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Crafting a Sustainable Secure Future through Strengthening the Food Processing Sector

Importance of Agriculture in India's economy is evident since Independence. It is the source of livelihood and sustenance for more than half of India's population especially for people living in the rural areas. But unfortunately, the growth rate in this sector and the level of development is far from its true potential. The domestic food market in India is supposed to reach ~ USD 260 by the year 2015 based on the current trends according to various reports. During the period, the share of processed food in terms of value is expected to increase from ~ 40 per cent to 50 – 53 per cent.

Globalization has brought some distinct thrust for the food processing sector –

a)         Indians migrating abroad still look for Indian food products and especially spices apart from existence of exotic Indian restaurants have appealed to the foreigner's eating preferences

b)         Resident Indians are also seriously embracing foreign cuisine in their regular diet thus creating ample commercial opportunities for both domestic and foreign enterprises in the food processing segment. Foray of retail giants are further adding to the demand thrust.

c)         Outsourced businesses in India have changed the working hours of many people here. It is also forcing Indian companies to work longer hours. Women are also seriously pursuing their career options owing to greater opportunities with the opening of the economy. Family structure is also tending towards nuclear system. This is impacting our eating habits. People are steadily looking for simpler and off the shelf food solutions which are also nutritious.

Hence, there is a clear and strong demand for processed food of all kinds. But not just any processed food. People are slowly learning to become quality conscious and to read the labels and not just the price tag. This however is a serious matter especially in the developed countries where apart from pharmaceuticals processed food has to have a certain level of quality and pass certain mandatory tests to achieve consumer acceptance.

Owing to our tropical weather and vast geographic spread, India has huge potential and variety in the food processing segment and is ranked fifth in terms of production, consumption, export and expected growth. The export potential for India especially is huge and varied thus beating any slowdown due to seasonality.

However, we are unable to attain our potential mainly due to disintegrated players, lack of technology and know-how, awareness of applicable laws and regulations to compete in the global market.

The Scenario

India's potential in the food sector is undisputed. The food processing sector is presently growing at an average rate of 13.5 per cent per annum. The Vision Document 2015 envisages increasing the value addition from 20 per cent to 35 per cent by 2015. Department of Industrial Policy and Promotion (DIPP) published data states that FDI in food processing businesses have been to the tune of US$ 1,273.96 million (Apr 2000 – Jun 2011).

India's food processing sector includes fruit and vegetables; meat and poultry; dairy products, alcoholic beverages, fisheries, plantation, grain processing and other consumer product groups including chocolates or mineral water etc. There is also demand for semi-processed food like various Indian snacks (for e.g. bhel puri, chaat, idli, dosa, gulab jamun).

SMEWORLD has earlier stressed on the potential of this sector in the January 2012 cover story. But the road ahead is not a bed of roses. What India lacks is proper and effective value addition to food products and gain edge in the international market.

Owing to its vital nature and vast dispersal across the country, the role of the Government in development of the sector is implied. The Ministry of Food Processing Industries governs the overall sector in India. A visit to the ministry's official website will show the regular issuance of new schemes or incentives to promote the sector in India. There are various other agencies at Centre and State level to provide further support of infrastructure.

India has a National Food Processing policy in place to support the sector.

Though our resources are huge, due to lack of proper technology a substantial amount of the food products perish which results in colossal wastage. The problem starts from production to transportation and storage. We are making inefficient use of our land and resources. Thus, any competitive advantage that we might otherwise create is diminished.

The consumption pattern in India is fast changing and there is a growing market of urban consumers as well as rural ones due to increase in exposure to mass media. But Indian processed products lack in certain areas due to which its acceptance is still low. The “Quality” issue of our indigenous products continues to loom large in the background overshadowing the possibilities of phenomenal growth. Further, this sector has a huge number of disorganized small scale sector enterprises who have good business ideas and products but are often unaware of the schemes and incentives which can help them grow their business. They are also not equipped enough to tap the nascent exports market which can increase their revenues.

MOFPI's Vision 2015 document highlights thrust areas identified for strategic intervention as detailed mapping of food clusters; establishment of Mega Food Parks in identified SSI/ horticulture/ meat/ dairy/ marine sectors; strengthening backward and forward linkages and developing supply chain with cold chain mechanism; modernization of Abattoirs; developing infrastructure for organized food retail market; rationalizing tax structure for the sector; etc.

Food Processing Global Scenario Brief Highlight

The food market is one of the largest in the world considering its essential nature in our lives. The processed food market globally is highly regulated and cost – competitive with increasing demands from most countries. But the sector also has a large number of fragmented smaller enterprises who are able to survive due to the presence of retail giants who source through them.

A key statistical data from a FAO presentation states the obvious -

One hundred companies control about 35 percent of grocery sales globally, of which 40 percent is controlled by the top ten, including Wal-Mart, Kroger, the French company Carrefour, and the British Tesco.

A brief idea of the breadth of the processed food market can be
evinced by casting a quick glance at the various categories:

 

Alcohol and non – alcoholic beverages including wine is consumed in everyday life in many countries. The wine industry in India has a scope of expanding further to cater to global needs. Packaged food is routine form of food consumption common across countries where say unlike India an item like prawn is always bought cleaned and deveined and not directly from the fisher folks.

The following samples of meal types offered in certain airlines speak volumes of the scope for business in this sector based on consumer preference: Raw Vegetarian Meal – (fresh, raw vegetables), Non Dairy Vegetarian Meal - (purely vegetarian menu, no milk and egg products), Lacto-Ovo Vegetarian Meal - (vegetarian menu with milk and egg products), Asian Vegetarian Meal – (without fish, poultry or meat; mainly paneer), Jain Menu – (very strict vegetarian Asian Meal; products that grow beneath the soil are strictly forbidden), Fruit Platter - (selection of fresh fruit), Hindu Meal, Kosher, Muslim, Low Fat, Low Salt, Diabetic and Gluten Intolerant Meal apart from simple Child Meals.

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