The Global Processed Food

Market: An Opportunity for India

Rosa. S. Rolle, Ph.D

Senior Agro-Industry and Post-harvest Officer
FAO Regional Office for Asia and the Pacific
Bangkok, Thailand
Presentation Overview

Overview of the market

Factors that drive and shape the market

Tapping into the global food market

Recommendations

Conclusion
 Processed Food Market

Packaged food products

Beverages
 Alcoholic beverages
 Soft drinks
 Hot drinks
 Beverages

Alcoholic Beverages
Soft Drinks
 Beer  Carbonated beverages
 Wine  Fruit/vegetable juices
 Spirits  Bottled water
 Flavoured beverages
 Functional Drinks
 Ready-to-drink

Hot Drinks concentrates
 Coffee  Ready-to-drink teas
 Tea
 Other drinks

Chocolate based
Key Players in the Processed Food
Market

Consumers

Retailers

Manufacturers
 Production

Harvesting

Post-harvest
handling
The processed food
Processing
market is largely
Packaging
driven by
consumer retail
Storage pull.
RETAIL
Highly Consolidated Retail Sector

One hundred companies control about 35
percent of grocery sales globally, of which
40 percent is controlled by the top ten,
including Wal-Mart, Kroger, the French
company Carrefour, and the British Tesco.

In 2007 close to 50 percent of all

supermarket food sold in the US was sold
by five corporations, with Wal-Mart far-
and-away the largest
Highly Consolidated Manufacturing
Sector

Ten companies - Nestle, Kraft,

Coca-Cola, Pepsi and others...
now control 26 percent of the
food and beverage manufacturing
sector globally.

One hundred companies control

three-quarters of all the world’s
packaged foods.
Global Food Sales in 2002

Retail Stores Food Service

Processed 1, 762 1,420
Food
• Packaged 1, 148 828
Food
• Beverages 614 592
- Alcoholic 316 422
Drinks
- Hot Drinks 53 12
- Soft Drinks 245 167
(Billion dollars)

Source: Euromonitor 2003

Demand For Packaged Foods

In most countries, packaged food accounts for

about two-thirds of all processed product sales,
with alcoholic beverages, soft drinks and hot
drinks constituting the remaining one-third.

Packaged food accounts for about half of total

food expenditures in developed countries but only
a third or less in most developing countries.

(Regmi and Gehlar, 2005)

 Little Trade in Processed Food

Only 6 percent of processed food sales are

traded compared with 16 percent of major
bulk agricultural commodities.
(Regmi and Gehlar, 2005)

http://www.ers.usda.gov/AmberWaves/February05/pdf/FeatureProcess
edFoodFeb05.pdf
World Trade in Processed Food
Slow Growth in Processed Food Trade

Multilateral trade rules favor trade in raw
commodities

Increased manufacturing of processed

foods in local markets through FDI

India Gujarat Cooperative

Unilever

Danone

GlaxoSmithKline
Current Challenges to the Processed
Food Sector

 Rising input costs

 Low consumer
spending

Globally food costs

increased by nearly 40
% in 2008 (FAO)
Drivers of Consumer Demand

Incomes

Lifestyle

Cultural preferences
Preferences of High Income Consumers

- Convenience
- Food safety and quality
- Variety
- Wellness through diet
- Credence attributes of foods
At the right price
Consumer Lifestyles

More amenities in the home

 Increased acquisition of refrigerators
 Increased ownership of microwave ovens

More women in the work place

Greater access to transportation

Limited time for shopping
Manufacturing Focus to Income and
Lifestyle Changes

Product Development and Innovation

- Ready-to-eat foods
- Foods with special attributes
- organic
- foods that offer well being
Cultural Preferences

Demand for foods that conform to local
taste and cultural preference
Manufacturing Trend to Address
Cultural Preference

Product customization to meet local

consumer tastes and preferences
 Basmati rice flakes (Kellogs)
 Mango-flavoured cereals (Kellogs)
 Vegetarian options
Urbanization will Continue to Create
Demand for Processed Foods
Trends in Urban Migration Globally
6000

5000
POPULATION (millions)

4000

URBAN
3000
RURAL

2000

1000

0
1950 1975 2000 2030

YEAR
Urbanization Rates in India

31
% OF TOTAL POPULATION

30

29

28

27

26

25

24

23

22
1989 1990 1991 1995 2000 2005 2010

YEAR

Source: UNESCAP
Manufacturing Trend

Increased production of basic commodities

 Oil, dairy products, cereals, dried foods

Focus on food safety and quality
Waves of Supermarket Diffusion
Growth in supermarkets'
Period Countries/regions
average share in retail sales
First wave Much of South America, East From about 10 percent around
started in early Asia (outside China), and 1990 to about 50-60 percent by
1990s South Africa. the mid-2000s
Second wave
Mexico, Central America, and From 5-10 percent in 1990 to 30-
started in mid-
much of Southeast Asia 50 percent by the mid-2000s
to late 1990s
Third wave
Reached about 2-20 percent by
started in late
China, India, and Vietnam mid-2000s; supermarket sales
1990s and early
growing at 30-50 percent a year
2000s
Source: Reardon and Gulati, 2008
Supermarkets/Hypermarkets/Retailers

Offer a range of products

Centralization of procurement

Coordinated and planned product flows

Specialized logistical facilities

Imposition of high private standards

Have considerable influence over the entire

food supply chain
Brand Establishment by Retailers

As grocery chains have consolidated and
grown bigger, they are increasingly able to
stock their shelves with their own
products, which bring higher profits and
drive customer loyalty.
(New York Times, December 2008)
In a nutshell...

The processed food market is:
 Highly consolidated
 Highly competitive
 Growing across the developing world
 Driven largely by retailers and consumers

However,

Products must comply with:

 specifications of retailers and consumers
 standards and regulations of the target market in which
they will be sold
Tapping into the Global Market
Necessitates
An understanding of:

Consumer preferences in target
markets

Linkages within supply chains

Technological Requirements

Prevailing policies

Business environments
Building Blocks Exist in India:
 FDI in the food processing sector from large
multinationals
 Large local investors
 Skilled man power
 Large, low-cost workforce
 Enabling environment Production capacity
 Production capacity
India a Top Commodity Producer

Source: FAOSTAT 2009

 What is Required?

India must strive to:
 Increase efficiency
 Use modern technology to:

improve the safety and quality of its outputs

enhance administrative and logistical efficiency
 Develop better integrated supply chains
 Improve its infrastructural support base

Cold chain facilities to reduce losses in horticultural crops
 Upgrade the technical capacity of its labor force

Emphasis on food safety
 Keep monitoring and learning from models of
success
“ The Bottom Line: In a world more
interconnected than ever, there is value to
be created and competitive advantage to
be carved out, even in challenging
economic times – perhaps especially in
these economic times.”
Food, Beverage and Consumer Products
Industry,2008. Price Waterhouse Cooper
THANK YOU

Rosa.Rolle@fao.org