Agri Retail Management

GROWTH OPPORTUNITY FOR AGRI

RETAILING OF PROCESSED FOOD
PRODUCTS IN INDIA

Submitted To: Mr. Ashok Kumar

Submitted By:
Ankan Das (19020242005)
Anshul Gupta (19020242006)
Divyanshu Malhotra (19020242012)
Poornima Thapliyal (19020242034)
Rahul Khurana (19020242038)
INTRODUCTION

Food processing is the alteration of foods from the state in which they are harvested or raised to
better preserve them and feed consumers. As the 2007 World Food Prize Laureate Philip E
Nelson said, “If you teach a person how to process food, you can feed a village” (P Nelson,
personal communication, 2013). Processing began in prehistoric times. As agriculture and animal
husbandry spread, it was essential to preserve foods to avoid losses because of spoilage and to
survive during times of scarcity. Food processing was probably the first “technology” that was
sufficiently successful such that it led to a segregation of societies into discrete artisan industries.

India’s food processing sector is one of the largest in the world and its output is expected to
reach $ 535 Bn by 2025-26. It lies at the heart of the Government of India’s Make in India
initiative and resonates with Prime Minister Modi’s call for ‘vocal for local’.
Currently, India is processing less than 10 % of its agricultural output, thus, presenting immense
opportunities for increasing these processing levels and leading to investments in this sector.
With agriculture and its allied sectors being the largest source of livelihoods in India, 70 % of its
rural households still depend primarily on agriculture for their livelihood. Thus, this sector
provides a huge employment generation potential as well.
According to the latest Annual Survey of Industries (2016-17), India’s food processing
accounted for:

● 15.95 % of the total number of factories

● Employment to 11.36 % of the workforce
● 14.09 % of the output
● 16.78 % of the operational factories
GROWTH OF FOOD PROCESSING SECTOR

Four major drivers in the growth of the food processing sector are:
Strong domestic demand
Changing lifestyle and food habits due to increased disposable income

Supply side surplus

High level of agricultural production leads to high level of material availability eventually
leading to increase in demand.
- large livestock base
- wide variety of crops
- inland water bodies and a long coastline that help increase marine production

Wide range of products to choose from

The increasing penetration of organized food retail outlets are offering a wide range of options to
consumers. These outlets provide consumers access to diverse products, usually with attractive
discounts.

Export opportunities
Proximity to key export destinations, greater integration with the global economy

Proactive government policy and support

PRADHAN MANTRI KISAN SAMPADA YOJNA (PMKSY)

- Scheme for Mega Food Parks

- Scheme for Cold Chain and Value Addition Infrastructure

- Scheme for creation/ expansion of Food Processing and Preservation Capacities

 - Scheme for creation of backward and forward linkages

- Scheme for Food Safety and Quality Assurance Infrastructure

- Setting up/Up-gradation of Quality Control/ Food Testing Laboratories

- Scheme for Human Resources and Institutions

- Research & Development in food processing sector

DRIVERS OF DEMAND
CONSUMER ATTRIBUTES
Posing as an opportunity to generate the demand.
- Urbanization: The movement of people from their home place usually in search
of work and ending up settling up there.
- Change in lifestyle: With an increase in urban working culture and fast-paced
lifestyles, there is limited time available for cooking and meal preparation. Thus,
processed foods such as ready-to-eat products and snacks have become quite
popular, particularly in urban areas. By 2030, Indian annual household
consumption is set to treble, making India an opportune market for consumption
of processed foods.
- Increment in disposable income: India has one of the largest working
populations in the world and, with a rise in disposable incomes, this segment of
the population is also becoming the biggest consumer of processed foods in the
country.
- Workforce compositions: the proportion of working women in the industry has
been increasing continuously both in the urban and rural regions. Thus, there is an
increase in the number of consumers for Ready to eat and quick meals (processed
products)
- Consumption rates: The growing consumption of food is expected to reach $ 1.2
Trn by 2025-26.
Posing as an opportunity to fulfill the demand.
- Subscription plans: Millennials have a habit to subscribe for repeat purchases,
this attribute of users help companies to plan for the demand well in advance
- Basket building (Modern retailing) : While ordering through e-commerce users
have a tendency to order multiple items in a single order. This helps companies to
optimize for the supply chain cost.

OBSTACLES - REGULATORY ISSUES

FICCI conducted a survey across the entire value chain, reaching 250 companies. A total of 125
responses were received. The respondents' profile constituted the top decision makers of food
organizations.

Here are the top challenges identified by this survey

Out of the top 5: 2nd, 3rd and 4th were related to regulatory issues which acts as an obstacle to
growth of the food processing sector.

Let’s have a look at each of them one by one.

Absence of Comprehensive national level policy on food processing sector:

➔ The respondents felt that policy should evolve through detailed discussions between all
the stakeholders across the entire value chain
➔ The food processing sector is governed by statutes rather than a single comprehensive
policy on food processing.
➔ India urgently needs a national food processing policy which incorporates tax breaks for
the sector.
➔ The policy to be effective will have to be comprehensive and adopt a number of
legislative, administrative and promotional measures.

Food Safety Laws & Inconsistency in State and Central policies:

➔ The Indian food regulations comprise various food policies that have been enacted at
different points of time, and are under the ambit of various ministries of Government of
India (GOI).
➔ Historically they were introduced to complement and supplement each other in achieving
total food sufficiency, safety and quality.
➔ The result is that the food sector in India is governed by a number of different statutes
rather than a single comprehensive enactment.
➔ This incremental approach has led to incoherence and inconsistency in the food sector
regulatory scenario.
➔ In addition the multiplicity of ministries and administering authorities at both the central
and state level has resulted in a complex regulatory system that is not well integrated
adding an additional burden on the food industry.
Challenges involved in fulfilling the demand by the retailer.

Maintaining customer and distribution commitments can be challenging for food businesses, especially as
consumer demand changes and as retailers expect more from their suppliers and distribution partners.

Struggling to meet these rigorous requirements can be costly for food manufacturers, but those businesses
that can evolve to comply with regulations and meet expectations give themselves a competitive
advantage.

With the right technology, food manufacturers can better manage their operations and supply chain
processes, thus enabling evolution with customer demand and facilitating retailer compliance without
breaking the bank.

Consider the following challenges limiting food and beverage manufacturers from growing their
businesses. Then, join the webinar to see how you can better meet these challenges to deliver the product
your customers want and expect.

Challenge #1: Understanding and satisfying demand

Knowing that customers drive distributor demand, it’s important to be aware of when and where
consumers are looking for your product before expending resources to meet a retailer’s rigorous
requirements.

Company-wide reporting tools are one of the most efficient and reliable ways to understand that demand.
ERPs provide insights and business intelligence that enable you to better understand which regions
demand your products and when. This allows for decision-making that is more strategic, satisfies the
demand, and adapts to changes.

Challenge #2: Managing food recalls, safety and quality

Meeting food safety standards, as well as quality and recall regulations, is always a priority for food
manufacturers. Being able to trace products across the entire supply chain, from your operations to
retailer shelves, is a challenging task, and it’s essential that it’s done correctly. A failure here can be
costly, both financially and to your brand’s reputation.

Food safety standards and processes are established to not only remove risk for consumers but to give
employees guidelines to follow. These procedures can be defined and enforced with the help of an ERP
system. Industry-specific solutions are built with functional capabilities that help you manage recall
processes and tracking, provide quality audits to ensure food safety requirements are being adhered to
throughout your operations.
Challenge #3: Ensuring supply chain visibility
The food distribution supply chain involves multiple steps. This is particularly true if your product is a
base ingredient that must be re-mixed by another manufacturer. It’s critical for food manufacturers to
have visibility throughout the supply chain and fully understand where their product is, the anticipated
timeline, and the expected arrival or departure time.

Purpose-built ERPs allow you to track and trace each of your products as they move from raw ingredients
to finished products at a warehouse or retail store. This reduces the risk of unexpected problems, such as
quality and safety issues or incorrect expiration dates, and ensures consumables ship and arrive on time.

Challenge #4: Maintaining continuous product development

Because product demand tends to fluctuate, you want your shop floor and product development to be just
as adaptable to shifting consumer desires. Innovations and changes to food and beverage production come
through both data monitoring and experimentation.

Modern technology can support research and development teams as they compare current formulas and
processes with new combinations. This kind of experimentation has the potential to unlock new, cost-
effective recipes and products that not only reduce expenses and increase the bottom, but also meet
customer and retailer demands.

Challenge #5: Controlling your costs

By minimizing waste and streamlining operational efficiency across your organization, you’ve created an
operation that’s not only sustainable but will, inevitably increase your profits. If your business doesn’t
have the ability to drill down on purchasing, supply chain, logistics, manufacturing or sales costs, you
could be overlooking opportunities for improvement. As a decision-maker at your company, you need to
be able to see the bigger picture and the small details within your operation.

From safety and compliance to margin control and yield management, an ERP solution built for the food
industry can give you the control you need to reduce costs and grow your business.
Scope of technology in meeting the demand and customer
experience
The agricultural production of India has consistently recorded higher output. India ranks number one in
the world in the production of Milk, Clarified Butter (Ghee), Ginger, Banana, Guava, Papaya and
Mangoes. Further, India ranks second in the world in the production of Rice, Wheat and several other
vegetables and fruits. The availability of a wide range of cereals, oilseeds, pulses, herbs, spices coupled
with high levels of consumption allows a unique opportunity for various international and global
businesses to be a part of the food industry in India.

The Government of India has taken several initiatives to support the sector with 100 per cent Foreign
Direct Investment (FDI) in food processing, warehousing, storage and transportation for cold chains and
marketing of food product produced and manufactured in India.

The growth in the processing equipment market in India is driven mainly by the increased demand for
processed food products. The consumer is shifting towards more value-added food categories such as
yoghurt, cheese, processed meat and ready-to-eat food products. In addition, there is a growing demand
for processing basic products such as fruits, vegetables and grains which require technologically
advanced equipment. Therefore, there is a need to adopt new methods, technology, and machinery for the
food processing industry with least impact on sensory qualities such as color and texture. Technological
advancements are necessary for the growth of the sector and for the diversification of the existing
production capacity of the food processing industry.

● Recognize the dimensions of customer service that are critical for improving customer
satisfaction. According to Pennsylvania State University agricultural marketing educator
John Berry, these dimensions are activities, such as order processing and billing;
performance indicators, such as order-processing times; and a strategic focus on customer
service throughout the company.
● Design a website for your business. If you sell packaged items, such as seeds or
processed food items, consider adding e-commerce features to your website. The
convenience of online shopping could increase both sales and customer satisfaction.

When considering changes to ag retail, it's important to compare them to changes in retail outside
of ag.
Consider Walmart. By leveraging economies of scale and using data and automation to reduce
inefficiency in their supply chain, they reduced excess costs and maintained an appropriate level
of inventory.
The result: high quality and service, but at a low price.
Later Amazon changed the game once more, moving nearly all consumers into an e-Commerce
environment, making brick-and-mortar stores less relevant than ever before.
If you want your ag retail operation to remain successful in a shifting ag market, you must
employ the same principles that these companies did. Embrace change, and the successes the
come with successfully doing so. Here are some steps you can take to realize the full benefits of
modern retail practices and e-Commerce in agriculture.

SWOT Analysis

Strength
- Round the year availability of raw materials.
- Increasing acceptability of the people towards processed products
- Vast network of manufacturing facilities all over the country
- Vast domestic as well as international demand

Weakness
- High requirement of working capital
- Low availability of new reliable and better accuracy instruments and equipment
- Inadequate automation information management.
- Fluctuation in demand causes a huge loss.

Opportunity

- Large crop and material base in the country due to agro-ecological variability offers vast potential
for agro processing activities.
- Integration of developments in contemporary technologies such as electronics, material science,
computer, bio-technology etc. offer vast scope for rapid improvement and progress.

Threat

- Competition from global & domestic players

- Loss of trained manpower to other industries and other professions due to better working
conditions
- Harm to the raw material harvest due to ecological changes.
References

- https://www.investindia.gov.in/siru/indian-food-processing-sector-untapped-growth-opportunity
- http://ficci.in/Sedocument/20073/Food-Processing-Bottlenecks-study.pdf
- https://blog.farmmarketid.com/blog/e-commerce-in-agriculture
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