Sei sulla pagina 1di 48

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

Key Trends in Food Processing Industry 12 Leading players : Profile 1 3 Case Study: 1.
1 3 Case Study: 1. Amul 2. Lijjat Pappad D’Essence Consulting chandni@dessenceconsulting.com

D’Essence Consulting chandni@dessenceconsulting.com

022-28347425

303, Aar Pee Center, 11 th Road, MIDC, Andheri (E), Mumbai-400093

EXECUTIVE SUMMARY Food processing involves any type of value addition to agricultural or horticultural produce

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.

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 lead to a wide-ranging and

Opportunities in Food Processing in India

Diverse agro-climatic conditions lead to a wide-ranging and large raw material base suitable for food processing industries in India. Currently a very small percentage (less than 2%) of these is processed into value added products, leaves opportunity to explore in the sector.

One of the biggest emerging markets, with more than 1 billion population and 250 million strong middle class sets a large consumer base within the country.

India is the seventh largest country, with extensive administrative structure and independent judiciary, a sound financial & infrastructural network. Stable and flourishing democracy is also an opportunistic attribute of the country.

Increasing literacy, rapid urbanization and rising per capita income resulting in rapid growth and changes in demand patterns. This is creating great opportunities for exploring the large hidden markets. An average Indian spends about 40 % of household expenditure on food items.

Demand for processed /convenience food is constantly increasing.

Cheaper workforce availability can be effectively utilized to setup large low cost production bases for domestic and export markets.

Liberalized policies with specific incentives for high priority food processing sector provide very favourable environment for investments and exports in the sector.

Challenges in Food Processing • Unprocessed foods are susceptible to spoilage by biochemical processes, microbial

Challenges in Food Processing

Unprocessed foods are susceptible to spoilage by biochemical processes, microbial attack and infestation. The right post harvest practices such as good processing techniques, and proper packaging, transportation and storage (of even processed foods) can play a significant role in reducing spoilage and extending shelf life.

and attractive packaging, and at low incremental costs. The challenges for the food preservation, distribution and processing sectors are diverse and demanding, and need to be addressed on several fronts to derive maximum market benefits. Presently, the organizations addressing the educational and R & D requirements

High wastage reflects inefficiencies in the delivery chain

20% 18% 3% 2% 16% 1% 14% 12% 2% 10% 1% 2% 2% 0.25% 2%
20%
18%
3%
2%
16%
1%
14%
12%
2%
10%
1%
2%
2% 0.25% 2%
8%
1%
6%
4%
0.25%
2%
0%
Source: Ministry of Food Processing
Annual Report 2007-08

Wastage outside the StateSource: Ministry of Food Processing Annual Report 2007-08 Wastage within the State Wastage within the District

Wastage within the StateProcessing Annual Report 2007-08 Wastage outside the State Wastage within the District From the Farmgate to

Wastage within the District2007-08 Wastage outside the State Wastage within the State From the Farmgate to Local Mandi •

From the Farmgate to Local MandiState Wastage within the State Wastage within the District • The challenges in processing lie in

The challenges in processing lie in retaining the nutritional value, flavour, aroma, and texture of foods, and presenting them in near natural form with added conveniences. Besides, processed foods need to be offered to the consumer in hygienic

are too few, and there is a pressing need for supplementing their efforts. In the emerging scenario, the Food Engineering professional needs to develop sufficient awareness and appreciation of the relevant principles of life sciences, and physical sciences, as well as of a

wide variety of other topics including: nutrition, preservation and storage techniques, processing unit operations,

wide variety of other topics including: nutrition, preservation and storage techniques, processing unit operations, bio-processing, waste management, distribution and supply chain management, food laws and regulations and so on. Besides, the professional needs to develop an appreciation of R&D and

innovation in critical technology areas such as: newer or novel process development in preservation and storage techniques, rheology, colloids and dispersal systems, packaging-polymers and composites, sensors for detection and process control, bioprocess engineering etc.

Overvie w of Food Processing Indu stry The scenario of the food industry has producer

Overvie w of Food Processing Indu stry

The scenario of the food

industry has

producer of milk, pulses, sugarcane and

changed drastically due to

the changing

tea in the world

and the second largest

lifestyle, food habits and ch ange. Demand

producer of wh eat, rice, fruits and

for healthy and high value fo od items along

vegetables.

with improved technolog y and trade

generated great

liberalization policies have

growth opportunities in the f ood processing

industry

The size of the global f ood processing

industry which accou nts for three

fourth of the global fo od industry is

Rs.190 trillion.

Major economies in

the food

processing include US,

Europe, China

and Japan.US and Euro pe account for

more than 50% of the glo bal food sales.

India has been one of

the key food

producers in the world,

with the second

largest arable land area.

It is the largest

The consumption

changed due to

changing lifesty le. Food processing

industry can do

pattern in India has

economic growth and

to rural India what

Information Tec hnology has done to

urban India.

Share in G lobal Food Processing Industry

9% 21% 31% 39%
9%
21%
31%
39%

USAShare in G lobal Food Processing Industry 9% 21% 31% 39% Europe Asia Pacific Rest of

Europein G lobal Food Processing Industry 9% 21% 31% 39% USA Asia Pacific Rest of the

Asia Pacificlobal Food Processing Industry 9% 21% 31% 39% USA Europe Rest of the World Source: D’Essence

Rest of the WorldFood Processing Industry 9% 21% 31% 39% USA Europe Asia Pacific Source: D’Essence Consulting Sec ondary

Source: D’Essence Consulting Sec ondary Research

While India has an abundant supply of food, the food processing industry is still nascent:

While India has an abundant supply of food,

the food processing industry is still nascent:

Country-wise Level of Processing

COUNTRY

LEVEL OF PROCESSING (%)

USA

80.0

France

70.0

Thailand

30.0

Malaysia

80.0

Australia

25.0

Netherland

12.0

India

1.3

Source: Rabobank

Despite these low volumes, the processed

food industry is one of the largest

industries in the country - it is ranked

fifth in terms of production, consumption,

export and expected growth.

Processed food industry accounts for 13

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

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

tone valued at Rs 21,805.9 Crore

($4361.2mn.) the previous year which

shows growth of more than 45% in terms

of value.

Level of Processing in Perishable product range

in India

Product

Organised

Un-organised

Total

Fruits

1.3

0.8

2.1

&Vegetables

Milk & Milk Products

13.0

22.0

35.0

Meat

21.0

-

21.0

Poultry

6.0

-

6.0

Marine

8.0

15.0

23.0

Market and Research Report 2008

(All figures in %)

Strengths India has access to several natural resources that provides it a competitive advantage in

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

 

Particulars

India

Global Rank

Share in Global Production (%)

Arable Land(million hectares)

184.00

2

-

Irrigated Land (million hectares)

59.00

1

-

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

Basic Structure of Food Processing Industry

Basic Structure of Food Processing Industry The chart above describes the process i.e. the Entire Value

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 : the Entrepreneur estimates the

The Stages involved in the value chain are:

1. Market:

the

Entrepreneur estimates the demand for crops and decides which crop to sow

In

this

stage,

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.

% of total population

% of total population Consumption Pattern of Household Income in India Food is the major portion

Consumption Pattern of Household Income in India

Food is the major portion of household

consumption expenditure across all cities

categorised (Refer graph below).

Transportation is the second highest

component in expenditure. This opens up

tempting opportunities in the field of food

processing. And we can see it is in the

nascent stages of development.

Household consumption expenditure as a share of income

2.9

3.1

2.9

14.3

16

10

5.5

4.6

 

5.3

5.9

7

5.2

7.4

8.8

 

7.6

13.1

10.4

8

20.3

21.3

20.1

34.6

31.5

34.4

Megacities

Boomtowns

Source: NCAER / FCR

Nichecities

Communication34.4 Megacities Boomtowns Source: NCAER / FCR Nichecities Household &personal products Education and recreation

Household &personal productsBoomtowns Source: NCAER / FCR Nichecities Communication Education and recreation Apparel Healthcare Housing

Education andNichecities Communication Household &personal products recreation Apparel Healthcare Housing &Utilities

recreation

ApparelHousehold &personal products Education and recreation Healthcare Housing &Utilities Transportation

Healthcare&personal products Education and recreation Apparel Housing &Utilities Transportation Food,beverages &

Housing &UtilitiesHousehold &personal products Education and recreation Apparel Healthcare Transportation Food,beverages & tobacco

Transportation&personal products Education and recreation Apparel Healthcare Housing &Utilities Food,beverages & tobacco

Food,beverages &Household &personal products Education and recreation Apparel Healthcare Housing &Utilities Transportation tobacco

tobacco

If we try to analyse the distribution of households by major source of income, it

If we try to analyse the distribution of

households by major source of income, it

varies significantly across poor and non-

poor households (Refer graph below).

Labourers constitute the largest segment of

poor households and comprise over 62

percent of such households. But then,

we cannot ignore the fact that

agriculture also provides earning

source to 30.3 percent APL (Above

Poverty Line) and 22.7 percent BPL

(Below Poverty Line) households.

Distribution of households by major source of income

OthersDistribution of households by major source of income 3.4 1.6 30.3 22.7 25.7 62.4 18.9

3.4

1.6

30.3

22.7

25.7

62.4

18.9

21.7

8.9

 

3.8

Self employed in Agriculture25.7 62.4 18.9 21.7 8.9   3.8 Labour Self employed in Non-agriculture Regular Overall it

Labour21.7 8.9   3.8 Self employed in Agriculture Self employed in Non-agriculture Regular Overall it is

Self employed in Non-agriculture8.9   3.8 Self employed in Agriculture Labour Regular Overall it is found that food expenses

Regularin Agriculture Labour Self employed in Non-agriculture Overall it is found that food expenses comprise 51.1

Overall it is found that food expenses

comprise 51.1 percent of all routine

expenditure at the all India level.

salary/wages

APL households (%) BPL households (%)

Source: The Max-NCAER India Financial Protection Survey

Household consumer spends in India (Total - Rs 20,721 billion)

4% 18% 12% 7% 4% 4% 7% 5% 4% 35% Source:Private Final Consumption Expenditure CSO;EY
4%
18%
12%
7%
4%
4%
7%
5%
4%
35%
Source:Private Final Consumption Expenditure CSO;EY Research

Furniture,furnishing appliances & services

Gross rent,fuel &powerResearch Furniture,furnishing appliances & services Medical care and health Miscellaneous goods & services

Medical care and healthappliances & services Gross rent,fuel &power Miscellaneous goods & services Recreation,education

Miscellaneous goods & servicesservices Gross rent,fuel &power Medical care and health Recreation,education & cultural services Food Clothing

Recreation,education & cultural services

Food& services Recreation,education & cultural services Clothing & footwear Beverages,pan & intoxicants

Clothing & footwearservices Recreation,education & cultural services Food Beverages,pan & intoxicants Grocery Transportation &

Beverages,pan & intoxicantsRecreation,education & cultural services Food Clothing & footwear Grocery Transportation & communication

Grocery& cultural services Food Clothing & footwear Beverages,pan & intoxicants Transportation & communication

Transportation & communicationservices Recreation,education & cultural services Food Clothing & footwear Beverages,pan & intoxicants Grocery

Sectors in Food Processing Industry Food processing is a large sector that covers activities such

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

SEGMENT

SIZE – OUTPUT / VALUE

PROCESSING

(%)

ORGANIZED

SECTOR (%)

KEY SEGMENTS

 

GROWTH

RATE (%)

 

Raw

fruits

& vegetables,

 

Fruits &

Vegetables

Rs 1687.5 Cr.

02

48

pulp,

pickles

canned

fruits

and

20

 

2.33 million

 

Marine

fisheries,

frozen

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

tonnes

01

05

Cattle, Buffalo & poultry

10

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 and vegetables in

Fruits & Vegetable Processing:

India produces the widest range of fruits

and vegetables in the world.

It is the second largest vegetable (100

million tonnes) and fruit (50 million

tonnes) producer accounting for 8.4 per

cent of the world’s fruit and vegetable

production.

The share of

organised

sector in fruit

processing is

estimated to

be nearly 50

per cent.

1523.25

However less than 2 per cent of the total

vegetables produced in the country are

commercially processed, as compared to

nearly 70 per cent in Brazil and 65 per

cent in USA.

India’s installed capacity for fruits and

vegetable processing

Fruits and Vegetable exports (In Cr. Rs.)

F & V Processed F & V 2214.90 2580.30 3555.00
F & V
Processed F & V
2214.90
2580.30
3555.00

increased from 1.1

million tonnes in

1993 to 2.77 million

tonnes in 2007.

About 20 per

cent of processed

fruits and vegetables

4517.55

2209.05

2298.15

2589.30

3060.00

3134.25

2005-06

2006-07

Source: APEDA

2007-08

2008-09

2009-10

Fruit production in India registered a

growth of 3.9 percent over the years

whereas the fruit processing sector grew

several times faster at 20 per cent over

are exported.

Major products exported include fruit

pulps, pickles, chutneys, canned foods,

concentrated pulps and juices and

the same period.

vegetables.

The total area under fruit cultivation is

estimated at 4.18 million hectares and

7.59 million hectares under vegetable

cultivation.

Fruit exports registered a growth of 16

per cent in volume and 21 per cent in

value terms in 2006-07.

Mango and mango based products alone

constitute 50 per cent of the exports.

Milk Processing: • Indian stands first in the world in terms of milk production. •

Milk Processing:

Indian stands first in the world in terms of milk production.

The current size of the Indian dairy sector is Rs.3133.5 billion and has been growing at 5 per cent a year.

The dairy sector

ranks first in terms of processed foods with 37 per cent of the produce being processed.

The organised sector processes an estimated 20 percent of the total milk output in India.

There are 676 dairy plants registered with Government of India, which come under the organised sector.

The cooperative sector dominates the milk industry with over 70,000 village level dairy federations at the state level.

Gujarat Cooperative Milk Marketing Federation (GCMMF or AMUL) is the most successful player in the evolution of the Indian Dairy Industry.

Milk and milk products contribute to a significant 17 per cent of the country’s total expenditure on food.

The market for dairy products is expected to grow at 15-20 per cent.

Some private players includes Hatsun,

Heritage, Modern ,Paras, Dynamix, Parag and Metro ,also FMCG players like Nestle,Danone

& Britannia all of which sell liquid milk and manufactures value added

products like milk powder, ghee, butter, cheese, curd and butter milk in small quantities.

Taking Dairies to the Next stage:-

Indian dairies are ready to use various latest innovative technologies that improves the milking efficiency as well as cow throughput including auto ID, innovative milking claw design, electronic milk meters, stimapulse, an auto shedding system, an auto cleaning-in-place system (to maintain hygiene).

.

Exports of Dairy Products (in Cr. Rs.)

 

947.25

980.86

 

507.15

510.75

           

402.68

2005-06

2006-07

2007-08

2008-09

2009-10

Source: APEDA

PE funds in the Dairy Sector:- It is estimated that by 2015 over Rs 10,000

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

processing potential with varied fish

resources along the 8,041 km coastline,

28,000 km of rivers and millions of

hectares of reservoirs and brackish

water.

India is the third largest fish producer in

the world and second in in-land fish

production.

The Fisheries sector in India has been

classified into marine, inland and

aquaculture.

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

cent (3.9 million tons) came from marine

resources.

Fish processing is mostly targeted for

export markets.

Exports of Marine Products (in Cr. Rs.)

7398.95

8338.18

8545.90

8588.83

9597.78

2005-06

2006-07

2007-08

2008-09

2009-10

Source: MPEDA

There are over 369 freezing units with a

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 grains – rice, wheat, maize, barley and

Grain Processing:

India’s production covers all major grains – rice, wheat, maize, barley and millets like jowar, bajra and ragi.

Export of Cereals(in Cr. Rs.)

 

7132.5

14847.35

15167.77

14359.75

6701.4

                   

2005-06

2006-07

2007-08

2008-09

2009-10

Source: APEDA

It ranks third in the production of grains in the world with a share of 40 per cent,

Meat and Poultry Processing:

India has the largest number of livestock population in the world accounting for 50 per cent of buffaloes and 16 per cent of the goat population.

Meat production is Rs.625 million and a Meat export is Rs.5.2 million.

2488.5

Exports (in Cr. Rs.)

Meat 3007.35
Meat
3007.35

Processed Meat

8 8 . 5 Exports (in Cr. Rs.) Meat 3007.35 Processed Meat Poultry 5602.05 7069.95 7606.35

Poultry

5602.05

7069.95

7606.35

2.205

6.255

13.86

10.395

10.26

 

289.8

 

290.25

472.5

431.55

398.7

2005-06

2006-07

Source: APEDA

2007-08

2008-09

2009-10

grain processing is the biggest component of food sector.

Primary processing constitutes 96 per cent with the remaining accounted for by the secondary and tertiary sectors.

Total rice milling capacity in the country is 186 million tonnes.

There are about 516 large flour mills in the country, as well as about 10,000 pulse mills.

Most of the animals in India are not bred for meat. Animals generally used for production of meat are cattle, buffaloes, goats, sheep, pigs and poultry. Only 11 per cent of the buffalo population, 6 per cent of the cattle, 33 per cent of the sheep and 38 per cent of the goat population is culled for meat.

Consumption per head of both fresh and processed meat is very low at 1.5 kg compared with world average of 35.5 kg.

Indian poultry meat market is approximately Rs. 105.0 billion.

• Indian broiler industry has seen a rapid growth in the last few years -

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

primarily

alcoholic beverages

consists

of

beverages

market

non-alcoholic

and

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, which 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 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.

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

(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 in India

registered a growth of 10 per cent in

2007.

Noodles/Vermicelli is the fastest

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

619.65

362.7

of Alocoholic Beverage (in Cr. Rupees) 554.85 619.65 362.7 147.6 107.1 2005-06 2006-07 Source: APEDA 2007-08

147.6

107.1

Beverage (in Cr. Rupees) 554.85 619.65 362.7 147.6 107.1 2005-06 2006-07 Source: APEDA 2007-08 2008-09 2009-10
Beverage (in Cr. Rupees) 554.85 619.65 362.7 147.6 107.1 2005-06 2006-07 Source: APEDA 2007-08 2008-09 2009-10
Beverage (in Cr. Rupees) 554.85 619.65 362.7 147.6 107.1 2005-06 2006-07 Source: APEDA 2007-08 2008-09 2009-10
Beverage (in Cr. Rupees) 554.85 619.65 362.7 147.6 107.1 2005-06 2006-07 Source: APEDA 2007-08 2008-09 2009-10

2005-06

2006-07

Source: APEDA

2007-08

2008-09

2009-10

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.

Staples – Bread, Wheat Flour, Salt and Sugar

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

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

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 of operation

Even though India ranks second in production of fruits and vegetables, nearly 20 to 25 per cent of this production is lost in spoilage in various stages of harvesting.

The major problems are poor quality of seed, planting material and lack of technology.

Quality produce lead to investment in technology and ability to sustain a long gestation period for harvest.

It also results in better quality of processed food. So we need to establish backward integration like contract farming to improve quality of produce.

Nearly 90 percent of the food processing units are small in scale so not able to exploit the advantage of economies of scale.

The country has only 3600 slaughterhouses, 9 modern abattoirs and 171 meat processing units, and a limited number of pork-processing units.

This is one of the reasons penetration of processed meat is extremely poor at 1 per cent in India.

These figures indicate both the need for scale, and the potential or growth offered by the sector.

Processing Technology

Currently most of the processing in India is manual.

There is limited use of technology like pre-cooling facilities for vegetables, controlled atmospheric storage and irradiation facilities. This technology is important for extended storage of fruits and vegetables in making them beneficial for further processing.

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

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

Domestic market

Most of the processing units are export oriented and hence their penetration levels in the domestic market are low. For example,

Penetration of processed fruits and vegetables overall is 10 percent.

The relative share of branded milk products especially ghee is still 2 percent

Penetration of culinary products is still 13.33 per cent and is largely tilted towards metros

Consumption of packaged biscuits for 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.

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 consumption. Competitive pricing also enables penetration in the rural markets.

Brand competitiveness

Share of branded products in purchases of Indian consumers has increased by 25 per cent to 35 per cent. This is especially true for urban consumers.

Branded products like Basmati rice and Godrej’s chicken have been very successful implying that there is a good demand for hygienic branded products at reasonable prices.

Product Innovation Certain processed food categories such as snack foods are impulse purchase products where

Product Innovation

Certain processed food categories such as snack foods are impulse purchase products where consumers look for novelty and new flavours and hence these categories lack brand loyalties. Visibility through attractive packaging boosts consumption.

Increasing time constraints amongst the working middle class has boosted consumption of products like instant soups, noodles and ready-to-make products. Innovation in packaging and product usage is an important success factor for processed foods.

Backward Integration – Emerging Business Models Everybody is well versed with the traditional methods of

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
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

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

 

Banking Finance

 

Sales

E-auction

Storage

Trader/ Processor

Warehouse

Retailer/exporters

Cold storage

Ripening Chambers

Retailer/exporters Cold storage Ripening Chambers COLLECTION CENTRES Collection and aggregation of produce

COLLECTION CENTRES

Collection and aggregation of produce Advisory on inputs, prices etc. Settlement of payments

INFRASTRUCTURE

Grading, washing & packing

lines,

quality testing,

palletisation,

material

handling,

parking for

transporter.

INFRASTRUCTURE

Washing, grading, sorting, weighment , transport, 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

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.

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

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.

First Food Park in India • KIFPRO –KINFRA Food Processing Park in Malappuram (Kerala) •

First Food Park in India

KIFPRO –KINFRA Food Processing

Park in Malappuram (Kerala)

It is the first food park in the country

of

assisted

by

ministry

food processing industries Govt of India

It includes:-Yeast manufacturing, soft

drinks and mineral water bottling , spirit

from cassava, fruits , fruit juice, fruit

pulp / concentrate , pappad, pickles,

chutney, jam, jelly, dehydrated /dried

vegetable, spices, oleoresins, essential oils,

breakfast cereals, weaning foods, nutrition

foods , IQF for fruits and vegetables ,

ready-to-eat snacks/meals ,flour mills,

bakery, noodles, vermicelli, confectionery ,

tomato sauce, ketchup, powder, paste, juice

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 As far as the processed food market

Growth Drivers for Food Processing Industry

Changing Lifestyle

As far as the processed food market is concerned, Indian households are closely knit and the percentage of nuclear families and working women is very low. Therefore, while the market itself is one of the largest in the world, the penetration of packaged and branded products is abysmally low. People prefer homemade or fresh products, which are cheaper than branded products.

However, over the last couple of years, private players have started taking enormous interest in the sector, with many MNC's already testing the waters. Their efforts have been aided by the fact that urban India is showing a marked shift towards ready-to-eat food:

With urban incomes increasing and urban consumers squeezed for time, they 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,

This presents an opportunity for makers of branded products like HLL, ITC, Nestle to convert potential consumers into patrons on as big a scale as never before.

Large share of wallet:

Food forms the largest component of the total consumption expenditure in India accounting for as much as 51%.

This is highest compared to 9.7% for an average American person and 15% for both Japanese and British. Though with rising income, the share would go down, but would increase in absolute terms.

Multi-national companies such as Coca- Cola, PepsiCo, Britannia, Danone, Nestle, Cadbury, Heinz and Perfettiae have made their presence felt in India. Indian majors like HUL, ITC, Dabur too have lined up investments in this segment.

Growth in Retail • The Indian organized retail industry in 2008 is estimated at Rs.17,650

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 Stores 1

Some of the Key players in organized retail are:

Sr. No.

Group Company

Stores

1 Future Group

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.

2 RPG Retail

Food world, Books and Beyond, Music world, Health & Glow, Spenser’s,

Cellucom.

3 Reliance Retail

Reliance Fresh, Reliance digital, Reliance Trends, Reliance Footprints,

Reliance Jewels, Reliance Timeout, Reliance Wellness

4 Tata Retail

Westside, Landmark, Fashion Yatra, Croma, Star Bazaar

5 K. Raheja Corp.

Shoppers Stop, Hypercity, Crossword, Inorbit mall

6

A.V. Birla

More

Source: D’Essence Consulting Research

Sr. No

Group Company

Tie-up

Stores

1 Wal-Mart Pvt. Ltd.

Bharti Enterprises

One Store Cash-n-Carry in Amritsar

2 Tesco

TATA

Proposed

3 Carrefour SA

Future Group

Proposed

4

Metro Ag

-

5 Stores Metro (Cash & Carry)

Source: D’Essence Consulting Research

Sr. No.

International Player

Indian JV partner

Product profile

Strategy

1

Danone

-

Dairy Products

Entered India with 50:50 joint venture with Yakult, Japan.

2

Con Agra

ITC

Branded Foods and bulk & processed commodities

Conagra has 34.3 % in ITC Agro Tech

3

Del Monte

Bharti Enterprises

Fresh fruits& Vegetables

50:50 JV

Source: D’Essence Consulting Research

Food Retail: • Food retail has surpassed the dominating apparel and accessories sector. Contrary to

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

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.

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

Excise

and

custom

duties:

installation of modern machinery and equipment, especially in areas of canning, dairy plants, specialty processing.

installation of modern machinery and equipment, especially in areas of canning, dairy plants, specialty processing.

Food laws: Consumer protection against

adulterated food has been brought to the fore by the Prevention of Food Adulteration Act (PFA), 1954, which applies to domestic and imported food commodities and encompasses food colour and preservatives, pesticide residues, packaging, labeling and regulation of sales.

Food parks: In a bid to boost the food

sector, the Government is planning to set up agri zones and mega food parks. 30 such

mega parks are coming up across the country in various cities to attract Foreign Direct Investment (FDI) in the food- processing sector. Each food park will have a cold storage facility, apart from facilities for sorting, grading, food processing, packaging and quality control and R&D laboratories, among other things. The government has already identified five locations in Maharashtra, Andhra Pradesh, Punjab and Jharkhand and one in the North- East region. It is also planning to set up 30 food parks across the country.

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

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 expressions of interest (EoI) for the setting up of 10 mega food parks (MFPs) with an investment of US$ 514.37 million.

In August 2008, the first chocolate academy in India was opened by Swiss confectioner Barry Callebaut, making its fifth foray into the Asia market.

South Korean confectionery giant, Lotte Group, also has plans to set up a subsidiary in India.

Belgian brewing giant, InBev, has announced increased expansion in India, with a focus on the beer market. Through its recent acquisition of US brewing giant Anheuser-Busch (A-B), the company now also owns A-B's Indian subsidiary, Crown Beers India.

Italian confectionery company, Ferrero SpA, has announced plans to invest US$

Year

Foreign Direct Investment

(Rs. In Crore)

2005-06

182.94

2006-07

441.00

2007-08

719.00

2008-09

400.00

2009-10

945.00

Source: Ministry of Food Processing Industry in India

35 million for setting up a mint manufacturing plant in Maharashtra.

Conglomerate Reliance Industries Ltd has invested US$ 1.25 billion in a dairy project. In August 2008, Reliance Industries was reported to be mulling a partnership with UK-based supply chain solutions provider, Wincanton, for its efforts focussed on India’s mass grocery retail (MGR) sector.

Dairy major and ice cream specialist, Amul Dairy, has announced plans to enter India's US$ 500 million snack food market.

Texas Chicken, the chicken fast-food brand of the US-based Church's Chicken,

has already opened its first outlet in Hyderabad and plans to open at least 300

has already opened its first outlet in Hyderabad and plans to open at least 300 outlets in India over the next 10 years.

The world's third largest pizza chain, Papa John's, plans to open 100 outlets in different parts of the country with an investment of US$ 51 million.

Fast-food chain McDonald’s is pumping in US$ 83.4 million on increasing its footprint in India.

ITC is planning to set up a world-class processing infrastructure in Rajasthan for an integrated 'cleaning-cum-sorting' facility for spices like cumin, coriander and pepper. Moreover, ITC is also planning investments to automate the

different operations in its supply chain. It is planning to set up a pepper garbling and steam-washing facility in Kerala, apart from a 'blended spices' facility over the next two years.

Sapat International, a Mumbai-based tea company, is reportedly in talks with EPIC, a private equity firm in the UK, for the acquisition of its stake in Whittard, an upmarket tea and coffee retailer in the UK.

France-based Belvedere Group, which is the world’s second-largest vodka producer, is planning to enter India via the travel retail channel.

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

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

chips, ‘chaklis’ and ‘samosas’ to steamed fare like ‘dhoklas’. The snack food industry in India is

‘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.

to their perceived health benefits over conventional food. • The organic industry is growing rapidly and

The organic industry is growing rapidly and has caught the attention of farmers, manufacturers and, above all, consumers.

• Organic foods protect from heart disease and cancer, as they contain Phenolic compounds. •

Organic foods protect from heart disease and cancer, as they contain Phenolic compounds.

Organic food ensures high food quality, which other conventional foods cannot give. Many people prefer to grow organic food in their home gardens, because it costs about 20% more than the conventional food.

Fabindia has ventured into the organic health food products called Fabindia Organics with no preservatives or colors added.

24 Lettered Mantra, India’s first organic food store chain has exclusive stores in Hyderabad, Bangalore and Pune. Godrej AgroVet’s retail product, Nature’s Basket, is also looking into the possibility of test marketing certified organic produce through its outlets. HUL’s 3 Roses brand, with ayurvedic ingredients is positioned on the ‘mind sharp’ category, as its Red Label brand, with its ‘Natural Care’ offering.

Health & Wellness Food

This is a trend that plays directly to our desire to ingest specific foods or beverages for the purpose of preventing or palliating a disease or condition.

From an ingredient standpoint, health and wellness concerns offer the best variety of options for processors.

No wonder healthy food is becoming a fast-growth category. Rising awareness and affluence have made health food products accessible to a larger segment of the population.

In recognition of these trends, food marketers in the country have introduced a number of new products, spurring the growth of the health food market.

Several savvy marketers are already riding this trend.

Amul has introduced a range of

functional products, from energy drink Stamina to Probiotic Ice-creams, Probiotic Lassi and Curd, and High

Calcium Milk; Reduce

d Salt Butter

Convenience Food • Changing lifestyles and the modified eating habits of India’s growing urban population

Convenience Food

Changing lifestyles and the modified eating habits of India’s growing urban population have propelled its processed food industry.

This has led to a growth in the availability of processed foods as manufacturers rush to cater to a growing

processed foods as manufacturers rush to cater to a growing demand. Various social changes are driving

demand. Various social changes are driving this trend, from the growing number of nuclear families to increased urbanization and a significant rise in the number of working women as well as a growing practice of singles living away from home for education or work.

According to a study, the Indian ‘Ready to Eat’ market is estimated to grow to US$ 727.09 million by 2015 from the current $ 32.09 million.

Some major players include ITC Foods with products like Aashirvaad &

Kitchens of India, MTR Foods currently comprise 22 Indian curries, gravies and rice,

Amul has products like Ghee , Shrikhand, Nutramul, Kohinoor, Rajbhog Foods, Ethnic Kitchens and Tasty Bite etc.

From a mindset where home- cooked 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’ revolution, men and women, boys and girls are increasingly embarking on various ill-advised diets to cultivate that Size Zero figure.

Many companies have started Diet variant in their product range that promises enjoyment without the guilty side effects.

While the market for low-calorie foods is small in developing countries, India already ranks among the top 10 consumers of diet foods.

• Zydus Cadila Healthcare, which is working on brand extensions, recently introduced Sugar Free D’lite,

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 to compromise on its taste quotient.

and claims not to compromise on its taste quotient. • Amul has come up with its

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.

ies of sugar and

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

Due to the large quantit

mixer for alcohol in the party • Due to the large quantit circuit. Amul has launched

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,

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.

of the same old thing seems to be the new flaunt mantra. • Many brands are

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.

Chocolate cookie are also deluxe versions of their cookies. • Food Classics Ice-cream by Mother Dairy

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

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 paste, Coconut, Milk, Tomato puree, Lemon drink, Chilli powder, Honey •
 

Fruit juice, Cooking paste, Coconut, Milk, Tomato puree, Lemon drink, Chilli powder, Honey

Closely held listed company with promoters

Dabur Foods

holding at 78.4% of the total share capital

Dabur has done sales of Rs.241crs in the

 

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
 

Amul is the world’s largest pouched milk

Amul

Dairy products, Ice creams, Chocolates

brand in the world.

 

The annual sale of Amul in the year 2007-08

 

is around Rs.5255.4crs.

  Sweet Mix, Namkeens, Pure ghee, Dairy whitener, Milk powder • Unlisted private family owned
 

Sweet Mix, Namkeens, Pure ghee, Dairy whitener, Milk powder

Unlisted private family owned business

GITS Food

Exports to UK, USA, Australia, Canada &

Products Pvt

Ltd

Middle East contributing to the extent on 35%

 

of the revenue.

 

Started in April 2006 as Godrej Beverages &

 

Godrej

Foods Ltd.

Industries

Acquired Nutrine Confectionary Company

Ltd

• Acquired Nutrine Confectionary Company Ltd Edible oils,Vanaspati, Bakery fats, Fruit drinks, Fruit

Edible oils,Vanaspati, Bakery fats, Fruit drinks, Fruit Juices, Fruit nectar.

Private Ltd. In June 2006.

  • Started in 1936, Major share in Namkeen &   Snack food market in
 

Started in 1936, Major share in Namkeen &

  Snack food market in India.
 

Snack food market in India.

Haldiram

Sweets, Syrups, Namkeens, Crushes, Chips& Papads

Strong presence in northern market in India

Marketing

especially New Delhi.

Pvt ltd

 

Exports to USA, UK, Canada, Australia, UAE

 

& Singapore.

 

Amongst the top five processed food

manufacturers in India.

  Ready to eat curries, Frozen food, Ready to cook gravies, Spices, Ice creams, Instant
 

Ready to eat curries, Frozen food, Ready to cook gravies, Spices, Ice creams, Instant snack & Dessert mixes

Turnover is estimated at US$ 261 million

MTR Foods

with the export of approximately 10% of total

Ltd

MTR Sales.

 

Recently acquired by Orkla, a Norway based

 

company for US$ 80 million.

 

Leading player in the fruit based beverages

Parle Agro Fruit drinks & Mineral segment & bottled water.

Parle Agro

Fruit drinks & Mineral

segment & bottled water.

Pvt Ltd

water

Its main product is the mango based fruit

 

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.
 

Institutions holdings 50% stake.

 

Wheat flour atta, Ready -to-eat meals, Biscuits, Salt, Snacks & Cooking paste

ITC entered into branded & packaged food

ITC Ltd

business in August 2001 with the launch of

 

Kitchens of India Brand.

 

ITC entered into confectionery, staple &snack

food items by mid 2002.

Marico Vegetable oils, Jams industries & Soya products • Marico introduced its edible oil brand
Marico Vegetable oils, Jams industries & Soya products • Marico introduced its edible oil brand

Marico

Vegetable oils, Jams

industries

& Soya products

Marico introduced its edible oil brand

Sweekar in the year 2001-02 and other major

brands of oils are parachute and Saffola.

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

 

Biscuits, Instant coffee, Tea, Instant drinks, Jam, Syrups, Salt, Wheat flour-atta,

India’s largest FMCG Company with

Hindustan leadership in Home & Personal care products

Hindustan

leadership in Home & Personal care products

Unilever

Ltd

and Food &Beverages

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 whitener, Ghee, Biscuits, Cake & Rusk

equally shared by the Nuslia Wadia group in

Industries

Ltd

India & Group Danone, French multi product

Ltd India & Group Danone, French multi product food company • Made a sales of Rs.2617.7crs

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.
 

A dominant player in the edible oil &branded

  food segment in India.
 

food segment in India.

Agro Tech

Wheat flour atta, Popcorn, Edible oil,

ConAgra Foods Inc of USA, world’s third

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, Condensed milk, Infant food, Dairy • Nestle India is 51% subsidiary of
 

Instant coffee, Condensed milk, Infant food, Dairy

Nestle India is 51% subsidiary of Nestle SA

Nestle

India Pvt

(founded 1866), which is today the world’s

ltd

whitener, Chocolates

largest food & beverage company.

&

Confectionaries

 

PepsiCo is formed by the merge of Pepsi-Cola

  &Frito-Lay IN 1965
 

&Frito-Lay IN 1965

Pepsico

India

Soft drink, Fruit juices

&

Chips

Tropicana was acquired in the year 1998

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

& Gems.

 

Cadbury

Dairy milk is the largest chocolate brand in the

India Ltd

milk is the largest chocolate brand in the India Ltd Chocolates, Hard boiled confectionery, Malt foods,

Chocolates, Hard boiled confectionery, 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

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 4 th 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, Amul has remained the undisputed market leader since

In butter, cheese and saturated fats, Amul has remained the undisputed market leader since its inception in 1955, by offering quality products at competitive prices.

In other categories, Amul has nullified its late mover disadvantage through aggressive pricing, better quality, innovative promotion, and superior distribution Gujarat Cooperative Milk Marketing Federation (GCMMF), the largest food company in India, recorded a turnover of Rs 2882 crore ($ 0.65 bn) in 2003-04.

Its flagship brand 'Amul' was the market leader in butter, whole milk, cheese, ice cream and dairy whitener.

GCMMF was the largest cooperative movement in India with 2.2 million milk producers of Gujarat organized in 10,552 cooperative societies.

GCMMF collected 5 million litres of milk per day from its shareholders who owned 3.2 million buffaloes, one million cows and 0.3 million crossbred cows.

The Federation's extensive marketing network comprised 3000 distributors and 500,000 retailers spread across the country.

The liberalization of the dairy industry in 1991 had seen a number of multinational players like Britannia, Le Bon, Dabon and Hi-Life enter the sector.

Analysts wondered whether a co- operative with limited financial means could stand up to the might of these MNCs, and if its low pricing strategy would continue to stay relevant.

MNCs like Pizza Hut, Domino's, Hindustan Lever Limited and Cadbury had also become competitors. Amul had proved its detractors wrong and firmed up ambitious growth plans.

Case Study 2: Lijjat Papad • In 2002, with a turnover of Rs 3 billion,

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

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.

D’ESSENCE is a full service Boutique Management Consulting firm incorporated in 1998. We assist Corporate, Mid-Sized Owner Managed Companies and Government Organizations to Build, Grow and Remain Competitive. Our highly professional and qualified team includes Management Graduates, Engineers, Accountants, and Economists who analyze and present a “fresh perspective” to your business.

Chandni Sahgal: Managing Consultant

+91 9820075332 chandni@dessenceconsulting.com

Shahid Tanwar: Project Leader

+91 9833854580 shahid@dessenceconsulting.com

Sachin Chavan: Project Leader

+91 9967588598 sachin@dessenceconsulting.com