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MNCs targeting Indian food processing; packaging next on the horizon

By RJ Whitehead , 28-Jan-2014

MNCs targeting Indian food processing; packaging next on the horizon

Following the news that multinational food processing companies invested over US$2bn in India operations between April and October last year, a senior government official has heralded food packaging as the latest segment to be ripe for development.

The investment by foreign companies in food processing represents the highest such figure in over a decade and accounted for around 17% of overall foreign direct investment in the country over that six-month period.

During the last year, Hindustan Unilever, PepsiCo, Cadbury and Nestlé have all announced substantial investments in the country.

PepsiCo said it would invest US5.5bn in India by 2020, while Cadbury has revealed plans to spend almost US$160m on the first phase of the company’s largest manufacturing plant in the Asia-Pacific region, to be located in Andhra Pradesh.

Poised for take-off

India is poised for a big take-off in the food processing sector,” said JP Meena, joint secretary in the ministry of food processing industries, as he launched a ministry website aimed at foreign investors to provide information on locating joint-venture partners and the regulatory approvals process.

Meanwhile, the packaging industry is expected to rev up from its current lowly position, according to K Chandramouli, of the Food Safety and Standards Authority of India.

"Packaging plays a very important part in the food processing industry, a dominant segment of India's food industry, with a 32% share,” he said.

However, while India has abundant food supply, the processed food industry is still in its early stages, with only 2% of fruits and vegetables and 15% of milk being processed. 

The value addition of packaging to food production in India is only 7%, compared to 23% in China, 45% in the Philippines and 188% in UK. 

Moreover, the unorganised packaging segment still accounts for three-quarters of the industry as a whole, with few large and medium-sized industries in the organised sector. 

Government support

In a bid to realise India's potential, the government has set an investment target of U$25.07 billion by 2015. This, it hopes, will almost double India's share in the global food business from 1.6% to 3%, and increase the processing of perishable food from 6% to 20 percent, with value additions from 20 percent to 35 percent.

"Packaging will play a major role, as the food processing Industry, which has been growing at 7%, is likely to register a growth rate of over 10% in the near future,” said C Saha, director of the Indian Institute of Packaging.

[This is] on the back of a set-up in investments and increase in consumer demand. Other industries such as FMCG and pharma will also benefit from developments in packaging technology."