By: Dr. Dietrich Kebschull

INDIA WEEK HAMBURG 2011

FOOD PROCESSING INDUSTRY :MARKET

OPPORTUNITIES FOR INDIAHandelskammer Hamburg-PlenarsaalAdolphsplatz1, 20457 Hamburg

An Over view

of the Indian Food Processing Industry(FPI)

Advantage India: Sourcing Hub A huge Market

India is an emerging market for processed food

• Nearly 1.300 million people• 350 Million strong urban middle class.• Increasing disposable income.• Fast changing lifestyles with ongoing urbanization.• Increasing Number of working women.• Health consciousness.• Increasing number of small families with two earners.• Increasing consumer base.• Rapidly growing organized retail sector.

Untapped Potential

High Demand

High returns in terms of quality &

brand loyality building

High Investment

Estimated investments

by 2015 =EUR 22.9 bn

Demand for processed food & value added products

Growing corporate participation, improved infrastructure

Healthy living, brand consciousness, high disposable income

India as a sourcing Hub

• Annual milk Production-105 million tones(Highest in the world).• 485 million live stock(highest in the world)• 150 million tones of F&V(2nd in the world)• 230 million tones of food grains.• 20 agro climatic zones • Out of 60 soil types 40 are found in India• 160 million hectares of arable land• Largest Producer of spices• 3rd largest producer of oil seeds

Major sectors today

Fruits & Vegetables

Dairy

Meat and Poultry

Marine Products

Grain Processing

Beer & Alcoholic Beverages

Packaged and convenience Food

Present Level of Processing in different food segments are still low

• Fruits & Vegetables(F&V)-2.2%• Marine Products-26%• Meat -20%• Poultry-6%• Milk-35%

As against 60-70 % in developed countries.

Food wastage due to lack of processing infrastructure is estimated to be 9 billion!! Euros.

Facts and Figures

• FPI is very important for India’s development and employment. It links industry, agriculture and services.

• The Industry has highest number of plants approved by the US Food and Drug Administration(FDA) outside the USA.

• FPI is the 5th largest industry in India in terms of consumption, employment and exports ,contributes 14% to the Manufacturing GDP.

• Employs 13 Mn people directly and 35 Mn indirectly.• The FPI is estimated at 79 Billion Euros (2007-08)and is expected

to grow to 241 billion Euros by 2015.• The processed food market is expected to grow at a rate of 13.5%.• Contributes 14% to the Manufacturing GDP.

SECTOR WISE OVERVIEW

Dairy

• India ranks 1st in the world in terms of milk production• The dairy sector has an estimated consumer demand EUR 32 billion

and growing at a rate of 8% per annum.• Present level of processing in Dairy is 35%.• Industry profitability is good and has high potential for introduction

of new value added products.• Manufacturing of CASEIN and LACTOSE has good scope in the

country: at present these are generally imported.• Market of yoghurt is growing at a rate of 18% that of sour milk at

33%.• Major players in Indian Dairy Industry are Nestle, Cadbury, Amul,

H.J.Heinz, Smith Kline Beachem,Wockhardt.

Meat and Poultry

• Meat and poultry sector is expected t grow at a rate of 15% per annum.

• Indian buffalo meat is witnessing strong demand in the international market due to its lean character and near organic nature.

• Large potential for setting up of modern slaughter houses and cold chains.

• Poultry is also witnessing strong growth.• The newly upcoming modern retail sector has strong influence on

the growth of Processed Meat and Poultry.• Major Players are Venkateshwar Hatcheries(Venky’s) , Godrej

Agrovet, Frigo refico Allana Limited.

Years 2002-03 2006-07 2010-11 2014-15

Market Size EUR2 bn 3.5 bn EUR 5 bn EUR 7bn

Processed EUR 400mn EUR 740 mn EUR1.6 bn EUR 3.1 bn

Non-Processed EUR1.6 bn EUR 2.8 bn EUR 3.4 bn 3.9bn

Market size of meat and poultry products

Fruits and Vegetables

• India is the 2nd largest producer of fruits and vegetables.

• Expected to grow at 14-15% per annum between 2010 -2015.

• Major F&V products are fruit pulp & juices,fruit based ready to serve beverages,canned fruits and vegetables, jams , squashes , pickels etc.

• F& V processing market growing at a rate of 11% per annum. Offers opportunities for high tech equipment manufacturers.

• Major players are Unilever, ITC, Dabur, MTR.

Marine Products

• With 8000 Km coast line, 50600 Sq km of continental shelf area & 2.2 million Sq Km of Exclusive economic zone India is endowed with rich fisheries resources.

• Total marine products targeted for next 5 years EUR 2.82 bn.• Government has plans to develop India as a major hub for

outsourcing reprocessing of marine products.• Key products are frozen shrimp,lobster , cattle fish,clams and fish

fillets.• Major Players in marine products are ASF sea foods, Bell foods,

Deep Sea products.• More than 200 units are approved by the EU for exports to the EU.

Grain processing

• Grain processing includes milling of wheat rice and pulses.• There are 43.000 modern rice mills,10.000 pulse mills,820 large

flour mills.• The breakfast cereal market is growing at a rate of 7% and sales are

expected to reach EUR 55million by 2015.• Investments in the bakery and milling sector risen by 30,4% since

2007.• This segment is expected to grow steadly at 15-20% for next 5

years.• Indian basmati rice has high demand in International markets.

Alcohol and Beverages

• Market value is 60 million Euros. This segment has grown at 25% per annum for last few years.

• The industry is estimated to grow at 24% per annum to 1.06billion from 2010-15.

• Government has introduced special wine policy to promote grape plantation and establishment of wineries.

• India is one of the fastest growing beer markets.• Evolving pub culture and urbanization.• Major players are Radico Khaitan, UB, SAB Miller.

Requirements of the Indian Food Processing Industry

Indian FPI needs..

• Efficient supply chain.

• Quality Testing Infrastructure.

• Packaging and Grading Centers

• Cold Chains

• Modern Abattoirs.

• Policy framework to boost the FPI.

• Modern R&D

• Skill Development.

Government’s Initiatives.

• Vision 2015 Increasing food processing level to 25% by 2015 Increasing Value addition to 35% by 2015 Increasing India’s share from 1.6% to 3% in global processed food

trade by 2015• EUR 60 billion set apart 11th five year(2007-2012) plan to achieve

above mentioned objectives.

..Contd TAX INCENTIVES• Custom duty reduced 5% from 7.5%earlieron on food processing machinery and to 10%

from 20 %refrigerated vans.• Full exemption from custom duty to refrigeration units required in manufacturing of

refrigerated vans.• Customs duty on packaging machines reduced from 15% to 5%. TOTAL QUALITY MANAGEMENT(TQM)• Ministry of Food Processing Industry aims to set a country wide network of Labs for

TQM in FPI• Reimbursement upto 50% of total expenditure towars impementation of TQM including

HACCP( hazard analysis and critical control points), GMP(good manufacturing practices),GHP(Good handling practices), ISO 14000, ISO 22000.

R&D• To reduce wastage and spoilage• Development of technologies and methods for preservation of food products• Identification of better and ecofriendly packaging material.

..contd

Infrastructure Development• Food parks• Mega food parks• Modern abattoirs

Human Resource Development• Establishment of industry specific Institutes

India as a Investment Destination

.. Contd

• India offers big chances to the food processing sector.• An average Indian spends the majority of his income on food products.• Rapid urbanization and busy lifestyles has propelled the demand of processed

food.• Huge consumer base more than 350mn consumers of processed food.• Vast resource of raw material for food processing.• Stable economy with strong growth.• Automatic approval of foreign equity upto 100% for almost all processed food

Items.• FDI in food processing sector from 2000 to 2011 only has been around EUR 1

billion .• Major multinationals that have invested in India are Nestle, Pepsico, Coca Cola,

Perfetti, Conagra,Unilever,Glaxo Smithkline,Heinz ,Wyeth

India Calling : Opportunities for German Companies

German companies can assist Indian food processing sector in all aspects.

Germany has years of experience and expertise in Food processing Industry.

Experience with SPS/TBT which is a big barrier for Indian companies.

Hold 2nd position in food processing in Europe.

Promising Fields of Co-operation

• Fruit & Vegetable sector : grading, processing ,packaging.

• Dairy : cheese and yoghurt.

• Fish and marine products

• Meat products: smoked varieties products specially sausages.

• Spices ,tea, cocoa and coffee.

• Grapes for wine etc

• Machinery and equipments

• TQM

• R&D and testing Labs

..contd

• Imparting training to food processing professionals.

• Tie ups with educational institutes for industry specific courses

• Building of infrastructure like cold chains ,abattoirs, modern processing facilities.

• Assistance in marketing in India Europe /USA and third markets

IGEP’s Support possibilities

Working on Indo German trade for last 25 years

Representing Hamburg. We are operating Hamburg business center in India

Providing professional support to many German SMEs I India.

Can assist and play a facilitating role in business linkages for German companies & research institutes with joint cooperation partners in India.