SECTOR ANALYSIS: FOOD & BEVERAGES

An Introduction to the Sector

India is fervently poised for the Food Revolution This will ensure agricultural diversification and large investments in food processing. The concept of food security has two dimensions availability of food and access to food. 30% of the food produced in the country is wasted. There is a need to increase the range of foods available to improve overall nutrition. Special foods for patients suffering from hypertension, diabetes gives health benefits. Packaging of food products has become important to ensure safety and hygiene.

A comprehensive view
The Indian food market is approximately Rs 2,50,000 crore ($69.4 billion) Value-added food products comprise Rs 80,000 crore ($22.2 billion). The food processing industry is witnessing a 20% annual growth rate. Post-Green Revolution, it is essential that agricultural research reoriented to address new challenges. Application of biotechnology, RNA use, and molecular biology. Nutritional research and improved cost-effective vaccine programmes

Target Segment Profile

Governments high priority for development of food processing industry to encourage commercialization and value addition to agricultural produce. Agro based l00 percent export oriented units allowed sale up to 50 per cent in Domestic tariff area. Indias middle class segment continues to hold the key to success of the processed food market in India.

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Indian food and beverage companies are making a beeline for regional overseas markets like Bangladesh, Pakistan, Nepal, Middle East The market is seeing players like Heinz, Mars, Marico, Pepsi, ITC, Dabur, Britannia, Cadbury, HLL, Pillsbury, Nestle and Amul. Both public and private players operate in the market, e.g., Hindustan Lever, Nestle and NDDB, NAFED. The price stability throughout the year has contributed to the increase in domestic liquor sales. Branded products are preferred in the Edible oil segment as the urban consumers are increasingly becoming health conscious and looking out for low cholesterol cooking medium.

Basic Issues & Constraints

Lack of adequate infrastructure. Absence of a strong and dependable cold chain system which is very vital There is a need for a review of the Agricultural Produce and Marketing Act to ensure freedom to farmers Some commodities in one segment are used as inputs in another segment of the food processing industry Excise Duty on all Value Added food products like Nutritional and health foods Ice creams and Non-alcoholic beverages dispensed by vending machines are exempt from excise duty

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Packaging material for match sticks is exempted from excise duty. The higher railway freight has pushed up cost of raw materials and inputs such as sugar, edible oil and all these add to cost of production. FICCI has highlighted some areas of concern impacting the overall Food and Beverage Industry

The Industry survey

India is among the world's major producer of food and produces over 600 million tonnes of food products every year Indias food consumption market is expanding rapidly to attract global food and drink giants India is the second largest producer of rice and wheat and the largest producer of pulses. Indian food processing industry is poised for further growth in view of the liberal policy measures and governments commitment for reforms and development of food and agroprocessing industries.

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Health food, health food supplements, Convenient Food and Branded Food are rapidly gaining vast popularity with the changing life styles of the consumers. The unorganized, small players account for more than 75% of the industry output in volume terms and 50% in value terms The Government has provided many liberal incentives to encourage the Food Processing industry.

Segment-wise Analysis
BRANDED FLOUR (ATTA) The grain-processing sector is largely un-organized, although there are a few large players in the market. Brands like "Captain Cook", some large players, like Hindustan Lever (with its Annapurna brand) and Agro Tech (Healthy World), Nature Fresh and ITC (Aashirvaad) re players of the market Increased competitive activity is spurring market growth The segment, which had been growing with excellent rate of 4050% till 2000 grown by 12% from 2005 onwards.
BAKERY INDUSTRY

The annual production of bakery products was 50 lakh tones in 2004-05 with estimated value of Rs 69 billion and is growing at rate of 9 % every year.

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The organized sector has a market share of 45 per cent and the balance 55 per cent is with the unorganized sector in the baked products. Bread Industry: The large organized sector players who are prominent in the highand medium-price segments include Britannia, Modern Industries Ltd. Local manufacturers with numerous local brands cater to populous segment and contribute considerably in the bread segment. Biscuit Industry: The major brands of biscuits are Britannia, Parle, Bakeman, Priya Gold etc The per capita consumption of biscuits in our country is about 1.52 kg as compared to more than 12 kg in developed countries

Semi processed/ Cooked/ Ready to Eat

The market for semi-processed/cooked and ready to eat foods was around Rs 82.9 billion in 2006-07 and increasing at rate of 10% every year. HLL has entered the ready to eat segment through Indus Valley rice meals in seven flavours ITC s more than 50 packaged branded food products under Kitchens of India and Aashirvaad brands with different varieties of ready to eat/ cooked food is gaining popularity in the market. CULINARY PRODUCTS & SNACK FOOD The total production of culinary products and snack food was around Rs 5750 crore in 2007-08 and is growing at a moderate rate of 8 per cent The culinary products including mainly wheat based products comprising of noodles, vermicelli, macaroni and spaghetti is gaining popularity

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HLL (Kissan and Knorr range) and Nestle (Maggi) dominate this segment. Heinz and Top Ramen are also strong players.

Frito Lay's India, Pepsicos Snack Food Division having snack foods plants in Channa (Punjab) and Pune (Maharashtra) , and going for another in (Sakrail) West Bengal with investment of Rs 75 Crores.
FRUIT JUICES / PULP & CONCENTRATES/ SAUCES/ KETCH UPS India is the second largest producer of both fruits and vegetables in the world. The market has immense potentialities provided some infrastructural facilities for efficient transportation and marketing of fruits and vegetables are created.

Sugar Industry
The largest agro-processing industries of the country with an annual turnover of Rs 200 billion. Indian sugar industry uses sugar cane as the only input The sugar industries have sprung up in states like Uttar Pradesh, Maharashtra, Punjab, Gujarat, Andhra Pradesh, West Bengal. The leading players in Indian sugar industry are Balrampur Chini Mills Ltd, Bajaj Hindustan Ltd, Andhra Sugars Ltd, Thiru Arooran Sugars Ltd and, Dhampur Sugar Ltd. The Government controls sugar capacity additions through industrial licensing, determines the price of the major input sugarcane, decides the quantity Inadequate sugar cane availability, uneconomical size, bad condition of plant and machinery are responsible for closure of many mills in the country.

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Central Government has also provided inland transport subsidy for sugar export. Dual Pricing System is adopted in the Indian sugar industry, which includes sugar price in Public distribution system and the free sale sugar price.

Edible oil
The growth of the Rs. 250 billion edible oil industry in India has been somewhat stagnant at around 5% per annum. NDDB has emerged as a major player in the sector with its "Dhara" brand of edible oil. Even small growers and co-operatives having crushing units or solvent extraction units have started branding their products. In Edible oils, National Dairy Development Board (Anand), ITC Agro-Tech (Secunderabad) , Marico Industries (Mumbai), Ahmed Mills, (Mumbai) are the major players. The main issues in the edible oil segment is the rising cost of raw materials. Raw material cost account for 70 per cent of sale price.

Alcoholic Beverages
The alcoholic beverages industry in India is generally divided into two main categories-Industrial Alcohol and Potable Alcohol. The price stability throughout the year has contributed to the increase in domestic liquor sales. United Breweries Ltd, Shaw Wallace, MC Dowell & Co Ltd (part of the UB Group) Radico Khaitan, Seagram India Ltd are among the familiar names in the alcoholic beverage industry in the country. The Indian wine market, estimated at 5 lakh cases annually, has witnessed robust 30% growth over the past few years. Several Indian brands have made inroads into the foreign markets including British market.

Malted Food & Health Beverages

The Rs. 14.4 billion malted foods market is composed of two segments - brown and white. Malted beverages with nutritional attributes control around 70% of the total market and energy drinks (brown beverages) account for the rest. The malted food drink industry is dominated by few players. These include brands such as ' Horlicks, 'Complan' and 'Viva', which are mainly known as white beverages. 'Boost', 'Bournvita', 'Milo' and 'Maltova' on the other hand are classified as brown drink. The consumption pattern of malted beverages differs according to usage patterns across geographic zones

MILK AND DAIRY PRODUCTS

India is the largest milk producing country with production of about 92 million tonnes. Efficient production and marketing can bring about more than 200 per cent value addition in the Indian dairy segment. The National Dairy Development Board (NDDB) is a major player in the market with its major brand, Amul. Leading brands like Amul, Nestle, Mother Dairy and Britannia are in the race to tap the growing market. The milk and dairy products segment is set for up gradation of cold-storage chains for expansion.

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Mother Dairy brand through retail outlets across the country in addition to its own 300 outlets with provision of cold storage and cold chains.

Rising standards of living and popularity of convenience foods, the industry is expected to witness strong long-term demand growth potential.

Confectionary Industry
The entire market can be divided into 7 major categories, namely Hard Boiled Candies (HBC), Toffees, Eclairs, Chewing gums, Bubble gum, mints and Lozenges. It is dominated by 2 major players, Cadbury India Ltd and Nestle India Ltd, which together account for about 90% of the total chocolate market. The perishable nature of the product and the fact that India lacks a cold chain distribution network are among the major problems that inhibit market expansion. The private dairies have raised the prices including the prices of Skimmed Milk Powder (SMP), the essential ingredient for manufacturing milk chocolates and ice cream mixes in addition to biscuits and confectionery products.

Study on TEA Industry

Tea has brought cheer to people across the world for over 4500 years. Chinese first drank it for its medicinal value, and later, from the third century onwards, as a refreshing beverage. India has a vast domestic market. The Industry has achieved a production of 878 million kg in 2005 from 820.5 million Kg in 2004 with a growth of about 7 percent. Tea plantations in India are concentrated in the North-East (Upper Assam, West Bengal) and the South (Kerala, Tamil Nadu). Tea trading in the domestic market is done in two ways-auction and private selling

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Tea imports surged from a mere 7 million kg in 2003 to whopping 30 million kg in 2004. Lower availability of tea in the domestic market may continue in short run, as tea production falls in January seasonally Assam produces around 53 percent of the country's total production, but also employs more than 10 percent of the states work force or around 12 lakh people.

Tea Cultivation and Production Process

Rainfall: More than the total amount, the distribution of rainfall matters a lot for sustained high yield of tea throughout the season. Temperature and RH: Temperature affects tea yield by influencing rate of photosynthesis and controlling growth and dormancy. In general, the ambient temperature within 13C and 28-32C is conducive for growth of tea Day length: Day length influences growth and dormancy in tea bushes. Soil: Tea grows well on high land well drained soils having a good depth, acidic pH in the range 4.5 to 5.5 and more than 2% organic matter

OPPORTUNITIES AND PROJECTION

The Food and Beverage Industry is projected to have overall growth between 8% -8.5 % The sectors which are projected to achieve excellent growth of 20% and above are Semi Processed/Cooked Ready to eat (22%), Ice-Cream(20%), Edible/Vegetable oil (20%),Wine(22%) . Development of rural infrastructure, rural extension services, agro-based and food processing industries have been given high priority. The process of setting up of Food Parks in various key locations of the country with the involvement of the various state governments and other allied institutions is on.

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