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Value added products in Indian bakery industry
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Friday, 13 August, 2021, 12 : 00 PM [IST]
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Sagar Neve
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The bakery industry in India is the largest of the food processing segments with an estimated annual turnover of about $7.60 billion in 2020.
The growth and spread of the bakery market is largely driven by a thriving biscuits and cookies industry. It accounts for nearly 72% of the sales in the Indian bakery market. The penetration of cookies and biscuits in both the urban and the rural market is increasing owing to their affordable price and ready to eat nature.
In addition to this, the growth of the fast food chains in recent years has further boosted the demand for breads as they are used for sandwiches, burgers, snacks. Introduction of value added bakery products too has expanded its market base.
India is the second largest producer of biscuits in the world. However, it is the world's largest biscuit consuming nation with an estimated turnover of $ 4.65 billion in 2020. Bread and biscuits form the major baked foods accounting for over four-fifths of total bakery products produced in the country. India enjoys a comparative advantage in manufacturing, with an abundant supply of primary ingredients and cheap workforce, which support the growth of the industry.
The cake market is forecasted to reach $ 882.24 million by 2024 growing at an annual compound rate of 12.5% during 2019 to 2024. As the consumption of cakes is gaining market traction, owing to consumer’s changing perceptions, as well as their convenience and health attributes, the demand for on-the-go cake products, which are baked off or made at the convenience of the consumer is rising sharply.
Growth trend and future potential
The bakery industry is experiencing robust growth of over 9%. It's a huge industry employing a large number of people. In fact with over a million unorganised small scale bakeries and more than 2000 organised or semi organised bakeries, it is the largest of all the segments of India's food processing industry. A report by the IMARC Group, ‘Indian Bakery Market: Industry Trends, Share, Size, Growth, Opportunity and Forecast 2020-2025’, the Indian bakery market was worth $ 7.22 billion in 2018. The market value is projected to reach a value of $13.3 billion by 2025, expanding at an annual compound rate of 9.1% during the period. The organic bakery products, due to their high nutrient value and affordability, have now become an item of huge consumption which has also shown a strong demand growth for bakery products in India.
A large part of this market is accounted for by bread and biscuits which are items of mass consumption. Major players in this sector, like Parle, Britannia and ITC Foods, have captured the markets to a great extent, with Britannia holding the leadership position. In terms of value, Britannia and Parle account for more than a third of the total volume of branded biscuits marketed in India.
Organised bakeries in India are utilising social media to provide targeted and cost-effective marketing. The small local bakery cafes are eschewing traditional marketing to rely on word-of-mouth recommendations and social media engagement. Tapping into the artisanal market, smaller bakeries can concentrate on quality over quantity, while larger Indian chains such as Barista and Mad Over Donuts rely on creating larger quantities but with strong branding and associated trust.
The rising trend of “natural nutrition”, “healthy living” and “organic products” has significantly raised the consumers’ demand on whole wheat, light, natural and additive-free products. With the changing consumer preferences and health consciousness, the bakery industry is discovering new dimensions. One can have now multigrain bread, brown bread, sweet bread or even gluten-free bread of one’s choice. And it is not only breads which have become healthier. The same can be said of biscuits, cakes and pastries.
Another trend that has emerged in recent years is a preference for homemade items. The pure variety of homemade chocolates that becomes available during festivals points towards the growing demand for such items in the country.
Challenges faced by the industry
The growth of an industry also brings in its own challenges and the most important of them is to expand production capacity to meet the new age demands. For example, to meet the demand for healthier food, bakery store or shop need to invest in making the facilities more hygienic and also hiring new people with knowledge of such products.
Innovating new products is another big challenge for industry in view of increasing competition in the market. There is also a need to increase awareness about the digital technologies and convenience of social media platforms that can help bakeries in the unorganised sector reach a wider market. Currently, the organised bakery segment constitutes about 62%, whereas the rest 38% belongs to the unorganised bakery segment in the country.
With the arrival of multinational companies who are selling pizzas and burgers, consumers' tastes are also changing. Many local and international manufacturers have occupied the market, and competition is intensifying year by year. The states such as Delhi, Maharashtra, West Bengal, Karnataka, Tamil Nadu, Kerala, Andhra Pradesh and Telangana witnessed remarkable growth with the rise in local and global players.
The bakery industry has also been experiencing certain administrative challenges. The bakers have to face fluctuating government regulations, demand-supply chain, and increase in price of few raw ingredients like refined flour, chief ingredient of almost all bakery products.
Impact of Covid-19 on bakery industry
Unlike most industries, the bakery industry seems to have gained from the Covid-19 pandemic. The pandemic led to a rise in demand for healthy and functional bakery items like those which consist of multigrains, nuts and other healthy ingredients. Consumers are purchasing a variety of bakery products that are high on the health quotient, as it has been seen that people suffering from lifestyle diseases such as diabetes, high blood pressure and obesity are more prone to the deadly infection.
According to a research by Mintel, almost three out of four Indians have put healthy eating as a higher priority. Accordingly the consumption pattern of bread saw a major shift from white breads towards more multigrain, wholegrain, and specialty, ethnic and seeded breads. This was all due to the consumer’s desire for nutritious and healthier products.
At the other end, the pandemic has paved the way for a clean and hygienic environment inside the factories, too. Proper maintenance of the machines and hygiene control are important factors in the production of bakery products.
(The author is owner of Mondo Bakes)
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