Introduction

As per Ministry of Food Processing of India (MOFPI), the term 'food processing' is mainly defined as a process of value addition to the agricultural or horticultural produce by various methods like grading, sorting and packaging. In other words, it is a technique of manufacturing and preserving food substances in an effective manner with a view to enhance their shelf life; improve quality as well as make them functionally more useful. It covers a wide spectrum of products from sub- sectors comprising agriculture, horticulture, plantation, animal husbandry and fisheries. It also includes other industries that use agricultural inputs for manufacturing of edible products.

segments in the fpi

The food processing sector comprises of three segments based on the levels of processing

1> Primary processing of food

Primary processing of food comprises of sorting, grading and packaging of fruits and vegetables, milk, rice, spices, etc

2> Secondary Processing of Food

Secondary processing of food comprises of re-shaping of food for ease of consumption. It includes flour, oil cakes, tea leaf and beverages powder etc. Together with primary processing, the two segments constitute around 62% of the processed foods in value terms.

3> Tertiary Processing of Food (or) Value Added Food Segment

Value added food segment includes processed fruits and vegetables, juices, jam & jelly etc and holds around 38 % share in the total processed food market.

food processing industry in india

The Indian food processing industry is valued at approx. ` 78,094 crore for the year 2011-12. The industry is still in its nascent stage and contributes only 1.49% to the total Gross Domestic Product (GDP) of the economy. It has been accorded the status of priority sector by the Government of India. The industry has shown an impressive Compounded Annual Growth Rate (CAGR) of 8.4% during the period 2006-07 to 2011-12, which is higher than the CAGR registered by either the national economy at 8.0% or the agriculture sector at 3.8%. This implies that the level of food processing has increased in terms of both – value and volume. The FPI has got a boost due to a healthy harvest of agricultural goods induced by a good rainfall. The benefits derived by the industry due to the priority status of the sector and the fiscal initiatives launched for the sector by the government at various levels have also contributed to the impressive growth exhibited by the industry. A major proportion of the FPI produce is eventually exported due to the quality offered and the demand of the processed Indian food products in the markets abroad. A major share of the export produce is held by Guargum and Basmati Rice.

India is ranked 5th in the world in terms of production, consumption and export of processed food. It is a leading producer of quite a few agriculture based and dairy based items. It is ranked 1st in the world in production of rice, milk (Fresh, Whole, Buffalo Milk), pulses, ginger, chick pea, and fruits such as banana, guava, papaya and mango.
India also holds 2nd position in the world in production of wheat, potato, garlic, cashew nut, ground nut, dry onion, green pea, pumpkin, guard and cauliflower. A good agricultural and dairy produce enables India to expand its food processing industry and meet the global demand easily after satisfying the domestic needs.
The macroeconomic environment offers immense opportunities for growth and investment to the registered players in the industry and has the potential to boost the national economy. The industry employed more than 1.3 crore workers directly and about 3.5 crore indirectly in 2008-09. According to an estimate of the Confederation of
Indian Industry (CII), the sector may generate employment of 0.9 crore people days in the next ten years. The registered units in the organized sector are expected to lead the employment generation in the FPI.

SEGMENTAL ANALYSIS

1> Fruits and Vegetables

Opportunities

>> India is the world’s 2nd largest producer of fruits and vegetables
>> Presently 10% of the products in this segment are processed. It is expected that the processing will grow to 25% by 2025
>> Highly export oriented segment as the domestic penetration is low. Domestic demand is expected to grow

Market Structure

>> An almost equal division of the market between organized and unorganized players
>> Organized players mostly produce juices and pulp products; while unorganized players have a foothold in traditional areas like pickles, sauces and splashes
>> Pickles hold the major share in this segment

Key Players

>> Mostly SMEs are operating in both the organized and unorganized segments. Some brands include Mothers Recipe, Tops etc.

2> Fisheries

Opportunities

>> Third largest producer of fish
>> Second largest inland fish producer
>> An entirely export oriented segment

Market Structure

>> Small scale organized sector rules this segment

Key Players

>> The units are largely small scale proprietary/ partnership firms, or fishermen cooperatives

3> Meat and Poultry

Opportunities

>> Largest producer of buffalo meat
>> Second largest producer of goat meat
>> Only 1-2% of the raw meat is converted into value added products, remaining purchased in raw form for domestic consumption
>> The processed food is mainly exported to Maldives and Oman.
>> Eggs and Broilers are leading the growth in this segment with a growth rate of 16% and 20% respectively

Market Structure

>> The unorganized sector dominates this segment

Key Players

>> Brands such as Venky’s and Godrej’s Real Chicken are popular in India

4> Milk & Dairy

Opportunities

>> Largest Producer of Milk and Milk Products
>> India shelters the maximum number of cows and buffaloes across the world

Market Structure

>> This segment is controlled by the unorganized market
>> Organized market holds less than 15% of the share
>> Estimated size of market is 100 crore

Key Players

>> Mostly cooperatives such as AMUL
>> Nestle and Britannia have shifted their focus on this segment

5> Grains and Cereals

Opportunities

>> India is a self sufficient country in terms of grain production
>> Largest producer of rice in the world, but most of it is consumed domestically
>> Rice, wheat and pulses milling is the most important food processing activity in this segment

Market Structure

>> Approx. 80% of the market is controlled by the unorganized sector
>> This sector also lacks the technological up gradations resulting in higher wastages

Key Players

>> Most of the milling happens in the SME segment and is unorganized
>> Some of the big players in this industry are R S Rice Mill, LT Foods Limited etc.

6> Consumer Foods

Opportunities

>> The fastest growing segment in India, which includes:
- Packaged Food
- Aerated Soft Drinks
- Packaged Drinking Water
- Alcoholic Beverages
>> The packaged food consists of snacks, chips, namkeens and bakery foods
>> The segment is growing at approx. 6-7% annually
>> The largest component of the segment is tea followed by packed biscuits and then by aerated drinks
>> India is the third largest market of alcoholic beverages

Market Structure

>> A highly organized segment
>> World market leaders operate in the aerated soft drinks segment and alcoholic beverages segment

Key Players

>> Pepsi, Coca Cola, Nestle, Britannia, Dabur, ITC

Growth asppects

With its varied geographic and climatic profile and the variety of crops cultivated, India has a natural advantage in the food and food processing industry. In 1999, the FPI became a focus area for the Government of India and it was included in the list of priority sector for bank lending. With various infrastructural thrusts being provided to the industry regularly, India is projected to achieve the highest growth rate in the industry across the globe

Abundance of raw material

>> India is rich in most of the raw materials used in the food processing industry. It is amongst the leading producer of cereals and grains, livestock, milk, fish, etc. An agrarian economy, a favourable climate for agriculture and a wide variety of crops has helped India to provide abundant agricultural supply to the sector. Rich endowment of natural inland water bodies and a long coast line has helped the marine product segment of the FPI.

Cost competitiveness

>> A low raw material cost resulting from domestic sourcing and labour cost offers competitiveness to the food processing units. This lends support to the units in the export markets to capture a higher share in the global markets.
However, due to increased consumer awareness, there are pressures on the units operating in the industry to improve the quality of the processed food and at the same time maintain their cost competitiveness.

Easier Credit

>> There has been significant growth in the bank credit in the FPI sector post 2009. As per RBI, the share of food processing in the total credit outstanding to all industries was 5.2% in FY12, which is almost the same as it was during the previous year
Easier credit has facilitated the creation of fixed assets in the industry, which have increased at a faster rate than pre 1999 period. While the growth in fixed asset creation was pegged at 18.45% for the period 2007-2009, it increased to 21.96% for the period 2009-2011.

Policy Support

>> The FPI comprises a lot of segments within itself and each segment has some different needs in terms of industrial ecosystem, infrastructural support and policy impetus required from the government. The Government of India has recognized the uniqueness of each segment and has formulated policies specific to each segment to help them grow independently. Even while creating export zones, separate export hubs have been created for sea food, vegetarian food, organic food and halal food