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Indian consumers driving extract market

By Ankush Chibber , 09-Oct-2012
Last updated on 09-Oct-2012 at 07:16 GMT

Indian consumers are far more aware of the functionality of food and beverage ingredients, which is driving innovation with fruit and vegetable extracts for ingredient manufacturers, a new report has revealed.

According to analysis of the Indian fruit and vegetable extracts market by Frost and Sullivan, uptake for these extracts has been picking up over the last three to four years due to rapidly evolving product types and consumer preferences. 

Indians’ increasing desire for health and wellness, and their rising awareness of the functionality of food and beverage ingredients, have compelled manufacturers to innovate and offer a wider variety of product variants,” the report said.

Gayathry Ramachandran, senior consulting analyst in Frost & Sullivan’s chemicals, materials and foods practice for South Asia, Middle East and North Africa, told FoodNavigator-Asia that innovation has contributed close to 60% in the formulation stage of beverages, which is driven by consumer awareness.

Government’s helping hand

Ramachandran remarked that government initiatives are the primary driver for the growth of the Indian extracts market.

“Some government initiatives to support the growth of this industry include giving high importance to agri-based industries and the opening of around thirty mega food parks scheduled towards the end of 2013,” she said.

Ramachandran pointed out that the fruit and vegetable processing industry is exempted from paying taxes and has been given top priority for financial assistance from banks develop a sophisticated cold-chain infrastructure.  

Also, an increase in contract farming and rapid increase in awareness about health and wellness have also supported the growth of the extracts market, she added. 

Health and wellness driving uptake
According to the report, the highly health-conscious consumer has already prompted a number of beverage manufacturers to switch from aerated drinks to those based on fruit juice.

Ramachandran predicted that increased awareness about health and wellness will soon be the primary driving force for the industry. 

“Presently, consumers are more aware about the benefits of fruit juices compared to carbonated drinks. Hence, many leading beverage manufacturers have entered this space and are leveraging their brands to gain market share,” she said.

The report revealed that manufacturers are conducting trials to derive fruit pulp, purées, and juices from seasonal fruits to store for future use.
High growth not expected in the future

It also found that the market earned revenues of U$400.5m last year and estimates this to reach US$690.5m by 2017—much of it thanks to the boom in the Indian retail industry, which has benefited the Indian food processing industry, and in turn, the extract market.

But although manufacturers are innovating, the market is not expected to see explosive growth over the next five years as the lack of variety in products and insufficient infrastructure to minimise agricultural wastage will peg back the market. 

“Although the potential of the fruits and vegetables extracts market is promising, it has been experiencing challenges, such as the non-availability of processable and high-quality raw material, poor infrastructure and high packaging costs, along with unpredictable raw material prices,” said Ramachandran.

She pointed out that the limited availability of varieties suitable for processing reduces processing units as well as volumes, and hikes processing costs. Moreover, the existing raw material storage systems are not sufficiently adequate to meet the growth in extract production.

“The heavy post-harvest loss of fruit and vegetable produce affects the availability, reliability and price of these products,” she said.

But there is light at the end of the tunnel.

 The report said that despite difficulties in procuring raw materials, manufacturers are creating distinct methodologies to keep supply and prices stable. 

“The current trend of backward integration process will also help mitigate the issues of inconsistent raw material quality and product availability. The market will get a leg up from favorable trade policies and the government’s focus on agri-based sectors.”

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