Food processing

Market Assessment of Food and Food Processing
Industry in India
Final Review
4 March 2014
Tecnova’s Presentation for
Italian Trade Agency

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Table of ContentsTable of Contents
 India Macro-economic Overview
 Food Habits in India
 Processed Food Industry in India
 Processed Food Distribution Formats in India
 Processed Food Industry Overview
 Competition Analysis
 Developments in Processed Food Industry
 Regulatory and Custom Duties Analysis
 Presence of Italy in Indian Food Industry
 Food Processing Machinery
 Industry Overview
 Major Target Industries for Machinery Manufacturers
 Customer Concentration
 Cold Storage Overview
 Packaging Machinery Overview
 Conclusion and Recommendation
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India Macro-economic Overview
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The Indian DimensionThe Indian Dimension
Location
Southern Asia, bordering Arabian sea and
Bay of Bengal, between Burma & Pakistan
Area
Total: 3.3 Mn. Sq.Km (7th
largest in the
world)
Land area: 2.97 Mn. Sq. Km
Land boundary: 14,000 km
Coastline: 7,000 km
Climate
South: Tropical monsoon
North: Temperate
Terrain
South: Upland Plain (Deccan plateau)
West: Dessert region
North: Himalayan mountain range
Rolling plain along the Ganges river
Natural
resources
Iron ore, manganese, mica, bauxite, rare
earth elements, titanium ore, chromite,
natural gas, diamonds, petroleum, etc
Land use Arable: 48.8%; Other: 48.37%
Capital New Delhi
State and
territories
28 States and 7 Union Territories
Official
languages
Hindi and English
North
West East
South
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Indian Geographical ClassificationIndian Geographical Classification
8
1.2 Bn
Population
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Majority of packaged food
consumption will be concentrated in
the metros, cities and towns

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The Story so Far…The Story so Far…
Source: Census 2011
* Proportion of dependent population (0-14, Above 65 age group) to
working population (15-64 age group)
Technological/Infrastructure
Advancement
Mobile penetration 61.4% (752M)
International Airports 17
Internet penetration ~15% (~200M)
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Indian DemographicsIndian Demographics
* As per Census 2011 (latest census available)
Source: MOSPI
65% of the population falls in the
working age group of 15-65 years
leading to rise in disposable income
Population classification by age group
With 1.2B population, India is the second
most populous country making it a huge
market for processed food companies
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Metros of IndiaMetros of India
Chennai
Bangalore
Hyderabad
Kolkatta
Delhi
Mumbai
Ahmedabad
Pune
~7% of India’s population lives in metros; a
high potential segment for processed foods
Metro
Population
(Mn, 2011)
Literacy
Ratio (2011)
Mumbai 23.5 82.0%
Delhi 16.8 76.2%
Kolkata 4.4 81.3%
Chennai 4.6 82.3%
Bangalore 9.6 79.4%
Hyderabad 4.0 72.5%
Ahmedabad 7.2 77.0%
Pune 9.4 77.3%
Total (8 Metros) 79.5 78.5%
Source: NCEAR & Census
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Major Cities in IndiaMajor Cities in India
City
Population
(Mn, 2011)
Literacy
Ratio (2011)
Metros (8) 79.5 78.5%
Surat 6.1 76.5%
Kanpur 6.4 71.1%
Jaipur 6.7 66.0%
Lucknow 4.6 70.3%
Nagpur 4.7 80.3%
Bhopal 2.4 72.1%
Coimbatore 3.5 77.1%
Faridabad 1.8 72.1%
Amritsar 2.5 68.9%
Ludhiana 3.5 73.9%
Chandigarh 1.1 76.8%
Jalandhar 2.2 74.3%
All 20 Cities 125 76.2%
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Chandigarh
LucknowJaipur
Amritsar
Jalandhar
Ludhiana
Surat
Bhopal
Kanpur
Nagpur
Coimbatore
Faridabad
Tier I cities will drive the demand for Ready-To-Eat (RTE)
and processed foods as there is a steady increase in
number of working women in these cities
Source: NCEAR & Census

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Income group classificationIncome group classification
Aspirers and Middle Class groups are expected to riseAspirers and Middle Class groups are expected to rise
25 million
(2%)
164 million (13%)
431 million (34%)
647 million
(51%)
Population (% of total population) Annual Income
Above US$60,000 per annum
4 Mn Households
Between US$12,000–
US$60,000 per annum
28 Mn Households
Between US$5,400–US$12,000
per annum
75 Mn Households
Less than US$ 5,400 per annum
114 Mn Households
• Source: NCAER (National Council for Applied Economic Research); Average household size in India: 4.8
• NCAER reports income levels at 2001-02 prices; to bring these to current prices (2010-11) income levels, a conversion factor of
2.7 has been taken to adjust the nominal per-capita income growth.
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With majority of consumption
lying with the Middle Class and
Aspirers, these two groups
are expected to play a
critical role in the
development of
processed food
industry in
India

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Rate of InflationRate of Inflation
WPI: Wholesale Price Index; CPI: Consumer Price Index
Source: Central Statistical Organisation (CSO)
While WPI has been largely volatile, CPI has been increasing consistently indicating
that consumption in India is increasing
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 ADB – Asian Development Bank
 BRICS
 ASEAN
 Commonwealth of Nations
 FAO – Food and Agriculture Organisation
 G-15, 20, 24, 77
 ICC – International Chamber of Commerce
 IMF – International Monetary Fund
 IMO – International Maritime Organisation
 ISO – International Organisation for
Standardisation
 ITUC – International Trade Union Confederation
 SAARC – South Asian Association for
Regional Cooperation
 UN – United Nations (and those that come
under UN)
 WFTU – World Federation of Trade Unions
 WTO – World Trade Organisation
India is a member of more than 65 international organizations. The predominant ones are listed
below.
For complete list, refer to the
attached excel
India has been a founding member of a number of international organizations, and
hence exerts significant influence on policy making
International Agreements Joined by IndiaInternational Agreements Joined by India
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International
Agreements

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 South Asian Countries (SAFTA)
 Bangladesh
 Bhutan
 Maldives
 Nepal
 Pakistan
 Sri Lanka
 Afghanistan
 Japan
 South Korea (India-Korea CEPA)
 ASEAN (AIFTA)
 Brunei Darussalam
 Cambodia
 Indonesia
 The Lao PDR
 Malaysia
 Myanmar
 Philippines
 Singapore
 Thailand
 Vietnam
India currently has Free Trade AgreementsIndia currently has Free Trade Agreements
(FTAs) with…(FTAs) with…
FTAs are beneficial for companies with manufacturing facilities established in partner
countries (above) making them entitled in import duties reduction
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The much talked about bi-lateral trade agreement between India and EU is still pending
due to few last mile hurdles

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Food Habits in Each Region Vary withFood Habits in Each Region Vary with
Climate, Topography, Culture & HeritageClimate, Topography, Culture & Heritage
 India is a culturally rich & diverse nation having
varied lifestyles, religions, art, culture, attire & food.
 Weather & topography vary widely with region:
 North: Closest to the Himalayan range, hilly
regions with extreme weather conditions; high
fertility area with high wheat production
 West: Arid areas of Rajasthan and Gujarat –
which are dry and hot through most of the year.
In some coastal areas of Maharashtra, fish is the
staple diet
 South: Temperate climatic condition all through
the year; high rice production & consumption
area
 East: Hilly regions with varying weather
conditions; East is the poorest regions of the
country
North
West East
South
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 Indians take food very passionately
 Mealtimes are considered as occasions and time for families to get together and spend quality time.
 Fresh cooking is essential in most Indian homes, with limited preference for stocked food
 Most meals comprise of several dishes ranging from staples like rice and breads, to meat or
vegetables, rounded off with a dessert
A typical Indian meal includes…
Appetizers/ Starters Salad, Soup, etc.
Main Course
Curry & Dry Dish
 Vegetarian – Lentils, Cooked Vegetables (Potato,
Cauliflower, Okra, mixed vegetables, etc.)
 Non-vegetarian – Egg, Chicken, Mutton, Fish, etc.
Side items
 Yoghurt/ Raita
 Papad (thin & crispy bread made of lentils/ wheat
 Chutney (Herb-based thick sauce accompanying breads)
Indian Breads  Roti/ Chapati, Parantha, Puri, Naan
Rice  Biryani, Pulao, Jeera rice, Plain rice
Dessert Milk-based desserts like Kheer, Gulab Jamun, Halwa, etc.
Diversity of Food in IndiaDiversity of Food in India
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 North Region – Madhya Pradesh, Uttar Pradesh, Haryana,
Punjab, Himachal Pradesh, and Jammu and Kashmir
 Wheat-breads are the staple diet which accompany all meals
 Largely meat-based diet characterized by tandoori-style
cooking methods
 Fair amount of cooking is done using deep frying in oil
 High consumption of milk and milk-based products
 High consumption of fresh fruits such as apples, cherries,
plums and strawberries which are unique to this region due
to its cooler climate.
 Increasing number of households are shifting toward replacing
traditionally made food items such as curd and cottage cheese
with packaged items (packaged curd or cottage cheese)
Punjabi Food
Food served with milk-based
beverage (Lassi)
Regional Food Habits – NorthRegional Food Habits – North
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 Southern India – Andhra Pradesh, Karnataka, Goa, Tamil Nadu, and
Kerala
 Primarily vegetarian population barring coastal areas where
fish is a staple diet
 Rice is abundant & appears in almost every dish during a meal
& are eaten in multiple forms
 Tamarind and coconut form the base for most preparations,
with most curries based in coconut gravy
 Hot spicy foods are cooked, with chettinad cuisine being one of
the most fiery
 Food is often eaten on banana leaves
 Major shift is seen in people moving towards ready-to-use
packaged food items for idlis and dosas, rather than going
through the relatively longer process of preparing the batter in-
house
Food served on a banana leaf
Idli, Dosa
Regional Food Habits – SouthRegional Food Habits – South
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 Western India – Rajasthan, Gujarat, and Maharashtra
 High demand of dairy products, including yoghurt,
buttermilk, cow's milk, and goat's milk
 Rice is the staple food grain
 Goan cuisine is dominated by rice, coconut, fish and
seafood
 Gujarati cuisine is largely vegetarian, with a hint of sugar
or jaggery in every preparation
 Peanuts and coconut are widely used
 Other popular cereals include gram flour, bajra and corn
Goan Fish curry
Gujarati Thali
Regional Food Habits – WestRegional Food Habits – West
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 Eastern India - Orissa, Bihar, West Bengal, Assam,
Meghalaya, Tripura, Mizoram, Manipur Nagaland, and
Arunachal Pradesh
 Relatively more simplistic and less elaborate food
 Characterized by a variety of different types of rice
 Predominantly fish eating population in coastal areas
 Common practice to eat steamed food, e.g.: momos
 Curries include lot of poppy, mustard and cumin seeds,
cumin seeds
 World famous for sweets
Sandesh
Rasagolla
Momos
Regional Food Habits – EastRegional Food Habits – East
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Changing Trends in Consumer PreferencesChanging Trends in Consumer Preferences
for Foodfor Food
 Growing middle class population and household incomes are driving people to spend
more on food
 Increasing cases of lifestyle diseases have resulted in shift towards healthier food options
such as fruit juices, pro-biotics, cereals and oats
 Shift in consumption preferences & increasing demand is driving the food companies to
introduce innovative products such as digestive biscuits, fortified dairy products, etc.
 Increased demand for processed & packaged products with high shelf-life
 Willingness to pay a premium for value-added products such as cheese, butter, flavoured milk
 Overall change in palate and preference for newer varieties of food due to western influence
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Key Markets and Product Preferences (1/2)
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West
 Being the key port region, majority of players have a
presence in this region
 Market is led by Modern retail channels and HORECA
segment, also has a significant grey channel
Product Preference
 Biggest market for candies and confectionary
 Key market for fruit based flavours, especially strawberry
and orange
North
 Second most important market
 Market led by wholesalers, but large volume of sales
through grey channel; large number of Modern Trade
food & grocery outlets
Product Preferences
 Wheat based products

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Key Markets and Product Preferences (2/2)
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South
 Highest penetration of Modern Trade, having high sales
per outlet
 High levels of consumer awareness
Product Preferences
 Biggest market for chocolates and bakery products
 Highest incidence of diabetic population in India leading
to consumer awareness about healthy breakfast
choices
 Fastest emerging market for RTE/RTC foods
East
 Lowest sales volume by channels
 High presence and consumption of mass/regional
products
Product Preferences
 Preference for non-oily and less spicy food products
 Beef and pork products are heavily consumed

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Processed Food Distribution Formats
in India
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Distribution Formats for Food Products inDistribution Formats for Food Products in
IndiaIndia
Traditional FormatModern Format
 Super Marts
 Hyper Marts
 Convenience Stores
 Food Gourmet Stores
 Petro- Convenience
Stores
 Cash and Carry
 Neighborhood general
store
 Bakery Shops
Institutions
 Railways and Airlines
 Hotels, Restaurants and
Catering (HORECA)
 Canteen Store
Department
 Others (Schools,
Colleges, Offices and
Hospitals)
Retail Formats
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Modern Trade Formats in IndiaModern Trade Formats in India (1/2)(1/2)
Hypermarts
 Large retail store offering wide
range of products and brands
 Average size between 4,000 –
10,000 sq. mtr.
 E.g. Big Bazaar, Spencer Hyper
etc.
Supermarts
 Smaller version of a Hyper
marts with a average size of
300 to 1,000 sq. mtr.
 Mainly offers food items like
groceries along with non food
items
 E.g. – Food Bazaar, Reliance
Fresh etc.
Convenience Stores
 Small store (average size of
100-150 sq. mtr.)
 Mostly stock essential items
such as groceries, food items
and daily need items
 E.g. – Big Apple, LM 365
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Modern Trade Formats in IndiaModern Trade Formats in India (2/2)(2/2)
Food Gourmet Stores
 Store size of ~300-1,500 sq.mtr.
 Targeting SEC A population with
assortment of fresh food and
grocery
 High focus on imported food
products
 E.g.: Lemarche, Nature Basket,
Modern Bazaar
Cash and Carry
 Wholesale store with a size b/w
5,000 to 10,000 sq. mtr with focus
on staples and food items
 Sell to Distributors / Dealers (B-2-B
transactions only)
 Recently, many international players
entered in Indian market e.g.
Carrefour, Walmart, Booker, Metro
Petro Convenience Stores
 Stores located at petrol
pumps
 Generally having an
assortment of impulses
purchase & utilities
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Traditional Trade Formats in IndiaTraditional Trade Formats in India
 Neighborhood/General Stores
 Traditional small shops located in residential areas
 Stocks daily groceries and sundries
 Bakery/Sweet Shops
 Gaining popularity in the ready-to-eat food segment
which tops-up as consumption points for Juices,
Candies, Flavored Milk & other milk-related products,
etc.
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Key Institutional Segments in IndiaKey Institutional Segments in India
 Railways and Airlines
 Work on contract based arrangements
 Contracts are based on volume & price negotiations/tenders
 CSD Canteens
 CSD (Canteen Stores Department), run by the Ministry of Defense catering to the Armed forces
 Assortment of food and non food products at subsidized rates and differentiated packaging
 Work on Tender based arrangements
 Hotels
 Indian Hotel and Restaurant industry is growing @ 20-25% due to increase in foreign tourists and
business-related travel
 Multiple consumption points (Breakfast Buffet, Restaurant, Gym, Bar, Mini-bar)
 Others (Schools, College, Offices & Hospitals)
 Products such as yoghurt, juices etc.. are gaining popularity on back of its health proposition
 Companies are tying up with institutions such as Schools, Hospitals, Offices etc. to club their
products along with meals
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Processed Food Industry Overview
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 Varied agro climatic zones
 2nd
largest arable land (161 M ha) in the world
 Largest irrigated land (55 M ha) in the world
 Largest producer of Wheat, Pulses & Milk
 Largest producer and exporter of Spices
 Second largest producer of Tea, Rice, Fruits &
Vegetables
 Second largest producer of Sugarcane
 Largest exporter of the world's best rice (Basmati)
 Third largest producer of Coarse grains and
Edible Oilseeds
India Food Production – Key FactsIndia Food Production – Key Facts
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Food Industry – Market SizeFood Industry – Market Size
Source: FICCI, Tecnova analysis
 Indian food industry was estimated at
US$241 billion in 2010-11
 Growing at a CAGR of 5.1% (2003-11)
 Higher disposable income resulting in
greater spending and consumption is
driving the growth of food industry in
India
 Expected to reach US$300 billion by 2015
 Food processing industry represents ~43%
of the total food industry; expected to grow
to 50% by 2015
CAGR: 5.1%
Spending on food constitutes the largest share of consumer wallet; as the overall
economy grows, spend on food is expected to grow
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The Indian Food and Food Processing
industry (FPI) primarily comprises of the
following segments
 Fruits & Vegetables (F&V)
 Dairy
 Meat, Poultry and Marine
 Grains and Seeds
 Packaged Foods (including
Beverages)
Relative Share of Various Food Segments
in Food Processing (2011)
Source: MOFPI
Industry SegmentationIndustry Segmentation
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Food Processing Industry – Market SizeFood Processing Industry – Market Size
Source: MOFPI, Tecnova analysis
 The size of the processed food sector in India was
approximately US$105 billion in 2011
 Includes both the organized and unorganized
sector where organized forms 50-55% of the
overall market
 Sector is growing by 13-15%, but is expected to
grow by ~25% in the coming years to reach size of
US$530-550 billion by 2020
 Within the food processing sector, segments like
meat, and packaged foods are expected to witness
high growth rates
 Historically, food processing industry has
contributed around 1.5% to Indian GDP
Unorganized
50-55%
Organized
45-50%
Processed Food Industry organization
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Processing Levels for Key Segments in theProcessing Levels for Key Segments in the
FPIFPI
Source: Ministry of Food Processing Industry
India’s food processing levels are significantly low compared to other developing
nations such as Brazil, Malaysia and China
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Processing Stages for Various ProductsProcessing Stages for Various Products
Primary
processing
Secondary
processing
Tertiary
processing
Fruits &
Vegetables
Milk
Meat & Poultry
Marine products
Grain and seeds
Beverages
Cleaning, sorting
and cutting
Grading and
refrigerating
Sorting and
refrigerating
Chilling and freezing
Seeding and grading
Sorting, bleaching
and grading
Slices, pulps and
paste
Cottage cheese,
cream, simmered &
dried milk
Cut, fried, frozen
and chilled
Cut, fried, frozen
and chilled
Flour, malt and
milling
Leaf, dust and
powder
Ketchups, jam,
juices and pickles
Processed milk,
spreadable fats,
yoghurt
Ready-to-eat meals
Ready-to-eat meals
Biscuits, noodles,
flakes, cakes, savory
Tea bags, flavored
coffee, soft drinks,
alcoholic beverages
Source: Ministry of Food Processing Industry
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Export from FPI sectorExport from FPI sector
 In 2012-13, total exports from FPI sectors reached US$36 billion, growing at a CAGR of 21.9%
since 2008-09
Source: Ministry of Commerce, DIPP
The major markets for Indian processed food are Europe, the Middle East, Japan,
Singapore, Thailand, Malaysia and Korea
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India – Total Food ImportsIndia – Total Food Imports
Source: DGFT
Total Food Imports from Italy
 Italian food imports are growing at a similar rate
as that of total food imports by India
 Top 5 imports account for more than 73% of total
food imports from Italy
India – Total Food Imports
Top 5 Food Imports from Italy, 2012-
13
16.5%
16.3%
Values in $ M
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India – Total Food ExportsIndia – Total Food Exports
Source: DGFT
Total Food Exports from Italy
 Food exports to Italy are growing at a relatively slower
rate as compared to India’s total food exports
 Top 3 exports account for more than 81% of total food
exports to Italy
India – Total Food Exports
Top 5 Food Exports to Italy, 2012-13
12.1%
7.8%
Values in $ M
*Mollusc and
Crustacean
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Food Processing Demand DriversFood Processing Demand Drivers
Food
Processing
Demand
Drivers
Growing nuclear
families and working
women
Rising demand for
functional food
(oatmeal, etc)
Increasing modern trade
formats and private label
penetration
Increasing
urbanization – lifestyle
and aspirations
Changing
demographics – Rise
in disposable incomes
Increasing spending on
food products
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SWOT analysis of Food and FoodSWOT analysis of Food and Food
Processing Industry in IndiaProcessing Industry in India
 Huge domestic consumption market
 Large production base of raw material
 Breadth in crop base offering scope for varied processing activities
 Inadequate infrastructure facilities
 High upfront capital investments
 Lack of adequate quality control & testing protocols
 Large number of intermediaries resulting in inefficient supply chain and increase in prices
 Seasonal variability of crops
 Low packaging aesthetics
Strengths
Weaknesses
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 Government incentives (priority sector, tax relief, R&D support, etc)
 Increasing western influence on Indian palate (cheese, pasta, sauces, cereals, aerated drinks, juices,
yoghurt, etc) which is driving the demand for processed foods
 Increase in nuclear families and working women who prefer ready-to-use food items
 Traditional preference for freshly cooked food especially in rural areas
 Affordability (e.g., processed fruits are significantly higher than fresh fruits)
 High supply chain costs
Opportunities
Threats
SWOT analysis of Food and FoodSWOT analysis of Food and Food
Processing Industry in IndiaProcessing Industry in India
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Distribution System in Food ProcessingDistribution System in Food Processing
IndustryIndustry
Carrying and Forwarding
Agent/ Super stockiest
Company’s Warehouse or
Importer-Distributor
Modern trade
Distributors
Modern Trade
Chains/ Stores
Distributors
Institutions Sales
Agents
Retailers
3 - 5%
8 - 15%
25 - 35%
Rate contract
Rate contract
CSD
contractor
CSD
canteen
Institutions/
Foods services
* The figures mentioned are trade margins of channel partners. These are taken as an approximate value and vary
depending on company, distributor and industries
IntermediariesEndusers
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Competition in Dairy ProcessingCompetition in Dairy Processing
 Dairy market is largely dominated by regional cooperatives in Gujarat, Karnataka, Maharashtra, Tamil
Nadu, Rajasthan and Punjab; Amul (Gujarat Cooperative) has ~26% pan-India market share in liquid
milk; Nandini (Karnataka Cooperative) has significant presence in South India
 Amul captures nearly 85% of the butter market and ~70% of the cheese market, while other players
such as Nestle manage rest of the market; Unilever has strong presence in ice cream segment
Company name (Brand) Country India presence Major products
Gujrat Cooperative Milk
Marketing Federation (Amul)
India Pan-India
Milk, cheese, butter and other value-
added products
Karnataka Milk Federation
(Nandini)
India South India
Milk, ghee, whitener, butter, milk power,
and ice cream
National Dairy Development
Board (Mother Dairy)
India Pan-India
Milk, cheese, butter, ice cream,
buttermilk, pro-biotic products
Nestle (Milkmaid, Everyday) Switzerland Pan-India
Pro-biotics, Raita, condensed milk, milk
powder, ghee, infant nutrition
HUL (Kwality Wall’s) Anglo-Dutch Pan-India Frozen desserts
Danone (Danone) France Metros Yoghurt, value added products
Value-added products such as cheese, yoghurt, pro-biotic drinks, flavored milk, and
infant nutrition products are the key growth segments for international companies
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Competition in Fruits & VegetablesCompetition in Fruits & Vegetables
ProcessingProcessing
 Processed forms of fruits & vegetables in India include jams, juices, pickles, chutney, and fruit
concentrates
 While the fresh fruits & vegetables market in highly unorganized with local farmers, wholesalers,
and intermediaries selling directly to customers, the processed F&V market is somewhat
organized with presence of national and international players
HUL (Kissan) Anglo-Dutch Pan-India
Jams, ketchup, sauces, spreads, fruit
juices
Mother Dairy (Safal) India Pan-India Frozen F&V (peas, carrots, etc)
Priya Foods (Priya) India Pan-India Pickles, chutney, fruit pulp
Cremica (Mrs. Bectors) India Pan-India
Sauces, condiments, spreads, dips,
syrups
Namdhari Fresh India South-India
Packaged fruits and vegetables, exotic
vegetables
Adani Agri Fresh India Pan-India Fresh and processed fruits
Heinz USA Pan-India Ketchup
With the potential to become one of the largest producers of F&V, coupled with abysmally
low levels of processing, India offers huge potential for international companies
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Competition in Meat, Poultry and MarineCompetition in Meat, Poultry and Marine
 Highly fragmented industry with only a handful of large players
 Uttar Pradesh, Andhra Pradesh, Maharashtra, Delhi are the key areas of processed meat and
poultry production
 Within this industry, poultry is the fastest growing segment owing to strong domestic consumption
Company name Country India presence Major products
Allanasons India Pan-India
Frozen buffalo meat, marine products,
canned corned beef, tropical fruits and
vegetables, etc
Hind Agro India Pan-India
Frozen boneless buffalo meat, offals
and processed buffalo meat
Venky’s India Pan-India
Ready-to-cook and Ready-to fry
products
Godrej Agrovet India Pan-India Poultry
Al Kabeer UAE Pan-India Beef and poultry, ready-to-fry products
Suguna Foods India South India Broiler chicken, value added eggs
As European and western cuisines expand in India, demand for processed meat products
such as sausages, hams, steaks and fillets has been increasing consistently
47

48
Competition in Grains & Seeds processingCompetition in Grains & Seeds processing
 Grain processing includes milling of rice, wheat and pulses; seed processing include extraction of
oil for edible and industrial purposes
 A highly fragmented industry with thousands of rice hullers, flour and pulse mills, and ghanis and
oil refineries operating in every part of the country; competition in the organized segment is
intense
 Though primary processing is the most important activity in this segment, secondary and tertiary
processing is limited to few large playersCompany name (Brand) Country India presence Major products
HUL (Annapurna) Anglo-Dutch Pan-India Wheat flour
Kellogg’s (Kellogg’s) USA Pan-India
Oats, bran wheat flakes, corn flakes,
RTE breakfast cereals, Muesli
ITC (Aashirvaad) India Pan-India Wheat flour, multi-grain flour
ConAgra Foods (Sundrop) USA Pan-India Sunflower oil, corn products
Cargill (Nature Fresh) USA Pan-India Edible oils, flour,
REI Agro (Raindrop) India Pan-India Rice (Basmati)
As one of the world’s largest agricultural base, India offers huge potential for international
companies in grain and seeds processing; however, domestic competition is intense
48

49
Competition in Consumer FoodsCompetition in Consumer Foods
HUL (Kissan) Anglo-Dutch Pan-India Soups, bakery, RTC
Nestle (Maggie, Nescafe) Switzerland Pan-India
Pasta, RTC, cooking aids (masalas),
coffee and tea, chocolate powder,
Parle Agro (Parle) India Pan-India Biscuits, beverages
Perfetti Van Melle Italy Pan-India Confectionery
Britannia Industries (Britannia) India Pan-India Biscuits, bakery and dairy
Mondelez International (Cadbury) USA Pan-India Chocolate
PepsiCo (Pepsi, Frito-Lay) USA Pan-India Snack food, beverages
Coca-Cola USA Pan-India Beverages
ITC (Sunfeast) India Pan-India
Biscuits, noodles, snack food,
confectionery, RTE
RTE and RTC segments have large untapped potential; with modern trade formats
growing at a rapid pace, RTE offers huge scope for investment
 Consumer foods is a highly competitive industry in India with presence of large national and
international companies
 Britannia, Parle and ITC capture ~90% share of biscuit industry, while Perfetti has over 70%
market share in confectionery market; Nestle, with its Maggie brand, is a market leader in noodles
segment, while Coca Cola and Pepsi has over 90% market share in aerated beverages segment
49

50
Key Players – ProfilesKey Players – Profiles
Company name Employees
Turnover –
(INR Crores)
Y-o-y growth CAGR (2008-12)
Operating
Margin
Britannia
Industries
2,000
6,254
Year end: Mar’13
12.6% 15.9% 6.7%
HUL 16,000# 28,167
Year end: Mar’13
18.8% 7.1% 14.5%
REI Agro NA
9,462
Year end: Mar’13
48.1% 63.2% (2 year) 15.7%
Nestle 5,500
8,457
Year end: Dec’12
11.9% 17.8% 21.6%
ITC 25,000# 8,352*
Year end: Mar’13
37.9% 12.1% --
Vadilal
Industries
600
340
Year end: Mar’13
16.0% 20.9% 10.6%
50
#
employee data for entire company; *only for food division
Source: Company Annual Reports

51
Developments in Processed Food
Industry
51

52
Infrastructure Development in FPIInfrastructure Development in FPI (1/3)(1/3)
 Vision-2015 plan of MoFPI aims to double the
size of food processing industry to US$ 200B,
increase processing of perishables to 20%,
increase value addition to 35% (from 20%), and
enhance India’s share in global food trade to 3%
(from 1.5%)
 Scheme for Infrastructure Development,
implemented by MoFPI, during 11th
Five Year plan
(2007-12) include—
 Mega food parks
 Cold chain, value addition and
preservation infrastructure
 Setting up / modernization of abattoirs
Source: MOFPI Annual Report 2011-12
Mega food parksCold chains
Modernization of
abattoirs
Funds allocated for infrastructure
development in FPI
Funding in 12th
Five Year plan (2012-17), $M
52

53
Mega Food Parks (MFPs)
 It aims to bring together farmers, processors, and retailers to
link agricultural produce to the market place and to ensure
maximum value addition, minimum wastage, increase farmers’
income and create employment in rural sector
 These parks will have state-of-the-art processing facilities and
well-established supply chain
 Under the scheme, a total of 30 MFPs will be established in a
phased manner (10 parks in phase I, 5 in phase II, and 15 in
phase III)*
* Refer to Appendix for list
53

54
Cold chain, value addition, and preservation infrastructure
 The infrastructure scheme will provide financial assistance in setting up integrated and complete cold
chain facilities, preservation infrastructure facilities, value addition facilities, and irradiation facilities
 Financial assistance of up to 75% of the total project cost is provided by the government
 Total of 49 projects have been planned across the country, of which 10 are in progress
 These projects are expected to add 232,628 MT of cold chain to the existing infrastructure
Setting up / modernization of abattoirs
 Lack of basic infrastructure facilities such as water, electricity, and carcass handling mechanism
result in tremendous wastage and contamination / deterioration of meat
 The FPI infrastructure scheme plans to set up 10 new abattoirs and modernize several existing
facilities in the coming years
 An amount of US$6.8 million have been disbursed to set up the 10 new facilities
 So far, 2 abattoirs have been completed at Dimapur, Nagaland and Ahmednagar, Maharastra
54

55
Government Incentives for FPI Sector (1/2)Government Incentives for FPI Sector (1/2)
Incentive Description
Tax relief
 100% tax exemption for first 5 years followed by 25% tax exemption for the
next 5 years for food & vegetables processing businesses
 Preferred tax exemption for companies operating in perishable food items
such as milk, meat and poultry
 Investment-linked tax incentive to businesses setting up and operating cold
chains or warehouse facilities
 Full excise duty exemption for goods that are used in installation of cold
storage facilities
 Excise duty waived on fruits & vegetables processing from 2000 – 01
 Income tax holiday for fruits & vegetables processing from 2004 – 05
 Customs duty reduced on freezer van from 20% to 10% from 2005 – 06
 Central sales tax reduced from 4% to 3%
Relaxed FDI norms
 100% FDI under automatic route, except for items reserved for micro, small
and medium enterprises
Easy funding
 Assigned food processing industry as priority sector for easy securing of
bank funding
The Ministry of Food Processing has taken several initiatives to promote the growth of the industry
55

56
Government Incentives for FPI Sector (2/2)Government Incentives for FPI Sector (2/2)
Incentive Description
Focus on
infrastructure
 Strong focus in infrastructure development (as discussed in earlier slides),
particularly on setting up Mega Food Parks, Agri Export Zones (AEZ), cold
chains, warehouses and modernization of abattoirs
Push for R&D
 Weighted deduction on expenditure incurred on in-house R&D has been
increased from 150% to 200%
 Weighted deduction on payments made to R&D laboratories increased from
125% to 175%
Private sector friendly
 100 per cent export-oriented units are allowed to sell up to 50% of their
produce in the domestic market
 Export earnings are exempted from corporate taxes
Apart from these, the state governments have also taken initiatives such as lowering of VAT rates to
promote the industry in respective states
56

57
Regulatory and Custom Duties
Analysis
57

58
Foreign Direct Investment PolicyForeign Direct Investment Policy
 FDI is permissible for all the processed food products under 100% automatic route, except for
items reserved for micro, small and medium enterprises where FDI is permissible under automatic
route up to 24%
 FDI under automatic route is approved at Reserve Bank of India (RBI) level and does not require
approval of Foreign Investment Promotion Board (FIPB)
Source: Ministry of Commerce
During April 2000-13, the total
FDI in the food processing
industry reached US$1.8 billion,
which was under 2% of total FDI
inflows
FDI in food processing industry (cumulative)
58

59
Import Regulations Related to FoodImport Regulations Related to Food
ProductsProducts (1/2)(1/2)
59
 Due to free trade agreements with ASEAN countries, products imported from these countries attract
substantially lower (or zero) basic duty. For example, basic duty for HS code 0204 10 00 (meat of
sheep or goats) under normal circumstances is 30%, however, if it is manufactured and imported via
ASEAN route, the basic duty reduces to 0%
 Excise duties are reduced significantly (completely exempted in some cases) on all such products
that cannot be produced in India (such as olive oil)
 Import of beef and derived products in any form are prohibited
 All consignments of edible oils and processed food products imported in bulk shall carry a
declaration from the concerned exporter on the shipping documents that the consignment does
not contain beef in any form; all consignments imported in consumer packs shall carry a
declaration on the label of the package that the product is free from beef in any form
 Import of all such edible/food products (which are governed by Prevention of Food Adulteration Act)
shall be subject to condition that, at the time of importation, the products have a valid shelf life of not
less than 60% of its original shelf life

60
Import Regulations Related to FoodImport Regulations Related to Food
ProductsProducts (2/2)(2/2)
60
 Import of meat and meat products of all kinds (fresh, chilled, frozen, etc) shall be subject o sanitary
import permit to be issued by Department of Animal Husbandry and Dairying
 Import of alcoholic beverages shall be subject to compliance of various mandatory requirements as
stipulated by various state governments
 Import of meat and poultry products will be subject to the compliance of conditions regarding
manufacture, slaughter, packaging, labeling and quality conditions as laid down in Meat Food
Products Order, 1973
 Import of all such edible/food products including tea shall be subject to conditions laid down in the
Prevention of Food Adulteration Act, 1954

61
Food Safety and Standards Authority ofFood Safety and Standards Authority of
India (FSSAI)India (FSSAI)
 The Food Safety and Standards Authority of India (FSSAI) has been established under Food
Safety and Standards Act, 2006 (FSS Act) which consolidates various acts & orders that have
hitherto handled food related issues in various Ministries and Departments
 It is responsible for
 Laying down science based standards for articles of food
 Regulating the manufacture, storage, distribution, sale and import of food to ensure
availability of safe and wholesome food for human consumption
 Introduction of the FSS Act repealed a number of individual regulatory acts such as Edible Oils
Packaging Order and Milk and Milk Products Order
 The Act aims to establish a single reference point for all matters relating to food safety and
standards
 FSSAI also collects and collates data regarding food consumption, incidence and prevalence of
biological risk, contaminants in food, residues of various, contaminants in foods products,
identification of emerging risks and introduction of rapid alert system
Source: FSSAI
61

62
Impact of Changes in Labelling LawsImpact of Changes in Labelling Laws
 Over 200 MT of imported gourmet chocolates from around the world, including brands such as
Godiva, Guylian, Lindt and Mars, are stuck at various Indian ports due to non-compliance with
new Indian labelling laws
 Several other food categories such as French artisinal cheese, American crisps, Thai condiments,
and Italian pasta sauces have also been held up for non-compliance
 FSSAI is especially wary of labelling violations on chocolate products as tests reveal that many of
them contain very high level of vegetable fat, which is not permissible under the Indian law
 Small-scale importers who primarily depend on a single food category have been badly affected
with many of them already closing the business
 Indian packaging and labelling regulations have been in place since 2011 and ample grace period
was given to importers to align themselves with new regulations
 Since November 2013, FSSAI has stopped allowing imported products that do not comply with the
new laws
Source: Secondary Search and Interaction with FSSAI
62

63
Labelling RequirementsLabelling Requirements
Source: Primary research
A
Currently required points in Primary
Labelling (Non Rectifiable)
1 Generic Name of Product
2 Net Weight in Grams
3 Ingredients
4 Nutritional Information
5 Best Before Date
6 Country of Origin
7 Production Date
8
Traceable Batch No. (this cannot be same as
best before date. It must be stated on the
pack separately
9
Manufacturer’s Name, address and contact
details
10 Additive caution declaration
B Rectifiable Defects (on sticker)
1
Indian Importing Company Name and
Contact Details
2 Veg/Non-Veg Symbol
3 Maximum Retail Price (MRP)
4
FSSAI Logo and Importer License No. -
This is only till June '14 after which it has
to be on primary packaging label
63

64
Packaging RequirementsPackaging Requirements
64

65
Duties Applicable on Imported ProductsDuties Applicable on Imported Products
Duty Description
Basic Customs Duty Is the duty levied on imported goods at prescribed standard rates
Countervailing Duty
(CVD)
As the name suggests, CVD is equivalent to Central excise duty levied on a like
article manufactured in India; some of the packaged consumer goods are
charged this duty based on their MRP (Maximum Retail price)
Education and
Additional CESS
Education CESS of 2%+1% is charged on the total customs duty (except
special CVD)
Special CVD/ ACD
The 4% special CVD or additional customs duty (ACD) is applicable to all
imports (except for few exemptions), this duty is not included in the accessible
value for levy of educational CESS on imported goods. Also, manufacturers
can take credit for payment of excise duty on their finished products.
65

66
IMPORTS LOCAL SOURCING
CIF Value 1.00 CIF Value 1.00
Basic Customs Duty 30% 0.30 Basic Customs Duty 0% 0.00
Sub-Total for Calculating CVD 1.30 Sub-Total for Calculating CVD 1.00
CVD (with 30% abetment) 12% 0.35 CVD (with 30% abetment) 12% 0.27
Sub-total for calculating Edu. Cess
on Customs
0.65
Sub-total for calculating Edu.
Cess on Customs
0.27
Education Cess on Customs 3% 0.02 Education Cess on Customs 3% 0.01
Sub-total for ACD 1.67 Sub-total for ACD 1.27
ACD 4% 0.07 ACD 4% 0.05
Landed Cost 1.74 Landed Cost 1.33
Indian Importer Margin 30% Indian Importer Margin 30%
Price to Distributor/ Wholesaler 2.48 Price to Distributor/ Wholesaler 1.89
Distributor Margin 10% Distributor Margin 10%
Price to Retailer 2.76 Price to Retailer 2.10
Retailer Margin 25% Retailer Margin 25%
MRP before VAT 3.67 MRP before VAT 2.80
VAT (Value Added Tax) 13.1% VAT (Value Added Tax) 13.1%
MRP (Maximum Retail Price) 4.16 MRP (Maximum Retail Price) 3.17
HS Codes: 1806 (Chocolate and other food preparations containing cocoa)
Benefit of doing local sourcing
Custom Duty and Price Build-upCustom Duty and Price Build-up (1/3)(1/3)
66

67
CVD 0% 0 CVD 0% 0.0
on Customs
0.30
Cess on Customs
0.0
ACD 4% 0.05 ACD 4% 0.04
HS Codes: 19059030 (Extruded or expanded products, savory or salted)
67

68
CVD 0% 0 CVD 0% 0.0
on Customs
0.30
Cess on Customs
0.0
ACD 4% 0.05 ACD 4% 0.04
HS Codes: 0204 (Meat of sheep or goats, fresh, chilled or frozen)
68

69
HS Code
Basic
Customs
Duty (BCD)
Countervailing
Duty (CVD)
Education and
Additional CESS
Special CVD /
Additional Customs
Duty (ACD)
Total
02.03, 04, 08 (Meat) 30% 0% 3% 4% 36.136%
02.03.11, 12, 19 30% 0% 3% 0% 30.9%
03.02, 04* (Fresh fish) 30% 0% 3% 0% 30.9%
03.05* (Dry fish) 30% 0% 3% 4% 36.136%
03.06 (Crustaceans) 30% 0% 3% 4% 36.136%
03.06.21,22,23,29 30% 0% 3% 0% 30.9%
07.02, 04, 05, 06, 07, 08,
09* (Vegetables)
30% 0% 3% 0% 30.9%
07.10, 11, 12 30% 0% 3% 4% 36.136%
09.01 (Coffee) 100% 0% 0% 4% 108%
09.01.12, 21, 22, 90 100% 0% 3% 4% 111.12%
09.02* (Tea) 100% Re. 1/kg -- 4% --
* All sub-codes under this code have same duty structure
With local sourcing, companies stand to eliminate the basic customs duty (BCD) which
may go up to 100% in some cases
Import Duties for Food Sector (indicative list)Import Duties for Food Sector (indicative list)
69

70
Benefit of Local SourcingBenefit of Local Sourcing
HS Code Product
Imported
price
Total duties if
imported
Locally
manufactured
price
Total duties if
manufactured
locally
1905 3100
(Sweet
biscuits)
McVities
Digestive
Light (400g)
INR 186
Basic customs: 30%
CVD: 6%
ACD: 4%
Edu. Cess: 3%
INR 155
Basic customs: 0%
CVD: 6%
ACD: 4%
Edu. Cess: 3%
Hobnobs
(300g)
INR 109 INR 75
70

71
Presence of Italy in Indian Food
Industry
71

72
Italian Presence in IndiaItalian Presence in India
1
Represents total FDI (not only in food sector)
72
FDI Equity Inflows from Italy1
(from Apr 2000 to Nov 2013)
 With US$ 1.24B, Italy is the 14th
largest
investor in India
 Among the European countries, Italy is
the 6th
largest investor
 From representative offices to fully owned
subsidiaries, Italian companies are
present through all modes of operation
 Select Italian companies operating in
India include Benetton, Comua, Fiat,
Luxottica, Denso, Galvi Engineering,
Lombardini, Mainetti, New Holland
Tractor, Pirelli, and Piaggio Vehicles
 Italian cuisine and Italian fashion has
seen tremendous growth in India in the
recent years
Italy’s presence in Indian food industry can be
predominantly felt in chocolate & confectionery,
olive oil, wine and pasta industries

73
Italian Companies in Indian Food IndustryItalian Companies in Indian Food Industry
73
Olive Oil Pasta Wine Chocolate and
Confectionery
Other Food Products

74
Company
name
India presence Market presence
Perfetti van
Melle
Subsidiary -
Perfetti Van
Melle India Pvt.
Ltd. (PVMI)
 Manufacturer, distributor and marketer of sugar confectionery products
 With more than 15 brands, Pefetti has close to 25% market share in
organized confectionery business making it the market leader
 Key brands include Center Fresh (chewing gum), Alpenliebe (sugar
candy), Chlormint and Happydent (mouth freshener)
 2012 sales totaled US$260 M*
 Manufacturing units in Gurgaon and Chennai
 Has a network of 4,000+ distributors across 1,500 towns and extended
network of 10,000+ sub-stockists covering 7,000+ towns
 PVMI, in 2011, became the first PVM group company to diversify into
snacks business with ‘Stop Not’ brand
Lavazza
Acquisition of
Barista chain
 Entered India in 2007 by acquiring the second largest espresso bars
in India
 Has more than 180 bars; its Frest&Honest Café company is a key
player in the HORECA#
segment
 2009 revenues totaled US$33 M*
 Opened a new plant in Andhra Pradesh in 2011
* 1 USD = 61.5 INR; #
Hotels, Restaurants, and Catering
74

75
Company
name
India presence Market presence
Ferrero SpA
Subsidiary –
Ferrero India
 Entered India in 2010
 With ~6% market share, Ferrero India is the 3rd
largest player in
India’s chocolate industry; however Ferrero enjoys 60% share in
premium chocolates segment
 2012 sales totaled US$55 M*; 31% y-o-y growth
 Key brands include Nutella (chocolate spread), Ferrero Rocher
(chocolates), Kinder (children chocolate toys) and Tic Tac (mouth
freshener)
 Manufacturing unit in Maharastra
* 1 USD = 61.5 INR
75

76
Italian Companies in Indian Food Industry:Italian Companies in Indian Food Industry:
Olive OilOlive Oil
 Italy is the second largest supplier of olive oil to India; 40% of olive oil imported in India comes
from Italy
 Second largest olive oil brand in India, Leonardo Olive Oil owned by an Indian company Dalmia
Continental, is manufactured by Nicola Pantaleo in the Puglia province of Italy
 All olive oil brands in India are present through Importer-Distributor model
76
Italy
40%
Rest of
World
10%
Spain
50%
Total Olive Oil Market (Volume)
2012-13 : 11,916 MT
* Indicative list
Source: DGFT, Primary research
Leading Brand* Indian Partner
Leonardo Dalmia Continental Pvt. Ltd.
Bertolli
Unilever (till 2013); currently Consumer
Marketing
Colavita Manisha International Pvt. Ltd.
Olitalia Olive Tree Trading
Dolce Vita Chenab Impex Pvt. Ltd.
Basso Suresh Kumar & Impex
Sasso Rai & Sons
Cirio United Distributors Inc.

77
WineWine
 Italy is the third largest supplier of wine to India; ~10% of wine imported in India comes from
Italy
 Wine industry in India is growing at 25-30% per year with current consumption reaching 1.2 million
cases, of which ~15% is imported; by 2017, this is estimated to reach 10 million cases of which
imported wines will account for 20%
 Currently more than 2 million people in India consume wine and are primarily located in Mumbai,
Delhi, Bangalore, and Goa
77
Source: DGFT; * Indicative list
Leading Brand* Indian Partner
Fratelli Wines
Indo-Italian JV (Secci brothers, Sekhri
brothers, and Mohite-Patil brothers)
GAJA Brindco Ltd.
Garofoli Sonarys Co Brands Pvt. Ltd.
San Simone Wines Hema Connoisseur Collections
Allegrini Brindco Ltd.
Cesari Wines Hema Connoisseur Collections
Casa Girelli Global Tax Free Traders Inc.
Antinori Sonarys Co Brands Pvt. Ltd.
Fratelli Wines, a INR 40 crores JV
between three families from Italy and
India, has seen tremendous growth
since its inception in 2010; the winery
in Solapur district has production
capacity of 600,000 liters and is
equipped with 58 multi-capacity tanks
all imported from Italy

78
PastaPasta
 After Indian and Chinese, Italian cuisine is the
most popular cuisine in India
 Italy is the largest supplier of pasta to India;
42% of pasta imported comes from Italy
 The share of Italy in pasta imports has
increased from 16% in 2008-09 to 42% in
2012-13
 Despite growth of Indian pasta brands (such
as Bambino), with ~5,200 tons, imported
brands (particularly from Italy) still have a large
demand
 Dalmia Continental’s Leornado pasta is
imported from Italy
 Ready-to-cook pasta variants are seeing
tremendous growth in the Indian market
78
Source: DGFT
Pasta imports from Italy
16% 42%
% share of Italy in total pasta imports
The growth and popularity of pasta has
given rise to a parallel market for pasta
sauces in India

79
Entry into India: Importer-Distributor ModelEntry into India: Importer-Distributor Model
 Majority of the Italian processed food companies have entered India through the Importer-Distributor
model
 Depending on the complexity of the product and the presence of distributors, Italian companies may
choose a single pan-India distributor, or go for multiple regional distributors
 Some key Importer-Distributors include Chenab Impex, Olive Tree Trading, R R Oomerbhoy, Tree
of Life, Fortune Gourmet Foods, etc
79
Manufacturing
company in
Italy
Importer-
Distributor
Forwarding
agents
Sub-
distributors
CSD
contractors
End customers
(retailers, food
services,
modern trade
stores, etc)

80
Entry into India: Greenfield SetupEntry into India: Greenfield Setup
80
Formation of India Entity
Company incorporation (Pvt
Ltd / LLP)
Basic Regulatory Approvals
IEC / PAN / TAN / VAT /
CST (required without
manufacturing)
Location and Site
Analyzing specific locations
& sites
Securing land in select
industrial zone
Business Plan
Budgetary analysis of plant
Capex, P&L, BS, Break
even perspective
Vendor Selection
Shortlist vendors for
complete package
EPC requirements (HVAC,
Electrical)
Equipment – local sourcing
Regulatory: Manufacturing
Over 25 approvals required
to construct & operate the
factory
Environmental clearances
Recruitment
Evaluation of candidates
Recruit start of positions at
plant level
Recruit management & C-
level positions
Project Management
Coordinate with all vendors
Monitor timely completion
Liaison with all government
& private agencies
Perfetti successfully set
up its green field project
in India in 1994 and has
since then grown to
become a market leader
in confectionery segment

81
Food Processing Machinery
81

82
Food Processing Machinery – Market SizeFood Processing Machinery – Market Size
1 USD = 61.5 INR
 INR55,000 crores (~US$ 9B) is the total market size of food processing machinery in India
Other food processing machinery
market
Dairy processing machinery
market
More than 40% (US$3.5B) of the machinery in food processing industry is imported
Agro processing machinery
market
Domestic
70%
Imported
30%
Domestic
50-60%
Imported
40-50%
Domestic
50-60%
Imported
40-50%
100% = 40,000 crores
(US$6.5B)
100% = 4,000-5,000 crores
(US$813M)
100% = 10,000 crores
(US$1.6B)
82

83
Market Dynamics and TrendsMarket Dynamics and Trends
 Food processing machinery market has been growing at 15% over the past 5-8 years
 Growth rate expected to increase to 15-20% in the coming years on back of food processing
industry which is expected to grow at 30%
 With hundreds of players operating in India, machinery manufacturing is a highly fragmented
industry
 Food processing industry in general is moving towards modernization in India; players are
looking towards automation, energy efficient, and water saving equipment
 Existing players are replacing old machinery with hi-tech imported machinery, while new
entrants are already buying latest technology equipment
 Alfa Laval is the market leader in the equipment industry; other players include L&T, Heat and
Control, American Extrusions, GEA, and Goma
83

84
Food Machinery Imports and ExportsFood Machinery Imports and Exports
Source: DGFT
84
 Of the US$ 4.7B machinery imported from Italy,
food processing related machinery accounted
for only US$ 377M (8%)
 Food machinery imports witnessed a spike in
2011-12 due to significant increase in import of
industrial ovens and pumps for handling liquid
Imports from Italy
 Less than 1% of total machinery exported to
Italy in 2012-13 was related to food processing;
however, they have been consistently
increasing over the past 4 years
 Filtering and purifying machinery contribute to
the majority of exports to Italy
Exports to Italy

85
Food Processing TrianglesFood Processing Triangles
Delhi
GurgaonNoida
Ahmedabad
PuneMumbai
Hyderabad
ChennaiBangalore
 Food processing industry is largely
concentrated in three regions—
usually referred to as the three
triangles
 Other concentrations depend on the
type of food processed
 Snack food – North and West of
India
 Dairy – Rajasthan/Gujarat/UP
 Meat – UP/Hyderabad/Maharastra
 F&V – West Bengal/Kerala/
Bihar/Jharkhand
 Grapes – Pune/Nashik
 Apple – Jammu/Shimla
85

86
Machinery Distribution SystemMachinery Distribution System
Equipment
manufacturing company
Direct Purchase Model
Purchasing company
Buyer company and supplier company
establish a direct contact between each other
Exhibitions and expositions are the prominent channels for showcasing state-of-the-art
products and technologies; millions of dollars of contracts are signed during these events
Equipment
manufacturing company
Agent / Distributor Model
Purchasing company
Importer-
Distributor /
Agent
Machinery is imported in the name of the buying
company; agents organize meetings, test
equipment, and negotiate on behalf of buyers
5-10% margin
86

87
Distributor Name Location Segment Contact Information
Kanchan Metals Kolkata Snack Food raghav@snackfoodmachines.com
+91 983 174 4709
Standard Machinery
Marketing Co.
Bangalore All segments +91 80 2549 5844, +91 80 2549 5845
smc@stanmac.net
Menon Technical Services Bangalore F&V and Snack
Food
+91 80 4113 3783; +91 80 4127 8554
mtsinfo@vsnl.net
ACE Technologies Mumbai Food and Beverages +91 22 2870 0281; +91 22 2870 4108
info@acetechnologiesgroup.com
Heat & Control India (sales
office)
Chennai Snack Food +91 44 4210 3950/51; +91 44 2621
2943/44
Repute Engineers Pvt. Ltd. Pune Dairy +91 20 27481687; +91 94220 20943
info@reputeindia.net
Distributors / Agents exert significant bargaining power over manufacturing companies as
they place bulk orders from multiple clients
Select Importer-Distributor / AgentsSelect Importer-Distributor / Agents
87

88
Recent Investments by PlayersRecent Investments by Players
(US$16.3M)
Invested in its mega food park; 50-60 crores worth
machinery bought from Alfa Laval
Invests ~100 crores every year in biscuit machinery
Invested in snack machinery in Greater Noida
Invested 25 crores in ice cream machinery and 20
crores in frozen foods machinery
Replaced all its local-made machinery with imported
machinery from Germany, Japan and US
Invested in beverages and snack machinery
Expanding businesses and growing revenues are enabling large and medium-sized players to
invest heavily in machinery
88

89
International Companies in MachineryInternational Companies in Machinery
Industry in IndiaIndustry in India
Leading Companies Country Segment
Alfa Laval Sweden All segments
GEA Farm Technologies Germany Dairy
Buhler Switzerland Agro processing
Heat & Control USA Snack food
Fen Italy Snack food
SPX USA Dairy
American Extrusion USA Snack food
AC Horn USA Coated snacks
Isolteck Cusinato Srl Italy Pasta, snack pellets
Florigo International Netherlands Snack food
Alfa Laval is by far the largest company providing comprehensive range of machinery
equipment across processing segments; it is the largest player currently offering turnkey
solutions to processing players
89

90
Key Machinery Supplier CountriesKey Machinery Supplier Countries
Huge demand exists for international companies who can offer turnkey equipment and
technological solutions to Indian processors
Dairy Snack Food F&V
Meat
Chinese equipment is used in
every segment because of its
cost advantage; replicas of
high-end models are available
from China at a fraction of cost
Beverages
90

91
Major Target Industries for MachineryMajor Target Industries for Machinery
Manufacturing PlayersManufacturing Players
Meat
Processing
Packaged
Foods
Ice Cream
(Dairy)
 With 25% growth rate, meat
processing is the fastest growing
segment for equipment manufacturers
 Snack food, biscuits and RTE
processing machinery is witnessing
strong growth
 Ice cream segment in the dairy
processing industry is witnessing a
robust growth of 15-20% year-on-year
Major
Target
Industries
91

92
Source: Primary research, APEDA
Snapshot of Meat Processing IndustrySnapshot of Meat Processing Industry
 Meat processing (including poultry and marine) is the fastest growing segment with 25% growth
rate, of which buffalo meat processing is the biggest segment; India exported 1.8 million tons or US$
3.2B worth beef in 2012-13, up from US$ 1.9B in 2011-12
 Unlike the restrictions on cow slaughter, buffalo slaughter does not have any restrictions; however,
domestic consumption of buffalo meat is very less in India and majority of it is exported
 Meat processing machinery market is estimated to be around 300-400 crores and is growing at a
much faster rate of 30-40%
 Imported machinery use is currently less; however, it is growing at a very strong pace
 ~25% of the machinery in meat segment and ~35% of machinery in poultry segment is
currently imported in India
 Upgradation and replacement demand is pushing the growth of imported machinery
 Investment in buffalo meat processing industry is required to tap the export market, while investment
in poultry industry is required to address the domestic demand and exports
 In 2012-13, India exported 796 MT of processed meat in the form of sausages, canned meat,
meat extracts and preserved poultry meat
92

93
 48 abattoirs-cum-meat processing plants
in India
 Primarily concentrated in Delhi/NCR
region, UP, Maharashtra, and AP
 Hyderabad is home to several small-to-
medium scale meat processors
 Largest meat processing players include
Allanasons, Al Hind, and Al Kabeer
 Leading poultry processing players
include Godrej Agrovet, Suguna, and
Venky’s
Allanasons
Al Hind
Al Kabeer
Godrej Agrovet
Suguna
Venky’s
Several medium sized players who aspire to
join the league of Allanasons and Al-Hind
are replacing their existing less efficient
equipment with high quality imported
machinery
Meat Processing – Customer Concentration
93
Source: Primary research, Company websites

94
Source: Primary research, News articles
Expansion Plans in Meat ProcessingExpansion Plans in Meat Processing
IndustryIndustry
 Suguna Foods, one of the largest players in poultry processing, has huge plans for expansion
 To become a 10,000 crores company by 2017; planning to invest Rs 150 crores annually
 To expand its Suguna Daily Fresh retail outlets, which offers fresh and RTC poultry products, to
500 from the current 150 by 2016
 To set up a RTE processing plant in North India by 2015; plant will have slaughtering and
processing facilities
 To set up 2,000 QSRs (which will compete with McDonalds and KFC) in the next 5 years
 Allana Group, one the largest players in meat processing, has been consistently investing in world
class integrated food processing infrastructure
 To invest US$20M in setting up a meat processing plant in Ethiopia which will be operational by
September 2014; 75 MT of processed meat products will be exported daily from this plant
 Godrej Agrovet’s subsidiary Godrej Tyson Foods, which recently upgraded its chicken processing
plants in Karnataka and Maharashtra, plans to expand its RTC poultry products to 60 cities (from its
current 50 cities) by end of 2014
94

95
Snapshot of Ice Cream IndustrySnapshot of Ice Cream Industry
 Ice cream market in India is estimated to be around 3,500
crores, and is growing at a rate of 15-20% year-on-year
 By 2015-16, the market is expected to double to 7,500-
8,000 crores
 Highly seasonal industry with almost all the sales (retail)
happening in the summer period (April-August); institutional
sales provide cushion during lean periods
 Presence of 7,000-10,000 players
 Small unorganized players go off market during the
lean periods
 Indian consumers are actively storing ice creams at home
which is leading to higher consumption
 Ice creams as desserts during marriages and innovative
products (such as Ice cream Sandwich) are boosting sales
Ice cream Industry in India, 2012-13
Unorganized
45% Organized
55%
100% = 3,500 crores
(US$570M)
Per capita ice cream consumption is only
300ml (2011-12) which is expected to
double by 2015-16
Retail,
65%
HoReCa
, 35%
95

96
Ice Cream Industry – Key PlayersIce Cream Industry – Key Players
 ~80% of ice cream market is captured
by top 5-7 players
 Regional players have strong presence
in respective regions
Leading players market share
Baskin-Robbins
is the biggest
foreign player in
India
Top 5 brands
have pan-India
presence
96

97
Ice Cream Machinery IndustryIce Cream Machinery Industry
 Ice cream machinery is primarily imported from China; high end equipment comes from Germany and
Netherlands; 60% of machinery is purchased directly from the equipment manufactures, 40% through
brokers/distributors
 Backed by healthy growth, all major players are expanding aggressively
 Hatsun Agro acquired Jyothi Dairy as part of expansion plans; Amul is adding 5,000 outlets every
year to its existing 80,000+ outlets; Unilever’s premium brand Magnum is doing exceptional
business in India
 Domestic machinery players include VCS India, Goma Engineering, Sriram tools, etc
 Refrigeration market is growing at strong pace; in 2012-13, 3 lakh refrigeration units were sold in India
(in the organized segment only)
 Vadilal and Mother Dairy are investing in frozen food category (which is growing at 25% rate); Vadilal
bought machinery from Italy recently
Italian companies will face tough competition from China in ice cream equipment market as
Chinese machinery is relatively inexpensive
97

98
 Ice cream/Frozen Dessert
manufacturing units are primarily
located in the west and north of
India
 Largest 4 players have 17
manufacturing units
 Regional players have one or two
manufacturing units in respective
regions/states
Amul
Mother Dairy
Cream Bell
Vadilal
Ice Cream Machinery – CustomerIce Cream Machinery – Customer
ConcentrationConcentration
Replacement demand is very high as
players are going for more efficient and
power saving machinery
98

99
1
Snack food include all chips and extruded snacks
Snapshot of Packaged Food IndustrySnapshot of Packaged Food Industry
 Snack food1
, biscuits and RTE machinery segments within
the packaged food industry are growing at a strong pace
 With 20% y-o-y growth rate, snack food processing industry
is one of the fastest growing segments
 Potato processing (potato powder and potato by-
products) and corn processing are witnessing huge
demand within snack processing
 ~25-30% of the machinery is imported from USA, Japan,
Netherlands, etc
 Key machinery imported include conveying systems and
ovens
 Heat and Control and American Extrusions are the key
suppliers of snack food machinery in India; Italian company
Fen s.r.l, is also a key player with seven plants in India
Packaged Food (excl. Beverages)
Machinery Market in India
100% = ~1,000 crores
(US$160M)
RTE,
500 croresBiscuit,
300 crores
Snack
Food, 200
crores
99

100
Illustration does not include contract manufacturing facilities
 Key customers in the packaged food
industry are primarily concentrated in the
northern and western parts of the country
as well as along the eastern coast line
PepsiCo
Parle
Britannia
ITC
Priya Foods
Haldiram’s
 Backed by strong growth, mid-sized
players in the snack food and RTE
segments are emerging as front runners
in acquiring high-end imported machinery
 Demand for high efficiency conveyer
systems is driving the packaged food
machinery segment
Packaged Food – Customer Concentration
MTR
Balaji Wafer
100
Nestle

101
Source: Primary research, News articles
Expansion Plans in Packaged Food IndustryExpansion Plans in Packaged Food Industry
 By 2020, PepsiCo to invest 33,000 crores (US$ 5.5B) in India
 It intends to make Andhra Pradesh a national hub for sourcing mango pulp for its soft drinks
 ITC to set up a 50 crores noodle manufacturing plant in Kolkata in partnership with Keventer Group
 Balaji Wafers, the market leader in snack food in Western India, plans to enter North and South of
India by setting up two manufacturing plants with an investment of 200 crores by 2015
 Coca Cola to invest US$ 5B by 2020 across its beverages and bottling lines
101

102
Cold Storage – An OverviewCold Storage – An Overview
 Cold storage infrastructure in India is highly inadequate for the country’s requirements
 About 40,000 crores worth of food (F&V, dairy, meat, grains etc) is wasted primarily due to lack
of cold storage
 India currently has about 30 million MT of cold storage capacity which is only half of what is
actually required
 75% of the cold storage network is concentrated in 5 states of Gujarat, Uttar Pradesh, West
Bengal, Punjab and Himachal Pradesh
 Majority of this cold storage network supports only potato storage; there is not adequate
infrastructure for other vegetables
 Though cold storage and refrigeration requirements are required across all food processing
segments, they are required most in meat processing, diary processing and F&V processing
segments
 Danfoss and Alfa Laval are leading players in cold storage, and Voltas, Carrier, Blue Star and Rinac
are prominent in the refrigeration segment
102

103
Cold Storage – OpportunitiesCold Storage – Opportunities
 There is a huge scope for development and investment in this sector
 Frozen foods segment is growing at 20-25% year-on-year
 Dairy segment is growing at around 10-15% year-on-year
 Replacement demand is very high as a number of companies are using old equipments which
consume high amounts of power; smart power saving cold storage equipments’ market is seeing an
uptrend
 International companies aren’t keen on building the cold storage network per se, but are focusing
primarily on selling and marketing refrigeration equipment
 Government is trying to help players who are interested in investments by providing subsidies and
tax incentives
103
In addition to an immediate need for development of a strong cold storage network, there is a
huge demand for specific products in the value chain, such as compressors, insulation
products, and heat exchangers; in the short term, Italian companies can take advantage of this
market

104
1 USD = 61.5 INR
 INR20,000 crores (~US$ 3.3B) is the total market
size of food packaging machinery in India
 Industry is growing at a rate of 8-10% per annum,
and with strong growth in processed food industry,
the growth of packaging industry is also expected to
accelerate
 Replacement demand is driving the packaging
industry as large number of companies are going for
more efficient machinery
 With growth in the packaging machinery, packaging
materials such as oil tins and beverage cans are
also growing at healthy pace
Food packaging machinery
market
Domestic
70%
Imported
30%
104
Among various segments within the processed food industry, packaged goods segment
contributes the most to the growth of packaging machinery industry
Packaging Industry in India

105
1 USD = 61.5 INR
 Weighers and Drives form the two largest product
categories, accounting for more than 40% of the
packaging industry
 Nearly 100% of the weighers and a significant
portion of drives are imported
 Filling Lines is one of the fastest growing product
categories in Indian packaging industry as large
consumer foods companies are opting for high-
speed filling equipment
Food packaging machinery – Key
Product Categories
105
A significant portion of packaging machinery is imported from Italy; pouch making
machines in the snack food industry come largely from Italy
Packaging Industry – Key ProductPackaging Industry – Key Product
CategoriesCategories

106
 Majority of the machinery that is imported comes from Germany, Italy, Japan, China, and USA
 Bosch and Uflex are the two dominant players in India
106
Leading Companies Country Segment
Bosch Germany All segments
Uflex India Packaging films and other machinery
Toshiba Japan Drives
Omron Japan Drives
Krones Germany Filling lines
Shimadzu Japan Weighers
Schneider USA Case Packing
Propack Italy Safety packaging
Ishida Japan Weighers
OMAG Italy Bag sealing machines
Altech Italy Labelling
Packaging Industry – Key PlayersPackaging Industry – Key Players

107
Conclusions and Recommendations
107

108
1
Under Industries (Development and Regulation) Act, 1951
Conclusion and Recommendations – FoodConclusion and Recommendations – Food
 India is one of the largest food producers in the world and offers vast opportunities to food
processing companies; the sector has been growing at ~15% CAGR and is expected grow at a
much faster rate of 25% in the coming years. Its priority sector status and significant support from
the government (setting up mega food parks, etc) makes it a very attractive sector for investment.
Apart from catering to domestic demand, Italian companies can make India an exporting hub for its
competitive advantage in production and exports (Nestle has been successful in doing so)
 As most of the segments within food processing sector are exempted from the provisions of
industrial licensing1
making it easier for Italian companies to set up operation in India; moreover,
with 100% allowance in FDI in food processing sector (except in beer and alcoholic drinks, and
items reserved for small scale sector, like vinegar, bread and bakery), Italian companies may enter
the Indian market through any mode of operation (joint venture, partnership, acquisition,
representative office, etc)
108

109
Conclusion and Recommendations – FoodConclusion and Recommendations – Food
 As food industry in India evolves, food norms are changing rapidly and are becoming more
stringent than before, especially in terms of labeling and packaging requirements; Italian
companies planning to set up operations in India should thoroughly understand the implications of
these changes before deciding on the entry strategy
 Competition within the food processing sector is intense with few large players in each segment
competing for organized market share, however, companies with robust and innovative product
offerings, customized to suit Indian palate, have good potential to become leading players in the
Indian market
109

110
Conclusion and Recommendations –Conclusion and Recommendations –
MachineryMachinery
 Italian machinery has significant presence in the fruits & vegetables processing segment, and
beverages segment; however, meat processing, packaged foods (snack food, biscuits and RTE),
and ice cream industry offer high growth potential for machinery manufacturers
 There is substantial demand for companies offering turnkey solutions; currently except Alfa Laval,
hardly any other company is offering such high-end solutions; Italian equipment manufacturing
companies can enter India with a focus on providing end-to-end solutions to food processing
companies
 Solutions for small and medium companies: small and medium players currently have very limited
options when it comes to cost effective solutions; Italian machinery manufacturers may expand their
presence by acquiring equipment manufacturers who provide solutions to small scale companies
 In 2011, Heat and Control acquired Indore-based Flavorite Technologies, a company that
provides equipment and solutions to the local food processing industry. Since then, market
share of Heat and Controls have increased significantly, and a large portion of its India
revenues come from Flavorite
110

113 113
List of Importer-Distributors
Specified HS Codes Duties
Marketing Events Listing
List of Importers
and Distributors
Specified HS
Codes Duties
Marketing Event
Listing

114
List of Mega Food Parks Implemented inList of Mega Food Parks Implemented in
Phase I and IIPhase I and II
Name State Location Investment ($M)
Patanjali Food & Herbal Park Uttarakhand Haridwar 17.4
Srini Food Park Andhra Pradesh Chittoor 23.2
North East Mega Food Park Assam Nalbari 13.9
Jharkand Mega Food Park Jharkaand Ranchi 20.9
Tamil Nadu Mega Food Park Tamil Nadu Dharmapuri 24.5
Jangipur Bengal Food Park West Bengal Jangipur 20.4
Integrated Food Park Karnataka Tumkur 26.5
International Mega Food Park Punjab Ferozpur 28.2
Keventer Food Park Infra Bihar Bhagalpur 28.2
Sikaria Infra Projects Tripura Agartala 15.6
Anil Mega Food Park Gujrat Vadodara 32.9
Shaktiman Mega Food Park Uttar Pradesh Sultanpur 31.0
Paithan Mega Food Park Maharastra Aurangabad 22.2
MITS Mega Food Park Orissa Rayagada 21.4
Madhya Pradesh MFP Madhya Pradesh Khargon 29.7
114

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