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“Rural India provides growth opportunities for packaged food and beverages”
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Monday, 18 July, 2016, 08 : 00 AM [IST]
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fiogf49gjkf0d fiogf49gjkf0d  The liaison office of German Engineering Federation (VDMA), which is located in Kolkata, serves Indo-German economic relations in different engineering sectors. It promotes activities of VDMA member companies in India. The office maintains close relations with the Indian industry, Indo-German companies, embassy and consulates and various Indian industry associations, particularly CII, FICCI, EEPC, Assocham, FIEO, Capexil, ICC, and IGCC. Its activities have led to closer co-operation between specialised associations within VDMA and equivalent Indian associations. The office also offers assistance to individual member companies in identifying potential partners in India. Rajesh Nath, MD, German Engineering Federation (VDMA), in an email interaction with Anurag More, highlights the trends, opportunities and challenges in food packaging in the country. Excerpts:
How do you see the food & beverage packaging industry by 2020?
The packaged food industry is the fifth-largest sector in India. The Indian packaged food industry is worth US$39.7 billion and is expected to reach US$65.41 billion by 2020. With a sales volume of 30 million tonne in 2013, India is one of the largest markets for packaged food in the world, just behind the US, China, Brazil and Mexico, and the second-largest in Asia. But with per capita consumption of 24 kg per year the Indian packaged food market is still at an early stage.
With a consumption of 22 billion litre of drinks (alcoholic drinks and soft drinks) India is the fourth-largest sales market for beverages in Asia. Soft drinks are the largest segment. The Indian non-alcoholic beverage market was growing at an annual compound growth rate of 23 per cent between 2010 and 2013 as more and more people are choosing packaged soft drinks. Within the soft drinks market, bottled water is the largest category and the demand will double until 2017. Packaged juice shows a strongly increasing demand. It is expected that the consumption of juice in India will rise by an annual compound growth rate of 20 per cent until 2017 up to 1.2 billion litre.
What are the trends in F&B packaging?
The Indian middle-class is growing rapidly and it simply loves to buy. It is on the lookout for premium brands, especially for confectionery products like chocolate. ‘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 70 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 drinks market is slowly reaching maturity in urban India, rural India is the new target for most of the manufacturers of soft drinks.
What kind of investment is happening in the F&B packaging industry?
The government has also approved proposals for joint ventures, foreign collaboration, industrial licences and 100% EOUs (Export Oriented Units) envisaging an investment of Rs 19,100 crore during the same period. Out of this, foreign investment is over Rs 9,100 crore.
A National Mission on Food Processing (NMFP) has been approved and under the government’s Vision 2015 plan, Agri Export Zones have been set up. In cooperation, the public and private sector plans to establish 30 to 40 Mega Food Parks with the corresponding infrastructure for packing, packaging, transport and refrigeration. By 2015, more than US$25 billion are to be pumped into the food sector and the required infrastructure.
What are the innovations happening in the industry?
Be it the production of confectionery or cookies, sandwiches, bread and other baked products, meat and meat products, beverages, dairy products, or other convenience products, the processing stages in the production and filling of food and drinks are diverse and distinct worldwide.
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 flexible packaging demand is increasing. Key advantages of flexible packaging over rigid include lightweight, small pack size, energy saving, ease of storage and transportation and convenience in disposal.
The flexible packaging industry is estimated to be valued at US$900 million, growing at about 20 per cent annually. Plastics, paper and metals are the key materials used in flexible packaging products, which are made from foil or paper sheet or laminated paper and plastic layers. Food and Fast Moving Consumer Goods (FMCG) industries are the largest consumers of flexible packaging products; food accounts for 38 per cent of flexible packaging market.
Moreover, spouted standup bag is a smart innovation for packaging liquids of all kinds. After pouring, the caps can be tightened to keep the product safe. For sauces etc., standup pouches can be fitted with pour spouts and easy screw-on caps.
With given climate conditions which India has, do we need special packaging for F&B?
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 at home. 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.
Where does India stand compared to developed countries?
Eating and drinking are basic human needs and people respond to these needs in a way that is largely untouched by the ups and downs of economic developments. With the world population increasing, more processed and packaged food and bottled beverages will be consumed. Some 742 million tonne of processed and packaged foods were sold in 2013 globally.
Market researchers predict that by 2017 the demand for modern processed and packaged foods will have increased by 11 per cent annually to around 829 million tonne. Already today, in Asia, Latin America and the Middle-East/Africa large growth markets for packaged food have emerged. These three regions together combine over 55 per cent of the retail volume.
In Asia alone, around 215 million tonne of processed and packaged foods were sold in 2013 and it is expected that by 2017 the demand for modern processed and packaged foods will have increased by 23 per cent annually to around 265 million tonne.
With a sales volume of 30 million tonne in 2013, India is one of the largest markets for packaged food in the world, just behind the US, China, Brazil and Mexico and the second-largest in Asia. But with a per capita consumption of 24 kg per year the Indian packaged food market is still at an early stage and there is room for growth.
Last year 899 billion litre of beverages were consumed globally. One-third of the entire global beverage consumption was consumed in Asia, around 277 billion litre. Indian consumers drank 22 billion litre of beverages (alcoholic and soft drinks) last year and It is expected that the demand will rise by 80 per cent till 2017.
What are the challenges and opportunities in F&B packaging?
India is one of the largest consumer markets worldwide and the second-largest producer of foodstuffs in the world. Shortage of skilled labour and food safety concerns are the key challenges for F&B packaging in India.
The food supply chain structure in India is more complicated with perishable goods and uncountable number of small stakeholders and farmers. The road and rail network and other infrastructure connecting these partners is very weak. Another major issue is the unorganised manner of our agriculture. We don’t have one farm produce stretched at hundreds of hectare. Here farmers, wholesalers, manufacturers and retailers deal in small quantity.
Some of the opportunities for F&B machinery in India include high consumer spending on food and beverages.
In India, the demand for packaged food, convenience products and beverages is stipulated by - spiralling large and young population; increasing number of working women and single households; growing middle class and rising disposable incomes; ongoing urbanisation; and rising organised retail.
How is the industry coping with the challenges?
Shortage of skilled labour and food safety concerns are the key challenges for food processing industry and this is encouraging food processors to invest in automation. Many conventional processes for making Indian ethnic snacks are being converted to automated lines. Many companies, both Indian and foreign, are planning big investments in the food processing segment.
How are government regulations for the industry?
The Indian food processing industry is regulated by several laws which govern the aspects of sanitation, licensing and other necessary permits that are required to start up and run a food business. The legislation that dealt with food safety in India was the Prevention of Food Adulteration Act, 1954 ("PFA"). The PFA had been in place for over five decades and there was a need for change due to varied reasons which include the changing requirements of our food industry. The Act brought into force in place of the PFA is the Food Safety and Standards Act, 2006 ("FSSA") that overrides all other food related laws.
FSSA initiates harmonisation of India's food regulations as per international standards. It establishes a new national regulatory body, the Food Safety and Standards Authority of India ("FSSAI"), to develop science-based standards for food and regulate and monitor the manufacture, processing, storage, distribution, sale and import of food so as to ensure the availability of safe and wholesome food for human consumption. All food imports are therefore subject to the provisions of FSSA.
How do MNCs look at Indian F&B packaging?
In 2012, the export of food processing and packaging machinery to Asia reached a volume of 7.5 billion Euros. India is the fourth-largest sales market in Asia for food processing and packaging machinery. India imported food processing and packaging machinery worth 664 million Euros in 2012.
A look at the supplier countries shows that food processing and packaging machinery "Made in Europe" are highly valued. 40 per cent of total deliveries come from Europe, whereby Italy with a share of 19 per cent was India’s most important trading partner in 2012, followed by Germany with 16 per cent.
In 2013, out of the total import volume of 132.4 million Euros of food processing and packaging machinery from Germany to India, the highest share of machinery import was packaging machinery with a total volume of together 79.1 million Euros (beverage packaging machinery: 30.9 million Euros and other packaging machinery: 48.2 million Euros).
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