Report predicts impending boom in Indian additives market
With more money and less time, people’s eating habits have been changing, while the frequent introduction of new functional food and beverage products spells growing opportunities for the food additives market, the report predicts.
It adds that government measures have also been encouraging, with policies to promote loans for small-scale food processing industries having a major impact on the segment. As a result, market revenues, which stood at US$484.2m in 2012, are expected to reach US$897.7m by 2017.
Flavours leading the way
Among the additives segment, flavours account for 47% of the market. Sweeteners, which contribute the smallest portion of the market, are still growing at the rate of 25%, with this popularity continuing to grow over time.
Flavours are expected to rise at a rate of 13.9%, synthetic colours at 7.4%, natural colours at 12%, preservatives at 15% and emulsifiers at 10.1%.
“The additives industry is veering towards natural emulsifiers and nature-derived colours,” said a Frost and Sullivan chemicals, materials and food research analyst source.
He added that this change in preferences emanated from the increasing health consciousness among Indians. However, natural food additive manufacturers find it difficult to source raw materials due to the lack of a centralised supply chain and presence of multiple sourcing points.
The study found that such companies could forge partnerships with cooperatives and invest in contract farming to counter this issue. Such strategic alliances and joint research and development could also lower the prices of nature-derived products and lead to customised pre-mixes with application specific combination of flavours, colours and other additives for clients.
India’s supply chain
Because of poor cold storage infrastructure, a lack of advanced logistics and transport for perishable goods, the government has allowed 100% foreign direct investment to attract large industry groups to invest in developing cold chain logistics.
But Frost’s analyst said government intervention also has its pitfalls. “Ironically, certain government policies could stifle innovation. For instance, the Food Safety and Standards Act, 2006, which governs the food additives segment, permits only certain colours that are certified by the Bureau of Indian Standards,” he added.
Nevertheless, continuing product and process innovations in the food and beverage sector will motivate the additives market to expand its product portfolio, along with the entry of global participants, which will serve as market drivers, and can lead to an increase in market consolidation.
As smaller retailers from the unorganised sector are acquired, the margins of larger manufacturers will improve, the report predicted.
