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Indian beverage industry's double-digit growth will continue, says IBA
Saturday, 13 April, 2013, 08 : 00 AM [IST]
Harcha Bhaskar, Mumbai
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The Indian Beverage Association (IBA) expects the country's beverage industry to continue to grow in double digits in 2013, despite the recessionary trends being shown by most economies the world over, including the Indian economy.

Speaking at an IBA-organised seminar titled 'Agenda for Growth: Indian Beverage Industry – Leveraging International Practices' in Delhi, experts from the beverage industry stated that it could witness a revolution, fuelled by changing lifestyles, a growing middle-class, rapid urbanisation and increased disposable incomes.

Participants in the seminar included Rakesh Kacker, secretary, Ministry of Food Processing Industries, Government of India; K Chandramouli, chairman, Food Safety and Standards Authority of India (FSSAI); Geoff Parker, president, International Council of Beverages Associations, and Patricia Vaughan, senior vice-president, American Beverage Association.

The non-alcoholic ready-to-drink beverage segment has been growing at a compound annual growth rate (CAGR) of 13 per cent since 2009, and is one of the segments that have defied the slowing economic growth.

Arvind Varma, secretary general, IBA, said, "The non-alcoholic ready-to-drink beverage industry is one of the largest investors in the country and has contributed significantly to the growth of allied industries. This industry is witnessing robust growth, driven by a combination of factors such as increased investments and innovations.”

“However, the government needs to take a long-term view on the industry while formulating policies or else there is a chance this industry’s growth may get derailed,” he stated.

“IBA aims to act as a catalyst to enable the non-alcoholic beverage industry to play an increasingly significant role in the growth of the economy, by providing employment opportunities and driving income growth and therefore has raised its expectations with the government authorities,” Varma added.

IBA's suggestions

At the deliberations in the seminar, speakers observed that the macro-indicators and the demographic dividends favour robust growth for the beverage industry in India.

“With an enabling policy regime, which includes a more rational tax structure, frequent consultations with the industry on food regulations, giving the industry its due recognition as manufacturers of high quality, healthy and nutritious products as well as life-critical products like water, will further help the industry realise its potential,” IBA stated.

As an industry that has strong backward linkages with agriculture, its growth will also benefit millions of farmers across the country.

GST

One of the key areas where the beverage industry expects Central and state government intervention is goods and service tax (GST) and direct tax code (DTC).
 
The beverage industry has learnt that a single rate for both Central GST and state GST, which was proposed earlier, is reportedly being talked about as three different rates. This defies economic logic and is indicative of difficulty in moving forward the proposal of a Constitutional amendment in Parliament.

IBA also suggested that the beverage industry be made a key stakeholder in the introduction of GST, and should be a natural partner in the process of consultation while formulating the plan and roll-out of GST. The extent of involvement of industry currently in the consultation process needs to be scaled up and made more intense and frequent.

VAT

The value-added tax (VAT) rate of six per cent is applicable to fruit juice and fruit juice-based drinks. Despite the states coming to an understanding that VAT would be charged at the rate of six per cent on fruit juice and fruit juice-based drinks, some states have increased the VAT substantially. The move to increase VAT on fruit juice and fruit juice-based drinks will subvert the growth of the juice industry as also the development of the fruit and vegetable processing industry.

The soft drink industry is already reeling under margin pressure due to the high rate of taxes it is paying to the Central and state governments, but some states have also increased the VAT on carbonated soft drinks.

This increase in taxes will, therefore, have to be passed on to the consumer leading to an increase in the price of the soft drinks, which will restrict purchase of soft drinks by the general mass.

This, in turn, will have an adverse effect on the beverage industry and industries that depend on the beverage industry. An increase in price also favours spurious manufacturers to sell their products on the basis of cost arbitrage.

R&D

Industry players also felt that their prowess in research and development would help them move beyond global brands and develop local, indigenous products to suit regional palates, thereby driving further growth in the market. These innovations are meant to address the low per-capita consumption of packaged beverages and will create both a direct and an indirect impact.

Regulatory aspect

The industry also expects that the food safety authorities remove roadblocks and provide much faster clearances and approvals on ingredients and new products, without compromising the safety and quality of new products.

This is most relevant in case of proprietary foods, where inordinate delays result in food and beverage companies having to wait for many months before launching new products.

IBA also suggested that CODEX should be made a reference point for national food control agencies. The international food standards, guidelines and codes of practice laid down by CODEX contribute to the safety, quality and fairness of international food trade.

Referring to CODEX will help the Indian beverage industry contribute a higher share to the global food and beverage trade, which is estimated at $200 billion dollars.
 
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