FOOD PROCESSING INDUSTRY

WHERE WE ARE..

India is the front ranking producer of many perishable commodities

Milk Largest Producer 91 Mn T

Cattle / buffaloes Largest in the world 283 million

F&V #2 in the world 151 Mn T

Fisheries Marine: 2.7 Mn T Inland : 3.1 Mn T

Food Grains #2 in the world (220 Mn T) Sugarcane # 2 in the world (245 Mn T)

Tea Largest Producer (0.85 Mn T) Goat & Sheep 182 million

Well Known Fact

Only 2% of total food produce is processed

Flow of Presentation
Market overview Share of organized and unorganized sector Growth potential Competitive advantage Government regulation and support conclusion

Market Overview

Industry size is US$ 70 billion (MOFPI) Share to Indian GDP is 6.3% Share of 6% in total Industrial production Employs 1.6 million workers directly

Segments

Under Food Industry

Dairy Fruit and vegetable industry Grain processing Meat and poultry processing Fisheries Consumer foods including packed food, beverages and packaged drinking water

Segmentation Of Different Sectors In Food Industry

Level of Food Processing

Source: MOFPI

Share Of organized and unorganized sector across different segments

Source: MOFPI

Source: MOFPI 2005

Food processing Units In Organized Sector (numbers)

Source:MOFPI2003

Factors Affecting Demand of Food Products

Demand side factors Supply side factors

Demand Side Factors

Low per capita income Socio-cultural factors

Socio-cultural factors
Indians prefer freshly cooked products Significant variations in food habits and cooking recipes The share of working women still less than 19% Raw materials and ingredients are easily available

Supply Side Factors

Lack of Scale
Internationally, Growth strategy of many food companies

Alliances
Increased scale of economies Reducing the cost of food The worlds largest food processors are diverse, with business interests across sub-segments

In contrast, Indian companies

Scale of operations small Restricted to few products. Leads to High unit cost of production Low global competitiveness Inability to reinvest in quality and brand / market development

Significant growth, across all segments.

Growth in organized dairy and consumer food segments

Dairy Sector
17% of total expenditure on food Projected to grow to 108 million tones by 2007 end 50,000 ton branded bottle market valued at US $ 33 million (estimated to grow at 810%/annum) Ice cream market US$ 199 million

 Cheese market US$ 110million or 54000 tonnes (volume terms), present growth rate 8-10%/annum Market for UHT milk becoming popular (market size US$33.4 million) Total investment in dairy sector US$3.3 billion

Fruit And Vegetable Processing

Installed capacity increased from 1.11 million tonnes in 1993 to 2.33 million tonnes in 2004 Expected growth 10% Will jump to 25% by 2025

Grains
More than 200 million tonnes of different food grains every year 15% of annual wheat production converted into wheat products Total investment till 2002, US$ 1.5 billion of which 253.5 million is FDI

Meat And Poultry

Source: MOFPI

 Livestock population -470 millon Only 1-2% converted into value added products 450 million broilers, 33 billion eggs annually with growth rates of 16% and 20%

 Surplus buffalo meat in the country (lucrative export market) Poultry export mainly to Maldives and Oman (other markets like Japan, Indonesia, Singapore) Venkys and godrejs real chicken getting popular

Fish Processing
3rd largest fish producer(2nd in inland fish production) 8000 km coastline Contribution to national income is US$4.4 billion 1.4% to GDP Investment 1991-2003 US$600 million of which 122.5 million is FDI

Packaged or Convenience Food

Market size of confectionaries US$484.3 million with growth rate 5-7%/annum Biscuit market size US$ 373.4 million with annual growth of 7.5% Huge demand for Indian snack food in overseas market (market size US$33.4 million with growth rate 20% annually)

Aerated Soft Drinks

Over 100 plants across all states Attracts one of the highest FDI in the country(US$1049 million) Presently 700,000 outlets retailing soft drinks in the country Total export earning of over 1150 million annually Global giants coke, pepsi are here

Packaged Drinking Water

Market size of US$223 million 215 licensed companies Changing lifestyle boosting sales

Alcoholic Beverages
3rd largest market for alcoholic beverages Demand for spirits and beer is estimated to be around 373 million cases/annum Demand for wine in the domestic market is around 6 million bottles/annum

Few More Facts..

Value addition of food products is expected to increase from the current 8% to 35% by 2025 Fruit and vegetable processing is expected to increase from 2% to 10% by 2010 and to 25% by 2025

Growth In trade
In food category gross Indian trade was US$ 9862.34 million during fiscal year 2004(10% higher than previous US$ 8914.82 million figure

Source: MOFPI 2005

Source: MOFPI 2005

Growth In FDI
US$ 711.4 million till march 2004 US$ 111.2 million in 2004 up from US$ 36.5 million in 2003 30% comes from EU countries

 Successful ventures from EU countries are: Perfetti, Cadbury, Godrej-pilsbury, Nutricia international, Manjini comaco

Source: MOFPI 2005

Competitive Advantage
Demand conditions Factor conditions

Demand Conditions
Annual income of US$ 980 or above of consuming class It is likely to constitute over 80% of the population by 2009-10 Large consumer base Changing age profile Changing lifestyles

Source: NCAER

Factor condition
Largest irrigated land Largest producer of milk 8000 km coastline Largest livestock population 80% buffalo and 20% cattle Cheap workforce Cost of production

Institutional Support
Central Food Technological Research Institute Central Institute of Fisheries Technology National Dairy Research Institute National Research and Development Centre

Government Regulation And Support

Development of AEZ and food parks (grant of US$22.97 million) Full repatriation of profits and capital Automatic approval for FDI up to 100% Zero duty import of capital goods and raw material for 100% export oriented units

 Full duty exemption on all imports for units in export processing zones Government grants for setting up common facilities in agro food parks