India’s food processing sector is poised for growth in response to changing demographics, evolving preferences for branded items, a modernizing retail sector, growing consumer acceptance of processed foods, and government advocacy to develop food manufacturing.
Income growth has increased consumer appetites and discretionary spending within India for a while now. However, there have also been increases in urbanization and the number of working women, which has pushed consumers to look for products offering more convenience, specifically when it comes to products within the food and beverage sector. This will lead to trading up from unpackaged to packaged products as well as unbranded to branded products.
Urbanization will continue to drive consumers towards packaged foods as well. Additionally, consumers have gained a level of health consciousness – a development which has led them to choose their packaged foods products more wisely. Given that the industry is underpenetrated, improved competition will bolster volume growth and create more awareness and better availability through stronger distribution. This has led to India witnessing a sizeable shift in its restaurant sector as well - from largely serving Indian snacks to serving Western foods with an Indian flavour.
India’s government has simplified investment procedures in the food processing sector in an effort to attract foreign investment and boost job creation. According to the Ministry of Commerce, the food processing industry has attracted investment valued at US$7.3 billion during 2000 – 2016.
So where do we see the biggest growth in the Indian food processing sector?
India is a large producer of fruits and vegetables, but only two percent are processed. The major processed items are fruit pulps, juices, Indian-style pickles, dehydrated vegetables, curried vegetables, dried fruits, and processed mushrooms. The processed meat sector, which was formerly regulated by the Ministry of Food Processing, is now regulated by the Food Safety and Standards Authority of India. There are around 4,000 municipal slaughter houses in the country along with a number of modern private sector slaughter houses and meat processing plants. Over a hundred of India’s meat slaughter and meat processing plants are registered exporters of meat, primarily buffalo meat and, to a lesser degree, mutton.
As the world’s largest dairy producer, demand for dairy products is growing at twice the rate of production, with Western cheeses and yoghurts being emerging dairy categories. India is the world’s largest importer of vegetable oil, and edible oils purchased by households or institutions are sold in liquid form or as vanaspati (partially hydrogenated vegetable oil). According to industry sources, 35 to 40 percent of the Indian edible oil market is branded.
Another segment where we witness huge growth is in milling and baking. Approximately 90 percent of grains undergo primary processing, with wheat being the primary processed grain in India, largely used for wheat flour. Milling of rice and pulses makes up the remainder of the grain processing sector. Most grain processing is carried out in the unorganised or informal sector; however, some large players are active in the market and sell processed grains in branded retail packs. Additionally, imported specialty flours direct for retail have found a niche in the Indian market owing to their unique attributes or to a greater awareness of their benefits.
Due to changing lifestyles, the breakfast cereal segment is showing slow and steady growth, primarily for corn flakes and oat products. The bakery and snacks industry is dominated by small and medium players and a handful of large firms. In response to the growing baking and retail industry, imports of ingredients such as malt, starches, food flavouring agents, and wheat gluten are increasing. India also imports a significant amount of pulses from Myanmar, Canada, Australia, China, and Kenya.