Land of Opportunities: Indian Food Industry

IFE 09, London15th March, 2009

Sanjay Sethi, Vice President, Technopak Advisors

Table of Contents

I. Indian Food Industry: An Overview

II. Indian Consumer

III.Business Opportunities

IV.Key Growth Drivers

V. Government Regulations

VI.Challenges

2

Indian Food Industry: An OverviewI.

An Overview

Indian Agriculture sector contributes 17% to the GDP and provides 60% of employment.

World leaders in various food items like cereals, fruits & vegetables and dairy products.

Diverse agro-climatic conditions - production of a wide range of crops.

Value addition to agricultural products is < 7% and low processing levels of F&V i.e. < 2%.

Shifting food habits from basic food items towards high value crops and processed food items.

Lower investment / capital formation.

4

5

Indian Food Industry

Huge Production Base Large Consumer Market

Rising income Change in food habits

with experimentation on cuisines

Need for convenience

Huge population of 1.13 Billion

Increased spending on food

219 mn tons (2007-08) Growth of 4% over

previous year World leader of F&V,

milk and cereals etc.

Changing Consumer

Food Industry is slated to rise by about £176 billion by 2015

The organized food processing sector is slated to increase to 40% by 2015 from current level of 27%.

Size of Indian Food Industry is £117 billion.

Food Processing Industry contributes a major share of about 43%(£ 50 billion).

Main Segments - Staples Dairy Fruits & Vegetables Meat and Poultry Fish and Marine Beverages Packaged Foods Other foods (like sugar, edible oils,

pulses, spices)

6

Source: Technopak Analysis, * Projections

Share of processing is slated to increase from 43% to 50% by 2015.

Indian Food Industry (contd…)

Potential for International Players

Low level of food processing.

Only 1.6% share in world food trade.

India is an agrarian economy, provides opportunities to explore options as:

Sourcing Hub• Strong footing in agriculture provides a large

and varied raw material base for food processing

• Leading food supplier to the world

Consumption Centre• 1 billion+ consumers, increasing incomes• Increase in awareness and spending on

processed food items

Demand for value added food products is rising at 13% p.a.

Growth Rate % across Key Sectors

7

Indian ConsumerII.

A Huge Consumer Class

9

5-7 million

Super Rich

70 – 80 million

Afford Cars, Private Healthcare & Foreign travel

250 - 300 million

Afford goods like Refrigerators , Scooters & Colour TVs

600-700 million (Generally Rural)Afford simple industrial products

e.g. bicycles , radios , textilesPoverty Line = income less than £0.7- £ 1/day

A population of 1.13 billion(1/6th of total world population) with rapidly increasing middle class (~ 350 million).

60 % of India’s population are under 24 years.

Changing Consumer

10

Changing demographics• Younger earning population - 60% below 24 years• 81% population below 45 years• Brand conscious• More acceptance of new concepts• Changing aspirations

More nuclear families with dual income• 75 million households, called ‘consuming classes’ with annual

income between £ 650 to £ 60,000• Convenience overriding price consideration• Higher disposable income and easier financing options• 1 mn households in creamy layer with income at par with

International

Lifestyle values• Awareness of global lifestyle: media exposure and overseas

travel• Look at me (LAM) the most important criteria

New Trends of Food Sector

11

Consumer Spending

12

More than 60% share in consumer spending in Food & Grocery

Source: Technopak Analysis

13

Consumption Pattern

Source: Food & Grocery Shopping Trends 2008 – Technopak Publication

Business Opportunities: UnlimitedIII.

15

Business Opportunities

16

Business Opportunities (Contd…)

Business Opportunities (Contd…)

17

Retailer No. of Outlets

Locations % of shelf space to imported food

Foodworld 55 Majorly in south India Bangalore, Mysore

10%

Nilgiris 27 South India 12 %Vitan 9 Chennai and Bangalore (South India) 5%

ABG -More 26 Bangalore 4%Nuts n Spices 5 Chennai (South India ) 40%Food Bazaar 19 Across India 3%

D-Mart 2 Mumbai 7%Crossroads 4 NCR- Delhi 25%

Market for the imported food products and fresh fruits currently stands at £660 million p.a. and is growing steadily

Retailers associated with imported food

Business Opportunities: Dairy Industry

Yoghurt

Pascuals (Spain) entered the Indian market 3 years ago and enjoys a monopoly.

Opportunity: 3-4 other yoghurt brands – in fat free variants & different flavors (mango, peach, strawberry, pineapple, passion fruit flavors).

Cheese

Currently, imported cheese has 5% market share in the overall cheese market.

Happy Cow (Austria), Laughing cow (France) and Kraft (Australia) are prominent selling imported brands.

Opportunity: Low fat cheese for healthy food category.

Soft cheese incorporating fruits and herbs.

Popular flavors: Pepper, Paprika, creamy, cheddar.

Butter:

Dominated by local brands: Amul, Britannia.

Imported Brands: Lebon, Meadow Lee.

Opportunity: Low cholesterol, reduced salt / fat butter for healthy food category.

18

19

Domestic Brands

Nestle India Ltd., Amul, Godrej, Mother Dairy, Nandani, Britannia, Thackers

Imported Brands

Charlie’s, Happy cow, Pascual, Elle & vire, Swan Blue, Pilgrims Choice, Arla

Major Importers Siganporia Bros, Max Foods Pvt Ltd., Rai and Sons Pvt. Ltd., Fortune Gourmet Specialities Pvt. Ltd., Shirin Foods Limited, Suresh Kumar & Co. (Impex) Pvt. Ltd., Epicure Frozen Foods & beverages Pvt. Ltd., L Comps, Taurus International, India Hut Pvt. Ltd.

Business Opportunity: Dairy Industry

Business Opportunity: Pasta Products

Consumption of pasta doubled in past couple of years, more popular amongst vegetarians

Pasta imports crossed £3.3million

Current market size for imported pasta is 5200 tons with growth rate of 26% p.a.

Top two largest selling pasta brands are Australian (125 Mt) and Barilla (250-300 Mt)

Total 10 pasta brands are available in the market

Domestic: ITC – Sunfeast

Imported: Loyd Grosssman, San Remo, Barilla, Agnesi and Voiello

Opportunity: Wheat pasta (good health alternative)

Major Importers: Labh Group of Companies, Prayag Food International, Arun International, Prakya Group, Shiva International and Sangeeta foods

20

Business Opportunity: Sauces & Dressings

Opportunities for flavors like chilli, soya, garlic, pasta, chinese sauces

Market for imported honey growing at 150% p.a.

Wescobee honey (WA), Airborne honey (NZ) are popular imported brands

Imported brands: Remia (Holland), Kraft (Philippines), Barilla (Australia), Prego (US), Tabasco (US), Heinz

Domestic Brands: Hindustan Unilever Ltd(HUL), The Global Green Company, Nestlé India Ltd., Fun Foods, Shelf mate, Kilban Foods, Wimm – Prem Foods

Major Importers: J. D. Corporation, ABC International, Evergreen Exports, Home Made Foods, Paramount Nourishments Pvt. Ltd., Tipsy-Topsy Exports, Hart Foods, Sangeeta Foods

21

Business Opportunity: Confectionery

Chocolate imports have been increasing steadily ( about £ 6.35 million)

Market is flooded with locally manufactured MNC brands such as Cadbury & Nestle

Alpenliebe is the single largest selling sugar confectionery brand in India

Domestic brands: Cadbury, Perfetti, Hindustan Unilever Ltd(HUL), ITC Ltd., Nestlé India Ltd., Candico , Ravalgaon Sugar Farm

Imported brands: Kraft Foods, Lotte, Ferrero, Mars, Lindt, Toblerone, Dagoba

Major Importers: Siganporia Bros., Prakhya Group, Rai & Sons Pvt. Ltd., Woodland products, L Comps, S.K. Enterprises, Shell Overseas, Pranav Corporation

Opportunity: Fruit based / flavored confectionery – Jelly, puddings, fruit gummies & candies

22

Business Opportunity: Wine Industry

India's wine market at £ 4.25 million, makes up less than 1% of India's £1.06 billion alcohol beverages market.

Wine consumption growing @30% p.a. and expected to grow @40%.

India consumes ~8 mn bottles of wine annually.

Out of which, 1.2 mn are imported.

Target market is expected to grow to 100 million people in next 5 yrs.

Domestic Brands: Chateau Indulge, CreeGrovers Vineyards, Sula Selections, Chateau D’ori, Nine hills, Big Banyan, Zinzi - UB group.

Imported Brands: Jasons Creek, Gato Negro, Mateaus Rosea, Bodega Nortan, Rupert & Rothschild, Heidsieck Monopole, Moet & Chandon.

23

Routes to Market

India is amongst the least saturated of all major global markets in terms of penetration of modern retailing formats.

Many strong regional and national players emerging across formats and product categories.

Players are now gearing up to expand rapidly after having gone through their respective learning curves.

The Shopping Mall formats are fast evolving.

Partnering among Brands, retailers, franchisees, investors and malls.

24

Distribution Channel – Imported Products

25

Food Supplies

Indian Food Processing Industry

Import Agent

Distributor/Wholesaler

Retail Outlet/ Food Services

t e c h n o p a k

26

F&G enjoys the largest ‘share-of-wallet’ across retail categories accounting for 62% of urban consumer spending.

Valued at £14,000, making it the 6th largest grocery market in the world.

Significant potential for organized formats to increase penetration levels to cater to the consumer spending.

Opportunities: wet groceries (fruits, vegetables, meat products, etc.) where organized retailers have not yet capitalized on the large consumer spend.

Food & Grocery (F&G)

Food Services

27

More than 200 food chains

McDonald’s remains the leading consumer food service player with a 13% share of total chained consumer foodservices

Expected revenues from Indian Hotel and Restaurant industry is > £ 80 million, an increase of nearly 22% over the previous year

Fast food units grew by >20 % in 2006 which is the highest across Asia

Growing @ CAGR of 8%

Major Players offering Food Services

28

Major Players No. of Outlets* Major Players No. of Outlets*

Pizza hut 137 Mocha – coffees 20

Mc donalds 200 Jumboking foods pvt. 80

KFC 30 Minimelts icecream 45

Barista coffee 206 Pizza corner india 36

Café coffee day 520 Haldiram Marketing 27

Baskin31robbins 300 Yo China 25

Chawla’s 80 Domino's Pizza 220

Monginis 400 Nirula's 60

Subway restaurants 540 Nathus 18

Donut king 180 Costa coffee 45

Corn Club 5 Star one fast food 17

*Still counting

Key Growth DriversIII.

30

Key Growth Drivers

Food RegulationsIV.

Regulatory Mechanism for Food Trade in India

Regulations to be considered before importing a packaged food product to India:

Customs Act Customs duty and import formality

Prevention of Food Adulteration Act & Rules (PFA) Specifies standards & quality levels for food articles Prohibits imports of adulterated, misbranded food products

Fruits Products Order (FPO) Sanitary and hygiene conditions of manufacturing, product

standards Maximum limits on preservatives, additives and contaminants

Labeling & Regulatory Act Information on the label of food products

32

Key ChallengesVI.

Key Challenges

34

Meeting Global Standards of Quality

Inadequate Infrastructure and Supply Chain

Skill Gap

Food Regulations Research & Development Market Linkage

Thank You!

sethi100@gmail.com

+91-9004389012