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"With shift, flexible packaging demand is increasing"
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Monday, 06 October, 2014, 08 : 00 AM [IST]
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fiogf49gjkf0d  VDMA India Services Pvt. Ltd maintains close relations with the Indian industry, Indo-German companies, embassy and consulates and various Indian industry associations, particularly with CII, FICCI, EEPC, ASSOCHAM, FIEO, CAPEXIL, ICC, and IGCC. For VDMA India, presently the key sectors are agricultural machinery, food processing & packaging machinery, and process plant equipment.
Rajesh Nath, managing director, VDMA India Services Pvt. Ltd, in an email interaction with Anurag More delved deeper into the challenges being faced by the food and beverage packaging industry, how the industry was coping with them and emerging trends that would take the industry on a growth course. Excerpts:
What is your take on the current food and beverage packaging industry in India? At what rate is it growing?
The packaged food industry is the fifth-largest sector in India. The Indian packaged food industry is worth US$39.7 bn and is expected to reach US$65.41 bn by 2020. With a sales volume of 30 mn 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 bn 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 compounded 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 also shows a strongly increasing demand. It is expected that the consumption of juice in India will rise by an annual compounded growth rate of 20 per cent until 2017 up to 1.2 bn litre.
Where do you see the industry in the next five years?
All these developments result in a continuously growing demand for packaged food and beverages in India. It is expected that the demand for packaged food in India will rise by an annual compounded growth rate of 6 per cent to reach an amount of 37 mn tonne by 2017. The beverage consumption will grow by an annual compounded rate of 15 per cent to reach an amount of 38 bn litre in 2017.
To meet the rising demand for processed and packaged food and beverages, companies have to expand their production, and as a result the demand for state-of-the-art processing and packaging technology will grow. Export-oriented manufacturers in particular favour high-tech solutions in order to meet the international standards and be competitive.
What are the growth drivers for the industry?
With more than 50 per cent of the population younger than 25 years, increasing disposable incomes, a growing middle class, ongoing urbanisation, changing lifestyles and a rising number of modern retail formats like supermarkets, the country enjoys highly favourable demographic patterns. These will enable shifts in the Indian food and drinks industry, as young people are one of the key drivers in the demand for processed and hygienic packaged foods. Manufacturers are continuing to introduce products that increase convenience and reduce the time required to prepare meals. Products with additional ingredients - in easy to handle packaging and convenient package sizes - will continue to gain popularity.
What are the innovations and trends that are being witnessed in the food and beverage packaging industry in India?
The Indian middle class is growing rapidly and it simply loves to buy. They are on the lookout for premium brands, especially for confectionery products like chocolate. 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 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 manufacturer of soft drinks.
Where does India stand compared to developed countries with regard to food & beverage packaging?
The global beverage and food industry is a highly dynamic growth market, and the global spending on food and beverages will continue to rise. According to estimates issued in 2013, 3 bn Euros were spent on packaged food and beverages globally and the demand is rising up to 3.4 bn Euros in 2017. This is a plus of 28 per cent.
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 mn 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 mn tonne of processed and packaged foods were sold in 2013 and was expected that by 2017, the demand for modern processed and packaged foods would have increased by 23 per cent annually to around 265 mn tonne.
With a sales volume of 30 mn 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 bn litre of beverages were consumed globally. One third of the entire global beverage consumption was consumed in Asia, around 277 bn litre. Indian consumer drank 22 bn 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 technological advancements that are being witnessed in the food and beverage packaging sector in India?
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, and energy savings, ease of storage and transportation and convenient disposal.
The flexible packaging industry is estimated to be valued at US$900 mn, 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.
How do MNCs look at Indian markets?
In 2012, the export of food processing and packaging machinery to Asia reached a volume of 7.5 bn 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 mn Euros in 2012.
A look at the supplier countries shows that food processing and packaging machinery "Made in Europe" are highly valued. Forty 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 mn 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 mn Euros (beverage packaging machinery: 30.9 mn Euros and other packaging machinery: 48.2 mn Euros).
What are the problems faced by the industry?
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 machinery 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 are very weak. Another major issue is the unorganised manner of our agriculture. We don’t have one farm produce stretched at hundreds of hectares. Here farmers, wholesalers, manufacturers and retailers deal in small quantity.
How is the industry coping with challenges and issues?
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.
What kind of government support would benefit the industry?
The Government of India has ultimately taken decision to allow 51 per cent Foreign Direct Investment in multi-brand retail. This decision has been described as a step forward to open the retail sector for world's renowned brands entry into India. The government has also approved proposals for joint ventures, foreign collaboration, industrial licences and 100 per cent 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.
The 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 bn are to be pumped into the food sector and the required infrastructure.
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