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India promises to be a global food processing hub

By Nantoo Banerjee. Dated: 12/6/2017 1:42:46 PM

Investors ready to bet their billions

An investment commitment of nearly $19 billion from food firms during a three-day industry-specific business meet in Delhi - from November 3 to 5 - may be a world record. It seems multinational companies have, for once, been able to gauge somewhat correctly India's appetite for large varieties of processed foods. They are now ready to pump in billions to tap Indians' taste buds. One Delhi road show - Global Food India - brought some of the world's 60 food giants together to a venue that offered them to witness the confluence of world culinary cultures. India, the world's fastest growing processed foods market, appreciates good cookeries from countries across the world. Investments already committed in food processing by private sector foreign and local firms at the food meet were a mind boggling $11.25 billion. The rest came from state governments and local organisations. More may follow in the coming months to whet the Indian appetite as well as consumers' gustatory cells. The show was unique as no trade and commerce fairs in India has ever received such an enthusiastic spot investor response.
The 'Global Food India' meet witnessed over 10,000 participants. It hosted some 8,000 business to business (B2B) and business to government (B2G) meetings. Several Indian states showcased their products through their stalls. They unfurled schemes and projects to attract investments. Many States such as West Bengal and Tamil Nadu have excellent food parks. The union government plans to have 42 food parks across the country. The credit for the success of the food summit goes to both the centre and states and, in particular, India's Food Processing Minister Harsimrat Kaur Badal. A dedicated cell has been put in place in her ministry to ensure each of the 50 memoranda of understandings (MoUs) signed during the food fair materialises. The US, UAE, Germany, Netherlands and France have announced big investments in the country's food processing sector. Investments are promised in a host areas of food processing, beverages, logistics, cold chains, wholesale and retailing, e-commerce, organic farming, among others.
Yet, for India to fully use its potential to be become a global food processing and export hub, the government will have to walk the talk to impress the investors and be prepared to further ease tariff barriers in the areas of both imports and exports. According to Steven Schiller, Hershey's President-International: "We believe there is a huge potential to use the manufacturing set-up in India to export products to other markets. At the same time, we would like to use our multinational infrastructure to bring our international products to India, and rapidly learn which products receive good response. This will help us make deeper investments and grow our Indian business faster." Schiller's confectionary company has more than 80 brands globally. Incidentally, Schiller was among a group of international participants who attended a closed-door round table with Prime Minister Narendra Modi.
India's domestic processed foods market is growing at a much faster pace than those in other parts of the world. Even its rural consumers have taste for pizzas, noodles, burgers, candies, cookies, bubblegums, chocolates, cakes, prunes, etc. The health conscious people are fast switching over to fat-free, sugar-free stuff. Consulting firm Euromonitor International, has projected an eight per cent annual growth of India's chocolate confectionary market alone to reach Rs16,200 crore (on constant value) in 2021 from last year's Rs11,256 crore. For US-based Yum! Brands chief executive Greg Creed, "India is a standout market for Pizza Hut with its fifth consecutive quarter of same store sales growth." The company owns brands such as Pizza Hut, KFC and Taco Bell.
Similarly, US-based Amway, the world's largest direct selling firm, which has set up a high-tech manufacturing unit in Tamil Nadu, sees a great business opportunity in India, especially in the nutritional segment. "Nutrition is core to our business and contributes nearly half our sales globally," Amway regional president - Europe, Africa and India, Samir Behl said. "We are exploring a range of options to service the needs of Indian consumers at reasonable costs. Products based on proteins, micronutrients, minerals, calcium, Omega 3 - we play in all these sectors globally." Behl thinks global companies need to encourage shared entrepreneurship to fuel consumption when world economies are slowing down. Nutraceuticals is a $200-billion industry worldwide and in India it is growing at 20% with revenue of $2 billion and potential to reach $6 billion by 2022, said Amway India CEO Anshu Budhraja, adding that "Amway has the ability to fulfil India's nutrition gap story and we are doing focused pilot projects aligned to drive down prices of high-nutrition products for consumers." Amway India is moving beyond its core direct selling model into other avenues including brick-and-mortar retail stores, online and mobile apps. Companies such as PepsiCo and Nestle are developing low-cost, healthy products in India. PepsiCo has introduced entry-level Quaker Oats sachets and, through a joint venture, Tata GlucoPlus water, while Nestle is pushing fortified Maggi seasoning at low-unit prices.
India's own giant multi-product food processing firms, including Gujarat Co-operative Milk Marketing Federation Ltd, boasting globally-acclaimed Amul brand, the house of Tatas, ITC, Britannia, Parle, Haldiram, Kwality, Hatsun Agro, Varun Beverages, Heritage Foods, Parag Milk, Prabhat Dairy and Kohinoor Foods, have lined up investments worth over Rs. 8,000 crore. Indian food services market is set to grow at 10 per cent annually to reach Rs 5.52 lakh crore in the next five years. A recent FICCI-Technopak report said that the food industry has emerged as a high-growth and high-profit sector due to its immense potential for value addition. The food services market in India is estimated at Rs 3.37 lakh crore in 2017. Obviously, the sector needs full support of the state and central governments to become a big domestic-cum-global player.
—(IPA Service)