Food Processing Sector in India – Challenges & Opportunities

Priyanka Gupta Rahul Krishnan Rohit Batra RudraPratap Sadaf Irfan

The Indian Food Sector : Introduction
 India is one of the major food producers in the world.  The food sector contributes to about 28 % of India’s GDP.  In terms of world ranking, India stands :
 1st in the production of Cereals, Milk & Livestock population  2nd in producing Fruits & Vegetables  Ranks amongst the top 5 in producing Rice, Wheat,

Groundnuts, Tea, Coffee, Tobacco, Spices, Sugar & Oilseeds
 Total market for food products
 Of this, processed food

Rs. 2,500 Bn.
Rs. 1,400 Bn.

Food is the largest consumption category in India .

tobacco. groundnuts. sugar and oilseeds. .India has huge supply advantages due to diverse agroclimatic conditions and wide ranging raw material base. • 52% cultivable land compared to 11% world average • All 15 major climates in the world exist in India • Largest livestock population • Largest producer of milk • 46 out of 60 soil types exist in India • Largest producer cereals Significant Opportunity India as a global sourcing hub • 20 agri-climatic regions • Sunshine hours and day length are ideally suited for round the year cultivation • Second-largest fruit and vegetable producer • Among the top five producers worldwide of rice. tea. coffee. wheat. spices.

milling) high Level of Processing across Segments losses in Transport the initial parts of (e.g. excessive peeling. Diseases.g. spillage. technical deficiencies) Rich 2.Huge wastage across the supply chain leads to lower level of processing and hence low value addition. inefficient harvesting.g. Rodents etc)) Developi ng Countrie s– Pre-Processing Relatively (e. rotting in stores) stage Buffalo Meat 20% in the Wastage by Consumer food 60-75% in developed (e.g. washing) Marine 26% losses at a 60-70% in developed Marketing Poultry 6% later countries (e.g. overeating. Producer Consumer Field Losses (Pest.g. Philippines Fruits and (e. Processing & Packaging ries – High (e. SIWI Field . leakage) Segment India Other Countries the value chain Storage US A (65 %).2% (78%) Vegetables Count China (23)%. drying. food chain wastage) Milk 35% countries Britt-Louise Andersson. spoilage.

India’s Position in Global Trade • India has the second largest arable land of 161 million hectares and has the highest acreage under irrigation.4%. • However. India’s share in the global exports has increased from 1. Agricultural & Processed food products Export Development Authority (APEDA) . • During the period 1980-2007. • Two nodal agencies.1% to just 1. Export of Processed Food and Beverages is growing faster than the overall Food and Beverages. the majority of the increase happening in this decade.

low cost of technology and rise in commodity branding has resulted in a change in the Indian food industry.Major Food Processing Companies in India Entry of multinationals. .

Major Players in Milk Products .

Major Players in Fruits and Vegetable Processing .

Major Players in Rice-Most Processed grain .

government and institutions Taxation in line with other nations Streamlining of food laws .Major Challenges for the Indian Food Processing Industry are:  Consumer education on nutritional facts of        processed foods Low price-elasticity for processed food products Need for distribution network and cold chain Backward-forward integration from farm to consumers Development of marketing channels Development of linkages between industry.

Productivity Issues India's overall agriculture productivity is still low .Some of the Challenges in the Sector: 1.

Convergence of existing technologies to match the need 3. Refinement of technologies. Ensuring timely availability of inputs . extension. Generation of need-based viable technologies using the holistic farming system approach 4. if necessary 7.Challenge 2: R&D Commodity-centric R&D Lack of a holistic approach involving a matrix of farm enterprises Compartmentalization of R&D agencies Poor validation and feedback mechanisms Lack of effective bilateral flow of information amongst research. and implementation departments Lack of large-scale on-farm validation of techniques and feedback thereon. On-farm assessment and evaluation 5. Feedback on the technologies 6. Problem identification and prioritization 2. leading to practically no scope for enhancement A seven-step mechanism is required to set-up a research-development-technology transfer continuum involving all stakeholders 1.

storage and safe transportation • .Challenge 3: Human Resource Development The industry is in dire need of highly skilled/trained manpower across different levels to handle various operations Emphasize food safety in storage conditions Training in Warehousing and Distribution • • • Managerial and Operational level HRD Industry level Regulatory and trade issues Food production • Warehousing & Distribution Platform to make policy decisions Inclusion in academic curriculum • Enforcement • • Food safety awareness Auditing and inspection skills Process development • • Institutional Development Focus on packaging techniques.

Challenge 4: Supply Chain Hindrances Necessity for a Strategic focus on Supply Chain in FPI Seasonality Seasonal production Vs Year-round Processing Operations Perishability Higher persishability of raw materials Variability Variable quality of raw materials due to cyclical variations and changing weather conditions  This situation discourages processing units to reach optimum size and achieve economies of scale.  Additionally. . lack of consistent quality hinders small scale units to build brand equity for themselves in international and domestic markets.

Challenge 5: Low Adherence to Quality Standards Increasing need for food processors to adhere to quality standards for both domestic as well export market Increasing GlobalisationStringent Safety Norms Rising Customer awareness on Quality and Health • Lack of requisite controls across the agri-value chain-from farm inputs to storage of produce to food processing techniques • Poor compliance to requisite food standards in export countries • Absence of basic standardization and certification infrastructure .

players should consider the constraints as opportunities waiting to be exploited and make investments for the overall growth of the industry. .Opportunities  Food Processing sector has strong synergies with the inclusive growth mandate of the government and also provides a platform to significantly transform the face of rural India. A developed Food Processing sector will help overcome the biggest challenges in front of India: • Low farmer income and high subsidies • High wastage along the value chain • Poor hygiene and safety standards Given the huge potential opportunity.

Opportunities High domestic demand and supportive policy provides significant opportunities across the Food Processing value chain Policy Support Farm Inputs Farming M arketing/ Aggregator Processing Logistics (Food) Retail/ Food Services Consumer Product Design Distribution Financial & Business Services Transport Services/ Infrastructure Quality Control M arket Intelligence M arketing Mega Food Parks Key Opportunities Integrated Cold Chain Backward and Forward Integration Food Safety Management Systems Training Facilities B2B Sales Quality Control Labs Joint Research Facilities Customised Farm Equipment .

data integration. Blue-Star and Kirloskar Pneumatic are some of the cold storage players and equipments  Supply chain: An efficient supply chain not only brings down the price of the end product but also eliminates intermediaries by connecting farmers directly to the super stores. FDI to the extent of 100% is allowed in the sector. information sharing will enable it to become mature and efficient.7 billion and is expected to grow at 20-25% annually. With the rising focus on horticulture. supply-demand matching. increasing corporate participation and advent of food parks and agri export zones is likely to result in significant restructuring of cold storage infrastructure with an estimated investment of US $8-10 billion.2-2. It has thus become an important aspect of organised retail setup. Sophisticated applications such as demand forecasting. financial flow management. The size of cold chain industry is estimated to be around US $2.5 mt is less than 15% of the annual horticulture production.Attractive areas for investments  Cold chain: The estimated cold-storage capacity at 19. . Voltas. The food supply chain in India is highly fragmented with numerous intermediaries and lack of economies of scale.

freshness and hygiene remains a key factor in determining buying by consumers. a number of new technologies have emerged both in processing and packaging. Branded foods market size is growing at 15-20%. However.  Food retail Food and groceries form major portion (75%) of the retail pie. it has the lowest level of penetration of 1% in organized retail. Players have outlined major expansion plans recognizing the opportunity . have led to increased adherence of safety norms and regulations. In recent times. which have made an impact on the shelf life of food products. Food safety management systems The tightening of restrictions and the introduction of the Sanitary and Phytosanitary Agreement by global industry bodies like the World Health Organisation (WHO).  Machinery In packaging. Indian companies will have to strictly adhere to international food safety standards in order to gain a larger share of world trade.

 Value addition to increase from 20 % to 35%  Share in global food trade to increase from 1.5 % to 3% .Vision FPI Vision 2015 adopted by the Ministry of Food Processing envisages  Trebling the size of the processed food sector  Increasing level of processing of perishables from 6 % to 20 %.

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