foo 2011

White Paper on Food & Food

Processing Industry in India

S.No Topic

1 Executive Summary

2 Opportunities & Challenges for Food Industry in India

3 India Food & Agriculture : An overview

4 Basic structure of Food Processing Industry

5 Consumption pattern of Food in India

6 Sectors in Food Processing Industry

7 Growth Drivers for Food Processing Industry

8 Critical Success Factors

9 Emerging Business models

10 Major Investments in Food Processing Industry

11 Key Trends in Food Processing Industry

12 Leading players : Profile

13
Case Study:
1. Amul
2. Lijjat Pappad

D’Essence Consulting
chandni@dessenceconsulting.com
022-28347425
303, Aar Pee Center, 11th Road,
MIDC, Andheri (E), Mumbai-400093
 EXECUTIVE SUMMARY

Food processing involves any type of value addition to agricultural or horticultural produce and
also includes processes such as grading, sorting, and packaging which enhance shelf life of food
products. The food processing industry provides vital linkages and synergies between industry
and agriculture.

The Food Processing Industry sector in India is one of the largest in terms of production,
consumption, export and growth prospects. The government has accorded it a high priority, with
a number of fiscal reliefs and incentives, to encourage commercialization and value addition to
agricultural produce, for minimizing pre/post harvest wastage, generating employment and
export growth.

The idea of India is gradually changing as number of countries showing interest to invest in
India is increasing. In fact it is observed that India has displaced the US as the second most
favoured destination in the world for FDI after China.

Food industry is one of the key sectors which is the mainstay of Indian economy because of its
high share in employment and major contribution to GDP. At present the food processing sector
employs about 13 million people directly and about 35 million people indirectly. The food
market in India is estimated at over Rs. 9,100 billion and accounts for about two third of the total
Indian retail market.

India's food processing sector covers a wide range of products fruit and vegetables, meat and
poultry; milk and milk products, alcoholic beverages, fisheries, plantation, grain processing and
other consumer product groups like confectionery, chocolates and cocoa products, Soya-based
products, mineral water, high protein foods etc.
Looking into some of the key facts, India has largest irrigated land in the world. India produces
annually 105 million tonnes of milk (highest in the world), 150 million tonnes of fruits &
vegetables (second largest), 485 million livestock (largest), 230 million tonnes food-grain (third
largest), 7 million tonnes of fish (3rd largest), 489 million Poultry and 45,200 million eggs.

Food processing industry is currently growing at around 14%. The industry received FDI
totalling Rs 9450 million in 2009-10. However, India’s share in export of processed food in
global trade is only 1.5 %; whereas the size of the global processed-food market is estimated at
Rs. 190 trillion and nearly 80 per cent of agricultural products in the developed countries get
processed and packaged.

India has set itself a target of doubling its processed food production by 2015, and will set up 10
food technology parks during the next year with a view to achieving this. According to the India
Food and Drink Report by research analysis firm Research and Markets, by 2012, India’s
processed food output is likely to grow by 44.2 per cent to touch Rs. 4,505 billion, while
packaged food sales will increase by 67.5 per cent to reach Rs. 1,085 billion. On a per capita
basis, per capita packaged food spending is expected to grow by 56.5 per cent to Rs. 903 by
2012.
 Opportunities in Food Processing in India
• Diverse agro-climatic conditions • Increasing literacy, rapid
lead to a wide-ranging and large raw urbanization and rising per capita
material base suitable for food income resulting in rapid growth and
processing industries in India. changes in demand patterns. This is
Currently a very small percentage creating great opportunities for
(less than 2%) of these is processed exploring the large hidden markets.
into value added products, leaves An average Indian spends about 40
opportunity to explore in the sector. % of household expenditure on food
• One of the biggest emerging items.
markets, with more than 1 billion • Demand for processed /convenience
population and 250 million strong food is constantly increasing.
middle class sets a large consumer • Cheaper workforce availability can
base within the country. be effectively utilized to setup large
• India is the seventh largest country, low cost production bases for
with extensive administrative domestic and export markets.
structure and independent judiciary, • Liberalized policies with specific
a sound financial & infrastructural incentives for high priority food
network. Stable and flourishing processing sector provide very
democracy is also an opportunistic favourable environment for
attribute of the country. investments and exports in the
sector.
 Challenges in Food Processing
• Unprocessed foods are susceptible to and attractive packaging, and at low
spoilage by biochemical processes, incremental costs.
microbial attack and infestation. The • The challenges for the food
right post harvest practices such as preservation, distribution and
good processing techniques, and processing sectors are diverse and
proper packaging, transportation and demanding, and need to be addressed
storage (of even processed foods) on several fronts to derive maximum
can play a significant role in market benefits. Presently, the
reducing spoilage and extending organizations addressing the
shelf life. educational and R & D requirements

High wastage reflects inefficiencies in the delivery chain

20%
18%
3% 2%
16%
1%
14%
12%
2% Wastage outside the State
10% 2% 1%
2% 2% 0.25%
8% 1% Wastage within the State
6%
4% Wastage within the District
2% 0.25%
From the Farmgate to Local Mandi
0%

Source: Ministry of Food Processing Annual Report 2007-08

are too few, and there is a pressing
• The challenges in processing lie in
need for supplementing their efforts.
retaining the nutritional value,
• In the emerging scenario, the Food
flavour, aroma, and texture of foods,
Engineering professional needs to
and presenting them in near natural
develop sufficient awareness and
form with added conveniences.
appreciation of the relevant
Besides, processed foods need to be
principles of life sciences, and
offered to the consumer in hygienic
physical sciences, as well as of a
 wide variety of other topics innovation in critical technology
including: nutrition, preservation and areas such as: newer or novel process
storage techniques, processing unit development in preservation and
operations, bio-processing, waste storage techniques, rheology,
management, distribution and supply colloids and dispersal systems,
chain management, food laws and packaging-polymers and composites,
regulations and so on. sensors for detection and process
• Besides, the professional needs to control, bioprocess engineering etc.
develop an appreciation of R&D and
 Overview of Food Processing Industry

The scenario of the food industry has producer

ucer of milk, pulses, sugarcane and
changed drastically due to the changing tea in the world and the second largest
lifestyle, food habits and change. Demand producer of wheat, rice, fruits and
for healthy and high value food items along vegetables.
with improved technology and trade • The consumption pattern in India has
liberalization policies have generated great changed due to economic growth and
growth opportunities in the food processing changing lifestyle. Food processing
industry industry can do to rural India what
Information Technology has done to
• The size of the global food processing
urban India.
industry which accounts for three
fourth of the global food industry is
Share in Global Food Processing
Rs.190 trillion. Industry
• Major economies
onomies in the food
processing include US, Europe, China 9% USA
21%
and Japan.US and Europe account
acc for
Europe
more than 50% of the global food sales.
sales 31%
Asia Pacific
• India has been one of the key food
producers in the world, with the second 39% Rest of the
World
largest arable land area. It is the largest

Source: D’Essence Consulting Secondary Research

While India has an abundant supply of food,
the food processing industry is still nascent:
Country-wise Level of Processing
• According to official data, India exported
about 17.5 million tone of agri and
processed foods worth Rs 31,870 Crore ($
6639.58mn.) in FY08 against 10.9 million

LEVEL OF tone valued at Rs 21,805.9 Crore

COUNTRY PROCESSING (%) ($4361.2mn.) the previous year which
USA 80.0
France 70.0 shows growth of more than 45% in terms
Thailand 30.0 of value.
Malaysia 80.0
Australia 25.0 Level of Processing in Perishable product range
Netherland 12.0 in India
India 1.3
Source: Rabobank
Product Organised Un-organised Total
• Despite these low volumes, the processed Fruits 1.3 0.8 2.1
food industry is one of the largest &Vegetables
Milk & Milk 13.0 22.0 35.0
industries in the country - it is ranked Products
fifth in terms of production, consumption, Meat 21.0 - 21.0
export and expected growth. Poultry 6.0 - 6.0

• Processed food industry accounts for 13 Marine 8.0 15.0 23.0

Market and Research Report 2008 (All figures in %)
per cent of the country’s exports and 6
per cent of total industrial investment.
• The food industry size is estimated at
Rs.9100 billion and the food processing
industry at Rs.350 billion
Strengths

India has access to several natural resources that provides it a competitive advantage in the food
processing sector. Due to its diverse agro-climatic conditions, it has a wide-ranging and large
raw material base suitable for food processing industries.

IINDIA’S FAVOURABLE FACTOR CONDITION

Share in Global
Particulars India Global Rank
Production (%)
Arable Land(million hectares) 184.00 2 -
Irrigated Land (million
59.00 1 -
hectares)
Coast Line (km) 8041.00 19 -
Fruits (MT) 50.00 2 10
Vegetables(MT) 100.00 2 10
Rice/Paddy(MT) 132.00 2 22
Wheat (MT) 78.40 2 12
Milk (MT) 105.00 1 16
Sugarcane(MT) 289.23 2 21
Pulses(MT) 15.11 1 21
Tea (MT) 0.95 1 28
Edible Oil seeds (MT) 28.82 3 7
Cattle (million) 226.00 1 16
Source : Ministry of Food Processing of India, 2009-10
 Basic Structure of Food Processing Industry

The chart above describes the process i.e. the Entire Value Chain for a Private Entrepreneur
from Demand Estimation to Consumption. Government i.e. Central as well as State government
along with its agencies supports the farmer and processing units to encourage this sector.
The Stages involved in the value chain are:
1. Market: In this stage, the
Entrepreneur estimates the demand
for crops and decides which crop to
sow
2. Input: After deciding on specific
crops, the entrepreneur ploughs the
crop with the use of fertilizers,
pesticides, nutrients and water to
realize a good crop.
3. Pre Harvest: After a good crop has
developed, Pre Harvest involves
maintaining the crop till harvest with
the use of Latest technology and
Fertilizers.
4. Harvesting: It involves the process
of separating a full grown crop for
processing, packaging, transportation
and finally for consumption.
5. Post Harvesting: After Harvesting,
the crop goes through a chain of
processes to filter the crop on the
basis of Quality and many other
parameters. The crops thus chosen
are packaged accordingly for safe
transportation to the market. In case
of perishable products it also
requires to be processed for their
preservation. Processing even helps
in avoiding food wastage.
6. Transportation: It involves the
physical movement of the crop and
processed food from the farm to the
actual Market.
7. Marketing: Marketing involves
providing sales platform for the food
products. Sometimes it is done by
the producer himself. Government
creates a market through setting up
APMC Depots, online websites and
also through trade exhibitions.
8. Market: Finally, the Chain gets
completed when the crop reaches the
market for consumption and the
farmers as well as the processing
units get the money out of it.
 Consumption Pattern of Household Income in India

Food is the major portion of household component in expenditure. This opens up

consumption expenditure across all cities tempting opportunities in the field of food
categorised (Refer graph below). processing. And we can see it is in the
Transportation is the second highest nascent stages of development.

Household consumption expenditure as a share of

income
Communication
2.9 3.1 2.9
14.3 10
16 Household &personal
5.5
4.6 5.3 products
% of total population

5.2
5.9
7.4 8.8 Education and
7
7.6 recreation
10.4 13.1
8 Apparel
20.3 21.3 20.1
Healthcare

Housing &Utilities
34.6 31.5 34.4
Transportation

Megacities Boomtowns Nichecities Food,beverages &

tobacco

Source: NCAER / FCR

If we try to analyse the distribution of poor households (Refer graph below).
households by major source of income, it Labourers constitute the largest segment of
varies significantly across poor and non- poor households and comprise over 62
percent of such households. But then,
Distribution of households by major we cannot ignore the fact that
source of income
Others agriculture also provides earning
3.4 1.6
22.7
source to 30.3 percent APL (Above
30.3 Self employed in
Agriculture Poverty Line) and 22.7 percent BPL
Labour (Below Poverty Line) households.
25.7
62.4
Self employed in
18.9 Overall it is found that food expenses
Non-agriculture
Regular comprise 51.1 percent of all routine
21.7 8.9 salary/wages
3.8 expenditure at the all India level.
APL households (%) BPL households (%)

Source: The Max-NCAER India Financial Protection Survey

Household consumer spends in India

(Total - Rs 20,721 billion)

Furniture,furnishing appliances & services

4% Gross rent,fuel &power

18% 12% Medical care and health

Miscellaneous goods & services

4% 7%
Recreation,education & cultural services
4%
7%
5% Food

4% Clothing & footwear

Beverages,pan & intoxicants

35%
Grocery

Transportation & communication

Source:Private Final Consumption Expenditure CSO;EY Research

 Sectors in Food Processing Industry
Food processing is a large sector that covers activities such as agriculture, horticulture,
plantation, animal husbandry and fisheries. It also includes other industries that use agriculture
inputs for manufacturing of edible products.

Important sub sectors in food processing industry are:-

• Fruit & Vegetable Processing

• Fish Processing
• Milk Processing
• Grain Processing
• Meat & Poultry Processing
• Packaged/Convenience Foods
• Alcoholic beverages & Soft drinks
• Staple foods

EXTENT OF SHARE OF
SIZE – OUTPUT GROWTH
SEGMENT PROCESSING ORGANIZED KEY SEGMENTS
/ VALUE RATE (%)
(%) SECTOR (%)
Raw fruits & vegetables,
Fruits &
Rs 1687.5 Cr. 02 48 pulp, canned fruits and 20
Vegetables
pickles
Marine fisheries, frozen
2.33 million
Fish 12 - products, minced fish 20
tonnes
products
Milk Rs 58.5 Cr. 37 15 Butter, Ghee, Cheese etc. 15
6.4 million
Meat & Poultry 01 05 Cattle, Buffalo & poultry 10
tonnes
Packaged Rs 9000 Cr. - 80 Noodles, vermicelli & pasta 08
Fruit based & carbonated
Beverages Rs 697.5 Cr. - 77 27
drinks
Staple Food - 50 Salt, sugar, Flour, Bread 85
Source: Investment commission of India,2009 and www.ibef.org
Fruits & Vegetable Processing:

• India produces the widest range of fruits • However less than 2 per cent of the total
and vegetables in the world. vegetables produced in the country are
• It is the second largest vegetable (100 commercially processed, as compared to
million tonnes) and fruit (50 million nearly 70 per cent in Brazil and 65 per
tonnes) producer accounting for 8.4 per cent in USA.
cent of the world’s fruit and vegetable • India’s installed capacity for fruits and
production. vegetable processing
• The share of Fruits and Vegetable exports increased from 1.1
(In Cr. Rs.)
organised million tonnes in
F&V Processed F & V
sector in fruit 1993 to 2.77 million
1523.25 2214.90 2580.30 3555.00 4517.55
processing is 2209.05 2298.15 2589.30 3060.00 3134.25 tonnes in 2007.
estimated to • About 20 per
be nearly 50 2005-06 2006-07 2007-08 2008-09 2009-10 cent of processed
per cent. Source: APEDA fruits and vegetables
• Fruit production in India registered a are exported.
growth of 3.9 percent over the years • Major products exported include fruit
whereas the fruit processing sector grew pulps, pickles, chutneys, canned foods,
several times faster at 20 per cent over concentrated pulps and juices and
the same period. vegetables.
• The total area under fruit cultivation is • Fruit exports registered a growth of 16
estimated at 4.18 million hectares and per cent in volume and 21 per cent in
7.59 million hectares under vegetable value terms in 2006-07.
cultivation. • Mango and mango based products alone
constitute 50 per cent of the exports.
Milk Processing:

• Indian stands first in the world in terms • The market for dairy products is
of milk production. expected to grow at 15-20 per cent.
• The current size of the Indian dairy
Some private players includes Hatsun,
sector is Rs.3133.5 billion and has been
Heritage, Modern ,Paras, Dynamix, Parag
growing at 5 per cent a year.
and Metro ,also FMCG players like
• The dairy sector
Nestle,Danone
Exports of Dairy Products
ranks first in terms (in Cr. Rs.) & Britannia all
of processed foods 947.25 980.86
of which sell
with 37 per cent of 507.15 510.75
402.68 liquid milk and
the produce being
manufactures
processed.
2005-06 2006-07 2007-08 2008-09 2009-10 value added
• The organised
Source: APEDA products like
sector processes an
milk powder,
estimated 20 percent of the total milk
ghee, butter, cheese, curd and butter milk in
output in India.
small quantities.
• There are 676 dairy plants registered
with Government of India, which come • Taking Dairies to the Next stage:-

under the organised sector.

Indian dairies are ready to use various latest
• The cooperative sector dominates the innovative technologies that improves the
milk industry with over 70,000 village milking efficiency as well as cow
level dairy federations at the state level. throughput including auto ID, innovative
• Gujarat Cooperative Milk Marketing milking claw design, electronic milk meters,
Federation (GCMMF or AMUL) is the stimapulse, an auto shedding system, an
most successful player in the evolution auto cleaning-in-place system (to maintain
of the Indian Dairy Industry. hygiene).
• Milk and milk products contribute to a
.
significant 17 per cent of the country’s
total expenditure on food.
 PE funds in the Dairy Sector:-
It is estimated that by 2015 over Rs 10,000 crore of capital expenditure will be required to meet the
growing demand of our burgeoning population.

Besides debt, private equity has become a preferred source of raising funds in dairy sector.

PE funds are supported by liberal FDI policies. PE funds include investment from International
Finance Corporation in Modern Dairy (North India), Actis in Nilgiri Dairy (South India), Motilal
Oswal Private Equity in Parag Milk Foods.

Fish Processing:

• India has large marine product and cent (3.9 million tons) came from marine
processing potential with varied fish resources.
resources along the 8,041 km coastline, • Fish processing is mostly targeted for
28,000 km of rivers and millions of export markets.
hectares of reservoirs and brackish
Exports of Marine Products (in Cr. Rs.)
water.
• India is the third largest fish producer in 9597.78
8338.18 8545.90 8588.83
7398.95
the world and second in in-land fish
production.
• The Fisheries sector in India has been
2005-06 2006-07 2007-08 2008-09 2009-10
classified into marine, inland and Source: MPEDA

aquaculture. • There are over 369 freezing units with a

• The fisheries sector contributes nearly 1
per cent to the country’s GDP. This
segment also provides employment to 11
million people engaged fully, partially or
in subsidiary activities pertaining to the
sector.
• India’s fish production stood at a level of
6.4 million tonnes. Of this, about 60 per
daily processing capacity of 10,266
tonnes and 499 frozen storage units with
a capacity of 134,767 tonnes.
• Processed fish product exports include
conventional block frozen products,
individual quick frozen products and
minced fish products like fish sausage,
cakes, cutlets, pastes etc.
 Grain Processing:

• India’s production covers all major grain processing is the biggest

grains – rice, wheat, maize, barley and component of food sector.
millets like jowar, bajra and ragi. • Primary processing constitutes 96 per
cent with the remaining accounted for by
Export of Cereals(in Cr. Rs.)
the secondary and tertiary sectors.
14847.35
15167.77 14359.75
7132.5
6701.4
• Total rice milling capacity in the country
is 186 million tonnes.
• There are about 516 large flour mills in
2005-06 2006-07 2007-08 2008-09 2009-10
Source: APEDA the country, as well as about 10,000
• It ranks third in the production of grains
pulse mills.
in the world with a share of 40 per cent,

Meat and Poultry Processing:

• India has the largest number of livestock • Most of the animals in India are not bred
population in the world accounting for for meat. Animals generally used for
50 per cent of buffaloes and 16 per cent production of meat are cattle, buffaloes,
of the goat population. goats, sheep, pigs and poultry.
• Meat production is Rs.625 million and a • Only 11 per cent of the buffalo
Meat export is Rs.5.2 million. population, 6 per cent of the cattle, 33
per cent of the sheep and 38 per cent of
Exports (in Cr. Rs.)
Meat Processed Meat Poultry the goat population is culled for meat.
2488.5 3007.35 5602.05 7069.95 7606.35
• Consumption per head of both fresh and
processed meat is very low at 1.5 kg
2.205 6.255 13.86 10.395 10.26
289.8 290.25 472.5 431.55 398.7 compared with world average of 35.5 kg.
2005-06 2006-07 2007-08 2008-09 2009-10 • Indian poultry meat market is

Source: APEDA
approximately Rs. 105.0 billion.
• Indian broiler industry has seen a rapid
growth in the last few years - CAGR of
more than 10 per cent a year since 1998.
Beverages: The beverages
primarily consists of non-alcoholic and
alcoholic beverages
Non – alcoholic beverages
• Non-alcoholic beverages can be broadly
classified into carbonated drinks, non-
carbonated drinks and hot beverages.
• The market for carbonated drinks in
India is worth Rs.75 billion while the
juice and juice-based drinks market
accounts for Rs.12.5 billion.
• Growing at a rate of 25 per cent, the
fruit-drinks category is one of the fastest
growing in the beverages market.
• Sports and energy drinks,
currently have a low penetration in the
Indian market, have sufficient potential
to grow.
• They are considered a socially-
acceptable alternative to alcoholic
beverages. Hot beverages include health
drinks such as white beverages and
brown beverages such as tea/coffee as
well as branded drinks.
• The total size of this market is estimated
at Rs.16,650 million by value and 85,000
tonnes by volume.
• White beverages account for 65 per cent
of the market and brown beverages
market constitute the remaining 35 per cent.
• India is the largest producer of tea in the
world accounting for 28 per cent of the
total global production, at 857 million
kgs.
• Tea production in India has been
growing at 1.2 per cent per annum and
India is the fourth largest exporter of tea
in the world with estimated exports of
Rs. 18886.8 million in 2007-08.
• India is also the fifth largest producer of
coffee accounting for 4 per cent of the
total production in the world.
• Nearly 75 per cent of India’s production
is exported and coffee exports stood at
Rs. 29,315 million in 2007-08.
which
Alcoholic beverages
• The market for alcoholic beverages has
been growing consistently.
• The market for wine in India was
growing at over 25 per cent per year.
• 59.84 per cent growth of wine
production was observed in 2007-08
 (211 million litres in FY 2007-08 from
132 million litres in FY 2006-07).
• Global wine majors have already set up
shop in India to tap the vast potential.
• Out of the total consumption of grape
wine in India, around 80 per cent wine
consumption is from the major cities.
Packages/Convenient Foods:
• Packaged foods segment
registered a growth of 10 per cent in
2007.
• Noodles/Vermicelli is the
growing category in this segment with a
CAGR at 15 percent.
• The market for branded noodles is
estimated at 230 million servings per
year.
• The Soups market is still small and
Export of Alocoholic Beverage
(in Cr. Rupees)
554.85
362.7
147.6 107.1
2005-06 2006-07 2007-08 2008-09 2009-10
Source: APEDA
nascent in India and is approximately
US$ 14 million in value.
• The market for culinary products is
estimated at Rs. 25 million and estimated
to grow at 18 to 20 per cent per annum.
• Products like Tomato Ketchup and Jams
currently have low penetration levels,
but are growing rapidly.
• Ketchups, for example, have a
penetration of just 3 per cent in India;
however this category is estimated to be
growing at 20 per cent per annum.
in India
Staples – Bread, Wheat Flour,
Salt and Sugar
fastest
• Bread is slowly coming to be a staple
product consumed by people of all
economic classes in India.
• Total bread production in the country in
2004-05 was estimated at 2.7 million
tons, growing at 7.5per cent.
• About 55 per cent of bread production
comes from the organised sector.
• India is the second largest producer of
619.65
wheat in the world with an output of
more than 70 million tonnes.
• Branded ‘atta’ (wheat flour) is an
important item in this segment with an
estimated market of US$195 million.
 Critical Success Factor
The growth potential of Indian Food Processing Industry cannot be neglected. But require certain
competencies and success factors to exploit its potential. These include addressing current gaps
in the value chain and also leveraging on the advantages the country provides. Investors in the
sector need to be aware of these factors and build the required capabilities in their business to
ensure success. Some of the success factors are as follows:

Integrated supply chain and scale • The country has only 3600
slaughterhouses, 9 modern abattoirs and
of operation
171 meat processing units, and a limited
• Even though India ranks second in number of pork-processing units.
production of fruits and vegetables, • This is one of the reasons penetration of
nearly 20 to 25 per cent of this processed meat is extremely poor at 1
production is lost in spoilage in various per cent in India.
stages of harvesting. • These figures indicate both the need for
• The major problems are poor quality of scale, and the potential or growth offered
seed, planting material and lack of by the sector.
technology.
• Quality produce lead to investment in Processing Technology
technology and ability to sustain a long • Currently most of the processing in India
gestation period for harvest. is manual.
• It also results in better quality of • There is limited use of technology like
processed food. So we need to establish pre-cooling facilities for vegetables,
backward integration like contract controlled atmospheric storage and
farming to improve quality of produce. irradiation facilities. This technology is
• Nearly 90 percent of the food processing important for extended storage of fruits
units are small in scale so not able to and vegetables in making them
exploit the advantage of economies of beneficial for further processing.
scale. • In case of meat processing, even with the
presence of over 3600 licensed
 slaughter-houses in India, the level of
technology used in most of them is
limited, resulting in low exploitation of
animal population.
• Bringing in modern technology is an
area that existing as well as new
investors in the sector can focus on, this
will make a clear difference in both
process efficiencies as well as quality of
the end product.
Increasing penetration in
• India has a large untapped customer base
and even a small footprint in the
domestic market would enable the player
to gain significant volumes.
• Acceptance in the domestic market and
hence higher penetration is driven by the
following factors:
Competitive Pricing
Consumers of processed foods are extremely
price sensitive even a small change in
pricing can have significant impact on

Domestic market consumption. Competitive pricing also

enables penetration in the rural markets.
Most of the processing units are export
oriented and hence their penetration levels in
Brand competitiveness
the domestic market are low. For example,
• Share of branded products in purchases
• Penetration of processed fruits and
of Indian consumers has increased by 25
vegetables overall is 10 percent.
per cent to 35 per cent. This is especially
• The relative share of branded milk
true for urban consumers.
products especially ghee is still 2 percent
• Branded products like Basmati rice and
• Penetration of culinary products is still
Godrej’s chicken have been very
13.33 per cent and is largely tilted
successful implying that there is a good
towards metros
demand for hygienic branded products at
• Consumption of packaged biscuits for
reasonable prices.
Indian consumers is still low at 0.48
percent while that for Americans is 4
percent
• However, there is increasing acceptance
of these products amongst the urban
population.
Product Innovation Increasing time constraints amongst the
working middle class has boosted
Certain processed food categories such as
consumption of products like instant soups,
snack foods are impulse purchase products
noodles and ready-to-make products.
where consumers look for novelty and new
Innovation in packaging and product usage
flavours and hence these categories lack
is an important success factor for processed
brand loyalties. Visibility through attractive
foods.
packaging boosts consumption.
 Backward Integration – Emerging Business Models
Everybody is well versed with the traditional methods of value chain in food processing.
Looking at the dominance of the sector towards the growth of economy it has been considered
priority sector amongst all. We can see the generic value chain of the food processing industry
below.

TERMINAL
MARKET

AGGREGATORS FOOD
FARM INPUTS ANCILLARIES FOOD RETAILING
AND LOGISTICS PROCESSORS

CONTRACT
FARMING

In recent days trend has been towards integration and collaboration across players in the value
chain, to garner mutual benefits. Such integration is initiated by manufacturers, who are looking
to integrate backward to establish linkages with farmers and logistics provider. This led to two
new models emerging in the sector – Contract farming and Terminal markets.

Contract Farming
Contract Farming is an agreement between the food processor (contractor) , who is typically
a large organized player, and the farmer, whereby the farmer is contracted to plant the
contractor ’s crop on his land. He also agrees to harvest and deliver to the contractor a quantum
of produce, based upon anticipated yield and contracted acreage at a pre-agreed price.

The food processor provides inputs in terms of technology and training to the farmer, to improve
the yield and quality of the produce.

This results in a win-win situation that generates a steady source of income for the farmer and
eliminates supply shocks and assures good quality farm inputs which are crucial for the
processor.

The Government of India has been actively encouraging contract farming endeavours. The
National Agricultural Policy envisages that ‘private sector participation will be encouraged
through contract farming and land leasing arrangements to allow accelerated technology
transfer, capital inflow and assured market for crop production ’.

Terminal Markets
A Terminal market is a central site, often in a metropolitan area, that serves as an assembly and
trading place for agricultural commodities. Here there are different options for disposing off the
produce. It can either be sold to the end consumer, or to the processor, or packed for export, or
even stored for disposal at a future date. It thus offers different options to farmers under a single
roof.
Typically, terminal markets operate on a hub and spoke model where the markets form the hubs,
and are linked to different collection centres (spokes) that are located close to the production
centres. The typical value chain structure for a terminal market, as well as the key activities and
corresponding infrastructure requirements at each level, are depicted in the figure below:

TERMINAL MARKET INFRASTRUCTURE

Banking Finance
Grading, washing & packing
Sales E-auction Storage lines, quality testing,
palletisation, material
Trader/ Processor Warehouse handling, parking for
Retailer/exporters Cold storage transporter.
Ripening Chambers

COLLECTION CENTRES INFRASTRUCTURE

Collection and aggregation of produce Washing, grading, sorting,

Advisory on inputs, prices etc. weighment , transport,
Settlement of payments plastic crates

The Government of India is looking to promote terminal markets, as a means of integrating

domestic produce with retail chains.
There are plans to set up such markets in eight cities across five states, at a cost of US$ 131
million. The cities being considered are Mumbai, Nasik, Nagpur, Chandigarh, Rai, Patna, Bhopal
and Kolkata.
Global Farming
The next step towards globalization comes
from –global farm lands. Food shortage and
reducing level of arable land is encouraging
countries to approach other territory for farm
land.
China government wants its agricultural
firms to buy or lease farm lands in Africa or
South America to bolster food security in
their country. China has 40% of farmers
across the globe but only 9% of agricultural
land. More than 40% of arable land of Brazil
is unused and china would like to take up
this land for soyabean production.
Similarly Libya is negotiating with Ukraine
for growing wheat and Saudi Arabia is too
looking for green pastures for their steady
supply of food & live stock supplies.
scale units, because these are expensive to
be set up by any single individual unit.
Therefore a common park with all the
infrastructures would help in the growth of
this industry.
The ministry of food processing industries
has envisaged an initial investment of Rs
120 Crore (Rs 1.2 billion) for setting up the
common infrastructure in a park.
It is of the view that by providing a grant of
Rs 1,500 Crore (Rs 15 billion) for 30 parks,
Rs 50 Crore (Rs 500 million) for each, the
private sector would be encouraged to invest
up to Rs 9,000 Crore (Rs 90 billion) in
various parks across the country.

Food Parks
Food Parks are comprehensive industrial
estates for food-processing units where the
industries would have the provision of
common facilities like cold storage, cold
chain, effluent treatment plant, warehousing,
power connection, water facilities, sewage
etc.

The creation of these common

infrastructures would benefit the individual
units particularly the small and medium
First Food Park in India

pulp / concentrate , pappad, pickles,

• KIFPRO –KINFRA Food Processing
chutney, jam, jelly, dehydrated /dried
Park in Malappuram (Kerala)
vegetable, spices, oleoresins, essential oils,
• It is the first food park in the country
breakfast cereals, weaning foods, nutrition
assisted by ministry of
foods , IQF for fruits and vegetables ,
food processing industries Govt of India
ready-to-eat snacks/meals ,flour mills,
• It includes:-Yeast manufacturing, soft
bakery, noodles, vermicelli, confectionery ,
drinks and mineral water bottling , spirit
tomato sauce, ketchup, powder, paste, juice
from cassava, fruits , fruit juice, fruit
etc.

Name of Food Park Investment Investor Location

Indian Food Park 13 Crs MOFPI Palavanatham, Tamil Nadu
Nilakottai Food Park 13.5 Crs SIPCOT Dindigul, Tamil Nadu
Western Agri Food Park (P) Ltd 120 Crs MOFPI Pune
Patanjali Food and Herbal Park 200 Crs Baba Ramdev Haridwar
Six food park in Karnataka ------- Proposed Karnataka(Malur, Bagalkot,
Jewargi, Belgaum)
MIDC Food Park 4 Crs MIDC Butibori, Nagpur
Source: D’Essence Consulting Research
 Growth Drivers for Food Processing Industry

Changing Lifestyle This presents an opportunity for makers of

branded products like HLL, ITC, Nestle to
As far as the processed food market is
convert potential consumers into patrons on
concerned, Indian households are closely
as big a scale as never before.
knit and the percentage of nuclear families
and working women is very low. Therefore, Large share of wallet:
while the market itself is one of the largest
• Food forms the largest component of the
in the world, the penetration of packaged
total consumption expenditure in India
and branded products is abysmally low.
accounting for as much as 51%.
People prefer homemade or fresh products,
• This is highest compared to 9.7% for an
which are cheaper than branded products.
average American person and 15% for
However, over the last couple of years, both Japanese and British. Though with
private players have started taking enormous rising income, the share would go down,
interest in the sector, with many MNC's but would increase in absolute terms.
already testing the waters. Their efforts have • Multi-national companies such as Coca-
been aided by the fact that urban India is Cola, PepsiCo, Britannia, Danone,
showing a marked shift towards ready-to-eat Nestle, Cadbury, Heinz and Perfettiae
food: have made their presence felt in India.
Indian majors like HUL, ITC, Dabur too
• With urban incomes increasing and
have lined up investments in this
urban consumers squeezed for time, they
segment.
are slowly demanding more of the
products they consume.
• Also, the hygiene factor is facilitating
growth.
• With 200 million people expected to
shift to processed and packaged food by
2010,
Growth in Retail
• The Indian organized retail industry
in 2008 is estimated at Rs.17,650
billion and is expected to grow to
Rs.23,500 billion in 2010.
• Although organized retail is around 5
% of the total market, it is expected
to be seen 35-40% in next 10 years.
• The annual growth of the retail
market in India is expected to be
around 8 per cent. Indian market has
become the most lucrative market for
retail investment in the world.
• The great Indian consumer market is
still going strong. Existing middle
class with increasing share of wallet,
rapid urbanization, increase in the
number of working women, large
number of working young
population, changing attitudes, tastes
and lifestyle, globalization , •
indulgence and convenience aspects
are triggering the retail food industry
which in turn will a great boost to the
food processing industry.
• This also attracts global retail giants
like Wal-Mart, Tesco, Carrefour SA,
Metro AG etc. to enter the Indian
markets. With increasing number of
shelf space more and more branded
and processed food is finding its way
in retail stores.
• Industry estimates the total retail
stock in India stands at 34.8 million
sq ft. Another 62.6 million sq ft of
mall space is either proposed or
under various stages of construction
in the next 2-3 years; only 35% of
this supply is coming in Mumbai and
Delhi.
• It is expected that the share of the
two cities to fall from the current
72% of the total stock to 49% by end
of 2011. This will enable retailers to
plan at increasing their penetration
into the Tier II and III markets,
which have lower operating and
rental costs, and are relatively
untapped.
With a sizeable amount of supply in
pipeline, the retailers and developers
would shift the focus of Indian retail
market from lifestyle goods to value
retailing. FMCG and food retailing is
likely to be the least affected in this
downturn and some activity is
expected in this sector.
Some of the Key players in organized retail are:
Sr. No. Group Company
1 Future Group
2 RPG Retail
3 Reliance Retail
4 Tata Retail
5 K. Raheja Corp.
6 A.V. Birla
Source: D’Essence Consulting Research
Sr. No Group Company
1 Wal-Mart Pvt. Ltd.
2 Tesco
3 Carrefour SA
4 Metro Ag
Source: D’Essence Consulting Research
Sr. No. International Player
1 Danone
2 Con Agra
3 Del Monte
Source: D’Essence Consulting Research
Stores
Pantaloon, Big Bazaar, Central, E-zone, Electronic Bazaar, Brand Factory,
Planet Sports, aLL, Top 10, Star and Sitara, Home Town, Collection i,
Furniture Bazaar, Adhaar.
Food world, Books and Beyond, Music world, Health & Glow, Spenser’s,
Cellucom.
Reliance Fresh, Reliance digital, Reliance Trends, Reliance Footprints,
Reliance Jewels, Reliance Timeout, Reliance Wellness
Westside, Landmark, Fashion Yatra, Croma, Star Bazaar
Shoppers Stop, Hypercity, Crossword, Inorbit mall
More
Tie-up Stores
Bharti Enterprises One Store Cash-n-Carry in Amritsar
TATA Proposed
Future Group Proposed
- 5 Stores Metro (Cash & Carry)
Indian JV partner Product profile Strategy
Entered India with
- Dairy Products 50:50 joint venture
with Yakult, Japan.
Branded Foods and bulk & Conagra has 34.3 %
ITC
processed commodities in ITC Agro Tech
Bharti Enterprises Fresh fruits& Vegetables 50:50 JV
Food Retail:
• Food retail has surpassed the dominating
apparel and accessories sector. Contrary
to the belief that fashion is the largest
segment of organized retail in India,
food & beverages is the major segment,
worth Rs 8,97,000 crore.
• Growing at the rate of 30%, the Indian
food retail is going to be and no doubt is
the major driving force for the retail
industry. The percentage of income
spent in households will drive growth in
the food market.
• Food accounts for the largest share of
consumer spending. Food and food
products account for about 50% of the
value of final private consumption. This
share is significantly higher compared to
developed economies, where food and
food products account for about 20% of
consumer spending.
• Currently, the retail food sector is Rs.
3500 billion and is expected to rise to
Rs. 7500 billion by 2025. Food has the
largest consumption in the Indian
economy and will remain the single
largest category.
Government Initiatives
The government has taken steps to provide
financial assistance for setting up and
modernizing food processing units, creation
of infrastructure, and support for R&D and
human resource development in addition to
other promotional measures to encourage the
growth of the processed food sector.
The government has set a vision 2015, for
the sector which includes:
• Promoting a dynamic food processing
industry
• Enhancing competitiveness in domestic
and international market
• Making sector attractive for both
domestic and foreign market
• Achieving integration of food processing
infrastructure from farm to market
It also has following specific targets:
• Level of processing of perishables from
6% to 20%
• Value addition from 20% to 35%
• Share in global food trade from 1.5% to
3% by 2015
In order to achieve the vision, the
government has taken following steps:
Priority area: The Government of India
has identified the food processing sector as a
high priority area and has given a number of
fiscal relief and incentives to encourage
commercialisation and value addition to
agricultural produce.
FDI: Automatic investment approval up to
100% foreign equity has been allowed for
larger part of the food-processing sector
except for malted food, alcoholic beverages
and those reserved for small-scale industries
(SSI). 24% foreign equity has been
permitted in small-scale sector. Foreign
investments are allowed in SSI reserved
items under an export obligation in selected
items.
Licenses: The Indian government has
abolished licensing for almost all food and
agro-processing industries except for some
items like alcohol, cane sugar, hydrogenated
animal fats and oils and items reserved for
the exclusive manufacture in the small scale
industry (SSI) sector. This has resulted in a
boom in the FMCG market through market
expansion and greater product opportunities.
Taxes: To further aid the segment, the
government has announced a liberal
corporate tax policy for export and domestic
earnings. Income tax rebate has been
allowed (100% of profits for five years and
25% of profits for the next five years) for
setting up of new agro-processing industries
to process and package fruits and vegetables
(F&V). Export earnings are exempted from
corporate tax. Various states governments
like Himachal Pradesh, Uttaranchal and
Jammu & Kashmir have encouraged
companies to set up manufacturing facilities
in their regions through a package of fiscal
incentives. The move towards uniform VAT
has also been considered.
Excise and custom duties: Quantity
restrictions on all food products have been
removed. Peak rate of customs duty has been
reduced from 30% to 25% (excluding
agricultural and dairy products) and duty
structure on designated items has been
rationalised. The import of food processing
machinery is allowed freely with low levels
of duties. Import of capital goods for exports
of agricultural products and their value-
added variants under the Export Promotion
Capital Goods (EPCG) is allowed duty-free
and Foreign Technology Agreement within
norms has been made automatic. This opens
up huge opportunities for large investments
in food and food processing industries in
different fields including up gradation of
technologies, improvement of skills with
installation of modern machinery and mega parks are coming up across the
equipment, especially in areas of canning, country in various cities to attract Foreign
dairy plants, specialty processing. Direct Investment (FDI) in the food-
processing sector. Each food park will have
Food laws: Consumer protection against
a cold storage facility, apart from facilities
adulterated food has been brought to the fore
for sorting, grading, food processing,
by the Prevention of Food Adulteration Act
packaging and quality control and R&D
(PFA), 1954, which applies to domestic and
laboratories, among other things. The
imported food commodities and
government has already identified five
encompasses food colour and preservatives,
locations in Maharashtra, Andhra Pradesh,
pesticide residues, packaging, labeling and
Punjab and Jharkhand and one in the North-
regulation of sales.
East region. It is also planning to set up 30

Food parks: In a bid to boost the food food parks across the country.

sector, the Government is planning to set up

agri zones and mega food parks. 30 such

Organization under Ministry of Food Processing Industry

1. Directorate of fruits & Vegetable Processing(F&VP)

2. Directorate of Meat Food Products
3. National Institute of food Technology Entrepreneurship & Management
4. Paddy Processing Research Centre
Ministry also interacts with various Nodal Agencies & Promotional organizations
1. Agricultural & Processed Food Export Development Authority (APEDA)
2. Marine Products Export Development Authority (MPEDA),
3. National Co-operative Development Corporation (NCDC),
4. Central Food Technological Research Institute (CFTRI )
Source: Ministry of Food Processing Industry
 Major investments in Food Processing Industry

Private investment has been one of the key drivers for growth of the Indian food industry. As we
know food processing industry has been allowed 100 % FDI it has shown substantial growth
which can be observed in the chart:

Industry estimates the total amount of investments in the food processing sector in the pipeline
for the next three years is about Rs. 1,150 billion.

• The government has received around 40 Foreign Direct Investment

Year
(Rs. In Crore)
expressions of interest (EoI) for the
2005-06 182.94
setting up of 10 mega food parks (MFPs)
2006-07 441.00
with an investment of US$ 514.37 2007-08 719.00
million. 2008-09 400.00
• In August 2008, the first chocolate 2009-10 945.00
Source: Ministry of Food Processing Industry in India
academy in India was opened by Swiss
confectioner Barry Callebaut, making its • 35 million for setting up a mint

fifth foray into the Asia market. manufacturing plant in Maharashtra.

• South Korean confectionery giant, Lotte • Conglomerate Reliance Industries Ltd has

Group, also has plans to set up a invested US$ 1.25 billion in a dairy

subsidiary in India. project. In August 2008, Reliance

• Belgian brewing giant, InBev, has Industries was reported to be mulling a

announced increased expansion in India, partnership with UK-based supply chain

with a focus on the beer market. Through solutions provider, Wincanton, for its

its recent acquisition of US brewing giant efforts focussed on India’s mass grocery

Anheuser-Busch (A-B), the company retail (MGR) sector.

now also owns A-B's Indian subsidiary, • Dairy major and ice cream specialist,

Crown Beers India. Amul Dairy, has announced plans to enter

• Italian confectionery company, Ferrero India's US$ 500 million snack food

SpA, has announced plans to invest US$ market.

• Texas Chicken, the chicken fast-food
brand of the US-based Church's Chicken,
 has already opened its first outlet in different operations in its supply chain. It
Hyderabad and plans to open at least 300 is planning to set up a pepper garbling
outlets in India over the next 10 years. and steam-washing facility in Kerala,
• The world's third largest pizza chain, apart from a 'blended spices' facility over
Papa John's, plans to open 100 outlets in the next two years.
different parts of the country with an • Sapat International, a Mumbai-based tea
investment of US$ 51 million. company, is reportedly in talks with
• Fast-food chain McDonald’s is pumping EPIC, a private equity firm in the UK, for
in US$ 83.4 million on increasing its the acquisition of its stake in Whittard, an
footprint in India. upmarket tea and coffee retailer in the
• ITC is planning to set up a world-class UK.
processing infrastructure in Rajasthan for • France-based Belvedere Group, which is
an integrated 'cleaning-cum-sorting' the world’s second-largest vodka
facility for spices like cumin, coriander producer, is planning to enter India via
and pepper. Moreover, ITC is also the travel retail channel.
planning investments to automate the
Sr. No. Company Name VC investor Investment
1 KS Oils CVCI, Baring Rs. 450 crores
2 Nuziveedu Seeds( Hyderabad) Blackstone Rs. 400 crores
3 Biotar Industries Ltd. ( Mumbai) Standard Chartered PE Rs. 180 crores
4 Blue Foods( Restaurants) Indivision Capital Rs. 150 crores
5 Mainland China( Restaurants) SAIF Partners Rs 90 crores
6 Jain Irrigation( Jalgaon) IFC Rs. 75 crores
7 Parag Dairy( Pune) Motilal Oswal Rs. 60 crores
8 Ramcides(Chennai) ePlanet Ventures Rs. 25 crores
9 Capital Foods Ltd. Indivision Capital Rs. 25 crores
10 Asian Dhall SAIF Partners Rs. 4 crores
11 Mast Kalandar (Restaurants) Jacob Ballas NA
 Trends in consumption pattern of food
Food On-The- Go
India has had a long tradition of salty
snacking, with a host of regional ingredients
and flavors creating a smorgasbord of
snacks, ranging from fried snacks like chips,
‘chaklis’ and ‘samosas’ to steamed fare like
‘dhoklas’. The snack food industry in India
is highly fragmented, with the market
dominated by savories sold by local
vendors.
• The market is estimated at Rs. 150
billion, with 50percent comprising the
organized snacks category.
• This category, growing at a healthy 30
percent annually, is sub-divided into the
traditional segment (bhujia, chanachur),
western segment (potato chips, cheese
balls) and the newly established finger
snacks segment.
• The market in India is diverse and large
with over 1,000 different snack products
and some 300 types of savories. Potato-
based snacks, and in particular potato
chips, are the largest product segment,
holding an 85 percent share of the salty
snack market, followed by snack nuts,
chickpeas and other pulse-based savory
snacks..
Organic Food
• Organic foods have been accepted due to
their perceived health benefits over
conventional food.
• The organic industry is growing rapidly
and has caught the attention of farmers,
manufacturers and, above all,
consumers.
• Organic foods protect from heart disease Health & Wellness Food
and cancer, as they contain Phenolic
compounds. • This is a trend that plays directly to our

• Organic food ensures high food quality, desire to ingest specific foods or

which other conventional foods cannot beverages for the purpose of preventing

give. Many people prefer to grow or palliating a disease or condition.

organic food in their home gardens, • From an ingredient standpoint, health

because it costs about 20% more than and wellness concerns offer the best

the conventional food. variety of options for processors.

• Fabindia has ventured into the organic • No wonder healthy food is becoming a

health food products called Fabindia fast-growth category. Rising awareness

Organics with no preservatives or colors and affluence have made health food

added. products accessible to a larger segment

• 24 Lettered Mantra, India’s first organic of the population.

food store chain has exclusive stores in • In recognition of these trends, food

Hyderabad, Bangalore and Pune. Godrej marketers in the country have introduced

AgroVet’s retail product, Nature’s a number of new products, spurring the

Basket, is also looking into the growth of the health food market.

possibility of test marketing certified • Several savvy marketers are already

organic produce through its outlets. riding this trend.
HUL’s 3 Roses brand, with ayurvedic • Amul has introduced a range of
ingredients is positioned on the ‘mind functional products, from energy drink
sharp’ category, as its Red Label brand, Stamina to Probiotic Ice-creams,
with its ‘Natural Care’ offering. Probiotic Lassi and Curd, and High
Calcium Milk; Reduced Salt Butter
Convenience Food Kitchens of India, MTR Foods currently
comprise 22 Indian curries, gravies and
• Changing lifestyles and the modified rice,
eating habits of India’s growing urban • Amul has products like Ghee ,
population have propelled its processed Shrikhand, Nutramul, Kohinoor,
food industry. Rajbhog Foods, Ethnic Kitchens and
• This has led to a growth in the Tasty Bite etc.
availability of processed foods as • From a mindset where home- cooked
manufacturers rush to cater to a growing and fresh food was preferred and
housewives insisted on making
everything from snacks to multi-course
meals in-house, today it has become
commonplace to seek convenience and
variety using the vast menu of ‘ready to
cook and eat’ foods.

Food as Control

• Driven by the size zero and ‘thin-is-in’

demand. Various social changes are revolution, men and women, boys and
driving this trend, from the growing girls are increasingly embarking on
number of nuclear families to increased various ill-advised diets to cultivate that
urbanization and a significant rise in the Size Zero figure.
number of working women as well as a • Many companies have started Diet
growing practice of singles living away variant in their product range that
from home for education or work. promises enjoyment without the guilty
• According to a study, the Indian ‘Ready side effects.
to Eat’ market is estimated to grow to • While the market for low-calorie foods
US$ 727.09 million by 2015 from the is small in developing countries, India
current $ 32.09 million. already ranks among the top 10
• Some major players include ITC Foods consumers of diet foods.
with products like Aashirvaad &
• Zydus Cadila Healthcare, which is
working on brand extensions, recently
introduced Sugar Free D’lite, a low
calorie fruity drink which is 99 %
calorie-free and claims not
compromise on its taste quotient.
• Amul has come up with its Sugarfree
Probiotic Frozen Dessert, Mother Dairy
with its low-fat Dietz ice creams, and
Nestle with Kit Kat Lite.
• Eating joints have also introduced a new
concept of diet calorie-controlled food.
VLCC Alive is India’s first calorie kiosk
where each meal promises to be less
than 300 calories. There are also many
more products in the market targeting
such customers.
Instant Energy Food
• With long commutes and the need for
work combined with play on a daily
basis have led to consumers needing a
greater infusion of energy than ever
before.
• The popular energy drinks in the Indian
market are Phantom, Red Bull, Effect
and Gatorade.
• Due to the large quantit ies of sugar and
to caffeine, these energy drinks give an
instant punch and thus make one feel
energized.
• Red Bull is in fact also gaining currency
as a mixer for alcohol in the party
circuit. Amul has launched ‘Stamina’,
which is India’s first-ever instant energy
sports drink.
• The sports and energy drinks are at their
‘infancy stage’, but they are expected to
post strong growth in the niche segment.
• The consumption of energy bars is also
becoming a trend among the youngsters.
And popular among these are brands like
‘RiteBite’ and ‘Nature Valley’. These
bars are being marketed as a healthy
alternative to the sugary, fattening
normal chocolate bars.

Luxury Food
• Today, food is about many different
things, including lifestyle choices or
values, and affluent consumers are using
food exclusivity to signal their affluence
or ‘arrived’ status.
• Buying a richer version of the same old
thing seems to be the new flaunt mantra.
• Many brands are riding this trend by
introducing up-market versions of mass-
market brands.
• Parle’s variant, Milano, is priced at a Rs
10 premium over its existing brand in
the market. Britannia’s Pure Magic and
ITC ‘s Dark Fantasy, a cream-based
Chocolate cookie are also deluxe
versions of their cookies.
• Food Classics Ice-cream by Mother
Dairy is a range of premium ice creams
with more fruit blended with creamy ice
cream.
• Cadbury Temptations is a range of
delicious premium chocolate; Amul has
added Emmental and Gouda.
 Profiles of Major Players in Food Processing Industry
Indian Players

Company Logo Company Products Brief about the company

• Dabur foods is a hundred percent subsidiary
of Dabur India Ltd
Fruit juice, Cooking • Closely held listed company with promoters
paste, Coconut, Milk,
Tomato puree, Lemon holding at 78.4% of the total share capital
Dabur Foods
drink, Chilli powder, • Dabur has done sales of Rs.241crs in the
Honey
financial year 2007-08, a 19% increase than
the previous year.

• Founded in 1946 in Anand, Gujarat.

• Amul is the world’s largest pouched milk
Dairy products, Ice brand in the world.
Amul
creams, Chocolates
• The annual sale of Amul in the year 2007-08
is around Rs.5255.4crs.

• Unlisted private family owned business

Sweet Mix,
GITS Food • Exports to UK, USA, Australia, Canada &
Namkeens, Pure ghee,
Products Pvt
Dairy whitener, Milk Middle East contributing to the extent on 35%
Ltd
powder
of the revenue.

• Started in April 2006 as Godrej Beverages &

Edible oils,Vanaspati, Foods Ltd.
Godrej
Bakery fats, Fruit
Industries Acquired Nutrine Confectionary Company
drinks, Fruit Juices, •
Ltd
Fruit nectar. Private Ltd. In June 2006.
 • Started in 1936, Major share in Namkeen &
Snack food market in India.
Haldiram Sweets, Syrups, • Strong presence in northern market in India
Marketing Namkeens, Crushes,
especially New Delhi.
Pvt ltd Chips& Papads
• Exports to USA, UK, Canada, Australia, UAE
& Singapore.

• Amongst the top five processed food

manufacturers in India.
Ready to eat curries, • Turnover is estimated at US$ 261 million
Frozen food, Ready to
MTR Foods with the export of approximately 10% of total
cook gravies, Spices,
Ltd
Ice creams, Instant MTR Sales.
snack & Dessert mixes
• Recently acquired by Orkla, a Norway based
company for US$ 80 million.

• Leading player in the fruit based beverages

segment & bottled water.
Parle Agro Fruit drinks & Mineral
• Its main product is the mango based fruit
Pvt Ltd water
drink Mango Frooti, which has 75% market
share.

Milk powder, baby • The company is a subsidiary of LP

Milk Food food, cheese & other Investments Ltd which is a wholly owned
milk products subsidiary of Jagatjit Industries Ltd.

• ITC is a listed company with British

American Tobacco holding 33% stake &
Institutions holdings 50% stake.
Wheat flour atta,
Ready -to-eat meals, • ITC entered into branded & packaged food
ITC Ltd
Biscuits, Salt, Snacks
business in August 2001 with the launch of
& Cooking paste
Kitchens of India Brand.
• ITC entered into confectionery, staple &snack
food items by mid 2002.
 • Marico introduced its edible oil brand
Sweekar in the year 2001-02 and other major
brands of oils are parachute and Saffola.
Marico Vegetable oils, Jams
industries & Soya products • Acquired Nihar from HUL in Feb 2006.
• Parachute has 48% market share in its
segment as of 2008.

Overseas Players
Company Logo Company Products Brief about the company
• The parent company Unilever holds 51.5%of
HUL’s Equity
• India’s largest FMCG Company with
Biscuits, Instant
Hindustan leadership in Home & Personal care products
coffee, Tea, Instant
Unilever
drinks, Jam, Syrups, and Food &Beverages
Ltd
Salt, Wheat flour-atta,
• HUL’s brands so reach across 20 different
categories with combined volumes of about
4mn tons and sales of US$ 2.17 billion

• A leading player in the Indian organized

biscuit market segment with 30% value sale.
• The 48.5% promoter holding in Britannia is
Britannia Flavored milk, Dairy equally shared by the Nuslia Wadia group in
Industries whitener, Ghee,
India & Group Danone, French multi product
Ltd Biscuits, Cake & Rusk
food company
• Made a sales of Rs.2617.7crs sales in the year
2007-08.
 • A dominant player in the edible oil &branded
food segment in India.
Wheat flour atta,
• ConAgra Foods Inc of USA, world’s third
Agro Tech Popcorn, Edible oil,
Foods Ltd Vanaspati, French fries largest foods company along with the Tiger
& Green peas.
Brands of South Africa holds a majority stake
in Agro Tech Foods Ltd.

Instant coffee, • Nestle India is 51% subsidiary of Nestle SA

Nestle Condensed milk,
(founded 1866), which is today the world’s
India Pvt Infant food, Dairy
ltd whitener, Chocolates largest food & beverage company.
& Confectionaries

• PepsiCo is formed by the merge of Pepsi-Cola

&Frito-Lay IN 1965
Pepsico
Soft drink, Fruit juices • Tropicana was acquired in the year 1998
India
& Chips
Holdings • Gatorade was introduced in 2001 by the
merger with The Quaker Oats Company

• In Indian chocolate market Cadbury have

strong brands like Dairy milk, Five star, Perk

Chocolates, Hard & Gems.

Cadbury boiled confectionery, • Dairy milk is the largest chocolate brand in the
India Ltd Malt foods, Cocoa
powder world
• 75% of the total turnover of Cadbury is
contributed by chocolates & confectionaries
Case study 1: AMUL
• Amul is the largest co-operative
movement in India with 2.2 million milk
producers organised in 10,552 co-
operative societies in 2003-2004.
• The country's largest food company,
Amul, is the market leader in butter,
whole milk, cheese, ice cream, dairy
whitener, condensed milk, saturated fats
and long life milk.
• Amul's genesis was linked to the
freedom movement in India. Sardar
Vallabhbhai Patel, an eminent Indian
freedom fighter encouraged the dairy
farmers from the Kaira district in Gujarat
to form a cooperative to counter the
'exploitatively' low prices offered for
their milk by the monopoly milk supplier
of the area, Polson's Dairy.
• The dairy farmers met in Samarkha
(Kaira district, Gujarat) on the 4th of
January 1946, and decided to set up a
milk producers' cooperative that would
deal directly with the Bombay
government, the final buyer of their
milk. This was the origin of the Anand
model.
• Initially, when the Bombay government
refused to deal with the cooperative, the
farmers called a strike. The government
finally relented when Bombay went
without milk for a fortnight.
• The successful union registered itself as
the Kaira District Cooperative Milk
Producers' Union Ltd. (KCMPUL),
Anand, in Gujarat in December 1946.
• In 1954, when the Bombay Milk Scheme
refused to take all the milk that
KCMPUL had produced, the cooperative
found itself saddled with surplus milk.
• Apart from marketing milk in and
around Anand, KCMPUL embarked on a
wide range of dairy processing activities.
• To differentiate its high quality products,
KCMPUL decided to brand its produce.
• In 1955, KCMPUL adopted the brand
name 'Amul' for its products. 'Amul',
derived from the Sanskrit word
'Amulya', meaning priceless, also stood
for 'Anand Milk Union Limited'.
• Amul follows a unique business model,
which aims at providing 'value for
money' products to its consumers, while
protecting the interests of the milk-
producing farmers who are its suppliers
as well as its owners.
• Despite being a farmers' co-operative,
Amul has given multinationals a run for
their money.
• In butter, cheese and saturated fats, • GCMMF collected 5 million litres of
Amul has remained the undisputed milk per day from its shareholders who
market leader since its inception in 1955, owned 3.2 million buffaloes, one million
by offering quality products at cows and 0.3 million crossbred cows.
competitive prices. • The Federation's extensive marketing
• In other categories, Amul has nullified network comprised 3000 distributors and
its late mover disadvantage through 500,000 retailers spread across the
aggressive pricing, better quality, country.
innovative promotion, and superior • The liberalization of the dairy industry in
distribution Gujarat Cooperative Milk 1991 had seen a number of multinational
Marketing Federation (GCMMF), the players like Britannia, Le Bon, Dabon
largest food company in India, recorded and Hi-Life enter the sector.
a turnover of Rs 2882 crore ($ 0.65 bn) • Analysts wondered whether a co-
in 2003-04. operative with limited financial means
• Its flagship brand 'Amul' was the market could stand up to the might of these
leader in butter, whole milk, cheese, ice MNCs, and if its low pricing strategy
cream and dairy whitener. would continue to stay relevant.
• GCMMF was the largest cooperative • MNCs like Pizza Hut, Domino's,
movement in India with 2.2 million milk Hindustan Lever Limited and Cadbury
producers of Gujarat organized in 10,552 had also become competitors. Amul had
cooperative societies. proved its detractors wrong and firmed
up ambitious growth plans.
Case Study 2: Lijjat Papad
• In 2002, with a turnover of Rs 3 billion,
exports worth Rs 100 million, 62
branches and 40 divisions all over the
country, and 42000 members, the Sri
Mahila Griha Udyog Lijjat Papad
(SMGULP) was a women's
entrepreneurial success story in India.
• From humble beginnings in a thickly
populated locality of Mumbai in 1959,
SMGULP has come a long way.
• The organization gained recognition
through its most famous product- Lijjat
papad. In addition to papads, SMGULP
manufactured other household products
like spices, bakery products and
detergents.
• A look at any of the branches of
SMGULP gives the feel of an efficient
entrepreneurial set up.
• The key to SMGULP's success lies in
the feeling of oneness that it creates.
• Women above 18 years of age can
become members of SMGULP by
signing a pledge of devotion to the
organization.
• At SMGULP, workers are referred to as
co-owners and the women who work
there are referred to as sisters.
• The member sisters are free to choose
the work they like, rolling papads, or
packing, or preparing the dough.
• Payment is made on a daily basis. The
supervisors constantly check for the
quality and weight of papads.
• SMGULP inculcates in its members, "a
commitment to earn a legitimate income,
honesty, and not snatching the fruits of
another person's income" and adherence
to quality. Stringent rules of cleanliness
and purity are maintained.
• The whole manufacturing process is
open to inspection by anybody. A well
laid formula is strictly followed to obtain
products of a fixed standard of taste,
color and size.
• In March 1959, seven semi-literate
women from Gujarat came together to
supplement their family incomes and
create a sustainable source of
employment with the skill they knew -
cooking.
• They started out on the terrace of a large,
old, residential building called Lohana
Niwas in Girgaum, a thickly populated
area in south Mumbai. This is where the
seven housewives, bored and confined to
 their homes, saw an opportunity to set up
an organization 44 years ago.
• These women borrowed Rs 80 from
Chaganlal Karamsi Parekh, a member of
the Servants of India Society and a
social worker. The women commenced
business by selling papads.
• Within 3 months there were 25 women
joined them and within 6 months they
were able to reward themselves with half
gram of gold each with the profit they
had made.
• The group used considerable publicity
through word-of-mouth publicity and
articles in vernacular newspapers.
• By the second year of its formation, 100
to 150 women joined the group, and by
the end of the third year more than 300
women were rolling papads.
• SMGULP is a symbol of the progress of
women in developing countries like
India. It took the organization 43 years
to grow from a 7-member team, to one,
which has 42000 members.
• The organization not only aims at the
economic empowerment of women, it
also seeks to raise the standard of living
of women.
• SMGULP has taken a major step
towards eradicating evils like poverty
and illiteracy.
• Such an organization also forms a vital
link between social development and the
advancement of rural women.

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