Food Processing Industry- An Indian & global overview and Marketing strategy for rural areas

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1 Food Processing Industry- An Indian & global overview and Marketing strategy for rural areas

2 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 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.

3 Market trends in the Indian food processing sector Changing consumer tastes Entry of international companies 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 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 Rising business and product innovation 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.

4 Industry trends in the Indian food processing sector 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

5 Food Processing Industry : Market Size & Growth Matrix Source: ASA and Associates

DIFFERENT STAGES OF PROCESSING ACROSS PRODUCTS Segments Primary Processing Secondary Processing Fruits and vegetables Cleaning, sorting, grading and cutting Slices, Pulps, Flakes, Paste, Preserved

6 DIFFERENT STAGES OF PROCESSING ACROSS PRODUCTS Segments Primary Processing Secondary Processing Fruits and vegetables Cleaning, sorting, grading and cutting Slices, Pulps, Flakes, Paste, Preserved and Flavoured Grains and Seeds Sorting and Grading Flour, Broken Rice, Puff, Malt and Milling Tertiary Processing Ketchups, Jams, Juices, Pickles, Preserves, Candies, Chips etc. 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 Milk Grading and Refrigerating Cottage Cheese, Cream, Skimmed and Dried Milk Meat and Poultry Sorting and Refrigerating Cut, Fried, Frozen and Chilled Marine Products Chilling and Freezing Cut, Fried, Frozen and Chilled Tea Bags, Flavoured Coffee, Soft Drinks, Alcoholic Beverages Processed Milk, Spreadable Fats (Butter and Cheese), Yoghurt Ready to Eat Meals Ready to Eat Meals

7 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

8 KEY POLICY INTIATIVES FOR THE INDUSTRY INFRASTRUCTURE This sector has been assigned priority status for bank credit 60 AEZ has been set up in the country FDI 100% FDI under automatic route Investment between April 2000 and March 2017 stood at USD 7.54 billion. JOINT VENTURES AND TIE UPS Global and Indian companies are collaborating to make global products available in India Eg: Starbucks and Tata Alliance

9 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 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

10 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 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.

11 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)

12 FOREIGN INVESTORS

13 Source: India Brand Equity Foundation Domestic food spending: USD 181 billion 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 Increasing investments Advantage India 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 Advantage India Government expects USD21.9 billion of investments in food processing infrastructure by 2015 Investments, including FDI, will rise with strengthening demand and supply fundamentals 2020 Domestic food spending: USD318 billion 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 Sector Impediments Supply Chain Institutional Gaps

development and Innovation Supply Chain Infra Gaps (Lack of

Challenges for Food Processing Sector Inadequate focus on quality

processing (lack of processable varieties) Seasonality of

14 Food Processing Sector Impediments Supply Chain Institutional Gaps (procurement dependence on APMC markets ) Lack of product development and Innovation Supply Chain Infra Gaps (Lack of primary processing, storage and distribution facilities) Challenges for Food Processing Sector Inadequate focus on quality and safety standards Inadequate link between production and processing (lack of processable varieties) Seasonality of operations and low capacity utilization Source: Ministry of Food Processing Industries Government of India

15 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 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 , 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.

16 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.

17 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.

18 NOTABLE TRENDS IN THE AFRICAN FOOD PROCESSING SECTOR Changing consumer tastes 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. Growth of supermarket chains Emergence of consolidated firms 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. 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.

19 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

20 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

21 Source: Food 360 Knowledge Paper 2013 The model of Food Industry and channels of linking farmers

22 Innovation in Agricultural Value chain Institutional Innovation Farmer Transporter Wholesale r Processor Retailer Consumer Market Chain Technological Innovation Commercial Innovation

23 MARKETING STRATEGY FOR RURAL AREAS An overview

24 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

25 MARKETING STRATEGIES SEGMENTATION Geographic segmentation Demographic segmentation Psychographic segmentation Behavioral segmentation TARGETING Undifferentiated marketing Differentiated marketing Single segment concentration

26 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

27 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

28 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.

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

Six Value-chain based Agri-Business Incubators in Africa AIP-ICRISAT has

handholding and mentoring its UniBRAIN (Universities, Business and Research

Incubation Consortia (AIIC) under UniBRAIN are being supported in five

ICRISAT and FARA along with its local African Partners are helping in

30 Six Value-chain based Agri-Business Incubators in Africa 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.

31 ICRISAT initiatives under The Second India-Africa Forum Summit (IAFS II) 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

Establishment of Food Processing Business Incubation Centres (FPBICs) at bilateral level SCENE Setting up of 5 FPBICs in 5 African Countries in

scaling-up in the business of food processing.

32 Establishment of Food Processing Business Incubation Centres (FPBICs) at bilateral level SCENE 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.

Establishment of Food Testing Laboratories at bilateral level Setting up FTLs in 5 African Countries in Gambia, Republic of Congo, Chad (replaced

stringent nutritional and food safety standards.

33 Establishment of Food Testing Laboratories 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

34 Knowledge and skill development training for African nationals 1

35 Thank You

Centre for Economic Policy Research. Working Paper on Role of food processing industry in Indian economy

Centre for Economic Policy Research Working Paper on Role of food processing industry in Indian economy Food Processing industry has emerged as a vital part of Indian economy both in generating GDP and