ingredients,
contaminants, pesticide residue, biological hazards, labels and others.

The law will be enforced through State Commissioners of Food Safety and local level officials.
l

Everyone in the food sector is required to get a license or a registration that would be issued
l
by local authorities.
l
Food Recall procedures: Every distributor is required to be able to identify any food article to
its manufacturer, and every seller to its distributor. Anyone in the sector should be able to
initiate recall procedures if he finds that the food sold had violated specified standards.

Rules under the act are under preparation. The rules will further elaborate the standard setting
process and the participation of various stakeholders in the activity.

VOLUNTARY DOMESTIC REGULATIONS

n
n
nThe Bureau Of Indian Standards (BIS)
The National Standards Body of India is involved in the development of technical standards
(popularly known as Indian Standards), product quality and management system certifications and
consumer affairs. It resolves to be the leader in all matters concerning Standardization, Certification
and Quality.

Objectives

Harmonious development of standardization, marking and quality certification.

To provide new thrust to standardization and quality control.

To evolve a national strategy for according recognition to standards and integrating them
with growth and development of production and exports

Functions

lFormulation of Indian Standards for products and services by bringing together and
coordinating various interest groups like manufacturers, consumers, technical experts,
testing personnel and others interested. The standards so prepared are known as Indian
Standards (IS) and are considered as legal documents. The standards are priced publications
and are available from all the offices of the Bureau.

BIS is engaged in formulation of Indian Standards for the following sectors: Basic & Production
Engineering, Chemicals, Civil Engineering, Electronics and Information Technology,
Electrotechnical, Food and Agriculture, Mechanical Engineering, Management and Systems,
Medical Equipment and Hospital Planning, Metallurgical Engineering, Petroleum Coal and Related
Products, Transport Engineering, Textile and Water Resources.

Land Of Opportunities -
The Food Industry in India 61
Each of these sectors has Division Council to oversee and supervise its work. BIS publishes detailed
Work Programme for each of the 14 Division Councils once in a year on 1 April, giving scope of
Division Council and Sectional Committees and committee wise position of standards published and
draft standards (like preliminary, wide circulation and finalized draft standards) at different stages
of preparation. Currently, under Food and Agriculture Council, 23 Sectional Committees are actively
working. The copies of Work Programme (and also of wide circulation drafts for comments during
the wide circulation period) can be obtained from the Director of the concerned Technical Divisions,
Bureau of Indian Standards, New Delhi.

Apart from formulation, emphasis is laid also on regular review of the standards to keep them in
line with modern technological developments, as also to harmonize them with international
standards or their equivalents

l
Certification Schemes

Product Certification Scheme is a scheme whereby manufacturers of products interested in


producing their products as per relevant Indian Standards are permitted to use the Standard Mark
of the Bureau (the popular ISI mark) on their products after obtaining a licence from the Bureau.
The pre-requisites for obtaining a licence are that the manufacturer has the necessary
manufacturing and testing facility for the product and agrees to follow the quality assurance
scheme of the Bureau in addition to payment of necessary fees as stipulated. The licence is initially
granted for a period of one year which is renewable for subsequent periods based on satisfactory
operation of the scheme. The scheme is voluntary in nature for most products. However, the
government has insisted on ISI marking of about 136 products which affect the health and safety of
consumers or are products of mass consumption like LPG Cylinders, Food Colours and Additives,
Cement, Packaged Drinking Water, etc.
Certification for Indian Importers is a similar scheme operated for importers who are desirous of
using the standard mark (ISI Mark) on imported products. The Government of India has also
stipulated that some of the products be imported into the country only after approval of BIS is
obtained.
Certification for Foreign Manufacturers is another scheme again operated on the same lines
whereby manufacturers located in foreign countries are permitted to use the Standard (ISI) mark on
their products.
ECO MARK BIS grants licences to environment friendly products under this special scheme. For
obtaining the ECO Mark Certificate the products should conform to additional requirements
specified in the Indian Standards.
IECEE & IECQ Certification BIS is a National Certifying Body (issuing and recognizing) under the
International Electrotechnical Commission (IEC) System for Conformity Testing and Certification of
Electrical Equipment (IECEE). The product categories for which BIS has IECEE acceptance are Cables
and Chords, Capacitors as components, Low voltage high power switching equipment, Installation
of protective equipment and Electronics entertainment. BIS is also the National Authorised
Institution and the National Standards Organization under the IEC System of Quality Assessment of
Electronic Components (IECQ).
Management System Certifications
l

Under the Management System Certifications, the Bureau operates the following four Certification
Schemes:
Quality Management System Certification (ISO 9001 Certification): The Bureau operates the

Land Of Opportunities -
The Food Industry in India 62
Quality Management System Certification for organizations based on the ISO 9001:2000 Standard
published by the International Organization of Standardization (ISO). Being a member of ISO the
standards of ISO can be adopted in-toto by the Bureau and can be published as IS/ISO standards.
Accordingly, the ISO 9000 series of standards have been adopted and are published as the IS/ISO
9000 series of standards. The certification being operated by the Bureau is accredited by the Dutch
Council of Accreditation - Raad voor Accreditatie (RvA), The HACCP (Hazard Analysis Critical
Control Point) programme for the food industry can also be covered in QMS Certification Scheme if
so desired by any organization.
Environment Management System Certification : The certification scheme is based on the ISO 14001
standard which as in the case of ISO 9000 standards has been adopted as IS/ISO 14001.
Information Security Management System Certification (ISMS based on ISO/IEC 27001).
Food Safety Management System Certification (FSMS based on ISO 22000)

n
n
nAgmark
Agricultural Produce (Grading & Marking) Act, 1937 provides for the grading and marking of
agricultural and other produce. The Act empowers the Central Government to make Rules for :

(a) fixing grade designations to indicate quality of any scheduled article.

(b) defining the quality indicated by every grade designation, and

(c) specifying grade designation marks to represent particular grade designation.

As per provision in the Section 3 of the Act, General Grading and Marking Rules, 1988 are notified
in which the detailed procedures for grant of Certificate of Authorisation, setting up of
laboratories, issue of Certificate of Agmark Grading, action on irregularities, consumer protection
measures, etc. are given. As on date, 105 specific Commodity Grading & Marking Rules are notified
which provide information on commodity specific requirements relating to hygienic aspects,
packaging, labeling and grade standards based on quality parameters.

Grade standards notified as per the provisions of the Act are popularly called AGMARK Standards.
These standards differentiate between quality and 2-3 grades are prescribed for each commodity.
Grades help farmers/traders to get prices for agricultural commodities commensurate with the
quality produced by them. Consumers get the produce of the quality desired by them. Till date,
grade standards for 195 agricultural commodities have been notified. These include cereals, pulses,
oilseeds, fruits and vegetables, creamery butter & ghee, vegetable oils, spices, honey, wheat atta,
besan, etc. Directorate of Marketing & Inspection (DMI) in the Department of Agriculture &
Cooperation, Ministry of Agriculture, is implementing the provisions of the Act.

Revision of Grade Standards

Grade Standards notified under the provisions of the Act are frequently revised to keep pace with
the development of new varieties of agricultural commodities and technological advancements.
Due to globalization, there is need to harmonize the standards with international standards.
Recently, grade standards of spices, fruits and vegetables and pulses have been harmonized with
the Codex Alimentarius Commission, International Organization for Standardization (ISO), etc.

Land Of Opportunities -
The Food Industry in India 63
Certification for Domestic Market

The scheme for certification of agricultural commodities is voluntary except for blended edible
vegetable oils and fat spread. Certification under AGMARK is mandatory for these commodities as
per provisions in the Prevention of Food Adulteration Rules, 1955. The parties desirous of certifying
an agricultural commodity under Agmark should have hygienic premises, necessary infrastructure
to process and pack the commodity and have access to a well equipped laboratory for the
estimation of prescribed parameters. They can either have their own laboratory or get attached
with the State Grading Laboratory or Commercial Laboratory approved by the DMI for grading and
marking of the commodities. The Chemist of the laboratory is trained in one of the Regional
Agmark Laboratories (RALs) and is approved for carrying out grading and marking. Certificate of
Authorization (C.A) is granted to such parties on their request after they submit the required
documents and their capacity to process and pack the commodity is ascertained. The approved
Chemist of the C.A. holder analyses the raw material and the processed commodity for determining
the grade standard and gets it packed in his presence. Inspecting Officers of DMI frequently visit the
authorized premises for carrying out inspections and draw check samples which are analyzed in the
RALs for ascertaining their conformance with the prescribed standards.Check samples are also
drawn from the market and analyzed in RALs.

There are more than six thousand Certificate of Authorization holders throughout the country.
These Certificate of Authorization holders grade and mark the agricultural commodity through
more than 1200 laboratories approved for the purpose.

Vegetable oils, ghee, honey, creamery butter, spices, wheat atta, suji, maida, besan, etc. popularly
graded and certified under AGMARK for domestic trade. Agmark certified products are pre-tested
as per the prescribed standards in the laboratories of the authorized packers.

Source: CIFTI- FICCI

Land Of Opportunities -
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ABOUT TECHNOPAK

A leading Management Consulting firm offering strategic advice, start up assistance,


performance enhancement impetus, consumer insights and capital advisory, to leading Indian
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with clients across the world. In 2007, we worked with 90 Clients across 127 projects, in 20
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that are unique due to our rich experience, strong industry relationships and a global
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Technopak’s ‘Food & Agriculture’ practice provides advisory services and implementation
support across the entire food value chain in the sector. The services include Strategic Planning
and Diversification, Feasibility Study, Turnkey Solutions, Contract Research for Product
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Land Of Opportunities -
The Food Industry in India 65
Federation of Indian Chambers of
ABOUT FICCI Commerce and Industry

FICCI the largest and oldest apex organization of Indian business and industry is the rallying
point for free enterprises in India. It has empowered Indian businesses, in changing times, to
shore up their competitiveness and enhance their global reach. With a nationwide
membership of over 1500 corporates and over 500 chambers of commerce and business
associations, FICCI espouses the shared vision of Indian businesses and speaks directly and
indirectly for over 250,000 business units. It has an expanding direct membership of enterprises
drawn from large, medium, small and tiny segments of manufacturing, distributive trade and
services. FICCI maintains the lead as the proactive business solution provider through research,
interactions at the highest political level and global networking.

FICCI-Food Processing Division not only provides institutional support to processed food
industries manufacturing different types of food and allied products at the national level but also
plays a pivotal role as a facilitator in partnering the Government in preparing the policy
framework and the private sector in promoting the development of food processing in India.
FICCI Food Processing Division focuses on macro issues that have a larger bearing on the sector like:

Supportive Infrastructure,Fiscal Reforms and Regulatory and Legal Affairs.

Some other services and activities of FICCI-CIFTI are as follows:


l
Interaction with various Ministries and Government Departments dealing with
Food Processing industry and trade with the objective of assisting the Government
in introducing investor friendly policies and formulating laws and regulations.
Conducts
l studies and undertakes projects for various organizations and also for its
members.
l
Represents in all the Committees of the Ministry of Food Processing Industries,
Ministry of Agriculture & Ministry of Health.
l
Represents in different committees of BIS, Shadow committees of CODEX etc.
l
Maintains liaison with other international organizations like CODEX
Alimentarious Commission of FAO/WHO, FDA of USA and Ministry of Food and
Agriculture and Fisheries in UK.
l
Disseminating information on economic policies, food laws as well as opportunities
through constant publications on different aspects of Indian Food Industry.
l
Organizes regular workshops and programs on topical issues relevant to food Industry
Maintains
l close liaison with all foreign missions and counterpart Chambers of
Commerce and Industry Associations within India as well as outside India providing the
perfect platform for interaction on all food industry and trade related matters.

Land Of Opportunities -
The Food Industry in India 66