A detailed report on the long-term investment prospects in Food Processing Industry including the impact created by Covid-19

1. FOOD
PROCESSING
INDUSTRY
by ProfNITT, NIT Trichy
and the Impact of COVID-19
A P R I L 2 0 2 0
P R E P A R E D B Y :
Satyam Gupta
Senior Manager
ProfNITT, NIT Trichy
A P P R O V E D B Y :
Dr. Senthil Arasu
Professor, Finance
DoMS, NIT Trichy

2. PROFNITT, NIT TRICHY PAGE 01
THE SECTOR AND THE
INDIAN SCENARIO
Food processing industry in India
is a sunrise sector that has gained
prominence in recent years.
Availability of raw materials,
changing lifestyles and
appropriate fiscal policies has
given a considerable push to the
industry’s growth. This sector has
an important role to play in
linking Indian farmers i.e. the
agriculture sector with the
consumers who form the
industrial segments of the
domestic and global economy.
Introduction
The key sub-segments of the
Food Processing industry in India
are: Dairy, Fruits & Vegetables,
Poultry & Meat processing,
Fisheries, Food retail etc.
The Government of India
through the Ministry of Food
Processing Industries (MoFPI)
has been taking all necessary
steps to boost investments in the
food processing industry.

3. PROFNITT, NIT TRICHY PAGE 02
LOOKING AT
NUMBERS:
11.6%The industry engages approximately 1.85 mn people
which estimates to about 11.6% of the total
employment in around 39,748 registered units with
fixed capital of $ 32.75 bn and aggregate output of
around $ 158.69 bn.
$258 BnThe food processing industry stands at a total
valuation of USD258 billion, and is the fifth largest
industry domestically in terms of production,
consumption, export, and expected growth in the
country.
14%It contributes to around 14% of manufacturing Gross
Domestic Product (GDP) and 13 percent of India's t
otal food exports.

4. GROWTH & POLICIES
India's unique physical factors that help boost export, domestic
demand and improving Government Policies continue to enable
growth in the Sector.
PROFNITT, NIT TRICHY PAGE 03

5. Changing lifestyle and food habits of Indian citizens gives huge
Strong Domestic demand
Proactive government policies
provide attractive fiscal
incentives.
Conducive
policies
India being the hub of several
agri-commodities ensures High
level of agricultural production -
large livestock base, wide variety
of crops. Blessed with Inland
water bodies and long coastline,
India’s marine production knows
no bounds.
Supply side
advantages
Its Proximity to key export
destinations and Greater
integration with the global
economy has enabled India to
become the fastest growing
economy.
Export
Opportunities
PROFNITT, NIT TRICHY PAGE 04
impetus to food processing
companies as increasing
disposable income is channeled
towards quality-ensured food
products be it extravagant
restaurant dishes or the instant
foods shelved at mart outlets.
GROWTH IN INDIA

6. Changing lifestyle and food habits of Indian citizens gives huge
Infrastructure Support
National Agriculture Market (NAM) is a pan-India electronic trading
portal that networks existing APMC mandis to create a unified
national market for agricultural commodities.
e-NAM
100% FDI permitted for food
processing under government
approval route for trading,
including the same through e-
commerce, with respect to food
products manufactured and/or
produced in India
FDI Policy
India was showcased as the
preferred investment destination
in the Food Processing sector and
50 MoUs with domestic and
foreign investors, worth
investment intent of USD 11.5 Bn,
were signed at WFI 2017
World Food India
2017
PROFNITT, NIT TRICHY PAGE 05
Under the Pradhan Mantri Kisan Sampada Yojana, the Government has
sanctioned 39 Mega Food Parks (MFPs) to be set up in the country under
the Mega Food Park Scheme. Currently, 18 Mega Food Parks have become
functional. Besides, 299 cold chain projects have also been approved.
GOVERNMENT
INITIATIVES

7. PROFNITT, NIT TRICHY PAGE 06
COVID-19 IMPACT
A surge in sales of shelf-stable
foods and beverages may boost
profits for some food
manufacturers and retailers in
the near term. Sales of powdered
milk products and staples like
bread and eggs along with rice,
beans and frozen foods also have
increased.
Food demand is generally
inelastic and the effect on overall
consumption is likely limited.
Source: NIFTY FMCG INDEX during COVID-19 Lockdown
Owing to fears of serious economic dislocations in the wake of
Coronavirus (COVID-19) pandemic, the stock market has witnessed a
brutal sell-off over the past one month. However, food processing
companies (majorly FMCG sector) are seeing a stock bump attributed
to consumers stocking up their pantries as a reaction to the pandemic.
Even in the absence of stockpiling or panic-buying one cannot deny
the importance of food items and daily-use products.

8. At a time when fancy restaurants and hotels remain closed and
people are encouraged to stay within their homes, sale of basic
staples and daily-use consumer products is bound to sustain
and even inflate.But then comes the problem of
supply for which logistics is utmost necessary.
As the virus spreads and cases
mount, and block downs
prevail there are
seemingly countless
ways the food system
will be tested and
strained in the
coming
time.
SUPPLY CHAIN
DURING COVID-19
Food supply chains have been disrupted as of April/May due to
shortage of labour and hampered vehicular movements for
goods transportation.
Constrained by a state government order that processing units
should operate with not more than 50% of its headcount during
the lockdown, less production is likely but companies with
strong fundamentals and good management like Amul, on whose
protein supplements the nation depends, are bound to remain
operational with efficiency.
It must be noted that no current noticeable impact on crop
production has been observed; global cereal prospects for 2020
are overall favourable. However, more perceptible impact on
livestock sector due to disproportionately larger decline in meat
consumption (implication from its zoonotic origins) and other
higher-valued products (likely to cause price slumps) have been
observed.
PROFNITT, NIT TRICHY PAGE 07
Risk of Disruption in Supply Chain

9. PROFNITT, NIT TRICHY PAGE 08
HELP IS HERE!
Our Government has been
proactively working to look into
the grievances and barriers faced
by the food industries due to the
temporary supply chain
disruptions caused by the
pandemic.
The FPI Minister discussed
suggestions with major industry
associations on interventions
required by the government for
development of the Food
Processing sector with renewed
vigour post lockdown. The
Ministry may arrange special
trains for labourers to return and
infuse working capital to
overcome the immediate liquidity
crunch.
The Ministry has already resolved
50% of the queries received with
regards to resolve the micro
issues being faced by the industry,
to facilitate supply chain and
logistics management for
availability of food and
medicines.

10. Amidst this temporary economic
setback, food processing
Companies who effectively adjust
their operations to meet increased
demand with limited workforce
and adopt more stringent safety
protocols will outshine. This can
be witnessed by the performance
of Hindustan Unilever, Nestle
India, Amul, Dabur LTD and such
who have higher rural penetration
and dominant traditional
distribution channels. Food
commands the largest share of the
Indian consumers’ wallet (around
40%). The USD 200 billion Indian
processed food market is
witnessing significant changes in
the food plate composition,
changes in consumer preferences,
higher need for convenience as
well as rising consumer demand
for food safety, health and
nutrition.
Changing market drivers such as increasing disposable income,
increasing modern retail formats, e-commerce platforms, improved
delivery mechanism and above all increased TV programmes on food
and cuisines & social media platforms is growing the processed foods
space.
PROFNITT, NIT TRICHY PAGE 9
"$200 Billion Indian Market "
CONCLUSION