THE INDIA FOOD REPORT 2016
A TERM REPORT ON THE WORLD’S MOST EXCITING FOOD MARKET
Sizing • Sectors • Key Players • Opportunities • Challenges • Future
Sizing • Sectors • Key Players • Opportunities • Challenges • Future
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A WORD ABOUT IMAGES
THE INDIA
FOOD REPORT
2016
INDIA FOOD REPORT 2016 | 5 |
I am glad to know that India Food Forum is publishing The India Food Report 2016.
It is our topmost priority to provide food security to the people of our country. We are implementing the National Food Security Act, 2013 to provide Food security to our population. So far 22 states/ union territories have implemented the Act, which aims at providing subsidized food grain for up to 75 per cent and 50 per cent of India’s rural and urban population, respectively.
I hope that this report will contribute in taking care of consumers as well as increasing the awareness among people.
I convey my best wishes to the team of the India Food Report 2016.
RAM VILAS PASWAN
MINISTER FOR CONSUMER AFFAIRS, FOOD AND PUBLIC DISTRIBUTION,
Government of India
| 6 | INDIA FOOD REPORT 2016
FOREWORD
It gives me immense pleasure to learn that India Food Forum is publishing India Food Report 2016. I wish the said report will be useful for all those who are associated with Food Processing Industries in different sectors.
GENERAL (DR.) VIJAY KUMAR SINGH
PVSM, AVSM, YSM (RETD.)
MINISTER OF STATE FOR STATISTICS AND PROGRAMME IMPLEMENTATION
(INDEPENDENT CHARGE) | MINISTER OF STATE FOR EXTERNAL AFFAIRS &
MINISTER OF STATE FOR OVERSEAS INDIAN AFFAIRS,
Government of India
General (Dr.) Vijay Kumar Singh
INDIA FOOD REPORT 2016 | 7 |
It is a matter of great pleasure for me to learn that India Food Forum is bringing out a report called ‘India Food Report 2016’, which aims to present a holistic view of the food sector and highlight important trends and developments in the industry. The food industry in India offers plenty of opportunities for growth in the areas of horticulture, aquaculture and other allied sectors, which, if managed well, will pave the way for India to emerge stronger in the world food market. I am happy to note that India Food Forum is acknowledged today as the best platform in the country for developing new concepts and products under Food and Hospitality sector through knowledge and innovations by the leaders of the industry. Relevant information on trends and directions for all in the food sector and can guide this industry to achieve higher growth.
I hope that the chapters and subjects dealt in India Food Report 2016 would benefit all the stake holders in the Food and Grocery and Food Services sector in India.
MOHANBHAI KUNDARIYA
MINISTER OF STATE FOR AGRICULTURE ,
Government of India
| 8 | INDIA FOOD REPORT 2016
T
he India Food Report 2016, an initiative of India Food Forum, has been prepared with lots of painstaking labour and research by the IMAGES Group with invaluable support from leading consultancies, think tanks and experts associated with India’s large food industry.Relevant, accessible information and resources are the required cornerstones for a clear understanding and analysis of any industry. It is therefore a matter of great happiness and satisfaction for me that data and research that has gone into the making of India Food Report 2016 and its findings will provide a comprehensive understanding of India’s Food sector and prove useful for all stakeholders. As the Indian economy is looking at opportunities for growth and employment, the Food sector can act as a catalyst and contribute immensely to the economy at large. This Report highlights the potential of India’s Food sector – both Food & Grocery and Food Service – and suggests key interventions that are necessary to ensure sustained impetus for the sector’s growth. The Report looks at key business opportunities within these sectors, focuses on the investment potential and stresses on key challenges that need to be addressed.
The findings of IMAGES Research done for the India Food Report 2016 reveal that the country’s Food Retail sector comprising Food & Grocery and Food Service, is valued at INR 25,12,962 crore (2014) and holds a 65 per cent share in the country’s total retail market pie. Out of this, Food and Grocery (F&G) retail is worth INR 23,03,496 crore and Foodservice (FS) market is valued at INR 2,09,466 crore. The average rate of growth during the past four years in F&G has been 15 per cent p.a. and 22 per cent p.a. in FS. The respective growth rates are estimated to take these retail markets to INR 54,20,789 crore and INR 6,90,672 crore by 2020.
Food is the largest retail consumption category in India, accounting for 33 per cent of overall consumption expenditure. Indians spend more on food than on any other consumption category and this is expected to continue in the coming decade. This fact alone points to the rising potential of India’s Food sector and its market that is young, growing, aspiring, earning, spending and consuming a whole range of various products and services. India is already the largest global consumer of dairy, pulses, sugar and spices.
The findings of the Report reveal that more than half of the total household sector spending on food is expected to come from rural India in the coming decade. There is huge demand from small towns and the rural markets. So, I expect the next phase of revolution (in terms of growth) in the food sector to come from rural areas and tier-II & III cities. If the economy has to grow 8-10 per cent, then there is no way that it can happen without investing in the Food sector and making value additions, which will lead to higher incomes and better living standards and will, in turn, generate more and more demand.
A WORD FROM THE EDITOR
INDIA FOOD REPORT 2016 | 9 |
Data from the chapters in the Report show that over the next six years the food market is expected to register an average growth rate of 5.3 per cent per annum. The pace of growth is expected to be slightly higher at 5.7 per cent per annum between 2020-21 and 2025-26. Both urban and rural growths are likely to be considerably higher during the next decade as compared to the decade ending 2014-15.
Going forward, Food Retail is expected to reach INR 61,00,000 crore by 2020. The sector will have much more to offer to both domestic and international investors, in all aspects of growth and business. As we step closer to the onset of a new year, I am sure there will be lots of interesting trends and observations to watch out for. Within the food basket, there will be sub-categories that will emerge strong, health-based foods that will see increasing demand, new flavours from across the world will become popular, and new concepts, formats, themes will get introduced in Food & Grocery and Food Service markets.
New players, both in F&G Retail and Food Service, are emerging on the horizon with each one promising faster and better services and quicker delivery. New and innovative retail formats are being introduced. Our lifestyles are evolving, which is influencing our consumption and eating habits. These changes are bringing about the development of new and hybrid formats of organised food retailing. At the same time, the growth of online business presents fresh new opportunities for both F&G and FS players and in a way that they would be able to add value to the supply chain. With so much new developments taking place so fast, the contours of grocery retail and food service are getting redefined. The future will belong to the players who will put in place better customer-friendly models and faster modes of delivering service. All of these will help to grow and expand the market, build consumer confidence and brand loyalty.
The future is bright for a society that takes its food seriously and enjoys it too! As manufacturers, retailers and brands continue to gain a better understanding of consumers and their consumption habits, the food sector will grow from strength to strength and become even more resilient.
Once again, my heart-felt thanks to all those who made this project possible.
Amitabh Taneja
Chief Convenor, India Food Forum CMD and Editor in Chief, Images Group
PREFACE
| 10 | INDIA FOOD REPORT 2016
I
MAGES Research pegs the market size of India’s Food & Grocery retail (F&G) retail at INR 23,00,500 crore (~$383 billion). The market is growing at 15 per cent per annum , and is expected to cross INR 35,60,000 crore (~$593 billion) by 2017. By 2020, it is estimated to grow twice its current size. The modern F&G retail market, which is currently less than two per cent of the total market, is expected to grow at 20–25 per cent per annum. With the same growth rate, the modern F&G retail market is well poised to grow even triple its present size by 2020.The findings of IMAGES Research reveal that the Indian food market, sixth-largest food market in the world at present, is valued at INR 25,13,00 crore (25.13 billion rupees), and is expected to cross INR 61,00,000 crore (61 billion rupees) by 2020.
Food is the largest retail consumption category in India, accounting for 33 per cent of overall consumption expenditure. Indians spend more on food than on any other consumption category and this is expected to continue in the coming decade. In the year 2014-15, the share of total household sector expenditure going into food was around 43 per cent.
Growth Dynamics of India’s F&G market
India’s Food Retail market is worth INR 25,12,962 crore (2014) and holds a 65 per cent share in the country’s
total retail market pie. The Food Retail market has grown at an average 16 per cent p.a. from 2010 to 2014.
With the same pace of growth, it will be worth INR 61,11,461 crore by 2020. Out of this, Food and Grocery
(F&G) retail is worth INR 23,03,496 crore and Foodservice (FS) market is valued at INR 2,09,466 crore. The
average rate of growth during the past four years in F&G has been 15 per cent p.a. and 22 per cent p.a. in
FS. The respective growth rates are estimated to take these retail markets to INR 54,20,789 crore and INR
6,90,672 crore by 2020.
These are the findings of IMAGES Research done for the India Food Report 2016, which covers in-depth
analyses and perspectives on the Food Retail market in India from leading industry experts and think tanks.
The India Food Report 2016 takes a close look at the currents, undercurrents and trends in the country’s
Food & Grocery (F&G) and Foodservice (FS) markets to map out their future course and trajectory and its
implications for all stakeholders.
Both these sectors are evolving and maturing, offering lots of opportunities for business and growth. What
is fuelling the growth of these two sectors and what are the opportunities for investment? While the chapters
later on in the book offer a detailed perspective and analysis of food business segments – food retail, food
processing, food logistics & support, food services, supply chain and technology – here’s a brief overview of
the market dynamics shaping India’s F&G retail and food-service business.
There has been a steep decline in this share over the last two decades from 62 per cent in 1993-94 to 50 per cent in 2000-05. More than half of the total household sector spending on food is expected to come from rural India in the coming decade.
Food demand is expected to more than double by 2025. There has been average growth of 12-13 per cent every year in food consumption in value terms. Recent data released by CSO finds that consumption expenditure on food items is on the rise. For the period from 2004–05 to 2012–13,
INDIA FOOD REPORT 2016 | 11 | Indians are becoming more welcoming
towards processed, Western food options like noodles, corn flakes, juices and oats – something which was very nascent until 10 years ago. Factors like increasing awareness and health consciousness, changing lifestyles and time poverty, increasing drift towards convenience and improving availability of convenience foods are increasing the share of processed and packaged foods (including ready to eat / ready to cook traditional and westerns food options, snacking etc.) in the consumer’s food basket.
India’s food processing industry was about INR 2,47,680 crore ($41.28 billion) in 2013 and is expected to grow at a rate of 11 per cent to touch INR 4,08,040 crore ($68 billion) by 2018. The food processing industry forms an important segment of the Indian economy in terms of contribution to GDP, employment and investment. The industry contributes as much as 9-10 per cent of GDP in agriculture and manufacturing sector, according to the Ministry of Food Processing Industries (GOI). The Confederation of Indian Industries (CII) estimates that food processing sector can attract an investment worth $33 billion in a span of 10 years. The sector has a potential for generating employment to the tune of 9 million people.
Market Size of Food Categories
The Dry Food Grocery category as a
whole contributes 34.7 per cent to the total food market in India. The category includes cereals, grains and related products; grams and its products; pulses and its products; sugar in all forms; edible oils; and dry fruits. The large market size of the category, highest among all food
CAGR of 11 per cent over the last decade. With this growth rate, the category is all set to touch the INR 15,00,00 crore mark by 2020, thus becoming almost double of what it is today.
Milk and Dairy foods constitute
the second-highest share, after Dry Food Grocery, among all the seven F&G categories. The segment holds about 16 per cent of the overall food market in India. The country is the largest producer of milk in the world and has a substantially large bovine population with about 118 million milk-producing animals. India contributes 16 per cent of the world’s milk production followed by USA with 12 per cent contribution. Milk and related dairy products are worth INR 3,62,000 crore market and have grown at a CAGR of 12–14 per cent during the last decade. The market is estimated to cross INR 8,00,000 crore by 2020. About 58 per cent of India’s dairy products market lies with rural consumers and the remaining 42 per cent with urban consumers.
Spices category is another growth
leader in the food industry. The current market for spices is estimated at INR 1,50,000 crore and has grown at a CAGR of 13 per cent over the last decade. By 2020, the market is likely to grow twice as big as its present size with the same growth rate. In other words, about INR 6,000 crore is estimated to be the branded market in spices. India is estimated to consume over 5 million tonnes of spices annually. This consumption is almost 90 per cent of all spices produced in the country. Ginger-garlic, dry chillies and turmeric together contribute 44 per cent to 48 per cent of total spices in India. This consumption share is not much varied in rural and urban markets.
by 2020 riding on the wave of healthy food habits, which demands significant portion of fresh produce in daily diet. Fresh produce covers just two broad segments of fruits and vegetables. Among the two, 70 per cent is contributed by vegetables alone. Although fruits are a growing segment, they contribute a current share of just 30 per cent, which translates to INR 1,17,000 crore worth of market. Out of the total fresh produce market of INR 3,90,000 crore, 60 per cent is rural market. Again, this has three-fourths of the market occupied by vegetables. As mentioned earlier, fruits form the urban-centric market while vegetables are comparatively a national market.
Perishables food market is worth INR
2,00,000 crore, and has grown at a CAGR of close to 20 per cent. This growth rate is among the highest for all food groups. With the same growth rate, the market is expected to treble by 2020, in which the segment for fish, seafood and meats will grow at a faster pace owing to the growing demand for such food items. The four primary sub-segments of perishables include fish & seafood, meats including mutton, beef, pork, poultry and game birds, and eggs. About 45 per cent of the total market share is occupied by fish & seafood. The largest market segment of fish & seafood is thanks to a vast coastline and fishing inland waters, which a large country like India possesses. In addition, there is a sizeable share of imports of canned seafood and fisheries, which is growing in demand and size. The domestic consumption is no more confined to coastal areas but has penetrated deeper into the mainland markets also.
Beverages category contributes
| 12 | INDIA FOOD REPORT 2016
PREFACE
India. By far, tea is the largest segment of beverages in India ruling over 79 per cent of the market. The market is growing at 20–23 per cent and will cross its present market size by more than three times by 2020. The average monthly per capita spend on tea is INR 106 at present. Together with tea, coffee is another strong beverage market. The market for coffee is growing at 20 per cent and will be triple its present size in the next 4–5 years. There are various types of coffee in the market, which come at all relevant price-points. The overall coffee market, though, is very small in comparison to tea market but the southern region alone contributes 73 per cent of the total coffee market. This is followed by the western region with 14 per cent share. The monthly per capita consumption for coffee in the southern region is INR 17 against the national average of INR 5.
Packaged drinking & flavoured water is the smallest segment in beverages market. The segment, which is growing at a healthy rate, will be worth INR 6,000–7,000 crore by 2020. The market is urban-centric with 85 per cent share. Within this market share, half of it lies in the eastern region of the country whereas western region has the lowest consumption. The monthly per capita consumption is INR 4 in the overall urban market but the urban eastern region has a higher consumption figure, which is three times higher at INR 12.
About four per cent of the total beverages market is formed of the juices segment. The segment is growing at 20–25 per cent and is expected to grow almost four times bigger in the next five years. Today, Indians are spending at an
average just INR 6 per month on juices, which is less than what they are spending on other beverages.
The culture of eating out has given birth to meal and soft drink combos, which Indian consumers are savouring to the fullest. The segment has made some significant achievements and penetration in rural areas is definitely one of them. Rural areas account for 75 per cent sales of PET bottles. Public consumption accounts for almost 80 per cent of the total sale of soft drinks and household consumption accounts for the remaining 20 per cent of the sales.
Other Processed Foods category
market is over INR 2,00,000 crore and is strongly growing at a CAGR of over 20 per cent. Biscuits market is growing at 20-23 per cent and will eventually cross the current size of total OPF market by 2020. At present, 46 per cent of biscuits market lies with urban consumers using the products. In this urban market, the western region alone contributes 31 per cent.
It is estimated that the ketchup market is worth INR 220 crore in India. Namkeens & Snacks segment can be truly and aptly defined as ‘Indian’ OPF segment. The constituting products cover thousands of snack items manufactured in traditional as well as modern set up. Industry reports attribute the branded namkeen market segment to hold 40 per cent of total salted snacks market in India.
Trends in Consumption
Among the seven broad components that make up the food basket, in 2014-15, one third of the total food market was occupied
by protein food, followed by cereals that cover 19 per cent. On the other hand, edible oil is the smallest segment with a share of 7 per cent. While the overall food share in the consumption pie has decreased over the years, there have been clear structural shifts in the food consumption pattern of Indian households. Indians are steadily moving their diet away from staple grains like rice and wheat towards, dairy products and processed food. For instance, while the share of protein food in the entire consumption basket has increased from 13.5 per cent to 14.4 per cent, that of beverages & processed food went up from 5 per cent to 6.8 per cent during the last decade. India’s protein food market is estimated to be around INR 2,17,400 crore in 2014-15 at 2004-05 prices, with 60 per cent contribution by rural India. This market is growing at a rate of 6.6 per cent per annum in real terms and is expected grow little faster in the coming decade.
Beverages and processed food as a combined category registered the fastest growth between 2004-05 and 2014-15. The pace of growth in this category has in fact doubled during last decade than that a decade earlier. The next category in terms of pace of growth is protein food that grew at 7 per cent per annum during this period. Going ahead, the share of processed food in the overall food market is predicted to increase to 40–45 per cent by 2025–30, compared to a little above 30 per cent currently. This change in consumption pattern is purely ‘demand-led’ and processed food companies will do well to prepare for this opportunity. With food habits changing, a proportional increase
INDIA FOOD REPORT 2016 | 13 | which is worth INR 33,000 crore currently
with a growth rate of 6 per cent over the last year. Today, the health and wellness trend is playing across segments of the food basket like snacks, packaged grocery, beverages, sugar substitutes and refined/ non-refined oils. This encouraging value growth rate seen in health and wellness foods is spread across different strata of society. Rural India is no stranger to this trend. In fact, it is a frontrunner in the health and wellness food growth story.
F&G Retail: Market and Trends
India’s Food and Grocery Retail market offers one of the largest opportunity areas for business. The food & grocery category will continue to grow at about 15 per cent per annum over the next five years, and will dominate the overall retail market.
IMAGES Research data show that by 2025, the food & grocery retail market is expected to reach INR 109,00,000 crore, with a growth rate of 15 per cent per annum. A large part of this growth will be driven by inflationary price increase, and the balance by demand growth led by increasing population, increasing incomes and thereby higher spend on foods and lastly urbanisation, which is changing food habits.
IMAGES Research finds that the penetration of modern organised retail in food is currently one of the lowest at 1.6 per cent. However, this is also expected to change dramatically over the next
CAGR of 22.5 per cent from current levels. Convenience seems to be the biggest driver of visitation to the hitherto small category of modern format stores – the fact that all categories and brands are available under one roof. While “location convenience”, “customised services” and “easy goods return/exchange facilities” drive a customer towards kirana stores, “product choice”, “efficient store-management” and “value-enhancing services” attract customers towards modern retailers.
Local kirana stores and street hawkers will however continue to dominate the food & grocery market with a 90 per cent plus share, even in 2025. Although, consumption is on the rise and most formats of retail are proliferating in important developing markets, yet the penetration of large format modern retailing in India has not even crossed the 10 per cent mark.
Looking into the future, the Indian market will be unique in its own way and will be a medley of extremes. The unorganised, organised and online players will co-exist in the Indian retail ecosystem and will expand the market for each other, as all have unique strengths and the sector is large enough to accommodate all participants. It is expected that unique partnership models will emerge as the retail market matures and this partnership will further push the sector growth. Early signs of this are already visible as
shun one channel for the other and will seamlessly switch between channels. The consumer approach to channel selection will thus be “inclusive” and not “exclusive”. The shopper is moving seamlessly between the physical and digital world, and the mobile is fast becoming the central processing unit of her life! She is buying more and more food online – grocery buying on the internet has grown by 14 per cent over the past two years. Over all, F&G e-tailing is the fastest growing category in India.
In India, the online market stands at about at 1 per cent of the total retailing market but considering that the country’s tech-savvy, young generation has made India the third-largest country in terms of internet users, the growth in electronic commerce may happen more rapidly than expected. The e-tailing sector is booming on the growing internet user base, which was projected to cross around 400 million users by 2020. E -tailing in India has the potential to reach USD 20-30 billion by 2020. A major contributor for the growth of e-tailing is the Indian urban population; Mumbai, Delhi and Kolkata ranked among the top three cities in India respectively with the maximum number of internet users. The shopping style of Indian customers is changing fast and it is expected that in the next 10 years, around 30–40 per cent of the total retail in top 75 cities of our country will be done through online.
| 14 | INDIA FOOD REPORT 2016
PREFACE
I
ndia’s Foodservice market is growing at a higher rate, more than the F&G market. While the F&G segment has been growing about 15 per cent, the FS segment has grown at 22 per cent. This growth is inclusive of price fluctuation owing to high inflation trends in recent years. Yet the volumes in food consumption have not receded. This increase in share is the result of widening of eating out culture, entry of international brands, acceptance of global cuisines, changing food habits & palates and increase in institutional, commercial, social & community catering services.IMAGES Research data shows the size of Foodservice market at INR 2,09,466 crore in 2014. The estimated size of the market is expected to reach INR 2,55,548 crore in 2015. At 22 per cent p.a. growth, the market size will reach INR 3,80,358 crore in 2017 and INR 6,90,672 crore in 2020. The Technopak chapter prepared for Images’ India Food Report 2016 reveals that the domestic Food Service Industry (organised and unorganised) in 2014 was estimated to be INR 2,72,700
crore and is projected to grow to INR 4,23,100 crore by 2020 at a CAGR of 8 per cent. Within this, the unorganised market holds a 68 per cent share with an estimated market size of INR 1,86,000 crore in 2014. The organised restaurant segment is estimated at INR 78,900 crore (29 per cent of the overall market) and is projected to grow, at a CAGR of 11 per cent, to reach INR 1,44,900 crore by 2020. The restaurants and cafes segment contributes highest in terms of sales in entire industry. It accounted total sales of $115.1 billion in 2014, which was 75.9 per cent of total industry value. It was followed by fast food industry, which contributed $30.3bn sales which is equal to 20 per cent of industry value.
Thanks to the rising income of middle-class population, consumer spending and consumption pattern in both suburban and urban areas have undergone a sea change. Middle-class families in tier-II
& III cities are spending much higher in fast food restaurants. The annual spending of middle class households in India’s tier-II and III cities has increased by INR 2,500 to INR 5,200, a growth of 108 per cent on fast food restaurants in the last two years. Indians are also eating out more often now, as many as eight times a month, but still less than the US (14 times), Brazil (11 times), Thailand (10 times), and China (9 times).
The growth and expansion of commercial real estate is also driving growth of the food service business as well. The increasing acceptance of malls as a getaways and day out centres in small cities is supporting this expansion of organised food restaurants, which are providing good services at reasonable prices. Food-service providers have definite advantages by setting up outlets in malls, as auxiliary
Growth Dynamics of India’s Food Service market
INDIA FOOD REPORT 2016 | 15 | number of players, both domestic and
international. Post-2008, the industry has seen a huge growth in terms of number of outlets. Cafe Coffee Day, Domino’s, McDonalds, Haldiram, Pizza Hut, KFC, Sagar Ratna, Barista Café, Yo! China and Mainland China, and Bikanervala, among others, have all expanded their footprint and opened new outlets. Currently, there are approximately 1.5 million food outlets in India, out which nearly 3,000 are from the organised segment. The fast food and fine dining are the most organised. Restaurants in fast food / QSR segment consist of more than 60 per cent outlets owned by multi-nationals. The organised market, comprising QSRs, full service restaurants, PBCL (Pubs, Bars, Clubs and Lounges), food courts and kiosks, follows three key parameters: accounting transparency, organised operations with quality control and sourcing norms, and outlet penetration. But a majority of food outlets belong to the unorganised segment, which comprises roadside vendors, dhabas, vans, carts, street stalls and trolleys.
In recent years, there has been a continued shift from the unorganised to organised. As a result, the organised sector is growing @ 16 per cent primarily driven by new investments. The segment
Point, Goli Vada Pav, Ammi’s Biryani etc.). International brands from USA and Europe including Fatburger, Carl’s Jr, Cheesecake Factory, Cali Burger, Great American Cookies, Forever Yoghurt, Second Cup Coffee, Pie Face and Mr. Cod among others are actively looking at setting up and expanding the business in India.
Apart from the metros and mini-metros such as Delhi-NCR, Mumbai, Hyderabad, Chennai, Kolkata and Bangalore, major food service brands are also looking to spread out to a number of tier-II and tier-III cities, like Lucknow, Jaipur and Ahmedabad, on account of the growth in infrastructure and business opportunities there. More than 50 international chains of restaurants have entered the country and have made inroads into even tier – II and tier – III towns. This has helped the existing domestic players to consolidate and thousands of new ventures to flourish.
With increased competition and cost of operations in the metros and tier I cities, a number of tier II and III cities may offer better growth prospects for players across sectors, driven by factors such as favourable demographics, infrastructure growth and higher disposable income driven by both strong economic growth. Increase in literacy, high disposable income, exposure to media, greater
Growth Potential of Segments
The increasing income and exposure to new avenues to express consumption has brought sweeping changes. More than 65 per cent of the Indian population is aged less than 30 years and exposed to international brands. QSRs is one of the sector that has managed to grow even during the economic slowdown. Going ahead, Café & QSR’s in the organised segment will continue to grow at a CAGR of ~11 per cent and ~14 per cent respectively. In the organised market, the chained segment is expected to grow at a healthy rate as compared to the licensed standalone segment. In the chained market, the QSR and the CDR constitute ~75 per cent of the total organised food service market followed by cafés (12 per cent). The Café and QSR’s are projected to grow at a CAGR of 15 per cent and 18 per cent respectively in the chained segment. The higher growth in the chained segment for next six years will be driven by the increasing presence of international brands, strengthening of back end infrastructure, acceptation of new cuisines and formats, changing lifestyles and aspirations and emergence of entrepreneurial ventures in these segments.
SECTION 1:
INTRODUCTION & OVERVIEW
SECTION 3:
GROCERY RETAIL & MARKET
SECTION 2:
PROCESSED FOOD
1.1 India’s Food Sector ...22
1.2 Food Grocery Market ...28
1.3 Dry Food Grocery ...42
1.4 Dairy ...48
1.5 Spices ...54
1.6 Fresh Produce ...56
1.7 Perishables ...62
1.8 Beverages ...68
1.9 Other Processed Foods ...74
2.1 Food Processing: Advantage India ...82
By India Brand Equity Foundation (IBEF) 2.2 Competitiveness of India’s Food Processing Sector ...92
By Amit Kapoor & Sankalp Sharma, Institute for Competitiveness Analysis 2.3 Investment Opportunities in Food Back-End Operations ...102
By Debashish Mukherjee & Subhendu Roy, A.T. Kearney 2.4 Health & Wellness Foods: The Marketer’s Recipe Book ...108
By Dolly Jha & Rishi Sharma, Nielsen India 3.1 Food & Grocery Retail - Industry Trends and Insights ...138
By Baqar Iftikhar Naqvi, Avnish Malhotra & Varun Chugh, Wazir Advisors 3.2 Rising Share of E-Grocery in India ...152
By Dr Sandeep Puri, Abhijeet Gaurav and Rajat Agarwal, IMT Ghaziabad
contents
3.3 Online and Kirana -The Odd Couple ...158By Prof. Piyush Kumar Sinha, Prof. Srikant Gokhale and Saurabh Rawal, Indian Institute of Management Ahmedabad (IIMA), India 3.4 How Technology is Powering the Retail Bandwagon ...168
Images Report 2.5 Sweet Indulgence ...114
IMAGES Report and Research Analysis by Euromonitor International 2.6 Ready to Eat / Ready to Cook ...118
By P. Rajan Mathews 2.7 Meeting the Challenges of Nutritional Transition ...122
By Arabind Das 2.8 Rising Bakery Industry ...126
By Ravindra Yadav, Reetesh Shukla & Tripti Bisht
2016
SECTION 4:
F&G RETAILERS
SECTION 5:
TRENDS IN CONSUMPTION
4.1 Retail Majors ...174 4.2 Regional Retailers ...192
5.1 Structural Shift in India’s Food Consumption ...200
By Mridusmita Bordoloi & Rajesh Shukla
People Research on India’s Consumer Economy (PRICE)
5.2 India’s Changing Rural Markets: How FMCG Companies Can Win Over
Aspiring Rural Consumers ...218
By Sanjay Dawar & Raghuram Devarakonda, Accenture
5.3 Why Don’t Big Businesses ‘get’ it? ...226
By Rama Bijapurkar
5.4 The Will of Food: Understanding the Food & Beverage Motivations in Modern India ...232
By Soumya Mukhopadhyay, Ranjana Gupta & Gurpreet Wasi, IMRB International
5.5 Why We Buy:
Decoding Food Buying Behaviour ...244
By Soumya Mukhopadhyay, Ranjana Gupta & Gurpreet Wasi, IMRB International
5.6 Exotic’s Place of Pride ...248
By Tarun Jain & Ravindra Yadav
5.7 The Organic Age ...250
By Sunil Kumar
5.8 Tracking the Milky Way ...254
By Sam Allen, Canadean
5.9 Brewing Success ...260
By Tarun Jain & Reetesh Shukla
5.10 Nuts about Dry Fruits ...264
By Ravindra Mehta & Avinash Kant Kumar
5.11 All Things Hot ...268
By Sam Allen, Canadean Research
6.1 The Impatient Consumer,
iOT and the Food of Everything ...272
By Harish Bijoor
6.2 Disruption in the Food Industry-
Rise of Food Tech Startups ...280
By Sachit Bhatia, Troika
6.3 Product Recall -
The Big Challenge for Food Businesses ...286
By Charu Khanna, GS1 India
SECTION 6:
FOOD & TECHNOLOGY
6.4 Managing Global Food Chain Risks ...296
By Ajay Kakra, Pwc India
6.5 Sustainable and Inclusive Supply Chains-
a Key Business Driver for Food Industry ...304
By Asitava Sen & Barry Lee,
7.1 Indian Food Service Market Overview...314
By Suman Dabas & Ravindra Yadav, Technopak Advisors Pvt. Ltd.
7.2 Intensifying Competition ...326
By Maple Capital Advisors Research
7.3 Indian Homegrown Restaurants ...334
By Prof. Piyush Kumar Sinha and Anshul Mathur, Indian Institute of Management Ahmedabad
7.4 Experiments for the Palate ...342
By Rachna Nath
7.5 What’s on the Plate? ...346
By Puneet Verma 7.6 Goal Vegetarianism ...350 By Mini Ribeiro 7.7 Scaling Up ...354 By Manisha Bapna Amit Burman ...398 Chairman, Dabur India Ltd. / Lite Bite Foods
Krish Iyer...400 President & CEO, Walmart India
Prakash Nedungadi...402 Group Head, Customer Insights & Brand Development, Aditya Birla Group
Ramanathan Hariharan ...404 Director, Landmark Group
Saurabh Sanyal ...406 Secretary General, PHDCC
Rohan Kichlu ...408 Director F&B, The Park Hotels
SECTION 7:
FOOD SERVICE
SECTION 8:
DEVELOPING A VISION AND STRATEGIC PLAN
7.8 Franchising Fervour ...356
By Kavitha Srinivasa
7.9 Scientific Service ...360
By Mini Ribeiro
7.10 Social Media Power ...364
By Annie Johnny
7.11 Supply’s Strength & Support ...368
By Manisha Bapna
7.12 Biryani or Pizza Choice for QSR ...382
By Team D’Essence Hospitality Advisory Services Pvt. Ltd.
7.13 Making the Right Choice ...390
IMAGES Report
7.14 Amping up Efficiency Standards ...392
IMAGES Report
P. Rajan Mathews ...412 VP - Marketing & Sales, Desai Brothers Ltd. - Food Division (Mother’s Recipe)
Sougata Basu ...414 Head of Marketing, Innovative Foods Ltd (Brand Sumeru) O P Khanduja ...416 Business Head, DS Spice Co. Pvt. Ltd.
Ajay Katyal ...417 President - Organics at Amira Pure Foods Pvt. Ltd
Oliver Mirza ...418 MD, Dr. Oetker India Pvt. Ltd
Sahil Gilani ...419 Director - Sales & Marketing, GITS Food Products Pvt Ltd
contents
THE INDIA
FOOD REPORT
2016
THE INDIA
FOOD REPORT
2016
& OVERVIEW
1.1 INDIA’S FOOD SECTOR
1.2 FOOD GROCERY MARKET
1.3 DRY FOOD GROCERY
1.4 DAIRY
1.5 SPICES
1.6 FRESH PRODUCE
1.7 PERISHABLES
1.8 BEVERAGES
| 22 | INDIA FOOD REPORT 2016
India’s
food
sector
I
ndia is the seventh largest country in the world in terms of land area. The country, with second largest human population in the world, hosts more than 1.25 billion people who are driving the nation’s economy, and along with it the consumption market within. The country is equally fortunate for being home to the largest young population in the world. This young population is growing, aspiring, earning, spending and consuming a whole range of various products & services, thus expanding the opportunity for all stakeholders in the market to carve a niche for themselves. The growing middle class with its spectrum of aspirations, entry of international stakeholders, growing economy, technological advancement, IT stronghold, urbanisation and improving living standard, all have contributed immensely in taking the country at a higher global position in various areas of achievements. One such area of immense growth is its food sector. The sector itself commands keen attention owing to the fact that it is catering to 13.4 per cent of world’s population domestically, and a large part of world population outside its political boundaries through food & agricultural exports. This sector is now in focus of big economies of the world.
INDIA FOOD REPORT 2016 | 23 |
Food Sector - An Overview
Food being the basic need of all living creatures is a complex and extensive sector. The complete value chain in this sector encompasses production, processing, marketing, distribution and retailing of food items to the end-consumers. These make the sector dynamic in terms of its entire scope, delivery and penetration. In the same value chain, food passes through three main stages – raw form, processed form and ready-to-consume form. Each form at its respective stage plays an important role and shapes the market for the next form it enters into. Because of this, the
penetrated into even smaller markets with growing demand for processed and packaged foods. The sector is ruled by corporate giants and various global and domestic players who have years of expertise, skills, advanced technology and capability to service the food consumption sector.
Food consumption sector is service-based consumer-driven sector. Its entire value chain ends up in servicing the end-consumers through various types of food retailing options. This sector provides climax to all the efforts of preceding sectors by connecting with the end-consumers. This sector also serves as the indicator of market pulse, evolving trends, emerging new markets and future prospects. Over the period of time, first two sectors have evolved and achieved certain amount of delivery performance, but it is the food consumption sector which is undergoing an evolutionary change and will be a key area of play in the future.
India’s Food Market
India’s food consumption sector includes Food Grocery (FG) market and
Foodservice (FS) market. The former
one provides food items which are raw, processed and/or in partially prepared form, and needs cooking before the final consumption. The latter one offers cooked
Primary Food Sector Agriculture Forestry Animal husbandry Fishery Secondary Food Sector Manufacturing Processing Distribution Food Consumption Sector Raw consumption Processed consumption Ready-to-eat inter-relation among them, agriculture
and retailing have assumed a far greater importance in India’s food sector. India’s food sector can be divided into three key sub-sectors:
Primary food sector consists of all those sources, which produce food materials naturally such as agriculture and forests. It provides vegetative products of grains, cereals, fruits & vegetables, pulses, oil seeds and spices, and animal husbandries, which help in raising livestock for meat, milk and eggs, and fishery for providing aquatic products like fish, marine vegetation, seafood and other such food from its on-shore and off-shore areas. India is fortunate to have a robust primary sector which ensures abundant supply to the succeeding sectors. Modern technology has not only improved primary sector’s quality but also paced its delivery efficiency. The sector is monitored, controlled, upgraded and supported by various government bodies which are responsible for its upkeep and health. Secondary food sector takes care of processing, marketing and distribution of food materials which are provided by the primary sector. With the changing life dynamics, and the demand-mix food processing sector has also grown by leaps and bounds, and has
| 24 | INDIA FOOD REPORT 2016 | | | | | | | | | | | | | |
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food ready to be consumed under certain environment of ambience and services. FG market share is larger in the total food market for the simple reason that it involves food in raw as well as in processed forms. Although it is much larger in size but it is the FS market which is growing at a faster pace. What is driving India’s overall food market? There are four main reasons for its growth:
Vast primary sector – Traditionally India has been an agrarian economy with a substantial contribution coming from agriculture. The large fertile lands, abundant livestock existence and improving technology ensure that there is no drop in production of food materials. Since last few decades, there has been much advancement in agro-technology, farming, crop hybrids and related R&D which have improved farm yields and quality of harvests. At the same time, scientific methods have ensured that livestock which Indian farmers breed provide quality animals and their products. The country has also seen incremental share of inland fishery to support overall devlopment. Since the consumption of food items has grown over the years; the sector will also keep upgrading its efficiency
and delivery services in the future also, which it has done admirably so far. The technical support and knowledge exchange with
other developed nations on improved breeds,
better quality hybrids and content varieties have further helped food production to grow. In recent times there has been a lot of emphasis on bridging the gap between farms and consumers. Once achieved, this approach of farm-to-fork will further fasten the growth of the sector.
Expansion in food processing
industry – With strong primary food
sector flourishing in the backyard, India is poised to have growth in food processing sector as well. With available cost-competitiveness and by adopting international standards, India has emerged as a fast growing hub of processed foods. The processed food is consumed on a large scale in domestic market as well as is exported to other markets. Exports of processed food and related products have been increasing steadily; the main destinations being the Middle East and Southeast Asia. The significance of India’s food processing industry is proved by the fact that it ranks fifth in the world in exports, production and consumption of food items. Major parts of the food processing in India are milled grain, sugar, edible oils, beverages and dairy products. The industry had grown annually at 8.4 per cent for 5 years leading up to 2012-13. Investment in registered food processing sector had grown by 20.1 per cent at the end of 2012. The number of registered processing factories has increased from 35,838 in 2010-11 to 36,881 in 2011-12, marking a growth rate of 2.9 per cent. The industry is also one of the largest employment creators, with growth in direct employment in the organised food processing sector standing at 6.05 per cent between 2010-11 and 2011-12. No surprises that India is fast emerging as a global outsourcing hub, with even large retailers in the world sourcing from India owing to abundant raw materials, supply and cost advantages. Large food consuming population
– India would have been left wanting
if it lacked sufficient population to consume the outputs of vast agriculture and growing food processing industry. Fortunately, India is not in such a situation. Out of 1.21 billion people living in India, just over 13 per cent are up to the age of 6 years and another 61 per cent fall in the young age group of 7 to 40 years. Thus this 74 per cent of India’s population is responsible for
India’s food consumption
sector includes Food
Grocery (FG) market and
Foodservice (FS) market.
FG provides food items
which are raw, processed
and/or in partially prepared
form and FS offers cooked
food ready to be consumed
under certain environment.
INDIA FOOD REPORT 2016 | 25 | shaping the future markets. Although
the consumption in India is driven by large-sized young population, but food being basic necessity is the need for the entire population. In addition, it is also estimated that by the end of this decade almost one-third of India’s population will be urbanised. Urbanisation will bring in improved lifestyles and higher living standards. This will make inhabitants of newly formed urban markets serious consumers of a variety of food items. Alongside rising income levels and a growing middle class in the country there is anticipation that this situation will impact food sector also. Food is the biggest expense for an average Indian household especially in the rural areas. At an average, about 48 per cent of the total consumption expenditure of an Indian household is spent on food items.
Globalisation & modernisation of
food market – Even having a large
consuming population would have found its limitation if the market could not expand. For expanding the market there is a strong need for influencing factors to exist in the market. Here, also, India is lucky to serve as an able host to food globalisation trends. Globalisation of cultures and exposure to various foods items and cuisines through media, travel & tourism is also enlarging food sector. There is a growing aspiration for branded food, fast-food, ready-to-eat, multi-cultural cuisines and food-on-the-run to suit fast-paced and changing life of Indian consumers. This has bloated the food consumption sector and resulted in its expansion during the last few decades thanks to economic liberalisation and growth in modern retail. This has not only made India an attractive destination for global players but has also provided an opportunity for local players to improve upon their
standards, quality and efficiency, thus generating healthy competition which is beneficial for the end-consumers. There is an emergence of large and distinct consumer brackets to support customised offerings, new categories and brands within each food segment. There is an increased awareness and concern for wellness & health, for high protein, low-fat, wholegrain, organic foods, etc. Consumers are ready to experiment with their food.
Consumption Trend
Data of Private Final Consumption Expenditure (PFCE) for the period from 2004-05 to 2012-13 reveals that the share of consumption expenditure on food items is on a decline. From a defining share of close to 34 per cent in PFCE during 2004-05, it has come down to about 29 per cent by 2012-13. Looking at the positive side of it there has been an average growth of 12-13 per cent every year in food consumption in value terms. So, does the declining share of food in PFCE pose any real threat?
Though the trend does not appear to be very encouraging for the food sector but on deep diving, it speaks of yet another positive trend. The decline is actually
indicative of improved living standard and changing lifestyles wherein consumption share of non-food items and services have increased. This, by no means, indicates that food consumption will lose its sheen in the coming times. Optimisim sees silver lining in the same figures, but in other space of food sector. During the same period of 2004-05 to 2012-13, The consumption expenditure share on hotels and restaurants products and services in PFCE had increased from 2 per cent in 2004-05 to 2.5 per cent in 2012-13, suggesting increased inclination towards the eating out culture. The same can be verified with higher growth rate in food service market than that of food grocery market. In a nutshell, food consumption will continue growing but may adorn different market mix.
Growing eating out culture is a part of changing lifestyle. Buying from malls, supermarkets, hypermarkets and online market places are also a part of changing lifestyle. Similarly, eating out at fast food joints, enjoying coffee during professional meeting at a café, relishing some specialty cuisine at a fine dining restaurant or gulping down a few servings of beer with friends at a pub/bar is also
Share% of Consumpton Expenditure in Total PFCE
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Food items 33.8 33.1 31.5 31.0 29.2 30.6 30.3 29.1 28.6
Hotels & Restaurants 2.0 2.3 2.7 2.8 3.1 2.2 2.3 2.6 2.5
| 26 | INDIA FOOD REPORT 2016
part of changing lifestyle. Maple Capital Advisors reports that continued shift from unorganised foodservice to organised foodservice is visible with organised sector growing primarily driven by new investments. Between January 2014 to April 2015, the foodservice segment had attracted over $400 million in various ventures from different types of investors.
The organised food service businesses are witnessing increased competition due to emergence of new International brands (e.g., Taco Bell, Burger King, Johnny Rockets, Starbucks) and domestic players (e.g., Faasos, The Beer Café, Chai Point, Goli Vada Pav , Ammi’s Biryani, etc.). The regulatory changes, access to information to consumers by consumer internet ventures and improved supply chains are accelerating the pace at which the sector is getting organised. At the same time, all these factors are also pushing the boundaries of food sector directly and indirectly.
Food Retailing
The mainstay of food consumption sector in India is food retailing encompassing food grocery and food service. The food retailing has also shown positive and very encouraging signs especially with the advent of modern retail. The modern retail has served as a catalyst to bring in global players on one hand and helped in making the food segment more structured, better defined and segmented and organised.
FG market covers monthly food groceries used in households and FS market includes food which is served for consumption with all-important service
component attached to it. FG segment has been growing about 15 per cent and FS segment has grown at 22 per cent. This growth is inclusive of price fluctuation owing to high inflation trends in recent years. Yet, the volumes in food consumption have not receded. The total food market in India is worth Rs 25.13 billion which will cross Rs 60 billion by 2020. Since the food service market is growing at a higher rate, the segment will have 11 per cent share in the total food market as compared to current share of 8-9 per cent. This increase in share is going to be the result of widening of eating out culture, entry of international brands, acceptance of global cuisines, changing food habits and palates, and increase in institutional, commercial, social and community catering services.
Challenges
Like all other sectors India’s food sector is also facing challenges which need correction and attention at various levels:
Inspite of appreciable improvement in quality and standards in primary sector, India’s benchmarks still stand low on international measures. The per capita yield of our agricultural lands and animals and per capita availability of food items are the areas which demand improvement if India’s food sector wish to claim to be among the best in the world.
As per experts about 40 per cent of India’s food production goes in waste or is unable to reach consumers due to lack of proper roads, sound logistics, efficient transportation systems and suitable storage capabilities. Arresting this problem will at least provide food to many needy people who suffer from malnutrition or under-nourishment on one hand and simultaneously, bring down the food price volatility in the market on the other hand. If wastage problem can be tackled,
the inflationary tendencies in food items can also be checked. This has raised its ugly head in the recent times more than often, thus disturbing the consumption pattern and hindering demands in the market.
At the policy level, the debate on multi-brand FDI is an urgent need. The current policy with riders in its present form has not been able to impress upon its aim properly, neither to local players nor to the aspiring entrants. FDI in multi-brand retailing affects food retailing in a major way thus a thorough review of the policy is very crucial for the sector to grow.
Retail market Food market
2010 2014 2020
CAGR 16%
| 28 | INDIA FOOD REPORT 2016
Constituting more than 60 per cent of India’s total retail market and about
90 per cent of the overall food market, Food Grocery (FG) represents the
largest retail vertical. The extensive range of products offered, amplified by
regional and local tastes, geographical demands, cultural and traditional
food habits, and varied consumer preferences, makes it a dynamic market.
The market exists in varied forms and reaches the end consumers through
all types of retail channels, such as hawkers, peddlers, cart-driving street
vendors to modern retailers operating supermarkets, hypermarkets, specialty
food stores and shopping websites.
Food grocery
market
INDIA FOOD REPORT 2016 | 29 | 2010 2014 2020 FG Market 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 -CAGR 15% Source: CSO
Trends of Food Share in PFCE (%)
34 33 31 31 29 31 30 29 29 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
FG Consumption
According to the recent data released by CSO, the consumption expenditure on food items is on the rise. For the period from 2004–05 to 2012–13, the food expenditure grew at a CAGR of 12.5 per cent. In 2004–05, households used to spend the highest on cereals among all food items followed by fruits and vegetables, and milk and milk products. This trend saw a change over the next nine years. By 2012–13, the highest spend was on fruits and vegetables followed by milk and milk products. The spend share on cereals got reduced, thus settling at the third rank.
The other items which gained increased share in food expenditure during the same period included pulses, meat, eggs and fish. Spices maintained the same share as was in 2004–05. outlets has been taking place at a mixed
rate depending on the format. The number of outlets in smaller formats increased at a steady pace over the years whereas expansion among large formats continued with an average growth of over 12 per cent. It is the specialty format of FG segment which has grown by over 40 per cent. If smaller-sized outlets provide the advantage of deeper penetration and grow more in numbers than large-sized outlets, it is the large-sized outlets such as hypermarkets (which are usually guided more by strategic but limited presence in city areas) which have contributed significantly in increasing the total retail area dedicated to FG products. In terms of revenue, the same-store sale in the segment has grown at an average of 13 per cent across all formats dealing in FG.
FG Market Size & Growth
The FG retail market is currently pegged at Rs. 23,00,500 crore (~$ 383 billion). Growing at 15 per cent, the market is expected to cross Rs. 35,60,000 crore (~$ 593 billion) by 2017. By 2020, it is estimated to double its current size. Modern FG retail market, which is currently less than 2 per cent of the total market, is expected to grow at 20–25 per cent per annum. With the same growth rate, the market is well poised to even triple its present size by 2020.
The retail expansion among modern FG retailers in terms of number of retail
| 30 | INDIA FOOD REPORT 2016
Uttarakhand, Uttar Pradesh, Punjab, Haryana and Rajasthan, holds the largest FG market share of close to 30 per cent. The next region in terms of market size share (24 per cent) is south India, with the states of Andhra Pradesh, Tamil Nadu, Kerala and Karnataka and the union territories of Puducherry, Lakshadweep and Andaman & Nicobar Islands. 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0
Source: CSO Food Consumption Total PFCE
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Market Estimation Approach
It is not easy to gauge such a vast, complex and seamless market as the FG sector with its overlapping diversity. Equally difficult is to comment upon its sub-markets for the same reasons. So, in order to comment upon the FG market and its constituting sub-markets, The India Food Report has relied upon MPCE data released by NSSO. The data has been chosen for the following reasons:
It is a standardised piece of information by the government agency, and hence provides credibility, establishes authenticity and follows regular updation of information. It incorporates inflationary trends and
impact of other market forces, which are absorbed in its figures.
It is based on a large number of household surveys encompassing sizeable sample size of rural and urban segments of all states and union territories, and includes an extensive list of items and their consumption data at current market prices. All these factors form an integral part of the retail market. The data collected during surveys is
at consumption level and not at the production level, as is the case with PFCE data. Thus, it captures the end-consumer spending behaviour at sale price, which is another hallmark of the retail market.
The MPCE data was structured and analysed under various broad heads to arrive at regional and sub-market shares. Each sub-market was further segmented applying the same approach. This methodology was applied to analyse total market only, and in no way does it indicate any trend of modern retail market of FG.
Market Composition
Applying the same approach, India’s FG market worth Rs. 23,00,500 crore (~$383 billion) was broken into different sub-heads of markets and regions to arrive at respective market sizes.
Regional composition
North India, which comprises of Delhi, Chandigarh, J&K, Himachal Pradesh,
FG Regional Market
Source: NSSO; MPCE analysis
North North-east East West South 24.4% 3.6% 29.6% 20.4% 22%
INDIA FOOD REPORT 2016 | 31 | Based on the respective population
size of each region, the monthly per capita FG market for the north, north-east, north-east, west and south region is Rs. 1,540, Rs. 1,512, Rs. 1,327, Rs. 1,709 and Rs. 1,850, respectively. However, it is the west and south regions which have higher monthly per capita FG market than the all-India figure, which stands at Rs. 1,586.
Per capita figures suggest that on an average, every Indian is buying FG items worth Rs. 53 per day, which is abysmally low. The figure of Rs. 53 means about 2–3 kg of wheat flour or a little over 1 litre of milk or 1 kg of tomatoes or a few eggs. This is not sufficient for even one complete meal for a person. To meet this buying budget, an Indian consumer is required to forego one or the other part of wholesome and complete meal in a day. Another concern is that three out of five regions fall even below Rs. 53 per day.
At the same time, there is a positive side to this alarming and worrisome scenario – the market is still growing at a healthy rate of 15 per cent and the population is growing at 1.6 per cent per annum. This means that the market still has huge opportunity to service even bigger markets in the future.
With increasing income, improved production capability, growing food processing sector and growing demand for variety in food items will definitely work in favour of pushing the market size. The growing size of market will also push the monthly per capita spending towards higher spends.
FG sub-markets
Applying the same methodology, the extensive list of all food items of MPCE was grouped under seven broad categories of Dry Food Grocery (DFG), Dairy, Spices, Fresh Produce, Perishables, Beverages and Other Processed Foods (OPF). Needless to say, the largest among these groups is DFG with over one-third market share. It includes cereals, grains, grams, pulses, legumes, edible oils, sugar and dry fruits. Spices along with salt have been grouped separately since they serve as accompaniments to DFG like other food groups. Dairy includes milk and all milk products, such as cheese, butter, curd, baby foods, etc. Fresh produce is the food group that includes both fruits and vegetables. Perishables include eggs, meat, fish, seafood, game, poultry and other such items originating from livestock and marine life. Beverages form drinks like tea, coffee, packaged drinking water, flavoured or carbonated drinks, juices and other non-alcoholic beverages,
but excludes alcoholic beverages. OPF contains all food FMCG, such as snacks, biscuits, bakery items, sweets and confectionery and table accompaniments, such as pickles, sauces, ketchups, spreads, preserves, toppings, etc.
Focus of Modern FG Retailers
Though relatively small, but FG retailing in its modern avatar is evolving rapidly. From local grocery stores and cart vendors, it has successfully assumed the form of large supermarkets and hypermarkets, which drive a large part of their business by selling FG items in large volumes. In fact, the market is abuzz with the entry of online players who have accepted the challenge of providing fresh and quality merchandise of FG items, which until a few years ago was perceived as a dream. The journey has been fascinating, challenging yet exciting for all stakeholders to learn the tricks of the trade. In recent times, FG retailing has shown some interesting trends that highlight the importance of innovation, future vision and thinking out-of-the-box approach to serve consumers while achieving commercial goals. The followings are some of the key trends that the industry has been witnessing over the last few years:
FG Market Pie
Source: NSSO; MPCE analysis
Other Processed Foods (OPF) 9% Beverages 8% Perishables 9% Fresh Produce 17% Spices 6% Dairy16% Dry Food Grocery
(DFG) 35%
