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Growing food processing industry to drive India food additives market
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Friday, 01 July, 2016, 08 : 00 AM [IST]
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Rishi Mohan Srivastava
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fiogf49gjkf0d Food additives are edible substances, which are directly or indirectly added to food for improving its taste, appearance, nutritional value, texture and safety. More than 3,000 types of food additives are used to enhance texture, flavour, freshness, shelf life and visual appeal of food items. Some of the commonly used food additives include flavours and essences, colouring agents, preservatives, emulsifiers and sweeteners.
Growth in India food additives market was majorly dependent on the demand from the food & beverage sector, which was valued at US$65.6 billion in 2013. Strong growth in beverage market is anticipated to drive sales of food additives such as sweeteners and preservatives in India over the next five years.
Increasing focus towards healthier lifestyles, rising workforce and increasing awareness about quality foods, and so on are spurring demand for food additives in the country. Additionally, increasing women working population and rising discretionary spending are expected to drive adoption of ready-to-eat foods in India, thereby fueling growth in the country’s food additives market through 2021.
Increasing number of “Dual Income, No Kids’’ and “Double Income Single Kid’’ families in urban areas of India is driving demand for exotic food & beverages. Rising disposable income levels have increased frequency of dining out and also increased preference for diverse culinary styles, which is contributing to the growth in demand for food additives in India.
Rising health-consciousness and increasing disposable income levels among consumers are driving demand for healthy food products, fortified with essential nutrients. Apart from experimenting with different cuisines to satisfy their taste buds, Indian consumers are gravitating from just tasty food to heathy food choices. Consequently, demand for organic food in the country is forecast to grow at a CAGR of 25.89%, in value terms, during 2015-2020. Organic foods also require incorporation of additives in a ratio of 95:5 where 95% of the ingredients added need to be organic or natural and rest can be non-organic additives and processing aids. There is already a steadfast demand for organic foods in Tier I cities, which may graduate up to Tier II and Tier III cities in the near future. Rising preference for natural food additives in organic food aimed at lowering chemical intake is expected to encourage production and use of naturally sourced food additives in India.
In 2015, flavours garnered a revenue share of 51.5% in India food additives market, followed by colourants and emulsifiers. Dominating share of flavours in food additives market can be attributed to their extensive utilisation in dairy products, and savoury and cereal products. Rising demand for colourants in India food additives market can be attributed to their growing use in colourful candies, ice creams and other bakery products. Emulsifiers are majorly used in dairy and confectionery products.
Growing demand for healthier and organic food items over ice creams and chocolates is projected to impact the market for food emulsifiers in India in the coming years. Colourants and emulsifiers garnered a share of 23% and 15.4%, respectively in India food additives market in 2015. The market share for preservatives and sweeteners in India food additives market, stood at 5.5% and 4.6%, respectively, in 2015. Rising penetration of ready-to-eat food and growing demand for low calorie sweeteners in the country is projected to drive demand for food additives in India through 2021. In 2015, beverage industry was the largest demand generator for food additives in India, followed by bakery & confectionery, dairy and meat, poultry and seafood industries.
North India accounted for a revenue share of 28.5% in India food additives market in 2015. Rising demand for packaged food in cities such as Delhi, Gurgaon, Noida and Chandigarh coupled with growing manufacturing capacities of ITC, Haldiram’s, McCain and MTR is boosting demand for food additives in the region. In 2015, Southern India accounted for a value share of 25.2% in India food additives market. Kerala accounted for the largest share in demand for processed and packaged meat products in South India. Establishment of Takasago International’s new flavour production plant in Chennai, is projected to augur well for food additives sector in the coming years.
East India accounted for the smallest share in India food additives market. The cities in this region belong to Tier III category and witness slow economic growth. Due to presence of limited number of food producers in the region, consumption of food additives in the region is low.
West India accounted for the largest revenue share of around 34.5% in food additives market in India in 2015. High consumption of food additives in West India can be attributed to presence of a large number of food processing plants in this region. Increasing demand for ready-to-eat food from young working population coupled with growing consumer preference for processed and packaged food is projected to drive demand for food additives in the region.
Growth in India food additives market can be attributed to rising demand and utilisation of flavours in soft drinks, ready-to-eat meals, snacks, bakery products and confectioneries. Growing hygiene concerns, increasing preference for branded food items and rising demand for local flavours in combination with improved nutritional value is forecast to fuel demand for food additives, particularly flavours in India through 2021. In 2015, beverage industry was the largest end-user segment for food additives.
Food additives such as flavours and sweeteners are used in beverages in order to accentuate taste. Surging demand for tropical flavours in non-alcoholic beverages such as carbonated drinks, juices and flavoured water is also driving demand for food additives in the country. During 2011-2015, beverages market in India exhibited a growth rate of 18% and this is expected to propel the market for food additives in India, over the next five years. Majority of the confectionery items such as chocolates, candies, caramels, and gums use a variety of food additives such as sweeteners, emulsifiers, texturisers and food colourants.
The overall confectionery industry in the country experienced growth at a CAGR of around 24%, during 2011-2015, due to mounting sales of chocolates, candies, sugar and other chewing gums. Evolving taste palate of consumers is expected to drive consumption of food additives in the country’s confectionery sector, over the next five years.
Increasing working population due to setting up of multinational companies and rising working women population in urban areas has increased disposable income levels of Indians and reduced time. This is expected to create a surge in consumption of ready-to-eat meals, fortified with authentic flavours. Shift from carbonated to fruit-based drinks, increase in penetration of premium chocolates and expansion of the retail market is expected to boost food additives market in India. Growing health concerns are compelling consumers to shift towards healthy food items, which have high nutritional value. Nevertheless, price-sensitive behaviour of consumers in India is compelling food additive manufacturers to reduce retail prices of their products and this is projected to restrain growth of the food additives market in the country.
In order to consolidate their market share in India food additives market, food additive manufacturers are recommended to focus on production of food additives from natural resources in order to garner the attention of health-conscious Indian population. Currently, these naturally- derived additives account for a minority share in almost all the product segments including preservatives, emulsifiers and colourants.
However, demand for these natural food additives is projected to grow at a faster pace when compared to artificial food additives. Rising demand for natural sweeteners in India can be attributed to increasing awareness levels among consumers. The effects of excess artificial additives on human health has become a major concern as government and regulatory bodies are focussing on ensuring that only best quality foods reach consumers.
Increasing consumer and media focus on food safety is one of the major driving forces driving technological improvements in the food additives industry. Increasing media coverage on incidents related to food adulteration by food companies would inhibit the penetration of harmful additives.
Food additives manufacturers are focussing on upgrading their product portfolio in accordance to the growing requirements of product manufacturers. It has also been observed that a growing number of food additive companies are widening their product portfolios with launch of healthier substitutes. Also, product positioning by the way of product differentiation or price differentiation is the need of the hour.
Increasing awareness about health benefits of natural additives, marketing initiatives by leading additive manufacturers, implementation of strict regulatory norms, coupled with increasing per capita income and changing lifestyles are anticipated to bolster growth in India food additives market through 2021.
“Shift from harmful artificial sweeteners to plant-based sweeteners can be attributed to rising health-consciousness among consumers. This is expected to continue boosting the country’s natural sweeteners market in the coming years. Stevia, a naturally obtained zero-calorie sweetener, is gaining popularity in the country, and this trend of growing consumer adoption of natural products with natural additives is expected to gain strength over the next five years.”
(The author is research consultant, water & chemical domain, TechSci Research)
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