India’s food processing industry attracted foreign direct investment (FDI) worth US$ 1,309.54 million from April 2000 to September 2011, according to the data provided by the Department of Industrial Policy and Promotion (DIPP).
According to the Agriculture and Processed Food Products Export Development Authority (APEDA), exports of organic food products are expected to grow five-fold by 2015. The Government agency predicts exports will near US$ 1.43 billion by 2014-15, dwarfing the US$ 280 million in 2010-11.
‘There are a total of 2,084 organic projects in India which have been certified by our certification bodies. 191 out of these are exporters of organic produce', reported Shailender Singh, Consultant, Organic Division, APEDA.
Investment trends
With Indian coffee retailing set to grow 40 percent per annum, Di Bella is set to capitalise by expanding and opening 50 more outlets across India in the next three years.
- CavinKare Group has entered the Indian confectionery segment with its liquid candy, Funfills. The organised confectionery market in India is estimated at approximately Rs 3,000 crore (US$ 567.11 million), as per Sanjay Sachdeva, the firm's Business Head, Foods & Snacks.
- Sequoia Capital will invest US$ 5 million for a minority stake in Faasos, a Pune-based vendor of Indian fast food. The chain will use this funding to set up 300 to 400 outlets across India. According to some industry estimates, the Indian ‘eating out’ industry is itself worth Rs 100,000 crore (US$ 18.90 billion) and growing at 15-20 percent per annum.
- The world's largest consumer goods maker, Procter & Gamble, is investing Rs 700 crore (US$ 132.33 million) to expand its manufacturing capacity in India.
- Switzerland-based Franke Artemis Group is expanding its operations in India and is set to launch new raft of food service systems in the country involving a first phase investment of Rs 50 crore (US$ 9.45 million)
- Consumer goods makers such as L'Oréal, Kraft Cadbury, and Del Monte, to name but a few, are making more products in India to capitalise on the growing consumer demand
- Italian chocolatier Ferrero, which saw sales of its chocolates such as Ferrero Rocher and Kinder Joy grow by over 50 percent over the last two years, has set up a plant in Maharashtra.
These companies are increasing their manufacturing capacities in the country to take advantage of lower production costs, save on import costs, and make their products more competitive and widely available to the booming Indian consumer market.
According to a report by the credit rating agency, Crisil, major players in India's fast-moving consumer goods (FMCG) industry will continue to pursue acquisitions over the medium term, given the scope for expansion in under-penetrated product segments and geographies, and the intensifying competitive pressures in the domestic market.
- Pizza chain major Domino's expects India to be the biggest market for its online sales globally. Patrick Doyle, President and CEO, Domino's Pizza Inc, claimed, ‘For us, e-commerce in India is definitely going to grow huge.’
- Lavazza, the Italian coffee giant is getting its Indian game plan in place and as a part of the consolidation process it has announced Law & Kenneth as its communications partner, assisting the brand with strategic and creative solutions. ‘India is a top priority market and is in line with our emerging market growth strategy. We foresee India to be a significant business in 10 years and are committed to invest in this fast growing market’, exclaimed Alan Wilson, Chairman, President and CEO.
- The branded frozen foods category is estimated at Rs 1,000 crore (US$ 189.04 million), and industry insiders note it is now growing at the rate of 20-25 percent per annum
What’s next?
India's development and expansion is expected to continue with a predicted 14 percent growth over the next three years, driven, mainly, by three factors – inclusiveness, mix changes and specific consumption categories, according to senior analysts Vijay Chugh, Ashvin Shetty and Shariq Merchant in the report The Indian Consumer: a robust operator in an uncertain world.
The Ministry of Food Processing Industries (MOFPI) Vision 2015 report focuses on enhancing the competitiveness of the food processing industry in both domestic as well as international markets along with ensuring stable income levels for farmers. Vision 2015 seeks to increase the processing of perishable goods to 20 percent, enhance value addition to 35 percent and increase the share in global food trade from 1.5 percent to 3 percent, by 2015.
With its growing economy, its large population offering considerable scope for additional geographic penetration (particularly in the rural areas) and low per-capita consumption, India remains an attractive market, and the opportunities in the food processing industry are potentially enormous.
