Indian Food Industry

Indian Processed Food Industry
Sector Coverage
April 15, 2008
Opportunities Galore
Industry Overview
Global Processed Food Industry
Processed Food Industry - A Sunrise sector
Where the opportunity lies- areas for investment
Industry Analysis
Driving Forces
Major Challenges
Indian Food Processing Industry by sectors

Diary
Fruits and Vegetable
Grains
Meat and Poultry
Fish
Packaged/Convenience Food
Aerated Soft Drinks, Packaged drinking
water
Exports
FDI in Food Processing
Government Regulation and support
Regulatory framework
Outlook
Initiating Coverage
Lakshmi Energy & Foods
Ruchi Soya
Analyst - Nisha Harchekar

nishaharchekar@way2wealth.com
Sectors - FMCG, Pharma, Entertainment
WAY2WEALTH Securities Pvt. Ltd.,

15/A Chander Mukhi, Nariman Point, Mumbai - 400 021. Tel: +91 22 4019 2900
email: research@way2wealth.com website: www.way2wealth.com
Sector Coverage
Executive Summary
The size of global processed food industry is estimated to be valued around US $3.6 trillion
and accounts for three-fourth of the global food sales. Despite its large size, only 6% of
processed foods are traded across borders compared to 16% of major bulk agricultural
commodities. Indian food-processing industry is miniscule in comparison and is estimated to
be US $40 billion and is likely to grow at over 10%, on the basis of an expected GDP growth
Ruchi Soya rate of 8-8.5% p.a.
FY09(E) With enormous scope for value addition, increase in the consumption of processed food
CMP (Rs) 86 products in India and many fiscal incentives being planned by the government, this sector is
Marketcap (Rs poised to maintain the growth momentum in the future. Moreover, the advent of the WTO
crores) 1570 regime and the possibility of reduced subsidies in developed countries can add to India’s
PE (x) 6.8 strengths in food production and processing industry.
Mktcap/sales (x) 0.1 India accounts for less than 1.5% of international food trade despite being one of the
EV/EBITDA (x) 5.3 world’s major food producers, which indicates huge potential for both investors and
RoCE (%) 16.8 exporters. With rapid increase in the per capita income and purchasing power along with
RoNW (%) 15.0 increased urbanization, improved standards of living, there lies a large untapped
opportunity to cater to 1000 million domestic consumers. It is estimated that 300 million
upper and middle class consume processed food. With the convenience needs of dual
income families, 200 million more consumers are expected to move to processed food by
Lakshmi Energy & Foods 2010. The market size for the processed foods is thus bound to increase from US $102
billion currently to US $330 billion by 2014-15 assuming a growth of 10%. The share of the
FY09(E) value added products in processed foods would almost double from US $44 billion currently
CMP (Rs) 200 to US $88 billion during the same period, growing at the rate of 15%. This presents
Marketcap (Rs enormous opportunities for investment in processed food sector.
crores) 1200
Several global food giants and leading Indian industrial enterprises are already making their
PE (x) 7.2
presence felt in a big way in the sector. Some of them are Nestle India, Cadbury's India,
Mktcap/sales (x) 0.9 Kelloggs, Hindustan Unilever, ITC-Agro, Godrej Foods and MTR Foods.
EV/EBITDA (x) 4.4
RoCE (%) 29.3 It is estimated that the food production in India is likely to grow two-fold in the next ten
RoNW (%) 35.5 years. Thus, there is ample of opportunities for investments in food and food-processing
technologies, equipments, especially in areas of canning, dairy & food-processing, specialty
processing, packaging, frozen food and thermo processing, cold chains and in the area of
food retail.
Ministry of food processing in its Vision 2015 document has estimated the size of processed
food sector to treble, processing level of perishable to increase from 6% to 20%, value
addition to increase from 20 % to 35% and India’s share in global food trade to increase
from 1.5 % to 3%.
The government’s focus towards food processing industry as a priority sector will ensure
policies to support investment in this sector and attract more FDI. India with its vast pool
of natural resources and growing technical knowledge base has strong comparative
advantages over other nations. According to CII estimates, food-processing sector has the
potential of attracting US $33 billion of investment in 10 years and generate employment
of 9 million person-days. The food-processing sector in India is clearly an attractive sector
for investment and offers significant growth potential to investors.
The report outlines the tremendous growth potential in the sector and various
opportunities for investments. We initiate coverage on Ruchi Soya and Lakshmi Energy &
Foods with a BUY recommendation.

Sector Coverage
Global Processed Food Industry

The size of global processed food industry is estimated to be valued around US $3.6 trillion
and accounts for three-fourth of the global food sales. Despite its large size, only 6% of
processed foods are traded across borders compared to 16% of major bulk agricultural
commodities. Over 60% of total retail processed food sales in the world are accounted by
Size of global food- the U.S, EU and Japan taken together.
processing industry –
US $3.6 trillion Japan is the largest food processing market in the Asian region, though India and China are
catching up fast and are likely to grow more rapidly. Leading meat-importing countries
namely Japan and South Korea have a developed processed food industry. One of the most
technically advanced food-processing industry globally is Australia as the products
produced are of international standards and at comparatively lower prices. Countries in the
Sub-Sahara African region, Latin America and parts of Asia continue to be on the lower-end
of technology competence in food items. However, Europe, North America, and Japan are
on the higher-end of technology, with a sharper shift towards convenience and diet foods.

Food and Agriculture: An overview
India has the second largest arable land of 161 million hectares and has the highest acreage
under irrigation. Next to China, India ranks second largest food producer in the world and
has the potential to immerge the biggest with its food and agricultural sector. India
accounts for less than 1.5% of international food trade despite being one of the world’s
major food producers, which indicates huge potential for both investors and exporters.
India’s GDP is expected to grow in the range of 8-8.5% in the coming fiscal year, fuelled by
robust investments and buoyant consumer spending. According to Goldman Sachs
India ranks second
projections, India’s GDP will exceed Italy’s in 2020, France’s in 2020, Germany’s in 2025
largest food producer
and Japan’s in 2035.
in the world next to
China The growth estimated is
Year India’s GDP ($ billion)
2005 604
2020 2014
2025 3174
2030 4935
2035 7854
Excessive controls, low public investment, inadequate infrastructure, poor agri-input

management, distorted pricing and incentives structures, and inadequate credit weighed
down India’s agricultural sector for several decades. The share of agriculture in India’s GDP
has fallen by more than 60% in the past five decades. However, the policy environment is
changing with increase in public investment, fading controls on product marketing and
distribution, better price-discovery mechanisms and improvement in credit availability.
Indian agriculture, particularly food processing and allied activities is thus going through a
major transformation with the government targeting 4% growth for the agri-sector from
2005-2020.

Sector Coverage
Agri GDP growth (%CAGR)
Agri GDP is expected to 4

grow by 4% from 2005- 4.0
3 3.5
2020, which will be
2.7 2.8
beneficial for the food- 2
2.1
processing sector
1
0
Pre Green Green Revolution Wider Tech Post economic The Agri
Revolution 1951- 1965-80 diffusion 1980- reforms 1995-05 challenge 2005-
65 95 20
Source: RBI, Chand (2005): WTO & Indian Agriculture: Issues & Experience
With the upturn of the agriculture sector, lot of opportunities has opened up for players
having strong linking with the entire agri-value chain and the food-processing sector will be
one of the biggest beneficiaries. Supply chain management, cold storages, financing,
retailing and exports are the areas where sizable opportunities are yet to be tapped. The
Government is taking steps to liberalize the agri sector to encourage investments.
Indian agri-business: Key facts

• Varied agro climatic zones
• 2nd largest arable land (161 million hectares) in the world
• Largest irrigated land (55 million hectares) in the world
• Largest producer of wheat (72 million tones), accounting for nearly 15% of global wheat
production
• Largest producer of pulses (15 million tones), accounting for nearly 21% of global pulse
production
• Largest producer of milk (96 million tons), accounting for nearly 17% of global milk
production
• Largest producer and exporter of spices
• 2nd largest producer of tea, accounting for nearly 28% of the global tea production
• 2nd largest producer of rice (92 million tons), accounting for nearly 22% of global Rice
production
• Largest exporter of the world's best basmati rice
• 2nd largest producer of fruits (50 million tons) and vegetables (100 million tons)
• 2nd largest producer of sugarcane (296 million tons), accounting for nearly 21% of the
global sugarcane production
• 3rd largest producer of coarse grains (31 million tons), including maize, accounting for nearly
4% of the global coarse grain production
• 3rd largest producer of edible oilseeds (25 million tons), accounting for nearly 7% of the
global edible oilseed production
Source: FICCI, Ministry of Agriculture

Sector Coverage
Processed Food Industry: A sunrise sector
Introduction
Food-processing industry is significant for India’s development because it has important
link and synergy with industry and agriculture, the two main support of the economy. Total
size of food-processing industry is around US $40 billion growing at 10% and the size of
processing sector is estimated to be US $2.53 billion. The industry is mainly unorganized
with 75% of the processing units belonging to the unorganised category, the organised
category though small, is growing fast. The food production is expected to double in the
next 10 years and the consumption of value added food products is expected to grow at a
much faster pace. This growth will benefit the economy, increase agricultural yields,
create employment and raise the standard of living of various associated people. Rising
consumer affluence and economic liberalization is opening up new opportunities in the
sector.
Structure of Indian Food Processing Industry
Organised
The industry is 25% Unorganised
unorganized with 75% 42%
of the processing units
belonging to the
unorganised category
Small Scale
Industries
33%
Source: FAIDA / Ministry of Food Processing Industries
The food-processing industry has been identified as a focus area for development and has
been included in the priority-lending sector. Most of the food-processing industries with the
exception of beer & alcoholic drinks and items reserved for small scale sector, like vinegar,
bread, and bakery have been exempted from the provisions of industrial licensing under
Industries (Development and Regulation) Act, 1951. Automatic approval up to 100% of
equity in case of foreign investment is available for most of the processed food items.
With over 1.10 billion consumers and fourth largest economy in terms of purchasing power
parity, UNCTAD and AT Kearney has ranked India amongst the top three investment
destinations in the world.
Low level of processing
The industry has very low processing level i.e 2.2% for fruits and vegetables, around 35% in
Low level of processing milk, 21% in meat and 6% in poultry products, which is significantly lower by international
leading to wastage standards. For e.g. processing of agriculture produce is around 40% in China, 30% in
Thailand, 70% in Brazil, 78% in the Philippines and 80% in Malaysia. Value addition to
agriculture produce in India is just 20% with wastage estimated to be valued at around US
$13 billion.

Sector Coverage
Source: FICCI, KPMG report
Processing levels for key Segments in Indian food-processing industry

50%
Fruits & vegetables 40%

have the lowest level 30% 3 5.0 %
of processing. Milk is
the most processed 20%
food item 21.0%
10%
2.2 % 6.0 %
0%
Fruits and M ilk & D airy M eat Poultry
Vegetables Produ cts
Source: Ministry of Food Processing Annual report 2005-06
Food-processing- a growing market

With rapid increase in the per capita income and purchasing power along with increased
urbanization, improved standards of living, there lies a large untapped opportunity to cater
to 1000 million domestic consumers. It is estimated that 300 million upper and middle class
consume processed food. With the convenience needs of dual income families, 200 million
With 1000 million more consumers are expected to move to processed food by 2010. The market size for the
domestic consumers, processed foods is thus bound to increase from US $102 billion currently to US $330 billion
there lies huge by 2014-15 assuming a growth of 10%. The share of the value added products in processed
untapped opportunity foods would almost double from US $44 billion currently to US $88 billion during the same
period, growing at the rate of 15%. This presents enormous opportunities for investment in
processed food sector.
Several global food giants and leading Indian industrial enterprises are already making their
presence felt in a big way in the sector. Some of them are Nestle India, Cadbury's India,
Kelloggs, Hindustan Unilever, ITC-Agro, Godrej Foods and MTR Foods.

Sector Coverage
According to Government estimates, Rs 1,000 billion investment is needed in this sector

across all segments of the value chain, from agri inputs to logistics to front-end
infrastructure and distribution, out of which bulk of investment will be from private sector.
As a result, various private corporate houses like Reliance have ventured in this space with
full vigor. Hence, there is immense potential for investment in this sector. To facilitate the
prompt growth of food-processing industry, the Government has implemented the scheme
for infrastructure development comprising a food park scheme, establishing packaging
centers, integrated cold chain facility; value added centers and irrigation facilities.
Where the opportunity lies- areas for investment

It is estimated that the food production in India is likely to grow two-fold in the next ten
years. Thus, there is ample of opportunities for investments in food and food-processing
technologies, equipments, especially in areas of canning, dairy & food-processing, specialty
processing, packaging, frozen food and thermo processing, cold chains and in the area of
food retail.
One of the key reasons for low levels of food processing is poor infrastructure for storage,
marketing and distribution of food products. 25-40% of agri-produce is lost post harvest
season. According to estimates, India’s marketable surplus is set to increase by 350 mtpa to
870 mtpa by 2012. 40% of the increase (150 mtpa) would be accounted by perishable fruits
and vegetables. The need for investments in the areas of infrastructure and supply chain is
Canning, specialty evident from the fact that India’s current storage infrastructure for all food items is only
processing, packaging, 100 mtpa.
frozen food and
thermo processing, The Government has announced various policy and fiscal measures to expand the storage
cold chains are capacity. It has announced 15-25% capital subsidy scheme for facilitating construction of
attractive areas for rural godowns and has also sanctioned 16 mt of new capacity the last five years.
investments
Cold chain
The estimated cold-storage capacity at 19.5 mt is less than 15% of the annual horticulture
production and is mainly dominated by potatoes (80% of capacity). The size of cold chain
industry is estimated to be around US $2.2-2.7 billion and is expected to grow at 20-25%
annually. FDI to the extent of 100% is allowed in the sector. With the rising focus on
horticulture, increasing corporate participation and advent of food parks and agri export
zones is likely to result in significant restructuring of cold storage infrastructure with an
estimated investment of US $8-10 billion.
Voltas, Blue-Star and Kirloskar Pneumatic are some of the cold storage players and
equipments. Radhakrishna Foodland and Snowman Frozen are major providers of cold
storage facilities. Concor is setting up a countrywide network of 14 cold-chain complexes
for horticulture in Delhi, Mumbai and Bangalore among other places.
Supply chain
An efficient supply chain not only brings down the price of the end product but also
eliminates intermediaries by connecting farmers directly to the super stores. It has thus
become an important aspect of organised retail setup. The food supply chain in India is
highly fragmented with numerous intermediaries and lack of economies of scale.
Sophisticated applications such as demand forecasting, data integration, financial flow
management, supply-demand matching, information sharing will enable it to become
mature and efficient.

Sector Coverage
Food safety management systems

The tightening of restrictions and the introduction of the Sanitary and Phytosanitary
Agreement by global industry bodies like the World Health Organisation (WHO), have led to
increased adherence of safety norms and regulations. Indian companies will have to strictly
adhere to international food safety standards in order to gain a larger share of world trade.
Machinery
In packaging, freshness and hygiene remains a key factor in determining buying by
consumers. In recent times, a number of new technologies have emerged both in
processing and packaging, which have made an impact on the shelf life of food products.
Food parks
30 mega food parks with investments of around US $110 million are coming up across the
country to attract FDI in the food-processing sector. The food parks will have facilities
ranging from cold storage, sorting, grading, food-processing, packaging and quality control,
and R&D laboratories. The government for these food parks has identified Maharashtra,
Andhra Pradesh, Punjab and Jharkhand and one Northeast region.
Food retail
Food and groceries form major portion (75%) of the retail pie. However, it has the lowest
level of penetration of 1% in organized retail. Branded foods market size is growing at 15-
20%. Players have outlined major expansion plans recognizing the opportunity.
Player expansion plans

Current Expansion Expected
Player Format
outlets Plans year
More (Supermarket) 14 1000 2010

Aditya Birla Group
Trinethra Super Retail 1 4 na
Bharti Wal-Mart Wholesale Stores - 15 2012
Express Retail Services Big Apple/Big Apple Fresh 16 100 na

Big names in the retail
Godrej Group Aadhar 31 1000 na
industry have outlined
huge plans in food & Fresh (Flagship
Heritage Foods 12 100 na
groceries segment Stores,Daily Stores
Big Bazar 62 100 na

Pantaloon Food Bazar 95 na na
KB’s Fairprice Value tores - 1500 2009
Reliance Fresh 240 471 2010

Reliance Retail Hypermarket 2 500 2010
Reliance Town Centres - 784 2010
Spencer’s (Fresh, Express,

RPG 200 5000 2011
Daily, Super, Hyper)
Sahakari Bhandar Sahakari Bhandar 18 na na
Subhiksha Subhiksha 870 150 2009
Wadhan Food Retail

Super Local, Express 84 1500 2010
(Spinach)
Source: Media report

Sector Coverage
Industry Analysis
Driving Forces
Abundant availability of raw material
India has varied agro climatic conditions; it has a wide-ranging and large raw material base
suitable for food-processing industries. It has a vast coastline of 8000 km, vast marine land
with 10 major ports. India produces annually 90 million tones of milk (highest in the world),
150 million tones of fruits and vegetables (second largest), 485 million livestock (largest),
204 million tones food grain (third largest), 6.3 million tones fish (third largest), 489 million
poultry and 45,200 million eggs. India's agricultural production base is huge.
With huge agriculture India- Competitive edge

production base, Share in global production Global
cheap labour force, India (%) Rank
lower cost of
production, India has Arable Land (million hectare) 161 2
a competitive edge Irrigated Land (million hectare) 55 1
over others Coast line (km) 8,000 19
Major Food Crops (MT) 35 4 3
Fruits (MT) 50 10 2
Vegetables (MT) 100 10 2
Rice/Paddy (MT) 92 22 2
Wheat (MT) 72 15 1
Milk (MT) 90 17 1
Sugarcane (MT) 296 21 2
Pulses (MT) 31 4 3
Tea (MT) 28 2
Edible Oil seed (MT) 25 7 3
Cattle (million) 485 16 1
Source: FICCI, Ministry of Agriculture
Low cost production base for domestic and export market can be set up considering India’s
comparatively cheap labour force and lower cost of production. India has access to
significant investments to facilitate food-processing industry.
Demographic trends
The food-processing industry has a bright future due to demographic environment in India,
which is a key positive.
Favorable
demographic Rising income levels leading to large customer base
environment works in India with its population of more than 1 billion accounts for close to 17% of the global
favour of the population. It is one of the most attractive consumer markets in the world with the
industry increase in income levels across the population segments. Food and grocery comprise the
largest share of the spending pie followed by personal care items, thus offering a lot of
scope for the food-processing industry. According to NCAER data, the consuming class, with
an annual income of US $980 (Rs 45,000) or above, is growing and is expected to constitute
over 80% of the population by 2009-10. The increase in income levels and higher tendency
to spend provides great opportunities for companies across various sectors.

Sector Coverage
200
12.8
15.3
23.4
150 33.0 28.1
74.1 Destitutes (<$327)
44.0 Aspirants ($327-$449)

100 Climbers ($449-$915)
71.6
Consumers ($915-$4388)
54.1 Very Rich (>$4388)
50 90.9
54.6
32.5
0 1.0 2.0 6.0
1997-98 2000-01 2006-07
Growing consuming class (million households-annual income)
The Rupee Spending

3% 4%
6%
3%
7%
57%
Food and grocery
takes away 57% from 5%
the consumer’s wallet
9%
1%
5%
Food and grocery Personal Care items
Home Textiles Savings & Investments
Clothing, Footwear and Accessories Consumer Durable/ Appliances
vacation Eating out
Movies and Entertainment Books and Music
Source: NCAER
Relatively young population

India has a relatively young population with close to 55% of population in the age group of
20- 59 years. This group is also high in consumption and therefore, this trend is expected to
provide a further boost to the growth of consumption in India.
Changing lifestyles
Increase in literacy and exposure to western lifestyles by more and more urban consumers
have led to change in mindset and preference. Increase in the population of working
women and increase in nuclear double income families in urban areas are some of the
other factors that are influencing the lifestyles. As a result, there has been an increase in
demand for processed, ready-to-cook and ready-to-eat food. According to Euromonitor,
money spend by Indians on meals outside the home has more than doubled in the past
decade to about US $5 billion a year, and is expected to further double in the next 5 years.
Thus, there lies significant growth potential for the sector and its investment
attractiveness.

Sector Coverage
Increase in consuming class in rural areas

Nearly 70% of India’s population resides in rural areas and account for nearly 50% of India’s
Rural areas cannot be consumption. Even with increasing urbanization and migration it is estimated that 63% of
ignored as it accounts India's population will continue to live in rural areas in 2025. Average income levels for
for 50% of India’s rural India will increase with higher agri-incomes and a gradual shift from farm to non-farm
employment. 37% of rural households could move into the middle income-and-above
consumption
consuming class by 2010 according to NCAER survey from just 15-17% in the late 1990s. This
will result in a consuming class of 56 million rural households by 2010 more than half of
India's overall estimated middle class by this time. This will open up vast and relatively
unexplored section of India to companies.
Major Challenges for the Indian Food Industry

Food-processing industry is facing constraints like non-availability of adequate
infrastructural facilities, lack of adequate quality control & testing infrastructure,
inefficient supply chain, seasonality of raw material, high inventory carrying cost, high
taxation, high packaging cost, affordability and cultural preference of fresh food.
Unprocessed foods are prone to spoilage by biochemical processes, microbial attack and
The industry needs to infestation. Good processing techniques, packaging, transportation and storage can play an
overcome various important role in reducing spoilage and extending shelf life. The challenge is to retain the
challenges if it has to nutritional value, aroma, flavour and texture of foods, and presenting them in near natural
grow to the estimated form with added conveniences. Processed foods need to be offered to the consumer in
levels. hygienic and attractive packaging, and at low incremental costs.
Major Challenges for the Indian Food Processing Industry are:
• Consumer education on nutritional facts of processed foods
• Low price-elasticity for processed food products
• Need for distribution network and cold chain
• Backward-forward integration from farm to consumers
• Development of marketing channels
• Development of linkages between industry, government and institutions
• Taxation in line with other nations
• Streamlining of food laws
Indian Food Processing Industry by sectors

India's food-processing sector covers fruit and vegetables; meat and poultry; milk and milk
products, alcoholic beverages, fisheries, plantation, grain processing and other consumer
product groups like confectionery, chocolates and cocoa products, soya-based products,
mineral water, high protein foods etc. The most promising sub-sectors includes- soft-drink
bottling, confectionery manufacture, fishing, aquaculture, grain-milling and grain-based
products, meat and poultry processing, alcoholic beverages, milk processing, tomato paste,
fast food, ready-to-eat breakfast cereals, food additives, flavors etc. Health food and
health food supplement is another rapidly rising segment of this industry, which is gaining
vast popularity amongst the health conscious.
The dairy sector has an estimated consumer demand for milk and milk products at Rs 1,400
billion, growing at about 8% p.a. Poultry meat is estimated to have production of 1.8
million tones, growing at a CAGR of 11%. Besides, ready-to-eat (RTE) industry, still nascent
in India, is estimated to be about Rs 5 billion growing at 30% p.a and expected to cross Rs
15 billion by 2010. The wine sector, is growing at about 50% p.a is expected to have a
market size of Rs 20 billion by 2010.

Sector Coverage
Segmentation of various sectors in the industry

Sectors Products
Dairy Whole milk powder, skimmed milk powder, condensed milk,

ice cream, butter and ghee, cheese
Fruits &
Beverages, juices, concentrates, pulps, slices, frozen &
Vegetables
dehydrated products, potato wafers/chips, etc
Grains &
Flour, bakeries, starch glucose, cornflakes, malted foods,
Cereals
vermicelli, beer and malt extracts, grain based alcohol
Fisheries
Frozen & canned products mainly in fresh form
Meat & Poultry
Frozen and packed - mainly in fresh form, Egg Powder
Consumer
Snack food, namkeens, biscuits, ready to eat food, alcoholic
Foods
and non-alcoholic beverages
Dairy
Milk and milk products is rated as one of the most promising sectors in the processed food
industry. India is the largest producer of milk in the world with production of 97.1 million
tones in 2005-06, growing at a CAGR of 4%. According to estimates by Dairy India, the size
of the Indian dairy market is Rs 2,27,340 crores, which is expected to more than double to
Rs 5,20,780 crores by 2011. India’s total milk production is projected to cross 100 million
tones by end of 2007 according to the tenth five-year plan estimates. Milk and milk
products account for a significant 17% of India’s total expenditure on food. India is on the
verge of assuming an important position in the global dairy industry.
Production and Per capita availability of milk

Milk and milk products
Per capita availability
is rated as the most Production in million tonnes
Year (grams / day)
promising sectors and
1950-51 124 17
is expected to more
than double by 2011. 1960-61 124 20
1970-71 112 22
1980-81 128 31.6
1990-91 176 53.9
2000-01 220 80.6
2001-02 225 84.4
2002-03 230 86.2
2003-04 231 88.1
2004-05 233 92.5
2005-06 241 97.1
2006-07 245 100
* Provisional
Source: department of Animal Husbandary and dairying
About 35% of milk produced in India is processed. The organized sector comprising of large
dairy plants processes about 13 million tones, whereas the unorganised sector (halwaiis and
vendors) process about 22 mtpa.

Sector Coverage
Milk Uses in India
22% Value Added (Unorganised)
Vlaue Added (organised)

7%
Packed liquid Milk
63%
8%
Unprocessed
Source: Cygnus
The traditional dairy products are India’s largest selling and profitable segment and
accounts for more than 50% of milk and dairy products. With liberalisation, the import of
technology and machinery has effected modernization and technological breakthrough in
production of traditional milk products and this has encouraged the growth of the
organized sector in the dairy segment.
As per estimates by dairy India 2007, by 2011 private dairies are slated to outpace the co-
operative sector and become the largest producers of milk in the industry. Private dairies
Big names like are likely to contribute double the quantity of milk that would be contributed by co-
Reliance, Walmart, operatives in 2011. Many corporates are planning a foray into the dairy business sensing the
Dabur are entering the big opportunity. Reliance and Walmart have already made an entry into this business by
private diary sector signing deals with farmers to procure 7 lakh litres and 15 lakh litres of milk per day. Dabur
through tie ups with India is exploring the possibility of entering into the milk-based drink segment. Yakult
farmers Danone plans to launch health drinks and yoghurts based on probiotics bacteria. Amul has
also forayed into the flavored yoghurt segment.
The 55,000 tpa branded butter market, valued at US $133 million is estimated to be
growing at 8-10% pa. The cheese market is estimated to be US $110 million in value terms
and an estimated 54,000 tones in volume terms, and has been growing at a CAGR of 8-9%
during 1999- 2003. The ice-cream market in India is estimated to be about US $199 million
pa.
Major Players
The packaged milk segment is dominated by the dairy cooperatives. Gujarat Co-operative
Milk Marketing Federation (GCMMF) is the largest player. All other local dairy cooperatives
have their local brands (For e.g. Gokul, Warana in Maharashtra, Saras in Rajasthan, Verka
in Punjab, Vijaya in Andhra Pradesh, Aavin in Tamil Nadu, etc). Other private players
include J. K Dairy, Heritage Foods, Indiana Dairy, Dairy Specialties, etc.

Sector Coverage
Some of the major dairy products manufacturers in the country

Company Brands Major Products
Milkmaid, Cerelac, Sweetened condensed
Nestle India Lactogen, Milo, milk, malted foods, milk
Everyday powder and Dairy whitener
Butter, Ghee, milk powder,
Milkfood Milkfood ice cream, and other milk
products
Malted Milkfood, ghee,
GlaxoSmithKline Horlicks, Boost, butter, powdered milk,
Consumer Healthcare Maltova, Viva milk fluid and other milk
based baby foods
Skimmed milk powder,
Indana, Kream
Kwality Dairy (India) whole milk powder, dairy
Kountry
milk whitener, Ghee
Gujarat Co-operative Milk, Butter, cheese, Ghee,
Milk Marketing Amul Ice cream and other milk
Federation products
Farex, Complan,
Infant Milkfood, malted
H.J. Heinz Glactose, Bonniemix,
Milkfood
Vitamilk
Milk, Curd, Ghee, Butter
Heritage Foods Heritage
Milk
Flavoured milk, cheese,
Britannia Milkman
Milk Powder, Ghee
Cadbury Bournvita Malted food
Milk, Ice Cream, milk
Mother Dairy Mother Dairy
products
Source: Company website
Fruits and Vegetable Processing
India is the 2nd largest producer of fruits (50 million tones) and vegetables (100 million
tones). The installed capacity of fruit and vegetable processing industry has increased from
F&V processing is still
11.08 lakh tones in 1993 to 21.18 lakh tones in 2006. The industry is still nascent and just
at its nascent stage
about 2.2% of the total output of fruits and vegetables is processed as per estimates. The
with processing level
country's share in the world trade of processed fruits and vegetables is still less than 1%.
of only 2.2% of total
Likewise, the consumption of value added fruits and vegetables are also low compared to
output
the primary processed food in general and fresh fruits and vegetables in particular. This
throws up a huge opportunity for the sector through increased penetration in the domestic
market. The government expects the processing in this sector to grow to 10% in 2010 and
25% of the total produce by 2025.

Sector Coverage
Fruit & Vegetable exports (Rs crores)
1800
1600
1400
1200
1000
800
600
400
200
0
2001-02 2002-03 2003-04 2005-06
Source: APEDA
Major players
Company Brands Products
Kissan, Knorr, Jams, Ketchups, wheat flour,
HUL
Annapurna, Fruit Beverages, soups
Real, Real Activ,
Dabur India Fruit Beverages
Coolers
Frozen processed fruits and
Mother Dairy (Safal) Safal
vegetables, Jam, Pickle
Temptation Foods Pure Temptation IQF fruits and vegetables,
Godrej F&B Fruit Juices, Fresh F&V (Retail)
Capital Foods Private Label Frozen Foods, IQF Vegetables
Mafco Mafco Frozen fruits and vegetables
Priya Foods Priya Pickles, Fruit Juices
Frozen Foods, Pickles, spices &
MTR Foods MTR
masala
Allana Cold Storage Allana Frozen Foods
Grains
India produces more than 200 million tones of different food grains every year. All major
grains like rice, wheat, maize, barley and millets like jowar (great millet), bajra (pearl
millet) & ragi (finger millet) are produced in India. About 15% of the annual production of
wheat is converted into wheat products. There are 10,000 pulse mills in the country with a
milling capacity of 14 million tones, milling about 75% of annual pulse production of 14
million tones.
Rice- most processed grain
Branded rice is India is the second largest rice producer in the world with a 20% share in world rice
growing at 15% in production. The total rice market in India is estimated to be worth around Rs 1,00,000
domestic market and crores (growing at 3-4% annually) of which only 10% of the rice is branded. The branded
25% in international rice sales have taken off in recent years and have been growing at around 15% in the
market domestic market compared to 5% for unbranded rice. The branded rice sales growth is an
impressive 25% in the international market as compared to stagnant sales of unbranded
rice. Added to this, of the Rs 3,500 crores worth of basmati rice produced, only around Rs
500 crores worth is sold in branded form.

Sector Coverage
While the total rice market is growing at 3-4% p.a, the basmati rice category is growing at
6%, indicating a latent robustness in the country’s consumption. India is the largest
producer and exporter of basmati rice accounting for around 74% of the global production.
Indian basmati rice commands premium over its traditional rivals in terms of prices and
quality. India produces around 2 million tones of basmati p.a, around 50% of India’s total
basmati production is consumed within, while the rest is exported.
In d ia n B a s m a ti R ic e E x p o rt D e s tin a tio n s
0 .7
0 .6
0 .5
0 .4
MMT
0 .3
0 .2
0 .1
0
Saudi K u w a it UAE UK USA O th e r s
A r a b ia
Source: Rice India January 2006
India exports around one million tones of basmati rice every year. Saudi Arabia comprises
60% of the exports. Pakistan is India’s sole basmati competitor in the international market.
The country wise breakup of exports is given in the figure below.
Outlook
The demand for basmati rice is expected to grow for the following reasons:
Growth in world population from 6.2 billion in 2002 to more than 8 billion in 2030;
growth in the Indian population from 1.1 billion in 2005 at 1.7% p.a
Growing per capita incomes, rising disposable surpluses, increasing consumerism and
increase in the share of organised retail. The Indian retail space is also experiencing
enormous growth in retail chains and malls
Rising disposable incomes are growing branded volumes. Demand for branded rice is
likely to grow at around 15%
Basmati accounts for only 2% of India’s Rs 1,000 billion rice market by volume and
about 5% by value, signifying a huge growth potential
The median age of the Indian population is one of the youngest in the world, averaging
around 24, complemented by an increase in income levels, which could translate into
encouraging spending patterns
A rising number of Indian expatriates as well as a growing preference for basmati in the
Middle East are likely to keep demand on the boil
Recent projections made by the IMPACT model developed at the International Food
Policy Research Institute (IFPRI) indicate that the demand for rice will increase by 1.1%
annually over the next three decades
Branded rice is becoming popular in both the domestic as well as the export market.
Indian Basmati rice commands a premium in the international market. This segment thus
offers opportunities in marketing of branded grains, as well as grains processing.
The global rice trade is expected to grow at 2-3% p.a over the next 10 years,
strengthening production to around 34 million tones by 2014. Basmati is expected to
maintain a robust growth of over 6% in the medium-to-long term.

Sector Coverage
Major players
India Gate, Lion, Doon, Bemisal, Nur
KRBL Rice
Jahan, Rice King, Taj Mahal
Rice, Convenience
Kohinoor Foods Kohinoor,
Food
Daawat, Heritage, Orange, Josh,
LT Overseas Rice, Wheat
Apsara,
Lakshmi Energy
Lakshmi Foods Rice, Wheat
and Foods
Usher Agro Rasoi Raa Rice, Cereals
Kasauti, Real Magic, Mr Miller,
REI Agro Rice
Hungama, Ikon, Hansraj, Rain Drop
Meat and poultry processing

At 485 million India has the world’s largest livestock population- accounting for over 55%
and 16% of the world’s buffalo and cattle populations respectively (the world’s largest
bovine population). It ranks second in goats, third in sheep and camels, and seventh in
poultry populations in the world.
Processing of meat products is licensed under Meat Food Products Order, (MFPO), 1973.
Total meat production in the country is estimated at 5 million tones annually. Indian
consumer prefers to buy freshly cut meat, rather than processed or frozen meat. A mere
6% of production of poultry meat is sold in processed form. Of this, only about 1%
undergoes processing into value added products (Ready-to- eat/ Ready-to-cook). Processing
Low preference level
of large animals is largely for the purpose of exports. This is because of low processing of
for frozen meat has
value added meat products and consumer preference for fresh meat. The total processing
resulted in only 6% of
capacity in India is over 1 million tones p.a of which 40-50% is utilized.
poultry meat sold in
processed form In meat & meat processing sector, poultry meat is the fastest growing animal protein in
India. The estimated production is 15,00,000 tones growing at CAGR of 13% through 1991-
2005. India ranks among the top six egg producing countries and ranks among the top five
chicken producing countries. Per capita consumption has grown from 870 grams in 2000 to
about 1.68 kg in 2005. This is expected to grow to 2 kg in 2009. Growth in Buffalo meat
production has been less rapid (CAGR of 5% in the last 6 years). The current production
levels are estimated at 1.9 million mt. Of this about 21% is exported. Mutton and lamb is
relatively small segment where demand is outstripping supply, which explains the high
prices in domestic market. The production levels have been almost constant at 950,000 mt
with annual exports of less than 10,000 mt. This has restricted large processing companies
from developing business interests in this sector.
Details of exports in terms of quantity and value of meat products are given below:
Quantity in mts and value in Rs crores
Items 2001-02 2002-03 2003-04 2004-05
Qty. Value Qty. Value Qty. Value Qty. Value
Buffalo meat 243355.58 1144.42 297897.3 1305.45 343817.1 1536.77 306970.81 1615.59
Sheep/ Goat meat 3915.06 33.07 4973.55 39.95 16820.53 110.39 8885.28 79.36
Poultry Products 19876.02 130.07 26450.01 156.47 415228.2 202.4 264607.54 154.11
Animal casings 464.28 9.63 8296.17 140.27 732.84 12.43 552.33 12.57
Processed Meat 267.13 1.29 669.48 4.8 986.13 7.63 107.45 1.57

Sector Coverage
Country-wise Exports of Meat Products in Value Terms (April 06-March 07)

8%
8%
Philippines
7% Saudi Arabia
UAE
54%
14%
Malaysia
Angola
9% Others
Source: CMIE
Processed meat has India exports more than 5,00,000 mt of meat of which major share is buffalo meat. Indian
huge potential with buffalo meat is witnessing strong demand in international markets due to its lean character
rising number of fast and near organic nature.
food outlets and is
expected to double in The total processed meat production in India is likely to double in the next 10 years and
next 10 years has a huge potential with the growing number of fast food outlets in the country. With the
rise in per capita incomes and busy lifestyles, the demand for processed meat products,
which can be quickly cooked, has been rising. Most of the production of meat and meat
products continues to be in the unorganised sector. Branded products like Venky’s and
Godrej’s Real Chicken are, however, becoming popular in the domestic market.
Fish Processing
India is the third largest fish producer in the world and is second in inland fish production.
Fish production in the country has increased from 0.75 mt in 1950-51 to 6.50 mt in 2005-06.
In 2005-06, it contributed about 1% of the total GDP and 5.3% of the GDP from agriculture
sector. The geographic base of Indian marine fisheries has 8,118 km. coastline, 2.02 million
sq.km. of exclusive economic zone including 0.5 million sq. km. of continental shelf, and
3,937 fishing villages. India is endowed with rich fishery resources and has vast potential
for fishes from both inland and marine resources.
Processing of fish into canned and frozen forms is carried out almost entirely for the export
market. It is widely felt that India’s substantial fishery resources are under-utilised and
there is tremendous potential to increase the output of this sector. The potential could be
gauged by the fact that against fish production potential in the exclusive economic zone of
3.9 million tones, actual catch is to the tune of 2.87 million tones. Harvesting from inland
sources is around 2.7 million tones. In last six years there was substantial investment in
fisheries to the tune of Rs 3,000 crores of which foreign investments were of the order of
Rs 700.

Sector Coverage
Production and export of marine products

Fish production Export of marine
Year (million tones) products
Quantity
Marin ('000 Value
e Inland Total tones) (Rs crores)
1950-51 0.5 0.2 0.7 20 2
1960-61 0.9 0.3 1.2 20 4
1970-71 1.1 0.7 1.8 40 35
1980-81 1.5 0.9 2.4 80 235
1990-91 2.3 1.5 3.8 140 893
2000-01 2.8 2.8 5.6 503 6288
2002-03 3 3.2 6.2 521 6793
2003-04 3 3.4 6.4 412 6086
2004-05 3.52 2.78 6.3 482 6460
2005-06(P) 3.76 2.81 6.57 551 7019
Source: Department of Animal Husbandry, Dairying and Fisheries
Major players in meat, poultry and fisheries

Arambagh Hatcheries Arambagh Meat, Poultry
Frozen buffalo meat, Chilled/
Hind Industries Sibaco,Eatco
Frozen sheep and Goat meat
Venkateshwara
Venky's Poultry products
Hatcheries
Alkabeer Exports
Alkabeer Frozen buffalo meat, Chilled/
Limited
ASF Seafoods ASF Seafoods Seafood
Bell Foods Bell Foods Marine foods
Frigo Refico Allana Allana Frozen buffalo and other meat
Godrej Agrovet Real Good Chicken Poultry products
MAFCO, Mumbai MAFCO Pork and other meat products
Packaged/Convenience Food
This segment mainly comprise of pasta, breads, cakes, pastries, rusks, buns, rolls, noodles,
corn flakes, rice flakes, ready to eat and ready to cook products, biscuits etc. Bread and
biscuits constitute the largest segment of consumer foods. The annual production of bakery
products, which includes bread, biscuits, pastries, cakes, buns, rusk etc, is estimated to be
50 lakh tones in 2004-05 with estimated value of Rs 69 billion. The two major bakery
industries, viz., bread and biscuit account for about 82% (4 million tones) of the total
bakery products. The organised sector has a market share of 45% and the balance 55% is
with the unorganised sector in the baked products. The sectors that are projected to
achieve high growth between 10-20% in 2005-06 in bakery segment include bread, cakes,
pastry which is expected to achieve up to 11% growth and biscuits over 13%.

Sector Coverage
Biscuits
The size of biscuits market in India is Rs 5,000 crores of which Rs 3,000 crores is accounted
for by the organised sector. Glucose and milk biscuits account for 25% each and Marie
biscuits 20% of the biscuits market.
The biscuit industry in India witnessed annual growth as below:

2003-04 15%
2004-05 14%
2005-06 14%
2006-07 13%
While the growth rate has been stagnating during last 4 years, momentum is expected to
pick up during 2007-08, mainly on account of exemption from central excise duty on
Growth rate of biscuits biscuits with MRP up to Rs 100/per kg, as per Union Budget for 2007-08. Indian Biscuit
is expected to pick up Manufacturers’ Association (IBMA), instrumental in obtaining the excise duty exemption,
from 13-15% during estimates annual growth of around 17-18% in 2007-08. Growth in biscuit marketing has
2003-07 to 17-18% in been achieved, mainly due to improvement in rural market penetration.
2007-08
The per capita consumption of biscuits in our country is only 2.1 kg compared to more than
10 kg in the USA, UK and West European countries and above 4.5 kg in South East Asian
countries like Singapore, Hong Kong, Thailand, Indonesia etc. China has a per capita
consumption of 1.9 kg while in the case of Japan it is estimated at 7.5 kg. This shows the
huge untapped potential of biscuit industry in India. Exports of Biscuit is estimated to
around 10% of the annual production during the year 2006-07
With the entry of big players, the domestic biscuit manufacturing sector is to see a healthy
competition that would ensure good quality products at affordable prices to the consumer.
Exports of biscuits would also pick up. It has already increased with Indian biscuits turning
favourite choice in several Middle East markets. The export of high end products (like
cream biscuits) to former East European countries has also begun to rise. Thus, the biscuit-
manufacturing segment is poised for a stronger growth in the coming days.
Bread
The bread industry with estimated production of 27 lakh tones in 2004-05 is represented by
both the organised and unorganised sectors with 55% and 45% contribution to production.
The overall market size for bread in India is a little over 36 lakh loaves a day, and only one-
third of this is from the organised sector.
The large organised sector players who are prominent in the high and medium-price
segments include Britannia, Modern Industries. Brands like Modem and Britannia are major
players in the bread market and together they account for 90% of the organised bread
market. Local manufacturers with numerous local brands cater to populous segment and
contribute considerably in the bread segment. Low margins, high level of fragmentation
are the main features in the bakery industry. Volumes, brand loyalty and strong
distribution networks are the main drivers of growth.

Sector Coverage
Major players- Bread, Biscuits

Modern Foods Inds Bread
Parle-G, Krackjack,
Parle Biscuits
Manaco, Hide & Seek
Priya Food Products Priya Biscuits
Surya Foods and Agro PriyaGold Biscuits
Britannia Industries Britannia Biscuits, Bread, Cakes
ITC Sunfeast Biscuits
Confectionery
The organised market for confectionery estimated at Rs 2,000 crores is growing at around
7-8% p.a. The retail value of the Indian sugar confectionery market, which includes
products such as sweets, jellies and gums, is estimated to be US $461 million in 2007 and is
Sugar confectionery projected to reach US $498 million in 2008. The yearly growth rate from 2002 to 2006 was
market is projected 7.2%. The Indian candy market is currently valued at around US $664 million, with about
to expand at a CAGR 70% in sugar confectionery and the remaining 30%, in chocolate confectionery. The Indian
of 8% until 2011 sugar confectionery market is projected to expand at a CAGR of 8% until 2011, according to
a study by Euromonitor International. Two major players namely Cadbury India and Nestle
India, which together account for about 90% of the total chocolate market, dominate the
chocolate market in India.
Increase in affluent consumers who show a tendency for impulse purchases of products
such as sugar confectionery, the development of supermarkets, hypermarkets and
convenience stores coupled with the trend towards higher allowances for children are
likely to be the primary growth drivers for sugar confectionery.
Major players
Company Brands
Dairy Milk, Eclairs,
Cadbury India
Gems,Temptations,Celebrations, Nutties
Candico (I) Loco Poco, Koffi Toffi, Gumbo Jumbo
Lotte India Corp Coffee bite, Lacto King, Caramilk, Coconut Punch
Nestle India Kit Kat, Milky Bar
Parle Melody, Poppins, Kismi, Mangobite
Mentos, Centerfresh, Alpenliebe, Chlormint,
Perfetti
Happydent
Coffee break, Mango Moods, Pan Pasand,
Ravalgaon Sugar Farms
Klearmint
ITC Mint-o, Candyman
Ready-to-eat foods
Ready-to-eat foods market in India is expected to reach Rs 2,900 crores by 2015 from its
present size of Rs 128 crores (2006). The factors contributing to this growth would be
changes like cold chain development, disintermediation, streamlining of taxation,
economies of scale on the supply side, coupled with increasing disposable incomes,
diminishing culinary skills and the rising need for convenience on the demand side. The
ready-to-eat foods market in India has remained under-penetrated owing to factors like
consumers’ penchant for freshness, low affordability and the Indian housewife’s preference
for home cooked food. Packaged foods in India have grown at approximately 7% p.a

Sector Coverage
between 2000-2005, with ready-to-eat foods (RTE) being the fastest growing category at
CAGR 73%. The Indian RTE foods market, canned/preserved segment is more popular,
contributing to approximately 90% of the market and growing at a CAGR of 63% between
2001 and 2006. The chilled and dried ready meal segments are non-existent. The packaged
foods industry in India has not experienced significant growth due to inadequate demand
arising from low household incomes and consumer preference for fresh and home-cooked
food. There is thus a huge untapped market opportunity arising due to rapid demographic
shifts in income, urbanization and proportion of urban working women in India. The
RTE foods is expected industry needs to concentrate on broadening the market and increasing penetration
is growing at CAGR of amongst Indian consumers.
73% and is the fastest
growing category in Major players
packaged food Company Brands Products
segment Dabur India Hommade
Instant mixes, Puries, Pulihora
Priya Foods Priya
paste, Ready to Eat
Ching’s Secret, Smith
Capital Foods Cooking Paste, Sauce & Ketchups
& Jones
Packaged bhel puri chats, chana
Haldirams Haldirams masala, samosa, pakoras, among
others.
ITC Aashirvaad Atta, Bingo,
Ready to eat/cook foods.
Kitchens of India
Indian curries,
MTR MTR
gravies and rice.
Satnam Overseas Ltd Kohinoor Ready to eat Indian delicacies.
Gits Gits Variety of ethnic Indian cuisine
Aerated Soft Drinks, Packaged drinking water
Aerated soft drinks

The soft drinks constitute the 3rd largest packaged food regularly consumed after packed
tea and packed biscuits. The aerated soft drinks industry in India comprises over 100 plants
across all states. It provides direct and indirect industry related employment to over
1,25,000 employees. It has attracted one of the highest foreign direct investments in the
country. It has strong forward and backward linkages with glass, plastic, refrigeration,
sugar and transportation industry. Installed capacity of sweetened/aerated water as on
January 2006 is reported to be 29.60 lakh tons p.a.
Soft drink market overview: Indian soft drink market is valued to be Rs 6,000 crore. The
soft drink market can be broadly divided into two major segments- carbonated soft drink
and non-carbonated soft drink. The carbonated drinks are the mainstay and accounts for
85% of the total soft drink market, however the growth rate has been stagnant and in fact
on declining trend on account of controversial issue of pesticide. Non-carbonated soft drink
category includes sub category like fruit drink, juices, dairy drinks and more. The
preparatory soft drink market is around Rs 250 crores, out of which Rasna has almost 90%
volume share.
Packaged drinking water

There are 218 companies, which have been granted licence for manufacturing packaged
drinking water and packaged natural mineral water. There has been a spurt in growth for
the last 3-4 years, which can largely be attributed to a range of various packaged sizes to
suit the consumers. 80% of the packaged water sale comes from the bulk containers (5
litres and above).

Sector Coverage
Major Players
Pepsi, Miranda,
Soft Drink, Packaged drinking
Pepsi & Co Mountain Dew, 7up,
water
Lehar, Duke’s, Aquafina
Coca Cola, Fanta,
Soft Drink, Packaged drinking
Coke Sprite, Thumps Up,
water
Limca, Kinley
Exports
The Ministry of Food Processing Industries has been encouraging the new processing
capacities for agro-food products through its various policy initiatives and plan schemes
providing financial incentives for setting up of new units and modernization of existing
units. The export of processed food items has been as under:
Export of processed food products

Items 2001-02 2002-03 2003-04 2004-05 2005-06
Qty. Value Qty. Value Qty. Value Qty. Value Qty. Value
Processed Fruits & Vegetables
Dried & Preserved
209157.78 537.15 216640.2 561.03 211160.1 520.49 351034.32 765.75 566238 1459.17
Vegetables
Mango Pulp 76735.18 241.34 96107.31 297.01 89514.84 241.99 90988.6 300.86 134613 364.24
Pickle & Chutney 38758.97 120.34 56384.37 154.16 63052.73 119.75 67193.29 120.58 135382 260.98
Other Processed
61332.36 201.74 54792.77 194.73 66070.26 243.58 80760.5 275.53 107335 370.21
Fruits & Vegetables
Total 385984.29 1100.57 423925 1206.93 429798 1125.81 589976.71 1462.72 501826 1359.54
Animal Products
Buffalo Meat 243355.58 1144.42 297897.3 1305.45 343817.1 1536.77 306970.81 1615.59 459938 2629.57
Sheep/Goat Meat 3915.06 33.07 4973.55 39.95 16820.53 110.39 8885.28 79.36 7177.51 80.37
Poultry Products 19876.02 130.07 26450.01 156.47 415228.2 202.4 264607.54 154.11 145889 167.58
Dairy Products 24774.13 182.45 21439.81 153.59 15882.67 155.19 48426.79 389.14 76515 668.5
Animal Casings 464.28 9.63 8296.17 140.27 732.84 12.43 552.33 12.57 1125 .82 17.51
Processed Meat 267.13 1.29 669.48 4.8 986.13 7.63 107.45 1.56 256.04 2.43
Total 292652.2 1500.93 359726 1800.53 793467 2024.81 629550.2 2252.33 690901 3566.96
Other Processed Foods
Groundnuts 112812.81 250.94 67889.75 178.3 176109.3 544.3 177114.96 503 190053 513.69
Guargum 117883.03 403.09 111948.4 486.74 120561.3 507.9 129648.47 664.28 186718 1049.23
Jaggery &
365893.44 436.49 191522.5 212.98 295013.3 331.48 35549.29 77 107197 227.57
Confectionery
Cocoa Products 1293.38 12.87 1235.21 11.94 1688.37 16.15 2273.85 27.3 2147.09 21.83
Cereal
38087.17 224.67 51809.74 268.83 46275.35 241.71 49486.85 277.77 76880.6 393.96
Preparations
Alcoholic & Non
49671.86 118.29 26164.58 102.47 28964.09 108.62 30045.49 113.78 49587.9 117.2
Alch. Beverages
Miscellaneous
23189.16 137.33 38687.41 170.2 65252.02 210.33 52513.73 224.36 49606.7 225.77
Preparations
Milled Products 322346.5 196.39 499692.8 288.65 545755.4 355.95 140123.27 144.85 50901.5 64.68
Total for other
1031177.35 1780.07 988950.4 1720.11 1279619 2316.44 616755.91 2032.34 713092 2613.93
Processed Foods
Grand Total 1709813.8 4381.57 1772601 4727.57 2502884 5467.06 1836282.82 5747.39 19058197539.43
Source: APEDA

Sector Coverage
FDI
According to industry estimates, the food-processing sector needs investment of about US
$28-35 billion to meet the changing food demands in India. The outlay for the food-
processing segment has been increased from US $19.5 million in 2004-05 to US $41.4 million
next year, more than twice the earlier amount.
FDI in the country's food sector is poised to hit the US $3-billion mark. In the last one-year
alone, FDI approvals in food-processing has doubled. Add to this the US $55 million that has
been invested in sugar and cooking oil companies.
The food-processing sector continues to attract FDI. Details of FDI inflow Since 2000-01 is
as under:
FDI
1500
1250 1036.1
1000
Rs crores
750 510.9 441.0

500
198.1 176.5 174.1 182.9
250 26.0
0
2000- 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
01(Apr- (Apr-
Mar) Mar)
Source: MOFPI
Maharashtra was among the front-runners to receive the highest share of FDI in food
processing during the last five years. The dairy and consumer industries received FDI worth
Rs 2.7 billion each as foreign investment. Nearly 30% of FDI in the food-processing sector
comes from EU countries such as Netherlands, Germany, Italy and France.
Government Regulation and Support

Since liberalisation several policy measures have been taken with regard to regulation &
control, fiscal policy, export & import, taxation, exchange & interest rate control, export
promotion and incentives to high priority industries. Food-processing and agro industries
have been accorded high priority with a number of important relieves and incentives. Some
of the important policy changes are as follows
Regulation and Control
As per extant policy, FDI up to 100% is permitted under the automatic route in the food
infrastructure (food park, cold chain/warehousing).
Automatic approval to FDI up to 100% equity in FPI sector excluding alcoholic beverages
and a few reserved items.
Foreign investments are allowed in SSI reserved items under an export obligation
(pickles, chutneys, bread, pastry, hard-boiled sugar candy, rapeseed oil, sesame oil,
groundnut oil, sweetened cashew nut products, ground and processed spices other than
spice oil and oleoresin, tapioca sago and its flour).
FDI up to 100% is permitted on the automatic route for distillation & brewing of alcohol
subject to licensing by the appropriate authority.

Sector Coverage
No industrial license is required for almost all of the food & agro processing industries
except for some items like: beer, potable alcohol & wines, cane sugar, hydrogenated.
Animal fats & oils etc. and items reserved for exclusive manufacture in the small-scale
sector.
Up to a maximum of 24% foreign equity is allowed in SSI sector
Fiscal policy and taxation:
Rupee is now fully convertible on current account and convertibility on capital account
with unified exchange rate mechanism is foreseen in coming years.
Repatriation of profits is freely permitted in many industries except for some, where
there is an additional requirement of balancing the dividend payments through export
earnings.
Liberal corporate tax policy is applicable for export and domestic earnings, income tax
rebate allowed (100% of profits for five years and 25% of profits for the next five years)
for setting up of new agro-processing industries to process and package fruits &
vegetables.
Fruits & vegetables, and dairy machineries are completely exempt from central excise
duty. Central excise duty on preparation of meat, poultry and fish, pectin, pats and
yeast is also completely exempt.
Quantity restrictions on all food products have been removed. Peak rate of customs
duty has been reduced from 30% to 25% (excluding agricultural and dairy products) and
duty structure on designated items has been rationalized.
Customs duty on refrigerated goods transport vehicles has been reduced form 20% to
10%.
Excise Duty of 16% on dairy machinery has been fully waived off and excise duty on
meat, poultry and fish products has been reduced from 16% to 8%.
Export promotion:
Food-processing industry is one of the thrust areas identified for exports. Free Trade
Zones (FTZ) and Export Processing Zones (EPZ) have been set up with all
infrastructures. Also, setting up of 100% Export Oriented Units (EOU) is encouraged in
other areas. They may import free of duty all types of goods, including capital foods.
Capital goods, including spares up to 20% of the CIF value of the capital goods may be
imported at a concessional rate of customs duty subject to certain export obligations
under the EPCG scheme. Export linked duty free imports are also allowed.
Units in EPZ/FTZ and 100% EOUs can retain 50% of foreign exchange receipts in foreign
currency accounts.
50% of the production of EPZ/FTZ and 100% EOU units is saleable in domestic tariff
area.
All profits from export sales are completely free from corporate taxes. Profits from
such exports are also exempt from MAT.
Agri export zones and food parks
Setting up of 60 agri zones for end-to-end development for export of specific product
from geographically contiguous areas.
53 food parks approved to enable small and medium food and beverage units to set up
and to use capital intensive common facilities such as cold storage, warehouse, quality
control labs, effluent treatment plant, etc.

Sector Coverage
Regulatory Framework
There are different laws that govern the food-processing sector in India. The prevailing
laws and standards adopted by the Government to verify the quality of food and drugs is
one of the best in the world. Multiple laws/regulations prescribe varied standards regarding
food additives, contaminants, food colours, preservatives and labeling. In order to
rationalize the multiplicity of food laws, a Group of Ministers was recently set up to suggest
legislative and other changes to formulate a modern, integrated food law, which will be a
single reference point in relation to the regulation of food products. The food laws in India
are enforced by the Director General of Health Services, Ministry of Health and Family
Welfare, Government of India (GOI).
Various food laws applicable to food and related products in India are:
Prevention of Food Adulteration Act (PFA), 1954 and Rules (Ministry of Health &
Family Welfare): Covers specifications related to food colour, preservatives, pesticide
residues, packaging and labeling, and regulation of sales. The Standards of Weights
and Measures Act, 1976, and Standards of Weights and Measures (Packaged
Commodities) Rules, 1977: Designed to establish fair trade practices with respect to
packaged commodities
Agriculture Produce (Grading & Marking) Act (Ministry of Rural Development).
Essential Commodities Act, 1955 (Ministry of Food & Consumer Affairs).
Fruit Products Order (FPO), 1995: Specifications and quality control requirements
regarding the production and marketing of processed fruits and vegetables, sweetened
aerated water, vinegar, and synethic syrups.
Meat Food Products Order, 1973 (MFPO): Administers the permissible quantity of
heavy metals, preservatives, and insecticide residues for meat products
Milk and Milk Products Order, 1992: Regulates the production, distribution, and
supply of milk products; establishes sanitary requirements for dairies, machinery, and
premises; and sets quality control standards for milk and milk products.
The Food Safety and Standards Act, 2006: In August 2006, the Government of India
had passed a new legislation Food Safety and Standards Act. The Act proposes
establishment of a new authority, the Food Safety and Standards Authority,
reorganisation of scientific support pertaining to the food chain through the
establishment of an independent risk assessment body and a new Food Law, merging
eight separate Acts.
• The Infant Milk Substitutes, Feeding Bottles and Infant Foods (Regulation of
Production, Supply and Distribution) Act, 1992 and Rules 1993.
• The Insecticide Act, 1968.
• Export (Quality Control and Inspection) Act, 1963.
• Environment Protection Act, 1986.
• Pollution Control (Ministry of Environment and Forests).
• Industrial Licenses.
• BIS Act, 1986.
• VOP (Control) Order – 1947.
• SEO (Control) Order -1967.

Sector Coverage
Major Food Processing Companies in India

Indian MNCs likely to
Major MNCs Major Indian companies
enter
Nestle, Pepsi, Coke, Kellogs,
Conagra, Unilever, Perfetti, IT, Dabur, Britannia, Parle, Reliance, Bharti Group,
Glaxo Smithkline, Heinz, Amul, Haldiram, Godrej, Tatas, Wipro, thapars
Wyeth, Ajinomoto, Nissinmet, Venky's etc.
Walmart.
Outlook
With the success of Green and White Revolution, India is now poised for the Food
Revolution. Entry of multinationals, low cost of technology and rise in commodity branding
has resulted in a change in the Indian food industry.
Vision 2015 adopted by this Ministry of Food Processing envisages

- Trebling the size of the processed food sector
- Increasing level of processing of perishables from 6 % to 20 %.
- Value addition to increase from 20 % to 35%
- Share in global food trade to increase from 1.5 % to 3%
Vision Document Projections

2003-04 2014-15
($ billion) ($ billion)
Total food consumption 205
Processed foods 126 274
Primary processed food 79 136
Value Added Food 48 138
Share of value added products in food
16% 50%
production
Indian food-processing industry is poised for explosive growth driven by changing

demographics, growing population and rapid urbanization along with increased government
support. These factors will increase the demand for value added products and thus improve
the prospects of food-processing industry in India. The government’s focus towards food-
processing industry as a priority sector will ensure policies to support investment in this
sector and attract more FDI. India with its vast pool of natural resources and growing
technical knowledge base has strong comparative advantages over other nations. According
to CII has estimates, food-processing sector has the potential of attracting US $33 billion of
investment in 10 years and generate employment of 9 million person-days. The food-
processing sector in India is clearly an attractive sector for investment and offers
significant growth potential to investors.
We initiate coverage on Lakshmi Energy & Foods and Ruchi

Soya.

Sector Coverage
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Indian Processed Food Industry

Indian Food Processing Industry by sectors

Analyst - Nisha Harchekar

WAY2WEALTH Securities Pvt. Ltd.,

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Global Processed Food Industry

Indian Processed Food Industry

Excessive controls, low public investment, inadequate infrastructure, poor agri-input

WAY2WEALTH Securities Pvt. Ltd.,

Agri GDP growth (%CAGR)

Agri GDP is expected to 4

Indian agri-business: Key facts

Source: FICCI, Ministry of Agriculture

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Processed Food Industry: A sunrise sector

Structure of Indian Food Processing Industry

Source: FAIDA / Ministry of Food Processing Industries

Low level of processing

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Source: FICCI, KPMG report

Processing levels for key Segments in Indian food-processing industry

Fruits & vegetables 40%

Source: Ministry of Food Processing Annual report 2005-06

Food-processing- a growing market

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According to Government estimates, Rs 1,000 billion investment is needed in this sector

Where the opportunity lies- areas for investment

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Food safety management systems

Player expansion plans

More (Supermarket) 14 1000 2010

Bharti Wal-Mart Wholesale Stores - 15 2012

Express Retail Services Big Apple/Big Apple Fresh 16 100 na

Big Bazar 62 100 na

KB’s Fairprice Value tores - 1500 2009

Reliance Fresh 240 471 2010

Reliance Town Centres - 784 2010

Spencer’s (Fresh, Express,

Sahakari Bhandar Sahakari Bhandar 18 na na

Subhiksha Subhiksha 870 150 2009

Wadhan Food Retail

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With huge agriculture India- Competitive edge

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44.0 Aspirants ($327-$449)

Growing consuming class (million households-annual income)

The Rupee Spending

Relatively young population

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Increase in consuming class in rural areas

Major Challenges for the Indian Food Industry

Indian Food Processing Industry by sectors

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Segmentation of various sectors in the industry

Dairy Whole milk powder, skimmed milk powder, condensed milk,

Production and Per capita availability of milk

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Milk Uses in India

22% Value Added (Unorganised)

Vlaue Added (organised)

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Some of the major dairy products manufacturers in the country