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Bakery industry expected to reach $7.6 billion by ’15; Biscuits leader
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Friday, 19 December, 2014, 08 : 00 AM [IST]
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Manish Malhotra and Vaibhav Verma
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fiogf49gjkf0d Traditionally, Indian kitchen does not consist of a baking oven as a standard.
Till recently this has been the case in most Indian households even in modern kitchens in urban areas. As a result, the bakery section in the grandiose Indian cuisine solely consists of baking techniques which do not require baking ovens and use only unleavened flat breads which are baked over direct fire.
Baking, as the term is used in European and Western countries, is not part of the cooking knowledge of the average Indian individual and was always the exclusive knowledge of a few professional bakers in the community. And even these so-called Indian bakeries, to date, are until sweet shops that mainly serve traditional Indian delights.
In conclusion, Indians are not familiar with the habit of baking at home, in fact, the basic assumption is that a piece of cake, a small pastry, a loaf of bread or a special cake for any celebrated occasion are purchased items only and are never home-made.
Demand rising
With the quick food culture catching up, demand for bakery products has increased tremendously. The bakery industry, or for that matter, all the businesses catering to bakery are witnessing a sort of revolution. With the quick food culture catching up (indicated by the growth of fast food outlets and cafeterias in the country), the demand for bakery products has increased tremendously. Gone are the days of small artisan bakeries. In an age where malls, hypermarkets and supermarkets have become the customer's preferred destination, the concept of chain bakeries has come into its own. The bakery industry in India today has an important place in the industrial map of the country. Bakery products are items of mass consumption in view of their low price and high nutrient value. With rapid growth and changing eating habits of people, bakery products have gained popularity among masses. The sector, typically, constitutes cakes, breads and biscuits.
The bakery industry has achieved the third position in generating revenue in the processed food sector. The market size for the industry is pegged at $4.7 billion in 2010 and is expected to reach $7.6 billion by 2015. The shining star of the sector remains the biscuit industry, which is expected to outperform the growth of the sector overall. The sustained economic growth in the country has led to increased disposable incomes among Indian consumers. Urban-dwellers are becoming increasingly health-conscious and are demanding healthier options. Along with that, consumers are also willing to spend more and experiment. As more women join the workforce, convenience and time have become major factors among urban households. Consumers are increasingly relying on snacks and baked goods as substitutes to traditional breakfast.
Quick breakfast option
With the launch of a series of cookies and sandwich biscuits offerings, biscuits are now being viewed as a quick breakfast option among women and children. This has helped drive sales of biscuits, especially cookies and sandwich biscuits, over 2013. The biscuit category is dominated by Britannia Industries, Parle Products and ITC, which together are set to hold a combined retail value share of 80% in 2013. These are well-established domestic players and have strong distribution networks across the country, including rural areas. The biscuits category is expected to grow by a compound annual growth rate (CAGR) of 10% in constant value terms over the forecast period. Sustained economic growth has led to an increase in disposable incomes among Indian consumers. Indian consumers are now willing to spend more and indulge themselves. As a result, there has been a shift in eating habits with consumers willing to experiment. Consumers are moving towards premium biscuit offerings and are increasing their consumption of cookies and sandwich biscuits. This trend is expected to continue over the forecast period. Premium biscuit offerings, such as cookies and sandwich biscuits, are expected to witness strong growth over the forecast period. Manufacturers are also likely to launch a number of premium biscuits over the forecast period in order to tap into this demand.
The per capita consumption of bakery products in India, as it stands today, is 1-2kg per annum, which is comparatively lower than the advanced countries where consumption is between 10 and 50kg per annum. The growth rate of bakery products has been tremendous in both urban and rural areas. The sector has indicated promising growth prospects and has been making rapid progress.
The bread market
The bread market has a business volume of 1.5 million tonne. The bread industry has a production of approximately 27 lakh tonne. This segment is characterised by high level of fragmentation, and high margin. The major factors for growth in this segment are brand loyalty; volumes; and strong distribution networks.
The major challenge faced by the organised bread sector at present is low margins of profit. Hike in the prices of major raw materials like sugar, vegetable oil, milk, and wheat flour has been accounted for the industry's low margins of profit.
Major players
The major players in the bread industry that hold about 90% of the market share are Britannia and Modern Industries Ltd.
The biscuits market
The biscuit market has a total production volume of 1.1 million tonnes. The growth drivers for the biscuit industry are focussed advertising, urban markets, and new launches.
Major players
The major players in the biscuit segment are Britannia; Parle; Bakeman; ITC Foods Ltd; Surya Food and Agro Pvt. Ltd; and HLL.
Major brands
The major brands of biscuits are Britannia; Parle; Bakeman; Priya Gold; Elite; Cremica; Dukes; Anupam; and Horlicks.
The sector faces challenges in the form of raw material fluctuations, high taxation as well as its unorganised nature. The industry’s raw materials, being agricultural in nature, are exposed to seasonal fluctuations in terms of availability and price movements. Rising competition in the sector due to low capital requirements and high growth rate of the sector is another impediment faced by the industry. However, despite such challenges, the industry has opportunities galore. The low consumption of bakery products in the industry and spurt in the organised retail in the country are some of the biggest opportunities for the bakery players. Rising incomes as well as emergence of new middle-class segment would also be key factors in the growth of the industry. The Indian bakery segment is already in a favourable position with high rural penetration of its products which will help it tap the Indian rural consumption boom.
Cafe culture - Strong trend
The coffee café culture across urban India has gained momentum over the last decade. It is a trend that is fast traversing from being niche to being mainstream across urban India. These sleek coffee café retail outlets are serving as ideal settings for romantic rendezvous, animated discussions and calculated business parleys for the new-age upwardly-mobile India, along with hot or cool beverages and sumptuous snacking options. These hangout zones of today, and most probably of tomorrow, are offering innovative ranges of coffee concoctions, along with an impressive array of appetising snacking options, which Indians attuned to globalised tastes are savouring.
These days, many of the young, and even the not-so-young crowd, in the sleek coffee cafes are seen sipping Americano, Mocha, Cappuccino and many other exotic styles of coffee, which not so long ago were foreign to the then comparatively conservative tastes of India.
The future for the coffee café retail chains in India seems full of aroma of profits. The burgeoning retail coffee market has lately experienced the entrance of many foreign players to capture a market share, which has strengthened the aroma of competition that in turn is expected to waft across in the days, months and years ahead in the form of more evolved consumer preferences.
And these sleek coffee café outlets, which have also doubled or are fast doubling up as restaurants serving breakfast, lunch and dinner options, are serving a host of bakery products along with myriad varieties of coffees. Therefore, it is evident that the growth of the café retail chains can in turn give a better future for the Indian bakery industry.
(The authors are assistant professors, Banarsidas Chandiwala Institute of Hotel Management and Catering Technology)
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