Introduction

The Indian food industry is poised for huge growth, increasing its contribution to world food trade every year. In India, the food sector has emerged as a high-growth and high-profit sector due to its immense potential for value addition, particularly within the food processing industry.

The food industry, which is currently valued at US $39.71 billion! is expected to grow at a Compounded Annual Growth Rate (CAGR) of 11 per cent to US$65.4 billion by 2018. Food and grocery account for around 31 per cent of India’s consumption basket.

Accounting for about 32 per cent of the country’s total food market, The Government of India has been instrumental in the growth and development of the food processing industry. The government through the Ministry of Food Processing Industries (MoFPI) is making all efforts to encourage investments in the business. It has approved proposals for joint ventures (JV), foreign collaborations, industrial licenses and 100 per cent export oriented units.

Market Size

The Indian food and grocery market is the world’s sixth largest, with retail contributing 70 per cent of the sales. Food has also been one of the largest segments in India's retail sector, which was valued at USD 490 billion in 2013@. The Indian food retail market is expected to reach Rs 61 lakh crore (US $894.98 billion) by 2020.

The Indian food processing industry accounts for 32 per cent of the country’s total food market, one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth. It contributes around 14 per cent of manufacturing Gross Domestic Product (GDP), 13 per cent of India’s exports and six per cent of total industrial investment. Indian food service industry is expected to reach US $78 billion by 2018.The Indian gourmet food market is currently valued at US $1.3 billion and is growing at a Compound Annual Growth Rate (CAGR) of 20 per cent.

The online food ordering business in India is in its nascent stage, but witnessing exponential growth. The organised food business in India is worth US $48 billion, of which food delivery is valued at US $15 billion. With online food delivery players like FoodPanda, Zomato, TinyOwl and Swiggy building scale through partnerships, the organised food business has a huge potential and a promising future.

Investments

According to the data provided by the Department of Industrial Policies and Promotion (DIPP), the food processing sector in India has received around US $6.70 billion worth of Foreign Direct Investment (FDI) during the period April 2000-December 2015. The Confederation of Indian Industry (CII) estimates that the food processing sectors have the potential to attract as much as US $33 billion of investment over the next 10 years and also generate employment of nine million person-days.

Mr Tomasz Lukaszuk, the Ambassador of the Republic of Poland had also highlighted the keen interest shown by Polish companies looking for opportunities in India to expand collaboration and invest food processing.

Investment in food start-ups, which mainly include food ordering apps, has increased by 93 per cent to US $130.3 million# comprising 17 deals in 2015 till September 2015 as against only five deals in 2014.

Some of the major investments in this sector in the recent past are:

• Swiggy, a food delivery start-up owned by Bundl Technologies Private Limited, has raised Rs 230.34 crore (US $33.80 million) in a Series C funding round, with its existing investors SAIF Partners, Accel Partners, Norwest Venture Partners and Apoletto Asia Ltd contributing 79 per cent of the new funds raised.
• Gujarat Cooperative Milk Marketing Federation (GCMMF), popularly known as 'Amul', plans to invest Rs 5,000 crore (US $733.6 million) to establish ten new processing plants as well as expand the current capacity to touch 32 million litres per day (MLPD) capacity by 2020.
• American doughnut chain Dunkin' Donuts has tied up with local online grocery delivery platform Grofers for home-delivery of its packaged and freshly made products.
• Private Equity (PE) firm India Value Fund Advisors (IVFA) plans to invest around US $100-150 million in the food business in India over the next two years.
• Mahindra & Mahindra's (M&M) agri-commodities division has announced its entry into pulses retailing under the brand ‘NuPro’ with Tur dal being the first offering under the brand.
• Zomato, a restaurant search and discovery platform, has raised US $60 million from Singapore government-owned investment company Temasek, along with existing investor Vy Capital, in order to explore new business verticals.
• ITC Limited plans to invest Rs 800 crore (US $117.4 million) to set up a world-class food processing facility in Medak, a district located in Telangana. The company has also formulated plans to enter the dairy market.

Government Initiatives

In order to promote food processing industries, increase level of processing and exploit the potential of domestic and international market for processed food products, Vision Document-2015 was prepared by the Ministry of Food Processing Industries. The document envisages trebling the size of investment in the processed food sector by increasing the level of processing of perishables from 6 per cent to 20 per cent, value addition from 20 per cent to 35 per cent and share in global food trade from 1.5 per cent to 3 per cent by 2015. According to the Ministry, an investment of Rs 100,000 crore (US $14.67 billion) would be required in 2015 to achieve these targets.

Some of the major initiatives taken by the Government of India to improve the food processing sector in India are as follows:

• Union Budget 2016-17 has proposed 100 per cent FDI through FIPB (Foreign Investment Promotion Board) route in marketing of food products produced and manufactured in India.
• All of the ration cards in India have been digitised and 42 per cent of the digitised ration cards are now linked to Unique Identification (UID) or Aadhaar cards.
• Government of India plans to allow two Indian dairy companies, Parag Milk Foods and Schreiber Dynamix Dairies, to export milk products to Russia for six months, after these companies got approval for their products by Russian inspection authorities
• Ms Harsimrat Kaur Badal, Union Minister for Food Processing Industries, Government of India inaugurated the first of its kind Rs 136 crore (US $20 million) mega international food park at Dabwala Kalan, Punjab.
• The Food Safety and Standards Authority of India (FSSAI) has issued new rules for importing products, to address concerns over the entry of sub-standard items and simplify the process by setting shelf-life norms and relaxing labelling guidelines.
• The Ministry of Food Processing Industries announced a scheme for Human Resource Development (HRD) in the food processing sector. The HRD scheme is being implemented through State Governments under the National Mission on Food Processing. The scheme has the following four components:
• Creation of infrastructure facilities for degree/diploma courses in food processing sector
• Entrepreneurship Development Programme (EDP)
• Food Processing Training Centres (FPTC)
• Training at recognised institutions at State/National level
• The Food Safety and Standards Authority of India (FSSAI) under the Ministry of Health and Family Welfare has issued the Food Safety and Standards (Food Product Standards and Food Additives) Regulations, 2011 and the Food Safety and Standards (Contaminants, Toxins and Residues) Regulations, 2011 which prescribe the quality and safety standards, respectively for food products.
• The Ministry of Food Processing Industries has taken some new initiatives to develop the food processing sector which will also help to enhance the incomes of farmers and export of agro and processed foods among others.
• Spices Board, set up by the Ministry of Commerce to develop and promote Indian spices worldwide, aims spice exports of US $3 billion by 2017.
• The Spices Board India has dCSIded to sell around 30 of the choicest spices and value added products globally under the brand names ‘Spices India’ and ‘Flavourit’ by opening premium retail outlets abroad in partnership with private investors.
• The Government of India has approved the setting up of five numbers of Mega Food Parks in the states of Bihar, Maharashtra, Himachal Pradesh and Chhattisgarh. The Government plans to set up 42 such mega food parks across the country in next three to four years.
• In the Budget 2015-16, a corpus of Rs. 2,000 crore (US $293.44 million) was created under National Bank for Agriculture and Rural Development (NABARD) to provide cheaper credit to food processing industry. Excise duty on plant and machinery for packaging and processing has been brought down to six per cent from 10 per cent.
• The Government of India has planned to set up 42 mega food parks across the country in next three to four years.

Road Ahead

Going forward, the adoption of food safety and quality assurance mechanisms such as Total Quality Management (TQM) including ISO 9000, ISO 22000, Hazard Analysis and Critical Control Points (HACCP), Good Manufacturing Practices (GMP) and Good Hygienic Practices (GHP) by the food processing industry offers several benefits. It would enable adherence to stringent quality and hygiene norms and thereby protect consumer health, prepare the industry to face global competition, enhance product acceptance by overseas buyers and keep the industry technologically abreast of international best practices.

Exchange Rate Used: INR 1 = US $0.0147 as on March 01, 2016

References: Ministry of Food Processing Industries (MoFPI), Agricultural and Processed Food Products Export Development Authority (APEDA), Media reports and Press Releases, Department of Industrial Policy and Promotion (DIPP), Press Information Bureau (PIB), Confederation of Indian Industries (CII), Union budget 2015-16, Union Budget 2016-17

Disclaimer: Council for Start-up India is not responsible for any errors in the information