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Transcript of Market Assessment of Food and Food Processing Industry in India Final Review 4 March 2014...
Market Assessment of Food and Food Processing Industry in India
Final Review
4 March 2014
Tecnova’s Presentation for Italian Trade Agency
2
Table of ContentsTable of Contents
India Macro-economic Overview
Food Habits in India
Processed Food Industry in India
Processed Food Distribution Formats in India
Processed Food Industry Overview
Competition Analysis
Developments in Processed Food Industry
Regulatory and Custom Duties Analysis
Presence of Italy in Indian Food Industry
Food Processing Machinery
Industry Overview
Major Target Industries for Machinery Manufacturers
Customer Concentration
Cold Storage Overview
Packaging Machinery Overview
Conclusion and Recommendation
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India Macro-economic Overview
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The Indian DimensionThe Indian Dimension
LocationSouthern Asia, bordering Arabian sea and Bay of Bengal, between Burma & Pakistan
Area
Total: 3.3 Mn. Sq.Km (7th largest in the world) Land area: 2.97 Mn. Sq. KmLand boundary: 14,000 kmCoastline: 7,000 km
ClimateSouth: Tropical monsoon North: Temperate
Terrain
South: Upland Plain (Deccan plateau)West: Dessert regionNorth: Himalayan mountain rangeRolling plain along the Ganges river
Natural resources
Iron ore, manganese, mica, bauxite, rare earth elements, titanium ore, chromite, natural gas, diamonds, petroleum, etc
Land use Arable: 48.8%; Other: 48.37%Capital New DelhiState and territories
28 States and 7 Union Territories
Official languages
Hindi and English
North
West East
South
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Indian Geographical ClassificationIndian Geographical Classification
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1.2 Bn Population
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Majority of packaged food consumption will be concentrated in
the metros, cities and towns
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The Story so Far…The Story so Far…
Source: Census 2011
* Proportion of dependent population (0-14, Above 65 age group) to working population (15-64 age group)
Technological/Infrastructure Advancement
Mobile penetration 61.4% (752M)
International Airports 17
Internet penetration ~15% (~200M)
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Indian DemographicsIndian Demographics
* As per Census 2011 (latest census available)
Source: MOSPI
65% of the population falls in the working age group of 15-65 years
leading to rise in disposable income
Population classification by age group
With 1.2B population, India is the second most populous country making it a huge
market for processed food companies
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Metros of IndiaMetros of India
ChennaiBangalore
Hyderabad
Kolkatta
Delhi
Mumbai
Ahmedabad
Pune
~7% of India’s population lives in metros; a high potential segment for processed foods
MetroPopulation (Mn, 2011)
Literacy Ratio (2011)
Mumbai 23.5 82.0%
Delhi 16.8 76.2%
Kolkata 4.4 81.3%
Chennai 4.6 82.3%
Bangalore 9.6 79.4%
Hyderabad 4.0 72.5%
Ahmedabad 7.2 77.0%
Pune 9.4 77.3%
Total (8 Metros) 79.5 78.5%
Source: NCEAR & Census
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Major Cities in IndiaMajor Cities in India
CityPopulation (Mn, 2011)
Literacy Ratio (2011)
Metros (8) 79.5 78.5%
Surat 6.1 76.5%
Kanpur 6.4 71.1%
Jaipur 6.7 66.0%
Lucknow 4.6 70.3%
Nagpur 4.7 80.3%
Bhopal 2.4 72.1%
Coimbatore 3.5 77.1%
Faridabad 1.8 72.1%
Amritsar 2.5 68.9%
Ludhiana 3.5 73.9%
Chandigarh 1.1 76.8%
Jalandhar 2.2 74.3%
All 20 Cities 125 76.2%
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Chandigarh
LucknowJaipur
AmritsarJalandhar
Ludhiana
Surat
Bhopal
Kanpur
Nagpur
Coimbatore
Faridabad
Tier I cities will drive the demand for Ready-To-Eat (RTE) and processed foods as there is a steady increase in
number of working women in these citiesSource: NCEAR & Census
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Income group classificationIncome group classificationAspirers and Middle Class groups are expected to riseAspirers and Middle Class groups are expected to rise
25 million (2%)
164 million (13%)
431 million (34%)
647 million (51%)
Population (% of total population) Annual Income
Above US$60,000 per annum
4 Mn Households
Between US$12,000–US$60,000 per annum
28 Mn Households
Between US$5,400–US$12,000 per annum
75 Mn Households
Less than US$ 5,400 per annum
114 Mn Households
• Source: NCAER (National Council for Applied Economic Research); Average household size in India: 4.8
• NCAER reports income levels at 2001-02 prices; to bring these to current prices (2010-11) income levels, a conversion factor of 2.7 has been taken to adjust the nominal per-capita income growth.
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With majority of consumption lying with the Middle Class and
Aspirers, these two groups are expected to play a
critical role in the development of processed food
industry in India
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Rate of InflationRate of Inflation
WPI: Wholesale Price Index; CPI: Consumer Price Index
Source: Central Statistical Organisation (CSO)
While WPI has been largely volatile, CPI has been increasing consistently indicating that consumption in India is increasing
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ADB – Asian Development Bank
BRICS
ASEAN
Commonwealth of Nations
FAO – Food and Agriculture Organisation
G-15, 20, 24, 77
ICC – International Chamber of Commerce
IMF – International Monetary Fund
IMO – International Maritime Organisation
ISO – International Organisation for Standardisation
ITUC – International Trade Union Confederation
SAARC – South Asian Association for Regional Cooperation
UN – United Nations (and those that come under UN)
WFTU – World Federation of Trade Unions
WTO – World Trade Organisation
India is a member of more than 65 international organizations. The predominant ones are listed below.
For complete list, refer to the attached excel
India has been a founding member of a number of international organizations, and hence exerts significant influence on policy making
International Agreements Joined by IndiaInternational Agreements Joined by India
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International Agreements
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South Asian Countries (SAFTA)
Bangladesh
Bhutan
Maldives
Nepal
Pakistan
Sri Lanka
Afghanistan
Japan
South Korea (India-Korea CEPA)
ASEAN (AIFTA)
Brunei Darussalam
Cambodia
Indonesia
The Lao PDR
Malaysia
Myanmar
Philippines
Singapore
Thailand
Vietnam
India currently has Free Trade Agreements India currently has Free Trade Agreements (FTAs) with…(FTAs) with…
FTAs are beneficial for companies with manufacturing facilities established in partner countries (above) making them entitled in import duties reduction
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The much talked about bi-lateral trade agreement between India and EU is still pending due to few last mile hurdles
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Food Habits in India
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Food Habits in Each Region Vary with Food Habits in Each Region Vary with Climate, Topography, Culture & HeritageClimate, Topography, Culture & Heritage
India is a culturally rich & diverse nation having varied
lifestyles, religions, art, culture, attire & food.
Weather & topography vary widely with region:
North: Closest to the Himalayan range, hilly regions
with extreme weather conditions; high fertility area
with high wheat production
West: Arid areas of Rajasthan and Gujarat – which
are dry and hot through most of the year. In some
coastal areas of Maharashtra, fish is the staple diet
South: Temperate climatic condition all through the
year; high rice production & consumption area
East: Hilly regions with varying weather conditions;
East is the poorest regions of the country
North
West East
South
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Indians take food very passionately
Mealtimes are considered as occasions and time for families to get together and spend quality time.
Fresh cooking is essential in most Indian homes, with limited preference for stocked food
Most meals comprise of several dishes ranging from staples like rice and breads, to meat or
vegetables, rounded off with a dessert
A typical Indian meal includes…
Appetizers/ Starters Salad, Soup, etc.
Main Course
Curry & Dry Dish
Vegetarian – Lentils, Cooked Vegetables (Potato, Cauliflower, Okra, mixed vegetables, etc.)
Non-vegetarian – Egg, Chicken, Mutton, Fish, etc.
Side items Yoghurt/ Raita
Papad (thin & crispy bread made of lentils/ wheat
Chutney (Herb-based thick sauce accompanying breads)
Indian Breads Roti/ Chapati, Parantha, Puri, Naan
Rice Biryani, Pulao, Jeera rice, Plain rice
Dessert Milk-based desserts like Kheer, Gulab Jamun, Halwa, etc.
Diversity of Food in IndiaDiversity of Food in India
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North Region – Madhya Pradesh, Uttar Pradesh, Haryana,
Punjab, Himachal Pradesh, and Jammu and Kashmir
Wheat-breads are the staple diet which accompany all meals
Largely meat-based diet characterized by tandoori-style
cooking methods
Fair amount of cooking is done using deep frying in oil
High consumption of milk and milk-based products
High consumption of fresh fruits such as apples, cherries,
plums and strawberries which are unique to this region due
to its cooler climate.
Increasing number of households are shifting toward replacing
traditionally made food items such as curd and cottage cheese
with packaged items (packaged curd or cottage cheese)
Punjabi Food
Food served with milk-based beverage (Lassi)
Regional Food Habits – North Regional Food Habits – North
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Southern India – Andhra Pradesh, Karnataka, Goa, Tamil Nadu, and
Kerala
Primarily vegetarian population barring coastal areas where fish
is a staple diet
Rice is abundant & appears in almost every dish during a meal &
are eaten in multiple forms
Tamarind and coconut form the base for most preparations, with
most curries based in coconut gravy
Hot spicy foods are cooked, with chettinad cuisine being one of
the most fiery
Food is often eaten on banana leaves
Major shift is seen in people moving towards ready-to-use
packaged food items for idlis and dosas, rather than going through
the relatively longer process of preparing the batter in-house
Food served on a banana leaf
Idli, Dosa
Regional Food Habits – SouthRegional Food Habits – South
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Western India – Rajasthan, Gujarat, and Maharashtra
High demand of dairy products, including yoghurt,
buttermilk, cow's milk, and goat's milk
Rice is the staple food grain
Goan cuisine is dominated by rice, coconut, fish and
seafood
Gujarati cuisine is largely vegetarian, with a hint of sugar
or jaggery in every preparation
Peanuts and coconut are widely used
Other popular cereals include gram flour, bajra and corn
Goan Fish curry
Gujarati Thali
Regional Food Habits – WestRegional Food Habits – West
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Eastern India - Orissa, Bihar, West Bengal, Assam,
Meghalaya, Tripura, Mizoram, Manipur Nagaland, and
Arunachal Pradesh
Relatively more simplistic and less elaborate food
Characterized by a variety of different types of rice
Predominantly fish eating population in coastal areas
Common practice to eat steamed food, e.g.: momos
Curries include lot of poppy, mustard and cumin seeds,
cumin seeds
World famous for sweets
Sandesh
Rasagolla
Momos
Regional Food Habits – EastRegional Food Habits – East
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Changing Trends in Consumer Preferences Changing Trends in Consumer Preferences for Foodfor Food
Growing middle class population and household incomes are driving people to spend more
on food
Increasing cases of lifestyle diseases have resulted in shift towards healthier food options
such as fruit juices, pro-biotics, cereals and oats
Shift in consumption preferences & increasing demand is driving the food companies to
introduce innovative products such as digestive biscuits, fortified dairy products, etc.
Increased demand for processed & packaged products with high shelf-life
Willingness to pay a premium for value-added products such as cheese, butter, flavoured milk
Overall change in palate and preference for newer varieties of food due to western influence
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Key Markets and Product Preferences (1/2)
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West
Being the key port region, majority of players have a presence in this region
Market is led by Modern retail channels and HORECA segment, also has a significant grey channel
Product Preference
Biggest market for candies and confectionary
Key market for fruit based flavours, especially strawberry and orange
North
Second most important market
Market led by wholesalers, but large volume of sales through grey channel; large number of Modern Trade food & grocery outlets
Product Preferences
Wheat based products
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Key Markets and Product Preferences (2/2)
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South
Highest penetration of Modern Trade, having high sales per outlet
High levels of consumer awareness
Product Preferences
Biggest market for chocolates and bakery products
Highest incidence of diabetic population in India leading to consumer awareness about healthy breakfast choices
Fastest emerging market for RTE/RTC foods
East
Lowest sales volume by channels
High presence and consumption of mass/regional products
Product Preferences
Preference for non-oily and less spicy food products
Beef and pork products are heavily consumed
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Processed Food Distribution Formats
in India
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Distribution Formats for Food Products in Distribution Formats for Food Products in IndiaIndia
Traditional FormatModern Format
Super Marts
Hyper Marts
Convenience Stores
Food Gourmet Stores
Petro- Convenience
Stores
Cash and Carry
Neighborhood general
store
Bakery Shops
Institutions
Railways and Airlines
Hotels, Restaurants and
Catering (HORECA)
Canteen Store
Department
Others (Schools,
Colleges, Offices and
Hospitals)
Retail Formats
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Modern Trade Formats in IndiaModern Trade Formats in India (1/2)(1/2)
Hypermarts
Large retail store offering wide
range of products and brands
Average size between 4,000 –
10,000 sq. mtr.
E.g. Big Bazaar, Spencer Hyper
etc.
Supermarts
Smaller version of a Hyper
marts with a average size of
300 to 1,000 sq. mtr.
Mainly offers food items like
groceries along with non food
items
E.g. – Food Bazaar, Reliance
Fresh etc.
Convenience Stores
Small store (average size of
100-150 sq. mtr.)
Mostly stock essential items
such as groceries, food items
and daily need items
E.g. – Big Apple, LM 365
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Modern Trade Formats in IndiaModern Trade Formats in India (2/2)(2/2)
Food Gourmet Stores
Store size of ~300-1,500 sq.mtr.
Targeting SEC A population with
assortment of fresh food and
grocery
High focus on imported food
products
E.g.: Lemarche, Nature Basket,
Modern Bazaar
Cash and Carry
Wholesale store with a size b/w
5,000 to 10,000 sq. mtr with focus
on staples and food items
Sell to Distributors / Dealers (B-2-B
transactions only)
Recently, many international players
entered in Indian market e.g.
Carrefour, Walmart, Booker, Metro
Petro Convenience Stores
Stores located at petrol
pumps
Generally having an
assortment of impulses
purchase & utilities
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Traditional Trade Formats in IndiaTraditional Trade Formats in India
Neighborhood/General Stores
Traditional small shops located in residential areas
Stocks daily groceries and sundries
Bakery/Sweet Shops
Gaining popularity in the ready-to-eat food segment
which tops-up as consumption points for Juices,
Candies, Flavored Milk & other milk-related products,
etc.
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Key Institutional Segments in IndiaKey Institutional Segments in India
Railways and Airlines
Work on contract based arrangements
Contracts are based on volume & price negotiations/tenders
CSD Canteens
CSD (Canteen Stores Department), run by the Ministry of Defense catering to the Armed forces
Assortment of food and non food products at subsidized rates and differentiated packaging
Work on Tender based arrangements
Hotels
Indian Hotel and Restaurant industry is growing @ 20-25% due to increase in foreign tourists and
business-related travel
Multiple consumption points (Breakfast Buffet, Restaurant, Gym, Bar, Mini-bar)
Others (Schools, College, Offices & Hospitals)
Products such as yoghurt, juices etc.. are gaining popularity on back of its health proposition
Companies are tying up with institutions such as Schools, Hospitals, Offices etc. to club their
products along with meals
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Processed Food Industry Overview
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Varied agro climatic zones
2nd largest arable land (161 M ha) in the world
Largest irrigated land (55 M ha) in the world
Largest producer of Wheat, Pulses & Milk
Largest producer and exporter of Spices
Second largest producer of Tea, Rice, Fruits &
Vegetables
Second largest producer of Sugarcane
Largest exporter of the world's best rice (Basmati)
Third largest producer of Coarse grains and
Edible Oilseeds
India Food Production – Key FactsIndia Food Production – Key Facts
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Food Industry – Market SizeFood Industry – Market Size
Source: FICCI, Tecnova analysis
Indian food industry was estimated at
US$241 billion in 2010-11
Growing at a CAGR of 5.1% (2003-11)
Higher disposable income resulting in
greater spending and consumption is
driving the growth of food industry in
India
Expected to reach US$300 billion by 2015
Food processing industry represents ~43%
of the total food industry; expected to grow
to 50% by 2015
CAGR: 5.1%
Spending on food constitutes the largest share of consumer wallet; as the overall economy grows, spend on food is expected to grow
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The Indian Food and Food Processing
industry (FPI) primarily comprises of the
following segments
Fruits & Vegetables (F&V)
Dairy
Meat, Poultry and Marine
Grains and Seeds
Packaged Foods (including
Beverages)
Relative Share of Various Food Segments in Food Processing (2011)
Source: MOFPI
Industry SegmentationIndustry Segmentation
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Food Processing Industry – Market SizeFood Processing Industry – Market Size
Source: MOFPI, Tecnova analysis
The size of the processed food sector in India was
approximately US$105 billion in 2011
Includes both the organized and unorganized
sector where organized forms 50-55% of the
overall market
Sector is growing by 13-15%, but is expected to
grow by ~25% in the coming years to reach size of
US$530-550 billion by 2020
Within the food processing sector, segments like
meat, and packaged foods are expected to witness
high growth rates
Historically, food processing industry has
contributed around 1.5% to Indian GDP
Unorganized50-55%
Organized45-50%
Processed Food Industry organization
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Processing Levels for Key Segments in the Processing Levels for Key Segments in the FPIFPI
Source: Ministry of Food Processing Industry
India’s food processing levels are significantly low compared to other developing nations such as Brazil, Malaysia and China
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Processing Stages for Various ProductsProcessing Stages for Various Products
Primary processing
Secondary processing
Tertiary processing
Fruits & Vegetables
Milk
Meat & Poultry
Marine products
Grain and seeds
Beverages
Cleaning, sorting and cutting
Grading and refrigerating
Sorting and refrigerating
Chilling and freezing
Seeding and grading
Sorting, bleaching and grading
Slices, pulps and paste
Cottage cheese, cream, simmered &
dried milk
Cut, fried, frozen and chilled
Cut, fried, frozen and chilled
Flour, malt and milling
Leaf, dust and powder
Ketchups, jam, juices and pickles
Processed milk, spreadable fats,
yoghurt
Ready-to-eat meals
Ready-to-eat meals
Biscuits, noodles, flakes, cakes,
savory
Tea bags, flavored coffee, soft drinks,
alcoholic beverages
Source: Ministry of Food Processing Industry
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Export from FPI sectorExport from FPI sector
In 2012-13, total exports from FPI sectors reached US$36 billion, growing at a CAGR of 21.9%
since 2008-09
Source: Ministry of Commerce, DIPP
The major markets for Indian processed food are Europe, the Middle East, Japan, Singapore, Thailand, Malaysia and Korea
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India – Total Food ImportsIndia – Total Food Imports
Source: DGFT
Total Food Imports from Italy
Italian food imports are growing at a similar rate
as that of total food imports by India
Top 5 imports account for more than 73% of total
food imports from Italy
India – Total Food Imports
Top 5 Food Imports from Italy, 2012-13
16.5%
16.3%
Values in $ M
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India – Total Food ExportsIndia – Total Food Exports
Source: DGFT
Total Food Exports from Italy
Food exports to Italy are growing at a relatively slower
rate as compared to India’s total food exports
Top 3 exports account for more than 81% of total food
exports to Italy
India – Total Food Exports
Top 5 Food Exports to Italy, 2012-13
12.1%
7.8%
Values in $ M
*Mollusc and Crustacean
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Food Processing Demand DriversFood Processing Demand Drivers
Food Processing
Demand Drivers
Growing nuclear families and working
women
Rising demand for functional food (oatmeal, etc)
Increasing modern trade formats and private label
penetration
Increasing urbanization – lifestyle
and aspirations
Changing demographics – Rise
in disposable incomes
Increasing spending on food products
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SWOT analysis of Food and Food SWOT analysis of Food and Food Processing Industry in IndiaProcessing Industry in India
Huge domestic consumption market
Large production base of raw material
Breadth in crop base offering scope for varied processing activities
Inadequate infrastructure facilities
High upfront capital investments
Lack of adequate quality control & testing protocols
Large number of intermediaries resulting in inefficient supply chain and increase in prices
Seasonal variability of crops
Low packaging aesthetics
Strengths
Weaknesses
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Government incentives (priority sector, tax relief, R&D support, etc)
Increasing western influence on Indian palate (cheese, pasta, sauces, cereals, aerated drinks, juices,
yoghurt, etc) which is driving the demand for processed foods
Increase in nuclear families and working women who prefer ready-to-use food items
Traditional preference for freshly cooked food especially in rural areas
Affordability (e.g., processed fruits are significantly higher than fresh fruits)
High supply chain costs
Opportunities
Threats
SWOT analysis of Food and Food SWOT analysis of Food and Food Processing Industry in IndiaProcessing Industry in India
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Distribution System in Food Processing Distribution System in Food Processing IndustryIndustry
Carrying and Forwarding Agent/ Super stockiest
Company’s Warehouse or Importer-Distributor
Modern tradeDistributors
Modern Trade Chains/ Stores
DistributorsInstitutions Sales
Agents
Retailers
3 - 5%
8 - 15%
25 - 35%
Rate contract
Rate contract
CSD contractor
CSD canteen
Institutions/Foods services
* The figures mentioned are trade margins of channel partners. These are taken as an approximate value and vary depending on company, distributor and industries
Inte
rmed
iari
esE
nd
use
rs
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Competition Analysis
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Competition in Dairy ProcessingCompetition in Dairy Processing
Dairy market is largely dominated by regional cooperatives in Gujarat, Karnataka, Maharashtra, Tamil
Nadu, Rajasthan and Punjab; Amul (Gujarat Cooperative) has ~26% pan-India market share in liquid
milk; Nandini (Karnataka Cooperative) has significant presence in South India
Amul captures nearly 85% of the butter market and ~70% of the cheese market, while other players
such as Nestle manage rest of the market; Unilever has strong presence in ice cream segment
Company name (Brand) Country India presence Major products
Gujrat Cooperative Milk Marketing Federation (Amul)
India Pan-IndiaMilk, cheese, butter and other value-added products
Karnataka Milk Federation (Nandini)
India South IndiaMilk, ghee, whitener, butter, milk power, and ice cream
National Dairy Development Board (Mother Dairy)
India Pan-IndiaMilk, cheese, butter, ice cream, buttermilk, pro-biotic products
Nestle (Milkmaid, Everyday) Switzerland Pan-IndiaPro-biotics, Raita, condensed milk, milk powder, ghee, infant nutrition
HUL (Kwality Wall’s) Anglo-Dutch Pan-India Frozen dessertsDanone (Danone) France Metros Yoghurt, value added products
Value-added products such as cheese, yoghurt, pro-biotic drinks, flavored milk, and infant nutrition products are the key growth segments for international companies
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Competition in Fruits & Vegetables Competition in Fruits & Vegetables ProcessingProcessing
Processed forms of fruits & vegetables in India include jams, juices, pickles, chutney, and fruit
concentrates
While the fresh fruits & vegetables market in highly unorganized with local farmers, wholesalers,
and intermediaries selling directly to customers, the processed F&V market is somewhat
organized with presence of national and international players
Company name (Brand) Country India presence Major products
HUL (Kissan) Anglo-Dutch Pan-IndiaJams, ketchup, sauces, spreads, fruit juices
Mother Dairy (Safal) India Pan-India Frozen F&V (peas, carrots, etc) Priya Foods (Priya) India Pan-India Pickles, chutney, fruit pulp
Cremica (Mrs. Bectors) India Pan-IndiaSauces, condiments, spreads, dips, syrups
Namdhari Fresh India South-IndiaPackaged fruits and vegetables, exotic vegetables
Adani Agri Fresh India Pan-India Fresh and processed fruits
Heinz USA Pan-India Ketchup
With the potential to become one of the largest producers of F&V, coupled with abysmally low levels of processing, India offers huge potential for international companies
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Competition in Meat, Poultry and Marine Competition in Meat, Poultry and Marine ProcessingProcessing
Highly fragmented industry with only a handful of large players
Uttar Pradesh, Andhra Pradesh, Maharashtra, Delhi are the key areas of processed meat and
poultry production
Within this industry, poultry is the fastest growing segment owing to strong domestic consumption
Company name Country India presence Major products
Allanasons India Pan-IndiaFrozen buffalo meat, marine products, canned corned beef, tropical fruits and vegetables, etc
Hind Agro India Pan-IndiaFrozen boneless buffalo meat, offals and processed buffalo meat
Venky’s India Pan-IndiaReady-to-cook and Ready-to fry products
Godrej Agrovet India Pan-India Poultry
Al Kabeer UAE Pan-India Beef and poultry, ready-to-fry products
Suguna Foods India South India Broiler chicken, value added eggs
As European and western cuisines expand in India, demand for processed meat products such as sausages, hams, steaks and fillets has been increasing consistently
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Competition in Grains & Seeds processingCompetition in Grains & Seeds processing
Grain processing includes milling of rice, wheat and pulses; seed processing include extraction of
oil for edible and industrial purposes
A highly fragmented industry with thousands of rice hullers, flour and pulse mills, and ghanis and
oil refineries operating in every part of the country; competition in the organized segment is
intense
Though primary processing is the most important activity in this segment, secondary and tertiary
processing is limited to few large playersCompany name (Brand) Country India presence Major products
HUL (Annapurna) Anglo-Dutch Pan-India Wheat flour
Kellogg’s (Kellogg’s) USA Pan-IndiaOats, bran wheat flakes, corn flakes, RTE breakfast cereals, Muesli
ITC (Aashirvaad) India Pan-India Wheat flour, multi-grain flour
ConAgra Foods (Sundrop) USA Pan-India Sunflower oil, corn products
Cargill (Nature Fresh) USA Pan-India Edible oils, flour,
REI Agro (Raindrop) India Pan-India Rice (Basmati)
As one of the world’s largest agricultural base, India offers huge potential for international companies in grain and seeds processing; however, domestic competition is intense
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Competition in Consumer Foods Competition in Consumer Foods ProcessingProcessing
Company name (Brand) Country India presence Major products
HUL (Kissan) Anglo-Dutch Pan-India Soups, bakery, RTC
Nestle (Maggie, Nescafe) Switzerland Pan-IndiaPasta, RTC, cooking aids (masalas), coffee and tea, chocolate powder,
Parle Agro (Parle) India Pan-India Biscuits, beveragesPerfetti Van Melle Italy Pan-India Confectionery Britannia Industries (Britannia) India Pan-India Biscuits, bakery and dairyMondelez International (Cadbury) USA Pan-India ChocolatePepsiCo (Pepsi, Frito-Lay) USA Pan-India Snack food, beveragesCoca-Cola USA Pan-India Beverages
ITC (Sunfeast) India Pan-IndiaBiscuits, noodles, snack food, confectionery, RTE
RTE and RTC segments have large untapped potential; with modern trade formats growing at a rapid pace, RTE offers huge scope for investment
Consumer foods is a highly competitive industry in India with presence of large national and
international companies
Britannia, Parle and ITC capture ~90% share of biscuit industry, while Perfetti has over 70%
market share in confectionery market; Nestle, with its Maggie brand, is a market leader in noodles
segment, while Coca Cola and Pepsi has over 90% market share in aerated beverages segment
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Key Players – Profiles Key Players – Profiles
Company name EmployeesTurnover –(INR Crores)
Y-o-y growth CAGR (2008-12)Operating Margin
Britannia Industries
2,0006,254 Year end: Mar’13
12.6% 15.9% 6.7%
HUL 16,000# 28,167Year end: Mar’13
18.8% 7.1% 14.5%
REI Agro NA9,462Year end: Mar’13
48.1% 63.2% (2 year) 15.7%
Nestle 5,5008,457Year end: Dec’12
11.9% 17.8% 21.6%
ITC 25,000# 8,352*Year end: Mar’13
37.9% 12.1% --
Vadilal Industries
600340Year end: Mar’13
16.0% 20.9% 10.6%
50
#employee data for entire company; *only for food division
Source: Company Annual Reports
51
Developments in Processed Food
Industry
51
52
Infrastructure Development in FPI Infrastructure Development in FPI (1/3)(1/3)
Vision-2015 plan of MoFPI aims to double the
size of food processing industry to US$ 200B,
increase processing of perishables to 20%,
increase value addition to 35% (from 20%), and
enhance India’s share in global food trade to 3%
(from 1.5%)
Scheme for Infrastructure Development,
implemented by MoFPI, during 11th Five Year
plan (2007-12) include—
Mega food parks
Cold chain, value addition and
preservation infrastructure
Setting up / modernization of abattoirs
Source: MOFPI Annual Report 2011-12
Mega food parksCold chains
Modernization of abattoirs
Funds allocated for infrastructure development in FPI
Funding in 12th Five Year plan (2012-17), $M
52
53
Infrastructure Development in FPI Infrastructure Development in FPI (2/3)(2/3)
Mega Food Parks (MFPs)
It aims to bring together farmers, processors, and retailers to link
agricultural produce to the market place and to ensure maximum
value addition, minimum wastage, increase farmers’ income and
create employment in rural sector
These parks will have state-of-the-art processing facilities and
well-established supply chain
Under the scheme, a total of 30 MFPs will be established in a
phased manner (10 parks in phase I, 5 in phase II, and 15 in
phase III)*
* Refer to Appendix for list
Source: MOFPI Annual Report 2011-12
53
54
Infrastructure Development in FPI Infrastructure Development in FPI (3/3)(3/3)
Cold chain, value addition, and preservation infrastructure
The infrastructure scheme will provide financial assistance in setting up integrated and complete cold
chain facilities, preservation infrastructure facilities, value addition facilities, and irradiation facilities
Financial assistance of up to 75% of the total project cost is provided by the government
Total of 49 projects have been planned across the country, of which 10 are in progress
These projects are expected to add 232,628 MT of cold chain to the existing infrastructure
Setting up / modernization of abattoirs
Lack of basic infrastructure facilities such as water, electricity, and carcass handling mechanism
result in tremendous wastage and contamination / deterioration of meat
The FPI infrastructure scheme plans to set up 10 new abattoirs and modernize several existing
facilities in the coming years
An amount of US$6.8 million have been disbursed to set up the 10 new facilities
So far, 2 abattoirs have been completed at Dimapur, Nagaland and Ahmednagar, Maharastra
Source: MOFPI Annual Report 2011-12
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55
Government Incentives for FPI Sector (1/2)Government Incentives for FPI Sector (1/2)
Source: MOFPI Annual Report 2011-12
Incentive Description
Tax relief
100% tax exemption for first 5 years followed by 25% tax exemption for the next 5 years for food & vegetables processing businesses
Preferred tax exemption for companies operating in perishable food items such as milk, meat and poultry
Investment-linked tax incentive to businesses setting up and operating cold chains or warehouse facilities
Full excise duty exemption for goods that are used in installation of cold storage facilities
Excise duty waived on fruits & vegetables processing from 2000 – 01 Income tax holiday for fruits & vegetables processing from 2004 – 05 Customs duty reduced on freezer van from 20% to 10% from 2005 – 06 Central sales tax reduced from 4% to 3%
Relaxed FDI norms 100% FDI under automatic route, except for items reserved for micro, small
and medium enterprises
Easy funding Assigned food processing industry as priority sector for easy securing of
bank funding
The Ministry of Food Processing has taken several initiatives to promote the growth of the industry
55
56
Government Incentives for FPI Sector (2/2)Government Incentives for FPI Sector (2/2)
Source: MOFPI Annual Report 2011-12
Incentive Description
Focus on infrastructure
Strong focus in infrastructure development (as discussed in earlier slides), particularly on setting up Mega Food Parks, Agri Export Zones (AEZ), cold chains, warehouses and modernization of abattoirs
Push for R&D
Weighted deduction on expenditure incurred on in-house R&D has been increased from 150% to 200%
Weighted deduction on payments made to R&D laboratories increased from 125% to 175%
Private sector friendly 100 per cent export-oriented units are allowed to sell up to 50% of their
produce in the domestic market Export earnings are exempted from corporate taxes
Apart from these, the state governments have also taken initiatives such as lowering of VAT rates to promote the industry in respective states
56
57
Regulatory and Custom Duties
Analysis
57
58
Foreign Direct Investment PolicyForeign Direct Investment Policy
FDI is permissible for all the processed food products under 100% automatic route, except for
items reserved for micro, small and medium enterprises where FDI is permissible under automatic
route up to 24%
FDI under automatic route is approved at Reserve Bank of India (RBI) level and does not require
approval of Foreign Investment Promotion Board (FIPB)
Source: Ministry of Commerce
During April 2000-13, the total
FDI in the food processing
industry reached US$1.8 billion,
which was under 2% of total FDI
inflows
FDI in food processing industry (cumulative)
58
59
Import Regulations Related to Food Import Regulations Related to Food ProductsProducts (1/2)(1/2)
59
Due to free trade agreements with ASEAN countries, products imported from these countries attract
substantially lower (or zero) basic duty. For example, basic duty for HS code 0204 10 00 (meat of
sheep or goats) under normal circumstances is 30%, however, if it is manufactured and imported via
ASEAN route, the basic duty reduces to 0%
Excise duties are reduced significantly (completely exempted in some cases) on all such products
that cannot be produced in India (such as olive oil)
Import of beef and derived products in any form are prohibited
All consignments of edible oils and processed food products imported in bulk shall carry a
declaration from the concerned exporter on the shipping documents that the consignment does
not contain beef in any form; all consignments imported in consumer packs shall carry a
declaration on the label of the package that the product is free from beef in any form
Import of all such edible/food products (which are governed by Prevention of Food Adulteration Act)
shall be subject to condition that, at the time of importation, the products have a valid shelf life of not
less than 60% of its original shelf life
60
Import Regulations Related to Food Import Regulations Related to Food ProductsProducts (2/2)(2/2)
60
Import of meat and meat products of all kinds (fresh, chilled, frozen, etc) shall be subject o sanitary
import permit to be issued by Department of Animal Husbandry and Dairying
Import of alcoholic beverages shall be subject to compliance of various mandatory requirements as
stipulated by various state governments
Import of meat and poultry products will be subject to the compliance of conditions regarding
manufacture, slaughter, packaging, labeling and quality conditions as laid down in Meat Food
Products Order, 1973
Import of all such edible/food products including tea shall be subject to conditions laid down in the
Prevention of Food Adulteration Act, 1954
61
Food Safety and Standards Authority of Food Safety and Standards Authority of India (FSSAI) India (FSSAI)
The Food Safety and Standards Authority of India (FSSAI) has been established under Food
Safety and Standards Act, 2006 (FSS Act) which consolidates various acts & orders that have
hitherto handled food related issues in various Ministries and Departments
It is responsible for
Laying down science based standards for articles of food
Regulating the manufacture, storage, distribution, sale and import of food to ensure
availability of safe and wholesome food for human consumption
Introduction of the FSS Act repealed a number of individual regulatory acts such as Edible Oils
Packaging Order and Milk and Milk Products Order
The Act aims to establish a single reference point for all matters relating to food safety and
standards
FSSAI also collects and collates data regarding food consumption, incidence and prevalence of
biological risk, contaminants in food, residues of various, contaminants in foods products,
identification of emerging risks and introduction of rapid alert system
Source: FSSAI
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62
Impact of Changes in Labelling LawsImpact of Changes in Labelling Laws
Over 200 MT of imported gourmet chocolates from around the world, including brands such as
Godiva, Guylian, Lindt and Mars, are stuck at various Indian ports due to non-compliance with
new Indian labelling laws
Several other food categories such as French artisinal cheese, American crisps, Thai condiments,
and Italian pasta sauces have also been held up for non-compliance
FSSAI is especially wary of labelling violations on chocolate products as tests reveal that many of
them contain very high level of vegetable fat, which is not permissible under the Indian law
Small-scale importers who primarily depend on a single food category have been badly affected
with many of them already closing the business
Indian packaging and labelling regulations have been in place since 2011 and ample grace period
was given to importers to align themselves with new regulations
Since November 2013, FSSAI has stopped allowing imported products that do not comply with the
new laws
Source: Secondary Search and Interaction with FSSAI
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63
Labelling RequirementsLabelling Requirements
Source: Primary research
ACurrently required points in Primary Labelling (Non Rectifiable)
1 Generic Name of Product
2 Net Weight in Grams
3 Ingredients
4 Nutritional Information
5 Best Before Date
6 Country of Origin
7 Production Date
8Traceable Batch No. (this cannot be same as best before date. It must be stated on the pack separately
9Manufacturer’s Name, address and contact details
10 Additive caution declaration
B Rectifiable Defects (on sticker)
1Indian Importing Company Name and Contact Details
2 Veg/Non-Veg Symbol
3 Maximum Retail Price (MRP)
4FSSAI Logo and Importer License No. - This is only till June '14 after which it has to be on primary packaging label
63
64
Packaging RequirementsPackaging Requirements
64
65
Duties Applicable on Imported Products Duties Applicable on Imported Products
Duty Description
Basic Customs Duty Is the duty levied on imported goods at prescribed standard rates
Countervailing Duty (CVD)
As the name suggests, CVD is equivalent to Central excise duty levied on a like article manufactured in India; some of the packaged consumer goods are charged this duty based on their MRP (Maximum Retail price)
Education and Additional CESS
Education CESS of 2%+1% is charged on the total customs duty (except special CVD)
Special CVD/ ACD
The 4% special CVD or additional customs duty (ACD) is applicable to all imports (except for few exemptions), this duty is not included in the accessible value for levy of educational CESS on imported goods. Also, manufacturers can take credit for payment of excise duty on their finished products.
65
66
IMPORTS LOCAL SOURCING CIF Value 1.00 CIF Value 1.00Basic Customs Duty 30% 0.30 Basic Customs Duty 0% 0.00Sub-Total for Calculating CVD 1.30 Sub-Total for Calculating CVD 1.00CVD (with 30% abetment) 12% 0.35 CVD (with 30% abetment) 12% 0.27Sub-total for calculating Edu. Cess on Customs
0.65Sub-total for calculating Edu. Cess on Customs
0.27
Education Cess on Customs 3% 0.02 Education Cess on Customs 3% 0.01Sub-total for ACD 1.67 Sub-total for ACD 1.27ACD 4% 0.07 ACD 4% 0.05Landed Cost 1.74 Landed Cost 1.33Indian Importer Margin 30% Indian Importer Margin 30% Price to Distributor/ Wholesaler 2.48 Price to Distributor/ Wholesaler 1.89Distributor Margin 10% Distributor Margin 10% Price to Retailer 2.76 Price to Retailer 2.10Retailer Margin 25% Retailer Margin 25% MRP before VAT 3.67 MRP before VAT 2.80VAT (Value Added Tax) 13.1% VAT (Value Added Tax) 13.1%
MRP (Maximum Retail Price) 4.16 MRP (Maximum Retail Price) 3.17
HS Codes: 1806 (Chocolate and other food preparations containing cocoa) Benefit of doing local sourcing
Custom Duty and Price Build-upCustom Duty and Price Build-up (1/3)(1/3)
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67
IMPORTS LOCAL SOURCING CIF Value 1.00 CIF Value 1.00Basic Customs Duty 30% 0.30 Basic Customs Duty 0% 0.00Sub-Total for Calculating CVD 1.30 Sub-Total for Calculating CVD 1.00CVD 0% 0 CVD 0% 0.0Sub-total for calculating Edu. Cess on Customs
0.30Sub-total for calculating Edu. Cess on Customs
0.0
Education Cess on Customs 3% 0.01 Education Cess on Customs 3% 0.00Sub-total for ACD 1.31 Sub-total for ACD 1.00ACD 4% 0.05 ACD 4% 0.04Landed Cost 1.36 Landed Cost 1.04Indian Importer Margin 30% Indian Importer Margin 30% Price to Distributor/ Wholesaler 1.94 Price to Distributor/ Wholesaler 1.49Distributor Margin 10% Distributor Margin 10% Price to Retailer 2.14 Price to Retailer 1.63Retailer Margin 25% Retailer Margin 25% MRP before VAT 2.85 MRP before VAT 2.18VAT (Value Added Tax) 13.125% VAT (Value Added Tax) 13.125%
MRP (Maximum Retail Price) 3.23 MRP (Maximum Retail Price) 2.47
HS Codes: 19059030 (Extruded or expanded products, savory or salted)Benefit of doing local sourcing
Custom Duty and Price Build-upCustom Duty and Price Build-up (2/3)(2/3)
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68
IMPORTS LOCAL SOURCING CIF Value 1.00 CIF Value 1.00Basic Customs Duty 30% 0.30 Basic Customs Duty 0% 0.00Sub-Total for Calculating CVD 1.30 Sub-Total for Calculating CVD 1.00CVD 0% 0 CVD 0% 0.0Sub-total for calculating Edu. Cess on Customs
0.30Sub-total for calculating Edu. Cess on Customs
0.0
Education Cess on Customs 3% 0.01 Education Cess on Customs 3% 0.00Sub-total for ACD 1.31 Sub-total for ACD 1.00ACD 4% 0.05 ACD 4% 0.04Landed Cost 1.36 Landed Cost 1.04Indian Importer Margin 30% Indian Importer Margin 30% Price to Distributor/ Wholesaler 1.94 Price to Distributor/ Wholesaler 1.49Distributor Margin 10% Distributor Margin 10% Price to Retailer 2.14 Price to Retailer 1.63Retailer Margin 25% Retailer Margin 25% MRP before VAT 2.85 MRP before VAT 2.18VAT (Value Added Tax) 13.125% VAT (Value Added Tax) 13.125%
MRP (Maximum Retail Price) 3.23 MRP (Maximum Retail Price) 2.47
Benefit of doing local sourcing
HS Codes: 0204 (Meat of sheep or goats, fresh, chilled or frozen)
Custom Duty and Price Build-upCustom Duty and Price Build-up (3/3)(3/3)
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69
HS CodeBasic
Customs Duty (BCD)
Countervailing Duty (CVD)
Education and Additional CESS
Special CVD / Additional Customs
Duty (ACD)Total
02.03, 04, 08 (Meat) 30% 0% 3% 4% 36.136%
02.03.11, 12, 19 30% 0% 3% 0% 30.9%
03.02, 04* (Fresh fish) 30% 0% 3% 0% 30.9%
03.05* (Dry fish) 30% 0% 3% 4% 36.136%
03.06 (Crustaceans) 30% 0% 3% 4% 36.136%
03.06.21,22,23,29 30% 0% 3% 0% 30.9%
07.02, 04, 05, 06, 07, 08, 09* (Vegetables)
30% 0% 3% 0% 30.9%
07.10, 11, 12 30% 0% 3% 4% 36.136%
09.01 (Coffee) 100% 0% 0% 4% 108%
09.01.12, 21, 22, 90 100% 0% 3% 4% 111.12%
09.02* (Tea) 100% Re. 1/kg -- 4% --
* All sub-codes under this code have same duty structure
With local sourcing, companies stand to eliminate the basic customs duty (BCD) which may go up to 100% in some cases
Import Duties for Food Sector (indicative list)Import Duties for Food Sector (indicative list)
69
70
Benefit of Local SourcingBenefit of Local Sourcing
HS Code Product Imported price
Total duties if imported
Locally manufactured price
Total duties if manufactured locally
1905 3100(Sweet biscuits)
McVities Digestive Light (400g)
INR 186Basic customs: 30%CVD: 6%ACD: 4%Edu. Cess: 3%
INR 155Basic customs: 0%CVD: 6%ACD: 4%Edu. Cess: 3%Hobnobs
(300g)INR 109 INR 75
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71
Presence of Italy in Indian Food
Industry
71
72
Italian Presence in IndiaItalian Presence in India
1 Represents total FDI (not only in food sector)
Source: Primary research
72
FDI Equity Inflows from Italy1
(from Apr 2000 to Nov 2013) With US$ 1.24B, Italy is the 14th largest
investor in India
Among the European countries, Italy is
the 6th largest investor
From representative offices to fully owned
subsidiaries, Italian companies are
present through all modes of operation
Select Italian companies operating in
India include Benetton, Comua, Fiat,
Luxottica, Denso, Galvi Engineering,
Lombardini, Mainetti, New Holland
Tractor, Pirelli, and Piaggio Vehicles
Italian cuisine and Italian fashion has
seen tremendous growth in India in the
recent years
Italy’s presence in Indian food industry can be predominantly felt in chocolate & confectionery,
olive oil, wine and pasta industries
73
Italian Companies in Indian Food IndustryItalian Companies in Indian Food Industry
73
Olive Oil Pasta Wine Chocolate and Confectionery
Other Food Products
74
Italian Companies in Indian Food IndustryItalian Companies in Indian Food Industry
Company name
India presence Market presence
Perfetti van Melle
Subsidiary - Perfetti Van Melle India Pvt. Ltd. (PVMI)
Manufacturer, distributor and marketer of sugar confectionery products With more than 15 brands, Pefetti has close to 25% market share in
organized confectionery business making it the market leader Key brands include Center Fresh (chewing gum), Alpenliebe (sugar
candy), Chlormint and Happydent (mouth freshener) 2012 sales totaled US$260 M* Manufacturing units in Gurgaon and Chennai Has a network of 4,000+ distributors across 1,500 towns and extended
network of 10,000+ sub-stockists covering 7,000+ towns PVMI, in 2011, became the first PVM group company to diversify into
snacks business with ‘Stop Not’ brand
LavazzaAcquisition of Barista chain
Entered India in 2007 by acquiring the second largest espresso bars in India
Has more than 180 bars; its Frest&Honest Café company is a key player in the HORECA# segment
2009 revenues totaled US$33 M* Opened a new plant in Andhra Pradesh in 2011
* 1 USD = 61.5 INR; #Hotels, Restaurants, and Catering
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75
Italian Companies in Indian Food IndustryItalian Companies in Indian Food Industry
Company name
India presence Market presence
Ferrero SpASubsidiary – Ferrero India
Entered India in 2010 With ~6% market share, Ferrero India is the 3rd largest player in
India’s chocolate industry; however Ferrero enjoys 60% share in premium chocolates segment
2012 sales totaled US$55 M*; 31% y-o-y growth Key brands include Nutella (chocolate spread), Ferrero Rocher
(chocolates), Kinder (children chocolate toys) and Tic Tac (mouth freshener)
Manufacturing unit in Maharastra
* 1 USD = 61.5 INR
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76
Italian Companies in Indian Food Industry: Italian Companies in Indian Food Industry: Olive OilOlive Oil
Italy is the second largest supplier of olive oil to India; 40% of olive oil imported in India comes
from Italy
Second largest olive oil brand in India, Leonardo Olive Oil owned by an Indian company Dalmia
Continental, is manufactured by Nicola Pantaleo in the Puglia province of Italy
All olive oil brands in India are present through Importer-Distributor model
76
Italy 40%
Rest of World10%
Spain50%
Total Olive Oil Market (Volume) 2012-13 : 11,916 MT
* Indicative list
Source: DGFT, Primary research
Leading Brand* Indian Partner
Leonardo Dalmia Continental Pvt. Ltd.
BertolliUnilever (till 2013); currently Consumer Marketing
Colavita Manisha International Pvt. Ltd.
Olitalia Olive Tree Trading
Dolce Vita Chenab Impex Pvt. Ltd.
Basso Suresh Kumar & Impex
Sasso Rai & Sons
Cirio United Distributors Inc.
77
Italian Companies in Indian Food Industry: Italian Companies in Indian Food Industry: WineWine
Italy is the third largest supplier of wine to India; ~10% of wine imported in India comes from
Italy
Wine industry in India is growing at 25-30% per year with current consumption reaching 1.2 million
cases, of which ~15% is imported; by 2017, this is estimated to reach 10 million cases of which
imported wines will account for 20%
Currently more than 2 million people in India consume wine and are primarily located in Mumbai,
Delhi, Bangalore, and Goa
77
Source: DGFT; * Indicative list
Leading Brand* Indian Partner
Fratelli WinesIndo-Italian JV (Secci brothers, Sekhri brothers, and Mohite-Patil brothers)
GAJA Brindco Ltd.
Garofoli Sonarys Co Brands Pvt. Ltd.
San Simone Wines Hema Connoisseur Collections
Allegrini Brindco Ltd.
Cesari Wines Hema Connoisseur Collections
Casa Girelli Global Tax Free Traders Inc.
Antinori Sonarys Co Brands Pvt. Ltd.
Fratelli Wines, a INR 40 crores JV
between three families from Italy and
India, has seen tremendous growth
since its inception in 2010; the winery
in Solapur district has production
capacity of 600,000 liters and is
equipped with 58 multi-capacity tanks
all imported from Italy
78
Italian Companies in Indian Food Industry: Italian Companies in Indian Food Industry: PastaPasta
After Indian and Chinese, Italian cuisine is the
most popular cuisine in India
Italy is the largest supplier of pasta to India;
42% of pasta imported comes from Italy
The share of Italy in pasta imports has
increased from 16% in 2008-09 to 42% in
2012-13
Despite growth of Indian pasta brands (such
as Bambino), with ~5,200 tons, imported
brands (particularly from Italy) still have a large
demand
Dalmia Continental’s Leornado pasta is
imported from Italy
Ready-to-cook pasta variants are seeing
tremendous growth in the Indian market
78
Source: DGFT
Pasta imports from Italy
16% 42%
% share of Italy in total pasta imports
The growth and popularity of pasta has given rise to a parallel market for pasta
sauces in India
79
Entry into India: Importer-Distributor ModelEntry into India: Importer-Distributor Model
Majority of the Italian processed food companies have entered India through the Importer-Distributor
model
Depending on the complexity of the product and the presence of distributors, Italian companies may
choose a single pan-India distributor, or go for multiple regional distributors
Some key Importer-Distributors include Chenab Impex, Olive Tree Trading, R R Oomerbhoy, Tree
of Life, Fortune Gourmet Foods, etc
79
Manufacturing company in
Italy
Importer-Distributor
Forwarding agents
Sub-distributors
CSD contractors
End customers (retailers, food
services, modern trade stores, etc)
80
Entry into India: Greenfield Setup Entry into India: Greenfield Setup
80
Formation of India Entity
Company incorporation (Pvt Ltd / LLP)
Basic Regulatory Approvals
IEC / PAN / TAN / VAT / CST (required without manufacturing)
Location and Site
Analyzing specific locations & sitesSecuring land in select industrial zone
Business Plan
Budgetary analysis of plantCapex, P&L, BS, Break even perspective
Vendor Selection
Shortlist vendors for complete packageEPC requirements (HVAC, Electrical)Equipment – local sourcing
Regulatory: Manufacturing
Over 25 approvals required to construct & operate the factoryEnvironmental clearances
Recruitment
Evaluation of candidatesRecruit start of positions at plant levelRecruit management & C-level positions
Project Management
Coordinate with all vendorsMonitor timely completionLiaison with all government & private agencies
Perfetti successfully set up its green field project in India in 1994 and has
since then grown to become a market leader
in confectionery segment
81
Food Processing Machinery
81
82
Food Processing Machinery – Market SizeFood Processing Machinery – Market Size
1 USD = 61.5 INR
Source: Primary research
INR55,000 crores (~US$ 9B) is the total market size of food processing machinery in India
Other food processing machinery market
Dairy processing machinery market
More than 40% (US$3.5B) of the machinery in food processing industry is imported
Agro processing machinery market
Domestic70%
Imported30%
Domestic50-60%
Imported40-50%
Domestic50-60%
Imported40-50%
100% = 40,000 crores (US$6.5B)
100% = 4,000-5,000 crores (US$813M)
100% = 10,000 crores (US$1.6B)
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83
Market Dynamics and TrendsMarket Dynamics and Trends
Source: Primary research
Food processing machinery market has been growing at 15% over the past 5-8 years
Growth rate expected to increase to 15-20% in the coming years on back of food processing
industry which is expected to grow at 30%
With hundreds of players operating in India, machinery manufacturing is a highly fragmented
industry
Food processing industry in general is moving towards modernization in India; players are
looking towards automation, energy efficient, and water saving equipment
Existing players are replacing old machinery with hi-tech imported machinery, while new
entrants are already buying latest technology equipment
Alfa Laval is the market leader in the equipment industry; other players include L&T, Heat and
Control, American Extrusions, GEA, and Goma
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84
Food Machinery Imports and ExportsFood Machinery Imports and Exports
Source: DGFT
84
Of the US$ 4.7B machinery imported from Italy,
food processing related machinery accounted
for only US$ 377M (8%)
Food machinery imports witnessed a spike in
2011-12 due to significant increase in import of
industrial ovens and pumps for handling liquid
Imports from Italy
Less than 1% of total machinery exported to
Italy in 2012-13 was related to food processing;
however, they have been consistently
increasing over the past 4 years
Filtering and purifying machinery contribute to
the majority of exports to Italy
Exports to Italy
85
Food Processing TrianglesFood Processing Triangles
Source: Primary research
Delhi
GurgaonNoida
Ahmedabad
PuneMumbai
Hyderabad
ChennaiBangalore
Food processing industry is largely
concentrated in three regions—
usually referred to as the three
triangles
Other concentrations depend on the
type of food processed
Snack food – North and West of
India
Dairy – Rajasthan/Gujarat/UP
Meat – UP/Hyderabad/Maharastra
F&V – West Bengal/Kerala/
Bihar/Jharkhand
Grapes – Pune/Nashik
Apple – Jammu/Shimla
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86
Machinery Distribution SystemMachinery Distribution System
Source: Primary research
Equipment
manufacturing company
Direct Purchase Model
Purchasing company
Buyer company and supplier company
establish a direct contact between each other
Exhibitions and expositions are the prominent channels for showcasing state-of-the-art products and technologies; millions of dollars of contracts are signed during these events
Equipment
manufacturing company
Agent / Distributor Model
Purchasing company
Importer-Distributor /
Agent
Machinery is imported in the name of the buying
company; agents organize meetings, test
equipment, and negotiate on behalf of buyers
5-10% margin
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Distributor Name Location Segment Contact Information
Kanchan Metals Kolkata Snack Food [email protected]
+91 983 174 4709
Standard Machinery
Marketing Co.
Bangalore All segments +91 80 2549 5844, +91 80 2549 5845
Menon Technical Services Bangalore F&V and Snack
Food
+91 80 4113 3783; +91 80 4127 8554
ACE Technologies Mumbai Food and Beverages +91 22 2870 0281; +91 22 2870 4108
Heat & Control India (sales
office)
Chennai Snack Food +91 44 4210 3950/51; +91 44 2621
2943/44
Repute Engineers Pvt. Ltd. Pune Dairy +91 20 27481687; +91 94220 20943
Distributors / Agents exert significant bargaining power over manufacturing companies as they place bulk orders from multiple clients
Source: Primary research
Select Importer-Distributor / AgentsSelect Importer-Distributor / Agents
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88
Recent Investments by PlayersRecent Investments by Players
Source: Primary research
(US$16.3M)
Invested in its mega food park; 50-60 crores worth machinery bought from Alfa Laval
Invests ~100 crores every year in biscuit machinery
Invested in snack machinery in Greater Noida
Invested 25 crores in ice cream machinery and 20 crores in frozen foods machinery
Replaced all its local-made machinery with imported machinery from Germany, Japan and US
Invested in beverages and snack machinery
Expanding businesses and growing revenues are enabling large and medium-sized players to invest heavily in machinery
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89
International Companies in Machinery International Companies in Machinery Industry in IndiaIndustry in India
Leading Companies Country Segment
Alfa Laval Sweden All segments
GEA Farm Technologies Germany Dairy
Buhler Switzerland Agro processing
Heat & Control USA Snack food
Fen Italy Snack food
SPX USA Dairy
American Extrusion USA Snack food
AC Horn USA Coated snacks
Isolteck Cusinato Srl Italy Pasta, snack pellets
Florigo International Netherlands Snack food
Alfa Laval is by far the largest company providing comprehensive range of machinery equipment across processing segments; it is the largest player currently offering turnkey
solutions to processing players
Source: Primary research
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90
Key Machinery Supplier CountriesKey Machinery Supplier Countries
Huge demand exists for international companies who can offer turnkey equipment and technological solutions to Indian processors
Dairy Snack Food
F&V
Meat
Source: Primary research
Chinese equipment is used in
every segment because of its
cost advantage; replicas of
high-end models are available
from China at a fraction of cost
Beverages
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91
Source: Primary research
Major Target Industries for Machinery Major Target Industries for Machinery Manufacturing PlayersManufacturing Players
Meat Processing
Packaged Foods
Ice Cream (Dairy)
With 25% growth rate, meat
processing is the fastest growing
segment for equipment manufacturers
Snack food, biscuits and RTE
processing machinery is witnessing
strong growth
Ice cream segment in the dairy
processing industry is witnessing a
robust growth of 15-20% year-on-year
Major Target
Industries
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Source: Primary research, APEDA
Snapshot of Meat Processing IndustrySnapshot of Meat Processing Industry
Meat processing (including poultry and marine) is the fastest growing segment with 25% growth
rate, of which buffalo meat processing is the biggest segment; India exported 1.8 million tons or US$
3.2B worth beef in 2012-13, up from US$ 1.9B in 2011-12
Unlike the restrictions on cow slaughter, buffalo slaughter does not have any restrictions; however,
domestic consumption of buffalo meat is very less in India and majority of it is exported
Meat processing machinery market is estimated to be around 300-400 crores and is growing at a
much faster rate of 30-40%
Imported machinery use is currently less; however, it is growing at a very strong pace
~25% of the machinery in meat segment and ~35% of machinery in poultry segment is
currently imported in India
Upgradation and replacement demand is pushing the growth of imported machinery
Investment in buffalo meat processing industry is required to tap the export market, while investment
in poultry industry is required to address the domestic demand and exports
In 2012-13, India exported 796 MT of processed meat in the form of sausages, canned meat,
meat extracts and preserved poultry meat
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48 abattoirs-cum-meat processing plants
in India
Primarily concentrated in Delhi/NCR
region, UP, Maharashtra, and AP
Hyderabad is home to several small-to-
medium scale meat processors
Largest meat processing players include
Allanasons, Al Hind, and Al Kabeer
Leading poultry processing players
include Godrej Agrovet, Suguna, and
Venky’sAllanasons
Al Hind
Al Kabeer
Godrej Agrovet
Suguna
Venky’s
Several medium sized players who aspire to join the league of Allanasons and Al-Hind
are replacing their existing less efficient equipment with high quality imported
machinery
Meat Processing – Customer Concentration
93
Source: Primary research, Company websites
94
Source: Primary research, News articles
Expansion Plans in Meat Processing Expansion Plans in Meat Processing IndustryIndustry
Suguna Foods, one of the largest players in poultry processing, has huge plans for expansion
To become a 10,000 crores company by 2017; planning to invest Rs 150 crores annually
To expand its Suguna Daily Fresh retail outlets, which offers fresh and RTC poultry products,
to 500 from the current 150 by 2016
To set up a RTE processing plant in North India by 2015; plant will have slaughtering and
processing facilities
To set up 2,000 QSRs (which will compete with McDonalds and KFC) in the next 5 years
Allana Group, one the largest players in meat processing, has been consistently investing in world
class integrated food processing infrastructure
To invest US$20M in setting up a meat processing plant in Ethiopia which will be operational
by September 2014; 75 MT of processed meat products will be exported daily from this plant
Godrej Agrovet’s subsidiary Godrej Tyson Foods, which recently upgraded its chicken processing
plants in Karnataka and Maharashtra, plans to expand its RTC poultry products to 60 cities (from its
current 50 cities) by end of 2014
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95
Source: Primary research
Snapshot of Ice Cream IndustrySnapshot of Ice Cream Industry
Ice cream market in India is estimated to be around 3,500
crores, and is growing at a rate of 15-20% year-on-year
By 2015-16, the market is expected to double to 7,500-
8,000 crores
Highly seasonal industry with almost all the sales (retail)
happening in the summer period (April-August); institutional
sales provide cushion during lean periods
Presence of 7,000-10,000 players
Small unorganized players go off market during the
lean periods
Indian consumers are actively storing ice creams at home
which is leading to higher consumption
Ice creams as desserts during marriages and innovative
products (such as Ice cream Sandwich) are boosting sales
Ice cream Industry in India, 2012-13
Unorganized45% Organized
55%
100% = 3,500 crores (US$570M)
Per capita ice cream consumption is only
300ml (2011-12) which is expected to
double by 2015-16
Retail, 65%
HoReCa, 35%
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96
Source: Primary research
Ice Cream Industry – Key PlayersIce Cream Industry – Key Players
~80% of ice cream market is captured
by top 5-7 players
Regional players have strong presence
in respective regions
Leading players market share
Baskin-Robbins is the biggest foreign player in India
Top 5 brands have pan-India presence
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97
Source: Primary research
Ice Cream Machinery IndustryIce Cream Machinery Industry
Ice cream machinery is primarily imported from China; high end equipment comes from Germany and
Netherlands; 60% of machinery is purchased directly from the equipment manufactures, 40% through
brokers/distributors
Backed by healthy growth, all major players are expanding aggressively
Hatsun Agro acquired Jyothi Dairy as part of expansion plans; Amul is adding 5,000 outlets every
year to its existing 80,000+ outlets; Unilever’s premium brand Magnum is doing exceptional
business in India
Domestic machinery players include VCS India, Goma Engineering, Sriram tools, etc
Refrigeration market is growing at strong pace; in 2012-13, 3 lakh refrigeration units were sold in India
(in the organized segment only)
Vadilal and Mother Dairy are investing in frozen food category (which is growing at 25% rate); Vadilal
bought machinery from Italy recently
Italian companies will face tough competition from China in ice cream equipment market as Chinese machinery is relatively inexpensive
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Ice cream/Frozen Dessert
manufacturing units are primarily
located in the west and north of
India
Largest 4 players have 17
manufacturing units
Regional players have one or two
manufacturing units in respective
regions/statesAmul
Mother Dairy
Cream Bell
Vadilal
Ice Cream Machinery – Customer Ice Cream Machinery – Customer Concentration Concentration
Replacement demand is very high as players are going for more efficient and
power saving machinery
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Source: Primary research, Company websites
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1 Snack food include all chips and extruded snacks
Source: Primary research
Snapshot of Packaged Food IndustrySnapshot of Packaged Food Industry
Snack food1, biscuits and RTE machinery segments within
the packaged food industry are growing at a strong pace
With 20% y-o-y growth rate, snack food processing industry
is one of the fastest growing segments
Potato processing (potato powder and potato by-
products) and corn processing are witnessing huge
demand within snack processing
~25-30% of the machinery is imported from USA, Japan,
Netherlands, etc
Key machinery imported include conveying systems and
ovens
Heat and Control and American Extrusions are the key
suppliers of snack food machinery in India; Italian company
Fen s.r.l, is also a key player with seven plants in India
Packaged Food (excl. Beverages) Machinery Market in India
100% = ~1,000 crores (US$160M)
RTE, 500 croresBiscuit,
300 crores
Snack Food, 200 crores
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100
Illustration does not include contract manufacturing facilities
Source: Primary research, Company websites
Key customers in the packaged food
industry are primarily concentrated in the
northern and western parts of the
country as well as along the eastern
coast line
PepsiCo
Parle
Britannia
ITC
Priya Foods
Haldiram’s
Backed by strong growth, mid-sized players in the snack food and RTE segments are emerging as front runners in acquiring high-end imported machinery
Demand for high efficiency conveyer systems is driving the packaged food machinery segment
Packaged Food – Customer Concentration
MTR
Balaji Wafer
100
Nestle
101
Source: Primary research, News articles
Expansion Plans in Packaged Food IndustryExpansion Plans in Packaged Food Industry
By 2020, PepsiCo to invest 33,000 crores (US$ 5.5B) in India
It intends to make Andhra Pradesh a national hub for sourcing mango pulp for its soft drinks
ITC to set up a 50 crores noodle manufacturing plant in Kolkata in partnership with Keventer Group
Balaji Wafers, the market leader in snack food in Western India, plans to enter North and South of
India by setting up two manufacturing plants with an investment of 200 crores by 2015
Coca Cola to invest US$ 5B by 2020 across its beverages and bottling lines
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102
Source: Primary research
Cold Storage – An OverviewCold Storage – An Overview
Cold storage infrastructure in India is highly inadequate for the country’s requirements
About 40,000 crores worth of food (F&V, dairy, meat, grains etc) is wasted primarily due to lack
of cold storage
India currently has about 30 million MT of cold storage capacity which is only half of what is
actually required
75% of the cold storage network is concentrated in 5 states of Gujarat, Uttar Pradesh, West
Bengal, Punjab and Himachal Pradesh
Majority of this cold storage network supports only potato storage; there is not adequate
infrastructure for other vegetables
Though cold storage and refrigeration requirements are required across all food processing
segments, they are required most in meat processing, diary processing and F&V processing
segments
Danfoss and Alfa Laval are leading players in cold storage, and Voltas, Carrier, Blue Star and Rinac
are prominent in the refrigeration segment
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103
Source: Primary research
Cold Storage – OpportunitiesCold Storage – Opportunities
There is a huge scope for development and investment in this sector
Frozen foods segment is growing at 20-25% year-on-year
Dairy segment is growing at around 10-15% year-on-year
Replacement demand is very high as a number of companies are using old equipments which
consume high amounts of power; smart power saving cold storage equipments’ market is seeing an
uptrend
International companies aren’t keen on building the cold storage network per se, but are focusing
primarily on selling and marketing refrigeration equipment
Government is trying to help players who are interested in investments by providing subsidies and
tax incentives
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In addition to an immediate need for development of a strong cold storage network, there is a huge demand for specific products in the value chain, such as compressors, insulation
products, and heat exchangers; in the short term, Italian companies can take advantage of this market
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1 USD = 61.5 INR
Source: Primary research
INR20,000 crores (~US$ 3.3B) is the total market
size of food packaging machinery in India
Industry is growing at a rate of 8-10% per annum,
and with strong growth in processed food industry,
the growth of packaging industry is also expected to
accelerate
Replacement demand is driving the packaging
industry as large number of companies are going for
more efficient machinery
With growth in the packaging machinery, packaging
materials such as oil tins and beverage cans are
also growing at healthy pace
Food packaging machinery market
Domestic70%
Imported30%
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Among various segments within the processed food industry, packaged goods segment contributes the most to the growth of packaging machinery industry
Packaging Industry in India
105
1 USD = 61.5 INR
Source: Primary research
Weighers and Drives form the two largest product
categories, accounting for more than 40% of the
packaging industry
Nearly 100% of the weighers and a significant
portion of drives are imported
Filling Lines is one of the fastest growing product
categories in Indian packaging industry as large
consumer foods companies are opting for high-
speed filling equipment
Food packaging machinery – Key Product Categories
105
A significant portion of packaging machinery is imported from Italy; pouch making machines in the snack food industry come largely from Italy
Packaging Industry – Key Product Packaging Industry – Key Product CategoriesCategories
106
Source: Primary research
Majority of the machinery that is imported comes from Germany, Italy, Japan, China, and USA
Bosch and Uflex are the two dominant players in India
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Leading Companies Country Segment
Bosch Germany All segments
Uflex India Packaging films and other machinery
Toshiba Japan Drives
Omron Japan Drives
Krones Germany Filling lines
Shimadzu Japan Weighers
Schneider USA Case Packing
Propack Italy Safety packaging
Ishida Japan Weighers
OMAG Italy Bag sealing machines
Altech Italy Labelling
Packaging Industry – Key PlayersPackaging Industry – Key Players
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Conclusions and Recommendations
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1 Under Industries (Development and Regulation) Act, 1951
Conclusion and Recommendations – Food Conclusion and Recommendations – Food ProcessingProcessing
India is one of the largest food producers in the world and offers vast opportunities to food
processing companies; the sector has been growing at ~15% CAGR and is expected grow at a
much faster rate of 25% in the coming years. Its priority sector status and significant support from
the government (setting up mega food parks, etc) makes it a very attractive sector for investment.
Apart from catering to domestic demand, Italian companies can make India an exporting hub for its
competitive advantage in production and exports (Nestle has been successful in doing so)
As most of the segments within food processing sector are exempted from the provisions of
industrial licensing1 making it easier for Italian companies to set up operation in India; moreover,
with 100% allowance in FDI in food processing sector (except in beer and alcoholic drinks, and
items reserved for small scale sector, like vinegar, bread and bakery), Italian companies may enter
the Indian market through any mode of operation (joint venture, partnership, acquisition,
representative office, etc)
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109
Conclusion and Recommendations – Food Conclusion and Recommendations – Food ProcessingProcessing
As food industry in India evolves, food norms are changing rapidly and are becoming more
stringent than before, especially in terms of labeling and packaging requirements; Italian
companies planning to set up operations in India should thoroughly understand the implications of
these changes before deciding on the entry strategy
Competition within the food processing sector is intense with few large players in each segment
competing for organized market share, however, companies with robust and innovative product
offerings, customized to suit Indian palate, have good potential to become leading players in the
Indian market
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Conclusion and Recommendations – Conclusion and Recommendations – Machinery Machinery
Italian machinery has significant presence in the fruits & vegetables processing segment, and
beverages segment; however, meat processing, packaged foods (snack food, biscuits and RTE),
and ice cream industry offer high growth potential for machinery manufacturers
There is substantial demand for companies offering turnkey solutions; currently except Alfa Laval,
hardly any other company is offering such high-end solutions; Italian equipment manufacturing
companies can enter India with a focus on providing end-to-end solutions to food processing
companies
Solutions for small and medium companies: small and medium players currently have very
limited options when it comes to cost effective solutions; Italian machinery manufacturers may
expand their presence by acquiring equipment manufacturers who provide solutions to small scale
companies
In 2011, Heat and Control acquired Indore-based Flavorite Technologies, a company that
provides equipment and solutions to the local food processing industry. Since then, market
share of Heat and Controls have increased significantly, and a large portion of its India
revenues come from Flavorite 110
111
Thank You
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112
Appendix
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113
113
List of Importer-Distributors
Specified HS Codes Duties
Marketing Events Listing
List of Importers and Distributors
Specified HS Codes Duties
Marketing Event Listing
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List of Mega Food Parks Implemented in List of Mega Food Parks Implemented in Phase I and IIPhase I and II
Name State Location Investment ($M)
Patanjali Food & Herbal Park Uttarakhand Haridwar 17.4
Srini Food Park Andhra Pradesh Chittoor 23.2
North East Mega Food Park Assam Nalbari 13.9
Jharkand Mega Food Park Jharkaand Ranchi 20.9
Tamil Nadu Mega Food Park Tamil Nadu Dharmapuri 24.5
Jangipur Bengal Food Park West Bengal Jangipur 20.4
Integrated Food Park Karnataka Tumkur 26.5
International Mega Food Park Punjab Ferozpur 28.2
Keventer Food Park Infra Bihar Bhagalpur 28.2
Sikaria Infra Projects Tripura Agartala 15.6
Anil Mega Food Park Gujrat Vadodara 32.9
Shaktiman Mega Food Park Uttar Pradesh Sultanpur 31.0
Paithan Mega Food Park Maharastra Aurangabad 22.2
MITS Mega Food Park Orissa Rayagada 21.4
Madhya Pradesh MFP Madhya Pradesh Khargon 29.7
Source: MOFPI Annual Report 2011-12
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