Indian food processing industry has seen significant growth and changes over the past few years, driven by changing trends in markets, consumer segments and regulations.
These trends, such as changing demographics, growing population and rapid urbanisation are expected to continue in the future and therefore, will shape the demand for value added products and thus for food processing industry in India. The Government of India’s focus towards food processing industry as a priority sector is expected to ensure policies to support investment in this sector and thus attract more FDI. Some of the sectors which are relatively more attractive include Fruits and Vegetables, Meat, poultry and fisheries, dairy products, snack foods and ready-to-make items.
India, having access to vast pool of natural resources and growing technical knowledge base, has strong comparative advantages over other nations in this industry. Also, the Government has provided various incentives such as capital subsidies and tax exemptions for boosting investments in these segments. However despite the various aspects making these sectors attractive certain success factors are crucial in reaping their potential. These include, scale and supply chain efficiency, brand competitiveness and effective marketing, deploying superior technology, product innovation and pricing.
Many Indian company such as “HALDIRAM’ have been successful by leveraging the India-advantage. Learning from the experience of this successful traditional food industy and in light of the above assessment, the food processing sector in India clearly have a major role in food security and an attractive sector for investment and offers significant growth potential to companies so investing. A well-integrated supply chain and a successful marketing strategy with investments in the most attractive segments is key to competitiveness to success in this sector.
This work is based on an interview with Mr. ShivkishanAgrawal, Director, Haldiram’s Nagpur. Keywords: Success factors, India-advantage, food security 1. Introduction : The food industry in India is high with attempts at value-addition to make food more nutritious and healthy. Ready –to-eat food packs are gaining popularity even in small towns. This has been fuelled by growing urbanisation, large disposable incomes, change in people’s lifestyles as well as consumption patterns.
The new wave in food industry is not only about multinational companies arriving here attracted by the prospective size of the market, it is also about traditional Indian food and spices making a mark in the world market. Looking at the rapid rate at which the shelf space of the global food market is being gobbled up by Indian food processors, it is only a matter of time that the whole world relishes the taste of India. Ironically the Indian food processing industry began its journey with a variety of products of western origin that were marketed primarily to cater to the urban middle class.
For example bread, butter, cheese, jam, biscuits, noodles, hamburgers, pizzas and pastas, soft drinks, carbonated beverages, chocolates, ice-cream etc. which have their origin in the west. Now ready-to-eat/cook Indian food items, dairy products, marine and meat products and also agri food products are going in reverse gear to foreign countries. The Indian food sector, however, has not yet realised its potential and there is scope for further value creation by modernising the sector. With better technologies, quality standards and hygiene in production, India can become the food factory of the world. Food & beverage News Nov-16-30) 1. 1 India’s strengths in Food processing: Favourable Factor conditions India’s Food Processing industry is one of the largest industries in the country -it is ranked fifth in terms of production, consumption, export and expected growth. The Indian food industry is estimated to be worth over US$ 200 billion and is expected to grow to US$ 310 billion by 2015. India is one of the world’s major food producers but accounts for only 1. 7 per cent (valued at US$ 7. 5 billion) of world trade in this sector – this share is slated to increase to 3 per cent (US$ 20 billion) by 2015.
The Indian food processing industry is estimated at US$ 70 billion. It contributed 6. 3 per cent to India’s GDP in 2003 and had a share of 6 per cent in the total industrial production. The industry employs 1. 6 million workers directly. Food processing is a large sector that covers activities such as agriculture, horticulture, plantation, animal husbandry and fisheries. It also includes other industries that use agriculture inputs for manufacturing of edible products. The Ministry of Food Processing, Government of India has defined the following segments within the Food Processing industry: •Dairy, fruits & vegetable processing Grain processing •Meat & poultry processing •Consumer foods including packaged foods, beverages and packaged drinking water. Out of the country’s total agriculture and food produce, only 2 per cent is processed. The highest share of processed food is in the Dairy sector, where 37 per cent of the total produce is processed, of which 15 per cent is processed by the organised sector. Primary food processing (packaged fruit and vegetables, milk, milled flour and rice, tea, spices, etc. ) constitutes around 60 per cent of processed foods.
It has a highly fragmented structure that includes thousands of rice-mills and hullers, flour mills, pulse mills and oil-seed mills, several thousands of bakeries, traditional food units and fruits, vegetable and spice processing units in unorganised sector. In comparison, the organised sector is relatively small, with around 516 flour mills, 568 fish processing units, 5,293 fruit and vegetable processing units, 171 meat processing units and numerous dairy processing units at state and district levels. (Source: http://www. investmentcommission. in/food_&_agro_products. tm and KPMG Analyses ) The market for dairy products is expected to grow at 15-20 per cent over the next three years. Ghee is the most widely marketed and branded product with a nation-wide penetration of 24. 1 per cent. It is estimated to be growing at a rate of 8 per cent per annum • Consumer Foods Including Packaged foods, Beverages and Packaged Drinking water Packaged Foods : Packaged foods segment in India registered a growth of 8 per cent in 2005-06. Noodles/Vermicelli is the fastest growing category in this segment with a CAGR at 15 per cent.
The market for branded noodles is estimated at 230 million servings per year. The Soups market is still small and nascent in India and is approximately US$ 14 million in value. The market for culinary products is estimated at US$ 475,000 and estimated to grow at 18 to 20 per cent per annum. Products like Tomato Ketchup and Jams currently have low penetration levels, but are growing rapidly. Ketchups, for example, have a penetration of just 3 per cent in India; however this category is estimated to be growing at 20 per cent per annum.
Beverages: The beverages market primarily consists of non-alcoholic beverages which can be broadly classified into carbonated drinks, non-carbonated drinks and hot beverages. Staples – Bread, Wheat Flour, Salt and Sugar Bread is slowly coming to be a staple product consumed by people of all economic classes in India. Total bread production in the country in 2004-05 was estimated at 2. 7 million tons, growing at 7. 5 per cent. About 55 per cent of bread production comes from the organised sector. India has access to several natural resources that provides it a competitive advantage in the food processing sector.
Due to its diverse agro-climatic conditions, it has a wide-ranging and larger raw material base suitable for food processing industries. Presently a very small percentage of these are processed into value added products. semi-processed and ready to eat packaged food segment is relatively new and evolving. India is the second largest producer of wheat in the world with an output of more than 70 million tonnes. Branded ‘atta’ (wheat flour) is an important item in this 1. 2 India s competitive Edge in Food Processing : India has the largest irrigated land in the world. It is also world’s largest producer of milk, tea and pulses.
India has large marine product and processing potential with varied fish resources along the 8,041 km coastline, 28,000 km of rivers and millions of hectares of reservoirs and brackish water. India also possesses the largest livestock population in the world with 50 per cent of world’s buffaloes and 20 per cent of cattle. India’s comparatively cheaper workforce can be effectively utilised to set up large low cost production bases for domestic and export markets. Cost of production in India is lower by about 40 per cent over a comparable location in EU and 10-15 per cent over a location in UK.
Along with these factor conditions, India has access to significant investments to facilitate food processing industry. There have been increasing investments not only by domestic firms and Indian government, but also foreign direct investment Related and Supporting Industries The Indian food processing industry has significant support from the well developed R&D and technical capabilities of Indian firms. India has a large number of research institutions like Central Food Technological Research Institute, Central Institute of Fisheries Technology, National Dairy Research Institute, National Research and Development Centre etc. o support the technology and development in the food Processing sector in India. Government Regulations and Support The Government of India has taken several initiatives to develop the food processing industry in India. Source: Cygnus report, India Food Processing Sector, 2005 1. 3 Indian Sweets and Snacks India, more than in any other country in the world, has a colourful and diverse range of food and tastes to offer. For centuries, Indian food and spices have been known far and wide for their authentic taste and rich quality.
India has a variety of dishes, be it North Indian food or South Indian food, that use spices and herbs such as coriander, ginger, garlic, cinnamon, cardamoms, cloves, aniseed and asafoetida – that are used in different combinations and flavours to enhance the pleasure of a meal. Traditional Indian Sweets While Indians are great lovers of food, their second love without a doubt, is the love for ‘traditional Indian sweets’ and Indian beverages. India is a country of sweets, and Indians, if they can afford, would like to have sweets with almost every meal. Each region has its own specialties.
Basically, various regional recipes are only different forms of rice puddings, milk puddings, vegetables & fruits dipped in sweet syrup. Besides, there are a variety of milk-based Barfis and pastries. These are decorated with raisins, almonds, pistachio and the like. Various combinations of all the above delicacies offer hundreds of varieties of Indian traditional sweets to choose from. Most Indian sweets are made by boiling down milk to remove the moisture. It is called khoa. Adding butter, sugar and many other flavours, these are turned into barfi, malai, kheer, rasgulla and sandesh.
In North India, lassi is the most popular drink may it be sweet or salty, made from yoghurt. The south and the west offer fresh coconut. Special and typical sweets that come from Bengal are Sandesh and Rasgullas, made in different ways from cottage Cheese. One notable exception of Bengali sweets is misti doi (sweetened yogurt), in terms of the fact that Bengali cuisine is the only Indian cuisine where plain yogurt is missing. Some very popular Indian sweets are :- Kheer, Halwa (pudding), Rasgulla (spongy cheese balls, dipped in sugar syrup), Gulabjamun, Rasmalai, Sandesh and many more. Kulfi’, a creamy preparation of frozen milk and sugar, is the Indian version of ice-cream and is extremely popular. Indian Refreshments and Snacks The variety of refreshments available in India is as diverse as the country itself. Each region has its typical and local specialty but some common features are that they are usually spicy, easily available, and inexpensive!! The most popular and commonly known is ‘chat’ – a spicy mix of different ingredients, topped with tangy chutneys (sauce). Indians are very fond of chat and it is available across the country in one form or other. Bhel puri’ is type of chat famous in Mumbai. Similar ‘chats’ such as ‘Sev Puri’, ‘Chana Masala’ are available across the country. Some other well known snacks which can be savoured are: ‘Samosa’ ‘Pakoras’ ‘Alu Tikki’ ‘Kachori’ (very common in Uttar Pradesh) ‘Pao Bhaji'(very common in Maharashtra) ‘Gol Gappa’ ‘Dhokla’ (very common in Gujarat). Samosas and pakoras are mostly enjoyed with a cup of hot Indian tea in the company of friends and family. To relish these snacks, one should develop the taste for them…but once you do, you want them again and again and again….. 2.
Research Question This research work attempts to study a typical Indian family run FMCG business,its inception,its aspirants,the challenges faced in the context of Indian food security and the possible roadways to map the future. 2. 1 Empirical Context Haldiram’s Profile: Sweet and Salt are as diametrically opposite to each other as North pole and South Pole but they perform wonders when used on the taste buds, this delicate use of both the tastes in Mithais (Sweet Meat) and Namkeens (Salty Snacks) has made Haldiram’s undisputed leader of the sweet industry. Haldiram’s synonymous with sweet meat as Cadbury is to Chocolates.
By default Haldiram’s can be termed as “Taste of Tradition”. From a humble beginning in Bikaner in 1937 Haldiram;s have grown phenomenally and are today an internationally renowned sweet manufacturer with chain of restaurants and has also started Indian Fast food Restaurants and amusement parks. It is the flag bearer of the traditional Indian sweet, Haldiram’s was started by Shri Gangabisanji Agrawal alias Haldiram Agrawal, who is the grandfather of Shri Shivkisan Agrawal, the man responsible for the successes and fame of Haldiram’s he has made the brand a household name in India.
Haldiram’s products inherits the Matchless quality, Zero impurity and world class packaging, efficient distribution network are the hallmark of each and every Haldiram’s Product and to top it up the trump card of reasonable prices and efficient marketing strategy and the key to success. Headquartered at Nagpur (M. S. ) India. The management at Haldiram’s is quality conscious no doubt. Shri Shivkisan Agrawal always believes in superior input superior output. It has regional offices at Mumbai, Bangalore and Chennai.
It is a member of the SFA (Snacks Food Associations of America) ; ESA (European Snacks Food Association). The company has won prestigious International Food award from TROFEO International Alimentocian of Barcelona Spain in 1999. The company has ISO:9001-2000 certification and HACCP certification by Det Norske Veritas of Netherlands. The coveted Coca-Cola Golden Spoon Awards 2009 -given in recognition of excellence in food retailing in India. Haldiram’s bagged the most admired food ; beverages retailer of the year in the Quick Service Restaurant (QSR)Indian origin this year. Critical Success Factors for Manufacturers in this Sector The Indian food processing industry’s growth potential cannot be disputed; however, it requires certain competencies and success factors to fructify this potential. These include addressing the current gaps in the value chain as well as leveraging on the various advantages the country provides. Investors in the sector need to be aware of these factors and build the required capabilities in their business to ensure success. Some of the key success factors are discussed below . 1 Integrated Supply chain and Scale of Operations : While India ranks second in production of fruits ; vegetables, nearly 20 to 25 per cent of this production is lost in spoilage in various stages of harvesting. The key issues are poor quality of seeds, planting material and lack of technology in improving yield. Ensuring good quality produce entails investments in technology and ability to sustain a long gestation period for the harvest. Good quality production also results in better quality of processed fruits.
Hence there is a need to establish backward linkages with the farmers with the help of arrangements such as contract farming to improve the quality of the produce. Scale is a key factor in the processing industry. Nearly 90 per cent of the food processing units are small in scale and hence are unable to exploit the advantages of economies of scale. This is also true with land holdings. 3. 2 Processing Technology : Most of the processing in India is currently manual. There is limited use of technology like pre-cooling facilities for vegetables, controlled atmospheric storage and irradiation facilities.
This technology is important for extended storage of fruits and vegetables in making them conducive for further processing. Bringing in modern technology is an area that existing as well as new investors in the sector can focus on, this will make a clear difference in both process efficiencies as well as quality of the end product. 3. 3 Increasing Penetration in Domestic Market : Most of the processing units are export oriented and hence their penetration levels in the domestic market are low. For example, Penetration of processed fruits and vegetables overall is at 10 per cent .
The relative share of branded milk products especially ghee is still low at 2 per cent. Penetration of culinary products is still 13. 3 per cent and is largely tilted towards metros Consumption of packaged biscuits for Indian consumers is still low at 0. 48 per cent while that for Americans is 4 per cent However, there is increasing acceptance of these products amongst the urban population. India has a large untapped customer base and even a small footprint in the domestic market would enable the player to gain significant volumes.
Acceptance in the domestic market and hence higher penetration is driven by the following factors: 3. 4 Competitive Pricing : Consumers of processed foods are extremely price sensitive even a small change in pricing can have significant impact on consumption. For instance, the launch of PET bottles, new price points and package sizes in non-carbonated drinks (such as Coca Cola) has increased in-home consumption from 30 per cent in 2002 to 80 per cent in 2003. Competitive pricing also enables penetration in the rural markets. 3. Brand competitiveness : Share of branded products in purchases of Indian consumers has increased by 25 per cent to 35 per cent. This is especially true for urban consumers. Branded products like Basmati rice and KFC’s chicken have been very successful implying that there is a good demand for hygienic branded products at reasonable prices. 3. 6 Product Innovation : Certain processed food categories such as snack foods are impulse purchase products where consumers look for novelty and new flavors and hence these categories lack brand loyalties.
Visibility through attractive packaging boosts consumption. Increasing time constraints amongst the working middle class has boosted consumption of products like instant soups, noodles and ready-to-make products. Innovation in packaging and product usage is an important success factor for processed foods. 4. Challenges ; Opportunities before Haldiram to become a Global brand name Indian fast food has not become global because of the characteristics of the product like Rajkachauri,as one have to have ten different kinds of inputs to add to make a rajkachauri.
For example,curd and then two or three different types of spices. There is also a couple of ingredients which don’t have a long shelf life. The other reason could be the fact that none of the Indian companies have invested into packaging in order to increase the shelf life of the product. In contrast western products like burgers, pizzas, chips etc are available in western markets in a frozen form and has a good shelf life. There is no problem for western countries to send their products from America to India. They package it ,freeze it and send it across due to frozen technology and frozen supply chain.
A major problem they face in day to day working in food industry is that the customer’s in India prefer everything fresh, they are not very much interested in packaged food even today, apart from namkeens. Like the perishable sweets, if you keep a box packaged like you packaged it yesterday and it says shelf life of 20 days, he will again question that I want it fresh, give me fresh sweets, pack it in front of me. So, that is a challenge, which is driving Haldiram’s to develop improved packaging. In America, one can easily get frozen samosas or frozen parathas. hat technology is already implemented there but in India since the infrastructure is not so good for frozen products, the whole cold chain is apparently missing or incomplete. Due to this lot of packaged food expired before it reaches to end consumer and this is really a role which is played by food processing Industry for security of packaged Foods.