India's Market Opportunities: For Imported Fresh and Processed Foods

Department of Agriculture and Food Western Australian Trade O ce India
Bulletin: 4770 ISSN: 1833-7236 May 09
Indias market opportunities

for imported fresh and processed foods
Report Prepared by MADRAS CONSULTANCY GROUP, CHENNAI
Copies of this document are available in alternative formats upon request. 3 Baron-Hay Court South Perth WA 6151 Tel: (08) 9368 3333 Email: enquiries@agric.wa.gov.au Web: www.agric.wa.gov.au
For further information please contact: Western Australia Trade OfficeIndia 93, Jolly Maker Chambers No. 2, Nariman Point Mumbai 400 021 Tel: +91 (22) 6630 3973 Fax: +91 (22) 6630 3977 Web: www.dsd.wa.gov.au Department of Agriculture and Food, Western Australia 3 Baron-Hay Court South Perth WA 6151 Tel: +61 (8) 9368 3333 Fax: +61(8) 9367 7389 Web: www.agric.wa.gov.au
Disclaimer Whilst every care has been taken in compiling the information in this report, the Department of State Development, the Department of Agriculture and Food, Western Australia and its contractors neither warrant nor represent that the material published herein is accurate or free from errors or omissions. To the extent permissible by law the Department of State Development, the Department of Agriculture and Food, Western Australia and its contractors shall not be responsible or liable for any errors, omissions and misrepresentations made herein. Copyright Western Australian Agriculture Authority, 2009
Indias market opportunities for imported fresh and processed foods

Table of Contents
Page
1. Introduction ........................................................................................................................ 1.1 Background ................................................................................................................ 1.2 Objective .................................................................................................................... 1.3 Scope of work ............................................................................................................ 1.4 Research Methodology .............................................................................................. 1.5 Products covered ....................................................................................................... 1.6 Glossary of terms ....................................................................................................... Executive Summary ........................................................................................................... 2.1 Overview .................................................................................................................... 2.2 Import trends .............................................................................................................. 2.3 Distribution channels and logistics ............................................................................. 2.4 Duties ......................................................................................................................... 2.5 Market entry strategy: India ....................................................................................... Overview of the Indian Agriculture and Food Processing sectors ............................... 3.1 Agriculture .................................................................................................................. 3.2 Indian food processing sector .................................................................................... 3.3 Overview of production and consumption in major sectors ....................................... 3.4 Key drivers and trends ............................................................................................... 3.5 Investment opportunities ............................................................................................ Current status and trends in Indias imported food sector ........................................... 4.1 Current import scenario ............................................................................................. 4.2 Key drivers and trends ............................................................................................... 4.3 Major segments of imported food products ............................................................... 4.4 Challenges faced ....................................................................................................... Overview of the food retail sector in India ...................................................................... 5.1 Growth of retail in India .............................................................................................. 5.2 Evolution of food retail in India ................................................................................... 5.3 Retail models in India: Current and emerging ........................................................... 5.4 Growth in imported food ............................................................................................ 5.5 Profile of food retail stores in India ............................................................................ Distribution structure, logistics and infrastructure development ................................ 6.1 Introduction ................................................................................................................ 6.2 Distribution structure .................................................................................................. 6.3 Hotels and restaurants ............................................................................................... 6.4 Logistics ..................................................................................................................... 6.5 Physical distribution structure .................................................................................... 6.6 Cold storage ............................................................................................................... 1 1 1 1 1 2 2 4 4 4 8 9 9 13 13 13 15 30 31 32 32 32 33 46 47 47 48 49 50 51 52 52 52 55 55 55 56
2.
3.
4.
5.
6.
7.
Pricing structure and tariffs .............................................................................................. 58 7.1 Tariffs and duties of imported foods .......................................................................... 58 7.2 Pricing structure of imported foods ............................................................................ 60 Regulatory framework and import procedure ................................................................. 66 8.1 Regulatory framework ................................................................................................ 66 8.2 Import procedure and documentation ........................................................................ 70
8.
List of Tables
Page
Table 1.1 Interviews completed ...................................................................................................... Table 1.2 Abbreviations used in the report ..................................................................................... Table 2.1 Import duties on select food products ............................................................................ Table 2.2 Target product segments ................................................................................................ Table 3.1 Food grains production, 200508 (million tonnes) ......................................................... Table 3.2 Indian Food Sector: Market size, 200607 ..................................................................... Table 3.3 Number of units in the food processing sector ............................................................... Table 3.4 Major food processing sectors ........................................................................................ Table 3.5 Production of fruits and vegetables (million tonnes) ...................................................... Table 3.6 Meat production, 200607 (million tonnes) .................................................................... Table 3.7 Fish production, 200106 (million tonnes) ..................................................................... Table 3.8 Sea food processing: Industry structure ......................................................................... Table 3.9 Sea food processing units in select states ..................................................................... Table 3.10 Major players in the marine and fish industry ............................................................... Table 3.11 Market size of dairy products (US$ billion) ................................................................... Table 3.12 Milk production and per capita availability, 200006 .................................................... Table 3.13 Growth rates of milk and dairy products, 200607 (organised sector) ......................... Table 3.14 Major players, brands and products ............................................................................. Table 3.15 Major types and brands of chocolates .......................................................................... Table 3.16 Biscuits, production trends (organised sector), 200508 (million tonnes) ................... Table 3.17 Major players and brands ............................................................................................. Table 3.18 Major players and their market share ........................................................................... Table 3.19 Major players and flavours ........................................................................................... Table 3.20 Olive oil consumption and growth estimates, 20062012 (tonnes) ............................. Table 4.1 Summary of import data, 200507 ................................................................................. Table 4.2 Major fruits imported, 200708 (US$ million) ................................................................. Table 4.3 Prices of select fruits and brands ................................................................................... Table 4.4 Major vegetables imported, 200708 (US$ million) ....................................................... Table 4.5 Major meat products imported, 200708 (US$ million) .................................................. Table 4.6 Major meat and marine products imported, 200708 (US$ million) ............................... Table 4.7 Prices of select brands of meat and fish products ......................................................... Table 4.8 Major dairy products imported, 200708 (US$ million) .................................................. Table 4.9 Prices of select brands and dairy products .................................................................... Table 4.10 Prices of select brands of pasta products .................................................................... Table 4.11 Major confectionery products imported, 200708 (US$ million) .................................. Table 4.12 Prices of select brands of confectionery products ........................................................ Table 4.13 Major processed fruits and vegetables imported, 200708 (US$ million) .................... Table 4.14 Prices of select brands of processed fruits and vegetable products ............................ Table 4.15 Import of honey, 200708 (US$ million) ....................................................................... Table 4.16 Prices of select brands of honey .................................................................................. Table 4.17 Import of olive oil, 200708 (US$ million) ..................................................................... Table 4.18 Prices of select brands of olive oil ................................................................................ Table 5.1 Small convenience stores (Kirana stores) and hawkers ................................................ Table 5.2 Types of organised retailers ........................................................................................... Table 5.3 Profile of select retail stores ........................................................................................... Table 6.1 Transport infrastructure in India ...................................................................................... Table 6.2 SKU maintained by an importer ...................................................................................... Table 6.3 Sector-wise distribution of cold storage units, 2008 (nos) .............................................. Table 6.4 Commodity-wise distribution of cold storage units, 2008 (nos) ...................................... Table 7.1 Import duties on select food products ............................................................................ Table 7.2 Custom duty for imported apples ................................................................................... Table 7.3 Pricing structure for apples and olive oil ......................................................................... Table 8.1 Time taken for clearance of imported food at the port ................................................... Table 8.2 Approximate charges levied by clearing and forwarding agents .................................... 1 2 9 10 13 14 15 16 16 18 19 20 20 21 21 22 22 23 25 26 27 29 29 30 34 36 36 37 37 38 38 40 40 41 42 42 43 44 45 45 46 46 49 49 51 52 53 57 57 59 60 61 73 74
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List of Figures
Page
Figure 2.1 Trends in the import of fruits, 200207 (US$ million). .................................................. Figure 2.2 Trends in the import of meat and marine products, 200207 (US$ million). ................ Figure 2.3 Trends in the import of dairy products, 200207 (US$ million). ................................... Figure 2.4 Trends in the import of confectionery, processed F&V and other processed food, 200207 (US$ million). ................................................................................................. Figure 2.5 Distribution structure for imported food products. ......................................................... Figure 3.1 Market size and composition of the processed fruits and vegetables (US$ billion). .... Figure 3.2 Egg Production Trends, 200207 (billion numbers). .................................................... Figure 3.3 Market size and composition of fish and marine products (US$ billion). ...................... Figure 3.4 Composition of dairy products (US$ billion). ................................................................. Figure 3.5 Confectionery market, 200407 (US$ million). ............................................................. Figure 3.6 Confectionery Market Segmentation: Share, by volume, 200607 (%). ....................... Figure 3.7 Bakery Products: Market Share, 200506 (By Value). ................................................. Figure 3.8 Consumption of biscuits across regions (% share). ...................................................... Figure 3.9 Biscuit: Import and Export (tonnes). .............................................................................. Figure 4.1 Import of fruits and vegetables (US$ million). ............................................................... Figure 4.2 Import of meat products (US$ million). ......................................................................... Figure 4.3 Import of marine products (US$ million). ...................................................................... Figure 4.4 Import of dairy products (US$ million). .......................................................................... Figure 4.5 Import of pasta products (US$ million). ......................................................................... Figure 4.6 Import of confectionery (US$ million). ........................................................................... Figure 4.7 Import of juice, sauce and jams (US$ million). ............................................................. Figure 4.8 Import of natural honey (US$ million). .......................................................................... Figure 4.9 Import of olive oil (US$ million). .................................................................................... Figure 5.1 Retail market in India (US$ billion). ............................................................................... Figure 5.2 Retail market by sector, 2008 (%). ................................................................................ Figure 5.3 Organised retail market by sector, 2008 (%). ............................................................... Figure 5.4 Growth in imported food, 200508 (US$ million). ......................................................... Figure 6.1 Distribution structure for horticultural products. ............................................................ Figure 6.2 Distribution structure for frozen meat/fish/cheese and butter. ...................................... Figure 6.3 Distribution structure for processed food products within port cities. ........................... Figure 6.4 Distribution structure for processed food products outside the port cities. ................... 5 5 6 7 8 17 19 20 21 24 24 25 26 27 35 37 38 39 41 42 43 44 45 47 48 48 50 52 53 54 54
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List of Appendices
Page
Appendix I. Major players in the food processing sector and products .......................................... Appendix II. Cold storage tariffs ..................................................................................................... Appendix III. Customs duty on select imported food products ....................................................... Appendix IV. Conditions of import of select fruits from Australia ................................................... Appendix V. Inspection and fumigation fees for fresh fruits and vegetables .................................. Appendix VI. Regulatory agency contacts ...................................................................................... Appendix VII. Select list of importers/distributors in India .............................................................. 76 77 78 79 80 81 83
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Madras Consultancy Group
1. Introduction
1.1 Background
Western Australian Trade Office, India, in partnership with the Department of Agriculture and Food, Western Australia (DAFWA), has commissioned Madras Consultancy Group to prepare a publication titled Indias Horticulture and Food Processing SectorMarket Opportunities for Imported Products.
1.2 Objective
The objective of this report is to provide an understanding of Indias horticulture and food processing sectors and outline a market entry strategy for Western Australian exporters.
1.3 Scope of work

The study focuses on the different aspects associated with the growth and prospects of the imported foods market in India and it reviews: An overview of the Indian horticulture and food processing sector Current status and trends in Indias imported food sector with focus on products that are highly imported Import of food products and countries of origin Overview of the food retail sector in India Distribution structure, logistics and infrastructure development Pricing structure and tariffs Regulatory and policy framework in India.
1.4 Research Methodology

The research methodology comprised primary research and was supported by in-depth secondary and internet research. Primary research comprised personal interviews with some of the leading importers, distributors, food chains, institutions and government departments. The number of face to face interviews completed is shown below in Table 1.1. The field research was conducted by MCGs well established team of consultants and researchers in six cities, viz. Bangalore, Chennai, Hyderabad, Mumbai, New Delhi and Pune.
Table 1.1 Interviews completed Category Importers/distributors Food chains/stores Institutions (hotels) Associations and Others Total Nos 50 19 18 7 94
Secondary research was drawn from multiple sources such as the government publications, trade journals and white papers, industry association publications, press reports and features, external libraries and MCGs extensive library cum database. Intensive internet search and analysis was also undertaken.
1.5 Products covered

The products which are covered in this report include: Fruits Vegetables Fresh and processed meat and fish Dairy products Cheese Butter Ice-cream Processed fruits and vegetables Juice Jam Sauces Confectionery Honey Olive oil
1.6 Glossary of terms

Table 1.2 Abbreviations used in the report ACD APEDA APHIS CAGR CCFS CFTRI CIF CST CVD DA DAHD DGFT FDI FEMA FPO FSSA Additional Custom duty Agricultural and Processed Food Products Export Development Authority Animal Plant Health Inspection Service (APHIS) Compound annual growth rate Central Committee For Food Standards Central Food Technological Research Institute Cost, Insurance and Freight Central Sales Tax Countervailing duty Documents against acceptance Department of Animal Husbandry and Dairying Director General of Foreign Trade (DGFT) Foreign Direct Investment Foreign Exchange Management Act Fruit Products Order Food Safety and Standards Authority
Table 1.2 Continued FTA g GDP GRDI HACCP HUL IBMA kg LC OGL OIE MNCs MOFPI MPEDA MRLs MRP NOC PFA PQ RBI SIL VAT Free Trade Agreement grams Gross Domestic Product Global Retail Development Index Hazard Analysis Critical Control Points Hindustan Unilever Limited Indian Biscuit Manufacturers Association kilograms Letter of Credit Open General Licence Office International Des Epizooties Multinational corporations Ministry of Food Processing Industries The Marine Products Export Development Authority Maximum Residue Limits Maximum Retail Price No Objection Certificate Prevention of Food Adulteration Act Plant Quarantine Reserve Bank of India Special Import Licence Value Added Tax
2. Executive Summary
2.1 Overview
Though the Indian economic reform process commenced in 1991, it is only in the last five to seven years that the countrys GDP has accelerated well past the 7 to 8 per cent per annum growth rate. There is clear evidence of discernible increase in purchasing power in many parts of the country and rising affluence in many urban pockets. Globalisation, urbanisation, relaxation of import policies, rising income, growth of organised retailing, economic growth, impact of visual media and changing lifestyles and food habits have opened the doors for the entry of imported food products from across the globe. With increasing propensity to spend, the Indian urban consumer now has the willingness and means to try new products. Today, retail outlets ranging from small grocery stores to large retail chains in most urban cities sell imported food products. From Washington apples and Australian Kiwifruit to Swiss chocolates, French cheese and Italian pasta, a wide variety of imported products are available in the Indian market. Apples, pears, chocolates, juices, pasta, olive oil, sauces and salad dressings are some of the prime categories of imported products. The recent global financial crisis has cast its shadow over the Indian economy. However, the Indian economy is expected to weather the storm much better than its compatriots thanks to the well diversified and strong domestic economy and appropriate monetary and fiscal policy responses from the Central Government. The economy is expected to close the fiscal year 200809 with a GDP growth rate around 6.0 per cent and forecasts for 200910 are in a similar range. The economy is expected to revert to a higher growth trajectory by 2010. Recent data tends to suggest that the impact of the downturn on the domestic fast moving consumer goods sector has been much lower than other sectors. Brand owners are also making strong forays into the vast rural hinterland creating fresh demand for their products and services. The negotiations between India and Australia to sign a FTA will further create new opportunities for Western Australian exporters.
2.2 Import trends

The usage of imported products that started as a fad some decades back has now become a habit amongst a small but rapidly growing urban populace. Import of food products has now become one of the well traded segments. Growing at a CAGR of 23 per cent, Indias total import of food products reached US$3.6 billion in 200708, up from US$1.3 billion in 200203.
2.2.1 Horticulture
Fruits
Imported fruits have made successful inroads into the Indian markets and are well accepted by Indian consumers. Indias import of fruits in 200708 was US$202.8 million, an increase of 26 per cent over the previous year. Despite being priced higher than the Indian varieties, the major selling points for imported fruit are that they are of higher quality than local produce, well graded, attractively packed and have better appearance. Apples top the list of fruits imported followed by oranges, grapes and pears. USA, China and Chile are the major exporters of apples to India. It is worth noting that despite the long distance and longer transit time, Chile has emerged as the third largest exporter of apples to India. The peak season for imported fruits is during the off season for domestic crops.
250 200 150 100 52.13 50 0 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
* Excluding nuts. Source: Commerce.nic.in Figure 2.1 Trends in the import of fruits, 200207 (US$ million).
160.9
202.8
85.14 112.6 66.37
Vegetables
Indias import of vegetables was valued at around US$2.92 million in 200708, up from US$0.86 million in 200607. However, the import of vegetables is still small compared to fruits, with the majority being imported from the neighbouring countries.
2.2.2 Meat and marine products

Trends in import of meat and marine products are shown in Figure 2.2.
40 35 30 25 20 15 10 5 0
2002-03 2003-04 2004-05 Meat 2005-06 Fish 2006-07 2007-08
0.46 8.19 1.31 1.14 2.54 11.32 14.68 23.33 24.63 35.21
0.42
0.69
* Meat and marine products include both fresh and processed. Source: Commerce.nic.in Figure 2.2 Trends in the import of meat and marine products, 200207 (US$ million).
Meat
Indias import of meat is negligible and stood at only US$2.54 million in 200708. The meagre import of meat can be attributed to two factors; government restriction and the Indian mindset. High cost of the imported meat products is also a hindrance to its growth. But there is a gradual increase in the import of processed meat products. Zwan and Keells are some of the popular brands of frozen meat products.
Marine
Marine products imports in 200708 Indias import was valued at US$35.21 million. According to MPEDA, Indias import of marine products is not meant for domestic consumption but is mostly processed and re-exported. Chilled fish accounts for nearly 64 per cent of the total imports of marine products followed by frozen shrimps, prawns, crabs, cuttle fish and tuna. Processed marine products are also gaining acceptance. Ayyam and Farmland are the popular brands of frozen fish products.
2.2.3 Dairy products

Owing to the governments ban on the import of dairy products from certain countries including Australia, the import witnessed a decline of nearly 40 per cent, from US$23.61 million in 200607 to US$14.58 million in 200708; however, this is likely to improve with the recent lifting of the ban on Australian dairy products.
30
28.21
25 20
23.61
14.58
15 10 5 0
12.79
11.51 7.89
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
* Dairy products include cheese and curd, butter, yoghurt, milk and cream, whey, ice-cream. Source: Commerce.nic.in Figure 2.3 Trends in the import of dairy products, 200207 (US$ million).
Cheese, butter, whey, yoghurt and ice-cream are the some of the major dairy products that are imported with cheese being the most popular. The import of cheese reached US$4.79 million in 200708. Denmark, Netherlands, France and Italy are the major sources of imported cheese. Kraft, Happy cow and laughing cow are some of the popular brands. Whey, which is a by-product of cheese, is another major product of import which is sourced primarily from USA, France and Denmark. Import of whey was US$4.1 million in 200708. Indias import of yoghurt was valued at US$0.28 million in 200708, with Spain and France being the major sources. With increase in the consumption of ice-creams, the import of ice-creams reached US$0.43 million in 200708 from just US$0.08 million in 200506. London Dairy, a recent entrant in the Indian market has gained popularity.
2.2.4 Confectionery, processed fruits and vegetables and other processed food
Figure 2.4 shows the trend in import of Confectionery, processed fruits and vegetables and other processed foods.
40 35 30 25 20 15 10 5 0 Confectionery Processed F&V Other processed food 2002-03 7.16 11.03 11.41 2003-04 9.94 9.55 8.41 2004-05 12.2 12.71 10.51 2005-06 15.47 14.89 11.01 2006-07 19.51 22.16 9.27 2007-08 31.65 29.78 20.14
* Processed F&V includes juices, jams and sauces. * Other processed food includes pasta, honey and olive oil. Source: Commerce.nic.in Figure 2.4 Trends in the import of confectionery, processed F&V and other processed food, 200207 (US$ million).
Confectionery
Imported confectionery, an early entrant to the Indian market, continues to be well sought after and is now widely available. While the import of chocolate confectionery increased by 39 per cent from 200506 to 200708, the import of sugar confectionery increased by 51 per cent during the same period. Imported confectionery has gained wide appeal owing to distinctive taste, attractive packaging and extensive distribution networks. While chocolate confectionery is primarily imported from China, Singapore, UAE, Malaysia, UK and Switzerland, nearly 53 per cent of the sugar confectionery is imported from China. Toblerone, Snickers, Lindt, Mars and Bounty are some of the few well known brands in the Indian market.
Processed fruits and vegetables

Changing food habits, increasing number of nuclear families and working women has increased the demand for processed fruits and vegetables such as jam, juice, ketchups, sauces and dressings. In 200708 the import of juices, sauces and jams were US$16.8 million, US$11.4 million and US$1.5 million respectively. China, Brazil, USA, UAE and Malaysia are the major exporters of juices to India. Sauces are mostly imported from China, USA, Netherlands and UK. Jams are imported from various parts of the world such as Belgium, France, Australia, China, Turkey, and UK. While Tang is the most popular juice brand, Tabasco and Dana are the well known sauce and jam brands respectively.
Pasta
Driven by the rising attraction to Italian cuisine and easiness of preparation, pasta has emerged as one of the most popular imported food products. Import of pasta increased from US$2.5 million in 200607 to US$8.5 million in 200708. The lack of major domestic pasta manufacturers has facilitated the entry of foreign pasta brands. Pasta is mainly imported from Italy. San Remo, Barilla and Agnesi are some of the better known brands.
Honey
The market for imported honey is growing rapidly in the country. Indias import of natural honey was US$2.9 million in 200708, up from US$0.5 million in 200506. China is the largest supplier of natural honey to India and accounts for around 83.5 per cent of Indias total import of natural honey. Wescobee and Airborne are popular imported brands.
Olive oil
Olive oil is another product that is gaining market acceptance in recent years, largely owing to the new obsession towards nutritious food and the growing popularity of Italian food. Riding on high health benefits, the import of olive oil rose from US$5.24 million in 200506 to US$8.72 million in 200708. Figaro and Leonardo are the leading imported brands. The recent reduction of the import duty rate on olive oil to zero per cent will be a big advantage to Western Australian exporters.
2.3 Distribution channels and logistics

The channels of distribution vary based on the type of products imported into India. The importer stores perishables and other products that require refrigeration in a cold storage facility. Usually the cold storage is rented, although some importers have their own warehouses equipped with cold storage. The importer then sells the products to several regional distributors who in turn distribute to the retail stores and institutions. In certain cases the importer directly sells to the retail stores. The broad distribution structure is as per Figure 2.5.
Importer
Cold storage
Distributor
Retailer/ Institutions
Figure 2.5 Distribution structure for imported food products.
Managing the transportation and logistics costs has become increasingly strategic and complex for the importers and distributors. Container handling and cold storage facilities are available at all major ports. After the container with imported food products arrives at the port, the standard formalities need to be completed before they are cleared for further transportation by the importer. There is some evidence of delays in the customs clearance processes and it was reported during the study that the clearance of a consignment at an Indian port takes about 710 days, on an average. After obtaining clearance from the ports, the importer generally transports the goods to warehouses located near their central operations. Consignments are then transported to distributors in their respective locations and they in turn despatch the products to the retail outlets.
2.4 Duties
India, traditionally has maintained high tariffs and import restrictions on food items. The basic duties are levied while importing products into India and these include: Basic dutyThe Government of India considers the basic import duty as the main levy. This duty can either be a percentage rate applied to the value of the goods (valued at Cost, Insurance and Freight (CIF)) or a specific rate based on unit of measurement. Additional duty of customsAlso known as countervailing duty, it is calculated on the assessable value of imports plus the basic customs duty. This is equivalent to the rate of excise duty that would have been charged had the imported item been manufactured in India. Education CessThis is charged as a percentage of all duties and taxes levied by the central government except the additional duty of customs. Special additional dutyThis duty is levied on the total value of goods, computed as the value at CIF, along with the basic customs duty and the additional duty of customs.
Apart from these four duties, additional levies such as antidumping duties and safeguard duties may also be applied. It may be noted that at present additional duty of customs and special additional duty are nil for most food products.
Table 2.1 Import duties on select food products Category Apples Fresh meat Fresh fish Yogurt, buttermilk, cheese and curd Butter, Diary spreads, Ghee, Butter oil, whey, ice-cream Fruit juices Pasta, Jams, Sauces Confectionery (chocolate and sugar) Natural Honey Olive oil (Virgin) * Actual duty is calculated on Assessable value, i.e. CIF + 1%. Total Customs Duty (%)* 52.015 36.497 31.209 31.209 36.497 41.906 36.497 48.086 68.955 0
Notes: 1. These rates have been compiled from Clearing and Forwarding agents and customs officials. 2. Import duties and taxes are subject to change without notice. It is strongly suggested that they be re-checked prior to the conclusion of any commercial agreement.
2.5 Market entry strategy: India

Any well thought of country strategy would need to take into account: products that can be exported from the country of origin food products that are in demand (a threshold level) in the destination country
current demand (volume and value) for the selected products and their future growth potential competition from other exporting countries and pricing local tastes and preferences local distribution systems and commercial practicesstrengths and limitations laws of the land (home and destination countries).
In the ensuing paragraphs, an attempt has been made to present strategic direction and options for entering the Indian market. These are alternatives and options for discussion and further detailed investigation would be necessary to firm up some of the actions.
Identifying target product segments and regions

Target product segments
The demand for select imported products is growing well in India and it would be beneficial to focus on these segments, shown in Table 2.2. This list is not exhaustive and depending on the volume of export planned, other product may be selected. (Refer import of food products.xls attached.)
Table 2.2 Target product segments Import value (US$ million) 200203 Citrus fruits Apples Pears and Quinces Apricots Plums and sloes Cheese Pasta Chocolate confectionery Sugar confectionery Juices Sauces and dressings Natural honey Source: Commerce.nic.in 0.26 10.50 1.07 0.03 0.05 1.80 5.15 5.25 1.91 9.39 0.77 3.67 200708 2.78 52.96 5.66 0.15 0.76 4.79 8.51 20.39 11.26 16.83 11.40 2.91 60.6 38.2 39.5 38.0 72.3 21.6 10.6 31.2 42.6 12.4 71.4 - 4.5 CAGR (%) 200207
Product
Target markets
Major markets for imported products in India are the large metros such as Ahmedabad, Chennai, Cochin, Bangalore, Hyderabad, Kolkata, Mumbai, New Delhi and Pune. There is also significant demand in other cities such as Bhubaneshwar, Bhopal, Coimbatore, Chandigarh, Jaipur, Lucknow, Nagpur and Vadodara and Vishakapatnam. It is also important to target major tourist destinations that attract overseas visitors, such as Goa, Kerala and Rajasthan. As imported food products are increasingly being used by four and five star hotels, a separate strategy needs to be worked out to reach the decision makers in these hotels.
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Distribution dimension
The success of any export initiative depends on finding the right distribution partner; clearly, in the Indian context appropriate due diligence needs to be carried out prior to the selection of importers or appointment of distributors. In India, the business of importing food products as well as their distribution is largely carried out by small and medium sized firms, usually managed by their respective owners. The structure of these private owned firms would be either incorporated as a private limited company, a partnership or a proprietorship. The financials of these companies are not available in the public domain and hence, an exporter needs to ensure that a secured payment mode is in place. In the long term, some of the strategic options that can be considered are to establish tie-ups with reputed partnersfor branded products, it might be worthwhile to explore tie-ups with medium and large size Indian companies in the food sector. While co-branding will help the Indian firms expand their product range, it will enable Western Australian products to gain easier consumer acceptance and market share.
Promotional strategy
The long term marketing objective could be to establish brand Western Australia in the mind of the Indian consumer and some of the options are: Set up an India centric website giving details about Western Australian products and where they are sold in India. Site visitors can be tracked and automated responses to inquiries can be generated. Buy databases of prospective customers such as hotels and send them direct mailers with relevant details and promotional messages. A limited advertising campaign to reach a larger audience and create awareness of Western Australian products, may be attempted, subject to the availability of funding. Taking part in major trade shows and expos in India, such as Food Pro and Aahar will help in promoting the products and establishing direct contact with the potential customers. Point of sale promotional materials in the stores to attract customer attention, is an inexpensive promotional tool in the Indian context; comments have been made by distributors and retailers that promotional materials would help. Organise annual meets in Western Australia for the top performers in the import and distribution businesses.
Commercial aspects
As securing the payment is of high importance in the Indian context, it would be preferable to operate with a confirmed and irrevocable letter of credit till the financial credibility of the importer is established. According to the trade in India, while processed food products are generally imported by opening a Letter of Credit (LC), fresh fruits are usually sold on a Documents against Acceptance (DA) basis. Importers very often demand supplies on a consignment basis, wherein the payment is made to the exporter after selling the fruits in the market. However, offering unsecured credit to Indian importers is fraught with grave risk
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Effective consolidation of cargo at the Australian end can facilitate export as importers do frequently face the problem of filling up a container load. Consolidation of cargo is one of the most practical options to save on too many intermediaries and freight charges, especially while developing and expanding in a new market. Consolidation of cargo eases the cash flow issues at the importers end. While consolidation of cargo from Australia has commenced, it needs to be more extensively adopted and this could lead to a much faster growth of Australian export of food products to India.
To conclude, the Indian economy is expected to continue in its growth trajectory over the next decade and will offer growing opportunities for marketing food products. As the domestic food processing industry is not yet well developed, there is significant potential to be exploited by processed food manufacturers elsewhere in the world. An entry into the Indian market has to be carefully orchestrated to ensure that it is a win-win situation for all stakeholders, viz Western Australian exporters, Indian importers, distributors, retailers and most importantly the Indian consumer.
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3. Overview of the Indian Agriculture and Food Processing sectors

3.1 Agriculture
India has traditionally been an agrarian society and agriculture is a key sector of the Indian economy. In the 1950s, the contribution of agriculture to the overall GDP was in the range of 51 per cent. However, growing emphasis on the industry and service sectors and changes in the Indian economy has resulted in a drop in the proportion of the agriculture sector. Today, agriculture contributes around 18 per cent to the GDP and accounts for about 15 per cent of the total exports. Nearly 58 per cent of the population still depends on agriculture for a livelihood. India is home to a broad spectrum of flora and fauna and of the total geographic area of 329 million hectares, the cultivable land in India is about 167 million hectares. Indias favourable climatic conditions and rich natural resources have helped India become the worlds largest producer of a range of commodities such as coconut, banana, mango, pulses, cashew nuts, ginger, turmeric and black pepper. Improved infrastructural facilities like refrigerated transportation, cold storage and packaging and new technology like IT and biotechnology, has helped the agricultural sector to develop more significantly in the recent years. In terms of global farm output, India ranks second and is the second largest producer of rice, sugar, wheat, cotton, fruits and vegetables in the world. In 200708, the production of food grains in India grew by 6.2 per cent to reach 230.7 million tonnes.
Table 3.1 Food grains production, 200508 (million tonnes) 200506 Food grains of which: Rice Wheat Source: CMIE 208.6 91.8 69.3 200607 217.3 93.3 75.8 200708 230.7 96.4 78.4
3.2 Indian food processing sector

The food processing industry is ranked fifth in terms of production, consumption, export and expected growth. Major products of the food processing sector include: processed fruits and vegetables; meat and poultry; milk and milk products; marine products; plantation crops; processed grain; bakery products; alcoholic beverages; high protein foods; ready-to-eat, ready-to-cook and other convenience food.
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Food processing in India is gaining equal importance as agriculture or any other industry and is vital to the Indian economy as it acts as a linkage between manufacturing industries and agriculture. Offering employment to around 1315 million people around the country, the food processing sector contributes about 14 per cent to the GDP. In 200607, the food processing sector was estimated at US$82.6 billion, growing at 13 per cent per annum. However, when compared to some of the developed countries, the Indian food processing sector is still in a nascent stage. For instance, the current level of fruits/vegetables processed is around 23 per cent as against 80 per cent in USA, Malaysia and other developed nations.
Table 3.2 Indian Food Sector: Market size, 200607 Particulars Food sector* Food processing sector Organised food processing sector * US$ billion 194.3 82.6 22.3
Includes fruits and vegetables, dairy products, fish and marine, meat and poultry, packaged foods, beer and wine. Source: Ministry of Food Processing Industries
In terms of employment generation, better price realisation for farmers, reduction in agricultural wastage and improvement in quality, the food processing sector ranks way ahead of other sectors of the Indian economy. The multiplier for the food industry is reported to be much higher than other industries such as power and telecom. Therefore, the rapid growth in the food processing industry has stimulated the growth of domestic market and trade on the international front. In order to boost the food sector, the Government of India has introduced the concept of mega food parks in the country. Catering to the entire range of food processing activities, food parks consist of groups of large, medium and small-scale food processing units. Facilities such as cold storages, warehousing, power and water supply are provided by the food parks, thus making it more affordable for small and medium scale units. The gap between the farmers and industries have also been closed in with the help of food parks by facilitating a firm buyback agreement between processing units located in the parks and the farmers. Various food parks are being set up by the Ministry of Food Processing Industries (MOFPI) across the country in states such as Andhra Pradesh, Tamil Nadu, Maharashtra, Punjab and Jharkhand. With better market orientation, food processing units are enabled to be cost effective and also have auxiliary units such as printing, packaging, transportation agencies, etc. The table below shows the number of food processing units in this industry.
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Table 3.3 Number of units in the food processing sector Food processing units Huller rice mills Modern rice mills Fruit and vegetable processing units Flour mills Sweetened and aerated water units Sugar mills Fish processing units Meat processing units Milk production units Solvent extract units Source: MCG Compilation Number 139 208 35 088 5 293 516 656 429 568 171 266 725
The food processing industry is dominated by the cottage industry sector, which accounts for 40 per cent of the total processed food market. The rest is shared by the small scale sector and the organised players, each accounting for almost 30 per cent of the market share. Small players in this industry have only a local or regional presence and use basic technologies for processing the food products. Some of the well established brands in the food processing industry include: Britannia Industries, Cadbury India Ltd, Pepsi Foods, ITC Ltd, Nestle India Ltd, Parle Products Ltd, etc. A detailed list of some of the major players and their products is provided in Appendix I.
3.3 Overview of production and consumption in major sectors

The food processing industry can be classified as primary, secondary and tertiary processing based on the processing involved in the conversion of raw material to finished products. While primary processing includes cleaning, grading, powdering and refining of agricultural produce, secondary processing consists of value addition to the basic product. Products that have passed through the final or tertiary stage of processing are the value-added branded products that are ready for final consumption. Around 60 per cent of the food units in India are engaged only in primary processing. The production base of secondary and tertiary processed foods in India is relatively low, thus resulting in low value addition. Of the total production, value addition to foods by processing is a mere 8 per cent and is expected to increase to 35 per cent by the end of 2025. A wide range of products comprise the Indian food processing industry as listed in Table 3.4.
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Table 3.4 Major food processing sectors Sector Fruits and vegetables Meat and poultry Fishery Dairy Bakery products Confectionery Beverages Packaged/convenience foods Products Pulps, concentrates, slices, frozen and dehydrated products, chips/wafers, etc. Frozen and canned products, egg powder Frozen and canned products Whole milk powder, skimmed milk powder, condensed milk, flavoured milk, ice-cream, butter, ghee, cheese, infant milk food, malted milk food Bread, biscuits, cornflakes, vermicelli, pasta, noodles, etc. Chocolates, sugar candies, bubble gum, chewing gum Alcoholic and Non-alcoholic (tea/coffee, Carbonated Soft Drinks and non-carbonated soft drinks) Ready-to-eat (jams, pickles/chutneys, ketchup, soup, snack foods) and ready-to-cook food
3.3.1 Fruits and vegetables

Almost all varieties of fruits and vegetables are grown in India due to the diverse agro-climatic zones in the country. India is today the worlds 2nd largest producer of fruits and vegetables next only to China. The total cultivated area of fruits and vegetables is about 12 million hectares (7 per cent of the total cultivation area) and the country produced about 206 million tonnes in 200607, accounting for about 10 per cent of the global production of fruits and 15 per cent of the global production of vegetables. The country witnessed an increase of 22.7 per cent over 200506, which was around 167.9 million tonnes as shown in Table 3.5.
Table 3.5 Production of fruits and vegetables (million tonnes) Production Fruits* Vegetables** Total Source: MCG Compilation * Includes Dry Fruits. ** Includes Roots and Tubers. 200405 52.8 108.2 161.0 200506 54.4 113.5 167.9 200607 69.7 136.3 206.0
Some of the main fruits (accounting for 7580 per cent of the total fruit production) and vegetables (accounting for 70 per cent of the total vegetable production) produced in India include mango, banana, citrus, guava, apple, potato, brinjal, tomato, cauliflower, onion, cabbage and tapioca. While India stands first in the production of cauliflower, the country ranks second and third in the production of onions and cabbages respectively. The production of onions stood at 8.3 million tonnes in 200708. Onions are used extensively throughout India, both as the primary constituent as well as with other spices and vegetables. India stands first in the production of bananas and in 200708 banana production was estimated at 17.3 million tonnesa world market share of about 20 per cent. Bananas are mainly consumed fresh in the country. However, the ripe fruit can be converted into an extensive range of products such as pulp, powder and dehydrated strips, while the raw fruit is generally processed into chips.
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Mango on the other hand is known as the king of fruits and is found growing all over India. In 200506, the production of mangoes in India was estimated at 12.6 million tonnes, an increase of 9.1 per cent over the previous year. This fruit is processed into a variety of products such as pulps, juices, concentrates, squashes, jams and pickles. India is the sixth largest producer and consumer of apples in the world and in 200506, the production of apples stood at 1.8 million tonnes. Production of apples in India largely takes place in the hilly Northern States of India and about 70 per cent of the crop is usually transported to and sold in Indias largest wholesale fruit and vegetable market at Azadpur in Delhi. Most of the apples produced in India are used for fresh consumption, with only small quantities used for processing into products such as apple juice, jelly or jam. Over the last few years, there has been a positive growth in the processed fruits and vegetables sector, particularly in fruit juices and pulps, dehydrated and frozen fruits and vegetable products, pickles, tomato produces, processed mushrooms, convenience vegetable spices and curried vegetables. The installed processing capacity for fruits and vegetables was valued at US$3.1 billion in 200607. Of the total processed fruits and vegetables, about 36 per cent is contributed by the organised sector and the rest of the processing is undertaken by the unorganised sector. While the organised sector largely produces products like juices and pulp concentrate, the unorganised sector mainly concentrates on the traditional areas of processed items like sauces, pickles and squashes.
3.5 3 2.5 2 1.5 1 0.5 0 2002-03 2006-07
3.1 1.7 1.1 2
1 0.6
Processed fruits & vegetables Processed unorganised
Processed organised
Source: Ministry of Food Processing Industries Figure 3.1 Market size and composition of the processed fruits and vegetables (US$ billion).
3.3.2 Meat and Poultry

Meat
According to the livestock 2003 census, India had a livestock population of 485 million, which is one of the largest in the world. India has about 36 000 slaughter houses, 10 modern abattoirs, 171 meat processing units, 7 bacon factories, modern pork processing units and a number of small poultry processing plants. India is the 7th largest producer of meat in the world and of the total world meat production of 285 million tonnes; India contributes to about 2.1 per cent. In 200607, the production of meat in India stood at 6.1 million tonnes.
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Table 3.6 Meat production, 200607 (million tonnes) Item Bovine Meat Pig Meat Sheep and Goat Meat Poultry Meat Total 200607 2.8 0.5 0.7 2.1 6.1
Source: Department of Animal Husbandry Dairying (DAHD)
When compared to other developed countries, the per capita consumption of meat is well below average. In India, the per capita consumption of poultry meat stood at 1.9 kg, whereas in the US it was 45.4 kg. While poultry, goat or lamb meat is largely consumed in the country, buffalo meat production is linked closely to the production of leather, a sector in which India holds the second position. Processing plants for meat may be fully or partially integrated. International standards for meat processing plants are laid out by the Office International Des Epizooties (OIE), Paris. About 10 totally integrated processing plants conforming to these standards have been setup in the country. These plants have rendering and effluent treatment plants and are certified with ISO9002, HACCP (Hazard Analysis Critical Control Points) and SGS as prescribed by OIE.
Poultry meat
Poultry meat is the fastest moving animal protein in the country and is considered the most economical source of animal protein. India is the ninth largest producer of poultry meat in the world. This sector has undergone a major change since the 1960s, from being a backyard occupation to an activity of great commercial significance. In 200607, poultry meat production stood at 2.1 million tonnes. Growth in urban population and an increase in per capita income are some of the major factors that have contributed to the expansion of poultry meat production. Private entrepreneurship and encouragement from the government are also some factors that have influenced the growth in this sector. In 1986, Western Hatcheries (part of the Venkateswara Group) were the first to set up a poultry processing unit in India. Substantial investments have been made thereafter in areas of hatching, breeding and processing, with poultry farmers rearing hybrid, high-yielding birds with significant support in terms of veterinary health services and improved poultry feeds. Today around 95 per cent of the total processed meat and poultry is contributed by the top 10 major players. Shalimar Super Foods, Venkateswara Hatcheries, Al-Kabeer, Godrej Agrovet, Allanasons, Al Barkat Exports, Suguna Poultry, Mark International, Prabhat Poultry and Vista Processed Foods are some of the major companies in the meat and poultry sector. While the export of poultry meat stood at US$1.6 million in 200607, import of poultry meat is almost nil in India. The main reasons for this include: high price difference; high import duties for certain products; high cost of refrigerated transportation; Indians prefer fresh meat than frozen/chilled meat.
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Eggs
In terms of production of eggs, India ranks fifth in the world, producing about 51 billion eggs per annum. The figure below shows the production trends of eggs in India over the last five years:
60 50 40 30 20 10 0 2002-03
Source: DAHD Figure 3.2 Egg Production Trends, 200207 (billion numbers).
39
40
45
46
51
2003-04
2004-05
2005-06
2006-07
When compared to developed countries, the per capita availability of eggs in the country is very small. For instance, Indias per capita availability of eggs stood at around 42 numbers per head per annum as against USA, Europe, Taiwan, Japan and Mexico, whose per capita availability was 300, 280, 358, 346 and 304 nos. per head per annum respectively. Unlike the developed countries, where eggs are an item of daily use, Indians have not completely adapted to consumption of eggs. This is mainly because of a low consumer propensity to make eggs a part of their daily diet and the lack of purchasing power in the lower income segments.
3.3.3 Marine products

India is endowed with rich fishery resources due to its long coast line of over 8 000 km, rivers and canals of 195 210 km and 2.2 million square km of exclusive economic zones. India boasts of a great potential in fish and fish products and is among the top ten producers in the world. The country is the 3rd largest producer of fish and 2nd largest producer of inland fish. With a contribution of around 1.5 per cent to Indias GDP and 5 per cent to the agricultural GDP, the countrys main marine products include: shrimp, fin fish, tuna, cuttlefish, octopus, squid, red snapper, mackerel, ribbon fish, lobster, cat fish and prawns. With a total production of 6.9 million tonnes, the market size of fish in 200607 stood at US$8.4 billion. Since 200102, inland fish production has risen steadily with the additional impetus given to salt water aquaculture in West Bengal, Orissa, Andhra Pradesh, Tamil Nadu and Karnataka. The world average availability of fish is about 12.1 kg per annum, while the per capita consumption of fish in India is around 4.7 kg per annum.
Table 3.7 Fish production, 200106 (million tonnes) Year 200102 200203 200304 200405 200506 200607 Source: DAHD Marine 2.9 3.0 2.9 2.8 2.8 3.0 Inland 3.1 3.2 3.5 3.5 3.8 3.9 Total 5.9 6.2 6.4 6.3 6.6 6.9
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Processing provides an opportunity for marine products and exotic fish and today conventional cleaning and cooking fish is slowly giving way to convenient products.
9 8 7 6 5 4 3 2 1 0
8.4
0.8
1.1
2002-03
2006-07
Market size
Processed fish & marine products
Source: Ministry of food processing industries Figure 3.3 Market size and composition of fish and marine products (US$ billion).
Over the last 50 years a number of infrastructural facilities for processing of marine products have been developed. With a number of processing plants, freezing units and cold storages, the sea food processing sector provides employment to a sizeable population in the country.
Table 3.8 Sea food processing: Industry structure Processing units Processing plants Freezing units Freezing capacity Cold storages Source: DAHD Unit No. No. Tonnes per day No. Qty 473 372 10,320 504
A great deal of effort is being taken to transform India into a centre for processed sea foods. All the coastal states have put up units to process fish, with Kerala having the highest number at 124.
Table 3.9 Sea food processing units in select states State Kerala Gujarat Andhra Pradesh Tamil Nadu Maharashtra West Bengal Orissa Karnataka Goa Source: DAHD No. of units 124 55 52 48 41 37 21 14 7
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Some of the key players in the industry are mentioned in Table 3.10.
Table 3.10 Major players in the marine and fish industry Companies Allanasons ASF Seafoods Bells foods marine division Deep Sea Products IFB Agro Pvt Ltd Sea Sparkle Sumero Source: Technopak Key products Pomfrets, seer fish, squids, prawns and cuttle fish Seafood Crab, cuttlefish, shrimps, squid, fish octopus Marine products Pomfrets, crabs, prawns and sea food Octopus, squid, crabs and tuna Pomfrets, crabs, prawns and sea food

Dairy is one of the main contributors to the Indian food processing industry. In 200607, the total market size of the dairy industry was valued at US$44 billion and is expected to reach US$91 billion by 2015. The processed dairy sector accounts for a major share of the dairy market at 73 per cent. Within the processed sector, the major contribution comes from the unorganised sector in the form of sweets, homemade ghee, yoghurt, etc. However, the organised sector of the dairy industry is growing faster than the unorganised sector.
Table 3.11 Market size of dairy products (US$ billion) Category Market size Processed 200203 35 24 200607 44 32
Source: Ministry of food processing industries

24 19
20 15 10 5 0 2002-03 2006-07
25
Processed organised
Processed unorganised
Source: Ministry of food processing industries Figure 3.4 Composition of dairy products (US$ billion).
From a milk deficient country in the early 1960s, India has today emerged as the worlds largest producer of milk. Milk sales proved to be the most lucrative for the Indian dairy market. The main factors behind this include: initiatives taken by the Operation flood programs in organizing milk producers into cooperatives; building infrastructure for milk
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procurement, processing and marketing and providing financial, technical and management inputs by the Ministry of Agriculture and Ministry of Food Processing industries to turn the dairy sector into a viable self-sustaining organised sector.
Table 3.12 Milk production and per capita availability, 200006 Year 200001 200102 200203 200304 200405 200506 200607 Production (million tonnes) 80.6 84.4 86.2 88.1 92.5 97.1 100.9 Per capita availability (gm/day) 220 225 230 231 233 241 245
Source: www.indiadairy.com
In addition to fluid milk, milk in India is converted into an assortment of traditional milk-based and other value-added products such as cheese, butter, yoghurt/curd, ice-creams and flavoured milk, milk powder, condensed milk, baby food and a wide variety of sweets.
Table 3.13 Growth rates of milk and dairy products, 200607 (organised sector) Products Liquid milkpackaged Ethnic sweets Milk powder Ghee Ice-cream Butter Cheese Flavoured milk Condensed milk Yoghurt Source: DAHD Growth rate (%) 510 > 10 < 5 5 6 1214 810 510 510 < 5 > 10
Of the total milk produced in India, about 35 per cent (in volume terms) is processed. While the unorganised sector processes about 22 million tonnes per annum, the organised sector (large scale dairy plants) processed about 13 million tonnes per annum. There are about 676 dairy plants in the organised sector run by cooperatives, private and government sectors registered with the Government of India and the State Governments. Some key players in the processed dairy sector are given in the Table 3.14.
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Table 3.14 Major players, brands and products Company Condensed milk Nestle India Ltd Baby food Milk powder Malted milk food Milkfood Ltd Glaxo SmithKline Gujarat Cooperative Milk Marketing Federation Ltd Cadbury India Ltd Heinz India Tamil Nadu Cooperative Milk Producers Federation Karnataka Cooperative Milk Producers Federation Limited (KMF) Punjab State Cooperative Milk Producers Federation Limited Source: MCG Compilation Ghee, ice-cream, Malted milk food Milk, Butter, Ghee, Cheese, Ice-cream Baby food Milk powder Malted milk food Malted food Milk, Ghee, Ice-cream, Butter Milk, Ghee, Sweets, Butter, Curd, Ice-cream, Cheese, Milk Powder Milk, Cheese, Ghee, Butter, Ice-cream, Sweets Products
Cheese
In 200708, the cheese market was estimated at US$244 million. In terms of volume, the Indian cheese market was estimated at 54 000 tonnes. The consumption of cheese is comparatively low, as cheese in India is a luxury, while in developed countries they are a part of the daily meal. Mumbai with a market share of 30 per cent is the largest market for cheese in India, followed by Delhi at 20 per cent, Kolkata at 7 per cent and Chennai at 6 per cent. Amul, Britannia and Le bon International are the major players in the cheese market. Consumers in smaller towns and rural areas prefer non-branded processed cottage cheese popularly known as paneer. Most people prefer cheese in the form of paneer as they receive fresh stocks everyday and it is also more economical when compared to branded cheese. For instance, while branded cheese sells at US$45 per kilo, paneer sells at US$23 a kilo. Some of the regional players selling cheese in the India are Vijaya, Verka and Nandini.
Ice-cream
The market for ice-creams was estimated at US$265 million in 200607, growing at the rate of 1214 per cent. However, the per capita consumption of ice-cream in India is relatively low, when compared to developed countries. Per capita consumption of ice-cream is around 250 mL per annum as against 22 litres in the US, 18 litres in Australia, 14 litres in Sweden and 5 litres in the UK. The ice-cream market is dominated by a few large players and a number of regional players. The large players in the organised sector are restricted to large metropolitan cities and in small towns and villages, there are thousands of small players who produce ice-creams in their home backyard and cater to the local market. Major players such as Amul, Hindustan Unilever (Kwality Walls) and Mother Dairy, have a significant presence in the country. While Amul enjoys a 37 per cent share of the ice-cream market in India, Hindustan Unilever has a market share of 9 per cent.
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3.3.5 Confectionery
The confectionery market largely consists of chocolates, hard-boiled sugar confectionery, toffees, gums, mints and lozenges, lollipops, fruit rolls, etc. In 200607, the Indian confectionery market was estimated at US$0.6 billion, an increase of 12.8 per cent over the previous year.
700 600 500 400 300 200 100 0 2004-05
Source: CMIE Figure 3.5 Confectionery market, 200407 (US$ million).
611 554 448
2005-06
2006-07
The sales of hard boiled candies and toffees proved the most lucrative in the confectionery market and in 2007; these sectors were valued at 40 100 tonnes, equivalent to a combined market share of 35.9 per cent of the markets overall value. This was followed by the gums, mint and lozenges sector, which was valued at 29 100 tonnes, equivalent to 13 per cent of the confectionery market.
Hard Boiled Candy 18% Other Categories 47% Toffees 18% Digestive candies 2% Gum, Mint & Lozenges 13%
Lollipops 2%
Source: MCG Compilation Figure 3.6 Confectionery Market Segmentation: Share, by volume, 200607 (%). Total Confectionery market: 223 500 tonnes
Though multinationals such as Cadbury, Perfetti Van Melle, and Nestle have a significant presence in the country, the confectionery market in India is fragmented, with a number of small players and a few large players and MNCs in the organised sector. The confectionery sector in the country is a complex market, where factors such as government policy, bulk sugar prices and mass-market distribution play a crucial role in driving the volumes and sales. Unlike the global market, where confectionery sales rely heavily on organised trade, in India, bulk of the sales come from small road side retail outlets like paan shops and small stores. Small scale industries largely depend on the confectionery
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sector supply intermediary inputs like printed wrapping materials, pet jars, corrugated boxes, etc. Confectionery products are retailed to over 1 million outlets spread throughout the country.
Chocolates
The organised chocolate market in India was estimated at US$0.3 billion in 200607 and in terms of volume it was estimated at 35 700 tonnes for the same year. The per capita consumption of chocolates in the country is 300 g as against 1.9 kg in developed countries. With the urban population accounting for 70 per cent of the total chocolate consumption, this market is growing at about 15 per cent per annum. Western India accounts for the major market share for chocolates followed by North, South and East.
Table 3.15 Major types and brands of chocolates Type Moulded chocolates Count lines Panned products Source: MCG Compilation Brand Dairy Milk, Truffle, Amul Milk Chocolate, Nestle Premium, Nestle Milky Bar, Nestle Classic, Chunky 5 star, Perk, Kitkat, Picnic, Munch Gems (Panned products), Nutties, Marbles (Nestle)
The two major players who dominate the chocolate segment in India are Cadbury India and Nestle. Cadbury leads the market with a share of 72 per cent, followed by Nestle at 25 per cent and Amul with a share of 2 per cent. Other MNCs who have entered the market in recent years and have gained significant market share are Perfetti India and Wrigley India. In 2007, a joint agreement was formed between Godrej Beverages and Foods Ltd and Hersheys, Americas chocolate and confectionery giant, to manufacture and distribute chocolates across India. Today, this new entity named Godrej Hershey Foods and Beverages Ltd is slowly competing with Cadburys and Nestle.
3.3.6 Bakery products

The bakery products sector is one of the largest segments among the processed food markets in India. In 200607, the annual turnover of bakery products, which includes bread, biscuits, cakes, pastries, buns, rusk, etc. was estimated at US$0.9 billion. The bakery industry is dominated by the small scale sector and has very few big players in the organised sector. There are a total of about 2 million bakeries in India and some of the major players in the organised sector include Britannia, Parle and ITC. Breads and biscuits are the two main bakery products and together account for a total sales volume of 69 per cent of the bakery market.
Others 28% Bread 23%
Cake 3%
Biscuits 46%
Source: MCG Compilation Figure 3.7 Bakery Products: Market Share, 200506 (By Value).
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Biscuits
Biscuits account for a major share of the bakery sectors output. In terms of volume, the biscuit market was estimated at 1.7 million tonnes in 200708.
Table 3.16 Biscuits, production trends (organised sector), 200508 (million tonnes) Year Biscuits 200506 1.4 200607 1.6 200708 1.7
Source: Indian Biscuit Manufacturers Association (IBMA)
Biscuits are broadly categorised as glucose, milk based, marie, arrow root and other variants such as cream, wafer cream, salt crackers, cookies, assorted, etc. The biscuit market which was stagnant during the last four years has picked up momentum during 200708 and is growing at the rate of 15 per cent pa. This growth is mainly on account of exemption from Central Excise Duty on biscuits with MRP up to US$2.5 per kg. In terms of per capita consumption of biscuits, India ranks relatively low. For instance, it is only 1.8 kg as against 2.5 kg to 5.5 kg in South East Asian countries and European countries and 7.5 kg in the US. Across the regions, East India proves to be the biggest market for biscuits in India, followed by North India.
East 28% North 25%
South 24%
West 23%
Source: Indian Biscuit Manufacturers Association (IBMA) Figure 3.8 Consumption of biscuits across regions (% share).
Over the last two years, imports of biscuits to India have not shown any significant growth and have not affected production/sales of the Indian biscuit industry.
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35000 30000 25000 20000 15000 10000 5000 0 2004-05 635 20,375
30,400
26,856
940
1,399
2005-06
2006-07
Export
Im port
Source: MCG Compilation Figure 3.9 Biscuit: Import and Export (tonnes).
In addition to the large number of local/regional players and a few big players, a large quantity of biscuits are consumed at small roadside tea shops/stalls and are supplied by small bakers. The high penetration of this sector into the rural market is primarily responsible for this growth. There is almost a 5065 per cent penetration of biscuits in rural areas. Lower-priced varieties are largely consumed in rural markets and it is here that branded biscuits meet stiff competition from the unorganised sector. However, in recent years, the biscuit industry has been getting more organised. Today out of the total production, around 60 per cent is contributed by the organised sector and the rest 40 per cent by the local bakeries in the unorganised sector. In the organised sector, Parle with a market share of about 38 per cent leads the biscuit market, followed by Britannia, ITC and Surya Food and Agro Ltd (Priyagold). Some international brands are now being imported into the market. However the volumes of these brands are relatively small. The table below shows the major players and their respective brands in the market.
Table 3.17 Major players and brands Player Britannia Industries Ltd Parle Surya Food Glaxo Smithkline Beecham ITC HUL Brands Tiger, Snax, 5050, Marie, Nice, Milk Bikis, Good Day, Pure Magic, Little Heats, Bourbon, Treat, Time pass Parle-G, Monaco, Krackjack, Supermilk, Hide and Seek, Chocolate Chips, Milk Shakti Priya Gold Horlicks, Boost Sunfeast FruitCream, Modern Energy Global players Player Excelsior Foods United Biscuits Source: MCG Compilation Kidz Mcvites, Hob-Nobs, Ginger Snaps Brands
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United Biscuits, UK is the second largest biscuit manufacturer in the world and has entered the Indian market through their popular brand McVities Digestive brand. Biscuits from this company are directly imported by the company and are available in nearly 12 000 retail shops across the major cities of India. Other global players having a presence in India include Nabisco, Arnotts and Sara Lee.
3.3.7 Packaged/convenience foods

The packaged/convenience foods sector had rapidly developed over the last decade mainly due to increase in educated nuclear families with disposable incomes, change in lifestyles and food habits and more working women preferring convenience foods. The packaged/convenience food segment comprising of ready-to-eat and ready-to-cook food products is highly fragmented with small players accounting for almost 75 per cent of the output in terms of volume and 50 per cent in terms of value. While the ready-to-eat food products comprise mainly of jams, pickles and chutneys, tomato based products (ketchup, puree, soup) and snack foods (potato wafers), the ready-to-cook food products comprise of cooking ingredients (pastes/masala powders), instant mixes (idli, dosa, jamun mix, etc.) and instant cook and eat products (noodles, soup powder, etc.).
Jams and tomato based products (sauces/ketchups)

The fruit jam market was estimated at 26 700 tonnes by volume. The penetration of fruit jams in India is very low at 3 per cent, with urban penetration in the country being 9 per cent and rural penetration being 0.3 per cent. Kissan from Hindustan Unilever and Sil from Marico are the most popular brands in the country. While Kissan (HUL) has a market share of 74 per cent, SIL (Marico) accounts for a share of 11 per cent. Apart from these two brands, there are a number of local brands in the market. In 200506, the market for tomato sauce/ketchup was estimated at 30 500 tonnes. However, the penetration of tomato ketchup in India is relatively low at 3 per cent, with urban penetration being 9.2 per cent and rural penetration being 0.7 per cent. Hindustan Unilever (HUL) with its brand Kissan and Nestle with its brand Maggi lead the tomato ketchup market with a market share of 42 per cent each. Other brands such as Heinz account for the rest of the ketchup market at 16 per cent. Soups in India are primarily consumed by the upper income group of people and in 200607; the organised soup market was estimated at US$11 million. Soups in the country are still considered to be a small market and for its consumption to become a habit, companies need to invest heavily in this sector. Knorr Annapurna, the brand marketed by HUL leads the soup segment in the country. Nestle with its brand Maggi, entered this market in 1996 and currently has a 20 per cent plus market share. Another big player to have entered the soup market is MTR Food Ltd. Today this company offers flavours such as tomato soup, spicy tomato soup, and spinach and carrot soup. HUL has also extended its Knorr Annapurna range of soup powders with flavours such as Tomato Tease, Chicken Punch and Peppery Chicken, Spicy Vegetable, and Sweet Corn Vegetable, etc.
3.3.8 Fruit juice/drinks

The organised fruit beverage market which includes nectars, drinks and juices is among the fastest growing segments in the beverages category and was valued at US$0.3 billion in 200607, growing at annual rate of 25 per cent. While the fruit drink sector dominates the market with a 77 per cent market share, the fruit juice and nectar sector accounts for 23 per cent of the market.
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The advent of liquid packaging cartons (Tetra Pak) has helped in increasing the sales of fruit juices in India. The entry of large brands into the fruit juice market in Tetra Pak Packages has had a good impact on the growth of this sector. Today, most of the leading brands have introduced their products in tetra packages. The fruit juice market in India is fragmented, with a number of small regional players and a few large players in the organised sector. However, more than 90 per cent of the sales are through the unorganised route such as juice centres, street corner shops, kiranas, convenience stores, etc. Therefore juice manufactures generally tap the unorganised sector more. In the fruit drinks, Parles Frooti leads the market, followed closely by Cokes Maaza, Pepsis Slice and Godrejs Jumpin. Daburs Real and Pepsis Tropicana are the leaders in the fruit juice segment, though Dabur enjoys an edge over Pepsis Tropicana in terms of market share.
Table 3.18 Major players and their market share Sector Brand Real Fruit Juices Tropicana Others Frooti Fruit Drinks Mazaa Others Source: MCG Compilation Table 3.19 Major players and flavours Sector Company Parle Agro Fruit drinks Godrej Foods Coco Cola India PepsiCo Holdings Dabur Fruit Juice PepsiCo Holdings Parle Agro Coca Cola Fruit Nectar Dabur Godrej Foods Flavours Mango, Apple, Lime, Guava, Pineapple, Green Mango and Blended Mango, Apple, Lime, Guava, Pineapple and Blended Mango Mango Orange, Mango, Pineapple, Guava, Grape, Tomato, Litchi Apple, Orange, Grape, Pineapple, Guava, Mixed fruit Mango Strawberry, Banana, Peach, Chiku Orange Apple, Mango, Mixed Fruit, Cranberry, Orange Litchi, Mango Market share (%) 60 33 7 38 35 27
Source: MCG Compilation
3.3.9 Olive Oil

In India, the olive oil market was estimated at 2 300 tonnes in 200708 and is forecast to reach 42 218 tonnes by 201213.
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Table 3.20 Olive oil consumption and growth estimates, 20062012 (tonnes) 200607 Edible Non-edible Total 750 750 1 500 200708 1 410 890 2 300 201011 24 000 1 540 25 540 201213 40 000 2 218 42 218 CAGR (%) 200712 95.2 20.0 79.0
Source: Indian Olive Association
When compared to developed countries, the usage of olive oil in India is at a very small level. However, this market is expected to grow in the near future as people are becoming more health conscious these days. The growing middle class and more specifically the higher middle class with spendable cash are driving the interest of olives and its products like olive oil in the Indian market. India imports whole of the olive oil available in the domestic market and prices of olive oil in the domestic market ranges from US$10 to US$25 per litre for different grades. One of the major difficulties faced by importers, in the past, has been the high import duty which is being levied as olive oil in India is considered a luxury product compared to other edible oils. Spanish and Italian products are mainly visible in the olive oil market in India.
3.4 Key drivers and trends

The processed food industry has evolved into a modern industry from a traditional, small-scale production system. This industry today caters to the diverse needs and tastes of Indian consumers. Over the last decade there has been a drastic increase in the demand for processed food in India and some of the factors which have helped this increase include rapid change in the lifestyle of Indians particularly urban dwellers, rise in disposable incomes, increase in the number of working women, growth of nuclear and double income families, increase in the number of jet setters, explosion of the information and communication sector, etc. Other factors which have also helped in the growth of the food processing industry include favourable demography and economic factors, stable democracy and raw materials supply. Owing to factors such as increase in literacy rate, rapid growth in urbanisation, rising per capita incomes, relatively cheap workforce, etc. there are significant opportunities for developing vast underlying markets in the country. In addition to these factors, the geographical location of India helps in giving it the competitive advantage of being able to cater to major consumption centres. Some of the key drivers of the processed food sector include: expanding product variety; improvements in the supply chain; improvements in the food retail sector such as emergence of organised food retailing; growing awareness of health and food safety; upgrading and modernisation of food processing units; enhanced packaging facilities; increasing importance of food standards and labelling laws; liberalised government policies such as 100 per cent foreign direct investment in the key food segments, reduction in the excise duty, etc.; emergence of niche market opportunities in exotic product categories; increasing acceptance of India as a global sourcing partner;
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increase in the demand for processed food has led to the rise in the share of processed food in international trade. International trade also offers a large potential to increase value-addition to a food product than unprocessed products.
Some of the emerging trends of the processed food sector are: Greater demand for ready-to-eat and ready-to-cook food. Increasing preference for western food. Rise in the presence of multinational companies in the food processing sectors. Increasing recognition of regional and foreign brands. Increase in the number of mergers and acquisitions. Emerging investment opportunities in infrastructure development, technology, testing and inspection, marketing, packaging, etc. Change in food consumption patterns. A shift is being witnessed towards the consumption of higher value products across all income levels. A growing demand for different food attributes which include health, safety, convenience and the manner in which the food is grown is being witnessed in the country. A large potential for imported products mainly among urban consumers. The factors that have helped in increasing the awareness of imported products in India include increase in overseas travel, rising income levels, international exposure, changes in food habits, changes in spending patterns of consumers and the retail revolution.
3.5 Investment opportunities

The Indian processed food industry has seen rapid growth following the liberalisation of the economy in 1991. Investment deals are now extending to the food processing sector which has in turn helped it to get a higher share of foreign direct investment. The Indian food processing sector attracted around US$7 billion of foreign direct investment (FDI) during April 2000 to March 2008, which was about 1.2 per cent of the total FDI inflow into India for the same period. Primary processors like grain-milling units over the years have dominated the food processing sector. With the development and diversification of this sector, new investment opportunities have been available in areas like canning, dairy and food processing. Opportunities for building highly profitable businesses are largely seen in sectors such as dairy, wheat and poultry. Some of the potential areas for investment opportunities include: Mega Food Parks Fruit and vegetable products Meat products Fisheries and seafood Grains and cereals Agriculture infrastructure, supply chain aggregation, logistics and cold chain infrastructure Packaged/convenience goods/ready to eat food Wine and beer Machinery/Packaging
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4. Current status and trends in Indias imported food sector

4.1 Current import scenario
Since the beginning of economic reforms, India has transformed itself on the global market. Though still considered a developing economy, little remains the same in the Indian food market. Globalisation and liberalisation have opened doors for the entry of imported food products from across the globe. Gone are the days where one could purchase imported products only when they travelled abroad. With the relaxation of the import policies, the Indian market is flooded with products from across the world. From Washington apples and Australian Kiwifruit to Swiss chocolates, French cheese and Italian pastas, almost all kinds of imported products are available in the Indian market. Chocolates, cookies, juices, pasta, olive oil, honey, sauces and salad dressings and certain fruits are the prime categories of import. Growth of organised retailing, economic growth, rising income, urbanisation and changing lifestyles have provided momentum to the imported food and beverage sector. Over the years the quality of food consumed by Indians has also undergone tremendous change. Indian consumers now have both the willingness and ability to try new products. Urban residents are by and large the major consumers of imported food in India. The urban populations have higher incomes when compared to their rural counterparts and spend over 40 per cent of their income on food alone. Apart from the urban elite consumers, hotels and restaurants are the other major consumers of imported food products in India. Imported food products are no longer restricted for sale in only select retail stores across the country. Today almost all the stores ranging from small departmental stores to big retail chains sell imported food products. The modern retail formats also have a big role in boosting impulse purchase among customers. As a common practice, these imported products find their way into the Indian market through importers who in turn supply to distributors, local retailers, stores and other institutions. On a new product arrival, retailers initially sell them on a trial basis and if the product is well accepted and sales pick up they continue to stock more. Imported products such as chocolates, juices and pastas have penetrated the Indian market to such an extent that some of the foreign manufacturers are considering setting up production units in India. For example: Kraft Foods International is considering manufacturing Tang (orange beverage) in India. While the imported food products may not completely replace the Indian brands, they will definitely serve as add-ons to the Indian brands.
4.2 Key drivers and trends
Urbanisation
Rapid growth in industrialisation and robust growth of the IT industry have paved way to more employment opportunities and marked an increase in the concentration of people in urban areas. In 2007 the urban population accounted for nearly 30 per cent of the total population in India. With a large working population the need for convenience is on the rise and as a result products that simplify urban lifestyles are high in demand. The consumption pattern of these urban dwellers is also changing by the day with a clear shift of expenses from basic to luxury products. It is this change in attitude and lifestyle that has boosted the demand for imported food products.
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Rising income levels
With higher disposable incomes the upper-middle income urban elites are an important customer base for imported foods in India. Increasing incomes and personal freedom have attracted young customers wanting to move away from traditional lifestyles. Rising affluence of the middle income group has led to changes in eating and spending habits.
Exposure to global culture
With an increase in the number of jet setters, cable television and internet penetration (60.7 per cent and 5.3 per cent respectively), more Indians are now on the lookout for imported food products. International exposure is creating better brand awareness and product knowledge resulting in easier penetration of imported products into the country. People have also become more health conscious and hence prefer branded packaged food.
Retail revolution
Rising consumer spending, greater need for convenience and product variety and favourable government policies have fuelled the growth of organised retailing in India, making it a land of retail opportunities. Growing number of Indians now have the desire and ability to shop in organised retail stores and buy quality products. This new retail environment has resulted in the emergence of a large number of malls and modern supermarkets offering imported food products greater visibility and shelf space.
Growth of specialty restaurants
The concept of eating out has caught on in India due to increasing number of nuclear families, dual income families, increase in disposable income and willingness to experiment. This has translated into the mushrooming of different types of cuisines from across the world. Hotels and restaurants are therefore one of the major demand drivers of imported food products.
Relaxing of import regulations
In a bid to boost the Indian food market, the Government of India relaxed its restrictions on the import of food and beverages. Most of the products now fall under Open General Licence (OGL) and Special Import Licence (SIL).
Free Trade Agreement between India and Australia
India and Australia have been negotiating a FTA that will mutually benefit both the countries. The FTA will lower the trade barriers and create more trade opportunities for Western Australian exporters.
4.3 Major segments of imported food products

Import of food products started off as a small time trade and has now become one of the most highly traded segments. Growing at a CAGR of 23 per cent, Indias total import of food products reached US$3.6 billion in 200708, up from US$1.3 billion in 200203. The import of certain prime categories is given below in Table 4.1.
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Table 4.1 Summary of import data, 200507 (Value: US$ million ; Quantity: tonnes) S. No. 1 2 3 Fruits* Vegetables Fresh and processed meat Fresh Processed 4 Fresh and processed fish Fresh Processed 5 Dairy products Cheese Whey Milk and Cream Butter Yoghurt Ice-cream Butter Milk 6 7 Pasta Confectionery Chocolate confectionery Sugar confectionery 8 Processed fruits and vegetables Juice Jam Sauce 9 Other food products Natural Honey Olive oil * Excluding nuts. Source: Commerce.nic.in 0.47 5.24 502 1 426 1.30 5.42 1 008 1 481 2.91 8.72 2 529 2 484 8.70 1.36 4.38 8 489 651 3 235 15.21 1.40 5.55 13 006 874 3 862 16.83 1.55 11.40 11 394 617 8 065 10.56 4.91 4 224 2 074 13.53 5.98 5 649 2 920 20.39 11.26 5 837 4 003 22.38 0.95 7.97 2.80 1.68 1.43 1.80 0.08 0.08 0.01 5.30 12 127 229 3 133 605 938 635 881 60 9 4 3 806 24.08 0.55 23.61 2.92 4.31 1.85 14.14 0.18 0.18 0.03 2.55 10 526 180 12 565 550 2 217 731 8 898 116 28 24 2 191 33.99 1.22 14.58 4.79 4.10 2.77 2.16 0.28 0.43 0.06 8.51 13 575 293 3 804 758 1 003 838 973 123 89 20 5 970 0.45 0.86 90 324 0.33 0.81 39 379 0.74 1.8 115 672 Category 112.6 4.62 200506 Value Qty 295 773 14 355 200607 Value 160.9 0.86 Qty 364 192 4 560 200708 Value 202.8 2.92 Qty 347 471 9 760
4.3.1 Fruits and vegetables

Although India is one of the largest producers of fruits and vegetables in the world, there is still a considerable demand for imported fruits and vegetables in the Indian market. While Indias import of fruits in 200708 was US$202.8 million, its import of vegetables was around US$2.92 million during the same year. In the recent years imported fruits and vegetables are being sold in a number of places ranging from carts to big retail chains. With the entry of global retailers such as Metro and Wal Mart, India is likely to witness the entry of more imported fruits and vegetables as most of the Indian varieties do not meet their global
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standards. These firms procure from global distribution chains such as Hortifruti, thereby minimising the cost of transportation and logistics without much increase in the operational costs.
250 200 150 100 50 0 2005-06 Fruits 2006-07 Vegetables 4.62 0.86 2.92 2007-08 112.6 160.9 202.8
Source: Commerce.nic.in Figure 4.1 Import of fruits and vegetables (US$ million).
Fruits
Imported fruits have made successful inroads into the Indian markets and are well accepted by the Indian consumers. From Chinese apples and Australian pears to Californian grapes and South African oranges, almost all the varieties of imported fruits are available in the Indian market. These fruits are now given equal shelf space as the domestic brands. Despite being priced higher than the Indian varieties, the major selling points for imported fruits are that they are well graded, attractively packed, have better taste and appearance and are available almost throughout the year. Apples top the list of fruits imported, accounting for around 26 per cent of the total fruits imported. Nearly 37 per cent of the apples come from the USA, followed by China which accounts for around 27 per cent of the total import of apples. Chile, New Zealand and Australia are the other major sources for apple. It is worth noting that despite the long distance and longer transit time, Chile has emerged as the third largest exporter of apples to India. Indias tariff on apples is not only the highest among the fruits it produces locally but is also higher than the tariff on apples in other countries. Red Delicious (USA), Washington (USA), Fuji (China) and ENZA (New Zealand) are some of the famous brands of imported apples found in the Indian market. Rather than the brand names, these fruits are quite often known by their countries of origin. Though apples have remained the core item of import, other fruits such oranges, grapes, pears, plums are also imported. The market is also diversifying which is evident with the arrival of other fruits such as strawberries, apricots, peaches, figs, kiwifruit and so on. The demand is more in case of fruits that are not grown or easily available in India.
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Table 4.2 Major fruits imported, 200708 (US$ million) S. No. 1 2 3 4 5 Apples Pears and Quinces Grapes (fresh) Oranges (fresh or dried) Plums and sloes Category 200708 52.96 5.66 5.07 2.73 0.76 Major source and share USA (37.1%), China (27.6%), Chile (25.5%), New Zealand (7.2%), Australia (1.8%), Others (France, Italy, South Africa) China (43.8%), USA (34.3%), South Africa (20.1%), Australia (1.8%) USA (67.5%), Australia (17.8%), Chile (7.7%), Others (Mexico, South Africa, Peru, China) Australia (57.1%), South Africa (24.9%), USA (15.8%), Others (Italy, China, Spain) Italy (40.8%), USA (34.2%), Chile (13.2%), Australia (11.8%)
Source: Commerce.nic.in
The peak season for imported fruits is during the off season for domestic crops. The peak season for imported fruits is January to June. For instance, the peak season for imported apples is February/MarchJuly and imported oranges sell more during JanuaryMarch. The reason for lesser demand for imported products during the domestic harvest season is a combination of really low domestic prices and relatively high import prices because of which most of the importers avoid importing large quantities during such period. The demand for imported fruits is high during festivals and especially social occasions such as marriages. Often the imported fruits bear a paper seal carrying the brand name and the country from which it is imported. These fruits are normally supplied in crates, with carrying capacity of each crate depending on the size of the fruits. The price of these imported fruits normally depends on the quality, brand and the country from which it is being imported. Being a niche market, increase in prices normally does not affect the sales of imported fruits. These fruits have an edge as they are stored in refrigerated conditions till they reach the wholesaler, unlike the Indian fruits whose quality deteriorates quickly.
Table 4.3 Prices of select fruits and brands Product Brand/variety Red delicious Apples Fuji Washington Granny smith Pears ENZA Shandong CaliforniaRed AustraliaRed Zespri Naval orange Valencia orange Country of origin USA China USA Australia New Zealand China USA Australia New Zealand China China Retail price (US$/Kg) 2.4 2.7 2.9 3.7 2.02.2 1.7 6.2 6.26.7 1.3 2.0 1.3
Grapes Kiwifruit Orange
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Vegetables
Indias import of vegetables such as potatoes, tomatoes, cabbages and carrots is miniscule. Most of the vegetables imported in 200708 were sourced mainly from the Asian countries.
Table 4.4 Major vegetables imported, 200708 (US$ million) S. No. 1 2 3 4 5 Garlic Brussels Sprouts Cabbage (Kohrbi, Kale and Brassicas) Potatoes Root vegetables (carrot, turnip, beetroot, etc.) Category 200708 1.55 0.28 0.12 0.03 0.03 Major source and share Pakistan (76.1%), China (23.2%), Lao PDR (0.7%) Nepal Nepal Bhutan China
4.3.2 Meat and marine products (fresh and processed)

Meat
Indias import of meat is negligible. Meat products were imported to the tune of only US$2.54 million in 200708. The meagre import of meat can be attributed to two factors; government restriction and the Indian mindset. Indian government has banned the import of certain meat and meat products from countries with High Pathogen Avian influenza in 2007. Quality certificate requirements are restrictive in the interest of safe guarding human health. High cost of the imported meat products is also a hindrance to its growth. The other factor is that most Indians still prefer fresh meat over frozen meat. In recent years the demand for canned and ready-to-cook meat products is increasing, especially by foreigners and institutions. Apart from few retail sales, the major demand for imported meat and meat products is from the five star hotels, especially the ones with a large overseas clientele.
3 2.5 2 1.5 1 0.5 0 2005-06 2006-07 2007-08
Source: Commerce.nic.in Figure 4.2 Import of meat products (US$ million).
2.54
1.31
1.14
Among the meat products, the only significant import was swine meat which was valued at US$0.29 million in 200708 and was sourced mostly from New Zealand.
Table 4.5 Major meat products imported, 200708 (US$ million) Category Meat of swine Source: Commerce.nic.in 200708 0.29 Major source and share New Zealand
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Marine products
As compared to meat, considerable amount of marine products are imported by India. In 200708 Indias import of marine products was valued at US$35.21 million. According to MPEDA, Indias import of marine products is not meant for domestic consumption but is mostly processed and re-exported.
40 30 20 10 0 2005-06 2006-07 2007-08
Source: Commerce.nic.in Figure 4.3 Import of marine products (US$ million).
35.21 23.33 24.63
Indias import of chilled fish, which accounted for around 64 per cent of the total marine imports, was around US$21.76 million in 200708, with Bangladesh accounting for nearly 96 per cent of the total imports. Frozen shrimps, prawns, crabs, cuttle fish and tuna are some of the other major marine products that are imported. While shrimps and prawns are mainly imported from USA, China, Thailand, Germany and Australia; cuttle fish is mainly sourced from Pakistan, Indonesia, Bahrain and Spain.
Table 4.6 Major meat and marine products imported, 200708 (US$ million) S. No. 1 2 Category Chilled fish excl fillets Shrimps and prawns frozen 200708 21.76 5.17 Major Source and share Bangladesh (95.8%), Japan (2.1%), Thailand (0.6%), Others (China, Netherlands) USA (17.2%), China (9.5%), Thailand (6.8%), Germany (4.3%), Australia (1.7%), Others (Belgium, Canada, Pakistan, Vietnam, New Zealand) Pakistan (40.9%), Indonesia (15.3%), Bahrain (10.6%), Spain (10%), Others ( Bangladesh, Sri Lanka) Japan (68.2%), Korea (31.8%)
3 4
Cuttle fish Crabs frozen
1.70 1.29
Source: Commerce.nic.in Table 4.7 Prices of select brands of meat and fish products Category Brand Zwan Meat products Keells Al Kabeer TC Boy Fish products Farmland John West Country of origin Holland Sri Lanka Dubai Malaysia USA UK Product Chicken cocktail Chicken sausage Chicken sausage Tuna in BBQ sauce Tuna chunk in oil Sardines in olive oil Pack size 200 g 1 kg 500 g 185 g 185 g 120 g Retail price (US$) 2.8 6.6 3.2 2.8 2.2 2.2
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Dairy has been an attractive segment of import in India. But owing to the governments ban on the import of dairy products from certain countries, the import of dairy products saw a decline of nearly 40 per cent, from US$23.61 million in 200607 to US$14.58 million in 200708. However, the recent lift of the ban on Australian dairy products is likely to present more opportunities to the Western Australian exporters and give the Indian consumers a taste of whole new varieties of dairy products. The bound duty rate on skimmed milk powder has also been bought down from 15 per cent to 5 per cent, thereby opening the Indian market to dairy products from a number of countries including Australia.
23.61 14.58 7.89
25 20 15 10 5 0
2005-06
2006-07
2007-08
Source: Commerce.nic.in Figure 4.4 Import of dairy products (US$ million).
Cheese
Initially, imported brands of cheese were available only in metros such as Chennai, Kolkata, Mumbai and Delhi and were bought mostly by expatriates. But now imported cheese is sold in all the major cities and has gained wide acceptance among the Indian consumers. The import of cheese reached US$4.79 million in 200708. Denmark, Netherlands, France and Italy are the major sources of imported cheese and the well known brands include Kraft, Happy cow, Laughing cow, Arla and President. With changing lifestyles, cheese has become a part of most Indian food and is extensively being used with bread, fast foods, baked dishes and so on. The Indian retail stores and customers are now moving beyond the regular cheese spreads and slices and are trying new variants such as flavoured cheese, blue cheese, etc. With growing health conscious consumers, the market is also witnessing an increasing demand for low fat cheese. Though restricted mostly to the urban population, the demand for cheese is unlikely to reduce, with children continuing to be the major consumers of cheese products. Whey, which is a by-product of cheese, is another major product of import which is sourced primarily from USA, France and Denmark. Import of whey was valued at US$4.1 million in 200708.
Yoghurt
Indias import of yoghurt was around US$0.28 million in 200708, with Spain and France being the major sources. Pascual continues to remain the most preferred yoghurt brand. Flavoured yoghurt (mango, pineapple, strawberry, peach and passion fruit) and fat free varieties have made a recent entry in India but are yet to establish themselves.
Butter
The Butter segment, whose import was valued at around US$2.16 million in 200708, is mostly dominated by the Indian brands such as Amul and Britannia.
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With a sharp fall in international prices, India is witnessing an increase in the import of butter oil. Butter oil which is mostly imported from New Zealand, sells much cheaper than the ghee sold in India.
Ice-cream
Consumption of ice-cream in India is growing at around 9 per cent per annum. With the removal of the ban on import of ice-cream, Indian market is witnessing the entry of various new brands such as London Dairy, Gelato Fresco and Baskin Robbins. Indias import of ice-creams was valued at US$0.43 million in 200708, a huge jump from a meagre US$0.08 million in 200506. This segment is largely driven by the urban elite consumers who are willing to pay a higher price for trying new varieties.
Table 4.8 Major dairy products imported, 200708 (US$ million) S. No. 1 2 3 4 5 6 Category Cheese Whey Milk and cream Butter Yoghurt Ice-cream 200708 4.79 4.10 2.77 2.16 0.28 0.43 Major source and share Denmark (25.3%), Netherlands (22.8%), France (17.2%), Italy (11.4%), Nepal (9.4%), Others (Singapore, Germany, Poland, UK) USA (47.6%), France (22.9%), Denmark (19.0%), Australia (5.8%), Others (Malaysia, Switzerland, Singapore, Uruguay, Thailand) New Zealand (24.2%), Denmark (22.7%), Malaysia (15.5%), USA (9.5%), Netherlands (8.3%), Others (UK, UAE, France, Bhutan, China) Nepal (88.4%), France (4.1%), Denmark (3.7%), Bhutan (3.2%), Others (Malaysia, USA) Spain (46.4%), France (39.3%), Netherlands (7.1%), Germany (3.6%) Switzerland (34.9%), UAE (32.6%), New Zealand (14.0%), Australia (11.5%), France (7.0%)
Source: Commerce.nic.in Table 4.9 Prices of select brands and dairy products Category Yoghurt Brand Pascuals Happy Cow Lehru Yere Cheese Kraft Sporty Cow President Butter Meadow Lee President London Dairy Ben n Jerrys Country of origin Spain Austria Switzerland USA Egypt USA Australia USA UK USA Pack size 500 g 140 g 198 g 200 g 120 g 113 g 500 g 200 g 500 mL 475 mL Retail price (US$) 2.5 1.4 11.5 12.9 1.1 6.5 3.2 5.2 6.8 16.1
Ice-cream
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4.3.4 Pasta products

Pasta, a product which was unpopular in the Indian market till a few years back is currently witnessing a growth of 2530 per cent annually. Driven by the rising popularity of Italian cuisine and easiness of preparation, pasta has emerged as one of the most popular imported food products. Import of pasta increased from US$2.55 million in 200607 to US$8.51 million in 200708. The presence of only a few domestic manufacturers offers immense opportunities for foreign pasta producers. Pasta is mostly bought by the urban elite and upper middle income group. Apart from individual buyers, hotels and restaurants are the major consumers of pasta in India. Of the various imported brands available in the Indian market, Agnesi, San Remo and Barilla are the ones that are widely sold. Pasta is mainly imported from Italy. Other exporters of pasta to India include Singapore, Argentina, UAE, Thailand, Australia and Belgium.
10.00 8.00 6.00 4.00 2.00 0.00 2005-06 2006-07 2007-08
Source: Commerce.nic.in Figure 4.5 Import of pasta products (US$ million). Table 4.10 Prices of select brands of pasta products Brand San Remo Barilla De Cecco Country of origin Australia Italy Italy Pack size 500 g 500 g 500 g Retail price (US$) 2.5 3.9 4.0
8.51 5.30 2.55
4.3.5 Confectionery
Imported confectionery has been one of the early entrants in the Indian market and continues to be one of the most sought after and widely available segments in the imported food market. Import of confectionery has been constantly on the rise. While the import of chocolate confectionery increased by 39 per cent from 200506 to 200708, the import of sugar confectionery increased by 51 per cent during the same period. The market is flooded with brands such as Toblerone, Mars, Lindt, Bounty, Snickers, Ferro Rocher, Foxs and so on. These brands have gained popularity largely owing to their distinctive taste, attractive packaging and extensive distribution network as a result of which they are found in small departmental stores to big retail outlets. The sale of imported chocolates has become equal or even outpaced the domestic brands in some of the retail stores.
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25 20 15 10 5 0 2005-06 2006-07 2007-08 13.53 10.56 4.91 5.98 11.26 20.39
Chocolate confectionery
Sugar confestionery
Source: Commerce.nic.in Figure 4.6 Import of confectionery (US$ million).
Chocolate confectionery is primarily imported from China, Singapore, UAE, Malaysia, UK and Switzerland. And China accounts for nearly 53 per cent of the import of sugar confectionery followed by Malaysia, Thailand, UAE, USA and UK.
Table 4.11 Major confectionery products imported, 200708 (US$ million) S. No. 1 Category Chocolate confectionery 200708 20.39 Major source and share China (16.6%), Singapore (14.7%), UAE (11.8%), Malaysia (11.3%), UK (8.6%), Switzerland (8.4%), Netherlands (8.2%), Others (Belgium, France, Australia, Indonesia, Lebanon, Poland) China (53%), Malaysia (6%), Thailand (5.8%), UAE (5.8%), USA (5.5%), UK (3.7%), Others (Korea, Indonesia, Argentina, Australia, Turkey, Sri Lanka)
Sugar confectionery
11.26
Source: Commerce.nic.in Table 4.12 Prices of select brands of confectionery products Category Lindt Vochelle Hazelnuts Chocolates Choco pie Ritter Sport Snickers Toblerone Brand Country of origin Switzerland Malaysia South Korea Germany USA Switzerland Pack size 100 g 205 g 168 g 100 g 57 g 35 g Retail price (US$) 4.7 5.6 1.51.7 2.8 0.6 0.7
4.3.6 Processed fruits and vegetables

Changing food habits, increasing number of nuclear families and working women has increased the demand for processed fruits and vegetables such as juices, ketchups/sauces and dressings and jams. In 200708 the import of juices, sauces and jams was valued at US$16.83 million, US$11.4 million and US$1.55 million respectively.
Juice
Health consciousness is the buzzword in the metros and other big cities in India, owing to which the market is witnessing a gradual shift from carbonated to non-carbonated drinks. This is driving the demand for fruit and vegetable juices in the country. In recent years, a number of imported juices are found available in the Indian market and are preferred by
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many. Diversity in flavours and attractive packaging is the key selling point for imported juices. Tang, Tropicana, Ceres, Harvey Fresh and Ocean Spray are some of the popular brands.
Sauce/ketchup
With rapid urbanisation and change in eating habits, ketchups/sauces have occupied a substantial shelf space in the Indian retail outlets. While tomato sauce/ketchup is the most popular, other sauces such as chilli, soya, pasta and garlic have also gained wide acceptance. The growing demand for sauce/ketchup comes from both individual customers as well as institutions such as hotels, restaurants and clubs. Heinz, Tabasco, Remia, Barilla, Prego are some of the famous imported brands.
Jams
Indians have developed a liking for imported jams, largely owing to the wide range of flavours that are usually not available in the domestic range. Urban upper income people and hotels/restaurants are the major consumers of imported jam in the country. Dana, Hero, St Dalfour are the popular brands in the jams category.
20.00 15.21 15.00 10.00 5.00 0.00 2005-06 Juices 2006-07 Sauces Jam s 2007-08 8.70 4.38 1.36 5.55 1.4 1.55 16.83 11.4
Source: Commerce.nic.in Figure 4.7 Import of juice, sauce and jams (US$ million).
China, Brazil, USA, UAE and Malaysia are the major exporters of juices to India. China accounts for around 31 per cent of the juice imports. Sauces are mostly imported from China, USA, Netherlands and UK. No single country has a monopoly in the import of jams as they come from various parts of the world such as Belgium, France, Australia, China, Turkey, and UK.
Table 4.13 Major processed fruits and vegetables imported, 200708 (US$ million) S. No. 1 Category Juice 200708 16.83 Major source and share China (30.8%), Brazil (12.1%), USA (8.8%), UAE (6.5%), Malaysia (5.8%), Others (Israel, Spain, Thailand, UK, Bhutan, Bangladesh, Germany) China (47.6%), USA (11.8%), Netherlands (6.1%), UK (5.2%), Malaysia (4.4%), Argentina (4.5%), Others (UAE, Thailand, Singapore, Japan, Israel) Belgium (13.5%), France (12.3%), Australia (11.6%), Germany (8.4%), China (8.4%), Others (Thailand, Turkey, UK, Italy)
2 3
Sauces Jams
11.40 1.55
43
Table 4.14 Prices of select brands of processed fruits and vegetable products Category Brand Tampico Harvey Fresh Juices Ocean Spray Ceres Tang (jar/pack) Remia Sauces/Ketchups Barilla Tabasco Ongs Dressing Remia Dana Jams St Dalfour Mackays Amsterdam Denmark Australia Scotland Country of origin USA Western Australia USA South Africa USA Amsterdam Italy USA Pack size 2L 1L 926 mL 1L 750 g 260 mL 190 mL 60 mL 200 mL 250 mL 340 g 284 g 340 g Retail price (US$) 3.0 2.3 5.0 4.9 3.0 2.4 4.3 2.13.1 3.0 2.4 3.0 4.9 4.6
4.3.7 Others (honey and olive oil)

Honey
For over decades honey has been extensively used in India owing to its medicinal properties. The honey market in India is dominated by the domestic brands. Dabur is the market leader followed by other brands such as Sanjeevani, Nectar Fresh, Lion Kashmir Honey and so on. Apart from the domestic market, the market for imported honey is growing rapidly in the country. Indias import of natural honey was valued at US$2.91 million in 200708, up from US$0.47 million in 200506.
3.5 3 2.5 2 1.5 1 0.5 0 2.91 1.3 0.47
2005-06
2006-07 Honey
2007-08
Source: Commerce.nic.in Figure 4.8 Import of natural honey (US$ million).
China is the largest supplier of natural honey to India and accounts for around 83.5 per cent of Indias total import of natural honey. Nepal, Germany, USA, UK and Australia are the other major exporters of natural honey to India.
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Table 4.15 Import of honey, 200708 (US$ million) Category Natural honey Source: Commerce.nic.in 200708 2.91 Major source and share China (83.5%), Nepal (4.8%), Germany (4.1%), Others (USA, UK, Australia, France, UAE)
Apart from competition from the domestic brands, another deterrent to the import of honey is the high duty rate. Some of the imported brands occasionally seen in the Indian retail stores are Wescobee and Capilano from Australia and Airborne from New Zealand.
Table 4.16 Prices of select brands of honey Brand Wescobee Capilano Dana Country of origin Australia Australia Denmark Pack size 500 g 500 g 454 g Retail price (US$) 3.3 8.0 6.7
Olive oil
Olive oil is another product that has gained immense popularity in the recent years, largely owing to the new obsession towards nutritious food and growing popularity of Italian food. In the past olive oil was used only for cosmetic purposes in India, but is now being promoted as a healthy substitute for the cooking oil used in the country. Indias demand for olive oil is by and large met by imports. Riding on high health benefits, the import of olive oil rose from US$5.24 million in 200506 to US$8.72 million in 200708. Its consumers are restricted to higher income urban Indians and big hotels as it is nearly four times expensive than the cooking oil used otherwise. Figaro and Leonardo are the popular brands sold in India, with the 250 mL and 500 mL pack sizes being the most preferred. Some of the other brands available include Borges, Filippo Berio, Olitalia, Colavita and Evooroo.
10 8 6 4 2 0 2005-06 2006-07 Olive oil 2007-08 5.24 5.42 8.72
Source: Commerce.nic.in Figure 4.9 Import of olive oil (US$ million).
Nearly 90 per cent of olive oil comes from Spain and Italy. The Spanish government in particular, takes special interest in increasing the sales of olive oil in India by educating the consumers about the health benefits of olive oil. For instance, Figaro olive oil is promoted in various exhibitions, road shows, distributing pamphlets with details of Figaro olive oil, direct marketing and effectively using the word of mouth publicity. Turkey, Argentina, Greece, UK and Australia are the other exporters of olive oil to India. The recent reduction of the import duty rate on olive oil to zero per cent will be a big advantage to Western Australian exporters.
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Table 4.17 Import of olive oil, 200708 (US$ million) Category Olive oil Source: Commerce.nic.in Table 4.18 Prices of select brands of olive oil Brand Figaro Borges Filippo Berio Olitalia Colavita Evooroo Country of origin Spain Spain Italy Italy Italy Australia Pack size 1 litre 1 litre 1 litre 500 mL 500 mL 500 mL Retail price (US$) 13.0 17.8 18.0 7.0 11.4 10.6 200708 8.72 Major source and share Spain (47.1%), Italy (42.1%), Turkey (7.9%), Others (Argentina, Greece, UK, Australia)
4.4 Challenges faced

Despite gaining wide acceptance in the Indian market, the market for imported foods continues to face certain hurdles. Some of the challenges faced are the following: Despite a gradual increase in the demand for imported products, the market is still relatively small as the demand for such products is mainly from the upper income groups; however, this is anticipated to change as incomes increase in line with Indias economic growth. The prices are forced to remain high owing to the high import duties ranging from 20 per cent to over 60 per cent. Lack of consistent supplies of brands is another major issue faced by retailers in India. Very few importers deal with particular brands for a long period of time. Most of them buy products that are fast moving and shift to other brands or products in a short span leaving the Indian consumers to remain one time buyers of most imported products. A number of imported food products do not adhere to the basic guidelines of the Prevention of Food Adulteration (PFA) Act such as stating the vegetarian and non-vegetarian symbols on the package, spelling out the manufacturing and expiry dates, not giving directions for use and other information in English and so on. The high cost of transportation is another major bottleneck. Infrastructure challenges such as lack of sufficient cold storages, poor development of ports and related infrastructure in India is a hindrance to the import of food products, especially the ones with a shorter shelf life. Adherence to the various food laws prevalent in India, especially the ones related to labelling requirements, packaging, use of colours and additives, shelf life, sanitary and phytosanitary requirements, is also a cause of concern among the importers.
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5. Overview of the food retail sector in India

India is the fifth largest retail destination globally and is rated as the second most attractive emerging market for retail investments in the 2008 Global Retail Development Index (GRDI). Retail is one of the fastest growing sectors in the Indian economy and the country is witnessing the launch of a large number of malls, supermarkets and departmental stores. The retail industry accounts for about 35 per cent of Indias GDP and employs around 21 million people.
5.1 Growth of retail in India

At over 12 million, India has one of the largest number of retail outlets in the world. There is one retail outlet for approximately 90 people in India. The available mall size of about 30 million sq feet is expected to increase to 100 million sq. feet by 2010. The total retail market was valued at US$335 billion in 2008 of which organised retail accounted for only US$25 billion. However, organised retail is forecast to increase to at least 12 per cent of all retail sales by 2010.
45 0 40 0 35 0 30 0 25 0 20 0 15 0 10 0 50 0
$ Billion
211
23 3
272
301
3 35
372
4 10
9
2005
13
2006
18
2007
25
2008
36
2009*
52
2010*
2004
O rganis ed reta il
Retail ma rket
* Estimates. Source: India Retail Forum Figure 5.1 Retail market in India (US$ billion).
Food and grocery is one of the largest segments of the retail industry and also the least organised. Food and grocery account for almost 60 per cent (US$180 billion) of the total Indian annual retail business. Food retailing takes place largely through small neighbourhood stores and organised food retail accounts for a small share at present. However organised food retail is growing at about 2530 per cent per annum.
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Others 26%
Jewellery 5% Clothing & textile 10% Food & Grocery 59%
Source: India Retail Forum Figure 5.2 Retail market by sector, 2008 (%). Market size: US$335 billion
Others 47%
Food & Grocery 12%
Jewellery 3%
Clothing & textile 38%
Source: India Retail Forum Figure 5.3 Organised retail market by sector, 2008 (%). Market size: US$25 billion
5.2 Evolution of food retail in India

Weekly village market Convenience stores Department stores
Supermarket/Hypermarket
Food retailing has come a long way in India-from a time when food items were sold in small roadside grocer push-carts, to a stage where food products are retailed in supermarket shelves. From simple trading activity, food retailing is now graduating to a status of an industry. The demand for imported fruits and vegetables has significantly increased in India. Importers bring in off-season fruits and vegetables, as well as exotic horticultural products like asparagus, artichoke, certain varieties of mushroom, etc. Washington and Red Delicious apples from the United States, pears from China and grapes from Australia are some of the horticultural products that are imported into India. These fruits are not only sold through retail food chains like Food World, Nilgiris, etc. but also through small grocery stores, convenience
48
stores and even through street side vendors. Also, there is significant demand for imported food products like pasta, sauces, preserves, chocolates, beverages, etc.
5.3 Retail models in India: Current and emerging

The Indian food retail market is characterised by several co-existing types and formats. The traditional formats of small stores co-exist with modern retailing formats with the latter expanding much faster. These include:
Table 5.1 Small convenience stores (Kirana stores) and hawkers Type of store Street-side vendors and pushcart vendors Paan shops Description These vendors usually roam from place to place and sell fresh fruits and vegetables. Street-side shops that mainly stock tobacco products like cigarettes and chewing tobacco, betel leaves, beverages and select items of biscuits, confectionery, and snack foods. Controlled by the respective State Governments, these shops sell only unbranded grocery items. These are usually small to medium food retail outlets selling milk, grocery, beverages as well as a host of personal-care and household products.
Public Distribution System shops Kirana stores (Indian equivalent of the Mom n Pop stores or the 7 Eleven stores) Source: MCG Compilation
Unorganised and semi-organised retailers like kirana (convenience stores) and grocers are characterised by buying from the mandis or the farmers and selling from fixed structures. Economies of scale are not yet realised in this format, but the front end is already visibly changing with the times. The advantage of this format of stores is that the vendor often knows his customers personally and door-delivers the products.
5.3.1 Organised retailers

Table 5.2 Types of organised retailers Type of store Hypermarket Supermarket Department store Speciality chain Discount chain Cash N Carry Petro conversions Source: MCG Compilation Big Bazaar, Trent Food World, Spencers Daily, Reliance Fresh, More Lifestyle Spar Subhiksha Metro In and Out, Shell Example
To be successful in food retailing in India essentially means to draw away shoppers from the roadside hawkers and convenience stores to supermarkets. This transition can be achieved to some extent through pricing, so the success of a food retailer depends on how best he understands and gets the maximum out of his supply chain. The other major factor is that of convenience of shopping and ambience, an area where the supermarket has an edge over traditional convenience stores. On an average, a supermarket stocks up to 5000 to 7000 units against few hundreds stocked at an average kirana (convenience) store. With the entry
49
of large corporate houses like Reliance, Bharti, etc. and with the large scale expansion plans of Spencer, Food World, etc. this modern format of food retail is expected to have a wide reach.
5.4 Growth in imported food

An average urban Indian spends a significant portion of his income on food, and with food consumption increasing by about 10 per cent each year, food retailing is gaining popularity in India. One of the key factors driving this sector is changing food consumption patterns, others being better infrastructure, increasing disposable incomes, increasing exposure to the outside world, etc. Changing lifestyles and the boom in organised retailing have resulted in a growing demand for imported food and beverages in India. The market for such specialty foods is growing briskly. With the relaxation of import regulations, many business houses such as Godrej, Reliance and Pantaloon have moved into the market by opening specialty food stores and sell imported foods such as cheese, pasta, cookies, olive oil, chocolates, dried fruits, sauces and cereals. Other factors behind the growing popularity of imported foods are rising incomes and increased foreign travel. Speciality hotels and multi-cuisine restaurants have also fuelled the demand for exotic imported food ingredients. Some examples to illustrate the growth of imported food:
25 20 $ million 15 10
Olive oil Pasta Cheese Chocolate Confectionery
5 0 2005-06 Cheese Pasta 2006-07 Chocolate Confectionery 2007-08 Olive oil
Source: Commerce.nic.in Figure 5.4 Growth in imported food, 200508 (US$ million).
Almost all food retail stores in India devote significant amounts of shelf-space for imported products. This varies from 10 per cent to as high as 40 per cent in stores such as Nuts and Spices.
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5.5 Profile of food retail stores in India

Table 5.3 Profile of select retail stores No. stores 67 % of shelf space for imported food 10% Imported food as a % of total food sales < 2%
Supermarkets Foodworld
Location South India Bangalore, Hyderabad and Chennai Across 13 states and 57 cities 15 cities in South IndiaTamil nadu, Kerala, Andhra Pradesh nad Karnataka 66 cities all over India
Type of products Grocery, food, beverages and other household products. Grocery, food, beverages and other household products. Grocery, food, beverages, personal care and other household products.
Reliance Fresh
590
10%
< 2%
Nilgiris
87
1015%
10%
Spencers Retail
400
10%
5%
Multi-format stores. Spencers Hyper Grocery, food, beverages, personal care, electrical and electronics and other household products. Spencers Daily Convenience store format. Food, beverages and other household products. Food, beverages and other household products.
Fabmall Nuts and Spices Food bazaar
6 13 9
Bangalore Chennai and Hyderabad Across India
34% 65% 5% 2%
Grocery, food, beverages and other household products.
Crossroads
North India
25%
35%
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6. Distribution structure, logistics and infrastructure development

6.1 Introduction
Distribution systems are reasonably well developed in India. The country has an extensive rail and road network as well as good connectivity by air.
Table 6.1 Transport infrastructure in India Mode of transport Road Rail Port Airports Description 3.34 million km of road length, with 66 754 km of national highways 7 100 railway stations, total route length of over 63 465 km and 795 million tonnes of freight traffic 12 major and 200 minor and intermediate ports Over 20 international airports and several domestic airports
Good infrastructure and cold storage facilities are available in the large metros as well as most of the tier II cities. India has over 12 million retail outlets, comprising both small kirana type stores (convenience stores, the Indian equivalent of Mom and Pop store or the 7 Eleven) and medium-sized and large super market chains. While sales through large organised formats constitute the bulk of the food consumption across the world, its share in India is still small. However, the share of organised retailing in terms of total retail sales is increasing briskly.
6.2 Distribution structure

The importers usually appoint city specific or regional distributors to deliver the products to the retail stores. A few intermediaries may be needed before the products reach the retail chains. The channels of distribution vary based on the type of products concerned.
6.2.1 Horticultural products

The demand for imported fruits and vegetables has significantly increased in recent years in India. Importers bring in off-season fruits and vegetables, as well as exotic horticultural products like asparagus, artichoke, certain varieties of mushroom, etc. Granny Smith and Red delicious apples from United States, pears from China, grapes from Australia are some of the horticultural products that are imported into India. The distribution structure for these products largely follows the following pattern:
Importer
Distributor/ Wholesaler
Retailer/Institutional buyers like hotels
Cold storage
Figure 6.1 Distribution structure for horticultural products.
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After port clearance from the port or airport, the importer stores the cartons of fruits and vegetables in a cold storage facility. Usually the cold storage is rented, although some importers have their own warehouses equipped with cold storage. Distributors or wholesalers buy a certain quantity of cartons on a daily basis from the importer and sell them to retail stores. Distributors usually do not own or rent cold storages and warehouses. They obtain the required quantity of fruits and vegetables on a daily basis from the importer and supply to the retail chains. However, certain established retail chains may procure the imported horticultural products directly from the importer, provided they buy a certain minimum number of cartons. Five-star hotels and agents for premium caterers usually buy directly from the importer. Horticultural products are usually imported in 40 containers, containing 13001500 cartons with each weighing 1520 kg. If fruits or vegetables perish before the stipulated time, the importer sends photographs to the exporter and they usually replace the fruits. The imported fruits season is usually from January to June and the Indian fruit season spans the rest of the year. A particular importer from Delhi has the following SKU maintained:
Table 6.2 SKU maintained by an importer Fruit Grapes Apples Kiwifruit Guava Pear Source Australia China Italy Thailand China/USA SKU per month 50100 boxes 50200 boxes 1501000 boxes 500 boxes 50200 boxes for 3 months
An example: Apples Red delicious apples are imported from United States and arrive at an Indian port, usually the Chennai or Mumbai port. Each carton weighs about 20 kg and a typical importer imports about 2001000 cartons. After completing the required formalities at the port, the importer transports the cartons to a cold storage facility. Many distributors or wholesalers purchase a minimum of 20 cartons each day from the importer. They transport the cartons of fruit from the cold storage to retail chains and stores using vans and trucks. Distributors in nearby cities such as Madurai, Coimbatore, and Bangalore transport the cartons by road in ordinary vans or trucks. Generally, if the distance is greater than 400 km, refrigerated vans are used. Some big retail outlets buy directly from importers.
6.2.2 Frozen meat/fish and cheese/butter

Seafood such as shrimps, prawn and frozen meat and several varieties of cheese are imported into India. These products require a cold chain throughoutfrom the time of landing in the port until they reach the end-user. The distribution structure is as follows:
Importer Distributor/ Wholesaler Retailer
Cold storage
Cold chain
Figure 6.2 Distribution structure for frozen meat/fish/cheese and butter.
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After clearance from the port authorities, the importers transport the products in refrigerated vans to their cold storage units (owned or rented). The distributors then procure the required quantities of meat or other products and supply them to retail outlets. Transportation of these products is very critical. At every stage, refrigerated vans or trucks with freezer boxes are used. Retail stores have freezers and display counters maintained at low temperatures. The special vehicles are mostly leased out to the importers and distributors by the independent service providers. Speciality ingredients like cheese, frozen meat products and sea food are also directly purchased from the importer by hotels and big food retail chains. An example: Cheese Several varieties of cheeseedam, gouda, blue, brie, ricotta, etc. are exported to India from all over the world. Some of the major importers of cheese in India are: L-Comps (Delhi based)
Epicure Foods (USA based) Fortune Foods (Mumbai based)
These importers currently import about 3040 tonnes of cheese every month. About 75 per cent of the imported cheese is consumed by the five-star hotels. Once the consignment lands at Nhava Sheva port near Mumbai, cheese boxes are transferred to cool containers where the temperature is maintained between 2C and 8C. Import duty is 31.209 per cent and retailer margin is around 3040 per cent. Apart from this, after factoring in logistics and other overhead costs and value added tax the final price of cheese at retail outlets works out to about US$10 for a 200 g cube of any famous brand.
6.2.3 Processed food products (chocolates/pasta/jams/preserves)

A wide range of processed food, chocolates, etc. are imported into India. The distribution structure of these products is as follows: Within the port cities (Chennai, Mumbai, Ahmedabad, etc.) the distribution structure is as per Figure 6.3:
Importer Retail chain
Figure 6.3 Distribution structure for processed food products within port cities.
Outside the port cities the distribution structure is as per Figure 6.4:
Importer Distributor Retail chain
Figure 6.4 Distribution structure for processed food products outside the port cities.
In the port cities of Chennai, Mumbai, etc. after the products arrive, the importer usually supplies them directly to retail chains and stores. He may use his warehouse or cold storage facility if needed. Several regional distributors are appointed to reach the products to nearby cities. The distributor in turn sells the products to retail stores in his region. In this case, both the distributor and importer have either own or rented warehouses. Normally, cold storage or special refrigerated vans might not be required for these products.
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6.3 Hotels and restaurants

Hotels and restaurant chains usually buy more of imported food products based on the demand and during the festival season (October to March). For instance, imported meat in Leela Palace is used only for parties and special occasions. Hotels and restaurant chains usually buy directly from the importer or distributor. They usually maintain an inventory period of about a month. Some hotels however prefer to source directly from the manufacturers. Some hotels imports meat products directly from Australia, Singapore and Germany. Products such as confectionery are sometimes bought from retail stores. Some hotel chains have a centralised purchasing system in place. Ista Hotels, Delhi handles the purchase of all imported products and then dispatches them to its branches in Bangalore and Hyderabad.
6.4 Logistics
Managing the transportation and logistics costs has become increasingly strategic and complex for the importers and distributors. Niche solutions designed to meet specific challenges and issues of the food sector by logistics service providers (LSPs) are not only critical for the sustained growth of the sector but also form the core service infrastructure of modern food retail. Container handling facilities are available at most major ports in several cities, but refrigerated warehousing and transportation facilities are limited and expensive. All these pose significant challenges to importers of food products in India.
6.5 Physical distribution structure

After obtaining clearance from the ports, the importers generally transport the goods to warehouses located near their central operations. Supplies are then transported to distributors in their respective locations. The distributors in turn transport the products to the supermarkets/retailers. The distributor usually delivers the goods twice a week. Most supermarkets have an inventory of about one week to 15 days. Once an order is placed, the distributor delivers the products the next day. However, some supermarkets prefer to source certain products directly. For instance, Food World imports the confectionery Ferrero Rocher directly from the manufacturer. Metro Cash N Carry has a base of 743 registered suppliers from all over the world and also imports directly. Clearance of a consignment at a port in India takes about 710 days. If the importer is not based in the same city as the port of landing, further delays occur due to domestic transportation. Cross transportation from one state to another ranges from one week to two weeks. The importer/distributor generally has the necessary infrastructure including the cold storage and dry storage facilities and a distribution network in place. The importer/distributor may outsource the cold storage and other aspects of logistics to Logistics service providers (LSP). Major importers who operate in many parts of India usually have warehousing facilities in a few cities. Distributors in different regions are fed from these warehouses using a hub and spoke distribution system for outer regions. There are many large and small logistics companies that transport dry goods. However, vans and trucks equipped with refrigerated containers are costly and not very prevalent. Snowman and Radhakrishna Foodland are the biggest and most sophisticated operators in India of cold chain services.
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Brand promotions
Often, the importers are responsible for brand promotion and advertisements. Sometimes, the producer may assist the importer in brand promotions. Normally incentives such as cash discounts are given to the distributors to popularise the brand. Sampling of the product, in-store promotions and displays in retail stores are some measures to promote the product among the end-users.
6.6 Cold storage

A significant share of Indias cold storage facility is used for storing fruits and vegetables. Cold storage and deep freezers are also required for processed meat, marine products, milk products, etc. Importers usually outsource cold storage and cold chain services to service providers. Some cold storage units are completely used to store horticultural products while some are completely used for frozen fish and meat. A few combination cold storage units are also available. Some of the cold chain service providers in India include: Snowman (Bangalore, operates in ten metros) Radhakrishna Foodland Ltd (Kalamboli, Mumbai) Salva Food and Cold Storage Pvt Ltd (Mumbai) Delhi Cold Storage (Delhi)
A comprehensive list of cold storages in India can be found at http://india.gov.in/outerwin.php?id=http://agmarknet.nic.in/coldstorage.htm, The average cold storage tariffs of select products are provided in Appendix II. A typical example: Radhakrishna Foodland Radhakrishna Foodland has established one of the largest cold storage facilities near Mumbai. The unit has a storage capacity of 5 million cases (4 million wet and one million dry). The unit has five different temperature zones for different products. In addition, the company owns refrigerated vehicles with variable temperature settings. The company has established and operates a complete cold chain system for Mc Donalds. McDonald's local supply networks through a cold chain service provider, Radhakrishna Foodland. This company operates distribution centres for McDonald's restaurants in Mumbai and Delhi. Ranging from liquid products coming from Punjab to lettuce from Pune, the distribution centres receive items from different parts of the country. These items are stored in rooms with different temperature zones and are finally dispatched to the McDonald's restaurants on the basis of their requirements. Current scenario of cold storage facilities in India: The Directorate of Marketing and Inspection (DMI) of the Department of Agriculture and Cooperation provides consultancy and technical services to prospective entrepreneurs in construction, maintenance and operation of cold storages. It also trains managers and cold storage operators for efficient operation and management of cold storages at farm level. It provides technical support in preparation of master plan for cold storage requirements at micro/macro level.
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Table 6.3 Sector-wise distribution of cold storage units, 2008 (nos) Sector Private Sector Cooperative Sector Public Sector Total Source: www.india.gov.in Table 6.4 Commodity-wise distribution of cold storage units, 2008 (nos) Commodity Potatoes Multipurpose Fruits and vegetables Meat and fish Milk and milk products Others Total Source: www.india.gov.in India 2992 1386 149 513 191 85 5316 India 4820 363 133 5316
Maharashtra, Punjab, Uttar Pradesh and West Bengal are the front-runners in the cold storage capacity in India. With large companies expanding their food retail network, adequate cold storage infrastructure is likely to develop at a fast pace. As the demand for speciality foods and international brands remains strong, it is only a matter of time before world class cold chains and cold storage facilities are set up in India.
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7. Pricing structure and tariffs

In order to ensure that a product is competitive in the Indian market, exporters need to understand the system and take into account the following factors: duties, margins in a distribution chain consisting of importers, distributors and retail outlets and Central and State taxes of the country. There are many challenges faced while importing products in India. Costing is one of the most significant issues, as there is a high import duty. Foreign companies need to have a decent understanding of the Indian market and the consumer behaviour. Pricing is one of the most important factors to be considered for imported products.
7.1 Tariffs and duties of imported foods

India, traditionally has maintained high tariffs and import restrictions on food items. The basic duties are levied while importing products into India and these include: Basic dutyThe Government of India considers the basic import duty as the main levy. This duty can either be a percentage rate applied to the value of the goods (valued at Cost, Insurance and Freight (CIF)) or a specific rate based on unit of measurement. Different rates of duty apply for different products, as this duty is commodity specific. The Central Government may also, through notification, exempt goods specified in the notification partly or wholly from basic customs duty. The basic customs duty can be as high as 100 per cent for agriculture and food products Additional duty of customsAlso known as countervailing duty, it is calculated on the assessable value of imports plus the basic customs duty. This is equivalent to the rate of excise duty that would have been charged had the imported item been manufactured in India. Depending on the product, these excise duties can be as high as 24 per cent. Moreover, this duty is applied to the total value of the goods, calculated as the value at CIF plus the basic customs duty. Education cessThis is charged as a percentage of all duties and taxes levied by the central government except the additional duty of customs. The education cess paid on imported inputs cannot be set off against any duty/cess payable on manufactured items Special additional dutyThe special additional duty is a rate that differs by product. This duty is levied on the total value of goods, computed as the value at CIF, along with the basic customs duty and the additional duty of customs.
Apart from the four duties, additional levies such as antidumping duties and safeguard duties may also be applied. Anti-dumping duties are levied on specific goods imported from specified countries in order to protect the indigenous industry.
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Table 7.1 Import duties on select food products S. No. Fruits 1 Apples Oranges, grapes, pineapples, guavas, mangoes Pears and quinces Other fruits 50 40 35 30 0 0 0 0 3 3 3 3 0 0 0 0 52.015 41.612 36.411 31.209 Category Basic duty (%) CVD CESS (%) Additional duty (%) Total Customs duty (%)
Vegetables 2 Potatoes Other vegetables Fresh and processed meat 3 Fresh, chilled and frozen meat of bovine, swine, sheep, goats Sausages and similar products Fresh and processed fish 4 Fresh Processed Dairy products Skimmed milk, milk food for babies 5 Yogurt, buttermilk, cheese and curd Butter, Diary spreads, Ghee, Butter oil, Whey, Ice-cream 6 7 8 Preparations of cereals, flour, starch or milk and pastry products Pasta (cooked or uncooked) Confectionery (chocolate and sugar) Processed fruits and vegetables Juices, Jams, Jellies, Marmalade, Sauce, Soups Other food products Natural Honey 9 Olive oil Virgin Edible grade 0 0 0 0 0 0 0 0 0 0 60 0 3 4 68.955 30 0 3 4 36.497 30 30 0 10.504 3 3 4 8 36.497 48.086 60 30 30 0 0 0 3 3 3 4 0 4 68.954 31.209 36.497 30 30 0 0 3 3 0 4 31.209 36.497 30 100 0 0 3 3 4 4 36.497 111.15 30 30 0 0 3 3 4 0 36.497 31.209
** Import duty is calculated on assessable value, i.e. CIF + 1% (landing charges); the cess and additional duty have a compounding effect on the basic duty. Note: Import duties and taxes are subject to change without notice. It is strongly suggested that they be re-checked prior to the conclusion of any commercial agreement.
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A typical example for calculating the total custom duty for imported apples is given below:
Table 7.2 Custom duty for imported apples Rs CIF Value* Basic Custom duty @ 50% of assessable value = 101 CIF + Customs duty Total CESS (3% on basic duty) Landed cost Of which Total Customs duty Note: CIF value of apples is assumed to be Rs. 100. 100 50.5 150.5 1.515 152.015 52.015
7.1.1 State taxes

Sales Tax/Value Added Tax
Central Sales Tax (CST) is levied on interstate sale of goods, i.e. where the sale occasions movement of the goods from one state to another. This is levied by the state from which the movement of goods commences. Local sales tax/Local VAT are levied on sale of goods within the state, i.e. where the movement of goods as a result of the sale commences and terminates within the state itself. In India except for the State of Uttar Pradesh, the other 27 states have adopted Value Added Sales Tax (VAT). VAT paid on goods purchased from within a state can be off set against VAT and CST payable to that state on resale of those goods. Similarly, the VAT can also be set off against VAT/CST payable to that state against sale of goods manufactured within the state using the bought goods as inputs. Where the bought goods or goods manufactured within the state using them as inputs are stock transferred to another state, then the input credit for VAT shall only be allowed for VAT paid in excess of 4 per cent on those inputs. Entry tax is levied by the State Governments on goods brought into the state from outside for use or consumption within the state. The laws and the rates differ from place to place. In many states, the entry tax paid is allowed as a set off against the VAT payable on goods. A comprehensive list of some of the duty rates of imported food products in India is given in Appendix III.
7.2 Pricing structure of imported foods

With regard to the imported food sector, due consideration should be given to adapt to the Indian context, with respect to price and technology level. Therefore factors such as tariff rates, imported prices and volume of import are some of the most important factors to be considered while importing products. Given below is a typical structure used for pricing products such as apples and olive oil:
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Table 7.3 Pricing structure for apples and olive oil Particulars CIF (Cost Insurance and Freight) value at Indian Port + Total customs duty on CIF + Freight/clearing charges (2% on CIF) Landed cost Distribution Costs* (margins, taxes, etc.) MRP * * * Distribution margins = 1015% for apples and 1520% for olive oil. Retailer Margins = 2030% Local sales tax (VAT) = 4% Apples (US$ per kg) 1.00 52.015% 0.02 1.54 0.80 2.34
Some of the direct costs that an importer incurs when transferring products through to retail outlets include: local transportation costs from the port to the warehouse; storage cost; distribution costs (transport from the go-down to other cities).
7.2.1 Margins at different levels

All players in the value chain are aware of the MRP price of imported products. However, the costing of the landed price is complex and uncertain to distributors and supermarkets. Many of the importers negotiate the markdown profit with supermarkets and distributors.
Rs. 70 Price to distributor (Markdown profit) Rs. 80 Price to store Rs. 100 MRP
10%
25%
Within the supply chain, while the markdown profit to the distributor ranges between 710 per cent depending on the product and negotiation between the importer and distributor, supermarkets in India operate on a 20 per cent profit margin. Major stores operate on around a 1517 per cent profit.
7.2.2 Modes of payment

An importer pays to the exporter in many ways. While food products are generally imported by opening a Letter of Credit (LC), fresh fruits are usually sold on a Documents against Acceptance (DA) basis. Importers very often demand supplies on a consignment basis, wherein the payment is made to the exporter after selling the fruits in the market. However, this method is generally not recommended to exporters. Therefore, the four basic modes of payments, which are generally adapted in India include: Payment in Advance, Open credit, Documentary credits/letter of credit and document against acceptance.
Payment in advance
Under this method, the importer makes full payment to the supplier before the shipment of goods and the entire risk is laid on the importer. This method of payment generally takes place under the following circumstances:
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If the importer has not been long established. If the credit status of the importer is doubtful and unsatisfactory If the political and economic risks of the country are very high. If the product is in high demand and the seller does not have to accommodate the importer's financing request in order to sell the product.
This method proves to be inexpensive as it does not involve any commercial bank. However, a high degree of payment risk is faced by the buyer, if the seller sends poor quality goods or incorrect or incomplete documentation.
Letter of credit
The letter of credit method is the most popular mode of payment in India. Here, the buyers bank undertakes to pay the seller, when the terms and conditions have been met. According to the creditworthiness, the bank issues documentary credits to a customer. The credit period availed by an importer is usually 3040 days in India.
Documents against acceptance

This type of payment provides an important bank payment mechanism as it serves the need of both the exporter as well as the importer. Through an exchange of documents, the sale transaction is settled by the bank, thus enabling the payment and transfer of title simultaneously. For instance, in this system, the exporter transports the fruits and sends the documents through a bank and importer checks the documents. The importers bank on acceptance remits payment to the exporters account.
Open credit
Without issuing any negotiable instrument, the importer makes payments to the exporter at some specific date in the future, by only evidencing his legal commitment to pay at the committed time. This method usually takes place, either when the importer has a strong credit history or is well-known to the seller. No protection is provided to the exporter in case of non-payment. However, the exporter can decrease the repayment period and can retain the title to the goods until the payment is made. In spite of the risks, the open account payment is more prevalent in the international trade and exporters offering such terms are increasingly obtaining credit insurance to mitigate the potential open account credit risks. Usually, the credit to and by importers to distributors are generally not interlinked. Until a good relationship and understanding is established with the importer, exporters do not usually extend any credit. If a good relationship is established, then it is customary to extend a 3040 day line of credit. While importers allow 30 days credit to their distributors, the industry norm for receiving payment from food chains/stores is generally 3040 days and is slowly increasing to 6090 days credit.
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From farm to plate A Case Study on Imported Apples India is the sixth largest consumer of apples in the world. With the lowering of trade barriers, India has emerged as an attractive destination for overseas apple growers. Apples top the list of fruits imported, accounting for around 26 per cent of the total import of fruits. Steady consumer demand for imported apples is reflected in the increase in import from US$10.5 million in 200203 to US$52.96 million in 200708. Despite being priced higher than the Indian varieties, the major selling points for imported apples are that they are well graded, attractively packed and have better appearance. The peak season for imported apples is normally January-July, which is the off season for domestic produce. Trends in the import of apples, 200207 (US$ million)
60 50
52.96
40 30 20 10 0 2002-03 2003-04 2004-05

10.50 11.68 13.70
32.51
20.46
2005-06
2006-07
2007-08
From USA to Australia, apples from all parts of the world are available in the Indian market. Apples from USA accounted for 37.1 per cent of the total import of apple, followed by China and Chile which account for 27.6 per cent and 25.5 per cent respectively. New Zealand and Australia are the other major exporters of apples to India. Red Delicious (USA), Washington (USA), Fuji (China), ENZA (New Zealand) and Granny Smith (Australia) are some of the famous brands of imported apples found in the Indian market. Red Delicious and Fuji are imported the most, with their imports accounting for around US$16 million and US$11 million respectively.
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Major sources of imported apples, 200708

Australia 1.8%
Chile 25.5%
New Zealand 7.2%
Others 0.8%
USA 37.1%
China 27.6%
Imported apples arrive mostly at the ports of Mumbai, Chennai, Tuticorin and Vizag. Around 54 per cent of the imported apples arrive at the JNPT in Mumbai, followed by the Chennai port at 43 per cent. These apples are normally packed in cartons weighing 20 kg. Major port of destination
Tuticorin 2% Vizag 1%
Chennai 43%
JNPT, Mumbai 54%
After completing the required formalities at the port, the importer transports the cartons to a cold storage facility. Usually the cold storage space is rented, although some importers have their own warehouses equipped with cold storage. Distributors or wholesalers then transport the cartons of fruit from the cold storage to retail or wholesale markets using vans and trucks. Generally, if the distance is greater than 400 km, refrigerated vans are used. In certain cases, some of the big retail outlets buy directly from the importer.
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Distribution structure for imported apples
Importer
Cold Storage
Distributor/ Wholesaler
Retailer/ Institutions
India, traditionally has maintained higher tariffs on apples. The current rate for apples is 52.015 per cent. Indias tariff on apples is not only the highest among the fruits it produces locally but is also higher than the tariff on apples in other countries. Apples that arrive at CIF price of US$1 are finally sold to the customers at around US$2.34 in the retail outlets. One can buy imported apples from a number of places ranging from carts and wholesale markets to supermarkets and big retail chains.
Pricing structure for apples Particulars CIF (Cost Insurance and Freight) Value at Indian Port + Total customs duty on CIF + Freight/clearing charges (2% on CIF) Landed cost Distribution Costs* (Margins, taxes, etc.) MRP Apples (US$ per kg) 1.00 52.015% 0.02 1.54 0.80 2.34
* Distribution margins = 1015%

* * Retailer Margins = 2030% Local sales tax (VAT) = 4%
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8. Regulatory framework and import procedure

8.1 Regulatory framework
In terms of production, consumption, export and growth prospects, the food processing industry in India is one of the largest. With a number of fiscal reliefs and incentives, the government has accorded it a high priority, to encourage commercialisation and value addition to agricultural produce, for minimizing pre/post harvest wastage, generating employment and export growth. Various laws in India govern the food processing sector. While the existing laws and standards adopted by the government focus on ensuring the quality and safety of food, these laws also facilitate trade at both international and domestic level. The regulatory framework along with food safety and standards also emphasises self regulation and capacity building and decentralisation of licensing. The government has recognised the need to promote investments in the food processing sector to ensure an increase in India's share in the global trade of agricultural products, to generate employment for large a number of people, to increase the income of farmers and to contribute to the overall economy of the country. Reforms have been initiated to remove legislative barriers and introduce facilitative measures to catalyse private sector activity in the food and agri-business sector. Some of the key measures recently undertaken by the government include: amending the Essential Commodities Act to enable free trade and storage of commodities; amending the Agriculture Produce Marketing Commission Act; rationalising food laws; implementing the National Horticulture Mission to increase horticulture production through increased investments along the supply chain; removing restrictions on milk procurement; reducing taxation of food products; permitting 100 per cent foreign direct investment; formulating the Food Safety and Standards Act 2006.
The government, in order to boost the industry growth has also started providing tax concessions and several other benefits. A number of government organisations have come into existence, to give an impetus to the development of the food processing sector. Some of these organisations include Ministry of Food Processing Industries (MOFPI), Agricultural and Processed Food Products Export Development Authority (APEDA) and the Marine Products Export Development Authority (MPEDA).
8.1.1 Major laws governing food products

The Food Safety and Standards Act, 2006 The food sector in India is governed by several laws that are administered by different Ministries of the Government of India. However, consolidating all these laws, the Parliament enacted The Food Safety and Standards Act in 2006. The objective of this law was to integrate the food safety laws, so as to systematically and scientifically develop the food processing industry and shift from a regulatory regime to self-compliance.
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Science-based standards are laid down by the Act for articles of food and the act regulates their manufacture, storage, distribution, sales and import and deals will all packaged and processed food. It aims to establish a single reference point for all matters relating to food safety and standards from the present multi-level, multi-departmental control. The salient provisions of the Prevention of Food Adulteration Act 1954 are incorporated in the Act. The Act is based on the international legislations, instrumentalities and the Codex Alimentarius Commission. The key provisions of the Act are as follows: The Food Safety and Standards Authority (FSSA) would be established for regulating the food sector. Standards for food safety would be laid down by FSSA with the aid of scientific panels and a central advisory committee. These standards will deal with contaminants, pesticide residues, biological hazards and labels and will cover specifications for ingredients. Food additives, contaminants, processing aids, insecticides, pesticides, antibiotic residues, or solid residues in the food should be in accordance with specified regulations. Similarly, other foods which must adhere to specific regulations include irradiated food, organic food, genetically modified food, health supplements and proprietary food. Centrally, the nodal ministry for implementing the Act is the Ministry of Health and Family Welfare, Enforcement is to be the responsibility of State Commissioners of Food Safety and Food Safety Officers. Every entity in the food sector should get a licence or a registration, issued by local authorities. Packaged food products have to be labelled as per regulations in the Act and should not mislead consumers about quality, quantity or usefulness. Entities in the sector are required to initiate recall procedures if it is found that the food sold has violated specified standards. If a food item is not in compliance with the specific standards, a food operator owning or carrying out a business can withdraw the food and inform the competent authorities. The act places certain responsibilities on the distributors and retailers. For instance, the retailers are responsible for the expiry dates found in the food products in their premise.
Prevention of Food Adulteration Act, 1954 The PFA standards and regulations applying equally to both domestic and imported products cover various aspects of food processing and distribution. This act is proposed to prevent and protect consumers against food adulteration. Issues such as food colouring and preservatives, pesticide residues, packaging, labelling and sales are dealt with, under this act. The Central Committee for Food Standards, under the Directorate General of Health Services, Ministry of Health and Family Welfare, administers the operation of this Act. The Central Committee for Food Standards (CCFS) is responsible for advising the Central Government and State Government and matters arising out of the administration of the Act. Besides, a Central Food Laboratory has been set up by the Central government to perform functions entrusted to it for the administration of this act.
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Establishment of regulatory standards for primary food product is the main focus the PFA. The PFA does not always keep pace with advances in the food processing sector. Besides, PFA rules go beyond the mere establishment of minimum product quality specifications, by laying down recipes for how food products are to be manufactured. Though concerned parties may appeal to have the PFA Rules amended, the appeal processes are cumbersome and time-consuming. As specified in the regulation, including the labelling and marking requirements, all imported products must also adhere to the rules. The Fruit Products Order 1955 (FPO), issued under the Essential Commodities Act, 1955 The production and distribution of fruits and vegetable products, vinegar, sweetened aerated waters and synthetic syrups are regulated by the Fruit Products Order, 1955 (FPO), which is administered by the Department of Food Processing Industries. Specifications and quality control requirements regarding the production and marketing of processed fruits and vegetables are given in this order and a license is required for manufacturing of fruit and vegetable products under this order. Minimum sanitary and hygiene requirements of the premisessurroundings and personnelwater to be used for processing, processing equipment, etc. and marketing of processed fruits and vegetables are laid down under this order. This order which is implemented by the Ministry of Food Processing Industries also specifies the maximum limits of preservatives, additives and contaminants for various products. Imports of processed fruit and vegetable products must also meet the FPO standards. Meat Food Products Order, 1973 issued under the Essential Commodities Act, 1955 One of the main objectives of the Meat Food Products Order is to maintain hygienic manufacturing conditions of meat products for domestic consumption and to ensure better quality through proper quality control. Sanitary and other requirements, limits of heavy metals, preservatives, insecticides, residue, packing, marking and labelling of meat products, etc. are provided in this order. Manufacturers are accredited based on the sourcing of meat supplies. The Directorate of Marketing and Inspection, Ministry of Agriculture (Department of Agriculture and Cooperation), is the regulatory authority. In order to set up a factory for producing/processing meat products, a license is required and under this order export of beef is prohibited. The meat processing industry is also subject to the following State regulations: A No Objection Certificate (NOC) has to be obtained from the District administration for the slaughter of cattle, buffaloes, etc. Permission from the civic bodies/State Government (Department of Animal Husbandry) is required before setting up a meat processing unit integrated with a slaughter house. Slaughter of cows is banned in most of the States.
This order is equally applicable to importers of meat products. However, the implementation of the order is weak, due to unorganised production in the domestic market and few subject imports. The Government has also established procedures for the importation of livestock and related products to India under the Livestock Importation Act, 1898. This act is implemented by the Department of Animal Husbandry and Dairying, Ministry of Agriculture. These procedures are available at: http://dahd.nic.in/order/livestockimport.doc.
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The Milk and Milk Products Order, 1992, issued under the Essential Commodities Act, 1955 By regulating the processing and distribution, the Milk and Milk Products Order seeks to ensure the supply of liquid milk. Administered by the Department of Animals Husbandry and Dairying under the Ministry of Agriculture, this order establishes sanitary requirements for dairies, machinery, and premises and sets quality control standards for milk and milk products. While units handling up to 75 000 litres of milk per day are registered by the State Governments, units with more than 75 000 litres per day capacity are registered by the Central Registering Authority. Milkshed area, i.e. a geographical area, is demarcated by the Registering Authority for the collection of milk by the registered unit. Units handling less than 10 000 litres of liquid milk per day or milk solids up to 500 TPA are not required to register. Standards specified in the order also apply to imported products. Plant Quarantine (Regulation of Import into India) Order, 2003 Under the Destructive Insects and Pests Act, 1914, the GOI formulated the Plant Quarantine (Regulation of Import into India) Order, 2003. It was published on 18 November 2003, with the purpose of prohibiting and regulating the imports into India of agricultural articles. The implementing agency is the Directorate of Plant Protection, Quarantine, and Storage, under the Department of Agriculture and Cooperation, Ministry of Agriculture, which is similar to the Animal Plant Health Inspection Service (APHIS) of the USDA. The Standards of Weights and Measures Act, 1976, and the Standards of Weights and Measures (Packaged Commodities) Rule, 1977 Fair trade practices with respect to packaged commodities are prescribed by these measures. The purpose of these rules is to make certain that the basic rights of consumers regarding vital information about the nature of the commodity, the name and address of the manufacturer, the net quantity, date of manufacture and maximum sale price are provided on the label. Additional labelling requirements for food items covered under the PFA may be also be required. The act also specifies that the label of every pre-packaged product should carry a help line number for the customers. The regulatory authority of this law is the Department of Consumer Affairs, located within the Ministry of Consumer Affairs, Food, and Public Distribution. Importers of packaged food products must adhere to these acts, including labelling the product. Details to be provided on the imported products include, the name and address of the importer, the net quantity, date of manufacture, best-before date and maximum sales price. 8.1.1.1 Other major regulations relating to business operations in India Foreign trade (Export/Import) The foreign trade is governed by the Foreign Trade (Development and Regulation) Act, 1992 and the Foreign Trade (Regulation) Rules, 1993 and is administered by the Director General of Foreign Trade (DGFT), in the Ministry of Commerce. The Government has prepared the Foreign Trade Policy in 2004, which is applicable for five years and is amended from time to time. With certain export promotion schemes, the policy also lays down the import/export policy of the Government. Foreign Exchange Regulations The foreign exchange regulations are governed by the Foreign Exchange Management Act, 1999. This Act is implemented by the Reserve Bank of India (RBI). With its head office in Mumbai, the RBI has regional offices in all the import cities in India. The Foreign Exchange Department of RBI is the unit within RBI that is responsible for implementing FEMA.
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Several notifications, circulars and regulations are issued by the RBI for the purposes of implementing the Act. These lay down the conditions, limitations and the procedures governing foreign exchange transactions. The foreign exchange regulations have now become liberal with the liberalisation and growth of the Indian economy. Currently, the Indian rupee is freely convertible for current account transactionsi.e. for the purposes of remittances for imports, payment of interest, dividend, royalties, feeds for technical services and other services, as long as these transactions have been entered into within the regulatory framework governing them. However, in certain cases, capital account transactions (i.e. investments, commercial borrowings, divestments, etc.), need special approval from the RBI. Contact details of some of the regulatory agencies in India are provided in Appendix IV.
8.2 Import procedure and documentation

8.2.1 Procedure
It is the main responsibility of the importer to ensure that a product is permissible for importation and for clearing the consignment through the Customs. The services of a Clearing and Forwarding Agent is generally utilised by the importers and exporters need to fully cooperate with importers during this process. The procedure through Indian Customs is usually as under:1 The primary step is to obtain an import permit. No consignment shall be imported into India without a valid import permit issued by the Ministry of Agriculture. The importer or his agent shall file an application in PQ Form-15 in respect of each cargo immediately upon arrival or in advance in case of perishable consignments to the officer-in-charge of plant quarantine station at the notified point of entry along with the prescribed documents. On receipt of the application the PQ officer shall scrutinise the application and if found complete in all respects shall register the application and assess the inspection fees. On payment of inspection fees by the importer as per the prescribed rates in the form of demand draft/pay order drawn in favour of the 'Pay and Accounts Officer, Department of Agriculture and Cooperation' of concerned area of jurisdiction, the plant quarantine officer shall issue a quarantine order specifying name of inspecting staff, date, place and time of inspection of the consignment. On arrival of the consignment, the documentation and certificates are checked by the custom authorities to ensure that the product is permissible for imports. In order to ensure that the packaging and labelling requirements conform with importation requirements, the container is opened and checked. A Port Health Officer withdraws samples for testing with the Food and Drug Administration (FDA) or any government recognised testing lab. The product should comply with PFA requirements (it is advisable for exporters to send some samples beforehand to the importer for testing to avoid the unexpected outcome). The port health officer, in case of doubt of the pests or adulteration, will send samples of fresh fruits and vegetables to plant quarantine and processed food (vegetarian) to CFTRI for
There may be variations in the import procedure from product to product and hence exporters must check specific procedures for products they plan to export to India.
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inspection. In the case of frozen/processed meat and marine products the customs officials are required to send samples for testing to animal quarantine and MPEDA respectively. Custom officials determine the import duties i.e. basic import duty, countervailing duty and special additional duty on receipt of a No Objection Certificate (NOC). Inspection by the port authorities The clearance of imported food products at the port of entry requires a certification from the port health authority that the product conforms to the standards and regulations of the PFA. Detailed guidelines are laid down for examination and testing of food items prior to customs clearance. General inspection General inspection is conducted in addition to testing of samples. Customs officials are required to check the condition of the hold in which the products are transported, the physical appearance of the productswhether the package is swollen or bulged and also check for the presence of insect infestations, dirt, etc. Customs officials have to ensure that the products comply with the labelling requirements under the Prevention of Food Adulteration rules and Packaged Commodity rules. (Detailed labelling requirements are mentioned in the chapter titled Rules and Regulations). Also, the officer will check if the imported food item, at the time of import has a valid shelf life of not less than 60 per cent of original shelf life. Detailed checks Apart from the general checks referred to above, all consignments of edible/food products imported through ports are required to be referred to the Port Health Officer (PHO) for testing. The Ministry of Commerce and Industry has published a list of high risk food items. This list includes edible oils and fats, pulses and pulse products, cereal and cereal products, milk powder, condensed milk, food colours, and food additives, among other items. In order to alleviate the difficulties of importers consignments are allowed to be stored in warehouses pending the receipt of test reports. Clearance for home use will be allowed only after receipt of the test report. If the product fails the test, the customs authorities will ensure that the goods are re-exported out of the country by following the usual adjudication procedure or destroyed as required under the relevant rules. As regards ports where Port Health Officers (PHOs) are not available, the Customs is required to draw the samples and get them tested from the nearest Central Food Laboratory or a Laboratory authorised to conduct such testing by the Directorate General of Health Services. In addition to testing of food items under the PFA Act, these items shall also be subject to examination/testing to ensure compliance of the requirements of other Acts, Regulations and Orders such as Meat Food Products Order, the Livestock Importation Act, etc. if applicable, before these are allowed clearance into the country. Horticultural products Fresh agro products that are imported require an import license which can be obtained from Plant Quarantine office from the Ministry of Agriculture. For all the agricultural products, the following steps are to be followed for clearance: The importer or his agent shall arrange for inspection/sampling of the consignment on the scheduled date and time at the prescribed place by the nominated plant quarantine officer as per the quarantine order issued. The importer or his agent shall associate with inspecting officer while undertaking inspection. The PQ officer deputed for inspection shall draw appropriate size of sample for detailed laboratory testing.
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In the event of live insect infestation is noticed, the importer or his agent shall arrange for fumigation of consignments by an approved pest control operators at his own cost under the supervision of PQ officer. The importer or his agent submits an undertaking for supervision of fumigation operations along with remittance of supervision charges as per the prescribed rates A release order is issued if a consignment on inspection is found to be free from exotic pests. However in case of consignments found infested with live pests the same shall be permitted for clearance only after fumigation and re-inspection. A detention order is issued in respect of consignments that are found infested/infected with quarantine pests or imported in contravention with PQ regulations for arranging deportation failing which the same shall be destroyed at the cost of importer.
Without the clearance from plant quarantine the goods will not be released. Even the customs duty is paid only after PQ clearance. *Special conditions of import from Australia for select fruits are given in Appendix IV. Livestock The livestock productsmeat and meat products of all kinds including fresh, chilled and frozen meat are allowed to be imported only against a sanitary import permit issued by the Department of Animal Husbandry and Dairying. For this purpose, a detailed import risk analysis is carried out and a sanitary import permit is issued only after the concerned authorities are satisfied that the import of the consignment will not adversely affect the health of the animal and human population of this country. The Import Permit lays down the specific conditions that will have to be fulfilled in respect of the consignment, including pre-shipment certifications and quarantine checks. The Permit also specifies the post-import requirements with regard to quarantine inspection, sampling and testing. The Import Permit is generally issued for a period of six months and can be extended by the concerned authorities for a further period of six months after charging a revalidation fee. The livestock products are allowed to be imported into India only through the sea ports or airports located at Delhi, Mumbai, Kolkata and Chennai, where the Animal Quarantine and Certification Services Stations are located. On arrival at the port/seaport, the livestock product is required to be inspected by the officer in-charge of the Animal Quarantine and Certification Services Station or any other veterinary officer duly authorised by the Department of Animal Husbandry and Dairying. After inspection and testing, wherever required, quarantine clearance is accorded by the concerned quarantine or veterinary authority for the entry of the livestock product into India. If required in public interest, the quarantine or veterinary authority may also order the destruction of the livestock product or its return to the country of origin. Wherever any disinfection or any other treatment is considered necessary in respect of any livestock product, it is the importer who on his own or at his cost has to arrange for disinfection or other treatment of the consignment under the supervision of a duly authorised quarantine or veterinary officer. However, certification is based mostly on visual inspection and records of past imports. Consequently, importers of new products can sometimes face undue delays in clearing their products. The custom clearance period may last between one day and one month, depending on the product and experience of the importer. In case of a dispute or rejection of the consignment, the importer can file an appeal at the Customs office at the port of entry.
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Processed food A crucial step for an exporter from any country to India is to get an approval for their processed food products from Central Food Technological Institute (CFTRI), Mysore. Samples of all imported processed food items (vegetarian) will have to be sent to (CFTRI) for testing. CFTRI has the required state-of-the-art facilities to test cereals, pulses, plantation products, dairy products, oils and fat, processed fruits and vegetables, confectioneries, and other processed food. The products are tested for nutrition labelling, amino acid profile, vitamins, fatty acid composition, contaminants such as pesticide residues, food additives and adulterants. Samples received from the ports are analysed as per the specifications. Only after getting an approval from CFTRI, the goods will be handed over to the importers for distribution. The test report from CFTRI takes a minimum of two weeks. Minimum time taken for clearing imported products:
Table 8.1 Time taken for clearance of imported food at the port Category of food Processed food Plant quarantine clearance Animal quarantine clearance Customs clearance Source: MCG Compilation Time taken for clearance 1015 days 7 days 7 days 2 days
From 2003, the government of India has started de-licensing some categories of food products, bringing them under open general license. In 2007, about 450 food products were brought under the open general license. This is expected to result in an increase in import of food items.
8.2.2 Documentation
The important documentation procedures to be followed by importers in the country include: In the prescribed bill of entry format, importers must furnish an import declaration, disclosing the value of imported foods. This must be accompanied by the following documents: Import permit original A permit authorised by the Plant Quarantine Officer for the import of fresh fruits/vegetables, and processed food is mandatory. The importer has to clearly state the specified quantity intended to be imported. The Import Permit issued shall be valid for six months from the date of issue and valid for multiple port access and multiple part shipments provided the exporter, importer and country of origin are the same for the entire consignment. For frozen/processed meat products and frozen/processed marine products a permit is required from Animal Quarantine and MPEDA respectively. Phytosanitary certificate (original) issued at the country of origin or PSC Re-export format, in case of re-exported consignment along with attested copies of PSC issued from the country of origin. Customs bill of entry (duly endorsed). Shipping/airway bill. Invoice and Packing list.
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Fumigation certificate (if required). Certificate of Origin. Bill of lading.
A certification from the port health authority is needed for the clearance of imported food products at the port of entry. This certificate conforms to the standard and regulations of the PFA (Prevention of Food Adulteration Act). As most ports have very limited testing facilities, this certification is based mostly on visual inspection and records of past imports. Therefore, many importers face unnecessary delays in clearing their products. Depending on the product and experience of the importer, the custom clearance period may last between one day and one month. An appeal can be filed by the importer at the Customs office at the port of entry in case of a dispute or rejection of the consignment.
Table 8.2 Approximate charges levied by clearing and forwarding agents Category of food Processed food Frozen food Natural food Source: MCG Compilation Charges for a 20 container US$375 US$500 US$375
8.2.3 Packaging requirements

There are many requirements that an import must conform with, while importing products. Given below are some of them: Per Notification No. 44 (RE-2000)/19972002, issued by the Department of Commerce on 24 November 2000, all packaged commodities imported into India should carry the following declarations: Name and address of the importer. Generic or common name of the commodity packed. The name of the manufacturing company and contact details of the manufacturer. Net quantity using standard units of weights and measures. All weights or measures to be reported in metric units. Certain commodities can only be packed in specified quantities (weight, measure, or number). These include baby food, weaning food, biscuits, bread, butter, coffee, tea, vegetable oils, milk powder, and wheat and rice flour. If the net quantity of the imported package is given in any other unit, its equivalent terms of standard units shall be declared by the importer. Month and year of packaging in which the commodity was manufactured, packed, or imported. The MRP at which the commodity in packaged form may be sold to the ultimate consumer. This price shall include all taxes, local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertising, delivery, packing, forwarding, and the like. Labels must be printed in English or Hindi (Devnagari Script). Every package of vegetarian food must bear a symbol in green colour on the principal display panel just close to the name or brand name of the food. Similarly, every package of non-vegetarian food must bear a symbol in red colour. Details of ingredients as per PFA.
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Imports of certain products, including some food products (milk powder, condensed milk, infant milk foods, milk-cereal based weaning foods) and food additives, must comply with mandatory Indian quality standards. All manufacturers and exporters whose products are sold in India are required to register with the Bureau of Indian Standards.
Shelf Life: Notification No. 22 (RE-2001) 19972002, dated 30 July 2001, issued by the Department of Commerce, states: Imports of all such edible/food products, domestic sale and manufacture of which are governed by the PFA shall also be subject to the condition that, at the time of importation [emphasis added], these products are having a valid shelf life of not less than 60 per cent of its original shelf life. Shelf life of the product is to be calculated, based on the declaration given on the label of the product, regarding the date of manufacture and the due date of expiry. Per notification GSR 388 (E), issued by the Department of Health, on 25 June 2004, states that, every package of food which contains permitted artificial sweetener shall carry the label CONTAINS ARTIFICIAL SWEETENER AND FOR CALORIE CONSCIOUS, along with the name or trade name of the product. Per notification GSR 339 (E), dated 27 May 2005, issued by the Department of Health, states that: No containers or label relating to infant milk substitute or infant food shall have a picture of infant or women or both. It shall not have picture or other graphic materials of phrases designed to increase the saleability of the infant milk substitute or infant food. The terms Humanised or Maternalised or any other similar words shall not be used. The package and/or any other label of infant milk substitute or infant food shall not exhibit words, Full Protein Food, Energy Food, Complete Food, or Health Food, or any other similar expressions. The PFA Rules, 1955, includes a positive list for the presence of pesticide residues in various commodities and food (manufactured/imported) products, and their respective tolerance levels. Of the 189 pesticides registered for regular use in India, only 121 have Maximum Residue Limits (MRLs) notified. There are 27 pesticides that do not require MRLs. For the remaining pesticides, MRLs have not yet been established. CODEX Alimentarius MRLs may be accepted for imported foodstuffs only for those pesticides not included in Indias own positive list of pesticides. All imported foods are randomly sampled at the port of entry for their conformity to PFA standards. On 16 June 2004, with immediate effect, the Ministry of Commerce and Industry published a list of high risk food items, imports of which are subject to 100 per cent sampling. This list includes edible oils and fats, pulses and pulse products, cereal and cereal products, milk powder, condensed milk, food colours, and food additives, among other items. The import of product samples via express mail or parcel post is allowed, contingent on obtaining prior permission from the Directorate General of Foreign Trade. Mail order imports are not allowed. Once the products enter the domestic market, they are to be monitored randomly at the retail and wholesale level by the respective regulatory authorities.
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Appendix I. Major players in the food processing sector and products

Company Agro Tech Foods Britannia Industries Ltd Cadbury India Ltd Dabur Foods Ltd Gilts Food Products Pvt Ltd Glaxo Smithkline Beecham Godrej Foods Ltd Gujarat Cooperative Milk Marketing Federation Ltd Haldirams Marketing Pvt. Ltd Heinz India, Ltd Hindustan Unilever Ltd ITC Ltd Kelloggs India Ltd Mother Dairy Fruit and Vegetable Ltd Marico Industries Ltd MTR Foods Ltd Nestle India Ltd Parle Products Ltd Parle Agro Pepsi Foods India Ltd Venkateshwara Hatcheries Ltd Products Edible Oil, Wheat flour, Dried green peas, Packaged food, Microwave popcorn, Snacks (potato and corn chips) Biscuits and Bakery products, UHT Milk, Milk Products (cheese, butter, flavoured milk) Chocolates, Confectionery, Malted drinks, Cocoa powder, Hard boiled toffees Fruit juices, Cooking pastes, Candies, Coconut milk, Tomato puree, Lemon drink, Chilli powder Sweet mix, Snack mixes, Meal mix, Pure ghee, Dairy whitener, Milk powder Malted milk food, Biscuits Fruit juice, Tomato puree, Cooking medium, Bakery fats Ice-creams, Butter, Ghee, Cheese, Milk Powder, Infant Milk Powder, Traditional Indian Sweets, Chocolates, Curd Snack foods, Traditional Indian Sweets, Syrups, Vermicelli Malted milk food, Tomato ketchup Ice-creams, Atta, Salt, Tea/Coffee, Bread, Jam and Fruit juice, Biscuits, Soups Ready-to-eat foods, Snack foods, Confectionery, Biscuits Breakfast cereal Ice-creams, Butter, Cheese, Milk powder, Traditional Indian Sweets, Chocolates, Ghee, Processed fruits and vegetables Cooking medium, Fruit jams Convenience foods, Ice-creams, Snack foods, Pickles, Readymade mixes, Spice and masala powders, Frozen foods, Pickles Chocolates, Sugar confectionery, Malted drinks, Milk powder, Instant coffee, Tea, Noodles and Sauces, UHT and Condensed Milk, Yoghurt Biscuits, Toffees Fruit pulp, Mineral water, Fruit drinks Soft drinks, Snack foods, Fruit juice Poultry products, Olive oil pastes, Premium cookies
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Appendix II. Cold storage tariffs

S. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Commodity Apple, berry, maida Apple, berry, maida Apple, berry, maida Plums, Kiwifruit Plums, Kiwifruit Grapes, Litchi, Tamarind Potato Ginger/dry ginger Curd Egg Egg Chillis Coriander Tamarind Pulses Dry fruits Dates Dates Dates Dates Carrots Mango Mango Mango Butter and Cheese Milk Products Vanaspathy oil Pre-reserved rack for food products Weight 12 kg Up to 25 kg 30 kg Up to 5 kg 10 kg 10 kg Per quintal Per quintal Up to 20 kg Up to 10 kg Up to 20 kg Per quintal Per quintal Per quintal Per quintal Per quintal Up to 10 kg 20 kg 30 kg Per quintal Up to 5 kg Up to 20 kg Up to 20 kg Up to 20 kg 15 kg 30 kg Up to 20 kg Per rack Price (Rs.) 5 9 11 5 9 9 23 50 20 8.5 12 42 37 43 12 45 3 4 5 16 25 3 5 10 10 30 15 2 200 Price (US$) 0.12 0.22 0.27 0.12 0.22 0.22 0.57 1.24 0.50 0.21 0.30 1.04 0.92 1.07 0.30 1.12 0.07 0.10 0.12 0.40 0.62 0.07 0.12 0.25 0.25 0.75 0.37 54.67 Duration Per month Per month Per month Per month Per month Per month Per month Per month Per month Per month Per month Per month Per month Per month Per month Per month Per month Per month Per month Per month For 15 days Per week For 2 weeks For 1 month Per month Per month Per month Per month
Note: The above rates are indicative and need to be validated prior to commencing business operations.
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Appendix III. Customs duty on select imported food products

S. No. Category Fruits Bananas Dates, figs, pineapples, avocados, guavas, mangoes Oranges Grapes Melons Apples Pears and quinces Apricots, cherries, peaches, plums Strawberry, raspberry, blackberry, Kiwifruit, mulberry Pomegranate, Tamarind, Litchi, Chico Vegetables Potatoes Tomatoes Onions, shallots, garlic, leeks Cabbages, cauliflowers, kohlrata Lettuce and chicory Carrots, turnips, salad beetroot, radish, celeriac Cucumbers and gherkins Peas, beans, other leguminous vegetables Asparagus, Aubergines, Mushrooms, Olives, Green chilly, Pumpkin, Spinach, Green pepper Fresh and processed meat Fresh, chilled and frozen meat of bovine, swine, sheep, goats Sausages and similar products Fresh and processed fish Fresh, chilled and frozen Processed marine products (crab, shrimps, prawns, lobster, squid, octopus, cuttlefish, oysters, tuna, salmon, herrings) Dairy products Skimmed milk, milk food for babies Yogurt, buttermilk Butter, Diary spreads, Ghee, Butter oil Whey Cheese and curd Ice-cream Preparations of cereals, flour, starch or milk and pastry products Pasta (cooked or uncooked) Corn flakes Sweet biscuits Pastries and cakes Fruit juices Confectionery Chocolate confectionery Sugar confectionery Processed fruits and vegetables Jams, jellies, marmalade Sauce (soya, tomato, mustard, chilli, mayonnaise) Other food products Natural Honey Olive oil Virgin Edible grade Customs duty (%) 31.209 41.612 41.612 41.612 31.209 52.015 36.4105 31.209 31.209 31.209 36.497 31.209 31.209 31.209 31.209 31.209 31.209 31.209 31.209 36.497 111.15 31.209 36.497 68.954 31.209 36.497 36.497 31.209 36.497 36.497 48.086 59.190 13.004 41.906 48.086 48.086 36.497 36.497 68.955 0 0
7 8
10
Note: Import duties and taxes are subject to change without notice. It is strongly suggested that they be re-checked prior to the conclusion of any commercial agreement.
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Appendix IV. Conditions of import of select fruits from Australia

Particulars Citrus fruits (lemon, lime, orange, grapefruit, mandarins, etc.) Conditions of import
o MB fumigation @ 32 g/cubic metre for 2 hrs at 21 C or above at NAP or equivalent thereof against Mediterranean fruit fly and Queensland fruit fly. Or
Pre-shipment cold treatment at 0oC or below for 10 days; 0.55oC or below for 11 days; 1.1oC or below for 12 days plus in-transit refrigeration against o o Mediterranean fruit fly and 0 C or below for 13 days; 0.55 C or below for 14 days; 1.1oC or below for 18 days plus in-transit refrigeration against Queensland fruit fly. Pre-shipment cold treatment at 0oC or below for 10 days; 0.55oC or below for 11 days; 1.1oC or below for 12 days plus in-transit refrigeration against Mediterranean fruit fly and 0oC or below for 13 days; 0.55oC or below for 14 days; 1.1oC or below for 18 days plus in-transit refrigeration against Queensland fruit fly.
o MB fumigation @ 32 g/cubic metre for 2 hrs at 21 C or above at NAP or equivalent thereof against Cherry fruit flies and Mediterranean fruit fly. Or
Pome fruits (apple, pear, quince) Stone fruits (plum, peach, cherry, apricot, nectarine)
Pre-shipment cold treatment at 0 C or below for 10 days; 0.55 C or below for 11 days; 1.1oC or below for 12 days plus in-transit refrigeration against cherry fruit flies and Mediterranean fruit fly. MB fumigation @ 40 g/cubic metre for 2 hrs at 21oC or above at NAP or equivalent thereof against Mediterranean fruit fly and Queensland fruit fly. Or Pre shipment cold treatment at 0oC or below for 10 days; 0.55oC or below for 11 days; 1.1oC or below for 12 days plus in-transit refrigeration against Mediterranean fruit fly and 0oC or below for 13 days; 0.55oC or below for 14 days; 1.1oC or below for 18 days plus in-transit refrigeration against Queensland fruit fly.
Grapes
Source: http://www.plantquarantineindia.org/ Note: This is applicable for most of the countries including Australia. This adds to the clearance time and acts as a non-tariff barrier.
79
Appendix V. Inspection and fumigation fees for fresh fruits and vegetables
Particulars (i) (ii) (iii) (iv) Numbers/weight/volume Up to 2 kg. Above 2 kg up to 100 kg. Above 100 kg up to 1000 kg. Above 1000 kg Fee Rs. 50/Rs. 50/- plus Rs. 5/- per additional kg Rs. 550/- plus Rs. 2/- per additional kg Rs. 2500/- plus Rs. 75/- per additional tonne except in case of pulses Rs. 2500/- plus Rs. 50/- per additional tonne in case of pulses
Inspection fees
(A) On volume basis (i) Up to 5 cu.m (ii) Above 5 cu.m Fumigation fees (B) On container basis (i) 20 container (33 cu.m) (ii) 40 Container (66 cu.m) (C) Supervision charges Source: http://www.plantquarantineindia.org/ Rs. 2400 Rs. 4500 Rs. 500 per day per consignment Rs. 600/Rs. 600/- plus Rs. 300/- per additional 5 cu.m or part thereof
80
Appendix VI. Regulatory agency contacts

1) Ministry of Commerce Director General of Foreign Trade Ministry of Commerce Udyog Bhavan New Delhi 110 011 Phone: (9111) 2301 6262 Fax: (9111) 2301 6225 Email: dgft@ub.nic.in Website: http://dgft.delhi.nic.in/ 2) Ministry of Food Processing Industry Joint Secretary Ministry of Food Processing Industries Panch Sheel Bhawan August Kranti Marg New Delhi 110 049 Phone: (9111) 2649 2475 Fax: (9111) 2649 3228 Email: anpsinha@mofpi.delhi.nic.in Website: http://mofpi.nic.in/ 3) Registry of Trademarks Office of the Controller General Patents, Designs and Trade Marks Old CGO Building 101 M. Karve Road Mumbai 400 020 Phone: (9122) 2203 5007 Fax: (9122) 2208 9995 Email: cgpdtm@vsnl.net Website: www.ipindia.nic.in 4) Central Board of Excise and Customs Chairman Central Board of Excise and Customs Ministry of Finance North Block New Delhi 110 001 Phone: (9111) 2309 2849 Fax: (9111) 2309 3215 Email: cbecoff@finance.delhi.nic.in Website: http://www.cbec.gov.in/
81
5)
Prevention of Food Adulteration Act Joint Secretary (PFA) Department of Health Ministry of Health and Family Welfare Nirman Bhawan Maulana Azad Road New Delhi, 110 001 Phone: (9111) 2306 1195 Fax: (9111) 2306 1842 Email: dghs@nb.nic.in Website: www.mohfw.nic.in/pfa.htm
6)
The Standards Weights and Measures Act Additional Secretary (Weights and Measures) Department of Consumer Affairs Krishi Bhavan New Delhi 110 001 Phone: (9111) 2338 3027 Fax: (9111) 2338 6575 Email: as-ca@fca.nic.in Website: http://fcamin.nic.in/wm_ind.htm
7)
Phytosanitary issues Plant Protection Advisor Directorate of Plant Protection, Quarantine and Storage Ministry of Agriculture N.H. IV Faridabad 121 001 Haryana Phone: (91129) 241 3985 (9111) 2338 5026 (Delhi Office) Fax: (91129) 241 2125 Email: ppa@nic.in Website: www.plantquarantineindia.org
8)
Livestock and Products Imports Joint Secretary (Administration) Department of Animal Husbandry and Dairying Ministry of Agriculture Krishi Bhavan New Delhi 110 001 Phone: (9111) 2338 7804 Fax: (9111) 2338 6115 Email: jsadd@nic.in Website: http://dahd.nic.in/
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Appendix VII. Select list of importers/distributors in India

S. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Company name Three Rings Imports and Exports Pvt Ltd Lotte India Corp Ltd Polestar ventures Pvt Ltd Shahi Foods Universal Corp Ltd AVT Garia Foods Pvt Ltd Oracle Trading Co. Pvt Ltd Overseas Trading Tan Business Ventures Pvt Ltd Ajanthaa KTK Products (Distributor) Eden's International (Distributor) E Duraisamy and Bros Narang Bon Appetit Kritimma International RPC Foods Max Foods Rai and Sons Pvt Ltd L-Comps and Impex Suresh Kumar and Co S Naresh Kumar and Sons KLG Import and Exports Agro World Padma Fruits Everest Exim Enterprises Chenab Impex Pvt Ltd Sankalp Retail Value Stores Pvt Ltd Fortune Gourmet Specialities Pvt Ltd Address #9 (Old # 5), Kuppuswamy St, Lotus Apartments, T Nagar, Chennai 600017 No 4/111, Mount Poonamalle Road, Manapakkam Chennai 89 No. G-2 VS Manor, No. 2, Mannar Street, T-nagar, Chennai 600017 No. 5H, Century Plaza, Teynampet, Chennai 600018 4C, P M Twr, No. 37 Greams Road, Chennai 600006 No. 64, Rukmani Lakshmipathy Salai, Egmore Chennai Old No. 7, II cross Street, Dr Radhakrishna Nagar, Thiruvanmiyur, Chennai 41 34/2 New No. 86, II Floor Mookathal Street, Purasawalkam,Chennai 7 11/1, Mahalinga Chetty Street, Mahalingapuram, Chennai 600 034 #12, Govindappa Naicken St (near Sevenwells Market), Chennai 1 43/A, Second Floor, New Street, Nungambakkam, Chennai 600 034 TB 110, Anna Fruit Market, Koyambedu, Chennai 600 092 #5, Muktha Gardens, Spur Tank Road, Chetpet, Chennai 600 031 2/16 Ambour Salai Puducherry 605 001 1st Floor, Plot #1088, Near White Temple, Bhalaswa Village Outer Ring Road, New Delhi 110 033 M-412, Lado Sarai, New Delhi 110030 B 226 Ashok Vihar Phase-1, New Delhi 110052 9-A Connaught Place, New Delhi 110001 809-A, International Trade Tower, Nehru Place, New Delhi 110019 A-17, Sonu Towers 2nd Floor, Dr Mukherjee Nagar Coml. Complex, Delhi 110 009 D-397, New Subzi Mandi, Azadpur, Delhi 110033 B-160, New fruit market, Azadpur, New Delhi 110033 C-601, New Subzi Mandi, Azadpur, Delhi 110033 JP-8, Opp MP Market, Near City Park Hotel, Pitampura, Delhi 110034 Santa Mangesh, Savarkar Rd, Dombivli (E), Dutt-Thane J-1A, Anja Ind Est, Saki-Vihar Rd, Andheri (E), Mumbai 72 RG Thadani Marg, Worli Sea Mace, Mumbai 18 107, Adyaru Ind. Est. Sun Mill Compd, Lower Parel, Mumbai 13
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S. No. 29 30 31 32 33 34 35 36 37 38 39 40
Company name RR Oomerbhoy Euro Fruits Pvt Ltd Radhakrishna Foodland Pvt Ltd Universal Corporation Ltd Kayempee Foods Pvt Ltd Globe Trade Associates M Agencies Dutta Agency Universal Corporation Exotica Jayam Viniyog and Mercantiles Pvt Ltd Sai Foods
Address 5, Sona Mahal, 143, Marine Drive, Nariman Road Mumbai 400020 301, Vikas Commercial Center, Dr C G Rd, Chembur, Next to Basant Cinema, Mumbai 400 074 Radhakrisha House, Majiwade, Thane (W) 400601 180/A, Malakpet Hyderabad 56 40/P, CIE Gandhi Nagar, Kukatpally, Hyderabad 28/2/1, Old Ballygunge, 2nd Lane, Kolkata 4/4/40B, Banerjee Paru Road, Tollygunde Kolkata 41 4/1M, Abinash Chowdary Lane, Kolkata 46 20 Coal Dock Road, Khidderpore Kolkata 14/A, Burdwan Road, Kolkata 700027 9, 3rd Flr, Brabourne Rd, Brabourne Road, Kolkata 700001 Shed No. 45, 60 ft. Road, JC Nagar Main Road, Kurubarahalli, Mahalakshmipuram Post Bangalore 560086 22, Cunningham Apts, 5, Maj. Gen, Loganathan Road, Bangalore 560052 #22, BDA Complex, Austin Town, Bangalore 47 #7, 6th Cross, Vasanth Nagar, Bangalore 560052 APMCYard 560100 E'-Block, No. 34, Spl. APMC Sub Market Yard, Singena Agrahara Hosur Road Cross, Huskur Post, Bangalore 560 100 # 8, Muslim Hall Building Sethu Rao Street Cross, Bangalore 560002 No. A5, APMC Yard, Huskur gate Bangalore 560100 F-85/86, APMC Fruit Market, Bangalore560100 27/3891, Chakkalakkal Road, Perumanoor, PO Kochi 6282015 72 Marshalls Road, Chennai 600008 56, Anna fruit Market, Koyambedu. Chennai B 153 New Subzi Mandi, Azadpur, Delhi 110033 B/3 Fruit Market Complex, Gaddiannram. Hyderabad 660060
41 42 43 44 45
Steward and Pantry ST Marketing (Distributor) Aditya Enterprises MRC Trading (Distributor) A Abdul Rahim Shariff and Sons
46 47 48 49 50 51 52 53
G Sagar and Co (Distributor) MRC Mandi (Distributor) IG International (Distributor) Cosmo Fine Foods (P) Ltd Daily Life Retail and Trading Limited Arul Exports and Imports IFC International T Venkataramiah and Co
84
FOOD AND TRADE DEVELOPMENT DIRECTORATE Department of Agriculture and Food Western Australia 3 Baron-Hay Court South Perth Western Australia 6151 Telephone: +61 8 9368 3382 Facsimile: + 61 8 9367 7389
www.agric.wa.gov.au

India's Market Opportunities: For Imported Fresh and Processed Foods

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India's Market Opportunities: For Imported Fresh and Processed Foods

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Department of Agriculture and Food Western Australian Trade O ce India

Bulletin: 4770 ISSN: 1833-7236 May 09

Indias market opportunities

Report Prepared by MADRAS CONSULTANCY GROUP, CHENNAI

Indias market opportunities for imported fresh and processed foods

Madras Consultancy Group

1.3 Scope of work

1.4 Research Methodology

Madras Consultancy Group

1.5 Products covered

1.6 Glossary of terms

Madras Consultancy Group

Madras Consultancy Group

2.2 Import trends

Madras Consultancy Group

85.14 112.6 66.37

2.2.2 Meat and marine products

Madras Consultancy Group

2.2.3 Dairy products

Madras Consultancy Group

Processed fruits and vegetables

Madras Consultancy Group

2.3 Distribution channels and logistics

Figure 2.5 Distribution structure for imported food products.

Madras Consultancy Group

2.5 Market entry strategy: India

Madras Consultancy Group

Identifying target product segments and regions

Madras Consultancy Group

Madras Consultancy Group

Madras Consultancy Group

3. Overview of the Indian Agriculture and Food Processing sectors

3.2 Indian food processing sector

Madras Consultancy Group

Madras Consultancy Group

3.3 Overview of production and consumption in major sectors

Madras Consultancy Group

3.3.1 Fruits and vegetables

Madras Consultancy Group

3.1 1.7 1.1 2

Processed fruits & vegetables Processed unorganised

3.3.2 Meat and Poultry

Madras Consultancy Group

Source: Department of Animal Husbandry Dairying (DAHD)

Madras Consultancy Group

3.3.3 Marine products

Madras Consultancy Group

Processed fish & marine products

Madras Consultancy Group

3.3.4 Dairy products

Source: Ministry of food processing industries

Madras Consultancy Group

Madras Consultancy Group

Madras Consultancy Group

611 554 448

Madras Consultancy Group

3.3.6 Bakery products

Madras Consultancy Group

Source: Indian Biscuit Manufacturers Association (IBMA)

Madras Consultancy Group

Madras Consultancy Group

3.3.7 Packaged/convenience foods

Jams and tomato based products (sauces/ketchups)