Indian food processing sector needs US$30bn investment - report

By Rory Harrington

- Last updated on GMT

Related tags Cent Food processing sector Food preservation Food processing

Around US$30bn worth of investment is needed to “revolutionise” India’s food processing sector to boost the volume of processed products to 10 per cent of overall output by 2015, according to a new report.

The study by the Associated Chambers of Commerce and Industry of India (Assocham) said the multi-billion dollar cash injection would also see the country’s processed food exports leap 70 per cent to reach $25bn a year within five years. But the group cautioned that despite the country’s huge food output, its own imports of foodstuffs would climb to $13bn annually by 2015.

Changing demographics, such as a 650 per cent increase in the number of middle class consumers of processed foods over the next two years and burgeoning demand for health and functional foods, will also drive growth. The snack sector is also expected to see strong expansion, said the group in its report Emerging Opportunities and Strategic Thrust Areas for Food Processing.

At present, India processes just over a third of its milk, 26 per cent of its fisheries output, a fifth of all its buffalo meat, six per cent of poultry, while just 2.2 per cent of fruit and vegetables, said the body. But given the necessary investment, Assocham forecasts this figures could rise to about 40 per cent for fisheries, close to 15 per cent for poultry, 60 per cent for milk and 40 per cent for buffalo meat.

Processing levels for these sectors in fully developed industries such as the United States typically reach between 60-75 per cent, said the body.

Key growth drivers

Sustained economic growth and fast-paced urbanisation are two major trends set to fuel growth of the country’s food processing sector, said Assocham president Dr Swati Pirami. Rising disposable incomes, changing life-styles and aspirations, with more women entering the workplace, will trigger a sea-change in Indian eating habits, he added.

Changing demographics is cited by the trade body as “the most important demand booster for the processed food in India”. ​The economically active 15-59 year-old age group now makes up 80 per cent of the population – with this section showing a greater willingness and ability to buy processed food.

A growing middle class with higher disposable income will also fuel processed food growth. Middle and upper class consumers of packaged foods is set to explode over the next two years – rising almost seven-fold from 30m to 200m by 2012 – with major players such as like ITC, MTR and Amul set to benefit most, said the body.

Health and functional foods

The market for processed health, nutritional and functional foods will be a further driver to expansion. Consumers are becoming more health conscious and are beginning to reject foods with too high levels in salt, oil and preservatives, said the study.

Companies already are targeting this segment with numerous product launches,”​ said Assocham. “Secondly, increasing nuclear families, students and single employees staying alone in work/education and increasing women employees are leading to rise in consumption of processed ready-to-eat canned and frozen foods.”

The ballooning $3bn a year snack segment is enjoying robust growth thanks to changing lifestyle and increasing demand for “on-the-go”​ products.

The growing retail sector is also predicted to have a positive impact on the processed food sector. Organised retailing in India is growing at 20 per cent per annum with the food segment claiming a 14 per cent share of this sector.

“With the increasing trend of major retailers towards private labels, the demand from retail market for processed foods is also expected to increase significantly”, concluded Assocham.

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