Overview of Food and Beverage Industry in

India

India is one of the world's largest food producers with a large agriculture industry. With a
preference for fresh food, it supplies the majority of its population with its own, largely fresh
food,

India's GDP is forecast to be US $2,013 billion in 2013 and to continue growing at 7-8
percent per annum for the next few years (i) and there has been a clear increase in
purchasing power among the population, especially in the cities.

Small and independent family owned stores dominate the food and beverage retail
market, holding more than 65 per cent of market share however larger supermarkets and
hypermarkets are starting to have an impact.

Large retailers, who have a market share of close to 5 per cent and growing, tend to
operate in urban areas and are more likely to sell imported products. Leading retail
companies include Reliance Retail, Pantaloon Retail (India), Bharti Retail, Spencer's Retail,
Spar, Tata Trent and Aditya Birla Retail.

India's US$23 billion hospitality sector incorporating hotels, fast food outlets and
restaurants received $11 billion of investment in 2011/2012 and is likely to be worth US$42
billion by 2018.

The Indian food industry was US$25.4 billion in 2011 and is expected to be US$35 billion
by 2016, with the highest value segments in 2011, dairy, bakery and oil and fats.(iii)
Leading brands in India include Inustan Unilver, Gujarat Co-operative Milk Marketing
Federation and Nestle India.

Major segments in food and beverages industry

Sales
Soft drinks; 9%
Alcoholic beverages; 3%
Food grain milling; 35%
Bread & Bakery; 21%
Fish processing; 4%
Dairy production; 17% Meat & paultry; 10%

The leading companies in food and beverage sector

There are so many large companies present in India who are leading players in the Indian
Beverages Industry. The companies are having large annual turnovers with wide range of
product portfolios which include all kinds of beverage drinks from soda to energy drinks.
These companies are having a large variety of products like soda, water, Colas, Fruit based
drinks, Lemon based drinks, Milk beverages, and Fruit based wine, beer, Whisky, Coffee,
and Tea etc. with so many health and energy drinks portfolio.
These companies have a strong distribution and marketing channel which supply the
beverages products to customers through retailers, Coffee shops, Restaurant,
Hypermarket and Supermarkets. The segment is highly distributed all over the country
through a long chain of retailers and suppliers who are providing very efficient service to
the company.
The leading Indian Beverage sector players are as follows:

1.
2.
3.
4.
5.
6.
7.
8.

Coca-Cola Company
PepsiCo
UB Group
Dabur India Ltd
TATA Global Beverages Ltd [TATA Tea]
Nestl India
Caf Coffee Day
Red Bull India Pvt Ltd

Marketing strategies For Food & Beverage

Industry

Indian consumer market is mainly segmented on the basis of geography and demographic.
Also the market is highly seasonal and predominantly urban. The products are relatively low
cost with low margin but are sold in huge volumes. The marketing strategies are mostly
product driven focusing on the masses. Also, innovative products to catering to regional tastes
and the needs of niche consumers are been promoted, benefiting in growth of the industry.
Most of promotions are done to increase the visibility of the brand. One of the most common
practices is to offer the product in wide range package sizes and prices suiting the needs of
diverse consumer segments. The promotions and advertisements done by the companies are
often large with huge financial costs. The promotions are usually frequent and during popular
TV shows, sports event at the peak hour with many celebrity endorsements. Other media like
print, digital, banner and hoarding and event sponsorship are also used

SWOT Analysis:
Strengths
Indias abundance of natural agricultural resources makes the
market attractive to investors from all food sub-sectors
India has the second largest population in the world, and rising
domestic demand is a major growth driver
Indias mass grocery retail sector is developing, and there is scope
for considerable expansion across all formats and across all regions of
the country.
weaknesses

The processed food industry is less developed as a result of logistical

and distribution problems
Agriculture remains inefficient and is vulnerable to climatic changes
Despite rapid economic growth, India remains a very poor country
Indias infrastructure is notoriously inadequate. A 500km road
journey can take as much as 24 hours owing to poor road conditions,
congestion and tolls.

Opportunities
The government is actively seeking investment in the food
processing and agribusiness industries
Rising disposable incomes and increasing urbanization mean
higher-value processed foods are likely to experience strong growth
rates
The immense size of Indias population and landmass ensure that
market maturity is a distant prospect
Threats
Logistical problems, underdeveloped service networks and poor
infrastructure hinder development in fresh food industries, such as
dairy

Porters five forces analysis

Threat of substitutes: Soft drink industry offers substantial product differentiation.
However, substitutes like bottled water, sports drinks, tea etc. are increasingly getting
popular with health conscious trend. With increasing flavors and varieties, these products
pose a strong threat to the industry.
Threat of new entrants: Coca-Cola and Pepsi Co dominate the soft drink industry. In
addition, the industry is fully saturated and minimal chances of growth making it extremely
difficult for new players to start competing. Moreover, huge fixed costs are needed and thus
new entrants cannot compete without economies of scale. Therefore new entrants do not
create significant threat.
Bargaining power of suppliers: Suppliers of bottling equipment and packaging hold no
power. Companies mostly own the majority of the bottling and hence suppliers do not hold
much bargaining power. For sugar and additives suppliers, since there are a lot of them, soft
drink manufacturer can shift supplier leaving almost no bargaining power with suppliers.
Bargaining power of buyers: The buyers mainly include large grocers, restaurants and
stores. The soft drink companies distribute products to these stores, who later resale to the
consumers. Different levels of bargaining power exist with discount stores having a lot of it
due to large demand whereas restaurants ordering low volume fail to have any bargaining
power.
Intensity of existing rivalry: Carbonated software industry is a huge industry. Currently few
competitors exist and hence it allows multiple firms and producers to prosper.

What Type
Companies?

of

Segmentation

Is

Used

by

Food

Even the biggest food companies categorize their offerings into difference customer segments to
more effectively meet the needs of the marketplace. Segmentation helps businesses large and
small market their wares effectively and devise a corporate strategy that gears their products
towards the right audience. Among the categories that food companies use to segment their
products are price, location, cuisine and product lines.

Price
Food companies segment their audience based on the price the customer will pay. For a restaurant,
these price categories might be $15 or less, $16 to $25, $26 to $50 and $50-plus. Food vendors
have their own standards based on industry norms for their individual product categories. One
example of this type of segmentation comes from the increasingly significant line of store-branded
products. Companies may have two or more store brands serving a particular product line, one
geared towards customers who make purchasing decisions based solely on price and another for
those more willing to spend more for items of actual or perceived higher quality.

Location
Segmentation by location allows food companies to align themselves with smaller local audiences,
or serve regional or national audiences more efficiently. This takes into account both regional
preferences and distribution concerns. Companies may find their products do better in certain areas
and adjust their product distribution accordingly. Others go so far as to change their brand names
based on location. For example, when Dreyers ice cream expanded to the East Coast, it used the
Edys brand name instead to avoid confusion with Breyers ice cream, a popular regional dessert.

Cuisine
Segmenting based on the type of cuisine also leads to more effective positioning in the
marketplace. Both restaurants and commercial food companies can choose to identify themselves
as belonging to a particular genre. For example, a quick service restaurant might segment itself by
whether it serves burgers, chicken, Mexican food, pizza, sandwiches or other foods common in that
industry. Food products may be designated in similar categories on grocery store shelves, choosing
to appear in the kosher foods section or with the ingredients found in Caribbean food.

Product Lines
Food service distributors segment based on the products they carry and the categories they fit in.
Beverages, baked goods, dairy, meat, organic produce and seafood are among the relevant
categories here. Some foods can belong to more than one segment; for example, fish sticks could
be considered part of both the seafood and frozen food product lines. Similarly, restaurants can be
divided into lines like full-service, quick-service and fast food.

Marketing mix

The four components of food marketing are often called the four Ps of the marketing mix
because they relate to product, price, promotion, and place. [4] One reason food manufacturers
receive the largest percentage of the retail food dollar is that they provide the most
differentiating, value-added service. The money that manufacturers invest in developing,
pricing, promotion, and placing their products helps differentiate a food product on the basis of
both quality and brand-name recognition.

Product[edit]
In deciding what type of new food products a consumer would most prefer, a manufacturer can
either try to develop a new food product or try to modify or extend an existing food. For
example, a sweet, flavored yogurt drink would be a new product, but milk in a new flavor (such
as chocolate strawberry) would be an extension of an existing product. There are three steps
to both developing and extending: generate ideas, screen ideas for feasibility, and test ideas
for appeal. Only after these steps will a food product make it to national market. Of one
hundred new food product ideas that are considered, only six make it to a supermarket shelf.
The food industry faces numerous marketing decisions. Money can be invested in brand
building (through advertising and other forms of promotion) to increase either quantity
demanded or the price consumers are willing to pay for a product. Coca Cola, for example,
spends a great deal of money both on perfecting its formula and on promoting the brand. This
allows Coke to charge more for its product than can makers of regional and smaller brands.
Manufacturers may be able to leverage their existing brand names by developing new product
lines. For example, Heinz started out as a brand for pickles but branched out into ketchup.
Some brand extensions may involve a risk of damage to the original brand if the quality is not
good enough. Coca Cola, for example, refused to apply the Coke name to a diet drink back
when artificial sweeteners had a significantly less attractive taste. Coke created Tab Cola, but
only when aspartame (NutraSweet) was approved for use in soft drinks did Coca Cola come out
with a Diet Coke. Manufacturers that have invested a great deal of money in brands may have
developed a certain level of consumer brand loyaltythat is, a tendency for consumers to
continue to buy a preferred brand even when an attractive offer is made by competitors. For
loyalty to be present, it is not enough to merely observe that the consumer buys the same
brand consistently. The consumer, to be brand loyal, must be able to actively resist
promotional efforts by competitors. A brand loyal consumer will continue to buy the preferred
brand even if a competing product is improved, offers a price promotion or premium, or
receives preferred display space. Some consumers have multi-brand loyalty. Here, a consumer
switches between a few preferred brands. The consumer may either alternate for variety or
may, as a rule of thumb, buy whichever one of the preferred brands is on sale. This consumer,
however, would not switch to other brands on sale. Brand loyalty is, of course, a matter of
degree. Some consumers will not switch for a moderate discount, but would switch for a large
one or will occasionally buy another brand for convenience or variety.

Price[edit]
In profitably pricing the food, the manufacturer must keep in mind that the retailer adds
approximately 50 percent to the price of a wholesale product. For example, a frozen food sold
in a retail store for $4.50 generates an income of $3.00 for the manufacturer. This money has
to pay for the cost of producing, packaging, shipping, storing, and selling the product.

Promotion[edit]
Promoting a food to consumers is done out of store, in store, and on package. Advertisements
on television and in magazines are attempts to persuade consumers to think favorably about a
product, so that they go to the store to purchase the product. In addition to advertising,
promotions can also include Sunday newspaper ads that offer coupons such as cents-off and
buy-one-get-one-free offers.

Nowadays both Coke and Pepsi are going in for Brand Ambassadors to promote
their product. These brand ambassadors are famous people who usually people
idolize and people can relate to them. The following pictures do not need any
explanation as people are familiar with the celebrities and can thus quickly identify
with the product.

Place[edit]
Place refers to the distribution and warehousing efforts necessary to move a food from the
manufacturer to a location where a consumer can buy it. It can also refer to where the product
is located in a retail outlet (e.g., the end of an aisle; the top, bottom, or middle shelf; in a
special display case, etc.).
The food marketing system in the United States is an amazingly flexible one. Consumer focus
helps marketers anticipate the demands of consumers, and production focus helps them
respond to changes in the market. The result is a system that meets the ever-changing
demands of consumers.

Conclusion
India is one of the largest producers of food and dairy products. But when it comes to
processed packaged food and beverages, the market is largely unorganized with huge growth
potentials.

Continuous urbanization and changing consumer habits, has resulted in greater reliance of
people on packaged foods and beverages. With the influx of major international players like
Coca-Cola and PepsiCo, and efforts by large domestic players like Dabur and Parle Agro, the
industry is getting more organized. As a result, the industry is generating more opportunities in
sectors like marketing, supply chain, storing, warehousing, manufacturing, packaging and
R&D.

The food and beverage industry highly fragmented

The contribution of the food processing and beverage sector to the GDP has been growing
faster than that of the agricultural sector. This means, more and more agricultural
products are being converted into food products.
The market is highly fragmented. There are many small companies which work at a low
level of technology. According to the Ministry of Food Processing Industries MOFPI, roughly
35,000 food processing and beverage production companies (2011) are registered in India.
Around 50 percent of these are processing units for grain, crops and rice, including mills.
The other half is dominated by the dairy sector: 1,493 units are active in the dairy
industry; second largest sector is the bakery industry: 1,450 companies produce baked
goods. There are 1,200 units active in the beverage sector, around 500 companies are in
the cocoa and confectionery business and around 100 companies are in the meat sector.