Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
CONTACT US www.emis.com
Downloaded by in-afcons001 from 139.167.242.168 at 2020-01-10 16:55:59 GMT. EMIS. Unauthorized Distribution Prohibited.
FOLLOW US
ABBREVIATIONS
APEDA Agricultural Products Export Development Authority
01 EXECUTIVE SUMMARY
Sector in Numbers
Sector Overview
p.5
p.6
Sector Snapshot
Driving Forces
Restraining Forces
Foreword
India’s food and beverage processing sector is key
to the Indian economy in terms of its contribution
to the country’s GDP, employment and investment.
Compared to other industries, it has the largest
number of factories and engages the largest
number of employees. The sector is driven by
Julia Milojkova
Research Analyst strong domestic demand, rising exports, increasing
EMIS Insights
investment and government support.
India is the world’s second most populous country after China, with about 1.3bn residents at the end
of FY2018. Indians spend a high proportion of their disposable income on food. Half of India’s
population is below 25 years of age and 65% below the age of 35 years, which, combined with an
expanding middle class, changing culture and food habits, are key drivers for the sector’s rapid
growth.
The food and beverage processing sector receives strong support from India’s developed agricultural
base, which provides raw materials for the sector. India is the world‘s second-largest producer of food
after China. It is the world’s largest producer of milk, butter and some fruits and vegetables, such as
bananas, guavas, mangoes and papayas, as well as onions and ginger. The country is also one of the
world’s largest producers of meat, fish, cereals, sugarcane, nuts, tea and a number of fruits and
vegetables. Food and beverage processing connects agriculture with industry, which is why the sector
receives so much government attention and support.
Over the last few years, the Indian government has launched a number of initiatives to modernise
harvesting technologies, cold chain infrastructure and food processing facilities, aimed at reducing
the high level of food wastage and to increase the level of food processing.
As one of the largest global producers and consumers of food, India is expected to have a great
impact on world demand and supply of food products over the next few years. A number of foreign
companies have entered India’s food and beverage sector to tap the opportunities of its rapidly
growing market.
The sector is expected to attract more investment in the near future, following the approval of 100%
FDI in food trading, including through e-commerce, for food products manufactured in India. For
domestic enterprises, however, a top priority is to focus on product conformity with global standards
and good manufacturing practices.
Source: MOFPI
01
EXECUTIVE
SUMMARY
Sector in Numbers
INR 4.9%
2,123bn** 1.4%**
GVA of Food,
CAGR
GVA of Food, Beverage and Food and Beverage
Beverage and Tobacco, % of GDP Sector GVA,
Tobacco FY2014-2017
Sector Overview
India is one of the global leaders in the food and beverage industry, with prominent positions in the
production of dairy, meat products, refined sugar and spirits. The gross value added (GVA) of the food
and beverage sector expanded at a CAGR of 4.9% between FY2014 and FY2017, driven by positive
demographic trends, rising household incomes, an expansion of modern retail formats and a shift in
consumer preferences towards healthy food. The food and beverage industry was the fifth-largest
sector in manufacturing, and the leader in terms of employment generation in FY2017. With the entry
of multinational companies expanding the market, India is rapidly becoming a production hub for
processed foods, which are exported to countries in South Asia, the Middle East and Africa.
Entry Modes
Under current legislation, FDI involving 100% foreign stakes is allowed under the automatic route in
almost all food and beverage processing segments. The only exceptions concern certain items where
processing is reserved for micro and small enterprises, and a foreign equity stake above 24% requires
government approval. In a move to further liberalise and promote sector development, in February
2016 the government made possible 100% FDI under the automatic route in processed food retailing,
provided the foods in question were produced or processed in India. On the other hand, the
requirement for an industrial license for the manufacture, storage and sale of spirits, beer and wine,
was preserved. Apart from these restrictions, there are no major entry barriers for new players, who
may opt for either greenfield investment or acquisition of local players.
Segment Opportunities
Deficiencies in production and supply chain infrastructure, which have made India the world’s largest
importer of oils and fats, offer high growth opportunities for new players in this segment. Low levels
of processing in the meat and horticultural segments, combined with government financing
programmes, boost domestic and foreign investment not only in the expansion and modernisation of
the production base, but also in related supply chain infrastructure.
Government Policy
Government policy in the food processing sector is viewed favourably, with several initiatives
designed to attract foreign investors, promote the production growth, and develop and modernise the
infrastructure of the supply chain. On the other hand, the alcoholic beverages industry faces a high
level of government intervention in terms of pricing, licensing, manufacturing, sales and advertising,
as well as an excessive tax burden and a number of restrictions on alcohol consumption.
Sector Snapshot
India Food & Beverage
Sector
EXPORTS* IMPORTS*
USD 35.5bn USD 23.1bn
Export Value Import Value
Cereals: USD 8.2bn Animal or Vegetable Fats and Oils:
Fish and Crustaceans: USD 6.9bn PRODUCTION USD 11.7bn
Meat and Edible Meat Offal: USD 4.2bn Edible Fruits, Nuts and Peels: USD 3.4bn
Coffee, Tea, Mate and Spices: USD 3.3bn Edible Vegetables: USD 3bn
Edible Fruits, Nuts and Peels: USD 1.9bn
Milk: 165.4mn tonnes
Sugars and Sugar Confectionery: USD 1.1bn
Oil Seeds, Misc Grains, Medicinal Plants: Meat: 7.4mn tonnes** Coffee, Tea, Mate and Spices: USD 0.9bn
USD 1.6bn Fish: 12.6mn tonnes Beverages, Spirits and Vinegar: USD 0.7bn
Food Grain: 285mn tonnes
Vegetables: 179.7mn tonnes
Fruits: 97.1mn tonnes
Alcoholic Beverages: 2,491mn litres
OUTPUT VALUE
Food Manufacturing: INR 10,824.6bn
Beverage Manufacturing: INR 785.2bn
Sector Snapshot:
India Food & Beverage Sector
The most recent data, published by India’s Central Statistics Office (CSO), shows that in FY2017 the
GVA of food, beverage and tobacco manufacturing rose by 3.4% y/y, falling below the growth rates of
the manufacturing industry (7.9%) and the country’s GDP (7.1%). Following unfavourable weather
conditions in 2014 and 2015, which caused a reduced supply of agriculture inputs, a good monsoon
season and increased levels of processing helped the sector achieve higher outputs in FY2018. The
industrial production index (IPI) improved in FY2018 with food IPI rising by 9.3% y/y, and beverage IPI
marking a slight decline of 0.8% y/y. In volume terms, the value of output of food manufacturing
totalled INR 10.8tn, up by 5.4% y/y, while the beverage manufacturing output value reached INR
785.2bn, marking an increase of some 1% y/y. The increase was attributable to a positive y/y growth of
0.9% in the output value of beverages produced by manufacturing corporations, while India’s
household-based manufacturing units reported a y/y decline of 1.5% in beverage output value. The
ban of alcohol sales on highways in India, imposed by the government in 2017, caused a y/y decline of
2.3% in the production volume of alcohol in FY2018. In this period India produced nearly 2.5bn litres of
alcohol. All major food categories reported y/y growth in output. Favourable weather conditions
during FY2018 resulted in higher yields of wheat, rice, sugar and other crops. According to data
provided by the Department of Agriculture and Cooperation (DAC), the production of food grains
increased by 3.6% y/y to 285mn tonnes in FY2018. Sugar production was estimated to have increased
by 46% y/y to 32.4mn tonnes in MY2018 (from October 2017 to September 2018), according to the
United States Department of Agriculture (USDA), as a result of higher than anticipated production in
the two major sugar producing states, Maharashtra and Karnataka. In FY2018, production of fruits and
vegetables also marked y/y growths of 4.5% and 0.9%, respectively, based on DAC statistics. The
production of milk rose by 4.6% y/y to 173mn tonnes, supported by an average monsoon and growing
domestic demand.
The food processing sector in India is mostly export oriented. In FY2018, the trade surplus in India’s
food and beverage manufacturing sector increased to USD 12.4bn, compared to USD 7bn in FY2017,
according to data from the Ministry of Commerce and Industry (MCI). This was due to falling imports
of food and beverages in this period, while exports reported stable growth. India’s growing
capabilities to meet global standards and demand for food products was the main driver for sector
exports. In FY2018 all top five major export categories – cereals; fish and crustaceans; meat and edible
meat offal; coffee, tea, mate and spices; and edible fruits, nuts and peels – witnessed stable growth in
exports. Cereals, which accounted for 23% of sector exports, saw an increase of 35.6% y/y in terms of
export volume, attributable to higher exports of non-basmati rice. In FY2018, the sector reported a
negative y/y growth in imports, mainly due to a decline in imports of vegetables and cereals, as a
result of increased domestic production. Due to insufficient domestic production and price-
competitive imports, animal and vegetable oils and fats marked stable growth in imports, reaching
INR 11.7bn, or 50.7% of the sector’s total imports.
Source: CSO, DIPP, DAC, CEIC, MOFPI, USDA, Dun & Bradstreet
Driving Forces
India’s food and beverage sector is driven by several external and internal factors that boost its
growth. External factors include positive demographic trends, ongoing urbanisation, an expanding
middle class, and a shift in consumer habits in favour of higher value-added and healthy products.
The introduction of the Goods and Services Tax (GST) – the first single national value-added tax – has
had a positive impact on the food and non-alcoholic beverage subsectors, while the alcoholic
beverage subsector has been seriously affected. Sector-specific driving forces include plentiful inputs
supplied by India’s developed agricultural sector, the entry of foreign investors, and the expansion
and modernisation of the production base and supply chain infrastructure.
External
Several demographic trends underpin the positive performance of the food and beverage sector –
steady population growth, a large base of young consumers (over 65% of the population is under 35
years old), rising rural-to-urban migration and a higher number of women entering the workforce.
Moreover, an expanding middle class – supported by a strong labour market, rising wages and easier
access to credit – coupled with changing consumer habits, is driving the demand for higher value-
added products. Additionally, the entry into force of the GST in July 2017 is benefiting food and
beverage producers, retailers and consumers. GST is set to eliminate “cascade taxation”, bring down
the prices of manufactured goods, reduce the overall tax burden, improve cash flows and boost the
profitability of manufacturing companies. Moreover, a number of government support programmes
for the development of food processing and supply chain facilities, which in 2017 were consolidated
under the Pradhan Mantri Kisan SAMPADA Yojana (PMKSY) Scheme, are having great impact on
improving cost reduction and production efficiency of Indian food processing enterprises. The
liberalisation of FDI policy in recent years has attracted a number of foreign investors in the food and
beverage sector, which have opted to invest not only in new production capacity, but also in the
entire supply chain infrastructure, thus helping raise the share of the organised sector.
Internal
The strong agricultural base of the country has made India one of the world’s largest producers of
cereals, fruits, vegetables, nuts, and sugarcane. The country is also home to the world's largest cattle
population and second-biggest goat and sheep population, which have helped it become a developed
production base for raw milk and fresh meat. As a result, the food and beverage sector benefits from
an abundant supply of inputs at competitive prices. At the same time, India is one of the world’s
largest exporters of a variety of food and beverage products, due to its proximity to key export
markets in the Middle East, Europe and Asia.
Source: IBEF, MOSPI, MOFPI, DAHD&F, DIPP, RBI, MCI, CSO, USDA
Restraining Forces
The main factor impeding the healthy growth of the sector is its high reliance on an adequate supply
of agricultural inputs, which in turn is dependent on favourable weather conditions. An additional
constraint, in particular for the alcoholic beverage industry, is the high degree of government
intervention in pricing, licensing, manufacturing, sales and advertising, coupled with rising
restrictions on alcohol consumption. On the other hand,, the food processing industry continues to
suffer from relatively low levels of processing of raw inputs, high wastage of agricultural produce,
prevalence of low value-added products in the production basket, and deficiencies in supply-chain
infrastructure that reduce its overall competitiveness.
External
India’s agriculture sector remains underdeveloped technologically, which explains its heavy
dependence on sufficient rainfall during the monsoon season. Two consecutive years of insufficient
monsoons in 2014 and 2015 caused a prolonged drought period in several Indian states, reducing the
supply of agriculture inputs for the food and beverage sector. The demonetisation reform of
November 2016 also caused temporary disruptions in the sector’s supply chains, largely dominated by
cash payments, and reduced household consumption of discretionary goods. In the medium-term
however, the reform is seen as positive, as it will reduce informal economic activity and increase the
share of the organised sector. India’s alcoholic beverages industry is restrained by a high level of
government intervention, an excessive tax burden, exclusion of alcoholic beverages from the new GST
regime, and mounting restrictions, such as a national ban on liquor sales along highways
implemented in April 2017, coupled with state-level bans on alcohol consumption.
Internal
Gaps in the supply-chain infrastructure – including inadequate post-harvest infrastructure facilities
and a lack of appropriate primary processing, cold storage and distribution facilities – coupled with
underdeveloped links between agriculture producers and processing companies, are the main
restraining factors for the food and beverage sector. They result in large-scale wastage of agriculture
produce, mainly of perishable commodities. In 2017, the Food and Agriculture Organisation of the
United Nations (FAO) reported that about 40% of the food produced in India is wasted, due to its low
levels of food processing. The oils and fats industry remains one of the segments most affected by
scarce production capacity, erratic input supply and inadequate storage infrastructure, thus creating
increasing supply deficits that are filled mostly through imports. Moreover, the food and beverage
sector continues to suffer from low levels of adoption of new technologies, the prevalence of low
value-added beverages and food products, and an insufficient focus on quality and safety.
Source: IBEF, MOSPI, MOFPI, CIPHET, DAHD&F, DIPP, RBI, MCI, CSO, USDA
02
SECTOR
OUTLOOK
Macroeconomic Outlook
1090.0% 898.6%
7.4% 7.4% 1027.8%
7.3% 821.2% 859.9%
7.3% 769.1% 634.6%
7.2% 872.4% 717.6%
7.2% 811.7% 695.2%
763.0% 766.2% 736.6% 781.0%
770.4% 721.4% 707.8%
656.0% 795.8% 672.7%
6.7%
FY2017 FY2018f FY2019f FY2020f FY2021f FY2022f FY2023f FY2017 FY2018f FY2019f FY2020f FY2021f FY2022f FY2023f
Pr ivate Consumption Fixed Investment
Real GDP, y/y change, % Public Spending
Comments
India’s GDP has embarked on a recovery track in FY2018 in a trend likely to continue in the near future. GDP grew
at some 6.6% in FY2018, and is expected to rise by 7.3% in FY2019. This is in contrast to FY2016 and FY2017, when
the growth of the Indian economy recorded a distinct slow-down, largely as a result of two government
initiatives. One was the withdrawal of high-value banknotes in November 2016, known as the demonetisation or
DeMo. The other was the introduction of GST in July 2017. This replaced India’s complex taxation system and
created a single pan-Indian market for the first time since the country gained independence in 1947. The real GDP
growth is projected to stagnate respectably at around 7% in the years to FY2023, supported by ongoing structural
reforms, resilient private consumption, substantial public investment in infrastructure, and higher tax intake
resulting from the GST, following the initial disruption. India spent INR 60tn on infrastructure between FY2007 and
FY2017, and will invest an estimated INR 50tn over the five fiscal years starting on April 1, 2018. The upcoming
general elections in 2019 might pose risks for the reform agenda of prime minister Narendra Modi’s government,
but infrastructure remains a priority, supported by a wide political consensus that India needs better
infrastructure to sustain growth. The country’s upward growth trajectory enjoys support by the IMF. In October
2018, the Fund reaffirmed its May prognosis that India would be the fastest growing major economy in 2019, well
ahead of China, and with positive medium-term prospects.
Current Account
-90 -3%
Cur rent Account, USD bn Cur rent Account, % of GDP
19.9%
15.5%
12.2%
10.0%
9.8% 9.0% 9.3% 9.6%
8.9%
8.4% 7.7%
6.1% 6.9%
5.1%
Economic Sentiment
128 116
115
126
114
124
113
122
112
120 111
118 110
116 109
114 108
03/2015
06/2015
09/2015
12/2015
03/2016
06/2016
09/2016
12/2016
03/2017
06/2017
09/2017
12/2017
03/2018
06/2018
09/2018
12/2018
03/2015
06/2015
09/2015
12/2015
03/2016
06/2016
09/2016
12/2016
03/2017
06/2017
09/2017
12/2017
03/2018
06/2018
09/2018
Comments
The consumer confidence – as measured by the future expectations index of RBI’s consumer
confidence survey for the period between March 2015 and September 2018 – peaked at 129.7 in
December 2016 and fell thereafter. It started rising again after March 2018, but not quite to the same
levels. In March 2018, it fell to 118.6, its lowest level over the period. The dip was the result of
consumer worries about savings and household expenses, the ET daily commented in October 2018.
The business expectation index values were volatile over the period, falling to lows o 111.1 and 110.9 in
March 2017 and June 2016, respectively, an highs of 115.8 and 115.5 in March 118 and March 2015,
respectively. Generally, the discrepancy is rooted in the fact that the consumers are being hit harder
than businesses by government policy initiatives. In particular, companies were better placed to
handle the November 2016 demonetisation, which withdrew about 90% of India’s cash in circulation
(CIC) overnight. Businesses in capital-intensive sectors, such as the oil and gas and the construction,
are also supported by multi-year public spending programmes. In addition, the volatility in business
expectation does reflect a challenging business environment for domestic producers. The Indian rupee
declined substantially against the US dollar y/y in 2018, which helped increase India’s import bill and
put stress on export-oriented sectors.
Sector Outlook
1.13%
2.7%
0.95%
2.2%
0.83%
1.9% 0.73%
1.7% 0.66%
1.5%
819
11,779
11,957
814
11,582
808
11,362
801
11,113
794
FY2018f FY2019f FY2020f FY2021f FY2022f FY2018f FY2019f FY2020f FY2021f FY2022f
Food Manufactur ing Output Value, INR bn Beverage Manufacturing Output Value, INR bn
Comments
EMIS Insights estimates that the output value of India’s food manufacturing subsector will grow by an
average of 2% per year between FY2018 and FY2022, reaching almost INR 12tn, while the beverage
subsector is expected to expand at an average of 0.9% per year during this period. The food and
beverage sector will be driven by the improving economy, growing population, ongoing urbanisation,
rising disposable incomes, changing consumer preferences towards higher value-added and healthy
products, and government measures aimed at increasing processing capacity and expanding supply
chain infrastructure. In terms of beverages, the spirits market will continue to experience robust
growth, supported by the rising brand awareness and strong trend for premiumisation with growing
demand for luxury and premium products. In terms of food, the sector will benefit from improved
product quality and rising demand for branded food. The government’s proactive policy aimed at food
processing supply chain improvement will have a positive impact on the sector’s development over
the next few years. India’s strategic geographic location and proximity to food-importing countries, as
well as the increasing quality of food and beverage products will make it one of the most preferred
sourcing countries for processed food and beverages.
Production of Milk, Eggs, Meat and Fish Production of Food Grains, Vegetables
and Fruits, mn tonnes
8.0 8.2
7.7 7.9
7.6 13.7 97.1 100.3 103.6 106.9 110.2
12.8 13.2
11.9 12.3
FY2018f FY2019f FY2020f FY2021f FY2022f FY2018f FY2019f FY2020f FY2021f FY2022f
Comments
According to EMIS Insights, between FY2018 and FY2022, India’s production volume of eggs, fish, milk
and meat will grow at an annual average growth rates of 4%, 3.7%, 3.5% and 2%, respectively. The
country’s output of fruits, vegetables, and food grains is expected to expand at an average of 3.5%,
1.2% and 0.5% per year, respectively. In order to keep pace with the demand of the rising population,
the government has launched a number of schemes to modernise food processing infrastructure and
improve the linkages between farmers, processors and markets. The food processing sector is an
important contributor to GDP, employment, investment and exports, which makes it one of the sectors
with the highest priority for the government. With the new markets of South East Asia, Far East and
North Africa opening up for Indian food and beverage products, exports are expected to continue to
rise. Considering the higher purchasing power, higher awareness and preference for healthy food and
beverages, there are large opportunities to expand this category of products in the coming years.
Food Manufacturing Output Value, INR bn 11,113 11,362 11,582 11,779 11,957
Beverage Manufacturing Output Value, INR bn 794 801 808 814 819
03
SECTOR
IN FOCUS
GDP, constant 2011-2012 prices, INR bn 98,014 105,277 113,861 121,960 130,108
Gross Value Added (GVA), current prices, INR bn 103,632 115,043 125,666 138,416 151,824
GVA of Food Products, Beverages and Tobacco Manufacturing, current prices, INR bn 1,757 1,859 2,046 2,123 n/a
GVA of Food Products, Beverages and Tobacco Manufacturing, y/y change, % -8.3% 2.7% 7.2% 3.4% n/a
GVA of Food Products, Beverages and Tobacco Manufacturing, % of total GVA, current
1.7% 1.6% 1.6% 1.5% n/a
prices
GVA of Food Products, Beverages and Tobacco Manufacturing, % of GDP, current prices 1.6% 1.5% 1.5% 1.4% n/a
Consumer Price Index (FY2012=100), y/y change, % 9.4% 5.9% 4.9% 4.5% 3.6%
Consumer Price Index (FY2012=100), Food and Beverages, y/y change, % 11.9% 6.5% 5.1% 4.4% 2.2%
Wholesale Price Index (2011-2012=100), y/y change, % 5.2% 1.3% -3.7% 1.7% 2.9%
Wholesale Price Index (2011-2012=100), Food, y/y change, % 9.6% 4.3% 1.2% 5.9% 1.9%
Wholesale Price Index (2011-2012=100), Food Manufacturing, y/y change, % 4.3% 2.3% -1.3% 8.3% 2.5%
Wholesale Price Index (2011-2012=100), Beverage Manufacturing, y/y change, % 4.8% 3.1% 0.7% 1.8% 2.4%
Official Exchange Rate, INR/USD, year-average 60.5 61.1 65.5 67.1 64.5
Official Exchange Rate, INR/EUR, year-average 81.2 77.5 72.3 73.6 75.4
Deposit Rate, One Year Maturity, %, year-end 8.00-9.25 8.00-8.75 7.00-7.50 6.50-7.00 6.25-6.75
Monetary Policy Rate: Repo Rate, %, year-end 8.00 7.50 6.75 6.25 6.00
Food and Beverage Exports, USD mn 38,110 36,232 29,738 30,939 35,521
Food and Beverage Exports, % of total 12.1% 11.7% 11.3% 11.2% 11.7%
Food and Beverage Imports, USD mn 16,464 19,691 21,400 23,924 23,097
Food and Beverage Imports, % of total 3.7% 4.4% 5.6% 6.2% 5.0%
FDI Inflow in Food and Beverage Sector, USD mn 2,765 517 506 727 905
FDI Inflow in Food and Beverage Sector, % of total 11.4% 1.7% 1.3% 1.7% 2.0%
Industrial Production Index (2011-2012=100), Food Products, y/y change, % 1.3% 6.0% -5.6% -5.5% 9.3%
Industrial Production Index (2011-2012=100), Beverages, y/y change, % -1.8% 3.2% 1.4% -3.1% -0.8%
Food Manufacturing Output Value, INR bn 9,568 10,710 10,274 10,825 n/a
Beverage Manufacturing Total Output Value, INR bn 679 811 779 785 n/a
Food Grain Production, y/y change, % 3.1% -4.9% 0.1% 9.0% 3.6%
Alcoholic Beverage Production, y/y change, % n/a 4.3% 4.6% -6.6% -2.3%
Food Products, Beverages and Tobacco GVA of Food Products, Beverages and
Manufacturing GVA Share, current prices Tobacco Manufacturing, constant prices,
y/y change
10.7% 12.8%
10.3% 9.9% 12.2%
9.7%
9.1%
8.2%
7.9% 7.9% 6.7%
7.2%
7.4% 7.1% 5.7%
5.0%
3.4%
2.7%
GDP
GVA of Manufacturing
Share of Manufacturing GVA, % Share of GDP, % GVA of Food Products, Beverages and Tobacco Manufacturing
Production
10,825
1.4%
10,710
1.3%
10,274
9,568
-0.8%
8,016
-1.8%
-3.1%
811
785
779
679
631
-5.6% -5.5%
FY2014 FY2015 FY2016 FY2017 FY2018 FY2013 FY2014 FY2015 FY2016 FY2017
Comments
In 2014 and 2015, prolonged drought and inadequate monsoons in ten out of India’s 29 states had a
negative effect on the supply of agricultural inputs for the food and beverage processing sector,
forcing several companies to discontinue operations temporarily. As a result, in FY2016 the sector
showed negative performance in terms of production volume. In FY2017 it was affected by the
banknote demonetisation reform adopted by the government in November 2016. This caused cash
shortages, temporary interruptions in supply chains and a further decrease in the output of the food
and beverage sector. In FY2017, industrial production indices of both food and beverage processing
subsectors dropped by 5.5% y/y and 3.1% y/y, respectively. According to the CSO, in FY2017 the output
value of India’s food manufacturing sector increased by 5.4% y/y to INR 10,824.6bn, of which INR
9,570.4tn was the output value of manufacturing corporations, while INR 1,254.2bn was derived from
household-based manufacturing units. The output value of the beverage manufacturing sector
reached INR 785.2bn, up by 0.8% y/y, including INR 745.3bn from manufacturing corporations and INR
39.9bn from household-based manufacturing units. In FY2018 the sector performed much better,
supported by a higher level of agriculture production and government support through initiatives
aimed at fostering sector growth.
Global Positioning
Top 10 Global Cow’s Milk Producers, 2017 Top 10 Global Butter Producers, 2017
Top 10 Global Milled Rice Producers, Top 10 Global Wheat Producers, 2017*
2017*
External Trade
38,110
36,232
amounting to USD 12.4mn in FY2018. The largest
35,521
30,939
trade surpluses are recorded among the
29,738
categories of cereals, fish and crustaceans, edible
23,924
23,097
16,464
21,400
meat, coffee, tea, mate and spices. The country,
19,691
however, has a trade deficit in some products, 21,646
such as oils and fats, edible vegetables, fruits, 16,541
12,425
and nuts. In FY2018, trade surplus in food and
8,339
beverages recorded a significant y/y growth of 7,015
Exports
Food and Beverage Exports Top Export Products, USD mn, FY2018
Comments
Exports of processed food and beverages followed a downward trend between FY2014 and FY2016, due
to the depreciation of the local currency against the USD and lower export volumes of traditional
export products, such as cereals and food residues. Between FY2014 and FY2016, exports of cereals
declined by 41% y/y, while food residues – mainly comprising oil cake and solid residues from soybean
and rapeseed oil extraction – dropped by 74% y/y. An inadequate monsoon, which led to a decline in
cereal production, along with lower global demand, were the main reasons for the drop. In FY2017,
sector exports started to recover and in FY2018 achieved a significant y/y growth of 14.8% to USD
35.5mn. India’s top five export product categories – cereals, fish and crustaceans, meat and edible
meat offal, coffee, tea, mate and spices, as well as edible fruits, nuts and peels* – had a combined
share of 68.5% of food and beverages’ total exports in FY2018. In this period, all top five categories
reported y/y growth in exports, and cereals and fish and crustaceans witnessed double-digit growths
of 35.6% y/y and 24.5% y/y, respectively. India’s main food export destinations were the US, the Middle
East and Southeast Asia. In FY2018, the top five export countries for Indian food products were the US,
Vietnam, the UAE, Saudi Arabia and Malaysia, which accounted for 32.9% of the sector’s total exports
in value terms.
*Edible peels mostly denotes edible citrus peels used as condiments.
Source: MCI, CEIC, Dun & Bradstreet
Imports
Comments
Food and beverage imports followed an overall upward trend over between FY2014 and FY2017, closely
following the evolution of imports of oils and fats, the sector’s major import product, with a share of
more than 50% of food and beverage imports in value terms. During this period, imports of oils and
fats – mainly consisting of palm oil and soybean oil – rose by 15.9% to almost USD 11bn in FY2017, due
to a combination of rising domestic demand and insufficient domestic supply and price competitive
imports from countries such as Indonesia and Malaysia. In FY2018, imports of oils and fats continued
to rise, reaching USD 11.7bn. The sector’s total imports, however, suffered a 3.5% y/y decline in FY2018,
falling to USD 23.1bn. The decline came as imports of edible vegetables – the sector’s third-largest
category in value terms – dropped by 30.8% y/y to USD 3bn. The category of sugars and sugar
confectionery, which had a share of 4.5% of the sector’s imports, suffered a 4.8% y/y decline in
imports, while the imports of cereals shrank by 67.7% y/y on the back of increased domestic supply. In
FY2018, India’s top five source countries for food and beverage product imports were Indonesia,
Malaysia, the US, Australia and Thailand, which together claimed a share of 43.3% of the sector’s total
import value.
FDI Inflow in Food and Beverage Sector FDI Inflow in Food and Beverage Sector
by Segment, USD mn
2,764.6
1,997.2
11.4%
829.6
760.3
904.9
727.2
562.4
434.9
516.7
505.9
343.4
173.1
145.4
2.0%
71.6
67.5
19.4
1.7% 1.3% 1.7%
7.1
0.2
3.5
3.7
FY2014 FY2015 FY2016 FY2017 FY2018 FY2014 FY2015 FY2016 FY2017 FY2018
FDI in Food and Beverage Sector, USD mn Food Products Other Products Marine Products
Share of Total FDI, %
Comments
The government allows 100% of foreign direct investment (FDI) under the automatic route in the food
and beverage sector, with the exception of segments reserved for micro- and small enterprises, where
FDI is allowed under the automatic route for up to 24% of capital. For investments exceeding this
threshold, an industrial licence is required. Over the FY2014-FY2018 period, the food and beverage
sector attracted FDI worth USD 5.4bn, or 3% of total FDI in the country. FY2014 reported a significant
increase in FDI due to huge investments announced by PepsiCo India Holdings Pvt Ltd, Cadbury India
Ltd (now Mondelez India Foods Pvt Ltd) and Nestle India Ltd. In 2016 the Indian government also
allowed 100% FDI in trade of food products manufactured in India, attracting investors such as
Amazon, Big Basket and Grofers, amongst others. Between FY2015 and FY2018, FDI in the sector
increased at a CAGR of 15%. India’s growing demand for food and beverage products, supply
advantages and policy support are of key importance for foreign investors. The government’s main
focus on the development of supply-chain related infrastructure, such as cold storage, abattoirs and
food parks, will continue to drive FDI in the sector in the next few years. In 2018, India significantly
improved its position in the World Bank's Ease of Doing Business ranking for 2019. It jumped to 77th
place from 100th in 2017 and 130th in 2016.
1,613,316
1,599,818
1,582,527
1,547,183
available data from the CSO, there were 39,318
165,321
160,623
158,507
147,482
141,992
registered food and beverage factories in India at
the end of FY2016, employing nearly 1.8mn
people. In addition, 5.1mn people worked in FY2012 FY2013 FY2014 FY2015 FY2016
37,098
9mn people by 2024.
36,389
35,346
35,096
34,884
2,218
2,220
2,079
2,103
1,997
04
COMPETITIVE
LANDSCAPE
1826
Timeline India
Market Players
2008
The MOFPI launches Scheme for Mega Food Parks and
Scheme for Cold Chain, Value Addition and Preservation 2009 Development Milestones
Infrastructure for Non-Horticultural Products.
MOFPI launches the Modernisation of Abattoirs Scheme.
Development Milestones
The government releases its Three Year Action Agenda The national Goods and Services Tax (GST) is
(FY2018-FY2020), which contains key tasks related to introduced.
agricultural marketing reforms in India.
Source: MOFPI, FAO, US Library of Congress, Planning Commission, The Government of India, Company Data
Highlights
Overview
India’s food and beverage sector features a medium-to-high level of competition, with a total of
39,318 active factories at the end of FY2016, most of them small-scale industrial units. At around 60%
in FY2016, the share of the organised sector in food processing is relatively high, although there are
significant variations across segments, according to IBEF. Nevertheless, the unorganised sector still
has considerable influence, which intensifies competition. Liberalisation of the FDI rules for the sector
in recent years has attracted several large foreign investors willing to tap the growth potential of the
domestic market.
Market Structure
In segments where the unorganised sector has a predominant share – such as dairy products, meat,
fish and sugar – there is a relatively high level of competition. Several highly regulated and capital-
intensive segments remain dominated by a few large players, mainly of foreign origin. The spirits
market is dominated by the United Spirits, a subsidiary of the British company Diageo, with a market
share of 30.6% in 2017, according to MarketLine. A similar situation is observed in the brewery
industry – where the leader is United Breweries, with a market share of 46.1% in 2016 – and in the
carbonated soft drinks industry, where the US companies Coca-Cola and PepsiCo had 88% of the
market in 2017.
Main Players
The largest players in the sector are companies with operations in procurement, primary and
secondary processing, and retail. India’s domestic producers, such as Britannia Industries, Modern
Dairies, Kwality, REI Agro, Kohinoor Foods and others, are very active in the food processing sector.
The country’s fast development as a sourcing hub of processed food has also attracted a number of
foreign players, such as Pepsico, Coca-Cola, Danone, Nestle, Kraft Foods, Mondelez International,
Unilever, Heinz, and others.
Main Entries
The liberalisation of India’s FDI policy and the prospect of robust domestic demand has boosted
foreign investor interest in the local food and beverage sector. Despite the relatively high entry
barriers and growing state regulation in the alcoholic beverages industry, Dutch group Heineken has,
since 2015, gradually increased its stake in United Breweries Ltd, India’s biggest brewer, and plans to
acquire majority control. The most recent entrant in the sector is Greece-based snack and
confectionery producer Chipita SA, which struck a JV with Britannia Industries Ltd in 2017.
Source: CSO, CEIC, IBEF, Marketline, Dun & Bradstreet, Company Data, Business Standard
Top Companies
Top 10 Listed Companies by Sales Revenue in India’s Food and Beverage Sector
Open Market
12-Mar-18 Avanti Feeds Ltd Thai Union Asia Investment Holding Ltd Hong Kong 160.9 9
Purchase
23-Nov-17 Havmor Ice Cream Acquisition Lotte Corp South Korea 158.0 100
28-Jul-17 Shree Renuka Sugars Ltd Minority Stake Wilmar Sugar Holdings Pte Ltd; Wilmar International Ltd Singapore 122.0 34
SmallCap World Fund, Inc.; Goldman Sachs India Ltd; HDFC United States;
22-Sep-17 Prataap Snacks Ltd IPO Trustee Company Ltd; SBI FMCG Fund; DSP Blackrock Mauritius; 74.5 21
Mutual Fund ; BNP Paribas Arbitrage Fund India
29-Jul-17 Apricot Foods Pvt Ltd Acquisition Guiltfree Industries Ltd; RP-Sanjiv Goenka Group India 67.0 70
Open Market The Pabrai Investment Fund II LP; The Pabrai Investment
12-Feb-18 KRBL Ltd. United States 60.0 3
Purchase Fund IV LP; Pabrai Investment Funds; Unknown Buyer(s)
Open Market
22-Feb-18 Tata Global Beverages Ltd Unknown Buyer(s) n/a 50.7 2
Purchase
3-May-17 Dodla Dairy Ltd Minority Stake TPG Capital LP United States 50.0 25
19-Oct-17 John Distilleries Pvt Ltd Minority Stake Sazerac Company United States 43.0 28
18-May-18 Bikaji Foods International Ltd Minority Stake IIFL Special Opportunities Fund; IIFL Asset Management Ltd India 36.8 n/a
Open Market
10-Nov-17 Hatsun Agro Products Ltd. Unknown Buyer(s); DSP Blackrock Mutual Fund India 35.0 2
Purchase
Open Market
24-Aug-17 Tata Global Beverages Ltd Unknown Buyer(s) n/a 34.6 2
Purchase
25-May-17 Ready Roti India Pvt Ltd Acquisition Grupo Bimbo SAB de CV Mexico 32.5 65
Open Market
5-Jan-18 Varun Beverages Ltd Unknown Buyer(s) n/a 27.0 1
Purchase
14-Sep-17 Keventer Agro Limited Minority Stake Mandala Capital International Pte Ltd Singapore 25.0 15
11-Jan-18 Southern Health Foods Pvt Ltd Minority Stake Morgan Stanley Private Equity Asia Ltd Hong Kong 23.8 n/a
Singapore;
DSG Consumer Partners; Saraf Family-private investor;
India; United
27-Feb-18 Saraf Foods Ltd. Minority Stake PEDORIA Ltd; Investment Fund for Developing 4.6 n/a
Kingdom;
Countries (IFU)
Denmark
Open Market
21-Aug-17 Nestle India Ltd. Life Insurance Corporation of India (LIC) India 4.1 0
Purchase
Open Market
28-Aug-18 Ruchi Soya Industries Ltd Unknown Buyer(s) n/a 1.4 3
Purchase
6-Jul-18 White Owl Brewery Pvt Ltd Minority Stake IIFL Select Equity Fund; IIFL Asset Management Ltd India 1.4 n/a
Fireside Ventures; Singapore Angel Network; Mumbai
12-Dec-17 Vahdam Teas Pvt Ltd Minority Stake India; Singapore 1.4 n/a
Angels; Unknown Buyer(s)
19-Mar-18 Maverix Platforms Pvt Ltd Minority Stake Alteria Capital Advisors LLP India 1.3 n/a
Manufacturing Facility of Danone
19-Apr-18 Foods and Beverages in Sonipat, Acquisition Parag Milk Foods Ltd India n/a 100
Haryana
11-Nov-17 Vaman Milk Foods Pvt Ltd Acquisition Heritage Foods India Ltd India n/a 100
9 9 9
Open Market
Purchase
25.6%
6
4
373 Acquisition
344
15.4%
2
83 92
37 64 Minority
Stake
Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Purchase IPO 5.1%
53.8%
Singapore
13.0%
Others
20.4%
US 11.1%
50.1-100mn
10.8%
0-50mn
81.1% Hong Kong
5.6%
100.1-
1,000mn
8.1%
Belgium
India 44.4% 5.6%
05
COMPANIES
IN FOCUS
265,559
2.2%
257,568
239,209
11,041
6,519
5,234
3,513
1,434
Stock Exchange.
930
In FY2018, several regulatory challenges FY2016 FY2017 FY2018
impacting the sector, such as the ban on sale of
liquors on highways and alcohol exclusion in GST, Net Revenues EBITDA
Net Pr ofit EBITDA Margin
were the main reason the sales volume of USL
dropped to 78.5mn cases, compared to 90mn
cases in FY2017. Despite the challenges, company Balance Sheet, Consolidated, INR mn
sales revenues grew by 3.1% y/y to INR 265.6bn,
driven by extensive price increases in more than
half of India’s states, and a focus on 0.6
premiumisation, while its net profits marked a
triple-digit increase, reaching INR 6.5bn.
89,563
88,959
28,284
0.3
24,327
0.3
states, namely Chandigarh, Rajasthan, Madhya
21,594
17,831
Ciroc in India.
Pr estige and Above Segment Popular Segment
USL operates 52 manufacturing facilities across
23 states and three union territories in India,
employing more than 4,000 people. The company Sales in Volume Terms by Segment,
has a strong distribution network and point of FY2018
sale coverage, and was represented in 85,000
outlets across India as of March 2018.
63%
59%
In FY2018, the Prestige and Above segment 53%
represented 47% of the company’s total sales 47%
41%
volume and 63% of its total net sales value, 37%
compared to 41% and 58% respectively in FY2017.
Sales growth in the segment was supported by a
continued focus on premiumisation and brand
renovation. In FY2018 USL launched Captain
Morgan “Original Rum”, expanding its rum
segment. The Popular segment represented 53% FY2016 FY2017 FY2018
of total volumes and 37% of total net sales in
FY2018, compared to 59% and 42%, respectively, Pr estige and Above Segment Popular Segment
in the previous year.
124,306
102,298
shareholders (43.88%) and Indian shareholders
96,414
6.8%
(29.46%), as of March 2018. Heineken acquired a
9,141
37.5% stake in UBL in 2008, and since then has
7,780
6,928
3,946
2,987
2,299
gradually increased its stake in the company to
tap the fast-growing beer market in the country. FY2016 FY2017 FY2018
At the end of March 2018, Heineken’s share of
UBL was 43.73%.
Net Revenues EBITDA
Net Pr ofit EBITDA Margin
In FY2018, the company’s revenues grew by 21.5%
y/y to INR 124.3bn, as a result of higher sales
volumes, a favourable brand mix and price Balance Sheet, Consolidated, INR mn
increases in certain markets during the year. In
this period, UBL’s sales volume improved in key 0.3
profitable markets, with strong market share
gains in most large states, especially in
26,903
0.2
Telangana, Andhra Pradesh, Rajasthan, Orrisa,
23,342
47,234
1,897
1,714
302,405
the Bombay Stock Exchange and on the National
191,729
Stock Exchange. The latest published financial
7,617
1,388
-6,775
253
-13,090
-13,951
14bn. In FY2018, Ruchi Soya reported a 37.4% y/y FY2015 FY2016 FY2017
decline in revenue to INR 120.6bn, according to
financial data from the company’s quarterly
Net Revenues EBITDA
reports. Its net loss increased from INR 14bn in Net Pr ofit EBITDA Margin
FY2017 to INR 57.5bn. In last few years, the
company’s performance was adversely affected
by continuous drought, along with global price Balance Sheet, Consolidated, INR mn
volatility in agricultural commodities, which led
to lower capacity utilisation and a drop in 34.9
exports.
172,478
52,326
48,501
99,901
brands of Good Day, Tiger, 50-50, Treat,
93,241
86,262
15.5%
NutriChoice, Milk Bikis, and Marie Gold. Britannia 15.3%
16,605
13,339
14,233
10,040
8,846
8,246
702
684
13.5% y/y.
FY2016 FY2017 FY2018
In March 2017, Britannia announced that it had
entered into a JV with Greece-based firm Chipita
SA for production and sales of croissants in Total Assets Shareholders Equity
India. Britannia holds a majority stake of 60% in Net Debt Net Debt / EBITDA
the JV.
Kwality Ltd
73,194
68,718
listed on the Bombay Stock Exchange and on the
63,481
6.6%
National Stock Exchange of India.
5,366
Kwality has a diversified product portfolio of
4,162
4,673
1,941
1,736
923
fresh milk, milk powders, curd, ghee and butter
under the Dairy Best brand, as well as value- FY2016 FY2017 FY2018
added products, such as UHT milk, flavoured milk,
and cream tetra packs. Net Revenues EBITDA
Net Pr ofit EBITDA Margin
During FY2018, Kwality continued to shift its
business model from B2B to B2C, aiming to
become best-in-class consumer-led dairy Balance Sheet, Consolidated, INR mn
company in India, compliant with global
standards. It focused on new value-added dairy
3.4 3.4
products, moving away from the liquid milk
segment to new value-added products under the 2.8
brand KDIL's Kwality. As a result, in FY2018, the
15,885
34,812
12,566
11,173
8,536
06
REGULATORY
ENVIRONMENT
Government Policy
FDI Policy
Under current legislation, 100% foreign direct investment (FDI) under the automatic route is allowed
in all food and beverage processing segments, except in items reserved for micro and small
enterprises (MSEs). These include pickles and chutneys; bread; pastry; hard-boiled sugar candy;
rapeseed, mustard, groundnut oils; sweetened cashew nut products; ground and processed spices
other than spice oil and oleoresin spices; tapioca; and flour. For these, FDI is permissible under the
automatic route for up to 24% of the capital. Foreign equity ownership above 24% is possible after
receiving an industrial licence under the Industries (Development & Regulation) Act, with a mandatory
export obligation of 50%. Export-oriented units are given a number of incentives and concessions
such as tax exemptions. In February 2016, the Indian government allowed 100% FDI under the
automatic route in trade in food products manufactured in India. This measure aimed to promote
diversification by farmers, reduce waste, and support the development of the local food processing
industry by encouraging foreign companies to produce in India rather than sell imported goods. At
present, no industrial licence is required for entry into the food processing industries, except for
spirits, beer, wine, and products reserved for the small-scale sector.
Source: Knight Frank, DNA India, MOFPI, DIPP, Times of India, The Hindu Business Line, The Economic Times
Source: MOFPI, Planning Commission, Government of India, NITI Aayog, The Hindu Business Line
Major Schemes
SAMPADA Scheme
In May 2017, the Government of India approved a Scheme for Agro-Marine Processing and
Development of Agro-Processing Clusters, called Pradhan Mantri Kisan SAMPADA Yojana (PMKSY),
allocating it INR 60bn for the period from FY2016 to FY2020. The main targets of the scheme are
doubling farmer income, increasing employment opportunities, especially in rural areas, and reducing
wastage of agricultural produce. The PMKSY includes several ongoing schemes of the MOFPI along
with new schemes promoting sector growth, namely the Scheme for Mega Food Parks, Scheme for
Integrated Cold Chain and Value Addition Infrastructure, Creation / Expansion of Food Processing /
Preservation Capacities, Scheme for Infrastructure for Agro-processing Clusters, Scheme for Creation
of Backward and Forward Linkages, Scheme for Food Safety and Quality Assurance Infrastructure, and
Scheme for Human Resources and Institutions. A total of INR 314bn is expected to be invested in the
PMKSY for handling 33.4mn tonnes of agro-produce valued at INR 1tn, benefiting two million farmers
and generating 530,500 direct and indirect jobs in India by FY2020. Budget allocation for PMKSY has
doubled from INR 6.3bn in FY2018 to INR 13.1bn in FY2019. In FY2018, the actual expenditure for PMKSY
was nearly INR 6.1bn, according to MOFPI.
Source: MOFPI
On November 8, 2016, India’s Prime Minister Narendra Modi announced that INR 500 and INR 1,000
banknotes – which between them accounted for about 86% of the cash in circulation in India – could
no longer be used for cash payments. Instead, during a 50-day transition period, the bills could be
deposited into bank accounts or swapped for new ones, but only against documents proving their
origin. This radical move aimed to curb the informal economy – estimated to account for about 20% of
India’s GDP – by taking out of circulation illicit and counterfeit cash, which the government claimed
was being used to fund illegal activities. The resulting cash shortage had a huge effect on India’s
population generally, but most of all on the lowest-income households and on those living outside
the big cities, where the infrastructure that underlies electronic payments is poorly developed and
cash transactions are the most common payment method. Moreover, according to UK broadcaster the
BBC, more than half of the population in India did not have a bank account as of December 2016,
while some 300mn people did not have government identification. Analysts warned that the cash
shortage was likely to affect consumer spending, mostly in rural areas, which would translate into a
slowdown in overall household consumption and lower GDP growth. In November 2016, several
investment banks, including Goldman Sachs, Credit Suisse and Bank of America Merrill Lynch, cut their
GDP growth forecasts for India for FY2017 to below 7%.
Banknote demonetisation had a direct effect on many sectors, since, according to the Financial Times,
about 90% of the transactions in the Indian economy are in cash. The food and beverage sector was
also hit hard by the government measure. For instance, in the days immediately following the
monetary reform, there were interruptions in the majority of supply chains, as producers, distributors
and wholesalers traditionally deal mostly in cash. In addition, several food processing companies
specialising in the manufacture of discretionary items cut production and postponed investment
plans, as consumers prioritised the purchase of essential goods. According to the estimates of Sagar
Kurade, president of the All India Food Processors' Association, the sector’s sales declined by some
15%-40% – depending on product category – in the first three months after the reform. However, in the
medium term, the reform is expected to have a positive impact on the food and beverage sector by
reducing the informal sector’s share in it and increasing that of the organised sector. Industry
representatives have pointed out that the measure will promote the sale of food and beverages in
modern retail outlets, thus increasing transparency and compliance. Moreover, the reform is likely to
support the sale of branded and packaged food products and to push out players susceptible to trade
in products that are counterfeit or of unreliable quality.
Source: BBC, The Financial Times, The Economist, Deutsche Bank, Deloitte, The Financial Express, LiveMint, Just-food
On July 1, 2017, India replaced its complex tax system with a national goods and services tax (GST),
paving the way to a single national market for the first time since India’s existence as an independent
nation. The shift became possible after India’s President Pranab Mukherjee ratified the Constitution
(101st Amendment) Act 2016 in September 2016. The bill introduced GST as a comprehensive indirect
tax levied on the manufacture, sale, and consumption of goods and services, to replace over ten
indirect taxes levied by India’s Central and State governments. GST is expected to boost GDP growth
by 1.5%-2% by eliminating India’s cascading tax system and improving the business environment
through the adoption of simplified compliance and uniform processes across the country. In addition,
GST is seen to ease and promote manufacturing and trade activity across states, as well as improve
tax collection and administration. GST is levied and collected at each stage of the sale or purchase of
goods or services, on the basis of the “input tax credit” method, allowing GST-registered companies to
claim tax credits. Exports have a GST rate of 0%, while the GST on imports is the same as that on
domestic goods and services. The tax has two components – a central GST, and a State GST. Due to the
elimination of cascade taxation, the measure is expected to reduce prices of manufactured goods,
reduce the overall tax burden, improve cash flows, and boost the profitability of both manufacturing
companies and retailers. From the consumer’s standpoint, the main advantage of the reform is the
lower prices of goods and services, due to an estimated 25%-30% reduction of the tax burden on
goods, and the creation of a common market in India by eliminating state tariffs that serve as a
barrier for the free movement of goods. The government set four “tax slabs” with GST rates of 5%,
12%, 18% and 28%. The lowest tax rate of 5% is levied on precious metals like gold and on essential
items, while the highest rate of 28% applies to luxury items. In January 2017, the government
postponed the entry into force of the GST regime to July 1, 2017, from the previous date of April 1, in
order to finalise the complementary laws, define the tax rates of the “slabs” and receive approval
from all legislative bodies. In May 2017, the GST Council, the government body in charge of the reform,
decided on rates for goods and services on an item-by-item basis, in accordance with the Harmonised
System of Nomenclature (HSN) and the Service Accounting Codes (SAC). Out of the food and beverage
categories, only alcoholic beverages have been excluded from the GST regime. The main reason for
this is the paramount role in State budgets of the alcoholic beverages industry, which contributes
between 25% and 40% of State revenues. Apart from preserving the current system of multiple State
and national taxes on alcoholic beverages, their exclusion from the GST regime will increase both
administrative burdens and production costs for alcoholic beverage companies, as they will not be
able to pass down the value chain the higher taxes on industry inputs, which will be included in the
GST regime.
Source: Confederation of All Indian Traders, Corporate Catalyst India, Legal India, IBEF, Tally Solutions, The Times of India,
Economic Times, Financial Express, Tax Management India
INDIA FOOD & BEVERAGE SECTOR 2018/2022 57
An EMIS Insights Industry Report from 139.167.242.168 on 2020-01-10 16:55:59 GMT. DownloadPDF.
EMISPDF in-afcons001
Downloaded by in-afcons001 from 139.167.242.168 at 2020-01-10 16:55:59 GMT. EMIS. Unauthorized Distribution Prohibited.
INDIA FOOD & BEVERAGE SECTOR 2018/2022
An EMIS Insights Industry Report CONTENTS
07
FOOD
MANUFACTURING
Highlights
Overview
According to the latest available data from the CSO, the output of the food manufacturing subsector
expanded at a CAGR of 6.2% over the FY2013-FY2017 period, reaching INR 10.8tn in FY2017. The
subsector is driven by the abundant supply of primary agriculture and livestock products, rising
household incomes, and increasing spend on foods perceived as healthy and nutritious. The opening
of the industry to foreign investors and the gradual increase of the organised sector’s share have
made the industry attractive to multinational companies (e.g. Danone, Nestle, Kraft Foods, Mondelez,
Heinz and others), which have established production operations in the country. Nevertheless, India
remains a net importer of oils and fats, due to a lack of integrated processing equipment. On the
other hand, the country is a net exporter of cereals, meat, fish, coffee, tea, and spices.
Outlook
Realising its significance, the Government is encouraging investment in the food sector as higher
levels of processing help reduce food wastage, improve value addition, promote crop diversification,
ensure higher incomes for farmers, and export earnings. Thanks to the entry of international food
companies and the expansion of their positions in the sector, India is rapidly becoming a production
hub for processed foods such as refined sugar, dairy and bakery products, which are exported to
countries in South Asia, the Middle East and Africa. On the supply side, the improvement of
processing capacity and the development of supply chain infrastructure is expected to reduce costs,
increase production levels and improve the overall competitiveness of domestic food products.
Main Events
§ In March 2017, Britannia Industries Ltd announced that it had entered into a joint venture with
Greece’s confectionery company Chipita SA for production and sales of macro snacks, including
croissants, rolls and other dough products. According to the agreement, Britannia will hold 60% of
the JV company, registered as Britchip Foods Ltd. The JV is expected to launch production in 2019 in
Maharashtra. The first line will start producing cakes, followed by biscuits, croissants and dairy
products. Britannia expects INR 2bn revenue from the JV with Chipita in the next three years.
§ In November 2017, South Korea’s conglomerate Lotte Confectionery Co. Ltd agreed to acquire
India’s ice cream producer Havmor Ice Cream Ltd for USD 152mn. Lotte aims to expand its presence
in India, where it already sells gums, candies and snacks through its subsidiary Lotte India
Corporation Ltd. Lotte was one of the first South Korean food and beverage companies to enter the
Indian market in 2004. In 2016 it had a 90% share in the Indian choco pie market.
§ In December 2017, ITC Ltd – one of India’s largest fast-moving consumer goods (FMCG) companies –
opened its largest integrated food manufacturing and logistics facility in Punjab, with the first ever
“wheat mandi” unit to procure grain from farmers. ITC estimates that it will buy 130,000 tonnes of
wheat for biscuits and maida in Punjab, as well as onions for chips manufacturing. The company
also plans to produce milk-based ready-to-drink beverages, noodles, wafers, fruit juices and other
fruit-based beverages. The facility, built with an investment of INR 15bn, is part of the company's
plan to open 20 such food processing units across the country with a total investment of INR
100bn. ITC is focusing on its non-tobacco businesses and aims to increase its revenues from
packaged foods from INR 87bn in FY2018 to INR 650bn by FY2030.
§ In May 2018, Creamline Dairy Products Ltd – a subsidiary of India’s agribusiness company Godrej
Agrovet Ltd – announced plans to invest INR 4bn to set up three new plants in Karnataka, Tamil
Nadu and Maharashtra over the next three years. The expansion is expected to increase the
company’s milk processing daily capacity from 1.2mn litres to 1.5mn litres.
§ In June 2018, Singapore-based Wilmar Sugar Holdings (WSH) acquired an additional 19.77% stake in
India’s largest sugar refiner and ethanol producer Shree Renuka Sugars Ltd through an open offer.
According to the offer, WSH proposed to acquire up to an additional 26% in Shree Renuka Sugars at
a price of INR 16.29 per share, but actually it acquired a 19.77% stake. Prior to the stake purchase,
WSH had a 38.57% stake in Shree Renuka Sugars as of March 2018. After the completion of the
open offer, WSH's stake increased to 58.34%.
Source: The Economic Times, Business Standard, The Hindu Business Line, EMIS DealWatch, Company Data
21,100 21,521
20,095
19,055
17,119
9,200
9,000
8,750
8,600
8,052
5,250
5,200
4,600
4,100
3,309
2,700
2,390
2,300
2,225
2,000
1,900
1,700
1,665
1,650
1,558
1,446
1,390
1,350
1,300
1,275
1,250
1,255
1,230
1,125
1,120
Palm Oil Soybean Oil Sunflower Oil Rapeseed Oil Cottonseed Oil Other Oil Total
Comments
Between MY2014 and MY2018, the domestic consumption of edible vegetable oils is estimated to have
expanded at a CAGR of 3.5%, supported by a growing population, increasing household incomes and
strong demand from institutional buyers. Palm oil, soybean oil and sunflower oil are the major
products, with a combined share of 76.7% in domestic consumption in MY2018, according to the USDA.
The domestic production of edible oils is unable to meet market demand, which makes India
dependent on imports. Major constraints include outdated technology and equipment, lack of
integrated oil processing plants, as well as price uncompetitiveness. In FY2017, the country produced
1.4mn tonnes of soybean oil and 230,000 tonnes of palm oil, representing respective increases of
37.3% y/y and 5.5% y/y, against consumption volumes of 5.2mn tonnes and 9mn tonnes over the same
period. India is self-sufficient in peanut oil. It produced 1.3mn tonnes in FY2017, up by 36.8% y/y, and
consumed 1.2mn tonnes.
Source: USDA
11,700
10,946
10,670
10,530
9,442
1,264
857
973
877
-8,584
-9,697 -9,653 -10,054 -10,437
Comments
The robust growth of the domestic oils and fats market, combined with insufficient domestic
production, has created increasing supply deficits, filled mostly through imports. From FY2014 to
FY2018, the import value of vegetable and animal oils and fats grew at a CAGR of 4.4%. India is the
world’s largest importer of oils and fats, with imports valued at USD 11.7bn in FY2018, against USD
9.4bn in FY2014. In FY2018, palm oil and soybean oil remained the largest import categories with a
combined share of 62.8% of total sector imports. The major import source countries were Indonesia
and Malaysia, accounting for 56.6% of oil and fat imports during the year. In August 2017, the
government raised the import duty on crude palm oil from 7.5% to 15%, while import duty on RBD
Palmolein and palm oil was adjusted from 15% to 25%. The import duty on crude soybean oil rose
from 12.5% to 17.5%. Before these adjustments, importers preferred to stock refined palm oil due to its
minimal price difference with crude palm oil (CPO), which led to higher imports of refined oil and
fewer of CPO. In terms of exports, castor oil (non-edible) was the sector’s leading exporting product,
accounting for 76.5% of the oils and fats exports in FY2018. China, the Netherlands, the US and France
were the major export destinations, together accounting for 67% of total exports of oils and fats
during the year.
Bleached
Soybean Oil
Deodorized
21.9%
Palmolein
16.5%
Castor Oil
Wax 5.9%
Castor Oil Sunflower Oil
(Non-Edible Fish Oil 15.6%
Grade)
(Sardine Oil)
76.5%
2.5%
Other
Rape Oil
Vegetable Oil Palm Oil 2.1%
and Fats of 40.9%
Coconut Edible Grade
Copra Oil 1.9%
1.7%
Meat
2,000
3,264 3,464
2,682 2,850 3,045
1,000
0
FY2013 FY2014 FY2015 FY2016 FY2017
FOCUS POINT
Meat Production by State, FY2017
3.4%
Punjab 4.4%
Bihar
9.6%
5.8% West Bengal
Haryana
18.2%
Uttar Pradesh
11.4%
Maharashtra 8.6%
Andhra Pradesh
2.8%
Karnataka
7.8%
6.3%
Tamil Nadu 21.7%
Kerala
Others
Meat (cont’d)
-0.8%
-1.4%
-2.2%
FY2013 FY2014 FY2015 FY2016 FY2017 FY2013 FY2014 FY2015 FY2016 FY2017
Beef and Veal Consumption, thou tonnes y/y change, % Poultry Meat Consumption, thou tonnes y/y change, %
Comments
Poultry is the most frequently consumed meat in India, mainly due to its low price compared to other
meats, and the fact that fewer religious prohibitions and cultural taboos govern its consumption.
Between 2013 and 2017, domestic consumption of poultry meat expanded at a CAGR of 5.5%, reaching
INR 4.5mn tonnes, according to the USDA, favoured by a growing population, rising household
incomes, and a shift in consumer habits in favour of a higher-protein diet. This segment has huge
growth potential in the domestic market. The USDA estimates that in 2018, domestic poultry
consumption will increase from 4.9mn tonnes to 5.1mn tonnes. Almost all domestic consumption is
met by local production, due to consumer preference for fresh meat and strict import certification
requirements for livestock products. Water buffalo (carabeef) was the second most popular meat
consumed in India, with per capita consumption of 2kg in FY2016, due to its affordability compared to
other red meats. Overall, the domestic consumption of beef and veal grew at a modest CAGR of 3.4%
between 2013 and 2017, mostly due to religious restrictions on their consumption and the bans on
cattle slaughter in force in various Indian states.
Source: USDA
Meat (cont’d)
Comments
Deficiencies in production and cold chain infrastructure in India mean that only a small portion of
domestic meat and fish production is processed and transformed into higher value-added products.
According to the most recent data released by the MOFPI in 2016, the proportion of processed poultry
stood at 6%, against 21% for other types of meat. In FY2016 and FY2017, India’s meat and edible offal
exports experienced a downward trend, falling to USD 4bn in FY2017 versus USD 4.5bn in FY2013.
Exports were seriously hit by the Uttar Pradesh State government’s decision to crack down on illegal
slaughterhouses. As a result, India was surpassed by Brazil as the world’s largest beef exporter in
2017, according to USDA statistics. In FY2018, the exports of meat showed signs of recovery, with
export value reaching USD 4.2bn, an increase of 3.4% y/y, as a result of growing demand coming from
the major beef importing countries. India’s primary beef export destination is Vietnam, to which in
FY2018 it exported USD 2.3bn worth of meat and edible meat offal, accounting for 56.8% of the total.
Other major partners are Malaysia, Egypt and Indonesia, which together accounted for a 17.9% share
in India’s exports of meat and edible meat offal. By contrast, India’s imports of meat and edible meat
offal is insignificant, worth just USD 4.7mn in FY2018. However, it has strong growth potential, if the
CAGR of 18.9% registered between FY2013 and FY2018 is any indication.
4,926
4,474
4,208 4,170
4,034
4,929
4,476
4,210
4,175
4,038
3.2
3.1
4.7
2.0
2.0
Meat (cont’d)
Other Edible
Other Meat
Offal Of Other Meat
Bovine Of Swine,
Of Swine,
Animals, Fresh Or
Frozen
Frozen 4.4% Chilled 7.1%
32.9%
Boneless Carcassess
Meat of And Half Hams,
Bovine Carcassess
Animals, Shoulder And
Of Sheep, Cut Of
Frozen Fresh Or
90.7% Swine,
Chilled 2.7% Frozen, With
Other Cuts Bone 6.5%
Boneless
Of Sheep Boneless
Meat of
Bovine With Bone, Meat Of
Frozen Sheep,
Other cuts of Animals,
Fresh or 38.3% Frozen 6.2%
sheep with
bone, frozen Chilled 1.3%
0.3%
Fish
12,000
10.4%
10,000
3,640
3,580
8,000 3,652
3,443
3,321
6.0% 6.1% 6.2%
5.7% 6,000
12.6
10.8 11.4
9.6 10.2
4,000 7,770
7,210
6,136 6,512
5,719
2,000
Comments
With a coastline of 8,118km and rich inland water resources, India was the world’s third-largest fish
producer in 2016, after China and Indonesia, according to the USDA. Over the period FY2014-2018, fish
production in the country expanded at a CAGR of 5.6%. The main growth contributor was inland fish
production, which rose at a CAGR of 6.3% from FY2013 to FY2017. It accounted for 68.1% of India’s total
fish production in FY2017. On the other hand, marine fish production rose at a modest CAGR of 1.9%
between FY2013 and 2017. The government actively supports the sector, by promoting initiatives for
the development of freshwater aquaculture, such as financial assistance, technical support and
training through a network of over 430 Fish Farmers Development Agencies (FFDA) across the country.
As a result, the share of freshwater aquaculture reached about 80% in the country’s inland fish
production. About 90% of the fish produced in India is consumed domestically in the form of fresh
fish, while the remaining 10% is exported in canned or frozen forms. In 2016 MOFPI estimated that
only about 23% of the fish and seafood produced in India was processed in that year, a figure that
underlines the need for expansion and modernisation of the production, storage and logistics
infrastructure, as well as for the development of higher value-added products, such as fish/shrimp
pickles, fish/shrimp curry, skewers and marinated fish with Indian spices.
FOCUS POINT
Fish Production by State, FY2017
5.4%
Uttar Pradesh 4.5%
Bihar
14.9%
West Bengal
7.1%
Gurajat
5.3%
Odisha
5.8%
Maharashtra 24.2%
Andhra Pradesh
4.9%
Karnataka
5.9%
5.3%
Tamil Nadu 21.7%
Kerala
Others
Fish (cont’d)
6,760
5,442
5,188
4,778
4,419
6,851
5,501
5,250
4,823
4,486
90.5
61.7
67.2
58.9
44.6
Comments
From FY2014 to FY2018, exports of fish and crustaceans expanded at a strong CAGR of 7.3%, reaching
USD 6.9bn. In FY2018, major export destinations included the US, Vietnam and Japan, together
accounting for 48.1% of total exports in FY2018. India exports mainly shrimps and prawns, which
account for about 70% of the whole category’s exports in value terms, according to the statistics of
the Ministry of Commerce and Industry. By contrast, India’s imports of fish and crustaceans are
marginal – in FY2018, India imported about INR 90.5mn worth of fish and crustaceans, mainly from
Vietnam, the US and Bangladesh, which had a combined share of 42.7% of total imports of fish and
crustaceans in India in FY2018.
Fish (cont’d)
Shrimps And
Prawns
Other
15.3%
Ribbon Fish Excluding
3.8% Tilapia,Catfis
h,Carp,Eel
Other Fish 12.8%
Filet and Fish
Meat excl
Fresh or
Shrimps And
Chilled,
Prawns Frozen Fillets Other 16.3%
69.8%
3.5%
Hilsa 6.4%
Squids 2.9%
Mackerel Catfish
2.3% 17.9%
3.8% 7.8%
3.7% 7.2%
3.0% 3.3% 6.3%
3.0% 5.7%
5.0% 95.0
5.6 82.9 88.1
5.4 74.8
5.2 78.5
5.0
4.9
2014 2015 2016 2017 2018e FY2014 FY2015 FY2016 FY2017 FY2018
Butter Production, mn tonnes y/y change, % Egg Production, bn units Egg Production, y/y change, %
FOCUS POINT
Milk Production by State, FY2017
16.8%
Uttar Pradesh 5.3%
Bihar
6.8%
Punjab
5.4%
Haryana
12.6%
7.7%
Rajastan
Gurajat
8.1%
Madhya Pradesh
6.3%
Maharashtra
7.4%
Andhra Pradesh
4.6%
Tamil Nadu
19.0%
Others
3.8% 3.9%
4.8% 5.0%
4.8%
3.2% 3.3%
3.9% 3.0%
66.8
65.2 5.6
2.5% 5.4
62.8
5.2
59.8 5.0
57.0 4.9
2014 2015 2016 2017 2018e 2014 2015 2016 2017 2018e
Milk Consumption, mn tonnes y/y change, % Butter Consumption, mn tonnes y/y change, %
Comments
Over the 2014-2018 period, India’s consumption of cow milk and butter expanded strongly – at CAGRs
of 3.2% and 2.8%, respectively, according to USDA data. The USDA estimates that cow milk
consumption will increase by 2.5% y/y to 66.8mn tonnes in 2018, while butter consumption will rise by
3.9% y/y to 5.6mn tonnes. In 2018, the country preserved its position as the world’s largest consumer
of both cow milk and butter. The domestic market was boosted by India’s growing population, ongoing
urbanisation, rising household incomes and a growing consumer taste for packaged items and higher
value-added products such as dairy whitener, butter, ghee, flavoured milk, ice cream, cheese and
yoghurt. An additional positive factor is the relatively high percentage of vegetarians in India, who
treat milk and dairy products as their main sources of protein. The demand for ghee (clarified butter) –
the most consumed value-added dairy product – and butter remains strong. There is also a robust
demand for fermented dairy products such as yoghurt, cheese and ice cream, especially among the
urban middle- to high-end consumers. In response to growing demand for higher value-added
products, companies from the organised sector have opted to invest in expanding their dairy
processing capacity and distribution networks, encouraged by government policies designed to
promote the development of dairy cooperatives.
Comments
Almost all India’s milk and dairy product consumption is covered by local production. Imports of dairy
products and eggs are relatively small – in FY2018 they totalled USD 44.3mn – and are used to fill
temporary gaps between domestic production and consumption. Additional factors are strict import
certification requirements for milk and dairy products and tariff rate quotas applied to dairy products,
which mean that duties of between 20% and 60% are levied on imports above a certain threshold. In
FY2018, imports of dairy products consisted mostly of whey and cheese. The main supplier countries
were France, New Zealand and Denmark, accounting for a combined share of 40.8% of total imports.
On the other hand, exports of dairy products experienced a downward trend between FY2013 and
FY2016, due to strong growth in the domestic consumption of dairy products as well as a situation of
global oversupply and decreasing international prices. In FY2018, exports of dairy products and eggs
rose by 26.6% y/y to USD 265.3mn, driven by fresh eggs, ghee, butter and skimmed milk, which were
the major export product categories, with a combined share of 77.6% in total exports of dairy and
eggs. India’s largest export market for dairy products is the US with a share of 26.9% in FY2018,
followed by several milk-deficient countries in India’s vicinity, such as the UAE, Oman, Bangladesh and
Bhutan, which accounted for 37.7% of India’s total exports of dairy and eggs.
594
630
244
221
170 174
292
265
50.3
47.5
220
44.3
210
36.2
35.3
Melted Butter
(Ghee) Skimmed Melted Butter
20.7% Milk 12.6% (Ghee) 5.5%
Butter 5.3%
Cheese 8.7%
According to the Department of Agriculture and Grain Mill Products and Animal Feeds
Cooperation (DAC), in FY2017 India produced Output Value
285mn tonnes of food grains, an increase of 3.6%
y/y. As well as rice and wheat, which are the 16.6% 15.5%
largest categories with a combined share of 72% 9.7%
2,802
in FY2016, food grains comprise coarse cereals 3,235 3,130 3,024
(corn, jowar and bajra), and pulses (gram, tur, 2,402
FOCUS POINT
Food Grains Production by State, FY2017
17.9%
Uttar Pradesh 5.7%
Bihar
10.2% 6.2%
Punjab
West Bengal
6.2%
Haryana
7.7%
Gurajat
12.0%
Madhya Pradesh
5.7%
Maharashtra
3.8%
Andhra Pradesh
7.0%
Rajastan
21.8%
Others
300,000
28,720
24,170 25,900 26,000
250,000
22,570 46,970
43,076 43,470 42,250
200,000 38,701
100,000
0
MY2015 MY2016 MY2017 MY2018 MY2019f
300,000
100,000
0
MY2015 MY2016 MY2017 MY2018 MY2019f
Source: USDA
10,541
9,529
247 244 243
7,717
6,083 170
10,563
158
306
299
299
9,551
4,670
8,152
247
77.1
218
1,343.3
6,272
61.4
60.0
6,013
56.9
51.7
434.1
188.6
22.1
22.2
FY2014 FY2015 FY2016 FY2017 FY2018 FY2014 FY2015 FY2016 FY2017 FY2018
Comments
Local production covers almost all of India’s consumption of cereals. Since their output is reliant on
weather, cereal exports increase when there is surplus in domestic production, and decrease when
production is experiencing a downward trend. Between FY2013 and FY2018, cereal exports declined at
a CAGR of 5.1%, affected by the lower global prices of agricultural products, which started falling in
FY2015. As a result, the exports of cereals and milling industry products both suffered a decline in two
consecutive years, FY2015 and FY2016. During FY2018, however, the two categories witnessed positive
growth in exports, as well as increased domestic consumption.
Cereal imports have experienced a sizable growth over recent years, increasing at a CAGR of 81.4%
from FY2014 to FY2018, due to the fact that India started importing cereals at low international prices
to satisfy rising domestic demand. Imports of milling industry products also witnessed positive
performance during the last few years, growing at a CAGR of 8.3% between FY2014 and FY2018. In
FY2018, milling product imports rose by 28.5% y/y, driven by growing demand for high quality food. In
FY2018, imports of cereals dropped by 67.8% y/y, adversely affected by the government’s decision to
raise the import duty on wheat from 0% to 10% in March 2017, and further to 20% in November 2017 to
protect domestic production.
Source: MCI, CEIC
Main Export Cereal Products, FY2018 Main Import Cereal Products, FY2018
Rice
Parboiled
22.2%
Main Export Destinations for Cereals, Main Import Source Countries for Cereals,
FY2017 FY2017
Main Export Milling Industry Products, Main Import Milling Industry Products,
FY2018 FY2018
Rolled Or
Corn Stratch
Flaked Oat
18.2% Corn Groats Grains
and Meal 14.9%
7.6% Wheat
Dried Gluten 20.2%
Leguminous Hulled,
Vegetable Pearled,
Flour and Sliced Or
Meal 6.9% Kibbled Oats
10.1%
Main Export Destinations for Milling Main Import Source Countries for Milling
Industry Products, FY2017 Industry Products, FY2017
46.1% 3.9%
30,460 1.8%
1.7% 26,500 1.1%
14.5%
32,445 26,800
26,605 27,385 26,500
-2.7% -10.1% 22,200 26,023
-18.9% 25,500
-4.9%
MY2014 MY2015 MY2016 MY2017 MY2018f MY2014 MY2015 MY2016 MY2017 MY2018f
Pr oduction, thou tonnes y/y change, % Consumption, thou tonnes y/y change, %
Comments
India imports raw cane sugar mainly to meet local needs in the case of temporary gaps between
domestic production and consumption. The weak and erratic 2014-2015 monsoon seasons, which had a
negative effect on sugarcane harvest, contributed to an increase in raw cane sugar imports. In FY2016,
imports of sugar and sugar products reached USD 693mn, up from USD 146mn in FY2012. In FY2016,
about 85% of imports consisted of raw cane sugar, with Brazil as the main supplier country. The
government of India frequently intervenes in the external trade in sugar and sugar products to
regulate import and export levels and control domestic prices. Under current legislation, sugar mills
operating in India may, against a future export commitment, import raw sugar duty-free (instead of
paying the standard import duty of 40%). In June 2016, the government imposed a 20% export duty on
raw and refined sugar to boost local supply, keep domestic sugar prices in check, and restrict exports
following a sharp rise in international sugar prices. Despite increased domestic production, India
turned from a net exporter into a net importer of sugar and sugar products in FY2018, due to
increased consumption and uncompetitiveness of Indian sugar on the global market after the import
duty imposition. On March 20, 2018, the government dropped the export duty on sugar from 20% to
0%, so exports are expected to rise in FY2019.
1,509
1,355
1,104
1,075
1,050
1,019
1,071
880
686
693
475
389 405
-32
FY2014 FY2015 FY2016 FY2017 FY2018
Lactose And
Lactose
Syrup 6.9%
Sugar
Confectionery
12.7% Sugar
Confectionery
Cane Sugar
Glucose, 2.0%
88.0%
Refined Dextrose,
Sugar 72.3% Lactose Edible
6.9% Molasses
1.0%
Edible Fructose And
Molasses Frctose
1.4% Syrup 0.6%
179.7
178.2
169.1
is a leader in the production of fruits such as
166.6
bananas, lemons, mangoes and guavas, as well 160.3
as some vegetables, such as onions and ginger. In
addition, it is the second-largest producer of
97.1
92.9
91.6
90.2
89.5
potatoes, green peas and cabbage. Over the
period FY2014-FY2018, fruit production expanded
at a CAGR of 1.2% to 97.1mn tonnes in FY2018,
while vegetable production grew at a CAGR of
2.3%, reaching 179.7mn tonnes. Overall processing
FY2014 FY2015 FY2016 FY2017 FY2018
levels of fruits and vegetables is very low at
about 2%, MOFPI said in its report, released in
Vegetable Production Fruit Pr oduction
2016.
Tomato
10.8%
Mango Citrus 12.9%
21.9% Brinjal 7.1%
Onion 12.3%
FOCUS POINT
Fruit Production by State, FY2018
10.8%
Uttar Pradesh 4.4%
Bihar
4.0%
7.2%
West Bengal
Madhya Pradesh
9.3%
Gurajat
2.6%
11.2% Chhattisgarh
Maharashtra
14.3%
Andhra Pradesh
7.8%
Karnataka
5.3%
Tamil Nadu
23.1%
Others
FOCUS POINT
Vegetable Production by State, FY2018
15.7%
Uttar Pradesh 8.1%
Bihar
6.2%
West Bengal
4.4%
Haryana
7.4%
Gurajat
4.9%
Odisha
5.0%
Maharashtra
4.7%
Andhra Pradesh
4.8%
Karnataka
10.1%
Madhya Pradesh
20.5%
Others
3,051
3,401
3,042
that the country imports include various kinds of
2,672
peas and lentils, as well as cashew nuts,
2,063
1,857
1,731
1,623
1,611
1,585
almonds and fresh apples, while exports include
mainly cashew kernel, chickpeas, onions,
mangoes and fresh grapes. To increase its
competitiveness in the fruit and vegetable
market, India needs to solve its high wastage rate -440
-1,061
for fruits and vegetables. According to MOFPI, -1,466 -1,310
-1,544
about 35%-40% of the vegetables and fruits
produced in India go to waste due to a lack of a FY2014 FY2015 FY2016 FY2017 FY2018
4,287
584.9
2,969
2,834
504.7
493.8
488.3
2,142
449.7
1,356
1,306
1,295
1,261
1,181
483
430 410 412
374
-786
102.3
-1,654 -1,663
81.9
78.5
76.1
75.1
-2,761 -2,993
FY2014 FY2015 FY2016 FY2017 FY2018 FY2014 FY2015 FY2016 FY2017 FY2018
Fresh
Grapes
16.4% Almonds
26.0%
Fresh Apples
Mango Pulp 7.4%
5.6%
Dry Dates
Fresh 7.1%
Pomegranate
s 4.6% Dry Figs
Cashew 2.9%
Fresh
Kernel 47.0% Cashew Nuts
Mangoes
3.2% 40.4% Raisins 2.6%
Main Export Destinations for Fruits, Main Import Source Countries for Fruits,
FY2017 FY2017
Lentils
Chickpeas
(Mosul)
(Garbanzos) Mixed 16.0%
13.3% Vegetables Beans (Vigna
7.9% Chickpeas Mungo,
(Garbanzos) Hepper,
28.4% Vigna
Radiata,
Dried Onion Wilczek)
7.0% 9.6%
Main Export Destinations for Vegetables, Main Import Source Countries for
FY2017 Vegetables, FY2017
08
BEVERAGE
MANUFACTURING
Highlights
Overview
Beverage manufacturing has been one of the most dynamic sectors of the manufacturing industry in
India in recent years. According to CSO data, the output of the beverage industry expanded at a CAGR
of 4.5% between FY2013 and FY2017, reaching INR 785.2bn. The largest segment is alcoholic beverages
manufacturing, comprising Indian-made foreign liquor (IMFL), branded country liquor, wine and beer.
The soft drinks industry remains a relatively undeveloped market because of its limited product range,
sparse distribution network and poor modern retail penetration. The beverage industry features a
medium-to-high level of concentration, with a few large players controlled by foreign capitals having
dominant positions in various segments, notably spirits (United Spirits Ltd), beer (United Breweries
Ltd), and soft drinks (The Coca-Cola Company, PepsiCo Inc).
Outlook
The beverage subsector will be driven by the rising disposable incomes of India’s youth-dominated
population, ongoing urbanisation, a growing westernisation and premiumisation trend, and greater
social acceptance of alcohol. On the other hand, the industry will continue to suffer from a high level
of state intervention, an excessive tax burden and regional bans on alcohol consumption that disrupt
production chains and promote smuggling practices and the sale of illicit and counterfeit liquor. The
exclusion of alcoholic beverages from the scope of GST is seen as a restraining factor, as it will
maintain the current system of multiple state and national taxes on alcoholic beverages as well as
increasing both administrative burdens on the segment and production costs, since industry inputs
will fall under the GST regime.
Main Events
§ In January 2017, Hindustan Coca-Cola Beverages Pvt Ltd (HCCBPL) announced that it will build a
new bottling plant at Hoshangabad in Madhya Pradesh. The company will invest INR 7.5bn in the
new factory, which will spread over 110 acres and will have bottling lines for carbonated beverages
such as Coca-Cola, Sprite, Fanta, Thums Up, Limca, juices and juice-based drinks such as Minute
Maid and Maaza, packaged water and Kinley soda.
§ In May 2017, United Breweries Ltd announced that it had shut production at the company’s brewery
located in Patna, Bihar State. The decision came following the imposition of total prohibition in
Bihar, effective from April 1, 2017.
§ In October 2017, US-based alcohol producer Sazerac Company Inc. acquired a 28% stake in India’s
leading liquor manufacturer John Distilleries Pvt Ltd for USD 43mn. Sazerac plans to buy an
additional 15% stake in John Distilleries over the next two years, while the chairman of John
Distilleries will continue to hold the remaining 57% stake. With sales of more than 13mn cases, the
portfolio of John Distilleries includes Original Choice Whisky, Bangalore Malt, Paul John Single Malt
(PJSM) and Big Banyan wines. The brands owned by Sazerac include Fireball, Southern Comfort,
Buffalo Trace Bourbon, Pappy Van Winkle Bourbon, and E H Taylor Bourbon.
§ In November 2018, the National Company Law Tribunal (NCLT) ordered the start of Corporate
Insolvency Resolution Process against liquor manufacturing company Empee Distilleries Ltd. The
petition was filed by Union Bank of India (UBI), which claimed a default of 100mn from the
company as of December 31, 2015. The financing was done through a multi-banking arrangement
with 60% from Andhra Bank and the rest by UBI. The financing was mainly used for the company's
alcohol plant expansion and product imports and exports.
Alcoholic Beverages
826
814
805
804
796
791
792
780
rum and brandy, as well as white spirits such as
695
685
gin, vodka and white rum. Among them, whisky is
the most popular, accounting for about 61% of
the IMFL market by volume, followed by brandy
(21.2%), rum (14%) and white sprits (3.8%) in
FY2018.
FY2014 FY2015 FY2016 FY2017 FY2018
Between FY2014 and FY2018, both production and
Pr oduction Consumption
consumption fell at a CAGR of 2.6% as a result of
several factors including an increase in prices (as
Market Share of IMFL by Value, FY2018
producers passed higher production costs and
excise duties on to consumers); alcohol bans in
various states; rising health awareness among Brandy
10.7%
the population; growing preferences for premium
foreign brands; and rising wine consumption,
Rum 9.5%
mainly in urban areas.
Whiskey
73.5%
In the last two years, IMFL consumption has
Vodka & Gin
suffered from the partial prohibition on alcohol 6.3%
sales in the State of Kerala, the total ban on
alcohol in Bihar State, and the ban on alcohol
sales on highways. Market Share of IMFL by Volume, FY2018
The sector benefited from the reduction of excise Brandy
duties in Uttar Pradesh, which resulted in lower 21.1%
selling prices of IMFL in this state. According to
Dun & Bradstreet, both production and
Rum 14.1%
consumption of IMFL will resume growth in
FY2019 with the gradual weakening of the Whiskey
adverse effect of the highway liquor ban. 61.0%
Vodka & Gin
3.8%
Beer
1,285
1,276
1,244
1,241
Light Beer
20.0%
Strong Beer
80.0%
Pr oduction Consumption
Comments
Per capita beer consumption in India was 5.1 litres in FY2018, significantly lower than the Asian
average of 20.9 litres per capita. This can be attributed to licensing regulations, restrictions on the
sale of alcohol in several states, an excessive tax burden (beer is taxed at the same rate as IMFL) and
a preference for locally produced brown spirits. The beer segment suffered a major slump in FY2017,
when beer consumption dropped by 16.1% y/y. The main reasons were the restriction on alcohol
consumption in Bihar State, the highway ban on alcohol sales, the hike in excise duty in Maharashtra
State and an increase in minimum retail prices. In FY2018, beer consumption remained almost flat at
1,241mn litres. Between FY2014 and FY2018, domestic sales of beer declined at a CAGR of 1.8% in
volume terms, dragged down by the negative performance over the last two years. In value terms,
however, beer sales in India grew by a CAGR of 9% between FY2013 and FY2017, according to Dun &
Bradstreet, due to the rising prices and consumption of premium beers. About 80% of the market is
dominated by strong beer with an alcohol content of between 6% and 8%, while the remaining 20%
share is held by light beer. In FY2016, there were about 90,000 outlets serving beer in India, equivalent
to one beer outlet per 20,000 people, far fewer than in comparable countries like China (where the
rate is one outlet per 200 people).
Comments
India is a net importer of IMFL and wines, and a net exporter of beer. After strong growth rates over
the period FY2012-2014, exports of alcoholic beverages have followed a downward trend, falling to
USD 296.7mn in FY2017. This was mainly due to a decrease in exports of IMFL and other liquors
stemming from lower domestic production and weak demand in key export destinations in Africa and
the Middle East. On the other hand, beer exports have followed a steady upward trend, expanding at a
CAGR of 8.4% over the FY2014-FY2018 period, and reaching USD 47.5mn in FY2018, boosted by higher
demand from the Indian diaspora. In FY2018, the UAE, Singapore and Malaysia accounted for 82.1% of
total beer exports in value terms. The UAE was also a major destination for India’s exports of brown
spirits with a share of 24.9% in FY2018, while Ghana and Nigeria were the largest importers of ethyl
alcohol from India. In terms of imports, the government exercises strict control, imposing a minimum
import duty of 152% on ready-made wines and spirits. Nevertheless, imports of alcoholic beverages
expanded at a CAGR of 13% over FY2014-2018, driven by higher demand from the increasingly affluent
urban population and a growing premiumisation trend. India’s major sourcing countries for beer
imports are Belgium, Mexico and Vietnam, together accounting for 75.2% of the country’s total beer
imports in FY2018. Wine is imported mainly from France, which accounted for 40.3% of India’s total
wine imports in FY2018.
387.6
363.7
325.5
326.6
304.7
296.7
71.4
-24.0
-125.2
-221.6
-274.3
Beer 14.5%
Non-Alcoholic Beverages
Non-Alcoholic Beverages
External Trade
150.0
147.4
in FY2017, supported by consumers’ increasing
124.6
preference for higher value-added products, such
98.7
as fruit pulp or fruit juice-based drinks and
sweetened waters, which accounted for 95.5% of
14.5
13.4
13.0
11.6
and fruit pulp or fruit juice-based drinks, which FY2014 FY2015 FY2016 FY2017
RELATED
EMIS E-STORE PUBLICATIONS
Pay-as-you-go access to emerging market
company profiles and industry reports
Now covering 5-Year Forecast
Read more
Read more
EMISPDF in-afcons001 from 139.167.242.168 on 2020-01-10 16:55:59 GMT. DownloadPDF. Read more
Downloaded by in-afcons001 from 139.167.242.168 at 2020-01-10 16:55:59 GMT. EMIS. Unauthorized Distribution Prohibited.
About EMIS
EMIS operates in and reports on
countries where high reward goes
hand-in-hand with high risk. We
bring you time-sensitive, hard-to-
get, relevant news, research and
analytical data, peer comparisons
and more for over 120 emerging
markets. We license content from
the cream of the world's
macroeconomic experts, the most
renowned industry research firms
and the most authoritative news
providers. Formed over 20 years
ago, we employ nearly 300 people
in 13 countries around the world,
providing intelligence to nearly
2,000 clients.
Disclaimer:
The material is based on sources
which we believe are reliable, but
no warranty, either expressed or
implied, is provided in relation to
EMIS Insights
the accuracy or completeness of
the information. The views EMIS Insights is a unit of EMIS that
expressed are our best judgment
as of the date of issue and are
produces proprietary strategic research
subject to change without notice. and analysis. The service features
EMIS takes no responsibility for market overviews, industry trend
decisions made on the basis of
these opinions.
analysis, legislation and profiles of the
leading sector companies provided by
Any redistribution of this locally-based analysts.
information is strictly prohibited.
Copyright © 2019 EMIS, all rights
reserved.
104
EMISPDF in-afcons001 from 139.167.242.168 on 2020-01-10 16:55:59 GMT. DownloadPDF.
Downloaded by in-afcons001 from 139.167.242.168 at 2020-01-10 16:55:59 GMT. EMIS. Unauthorized Distribution Prohibited.
INDIA GLOBAL HEADQUARTERS
124, Mittal Court, C Wing CityPoint
Nariman Point 1 Ropemaker Street London
Mumbai - 400 021 EC2Y 9HT
UK
Voice: +91 22 22881123/29 Voice: 0207 153 1205
FOLLOW US
Downloaded by in-afcons001 from 139.167.242.168 at 2020-01-10 16:55:59 GMT. EMIS. Unauthorized Distribution Prohibited.
CONTACT US www.emis.com