1. Sector Profile
Namrata Sundaresan
Tel: +91 98401 84541 Food Processing
Email:namrata.sundaresan
@ibipartners.com
The Indian food processing industry presents itself as an
Giju Mathew attractive investment destination driven by changing
Tel: +91 99164 80277
Email:giju.mathew@ibipart consumption patterns and favourable policy environment.
ners.com
India’s food processing industry contributes 9 percent to the country’s
gross domestic product. The government is targeting an investment of
Industry facts $21.9 billion in the food processing industry over the next five years with
increased participation from the private sector and financial institutions.
 Market Size - $70
billion (2009) In terms of policy support, the government has formulated the National
According to industry
Food processing policy and approved complete de-licensing for the sector
estimates, the
excluding alcoholic beverages. The sector was also declared a priority
unorganized sector
accounts for 70 percent
sector for lending in 1999. The central government is working with all the
of output in terms of states to reform policy and facilitate investment in the food processing
volume and 50 percent sector.
in terms of value
 FDI in FY09 - $103 The areas for investment in the food processing industry include:
million  Mega food parks
 Agri-infrastructure
 Supply chain aggregation
 Logistics and cold chain infrastructure
Industry sub-segments
 Machinery and packaging
 Fruits & vegetables
Why India for food processing?
 Milk & milk products
 Beer & alcoholic  Vast source of raw material and low production cost
beverages
India ranks first in availability of milk, pulses and tea, and second in
 Meat & poultry fruits, vegetables, rice and wheat. Milk products offer a significant
 Marine products opportunity in India as it is the world’s largest producer. In addition to
 Grain processing this, the relatively low-cost but skilled workforce could be utilized to
 Convenience foods set up production facilities.
 Packaged drinks
 Large consumer market and changing consumption patterns
India's homogeneous market size endowed with growing incomes and
changing lifestyles has created market opportunities for food
Attractive states for
investing
producers, machinery makers, food technology and service providers.
Also, proportionate expenditure on staples such as cereals, grams and
According to a report by the pulses has declined while the expenditure on milk and milk products,
IBEF, the most attractive egg, fish, fruits and beverages increased.
states for food processing
investments are:
 Food parks and special agriculture zones
 Andhra Pradesh
The government is promoting agriculture zones and mega food parks to
 Uttar Pradesh
develop the food processing sector. More than 30 food parks are
 Madhya Pradesh
proposed across the country to attract foreign direct investment in
 Punjab
 Karnataka
this sector.
 Government assistance and favourable policy environment
The national policy on food processing aims at increasing the level of
food processing from the present 2 per cent to 10 per cent by 2010
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2. and 25 per cent by 2025. The government has allowed 100 per cent
Government Agencies FDI in processing sector.
 Ministry of Food
Processing Industries Policy Support – Vision 2015 of the Government of India
 Agricultural Products
Export Development Government policy seeks to create an appropriate environment for
Authority entrepreneurs to set up food processing units. The Vision 2015 strategy of
 Marine Products Export the government of India was created to treble the size of the food
Development Authority
processing industry and aims at:
 Coffee Board
 Enhancing and stabilizing the income level of the farmers
 Tea Board
 Cashew Board
 Providing choice to consumers in terms of wide variety and taste
 Promoting a dynamic food processing industry
 Enhancing the competitiveness of the food processing industry
 Making the food processing industry attractive for both domestic and
Major food processing foreign investors
companies in India  Having a transparent and industry friendly regulatory regime
MNCs:
Nestle, Pepsi, Coke,
SWOT Analysis
Kellogs, Conagra,
Unilever, Perfetti,
Glaxo Smithkline, Strengths Weaknesses
Heinz, Wyeth,
Ajinomoto, Nissin,  Abundant availability of raw  Inadequate infrastructural
Walmart material facilities
Indian companies:  Priority sector status for agro-  Lack of adequate quality
processing given by the central
ITC, Dabur, Britannia, control and testing methods
Government
Parle, Amul, Haldiram,  Inadequately developed
 Vast network of manufacturing
Godrej, Venky’s, MTR linkages between R&D labs and
facilities all over the country
 Large domestic market industry.
 Seasonality of raw material
Select fiscal Incentives
for food processing

Opportunities Threats
 Income Tax rebate is
allowed, 100% of  Large crop and material base  Affordability and cultural
profits for 5 years
offering a vast potential for preference of fresh food
and 25% of profits for
agro processing activities  High inventory carrying cost
the next 5 years, for
new industries to  Setting of special economic  High packaging cost
process, preserve and zones, agriculture economic
package fruits and zones and food parks
vegetables.  Rising income levels and
 Customs duty on food changing consumption patterns
processing machinery
and their parts
reduced to 5%. Dairy Source:
machinery is Ministry of Food Processing Industries, India Brand Equity Forum, Press reports
completely exempted
from Central Excise 
Duty.
 Custom duty on
packaging machines
to be reduced from
15% to 5%.
IBI Consulting is the advisory arm of international research and consulting group IBI Partners.
www.consultIBI.com
Copyright © 2010 IBI Consulting All rights reserved.