Food industry Analysis
Short Description
Industry analysis...
Description
Overall Bargaining Power of Suppliers - Low Switching costs - Low Differentiation of inputs - Low Threat of forward integration - High Supplier concentration – High
Need for Substitutes - Low
Overall Bargaining Power of Buyers: High
The strength of buying power that firms in this industry face from their customers depends on: buyers’ price sensitivity and relative bargaining power Buyer concentration - High Buyer Volume - Low
Switching cost - Low Brand Loyalty - Moderate
Ability to backward integrate - Low
Overall Threat of Substitutes- High Price- performance-differentiation - Low Switching cost – Low
Overall Threat of New Entrants – Medium Brand Loyalty: Quite Strong Access to Distribution - Tough Proprietary product differentiation – Low Access to necessary inputs: Tough
Entry and Exit Barriers - Moderate
Overall Industry Degree of Rivalry – High Market Growth - Moderate Brand identity – Strong Switching Cost for Customers - Low Degree of Differentiation - Low
Scope of Competition – High (Global and local) Strategic Stake - High
The Food and Beverages Industry if highly competitive and moderately attractive and profitable industry
Well established players are relatively in a comfortable position while new and small players would find it difficult to make it big
Suppliers and Buyers are in a low and high bargaining position
Rivalry is high laying emphasis on marketing and advertising, and to develop brand identity, due to low product differentiation
Entry and exit barriers are moderate and company which can make large investments could try and enter the industry e.g. ITC
Threat of global competitors and unorganized players
Key is developing SCM and distribution and maintaining good relations with suppliers and buyers
It is also essential for players in this industry to be attentive to changing consumer needs
It also becomes necessary to tap newer markets like rural markets
2012 Top 5 threats to profit margins
2011 Top 5 threats to profit margins
Cost of inputs or merchandise
Cost of inputs or merchandise
Discounting and other sales incentives
Discounting and other sales incentives
Decreased sales volumes
Decreased sales volumes
Regulatory Compliance
Administrative and marketing costs
Inventory carrying costs
Regulatory Compliance
Source: KPMG Food and Beverage Industry Outlook Survey 2012
Top Growth Barriers in 2012
Top Growth Barriers in 2011
Pricing Pressures
Pricing Pressures
Volatile commodity/input prices
Volatile commodity/input prices
Lack of Customer Demand
Labor Costs
Labor Costs
Lack of Customer Demand
Energy Prices
Energy Prices
Lack of qualified workforce
Regulatory and Legislative pressures
Regulatory and Legislative pressures
Inflation
Inflation
Lack of qualified workforce Source: KPMG Food and Beverage Industry Outlook Survey 2012
Convenience
Premiumization More-out-of-home consumption Choice/Selection Freshness Shopping Experience
Deloitte: Food and beverage 2012
2. India is the world’s second largest milk producer with a developed and high-value dairy sector 3. India’s abundance of natural agricultural resources makes the market attractive to investors 4. India has the second largest population in the world, and rising domestic demand is a major growth driver.
Weakness
Strengths
1. Foreign food companies continue to target the Indian market
1. The processed food industry in India is less developed compared to other countries due to logistical and distribution problems 2. The country’s agricultural industry suffers from a lack of investment and dependency on erratic climatic conditions 3. Specific state-by-state legislation governing aspects of high-value business hinders nationwide business strategies1
2. Rising disposable incomes and increasing urbanization mean higher-value processed foods should experience strong growth rates 3. The immense size of India’s population and landmass ensure that market maturity is a distant prospect 4. Premiumization
Threats
Opportunities
1. The government is actively seeking investment in the food processing and agribusiness industries
1. Logistical problems, underdeveloped service networks and poor infrastructure hinder development in fresh food industries, such as dairy 2. The division between the urban rich and the rural poor is as great as ever, meaning food manufacturers do not have access to the entire population 3. Elevated commodity costs are a threat to food processors
The Ministry of Food Processing, Government of India has defined the following segments within the Food Processing industry: Dairy, fruits and vegetable processing Grain processing Meat and poultry processing Fisheries Consumer foods including packaged foods, beverages and packaged drinking water
The Indian food processing at $135 billion and is estimated to grow at a CAGR of 10% to reach $200 billion by 2015
The industry has huge growth potential: Of the country total food and agricultural produce only 2% is processed
The Industry contributed to 7% of the country’s GDP and it employees 13 million people directly
Value addition of food products is expected to grow from 8% to 35% by the end of 2025
The fruit and vegetable processing which is at a 2% growth rate is expected to reach 25% growth rate by 2025
The highest growth is in the dairy processing sector where 37% of total produce is processed
Processed foods are primarily derived from agricultural commodities, which often incur multiple taxes at various stages. This multiple taxation has a cascading effect on prices and a barrier to the free flow of materials from the farm to the factory and ultimately to the consumers
Diet food and nutraceuticals are the latest fad are available for every patient today, be it hypertension, diabetes, obesity, or even weight reduction
Motivated by a desire for maximum indulgence coupled with a wish for calorie control and health benefits, consumers are increasingly choosing sugar-free and sugar-reduced products
Packaging of food products has become important in order to ensure safety and hygiene and to eliminate the possibility of adulteration. However, packaging industry is yet to achieve international standards in the country
India is one of the largest countries in the world, with a growing population of 1.2 billion people
India’s GDP was US$1,843 billion in 2011 and is forecast to rise to US$2,013 billion in 2012
GDP is expected to continue growing at rates around 7–8 percent per annum for the next few years
There has been a discernible increase in purchasing power in many parts of the country and rising affluence in many urban pockets
However, income distribution in India remains uneven between a wealthy urban population and a low income rural population
Almost a quarter of the population is living on less than US$1 per day, even though GDP per capita is US$3,787
The income split essentially means that India has two separate consumer segments, which are further split by strong regional differences
India is one of the world’s largest food producers and has a large agriculture industry and combined with a cultural preference for fresh food, means that India supplies the majority of its own food for consumption
India is a growing market for processed food imports, which are becoming more popular with the younger population, especially in urban areas
Consumption of food and beverages was estimated at US$366.8 billion in 2011
Primary food processing (packaged fruit and vegetables, milk, milled flour and rice, tea, spices, etc.) constitutes around 60% of processed foods
It has a highly fragmented structure that includes thousands of ricemills and hullers, flour mills, pulse mills and oil-seed mills, several thousands of bakeries, traditional food units and fruits, vegetable and spice processing units in the unorganized sector
In comparison, the organized sector is relatively small, with around 516 flour mills, 568 fish processing units, 5’293 fruit and vegetable processing units, 171 meat processing units and numerous dairy processing units at state and district levels
Segment
Dairy Sector
Fruit and Vegetables
Meat and Poultry Processing
10%
Fisheries
Packaged foods
Beverages
Staple foods
20%
8%
27%
85%
Noodles/ vermicelli
Fruit-based drinks and carbonated drinks
Sugar, wheat flour and salt
Growth rate of the market
15%
10%
Key segments
Value added milk products like butter, Cheese, ghee , condens ed milk and infant food
Raw fruit and vegetables, fruit pulps, canned fruits and pickles
Cattle, buffalo and poultry
Extent of Processing
37%
2%
1%
12%
-
-
-
Share of organized sector
15%
48%
5%
-
80%
77%
50%
Marine fisheries, frozen products and minced fish products
The overall packaged food industry reached US$25.4 billion in 2011 and is forecast to grow to US$38.5 billion by 2016
The highest value segments of packaged foods in 2011 were to be ‘dairy’ (at US$9.1 billion), followed by ‘bakery’ (at US$4.9 billion), and ‘oils and fats’ (at US$4.1 billion)
The West India region has the highest value sales of packaged foods in India
A large number of brands from domestic and multinational players are present in the region and many international brands are imported
Consumer awareness of packaged foods is also high in North India, which is one the most affluent regions in the country with areas such as New Delhi, NCR, Chandigarh, Jaipur and Lucknow
This has resulted in packaged foods seeing good growth in the region and this trend is expected to continue
East and Northeast India are the smallest markets in India for packaged food, due to the underdeveloped nature of these areas and continued political instability
ITC Limited Parle Products Pvt. Ltd. Agro Tech Foods Amul Perfetti India Ltd. Cadbury India Ltd. PepsiCo India Holdings Nestle India Pvt. Ltd. Britannia Industries Ltd. Hindustan Lever Limited
Milkfood MTR Foods Limited Godrej Industries Limited Gits Food Products Pvt. Ltd. Dabur India Ltd. Conagra Foods Nissin Foods Wal-mart Venky's
India today stands first in the world in terms of milk production
The output is expected to be about 108 million tonnes (estimate for 2007), growing at a compounded annual growth rate of 4%
Consumption of milk has registered a growth of nearly 8.4% (in urban areas) and is currently valued at US$ 16 billion
Within India, the dairy sector also ranks second in terms of processed foods with 37% of the produce being processed
The organized sector processes an estimated 15% of the total milk output in India. There are 676 dairy plants registered with Government of India, which come under the organized sector
According to estimates of “Dairy India 2007”, the current size of the Indian dairy sector is US$ 62.67 billion and has been growing at a rate of 5% a year. Both production and consumption of milk and its derivatives are traditionally high in the country
The dairy exports in 2007-08 rose to US$ 210.50 million against US$ 113.57 million in the corresponding period, in the last fiscal, whereas the domestic dairy sector is slated to cross US$ 108 billion in revenues by 2011
Milk and milk products contribute to a significant 17% of the country’s total expenditure on food
Traditional dairy products account for about 50% of the total milk produced
The market for dairy products is expected to grow at 15-20% over the next three years
Ghee (or clarified butter) is the most widely marketed and branded product with a nation-wide penetration of 24.1%
It is estimated to be growing at a rate of 8% per annum
The dairy whitener market comprises of sweetened milk powders, condensed milk and creamers. Its market size is estimated at US$ 450 million for 2005-06
The cheese market is estimated at US$ 2.49 million for 2005-06 (54’000 tonnes in volume terms), growing at a rate of nearly 10% per annum
The organized cheese market is dominated by processed cheese which accounts for 74% market share
The ice-cream market in India is estimated at US$ 226 million in 2005-06, with the organised market at US$ 158.2 billion
Probiotic dairy products - containing live organisms building immunity and helping in digestion - are an emerging category in the Indian food market
Along with domestic dairy majors like, Amul and Mother Dairy, global players like Nestle have made significant investments to capitalize the potential of this particular niche segment
The latest entrant is Yakult Danone with its investment worth US$ 28.3 million and an additional US$ 20.8 million on the cards for the next 2-3 years
According to the latest report on 'Indian Functional Foods and Beverage Markets' by Frost & Sullivan, the market of neutraceuticals and probiotics earned revenues of over US$ 185 million in 2007 and is projected to touch an estimated US$ 1.16 billion in 2012
Although the segment is currently in its nascent stage, it is poised for an upswing riding piggy-back on a healthy domestic economy and awareness of health products, thus giving a boost to this segment.
India produces the widest range of fruits and vegetables in the world. It is the second largest vegetable and third largest fruit producer accounting for 8.4% of the world’s food and vegetable production
The share of organised sector in fruit processing is estimated to be nearly 48%
Fruit production in India registered a growth of 3.9% during the period 2000-05 whereas the fruit processing sector grew several times faster at 20% over the same period
The total area under fruit cultivation is estimated at 4.18 million hectares
The total area under vegetable cultivation is estimated at 7.59 million hectares
However, less than 2% of the total vegetables produced in the country are commercially processed, as compared to nearly 70% in Brazil and 65% in USA
While products like juices and fruit concentrates are largely manufactured by the organized sector, pickles, sauces belong to unorganized sector
About 20% of processed fruits and vegetables are exported. Major products exported include fruit pulps, pickles and chutneys, canned foods, concentrated pulps and juices and vegetables
Fruit exports have registered a growth of 16% in volume and 25% in value terms in 2005-06. Mango and mango based products alone constitute 50% of these exports
India produces over 200 million tonnes of grains every year
India’s production covers all major grains are rice, wheat, maize, barley and millets like jowar, bajra and ragi
It ranks third in the production of grains in the world
With a share of 40%, grain processing is the biggest component of food sector
Primary processing constitutes 96% with the remaining accounted for by the secondary and tertiary sectors
Total rice milling capacity in the country is around 190 million tonnes
There are about 516 large flour mills in the country, as well as about 10’000 pulse mills
Soya food segment is also growing due to increased health consciousness and abundant production of quality soya bean (3.72 million tons/year) in the country
Total meat production is around 5 million tonnes annually
Most of the production largely belongs to unorganized sector. Some of the organised players are Venky’s and Godrej’s Real Chicken
Only 1-2% of the meat produce is converted to value added products
Growth rate of egg and broiler production is around 16% and 20% respectively
Poultry processing is still at a nascent stage in India
The fisheries sector contributes to 1.4% of the country’s GDP
Processing of fish and canned fish is almost entirely for export market
The fish and seafood market has continued to grow strongly as middle-class Indian consumers’ purchasing power continues to grow. However, this is starting from a very low base.
Molluscs and cephalopods are the fastest-growing categories of fish and seafood
India’s National Fisheries Development Board is spending Rs6.2 billion (US$123 million) to expand the use of intensive aquaculture in India, providing money to help farmers adopt technologies for sustainable fish farming and fish seed production
Consumer food industry which is a subset of the food industry consists of: Packaged Food
Aerated Soft Drinks Packaged Drinking Water
Alcoholic Beverages
The segment consists of bakery products, ready-toeat snacks, chips, namkeens
The beverages market primarily consists of non-alcoholic beverages which can be broadly classified into carbonated drinks, noncarbonated drinks and hot beverages
According to industry experts, the market for carbonated drinks in India is worth US$ 1.8 billion while the juice and juice-based drinks market accounts for US$ 300.67 million, of the approximately US$ 2.38 billion packaged beverages category. Growing at a rate of 25% per cent
The fruit-drinks category is one of the fastest growing in the beverages market
The US$ 1.80 billion carbonated drinks category is expected to face the heat of the rising competition from
Categories falling under the health umbrella, i.e. juice and juice-based drinks, energy and sports drinks, malted beverages, probiotic drinks and bottled water. They are considered a socially acceptable alternative to alcoholic beverages
At US$ 300.67 million, the juice and juice drink category is among the fastest growing segments
While fruit drinks as a category is growing at 18% - 20%, carbonated soft drinks are growing at 6% - 8% driven by the positive changes in India’s consumer profile.
Two of the world’s biggest global brands are well established in this segment
Soft drinks constitute the third largest packaged food segments after tea and biscuits
Penetration levels of aerated soft drinks if quite low compared to other developing and developed markets
Trends such as shortage of drinking water, changes in consumer lifestyle has fueled growth in this segment
Almost all the big players in the F&B players are trying to gain foothold in this segment
Hot beverages include health drinks such as white beverages (Horlicks, Bournvita, etc) and brown beverages such as tea/coffee as well as branded drinks (Boost)
The total size of this market is estimated at US$ 333 million by value and 85’000 tonnes by volume. White beverages account for 65% of the market and brown beverages constitute the remaining 35%
India is the largest producer of tea in the world accounting for 28% of the total global production, at 857 million kg.
Tea production in India has been growing at 1.2% per annum and India is the fourth largest exporter of tea in the world with estimated exports of US$ 5 million in 2002-03
India is also the fifth largest producer of coffee accounting for 4% of the total production in the World
Nearly 75% of India’s production is exported and coffee exports stood at US$ 5.2 million in 2005-06
India is the third largest for alcoholic beverages in the world
The demand for spirits and beer is estd. Around 373 million cases per annum
There are 12 joint venture companies producing grain based beverages with a combined capacity of 33.9 million liters per annum
The overall wine forecasted to grow to INR23,140.2 million by 2015
The highest value segments are estimated to be ‘still light grape wine’ (at INR7,884.7 billion), followed by ‘sparkling’ (at INR1,846.8 billion), and ‘fortified wines’ (at INR1,213.2 million)
And, while Bangalore, Chandigarh, Mumbai are reporting high growth in consumption, Nasik, the capital of Indian wines, registered a 100% rise
Out of the total consumption of grape wine in India, around 80% wine consumption is from the major cities
Bread is slowly coming to be a staple product consumed by people of all economic classes in India
Total bread production in the country in 2004-05 was estimated at 2.7 million tons, growing at 7.5%
About 55% of bread production comes from the organised sector
India is the second largest producer of wheat in the world with an output of more than 70 million tonnes
Branded ‘atta’ (wheat flour) is an important item in this segment with an estimated market of US$ 195 million
The Indian market holds enormous growth potential for snack food, which is estimated to be a market worth US$ 3 billion
The organised sector of the snack food market is growing at 15% - 20% a year while the growth rate of the US$ 1.56 billion unorganized sector is 7% - 8%
Consumption level of commercial savory snacks is 10 times higher than that in the rural markets
Around 1’000 snack items and 300 types of savories are sold in India
The segment is largely dominated by potato chips and potatobased products with over 85% share of the salty snack market.
The global retail market for organic food has grown to US$ 100 billion from US$ 35 billion over the last three years
The exports of organic food from India have grown to US$ 65 million over the past one year from US$ 21.6 million two years ago
Some players, like Navdanya, organically cultivates crops like jowar, bajra, millet, in its 21 acre farm in Dehradun and sells it from its retail outlets in Delhi and Mumbai
The number of such growers has been rising in the Dehradun valley and Bundelkhand. APEDA in association with the Ministry of Agriculture has taken an initiative to convert 20’000 farmers and a total area of 75’000 hectares to organic farming over the next three years
Following suit, the Darjeeling Tea Association (DTA) has mounted efforts to increase the production of organic tea
According to the industry experts, about 37% of the total crop grown on the slopes of the eastern Himalayas, at present, is organic tea, as per certifications given by European and Japanese agencies. DTA is aiming to organically produce the majority of the champagne of teas by 2010
Overall food and beverage consumption is expected to grow at rates between 6–11 percent for the next few years
The products and sectors that are expected to have the highest potential for growth are: › Ready to eat meals, canned foods and snacks are forecast to
be in higher demand › There is high growth for processed dairy and milk products. Additionally, the dairy processing industry in India is growing and demanding milk and dairy ingredients › Cheese, butter, whey, yoghurt and ice cream are some of the major dairy products that are imported with cheese being the most popular
› In India, tea is one of the only beverage products that has a
mature market. Other beverages such as coffee, carbonated drinks and functional drinks all are experiencing high growth. Coffee consumption is expected to grow 20–30 percent per year for the next few years › Demand for wine is also growing, but the market is still captured mostly by domestic suppliers due to high tariffs on imported wines. Still red wine sales are forecast to grow by 17.6 percent compound annual growth rate (CAGR) between 2010 and 2015, fortified wine by 15.9 percent and still white wine by 15.2 percent › As incomes rise, the consumption of fish is expected to increase 17 percent by 2015
What are the different segments?
Consumer Food Sector
Packaged Food Confectionary Canned Food
Bakery
Processed food
Dairy
Noodles & Pastas
Sweet and Savory Snacks Oils and fats
Sauces and Spreads Soups & Ready Meals
Also referred to as convenience food, packaged food is divided into numerous segments
Some of the leading players in packaged food in India are Hindustan Unilever, Gujarat Co-operative Milk Marketing Federation, Nestlé India Ltd, Frito-Lay India, GlaxoSmithKline Consumer Healthcare Ltd, Britannia Industries Ltd, MTR Foods and Karnataka Cooperative Milk Producers Federation Ltd.
With the range of packaged food products available in India likely to become wider and awareness of such products expected to increase over the forecast period, it is expected that packaged food will continue to witness healthy growth in the future.
Market Size by Retail Value 18,00,000.0
16,00,000.0
14,00,000.0
12,00,000.0
10,00,000.0
8,00,000.0
6,00,000.0
4,00,000.0
2,00,000.0
0.0 2007
2008 Packaged Food
2009 Canned/Preserved Food
2010 Confectionery
2011 Dairy
2012
Confectionary
Confectionary retail value sales in India rose by 7% in 2012
It includes the following – › Chocolate Confectionary Its sales grew by 13% in 2010 Manufacturers are increasingly targeting both upper and lower income consumers
› Gum Sales grew by 4% in 2010 Can be attributed to its rising consumption in smaller towns & cities
› Sugar Confectionary Sales grew by 1% in 2010
Market size
1,40,000.0
1,20,000.0 1,00,000.0
80,000.0 Confectionery
60,000.0 40,000.0 20,000.0 0.0 2007
2008
2009
2010
2011
2012
Stronger economic growth has boosted consumer confidence and led to increased disposable incomes
This has benefited the performance of key indulgence categories like chocolate confectionery and functional gum, which command higher unit prices
Giving chocolate as a gift for festive occasions has returned
Medicated confectionary is also exhibiting robust performance and grew by 2.4%in 2010
Functional gum remained the best performing gum category in value terms in 2010, growing by around17%
This can be attributed to active efforts by the manufacturers to educate consumers of its dental benefits
Canned/Preserved Food
Canned/preserved food is expected to increase in current value by 17% in 2012, rising to INR4.5 billion
Canned/preserved fruit is set to record the highest growth in 2012, Canned/Preserved Food rising in current value by 17% 5,000.0
Canned/preserved fruit and canned/preserved vegetables remain the largest categories in canned/preserved food
4,500.0
Canned/preserved food is set to increase in constant value at a CAGR of 8% over the forecast period
1,500.0
4,000.0
3,500.0 3,000.0
2,500.0 2,000.0
1,000.0 500.0 0.0 2007
2008
2009
2010
Canned/Preserved Food
2011
2012
Consumer awareness of packaged food categories such as frozen processed food and canned/preserved food continued to rise in India
This is occurring mainly due to the initiatives being undertaken by companies such as McCain Foods India Pvt. Ltd with the aim of educating Indian consumers about the benefits of these packaged food products
Canned/preserved fruit and canned/preserved vegetables were the first categories to be introduced & are set to be the fastest growing categories in canned/preserved food
However the value growth is expected to be lower than that of frozen processed food
The consumption of canned/preserved food remains limited to urban areas and the distribution of these products is concentrated in modern grocery retail channels
Bakery
It includes the following –
Baked Goods It is expected to post a CAGR of 4% in constant value terms › Unpackaged/artisanal pastries is likely to register the fastest growth of 13% ›
Biscuits Its’ sales are expected to post a CAGR of 9% › Cookies is expected to register › the strongest value growth ›
Breakfast Cereals It is projected to grow by a CAGR of 16% › Hot cereals is likely to lead breakfast cereals with value sales rising 33% in 2011 ›
Market Size 3,00,000.0 2,50,000.0 2,00,000.0
1,50,000.0 1,00,000.0 50,000.0 0.0
2007
2008
2009
Bakery
2010
2011
2012
Market Size 1,80,000.0
1,60,000.0
1,40,000.0
1,20,000.0
1,00,000.0
Baked Goods Biscuits
80,000.0
Breakfast Cereals
60,000.0
40,000.0
20,000.0
0.0 2007
2008
2009
2010
2011
2012
Demand for bread is relatively stable and consumers are shifting towards healthier formats such as brown or enriched bread
Bread, cakes and pastries have grown, aided by franchise expansion of the leading chains of both artisanal and packaged players
Cakes are increasingly being used as gifts instead of traditional sweets
Artisanal baked goods players were the leaders with a 57% value share in 2010
With chained supermarkets/hypermarkets projected to expand further to reach tier-two and tier-three cities, this will give rise to an increasing number of in-store bakeries
Consumers consider biscuits as a cheaper indulgence and nourishing products and an alternative to higher-priced cakes, pastries, and sweets
Diverse flavors and new products have made biscuits a more attractive snack for young consumers
Innovations such as savory biscuits and crackers have contributed majorly to the growth
With the rise in lifestyle related diseases including diabetes, hypertension and obesity, health has become a key factor
Leading manufacturers have started offering biscuits positioned on the health and wellness platform including sugar free, diabeticfriendly products, oat or wholegrain based
An increasing number of manufacturers have fortified breakfast cereals with vitamins, added health food ingredients and promoted their health benefits through educational and social programs
Growing awareness of the benefits of oats for heart health drives demand for breakfast cereals
Mueslis was the second fastest growing breakfast cereal category.
Niche products have emerged in the market, such as bran flakes, oatmeal squares and low fat granola, but their sales will be limited to urban areas because they are currently only available in large supermarkets/ hypermarkets
Processed Food
It includes the following –
Frozen Processed Food It is expected to increase in constant value at a CAGR of 17% › Frozen processed red meat is set to be the fastest growing frozen processed food category in 2012, increasing in value by 24% ›
Chilled Processed Food ›
Sales of chilled processed food are set to remain negligible
Dried Processed Food It is expected to increase in constant value at a CAGR of 16% › Instant noodles with a value growth of 30% followed by Rice with a value growth of 24% posted the highest value growth ›
Market Size 1,00,000.0 90,000.0 80,000.0 70,000.0
60,000.0 50,000.0 40,000.0 30,000.0 20,000.0
10,000.0 0.0 2007
2008
2009
2010
Processed Food
2011
2012
The rising number of supermarkets and hypermarkets with freezer display cabinets contributes to the strong growth registered in frozen processed food during 2012
Mother Dairy Fruit & Vegetable Ltd, Al Kabeer Exports Pvt. Ltd and Venky’s India Ltd are the three leading players
The changing perception of frozen processed food is based on rising awareness of its benefits in comparison with fresh food, and this in turn is driving its growth
Frozen processed vegetables is set to account for 44% of total frozen processed food retail value sales with Green Peas being the dominant format
The retail distribution of frozen processed red meat and frozen processed poultry is set to undergo quite radical changes
The rising awareness of frozen processed food and canned food in India has the potential to help build awareness of chilled processed food as well
A number of players introduced premium products in rice in India during 2011 and 2012 as many consumers became more willing to spend money on high quality rice
Spurred on by a variety of factors such as better shelf positioning, visual merchandising and in-store promotions, rice is expected to increase in value by 24%
Organic basmati rice has a good future in India
Dairy
It includes the following –
Ice Creams ›
It is expected to increase by a CAGR of 12%
Yogurt & Sour Milk Products › It is expected to increase by CAGR of 20%
Cheese ›
Drinking Milk Products ›
It is expected to post a CAGR of 14% Its’ sales are expected to post a CAGR of 7%
Other Dairy Products It is expected to increase by a › CAGR of 3% ›
Market Size
6,00,000.0
5,00,000.0
4,00,000.0
3,00,000.0
2,00,000.0
1,00,000.0
0.0 2007
2008
2009
2010
2011
2012
Current value sales of single portion dairy ice cream are expected to see the fastest growth
Historically, ice cream consumption in India was limited to the summer months but gradually it has become popular as a dessert option
The healthy growth being registered by ice cream fast food chains is expected to result in increased demand for retail forms
Flavored and fruited yoghurt are receiving increased attention
Pro/pre biotic drinking yoghurt sales are also increasing rapidly
Packaged and branded soft cheese (primarily paneer in India) overtook processed cheese for the first time in terms of value sales in 2010
The popularity of foreign cuisine such as pasta, pizza, and burgers, is likely to drive the retail volume growth of cheese in India
Spreadable processed cheese is expected to see the highest constant value CAGR, as it will gradually serve as a viable alternative to spreads in India
Spicy variants of processed cheese & packaged paneer will dominate the push towards product diversification
Fresh/pasteurized milk is expected to comprise 83% of value sales of drinking milk products
Ambient flavored milk drinks is expected to be the dominant format in India, as chilled milk drinks face operational constraints in the country
Value-added products such as fermented milk and fruit-based dairy drinks are likely to experience many new product launches
Dairy only flavored milk drinks and soy milk are forecast to see the fastest growth
Milk and milk powder, which are both essential components of other dairy products in India, registered exceptional increases in both wholesale and retail prices in 2011
New categories such as cream and dairy-based desserts are expected to emerge as rapid growth categories
Noodles & Pastas
It includes the following –
Noodles It is expected to increase by a CAGR of 18% › Pouch instant noodles will experience the fastest growth ›
Pastas › It is expected to increase by CAGR of 18% › Strong growth in the category due to the rising popularity of Italian cuisine
Noodles & Pasta 45,000.0 40,000.0 35,000.0
30,000.0 25,000.0 20,000.0
15,000.0 10,000.0 5,000.0 0.0 2007
2008
2009
2010
Noodles & Pasta
2011
2012
Due to the heavy advertising by manufacturers, the awareness of this product has improved drastically and has thus evolved to become a regular staple in all households
Manufacturers are experimenting with different & exotic flavours to offer a wide choice of product offerings
Noodles was dominated by Maggi five years ago, but with brands like Foodles, Yippie! and Knorr entering the space through brand extensions and deep advertising pockets coupled with strong distribution networks, the competition is intensifying
Soup, oat and curry noodles have also been launched
Many private label products have entered pasta and are expected to do well as they can offer competitive pricing
Sweet & Savory Snacks
It is expected to increase at a CAGR of 13%
Sweet and savory snacks witnessed many product innovations under the health and wellness banner Market Size
Nuts is expected to grow by 13%
1,00,000.0
Extruded snacks is expected to show robust growth which will be mainly attributable to high sales from snacks at lower price points priced between Rs5-10
90,000.0 80,000.0 70,000.0 60,000.0 50,000.0 40,000.0 30,000.0
20,000.0 10,000.0
The biggest threat to this category are growing health concerns
0.0 2007
2008
2009
2010
Sweet and Savoury Snacks
2011
2012
Oils & Fats
It is expected to increase by a CAGR of 4%
Vegetable and seed oil continues to dominate oils and fats
Although activity on the health and wellness front is on the rise price is still a key concern
Olive oil is expected to see the fastest growth
Market Size 4,00,000.0 3,50,000.0
3,00,000.0 2,50,000.0 2,00,000.0 1,50,000.0
New packaging sizes in margarine 1,00,000.0 & ghee are being introduced to 50,000.0 Drive volume sales 0.0
2007
2008
2009
2010
Oils and Fats
2011
2012
Sauces & Spreads
It includes the following –
Sauces, Dressings & Condiments It is expected to increase by a CAGR of 8% › It will witness 19% value growth ›
Market Size
Spreads › It is expected to increase by
70,000.0
CAGR of 7% › It will witness value growth of 12% › Honey is likely to lead in spreads with 13% growth in current value sales
60,000.0 50,000.0 40,000.0 30,000.0 20,000.0 10,000.0 0.0 2007
2008
2009
2010
Sauces & Spreads
2011
2012
International cuisines drive sales of sauces, dressings and condiments
Wet/cooking sauces are still at a nascent stage in India
Another factor which has led to robust growth in this category is the increasing prices of vegetables, like onion, garlic and ginger
The most popular table sauce is mayonnaise which showed the highest value growth in table sauces
Ketchup is the most notable category in table sauces which will grow by 16%
Companies have come up with innovative squeeze bottles which are far more convenient to use than glass bottles
MTR Foods Ltd which forayed into the snacks market is eyeing acquisitions in the jams and ketchup categories
Field Fresh Foods Pvt. Ltd has plans to introduce pasta sauce to the Indian market
Honey, jams and preserves made up the bulk of spreads sales in 2011
There is fast growing interest in chocolate spreads, such as Nutella in nut-based spreads, or Skippy in peanut butter
The lack of growth in the bread segment, coupled with competition from dairy spreads, may affect sales of jam and preserves
Soups & Ready Meals
It includes the following –
Soup It is expected to increase by a CAGR of 12% › Dehydrated soup to exhibit 21% value growth ›
Market Size
Ready Meals › It is expected to increase by
3,500.0
CAGR of 9% › Canned/preserved ready meals and frozen ready meals are set to be the most important categories in ready meals
3,000.0
2,500.0 2,000.0 1,500.0 1,000.0
500.0 0.0 2007
2008
2009
2010
2011
Soups & Ready Meals
2012
Canned/preserved soup, which is more popular than dehydrated soup worldwide, is expected to show a decline in value sales
Manufacturers are launching soups in varieties of exotic flavors to appeal to consumers’ taste buds
Potential threats include competition from other snack offerings, such as biscuits, snack bars and cereals, which are expected to compete with soup on the convenience and health front
Another potential threat for this category is the lack of awareness about such products in rural areas
Both Indian companies and international players are expected to make attempts to launch new products in ready meals which target demand for local flavours and traditional dishes
Packaged Food Industry
Demographical Changes › › ›
› ›
India has a large young population; with a median age of 25.5 as of 2012 They have sufficient disposable income, are individualistic and want to stand out in whatever they do. As a resulting they are driving demand for & rapidly embracing new brands Children are aware & have become more vocal in making their preferences known to parents An increasing number of young adults have moved to cities for work or study & also make daily decisions regarding what food products to buy
Socio Economic Drivers: Increased Income / Affordability ›
The Indian middle class is increasing in size and purchasing power and will definitely spend more on this category of consumer expendables
Expansion in the Food Services Sector ›
›
› › ›
›
The proliferation of foodservice outlets and consumer’s interest in dining out will present growth opportunities for packaged food manufacturers in coming years The consumers palate is also expanding and they are increasingly experimenting and trying out varied cuisines and flavors This has generated interest in packaged food products with international flavors Products that will benefit from these trends include cheese, sauces and dressings, frozen processed food, noodles, pasta, oil and fats Olive oil is also expected to perform well as consumers become more familiar with its use in preparation of Western dishes, as well as its health benefits Similarly, noodles and soup will also gain greater acceptance among consumers
Focus on Health Benefits › ›
›
›
›
In larger cities consumers are switching to healthier options of packaged food, such as whole meal bread and low-sugar sweets Healthy products positioned for the mass segment are expected to perform more strongly than products targeting the niche high-income segment With increases in disposable incomes consumers may be more willing to pay for healthier products which are often priced higher than similar products without health positioning Manufacturers continue to push health-oriented products, as they recognize there is huge potential for health and wellness to develop in India Manufacturers may also look at new fortified products aimed at rural consumers looking for basic nutritional needs such as iron, calcium, protein, etc.
Urbanization & Shifting Lifestyles ›
The increase in urbanisation has led to a demand for premium products in this segment
›
Shifting lifestyles of Indian people & the ongoing increase in the size of India’s middle-class population is also driving demand
›
Due to the paucity of time, consumers are looking at options where the meal can be prepared fast and is tasty as well
›
Coupled with these, factors like an increasing number of working couples and shortage of household help is also driving the sales
›
Consumers’ dietary mix is changing with increased focus on international food and reduced consumption of traditional food
Marketing Efforts Leading multinational manufacturers have started using social media to engage young consumers › Examples of such products include sweet and savory snacks, sugar confectionery, ice cream and snack bars etc. › The increased reach of media channels such as television and Internet in both urban and rural India is likely to help the growth of consumer goods’ value sales over the forecast period › Marketing efforts for brands such as Quaker and Kellogg’s heightened awareness for the entire cereals category, while increased instances of breakfast buffets at restaurants led to growth in demand for hot cereals as well. ›
Another factor which has led to robust growth is the increasing prices of fresh food & vegetables, like onion, garlic and ginger
Indian consumers, particularly the younger population, are becoming more accepting of different food and drink products
There is increased demand for product variety, as well as products from different countries
The number of imported food products is increasing in retail stores. This trend is evident not only in organised retail, but also in the small familyowned stores which dominate themarket.
Glocalisation is the localisation of globalised products or services and has caused international food products to be adapted to suit Indian consumers
For example, McDonald’s in India provide vegetarian rather than beef burgers and pizza chains serve pizzas with Indian toppings such as curry
This has resulted in greater acceptance and increased demand for international food and beverage products in India
With busier lifestyles, Indian consumers are moving away from the traditional three meals per day schedule
Smaller and more frequent meals are becoming common, resulting in higher demand for convenient products and snacks.
As more women join the work force and households become smaller, packaged and processed products such as ready to eat meals, canned foods and snacks will be in higher demand.
The most popular ready to eat products are those based on traditional Indian recipes.
Demand for specialty and high value foods such as chocolates, almonds and other dried nuts, cakes and pastries, imported fruits, fruit juices, and Indian sweets peaks during the festive season, especially at Deepawli (Diwali) - the festival of lights
Changes in Retail Format Growth in modern chained grocery retailing Supermarkets/hypermarkets have emerged as a key retail channel for packaged food, as their share in overall retail sales increased by three percentage points › The expansion of chained grocery stores and increase in product offerings, such as more imported brands on retailers’ shelves has contributed to the growth › There are also a growing number of specialist retailers in urban areas, especially in shopping centers, which attract high-end consumers › Their specialization with cold chains and associated product categories makes these outlets a favorite among manufacturers looking to cater to select urban consumers › ›
Other factors expected to positively influence growth of dried processed food include the lower levels of regulation expected in dried processed food and the increasing cultivation of rice
Efficient Back End infrastructure The growth of cold chain infrastructure is likely to heighten the use of frozen processed food, chilled processed food and non-traditional dairy products in India › International manufacturers and domestic manufacturers with strong financial backing are expected to begin providing freezer display cabinets to Indian grocery retailers in the near future in order to encourage them to stock their goods ›
FDI in retail With government allowing 51% FDI in multi brand retail and 100% FDI in single brand retail, International giants such as Wal-Mart & Carrefour are coming in › With the arrival of these giants, there is immense scope of growth for new segments in packaged food › This also signals the arrival of more international giants and increased versatility of products ›
Packaged Food Industry
Development of effective distribution network and supply chain: India with its high rural population mandates the companies to have an extensive distribution network › The market share is linked to distribution and product availability in a major way ›
Various range of product offerings, which is customized to meet local market requirements › India with its high diversity requires companies to customise their products to suit the local tastes
Superior processing technology to compete with other players in the market › The players in the market need to possess the latest technology
in order to compete and face the price sensitive audience
Brand building and marketing to gain market share; increasing penetration in domestic market; competitive pricing › With a mixed set of organised and unorganised players in the
market, there is a strong need for brand building and marketing to generate the required reach › The market is majorly price sensitive further adding to the requirement of competitive pricing › There is a constant effort to penetrate into the remotest of the areas to increase the presence
M&As, New entrants, Exits
During September 2011, US-based McCormick & Co Inc completed the formation of a joint venture with Kohinoor Foods Ltd for the marketing and distribution of basmati rice and various other packaged food products in India
McCormick invested a total of INR5.2 billion (US$113 million) in this transaction, which involves McCormick taking an 85% stake in the new joint venture
Total revenues achieved by the company’s new joint venture are expected to be in the region of US$85 million during its first year of operation.
Ben and Jerry’s Homemade Inc. plans to enter India
The unit of the Anglo-Dutch consumer goods maker Unilever Plc. - it took over the US company in 2000 - is planning to enter the Indian market within six months
Danone entered India to seek potential growth for its products.
The 15 years of learning Indian market allowed Danone to change from its diversification strategy to being focused in its Business line.
Danone BOP (Base Of Pyramid) India is charged with developing and marketing products to lower income consumers in smaller towns such as Gurgaon, Faridabad, Panipat, Sonepat and Ambala, before gradually moving to other parts of the country.
Reliance Retail has entered into a back-end joint venture with 2 Sisters Food Group (2SFG), a UK-based meatprocessing company owned by entrepreneur Ranjit Singh, to introduce chilled and frozen foods at its food & grocery outlets
The company wants to bring multiple food options to its customers and has already invested in a state-of-the-art food innovation lab to support new products.
Pharmaceutical and Biotechnology major Wockhardt Limited and its subsidiary today announced the signing of agreements to divest their Nutritional business to Danone, one of the fastest growing food Company in the world
Wockhardt has presence in India’s nutritional category with Farex®, Dexolac®, Nusobee® and Protinex®.
Britannia Industries acquires the entire stake of Fonterra, the company’s joint venture partner since 2002 in Britannia New Zealand Foods Pvt. Ltd, which is engaged in the dairy business.
Britannia Industries entered into an agreement with Fonterra Brands (Mauritius Holding) Ltd, Mauritius, for acquiring the latter’s 49 per cent equity and preference shareholding in Britannia New Zealand Foods Pvt. Ltd (BNZF).
Packaged Food Industry
India continued to experience inflation in 2011
In particular, food and oil prices surged in the first half of the year, although the pace of inflation slowed down in the later months
Many packaged food manufacturers reported that rising input costs put pressure on profit margins, and they either had to raise prices or manage costs more closely
Players in the mass segment also launched low-price variants of premium products to fatten profit margins
Inflation also reduced consumer spending power. In particular, consumers in the low-income segment were forced to reduce spending on non-essential items.
In response, many manufacturers launched products in small packets at lower prices
For products where profit margins are thin, for example plain biscuits and staples, dominant manufacturers were able to increase unit prices by applying direct price hikes or reducing pack sizes.
Nestlé India raised prices of dairy products, and changed its product mix to reduce focus on low-margin products in 2011
Hindustan Unilever Ltd reported that it managed cost pressure through aggressive saving programmes and price increases
It also launched Cup-a-Soup in February 2012. Through the new launch the company planned to increase volume sales through smaller packaging sizes.
Manufacturers targeting the mass segment launched lowprice variants of premium products
In January 2012 Parle Products Pvt. Ltd launched Happy Happy chocolate chip cookie, which was priced 60% cheaper than Parle Hide N Seek – the relatively premium offering from the company
Where an 82.5g packet of Parle Hide N Seek commanded a price of Rs 20.00, Happy Happy sells at Rs5.00 for a 45g pack
Hindustan Unilever Ltd’s Cup-a-Soup is also a cheaper soup variant of its Knorr soup products › The premium range of Knorr soup is priced around Rs35.00, while
Cup-a-Soup is Rs12.00
Some manufacturers were reluctant to increase price too much for fear of losing customers to competitors
These manufacturers looked into more stringent cost controls
Examples included ITC Ltd’s efforts to improve production efficiency and Hindustan Unilever Ltd’s efforts to reduce packaging costs.
High inflation has dampened India’s economic growth in recent times
However, in January 2012 the annual inflation rate slowed to a 2-year low of 6.6%
Easing inflation is expected to lower interest rates, increase consumer expenditure and decrease input costs for manufacturers
While the pace of inflation for input costs is expected to slow down in 2012, commodity prices are likely to remain volatile due to shortages of raw materials around the world, and an unstable political situation in the Middle East
Prices of certain food, such as milk and edible oils, remain a potential problem area for inflation
Uncertainties in the global economy are limiting the outlook for export
Packaged food value sales in North India are projected to see a constant value CAGR of close to 9% over the forecast period, marginally slower than the national average
The key growth driver will be growing demand for higher quality products (for example richer chocolate, premium offerings, healthier products) and the switch from the unorganized segment to the organized segment due to increases in consumers’ disposable incomes.
In response to volatility in commodity prices, manufacturers will continue to watch costs closely
Given the forecast slowdown in the economy, consumer sentiment may weaken, and manufacturers will be unwilling to raise prices
Leading manufacturers may live with narrow margins and drive volume sales instead, or they may reduce pack size while maintaining same price points
Private label products are not expected to see dynamic growth over the forecast period
› This is because margins are very narrow and retailers will not be able
to price private label products much lower than leading manufacturers such as ITC
Due to urban consumers’ desire for a higher quality of living, premium offerings in packaged food are less likely to be affected by changes in the economic situation
Hence, manufacturers whose portfolio includes established brands and premium products are expected to perform well over the forecast period
Small manufacturers will see reductions in value share, as they have less scale to cushion the impact of high input costs and softening consumer demand
Segmental Analysis
The Drinks Industry is divided into the following segments – 1) Soft Drinks: This segment includes – Bottled Water Carbonates Concentrates Fruit/Vegetable Juices Ready to Drink (RTD) Coffee RTD Tea
2) Hot Drinks: This segment includes – Tea Coffee Other Hot Drinks
3) Alcoholic Beverages This segment includes – Spirits Beer Wine
Drinks Sector
Soft Drinks:
2011 soft drink value sales growth = +7.5 %; CAGR forecast to 2015= +9.0%
With the growth in the number of modern retail outlets, the volume sales of soft drinks have also increased
Coca-Cola and PepsiCo compete through lemonade/lime carbonates by increasing the visibility of their brands Sprite, Limca and 7-Up respectively
Local flavours by manufacturers to cater to consumer tastes
Fruit/vegetable juice outshines carbonates in terms of growth as beverage companies continuing to invest in diversification away from carbonated beverages and into healthier sub-sectors
The Indian juice market is a very attractive proposition for juice producers, but the market remains fairly immature.
This immaturity can be linked on the supply side to the high costs of juice concentrates, transportation and packaging materials filter through to higher prices on packaged juice products, leaving packaged juice producers in a weaker position to compete against the price-competitive informal juice producers
RTD formats becoming popular due to convenience
Hot Drinks: Success of retail chains leads to robust growth within hot drinks
Child-specific and female-specific other hot drinks drive volume sales
Hindustan Unilever and GlaxoSmithKline battle for leadership riding on the popularity of the popularity of brands like Brooke Bond, Bru and Horlicks
Specialty teas and green tea still new but increasingly accepted
Fortified hot drinks still used by manufacturers to enhance product offerings
Tea sales growth for 2011 = +6.1% in local currency terms; compound annual average growth to 2015 = +6.7%
Point sales are forecast to reach a value of INR242.8bn (US$6.2bn)
Growth forecasts in the tea sector indicates a mature market
Green tea gaining popularity in urban India
Mature tea market prompting local tea manufacturers to look abroad to specialty tea markets in UK and US
Coffee sales growth for 2011 = +10.6% in local currency terms; compound annual average growth to 2015 = +11.6%
Point sales to reach INR52.9bn (US$1.3bn)
Growth rates and forecasts indicate a much less saturated market and continued industry dynamism
The rapidly expanding middle class is embracing café culture
Local players have also entered the high-growth café sector
Starbucks has opened shop in India in partnership with Tata, positioning itself in the premium end of the Indian coffee market
Clear trend towards premiumisation of the coffee industry
Premium hot drinks increasing presence on supermarket shelves with premium packaging being used to create a superior image and to maximize profits
Alcoholic Drinks: Alcoholic drinks value sales growth for 2011 = +9.3% in local currency terms; compound annual average sales growth to 2015 = +13.3% Alcoholic drinks volume sales growth for 2011 = +5.3 %; compound annual average sales growth to 2015 = +6.2% Vast sums being invested by the world’s leading companies into increasing production capacity as well as marketing and branding initiatives Numerous product launches in 2011 by both global and domestic brands, across different price points and categories
New launches reflected manufacturers extending and upgrading their existing portfolios as well as entering new markets
The year 2011 witnessed fierce competition between domestic and international players fighting hard to strengthen their positions
Packaging played a major role in the new launches to add aspirational value for consumers
Premiumisation was reflected in manufacturers upgrading their existing brands with new packaging and launching more premium brand varieties in beer and spirits
Beer continues to dominate the sector in terms of volume, with compound annual average growth forecast at 6.2% to 2015
The wine sub-sector is expected to outperform, with its compound annual average growth in volume terms forecast at 7.2% to 2015
Wine is increasingly perceived as a sophisticated alcoholic beverage and a symbol of social prestige
The shift from country liquor to branded spirits will continue to contribute to growth in the industry
Young adults becoming more prominent consumer base
The changes in each segment can be summarized graphically as follows
Drinks Segment
The Growth drivers vary in each category within each segment. They can be listed as follows – Soft Drinks: Supermarkets and hypermarkets accounted for a combined 9% share of total volume sales in 2011
Manufacturers can showcase their new variants to capture new consumers and enable them to understand the options. This channel is helping to facilitate the growth of soft drinks
Soft drinks players look towards supermarkets and hypermarkets as ideal channels to cater to the young, fashionable and relatively wealthy consumer segments
This trend reflects the rise in disposable incomes available to the working population of India
The real driver of growth to 2015 and beyond will be the increased interest in the non-carbonated, healthy drinks category.
Sales of fruit juices and bottled waters are expected to soar – a consequence of growing consumer interest in healthy living but also thanks to the promotional, product launch and marketing efforts of the industry’s major players, with sales of these higher-priced, higher-profitmargin products much greater contributors to financial performance than carbonates.
Growth in the soft drinks sector will be supported by continued investment from the industry’s leading players – namely US multinationals The Coca-Cola Company and PepsiCo
Hot Drinks: In 2011, hot drinks recorded its highest level of off-trade value growth of the review period
Growth was fuelled by strong double digit performances within areas like coffee and tea
Sales are being driven by the surge in the number of cafes in urban areas
The expansion of chains like Caffe Pascucci, Gloria Jeans, The Coffee Bean & Tea Leaf, Costa Coffee and Wagh Bakri Tea Lounges has also resulted in a robust increase in retail sales in recent years
Manufacturers are introducing new products to drive sales and are putting pressure on supermarkets and hypermarkets to showcase their product
Modern retail outlets have started to compete with independent small grocers on pricing in a bid to boost sales
Sustained high levels of investment in the Indian coffee sector are a key driver of growth in this category
Consumption of premium products is increasing within coffee and teas
Rising disposable incomes and increasing consumer sophistication will continue to fuel demand for premium products over the coming years
Alcoholic Drinks:
Strong growth forecast for alcoholic drinks
Demand for alcoholic drinks in India is expected to continue to rise over the forecast period, with a double-digit total volume CAGR expected over 2011-2016
Increasing availability, higher incomes and growing social acceptability of drinking alcohol will be the driving factors behind growth in India. The shift from country liquor to branded spirits will continue to contribute to growth in the industry
The demographic breakdown of this age group (around 145mn of India’s population are female and aged between 20 and 34 years) is another positive behind strong wine demand, with a growing number of younger women stepping into the workplace and drinking wine during social occasions.
Rising income would encourage the spread of wine consumption across India’s secondary and tertiary cities, with the Indian states of Karnataka, Andhra Pradesh, Orissa, Chhattisgarh and Jharkhand representing the strongest medium- to long-term opportunities
With dynamics such as the maturation of India’s youth population, rising purchasing power, greater exposure to Western influences and growing health awareness favouring growth of the domestic wine market, wine has been steadily increasing its market share against the other alcoholic beverages
The strong growth in affluence and a rapid change in social patterns and lifestyles provide a strong impetus to international beer sales
Drinks Sector
Soft Drinks:
PepsiCo India’s recent outperformance to Coca-Cola India further reflects the heightened price sensitivity of local consumers
PepsiCo India’s willingness to absorb the bulk of its higher input costs has allowed it to surpass market leader CocaCola India in recording volume sales growth in the Indian soft drinks market
Coca-Cola India Pvt Ltd and PepsiCo India Holdings Pvt Ltd continue to compete aggressively in this category by increasing the visibility of their brands Sprite, Limca and 7-Up respectively
Soft Drinks:
Catchy taglines were used by manufacturers to generate consumer interest, alongside aggressive campaigns using Bollywood actors
In the sales channel, independent small grocers will continue to dominate soft drinks sales in the forecast period due to the extremely widespread presence of this format throughout the country
Hot Drinks:
Hindustan Unilever and GlaxoSmithKline are the dominant players within hot drinks in India due to the popularity of brands like Brooke Bond, Bru and Horlicks
The introduction of lower priced products and brands which target specific consumer groups are examples of the strategies used by these companies to drive sales
The limited availability of milk in East India means that hot drinks which play a role as milk substitutes have a significant presence in the region, with GlaxoSmithKline’s Horlicks being the most trusted brand.
Hot Drinks:
In addition, Cadbury’s Bournvita also enjoys healthy brand recognition amongst consumers
In most semi-urban and rural areas of East and Northeast India, Tata Global Beverages has a stronger retail presence than Hindustan Unilever, with Bru and Nescafé being the dominate coffee brands.
GlaxoSmithKline led other hot drinks sales in North India in 2011 due to the popularity of its Horlicks brand. Other hot drinks are slowly increasing in popularity in North India, mainly among children
Tea in North India is fragmented, with many small regional brands like Uttam Tea and Mohani Tea being available in the area
Regional players are launching regional marketing strategies in order to maintain their sales shares within tea
Premium tea brands like Twinings, Tetley and Honest tea target urban consumers, especially young working professionals
Speciality teas and green teas are increasing in popularity in cities like Bangalore, Chennai and Hyderabad which are also the IT hubs of South India
Other hot drinks in South India is dominated by Horlicks, Boost and Bournvita. These brands are competitively priced but are still premium when compared to products within tea and coffee
Hindustan Unilever and Nestlé India continue to dominate coffee as their brands are widely available in kirana stores as well as in modern trade outlets in West India
Bru and Nescafé were the two most popular coffee brands in 2011
Other hot drinks is also characterized by the widespread presence of national players: GlaxoSmithKline (Horlicks) and Cadbury India (Bournvita).
Alcoholic Drinks:
Domestic players launch premium products to compete with MNC giants
The year 2011 saw many new such brands making their presence felt in India
Aspri Spirits Pvt Ltd brought Framingham wines to the Indian market; these are premium quality wines from New Zealand to target the ontrade and high-end restaurants and bars.
Modi Illva India Pvt Ltd introduced a premium vodka launched as a Pure Italian Luxury Vodka; its fine distillation process gives it a premium image which is expected to attract the younger generation looking for a sophisticated brand of vodka.
Alcoholic Drinks:
United Breweries Ltd launched Heineken as a domestic premium lager and positioned it as a super premium product but likely to be available at a lower price than the imported variant, so consumers can purchase a premium Heineken brand at a slightly lower price than before
Domestic manufacturers are driving this trend and are expected to introduce more premium and super premium brands in the Indian market to compete with giants such as Pernod Ricard and Diageo
This trend is expected to last for at least two more years
M&As, New Entrants, Exits
Soft Drinks Consumers are driving this trend as they are becoming more health orientated, particularly educated young working professionals. Leveraging the growing health trend, Coca-Cola India and PepsiCo India Holdings are strengthening their non-carbonated offerings Supermarkets and hypermarkets accounted for a combined 9% share of total volume sales in 2011; however this figure is following a rising trend. Soft drinks players look towards supermarkets and hypermarkets as ideal channels to cater to the young, fashionable and relatively wealthy consumer segments Domestic manufacturers and multinational operators have launched local flavours to cater to local tastes. PepsiCo India Holdings relaunched its Duke’s range in carbonates with exotic new flavours such as raspberry, masala soda, ginger ale and ice-cream soda Manufacturers who were focused on powder concentrates have slowly started to diversify their product portfolio to include RTD formats
Hot Drinks Success of retail chains leads to robust growth within hot drinks Demand for coffee is being driven by the surge in the number of cafes in India. The expansion of established coffee chains like Java City, Café Coffee day and Barista Coffee has resulted in an increase in both on-trade and off-trade sales On-trade coffee volume sales increased by 8% in 2011 whilst offtrade volume sales only increased by 6%. The number of chained specialist coffee shops increased by 15% in 2011 Child-specific and female-specific other hot drinks drive volume sales - Horlicks and Bournvita have introduced products like Horlicks Lite, Women’s Horlicks and Bournvita Li’l Champs which are targeted at specific consumer. Acti Life from Zydus Wellness was launched as a daily nutritional supplement for adults which the company claims contain probiotic actifibres which help to control cholesterol and improve digestion
Specialty teas and green tea still new but increasingly accepted - Sales of green tea and specialty teas are increasing at a faster rate than those of black standard tea
In January 2012, Tata Global Beverages launched Tata Tetley Green Tea. In addition, Brooke Bond Taj Mahal also launched a green tea range in high-end retail outlets and supermarkets
Fortified hot drinks still used by manufacturers to enhance product offerings - GlaxoSmithKline Consumer Healthcare launched Horlicks Gold in September 2011. The company claims that the product is a blend of malts which dissolve rapidly and contain an additional 20 vital nutrients which provide both higher energy and stamina.
Alcoholic Drinks Packaging used as tool to attract aspirational consumers Semi-premium products are launched with attractive packaging to give them a premium appearance. Embossed bottles without labels were used to give a new look to the bottles
Young adults becoming more prominent consumer base Heineken was launched locally only in the on-trade channel all over India. The company is focusing on young adults by promoting the brand through music shows, TV campaigns for Champions League football
Domestic players launch premium products to compete with MNC giants - Modi Illva India Pvt. Ltd introduced a premium vodka launched as a Pure Italian Luxury Vodka
In-house parties driving off-trade sales - Manufacturers such as Chateau De Banyan and specialist retailers such as Living Liquidz and Spiritz & More have started to offer home delivery services for in-house parties
Key new product launches - Brand portfolio extensions such as Black Dog 18 YO and Vladivar Vodka by United Spirits Ltd and Heineken by United Breweries Ltd enabled the leaders to create energy around mature brands and support their share against new domestic entrants
Specialist retailers - Over the review period increased affluence and consumer sophistication led to the rise of chained and independent specialist retailers that provided a premium shopping experience to consumers in the metro cities
Market mergers and acquisitions activity - in July 2011, United Spirits Ltd acquired a 61.5% stake in Sovereign Distilleries giving the company direct control to increase its in-house distillation capacity
The introduction of international brands through partnerships with domestic companies, especially bottling agreements, is expected to increase consumer exposure to nascent product categories, such as tequila (and mezcal), which will drive trial purchases and create a consumer base for such products.
Hindustan Unilever Limited
Coca Cola India
Amul Dairy
PepsiCo India
Company
Segments
Sales ($mn)
Year end
Hindustan Unilever Beverages-Hot & Limited India Soft
3,921
Mar-10
Coca-Cola India
Beverages-Soft
5271
Dec-10
Amul Dairy
Food-Dairy, Confectionery, Convenience; BeveragesHot & Soft
1791.2
Mar-10
PepsiCo India
Food- Snack; BeveragesHot & Soft
6639
Dec-10
Food-convenience;
Hindustan Unilever Limited (HUL) is majority owned (52.1%) by Anglo-Dutch fast-moving consumer goods giant Unilever
The company is India’s largest consumer products retailer.
Currently, its largest product category in terms of revenue contribution is soaps and detergents.
Its food and beverage division, on the other hand, which includes brands such as Kwality Wall’s ice cream, Knorr soups and Lipton tea, generates around a quarter of its revenues.
Food – convenience & various
Beverages – Hot Drinks
Annapurna – Atta, Salt
Brooke Bond Red label
Kissan – Jam, Ketchup, Squashes
Brooke Bond 3 Roses
Knorr – noodles, soups
Brooke Bond Taaza
Kwality Wall’s – ice cream
Brooke Bond Taj Mahal
Modern Bread
Bru – coffee
Lipton – Tea
The company posted a 10.8% growth in its net sales for the year ending March 2011
HUL has also enjoyed impressive volume growth across their key product categories such as food and beverage and health supplements
Turnover (in Rs cr) Year ending in March 2012
Year ending in March 2011
Sales
Others
Sales
Others
Beverages
2,577.02
40.41
2309.23
37.27
Packaged
1,341.93
17.53
1,162.28
16.15
Others: indicate service income from operations
Operational Indicators (in Rs cr)-Foods 2008
2009
2010
Net Sales
202,393
175,238
194,011
Net profit
24,965
22,020
23,060
No of employees
NA
NA
16,000
Production, 2010 Brand
Annual Production
Canned & processed fruits & vegetables
48, 189 tonnes
Frozen desserts & ice cream
18 million litres
Competitive Positioning, 2010 Product Type
Retail value share (%)
Rank
Soup
62.0
1
Ice cream
16.7
2
Bakery
2.5
5
Noodles
2.3
5
Sauces, dressings & condiments
5.9
8
Strengthened consumer spending in India › Reflected in the headline sales and volumes figures released by
HUL as the company posted a 10.8% growth in its net sales for the year ending March 2011
Aggressive advertising, branding initiatives and continuous product launches to boost volume growth amid sustained inflation › Hindustan Unilever posted only a slight decline in its net income for
the year ending March 2011 despite rising raw material costs
›
Led to relatively weaker operating margin performance as there was an increase in advertising and promotional expenses
Hindustan Unilever’s willingness to pass on the rising costs of production to consumers has also helped protect its margin growth in an inflationary environment.
HUL is also in a better position than industry players active only in a single product category to mitigate their exposure to commodity price volatility, given their wider range of inputs and product offerings.
So though it is exposed to a greater variety of potentially volatile input costs, the company is not completely exposed to sharp price movements for a single input and this offsets the direct impact of commodity price movements
HUL’s price hikes to protect its profit margins and boost value growth, further price increase could frustrate its efforts to reach the rural consumer base given that majority of the Indian population still falls into the lower-income bracket and are unlikely to be able to afford the substantial price increase
Coca-Cola India, the local subsidiary of US soft drinks giant The Coca-Cola Company
Market leader in India’s soft drinks industry. It operates across all soft drinks sectors in the
country, including carbonated soft drinks, fruit juices, energy drinks and bottled water
Hot Drinks
Soft Drinks
GEORGIA Gold
Coca-Cola Diet Coke Thums Up Sprite Fanta
Limca Maaza Minute Maid–Pulpy Orange & Nimbu Fresh Burn – energy drink Kinley- Water & Soda
Schweppers GEORGIA Gold- Cold Coffee & Iced Tea
Coca-Cola 35 34 33 32 Coca-Cola
31 30 29
28 2007
2008
Turnover in Rs million
2009
2010
2011
2012
Production (Volume in million litres) Coca-Cola 26 25.5 25 24.5
Coca-Cola
24 23.5 23
2007
2008
2009
2010
2011
2012
High investments level in the country after the parent company’s announcement that India is a key target
Creation of an independent retail sales team greatly enhancing distribution of Coca-Cola brands
Consolidating bottler activities and taking majority ownership of more operations allowed Coca-Cola better control over marketing direction, as well as boosted efficiency
Coca-Cola India’s decision to pass on cost increases to local consumers has allowed PepsiCo to play catch up
Coca-Cola has recently launched a number of these, such as its Burn energy drink and lemon juice drink Nimbu Fresh- because Healthier, higher value non-carbonated soft drinks represent the strongest long-term growth opportunities and also carry higher margins
New distribution and manufacturing model, streamlined supply chain infrastructure and delivery systems, provided greater economies of scale and improved profit margins, thus enhancing capacity to invest
Coca-Cola can further leverage on its existing distribution network to entrench itself deeper among the country’s rural consumer bases
The Coca-Cola Company plans to leverage on its franchise partnerships in India as it seeks to uphold its longterm sales and earnings outlook - started discussions with independent franchisee bottlers in India on the implementation of a new distribution and manufacturing model that it currently follows in China
Coca-Cola’s move to extend its tea-market partnership with Nestlé clearly marks another step towards protecting its Indian market share lead in this long-running and fierce market-share battle
Amul Dairy is one of India’s largest food companies and one of the country’s best-known brands.
Jointly owned by an estimated 2.8 million milk producers, the company produces spreads, cheeses, UHT milk, milk powder, fresh milk, curd and ice cream
It has been pursuing diversification into the confectionery, beverages and snack foods sub-sectors in recent years.
Amul also has a growing export business, with key markets at present including Singapore, the US and the Gulf countries.
Food – Dairy, Confectionery, Convenience
Beverages - Dairy
Bread Spreads – Amul Butter, Amul Lite, Delicious Table Margarine
Milk Drinks – Amul Kool, Kool Café, Kool Koko, Kool Chocolate, Kool Flavoured Bottled Milk, Tetra Pack
Powder Milk – Spray Infant Milk Foods, Full cream milk powder, Sagar Amul Masti Spiced Buttermilk, Lassee, skimmed milk powder, Sagar Tea Kool Thandai Coffee whitener, Amulya Dairy whitener Cheese – pasteurized, spreads, emmental, pizza mozzarella, gouda
Health Drink – Nutramul
Cooking – Pure Ghee, Cooking butter, Malai Paneer, Utterly delicious pizza, Mithai Mate, Masti Dahi, Probiotic Dahi
Fresh Milk – Amul Gold, Taaza, Lite, Fresh Cream, Double Toned, Slim & Trim, Shakti toned, Calci+, Buttermilk
Desserts – ice-creams, shrikhand, mithai gulab jamuns, chocolates, basundi, flavoured yoghurt
Growth Year
Sales (INR, bn)
Turnover (INR, mn)
Growth(%)
2010
80
80,053.6
52.2
2009
52.6
67,113.1
22.9
Competitive Position, 2010, Foods Product Type
Retail value share(%)
Rank
Confectionery
1.2
11
Dairy
14.6
1
Ice cream
36.3
1
Oils and Fats
10.8
2
India’s biggest dairy recording an increase in 20% of turnover from previous year (2010-11)
Farmers in Gujarat are rejoicing over a 58 per cent increase in their milk prices over the last three years at a time when their counterparts in other States were struggling to make their milk business viable in the absence of good returns
Apart from the 750 distributors added in dairy and fresh products segment, GCMMF also added 150 super distributors through the implementation of its new ‘hub & spoke’ model, to reach the smaller markets
GCMMF will be investing Rs 3,000 crore to set up nine processing units in the next four years. This would enhance Amul’s milk handling capacity from the existing 145 lakh litres per day to 180 lakh litres per day.
In 2011-12, 965 new Amul Parlours have been added, taking the total strength to 6,315. Apart from the 170 parlours at railway stations and 303 operating at various centres of excellence, Amul also has 600 air-conditioned ice-cream scooping parlours, making it the largest single brand retail in the country
Cost & Profitability Turnover (Rs cr) 16000 14000 12000 10000 8000
Turnover (Rs cr)
6000 4000 2000
0 2010-11
2011-12
For 2012-13, expected turnover
2012-13
Procurement Members
13 cooperative milk producers
No of producer members
3.03 million
No of village societies
15,712
Total milk handling capacity
13.67 million litres per day
Milk collection (2010-11)
3.45 billion litres
Milk collection (daily avg)
9.2 million litres
Milk Drying Capacity
647 Mts per day
Cattle feed manufacturing capacity
3690 Mts per day
Product diversification has been integral to Amul’s growth strategy in recent years
Entry into export markets – reduced Amul’s reliance on the intensely price-sensitive market of India
Invested in development of its distribution network to enhance distribution efficiency and increase sales opportunities – was essential and is important due to the perishable nature of the dairy products
The company will elevate its milk procurement and supply chain capacities in order to sustain increasing demand for branded milk and milk products. Employing a 2-pronged approach, it is likely to concentrate on expanding its retail reach into rural and semi-urban India on one hand, and introducing value-added dairy based products for urban consumers on the other.
Its recent venturing into ice parlour business – investment in new product development in new subsectors to improve chances of poaching market share from its competitors
Expanding in the high-value sectors to tap on the growing affluence among India’s middle classes
Like its rivals, Amul is now struggling in the face of elevated sugar, cocoa and milk prices – although being a cooperative and buying directly from its members, it is arguably more immune to rising milk prices than most
Growing importance of exports markets following the company’s recent decision to implement an aggressive pricing approach that will keep prices in a number of categories at their current levels.
PepsiCo India is the local subsidiary of US major PepsiCo
Second largest player in the Indian soft drinks market
Like rival Coca Cola, PepsiCo is active across a diverse range of beverage subsectors, while it is also present in the snack foods subsector via its Frito-Lay India subsidiary
Food – Snacks (Frito Lay India)
Beverages – Soft Drinks
Aliva
Pepsi & Diet Pepsi
Cheetos
7 UP
Kurkure
Aquafina – drinking water
Lay’s
Duke’s - soda
Lehar Namkeen
Gatorade – sports drink
Quaker Oats
Mirinda
Uncle Chips
Mountain Dew Nimbooz Slice Tropicana & Tropicana 100%- juices
PepsiCo Inc 27.5 27 26.5 26 25.5 25 24.5 24 23.5 23 22.5 22
PepsiCo Inc
2007
2008
Turnover in Rs million
2009
2010
2011
2012
Production (Volume in million litres) PepsiCo Inc 22.5 22 21.5 21
PepsiCo Inc
20.5
20 19.5 2007
2008
2009
2010
2011
2012
As part of extensive repositioning of its food & drinks portfolio, PepsiCo’s Frito-Lay plans to launch more than 50 new products as it invests in scale and innovation to consolidate its leading position in the country’s snack market
PepsiCo India continues to invest heavily in India, both to prevent Coca-Cola from building on its existing lead and to prevent smaller market players from threatening the dominance of the big two.
Capacity expansions at existing sites and new greenfield facilities are a priority, while greater investment in supply chain efficiency, market infrastructure (ie coolers and shelving units) and research and development are also key elements of its expansion strategy
PepsiCo India’s joint venture with Tata Tea (April 2010), gave access to a vast distribution network and a strong local brand name
Piloted the launch of cookies under the Quaker Oats brand
› Being a relative latecomer to the Indian biscuits
market (PepsiCo launched its first biscuits brand Aliva in the country in June 2009), PepsiCo could face hurdles in building a significant market foothold against stiff competition from domestic and multinational confectioners
Invested another US $ 500mn to fund its expansion plans over the next two yearschannelled into new manufacturing and marketing infrastructure, new product launches and research and development initiatives that PepsiCo hopes will further entrench its brand
PepsiCo leveraging on its developed marketing capabilities and existing distribution networks to engage in aggressive product innovation and development to cater to the ever-evolving tastes and preferences of the Indian consumer
Future Trends
Trade
Exports growth – 13.7% , Compounded annual growth rate till 2015 – 16.2%
Imports growth – 12.1%, Compound growth rate till 2015 – 14.3%
Short term perspective for growth in trade looks bearish
Major challenges include underdeveloped production, harvesting and storage infrastructure.
Demand among a population with rising purchasing power will contribute to the need for more foreign-sourced products.
In particular, Westernised consumption habits and the need for ingredients not widely produced on a local level will stimulate imports.
Inflationary pressure likely to put pressure on domestic household budget.
Global Macroeconomic factors – Growing risk of double dip recession in US, Eurozone crisis
Potential hard landing in China pose potential risk to domestic demand in short term
In long term FDI in retail and growing disposable income looks favourable
•
Government’s recent hiking of diesel and petrol are also likely to put pressure on headline inflation
•
Pepsi Co’s recent outperformance to Coca – Cola India further reflects the heightened price sensitivity of local consumers which has been due to Pepsi Co’s willingness to absorb bulk of its higher input cost.
Rapid income growth, a young and growing population and a continued influx of sector investments underline the potentially dynamic opportunities on offer on the consumer side.
India has a young and rapidly growing population of more than 1.2 billion.
As youth climbs up the income ranks, opportunities presented by the mass market catches the eye.
P & G’s focus on expanding its mass market portfolio is testimony to this view.
P & G plans to enter into new product categories such as mass skincare products, hair oils and toothpaste in a bid to leverage on the stronger rewards in this segment.
FDI will bring about positive spill over effects to the other consumer – facing sector in the industry.
The spread of organized retail would improve the visibility of consumer products and facilitate the distribution of products to local consumers
Indian government will be setting up 10 Mega Food Parks with an investment of $514 Million
The food processing industries are prioritized highly in terms of getting credit and lending money in the bank, because they grow fast and thus indicate a stable business.
The fruit and vegetable processing companies do not have to pay any taxes on these products to the Indian government, thus making the business easier to access.
The excise duty tax on ready-to-eat packaged foods and instant food mixes has been brought down from 8% to 16% making this industry highly competitive and attractive
Among the four key segments, i.e., Confectionary, Bread, Fun food and Snack, and Food Juices and Concentrates; the highest growth has been seen in the bread segment and the expected demand in 2014-15 for bread is Rs 26.90 billion.
Food consumption growth rate 5.9%, compounded annual growth rate till 2015 = 7%
Per capita food consumption growth rate 3.3% and compounded annual average growth rate 5.6%
Change of consumption habits over long term due to high disposable income will lift up consumers ability to trade up expensive stuff and non – essential purchases.
The mass grocery retail industry is expected to help drive up food consumption by presenting consumers with wider range of higher-value products
A dynamic industry should fuel competition which would in turn heighten marketing and promotional spending as well as drive down the price of non – essential items.
Confectionary volume sales growth – 7.2 % . Compound annual average growth rate till 2015 – 7.9%
Confectionary Sales value – 5.9% Compounded annual growth rate till 2015 – 8.1%
Chocolate is expected to outperform its counterparts with compounded annual growth rate of 10.3% till 2015
Rapid economic growth, increasing disposable incomes, increasing urbanisation and the continued spread of mass grocery retail will all serve to stimulate the demand for confectionery products
Buoyed by higher incomes, Indian consumers are gradually gravitating towards higher-value products in line with a growing familiarity with Western cultures.
Growth opportunities will remain via innovation and product diversification.
Manufcaturers have to capture unique Indian tastes and preferences.
A recent trend noticed is the nationalisation of confectionary brands as local confectioners roll out their regional brands
Parle Products launched Top biscuits brand in West Bengal and Assam to compete with SAJ Food Products
Parle, Dabur India, ITC Foods and Emami are already enjoying success from the launch of their regional brands across the country
Another distinct trend is Indian confectionary sector is strengthening focus on healthy product offerings.
Britannia sharpen its focus on diabetic-friendly products and Kellogs repositioning its brand as tastier and healthier.
Dunkin Donuts plans to set up 25 – 30 stores with the first year of its partnership
Coffee growth at 10.6% and compounded annual growth rate to 2015 – 11.6%
Tea growth at 6.1% and compounded annual growth rate to 2015 – 6.7%
The Indian tea sector remains fairly mature, given the presence of major tea manufacturers such as Tata Tea and Apeejay
Due to the maturity in the sector, it is prompting local tea manufacturers to look abroad for future growth opportunities, with special focus on US and UK
The outlook for the Indian coffee sector is much more attractive as a result of lower levels of market saturation and continued industry dynamism
Fresh & Honest’s recent espresso partnership with Illy and the entrance of Starbucks show a clear trend towards premiumisation of the industry
With this in mind, existing coffee players are clearly not resting on their laurels
Café Coffee Day took a period of 14 years to set up 1,000 stores in India but is now planning to double its outlet count
Starbucks will be positioning itself in the premium end of the Indian coffee market
With this in mind, existing coffee players are clearly not resting on their laurels
Café Coffee Day took a period of 14 years to set up 1,000 stores in India but is now planning to double its outlet count
Starbucks will be positioning itself in the premium end of the Indian coffee market
Alcoholic drinks growth – 9.3% , Compounded annual growth rate till 2015 – 13.3%
Alcoholic drinks volumes sales growth – 5.3% Compounded annual growth rate till 2015 – 6.2%
Wine sector to outperform with annual growth rate at 7.2%
As one of the fastest-growing emerging markets, India’s impressive growth trajectory is supportive of an acceleration of the premiumisation trend
This strong value growth could also be attributed to the vast sums being invested by the world’s leading companies into increasing production capacity as well as marketing and branding initiatives
Continued investments from Asia Pacific Breweries, Cobra Beer, Carlsberg and Anheuser-Busch InBev will only fuel this trend
Beer will continue to dominate the sector in terms of volume, with compound annual average growth forecast at 6.2% to 2015
Indian consumers can pay more than twice as much for foreign beer brands than locally brewed beer brands owing to the 100% import duties levied on foreign brand
With the Indian alcoholic drinks market traditionally focused on spirits and beer, wine consumption is still largely a fledgling concept in the country
Continued investments from Asia Pacific Breweries, Cobra Beer, Carlsberg and Anheuser-Busch InBev will only fuel this trend
Beer will continue to dominate the sector in terms of volume, with compound annual average growth forecast at 6.2% to 2015
Indian consumers can pay more than twice as much for foreign beer brands than locally brewed beer brands owing to the 100% import duties levied on foreign brand
With the Indian alcoholic drinks market traditionally focused on spirits and beer, wine consumption is still largely a fledgling concept in the country
Indian wine producer Sula Vineyards’ strong revenue growth of around 40% for its latest financial year underlines burgeoning domestic demand for wine
India has around 303mn people aged 20-34, among which wine is increasingly perceived as a sophisticated alcoholic beverage and a symbol of social prestige
Accompanied by growing health awareness, Indian consumers are developing a greater penchant for wines
Soft drinks growth at 7.5%. Compounded annual growth rate at 4.9% till 2015
Soft drinks value sale growth at 7.5%. Compounded annual growth rate at 9% till 2015
India’s soft drinks sector is forecast to experience bullish growth over our forecast period
Growth in the soft drinks sector will be supported by continued investment from the industry’s leading players – namely US multinationals The Coca-Cola Company and PepsiCo.
Both have committed large sums towards expansion in India in recent years owing to the potential that the vast market
The real driver of growth to 2015 and beyond will be the increased interest in the non-carbonated, healthy drinks category
Sales of fruit juices and bottled waters are expected to soar – a consequence of growing consumer interest in healthy living
There is no doubt that the Indian juice market is a very attractive proposition for juice producers, but the market remains fairly immature
This immaturity can be linked to a combination of demand and supply factors
Expensive packaging and transportation costs are arguably the other disincentives for packaged juice Producers
Mass grocery retail sales growth +19.7%; compound annual average growth rate to2015 = +17.6%
Indian consumers are still largely familiarising themselves with the concept of modern retail, which accounts for only 9% of overall grocery retail sales
Four key modern formats (supermarkets, hypermarkets, convenience and discount stores) are already present within India’s mass grocery retail
Dominant ones being Pantaloon Retail, Reliance Retail, and Big Bazaar.
Low purchasing power, Indian consumers have been relatively slow to trade up to modern retailing methods.
Another factor is the restrictive business environment of India’s MGR sector
Indian consumers are expected to increase their spending and turn to modern retail formats in search of the convenience and quality
Global retail giants Walmart and Carrefour, for instance, have already set up cash-and-carry stores in India through partnerships with local conglomerate Bharti Enterprises and Future Group
India is one of the world’s major food producers but accounts for only 1.7% (valued at US$ 7.5 billion) of world trade in this sector
This share is slated to increase to 3% (US$ 20 billion) by 2015
Sustained by high agricultural output, international demand and a strong domestic market, the Indian food industry offers ample scope for large investments in processing technologies, skills and equipment, packaging, refrigeration of frozen food and thermo processing.
Next few years India aims at raising the share of processed food to 20% in comparison to total agriproduce
Market experts are of the opinion that in future, the food products is going to increasingly contribute towards India's GDP growth
With globalization of industrial market and technological advancement the market size of Food and Beverage Sector has widened
Increased FDI inflow, government subsidised food parks, tax breaks are other reasons for the growth of this sector
Adopt proactive product and service differentiation strategies
Focus on successful product lines and global diversification in order to drive sustainable growth
Focus on product innovation as a long term goal for a sustaniable competitive edge
Understand the consumer's motivation for buying your product
Fear of Greed : These are the primary motivators that impacts whether the consumer will buy your product or not. Consumers will be more willing to buy if the product effectively communicates that it will help avoid a potential loss or paint or help to deliver a gain or pleasure
Effectively communicate the indirect costs of product switching
Look for opportunities that will communicate to consumers that product switching entails a sacrifice. Such cost should be pitched as an investment opportunity to the consumer
Invest in marketing strategies that focuses on your core product offering
Show that your product is an essential component of the average consumer's grocery basket
Build brand equity through targeted efforts by Marketing and Sales
Company positioning as a partner to help end users through this tough economic time
Integration of disparate products into a complete solution
Exploit opportunities from consumer feedback
Proactively seek the final consumer's need set and match product lines to those needs
Establish partnerships with other suppliers
Seek out joint branding with other manufacturers to exploit complementary synergies
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