Indian food & beverage Industry

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Indian Food & Beverage Industry


<ul><li> 1. Indian Food &amp; Beverage Industry. Project by ~Akib Siddiqui, F1/H1, IIPM(Mumbai). . </li></ul><p> 2. An Introduction to the Sector. The Indian food market is approximately Rs 2,50,000 crore ($69.4 billion) Value-added food products comprise Rs 80,000 crore ($22.2 billion). The food processing industry is witnessing a 20% annual growth rate. Post-Green Revolution, it is essential that agricultural research reoriented to address new challenges. Application of biotechnology, RNA use, and molecular biology. Nutritional research and improved cost- effective vaccine programs. Indian food and beverage companies are making a beeline for regional overseas markets like Bangladesh, Pakistan, Nepal, Middle East The market is seeing players like Heinz, Mars, Marico, Pepsi, ITC, Dabur, Britannia, Cadbury, HLL, Pillsbury, Nestle and Amul. Both public and private players operate in the market, e.g., Hindustan Lever, Nestle and NDDB, NAFED. The price stability throughout the year has contributed to the increase in domestic liquor sales. Branded products are preferred in the Edible oil segment as the urban consumers are increasingly becoming health conscious and looking out for low cholesterol cooking medium. INDUSTRY OVERVIEW. 3. India is the worlds second largest producer of food next to China, and has the potential of being the biggest with the food and agricultural sector. The food processing industry is one of the largest industries in India-it is ranked fifth in terms of production, consumption, export and expected growth. The food industry is on a high as Indians continue to have a feast. Fuelled by what can be termed as a perfect ingredient for any industry - large disposable incomes - the food sector has been witnessing a marked change in consumption patterns, especially in terms of food. Increasing incomes are always accompanied by a change in the food basket. The proportionate expenditure on cereals, pulses, edible oil, sugar, salt and spices declines as households climb the expenditure classes in urban India while the opposite happens in the case of milk and milk products, meat, egg and fish, fruits and beverages. For instance, the proportionate expenditure on staples (cereals, grams, pulses) declined from 45 per cent to 44 per cent in rural India while the figure settled at 32 per cent of the total expenditure on food in urban India. A large part of this shift in consumption is driven by the processed food market, which accounts for 32 per cent of the total food market. It accounts for US$ 29.4 billion, in a total estimated market of US$ 91.66 billion. The Confederation of Indian Industry (CII) has estimated that the foods processing sectors has the potential of attracting US$ 33 billion of investment in 10 years and generate employment of 9 million person-days. The Government has formulated and implemented several Plan Schemes to provide financial assistance for setting up and modernizing food processing units, creation of infrastructure, support for research and development and human resource development in addition to other promotional measures to encourage the growth of the processed food sector. 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 indicates the following segments within the Food Processing industry: Dairy, fruits &amp; vegetable processing Grain processing Meat &amp; poultry processing Fisheries Consumer foods including packaged foods, beverages and packaged drinking water. Though the industry is large in size, it is still at a nascent stage in terms of development of the country's total agriculture and food produce, only 2 per cent is processed. The Indian food processing industry stands at $135 billion and is estimated to grow with a CAGR of 10 per cent to reach $200 billion by 2015. The food processing industry contributed 7 per cent to Indias GDP. The industry employs 13 million workers directly. Value addition of food products is expected to increase from the current 8 per cent to 35 per cent by the end of 2025. Fruit &amp; vegetable processing, which is currently around 2 per cent of total production will increase to 25 per cent by 2025. The highest share of processed food is in the dairy sector, where 37 per cent of the total produce is processed, of this only 15 per cent is processed by the organized sector. The food processing 4. industry in the country is on track to ensure profitability in the coming decades. The sector is expected to attract phenomenal investments of about Rs 1,400 billion in the next decade. Segmentation of different sectors in food processing industry: Sectors Products Dairy Whole milk powder, skimmed milk powder, condensed milk, Ice cream, Butter and Ghee, Cheese. Fruits &amp; Veg. Beverages Juices, Concentrates, Pulps, Slices, Frozen &amp; Dehydrated products, potato wafers/Chips etc. Grains &amp; Cereals Flours Bakeries, Starch Glucose, Cornflakes, Malted Foods, Vermicelli Beer and Malt extracts, Grain based Alcohol. Fisheries Frozen &amp; Canned products mainly fresh form Meat &amp; Poultry Frozen and packed mainly in fresh form, Egg Powder. Consumer food Snack food, Namkeens, Biscuits, Ready to Eat food, Alcoholic and Non-Alcoholic beverages. Primary food processing is a major industry with a highly fragmented structure that includes hundreds of 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 the unorganized sector. FOOD INDUSTRY: The size of the Indian Food Industry is estimated at Rs 8,80,000 crores (US $ 200 billion) in 2006-07 and is slated to reach Rs 1,320,000 crores (US $ 300 billion) by 2015 with the increasing share of processed food (in value terms) from 43 percent to 50 percent. The Indian Food Industry is highly fragmented and is d o m i n a t e d b y t h e unorganized sector. 5. The Food Processing, being the major sector in the Indian Food Industry stands at Rs 3,74,000 crores (US $ 85 billion) and gives direct employment to about 20 lakhs or 2 million workers. The organized food retailing and food services are other emerging areas growing with the annual growth rate of 25 percent. Fruits and vegetables, dairy products, marine and fish, meat and poultry, edible oils, staples, alcoholic and non alcoholic beverages, breads and bakery, confectionary and packaged foods are the key sectors in the industry, which offer tremendous growth potential and investment opportunities POLICIES AND REGULATIONS POLICY INITIATIVES. The various competitive advantages in the food processing sector in India have been analyzed under the frame work given below: Given the size of the industry and the nascent development stage, the food processing sector is a key focus area for the Government of India. The importance of the sector is further enhanced by the fact that over 70 per cent of the population depends upon agricultural activity for livelihood. The government has therefore been focusing on commercialization and value addition to agricultural produce, minimizing pre/post harvest wastage, generating employment and export growth in this sector, through a number of regulatory and fiscal incentives. The industry is largely unorganized, with a small but growing organized sector. The popularity of food and agro products is not surprising when the sector is now offering a growth of more than 150 per cent in sales. With such promise in the sector, a number of foreign companies have joined the fray. While US brands such as McDonald's, Pizza Hut and Kentucky Fried Chicken have become household names, more are on their way. The new wave in the food industry is not only about foreign companies arriving here attracted by the prospective size of the market. It is also about the migration of the Made in India tag on food products traveling abroad. Indian food brands and fast moving consumer goods (FMCGs) are now increasingly finding 0% 5% 10% 15% 20% 25% 30% 35% BEER Meat Dairy Fruits &amp; Vegetables Marine and Fish Packages goods Poultry Wine Growth rate of Key sectors. Percenatge 6. prime shelf-space in the retail chains of the US and Europe. These include Cobra Beer, Bikanervala Foods, MTR Foods' ready-to-eat food stuff, ITC's Kitchen of India and Satnam Overseas' Basmati rice. The Government has formulated and implemented several schemes to provide financial assistance for setting up and modernizing of food processing units, creation of infrastructure, support for research and development and human resource development in addition to other promotional measures to encourage the growth of the processed food sector. The Centre has permitted under the Income Tax Act a deduction of 100 per cent of profit for five years and 25 per cent of profit in the next five years in case of new agro processing industries set up to package and preserve fruits and vegetables: Excise Duty of 16 per cent on dairy machinery has been fully waived off and excise duty on meat, poultry, and fish products has been reduced from 16 per cent to 8 per cent. Most of the processed food items have been exempted from the purview of licensing under the Industries (Development and regulation) Act, 1951, except items reserved for small-scale sector and alcoholic beverages Food processing industries were included in the list of priority sector for bank lending in 1999 Automatic approval for foreign equity up to100 per cent is available for most of the processed food items except alcohol, beer and those reserved for small-scale sector subject to certain conditions The Union Commerce Ministry has approved a brand promotion campaign for value-added Made in India cashew being launched in the West Asian market by March end. The campaign, mooted by Cashew Export Promotion Council of India (CEPCI), involves a financial assistance of US$ 344,787 by the Ministry Full repatriation of profits and capital has been allowed Zero duty import of capital goods and raw material for 100 per cent export oriented units Sales of up to 50 per cent in domestic tariff area for agro based, 100 per cent export Oriented units is allowed Government grants have been given for setting up common facilities in agro Food Park Full duty exemption on all imports for units in export processing zones has been done . FOOD SAFETY AND STANDARD ACT, 2006 Till the year 2005, thirteen different laws were applicable on the food and food processing sector. Multiple laws/ regulations prescribe varied standards regarding food additives, contaminants, food colors, and preservatives and labeling. In order to rationalize the multiplicity of food laws, a Group of Ministers (GoM) was set up to suggest legislative and other changes to formulate integrated food law, to be a single reference point in relation to regulation of food products. Based on the recommendations of the GoM the ministry of food processing enacted the Food Safety &amp; Standard Act (FSSA), 2006. Salient features of the act: 7. FSSA will be aided by several scientific panels and a central advisory committee to lay down standards for food safety. These standards will include specifications for ingredients, contaminants, pesticide residue, biological hazards and labels The law will be enforced through State Commissioners of Food Safety and local level officials Everyone in the food sector is required to get a licence or a registration which would be issued by local authorities Every distributor is required to be able to identify any food article to its manufacturer, and every seller to its distributor. Anyone in the sector should be able to initiate recall procedures if he finds that the food sold had violated specified standards. FOREIGN DIRECT INVESTMENT The government of India is planning to offer 100 per cent foreign direct investment and income tax benefits in the food processing sector. Foreign direct investment (FDI) in the country's food sector is poised to hit the US$ 3billion mark. In the last one year alone, FDI approvals in food processing have doubled. The cumulative FDI inflow in food processing reached US$ 2,804 million in March '06. The sector received approvals worth US$ 41 million. Thisfigure is almost double the US$ 22 million approved in 2004-05. Nearly 30 per cent of FDI in this sector comes from EU countries such as Netherlands, Germany, Italy and France. Some of the successful ventures from EU countries are Perfetti, Cadbury, Godrej-Pilsbury, Nutricia International, Manjini Comaco, etc. VISION STRATGEY AND ACTION PLAN Ministry had commissioned a Vision preparation for the growth of FPI sector. The Vision Document was released on April 07, 2005. The Vision envisages that industry should aim to increase processing level of perishables from 6per cent to 20 per cent, increase value addition from the present level of 20 per cent to 34per cent and share in global trade up from 1.6 per cent to 3 per cent, thus tripling the size of processed food industry by 2015. Tripling of the size of industry is estimated to generate direct employment of 2.8 million and indirect employment of 7.4 million persons. INFRASTRUCTURE DEVELOPMENT IN FOOD PROCESSING SECTOR There is a lack of suitable infrastructure in the shape of cold chain, packaging centers, value added centre, modernized abattoirs etc. Improvement in general infrastructure is also an aid for energizing of sector. Government attaches highest priority to development and expansion of physical infrastructure for facilitating prompt growth of industries. In order to address the problem of infrastructure in food processing sector, the Government has implemented the scheme for infrastructure development comprising the following components: FOOD PARK SCHEME 8. The idea behind setting up of food parks is that small and medium entrepreneurs find it difficult to invest in capital-intensive activities. Therefore, as a part of the strategy to develop food processing infrastructure, the Ministry has been pro actively pursuing the task of setting up of food parks in different parts of the country. In the food parks, common facilities like cold storage, food testing and analysis lab, affluent treatment plant, common processing facilities, packaging centre, power supply, water supply, seminar / conference / training facilities etc can be assisted. Financial assistance for food parks is provided at 25 per cent for general and 33.33 per cent for difficult areas subject to a maximum of Rs. 40 million. Under the scheme, 02 food parks were assisted under 8th Plan, 39 under 9th Plan Scheme and 10 under 10th Plan. An amount of Rs. 1.04 billion has been sanctioned up to December 2005. 22 food parks have become operational. In a bid to boost the food sector, the Government is working on agrizones and the concept of mega...</p>