Saturday, December 10, 2016
Packaged Food Industry in India - A Bright Road Ahead
Wednesday, 16 December, 2009, 08 : 00 AM [IST]
Increased consumer awareness and higher disposable income have been the engines driving the growth of the Indian packaged food industry. Growth of modern trade and convenience needs have further helped the growth of packaged foods. According to Datamonitor, the Indian packaged food industry is estimated to be approximately Rs.65,000 crore  and has been growing at an annual growth of higher than 8% over the past decade. Datamonitor expects the packaged food industry to grow at over 10% rate in the next 5 years.
Drivers of growth: Demand for the packaged food products in India has more than doubled since 2000. Some of the key drivers of this growth are:
Rising disposable income – The strong growth of the Indian economy has boosted individual disposable income levels. This has helped fuel the demand for packaged foods mainly in the urban centres.
Evolution of modern trade – The growth of modern trade has helped stimulate a revolution in the packaged food industry. The organised retail industry has seen rapid expansion across all formats such as supermarkets, hypermarkets, and convenience stores - together now garnering an increasingly sizeable chunk of the total packaged food market. In a few categories like frozen ready meals modern trade penetration has crossed 50% of total sales whereas in other categories the share for modern trade is growing rapidly.
Growing need for convenience and health – Cash rich and time poor consumers have been demanding more convenient and on-the-go food products to suit their busy lifestyles. Increased awareness and higher aspirations amongst Indian consumers have led to the increase in demand for healthier products.
Government initiatives: Under the new trade policy announced by the Indian government, there is an increased focus on agro based industries which have in turn triggered heightened activity in the packaged food industry. Some of the key initiatives which have been driving the growth of the industry include:
● Including food processing sector under priority lending sector
● Setting up of 10 mega food parks and a target of 30 mega food parks by 2015
● Tax rationalisation and exemption
Key sectors and leading players in the packaged food industry
Demand for packaged foods products in India remains need-based. Hence, products such as dairy and oil which form part of the daily staple dominate the total packaged food consumption.
Dairy products constitute about 35% of the total packaged food industry in India. India is the largest producer of dairy products in the world; however a large part of the produced milk and other dairy products remains unprocessed and used for self consumption for unorganised sector as raw milk. Groupe Danone has recently entered Indian dairy market which remains dominated by local cooperatives such as GCMMF. Among the multinationals, Nestle has a sizeable presence in the organised dairy market in India.
Strong demand of biscuit and other sweet snacks has helped make bakery & cereals the second most important packaged food category contributing 24% of the total packaged foods sales. Biscuits category is largely dominated by local players like Britannia and Parle. Breakfast cereals and energy bars have started appearing in the shopping basket of the Indian consumer and has been one of the fastest growing categories within the bakery & cereals market.
Key challenges: Despite the strong growth, various regulatory and infrastructural issues inhibit the growth of Indian packaged food industry.
Varied tastes and preferences – India is a country of a unique culture and has its own tastes and preferences which again differ from region to region. Hence, it is a challenge for manufacturers to customise their product portfolio to local tastes and preferences rather than just bringing in global products into India. Even local producers find selling their product suited to an individual region to a pan-India consumer without some level of customisation.
Strong unorganised market – All the key sectors of the food industry suffer from strong unorganised market. Success of the unorganised market is largely due to easy accessibility and cheaper prices of products. Packaged food manufacturers will need to focus on reducing prices and thereby increasing product penetration and also on increasing consumer awareness through innovative marketing campaigns
Higher prices – Although packaged food products are traditionally higher than the unorganised food market, increase in raw materials has led to further price rise in the packaged foods products. Due to this, price sensitive Indian consumers are not willing to move to the organised packaged food market. Although private labels products with its unique distribution model do attempt to fill the price difference; it is far from competing with the unorganised sector.
Poor infrastructure – India’s infrastructure suffers from lack of investment and lags behind the national economic growth. For increasing the consumer base, packaged food industry requires connectivity with all parts of India. Many categories in the packaged food industry such as ready to eat products, ice-creams, frozen food require strong infrastructural support such as cold chains and warehouses, dedicated logistic supply chain which is still not available in greater part of the country.
An Eye on the Future: As growth in income, urbanisation and organised retail penetration continues, Indian packaged industry will evolve from need-based consumption towards choice-driven consumption. Following sectors hold the key for the future growth of the packaged food industry:
Ready-to-eat – Low penetration, changing lifestyle and busier schedule are driving consumers towards ready-to-eat packaged food segments. Segments such as ready-to-eat meals, breakfast cereals and soups are expected to see higher growth driven by the convenience factor. Key companies in the segment include MTR foods, ITC, Nestle and Unilever among others.
Indulgence – Rising disposable income will drive consumers towards indulgent products such as ice-creams, confectionery and savoury snacks. Demand for the indulgence food category would largely be driven by “on-the-go” products such as chocolates, potato chips. Though uncharacteristic for the indulgent products, the category could see new product developments catering to health conscious consumers. Recent launches such as probiotic ice-cream by Amul, Monaco Smart Chips by Parle Products etc. suggest trends in this direction. Companies such as Nestle, Cadbury’s, ITC, GCMMF (Amul) and PepsiCo would be key beneficiaries for the overall growth in the indulgent product category
Health & Wellness: Datamonitor believes that health & wellness product segments could see heightened activities as Indian consumers follow the global trend of “Go healthy and be well”. Rising awareness has led to the demand of healthy products by Indian consumers. Recognising the trends, food manufacturers are increasingly focusing on launching new products in the category. Key product lines which are expected to benefit from this trend include edible oils (low cholesterol), digestive biscuits, cereal bars etc.
With consumers seeking convenience, manufacturers aggressively pushing for packaged food consumption, and government focusing on the food processing industry, strong growth trajectory for the packaged food sector is assured. Driven by the strong consumer demand, rapid urbanisation and increasing organised retail, pac
This page allows you to send the current page to your friend.
Your Friends Email ID:
Your Email ID:
Post Your Comment
"We wantto triple turnover from 10 to 30 mn euros"
FNB NEWS SPECIALS
Packaged wheat flour market growth 19% CAGR; may reach Rs 7500 cr: Ikon
Recipe for Success
Don’t hold back from ordering from a female bartender
Copyright © Food And Beverage News. All rights reserved.
Designed & Maintained by
Saffron Media Pvt Ltd