The Indian food processing industry was valued at Rs. 5060 billion in 2005, a growth of 10% over the previous year. The industry consists of segments like processed fruits and vegetables, cereal based products, dairy products, meat, poultry and fishery products, beverages and confectionary. The export of processed fruits and vegetables was to the tune of INR276.27 billion in 2005. India is the largest milk producer in the world with approximately 91m tonnes being produced; however almost 64% of the produced milk is consumed unprocessed. The meat production of India has grown by 3.37% during 2000-2005.
In addition, the Indian food processing industry is becoming an attractive FDI destination; it attracted around INR45.19 billion FDI during 1991-2005 which is 3.3% of total FDI inflow in India, and ranked as the 7th sector attracting largest FDI in India. Peculiarly, the unorganized sector dominates the industry. An estimated 75% of the sectoral contribution comes from the unorganised sector and the rest from the organised, big players.
This Industry Insight on Food processing in India gives an overview of the industry and its segments in terms of size and growth over the last five years. This report discuss in detail each segment while giving information on their products, exports, imports and outlook for the segment. Recent trends and developments in the industry are also covered. This report analyses the factors that drive the growth of the industry, issues and challenges faced by the industry and the critical factors that will determine the success of companies in the future.
Ten major companies have been profiled with informations on their business and financial profile, products, manufacturing facilities and R&D. Regulations governing the processed food have been covered and information on the key developments in the regulatory environment are also provided. The report ends with the outlook for the food processing industry for coming years.
The report will be useful to the food processing companies (Indian and overseas) in understanding the Indian food processing industry in a better way. It will also be useful to the government food processing departments and agencies working in the field to get an insight of the industry. The educational institutes may also use this information for their academic purpose to have in-depth industry knowledge. Other research bodies, industry experts, associations & consortia of the industry and consulting organizations may also benefit through the information given in the report.
The report has been prepared from numerous sources which include: Publication of the industry, industry interactions, websites, and proprietary and subscribed databases. Due diligence and adequate care has been taken in the report to check and validate the s used.
Since withdrawal of excise duty on fruit and vegetable products there has been significant rise in the growth rate of the industry. The sector has registered a production growth of 13% overall, exports have been increasing continuously and pure at US$ 250.million. The total investment approved o far exceeds Rs.4309 crores [US$ 1.19 billion], out of which foreign is Rs 788 crores [US $ 218.8 million]. The county's share in the world trade of processed fruits is still less than one percent. As such, abundant opportunities are there in the expanding domestic market and export arena. An increasing acceptance of new products with market development efforts is seen. Changes in export- import policies and exchange rate adjustments have helped improving the export potential. There is a good international demand for certain fresh fruits as well as processed fruits products. Fresh fruits identified as having good export potential are: Mango, Lichee and exotics like passion fruit, grown in this area.
Overview and Trends
1.1 Food Industry
According to a study by McKinsey & Company, the Indian food market is poised to grow from US$ 155 billion in 2005 to US$ 310 billion by 2015 and US$ 344 billion in 2025 - at an approximate compounded annual growth rate of 4.1%. The development of the food industry in India stems from the consistently increasing agricultural output. With the second largest global arable land area, India is one of the key food producing countries in the world, second only to China.
• Currently, India ranks second in fruit production and third in vegetable production in the world.
• In 2007-08, food grain production in India had registered a 4.6% growth with 227.32 million tons as against 217.28 million tons in 2006-07, according to estimates by the Ministry of Agriculture.
• The output of coarse cereals in 2007-08 was 39.67 million tons, 17% higher than the 33.92 million tons in the previous fiscal.
• The total output of oilseeds is estimated to have risen to a record 28.2 million tons, about 16% higher than the 24.29 million tons in 2006-07.
• The production of pulses has risen to 15.19 million tons, registering a year-on-year growth of 7% and touching a new high.
According to estimates by the agri-trade promotion body, the Agricultural and Processed Food Products Export Development Authority (APEDA), India's exports of agricultural and processed food products in 2007-08 has grown by 38%, which, in absolute value terms, is US$ 6.59 billion, against US$ 4.79 billion in 2006-07.
1.2 Food Processing
India's food processing industry is one of the largest industries in the country - it is ranked fifth in terms of production, consumption, export and expected growth. India is one of the world's major food producers but accounts for only 1.7% (valued at US$ 7.5 billion) of world trade in this sector - this share is slated to increase to 3% (US$ 20 billion) by 2015.
The Indian food processing industry is estimated at US$ 70 billion. According to the Ministry of Food Processing, this industry contributed 9% to India's GDP and had a share of 6% in the total industrial production. The industry employs 1.6 million workers directly.
Sustained by high agricultural output, international demand and a strong domestic market, the Indian food industry offers ample scope for large investments in processing technologies, skills and equipment, packaging, refrigeration of frozen food and thermo processing.
Currently, only 6% of the country's fruit and vegetable produce is processed and India's share of the global market stands close to a dismal 0.03%. While the size of the global processed-food market is estimated at US$ 3.2 trillion and nearly 80% of agricultural products in the developed countries get processed and packaged (as suggested by 'India Food Report 2008', released at the Food Forum India, in Mumbai), there is huge scope for export-led growth in this particular sector. Recognizing this, in the next few years India aims at raising the share of processed food to 20% in comparison to total agri-produce, on the one hand, and enhancing export of these items to 3% on the other.
The domestic food market, according to the 'India Food Report 2008' is estimated at over US$ 182 billion ac-counting for about 2/3rd of the total Indian retail market.
The steady economic growth is leading to a positive change in the lifestyle of the consumers and they are willing to pay a premium for both value-added private and branded products.
Interestingly, the fact is that while the country's GDP growth rate has increased from 3.5% in 2002-03 to 9% in 2006-07, the food processing sector has grown from 7% to 13.1% during the same period. However, market experts are of the opinion that in future, the food products is going to increasingly contribute towards India's GDP growth.
India's Competitive Advantages in Food Processing
Share in Global Production
Arable Land (million hectares)
Irrigated Land (million hectares)
Coast Line (km)
Major Food Crops (MT)
Fruits (metric tonnes)
Vegetables (metric tonnes)
Rice/Paddy (metric tonnes)
Wheat (metric tonnes)
Milk (metric tonnes)
Sugarcane (metric tonnes)
Pulses (metric tonnes)
Tea (metric tonnes)
Edible Oilseed (metric tonnes)
Food products like packaged fruit and vegetables, milk, milled flour and rice, tea, spices, etc. constitutes around 60% of processed foods. Processed food industry has highly fragmented structure that includes thousands of rice-mills and hullers, and oil-seed mills, several thousands of bakeries, traditional food units and fruits, vegetable and spice processing units in the unorganized sector. In comparison, the organized sector is relatively small, with around 520 flour mills, 570 fish processing units, 5293 fruit and vegetable processing units, 171 meat processing units and numerous dairy processing units at state and district levels.
Fruit and Vegetables
Meat and Poultry Processing
Growth rate of the market
Raw fruit and
vegetables, fruit pulps, canned fruits and pickles
added milk products like butter, cheese and ghee
Cattle, buffalo and poultry
Marine fisheries, frozen products and
minced fish products
Fruit-based drinks and carbonated drinks
Extent of processing
Share of organized sector
Milk and milk products contribute to 18% of the country's total expenditure on food. The Traditional dairy products contribute for 50% of the total milk produced. The market for dairy products is expected to grow at 15-20% over the next three-four years.
• Ghee is the most widely marketed product with a nation-wide penetration of 24.1%. It is estimated to be growing at a rate of 8% per annum.
• The dairy whitener market is divided into three main products like sweetened milk powders, condensed milk and creamers. Its market size is estimated at US$ 450 million for the year 2005-06.
• The cheese market is estimated at US$ 2.49 million for the year 2005-06 (54000 tonnes in terms of volume), growing at a rate of nearly 10% per annum. The organized cheese market is dominated by processed cheese which accounts for 74% market share of the entire organized cheese market.
• The ice-cream market in India is estimated at US$ 226 million in the year 2005-06, the organized market is estimated at US$ 158.2 billion. This is currently growing at 20% per annum.
Probiotic dairy products - containing live organisms building immunity and helping in digestion are an emerging category in the Indian food market. Along with domestic dairy majors like, Mother Dairy and Mother Amul (GCMMF) and global players like Nestle have made huge investments to capitalize the potential of this particular segment. The latest entry is Yakult Danone with its investment worth US$ 28.3 million and an additional US$ 20.8 million.
According to the recent report on 'Indian Functional Foods and Beverage Markets' by Frost & Sullivan, the market of neutraceuticals and probiotic dairy products earned revenues of over US$ 185 million in the year 2007 and is projected to touch an estimated US$ 1.16 billion in 2012. Although the segment is currently in its introduction stage, it is poised for an upswing riding piggy-back on a healthy domestic economy and awareness of health products, thus giving a boost to this segment.
2.2.2 Fruits and Vegetables
India produces the wide range of fruits and vegetables in the entire world. It is the second largest vegetable and third largest fruit producer accounting for 8.5% of the world's food and vegetable production. The share of organized sector in fruit processing is estimated to be nearly 49%.
Fruit production in India has registered a growth of 3.9% during the period of 2000-05 whereas the fruit processing sector grew faster at 20% over the same period. The total area under fruit cultivation is estimated to be 4.18 million hectares.
The total area under vegetable cultivation is estimated to be 7.59 million hectares. Less than 2% of the total vegetables produced in the country are commercially processed. Whereas 70% in Brazil and 65% in USA.
India's installed capacity for fruits and vegetable processing nearly doubled during 1990s, from 1.1 million tonnes in 1993 to 2.33 million tonnes in 2004. About 20% of processed fruits and vegetables are exported. Major products exported include different fruit pulps, pickles and chutneys, ketchups, canned foods, concentrated pulps and juices and vegetables.
Fruit exports have registered a growth of 16% in volume and 25% in value terms in the year 2005-06. Mango and mango based products alone constitute 50% of these total exports.
The packaged foods segment in India registered a growth of 8% in 2005-06. Noodles/vermicelli is the fastest growing category in this segment with a CAGR at 15%. The market for branded noodles is estimated at 230 million servings per year.
The soups market is still small and nascent in India and is approximately US$ 14 million in value. The market for culinary products is estimated at US$ 475'000 and estimated to grow at 18% to 20% per annum. Products like tomato ketchup and jams currently have low penetration levels, but are growing rapidly. Ketchups, for ex-ample, have a penetration of just 3% in India; however, this category is estimated to be growing at 20% per annum.
The beverages market primarily consists of non-alcoholic beverages which can be broadly classified into carbonated drinks, non-carbonated drinks and hot beverages. According to industry experts, the market for carbonated drinks in India is worth US$ 1.8 billion while the juice and juice-based drinks market accounts for US$ 300.67 million, of the approximately US$ 2.38 billion packaged beverages category. Growing at a rate of 25% per cent, the fruit-drinks category is one of the fastest growing in the beverages market.
The US$ 1.80 billion carbonated drinks category is expected to face the heat of the rising competition from categories falling under the health umbrella, i.e. juice and juice-based drinks, energy and sports drinks, malted beverages, probiotic drinks and bottled water. They are considered a socially acceptable alternative to alcoholic beverages.
At US$ 300.67 million, the juice and juice drink category is among the fastest growing segments while fruit drinks as a category is growing at 18% - 20%, carbonated soft drinks are growing at 6% - 8% driven by the positive changes in India's consumer profile.
Hot beverages include health drinks such as white beverages (Horlicks, Bournvita, etc) and brown beverages such as tea/coffee as well as branded drinks (Boost). The total size of this market is estimated at US$ 333 million by value and 85'000 tonnes by volume. White beverages account for 65% of the market and brown beverages constitute the remaining 35%.
India is the largest producer of tea in the world accounting for 28% of the total global production, at 857 million kgs. Tea production in India has been growing at 1.2% per annum and India is the fourth largest exporter of tea in the world with estimated exports of US$ 5 million in 2002-03. India is also the fifth largest producer of coffee accounting for 4% of the total production in the world. Nearly 75% of India's production is ex-ported and coffee exports stood at US$ 5.2 million in 2005-06.
Approaching the milestone of one million cases a year, the Indian wine market has also recorded an impressive growth rate. An impressive 59.84% growth of wine production in Maharashtra bears testimony to the fact.
Global wine majors have already set up shop in India to tap the vast potential. However, domestic companies control 80% of the market and are way ahead of the MNCs, producing nearly 800'000 cases of wine in a year. And, while Bangalore, Chandigarh, Mumbai are reporting high growth in consumption, Nashik, the capital of Indian wines, registered a 100% rise.
Out of the total consumption of grape wine in India, around 80% wine consumption is from the major cities. Although alcohol consumption level in India is lower than the leading countries of the world, such as, Italy, France, USA, the future growth potential is immense.
Organic Food - An Emerging Trend
While organic food and health food are emerging as a global trend in the food and food processing sector, India remains a traditional grower and consumer of organic food. The global retail market for organic food has grown to US$ 100 billion from US$ 35 billion over the last three years. The exports of organic food from India have grown to US$ 65 million over the past one year from US$ 21.6 million two years ago.
Some players, like Navdanya, organically cultivates crops like jowar, bajra, millet, in its 21 acre farm in Dehradun and sells it from its retail outlets in Delhi and Mumbai. The number of such growers has been rising in the Dehradun valley and Bundelkhand. APEDA in association with the Ministry of Agriculture has taken an initiative to convert 20'000 farmers and a total area of 75'000 hectares to organic farming over the next three years.
Attractiveness of Certain Segments in Food Processing
India presents several potential growth areas in the food processing sector. Based on potential growth opportunities and the enabling environment in terms of policy support, three key segments have been identified that indicate high attractiveness.
3.1 Mass Market Basic Foods
3.1.1 Fruits and Vegetables Segment
Several factors make the fruits and vegetables sector in India attractive from a market size and growth perspective. As mentioned, India is a significant producer of fruits in the world, contributing to 10% of global production. The fruits and vegetables sector is growing rapidly at a healthy rate of 20% per annum. It is, however, nascent with penetration level of about 10%. These factors indicate the high growth potential in the sector. This is also highly unorganized at present, with the unorganized sector at 48% share, indicating the scope for organized players to make an impact.
Several policy measures have been undertaken by the Government to create the right stimulus for growth in this sector. Some of the key initiatives include:
• Foreign equity participation up to 51% allowed. Initiatives like post-harvest management, logistics given priority in attracting FDI
• Complete exemption from excise duty
• Income tax rebate of nearly 100% of profits for new industries in fruits and vegetables sector
• Many fruits and vegetables processing industries eligible for automatic approval of technology up gradation
The Government has also taken up several initiatives to encourage investment and growth in this segment. These include:
• Foreign Equity participation allowed in the fisheries sector subject to approval. Foreign investment proposals on nearly US$ 210 million have been approved in this sector
• Financial assistance given for setting up of processing infrastructure like IQF plants, refrigerating transport equipment, freezing plants
• Excise duty on meat poultry and fisheries reduced from 16% to 8%.
The Government of India has declared food processing a priority by introducing a number of progressive measures to set up and modernize food processing units, create infrastructure, support research and development and human resource development.
• The National Policy aims to increase the level of food processing from 2% to 10% in 2010 and to 25% in 2025
• The level of institutional credit to be provided by banks and financial institutions has been increased from US$ 17.41 billion during 2003-04 to about US$ 23.76 billion in 2005-06
• Full repatriation of profits and capital is allowed
• Automatic approvals for foreign investment up to 100%, except in few cases, and also technology transfer
• The government has decided to give a boost to research and development in this sector with its decision to set up the National Institute for Food Technology and Management in collaboration with Cornell University of the US.
• Zero import duty on capital goods and raw material for 100 per cent export-oriented units. Custom duty on packaging machines reduced. Central excise duty on meat, poultry and fish reduced to 8%
• Income tax rebate allowed (100% of profits for 5 years and 25% of profits for the next 5 years) for new industries in fruits and vegetables besides institutional and credit support.
• The government would also set up abattoirs and dairies and will give a grant of US$ 3.1 million per abattoir and US$ 2.08 million per dairy.
On the Government side, there is also a renewed enthusiasm to popularize organic food cultivation since ex-ports of organic food have grown to US$ 75.16 million over the past one year from US$ 25.05 million just two years ago.
In a bid to boost the food sector, the Government is also developing 30 mega food parks which would cover the entire food processing cycle 'from the farm gate to the retail outlet'. While the Government would provide a grant of US$ 12.53 million for each one, private investment to the tune of US$ 75.21 million would be encouraged in these parks. The first five such parks would be set up in Punjab, Maharashtra, Andhra Pradesh, Jharkhand and the North-East region in the first phases.
Processing of Fruits and Vegetables
PROCESSED FRUITS AND VEGETABLES EXPORTS
Qty in MT, Value in Lakhs
OTHER PROCESSED FRUITS AND VEGETABLES
Joint effort of R&D institutions, farmers, government agencies and the trade has resulted in India emerging as a major producer of fruits and vegetables in the world. In the year 2000-2001, the country produced about 45 millions tonnes of fruits and 80 millions tonnes of vegetables. It was next to China in production of vegetables and topped in production of fruits. However, the growth in post harvest sector has not kept pace with the production. Even during the year 2000-2001, there
were only 6,000 fruits and vegetable units in the country that had grown from a of about 1,000 during 1950-51. Less than one per cent of the total produce was processed, though the installed capacity of the processing industry has grown steadily from 0.27 Mt in 1980 to about 3 Mt in 2000-2001. Significant developments in technology include better understanding of the process of ripening of fruits, optimum harvesting time, pre-cooling of freshly harvested produce, cold storing of the raw fruits and vegetables, sorting, cleaning, waxing, packaging technology for fruits. At CFTRI, DFRL, IIHR, Bangalore; IARI, New Delhi; GBPUA&T, Pantnagar; IIVR, Varanasi and HPKV, Palampur; a number of technologies have been developed. Most significant work has been recorded in the technology for ripening of the fruits under controlled conditions. Production of juices and value-added products including jams, jellies, pickles, canned products etc. has become a commercial success. The industry using indigenous technology includes units engaged in juice extraction, concentration of juices, canning and production of several of the products like jams, jellies, canned fruits, dried vegetables etc. Technology is still being imported for establishment
of large scale exported oriented units for production of items like banana paste, concentrates of various fruit juices, sorting, cleaning, washing, waxing and packaging of raw fruits and vegetables
By the year 1998-99, share of different products in the total processed fruits and vegetables was; pulp and juice 27%, jams and jellies 10%, pickles 12%, readyto-serve beverages 13%, syrups 8%, squashes 4%, tomato products 4%, by canned vegetables 4% and other products 18%. The industry has been facing problems of low capacity utilization, technological obsolescence and marketing. It has to work under the constraints of high fluctuations in raw material quality and fluctuating market price, poor technology for handling and storage, inadequate R&D support for product development, high cost of energy and uncertainty in availability of adequate quantity for processing purposes, inadequate and expensive cold chain facilities and varying requirement of processing conditions from one material to another. Future R&D has to focus on the issues of economically producing value-added products and product diversification, besides the issues mentioned above.
Fruits are an important source of energy for human-beings but they are perishable items. Hence since many years various products are made from juice of fruits so that they can be consumed during off season as well. Products like jam, jelly, squash etc. are made from fruits since long. With the advent of technology and preservatives, shelf life of such products has gone up and they can be preserved for many months with proper packing. The proposed location of this activity could be many centers in India as number of tropical fruits are grown in the country. However, this note deals with a project in Manipur as several fruits like pineapples, oranges, lemons, peaches etc. are cultivated in large quantities. Hence, it is suggested to undertake fruit processing activity.
Policies and Regulations:
Though no industrial license is required for setting up Processed food industries, setting up 100% EOUs requires specific Government approvals.
This sector is regulated by the fruit Products Order, 1955 (FPO), issued under the Essential Commodities Act. The ministry of food processing Industries administers this order. The order lays down products specifications and quality control requirements on production-hygiene, relabeling and marketing of processed food products.
All processing units are required to obtain a license under this order. Periodic inspection of units is also carried out. In addition, consignments of fruit products intended for exports are subject to pre-shipment inspection under FPO. Many industries are eligible for automatic approval of foreign technology agreement and up to 51% foreign equity participation.
FPO Application form format:
THE FIRST SCHEDULE
Application for License under the Fruit Products Order, 1955
Full name and full address of the applicant/s.
1(a) Name of the managing director/ directors, proprietors, partners, etc.
Address of the factory/firm/registered office.
2 (a) Address of go down/store of finished goods.
Description of the fruit products which the applicant wants to manufacture or relabel. *
Licence requirement period _______________________________________
Plan of the factory and list of equipments to be installed in the factory. ___________________________________
(a) Whether any power will be used in manufacture of fruit products. If so, state the exact horse power will be used ______________________________________________________
(b) Installed capacity per 8 hour shift* ________________________________________
License fee paid during the previous year ______________________________________
Total value of Fruit Product Manufactured/relabeled* during the previous year
I/We hereby undertake to comply with all the provisions of the fruit products of the Fruit Products Order, 1955.
I/We have forwarded a sum of Rupees ____________ in respect of the license fee due according to the provisions of Fruit Products Order, 1955.
Signature(s) of the applicant (s)
* Strike out whichever is not applicable.
The manufacturing process for making fruit juice and squash is standardized and not very complicated or time consuming. CFTRI, Mysore, has successfully developed this technology. In the first process, fully ripe and matured fruits are washed, cleaned, graded and then peeled. Thereafter juice is extracted from fruits and then it is filtered to remove seeds, fibers etc. This juice is then processed, sterilized and bottled after adding preservatives. In case of squash, syrup of sugar along with preservatives is added to juice and this mixture is stirred till uniform solution is formed and then it is bottled. As regards oranges, recovery of juice is substantial and weight and process loss is 10%. But in case of pineapple, wastages are around 50%. Process loss of 5-6% is compensated by addition of sugar syrup. The process flow chart is as under:
5.1 Land and Building
Total requirement of built-up area shall be around 150 sq.mtrs and hence land measuring about 300 sq.mtrs will be adequate. The built-up area is adequate to have production, storage and packing facilities. Cost of land is estimated to be Rs. 90,000/- whereas that of civil work Rs.3,75,000/-.FPO provisions about layout of factory building must be adhered to.
5.2 Plant and Machinery
In view of size of the market and to ensure economic viability of the project, rated production capacity of 150 tonnes per year with 2 shift working and 300 working days is advisable. To install this capacity following machines shall be required:
The all-important raw material will be fresh, ripe and matured oranges and pineapples. North-East states including Manipur are famous for horticulture products. The highest fruit crop of Manipur is pineapple with production of more than 70,000 tonnes whereas that of oranges it is about 4500 tonnes. Thus, availability of few hundred tons will not pose any problems. Other items like sugar, salt, additives and preservatives etc. shall be available locally. Packing materials like food grade plastic or glass bottles, labels, corrugated boxes, BOPP tape etc. shall be required for which prior arrangement is advisable.
As already mentioned at the beginning of this report, India is one of the world's major food producers but ac-counts for about 1.7% of international food trade. This indicates vast scope for both foreign investors and ex-porters.
The Indian food industry is widely recognized as a "Sunrise Industry" in India having huge potential for uplifting agricultural economy, creation of large scale processed food manufacturing and food chain facilities, resultant generation of employment and export earnings. India has enormous growth potentials from its current status of being the world's second largest food producer to be a world's number one producer. The Indian food processing industry has the highest number of plants approved by the US Food and Drug Administration (FDA) outside the USA.
India requires an investment of US$ 28 billion to bring the level of processing to 10% - 12% by 2012. It is expected that in future bulk investments and modern food processing technologies are going to turn the fortune for Indian food processing industry. Some of the most promising sub-sectors in the Indian food industry, as identified by the Ministry of Food Processing, include:
• Soft-drink bottling
• Confectionery manufacture
• Fishing and aquaculture
• Grain-milling and grain-based products
• Meat and poultry processing
• Alcoholic beverages
• Milk processing
• Tomato paste
• Ready-to-eat breakfast cereals
• Food additives, flavors etc.
• Mega food parks
• Agri-infrastructure and supply chain integration
• Logistics and cold chain infrastructure
• Fruit and vegetable products
• Animal products, meat and dairy
• Wine and beer
• Packaging machinery
According to the estimates of the Ministry of Food Processing Industry, currently, the food processing sector contributes nine per cent of the GDP and there is immense scope for further growth. In a bid to give a boost to the sector, the government is considering a proposal to allow foreign direct investment (FDI) in the food retail sector. While 100% FDI is already allowed in food processing and 51% FDI in single-brand food retailing, the next step will be allowing FDI in select food items, fresh and processed fruit and vegetables, which may include retailing of farm and dairy produce, marine and poultry products. The initiative would underline inclusive growth in the food sector through marketing-driven farming, disciplined procuring from the farms, state of the art processing, and organized retailing.
Some of the main key drivers of the Indian food industry are:
• Food, beverages and tobacco industry dominates the Indian retail industry and is anticipated to grow at a CAGR of nearly 8% during 2008-2012.
• Soft drinks market is anticipated to grow at a CAGR of nearly 12% from 2008 to 2012, and major demand will be seen in health & energy drinks, bottled water and fruit juices.
• Snack food market is estimated to grow at an annual rate of 18% to 20% in coming few years, albeit from a small base of consumers.
• With growing health awareness and concern, the functional food & drinks market is set to grow rapidly in India.
• Changing lifestyle, coupled with growing middle class population and changing eating habits, is an-ticipated to fuel 7%-10% growth in the Indian food service sector annually.
• Low per capita consumption of alcoholic drinks makes the country highly lucrative to expand, with wine consumption projected to grow at a CAGR of nearly 23% in volume terms.
In combination with the potential boom in the organized re-tailing sector, there is bound to be an increase in private labels, also in the food sector, which will provide a further thrust to the Indian food and food processing industries.
Swiss companies, active in the food and food processing, are well advised to seriously study the vast potential on offer and plan a systematic entry in the Indian market. As a first step, they are advised to promote - to test the market - their products through importers/distributors/agents. In this connection, they can utilize the ser-vices of Osec and the Swiss Business Hub India who have experience in conducting qualified business partner searches working through their excellent network of specialized external consultants.
Additionally, Swiss companies also have the possibility to gain firsthand experience of the Indian food and food processing sector by participating at the official Swiss Pavilion at the bi-annually held Foodtec exhibiting in India. Osec collaborates closely with Kölnmesse in organizing the Swiss pavilion.
To enter in any industry, it is important to know about the industry background. Hence, it becomes very crucial to meet different people who are already in that industry. To take their views and opinions regarding the growth and current trends in the industry, a primary research was conducted of 10 experts from food processing industry. There were three categories of respondents who spent Less than 5 years, 5-10 years and more than 10 years in the same industry. Respondents who spent less than 5 years are considered to be in learning phase. People who have spent more than 10 years are considered as experts who have knowledge for the industry for so long. In the survey conducted 3 respondents were highly experienced in the processed industry.
The processed food industry consists of several sub segments in it. Like Dairy, Poultry, Fisheries, Ready to eat food, Frozen foods etc. Before starting the venture it was essential to know which segment is in highest growth stage. According to the experts' opinion, both frozen foods and dairy segments are the fastest growing sub segments of processed foods. 4 of the respondents indicated highest growth in de hydrated vegetables-fruits and ready to eat vegetables segment. According to the further discussion regarding growth I came to know that the growth of a particular segment is based on the following factors:
1) Availability of raw material in India
2) Government initiatives
3) Availability of logistics and transportation
4) Adoption of technology
One interesting conclusion came out from the discussion was segments like ready to eat vegetables and frozen foods are growing because the migration of no. of Indian to foreign countries. Especially ready to eat foods like Indian vegetables, Parathas, Paste etc. are highly dependents on the above mentioned reason.
Merely 70% of Indian population is in the field of farming. Moreover, emergence of organic farming and increased significance of logistics business has flourished the fruits and vegetables segment. Moreover India's production of milk plays an important role in generating the maximum revenue.
Indian processed foods industry is one of the highest growing industries amongst all. The Ministry of Food Processing of India has already started taking initiatives for this industry. Lots of subsidies and subsidy loans are being provided on the establishment of new units. According to the experts, earlier look of the industry was not so lucrative but today's scenario of the industry has completely changed. These days processed foods industry is very attractive. 2 of the respondents justified the government initiatives very lucrative.
The reason behind this survey was to set up a new venture. Investment was one of the very important aspects. According to experts the bare minimum investment required was between 1 crore to 5 crores. Moreover lots subsidies are given by different government bodies to promote this industry.
Export procedures is one of the key processes in processed food business especially export units. Vey long and tedious procedures and lengthy procedures create a bottle neck. Most of the respondents' were quite satisfied the documents are to be prepared for exports. More over government procedures are also liberalized for this purpose. During the discussion list of some of the important documents came out which are the most essential like bills of landing and letter of credit.
Growth rate is the main indicator of performance of any industry. The lower growth rate defines the less attractiveness towards the industry whereas high growth rate defines the opportunities in that particular industry. The selection of the business was depending upon this result. Al most 80% of the respondents replied positively that the industry would grow at more than 80%. The reasons behind the growth of the industry are Government initiatives, globalization, more of foreign trade, emergence of logistics business.
I am a student of IIPM, Ahmedabad pursuing my post graduation in Business Management. As a fulfillment of my 6th Trimester, I am preparing a project report on “Venturing a Global Processed food enterprise”. I promise you for not disclosing the information shared by you.
Primary research on processed food industry:
1) For last how many years have you been in this industry?
A) Less than 5 years
B) 5-10 years
C) More than 10 years
2) Which sub segment of food processing industry do you expect to grow the most?
A) Fruits & Vegetables
E) Ready to eat
F) De hydrated vegetables & Fruits
G) Frozen foods
3) Which sub segment generates the maximum sales revenue amongst all?
H) Fruits & Vegetables
L) Ready to eat
M) De hydrated vegetables & Fruits
N) Frozen foods
4) Which country is the major importer of respective processed foods? ___________________
5) How do you justify the initiatives taken by government in favor of food processing industry?
A) Very Poor
6) At this point of time, according to you what is the minimum capital required to start a food processing company?
A) Less than 1 Crore
B) 1 crore to 5 crores
C) More than 5 crores
7) Please give rank to the followings in accordance to its significance in the cost structure?
A) Raw material procurement _________
B) Manufacturing _________
C) Administrative _________
D) Logistics & Distribution _________
E) Sales & Promotion _________
8) How do you justify the export procedure and documentation as a process?
A) Very tedious
D) Very easy
E) User friendly
9) How much do you expect the growth of the food processing industry will be?
A) Less than 5%
B) 5% to 10%
C) More than 10%
Your good name: __________________________________________
Company you belong to: ____________________________________
Thank you for your valuable time and knowledge sharing
After the results seen from market research and by collecting some secondary data from authentic sources, now it is time to start a global enterprise of food processing. Many important decisions are to be taken before staring a business like form of the organization, structure of the company, location of registered office and place of manufacturing unit. Land requirement, land location etc. Followings are key decisions to be taken.
The Scheme will provide 25% of the cost of plant & machinery and technical civil works subject to a maximum of Rs.50 lakhs in general areas and 33% up to Rs.75 lakh in difficult areas (Jammu & Kashmir, Himachal Pradesh, Uttarakhand, Sikkim, North-Eastern States, Andaman & Nicobar Islands, Lakshadweep and Integrated Tribal Development Project (ITDP) areas). Only new Plant & Machinery shall be eligible. Technical civil works include civil works for functional purposes and shall exclude boundary wall, office buildings, guest house, canteen and roads. An indicative list of
ineligible items of Technical Civil Works and Plant & Machinery, additional information required in case of applications for expansion/modernization of existing units and restrictions/in-eligibility of second grant in certain cases and definition of General and Difficult Areas are provided in Annexure-VI. The application should be made by the entrepreneur before commencement of commercial production.
The applicant while seeking financial assistance under the scheme will submit an application in duplicate to any branch of the bank/PLI of his choice, with the request for project appraisal and also for availing term loan. Applicant may also draw up the feasibility report with the assistance of a professional consultant and thereafter submit the same to the Bank for appraisal. The format of the application form and Acknowledgement to be given by the Banks/FIs are at Annexure-I and II respectively. The respective Bank may ask for any additional information, whenever required, for the purpose of appraisal of the project and also relating to the loan and grant component. (ii) The day any bank branch receives any application, it will get a
centrally allotted Computer No. to the applications through the e-portal and send the soft copy of one page summary sheet of the application details (as in Annexure-III) to the MoFPI the same day. (iii) After sanction of the assistance, the Banks/PLIs will
get an Agreement executed by the beneficiary in favour of the Government of India, which will, inter-alia, stipulate the terms and conditions under which financial assistance is to be provided to the beneficiary. It will also bind the beneficiary to allow inspection of the unit at any time by representatives of Banks/PLIs /MFPI, not to change the ownership or location of the unit in any manner without explicit written permission of the lending financial institution and refund the financial assistance to the Government in the event of violation of any of the terms and conditions of assistance or having obtained assistance by misrepresentation or furnishing false information, etc. The unit assisted is expected to function (at least) for a period of three years and the assistance shall also stand revoked if the Bank/PLI determines that the unit has not fulfilled the terms of the assistance. On revocation of assistance or for any reasons as above when assistance is revoked/ recalled/ assessed to have been ineligible, the unit shall be liable to refund the initial assistance along with interest at the Prime Lending Rate prevailing at the time of extension of assistance The Banks/PLI shall ensure that the grant is utilized for the purpose for which it is sanctioned. (iv) In the event of Bank/PLI going in for compromise/restructuring of their loan, they may do so without reference to the Government. In the case of banks
recovering their loan amounts, whether term loan or working capital, they shall make best endeavour to realize claims on behalf of Government in terms of the sub para above. The Banks/PLI shall refund to the Government the grant amount in proportion to their own dues as finally recovered from the defaulter.