The contrast between actual production and processing capabilities always offers an array of opportunities thanks to which food processing is one of the fastest evolving sectors in India. The opportunity in the food processing industry is vast, but so are the challenges; the need of the hour is to improve technology and productivity in order to be competitive globally.
The food processing industry has gained wider acceptance across the nation and is poised to grow manifold in the near future. Food processing is on the radar of many investment engines as processing sectors like dairy, bakery products, ketchups and gourmet segment present a slew of attractive opportunities.
The Indian food processing industry is expected to reach USD 200 billion by 2015. Currently, a large part of food processing happens primarily on the commodity side. However, as the nutritional needs of the Indian consumer increase, alongside a shift towards an urban lifestyle, it is expected that value-added products will witness high growth. Apart from rapid urbanization, the Indian food processing industry is set to benefit from such other promising growth drivers as changing lifestyles, increasing disposable income, rising health consciousness, growing culture of nuclear families, greater presence of women in the workforce and higher nutritional needs. The almost year-round availability of fresh products across the country, combined with consumers’ preference for fresh products and freshly-cooked food, stands out as a huge challenge against the acceptance of processed food.
The major markets for Indian processed food are Europe, the Middle East, Japan, Singapore, Thailand, Malaysia and Korea. The food processing industry, which was primarily driven by exports in the past, is now witnessing rapid growth in the domestic market as well.
In addition to the changes on the demand side, there are also changes occurring on the supply side with growth in organized retail, increasing FDI and new product introductions supporting the industry’s growth. Moreover, the central government has given priority status to all agro-processing businesses. Government incentives in the field of mega food parks, cold chain, research and development, etc., supported by exports, are also playing an important role in promoting food processing, but come with their own challenges.
By mapping the perishability, processing level and organized segment penetration it can be seen that there is a clear need for improvement across the supply chain to uplift the penetration of organized processing.
Specifically in key sectors such as Fruits & Vegetables, Dairy, Seafood and Marine Products, the perishability index is high and supply chain improvements represent enormous investment opportunities.
Analyzing the high wastage level clearly reveals that the extant state of our infrastructure is incapable of coping with crop surpluses. This leads to price reduction due to logistical challenges impairing market access. Food processing is one of the solutions poised to solve crop surplus issues.
Supply side constraints are more crucial to the processed food value chain and need immediate attention. There is also a clear need for effective and implementable action points as these constraints will result in blockages in the food processing growth story.
This segment concentrates on the different, crucial enablers of the food processing industry. Among the various influencers, the most crucial ones are cold chain, packaging and retailing.
Processed food has gained more shelf space in a majority of retail formats; this is poised to increase further in future. Also, processed food is not restricted only to imported segments in a retail store but has also spread to staples, FMCG, F&V, Dairy, Frozen & Meat categories. Retailers are stepping out and extensively launching specific processed foods as private labels.
To sum, India as a nation is shifting towards consolidation, improving from a situation of excessive wastage. Food processing is an imperative and will sustain India’s growth story. There are ample investment opportunities across supply and demand interventions. India as a country can feed other nations, the production parameters are in place and food processing can act as the delivery interface.
About the Authors
Ravindra Yadav is Principal Consultant and Aneesh Saraiya is Senior Consultant, Food services & Agriculture at Technopak.
