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  2009 

   

White Paper on Food


& Food Processing
Industry in India
 
 
 
S.No Topic

1 Executive Summary

2 Opportunities & Challenges for Food Industry in India

3 India Food & Agriculture : An overview

4 Basic structure of Food Processing Industry

5 Consumption pattern of Food in India

6 Sectors in Food Processing Industry

7 Growth Drivers for Food Processing Industry

8 Critical Success Factors

9 Emerging Business models

10 Major Investments in Food Processing Industry

11 Key Trends in Food Processing Industry

12 Leading players : Profile

13
D’Essence Consulting Case Study:
chandni@dessenceconsulting.com
022-28347425 1. Amul
303, Aar Pee Center, 11th Road,  
2. Lijjat Pappad
MIDC, Andheri (E), Mumbai-400093
 

EXECUTIVE SUMMARY
Food processing involves any type of value addition to agricultural or horticultural produce and
also includes processes such as grading, sorting, and packaging which enhance shelf life of food
products. The food processing industry provides vital linkages and synergies between industry
and agriculture.

The Food Processing Industry sector in India is one of the largest in terms of production,
consumption, export and growth prospects. The government has accorded it a high priority, with
a number of fiscal reliefs and incentives, to encourage commercialization and value addition to
agricultural produce, for minimizing pre/post harvest wastage, generating employment and
export growth.

The idea of India is gradually changing as number of countries showing interest to invest in
India is increasing. In fact it is observed that India has displaced the US as the second most
favoured destination in the world for FDI after China.

Food industry is one of the key sectors which is the mainstay of Indian economy because of its
high share in employment and major contribution to GDP. At present the food processing sector
employs about 13 million people directly and about 35 million people indirectly. The food
market in India is estimated at over Rs. 9,100 billion and accounts for about two third of the total
Indian retail market.

India's food processing sector covers a wide range of products fruit and vegetables, meat and
poultry; milk and milk products, alcoholic beverages, fisheries, plantation, grain processing and
other consumer product groups like confectionery, chocolates and cocoa products, Soya-based
products, mineral water, high protein foods etc.
 

Looking into some of the key facts, India has largest irrigated land in the world. India produces
annually 90 million tonnes of milk (highest in the world), 150 million tonnes of fruits &
vegetables (second largest), 485 million livestock (largest), 204 million tonnes food-grain (third
largest), 6.3 million tonnes of fish (3rd largest), 489 million Poultry and 45,200 million eggs.

Food processing industry is currently growing at around 14%. The industry received FDI
totalling Rs. 7190 million in 2007-08.However, India’s share in export of processed food in
global trade is only 1.5 %; whereas the size of the global processed-food market is estimated at
Rs. 190 trillion and nearly 80 per cent of agricultural products in the developed countries get
processed and packaged.

India has set itself a target of doubling its processed food production by 2015, and will set up 10
food technology parks during the next year with a view to achieving this. According to the India
Food and Drink Report by research analysis firm Research and Markets, by 2012, India’s
processed food output is likely to grow by 44.2 per cent to touch Rs. 4,505 billion, while
packaged food sales will increase by 67.5 per cent to reach Rs. 1,085 billion. On a per capita
basis, per capita packaged food spending is expected to grow by 56.5 per cent to Rs. 903 by
2012.
 

Opportunities in food
processing in India
• Diverse agro-climatic conditions • Increasing literacy, rapid
lead to a wide-ranging and large raw urbanization and rising per capita
material base suitable for food income resulting in rapid growth and
processing industries in India. changes in demand patterns. This is
Currently a very small percentage creating great opportunities for
(less than 2%) of these is processed exploring the large hidden markets.
into value added products, leaves An average Indian spends about 40
opportunity to explore in the sector. % of household expenditure on food
• One of the biggest emerging items.
markets, with more than 1 billion • Demand for processed /convenience
population and 250 million strong food is constantly increasing.
middle class sets a large consumer • Cheaper workforce availability can
base within the country. be effectively utilized to setup large
• India is the seventh largest country, low cost production bases for
with extensive administrative domestic and export markets.
structure and independent judiciary, • Liberalized policies with specific
a sound financial & infrastructural incentives for high priority food
network. Stable and flourishing processing sector, provide very
democracy is also an opportunistic favourable environment for
attribute of the country. investments and exports in the
sector.
 

Challenges in Food Processing


• Unprocessed foods are susceptible to offered to the consumer in hygienic
spoilage by biochemical processes, and attractive packaging, and at low
microbial attack and infestation. The incremental costs.
right post harvest practices such as • The challenges for the food
good processing techniques, and preservation, distribution and
proper packaging, transportation and processing sectors are diverse and
storage (of even processed foods) demanding, and need to be addressed
can play a significant role in on several fronts to derive maximum
reducing spoilage and extending market benefits. Presently, the
shelf life. organizations addressing the

High wastage reflects inefficiencies in the delivery chain


20%
18%
3% 2%
16%
1%
14%
12%
2% Wastage outside the State
10% 2% 1%
2% 2% 0.25%
8% 1% Wastage within the State
6%
4% Wastage within the District
2% 0.25%
From the Farmgate to Local Mandi
0%

Source: Ministry of Food Processing Annual Report 2007-08


educational and R & D requirements
• The challenges in processing lie in
are too few, and there is a pressing
retaining the nutritional value,
need for supplementing their efforts.
flavour, aroma, and texture of foods,
• In the emerging scenario, the Food
and presenting them in near natural
Engineering professional needs to
form with added conveniences.
develop sufficient awareness and
Besides, processed foods need to be
appreciation of the relevant

   
 

principles of life sciences, and • Besides, the professional needs to


physical sciences, as well as of a develop an appreciation of R&D and
wide variety of other topics innovation in critical technology
including: nutrition, preservation and areas such as: newer or novel process
storage techniques, processing unit development in preservation and
operations, bio-processing, waste storage techniques, rheology,
management, distribution and supply colloids and dispersal systems,
chain management, food laws and packaging-polymers and composites,
regulations and so on. sensors for detection and process
control, bioprocess engineering etc.

   
 

Ovverview of Food Proce


P essinng
Inddustrry
The sceenario of the
t food inndustry hass producer off milk, pulsees, sugarcanee and
changedd drastically
y due to thhe changingg tea in the world
w and thhe second laargest
lifestylee, food habitts and changge. Demandd producer of
o wheat, rice,
r fruits and
for healtthy and high
h value food items alongg vegetables.
with im
mproved technology
t and tradee • The consum
mption patteern in Indiaa has
liberalizzation policies have gennerated greatt changed duue to econoomic growthh and
growth opportunitie
o es in the foodd processingg changing lifestyle. Food
F processsing
industryy industry caan do to ruural India what
Informationn Technologgy has donne to
• The size of the global foodd processingg
urban Indiaa.
induustry which
h accounts for threee
fourrth of the global
g food industry iss
Sharee in Global Food Proceessing
Rs.1190 trillion. Induustry
• Majoor econom
mies in the foodd
proccessing inclu
ude US, Euurope, Chinaa 9% US
SA
21%
%
and Japan.US and
a Europe account forr
Eu
urope
moree than 50% of
o the globall food sales. 31%
Assia Pacific
• India has been one of thhe key foodd
prodducers in thee world, withh the secondd 39%
% Reest of the
W
World
largeest arable laand area. It is the largestt

Source:: D’Essence Consuulting Secondary Research


R

 
 

While India has an abundant supply of food, which shows growth of more than 45%
the food processing industry is still nascent: in terms of value.

Country-wise Level of Processing

Level of Processing in Perishable product range


LEVEL OF
COUNTRY in India
PROCESSING (%)
USA 80.0
France 70.0
Thailand 30.0 Product Organised Un-organised Total
Malaysia 80.0 Fruits 1.3 0.8 2.1
Australia 25.0 &Vegetables
Netherland 12.0 Milk & Milk 13.0 22.0 35.0
India 1.3 Products
Source: Rabobank Meat 21.0 - 21.0
Poultry 6.0 - 6.0
• Despite these low volumes, the Marine 8.0 15.0 23.0
processed food industry is one of the Market and Research Report 2008 (All figures in %)

largest industries in the country - it is


ranked fifth in terms of production,
consumption, export and expected
growth.
• Processed food industry accounts for 13
per cent of the country’s exports and 6
per cent of total industrial investment.
• The food industry size is estimated at
Rs.9100 billion and the food processing
industry at Rs.350 billion
• According to official data, India
exported about 17.5 million tone of agri
and processed foods worth Rs 31,870
Crore ($ 6639.58mn.) in FY08 against
10.9 million tone valued at Rs 21,805.9
Crore ($4361.2mn.) the previous year

   
 

Strengths

India has access to several natural resources that provides it a competitive advantage in the food
processing sector. Due to its diverse agro-climatic conditions, it has a wide-ranging and large
raw material base suitable for food processing industries.

IINDIA’S FAVOURABLE FACTOR CONDITION


Share in Global
Particulars India Global Rank
Production (%)
Arable Land(million hectares) 184.00 2 -
Irrigated Land (million
59.00 1 -
hectares)
Coast Line (km) 8041.00 19 -
Fruits (MT) 50.00 2 10
Vegetables(MT) 100.00 2 10
Rice/Paddy(MT) 132.00 2 22
Wheat (MT) 78.40 2 12
Milk (MT) 90.00 1 16
Sugarcane(MT) 289.23 2 21
Pulses(MT) 15.11 1 21
Tea (MT) 0.95 1 28
Edible Oil seeds (MT) 28.82 3 7
Cattle (million) 226.00 1 16
Source : Ministry of Food Processing of India, 2007-08

   
 

Basic structure of food


processing industry

The chart above describes the process i.e. the Entire Value Chain for a Private Entrepreneur
from Demand Estimation to Consumption. Government i.e. Central as well as State government
along with its agencies supports the farmer and processing units to encourage this sector.

   
 

The Stages involved in the value chain are: parameters. The crops thus chosen
are packaged accordingly for safe
1. Market: In this stage, the
transportation to the market. In case
Entrepreneur estimates the demand
of perishable products it also
for crops and decides which crop to
requires to be processed for their
sow
preservation. Processing even helps
2. Input: After deciding on specific in avoiding food wastage.
crops, the entrepreneur ploughs the
6. Transportation: It involves the
crop with the use of fertilizers,
physical movement of the crop and
pesticides, nutrients and water to
processed food from the farm to the
realize a good crop.
actual Market.
3. Pre Harvest: After a good crop has
7. Marketing: Marketing involves
developed, Pre Harvest involves
providing sales platform for the food
maintaining the crop till harvest with
products. Sometimes it is done by
the use of Latest technology and
the producer himself. Government
Fertilizers.
creates a market through setting up
4. Harvesting: It involves the process APMC Depots, online websites and
of separating a full grown crop for also through trade exhibitions.
processing, packaging, transportation
8. Market: Finally, the Chain gets
and finally for consumption.
completed when the crop reaches the
5. Post Harvesting: After Harvesting, market for consumption and the
the crop goes through a chain of farmers as well as the processing
processes to filter the crop on the units get the money out of it.
basis of Quality and many other

   
 

Consumption pattern of
household income in India
Food is the major portion of household component in expenditure. This opens up
consumption expenditure across all cities tempting opportunities in the field of food
categorised (Refer graph below). processing. And we can see it is in the
Transportation is the second highest nascent stages of development.

Household consumption expenditure as a share of


income
Communication
2.9 3.1 2.9
14.3 10
16 Household &personal
5.5
4.6 5.3 products
% of total population

5.2
5.9
7.4 8.8 Education and
7
7.6 recreation
10.4 13.1
8 Apparel
20.3 21.3 20.1
Healthcare

Housing &Utilities
34.6 31.5 34.4
Transportation

Megacities Boomtowns Nichecities Food,beverages &


tobacco

Source: NCAER / FCR

   
 

If we try to analyse the distribution of poor households (Refer graph below).


households by major source of income, it Labourers constitute the largest segment of
varies significantly across poor and non- poor households and comprise over 62
percent of such households. But then,
Distribution of households by major we cannot ignore the fact that
source of income
Others agriculture also provides earning
3.4 1.6
22.7
source to 30.3 percent APL (Above
30.3 Self employed in
Agriculture Poverty Line) and 22.7 percent BPL
Labour (Below Poverty Line) households.
25.7
62.4
Self employed in
18.9 Overall it is found that food expenses
Non-agriculture
Regular comprise 51.1 percent of all routine
21.7 8.9 salary/wages
3.8 expenditure at the all India level.
APL households (%)BPL households (%)

Source: The Max-NCAER India Financial Protection Survey

Household consumer spends in India


(Total - Rs 20,721 billion)

Furniture,furnishing appliances & services

4% Gross rent,fuel &power


18% 12% Medical care and health

Miscellaneous goods & services


4% 7%
Recreation,education & cultural services
4%
7%
5% Food

4% Clothing & footwear

Beverages,pan & intoxicants

35%
Grocery

Transportation & communication

Source:Private Final Consumption Expenditure CSO;EY Research 

   
 

Sectors in Food Processing


Industry
Food processing is a large sector that covers activities such as agriculture, horticulture,
plantation, animal husbandry and fisheries. It also includes other industries that use agriculture
inputs for manufacturing of edible products.

Important sub sectors in food processing industry are:-

• Fruit & Vegetable Processing


• Fish Processing
• Milk Processing
• Grain Processing
• Meat & Poultry Processing
• Packaged/Convenience Foods
• Alcoholic beverages & Soft drinks
• Staple foods

SHARE OF
EXTENT OF GROWTH
SEGMENT ORGANIZED KEY SEGMENTS
PROCESSING (%) RATE(%)
SECTOR(%)
Raw fruits & vegetables, pulp,
Fruits & Vegetables 02 48 20
canned fruits and pickles
Marine fisheries, frozen products,
Fish 12 - 20
minced fish products
Milk 37 15 Butter, Ghee, Cheese etc. 15

Meat & Poultry 01 05 Cattle, Buffalo & poultry 10

Packaged - 80 Noodles, vermicelli & pasta 08

Beverages - 77 Fruit based & carbonated drinks 27

Staple Food - 50 Salt, sugar, Flour, Bread 85


Source: Investment commission of India,2008

   
 

Fruits & Vegetable Processing:

• India produces the widest range of fruits • However less than 2 per cent of the total
and vegetables in the world. vegetables produced in the country are
• It is the second largest vegetable (100 commercially processed, as compared to
million tonnes) and fruit (50 million nearly 70 per cent in Brazil and 65 per
tonnes) producer accounting for 8.4 per cent in USA.
cent of the world’s fruit and vegetable • India’s installed capacity for fruits and
production. vegetable processing
• The share of Fruits and Vegetable exports increased from 1.1
(In million USD)
organised million tonnes in
F&V Processed F & V
sector in fruit 1993 to 2.77 million
490.9 492.2 510.7
processing is 338.5 tonnes in 2007.
278.3 316.5
estimated to • About 20 per
be nearly 50 cent of processed
per cent. 2004-05 2005-06 2006-07 fruits and vegetables
• Fruit Source: APEDA are exported.
production in India registered a growth • Major products exported include fruit
of 3.9 percent over the years whereas the pulps, pickles, chutneys, canned foods,
fruit processing sector grew several concentrated pulps and juices and
times faster at 20 per cent over the same vegetables.
period. • Fruit exports registered a growth of 16
• The total area under fruit cultivation is per cent in volume and 21 per cent in
estimated at 4.18 million hectares and value terms in 2006-07.
7.59 million hectares under vegetable • Mango and mango based products alone
cultivation. constitute 50 per cent of the exports.

   
 

Milk Processing:

• Indian stands first in the world in terms • The market for dairy products is
of milk production. expected to grow at 15-20 per cent.
• The current size of the Indian dairy
Some private players includes Hatsun,
sector is Rs.3133.5 billion and has been
Heritage, Modern ,Paras, Dynamix, Parag
growing at 5 per cent a year.
and Metro ,also FMCG players like Nestle
• The dairy sector
Exports of Dairy Products
& Britannia all
ranks first in terms (in Million USD)
210.5
of which sell
of processed foods
liquid milk and
with 37 per cent of 112.7 113.5
73.2 manufactures
the produce being
value added
processed.
2004-05 2005-06 2006-07 2007-08 products like
• The organised
Source: APEDA milk powder,
sector processes an
ghee, butter,
estimated 20 percent of the total milk
cheese, curd and butter milk in small
output in India.
quantities.
• There are 676 dairy plants registered
with Government of India, which come • Taking Dairies to the Next stage:-
under the organised sector.
Indian dairies are ready to use various latest
• The cooperative sector dominates the innovative technologies that improves the
milk industry with over 70,000 village milking efficiency as well as cow
level dairy federations at the state level. throughput including auto ID, innovative
• Gujarat Cooperative Milk Marketing milking claw design, electronic milk meters,
Federation (GCMMF or AMUL) is the stimapulse, an auto shedding system, an
most successful player in the evolution auto cleaning-in-place system (to maintain
of the Indian Dairy Industry. hygiene).
• Milk and milk products contribute to a
.
significant 17 per cent of the country’s
total expenditure on food.

   
 

PE funds in the Dairy Sector:-


It is estimated that by 2015 over Rs 10,000 crore of capital expenditure will be required to meet the
growing demand of our burgeoning population.

Besides debt, private equity has become a preferred source of raising funds in dairy sector.

PE funds are supported by liberal FDI policies. PE funds include investment from International
Finance Corporation in Modern Dairy (North India), Actis in Nilgiri Dairy (South India), Motilal
Oswal Private Equity in Parag Milk Foods.

Fish Processing:

• India has large marine product and cent (3.9 million tons) came from marine
processing potential with varied fish resources.
resources along the 8,041 km coastline,
Exports of Marine Products(in
28,000 km of rivers and millions of Million USD)
1644.21 1852.93
hectares of reservoirs and brackish 1330.76 1478.48

water.
• India is the third largest fish producer in
2003-04 2004-05 2005-06 2006-07
the world and second in in-land fish
Source: MPEDA
production. • Fish processing is mostly targeted for
• The Fisheries sector in India has been export markets.
classified into marine, inland and • There are over 369 freezing units with a
aquaculture. daily processing capacity of 10,266
• The fisheries sector contributes nearly 1 tonnes and 499 frozen storage units with
per cent to the country’s GDP. This a capacity of 134,767 tonnes.
segment also provides employment to 11 • Processed fish product exports include
million people engaged fully, partially or conventional block frozen products,
in subsidiary activities pertaining to the individual quick frozen products and
sector. minced fish products like fish sausage,
• India’s fish production stood at a level of cakes, cutlets, pastes etc.
6.4 million tonnes. Of this, about 60 per

   
 

Grain Processing:
Exports(in Million USD)
• India’s production covers all major Total Cereals Rice Wheat
grains – rice, wheat, maize, barley and 1872.1
1489.2 15851435.9
1381.4 1269.6
millets like jowar, bajra and ragi.
• It ranks third in the production of 297.9
113.8 7.2
grains in the world with a share of 40
per cent, grain processing is the biggest 2004-05 2005-06 2006-07
Source: APEDA
component of food sector. • Total rice milling capacity in the country
• Primary processing constitutes 96 per is 186 million tonnes.
cent with the remaining accounted for by • There are about 516 large flour mills in
the secondary and tertiary sectors. the country, as well as about 10,000
pulse mills.

Meat and Poultry Processing:


Exports in Million USD
• India has the largest number of Meat Processed Meat Poultry
668.3
553
livestock population in the world
378.7
accounting for 50 per cent of buffaloes
1.9 58.72 0.49 64.4 1.39 64.5
and 16 per cent of the goat population.
2004-05 2005-06 2006-07
• Meat production is Rs.625 million and
Source: IBEF Report 2008
a Meat export is Rs.5.2 million.
• Consumption per head of both fresh and
• Most of the animals in India are not bred
processed meat is very low at 1.5 kg
for meat. Animals generally used for
compared with world average of 35.5 kg.
production of meat are cattle, buffaloes,
goats, sheep, pigs and poultry. • Indian poultry meat market is

• Only 11 per cent of the buffalo approximately Rs. 105.0 billion.

population, 6 per cent of the cattle, 33 • Indian broiler industry has seen a rapid

per cent of the sheep and 38 per cent of growth in the last few years - CAGR of

the goat population is culled for meat. more than 10 per cent a year since 1998.

   
 

• White beverages account for 65 per cent


Beverages: The beverages market
of the market and brown beverages
primarily consists of non-alcoholic and
constitute the remaining 35 per cent.
alcoholic beverages
• India is the largest producer of tea in the

Non – alcoholic beverages world accounting for 28 per cent of the


total global production, at 857 million
• Non-alcoholic beverages can be broadly kgs.
classified into carbonated drinks, non- • Tea production in India has been
carbonated drinks and hot beverages. growing at 1.2 per cent per annum and
• The market for carbonated drinks in India is the fourth largest exporter of tea
India is worth Rs.75 billion while the in the world with estimated exports of
juice and juice-based drinks market Rs. 18886.8 million in 2007-08.
accounts for Rs.12.5 billion. • India is also the fifth largest producer of
• Growing at a rate of 25 per cent, the coffee accounting for 4 per cent of the
fruit-drinks category is one of the fastest total production in the world.
growing in the beverages market. • Nearly 75 per cent of India’s production

• Sports and energy drinks, which is exported and coffee exports stood at

currently have a low penetration in the Rs. 29,315 million in 2007-08.

Indian market, have sufficient potential


Alcoholic beverages
to grow.
• They are considered a socially-
• The market for alcoholic beverages has
acceptable alternative to alcoholic
been growing consistently.
beverages. Hot beverages include health
• The market for wine in India was
drinks such as white beverages and
growing at over 25 per cent per year.
brown beverages such as tea/coffee as
• 59.84 per cent growth of wine
well as branded drinks.
production was observed in 2007-08
• The total size of this market is estimated
(211 million litres in FY 2007-08 from
at Rs.16,650 million by value and 85,000
132 million litres in FY 2006-07).
tonnes by volume.
• Global wine majors have already set up
shop in India to tap the vast potential.

   
 

• Out of the total consumption of grape • Products like Tomato Ketchup and Jams
wine in India, around 80 per cent wine currently have low penetration levels,
consumption is from the major cities. but are growing rapidly.
• Ketchups, for example, have a

Exports in Million USD penetration of just 3 per cent in India;

Alcoholic Beverages however this category is estimated to be


32.8 growing at 20 per cent per annum.
24 23.8

Staples – Bread, Wheat Flour,


2004-05 2005-06 2006-07 Salt and Sugar
Source: APEDA

• Bread is slowly coming to be a staple


product consumed by people of all
Packages/Convenient Foods: economic classes in India.
• Total bread production in the country in
• Packaged foods segment in India
2004-05 was estimated at 2.7 million
registered a growth of 10 per cent in
tons, growing at 7.5per cent.
2007.
• About 55 per cent of bread production
• Noodles/Vermicelli is the fastest
comes from the organised sector.
growing category in this segment with a
• India is the second largest producer of
CAGR at 15 percent.
wheat in the world with an output of
• The market for branded noodles is
more than 70 million tonnes.
estimated at 230 million servings per
• Branded ‘atta’ (wheat flour) is an
year.
important item in this segment with an
• The Soups market is still small and
estimated market of US$195 million.
nascent in India and is approximately
US$ 14 million in value.
• The market for culinary products is
estimated at Rs. 25 million and estimated
to grow at 18 to 20 per cent per annum.

   
 

Critical Success Factor


The growth potential of Indian Food Processing Industry cannot be neglected. But require certain
competencies and success factors to exploit its potential. These include addressing current gaps
in the value chain and also leveraging on the advantages the country provides. Investors in the
sector need to be aware of these factors and build the required capabilities in their business to
ensure success. Some of the success factors are as follows:

Integrated supply chain and scale • The country has only 3600
slaughterhouses, 9 modern abattoirs and
of operation
171 meat processing units, and a limited
• Even though India ranks second in number of pork-processing units.
production of fruits and vegetables, • This is one of the reasons penetration of
nearly 20 to 25 per cent of this processed meat is extremely poor at 1
production is lost in spoilage in various per cent in India.
stages of harvesting. • These figures indicate both the need for
• The major problems are poor quality of scale, and the potential or growth offered
seed, planting material and lack of by the sector.
technology.
• Quality produce lead to investment in Processing Technology
technology and ability to sustain a long • Currently most of the processing in India
gestation period for harvest. is manual.
• It also results in better quality of • There is limited use of technology like
processed food. So we need to establish pre-cooling facilities for vegetables,
backward integration like contract controlled atmospheric storage and
farming to improve quality of produce. irradiation facilities. This technology is
• Nearly 90 percent of the food processing important for extended storage of fruits
units are small in scale so not able to and vegetables in making them
exploit the advantage of economies of beneficial for further processing.
scale.

   
 

• In case of meat processing, even with the • However, there is increasing acceptance
presence of over 3600 licensed of these products amongst the urban
slaughter-houses in India, the level of population.
technology used in most of them is • India has a large untapped customer base
limited, resulting in low exploitation of and even a small footprint in the
animal population. domestic market would enable the player
• Bringing in modern technology is an to gain significant volumes.
area that existing as well as new • Acceptance in the domestic market and
investors in the sector can focus on, this hence higher penetration is driven by the
will make a clear difference in both following factors:
process efficiencies as well as quality of
Competitive Pricing
the end product.
Consumers of processed foods are extremely
Increasing penetration in price sensitive even a small change in

Domestic market pricing can have significant impact on


consumption. Competitive pricing also
Most of the processing units are export
enables penetration in the rural markets.
oriented and hence their penetration levels in
the domestic market are low. For example,
Brand competitiveness
• Penetration of processed fruits and
• Share of branded products in purchases
vegetables overall is 10 percent.
of Indian consumers has increased by 25
• The relative share of branded milk
per cent to 35 per cent. This is especially
products especially ghee is still 2 percent
true for urban consumers.
• Penetration of culinary products is still
• Branded products like Basmati rice and
13.33 per cent and is largely tilted
Godrej’s chicken have been very
towards metros
successful implying that there is a good
• Consumption of packaged biscuits for
demand for hygienic branded products at
Indian consumers is still low at 0.48
reasonable prices.
percent while that for Americans is 4
percent

   
 

Product Innovation Increasing time constraints amongst the


working middle class has boosted
Certain processed food categories such as
consumption of products like instant soups,
snack foods are impulse purchase products
noodles and ready-to-make products.
where consumers look for novelty and new
Innovation in packaging and product usage
flavours and hence these categories lack
is an important success factor for processed
brand loyalties. Visibility through attractive
foods.
packaging boosts consumption.

   
 

Backward Integration –
Emerging Business Models
Everybody is well versed with the traditional methods of value chain in food processing.
Looking at the dominance of the sector towards the growth of economy it has been considered
priority sector amongst all. We can see the generic value chain of the food processing industry
below.

TERMINAL
MARKET

AGGREGATORS  FOOD 
FARM INPUTS ANCILLARIES FOOD RETAILING
AND LOGISTICS PROCESSORS

CONTRACT
FARMING

In recent days trend has been towards integration and collaboration across players in the value
chain, to garner mutual benefits. Such integration is initiated by manufacturers, who are looking
to integrate backward to establish linkages with farmers and logistics provider. This led to two
new models emerging in the sector – Contract farming and Terminal markets.

Contract Farming
Contract Farming is an agreement between the food processor (contractor) , who is typically
a large organized player, and the farmer, whereby the farmer is contracted to plant the
contractor ’s crop on his land. He also agrees to harvest and deliver to the contractor a quantum
of produce, based upon anticipated yield and contracted acreage at a pre-agreed price.

The food processor provides inputs in terms of technology and training to the farmer, to improve
the yield and quality of the produce.

   
 

This results in a win-win situation that generates a steady source of income for the farmer and
eliminates supply shocks and assures good quality farm inputs which are crucial for the
processor.

The Government of India has been actively encouraging contract farming endeavours. The
National Agricultural Policy envisages that ‘private sector participation will be encouraged
through contract farming and land leasing arrangements to allow accelerated technology
transfer, capital inflow and assured market for crop production ’.

Terminal Markets
A Terminal market is a central site, often in a metropolitan area, that serves as an assembly and
trading place for agricultural commodities. Here there are different options for disposing off the
produce. It can either be sold to the end consumer, or to the processor, or packed for export, or
even stored for disposal at a future date. It thus offers different options to farmers under a single
roof.
Typically, terminal markets operate on a hub and spoke model where the markets form the hubs,
and are linked to different collection centres (spokes) that are located close to the production
centres. The typical value chain structure for a terminal market, as well as the key activities and
corresponding infrastructure requirements at each level, are depicted in the figure below:

 
TERMINAL MARKET INFRASTRUCTURE
Banking Finance
Grading, washing & packing
Sales E-auction Storage lines, quality testing,
palletisation, material
Trader/ Processor Warehouse handling, parking for
Retailer/exporters Cold storage transporter.
Ripening Chambers

COLLECTION CENTRES INFRASTRUCTURE

Collection and aggregation of produce Washing, grading, sorting,


Advisory on inputs, prices etc. weighment , transport,
Settlement of payments plastic crates

   
 

The Government of India is looking to promote terminal markets, as a means of integrating


domestic produce with retail chains.
There are plans to set up such markets in eight cities across five states, at a cost of US$ 131
million. The cities being considered are Mumbai, Nasik, Nagpur, Chandigarh, Rai, Patna, Bhopal
and Kolkata.

Global Farming chain, effluent treatment plant, warehousing,


power connection, water facilities, sewage
The next step towards globalization comes
etc.
from –global farm lands. Food shortage and
reducing level of arable land is encouraging The creation of these common
countries to approach other territory for farm infrastructures would benefit the individual
land. units particularly the small and medium
China government wants its agricultural scale units, because these are expensive to
firms to buy or lease farm lands in Africa or be set up by any single individual unit.
South America to bolster food security in Therefore a common park with all the
their country. China has 40% of farmers infrastructures would help in the growth of
across the globe but only 9% of agricultural this industry.
land. More than 40% of arable land of Brazil
The ministry of food processing industries
is unused and china would like to take up
has envisaged an initial investment of Rs
this land for soyabean production.
120 Crore (Rs 1.2 billion) for setting up the
Similarly Libya is negotiating with Ukraine
common infrastructure in a park.
for growing wheat and Saudi Arabia is too
looking for green pastures for their steady It is of the view that by providing a grant of
supply of food & live stock supplies. Rs 1,500 Crore (Rs 15 billion) for 30 parks,
Rs 50 Crore (Rs 500 million) for each, the
Food Parks private sector would be encouraged to invest
Food Parks are comprehensive industrial up to Rs 9,000 Crore (Rs 90 billion) in
estates for food-processing units where the various parks across the country.
industries would have the provision of
 
common facilities like cold storage, cold

   
 

First Food Park in India pulp / concentrate , pappad, pickles,


chutney, jam, jelly, dehydrated /dried
• KIFPRO –KINFRA Food Processing vegetable, spices, oleoresins, essential
Park in Malappuram (Kerala) oils, breakfast cereals, weaning foods,
• It is the first food park in the country nutrition foods , IQF for fruits and
assisted by ministry of vegetables , ready-to-eat snacks/meals
food processing industries Govt of India ,flour mills, bakery, noodles, vermicelli,
• It includes:-Yeast manufacturing, soft confectionery , tomato sauce, ketchup,
drinks and mineral water bottling , spirit powder, paste, juice etc.
from cassava, fruits , fruit juice, fruit

Name of Food Park Investment Investor Location


Indian Food Park 13 Crs MOFPI Palavanatham, Tamil Nadu
Nilakottai Food Park 13.5 Crs SIPCOT Dindigul, Tamil Nadu
Western Agri Food Park (P) Ltd 120 Crs MOFPI Pune
Patanjali Food and Herbal Park 200 Crs Baba Ramdev Haridwar
Six food park in Karnataka ------- Proposed Karnataka(Malur, Bagalkot,
Jewargi, Belgaum)
MIDC Food Park 4 Crs MIDC Butibori, Nagpur
Source: D’Essence Consulting Research

   
 

Growth Drivers for Food


Processing Industry
Changing Lifestyle • With 200 million people expected to
shift to processed and packaged food by
As far as the processed food market is
2010,
concerned, Indian households are closely
knit and the percentage of nuclear families This presents an opportunity for makers of
and working women is very low. Therefore, branded products like HLL, ITC, Nestle to
while the market itself is one of the largest convert potential consumers into patrons on
in the world, the penetration of packaged as big a scale as never before.
and branded products is abysmally low.
Large share of wallet:
People prefer homemade or fresh products,
• Food forms the largest component of the
which are cheaper than branded products.
total consumption expenditure in India
However, over the last couple of years,
accounting for as much as 51%.
private players have started taking enormous
• This is highest compared to 9.7% for an
interest in the sector, with many MNC's
average American person and 15% for
already testing the waters. Their efforts have
both Japanese and British. Though with
been aided by the fact that urban India is
rising income, the share would go down,
showing a marked shift towards ready-to-eat
but would increase in absolute terms.
food:
• Multi-national companies such as Coca-

• With urban incomes increasing and Cola, PepsiCo, Britannia, Danone,

urban consumers squeezed for time, they Nestle, Cadbury, Heinz and Perfettiae

are slowly demanding more of the have made their presence felt in India.

products they consume. Indian majors like HUL, ITC, Dabur too
have lined up investments in this
• Also, the hygiene factor is facilitating
segment.
growth.

   
 

Growth in Retail
• The Indian organized retail industry and processed food is finding its way
in 2008 is estimated at Rs.17,650 in retail stores.
billion and is expected to grow to • Industry estimates the total retail
Rs.23,500 billion in 2010. stock in India stands at 34.8 million
• Although organized retail is around 5 sq ft. Another 62.6 million sq ft of
% of the total market, it is expected mall space is either proposed or
to be seen 35-40% in next 10 years. under various stages of construction
• The annual growth of the retail in the next 2-3 years; only 35% of
market in India is expected to be this supply is coming in Mumbai and
around 8 per cent. Indian market has Delhi.
become the most lucrative market for • It is expected that the share of the
retail investment in the world. two cities to fall from the current
• The great Indian consumer market is 72% of the total stock to 49% by end
still going strong. Existing middle of 2011. This will enable retailers to
class with increasing share of wallet, plan at increasing their penetration
rapid urbanization, increase in the into the Tier II and III markets,
number of working women, large which have lower operating and
number of working young rental costs, and are relatively
population, changing attitudes, tastes untapped.
and lifestyle, globalization , • With a sizeable amount of supply in
indulgence and convenience aspects pipeline, the retailers and developers
are triggering the retail food industry would shift the focus of Indian retail
which in turn will a great boost to the market from lifestyle goods to value
food processing industry. retailing. FMCG and food retailing is
• This also attracts global retail giants likely to be the least affected in this
like Wal-Mart, Tesco, Carrefour SA, downturn and some activity is
Metro AG etc. to enter the Indian expected in this sector.
markets. With increasing number of
shelf space more and more branded

   
 

Some of the Key players in organized retail are:

Sr. No. Group Company Stores


Pantaloon, Big Bazaar, Central, E-zone, Electronic Bazaar, Brand Factory,
1 Future Group Planet Sports, aLL, Top 10, Star and Sitara, Home Town, Collection i,
Furniture Bazaar, Adhaar.
Food world, Books and Beyond, Music world, Health & Glow, Spenser’s,
2 RPG Retail
Cellucom.
Reliance Fresh, Reliance digital, Reliance Trends, Reliance Footprints,
3 Reliance Retail
Reliance Jewels, Reliance Timeout, Reliance Wellness
4 Tata Retail Westside, Landmark, Fashion Yatra, Croma, Star Bazaar
5 K. Raheja Corp. Shoppers Stop, Hypercity, Crossword, Inorbit mall
6 A.V. Birla More
Source: D’Essence Consulting Research

Sr. No Group Company Tie-up Stores

1 Wal-Mart Pvt. Ltd. Bharti Enterprises One Store Cash-n-Carry in Amritsar

2 Tesco TATA Proposed


3 Carrefour SA Future Group Proposed
4 Metro Ag - 5 Stores Metro (Cash & Carry)
Source: D’Essence Consulting Research

Sr. No. International Player Indian JV partner Product profile Strategy


1 Danone - Dairy Products Entered India with
50:50 joint venture
with Yakult, Japan.
2 Kraft Food
3 Con Agra ITC Branded Foods and bulk & Conagra has 34.3 %
processed commodities in ITC Agro Tech
4 Del Monte Bharti Enterprises Fresh fruits& Vegetables 50:50 JV

Source: D’Essence Consulting Research

   
 

Food Retail: Government Initiatives


• Food retail has surpassed the dominating The government has taken steps to provide
apparel and accessories sector. Contrary financial assistance for setting up and
to the belief that fashion is the largest modernizing food processing units, creation
segment of organized retail in India, of infrastructure, and support for R&D and
food & beverages is the major segment, human resource development in addition to
worth Rs 8,97,000 crore. other promotional measures to encourage the
• Growing at the rate of 30%, the Indian growth of the processed food sector.
food retail is going to be and no doubt is
The government has set a vision 2015, for
the major driving force for the retail
the sector which includes:
industry. The percentage of income
• Promoting a dynamic food processing
spent in households will drive growth in
industry
the food market.
• Enhancing competitiveness in domestic
• Food accounts for the largest share of
and international market
consumer spending. Food and food
• Making sector attractive for both
products account for about 50% of the
domestic and foreign market
value of final private consumption. This
• Achieving integration of food processing
share is significantly higher compared to
infrastructure from farm to market
developed economies, where food and
food products account for about 20% of It also has following specific targets:
consumer spending. • Level of processing of perishables from
• Currently, the retail food sector is Rs. 6% to 20%
3500 billion and is expected to rise to • Value addition from 20% to 35%
Rs. 7500 billion by 2025. Food has the • Share in global food trade from 1.5% to
largest consumption in the Indian 3% by 2015
economy and will remain the single
In order to achieve the vision, the
largest category.
government has taken following steps:

   
 

Priority area: The Government of India allowed (100% of profits for five years and

has identified the food processing sector as a 25% of profits for the next five years) for

high priority area and has given a number of setting up of new agro-processing industries

fiscal relief and incentives to encourage to process and package fruits and vegetables

commercialisation and value addition to (F&V). Export earnings are exempted from

agricultural produce. corporate tax. Various states governments


like Himachal Pradesh, Uttaranchal and
FDI: Automatic investment approval up to Jammu & Kashmir have encouraged
100% foreign equity has been allowed for companies to set up manufacturing facilities
larger part of the food-processing sector in their regions through a package of fiscal
except for malted food, alcoholic beverages incentives. The move towards uniform VAT
and those reserved for small-scale industries has also been considered.
(SSI). 24% foreign equity has been
permitted in small-scale sector. Foreign Excise and custom duties: Quantity
investments are allowed in SSI reserved restrictions on all food products have been

items under an export obligation in selected removed. Peak rate of customs duty has been

items. reduced from 30% to 25% (excluding


agricultural and dairy products) and duty
Licenses: The Indian government has structure on designated items has been
abolished licensing for almost all food and rationalised. The import of food processing
agro-processing industries except for some machinery is allowed freely with low levels
items like alcohol, cane sugar, hydrogenated of duties. Import of capital goods for exports
animal fats and oils and items reserved for of agricultural products and their value-
the exclusive manufacture in the small scale added variants under the Export Promotion
industry (SSI) sector. This has resulted in a Capital Goods (EPCG) is allowed duty-free
boom in the FMCG market through market and Foreign Technology Agreement within
expansion and greater product opportunities. norms has been made automatic. This opens
up huge opportunities for large investments
Taxes: To further aid the segment, the
in food and food processing industries in
government has announced a liberal
different fields including up gradation of
corporate tax policy for export and domestic
technologies, improvement of skills with
earnings. Income tax rebate has been

   
 

installation of modern machinery and mega parks are coming up across the
equipment, especially in areas of canning, country in various cities to attract Foreign
dairy plants, specialty processing. Direct Investment (FDI) in the food-
processing sector. Each food park will have
Food laws: Consumer protection against
a cold storage facility, apart from facilities
adulterated food has been brought to the fore
for sorting, grading, food processing,
by the Prevention of Food Adulteration Act
packaging and quality control and R&D
(PFA), 1954, which applies to domestic and
laboratories, among other things. The
imported food commodities and
government has already identified five
encompasses food colour and preservatives,
locations in Maharashtra, Andhra Pradesh,
pesticide residues, packaging, labeling and
Punjab and Jharkhand and one in the North-
regulation of sales.
East region. It is also planning to set up 30

Food parks: In a bid to boost the food food parks across the country.

sector, the Government is planning to set up


agri zones and mega food parks. 30 such

Organization under Ministry of Food Processing Industry

1. Directorate of fruits & Vegetable Processing(F&VP)

2. Directorate of Meat Food Products


3. National Institute of food Technology Entrepreneurship & Management
4. Paddy Processing Research Centre

Ministry also interacts with various Nodal Agencies & Promotional organizations 

1. Agricultural & Processed Food Export Development Authority (APEDA)

2. Marine Products Export Development Authority (MPEDA),

3. National Co-operative Development Corporation (NCDC),

4. Central Food Technological Research Institute (CFTRI )


Source: Ministry of Food Processing Industry

   
 

Major investments in Food


Processing Industry
Private investment has been one of the key drivers
Year Foreign Direct Investment
for growth of the Indian food industry. As we know (Rs. In Crore)
food processing industry has been allowed 100 % 2000-01 198.13
FDI it has shown substantial growth which can be 2001-02 1,036.12
observed in the chart: 2002-03 176.53
2003-04 510.85
Industry estimates the total amount of investments 2004-05 174.08
in the food processing sector in the pipeline for the 2005-06 182.94
next three years is about Rs. 1,150 billion. 2006-07 441.00
2007-08 719.00
• The government has received around 40
Source: Ministry of Food Processing Industry in India
expressions of interest (EoI) for the
its recent acquisition of US brewing giant
setting up of 10 mega food parks (MFPs)
Anheuser-Busch (A-B), the company
with an investment of US$ 514.37
now also owns A-B's Indian subsidiary,
million.
Crown Beers India.
• In August 2008, the first chocolate
• Italian confectionery company, Ferrero
academy in India was opened by Swiss
SpA, has announced plans to invest US$
confectioner Barry Callebaut, making its
35 million for setting up a mint
fifth foray into the Asia market.
manufacturing plant in Maharashtra.
• South Korean confectionery giant, Lotte
• Conglomerate Reliance Industries Ltd has
Group, also has plans to set up a
invested US$ 1.25 billion in a dairy
subsidiary in India.
project. In August 2008, Reliance
• Belgian brewing giant, InBev, has
Industries was reported to be mulling a
announced increased expansion in India,
partnership with UK-based supply chain
with a focus on the beer market. Through
solutions provider, Wincanton, for its

   
 

efforts focussed on India’s mass grocery an integrated 'cleaning-cum-sorting'


retail (MGR) sector. facility for spices like cumin, coriander
• Dairy major and ice cream specialist, and pepper. Moreover, ITC is also
Amul Dairy, has announced plans to enter planning investments to automate the
India's US$ 500 million snack food different operations in its supply chain. It
market. is planning to set up a pepper garbling
• Texas Chicken, the chicken fast-food and steam-washing facility in Kerala,
brand of the US-based Church's Chicken, apart from a 'blended spices' facility over
has already opened its first outlet in the next two years.
Hyderabad and plans to open at least 300 • Sapat International, a Mumbai-based tea

outlets in India over the next 10 years. company, is reportedly in talks with
• The world's third largest pizza chain, EPIC, a private equity firm in the UK, for
Papa John's, plans to open 100 outlets in the acquisition of its stake in Whittard, an
different parts of the country with an upmarket tea and coffee retailer in the
investment of US$ 51 million. UK.
• Fast-food chain McDonald’s is pumping • France-based Belvedere Group, which is

in US$ 83.4 million on increasing its the world’s second-largest vodka


footprint in India. producer, is planning to enter India via
• ITC is planning to set up a world-class the travel retail channel.
processing infrastructure in Rajasthan for
Sr. No. Company Name VC investor Investment
1 KS Oils CVCI, Baring Rs. 450 crores
2 Nuziveedu Seeds( Hyderabad) Blackstone Rs. 400 crores
3 Biotar Industries Ltd. ( Mumbai) Standard Chartered PE Rs. 180 crores
4 Blue Foods( Restaurants) Indivision Capital Rs. 150 crores
5 Mainland China( Restaurants) SAIF Partners Rs 90 crores
6 Jain Irrigation( Jalgaon) IFC Rs. 75 crores
7 Parag Dairy( Pune) Motilal Oswal Rs. 60 crores
8 Ramcides(Chennai) ePlanet Ventures Rs. 25 crores
9 Capital Foods Ltd. Indivision Capital Rs. 25 crores
10 Asian Dhall SAIF Partners Rs. 4 crores
11 Mast Kalandar (Restaurants) Jacob Ballas NA

   
Trends in consumption pattern
of food
Food On-The- Go western segment (potato chips, cheese
balls) and the newly established finger
India has had a long tradition of salty snacks segment.
snacking, with a host of regional ingredients • The market in India is diverse and large
and flavors creating a smorgasbord of with over 1,000 different snack products
snacks, ranging from fried snacks like chips, and some 300 types of savories. Potato-
‘chaklis’ and ‘samosas’ to steamed fare like based snacks, and in particular potato
chips, are the largest product segment,
holding an 85 percent share of the salty
snack market, followed by snack nuts,
chickpeas and other pulse-based savory
snacks..

‘dhoklas’. The snack food industry in India Organic Food


is highly fragmented, with the market
dominated by savories sold by local • Organic foods have been accepted due to
vendors. their perceived health benefits over
conventional food.

• The market is estimated at Rs. 150 • The organic industry is growing rapidly
billion, with 50percent comprising the and has caught the attention of farmers,
organized snacks category. manufacturers and, above all,

• This category, growing at a healthy 30 consumers.

percent annually, is sub-divided into the • Organic foods protect from heart disease
traditional segment (bhujia, chanachur), and cancer, as they contain Phenolic
compounds.
 

• Organic food ensures high food quality, • No wonder healthy food is becoming a
which other conventional foods cannot fast-growth category. Rising awareness
give. Many people prefer to grow and affluence have made health food
organic food in their home gardens, products accessible to a larger segment
because it costs about 20% more than of the population.
the conventional food.
• Fabindia has ventured into the organic
health food products called Fabindia
Organics with no preservatives or colors
added.
• 24 Lettered Mantra, India’s first organic
food store chain has exclusive stores in
Hyderabad, Bangalore and Pune. Godrej
• In recognition of these trends, food
AgroVet’s retail product, Nature’s
marketers in the country have introduced
Basket, is also looking into the
a number of new products, spurring the
possibility of test marketing certified
growth of the health food market.
organic produce through its outlets.
• Several savvy marketers are already
HUL’s 3 Roses brand, with ayurvedic
riding this trend.
ingredients is positioned on the ‘mind
• Amul has introduced a range of
sharp’ category, as its Red Label brand,
functional products, from energy drink
with its ‘Natural Care’ offering.
Stamina to Probiotic Ice-creams,

Health & Wellness Food Probiotic Lassi and Curd, and High
Calcium Milk; Reduced Salt Butter
• This is a trend that plays directly to our
desire to ingest specific foods or
beverages for the purpose of preventing
or palliating a disease or condition.
• From an ingredient standpoint, health
and wellness concerns offer the best
variety of options for processors.

   
 

Convenience Food Kitchens of India, MTR Foods currently


comprise 22 Indian curries, gravies and
• Changing lifestyles and the modified rice,
eating habits of India’s growing urban • Amul has products like Ghee ,
population have propelled its processed Shrikhand, Nutramul, Kohinoor,
food industry. Rajbhog Foods, Ethnic Kitchens and
• This has led to a growth in the Tasty Bite etc.
availability of processed foods as • From a mindset where home- cooked
manufacturers rush to cater to a growing and fresh food was preferred and
housewives insisted on making
everything from snacks to multi-course
meals in-house, today it has become
commonplace to seek convenience and
variety using the vast menu of ‘ready to
cook and eat’ foods.

Food as Control

• Driven by the size zero and ‘thin-is-in’


demand. Various social changes are revolution, men and women, boys and
driving this trend, from the g rowing girls are increasingly embarking on
number of nuclear families to increased various ill-advised diets to cultivate that
urbanization and a significant rise in the Size Zero figure.
number of working women as well as a • Many companies have started Diet
growing practice of singles living away variant in their product range that
from home for education or work. promises enjoyment without the guilty
• According to a study, the Indian ‘Ready side effects.
to Eat’ market is estimated to grow to • While the market for low-calorie foods
US$ 727.09 million by 2015 from the is small in developing countries, India
current $ 32.09 million. already ranks among the top 10
• Some major players include ITC Foods consumers of diet foods.
with products like Aashirvaad &

   
 

• Zydus Cadila Healthcare, which is • The popular energy drinks in the Indian
working on brand extensions, recently market are Phantom, Red Bull, Effect
introduced Sugar Free D’lite, a low and Gatorade.
calorie fruity drink which is 99 % • Due to the large quantit ies of sugar and
calorie-free and claims not to caffeine, these energy drinks give an
compromise on its taste quotient. instant punch and thus make one feel
energized.
• Red Bull is in fact also gaining currency
as a mixer for alcohol in the party

• Amul has come up with its Sugarfree


Probiotic Frozen Dessert, Mother Dairy
with its low-fat Dietz ice creams, and
Nestle with Kit Kat Lite.
circuit. Amul has launched ‘Stamina’,
• Eating joints have also introduced a new
which is India’s first-ever instant energy
concept of diet calorie-controlled food.
sports drink.
VLCC Alive is India’s first calorie kiosk
• The sports and energy drinks are at their
where each meal promises to be less
‘infancy stage’, but they are expected to
than 300 calories. There are also many
post strong growth in the niche segment.
more products in the market targeting
• The consumption of energy bars is also
such customers.
becoming a trend among the youngsters.
Instant Energy Food
And popular among these are brands like
• With long commutes and the need for ‘RiteBite’ and ‘Nature Valley’. These
work combined with play on a daily bars are being marketed as a healthy
basis have led to consumers needing a alternative to the sugary, fattening
greater infusion of energy than ever normal chocolate bars.
before.

   
 

Luxury Food
• Today, food is about many different
things, including lifestyle choices or
values, and affluent consumers are using
food exclusivity to signal their affluence
or ‘arrived’ status.
• Buying a richer version of the same old
thing seems to be the new flaunt mantra. • Parle’s variant, Milano, is priced at a Rs
10 premium over its existing brand in
the market. Britannia’s Pure Magic and
ITC ‘s Dark Fantasy, a cream-based
Chocolate cookie are also deluxe
versions of their cookies.
• Food Classics Ice-cream by Mother
Dairy is a range of premium ice creams
with more fruit blended with creamy ice
cream.
• Many brands are riding this trend by
• Cadbury Temptations is a range of
introducing up-market versions of mass-
delicious premium chocolate; Amul has
market brands.
added Emmental and Gouda.

   
 

Profiles of Major Players in


Food Processing Industry
Indian Players

Company Logo Company Products Brief about the company


• Dabur foods is a hundred percent subsidiary
of Dabur India Ltd
Fruit juice, Cooking • Closely held listed company with promoters
paste, Coconut, Milk,
Dabur Tomato puree, Lemon holding at 78.4% of the total share capital
Foods drink, Chilli powder, • Dabur has done sales of Rs.241crs in the
Honey
financial year 2007-08, a 19% increase than
the previous year.

• Founded in 1946 in Anand, Gujarat.


• Amul is the world’s largest pouched milk
Dairy products, Ice brand in the world.
Amul
creams, Chocolates
• The annual sale of Amul in the year 2007-08
is around Rs.5255.4crs.

• Unlisted private family owned business


GITS Food Sweet Mix, Namkeens, • Exports to UK, USA, Australia, Canada &
Products Pure ghee, Dairy
Middle East contributing to the extent on 35%
Pvt Ltd whitener, Milk powder
of the revenue.

• Started in April 2006 as Godrej Beverages &


Edible oils,Vanaspati, Foods Ltd.
Godrej
Bakery fats, Fruit
Industries • Acquired Nutrine Confectionary Company
drinks, Fruit Juices,
Ltd
Fruit nectar. Private Ltd. In June 2006.

   
 

• Started in 1936, Major share in Namkeen &


Snack food market in India.
Haldiram Sweets, Syrups, • Strong presence in northern market in India
Marketing Namkeens, Crushes,
especially New Delhi.
Pvt ltd Chips& Papads
• Exports to USA, UK, Canada, Australia, UAE
& Singapore.

• Amongst the top five processed food


manufacturers in India.
Ready to eat curries, • Turnover is estimated at US$ 261 million
Frozen food, Ready to
MTR with the export of approximately 10% of total
cook gravies, Spices,
Foods Ltd
Ice creams, Instant MTR Sales.
snack & Dessert mixes
• Recently acquired by Orkla, a Norway based
company for US$ 80 million.

• Leading player in the fruit based beverages


segment & bottled water.
Parle Agro Fruit drinks & Mineral
• Its main product is the mango based fruit
Pvt Ltd water
drink Mango Frooti, which has 75% market
share.

  Milk powder,baby • The company is a subsidiary of LP


Milk Food food,cheese & other Investments Ltd which is a wholly owned
milk products subsidiary of Jagatjit Industries Ltd.

• ITC is a listed company with British


American Tobacco holding 33% stake &
Institutions holdings 50% stake.
Wheat flour atta, Ready
-to-eat meals, Biscuits, • ITC entered into branded & packaged food
ITC Ltd
Salt, Snacks & Cooking
business in August 2001 with the launch of
paste
Kitchens of India Brand.
• ITC entered into confectionery, staple &snack
food items by mid 2002.

   
 

• Marico introduced its edible oil brand


Sweekar in the year 2001-02 and other major
brands of oils are parachute and Saffola.
Marico Vegetable oils, Jams &
industries Soya products • Acquired Nihar from HUL in Feb 2006.
• Parachute has 48% market share in its
segment as of 2008.

Overseas Players
Company Logo Company Products Brief about the company
• The parent company Unilever holds 51.5%of
HUL’s Equity
• India’s largest FMCG Company with
Biscuits, Instant
Hindustan leadership in Home & Personal care products
coffee, Tea, Instant
Unilever
drinks, Jam, Syrups, and Food &Beverages
Ltd
Salt, Wheat flour-atta,
• HUL’s brands so reach across 20 different
categories with combined volumes of about
4mn tons and sales of US$ 2.17 billion

• A leading player in the Indian organized


biscuit market segment with 30% value sale.
• The 48.5% promoter holding in Britannia is
Britannia Flavored milk, Dairy equally shared by the Nuslia Wadia group in
Industries whitener, Ghee,
India & Group Danone, French multi product
Ltd Biscuits, Cake & Rusk
food company
• Made a sales of Rs.2617.7crs sales in the year
2007-08.

   
 

• A dominant player in the edible oil &branded


food segment in India.
Wheat flour atta,
• ConAgra Foods Inc of USA, world’s third
Agro Tech Popcorn, Edible oil,
Foods Ltd Vanaspati, French fries largest foods company along with the Tiger
& Green peas.
Brands of South Africa holds a majority stake
in Agro Tech Foods Ltd.

Instant coffee, • Nestle India is 51% subsidiary of Nestle SA


Nestle Condensed milk,
(founded 1866), which is today the world’s
India Pvt Infant food, Dairy
ltd whitener, Chocolates largest food & beverage company.
& Confectionaries

• PepsiCo is formed by the merge of Pepsi-Cola


&Frito-Lay IN 1965
Pepsico
Soft drink, Fruit juices • Tropicana was acquired in the year 1998
India
& Chips
Holdings • Gatorade was introduced in 2001 by the
merger with The Quaker Oats Company

• In Indian chocolate market Cadbury have


strong brands like Dairy milk, Five star, Perk

Chocolates, Hard & Gems.


Cadbury boiled confectionery, • Dairy milk is the largest chocolate brand in the
India Ltd Malt foods, Cocoa
powder world
• 75% of the total turnover of Cadbury is
contributed by chocolates & confectionaries

   
 

Case study 1: AMUL

• Amul is the largest co-operative finally relented when Bombay went


movement in India with 2.2 million milk without milk for a fortnight.
producers organised in 10,552 co- • The successful union registered itself as
operative societies in 2003-2004. the Kaira District Cooperative Milk
• The country's largest food company, Producers' Union Ltd. (KCMPUL),
Amul, is the market leader in butter, Anand, in Gujarat in December 1946.
whole milk, cheese, ice cream, dairy • In 1954, when the Bombay Milk Scheme
whitener, condensed milk, saturated fats refused to take all the milk that
and long life milk. KCMPUL had produced, the cooperative
• Amul's genesis was linked to the found itself saddled with surplus milk.
freedom movement in India. Sardar • Apart from marketing milk in and
Vallabhbhai Patel, an eminent Indian around Anand, KCMPUL embarked on a
freedom fighter encouraged the dairy wide range of dairy processing activities.
farmers from the Kaira district in Gujarat • To differentiate its high quality products,
to form a cooperative to counter the KCMPUL decided to brand its produce.
'exploitatively' low prices offered for • In 1955, KCMPUL adopted the brand
their milk by the monopoly milk supplier name 'Amul' for its products. 'Amul',
of the area, Polson's Dairy. derived from the Sanskrit word
• The dairy farmers met in Samarkha 'Amulya', meaning priceless, also stood
th
(Kaira district, Gujarat) on the 4 of for 'Anand Milk Union Limited'.
January 1946, and decided to set up a • Amul follows a unique business model,
milk producers' cooperative that would which aims at providing 'value for
deal directly with the Bombay money' products to its consumers, while
government, the final buyer of their protecting the interests of the milk-
milk. This was the origin of the Anand producing farmers who are its suppliers
model. as well as its owners.
• Initially, when the Bombay government • Despite being a farmers' co-operative,
refused to deal with the cooperative, the Amul has given multinationals a run for
farmers called a strike. The government their money.

   
 

• In butter, cheese and saturated fats, • GCMMF collected 5 million litres of


Amul has remained the undisputed milk per day from its shareholders who
market leader since its inception in 1955, owned 3.2 million buffaloes, one million
by offering quality products at cows and 0.3 million crossbred cows.
competitive prices. • The Federation's extensive marketing
• In other categories, Amul has nullified network comprised 3000 distributors and
its late mover disadvantage through 500,000 retailers spread across the
aggressive pricing, better quality, country.
innovative promotion, and superior • The liberalization of the dairy industry in
distribution Gujarat Cooperative Milk 1991 had seen a number of multinational
Marketing Federation (GCMMF), the players like Britannia, Le Bon, Dabon
largest food company in India, recorded and Hi-Life enter the sector.
a turnover of Rs 2882 crore ($ 0.65 bn) • Analysts wondered whether a co-
in 2003-04. operative with limited financial means
• Its flagship brand 'Amul' was the market could stand up to the might of these
leader in butter, whole milk, cheese, ice MNCs, and if its low pricing strategy
cream and dairy whitener. would continue to stay relevant.
• GCMMF was the largest cooperative • MNCs like Pizza Hut, Domino's,
movement in India with 2.2 million milk Hindustan Lever Limited and Cadbury
producers of Gujarat organized in 10,552 had also become competitors. Amul had
cooperative societies. proved its detractors wrong and firmed
up ambitious growth plans.

   
 

Case Study 2: Lijjat Papad

• In 2002, with a turnover of Rs 3 billion, • The member sisters are free to choose
exports worth Rs 100 million, 62 the work they like, rolling papads, or
branches and 40 divisions all over the packing, or preparing the dough.
country, and 42000 members, the Sri • Payment is made on a daily basis. The
Mahila Griha Udyog Lijjat Papad supervisors constantly check for the
(SMGULP) was a women's quality and weight of papads.
entrepreneurial success story in India. • SMGULP inculcates in its members, "a
• From humble beginnings in a thickly commitment to earn a legitimate income,
populated locality of Mumbai in 1959, honesty, and not snatching the fruits of
SMGULP has come a long way. another person's income" and adherence
• The organization gained recognition to quality. Stringent rules of cleanliness
through its most famous product- Lijjat and purity are maintained.
papad. In addition to papads, SMGULP • The whole manufacturing process is
manufactured other household products open to inspection by anybody. A well
like spices, bakery products and laid formula is strictly followed to obtain
detergents. products of a fixed standard of taste,
• A look at any of the branches of color and size.
SMGULP gives the feel of an efficient • In March 1959, seven semi-literate
entrepreneurial set up. women from Gujarat came together to
• The key to SMGULP's success lies in supplement their family incomes and
the feeling of oneness that it creates. create a sustainable source of
• Women above 18 years of age can employment with the skill they knew -
become members of SMGULP by cooking.
signing a pledge of devotion to the • They started out on the terrace of a large,
organization. old, residential building called Lohana
• At SMGULP, workers are referred to as Niwas in Girgaum, a thickly populated
co-owners and the women who work area in south Mumbai. This is where the
there are referred to as sisters. seven housewives, bored and confined to

   
 

their homes, saw an opportunity to set up the end of the third year more than 300
an organization 44 years ago. women were rolling papads.
• These women borrowed Rs 80 from • SMGULP is a symbol of the progress of
Chaganlal Karamsi Parekh, a member of women in developing countries like
the Servants of India Society and a India. It took the organization 43 years
social worker. The women commenced to grow from a 7-member team, to one,
business by selling papads. which has 42000 members.
• Within 3 months there were 25 women • The organization not only aims at the
joined them and within 6 months they economic empowerment of women, it
were able to reward themselves with half also seeks to raise the standard of living
gram of gold each with the profit they of women.
had made. • SMGULP has taken a major step
• The group used considerable publicity towards eradicating evils like poverty
through word-of-mouth publicity and and illiteracy.
articles in vernacular newspapers. • Such an organization also forms a vital
• By the second year of its formation, 100 link between social development and the
to 150 women joined the group, and by advancement of rural women.

   
 

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