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"India to be world’s 3rd-biggest packaged food market"
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Monday, 28 May, 2018, 08 : 00 AM [IST]
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 The German Engineering Federation (VDMA) in India strengthens economic relations between the two nations in different engineering sectors. It promotes the activities of VDMA member companies in India.
Among its various activities, it maintains close relations with the Indian industry, Indo-German companies, embassy and consulates and various Indian industry associations, particularly the Confederation of Indian Industry (CII), the Federation of Indian Chambers of Commerce and Industry (FICCI), the Engineering Export Promotion Council of India (EEPC), the Associated Chambers of Commerce and Industry of India (Assocham), the Federation of Indian Export Organisations (FIEO), the Chemical and Allied Export Promotion Council of India (Capexil), the Indian Chamber of Commerce (ICC), and the Indo-German Chamber of Commerce (IGCC).
Its activities have led to closer co-operation between the specialised associations within VDMA and the equivalent Indian associations.
In an e-mail interaction with Anurag More, Rajesh Nath, managing director, VDMA India, spoke about the Indian packaging machinery sector. Excerpts:
What is the outlook for the Indian food and beverage (F&B) packaging machinery market?
India is one of the top five markets for packaged food in the world, and the second largest in Asia, with a sales volume of 34 million tonne.
British market research company Euromonitor International expects that total sales of packaged food will increase by roughly seven per cent annually within the next five years.
In the year 2020, packaged food sales will reach 47 million tonne. According to the forecasts of Euromonitor, India will become the third biggest market for packaged food in 2020, after China and the United States.
The food packaging industry is India’s fifth largest sector with a current worth of nearly $40 billion. By 2020, it is expected to reach over $65 billion.
With a per capita consumption of 24kg per year, the Indian packaged food market is still at an early stage.
Due to rising incomes, urban lifestyle changes and modern retail trade, the food packaging market will expand distinctly.
As urban regions account for over 80 per cent of the demand for packaged food, there is a huge growth potential in semi-urban and rural regions.
The main categories of packaged food are bakery products, canned processed food, frozen processed food, meal replacement products and condiments.
Some emerging categories in this segment are processed dairy products, frozen ready-to-eat foods, diet snacks, processed meat and probiotic drinks.
What are the opportunities for packaging machinery in India for food and beverages?
The Indian middle class is growing rapidly and they simply love to buy. They are on the lookout for premium brands, especially for confectionery products like chocolates.
But the premiumisation trend is not only noticeable in chocolates, but also in biscuits. These trends are expected to continue even years from now.
Rural India provides growth opportunities for packaged food and beverages. Almost 65 per cent of the Indian population lives in rural regions. The rural population benefits from investment in infrastructure and rising wages.
Food processing companies are realising the potential of rural India and are trying to expand their presence in these areas. They are launching their products in smaller pack sizes and at low price points to attract consumers.
As India’s soft drink market is slowly reaching maturity in urban India, rural India is the new target for most of the manufacturers of soft drinks.
The government has made commendable efforts to promote investment in the industry by way of channelling resources through various schemes as subsidies and grants.
The schemes include the development of integrated cold chains, mega food parks (MFPs), modern terminal markets (MTMs) and bulk storage facilities, as well as the modernisation of markets, quality control laboratories and abattoirs.
What are the challenges faced by the food and beverage machinery sector in India?
The challenges that the industry is facing today include the lack of regulatory clarity in packaging, insufficient consumer awareness of sustainable packaging and uncertainty about green packaging materials.
For raw and processed foods, India needs packaging material which is suitable to the country's climatic variations. The country’s heat and high humidity are two problems that can reduce the shelf life of packaged goods.
It would be particularly important to focus on the seals and maintaining their integrity. But more important than the climate is perhaps the lack of a good supply chain or refrigeration in retail outlets and homes. This is a big barrier to many of the packaged food formats familiar to consumers in the West.
At the same time, a heavy focus on cost means that cheaper flexible packaging formats are often chosen over rigid packs that may offer greater protection for the product, but that would force a higher retail price.
Indian imports of packaging equipment consist mainly of highly-automated advanced machines and systems.
The major equipment suppliers to the Indian market include Germany, Italy, Switzerland, and others including Taiwan and the United States.
Technology, price, delivery and performance standards are critical factors that determine whether packaging equipment can be sold in the Indian market.
Due to intense competition in the end-user market, the cost of equipment and the low running cost remain the primary factors that influence the sale of the packaging equipment.
Upgrading would be another extremely important factor in the buying decisions of Indian end-users. After-sales service is also a key concern of buyers.
What steps is the industry taking to overcome the same?
Rigid and flexible are the two most significant types of packaging in use today. Rigid packaging dominates with about 80 per cent market share.
However, there is a shift in demand and the demand for flexible packaging is increasing. The key advantages of flexible packaging over rigid include light weight, small pack size, energy saving, ease of storage and transportation and convenient disposal.
Moreover, spouted stand-up bags are a smart innovation for packaging liquids of all kinds. After pouring, the caps can be tightened to keep the product safe. For sauces, etc., stand-up pouches can be fitted with pour spouts and easy screw-on caps.
As the Indian food and beverage industry is growing rapidly, creating awareness of product possibilities by utilising advanced packaging and processing technologies is very important, so that the latest and best technologies can be adapted.
With India being the second biggest producer of food and beverages after China, the market has a huge potential for foreign direct investment (FDI) concerning the technology of food processing and food packaging machines.
VDMA India helps the Indian companies to connect with German companies in order to build cooperation, exchange technology and provide them with the newest information about innovations within the food packaging industry.
What are the concerns of the F&B packaging machinery industry regarding food safety in India?
In today’s world, packaging is not only used to wrap the product, but it also plays a vital role in product differentiation and gives a positive impact of the product to consumers.
Quality, safety and performance are the most essential aspects of packaging products. The unorganised sector probably represents the largest opportunity in terms of volume.
As buyers/end-users become more quality-conscious, it will become imperative for this segment to upgrade its equipment.
The key factors that affect sales to this segment are the cost of the equipment, the lower processing cost and the ability to seamlessly incorporate the equipment in facilities. As in all cases, the presence of after-sales support would be treated as a prerequisite.
Printing ink is an integral part of packaging products. When we consider food packaging, the importance of food safety is applicable to the total packaging, including printing ink.
Due to the complexities involved in designing the composition of the printing inks, the risk of migration of the ink component to the food needs to be considered starting from the selection of the raw materials.
In the Indian market, toluene-free (TF) or non-toluene non-ketone (NTNK) inks are considered to be safe.
How are these concerns being allayed?
It is primarily essential that the packaged food is safe for consumption, with packaging constituents not migrating into the food.
For this purpose, various countries have laid down regulations for the food contact materials. In the European Union (EU), the Commission Regulation (EU) No. 10/2011 of January 14, 2011 on plastic materials and articles intended to come into contact with food, supersedes the previous Directive 2002/72/EC.
There are tests for plastic in food packaging and food contact materials on overall migration and specific migration of monomers, additives, and other trace residual substances like metals, phthalates, PFOS, PFOA, BPA and BADGE.
In India, the Indian Institute of Packaging (IIP) is a national apex body, with the specific objective of improving the packaging standards in the country. It is an autonomous body working under the administrative control of the Ministry of Commerce, Government of India.
The institute endeavours to improve the standards of packaging needed for the promotion of exports and create infrastructural facilities for overall packaging improvement in India.
And the Food Safety and Standards Authority of India (FSSAI) is also responsible for protecting and promoting public health through the regulation and supervision of food safety. The country’s apex food regulator was established under the Food Safety and Standards Act, 2006.
Going forward, the adoption of food safety and quality assurance mechanisms such as Total Quality Management (TQM), including ISO 9000, ISO 22000, Hazard Analysis and Critical Control Points (HACCP), Good Manufacturing Practices (GMP) and Good Hygienic Practices (GHP) by the food processing industry offers several benefits.
It would enable adherence to stringent quality and hygiene norms and thereby protect consumer health, prepare the industry to face global competition, enhance product acceptance by overseas buyers and keep the industry technologically abreast of international best practices.
Are you satisfied with the allocations for the F&B packaging machinery sector in the recent Budget?
The Budget has managed an appropriate mix of social and economic reforms. It can be termed balanced.
This year’s Budget has primarily focused on three sectors - agriculture and the rural economy, infrastructure and healthcare, besides benefits for senior citizens.
The slew of measures announced in the Budget for strengthening agriculture, including fixing the minimum support price (MSP) for kharif crops at 1.5 times the cost of production, if implemented well, could possibly push up the farm incomes in the long run in line with the government’s aim to double farmers’ incomes by 2022.
The government has also proposed to double the budget allocation to the food processing ministry to Rs 1,400 crore for fiscal year 2018-19 and set up institutions to finance agro-processing projects.
Under the scheme, the funds are given as grant-in-aid for setting up of mega food parks, development of infrastructure for agro-processing clusters, integrated cold chain and value addition infrastructure, creation of backward and forward linkages, among others.
If not, what allocations do you think could have been made by the finance ministry?
According to a report conducted by the New Delhi-based Centre for Market Research and Social Development, packaging in India is highly fragmented and has 22,000 firms, including raw material manufacturers, machinery suppliers, and providers of ancillary materials and services.
Moreover, 85 per cent of these firms are micro, small and medium enterprises (MSMEs). As the industry grows and matures, there is expected to be a trend towards consolidation as supply-side companies merge and acquire smaller companies to increase scale, reduce competition and improve bargaining power with customers.
The main problems faced by MSMEs are a lack of available sources of credit, the high costs of packaging materials, a lack of skilled labour, irregular power supply, an underdeveloped sense of how to market, brand and distribute.
Credit availability at reasonable rates, particularly for the small and medium enterprise (SME) segment is something that the government needs to address as part of the Budget or otherwise.
In order to promote greener packaging, the government should consider subsidising the production of bio-degradable plastics, which has gained a lot of popularity in the Western countries.
This will also help to considerably reduce the amount of landfills, which is a growing concern in urban India today.
The government should take steps to rationalise the imports of machinery. With competition in most industries being global, it is important that Indian companies invest in research and development (R&D) and technology.
However, the cost of importing is a big deterrent to forward-looking companies. This will result in mediocre quality and economies of scale will be hard to achieve.
VDMA offers Indian food packaging companies powerful partners from Germany for the expansion of the industry in India and promotes collaboration between these companies in order to bring the food processing and food packaging industry up to date on the newest technological possibilities.
What are the innovations in the Indian packaging machinery market?
A wide array of products, coupled with increasing global connectivity, has led to a change in the tastes and preferences of domestic consumers.
This trend has been bolstered by rising incomes, increasing urbanisation, a young population and the emergence of nuclear families.
Food packaging has enabled today’s consumers to look for various options, and compare the value offerings thereof, before making a purchase.
Packaging has also helped enhance the carryability of products and increase their shelf life. Vice versa, the rising demand for food and beverage has boosted the packaging industry as well.
The technological advancements have been rapid with the advent of the space and the information technology age, which gradually required and also facilitated the changes in consumer food habits and preferences across the world.
These changes brought in technologies like juice concentrates, preservatives, colorants, self-cooking meals (ready-to-eat/cook foods), reconstituted foods, fruit juices, etc.
While some of the Indian players are making use of the newer technologies to increase production, meet international quality standards and thereby increase profitability, since the industry is largely unorganised, the adoption has been sporadic.
Although market opportunities have been emerging in the recent past, requirement of investments, the lack of bank credit facility and the long gestation period have been impeding the adoption of newer technologies.
Packaging machines, such as automatic form-filling and sealing machines, tetra pack aseptic packaging machines for sterilised filling and packing of liquids and testing instruments offer considerable business opportunities.
The Indian packaging machinery manufacturers in the unorganised sector mostly fabricate general-purpose equipment to serve the basic needs of the industry.
What steps are being taken by VDMA for the industry?
India is now the second largest sales market in Asia for the German machinery industry. Presently, over 550 VDMA member companies are engaged with their own business in the Indian market.
In 2016, the bilateral trade between India and Germany grew to 17.42 billion Euro from a figure of nearly 17.29 billion Euro in 2015. Indian imports from Germany amounted to 9.8 billion Euro. The exports from India to Germany attained a value of 7.62 billion Euro in 2016.
In 2016, the total import of machinery from the whole of Europe reached a volume of 6.73 billion Euro. This was an increase by 2.4 per cent compared with the same period of time in the previous year.
Food processing and packaging machinery, being the third most important sector in terms of volume, had total exports from Europe to India worth 403.42 million Euro.
Since the inception of VDMA office in India, the export of German machinery to India has grown sevenfold.
In 2016, the total import of machinery from Germany reached a volume of 2.97 billion Euro. This was an increase by 1.7 per cent compared with the same period of time in the previous year.
Out of this, the total export of food processing and packaging machinery from Germany to India was in the tune of 25.2 million Euro.
What trends do you foresee in the food and beverage packaging machinery sector in India in the coming years?
One area that has been identified as having good market potential is equipment for manufacturing aluminium beverage cans.
Machinery for cleaning and drying containers; automatic high-speed labelling machines and capping machines; sealing machines for cans, boxes, and other containers; machinery for filling, and closing bottles and cans, packing/wrapping machines and moulding machines also offer good prospects.
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