Image Courtesy : Horsefeathered
Aptly recognized as the sunrise industry, providing vital linkages between the two pillars of our economy- manufacturing and agriculture this industry has undergone a significant transformation. Indian food industry has witnessed strong growth over the past few years and grown to become the second largest producer of food next to China and India has the potential of becoming the biggest producer in the years to come. Food production in India is likely to double in the next ten years. With a turnover of $110 billion, the Indian food industry accounts for 35 per cent of the Indian food market, and has been growing at a better rate of 14 per cent in the last few years according to the National Restaurant Association of India (NRAI).
Factors contributing to growth:
- Availability of raw materials, one being India is the largest producer of wheat and rice, coconuts, ginger, cashew nuts, turmeric and black pepper is widely grown across different parts of the country. Meat and poultry has also gained popularity due to the emergence of producers that have integrated breeding, feed milling, contract growing and marketing facilities for improved productivity. Meat, fish, and poultry are in rural areas as they are easily affordable and provide necessary nutrients.
- Fastest emerging hub of processed food
- Considered the largest market for organic food consumption worldwide as per research by RNCOS report titled “’Indian Organic Food Market Analysis”.
- Its 350 million strong urban middle class with its changing food habits poses a huge market for agricultural products and processed food
- The relatively low-cost but skilled workforce can be effectively utilised to set up large, low-cost production bases for domestic and export markets
- Government assistance by setting us modernized food processing units, creation of infrastructure, support for research and development and human resource development
- 100% Foreign Direct Investment (FDI) allowed and this is poised to hit US $ 3 billion in the coming years
- Government is working on the concept of Agri zones and the concept of mega food processing parks, developing integrated cold chains, modernization of markets, quality control laboratories and abattoirs.
Challenges in the food processing market:
Supply side bottlenecks: Small and isolated marketable surplus due to fragmentation holdings, low farm productivity, high season ability, perish ability and intermediation result in lack of distribution on supply and quality hence affect the processing and exports.
Bottlenecks in Infrastructure: More than 30 per cent of the produce from farm gate is lost due to inadequate cold chain infrastructure covering only 1% of the total F&V’s production and inadequate logistics. About 80 per cent of the 217 lakh tonnes cold storage capacity is engaged by potatoes while other F&Vs account for only 0.2 per cent.
Deficiencies in the regulatory environment: Lack of integration & clarity: Numerous laws, under the jurisdiction of different ministries and departments, govern food safety and packaging. The multiplicity of legislation leads to contradictions in specifications, conflicting approach, lack of co-ordination and administrative delays.
- Ruchi Soya Industries, India’s leading food and agro-based FMCG player, has inked a joint venture (JV) with J-Oil Mills Inc and Toyota Tsusho Corporation (TTC), both from Japan. The JV plans to start supplying products to the institutional customers by the end of 2013
- Mini Melts has tied up with HoneyBee Amusements for a foray in to India’s US$ 417.59 million organised ice cream market
- ITC will invest US$ 167.03 million in food and consumer goods sector in India in the next 2-3 years
- Costa Coffee plans to add 200 more outlets with an investment of US$ 33.41 million by 2015, to expand its presence in India
- Cargill will invest about US$ 66.80 million to set up a corn milling plant in Karnataka, and another US$ 16.70 million on expansion of capacity of existing edible oil plants, as per Siraj Chowdhury, Chairman, Cargill India
- Twinings India, a subsidiary of the UK-based Associated British Foods, is gearing up to bring malted drink brand Ovaltine to India. The tea major has earmarked US$ 8.36 million as investment for this fiscal and expects to make its top-line grow five times in the next three years
Food processing industry in one of the largest industries in India ranking the country fifth in production growth, consumption and export. The total value of Indian food processing industry is expected to touch US $ 194 billion by 2015 from the value of US $ 121 billion in 2012 according to the Indian Council of Agricultural Research (ICAR).
The agri processed foods exports in India shot up 63% to set a record at US$ 16.96 billion in the first 10 months of 2012-13, as compared to the corresponding period of last year, according to data compiled by Agricultural and Processed Food Products Export Development Authority (Apeda).
The packaged food segment is now expected to grow 9 percent annually to become a US $100.19 billion industry by 2030, dominated by milk, sweet and savoury snacks and processed poultry among the other products, according to the report on India as an agriculture and high value food powerhouse by 2030 by McKinsey.
The food processing industry has witnessed FDI investments worth US$ 1,811.06 million during April 2000 to March 2013, according to the latest data published by Department of Industrial Policy and Promotion (DIPP). India surely has the potential to be a leading global food supplier if it employs the right marketing strategies and creates an efficient supply chain.