FOOD PROCESSING

April 2010

FOOD PROCESSING

April 2010

Contents
 Advantage India  Market overview  Industry Infrastructure  Investments  Policy and regulatory framework  Opportunities  Industry associations
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ADVANTAGE INDIA Food Processing April 2010

Advantage India
India’s tropical climate favours the cultivation of several exotic food and flower crops. The peninsular coastline of the country drives growth of the marine industry. The establishment of 60 fully equipped Agri Export Zones (AEZs), in addition to food parks, act as an incentive for attracting foreign investment.

Favourable agro-climatic conditions and strategic location Infrastructure development

High production volumes

India is the largest producer of several fruits, such as banana, mango and papaya, and the second-largest producer of vegetables such as brinjal, cabbage and onion. Further, India is also one of the largest producers of rice.

Advantage India
The Middle East and Southeast Asia are major export destinations for Indian agricultural (agri) commodities and milk.

Proximity to importing countries Availability of workforce

Large livestock base

India has the largest livestock population in the world with 98.7 million buffaloes and 176 million cows (2008).

The sector employs about 13 million people directly and 35 million people indirectly. The presence of several agricultural institutes, such as the Indian Agricultural Research Institute (IARI), serves as a perfect platform for research and innovation.
Sources: Ministry of Food Processing Industries, Government of India (GoI), Annual Report 2008–09; Flavors of Incredible India, Ernst & Young, 2009; “Agri Export Zones of India,” APEDA website, www.apeda.com, accessed 29 December 2009.

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FOOD PROCESSING April 2010 Contents  Advantage India  Market overview  Industry Infrastructure  Investments  Policy and regulatory framework  Opportunities  Industry associations 4 .

• 2001 2002 2003 2004 2005 2006 2007 Output of processed food y-o-y growth Source: Flavors of Incredible India.MARKET OVERVIEW Food Processing April 2010 Market overview The food processing industry in India is at an early growth stage. with low penetration levels and high potential.725 units. the number of registered operating units increased from 24. 2009 5 .000 to 25. During this period. US$ billion Growth in output of processed food (US$ billion) 80 70 60 50 40 30 20 10 0 15% 43 46 53 57 62 9% 10% 7% 8% 68 75 10% 16% 14% 12% 10% 8% 6% 4% 2% 0% Y-o-y growth • The size of the food processing industry in India has increased from US$ 57 billion in 2004 to US$ 75 billion in 2007. Ernst & Young.

Dairy products India is the largest producer of milk in the world.MARKET OVERVIEW Food Processing April 2010 Market segments Food processing Agri products Milk and milk products Meat. Meat and poultry The production of meat in 2007–08 was estimated at 6.2 per cent of global milk production (2007–08). poultry and marine products Fruits and vegetables India is the second-largest producer of fruits (50 million tonnes) and vegetables (100 million tonnes) in the world (2007–08). Beverages India is the thirdlargest market in the world for alcohol and has 56 manufacturing units (2007–08). 6 . GoI. Ernst & Young analysis. Annual Report 2008–09.5 million tonnes. Sources: Ministry of Food Processing Industries. accountin g for nearly 15. Fisheries Fish production in India was estimated at 7 million tonnes (2007–08).

4% 13% Level of processing Unorganised 0.MARKET OVERVIEW Food Processing April 2010 Overview of processing activities across categories In the global context.2% 35% 21% 6% 8% Source: Flavors of Incredible India. providing considerable opportunity for new players. Ernst & Young. Products Organised Fruits and vegetables Milk and milk products Meat and poultry Buffalo meat Poultry Marine products 21% 6% 8% 1. India has a comparatively low penetration (of processing activities) across product categories.8% 22% Total 2. 2009 7 .

200 1. US$ million Exports of processed food (US$ million) 2.600 1.5 1153. GoI.7 1390.000 1.5 per cent of the global food trade in 2008–09.9 2003–04 2004–05 2005–06 2006–07 2007–08 Source: Ministry of Food Processing Industries. Annual Report 2008–09 8 .800 1.3 600.MARKET OVERVIEW Food Processing April 2010 Exports • India’s processed food exports constituted 1.400 1.000 800 600 400 200 0 1869.1 619.

especially among the urban population in the country. as well as evolving consumer preferences. but also by cottage industries or homegrown players. are driving the demand for ready-to-eat foods. Poultry processing is currently being undertaken by small. a popular snack item in India. saffron and chocolate.and medium-sized firms. consumption of chicken is increasing faster than any other category of meat. It is currently being manufactured by medium and large-scale cooperatives and private companies. are manufactured in a large scale not only by big firms. Popular flavours include cardamom. Agri-based products Milk and milk products Meat and marine products Poultry processing • In India.MARKET OVERVIEW Food Processing April 2010 Domestic demand Potato chips • Potato chips or wafers. 9 . With consumer tastes evolving. Ready-to-eat meals • Societal changes in India (more number of nuclear families). Flavoured milk • Milk features prominently in the Indian diet. with the presence of a few organised players. flavoured milk is gaining popularity.

Source: Flavors of Incredible India. increasing health awareness and growing exposure to international markets. This growth is expected to be driven by two key factors • Growth in household consumption 1400 1200 US$ billion 1000 800 600 400 200 0 2005 2008 2015E 2020E 384 592 920 1235 Socio-economic changes across India’s population base. 2009 10 .MARKET OVERVIEW Food Processing April 2010 Growth drivers By 2015. the Indian food industry is estimated to grow by about 40 per cent over the level in 2007. • Household consumption is expected to double by 2020. increasing youth population and migration from rural to urban areas. Ernst & Young. in terms of growth in the number of households in the higher income category. such as emergence of nuclear families. Changing and evolving lifestyle trends.

gov. Entry of international companies • Source: Flavors of Incredible India. have now extended their presence into the processed food segment. As per the compa ny. which earlier focussed only on back-end processing and manufacturing. Nimbooz is India’s first packaged nimbu pani — a popular traditional home-made drink in India.MARKET OVERVIEW Food Processing April 2010 Key trends In addition to large number of initiatives undertaken by the Government of India to drive consumption. butter. increased activity by domestic and international players has also resulted in an increased availability of products. With the opening up of the Indian economy. 2009 http://www. India. ghee. • Increase in the depth of distribution Indian companies. Andhra Pradesh Dairy Development Cooperative Federation Ltd (APDDCF) was established in 1981 with an objective of supplying milk and dairy development. etc. 2009. Pepsico. it is exploring to establish 1.apddcf.000 franchisee for retail sales and offering products like packed curd. paneer.in 11 . Ernst & Young. Presently. launched ‘Nimbooz’ on February 28. major international food product manufacturers have entered the market and introduced processed products in the agri products and milk products categories.

Five star. Pepsi. spices. Chocolates. Kissan. etc. jams and squash and other FMCG products Biscuits. Brooke Bond. Maggi. consumer products. juices. 2009 Note: This is an indicative list 12 . bakery fats. snack foods. Kwality Walls Britannia. Categories/products Juice. coconut milk. Tiger. Knorr. etc Source: Flavors of Incredible India. ghee. cake. infant food. malt food. Annapurna. Gems. coffee. soups. Jumpin. dessert mix. etc. Bourbon. beverages. MTR Nestle. flavoured milk. cheese. etc. papads. Vatika. dairy whitener. etc. Ernst & Young. Appy. Perk. coffee. Oils and vanaspati. Non-food items include chemicals. snack foods. atta (flour). Frooti. Xs. Tea. etc. Nescafe. Goodday. Godrej. confectionery. LMN. etc. fruit drinks and fruit nectar. beverages. milk. Water. Frito-Lay Dairy Milk. etc. etc. bread. spices. cocoa powder. pickle. instant drinks.MARKET OVERVIEW Food Processing April 2010 Key players — agri products Company Dabur India Ltd Godrej Industries Ltd Parle Agro Ltd MTR Foods Nestle India PepsiCo Cadbury India Ltd Hindustan Unilever Ltd Britannia Industries Ltd Major brands Dabur. Real Activ. cooking pastes. Chocolates. honey. Carbonated drinks. etc. ice creams. etc. Bailey. etc. etc. Ready-to-eat and frozen food. etc. biscuits. Pudin Hara.

paneer (cottage cheese). milk peda. shrikhand (sweet yogurt). curd. ice cream. Milk. ice cream. badam burfi.Gokul Verka Aavain Mother Dairy Source: Flavors of Incredible India. cheese Skim milk powder. cheese. Note: This is an indicative list. ghee. pasteurised butter. pure peda. Ultra High Temperature (UHT) milk. UHT milk.4 million litres per day from 12 dairy plants 2. curd. pure ghee. pasteurised butter. UHT standardised milk. flavoured milk Vijaya Nandini Mahanand . 2009. pure ghee.6 million litres per day from 19 dairy plants 2. butter. Table butter. toned milk. butter. table butter. skimmed milk powder. khoa. ghee. 13 . ice cream. cheese. kulfi. flavoured milk. buttermilk. paneer. etc. etc. ice cream. Ghee. dairy whitener.8 million litres per day from 29 dairy plants 1. pizza.MARKET OVERVIEW Food Processing April 2010 Key players — milk and milk products Company Gujarat Cooperative Milk Marketing Federation (GCMMF) Andhra Pradesh Dairy Development Cooperative Federation (APDDCF) Karnataka Cooperative Milk Producers’ Federation (KMF) Maharashtra Rajya Sahakari Maryadit Dugdh Mahasangh (Mahasangh) Punjab State Cooperative Milk Producers’ Federation (MILKFED) Tamilnadu Cooperative Milk Producers’ Federation Ltd (TCMPF) National Dairy Development Board (NDDB) Capacities 6. lassi.7 million litres per day from 15 dairy plants 2. etc. khoa. flavoured milk.6 million litres per day from nine dairy plants 2. sweets. yogurt. gulab jamun. curd. butter. skim milk powder. khoa. Pasteurised butter. processed cheese Skim milk powder.8 million litres per day Major brands Amul Categories/products Ice cream. paneer. table butter. skim milk powder. ghee. cheese. cheese. etc. lassi.13 million litres per day from 15 dairy plants 3. Ernst & Young.

Chicken and eggs Vegetables and fruits. coffee.MARKET OVERVIEW Food Processing April 2010 Key players — meat and marine products Company Hind Agro Industries Ltd Capacities 400 tonnes Major brands Fast Prax (fast food outlets) Premier (fruits and vegetables) Saffa (meat) VH Group Al Kabeer 194 units across hatcheries and broiler units Processed meat (8. snacks. pulses. spices. 2009 Note: This is an indicative list 14 . meat and poultry.000 tonnes of frozen food in 2008 Processed fruits and vegetables. Ernst & Young. ready-to-eat meals and seafood Source: Flavors of Incredible India. fish Allanasons Limited Sale of more than 333. sheep and goat Meat of buffalo and goat. cereals. etc.600 tonnes) (as of 2004) Venky’s Al Kabeer Categories/Products Meat of buffalo.

Heinz. Pepsi Foods Others DCW Group. cocoa products. chewing gum Potato chips. Mother Dairy. Marico Source: Ernst & Young research Note: This is an indicative list 15 . rusk etc. bread. wheatbased products. biscuits. wines Carbonated drinks. semiprocessed/ready-to-eat food. cereal bars. Heinz. Cadbury. Sula Vineyards. Parry’s Confectionary. candies. Parle Products. such as noodles. Cadbury. ciders. pastries. MTR Foods. United Biscuits. Mohan Meakins. McVities. Seagram India. Nestle. gum.). Mount Shivalik Group Pepsi Foods. Nature Fresh. Shakti Bhog. chocolates. Top Ramen. (fruit) juices. health/energy drinks. Nestle. vermicelli. Shaw Wallace. processed snacks. Nestle. bottled water. spirits.MARKET OVERVIEW Food Processing April 2010 Other key players Processed food category Alcoholic beverages Non-alcoholic beverages Components Beers. Godrej Pillsbury. Nutrine. ITC. HUL. GlaxoSmithKline (GSK). toffees. Frito-Lay. Coca Cola. Rasna International Britannia Industries Limited. Amul. ITC Foods. popcorn. macaroni and spaghetti Packaged flour. edible oil Major companies United Breweries Ltd. bakery products (cakes. Radico Khaitan. nuts and seeds. Parle Products Confectionery Savory snacks McCain Foods. Hindustan Unilever Limited (HUL). malted beverages Sugar confectionery. Modern Industries. Dabur Foods.

FOOD PROCESSING April 2010 Contents  Advantage India  Market overview  Industry Infrastructure  Investments  Policy and regulatory framework  Opportunities  Industry associations 16 .

sesame seeds Apples Apples and walnuts Vegetables Gherkins. pomegranate.INDUSTRY INFRASTRUCTURE Food Processing April 2010 Industry infrastructure — Agri export zones (AEZs) … (1/2) State Andhra Pradesh Assam Bihar Gujarat Himachal Pradesh Jammu & Kashmir Jharkhand Karnataka Kerala Madhya Pradesh Maharashtra Orissa Punjab Rajasthan Fresh and processed ginger Litchi Mangoes and vegetables. medicinal plants Potatoes. onions. mangoes. potatoes. lentil and grams. oranges Grapes and grape wine. basmati rice Coriander. chillies 17 . vanilla Horticulture products. mangoes including Kesar mango. banana. onions and garlic. flowers. seed spices. flowers. rose onions. oranges Ginger and turmeric Vegetables. grapes. dehydrated onions. cumin Products Mango pulp and fresh vegetables. wheat. gherkins.

vegetables. Total number of AEZs in India is 60 Source: “Agri Export Zones of India. vegetables.com. mangoes. litchi. basmati rice Basmati rice.com. www.” APEDA website. 18 . flowers (orchids) and cherry pepper Flowers. litchi.apeda. potatoes. mangoes.” APEDA website. Darjeeling tea Distribution of AEZs among states Maharashtra West Bengal 8 6 Andhra Pradesh 5 Madhya Pradesh 5 Karnataka Uttaranchal Uttar Pradesh Tamil Nadu Others 4 4 4 4 20 Source: “Agri Export Zones of India. www. cashew nuts Pineapples Potatoes.INDUSTRY INFRASTRUCTURE Food Processing April 2010 Industry infrastructure — Agri export zones (AEZs) … (2/2) State Sikkim Tamil Nadu Tripura Uttar Pradesh Uttaranchal West Bengal Products Ginger. accessed 29 December 2009.apeda. medicinal and aromatic plants Pineapples. mangoes. accessed 29 December 2009. flowers.

FOOD PROCESSING April 2010 Contents  Advantage India  Market overview  Industry Infrastructure  Investments  Policy and regulatory framework  Opportunities  Industry associations 19 .

nic. by Bacardi Ltd.4 • Sources: Bloomberg.018.INVESTMENTS Food Processing April 2010 Investments … (1/2) • The largest inbound deal between January 1. Ernst & Young analysis.68 3.5 million. 2009 to November 30.97 767. www. 20 .82 89.31 129. Source: “Fact Sheet on Foreign Direct Investment (FDI)”.72 149.76 1. 2009 to November 30.14 41.693. In 2009 — in a major outbound deal — Britannia Brands Ltd was acquired by Bombay Burmah Trading Corporation.9 Cumulative FDI inflows Period: April 2000 to January 2010 Sector Agricultural services Food processing industries Fermentation industries Agricultural machinery Vegetable oils and vanaspati Tea and coffee Sugar Total Amount of FDI inflows (US$ million) 1.5 12. accessed 4 December 2009. Department of Industrial Policy and Promotion website. M&A scenario — details Period : January 1.dipp.496. 2009 Deal type Inbound Outbound Domestic No of deals 2 1 4 Deal value (US$ million) 10. accessed 29 April 2010.in. 2009 was the acquisition of the businesses of Bacardi Martini India Ltd. for US$ 10.

2009 June 15. 2009 September16.INVESTMENTS Food Processing April 2010 Investments … (2/2) • The largest domestic deal during the period was the acquisition of Garden Namkeens Pvt Ltd by Cavinkare Pvt Ltd for US$ 10 million. Deal Domestic Domestic Domestic Inbound Outbound Inbound Domestic Deal type ACQ ACQ ACQ DIV DIV ACQ ACQ Announcement date November 23. 2009 August 20.5 N/A N/A N/A Source: Bloomberg. 2009 Announced total value (US$ million) 2. 2009 February 17. accessed 4 December 2009. Note: ACQ:Acquisition. DIV: Divestment 21 . 2009 March5.0 10.9 N/A Target name Tern Distilleries Pvt Ltd Atcomaart Services Ltd Garden Namkeens Pvt Ltd Bacardi Martini India Ltd Britannia Brands Ltd Carotino India Microsec Financial Services Target country India India India India Britain India India Acquirer name United Spirits Limited Nhn Corp Ltd Cavinkare Pvt Ltd Bacardi Ltd Bombay Burmah Trading Corp J C Chang Group Kohinoor Foods Limited Acquirer country India India India Bermuda India Malaysia India 10. 2009 April 16.

FOOD PROCESSING April 2010 Contents  Advantage India  Market overview  Industry Infrastructure  Investments  Policy and regulatory framework  Opportunities  Industry associations 22 .

• • Source: Flavors of Incredible India. Proposals falling outside notified sectoral policy/caps or are generally restricted/prohibited. 2009 * Note: Entry of foreign/large players is restricted for a few food items 23 . Ernst & Young. except the following (broadly) • Proposals that require an industrial licence.POLICY AND REGULATORY FRAMEWORK Food Processing April 2010 Policy and regulatory framework … (1/2) • FDI in the Indian food processing industry is allowed under the automatic route* in agri products. and marine and meat products. Proposals in which the foreign collaborator has a previous venture or tie-up in India. milk and milk products. and cases where foreign investment exceeds 24 per cent equity in units that manufacture items reserved for the small-scale industries. 2005. as on January 12.

Exemption of earnings from export activities from corporate taxes. 2009 • • 24 . are allowed to sell up to 50 per cent in domestic market. No import duty on capital goods and raw material for 100 per cent export-oriented units.POLICY AND REGULATORY FRAMEWORK Food Processing April 2010 Policy and regulatory framework … (2/2) • • • Repatriation of profits and capital permitted. Automatic approvals for foreign investment and technology transfer in most cases. Units based on agri products that are100 per cent export-oriented. Source: Flavors of Incredible India. Ernst & Young.

FOOD PROCESSING April 2010 Contents  Advantage India  Market overview  Industry Infrastructure  Investments  Policy and regulatory framework  Opportunities  Industry associations 25 .

packaging and quality control. grading. thereby providing an investment opportunity to integrated players. Investment in supply chain technology • • 26 . About 30 to 35 per cent of fruits and vegetables production in India get wasted due to lack of adequate storage facilities. as well as developers. each with a cold storage facility. Sophisticated techniques and applications are required in areas such as demand forecasting. providing an opportunity to set up more cold chain facilities.OPPORTUNITIES Food Processing April 2010 Opportunities … (1/2) Development of food parks • • India has set itself a target of doubling its processed food production by 2015. The Government of India is actively promoting the concept of mega food parks and is expected to set up 30 such parks. processing. funds flow management and information sharing. The parks will also have facilities for sorting. data integration.

provides the buyback arrangement for the farm output. and the farmer. India’s marketable surplus is set to increase to 870 million tonnes per annum (MTPA). HUL. Considerable investment is required in rural infrastructure and components of the supply chain. Contract farming in wheat is being practiced in Madhya Pradesh by Hindustan Unilever Ltd (HUL). which requires the farm produce as raw material for its food processing division. creating opportunities for development of storage infrastructure. 40 per cent of which would be accounted for by perishable foods. It is estimated that by 2012. Under the system. Rallis supplies agri inputs and know-how and ICICI finances (farm credit) the farmers. where the latter is contracted to plant and produce the former’s crop on his land. typically a large organised player. Rallis and ICICI. • 27 .OPPORTUNITIES Food Processing April 2010 Opportunities … (2/2) Investment in infrastructure through public-private partnerships (PPP) • Approximately 25 to 40 per cent of the agricultural produce is lost after the harvest season due to inadequate infrastructure. This will add value and help producers obtain better prices and income. • • Contract farming • Contract farming is an agreement between the food processor (contractor). which is undertaken with the involvement of all stakeholders on a PPP basis.

FOOD PROCESSING April 2010 Contents  Advantage India  Market overview  Industry Infrastructure  Investments  Policy and regulatory framework  Opportunities  Industry associations 28 .

Siri Institutional Area.INDUSTRY ASSOCIATIONS Food Processing April 2010 Industry associations Agricultural and Processed Food Products Export Development Authority (APEDA) NCUI Building 3. New Delhi –110 016 Phone: 91-11-26513204. August Kranti Marg. 26514572. 26534186 Fax: 91-11-26526187 E-mail: headq@apeda.com 29 .

NOTE Food Processing April 2010 Note Wherever applicable. Conversion rate used: US$ 1= INR 48 30 . numbers in the report have been rounded off to the nearest whole number.

This presentation is for information purposes only. Ernst & Young and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation. wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation). All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The same may not be reproduced. 31 . While due care has been taken during the compilation of this presentation to ensure that the information is accurate to the best of Ernst & Young and IBEF’s knowledge and belief. modified or in any manner communicated to any third party except with the written approval of IBEF. the content is not to be construed in any manner whatsoever as a substitute for professional advice. Neither Ernst & Young nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation.FOOD PROCESSING April 2010 DISCLAIMER India Brand Equity Foundation (“IBEF”) engaged Ernst & Young Pvt Ltd to prepare this presentation and the same has been prepared by Ernst & Young in consultation with IBEF.

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