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Food & Beverages industry

Food & Beverages industry

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Published by: Subhradeep Das on Apr 04, 2011
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Food & Beverages Sector

An Introduction to the Sector 

The food and beverage industry is composed of companies involved in processing raw food materials and manufacturing, packaging, or distributing food or drink In the food industry, the dairy is the largest, followed by baked, cereal items, and chilled foods The beverage segment is composed of alcoholic and nonalcoholic beverages For alcoholic beverages, beer, cider, and other flavored alcoholic beverages make up the bulk of the market, followed by wine and spirits In the nonalcoholic segment, soft drinks far outsell coffee, tea, juice and water    

which we now distinguish agriculture as a separate industry. Now. Reliance on transport has increased as the industry has developed to be more global in nature. the industry is much more focused on technology and mechanical manipulation of raw foods to create more valuevalueadded food products. it is very competitive and relies strongly on advertising to promote brand names The food and beverage industry used to be considered the production of food. with most food products being offered by a handful of globe-spanning globecorporations. .An Introduction to the Sector     The food and beverages industry is considered a mature industry.

A comprehensive view     The Indian food market is estimated at over US$ 182 billion. the retail food sector in India is likely to grow from around US$ 70 billion in 2008 to US$ 150 billion by 2025 It would account for a large chunk of the world food industry. which would grow to US$ 400 billion from US$ 175 billion by 2025 . according to consultancy firm McKinsey & Co. It accounts for about two thirds of the total Indian retail market.

6 billion in the next five years Agricultural and Processed Food Products Export Development Authority (APEDA) sees farm product exports in the global trade to grow from present 2% to over 5%    .An overview    The Indian food market is estimated at over US$ 182 billion Accounts for about two thirds of the total Indian retail market The retail food sector in India is likely to grow from around US$ 70 billion in 2008 to US$ 150 billion by 2025 The world food industry is set to grow from US$ 175 billion to US$ 400 billion by 2025 Exports of agricultural products from India are expected to grow more than double to top US$ 20.

5% to reach US$ 21.1 billion While packaged food sales will increase by 67.2% to touch US$ 90.06 by 2012 Investment opportunities in the Indian food industry are set to shoot up by a huge 42.5% to US$ 18.Growth Prospect  India¶s processed food output is likely to grow by 44.7 billion Per capita packaged food spending is expected to grow by 56.5% to US$ 181 billion in 2015 and to US$ 318 billion by 2020    .

growing at 15-20% a year 15The growth rate of the US$ 1.68 billion Compared with 2007-08. India exported 470.34 billion.56 billion unorganised sector is 7-8% 7-   Health Food  Recognising the growth potential of the branded health food sector in India. various FMCG majors are foraying into this sector . exports of spices had shown an increase of 200719% in rupee value and 6% in dollar terms   Snacks & Confectionary   The current market is estimated to worth US$ 3 billion The branded snack market estimated to be around US$ 1.520 tonnes of spices valued at US$ 11.Sectors  Spices  Despite a global slowdown.

05bn growing at 14-15% over the past two-three years 14twoIndia¶s share in exports of processed food in global trade is only 1. and the size of the global processed-food market stands at processedaround US$ 3.50 billion in the food processing industry over the next 5 years. requiring an investment of US$ 20. a major chunk of which it plans to attract from the private sector and financial institutions      .Sectors  Food Processing  The Indian packaged foods industry is estimated at US$ 13.2 trillion Under the Vision-2015 action plan GOI plans to triple the size of the Visionfood processing industry from around US$ 70 billion to about US$ 210 billion GOI also aims to increase the share in global food trade from 1.5%.5% to 3%.6 billion Ernst and Young predicts the food processing industry in India to grow at 30-40% as against the present 15% in the next 10 years 30GOI is looking for an investment of US$ 21.

67 billion and has been growing at 5% a year The domestic dairy sector is slated to cross US$ 108 billion in revenues by 2011 India continues to be the largest producer of milk in the world.Sectors  Dairy  The current size of the Indian dairy sector is US$ 62. It produced 110 million tonne of milk in 2008-09 2008-    Beverages    The market for carbonated drinks in India is worth US$ 1.25 billion juiceThe fruit drinks market is growing fastest at 25% followed by other sports and energy drinks The market for wine has also been growing at 25% per year  .5 billion The juice and juice-based drinks market accounts for US$ 0.

37 million .Investments in pipeline  Total amount of investments in the food processing sector in the pipeline for the next 3 years is about US$ 23 billion ± µIndia Food Report 2008¶  Pepsico would pump in an estimated US$ 152. of which 100 will be in India  GOI has received around 40 expressions of interest (EoI) for the (EoI) setting up of 10 MFPs with an investment of US$ 514.30 million to set up four new food and beverages projects by 2012  Global Franchise Architects (GFA) aims to open 250 stores around the world by March 2010.

Government Initiative  Food processing industries have been put in the list of priority sectors for bank lending  The government plans to open 30 mega food parks by the end of the 11th five year plan (2007-2012) Fruit and vegetable processing units have been completely exempted from paying excise duty Automatic approval for foreign equity up to 100 per cent is permitted for most of the processed food items   .

ice cream. condensed milk.Government Initiative  Items like fruits and vegetables products. meat production have been completely exempted from Central Excise Duty  Excise duty on ready to eat packaged foods and instant food mixes has been brought down to 8% from 16%  Excise duty on aerated drinks has been reduced to 16% from 24%  The Ministry of Food Processing Industry would assist in the setting up of more food processing units so that the industry could create 10 million jobs by 2015 .

Target Segment Profile   India's Food and Beverage industry is valued at Rs. the total beverage consumption will grow at 9% over the next 20 years.   . alcoholic beverage and non-alcoholic nonbeverage will see a spurt of 9. India produces above 600 million tonnes of food products every year and is one of the major producers of food in the world.6% and 8. 3584 billion. Of which. 2005According to Mckinsey's report.8% respectively. The food and beverage industry registered a growth rate of 8.5% in 2005-06.

transportation.Basic Issues & Constraints      Poor infrastructure Lack of adequate facilities for storage. and cold chain facilities No common food law (13 laws are enforced by 9 ministries) Food standards are confusing and contradictory  High cost of raw material and packing material and high railway freight put pressures on margins Different rules and regulations and licensing are defined for different commodities .

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

ITC Limited. Future Group. Godrej Industries Limited.Market Leaders  Diversification. RPG Enterprise and Godrej Agrovet Limited    .. PepsiCo. Hindustan Lever Limited. Inc. Nestle` SA. Britannia Industries Limited. has been the key to ensure future growth Nestle is the largest food and beverage company in the world followed by Unilever and Kraft Foods The nonalcoholic beverage segment is led by Coca-Cola and is followed by PepsiCo and Cadbury Schweppes The key players currently operating in the Indian food and beverages industry includes Dabur India Limited. whether into many different types of food or beverage or into different preparations. Cadbury Schweppes PLC.

Another trend in the industry has been the development of health foods. or those containing only organic ingredients. food processing industry is devoting themselves devoting more attention to products designed for restaurants. food makers realize food eaten away from home is still food they can provide. Although this is bad news for grocery retailers. and other foodservice providers. . vending machines. such as those containing less trans-fat or fewer transcalories. many times at higher margins.Trends:     Recently. companies have spent a lot of money researching consumers eating habits and preferences.

or those containing only organic ingredients Bottled water has become well established in the market. such as those containing less trans-fat or fewer calories. vending machines. and other foodservice providers. Another trend in the industry has been the development of health foods. enhanced waters containing vitamins or supplements are gaining popularity    .Trends  Recently. companies have spent a lot of money researching consumers eating habits and preferences Food processing industry is devoting more attention to products designed for restaurants.

distribution of food grains continues to be faulty ± almost 30% of the food produced in the country is wasted Lack of adequate facilities for storage. and cold chain facilities No common food law (13 laws are enforced by 9 ministries) Food standards are confusing and contradictory High cost of raw material and packing material and high freight charges put pressures on margins Different rules and regulations and licensing are defined for different commodities      . transportation.Basic Issues & Constraints  Despite bumper crops.

processing costs.Vulnerability  The food and beverage industry is particularly vulnerable to climate change and water scarcity World Resources Institute (WRI) findings show that findings suggest that the edible oils. poultry. and sugar sub-sectors will be most vulnerable to increasing agricultural prices. while aquaculture. price volatility and also decrease output Climate change and water scarcity can increase processing costs through operational disruptions and treatment costs and can create food safety and stakeholder challenges    . and dairy will be vulnerable to disease and contamination Climate change and water scarcity has it impacts on the F&B sector.increases agricultural input prices. starches.

a   Bottled water has become well established in the market as many beverage companies. such as Red Bull. which increases raw materials costs for food processors who also deal with increased production and transportation costs at their end. have also burst forth onto the scene. and enhanced waters containing vitamins or supplements are gaining popularity. as the rising costs of petroleum cause a twofold increase in cost for companies in the food industry: costs have increased at the agriculture end. . Energy drinks. Rising costs have become an issue in the food and beverage industry.

Food safety programs have been adopted recently as issues of chemical and bacterial contamination and new food-borne foodpathogens remain a public health concern. Quality control and assurance are vital to this industry. it is difficult for these companies to raise their prices accordingly and profit margins have suffered as a result. .continue   Since the industry is so competitive.

India produces above 600 million tonnes of food products every year and is one of the major Producers of food in the world. This sector holds a huge potential to grow because of the increase in advertisement spending. and increasing popularity of convenience foods. food and beverage sector is expected to grow at a high rate. awareness campaign about products in urban as well as rural areas. rapid urbanization. and large scale transformation. India's Food and Beverage industry is valued at Rs. 3584 billion. growing awareness among consumers about health products.Growth Prospects     With increase in disposable income of consumers. .

alcoholic beverage and non-alcoholic beverage will nonsee a spurt of 9. Of which. According to Mckinsey's report.6% and 8.  The food and beverage industry registered a growth rate of 8. the total 2005beverage consumption will grow at 9% over the next 20 years.5% in 2005-06.8% respectively .

This report helps clients to analyze the factors and examine the opportunities critical to the success of food and beverages industry in India. food processing industry and packed/convenience food industry. It looks into the industry in detail with foci on organized food retailing.Future Outlook    RNCOS "Indian Food and Beverages Forecast (2007-2011)´ (2007report gives an in-depth analysis of the present and future inprospects of the Indian food and beverages industry. consumer food purchasing behavior. .

OPPORTUNITIES AND PROJECTION ‡ ‡ ‡ ‡ The Food and Beverage Industry is projected to have overall growth between 8% -8. .Wine(22%) . The process of setting up of Food Parks in various key locations of the country with the involvement of the various state governments and other allied institutions is on.5 % The sectors which are projected to achieve excellent growth of 20% and above are ±Semi Processed/Cooked Ready to eat (22%). agroagro-based and food processing industries have been given high priority. Development of rural infrastructure. Edible/Vegetable oil Ice(20%). rural extension services. Ice-Cream(20%).

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