Food Processing Industry- An

Indian & global overview and

Marketing strategy for rural

areas

INTRODUCTION TO INDIAN FOOD

PROCESSING INDUSTRY

The Indian food processing industry accounts for 32 per cent of the country’s total food market and is ranked fifth in terms of production, consumption, export and expected growth.

It contributes around 8.80 and 8.39 per cent of Gross Value Added (GVA) in Manufacturing and Agriculture respectively, 13 per cent of India’s exports and 6 per cent of total industrial investment.

Major industries constituting the food processing sector are grain milling, sugar, edible oils, beverages, fruits & vegetables processing and dairy products.

Food processing industry is one of the major employment intensive segments contributing 11.69% of employment generated in all Registered Factory sector in 2013-14.

The industry is largely unorganized, with a small but growing organized sector. The organized sector contributes approximately 30% of the food processing industry in India. The highest share of the organized processed food is contributed by the meat and poultry segment, contributing approx. 27% of the total food processing sector.

Market trends in the Indian food

processing sector • Wide array of products, coupled with increasing

global connectivity has led to a change in the tastes and preference of domestic consumers

• This trend has been bolstered by rising incomes, increasing urbanization, a young population, and the emergence of nuclear families

Changing consumer tastes

• Liberalization and growth of organized retail have made the Indian market more attractive for global players

• With a large agriculture sector, abundant livestock, and cost competitiveness India is fast emerging as a sourcing hub of processed food

Entry of international companies

• Companies have been moving up the value chain; for example, cooperatives are transitioning from being pure producers of milk to offering a wide range of dairy products

• Firms, both domestic and global, have been focusing on product innovation to cater to domestic tastes, while also introducing international flavors.

Rising business and product innovation

Expanding markets and new channels :

Regional to national foot print ( Sudha dairy, Bihar), Rural

marketing (HUL), Franchisee model (APDDCF, Andhra dairy)

International players :

Entry of International players in food processing and value added

services - Del Monte, Walmart

New & Innovative Products:

Pepsico’s Nimbooz, Aliva snacks, Minute maid from Coca cola,

Maggi, Ataa Noodles

Strengthening of linkages :

Development of back end - Contract farming, investment in

modern storage

Emergence of third party logistics

Source: Global AgriSystem

Industry trends in the Indian food

processing sector

Food Processing Industry :

Market Size & Growth Matrix

Source: ASA and Associates

DIFFERENT STAGES OF PROCESSING ACROSS

PRODUCTS Segments Primary Processing Secondary

Processing

Tertiary Processing

Fruits and vegetables Cleaning, sorting, grading

and cutting

Slices, Pulps, Flakes, Paste,

Preserved and Flavoured

Ketchups, Jams, Juices,

Pickles, Preserves,

Candies, Chips etc.

Grains and Seeds Sorting and Grading Flour, Broken Rice, Puff,

Malt and Milling

Biscuits, Noodles, Flakes,

Cakes, Namkeen

Oilseeds Sorting and Grading Oil Cakes Sunflower, Groundnut,

Mustard, Soya, Olive Oil

etc.

Beverages Sorting, Bleaching and

Grading

Leaf, Dust and Powder Tea Bags, Flavoured

Coffee, Soft Drinks,

Alcoholic Beverages

Milk Grading and Refrigerating Cottage Cheese, Cream,

Skimmed and Dried Milk

Processed Milk, Spreadable

Fats (Butter and Cheese),

Yoghurt

Meat and Poultry Sorting and Refrigerating Cut, Fried, Frozen and

Chilled

Ready to Eat Meals

Marine Products Chilling and Freezing Cut, Fried, Frozen and

Chilled

Ready to Eat Meals

DRIVERS OF GROWTH IN FOOD

PROCESSING INDUSTRY IN INDIA

SUPPLY SIDE

Abundance of raw material

Cost competitiveness

Easier credit

Policy support

DEMAND SIDE

Changing profile and tastes of consumers

Product innovation

Increased spending on healthy and nutritional foods

Rising export opportunities

Advent of branded and organized retail

Better preservation and packaging techniques

KEY POLICY INTIATIVES FOR THE INDUSTRY

• This sector has been assigned priority status for bank credit

• 60 AEZ has been set up in the country INFRASTRUCTURE

• 100% FDI under automatic route

• Investment between April 2000 and March 2017 stood at USD 7.54 billion.

FDI

• Global and Indian companies are collaborating to make global products available in India

• Eg: Starbucks and Tata Alliance

JOINT VENTURES AND TIE UPS

NATIONAL MISSION ON FOOD

PROCESSING

The national mission on food processing was approved by the Government of

India with an outlay of Rs 1600 crore during the period 2012-17. The share of the

central and the state government was Rs 1250 crore and Rs 350 crore

respectively. The schemes taken up under the mission included:

1.Scheme for technology upgradation/ establishment/ modernization of food

processing industries

2. Scheme for cold chain, value addition and preservation infrastructure for non

horticulture products

3.Setting up/ modernization/ expansion of abattoirs

4. Scheme for human resource development (HRD)

5. Scheme for promotional activities

6.Creating primary processing centres/ collection centres in rural areas

7.Modernization of meat shops

8.Reefer vehicles

9. Old food parks

VISION 2015

MOFPI had commissioned a vision document for the industry in 2005, which aims to treble the size of the food processing sector from 2005 to 2015.

The tripling of size of the industry is estimated to generate a direct employment of 0.28 crore and an indirect employment of 0.74 crore persons.

The salient features are:

Increase the processing levels of perishables from 6% to 20%,

Increase the value addition from 20% to 34%

Increase the share in global trade from 1.6% to 3.0%

CURRENT STATUS:

The progress of the vision needs to be accelerated.

Greater state cooperation inducing higher levels of cluster farming, accelerated agricultural growth through high value segment (horticulture, livestock, fisheries) is needed.

There is a need to improve the fragmented and unreliable supply chain through infrastructure development.

AGENCIES INVOLVED

Ministry of Food Processing Industries (MoFPI)

Food Safety and Standards Authority of India (FSSAI)

Agriculture and Processed Foods Export Development Authority (APEDA)

National Institute for Food Technology and Entrepreneurship Management (NIFTEM)

All India Food Processors Association (AIFPA)

Commodity Boards under the Ministry of Commerce and the Ministry of Agriculture/Ministry of Food Processing: coffee, tea, spice, meat and grapes.

Indian Grape Processing Board (IGPB)

FOREIGN INVESTORS

Advantage India

Domestic

food

spending:

USD

181 billion 2009

Strong demand growth

• Demand growth for processed food

has been rising with growing

disposable income, urbanization, a

young population and nuclear

families

• Household consumption is set to

double by 2020

Policy support •Sops to private sector participation;

100 per cent FDI under automatic route

•Agri Export Zones have been set up;

under the government’s Vision 2015

plan, mega food parks to be established

•Approval of National Mission on Food

Processing

Food processing hub

•India benefits from a large

agriculture sector, abundant

livestock, and cost competitiveness

•Investment opportunities will

arise in agriculture, food

infrastructure, and contract

farming

Domestic

food

spending:

USD318

billion

2020

Advantage

India

Increasing investments •Government expects USD21.9 billion

of investments in food processing

infrastructure by 2015

•Investments, including FDI, will rise

with strengthening demand and

supply fundamentals

Source: India Brand Equity Foundation

Supply Chain Institutional Gaps

(procurement dependence on APMC

markets )

Inadequate link between production and

processing (lack of processable varieties)

Supply Chain Infra Gaps (Lack of primary

processing, storage and distribution facilities)

Challenges for Food Processing

Sector

Lack of product development and

Innovation

Seasonality of operations and low capacity utilization

Inadequate focus on quality and safety

standards

Food Processing Sector–

Impediments

Source: Ministry of Food Processing Industries

Government of India

INTRODUCTION TO GLOBAL FOOD

PROCESSING INDUSTRY The food market is expected to bring in revenue by 2020 of $3.03 trillion, registering a compound annual growth rate (CAGR) of 4.5 percent from 2015 to 2020.

Geographically, North America is the largest market in the current scenario followed by Europe, APAC and LAMEA.

Prominent players like Nestlé and the Kraft Foods unit are investing heavily in promotions and increasing brand awareness for aiding product differentiation.

Food & beverage companies are actively assessing customer insights and preferences to understand the market requirements.

The leading players in the market have been focusing on mergers and partnerships as their key strategies to expand their presence.

Also, growth of the worldwide packaged food market is mainly due to rising demand from emerging economies.

Asia Pacific ranks as the fastest CAGR of 5.4 percent during 2015 – 2020, primarily driven by the growing per capita incomes and increasing health awareness. China and India are expected to show significant market growth for packaged food products.

FOOD PROCESSING INDUSTRY IN AFRICA

The food processing industry in Africa is an exciting and fast-growing space.

Africa has historically been known for a wealth of fertile regions where fresh

produce is grown, harvested and distributed both for local consumption and

exports.

Now, this sector is being closely watched by private equity funds keen to

maximize investment opportunities across the continent.

The African market has recently seen a trend where companies are moving away

from solely producing raw consumables and increasingly investing in value-add

processing units and branded food products.

This trend has subsequently repositioned food processing as a manufacturing and

Fast Moving Consumer Goods (FCMG) sector rather than an agricultural sector.

OPPORTUNITIES IN AFRICA

Africa’s farmers and agribusinesses could create a trillion-dollar food

market by 2030 if they can expand their access to more capital, electricity,

better technology and irrigated land to grow high-value nutritious foods, and

if African governments can work more closely with agribusinesses to feed the

region’s fast-growing urban population, according to a new World Bank report.

African countries can tap into booming markets in rice, maize, soybeans,

sugar, palm oil, biofuel and feedstock and emerge as major exporters of

these commodities on world markets similar to the successes scored by Latin

America and Southeast Asia.

For Sub-Saharan Africa, the most dynamic sectors are likely to be rice, feed

grains, poultry, dairy, vegetable oils, horticulture and processed foods to

supply domestic markets.

NOTABLE TRENDS IN THE AFRICAN

FOOD PROCESSING SECTOR • A change in consumer tastes and incomes has

increased aggregate demand for processed goods.

• Higher disposable incomes allow for a greater ability to spend on packaged, branded products which are generally of a higher quality.

Changing consumer tastes

• Supermarket chains such as Shoprite, Carrefour and Pick n’ Pay are increasingly popular across Africa, expanding aggressively across urban centres on the continent.

• The ability to stock food products in cold storage and provide multiple varieties of domestic and international brands allows for an easy and convenient experience when buying household food items.

Growth of supermarket chains

• The move towards consolidation has allowed for much smaller players to be acquired by large food conglomerates such as Tiger Brands, Remgro Limited and Foodcorp.

• These food conglomerates have reliable distribution networks (a key advantage in Africa) and can provide consistently higher quality food products as they are vertically integrated.

Emergence of consolidated firms

CHALLENGES FACED BY THE

PROCESSING INDUSTRIES

The high cost of capital and limited access to finance

High crime rates and stock thefts

Lack of technical and market information

Limited managerial and administrative skills

Seasonality of raw materials remains the main supply constraint

RECOMMENDATIONS FOR THE

PROCESSING INDUSTRIES

Small scale food processors must be provided training in aspects related to

marketing

MIS platform needs to be developed for disseminating timely, accurate and

comprehensible information on prices and market by the government to help

strengthen the processing industries

Venture capital institutions need to be created by the government to

support the financial needs of the entrepreneurs

Allocation of budget for improvement in the infrastructural facilities related

to processing must be maintained

Focus on quality and safety standards must be maintained

The model of Food Industry and

channels of linking farmers

Source: Food 360 Knowledge Paper 2013

Market Chain

Farmer Transporter Wholesale

r Processor Retailer Consumer

Technological Innovation Commercial Innovation

Institutional Innovation

Innovation in Agricultural Value chain

MARKETING STRATEGY FOR RURAL

AREAS An overview

DEGREE OF MARKETING

Niche marketing: A very small group in a segment that has specific need and

the marketer has specific skills to satisfy it

Micro marketing: Tailoring of the product to satisfy a particular need

Local marketing: Involves designing brands and promotions to suit the needs

and wants of local customer groups on a geographical basis

Individual marketing: An individual can get the product made exactly

according to his needs, Eg: tailoring

MARKETING STRATEGIES

SEGMENTATION

Geographic segmentation

Demographic segmentation

Psychographic segmentation

Behavioral segmentation

TARGETING

Undifferentiated marketing

Differentiated marketing

Single segment concentration

MARKETING STRATEGIES

POSITIONING STRATEGIES

Product differentiation

Service differentiation

People

Image

PRODUCT STRATEGIES

New product development

Sturdy products

Brand name

Small unit packing

Low priced packing

MARKETING STRATEGIES

PACKAGING

Use bright colors

Use local languages on the pack,

images

BRAND BUILDING

Brand name development

Creating a brand identity

Building a brand image

MARKETING MIX CHALLENGES

Availability: Poor road condition is a challenge to make the products available in

remote areas.

Affordability: Low disposable income for rural consumers.

Awareness: Only limited rural households has access to television, so building

awareness is another major challenge.

Acceptability: There is a need to offer products that suit the rural market.

ICRISAT South-South Initiative

(IS-SI) Projects of Agribusiness and Innovation Platform (AIP) ICRISAT

•AIP-ICRISAT has partnered with Forum for Agricultural

Research in Africa (FARA) for handholding and mentoring

its UniBRAIN (Universities, Business and Research in

Agricultural Innovation) initiative

•Six Agribusiness Innovation and Incubation Consortia

(AIIC) under UniBRAIN are being supported in five African

countries (Ghana, Mali, Uganda, Kenya & Zambia).

•ICRISAT and FARA along with its local African Partners

are helping in setting-up of these incubator consortia

addressing value chains like sorghum, banana, fruits,

livestock and agroforestry.

Six Value-chain based Agri-Business

Incubators in Africa

Proposed initiatives under IAFS II

Establishment of institutions at Pan Africa Level

Establishment of institutions at Regional Level

Establishment of institutions at Bilateral Level

Capacity Building (Special Training courses)

HRD and Scholarships

Supporting Business and Infrastructure

Experience Sharing

ICRISAT initiatives under

The Second India-Africa Forum Summit

(IAFS II)

Setting up of 5 FPBICs in 5 African

Countries in Uganda, Cameroon, Ghana,

Mali, Angola

ICRISAT as an implementing agency

shall help the local entrepreneurs

enhance their business skills for

scaling-up in the business of food

processing.

The purpose is the development of

innovative entrepreneurs contributing

to higher production of quality food

products, which in turn, will help to

increase the economy of Africa by way

of meeting the livelihood concerns and

increased foreign exchange earnings.

SCENE

Establishment of Food Processing Business

Incubation Centres (FPBICs) at bilateral level

Setting up FTLs in 5 African Countries in

Gambia, Republic of Congo, Chad

(replaced with Nigeria), Rwanda,

Zimbabwe ICRISAT shall help the local

entrepreneurs entering the national

and international markets with

products meeting the stringent

nutritional and food safety standards.

ICRISAT shall establish state-of-the art

FTLs for promoting entrepreneurs in

the area of food processing by

providing them access to the latest

food testing facilities enabling

production of quality and safe food

products meeting international

standards.

1

Establishment of Food Testing Laboratories

at bilateral level

Knowledge and skill development training

for African nationals

1

Thank You