India Food Report 2016

THE INDIA FOOD REPORT 2016 A TERM REPORT ON THE WORLD’S MOST EXCITING FOOD MARKET Sizing • Sectors • Key Players • Opportunities • Challenges • Future

THE INDIA FOOD REPORT 2016 A TERM REPORT ON THE WORLD’S MOST EXCITING FOOD MARKET Sizing • Sectors • Key Players • Opportunities • Challenges • Future

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THE INDIA FOOD REPORT 2016

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THE INDIA FOOD REPORT 2016

FOREWORD

RAM VILAS PASWAN MINISTER FOR CONSUMER AFFAIRS, FOOD AND PUBLIC DISTRIBUTION, Government of India

I am glad to know that India Food Forum is publishing The India Food Report 2016. It is our topmost priority to provide food security to the people of our country. We are implementing the National Food Security Act, 2013 to provide Food security to our population. So far 22 states/ union territories have implemented the Act, which aims at providing subsidized food grain for up to 75 per cent and 50 per cent of India’s rural and urban population, respectively. I hope that this report will contribute in taking care of consumers as well as increasing the awareness among people. I convey my best wishes to the team of the India Food Report 2016.

Ram Vilas Paswan

INDIA FOOD REPORT 2016 | 5 |

FOREWORD

GENERAL (DR.) VIJAY KUMAR SINGH PVSM, AVSM, YSM (RETD.) MINISTER OF STATE FOR STATISTICS AND PROGRAMME IMPLEMENTATION (INDEPENDENT CHARGE) | MINISTER OF STATE FOR EXTERNAL AFFAIRS & MINISTER OF STATE FOR OVERSEAS INDIAN AFFAIRS, Government of India

It gives me immense pleasure to learn that India Food Forum is publishing India Food Report 2016. I wish the said report will be useful for all those who are associated with Food Processing Industries in different sectors.

General (Dr.) Vijay Kumar Singh

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FOREWORD

MOHANBHAI KUNDARIYA MINISTER OF STATE FOR AGRICULTURE , Government of India

It is a matter of great pleasure for me to learn that India Food Forum is bringing out a report called ‘India Food Report 2016’, which aims to present a holistic view of the food sector and highlight important trends and developments in the industry. The food industry in India offers plenty of opportunities for growth in the areas of horticulture, aquaculture and other allied sectors, which, if managed well, will pave the way for India to emerge stronger in the world food market. I am happy to note that India Food Forum is acknowledged today as the best platform in the country for developing new concepts and products under Food and Hospitality sector through knowledge and innovations by the leaders of the industry. Relevant information on trends and directions for all in the food sector and can guide this industry to achieve higher growth. I hope that the chapters and subjects dealt in India Food Report 2016 would benefit all the stake holders in the Food and Grocery and Food Services sector in India.

Mohanbhai Kundariya

INDIA FOOD REPORT 2016 | 7 |

A WORD FROM THE EDITOR

T

he India Food Report 2016, an initiative of India Food Forum, has been prepared with lots of painstaking labour and research by the IMAGES Group with invaluable support from leading consultancies, think tanks and experts associated with India’s large food industry.

Relevant, accessible information and resources are the required cornerstones for a clear understanding and analysis of any industry. It is therefore a matter of great happiness and satisfaction for me that data and research that has gone into the making of India Food Report 2016 and its findings will provide a comprehensive understanding of India’s Food sector and prove useful for all stakeholders. As the Indian economy is looking at opportunities for growth and employment, the Food sector can act as a catalyst and contribute immensely to the economy at large. This Report highlights the potential of India’s Food sector – both Food & Grocery and Food Service – and suggests key interventions that are necessary to ensure sustained impetus for the sector’s growth. The Report looks at key business opportunities within these sectors, focuses on the investment potential and stresses on key challenges that need to be addressed. The findings of IMAGES Research done for the India Food Report 2016 reveal that the country’s Food Retail sector comprising Food & Grocery and Food Service, is valued at INR 25,12,962 crore (2014) and holds a 65 per cent share in the country’s total retail market pie. Out of this, Food and Grocery (F&G) retail is worth INR 23,03,496 crore and Foodservice (FS) market is valued at INR 2,09,466 crore. The average rate of growth during the past four years in F&G has been 15 per cent p.a. and 22 per cent p.a. in FS. The respective growth rates are estimated to take these retail markets to INR 54,20,789 crore and INR 6,90,672 crore by 2020. Food is the largest retail consumption category in India, accounting for 33 per cent of overall consumption expenditure. Indians spend more on food than on any other consumption category and this is expected to continue in the coming decade. This fact alone points to the rising potential of India’s Food sector and its market that is young, growing, aspiring, earning, spending and consuming a whole range of various products and services. India is already the largest global consumer of dairy, pulses, sugar and spices. The findings of the Report reveal that more than half of the total household sector spending on food is expected to come from rural India in the coming decade. There is huge demand from small towns and the rural markets. So, I expect the next phase of revolution (in terms of growth) in the food sector to come from rural areas and tier-II & III cities. If the economy has to grow 8-10 per cent, then there is no way that it can happen without investing in the Food sector and making value additions, which will lead to higher incomes and better living standards and will, in turn, generate more and more demand.

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THE INDIA FOOD REPORT 2016 Data from the chapters in the Report show that over the next six years the food market is expected to register an average growth rate of 5.3 per cent per annum. The pace of growth is expected to be slightly higher at 5.7 per cent per annum between 2020-21 and 2025-26. Both urban and rural growths are likely to be considerably higher during the next decade as compared to the decade ending 2014-15. Going forward, Food Retail is expected to reach INR 61,00,000 crore by 2020. The sector will have much more to offer to both domestic and international investors, in all aspects of growth and business. As we step closer to the onset of a new year, I am sure there will be lots of interesting trends and observations to watch out for. Within the food basket, there will be sub-categories that will emerge strong, health-based foods that will see increasing demand, new flavours from across the world will become popular, and new concepts, formats, themes will get introduced in Food & Grocery and Food Service markets. New players, both in F&G Retail and Food Service, are emerging on the horizon with each one promising faster and better services and quicker delivery. New and innovative retail formats are being introduced. Our lifestyles are evolving, which is influencing our consumption and eating habits. These changes are bringing about the development of new and hybrid formats of organised food retailing. At the same time, the growth of online business presents fresh new opportunities for both F&G and FS players and in a way that they would be able to add value to the supply chain. With so much new developments taking place so fast, the contours of grocery retail and food service are getting redefined. The future will belong to the players who will put in place better customer-friendly models and faster modes of delivering service. All of these will help to grow and expand the market, build consumer confidence and brand loyalty. The future is bright for a society that takes its food seriously and enjoys it too! As manufacturers, retailers and brands continue to gain a better understanding of consumers and their consumption habits, the food sector will grow from strength to strength and become even more resilient. Once again, my heart-felt thanks to all those who made this project possible.

Amitabh Taneja Chief Convenor, India Food Forum CMD and Editor in Chief, Images Group

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PREFACE

India’s Food Retail market is worth INR 25,12,962 crore (2014) and holds a 65 per cent share in the country’s total retail market pie. The Food Retail market has grown at an average 16 per cent p.a. from 2010 to 2014. With the same pace of growth, it will be worth INR 61,11,461 crore by 2020. Out of this, Food and Grocery (F&G) retail is worth INR 23,03,496 crore and Foodservice (FS) market is valued at INR 2,09,466 crore. The average rate of growth during the past four years in F&G has been 15 per cent p.a. and 22 per cent p.a. in FS. The respective growth rates are estimated to take these retail markets to INR 54,20,789 crore and INR 6,90,672 crore by 2020. These are the findings of IMAGES Research done for the India Food Report 2016, which covers in-depth analyses and perspectives on the Food Retail market in India from leading industry experts and think tanks. The India Food Report 2016 takes a close look at the currents, undercurrents and trends in the country’s Food & Grocery (F&G) and Foodservice (FS) markets to map out their future course and trajectory and its implications for all stakeholders. Both these sectors are evolving and maturing, offering lots of opportunities for business and growth. What is fuelling the growth of these two sectors and what are the opportunities for investment? While the chapters later on in the book offer a detailed perspective and analysis of food business segments – food retail, food processing, food logistics & support, food services, supply chain and technology – here’s a brief overview of the market dynamics shaping India’s F&G retail and food-service business.

Growth Dynamics of India’s F&G market

I

MAGES Research pegs the market size of India’s Food & Grocery retail (F&G) retail at INR 23,00,500 crore (~$383 billion). The market is growing at 15 per cent per annum , and is expected to cross INR 35,60,000 crore (~$593 billion) by 2017. By 2020, it is estimated to grow twice its current size. The modern F&G retail market, which is currently less than two per cent of the total market, is expected to grow at 20–25 per cent per annum. With the same growth rate, the modern F&G retail market is well poised to grow even triple its present size by 2020. The findings of IMAGES Research reveal that the Indian food market, sixth-largest food market in the world at present, is valued at INR 25,13,00 crore (25.13 billion rupees), and is expected to cross INR 61,00,000 crore (61 billion rupees) by 2020. Food is the largest retail consumption category in India, accounting for 33 per cent of overall consumption expenditure. Indians spend more on food than on any other consumption category and this is expected to continue in the coming decade. In the year 2014-15, the share of total household sector expenditure going into food was around 43 per cent.

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There has been a steep decline in this share over the last two decades from 62 per cent in 1993-94 to 50 per cent in 2000-05. More than half of the total household sector spending on food is expected to come from rural India in the coming decade.

Food demand is expected to more than double by 2025. There has been average growth of 12-13 per cent every year in food consumption in value terms. Recent data released by CSO finds that consumption expenditure on food items is on the rise. For the period from 2004–05 to 2012–13,

food expenditure grew at a CAGR of 12.5 per cent. Along with the rising demand for food and its growing consumption, there is an evolution of dietary habits as well. Indians are becoming more welcoming towards processed, Western food options like noodles, corn flakes, juices and oats – something which was very nascent until 10 years ago. Factors like increasing awareness and health consciousness, changing lifestyles and time poverty, increasing drift towards convenience and improving availability of convenience foods are increasing the share of processed and packaged foods (including ready to eat / ready to cook traditional and westerns food options, snacking etc.) in the consumer’s food basket. India’s food processing industry was about INR 2,47,680 crore ($41.28 billion) in 2013 and is expected to grow at a rate of 11 per cent to touch INR 4,08,040 crore ($68 billion) by 2018. The food processing industry forms an important segment of the Indian economy in terms of contribution to GDP, employment and investment. The industry contributes as much as 9-10 per cent of GDP in agriculture and manufacturing sector, according to the Ministry of Food Processing Industries (GOI). The Confederation of Indian Industries (CII) estimates that food processing sector can attract an investment worth $33 billion in a span of 10 years. The sector has a potential for generating employment to the tune of 9 million people.

Market Size of Food Categories The Dry Food Grocery category as a whole contributes 34.7 per cent to the total food market in India. The category includes cereals, grains and related products; grams and its products; pulses and its products; sugar in all forms; edible oils; and dry fruits. The large market size of the category, highest among all food

groups, is attributed to the fact that the products that fall in this category are consumed in raw as well as semi-prepared form. India’s DFG market is worth INR 8,00,000 crore (2014) and has grown at a CAGR of 11 per cent over the last decade. With this growth rate, the category is all set to touch the INR 15,00,00 crore mark by 2020, thus becoming almost double of what it is today. Milk and Dairy foods constitute the second-highest share, after Dry Food Grocery, among all the seven F&G categories. The segment holds about 16 per cent of the overall food market in India. The country is the largest producer of milk in the world and has a substantially large bovine population with about 118 million milk-producing animals. India contributes 16 per cent of the world’s milk production followed by USA with 12 per cent contribution. Milk and related dairy products are worth INR 3,62,000 crore market and have grown at a CAGR of 12–14 per cent during the last decade. The market is estimated to cross INR 8,00,000 crore by 2020. About 58 per cent of India’s dairy products market lies with rural consumers and the remaining 42 per cent with urban consumers. Spices category is another growth leader in the food industry. The current market for spices is estimated at INR 1,50,000 crore and has grown at a CAGR of 13 per cent over the last decade. By 2020, the market is likely to grow twice as big as its present size with the same growth rate. In other words, about INR 6,000 crore is estimated to be the branded market in spices. India is estimated to consume over 5 million tonnes of spices annually. This consumption is almost 90 per cent of all spices produced in the country. Gingergarlic, dry chillies and turmeric together contribute 44 per cent to 48 per cent of total spices in India. This consumption share is not much varied in rural and urban markets.

Fresh Produce market in India is about INR 3,90,000 crore and has been growing at a CAGR of 14 per cent since the last 8–10 years. At the same growth rate, the category will be worth INR 8,50,000 crore by 2020 riding on the wave of healthy food habits, which demands significant portion of fresh produce in daily diet. Fresh produce covers just two broad segments of fruits and vegetables. Among the two, 70 per cent is contributed by vegetables alone. Although fruits are a growing segment, they contribute a current share of just 30 per cent, which translates to INR 1,17,000 crore worth of market. Out of the total fresh produce market of INR 3,90,000 crore, 60 per cent is rural market. Again, this has three-fourths of the market occupied by vegetables. As mentioned earlier, fruits form the urban-centric market while vegetables are comparatively a national market. Perishables food market is worth INR 2,00,000 crore, and has grown at a CAGR of close to 20 per cent. This growth rate is among the highest for all food groups. With the same growth rate, the market is expected to treble by 2020, in which the segment for fish, seafood and meats will grow at a faster pace owing to the growing demand for such food items. The four primary sub-segments of perishables include fish & seafood, meats including mutton, beef, pork, poultry and game birds, and eggs. About 45 per cent of the total market share is occupied by fish & seafood. The largest market segment of fish & seafood is thanks to a vast coastline and fishing inland waters, which a large country like India possesses. In addition, there is a sizeable share of imports of canned seafood and fisheries, which is growing in demand and size. The domestic consumption is no more confined to coastal areas but has penetrated deeper into the mainland markets also. Beverages category contributes 8–9 per cent to the total F&G market in

INDIA FOOD REPORT 2016 | 11 |

PREFACE

India. By far, tea is the largest segment of beverages in India ruling over 79 per cent of the market. The market is growing at 20–23 per cent and will cross its present market size by more than three times by 2020. The average monthly per capita spend on tea is INR 106 at present. Together with tea, coffee is another strong beverage market. The market for coffee is growing at 20 per cent and will be triple its present size in the next 4–5 years. There are various types of coffee in the market, which come at all relevant price-points. The overall coffee market, though, is very small in comparison to tea market but the southern region alone contributes 73 per cent of the total coffee market. This is followed by the western region with 14 per cent share. The monthly per capita consumption for coffee in the southern region is INR 17 against the national average of INR 5. Packaged drinking & flavoured water is the smallest segment in beverages market. The segment, which is growing at a healthy rate, will be worth INR 6,000–7,000 crore by 2020. The market is urban-centric with 85 per cent share. Within this market share, half of it lies in the eastern region of the country whereas western region has the lowest consumption. The monthly per capita consumption is INR 4 in the overall urban market but the urban eastern region has a higher consumption figure, which is three times higher at INR 12. About four per cent of the total beverages market is formed of the juices segment. The segment is growing at 20–25 per cent and is expected to grow almost four times bigger in the next five years. Today, Indians are spending at an

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average just INR 6 per month on juices, which is less than what they are spending on other beverages. The culture of eating out has given birth to meal and soft drink combos, which Indian consumers are savouring to the fullest. The segment has made some significant achievements and penetration in rural areas is definitely one of them. Rural areas account for 75 per cent sales of PET bottles. Public consumption accounts for almost 80 per cent of the total sale of soft drinks and household consumption accounts for the remaining 20 per cent of the sales. Other Processed Foods category market is over INR 2,00,000 crore and is strongly growing at a CAGR of over 20 per cent. Biscuits market is growing at 20-23 per cent and will eventually cross the current size of total OPF market by 2020. At present, 46 per cent of biscuits market lies with urban consumers using the products. In this urban market, the western region alone contributes 31 per cent. It is estimated that the ketchup market is worth INR 220 crore in India. Namkeens & Snacks segment can be truly and aptly defined as ‘Indian’ OPF segment. The constituting products cover thousands of snack items manufactured in traditional as well as modern set up. Industry reports attribute the branded namkeen market segment to hold 40 per cent of total salted snacks market in India.

Trends in Consumption Among the seven broad components that make up the food basket, in 2014-15, one third of the total food market was occupied

by protein food, followed by cereals that cover 19 per cent. On the other hand, edible oil is the smallest segment with a share of 7 per cent. While the overall food share in the consumption pie has decreased over the years, there have been clear structural shifts in the food consumption pattern of Indian households. Indians are steadily moving their diet away from staple grains like rice and wheat towards, dairy products and processed food. For instance, while the share of protein food in the entire consumption basket has increased from 13.5 per cent to 14.4 per cent, that of beverages & processed food went up from 5 per cent to 6.8 per cent during the last decade. India’s protein food market is estimated to be around INR 2,17,400 crore in 201415 at 2004-05 prices, with 60 per cent contribution by rural India. This market is growing at a rate of 6.6 per cent per annum in real terms and is expected grow little faster in the coming decade. Beverages and processed food as a combined category registered the fastest growth between 2004-05 and 2014-15. The pace of growth in this category has in fact doubled during last decade than that a decade earlier. The next category in terms of pace of growth is protein food that grew at 7 per cent per annum during this period. Going ahead, the share of processed food in the overall food market is predicted to increase to 40–45 per cent by 2025–30, compared to a little above 30 per cent currently. This change in consumption pattern is purely ‘demand-led’ and processed food companies will do well to prepare for this opportunity. With food habits changing, a proportional increase

is seen in the consumption of both fresh dairy products as well as protein foods. Another category witnessing a significant rise in consumption is the health and wellness foods market in India, which is worth INR 33,000 crore currently with a growth rate of 6 per cent over the last year. Today, the health and wellness trend is playing across segments of the food basket like snacks, packaged grocery, beverages, sugar substitutes and refined/ non-refined oils. This encouraging value growth rate seen in health and wellness foods is spread across different strata of society. Rural India is no stranger to this trend. In fact, it is a frontrunner in the health and wellness food growth story.

F&G Retail: Market and Trends India’s Food and Grocery Retail market offers one of the largest opportunity areas for business. The food & grocery category will continue to grow at about 15 per cent per annum over the next five years, and will dominate the overall retail market. IMAGES Research data show that by 2025, the food & grocery retail market is expected to reach INR 109,00,000 crore, with a growth rate of 15 per cent per annum. A large part of this growth will be driven by inflationary price increase, and the balance by demand growth led by increasing population, increasing incomes and thereby higher spend on foods and lastly urbanisation, which is changing food habits. IMAGES Research finds that the penetration of modern organised retail in food is currently one of the lowest at 1.6 per cent. However, this is also expected to change dramatically over the next

decade as organised retailers penetrate the markets deeper. By 2025, organised retail is expected to capture at least 3.2 per cent of the food & grocery market and be worth INR 340,000 crore, growing at a CAGR of 22.5 per cent from current levels. Convenience seems to be the biggest driver of visitation to the hitherto small category of modern format stores – the fact that all categories and brands are available under one roof. While “location convenience”, “customised services” and “easy goods return/exchange facilities” drive a customer towards kirana stores, “product choice”, “efficient storemanagement” and “value-enhancing services” attract customers towards modern retailers. Local kirana stores and street hawkers will however continue to dominate the food & grocery market with a 90 per cent plus share, even in 2025. Although, consumption is on the rise and most formats of retail are proliferating in important developing markets, yet the penetration of large format modern retailing in India has not even crossed the 10 per cent mark. Looking into the future, the Indian market will be unique in its own way and will be a medley of extremes. The unorganised, organised and online players will co-exist in the Indian retail ecosystem and will expand the market for each other, as all have unique strengths and the sector is large enough to accommodate all participants. It is expected that unique partnership models will emerge as the retail market matures and this partnership will further push the sector growth. Early signs of this are already visible as

e-grocers aggregate orders and pass them on to brick and mortar grocery stores nearest to the consumer, for local delivery. To a large extent this co-existence will be driven by the consumer who will not shun one channel for the other and will seamlessly switch between channels. The consumer approach to channel selection will thus be “inclusive” and not “exclusive”. The shopper is moving seamlessly between the physical and digital world, and the mobile is fast becoming the central processing unit of her life! She is buying more and more food online – grocery buying on the internet has grown by 14 per cent over the past two years. Over all, F&G e-tailing is the fastest growing category in India. In India, the online market stands at about at 1 per cent of the total retailing market but considering that the country’s tech-savvy, young generation has made India the third-largest country in terms of internet users, the growth in electronic commerce may happen more rapidly than expected. The e-tailing sector is booming on the growing internet user base, which was projected to cross around 400 million users by 2020. E -tailing in India has the potential to reach USD 20-30 billion by 2020. A major contributor for the growth of e-tailing is the Indian urban population; Mumbai, Delhi and Kolkata ranked among the top three cities in India respectively with the maximum number of internet users. The shopping style of Indian customers is changing fast and it is expected that in the next 10 years, around 30–40 per cent of the total retail in top 75 cities of our country will be done through online.

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PREFACE

Growth Dynamics of India’s Food Service market

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ndia’s Foodservice market is growing at a higher rate, more than the F&G market. While the F&G segment has been growing about 15 per cent, the FS segment has grown at 22 per cent. This growth is inclusive of price fluctuation owing to high inflation trends in recent years. Yet the volumes in food consumption have not receded. This increase in share is the result of widening of eating out culture, entry of international brands, acceptance of global cuisines, changing food habits & palates and increase in institutional, commercial, social & community catering services. IMAGES Research data shows the size of Foodservice market at INR 2,09,466 crore in 2014. The estimated size of the market is expected to reach INR 2,55,548 crore in 2015. At 22 per cent p.a. growth, the market size will reach INR 3,80,358 crore in 2017 and INR 6,90,672 crore in 2020. The Technopak chapter prepared for Images’ India Food Report 2016 reveals that the domestic Food Service Industry (organised and unorganised) in 2014 was estimated to be INR 2,72,700 crore and is projected to grow to INR

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4,23,100 crore by 2020 at a CAGR of 8 per cent. Within this, the unorganised market holds a 68 per cent share with an estimated market size of INR 1,86,000 crore in 2014. The organised restaurant segment is estimated at INR 78,900 crore (29 per cent of the overall market) and is projected to grow, at a CAGR of 11 per cent, to reach INR 1,44,900 crore by 2020. The restaurants and cafes segment contributes highest in terms of sales in entire industry. It accounted total sales of $115.1 billion in 2014, which was 75.9 per cent of total industry value. It was followed by fast food industry, which contributed $30.3bn sales which is equal to 20 per cent of industry value. Thanks to the rising income of middleclass population, consumer spending and consumption pattern in both suburban and urban areas have undergone a sea change. Middle-class families in tier-II

& III cities are spending much higher in fast food restaurants. The annual spending of middle class households in India’s tier-II and III cities has increased by INR 2,500 to INR 5,200, a growth of 108 per cent on fast food restaurants in the last two years. Indians are also eating out more often now, as many as eight times a month, but still less than the US (14 times), Brazil (11 times), Thailand (10 times), and China (9 times). The growth and expansion of commercial real estate is also driving growth of the food service business as well. The increasing acceptance of malls as a getaways and day out centres in small cities is supporting this expansion of organised food restaurants, which are providing good services at reasonable prices. Food-service providers have definite advantages by setting up outlets in malls, as auxiliary

activities such as parking, security etc. are managed centrally, with lesser overheads on their resources. The Indian Food Service market has seen a significant growth in terms of number of players, both domestic and international. Post-2008, the industry has seen a huge growth in terms of number of outlets. Cafe Coffee Day, Domino’s, McDonalds, Haldiram, Pizza Hut, KFC, Sagar Ratna, Barista Café, Yo! China and Mainland China, and Bikanervala, among others, have all expanded their footprint and opened new outlets. Currently, there are approximately 1.5 million food outlets in India, out which nearly 3,000 are from the organised segment. The fast food and fine dining are the most organised. Restaurants in fast food / QSR segment consist of more than 60 per cent outlets owned by multi-nationals. The organised market, comprising QSRs, full service restaurants, PBCL (Pubs, Bars, Clubs and Lounges), food courts and kiosks, follows three key parameters: accounting transparency, organised operations with quality control and sourcing norms, and outlet penetration. But a majority of food outlets belong to the unorganised segment, which comprises roadside vendors, dhabas, vans, carts, street stalls and trolleys. In recent years, there has been a continued shift from the unorganised to organised. As a result, the organised sector is growing @ 16 per cent primarily driven by new investments. The segment

is also witnessing increased competition due to the emergence of new International brands (eg. Taco Bell, Burger King, Johnny Rockets, Starbucks) and domestic players (eg. Faaso’s, The Beer Café, Chai Point, Goli Vada Pav, Ammi’s Biryani etc.). International brands from USA and Europe including Fatburger, Carl’s Jr, Cheesecake Factory, Cali Burger, Great American Cookies, Forever Yoghurt, Second Cup Coffee, Pie Face and Mr. Cod among others are actively looking at setting up and expanding the business in India. Apart from the metros and mini-metros such as Delhi-NCR, Mumbai, Hyderabad, Chennai, Kolkata and Bangalore, major food service brands are also looking to spread out to a number of tier-II and tier-III cities, like Lucknow, Jaipur and Ahmedabad, on account of the growth in infrastructure and business opportunities there. More than 50 international chains of restaurants have entered the country and have made inroads into even tier – II and tier – III towns. This has helped the existing domestic players to consolidate and thousands of new ventures to flourish. With increased competition and cost of operations in the metros and tier I cities, a number of tier II and III cities may offer better growth prospects for players across sectors, driven by factors such as favourable demographics, infrastructure growth and higher disposable income driven by both strong economic growth. Increase in literacy, high disposable income, exposure to media, greater

availability and penetration of a variety of consumer goods into the interiors of the country have also resulted in creating lifestyle and aspiration levels on a par with other fast-moving metropolitan cities.

Growth Potential of Segments The increasing income and exposure to new avenues to express consumption has brought sweeping changes. More than 65 per cent of the Indian population is aged less than 30 years and exposed to international brands. QSRs is one of the sector that has managed to grow even during the economic slowdown. Going ahead, Café & QSR’s in the organised segment will continue to grow at a CAGR of ~11 per cent and ~14 per cent respectively. In the organised market, the chained segment is expected to grow at a healthy rate as compared to the licensed standalone segment. In the chained market, the QSR and the CDR constitute ~75 per cent of the total organised food service market followed by cafés (12 per cent). The Café and QSR’s are projected to grow at a CAGR of 15 per cent and 18 per cent respectively in the chained segment. The higher growth in the chained segment for next six years will be driven by the increasing presence of international brands, strengthening of back end infrastructure, acceptation of new cuisines and formats, changing lifestyles and aspirations and emergence of entrepreneurial ventures in these segments.

INDIA FOOD REPORT 2016 | 15 |

contents SECTION 1: INTRODUCTION & OVERVIEW 1.1

India’s Food Sector ...................................................22

1.2

Food Grocery Market ................................................28

1.3

Dry Food Grocery ......................................................42

1.4

Dairy...........................................................................48

1.5

Spices .........................................................................54

1.6

Fresh Produce ...........................................................56

1.7

Perishables ................................................................62

1.8

Beverages ..................................................................68

1.9

Other Processed Foods.............................................74

SECTION 2: PROCESSED FOOD 2.1

Food Processing: Advantage India ...........................82

2.5

By India Brand Equity Foundation (IBEF)

2.2

Competitiveness of India’s Food Processing Sector ............................................92

2.6

By Amit Kapoor & Sankalp Sharma, Institute for Competitiveness Analysis

2.3

Investment Opportunities in Food BackEnd Operations ...................................................... 102

Sweet Indulgence................................................... 114 IMAGES Report and Research Analysis by Euromonitor International

Ready to Eat / Ready to Cook................................. 118 By P. Rajan Mathews

2.7

Meeting the Challenges of Nutritional Transition ............................................ 122 By Arabind Das

By Debashish Mukherjee & Subhendu Roy, A.T. Kearney

2.4

Health & Wellness Foods: The Marketer’s Recipe Book.................................. 108

2.8

Rising Bakery Industry ........................................... 126 By Ravindra Yadav, Reetesh Shukla & Tripti Bisht

By Dolly Jha & Rishi Sharma, Nielsen India

SECTION 3: GROCERY RETAIL & MARKET 3.1

Food & Grocery Retail Industry Trends and Insights ................................ 138

3.3

By Baqar Iftikhar Naqvi, Avnish Malhotra & Varun Chugh, Wazir Advisors

3.2

Rising Share of E-Grocery in India ........................ 152 By Dr Sandeep Puri, Abhijeet Gaurav and Rajat Agarwal, IMT Ghaziabad

Online and Kirana -The Odd Couple ..................... 158 By Prof. Piyush Kumar Sinha, Prof. Srikant Gokhale and Saurabh Rawal, Indian Institute of Management Ahmedabad (IIMA), India

3.4

How Technology is Powering the Retail Bandwagon............................................ 168 Images Report

THE INDIA FOOD REPORT 2016 SECTION 4: F&G RETAILERS 4.1

Retail Majors ......................................................... 174

4.2

Regional Retailers .................................................. 192

SECTION 5: TRENDS IN CONSUMPTION 5.1

Structural Shift in India’s Food Consumption ...... 200

5.6

By Mridusmita Bordoloi & Rajesh Shukla People Research on India’s Consumer Economy (PRICE)

5.2

India’s Changing Rural Markets: How FMCG Companies Can Win Over Aspiring Rural Consumers..................................... 218

5.7

Why Don’t Big Businesses ‘get’ it? ........................ 226

5.8

The Will of Food: Understanding the Food & Beverage Motivations in Modern India................. 232 By Soumya Mukhopadhyay, Ranjana Gupta & Gurpreet Wasi, IMRB International

5.5

Tracking the Milky Way.......................................... 254 By Sam Allen, Canadean

5.9

Brewing Success .................................................... 260 By Tarun Jain & Reetesh Shukla

By Rama Bijapurkar

5.4

The Organic Age ..................................................... 250 By Sunil Kumar

By Sanjay Dawar & Raghuram Devarakonda, Accenture

5.3

Exotic’s Place of Pride ............................................ 248 By Tarun Jain & Ravindra Yadav

5.10 Nuts about Dry Fruits ............................................ 264 By Ravindra Mehta & Avinash Kant Kumar

5.11 All Things Hot ......................................................... 268 By Sam Allen, Canadean Research

Why We Buy: Decoding Food Buying Behaviour ......................... 244 By Soumya Mukhopadhyay, Ranjana Gupta & Gurpreet Wasi, IMRB International

SECTION 6: FOOD & TECHNOLOGY 6.1

The Impatient Consumer, iOT and the Food of Everything ............................. 272

6.4

Managing Global Food Chain Risks ....................... 296 By Ajay Kakra, Pwc India

By Harish Bijoor

6.2

Disruption in the Food IndustryRise of Food Tech Startups.................................... 280 By Sachit Bhatia, Troika

6.3

Product Recall The Big Challenge for Food Businesses ................ 286 By Charu Khanna, GS1 India

6.5

Sustainable and Inclusive Supply Chainsa Key Business Driver for Food Industry............... 304 By Asitava Sen & Barry Lee, International Finance Corporation (IFC)

contents

THE INDIA FOOD REPORT 2016

SECTION 7: FOOD SERVICE 7.1

Indian Food Service Market Overview................ 314

7.8

By Suman Dabas & Ravindra Yadav, Technopak Advisors Pvt. Ltd.

7.2

Intensifying Competition ................................... 326

Franchising Fervour ........................................... 356 By Kavitha Srinivasa

7.9

Scientific Service ................................................ 360 By Mini Ribeiro

By Maple Capital Advisors Research

7.3

Indian Homegrown Restaurants ........................ 334 By Prof. Piyush Kumar Sinha and Anshul Mathur, Indian Institute of Management Ahmedabad

7.10 Social Media Power ............................................ 364 By Annie Johnny

7.11 Supply’s Strength & Support ............................. 368 By Manisha Bapna

7.4

Experiments for the Palate ................................ 342 By Rachna Nath

7.12 Biryani or Pizza Choice for QSR ......................... 382 By Team D’Essence Hospitality Advisory Services Pvt. Ltd.

7.5

What’s on the Plate? .......................................... 346 By Puneet Verma

7.13 Making the Right Choice .................................... 390 IMAGES Report

7.6

Goal Vegetarianism ............................................ 350 By Mini Ribeiro

7.14 Amping up Efficiency Standards ........................ 392 IMAGES Report

7.7

Scaling Up ........................................................... 354 By Manisha Bapna

SECTION 8: DEVELOPING A VISION AND STRATEGIC PLAN Amit Burman ....................................................................398 Chairman, Dabur India Ltd. / Lite Bite Foods Krish Iyer...........................................................................400 President & CEO, Walmart India Prakash Nedungadi..........................................................402 Group Head, Customer Insights & Brand Development, Aditya Birla Group

P. Rajan Mathews .............................................................412 VP - Marketing & Sales, Desai Brothers Ltd. - Food Division (Mother’s Recipe) Sougata Basu....................................................................414 Head of Marketing, Innovative Foods Ltd (Brand Sumeru) O P Khanduja ....................................................................416 Business Head, DS Spice Co. Pvt. Ltd.

Ramanathan Hariharan ...................................................404 Director, Landmark Group

Ajay Katyal ........................................................................417 President - Organics at Amira Pure Foods Pvt. Ltd

Saurabh Sanyal ................................................................406 Secretary General, PHDCC

Oliver Mirza ......................................................................418 MD, Dr. Oetker India Pvt. Ltd

Rohan Kichlu ....................................................................408 Director F&B, The Park Hotels

Sahil Gilani ........................................................................419 Director - Sales & Marketing, GITS Food Products Pvt Ltd

THE INDIA FOOD REPORT 2016

SECTION 1

INTRODUCTION & OVERVIEW

1.1 INDIA’S FOOD SECTOR 1.2 FOOD GROCERY MARKET 1.3 DRY FOOD GROCERY 1.4 DAIRY 1.5 SPICES 1.6 FRESH PRODUCE 1.7 PERISHABLES 1.8 BEVERAGES 1.9 OTHER PROCESSED FOODS

India’s food sector | 22 | INDIA FOOD REPORT 2016

I

ndia is the seventh largest country in the world in terms of land area. The country, with second largest human population in the world, hosts more than 1.25 billion people who are driving the nation’s economy, and along with it the consumption market within. The country is equally fortunate for being home to the largest young population in the world. This young population is growing, aspiring, earning, spending and consuming a whole range of various products & services, thus expanding the opportunity for all stakeholders in the market to carve a niche for themselves. The growing middle class with its spectrum of aspirations, entry of international stakeholders, growing economy, technological advancement, IT stronghold, urbanisation and improving living standard, all have contributed immensely in taking the country at a higher global position in various areas of achievements. One such area of immense growth is its food sector. The sector itself commands keen attention owing to the fact that it is catering to 13.4 per cent of world’s population domestically, and a large part of world population outside its political boundaries through food & agricultural exports. This sector is now in focus of big economies of the world.

1.1 INDIA’S FOOD SECTOR

inter-relation among them, agriculture and retailing have assumed a far greater importance in India’s food sector.

penetrated into even smaller markets with growing demand for processed and packaged foods. The sector is ruled by corporate giants and various global and domestic players who have years of expertise, skills, advanced technology and capability to service the food consumption sector.

India’s food sector can be divided into three key sub-sectors: Primary food sector consists of all those sources, which produce food materials naturally such as agriculture and forests. It provides vegetative products of grains, cereals, fruits & vegetables, pulses, oil seeds and spices, and animal husbandries, which help in raising livestock for meat, milk and eggs, and fishery for providing aquatic products like fish, marine vegetation, seafood and other such food from its on-shore and off-shore areas. India is fortunate to have a robust primary sector which ensures abundant supply to the succeeding sectors. Modern technology has not only improved primary sector’s quality but also paced its delivery efficiency. The sector is monitored, controlled, upgraded and supported by various government bodies which are responsible for its upkeep and health.

Food consumption sector is servicebased consumer-driven sector. Its entire value chain ends up in servicing the end-consumers through various types of food retailing options. This sector provides climax to all the efforts of preceding sectors by connecting with the end-consumers. This sector also serves as the indicator of market pulse, evolving trends, emerging new markets and future prospects. Over the period of time, first two sectors have evolved and achieved certain amount of delivery performance, but it is the food consumption sector which is undergoing an evolutionary change and will be a key area of play in the future.

India’s Food Market Secondary food sector takes care of processing, marketing and distribution of food materials which are provided by the primary sector. With the changing life dynamics, and the demand-mix food processing sector has also grown by leaps and bounds, and has

India’s food consumption sector includes Food Grocery (FG) market and Foodservice (FS) market. The former one provides food items which are raw, processed and/or in partially prepared form, and needs cooking before the final consumption. The latter one offers cooked

Food Sector - An Overview Food being the basic need of all living creatures is a complex and extensive sector. The complete value chain in this sector encompasses production, processing, marketing, distribution and retailing of food items to the endconsumers. These make the sector dynamic in terms of its entire scope, delivery and penetration. In the same value chain, food passes through three main stages – raw form, processed form and ready-to-consume form. Each form at its respective stage plays an important role and shapes the market for the next form it enters into. Because of this, the

Primary Food Sector Agriculture Forestry Animal husbandry Fishery

Secondary Food Sector Manufacturing Processing Distribution

Food Consumption Sector Raw consumption Processed consumption Ready-to-eat

INDIA FOOD REPORT 2016 | 23 |

India’s food consumption sector includes Food Grocery (FG) market and Foodservice (FS) market. FG provides food items which are raw, processed and/or in partially prepared form and FS offers cooked food ready to be consumed under certain environment.

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food ready to be consumed under certain environment of ambience and services. FG market share is larger in the total food market for the simple reason that it involves food in raw as well as in processed forms. Although it is much larger in size but it is the FS market which is growing at a faster pace. What is driving India’s overall food market? There are four main reasons for its growth: Vast primary sector – Traditionally India has been an agrarian economy with a substantial contribution coming from agriculture. The large fertile lands, abundant livestock existence and improving technology ensure that there is no drop in production of food materials. Since last few decades, there has been much advancement in agro-technology, farming, crop hybrids and related R&D which have improved farm yields and quality of harvests. At the same time, scientific methods have ensured that livestock which Indian farmers breed provide quality animals and their products. The country has also seen incremental share of inland fishery to support overall devlopment. Since the consumption of food items has grown over the years; the sector will also keep upgrading its efficiency and delivery services in the future also, which it has done admirably so far. The technical support and knowledge exchange with other developed nations on improved breeds, better quality hybrids and content varieties have further helped food production to grow. In recent times there has been a lot of emphasis on bridging the gap between farms and consumers. Once achieved, this approach of farm-to-fork will further fasten the growth of the sector.

Expansion in food processing industry – With strong primary food sector flourishing in the backyard, India is poised to have growth in food processing sector as well. With available cost-competitiveness and by adopting international standards, India has emerged as a fast growing hub of processed foods. The processed food is consumed on a large scale in domestic market as well as is exported to other markets. Exports of processed food and related products have been increasing steadily; the main destinations being the Middle East and Southeast Asia. The significance of India’s food processing industry is proved by the fact that it ranks fifth in the world in exports, production and consumption of food items. Major parts of the food processing in India are milled grain, sugar, edible oils, beverages and dairy products. The industry had grown annually at 8.4 per cent for 5 years leading up to 2012-13. Investment in registered food processing sector had grown by 20.1 per cent at the end of 2012. The number of registered processing factories has increased from 35,838 in 2010-11 to 36,881 in 2011-12, marking a growth rate of 2.9 per cent. The industry is also one of the largest employment creators, with growth in direct employment in the organised food processing sector standing at 6.05 per cent between 2010-11 and 2011-12. No surprises that India is fast emerging as a global outsourcing hub, with even large retailers in the world sourcing from India owing to abundant raw materials, supply and cost advantages. Large food consuming population – India would have been left wanting if it lacked sufficient population to consume the outputs of vast agriculture and growing food processing industry. Fortunately, India is not in such a situation. Out of 1.21 billion people living in India, just over 13 per cent are up to the age of 6 years and another 61 per cent fall in the young age group of 7 to 40 years. Thus this 74 per cent of India’s population is responsible for

1.1 INDIA’S FOOD SECTOR

shaping the future markets. Although the consumption in India is driven by large-sized young population, but food being basic necessity is the need for the entire population. In addition, it is also estimated that by the end of this decade almost one-third of India’s population will be urbanised. Urbanisation will bring in improved lifestyles and higher living standards. This will make inhabitants of newly formed urban markets serious consumers of a variety of food items. Alongside rising income levels and a growing middle class in the country there is anticipation that this situation will impact food sector also. Food is the biggest expense for an average Indian household especially in the rural areas. At an average, about 48 per cent of the total consumption expenditure of an Indian household is spent on food items. Globalisation & modernisation of food market – Even having a large consuming population would have found its limitation if the market could not expand. For expanding the market there is a strong need for influencing factors to exist in the market. Here, also, India is lucky to serve as an able host to food globalisation trends. Globalisation of cultures and exposure to various foods items and cuisines through media, travel & tourism is also enlarging food sector. There is a growing aspiration for branded food, fast-food, ready-to-eat, multi-cultural cuisines and food-on-the-run to suit fast-paced and changing life of Indian consumers. This has bloated the food consumption sector and resulted in its expansion during the last few decades thanks to economic liberalisation and growth in modern retail. This has not only made India an attractive destination for global players but has also provided an opportunity for local players to improve upon their Share% of Consumpton Expenditure in Total PFCE Food items Hotels & Restaurants

standards, quality and efficiency, thus generating healthy competition which is beneficial for the end-consumers. There is an emergence of large and distinct consumer brackets to support customised offerings, new categories and brands within each food segment. There is an increased awareness and concern for wellness & health, for high protein, low-fat, wholegrain, organic foods, etc. Consumers are ready to experiment with their food.

Consumption Trend Data of Private Final Consumption Expenditure (PFCE) for the period from 2004-05 to 2012-13 reveals that the share of consumption expenditure on food items is on a decline. From a defining share of close to 34 per cent in PFCE during 200405, it has come down to about 29 per cent by 2012-13. Looking at the positive side of it there has been an average growth of 12-13 per cent every year in food consumption in value terms. So, does the declining share of food in PFCE pose any real threat? Though the trend does not appear to be very encouraging for the food sector but on deep diving, it speaks of yet another positive trend. The decline is actually

indicative of improved living standard and changing lifestyles wherein consumption share of non-food items and services have increased. This, by no means, indicates that food consumption will lose its sheen in the coming times. Optimisim sees silver lining in the same figures, but in other space of food sector. During the same period of 2004-05 to 2012-13, The consumption expenditure share on hotels and restaurants products and services in PFCE had increased from 2 per cent in 2004-05 to 2.5 per cent in 2012-13, suggesting increased inclination towards the eating out culture. The same can be verified with higher growth rate in food service market than that of food grocery market. In a nutshell, food consumption will continue growing but may adorn different market mix. Growing eating out culture is a part of changing lifestyle. Buying from malls, supermarkets, hypermarkets and online market places are also a part of changing lifestyle. Similarly, eating out at fast food joints, enjoying coffee during professional meeting at a café, relishing some specialty cuisine at a fine dining restaurant or gulping down a few servings of beer with friends at a pub/bar is also

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

33.8 2.0

33.1 2.3

31.5 2.7

31.0 2.8

29.2 3.1

30.6 2.2

30.3 2.3

29.1 2.6

28.6 2.5

Source: CSO

INDIA FOOD REPORT 2016 | 25 |

part of changing lifestyle. Maple Capital Advisors reports that continued shift from unorganised foodservice to organised foodservice is visible with organised sector growing primarily driven by new investments. Between January 2014 to April 2015, the foodservice segment had attracted over $400 million in various ventures from different types of investors. The organised food service businesses are witnessing increased competition due to emergence of new International brands (e.g., Taco Bell, Burger King, Johnny Rockets, Starbucks) and domestic players (e.g., Faasos, The Beer Café, Chai Point, Goli Vada Pav , Ammi’s Biryani, etc.). The regulatory changes, access to information to consumers by consumer internet ventures and improved supply chains are accelerating the pace at which the sector is getting organised. At the same time, all these factors are also pushing the boundaries of food sector directly and indirectly.

Food Retailing The mainstay of food consumption sector in India is food retailing encompassing food grocery and food service. The food retailing has also shown positive and very encouraging signs especially with the advent of modern retail. The modern retail has served as a catalyst to bring in global players on one hand and helped in making the food segment more structured, better defined and segmented and organised. FG market covers monthly food groceries used in households and FS market includes food which is served for consumption with all-important service

Retail market

component attached to it. FG segment has been growing about 15 per cent and FS segment has grown at 22 per cent. This growth is inclusive of price fluctuation owing to high inflation trends in recent years. Yet, the volumes in food consumption have not receded. The total food market in India is worth Rs 25.13 billion which will cross Rs 60 billion by 2020. Since the food service market is growing at a higher rate, the segment will have 11 per cent share in the total food market as compared to current share of 8-9 per cent. This increase in share is going to be the result of widening of eating out culture, entry of international brands, acceptance of global cuisines, changing food habits and palates, and increase in institutional, commercial, social and community catering services.

Challenges Like all other sectors India’s food sector is also facing challenges which need correction and attention at various levels:

Food market

CAGR 16%

2010

| 26 | INDIA FOOD REPORT 2016

2014

2020

Inspite of appreciable improvement in quality and standards in primary sector, India’s benchmarks still stand low on international measures. The per capita yield of our agricultural lands and animals and per capita availability of food items are the areas which demand improvement if India’s food sector wish to claim to be among the best in the world. As per experts about 40 per cent of India’s food production goes in waste or is unable to reach consumers due to lack of proper roads, sound logistics, efficient transportation systems and suitable storage capabilities. Arresting this problem will at least provide food to many needy people who suffer from malnutrition or under-nourishment on one hand and simultaneously, bring down the food price volatility in the market on the other hand. If wastage problem can be tackled, the inflationary tendencies in food items can also be checked. This has raised its ugly head in the recent times more than often, thus disturbing the consumption pattern and hindering demands in the market. At the policy level, the debate on multi-brand FDI is an urgent need. The current policy with riders in its present form has not been able to impress upon its aim properly, neither to local players nor to the aspiring entrants. FDI in multi-brand retailing affects food retailing in a major way thus a thorough review of the policy is very crucial for the sector to grow.

Food grocery market Constituting more than 60 per cent of India’s total retail market and about 90 per cent of the overall food market, Food Grocery (FG) represents the largest retail vertical. The extensive range of products offered, amplified by regional and local tastes, geographical demands, cultural and traditional food habits, and varied consumer preferences, makes it a dynamic market. The market exists in varied forms and reaches the end consumers through all types of retail channels, such as hawkers, peddlers, cart-driving street vendors to modern retailers operating supermarkets, hypermarkets, specialty food stores and shopping websites.

| 28 | INDIA FOOD REPORT 2016

1.2 FOOD GROCERY MARKET

FG Market Size & Growth The FG retail market is currently pegged at Rs. 23,00,500 crore (~$ 383 billion). Growing at 15 per cent, the market is expected to cross Rs. 35,60,000 crore (~$ 593 billion) by 2017. By 2020, it is estimated to double its current size. Modern FG retail market, which is currently less than 2 per cent of the total market, is expected to grow at 20–25 per cent per annum. With the same growth rate, the market is well poised to even triple its present size by 2020. The retail expansion among modern FG retailers in terms of number of retail

FG Consumption

outlets has been taking place at a mixed rate depending on the format. The number of outlets in smaller formats increased at a steady pace over the years whereas expansion among large formats continued with an average growth of over 12 per cent. It is the specialty format of FG segment which has grown by over 40 per cent. If smaller-sized outlets provide the advantage of deeper penetration and grow more in numbers than large-sized outlets, it is the large-sized outlets such as hypermarkets (which are usually guided more by strategic but limited presence in city areas) which have contributed significantly in increasing the total retail area dedicated to FG products. In terms of revenue, the same-store sale in the segment has grown at an average of 13 per cent across all formats dealing in FG.

According to the recent data released by CSO, the consumption expenditure on food items is on the rise. For the period from 2004–05 to 2012–13, the food expenditure grew at a CAGR of 12.5 per cent. In 2004–05, households used to spend the highest on cereals among all food items followed by fruits and vegetables, and milk and milk products. This trend saw a change over the next nine years. By 2012–13, the highest spend was on fruits and vegetables followed by milk and milk products. The spend share on cereals got reduced, thus settling at the third rank. The other items which gained increased share in food expenditure during the same period included pulses, meat, eggs and fish. Spices maintained the same share as was in 2004–05.

FG Market 6,000,000 5,000,000 4,000,000 3,000,000 CAGR 15%

2,000,000 1,000,000 2010

2004-05

2005-06

2006-07

2014

2007-08

2008-09

2020

2009-10

2010-11

2011-12

2012-13

34 33 31

31

31 30 29

29

29

Trends of Food Share in PFCE (%) Source: CSO

INDIA FOOD REPORT 2016 | 29 |

8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000

Source: CSO

Food Consumption

Market Estimation Approach It is not easy to gauge such a vast, complex and seamless market as the FG sector with its overlapping diversity. Equally difficult is to comment upon its sub-markets for the same reasons. So, in order to comment upon the FG market and its constituting sub-markets, The India Food Report has relied upon MPCE data released by NSSO. The data has been chosen for the following reasons: It is a standardised piece of information by the government agency, and hence provides credibility, establishes authenticity and follows regular updation of information. It incorporates inflationary trends and impact of other market forces, which are absorbed in its figures. It is based on a large number of household surveys encompassing sizeable sample size of rural and urban segments of all states and union territories, and includes an extensive list of items and their consumption data at current market prices. All these factors form an integral part of the retail market. The data collected during surveys is at consumption level and not at the production level, as is the case with PFCE data. Thus, it captures the endconsumer spending behaviour at sale price, which is another hallmark of the retail market.

| 30 | INDIA FOOD REPORT 2016

20 1213

20 1112

20 1011

20 09 -10

20 08 -09

20 07 -08

20 06 -07

20 05 -06

20 04 -05

0

Total PFCE

The MPCE data was structured and analysed under various broad heads to arrive at regional and sub-market shares. Each sub-market was further segmented applying the same approach. This methodology was applied to analyse total market only, and in no way does it indicate any trend of modern retail market of FG.

Market Composition Applying the same approach, India’s FG market worth Rs. 23,00,500 crore (~$383 billion) was broken into different subheads of markets and regions to arrive at respective market sizes. Regional composition North India, which comprises of Delhi, Chandigarh, J&K, Himachal Pradesh, FG Regional Market North North-east East West South

24.4%

29.6%

3.6% 22%

20.4%

Source: NSSO; MPCE analysis

Uttarakhand, Uttar Pradesh, Punjab, Haryana and Rajasthan, holds the largest FG market share of close to 30 per cent. The next region in terms of market size share (24 per cent) is south India, with the states of Andhra Pradesh, Tamil Nadu, Kerala and Karnataka and the union territories of Puducherry, Lakshadweep and Andaman & Nicobar Islands.

FotograFFF / Shutterstock.com

1.2 FOOD GROCERY MARKET

Based on the respective population size of each region, the monthly per capita FG market for the north, northeast, east, west and south region is Rs. 1,540, Rs. 1,512, Rs. 1,327, Rs. 1,709 and Rs. 1,850, respectively. However, it is the west and south regions which have higher monthly per capita FG market than the all-India figure, which stands at Rs. 1,586.

Per capita figures suggest that on an average, every Indian is buying FG items worth Rs. 53 per day, which is abysmally low. The figure of Rs. 53 means about 2–3 kg of wheat flour or a little over 1 litre of milk or 1 kg of tomatoes or a few eggs. This is not sufficient for even one complete meal for a person. To meet this buying budget, an Indian consumer is required to forego one or the other part of wholesome and complete meal in a day. Another concern is that three out of five regions fall even below Rs. 53 per day. At the same time, there is a positive side to this alarming and worrisome scenario – the market is still growing at a healthy rate of 15 per cent and the population is growing at 1.6 per cent per annum. This means that the market still has huge opportunity to service even bigger markets in the future. With increasing income, improved production capability, growing food processing sector and growing demand for variety in food items will definitely work in favour of pushing the market size. The growing size of market will also push the monthly per capita spending towards higher spends.

but excludes alcoholic beverages. OPF contains all food FMCG, such as snacks, biscuits, bakery items, sweets and confectionery and table accompaniments, such as pickles, sauces, ketchups, spreads, preserves, toppings, etc.

FG sub-markets Applying the same methodology, the extensive list of all food items of MPCE was grouped under seven broad categories of Dry Food Grocery (DFG), Dairy, Spices, Fresh Produce, Perishables, Beverages and Other Processed Foods (OPF). Needless to say, the largest among these groups is DFG with over one-third market share. It includes cereals, grains, grams, pulses, legumes, edible oils, sugar and dry fruits. Spices along with salt have been grouped separately since they serve as accompaniments to DFG like other food groups. Dairy includes milk and all milk products, such as cheese, butter, curd, baby foods, etc. Fresh produce is the food group that includes both fruits and vegetables. Perishables include eggs, meat, fish, seafood, game, poultry and other such items originating from livestock and marine life. Beverages form drinks like tea, coffee, packaged drinking water, flavoured or carbonated drinks, juices and other non-alcoholic beverages,

Focus of Modern FG Retailers

FG Market Pie Beverages 8% Perishables 9%

Other Processed Foods (OPF) 9%

Dry Food Grocery (DFG) 35% Fresh Produce 17%

Spices 6%

Dairy 16%

Source: NSSO; MPCE analysis

Though relatively small, but FG retailing in its modern avatar is evolving rapidly. From local grocery stores and cart vendors, it has successfully assumed the form of large supermarkets and hypermarkets, which drive a large part of their business by selling FG items in large volumes. In fact, the market is abuzz with the entry of online players who have accepted the challenge of providing fresh and quality merchandise of FG items, which until a few years ago was perceived as a dream. The journey has been fascinating, challenging yet exciting for all stakeholders to learn the tricks of the trade. In recent times, FG retailing has shown some interesting trends that highlight the importance of innovation, future vision and thinking outof-the-box approach to serve consumers while achieving commercial goals. The followings are some of the key trends that the industry has been witnessing over the last few years:

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Smart expansion Retail expansion in India witnessed a distinct trend of acquisition and mergers. The trend has been equally effective in FG segment as well. However, acquisition with intelligent thoughts makes the efforts more fruitful. The retailer needs to see where the consumers are and how can they be reached in the most efficient manner via these acquisitions. The smart way is to identify new markets, new partners and new strategies for optimising the expansion. Take the case of Future Consumer Enterprise Limited (FCEL), which completed its acquisition of the famous Nilgiris convenience store chain in southern India by the end of 2014. The Nilgiris chain had a strong retail presence in the states of Kerala, Karnataka, Andhra Pradesh and Tamil Nadu. This acquisition allowed the Future Group to expand across south Indian cities, thus reaching the chain’s consumer base in the region. Since the group does not have either its KB’s Fair Price or Adhaar brand present, their taking over a regional player with strong retail presence made good sense. Go big ‘Go big’ is another business thought that has led to expansion of big box formats in FG retailing. Some retailers felt that managing umpteen numbers of smaller outlets and their logistics over a wider geographic area is not a wise option. Instead, existing through large format of hypermarkets in a city with fewer outlets offers more focussed business sense. In this case, a minimum management effort is required with limitation on wastage of resources, with more focus on deliverance of efficiency. Applying the same approach, RP-Sanjiv Goenka Group’s retail arm of Spencer’s began focussing on its hypermarket formats. It has shut down several of its small format stores and plans to open 10–15 hypermarkets in the next few years. Hypermarkets drive volume business and provide scale of economies and better margins owing to smart merchandise mix with varied margins mix.

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Omni-channel route Having a store is no longer sufficient, especially when e-commerce is going viral in the market. With fast-paced life gaining momentum in urban areas, one cannot expect a consumer to keep visiting the store for shopping. The retailers are looking to expand beyond regular brickand-mortar stores and are taking the online route to expand their reach. The online channel provides ample opportunity to test markets in new geographies. It provides data to make strategic decisions. The online window offers brand imagery and recognition. Most importantly, it enables penetration into consumers’ homes and workplaces. The trend seems to be attracting regional players as well. For instance, Goa-based supermarket chain Magsons has plans to introduce its e-commerce model. The retailer is undergoing trial runs and has plans to go fully functional in the online route by next year. The online window will be in addition to its existing chain of stores, which is confined to the state of Goa as of now. Consumer education International foods and food commodities touching Indian shores is nothing new but with changing times, this trend is getting segmented and refined. Despite a section of consumers progressing to higher levels by being specific in their demand for international food items, there is still a large consumer base which requires awareness about

Strengths

Weaknesses

Opportunities

Threats

various specialties from different parts of the globe. This has made the companies, brands and retailers come up with innovative marketing campaigns with an aim to bridge the gap of unfamiliarity and half-awareness. The market has observed key developments in this regard like a situation where some Indian consumers are aware of olives but are not aware of olives from different countries and their specialty. Similarly, many consumers are unaware of the proper use of imported sauces, exotic fruits and vegetables, mixes and other specialities, while preparing authentic cuisines and dishes at home. Such handicaps not only make consumers unconfident about buying these products but also affect a retailer’s business in turn. So, it is the retailers’ responsibility to make their consumers get rid of such barriers, thus improving sale of these products. To address such issues during the last quarter of the calendar year 2014, the FG market saw one such initiative wherein ‘Olives from Spain’ campaign was launched to raise awareness about Spanish olives and their use. Almost during the same time, there was the European Union’s 3-week long ‘Tastes of Europe’ campaign, which included Restaurant Week Festival, Retail Tasting Week, industry seminars, educative and informative workshops, and live cooking sessions featuring renowned culinary experts. Such campaigns are targeted at both – consumers and the industry.

• Largest retail market and a basic consumption category • Market is driven by all consumer segments • It is a mainstay of household consumption • Highly sensitive to inflation • Lacks strong supply chain mechanism to contain wastage • Low per capita consumption and many food items are below international quality and nutritional standards • Expanding supermarkets, food stores and hypermarket chains • Manufacturers improving food packaging and quality • Growing demand for imported, organic and specialty foods • Stretched inflation periods affecting consumer spending • Lack of cold storage facilities, barriers to imported and exotic food • Absence of investor-friendly FDI policy and its execution

1.2 FOOD GROCERY MARKET

TOP FOOD COMPANIES IN INDIA India’s large food sector has thousands of companies operating and serving consumers from all segments. However, there are a few top food giants in the country who have a major market-defining share in the food market. They enjoy this large market share due to their financial and marketing competence, which allow them to penetrate any challenging market through their strong distribution network, efficient manufacturing capabilities and a wide range of product offerings. This report has picked up some of the top rating companies whose food business, along with other business interests, have created a niche of their own.

NESTLÉ Nestlé is among the world’s leading nutrition, health and wellness company. It was founded in the year 1866, by Henri Nestle in Vevey, Switzerland, where it is headquartered. The company has an employee strength of about 2.8 lakh and has either factories or operations in almost every country in the world. The company began trading in India way back in 1912 under the name – Nestle AngloSwiss Condensed Milk Company (Exports) Ltd. At that time, it used to import and sell finished products in the Indian market. After India’s independence in 1947, the economic policies of the Indian government emphasised the need for local production. This made Nestlé form a company in India and set up its first factory in Moga, Punjab, where Nestlé focussed on developing dairy production. Nestlé has been a partner in India’s growth for over nine decades now. The company’s activities in India have facilitated direct and indirect employment and provides livelihood to about one million people including farmers and suppliers of packaging materials, services and other goods. Nestlé India manufactures products under internationally famous brand names such as Nescafé, Maggi, Milkybar, Kit Kat, Bar-One, Milkmaid and Nestea. In recent years, the company has also introduced products of daily consumption and use, such as Nestle milk range, dahi and jeera raita. With almost a century-old presence in India, today the company has a national presence with eight manufacturing facilities. The company set up its first manufacturing

facility at Moga (Punjab) in 1961 followed by manufacturing facilities at Choladi (Tamil Nadu) in 1967, Nanjangud (Karnataka) in 1989, Samalkha (Haryana) in 1993, Ponda and Bicholim (Goa) in 1995 and 1997 respectively, and Pant Nagar (Uttarakhand) in 2006. In 2012, Nestlé set up its eighth and the most recent manufacturing facility at Tahiwal (Himachal Pradesh). In addition, the company’s four branch offices are located at Delhi, Mumbai, Chennai and Kolkata, which help in facilitating its sales and marketing activities. The company’s head office is located in Gurgaon, Haryana.

BRANDS UNDER NESTLÉ INDIA Nestle, Everyday, a+, ActiPlus, Milkmaid Products range: Milk and nutrition products including dairy whiteners, curd, raita, milk and condensed milk Nestea, Nescafe Sunrise, Gold, Select, Cappuccino, Choco Mocha Products range: Beverages in tea and coffee Maggi Products range: Prepared dishes and cooking aids covering noodles, soups, sauces, ketchups, flavouring spice mix and pastas Kit Kat, Milkybar, Bar-One, Alpino, Polo Products range: Chocolates and confectionary including chocolate bars, candies, toffees, etc. Source: Company website

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HINDUSTAN UNILEVER LTD. Hindustan Unilever Ltd. (HUL) is India’s largest FMCG company with a heritage presence of over 80 years in the country. The company is a part of everyday life of millions of consumers across India. It is estimated that the company, through its products and services, touches the lives of two out of every three Indians. With over 35 brands spanning 20 distinct categories, the company’s range is divided into four main divisions – food and drink, personal care, home care and purifier. All these brands encompass categories such as soaps, detergents, shampoos, skin care, toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream and water purifiers. Its portfolio includes leading household brands such as Lux, Lifebuoy,

Surf Excel, Rin, Wheel, Fair & Lovely, POND’S, Vaseline, Lakmé, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Wall’s and Pureit. Food and drink category alone has 12 brands. The company has over 16,000 employees and has an annual turnover of Rs. 27,408 crore (financial year 2013– 2014). HUL is a subsidiary of Unilever, one of the world’s leading suppliers of fast moving consumer goods with strong local roots in more than 100 countries across the globe and with annual sales of € 49.8 billion in 2013. Unilever has 67.25 per cent shareholding in HUL.

BRANDS UNDER HUL Bru Products range: Coffee Magnum Products range: Ice cream Brooke Bond 3 Roses, Red Label, Lipton, Taj Mahal, Tazaa Products range: Tea Kissan Products range: Jams, marmalades, ketchups and squashes Knorr Products range: Soups and noodles Kwality Wall’s Products range: Ice cream and frozen desserts Modern Products range: Bakery items Annapurna Products range: Flour Source: Company website

DABUR Dabur India Ltd. (DIL) is one of the leading domestic FMCG companies in India. The company having revenues of over Rs. 7,073 crore and market capitalisation of US$ 5 billion is 130 years old. The company is promoted by the Burman family, which started operations in 1884 as an Ayurvedic medicines company. From its humble beginning in the by-lanes

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of Kolkata, Dabur India Ltd. has come a long way today to become one of the biggest Indian-owned consumer goods companies with the largest herbal and natural product portfolio in the world. The company has a wide distribution network, covering over 5.8 million retail outlets with a high penetration in both urban and rural markets. Dabur’s products also have a huge presence in the overseas markets and are today available in over 60 countries around the globe. Its brands are highly popular in the Middle East, SAARC countries, Africa, the US, Europe and Russia. Dabur’s overseas revenue today accounts for over 30 per cent of the total turnover.

BRANDS UNDER DABUR INDIA LTD. Food – Real, Real Activ, Burrst, Hajmola, Homemade, Lemoneez, Capsico, Lemon Fizz, Rose water Products: Juices, confectionery, pastes, concentrates, sauces, drinks and food essence Consumer health care – Glucose D, Gripe Water, Hajmola, Hingoli, Pudin Hara, Sat Isabgol, Active Antacid, Blood Purifier, Honitus, Janam Ghuti Products: Chyawanprash, honey, digestives, glucose powder, energy supplements and baby health foods Source: Company website

The company also forayed into modern retail in 2007, through its chain of stores selling health and beauty products.

1.2 FOOD GROCERY MARKET

The master brand of the company – ‘Dabur’ – is among the country’s most trusted names and the world’s largest Ayurvedic and natural health care brand. It has a portfolio of over 250 herbal/ Ayurvedic products. The company’s products portfolio includes five flagship brands with distinct brand identities – Dabur, the master brand for natural healthcare products; Vatika, the brand for premium personal care products; Hajmola, a brand for digestives; Real, servicing juices and beverages; and Fem, the brand for fairness bleaches and skin care products. DIL today operates in key categories like healthcare, personal care, foods, home care and consumer health.

GODREJ FOODS Food business is among one of the flourishing businesses of Godrej Group, which was established in the year 1897. The Group entered in security equipment and soaps segment, and is now a US$ 1.875 billion conglomerate. Godrej Group is engaged in chemicals, veg oils and real estate. The veg oil division produces edible oils, vanaspati and bakery fats. It exports its products to North America, South America, Asia, Europe, Australia and Africa. Godrej food business has three main components – agro-food sector, food processing and food retailing: Godrej Agrovet: Formerly a division of Godrej Soaps, Godrej Agrovet was reformed in 1971 with a focus on the agricultural sector. Over the years, this division has developed a close relationship with farmers with its innovative offerings in the form of animal feed, oil palm plantations, agrochemicals and poultry.

Godrej Hershey: Godrej has entered into a joint venture with The Hershey Company of North America to cater in the food and beverages segment. Under this it has launched brands like Nutrine, Jumpin, Godrej Xs, Tomato Puree, Godrej Tea, Sofit– Soymilk, etc. Godrej Hershey is one of the most respected business conglomerates established in 2006, with a prime focus on the food division. The range of products from the house of Godrej Hershey covers a number of popular products in the segment of confectionery, non-carbonated beverages, cooking aids, packet tea and edible oil. Godrej Nature’s Basket: A retail venture under Godrej Industries Ltd., Godrej Nature’s Basket is today India’s foremost retail destination for fine and gourmet foods and beverages from across the world. Started in 2005 as a single fresh food store, it has today morphed into a muchadmired chain of premium gourmet stores strategically located at high street locations in Mumbai, Delhi/NCR, Pune, Hyderabad and Bengaluru.

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PEPSICO INDIA PepsiCo is a global food and beverage leader with net revenues of more than US$ 65 billion and a product portfolio that includes 22 brands that generate more than US$ 1 billion each in annual retail sales. The company stepped into the Indian market in 1989, and is today one of the largest food and beverage companies in the country. It has proved itself as one of the largest US multinational investors in the country and has been a consistent investor. The company has built an expansive beverage and snack food business, which is supported by 38 beverage plants and three food plants. PepsiCo with its partners has targeted an additional investment of Rs. 33,000 crore in India by 2020, in the areas of production innovation, increasing manufacturing capacity, ramping up market infrastructure, strengthening supply chain and expanding the company’s agriculture programme. The company also provides direct or indirect employment to almost 200,000 people. PepsiCo has a diverse portfolio of products for Indian consumers including iconic brands like Pepsi, Lay’s, Kurkure,

Tropicana, Gatorade and Quacker. Within two decades, the company has been able to organically grow eight brands that generate a little over Rs. 1,000 crore annually. The company is in partnership with over 24,000 farmers across nine states out of which 45 per cent of these farmers are small and marginal farmers with land holding of one acre or less. This partnership provides 360 degree support to them on prices, quality, services, loans, insurance and technological practices.

BRANDS UNDER PEPSICO Food – Lay’s, Cheetos, Kurkure, Lehar, Uncle Chipps Product range: Potato chips, snacks and namkeen Beverage – Pepsi, Aquafina, 7UP, Gatorade, Duke’s, Mirinda, Mountain Dew, Nimbooz, Slice, Tropicana Product range: Aerated drinks, energy drinks, fruit juices and packaged drinking water

Parle Agro: The second company, led by another family faction comprising of Prakash Chauhan and his daughters Schauna, Alisha and Nadia Chauhan, deal primarily in beverages. Parle Products: The first company, led by Vijay, Sharad and Raj Chauhan, owns a range of biscuits and confectionery products. Parle Bisleri: The third company, led by Ramesh Chauhan, owns the famous packaged water and soda brand of Bisleri.

BRANDS UNDER PARLE PRODUCTS Parle G, Monaco, Hide & Seek, Parle Marie, Nimkin, Happy Happy, Coconut, Jam In, Gold Star, KrackJack, Milano Product range: Biscuits, cookies and rusk Orange Bite, Mango Bite, Londonderry, Melody, Kachha Mango Bite, Poppins, Mazelo Sweets Parle’s wafers, FullToss Snacks and namkeens

Source: Company website

PARLE Parle Company was founded in 1929 in British India and was owned by Chauhan family of Vile Parle, Mumbai. In the year 1939, the company started manufacturing biscuits. During its operating years in independent India, the company had two iconic brands of Parle-G Glucose biscuits and Thumbs Up soft drink. However, in the later years, the company was amicably split into three separate companies owned by different factions of Chauhan family focussing on specific brands of the company:

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Source: Company website

1.2 FOOD GROCERY MARKET

Parle Agro is a Rs. 2,500 plus crore organisation, with diversified businesses in the food and beverages segment. The company has 76 manufacturing facilities across India and operates through 3,500 channel partners. It claims to serve 600,000 outlets in the country. The company’s operations are divided into four main business verticals: 1. Beverages: Traditionally this has been the company’s main business. The brands in its beverages category include Frooti, Appy, Appy Fizz, Café Cuba, Frio and Dhishoom, which have significant market share in respective segments. All these brands target and serve mass markets. 2. Packaged drinking water: The brand under this vertical is Bailley, which offers packaged drinking water as well as soda. With a good market standing, the brand operates through 50 plants which are strategically located across the country to meet consumer demand. The objective is to achieve speed in delivering packaged water through an extremely cost-effective model. 3. Foods: Over the years, the company has invested in building technical know-how to develop

uniquely differentiated products in an otherwise cluttered snacking category. A completely independent business infrastructure, right from manufacturing to sales and distribution, takes care of the company’s food division. The leading brand of the vertical is Hippo. 4. PET Performs: Parle International, a strategic business unit of Parle Agro Pvt. Ltd., provides an absolute packaging solution in PET preforms bottles and containers. Being one of the largest PET processors in India, this unit has been catering to various industries like beverages, fruit drinks, packaged water, edible oil, pharma, liquor, cosmetics, home care, food products, confectionery, etc. Parle Products has been the largest manufacturer of biscuits and confectionery in India since over 80 years. With a 40 per cent share of the total biscuit market and a 15 per cent share of the total confectionary market in India, Parle has grown to become a multi-million dollar company. The company possesses one of the largest distribution networks in the country and services 33,00,000 outlets spread across cities, towns and villages of the nation.

BRANDS UNDER PARLE AGRO Frooti Product range: Mango drink Café Cuba Product range: Carbonated soft drink Appy, Appy Fizz Product range: Apple drink and sparkling apple juice Hippo Product range: Namkeens and snacks Frio Product range: Flavoured carbonated drinks Bailley, Bailley Soda Product range: Packaged drinking water and soda Dhishoom Product range: Jeera masala soda Source: Company website

KEY DEVELOPMENTS AT PARLE AGRO 1959: Operations started at Baroda Bottling Company for carbonated beverages 1985: Launched India’s first fruit-based drink – Frooti – in a unique tetra pack format 1986: Launched India’s first apple nectar – Appy 1993: Sold rights for carbonated beverages to Coco-Cola and entered the packaged drinking water market with the launch of Bailley 1996: Started preform (PET) division for backward integration Source: Company website

BRITANNIA Britannia is a 125-year-old Indian company, which specialises in biscuits. The company started its operations from Kolkata during the British era by preparing tea-time biscuits for British officers. Today, the company is worth Rs. 8,000 crore and finds itself among the top food companies of the country. Its products reach almost half of the Indian population through 3.5 million retail outlets in the country. The company’s

food range is divided into the broad categories of biscuits, dairy products, and bakery items including breads, cakes and rusks. The company offers bakery products through its wholly owned subsidiary, Daily Bread Gourmet Foods Pvt. Ltd. Though the company is best known as a biscuit manufacturer and marketer, it expanded its products portfolio in 1997, when it entered the dairy market.

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ITC ITC was incoprorated in 1910 as Imperial Tobacco Company of India Ltd. As the company’s ownership got Indianised, its name changed to India Tobacco Company Ltd. in 1970, and then to I.T.C. Ltd. by 1974. By the turn of the new millennium, the abbreviated name further got changed to ITC Ltd. in 2001 to recognise the company’s multi-business portfolio, which includes food and non-food FMCGs, cigarettes and cigars, education and stationery products, branded apparel, incense sticks and safety matches, hotels, paperboards and specialty papers, packaging, agri-business and information technology. Today, ITC Ltd. is one of India’s foremost multi-business enterprises with a market capitalisation of US$ 45 billion and a turnover of US$ 7 billion. In 1990, ITC set up its agri-business division for export of agri-commodities to leverage its agri-sourcing competency. The division is today one of India’s largest exporters. ITC’s unique and now widely acknowledged e-Choupal initiative began in 2000, with soya farmers in Madhya Pradesh. Today, it extends to 10 states covering over 4 million farmers. Also, through the ‘Choupal Pradarshan Khet’ initiative, the agri-services vertical has

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Britannia was one of the first companies in India to pioneer category defining innovations like Cream Cheese and introducing a host of international flavours for its cubes and spreads in India. Today, Britannia dairy products contribute close to 10 per cent of the company’s revenue. Britannia markets its dairy portfolio on the back of a wellintegrated cold chain logistics network and reaches millions of retail outlets across the length and breadth of the country.

BRANDS UNDER BRITANNIA Good Day, Crackers, NutriChoice, Marie Gold, Tiger, Milk Bikis, Jim Jam Treat, Bourbon, Little Hearts, Pure Magic, Nice Time Products: Biscuits and cookies Britannia Products: Breads, cakes and rusks Britannia Dairy Products: Dairy products including milk, processed cheese, butter, cheese cubes and spreads

been focussing on improving productivity of crops while deepening the relationship with the farming community. In 2000, the company also forayed into lifestyle retailing segment with its branded apparel range through its brand Wills, and then two years later it also launched its menswear brand, John Players. The company’s food business received a significant boost in 2001, when it launched ‘Kitchens of India’ ready-to-eat meals and dishes range. In 2002, ITC entered the confectionery and staples segments with the launch of the brands Mint-O and Candyman confectionery and Aashirvaad Atta (wheat flour). The year 2003 witnessed the introduction of Sunfeast as the company entered the biscuits segment. ITC entered the fast-growing branded snacks category with Bingo! in 2007. In 2010, the company launched Sunfeast Yippee! to enter the Indian instant noodles market. In just over a decade, the company’s foods business has grown to a significant size under seven distinctive brands. The business is today represented in multiple categories in the market – staples, spices, ready-to-eat, snack foods, bakery and confectionery, and the newly introduced juices and beverages. ITC’s foods business also exports its products to the key geographies of North America, Africa, the Middle East and Australia.

BRANDS UNDER ITC LTD. Sunfeast Product range: Biscuits and cookies Aashirvaad Product range: Flour, salt, spices, instant mixes and ready meals Bingo! Product range: Potato chips and snacks Mint-O, Candyman Product range: Confectionery Gum On Product range: Chewing gum Yippee! Product range: Noodles and pastas B Natural Product range: Fruit juices Kitchens of India Product range: Ready-to-eat meals, dishes and desserts

Source: Company website

Source: Company website

1.2 FOOD GROCERY MARKET

GUJARAT COOPERATIVE MILK MARKETING FEDERATION LTD. (AMUL)

Amul is a famous Indian brand of Gujarat Cooperative Milk Marketing Federation Ltd. (GCMMF), which is one of the largest food product marketing organisations with an annual turnover of US$ 3 billion (2013–14). The organisation daily procures approximately 13.18 million litres of milk from over 17,000 village milk cooperative societies. It comprises of 17 member unions, which cover 31 districts and 3.23 million milk producing members. It is the apex organisation of the dairy cooperatives of Gujarat, popularly known as Amul, which aims to provide remunerative returns to the farmers and also serves the interest of consumers by providing dairy products which are good value for money. It is the exclusive marketing organisation of ‘Amul’ and ‘Sagar’ branded products. The company operates through 53 sales offices and manages a vast network of 10,000 dealers and about one million retailers, which is one-of-its-kind in India. The brand’s products range includes milk, milk powder, health beverages, ghee, butter, cheese, ice cream, cottage cheese, chocolates and traditional Indian sweets.

GCMMF: AN OVERVIEW

Year of establishment: 1973 Members: 17 District Cooperative Milk Producers’ Unions No. of producer members: 3.23 million No. of village societies: 17,025 Total milk handling capacity per day: 23.2 million litres per day Milk collection (total 2013–14): 4.79 billion litres Milk collection (daily average 2013–14): 13.18 million litres Cattle-feed manufacturing capacity: 6,190 mts. per day

BRANDS UNDER GCMMF Amul Gold, Tazaa, Slim Trim Product range: Amul milk Amul Spray, Amulya, Sagar Product range: Milk powders Amul, Amul Lite, Delicious Product range: Butter, bread spreads and table margarine Amul Product range: Processed cheese, emmental and gouda Amul Gold, Tazaa, Calci Product range: UHT milk Amul Kool, Cafe, Koko Product range: Flavoured milk and beverage Amul PRO Product range: Malt-based food Amul, Flaavyo Product range: Ice cream, frozen desserts and yoghurts Amul, Flaavyo, Masti, Prolife Product range: Curd Nutramul Product range: Malted milk food Amul Product range: Mithai range – shrikhand, gulab jamun and basundi Mithai Mate Product range: Sweetened condensed milk Amul Product range: Chocolates, syrups Amul Product range: Fresh cottage cheese and malai cottage cheese Amul, Sagar Product range: Ghee and cow ghee Amul Product range: Fresh cream and whipped cream Amul Product range: Pouched butter milk Source: Company website

Sales turnover (2013–14): Rs. 18,143 crore ($3 billion) Source: Company website

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MOTHER DAIRY Mother Dairy was commissioned in 1974 as a wholly-owned subsidiary of the National Dairy Development Board (NDDB). It was an initiative under Operation Flood, the world’s biggest dairy development programme launched to make India a milk sufficient nation. Today, Mother Dairy manufactures, markets and sells milk and milk products including cultured products, ice creams, paneer and ghee under the Mother Dairy brand. The Company also has a diversified portfolio with products in edible oils, fruits & vegetables, frozen vegetables, processed food like fruit juices, jams, pickles, etc., to meet the daily requirements of every household. Brand Mother Dairy sources a significant part of its requirement of liquid milk from dairy cooperatives and village level farmer centric organisations. The company, over the last many years, has created a market leadership position for itself in branded milk segment in Delhi NCR through a robust network of its booth and retail channels. It has also expanded its reach to other regions in north, south, east and west with its offering of milk and milk products pegging it among a few companies to own such a vast channel of distribution in India. To sustain and support its large distribution network, Mother Dairy has invested extensively in installing hi-tech automated machines to ensure high quality, reliability and safety of its products. Safal: Safal is fruits & vegetables arm of Mother Dairy, and was the first company to organise F&V business in India. Today, Safal is the market leader in organised F&V retail business in Delhi NCR and operates the largest number of F&V Stores in Delhi NCR. It has a significant presence in Bengaluru. Safal was also the first brand in India to launch frozen vegetable in mid 90s. Over the years, the brand has gained significant customer support and has become a

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household brand with market leadership and presence across the country. The brand also has a state of the art plant in Bengaluru, which produces and sells about 23,000 million tonnes of aseptic fruit pulp and concentrate annually, and supplies to noteworthy companies in food processing space like Coca Cola, Pepsi, Unilever, Nestle etc. Safal also has a prominent presence across 40 countries viz., USA, Europe, Russia, the Middle East, Asia and Africa and exports fresh fruits & vegetables (grapes, banana, gherkin, onion, etc.), Fruit Pulp & Concentrate, Frozen Fruits & Vegetables, etc. Dhara: Mother Dairy is also present into edible oils segment under the brand name Dhara which was launched under the ‘Operation Golden Flow’ programme of NDDB as a market intervention programme to address a larger cause of the Indian farmers and consumers.

BRANDS UNDER MOTHER DAIRY Mother Dairy Products range: Token milk booths, packaged milk, dairy whitener, dairy products like curd, flavoured milk, lassi, butter, cheese, cream, ghee, yoghurt, chhach, sweets, paneer, ice cream and milk cakes Safal Products range: Frozen vegetables like peas, corns, mixed vegetables; Frozen foods including corns chatkara, aloo tikki; fruit juices & drinks, jams, marmalades, pickles, tomato ketchup, puree and Basmati rice Dhara Products range: Edible oils including groundnut, ricebran, mustard and vegetable oils Source: Company website

1.2 FOOD GROCERY MARKET

COCA-COLA INDIA PVT LTD The Coca-Cola Company re-entered India through its wholly-owned subsidiary, Coca-Cola India Private Limited (CCIPL) and re-launched Coca-Cola in 1993 after the opening up of the Indian economy to foreign investments in 1991. Since then, its operations have grown rapidly through a model that supports bottling operations, both company owned as well as locally-owned and includes over 7,000 Indian distributors and more than 2.6 million retailers. The company has extensive list of brands in beverage segment. Its brands in India include Coca-Cola, Coca-Cola Zero, Diet Coke, Thumbs Up, Fanta, Limca, Sprite, Maaza, Minute Maid range of juices, Georgia and Georgia gold range of hot and cold tea and coffee options, Kinley and Bonaqua packaged drinking water, Kinley Club Soda, BURN, Kinley Glucojal and Vitingo.

Source: Company website

The Coca-Cola System in India Includes

A companyowned bottling entity, namely, Hindustan CocaCola Beverages Pvt Ltd

Thirteen licensed bottling partners of The Coca-Cola Company, who are authorised to prepare, package, sell and distribute beverages under certain specified trademarks of The Coca-Cola Company

The Coca-Cola system in India has already invested US$ 2 billion till 2011, since its re-entry into India. The company will be investing another US$ 5 billion till the year 2020. The Coca-Cola system in India directly employs over 25,000 people including those on contract. The system has created indirect employment for more than 150,000 people in related industries through its vast procurement, supply and distribution system. Coca-Cola in India is also amongst the largest domestic buyers of certain agricultural products. CCIPL sells concentrate and beverage bases to authorised bottlers who are authorised to use them to produce company’s portfolio of beverages. These authorised bottlers independently develop local markets and distribute beverages to grocers, small retailers, supermarkets, restaurants and numerous other businesses. In turn, these channel partners make Company’s beverages available to consumers across India.

Extensive distribution system which comprise of company’s customers, distributors and retailers

LunaseeStudios / Shutterstock.com

A wholly-owned subsidiary of The Coca-Cola Company namely Coca-Cola India Pvt. Ltd. manufactures and sells concentrates and beverage bases and powdered beverage mixes

BRANDS UNDER COCA-COLA INDIA PVT LTD Coca-cola (Coke), Diet Coke, Coke Zero, Limca, Thums Up, Sprite, Fanta, Schweppes, Kinely soda Products: Aerated & carbonated drinks Mazaa, Minute Maid Products: Juices and fruit drinks Burn Products: Energy Drink Kinely, Bonaqua, Glucojal, Vitingo Products: Packaged drinking water & drinks Georgia, Georgia Gold Products: Tea & Coffee

INDIA FOOD REPORT 2016 | 41 |

Dry food grocery Food products constituting dry food grocery (DFG) include cereals, grains, grams, pulses and flours made out of them in addition to sugar, edible oils and dry fruits.

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1.3 DRY FOOD GROCERY

T

he DFG category as a whole contributes 34.7 per cent to the total food market in India. This share is the highest among all seven food groups. The large market size of the category is attributed to the fact that the products that fall in this category are consumed in raw as well as semi-prepared form. For instance, in India, wheat is used both in raw and as well as ground form, that is wheat flour. During the last two decades, it has been observed that consumption of DFG in raw form is on the decline among consumers owing to the increased availability and consumption of DFG in processed form. Although this trend is more pronounced in the urban markets, but the day is not far off when even rural consumers will also embrace it with open arms. The category being at the core of all food offerings will continue to enjoy the largest share in the consumers’ food basket.

Market Size & Growth India’s DFG market is worth Rs. 800,000 crore (2014) and has grown at a CAGR of 11 per cent over the last decade. With this growth rate, the category is all set to touch the Rs. 1.5-million mark by 2020, thus becoming almost double of what it is today.

Market Composition DFG Market Pie Dry fruits 2% Edible oils Suger 17% 9% Pulses 15% Grams 2%

Cereals, Grains & related products 55%

Source: NSSO; MPCE analysis

Although DFG category includes a large number of individual items, the category pie can be broken into six broad segments to incorporate all of them: 1. Cereals, grains and related products 2. Grams and its products 3. Pulses and its products 4. Sugar in all forms 5. Edible oils 6. Dry fruits The first segment makes a sizeable contribution to the category’s overall market with 55 per cent share followed by edible oils with 17 per cent share. The large market size can be attributed to the following factors: 1. A large segment of the rural population in the country is primarily engaged in the agriculture and production of these items. This allows substantial consumption of these items right at the source point. Farmers and producers keep part of their cereals and grains harvest for their household consumption for the entire year. This initiates the consumption of these items in the very beginning of the value chain. 2. The food items like wheat, rice, flours, grams, cereals, etc. form the basic range of staple foods around which other food items find their relevance. For instance, all Indian households require either rice or chapatti made out of flours as their staple food, while other food items serve mainly as accompaniments or substitutes to them. Thus, consumption of these food items occupies the largest share by default. There is no denying the fact that DFG category consumption will continue to grow in the years to come. It is just that the share of contribution by raw groceries and processed groceries will change more in the direction of the latter. This category’s consumption trends can be observed at two levels: 1. Rural and urban level 2. Regional level

Rural-urban market composition Taking into consideration the monthly per capita rural and urban consumption of DFG items and their respective population, the rural market size of DFG items is about Rs. 514,000 crore. It has already been explained above that the use of DFG items in raw form is much larger in rural areas, which has even larger population share. This results in twothird of DFG consumption taking place in rural markets, which leaves urban markets with the remaining one-third part. Thus, India’s big rural population plays a strategic role in shaping the DFG’s consumption in the country. However, as per NSSO, the rural monthly per capita consumption of DFG items is Rs. 514 and for urban India it is Rs. 632. This goes on to prove that the rural market valuation of DFG items exceeds urban market valuation owing to the large rural population component. Although the share percentage of all DFG items in rural and urban consumption pie is almost similar to that at the national level, there is a slight variation in the share of cereals, grains and dry fruits. If cereals and grains have a higher share (57 per cent) in rural consumption pie, dry fruits has a higher share (4 per cent) in the urban consumption pie.

INDIA FOOD REPORT 2016 | 43 |

Rural DFG Market

Regional Share - DFG

Monthly Per Capita DFG Consumption (Rs)

Dry fruits 1%

620.92 South 21.6%

North 28.3%

Edible oils 16% Cereals, Grains 57%

Suger 9%

North-east 3.8%

West 23%

Pulses 15% Grams 2%

East 23.3% North North- East east

Urban DFG Market

Cereals, grains 32.4

Edible oils 18%

28.3 Cereals, Grains 52%

39.4 28

Pulses 16% Grams 2%

West South All-India

Regional Share in Market Segments (%)

Dry fruits 4%

Suger 8%

567.81 550.79

550.17 525.39 512.5

50.4

Grams

0.8

9.5

2.7

21.1

2

16.2

2.2 0.7

18.8

5

25.7 North

Pulses

North-east

Sugar

Edible oils

Dry fuits

33.3

24.1

26.1

21.7

24.8

17.6 25.4

16.7

25.6 16.5 20.9

15.7

27.2 East

West

South

21.2

Source: NSSO; MPCE analysis

Regional market composition The share of DFG item consumption at the regional level is interesting. Two of the most populated regions in the country – north and east – together serve as the largest market for DFG consumption. The regions include highly populated states like Uttar Pradesh, Rajasthan, Punjab, Haryana, J&K, Himachal Pradesh, Uttarakhand from north India, and Bihar, Odisha, Jharkhand, Chhattisgarh, West Bengal and eight other north-eastern states of the country comprising the whole of the eastern region. The regions collectively have 75 per cent of rural population. In terms of DFG segments, the eastern region is the largest market for cereals and grains; the northern region

| 44 | INDIA FOOD REPORT 2016

for grams, pulses, sugar and edible oils; and the western region for dry fruits’ consumption.

Consumption Trends Per Capita/ Month

Rural (Rs.)

Urban (Rs.)

All India

Cereals, grains

291.32

330.55

303.54

Grams

10.28

11.05

10.52

Pulses

75.67

102.66

84.08

Sugar

45.80

54.04

48.37

Edible oils

82.50

111.07

91.40

Dry fruits

8.51

22.53

12.88

DFG total

514.09

631.89

550.79

Source: NSSO

The top three segments of cereals, pulses and edible oils, together, hold about 87 per cent of DFG market, and their respective consumption trends give good insights about the category. Cereals & grains The consumption market is currently worth Rs. 450,000 crore and is growing at 10 per cent. Cereals and grains are consumed on a large scale among Indian consumers. The consumption is further supported by the category’s large scale production. The production of food grains in India has grown at a CAGR of 2.6 per cent since 1951. The total food grains production in India reached an all-time high at 259 million tonnes (MT) in FY13. As per the 4th Advance Estimates of production of

1.3 DRY FOOD GROCERY

Cereals & Grains

Year

Rural Per Capita Monthly Consumption (kg)

Urban Per Capita Monthly Consumption (kg)

Rice and related products

2004–05 2009–10 2004–05 2009–10 2004–05 2009–10

6.38 6.00 4.19 4.25 1.13 0.75

4.71 4.52 4.36 4.08 0.355 0.291

Year

Per Capita Rural Monthly Consumption (kg)

Per Capita Urban Monthly Consumption (kg)

2004–05 2009–10 2004–05 2009–10 2004–05 2009–10 2004–05 2009–10 2004–05 2009–10

0.21 0.16 0.09 0.07 0.11 0.08 0.08 0.07 0.06 0.08

0.30 0.26 0.11 0.10 0.09 0.08 0.09 0.09 0.07 0.08

Wheat and related products Other cereals and grain products

Pulses & Grams

Arhar Moong Masur Urad Gram Source: NSSO 66th round

foodgrains for 2013–14, the total food grain production was estimated to be 264.77 MT. In 2013–14, India achieved actual record food grain production of 264 MT, exceeding the previous year’s (2012–13) production, according to data provided by the Department of Economics and Statistics (DES). It is just not the production which is growing but there is a corresponding rise in consumption of cereal items in terms of value as well. However, their monthly per capita in terms of consumption has declined from 2004–05 to 2009–10, as per NSSO. During 2004–05, the monthly per capita quantity rural consumption of cereals was 12.12 kg and for urban consumption it was 9.94 kg. These figures were found reduced to 11.35 kg and 9.37 kg, respectively, by 2009–10. At an average, the decline was 6 per cent in both cases. So how it is that the quantity has declined but the market in terms of value kept growing? If it is accepted that consumers began consuming lesser quantity of cereals since 2004–05, which is sanctioned by NSSO figures, then it conveys that per unit price would have gone up during the period to sustain the market growth. This reason can be agreed upon based on the fact that the price rise on comodities was also on the upward trend during the same period. The food inflation staying between 8–10 per cent during the period since then continued to be the sore point in Indian economy. Pulses & grams The present market size of the segment is estimated at Rs. 122,000 crore and should be more than one-and-a-half times its present size by 2020. India is the biggest producer of pulses in the world at 19 MT and their biggest importer with 3.5 MT. There has been a general fall in the consumption of pulses as well between 2004–05 and 2009–10, the decline being steeper for the rural sector. Overall, the consumption of pulses and grams has dropped since 2004–05 from 0.71 kg to 0.65 kg per capita in the rural sector and from 0.82 kg to 0.79 kg per capita in the urban sector.

INDIA FOOD REPORT 2016 | 45 |

Rural Per Capita Monthly Consumption Edible Oils Base = Rs 38.92 Vanaspati margarine 5% Other edible oils 34% Mustard oil Groundnut 49% oils Coconut oils 10% 2%

As mentioned earlier, there has been a shift in the consumption pattern of DFG items from raw to processed form. This category also reflects the same trend. It can be observed in the market that with growing age there is a recommended limited use of pulses and grams by the Rural Per Capita Monthly Consumption - Pulses & Grams (2009-10) Base = 651 gms Besan Peas 6% 10% Urad 12% Masur 13%

Arhar 28%

Gram split 13% Gram Moong whole 12% 6%

Urban Per Capita Monthly consumption - Pulses & Grams (2009-10) Base = 788 gms Peas 3% Besan 8% Urad 12%

Arhar 36%

Masur 11% Gram Moong 14% Gram split whole 11% 5% Source: NSSO; MPCE analysis

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health experts. Instead, consumers are advised to go for selective pulses, which are high on nutrituous content but more suitable in other than raw form. For instance, increased use of sprouted pulses in comparison to their raw use is catching up in metros and urban cities. In contrast, eating of pulses as accompaniments to chapatti or rice has emerged as not-so-high intake food item. The growth in the segment will continue riding on the growing demand of healthy foods, which can be generated out of the special use or preparation of pluses and grams. The other factor pushing its growth especially in the modern retail is the quality assurance by big retailers, who take special efforts and pain in their hygienic packaging and delivering quality content from reliable sources.

Urban Per Capita Monthly Consumption Edible Oils Base = Rs 52.85 Vanaspati margarine 4% Other edible oils 48%

Groundnut oils Coconut 17% oils 2% Source: NSSO; MPCE analysis

from other sources. The consumption of edible oils has been under a great debate over the last many years. The argument against their use is the health hazards which are posed by the ingredients and more than that the treatment or process applied to manufacture them. However, the entry of large-scale manufacturers, who are focussed to provide healthy, nutritious and trendy oils, will help the segment grow. The consumer base of

Edible oils The market for edible oils is expected to grow at a higher rate than cereals and pulses, which will bloat its market size to Rs. 322,000 – more than double of its present market size by 2020. The segment of edible oils consists of vanaspati, margarine, mustard oil, groundnut oil, coconut oil and edible oils Edible Oils Vanaspati, margarine Mustard oil Groundnut oil Coconut oil Other edible oils Source: NSSO 66th round

Mustard oil 29%

Per Capita Rural Monthly Consumption (gm)

Per Capita Urban Monthly Consumption (gm)

36 287 54 16 243

36 230 126 18 408

1.3 DRY FOOD GROCERY

S. No.

other source-based oils is expanding and there has been an increasing demand for packed and branded products, which ensure quality and health. People no more mind paying a little extra for health benefits, which is the core driver of this segment. The imported oils segment is another area, which will catalyse the segment’s penetration in newer markets in the days to come. Among all the variants of edible oils, it is mustard oil which enjoys the largest share among all oils in terms of quantity consumption in rural markets. At the same time, edible oils from other sources find the highest share in urban consumption. Close to 50 per cent contribution comes from oils of other sources in the urban monthly per capita consumption. The statistics are backed by growing trend of acceptance of olive oil, sesame oil, rice bran oil, etc., in the Indian household kitchen. The reasons, which can be quoted for this, are influence of global cuisines and a growing demand for healthy and nutritious oils.

Top Brands in DFG Category Product category

Brands

Wheat flour, maida, sooji, besan

Aashirvaad, Annapurna, Pillsbury, Shakti Bhog, Rajdhani, Nature’s Fresh

Rice

Lal Quila, India Gate, Daawat, Kohinoor, Jagat, Lal Haveli, Neesa, Saffol Arise, Amar, Shahjahan, Tilda, Satkar, Doon, Amira, Qilla, Golden Qilla, President, Double Diamond, Hanuman, RST, Satkar, Resham, Sugandha, Sharbati, Adora, Pari, Royal, Blue Label, Dunar

Pulses and grams

Top Sugar Companies in India

Market Cap (Rs. Cr.)

1

EID Parry

2,813

2

Bajaj Hind

1,306

3

Balrampur Chini

1,160

4

Shree Renuka

1,154

5

Bannariamman

961

6

Triveni Engg.

464

7

Andhra Sugar

266

8

KCP Sugar

207

9

Dhampur Sugar

200

10

Dalmia Sugar

146

11

DCM Shriram Ind.

131

12

Sakthi Sugars

127

13

Ponni Sugars (E)

107

14

Ugar Sugar Work

91

15

Piccadilly Agro

87

16

Oudh Sugar Mill

49

17

Uttam Sugar

46

18

Dharani Sugars

41

19

Rana Sugars

37

20

Dwarikesh Sugar

36

21

Simbhaoli Sugar

33

22

Jeypore Sugar

32

23

Thiru Arooran

29

24

Mawana Sugars

26

25

KM Sugar Mills

25

26

SBEC Sugars

20

27

Kesar Ent

18

28

Empee Sugars

16

29

Riga Sugar

10

30

Gayatri Sugars

9

Piccadilly Sug

9

Rajdhani, Mangat Ram Dal Mills (north), Taj Agro Interntional, Daily (East), Lakshmi, Angur, Rantio (West), Nandi, Shree Gold (south), Hasty Tasty, Swach, Mani (central), i-Shakti

Sugar

Trust, Mawana, Durala, Oatker

31

Edible oils

Saffola, Sundrop, Dhara, Fortune, Kanodia, P Mark, Vimal, Dalda, Gemini, NatureFresh, Sunflower Vanaspati, Sweekar, Leonardo, Rath, Mahakosh, Nutrela, Ruchi Gold, Sunrich, Rasoya, Sunsafe, Ambuja, Sweekar, Gemini, Uday, Safal, Borges, Del Monte, Bertolli

32

Dhampure Specia

8

33

Shree Hanuman

4

34

Eastern Sugar

3

Source: moneycontrol.com; figures rounded off

INDIA FOOD REPORT 2016 | 47 |

Dairy Food items that form the category of dairy products include liquid milk, baby foods, processed milk such as skimmed, condensed and powdered milk, curd, butter, ghee (clarified butter), ice-cream and other milk products.

M

ilk and dairy foods constitute about 16 per cent of the overall food market in India. This share is second highest among all seven FG categories after Dry Food Grocery (DFG). The dairy market in India is eye-catching for the primary reason that the country is the largest producer of milk in the world and has a substantially large bovine population with about 118 million milk-producing animals. Milk in India is sourced from cows, buffaloes, goats and sheep. However, it is cows and buffaloes, which contribute the largest share of milk production in the country. In fact, India produces 65 per cent of the world’s total milk produced from buffaloes. The Indian dairy industry has grown considerably post the White Revolution and various experts suggest that with the current growth rate, it is expected to become a Rs. 144,000-crore (US$ 24 billion) organised industry by 2020, and Rs. 840,000 crore (US$ 140 billion) overall, including the unorganised sector.

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1.4 DAIRY

Global Dairy Scenario

Southeast Asian regions. In terms of volume, liquid milk is the most consumed dairy product across the developing world. The top five milk producing nations in the world are led by India with 117 million tonnes of annual production taking place in 2010. Following India, in descending order of milk production, are the USA (87.46 million tonnes), China (41.14 million tonnes), Pakistan (35.49 million tonnes) and the Russian Federation (32.14 million

As per Food & Agriculture Organisation (FAO), the per capita consumption of milk and dairy products is higher in developed countries, but recently, the gap with many developing countries is also narrowing down. The demand for milk and milk products in developing countries is growing with the rising incomes, population growth, urbanisation and changes in dietary habits. This trend is more pronounced in the East and

Top 5 Milk Producing Nations (million tonnes) 1996

1997

2000

2005

87.46

117

2010 32.14

35.49 41.14

80.25

95.62

31.15

29.44

32.28

76.02

32.09

25.57

70.88

70.8

23.58

68.36

69.86

12.37 10.09 10.19

22.97

35.82

1. India

2. USA

3. China

4. Pakistan

5. Russian Federation

79.66

34.13

Source: FAO

Group (source: FAO) High consumption of milk Medium consumption of milk

Low consumption of milk (Million Tonnes) Milk Production

Annual Per Capita Countries in the Group Consumption (kg) 150 and above Argentina, Armenia, Australia, Costa Rica, Europe, Israel, Kyrgyzstan, North America and Pakistan Between 30 and India, Islamic Republic of Iran, Japan, Kenya, 150 kg Mexico, Mongolia, New Zealand, North and Southern Africa, most of the Near East and most of Latin America and the Caribbean Less than 30 kg Vietnam, Senegal, most of Central Africa and most of East and Southeast Asia

1990–91

2000–01

2009–10

2010–11

2011–12

2012–13

53.9

80.6

116.4

121.8

127.9

132.4

tonnes) in the same year. Though China is ranked third in the list, yet its milk production has grown during the period with the highest CAGR of 10.5 per cent, while the Russian Federation holds fourth position depsite the declined CAGR of -0.8 per cent. During the period from 1996 to 2010, India’s milk production grew at a CAGR of 3.9 per cent, the USA’s at 1.6 per cent and Pakistan’s at 3.2 per cent. In comparison, the world’s total milk production grew at a CAGR of just 2 per cent for the same period. In South Asia, including India and Pakistan, the consumption of milk and milk products is expected to increase by 125 per cent by 2030.

India’s Dairy Scenario India contributes 16 per cent of the world’s milk production followed by the USA with 12 per cent contribution. India’s milk revolution started in the 1970s, with the ‘Operation Flood’. This brought about much required pace in the milk production and placed India on the global map as the largest milk producer. The operation was spearheaded by the ‘Co-operatives model’, which was supported by the Government of India. The ownership remained with the farmers and this arrangement instilled trust among the member milk producers in the cooperative model, which also ensured transparent returns. The ‘Operation Flood’ has been a huge success and has delivered desirable results so far.

Source: Department of Animal Husbandry, Dairying & Fisheries

INDIA FOOD REPORT 2016 | 49 |

of liquid milk till date. Another traditional consumption aspect of this category is the 5 per cent market share of ghee, which is second only to the market for liquid milk. Ghee is consumed at a large scale in Indian households and is probably the main differentiating factor from the global dairy market. Processed dairy foods, such as curd, skimmed, condensed, powdered milk, butter, cheese, ice-cream, etc., together make up only the balance 6 per cent of the market.

Market Size and Growth

Rural Dairy Market Curd & other milk products

Powder/ condensed milk Ghee 3% 5%

Market Composition The dairy market in India is heavily centred on milk. This is evident from the fact that milk in its liquid form still rules the category. Unlike in other modernised markets in the world where milk products make a significant contribution to their respective dairy markets, India finds itself absorbed in the high consumption Dairy Market Curd & Powder/condensed milk other milk 3% 3% Ghee 5%

Milk 89%

Source: NSSO; MPCE analysis

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Rural-Urban market composition About 58 per cent of India’s dairy products market lies with rural consumers and the remaining 42 per cent with urban consumers. If milk alone

2.2%

Milk and related dairy products are worth Rs. 362,000 crore market and have grown at a CAGR of 12–14 per cent during the last decade. The market is estimated to cross Rs. 800,000 crore by 2020, riding on a wave of healthy foods consumption and growing demand for processed dairy products including milk. With growing urbanisation and a shifting inclination towards processed foods, Indian consumers are becoming more demanding, thus pushing individual markets of butter, cheese, ghee, ice-cream and other such dairy products to expand.

Milk 91.8%

Urban Dairy Market Powder/ condensed milk

Curd & other milk products

Ghee 4.3% 7.9% 2.7%

For many decades, dairy players in India have been engaged in the liquid milk processing activity only. The reason is obvious – high demand and consumption of liquid milk across the country. In addition, the agrarian economy of India has substantial contribution coming from agriculture and livestock-raising for cultivation and milk production besides their other numerous uses in farming. As per National Dairy Development Board (NDDB), the Indian dairy industry is expected to experience high growth rates with demand likely to reach 200 million tonnes by 2022 from 132 million tonnes in 2013. Presently, close to 20 per cent of the milk production comes from the organised sector comprising co-operatives and private dairies. The remaining 80 per cent is yet to adorn the organised efficiency and service delivery. Product innovations are accelerating India’s dairy market, which is only helping to improve the industry further by attaining greater scale, higher capacity use and an increasing contribution from new milk variants. Further, the development of processing and packaging technology along with improvement in retail and cold storage infrastructure has increased the shelf life of dairy products, which is an encouraging sign signalling the current increased consumption of dairy products and in future as well. Encouraged by such potential and competence of the category, NDDB has announced 42 dairy projects with a financial outlay of Rs. 221 crore (US$ 36.8 million) in order to boost milk output in India and increase per animal yield, that is, milk production per animal.

Milk 85.1% Source: NSSO; MPCE analysis

1.4 DAIRY

takes lion share of 92 per cent in rural consumption, it eats up to 85 per cent share of the urban consumption market. At the same time, products such as curd, ghee, butter and ice-creams have higher urban market size in terms of value than their rural counterparts. Although these products contribute a collective share of 11 per cent in the overall urban dairy market, this share is incapable and not large enough to challenge the milk market share, which dominates the overall dairy market in India. Given this dominance of milk segment in total dairy market, the other markets segments need to grow and expand at a much higher rate to compete with developed dairy markets of the world.

Regional Share - Dairy

Regional market composition The dairy market is concentrated in the North Indian region capturing 48 per cent of the total market share. West India region follows close behind with 23 per cent share. The decisive states in this market share are Uttar Pradesh, Rajasthan, Punjab, Haryana, Gujarat and Maharashtra. Each one of them boasts of a large population base, which hosts consumers of all age groups consuming milk and other dairy products. For each dairy segment, there is a respective STAR region, which holds the highest share of the segment’s consumption amongst all regions. For baby dairy products, it is the east (31 per cent); for powdered/condensed milk it is the south (67 per cent); for ice-cream it is

Monthly Per Capita Dairy Consumption (Rs)

South 16.9%

388.03 280.64

North 47.5%

West 23%

248.97

92.14

North-east 1.4%

114.61

North North- East east

West South All-India

Regional Share in Market Segments (%)

64.2 22.2 43.8 68.1 46.8 3 13.4 47.8

3.1 0.6 4 0.7 0.6

14.2

Powder / condensed milk Curd Ice-cream other milk products 7.9 10.3 4.9 4 11.2 12.5

48.7

12.3 18.3 4.8 4.9 23.3

42.4

11.6 East

West

8.5 1

12.5

22.4 17.9 2.8 16.8 23.6

31.4

North North-east Source: NSSO; MPCE analysis

Consumption Trends

200.66

East 11.2%

Milk Baby foods Ghee Butter

the west (49 per cent); and for milk, curd, ghee, butter and other such products it is north India (ranging from 44 per cent to 68 per cent). The monthly per capita consumption of dairy products at the regional level is also led by north India at Rs. 388, which is 56 per cent higher than all-India figures. In contrast, the north-east region records the lowest monthly per capita dairy consumption at Rs. 92, which is 63 per cent lower than the all-India per capita figure of Rs. 249.

67.5 29.9 16 South

Per Capita/ Month

Rural (Rs.)

Urban (Rs.)

All India

Milk

221.59

192.86

285.06

Baby foods

0.92

2.34

1.36

Powder/ condensed milk

5.21

9.06

6.41

Curd

1.54

4.59

2.49

Ghee

7.37

26.54

13.34 0.76

Butter

0.32

1.71

Ice-cream

0.58

2.87

1.29

Other milk products

1.31

2.68

1.73

Dairy Total

210.10

334.85

248.97

Source: NSSO

Being the largest milk producing country in the world, India is expected to set similar benchmarks in milk consumption capability also. However, such expectation are met with a different picture altogether.

INDIA FOOD REPORT 2016 | 51 |

Liquid Milk

Per Capita Monthly Per Capita Monthly Average Market Consumption in Qty. (litre) Consumption in Value (Rs.) Price 2014 (Rs./ltr.)

Rural

4.117

76.16

32.35

Urban

5.358

119.43

39.00

Source: NSSO 66th round

It is estimated that in India almost 50 per cent of milk is consumed on-farm. As per NSSO, the monthly per capita rural consumption of liquid milk is 4,117 gm, which translates into 137 gm per day per person. This quantity is not even sufficient for a growing baby, forget being of any use to a full-grown adult. Even the per capita urban consumption is no great achievement at 179 gm per day per person. These vital statistics reveal the low consumption side of the largest milk producing country on one hand and the huge opportunity and scope for the category to grow multi-fold on the other. By working further on NSSO per capita figures for rural and urban milk consumption and calculating their mean, we arrive at per capita consumption of 158 gm of milk at the national level. At the same time, NDDB data claimed that per capita milk availability on daily basis is 273 gm. This means the difference of 115 gm (273 minus 158 gms) is either used in preparing milk-based products or does not reach consumers at all. Given the infrastructure, the status of cold storage and transportation and the logistics scenario in the country, chances are that a large part of it is not consumed for one reason or the other. In spite of being the largest producer of milk, India is still not in a position to boast of being a country whose staple diet includes milk and milk products. This is a worrying scenario. India is a country with the largest young population and this young population is growing at a fast pace. If health boosting food items like milk are unable to reach or capture this vast market, there must be a big problem in its distribution and inefficiency in the value chain. In addition, this may pose a concern for the nation’s health quotient in the coming years. Despite these ground facts, there is also a silver lining in the present situation which cannot be ignored. There is a growing demand for processed and packaged dairy products. Milk products such as curd, cheese, butter and ice-

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creams are currently available under various brands. There are numerous players in the segment who are competing for market share with these products. In addition, India is also flooded with international brands and players who are slowly but steadily capturing the market by suitably positioning their dairy products. Due to convenience, health benefits and increased consumerism, milk derivatives like buttermilk, low fat yogurt and flavoured milk are, nowadays, part of the population’s regular consumption. This consumption trend is somehow accessing India’s young population and what if, these items are not as healthy as milk? This question remains to be addressed judiciously. Butter Butter is produced from curd and is a vital dairy component in an average Indian household. Traditionally, it has been a strong food item in north India especially in Punjab, Haryana, Himachal Pradesh, Gujarat and Rajasthan. Since the last 50 years, the production of butter in India has grown at a CAGR of 4.9 per cent.

Market Production Year (Million Tonnes) 1964 441 1965 444 1966 447 1967 449 1968 450 1969 425 1970 428 1971 432 1972 438 1973 438 1974 439 1975 551 1976 555 1977 557 1978 560 1979 581 1980 588 1981 620 1982 650 1983 670 1984 690 1985 700 1986 720 1987 750 1988 850 1989 880 1990 970 1991 1020 1992 1060 1993 1110 1994 1200 1995 1300 1996 1400 1997 1470 1998 1600 1999 1750 2000 1950 2001 2250 2002 2400 2003 2500 2004 2600 2005 2749 2006 3058 2007 3365 2008 3690 2009 3910 2010 4162 2011 4330 2012 4525 2013 4745 2014 4887 2015 5035 Source: www.indexmundi.com

Growth Rate NA 0.68 % 0.68 % 0.45 % 0.22 % -5.56 % 0.71 % 0.93 % 1.39 % 0.00 % 0.23 % 25.51 % 0.73 % 0.36 % 0.54 % 3.75 % 1.20 % 5.44 % 4.84 % 3.08 % 2.99 % 1.45 % 2.86 % 4.17 % 13.33 % 3.53 % 10.23 % 5.15 % 3.92 % 4.72 % 8.11 % 8.33 % 7.69 % 5.00 % 8.84 % 9.38 % 11.43 % 15.38 % 6.67 % 4.17 % 4.00 % 5.73 % 11.24 % 10.04 % 9.66 % 5.96 % 6.45 % 4.04 % 4.50 % 4.86 % 2.99 % 3.03 %

1.4 DAIRY

However, this production does not include production of butter in rural households for private consumption. This indicates the market is even larger than what can be recorded. The product also serves as a base material for producing ghee, which further finds its consumption space across rural and urban areas of the country. The urban consumer is an avid user of butter but more in its pasteurised form. All leading dairy manufacturers have their brands competing for a sizeable market share. More recently, consumers have become calorie conscious, and this has raised the demand for low-fat butter. Though margarine is another option to suit this requirement, but advanced technology has helped manufacturers to come up with low-fat versions. The raw white butter finds extensive use in the commercial and household bakery items. Ice-cream As per the PHD Chamber of Commerce & Industry (PHDCCI), the ice-cream industry in India was estimated at Rs. 4,500 crore in 2013. This industry is likely to reach about Rs. 7,000 crore by 2018, thus registering a CAGR of 9.2 per cent. The domestic ice-cream industry will grow at a CAGR of about 25 per cent with highprofit margins ranging between 15 and 20 per cent to reach the projected level since the per capita consumption of ice-cream has gone up to 300 ml. The study has identified the following trends, which will be responsible for its growth:

Growing institutional sales Increasing spend on eating out by consumers Growing disposable income of the middle class Large investments in advertising and infrastructure developments Diversification of product portfolio Identifying target consumers Entry of multinational companies Baby foods With the advent of healthy lifestyle and increased awareness about nutritious foods, the focus on baby food has assumed even greater significance. Parents, today, ensure they buy quality baby food items for their kids, and this has resulted in many brands emerging in the market to meet this growing demand. A few years back, no one would have heard about baby food brands and their benefits. Nowadays, however, even paediatricians recommend branded baby foods for infants between 6 and

Top Brands in Dairy Category Products Category Milk (liquid, condensed, powdered, processed) Butter, cheese, curd, paneer, lassi and other dairy products Ghee Baby foods Ice-cream

12 months of age. Needless to say, baby foods is a growing segment, which is estimated at Rs. 2,000 crore. It is heavily inclined towards urban consumers, who have better awareness about various baby foods available in the market. Moreover, they have easy access and availability of these foods in their close by markets. Since a child’s diet is a matter of great concern for the parents due to their vulnerability and susceptibility to ailments, it becomes essential to ensure that whatever food is being given to a child is pure, healthy and nutritious. Today, India is home to some famous baby food brands, which are readily available on the shelves of modern retailers, shopping malls, local retailers and with big food companies. Most of the top baby food brands in India are known for providing right amount of nutrients to babies and children. These branded products are not only apt for supplying the required nutrient to kids but are also easily digestible by them. The undisputed leader in the baby food market in India is Nestlé. Most of the infant foods dominating the Indian baby food industry are produced by Nestlé. The brand’s product called Lactogen is among the top baby food brands in India. It is available in a range of flavours of different quantities and sizes, which are meant for babies of different age groups, Lactogen is the most trusted food brand in India. Apart from Lactogen, Nestlé India Ltd. also produces a host of other baby food brands like Cerelac and Nestum. The company accounts for almost 85 per cent of the baby foods and nutrition market in India.

Brands Nestle, Everyday, a+, ActiPlus, Milkmaid, Vijaya, Verka, Amul, Vita, Mother Dairy, Paras, Saras, Sagar, Amulspray, Mithai Mate, Nutramul Amul, Britannia, Verka, Vita, Mother Dairy, Nestle, Danone, Amul Lite Amul, Panghat, Mother Dairy, Madhusudan, Milkfood, Everyday, Britannia Lactogen, Cerelac, Nestum, Farex Cream Bell, Kwality Wall’s, Mother Dairy, Vadilal, Amul, Magnum, London Dairy, Flaavyo, Top n Town, Dinshaw’s, Nirulas, Baskin-Robbins, Gelato Italiano, Haagen Daaz

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Spices Food items constituting the category of spices are edible salt and all other dry spices (both in raw and ground forms) which are used for adding flavour or for cooking food in an average Indian kitchen.

T

hough spices serve as part of Dry Food Grocery (DFG), their significant role as food additives allow them to be discussed separately. India is the largest producer, consumer and exporter of spices and spice products in the world. The country has had a reliable history in trading spices since ages. Historically, the Indian sub-continent was well connected with the world’s trading powers, which purchased spices in abundance from here. As a consequence, spices have played an important role in inviting various cultures from around the globe and got them converged at a single point. It was a remarkable achievement of the Indian trade to have witnessed all trading powers of the past, and the present era patronising the collection of spices which India could and can still provide them.

Market Size & Growth The current market for spices is estimated at Rs. 150,000 crore and has grown at a CAGR of 13 per cent over the last decade. By 2020, the market is likely to grow twice as big as its present size with the same growth rate. In other words, about Rs. 6,000 crore is estimated to be the branded market in spices.

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1.5 SPICES

The importance and competence of Indian spices is well documented in its export market. As per the Spices Board of India, during 2013 the total spice exports from India crossed US$ 2 billion, which was in tune with the export target of US$ 3 billion set for the year 2017. Spices exports from India is expected to achieve the target of US$ 3 billion by 2017, based on the support of creative marketing strategies, innovative packaging, strength in quality and a strong distribution network.

Spices Market

Consumption Trends India is estimated to consume over 5 MT of spices annually. According to industry experts, this consumption is almost 90 per cent of all spices produced in the country. Ginger-garlic, dry chillies and turmeric together contribute 44 per cent to 48 per cent of total spices in India. This consumption share is not much varied in the rural and urban markets. The southern region of the country plays a significant role in the spices market. It is not only the largest market

but its average monthly per capita consumption is also the highest among all regions. Although the region of north India follows next to the southern region in terms of market share, but its monthly per capita consumption is among the lowest at Rs 92. On the other hand, the western region with 23 per cent market share has monthly per capita figure of Rs. 118, which is the second highest after the south market. Both regions exhibit higher per capita consumption than all-India per capita consumption figure of Rs. 103. Monthly Per Capita Spices Consumption (Rs)

Regional Share - Spices

140.36

Salt 5%

South 28.4%

North 27%

117.74 103.5 92.26 73.27

North-east 2.7% Other Spices 95%

Rural Spices Market (excld. salt)

Other spices 27% Cury spices 7%

East 18.6%

West 23.3%

Source: NSSO; MPCE analysis

Ginger & Garlic 22%

Turmeric 17%

Tamarind 4% Dry chillies Pepper 4% 19%

North North- East east

Source: NSSO; MPCE analysis

Urban Spices Market (excld. salt)

Other spices 27% Cury spices 9%

78.7

Ginger & Garlic 23% Turmeric 14%

Tamarind 5% Dry chillies Pepper 5% 17%

Source: MPCE spices

West South All-India

Top Brands in Spices Category Products Category

Brands

Salt

Tata, Catch, Nirma, Annapurna, Captain Cook, Saffola

Spices

MDH, Catch, Everest, Kitchen King, MTR, Priya, Ashok, Rajah, Khazana, Ramdev, Spice N Flavor, Badshah, Smith & Jones

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Fresh Produce The category of fresh produce consists of fruits and vegetables in fresh and raw forms.

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T

he category of fresh produce contributes close to 17 per cent to the total food market in India. It also forms an integral part of the total cultivation in the country and caters to the overall Indian population. In retail segment, fruits and vegetables are sold from push carts, hawkers, street vendors, mandis and bazaars. The market is hugely unorganised with over 95 per cent share and is not location dependent. The fruits and vegetables serve as an all-year market nowadays in contrast to olden times, when the food items were restricted to be seasonal. The seasonality factor has been taken care of by advanced agriculture and large-scale imports from other countries, which have made possible the availability of all products across all seasons. India is the world’s second largest producer of fruits and vegetables after China. In the U.S., Australia, Canada and Asian countries like Indonesia, Malaysia, Thailand, and Philippines, organised fruits and vegetables (F&V) retail is highly developed. In contrast, the Indian market is in its nascent stage of development. The organised component in India is about 4–5 per cent, which is minimally low as of today.

1.6 FRESH PRODUCE

Market Size & Growth The fresh produce market in India is about Rs. 390,000 crore and has been growing at a CAGR of 14 per cent since the last 8–10 years. While talking about the growth rate, the role of inflation is also required to be acknowledged. At the same growth rate, the category will be worth Rs. 850,000 crore by 2020 riding on the wave of healthy food habits, which demands significant portion of fresh produce in daily diet.

Market Segments

alone. Although fruits are a growing segment, they contribute a current share of just 30 per cent, which translates to Rs. 117,000 crore worth of market. Fresh Produce Market

Vegetables 70%

Fruits 30%

Fruits The fruits market is distributed in the ratio of 50:50 between rural and urban markets. Both the markets reflect an equal share in consumption size. However, at individual item level they showcase some variations. If apple is a largely consumed fruit in urban markets, it is only as large as the market for mango in the rural market. In spite of mango being a seasonal fruit and the fact that it gets bigger only in certain regions during a particular season, its share matching that of apples’ confirms its stronghold in rural markets. In contrast, the share of mango consumption in urban markets remains almost identical. Thus, it is the fruit apple which differentiates both the markets. In other words, apple is still perceived and consumed as an urban fruit. Rural Fruits Market

Apple 13% Other Fruits 39% Banana 29%

Fresh produce is not a complex market and it involves just two broad segments of fruits and vegetables. Among the two, 70 per cent is contributed by vegetables Source: NSSO; MPCE analysis

Grapes 6% Mango 13%

Urban Fruits Market

Other Fruits 34%

Grapes 7% Mango 11%

Apple 24%

Banana 24%

Source: NSSO; MPCE analysis

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Vegetables Similarly, in the case of vegetables it is the consumption of potatoes and other types of vegetables, which differentiate rural market from the urban one. Otherwise, all constituting vegetables show similar share in their respective consumption pie. In terms of overall share, the rural vegetables market holds 63 per cent share in the total vegetables market, which leaves urban market possessing just a little over one-third share of the total market.

Rural-Urban market composition Out of the total fresh produce market of Rs. 390,000 crore, 60 per cent is rural market. Again, this has three-fourth of the market occupied by vegetables. As mentioned earlier, fruits form the urban-centric market while vegetables are comparatively a national market. If this is something to reason out, then does it mean that with growing urbanisation of Indian towns and villages, there will be growth in the fruit market also? It cannot be said with certainty because of the following reasons: Fruits consumption is highly dependent on their availability, which in turn is a logistic and supply chain efficiency dependent aspect. It is understandable that urbanisation does not necessarily mean that supporting infrastructure will also grow proportionately.

Rural Vegetables Market

Rural Fresh Produce Market

Fruits 25%

Potatoes 21% Other Vegetables 42%

5% 4%

South 24.2%

North 28.1%

North-east 3.8%

Vegetables 75%

7%

West 21.8%

Tomatoes

Leafy vegetables Tuber vegetables Urban Vegetables Market

Other Vegetables 47%

Regional Share - Fresh Produce

Onions 12% 9%

Green chillies

Use of fruits appears to hardly challenge use of vegetables since veggies are part of meal and fruits are supplement food. Moreover, the increased food processing sector producing juices, beverages, etc. is using fruits more than vegetables, which primarily serve as individual taste entity. For instance, cabbage or capsicum can be used in many ways and cuisines, such as in soups, as vegetable curry in Chinese and Indian cuisines, respectively, to suit the requirement of the users and consumers. But apples can be used either as fruit or for its juice. This substantiates that use of vegetables will continue more in their original form but the usage of fruits will transform more into processed forms.

Urban Fresh Produce Market

Potatoes 15%

East 22.1%

Per Capita Monthly Fresh Produce Consumption (Rs) 310.23 285.68 267.8 266.01 247.3 242.37

Fruits 37%

Onions 12% Vegetables 63%

10% Tomatoes 6% Leafy vegetables

4% 6% Green chillies

Tuber vegetables

Source: NSSO; MPCE analysis

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Source: NSSO; MPCE analysis

North North- East West South All-India east Source: NSSO; MPCE analysis

1.6 FRESH PRODUCE

Regional Share in Market Segments (%) Fruits

29.1

26

North

Vegetables

20.2 4.2

25.2

21.3

2.5

14.7

23

33.8

North-east

East

West

South

aspect, which includes end-to-end extension services, such as agronomy, certification, grading and packaging and finally, hygienic presentation. There is another consumer segment which craves for safe, healthy fruits and vegetables. By safe they not only mean hygienic but also nutritious and healthy supply of energy, vitamins and other vital contents, which their body requires. The same can be provided by specific breed or variety of fresh produce. The trend is on the rise as more and more people are turning to healthier food options. One cannot undermine even another set of consumers, which loves to see variety in what is being sold to them. Again, they also have to depend on food importers and organsied retailers to provide them with exotic, international varieties and high-grade quality produce from other countries. People these days are well aware of what is available abroad in terms of both variety and quality, and they are consciously looking for similar products locally. This expectation has a lot to do with growing globalisation and increased travel by Indians to other countries.

Source: NSSO; MPCE analysis

Regional market composition Broadly speaking, all the four regions (north-east combined under east) have equally relevant share in fresh produce consumption. However, it is the north region which has the largest share. Within regions, the north and the west have about 70:30 share of vegetables and fruits, respectively; the eastern region has 80:20 share and south has about 60:40 share. The southern region has been found to have the highest per capita consumption of fresh produce among all regions at Rs. 310. Whereas, in spite of being the largest market, the north has one of the lowest per capita consumption figures of Rs. 247. Both the west and south regions have above all-India per

capita consumption figures. People in these regions spend a substantial amount on fresh produce.

Consumption Trends Fresh produce is becoming synonymous with health and freshness. There is also a big consumer segment that is extremely health conscious and quality conscious. The production of fresh produce is very large in the Indian context but it does not necessarily translate into quality. It is only organised production that can guarantee the expected high-quality standard. This has fused fresh produce market with understanding of the role organised production and retailing can play in achieving the same. Consumers expect their buy to be linked with quality

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Modern retailers are reinventing their distribution and marketing strategies, and also testing newer retail formats and practices that may lead to fresh growth channels. All of the above consumption trends have resulted in consumers now preferring modern outlets over traditional shops, as they now seek a good shopping experience before actually savouring their purchase. Organic F&V consumption F&V should ideally be fresh, healthy and in the original form of nature. In present times, this mindset has got an extension in the form of organic foods. Fresh produce if produced organically means health, quality, trust and nutritious values attached to the product. There is a growing demand for such food items, and fresh produce takes the largest share of this demand. The consumer lifestyle outlook has transformed from casual to more awareness based. Food plays a decisive role in this transformation and so does fresh produce. This means that as the transformation grows for good, the market for healthy organic food also grows alongside.

Fresh Produce in Modern Retail F&V retail has carved its niche in modern retailing also. All big hypermarekts and supermarket chains in the country, such

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as Reliance Fresh, More, Spencer’s, Hypercity, Food Bazaar, Spar, Auchan, etc. stock F&V in raw as well as cut and packed form. There is a special space allocated to fresh produce merchandise with cold storage facilities at in-store display points as well as in back-store areas of retail shops. This trend is growing despite the stiff challenge faced by the category from unorganised retail components. The modern retailers are fully aware of the challenges posed by traditional retailers and have been working relentlessly to improve supply chain, infrastructure, distribution models and pricing strategies in order to capture the consumers’ wallet share through F&V. The industry as a whole is trying to achieve what has been the dream of India’s modern retail – ‘farm to fork’ situation, wherein fresh produce lands on the retailer’s shelve directly from farms without entertaining any middleman and escaping various transit points which delay the supply. Modern retailers are reinventing their distribution and marketing strategies, and also testing newer retail formats and practices that may lead to fresh growth channels. These efforts have brought with them a fresh approach to the F&V retailing. The market saw opening of new format stores, such as Safal (Mother Dairy) that offer convenient and superior shopping experience of buying F&V. Since a significant share of F&V market still lies with unorganised players, the situation has forced organised players to revisit their business and distribution models

to increase their market share. Further, as the modern consumerism backed by mall culture takes deeper roots in India, a bigger tussle between organised and unorganised players is heading for a healthy competition in the segment. Despite all the competition that F&V in modern retail faces from the unorganised market, it has certain advantages over its unorganised counterpart. These advantages include larger space availability in modern retail stores to showcase maximum possible varieties under customer-friendly ambience and hygienic conditions. Loaded with such advantages, further growth will depend on a modern retailer’s capacity for maintaining fresh stocks, competitive pricing, adding products that would entail efficient logistics, and a proper cold chain. Key developments The supply chain model of fruits and vegetables differs to a certain extent. In case of fruits, corporates and chains source fruits directly from farms and distribute them domestically as well as export them. However, in case of vegetables the sourcing is highly mandis-centric. In the present scenario, the farmers, producers, wholesalers, retailers and even consumers have become more aware of the benefits of a modern retail set-up. This situation is helping the industry push for its dream ‘farmto-fork’ approach. Nonetheless, structuring is catching up at every step of the value chain.

1.6 FRESH PRODUCE

well. So the probability is high that this change will boost the segment growth. On the demand side, the transformation is led by factors like rising incomes, improved living standards, busy lifestyle and a demand for quality products.

Challenges There are a number of agribusiness and large retail chains that work on the contract farming model. Desai F&V, a fruit exporter; Fieldfresh Foods (a Bharti & Del Monte joint venture), a vegetable exporter; and Champion Agro Fresh, supplier of fruits and vegetables to the domestic and overseas market – all sign contract farming agreements with growers. While Namdhari’s Fresh is an F&V exporter as well as retailer, Heritage Food’s agribusiness division not only feeds its supermarkets but also supplies to other organised retailers and general trade. Even large retail chains like Reliance Fresh, Food Bazaar, More, Easyday, Spencer’s and Safal have been networking with farmers for direct sourcing model. Additionally, they buy from local markets to maintain daily stock requirement. Big retailers have a centralised warehouse, which serves as the receiving point for produce from farmers and producers. The warehouse is integrated with a cold storage chain as well as a strong distribution network, which is closely connected with their retail outlets. The whole system minimises the delay in supply of F&V, which needs freshness to be maintained. Though unheard of in earlier times, retailers like Mahindra & Mahindra have launched their own fresh fruits brand with selective presence to test market branded F&V segment. Similarly, Big Bazaar is also planning to introduce its own branded vegetables. E-commerce perspective of F&V In recent years, the e-commerce wave has encapsulated various retail segments, and the F&V sector has also been invaded by e-tailers such as N-Fresh, Blive, Veg on Call in Delhi, Veggie Bazaar in Chennai,

and Farm2Kitchen in Gurgaon, etc. Ease of online ordering system from home and delivery to the doorstep are their unique selling propositions. However, most of the web stores have been unable to compete with physical stores. Since the population of working women, even that of working couples, has gone up in big cities and urban areas of the country, there is a need to value their time, shopping requirements, space and privacy. This can be achieved by shopping online and this is precisely where e-commerce serves as a great fall-back alternative to shopping in stores/ mandis. Now, if any such e-commerce player happens to be a producer, processor and retailer in itself, then there is a better conrol of complete supply chain, which can deliver quality products at competitive prices to the online consumers.

Growth Driver As of now, modern retailers are selling fresh produce of fruits and vegetables, which amounts to 3 to 4 per cent of their entire business. No doubt it is a small figure in relation to what a traditional F&V retail business is doing but this situation can be seen as an opportunity. How? With increased modern retail expansion the modern retail is penetrating smaller cities and towns. With them they carry the modern concepts and models of F&V retailing, which cannot leave consumers uninfluenced. Modern retailers are creating value in the front-end by having convenient locations, a broad range of products, good quality at comparative prices, a comfortable shopping atmosphere and better services. Similar developments are taking place in the e-commerce space as

As is the case with other categories, fresh produce also faces some great challenges at many fronts: The category is not branded, which disallows it to be marketed for niche requirements. The other factors like nature of market, consumer behaviour, and traditional practices pose a bigger challenge for an organised player than high capital requirement. The other most daunting challenge is that of wastage in the supply chain. Experts estimate that about 40 per cent of India’s produce goes in waste for various reasons – acute shortage of cold storage and refrigerated transport being among the top-most reasons. At the producers’ end, fragmented supply chain, low market visibility, lack of clarity on consmer requirements and lack of regulations are some of the key issues faced while operating in the F&V business. To operate modern F&V business at the store level, the retailers have to bear high logistic costs, rentals and other overheads, which are discouraging in comparison to the traditional set-up. These costs cannot be done away with since they are mandatory to store stocks, retain freshness and avoid wastage. The most important aspect is to maintain freshness of the fresh produce. As far as organic fresh produce is concerned, the problems get amplified. There are selective producers and suppliers and the costs involved to produce and procure organic F&V are also relatively higher than conventional farming. Otherwise, one has to deal with numerous small suppliers, which then raise the issues of scattered supplies, shrinkage, perishability and high inventory holding costs.

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Perishables The category of perishables includes eggs, meats (mutton, beef, pork, etc.), poultry and game, seafood and fish markets.

P

erishable food items form an integral part of daily meals. The category holds 9 per cent share of the total FG market. The products that we get from various land- and water-animals have a significant market share. The growth in this category is directly proportionate to improved standards in livestock and fish farming in addition to the consistent growth in the food processing industry. This is responsible for not just imparting extended shelf life to food perishability, hygienic packaging and assured quality, but also pushes their distribution in challenging markets, thus allowing them to reach their consumers effectively. The category is well structured by the origin and usage of constituting food items, which position each of them as a separate market altogether. With growing modern retail, evolving infrastructure and supply chain, the perishable products have an increased shelf life. And with increased consumption of these items, the market is expanding for the better.

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1.7 PERISHABLES

Market Size & Growth The market for perishable food items is worth Rs. 200,000 crore, and has grown at a CAGR of close to 20 per cent. The growth rate is among the highest in seven food groups. With the same growth rate, the market is expected to treble by 2020, in which the segment for fish, seafood and meats will grow at a faster pace owing to the growing demand for such food items. The market is becoming highly qualitycentric with the entry of branded players, increased caution over global contagious ailments, growing competition and improving quality standards of packaging and storage.

Market Composition The four primary sub-segments of perishables include fish & seafood, meats including mutton, beef, pork, poultry and game birds, and eggs. Close to 45 per cent market share is enjoyed by poultry followed by game and then meats. The largest market segment of fish & seafood holds this formidable share thanks to a long coastline and inland waters, which a large country like India possesses. In addition, there is a sizeable share of imports of canned seafood and fisheries, which is growing in demand and size. The

Perishable Foods Market

domestic consumption is no more confined to coastal areas but has penetrated deeper into the mainland markets also. Rural-Urban market composition The market for perishable foods is estimated at 59 per cent rural and 41 per cent urban. The constituting consumption markets do not show much disparity amongst their share in respective markets. This suggests that the trend is almost similar except slight variations in shares of fish & seafood and meats markets. However, better quality products, packaging, hygiene and high-grade

Rural Perishables Market Eggs 10% Poultry, game 25%

Meats 20%

Urban Perishables Market

Eggs 10% Poultry, game 25% Meats 21%

Fish, seafood 45%

Eggs 10% Poultry, game 24%

Fish, seafood 44%

Source: NSSO; MPCE analysis

Meats 23%

Fish, seafood 43%

Source: NSSO; MPCE analysis

animal produce back the consumption in urban markets. The urban market is further supported by strong marketing and distribution models, which help market these products at suitable avenues through relevant strategies. The packaging industry also plays a strategic role in branding these products and the price aspect is also competitive. In contrast, the rural consumption generally lacks all these supporting features of the urban market. Regional market consumption The eastern and southern regions hold a strong position in consumption of perishable items. The two regions are so strong that even the share of the north-east, which is though a part of total eastern share, comes close to the share of the northern and western regions. It is the same region which makes a decisive contribution to the eastern region making it the largest consumption market. The monthly per capita consumption of the north-eastern region is the highest among all regions. The monthly per capita consumption of Rs. 325 is 130 per cent higher than the all India average of Rs. 141. At the same time, the southern region of India holds a share of the constituting markets ranging from 27 per cent to 41 per cent unlike the northern region, which has the lowest fish and seafood consumption share of just 3 per cent among all regions.

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Regional Share - Perishables

Monthly Per Capita Perishables Consumption (Rs) 325.21

North 13 South 35%

North-east 9%

238.75 165.6

East 29%

140.78 98.08

59.46

West 14% North North- East east

Source: NSSO; MPCE analysis

West South All-India

Regional Share in Market Segments (%) Eggs

Fish, seafood

17

8

25

15

Meats

Poultry, game

29

12 9

24

3

34 27

31

18

41

30

12

29

East

West

7 22 7 North North-east Source: NSSO; MPCE analysis

Consumption trends Fish & seafood The fish and seafood consumption market is worth Rs. 90,000 crore and is growing at a healthy rate of 20–23 per cent annually. The discerning consumer is ready to experiment with marine produce encouraged by the globalisation of world cuisines. The aspiration to taste specific Fish Production (in ‘000 tonnes)

Marine

South

fish and seafood dishes has resulted in soaring demands for a specific variety of fish and seafood. This demand is triggering the supply mechanism through enhanced domestic fishery activities and imports. In addition, the demand is aided by availability of all relevant ingredients from across the globe required for preparing such dishes and foods. Inland

Total

1950–51

534

218

752

1980–81

1,555

887

2,442

1990–91

2,300

1,536

3,836

2000–01

2,811

2,845

5,656

2009–10

3,104

4,894

7,998

2010–11

3,250

4,981

8,231

2011–12

3,372

5,294

8,666

2012–13

3,275

5,744

9,019

Source: Department of Animal Husbandry Dairying & Fisheries

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Fish production in terms of volume has grown by a CAGR of 4 per cent during the period from 1951 to 2013. With the long coastline that India boasts of, it is expected that the major contributor to this growth volume would have come from marine fish and seafood. However, the data shared by the Department of Animal Husbandry, Dairying & Fisheries reveals that inland fish production grew by a CAGR of 5.4 per cent during the period of 62 years against a CAGR of 3 per cent in case of marinebased production. Not only the disparity in respective CAGRs but the respective shares in the total production also speak volumes about the gradual shift. In 1951, marine fishery had a commanding 71 per cent share in fish production, which went down to almost half by 2013. On the other hand, the share of inland fish production has grown from a humble 29 per cent to a staggering 64 per cent. This shift in trend can be attributed to either of the following reasons or a combination of all of them: The domestic demand for inland fish has grown during the period instigating their increased production to meet that demand. The stock of coastal fish varieties has either dried up considerably or has been taken under protection of conservationists, which has forced the market to look for alternatives in inland fishery. The stable demand for sea fish has been replaced by a growing demand for other aquatic seafood items, such as prawns, lobsters and crabs, which has affected fish production since they can be found only in sea water. The change in taste pattern of consumers has also shifted from salt water fish to fresh water or still water fish. Owing to the above cited reasons, the Indian inland water fish is driving the overall fish and seafood market if production trend is taken as any indication of domestic demand. Though NSSO data, also, does not state if consumption is more inclined towards marine fish or inland fish, but going by production trend it is evident that marine fish is losing the market share to inland varieties.

1.7 PERISHABLES

Poultry & game The market for poultry and game occupies about 39 per cent of the overall perishable foods market growing at 15 per cent. The consumption market for this segment is expected to be worth Rs. 117,000 by 2020. The number of poultry birds has grown at a CAGR of 3.4 per cent from 1951 to 2007. The registered poultry population, which was 73.5 million in 1951, reached about 469 million in the next 56 years. Due to various environmental and conservational activities, there has been a strict control over slaughter of game birds and their consumption over the last 7–8 decades has declined consistently. Moreover, game birds have remained confined to the kitchens of a very few royal families. At a CAGR of 3.4 per cent (2007), the estimated poultry population in 2014 was 592.42 million. For the same year, egg production was also 73.6 billion (see table in section on eggs). This implies that eggs yield per bird is 124 per annum, which is approximately 10 eggs per bird per month.

Meats Meats including mutton, beef and pork constitute about 20 per cent of the perishables market. Between mutton, beef and pork, consumption of beef is more than thrice the size of pork consumption while consumption of mutton is double

the size of beef consumption. Half of mutton consumption, one-third of beef consumption and one-fifth of pork consumption in the country, is by urban consumers. Urban consumers from the eastern region of the country hold the maximum share of meat consumption. In fact, the eastern region contributes about 40 per cent of the total meat consumption in India. The monthly per capita consumption of meats at an all India level is Rs. 30, and in relation to that the eastern region has Rs. 119, which is almost 300 per cent higher. Meat production in India achieved a production figure of 6,228 million tonnes in 2011, which was the sixth overall in the world after China, USA, Brazil, Germany and Russia for that year. India’s share at the global level was 2.1 per cent.

Species (Nos. in millions)

1951

1982

1992

2007

Poultry

73.50

207.74

307.70

468.88

Source: Department of Animal Husbandry, Dairying & Fisheries

(Nos. in billion) Eggs

1990–91

2000–01

2009–10

2010–11

2011–12

2012–13 (P)

21.1

36.6

60.3

63

66.5

69.7

Source: Department of Animal Husbandry, Dairying & Fisheries; P = Provisional

Eggs By 2020, the eggs market is expected to be about Rs. 50,000 crore, which will be more than the double of its present size growing at 15 per cent annually. As much as 40 per cent of egg consumption comes from the urban market and 60 per cent from the

rural market as per MPCE analysis of NSSO data. Eggs are consumed largely in the eastern and southern parts of the country. The western region has been found to have least annual consumption market size of eggs at Rs. 2,600 crore. Eggs have become a part of daily diet on the perception of being a healthy food, which supplies the much-required nutritious content to the consumers. They are also used extensively in baking and various other cookeries. The poultry farms provide this health commodity and the production by them has been on an upward trend. Official data shows a CAGR of 5.6 per cent from 1991 to 2013 in egg production in the country. During FY 2012, India produced over 66 billion of eggs. In terms of egg production, India ranks third after China and the USA with a world share of 4.9 per cent.

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Perishables in Modern Retail The modern retail industry verifies the contributing share of perishable product categories in their overall business. All food stores, supermarkets and hypermarkets are fully equipped with storage facilities of freezers, chillers in their front display and back store areas to accommodate perishable food items. Although perishables have four key food groups constituting the category, all of them except eggs require to be sold in frozen state. Their frozen state is mandatory to prolong quality and shelf-life. This has inadvertently shaped the market of frozen foods also. Earlier, keeping frozen foods was an option for the retailers but now they have become an essential section in those modern retail outlets which are in FG business. At HyperCity, one of the leading Hypermarket chains in the country, the frozen category has been growing at 30 per cent year-onyear. One can see a lot of new variants coming into the market and private labels being introduced in the category owing to the opportunity and potential the category holds. Industry experts also segregate the frozen category into veggies, poultry, fish & seafood, and meats. The players in the respective categories hold market share based on their sales in the segment. Take the case of Al Kabeer and Darshan Foods, who are key players in the meat segment. Both, together, held a combined share of 80 per cent in the segment for the year 2013. Sausages, with a value share of 39 per cent, was the most popular type of frozen processed meat, with mutton seekh kabab and hamburgers with

value shares of 20 per cent and 15 per cent, respectively, being the second and third most popular types of frozen meat products. Similarly, Venky’s, Al Kabeer, Meatzza, Sumeru and Yummiez with an anticipated combined retail value share of 93 per cent were the leading brands in frozen processed poultry in 2013. Here, chicken seekh kababs, nuggets and sausages were the most widely available and popular with value shares of 16 per cent each in 2013. The most important development in the category that has been brought about by modern retail is branding of such items. The market is witnessing a gradual shift towards branded products in the recent times. So there are no more surprises when today branded perishable foods are seen on the shelves of chillers and freezers of the modern retail shops.

Growth Drivers The category is being driven by various factors prevalent in the market. The key driver of growth is the advancement in packaging technology for increasing shelf life, hygiene and attractiveness. This has contributed immensely to the category’s growth. The other driving factor is the quality materials used for packaging. The materials are developed in order to withstand freezer temperatures and to maintain the quality standard of the contents inside. The packaging is also designed keeping in mind the way the products are to be placed in the freezer, and to ensure that the brand communication to the shopper is clear and enticing. With so many factors going behind the packaging of products, it has

emerged as the first and foremost of all reasons for the success that the category is witnessing. Next are the smart displays in the store. The type of display given to a product plays a key role in its sale. Typically, frozen food is displayed either in coffin-style freezers, or stand-up fridge-like freezers. The philosophy behind such display units is optimisation of freezing temperatures besides clear visibility of branding and packaging. In addition to these unique growth drivers, the acceptance of branded perishables items, increased demand for these foods, growing food processing sector and globe-trotting population in urban cities of the country also contribute significantly to the category’s growth.

Challenges To retail such unique products in the Indian market or for that matter anywhere in the world, the basic essential requirement is availability of freezers and suitable ambience to maintain the quality. To achieve the same, one needs to invest substantial amounts of capital, which not many retailers can afford in the segment especially the smaller food retailers. This situation is further challenged by inadequate and erratic power supply, which often results in breakdown of the machinery even before its expiry date besides causing damage and decay to the perishable food items. There are other major roadblocks in the trade, such as problems of infrastructure, distribution, cold storage, logistics and transportation while penetrating new markets. The frozen food category is also non-existent in the rural areas, where close to 69 per cent of the population resides.

Top Brands/Companies in Perishables Category Products Category Brands Fish and seafood Big Sam’s, Britte, Buffet, Cambay Tiger, Fish-N-Fish, IFB, Ocean Secret, Sea Sparkle, Seastar, Starchik, Sumeru, Snowman’s, and Mafco. Meats and poultry Delicious, Al Kabeer, Abr Farmer, Big Sam’s, Britte, Mafco, Meatzza, Buffet, Cambay Tiger, Carnivore, Choice Pork, Fresco Pollo, Fresho Meats, Homebites, IFB, Kdelite, Quickee, Real Gold, Republic of Chicken, Safa, Starchik, Suguna, Tastee Farms, Venky’s, Yummiez, Zorabian, Mafco, and Meatzza. Eggs Azad, Bagels & Bakes, Baker Street, Best, Bolst’s, Britte, Buffet, Del Monte, Double Horse, Drools, Fresh, Fun Foods, Halo, Kansal Agro, London Dairy, Mrs. Bector’s Cremica, Pillsbury, Suguna, Top One, Active, Heart, Pro and Shakti.

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Beverages The beverages category includes non-alcoholic drinks like tea, coffee, packaged & flavoured water, fruit juices and bottled & canned drinks.

T

he beverages category contributes 8–9 per cent to the total FG market in India. Drinking water and fresh fruit juices are passé. With the entry of major international beverage players over the last few decades, the market has evolved and has made way for many beverage products, which have found an immediate connect with Indian consumers. The emergence of various brands in all segments of the category ranging from drinking water to traditional tea and coffee and to processed drinks, the category has experienced an unprecedented thrust over the last couple of years. Consumers are delighted to choose from beverages of almost all flavours, colours, ingredients, health and nutritional values, and fulfill their aspiration and quench thirst for beverages.

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1.8 BEVERAGES

Market Composition

Market Size & Growth The market for beverages in India is close to Rs. 195,000 crore and is growing at 20–23 per cent. This growth rate will take the category at three-and-a-half times of its present size by 2020. All constituting segments are witnessing a growth at a healthy range of 20–25 per cent, which is the highest among all food groups. This growth can be attributed to the fact that the market for beverages is getting more segmented and niche than ever before. The expanding products range is majorly fuelled by the food processing sector and with the growth of the sector the category is bound to carry forward the acceleration.

The category can be divided into four broad segments – tea and coffee, occupying the largest market share; juices and flavoured drinks; packaged drinking and flavoured water; and other non-alcoholic drinks including soft drinks, cocoa, chocolate, etc. The lion’s share of tea and coffee in the category confirms that it is still ruled by traditional beverages. India may be the country with strong holds in tea and coffee in specific areas but combined together, they hold a commanding section of the whole market. Another traditional segment having a significant share is juices along with other canned and bottled beverage options. In spite of large financial muscle powers and unparalleled distribution advantage, the global beverage giants are able to hold just 5 per cent share in the category. Content-wise, the products in this segment are synthetic and this could be the reason why they will continue to remain a second option among traditional consumers. Packaged drinking water is the solution to lack of proper drinking water availability in the country but even that does not seem to help the segment occupy a market

Beverages Market

share of more than 1 per cent. This market share is almost negligible, and is generally concentrated in the urban areas. Rural-Urban market composition The beverages market enjoys a 50:50 split between rural and urban markets. However, the individual contribution share of constituting segments in both the markets differs. The largest segment of tea and coffee has a bigger share in the rural market than that in the urban market. The rest of the constituting segments have larger shares in the total urban market.

Rural Beverages Market Juices botteled, canned drinks 8% Packaged flavoured water 0.3%

Tea, coffee 88%

Urban Beverages Market

Other non-alcoholic drinks 5% Juices botteled, canned drinks 15%

Juices, bottled, canned drinks 11% Packaged, flavoured water 1% Tea coffee 83%

Source: NSSO; MPCE analysis

Other nonalcoholic drinks 4%

Other nonalcoholic drinks 6%

Packaged flavoured water 2% Tea, coffee 77%

Source: NSSO; MPCE analysis

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The consumption of packaged drinking water or juices or the culture of drinking soft drinks and having energy drinks are all urban trends and have limited penetration in rural areas. Consumers’ lifestyles and consumption habits are differentiating factors for this variation in both the markets. Regional market composition The eastern and southern regions are very strong in holding a large share in the beverage market. Together they possess 73 per cent of the total market. The north and the west have almost identical market share. In some way

Regional Share - Beverages

Monthly Per Capita Beverages Consumption (Rs) 182.97 161.45

North 13

South 35%

133.59

123.67 99.35 North-east 9%

85.65

East 29%

West 14%

North North- East east

West South All-India

Consumption Trends

Regional Share in Market Segments (%) Tea

Coffee

Packaged, flavoured water Bottled, canned drinks Juices Other non-alcoholic drinks

29

2

20

21

42

3

7 7

29

1 40 15 9 27

2 1 3

North North-east Source: NSSO; MPCE analysis

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28 19 9 23

43 45 3

16 14

the west and the south have a higher average monthly per capita consumption figures for beverages than the average figure of all-India consumption. In spite of holding the largest market share (including north-east), the eastern region has the lowest per capita consumption. As can be seen in the bar charts, coffee enjoys a commanding share in the south region followed by the west region. Similarly, the east is the ‘star’ region for packaged, flavoured water. Other non-alcoholic drinks in a way reflect the balanced share in the range of 21–29 per cent across all regions. Juices and bottled/canned beverages are least consumed in the east and south, respectively.

73

17

24

29

East

West

South

Tea By far, tea is the largest segment of beverages in India ruling over 79 per cent market. The market is growing at 20–23 per cent, and by the same rate it will cross its present market size by more than three times by 2020. At an average, each person in India spends about Rs. 106 on consumption of tea every month. Although south India is usually perceived as a market dominated by coffee, the market for tea here is about nine times bigger than that of coffee in the region. The monthly per capita consumption of tea in the region is Rs. 147, which is even higher than all-India average.

1.8 BEVERAGES

On all-India basis, tea dominates with a 45 per cent share in the urban market with the west and south regions having almost same market share in this segment. Both the regions also share same monthly per capita tea consumption figures about Rs. 177. There is an influx of beverages in the market in terms of brands, usage, content and quality. Tea is still the leader of the pack. The brands in tea segment are numerous and the list is growing every year. There are many national and local tea brands and each holds a respective market share. Most of these brands have created a niche market for themselves by targeting different consumer segments. The brands and manufacturers have extended their range in tea to suit every taste bud. The emerging segment of green tea and organic tea is providing the segment newness and health benefits. Coffee Together with tea, coffee is another strong beverage market. The market for coffee is growing at 20 per cent and will be triple its present size in the next 4–5 years. There are various types of coffee in the market, which come at all relevant price-points. The overall coffee market, though, is very small in comparison to tea market but the southern region alone contributes 73 per cent of the total coffee market. This is followed by the western region with 14 per cent share. The monthly per capita consumption for coffee in the southern region is Rs. 17 against the national average of Rs. 5.

In contrast to the market for tea, the one for coffee is more urbanised with 67 per cent share coming from urban consumers. Urban consumers love to spend twice the per capita amount spent on coffee at the national level. However, from market share point of view, coffee is stronger in the rural areas of the southern region. Here it holds 90 per cent share in the overall rural coffee market.

Juices About 4 per cent of the total beverages market is formed of the juices segment. The segment is growing at 20–25 per cent and is expected to grow almost four times bigger in the next 5 years. Today, Indians are spending at an average just Rs. 6 per month on juices, which is less than what they are spending on other beverages. The juices segment has been

Packaged drinking & flavoured water The smallest segment in beverages market has got more to do with poor drinking water supply infrastructure in the country than its fancy side of the market demand. The segment, which is growing at a healthy rate, will be worth Rs. 6,000–7,000 crore by 2020. As mentioned above, the market is urban-centric with 85 per cent share. Within this market share, half of it lies in the eastern region of the country. At the same time, the western region has the lowest consumption. The monthly per capita consumption is Rs. 4 in the overall urban market but the urban eastern region has a higher consumption figure, which is three times higher at Rs. 12. The rural market for this beverage segment is very low with a monthly per capita figure of Rs. 0.30!

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The rising number of health-conscious consumers is giving a boost to the fruit juices segment; it has been observed that consumers are shifting from fruit-based drinks to fruit juices as they consider the latter a healthier breakfast or snack option.

somewhat impacted by the emergence of other flavoured drinks, which have become an easy alternative to juices. However, three-fourth of the juice market is urbanised. The high consumption of juices in these markets is the result of higher health awareness, availability of branded juices, urban lifestyle which is full of options, boom in modern retail and mall culture, and influence of globalisation in the F&B space. People today realise the importance of healthy food and they demand packaged juices, which can easily be carried along while on the go. The juices segment has two components – packaged juices and fresh juices. The packaged juices component has a higher growth rate since it is easily available all the time. However, not more than 15 per cent of the segment is dominated by packaged juices. The packaged juices can be further classified into fruit drinks, juices and nectar drinks, which are recent additions. Fruit drinks have one-third fruit content in them and sell the most. The industry claims it to dominate 60 per cent market share. Fruit

juices, on the other hand, are 100 per cent composed of fruit content, and claim a 30 per cent market share at present. In contrast, nectar drinks have anywhere between 25 and 90 per cent fruit content, but account for only about 10 per cent of the market. The rising number of healthconscious consumers is giving a boost to the fruit juices segment; it has been observed that consumers are shifting from fruit-based drinks to fruit juices as they consider the latter a healthier breakfast or snack option. Soft drinks The culture of eating out has given birth to meal and soft drink combos, which

Indian consumers are savouring to the fullest. This has given a much required boost to soft drinks consumption. They have become penetrative in almost all consumer segments from kids to collegegoing students to middle-aged couples. Soft drinks are no more a sunny hot day culture but have evolved as part of the meal, especially while eating out. The growing consumption of soft drinks has revolutionised the pack sizes also. From 300 ml bottles to 2 litre PET bottles, the players in the segment are servicing all consumption demands. The segment has made some significant achievements and penetration in the rural areas is definitely one of them. The industry reports claim that rural areas account for 75 per cent sales of PET bottles. Based on the consumption patterns, the soft drink market in India is classified into two segments. The first is ‘Public’ segment, which represents the place where the soft drink is bought and consumed by public on a large scale, thus generating volumes. This includes places like railway stations, stand-alone shops, restaurants and cinemas. The other segment is that of ‘Household’, which represents soft drinks purchased and consumed at home and household level. However, in India the former beats the latter hollow. The public consumption accounts for almost 80 per cent of the total sale of soft drinks and household consumption accounts for the remaining 20 per cent of the sales.

Top Brands in Beverages Category Products category Brands Tea Ambootia, Apeejay, Bagaria, Brook Bond Red Label, Chamong, Duncan’s Double Diamond, Gaia, Goodricke, Himalaya, Jai Shree, Jay, Lipton, Marvel, McLeod Russel, No. 1, Nestea, Organic Tea, Pataka, Runglee Rungliot, Sargam, Shakti, Society, Taj Mahal, Tata Tea, Tetley, Twinings, Wagh Bakri, and Yogi Coffee BRU, Eight O’Clock, Nescafe Select, Gold, Sunrise, Cappuccino, Choco Mocha, and Tata Packaged drinking/ Bisleri, Himalayan, Aquafina, Bailley’s, and Dabur flavoured water rose water Juices Dabur Real, Tropicana, Frooti, Jumpin, Lehar Slice, Appy, Appy Fizz, Maaza, Nimbooz, Minute Maid, Del Monte, Lemon Fizz, and B Natural Other beverages Coke, Limca, Pepsi, Fanta, Sprite, Mountain Dew, 7 Up, Mirinda, Thums Up, Red Bull, Gatorade, Duke’s, Cadbury’s Cocoa & Drinking Chocolate, Café Cuba, Frio, and Dhishoom

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Other processed foods The category of other processed foods (OPF) includes all those foods that have undergone processing and transformed into readyto-eat items such as biscuits, bakery food items, sweets, snacks, sauces, pickles, preserves, etc. These foods generally serve as table accompaniments in meals, snacks and refreshments.

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1.9 OTHER PROCESSED FOODS

meals or serve as accompaniments to meals. The contribution of such foods cannot be undermined in today’s time for they meet consumer demands on the one hand and provide branding route to manufacturers and suppliers on the other hand. Before discussing the OPF category, the chapter will salute the main force behind the category and that is India’s food processing sector:

India’s Food Processing Sector

O

PF in today’s FG market is playing a large role. The category has become the face of modern trade, which is growing, evolving and advancing at the same time. The growth in India’s food processing sector is leveraging the catgeory’s back up support. OPF category contributes 9-10 per cent to total FG market in India. The category, as analysed for this report, is defined in the opening text of this chapter. Going by the same, it is clear that it will not touch upon the processed food segment wholly but in parts. The chapter talks about only those processed foods that are either partial

Indian Food Processing sector stood about Rs 247,680 crore ($41.28 billion) in 2013 and is expected to grow at a rate of 11 per cent to touch Rs 408,040 crore ($68 billion) by 2018. The Food Processing sector forms an important segment of the Indian economy in terms of contribution to GDP, employment and investment, and is a major driver in the country’s growth in the near future. The industry contributes as much as 9-10 per cent of GDP in agriculture and manufacturing sector, according to the Ministry of Food Processing Industries (GOI). The Confederation of Indian Industries (CII) estimates that food processing sector can attract an investment worth $33 billion in a span of 10 years. The sector has a potential to generate an employment in the tune of 9 million. India’s Food Processing sector covers fruit and vegetables, meat and poultry, milk and milk products, alcoholic beverages, fisheries, plantation, grain processing and other consumer product groups like confectionery, chocolates and cocoa products, Soya-based products, mineral water, high protein foods etc. The most promising sub-sectors includes - soft-drink bottling, confectionery manufacture, fishing, aquaculture, grain-milling and grain-based products, meat and poultry processing, alcoholic beverages, milk processing, tomato paste, fast-food, ready-to-eat breakfast cereals, food additives, flavours, etc. Health foods, along with the health food supplement, is another rapidly rising segment of this industry, which is gaining vast popularity amongst the health conscious consumers.

Government support The Government of India has formulated and put into implementation several plans and schemes, which will finance and provide support for setting up and upgrading food processing units, developing infrastructure, R&D and human resource. In addition to these initiatives, various other promotional measures have also been undertaken to encourage the growth of the sector. The Vision Document-2015 was prepared to help improve the state of the food industry in India. This document was prepared by the Food Processing ministry, which envisaged trebling the size of investment in the processed food sector by increasing the level of processing of perishables from 6 per cent to 20 per cent, value addition from 20 per cent to 35 per cent and share in global food trade from 1.5 per cent to 3 per cent by the end of the current year. Investment in the sector According to the data provided by the Department of Industrial Policies and Promotion (DIPP), food processing sector in India has received about $6,076.58 million worth foreign investments in the period April 2000 –September 2014. Let us now discuss OPF category.

Market Size & Growth The category market is over Rs 200,000 crore and is strongly growing at a CAGR of over 20 per cent. With the same growth rate, the market is expected to be more OPF Market Additional foods 24% Pickles, sauces, preserves Biscuits, 5% bakery items 36% Snacks 19% Sweets 16% Source: NSSO; MPCE analysis

INDIA FOOD REPORT 2016 | 75 |

than treble its present size by 2020. With the growth in food trade, modern retail and market places in e-commerce space, the category can never look back. Looking into the future, the growth will get further support from entry of more international players, growth in India’s manufacturing sector, favoured government policies and improved regulatory framework. At a micro level, the growth in overall F&B culture and FG segment, increased food consumption and rapid urbanisation of Indian towns and villages will expand the market further. Market composition The category encompasses numerous types of items, the list of which can be highly exhaustive. In terms of broad segments of biscuits and bakery items, it captures largest market with one-third share of the total market. This segment includes biscuits, cookies, cakes and such products, which are prepared in bakery, and have institutional as well as

Pickles, sauces, preserves 4% Snacks 20%

Regional market composition The south region with 31 per cent market share and highest per capita consumption of Rs 209 is frontrunner for OPF category. Early emergence of strong food retailers in the region probably has got something to do with region’s fat contribution to the category’s size. The early rise of modern retailers like Nilgirs, Food World in the region would have left a telling impact of processed foods retailing in the region. The retailers’ success

Rural-Urban composition The rural and urban market shares for OPF category is 51:49 respectively. The market share break-up does not add any special value to analysis since even

Rural OPF Market Additional foods 23%

the involved segments reflect almost similar market share in both markets. For discussion sake, it can be mentioned that sweets segment maintains same share in rural and urban markets. The urban market is high on additional foods and pickles, sauces and preserves. Another thing which requires special mention is the steep difference between rural and urban monthly per capita consumption figures at Rs 104 and 221, respectively, for both markets.

retail distribution. The segment of sweets, confectionery items involving toffees, candies, chocolates and other packaged sweets items, ranks fourth in market size terms as per analysis of NSSO data. Since the list of processed items can be exhaustive as stated, the additional foods segment occupies second-largest share of the OPF market with 24 per cent share. The segment contains numerous varietes of items even those ones, which may not be placed in either of other four segments of the category. In terms of market size, additional foods segment is followed by ‘snack and namkeen’ segment which comprise of India’s traditional savoury items of chips, snack foods and namkeens. The least market is held by pickles, sauces and preserves like items.

Regional Share - OPF

Monthly Per Capita OPF Consumption (Rs) 208.84

Biscuits, bakery items 37%

Sweets 16%

North 25

South 31%

144.12 116.89

North-east 3% East 20%

West 21%

North North- East east

Pickles, sauces, preserves

20 Biscuits, bakery items 34%

Snacks 18%

3

39

2 2 2 1 2

45 24 24

6% Sweets 16%

Source: NSSO; MPCE analysis

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West South All-India

Regional Share in Market Segments (%) Biscuits Bakery items Sweets Snacks Pickles Sauces Preserves Other processed foods

Urban OPF Market

Additional foods 26%

140.75

106.17 114.74

3

35

19 8 15 10 18 22 15

16 26

5

North

North-east

Source: NSSO; MPCE analysis

12 33 24 44 22 18 30

46 18 14 20 35 23 36

21

25

23

East

West

South

1.9 OTHER PROCESSED FOODS

stories of stocking their own range of local, regional and national brands in the category left many learning lessons for the other markets to develop later on. Another region which has higher average of monthly per capita consumption figure than all-India figure is West region. Interestingly the region has the least market share in OPF category.

Consumption Trends The category holding vast number of items becomes a complex market while talking of consumption trends. But to discuss a few key ones separately may throw some light on how the consumers perceive and consume the other items in this category. Biscuits & bakery The biscuits market is growing at 20-23 per cent, and will eventually cross the current size of total OPF market by 2020. Presently 46 per cent of biscuits market lies with urban consumers using the products. In this urban market, the west region alone contributes 31 per cent. Each urban consumer spends at an average Rs 68 per month on consuming biscuits but his fellow consumer in north-east market spends Rs 86. Some industry reports say that the states which have biggest of biscuits consumption in the country are Maharashtra, Karnataka, West Bengal, Uttar Pradesh and Andhra Pradesh. And, among these five states two belong to south India.

India’s biscuits industry is the biggest among all the food-based industries operating in the country. Indian subcontinent along with the USA are the two top biscuits producing areas in the world. India’s biscuit industry is organised in terms of production but breads – a key bakery product in India, is largely unorganised. Seventy per cent of the biscuits in India are produced by the small scale sector that is made up of nonfactory and factory workers. These small companies act as barriers to the entry of leading food companies to take up biscuits manufacturing. Industry experts estimate that per capita consumption of biscuits in India is 2 kg. Another point to be noted about India’s dominance in biscuits category is that biscuits import does not form a significant part of the total production. Noodles The success story of noodles as processed ready-to-eat food in Indian households goes back to 1983 when Nestle India launched them under the brand name Maggi. The average household in India welcomed the move and accepted it as fascinating and different food commodity. Since then the brand has ruled the noodles market, barring the middle half of 2015 due to food safety issue questioned by FSSAI. But now, there is a growing competition from various other brands which have forayed into the segment. Top Brands/Companies in OFP Category Products Category Brands Biscuits, cookies Parle G, Britannia, Priya Gold, Cremica, Anmol, Horlicks, Sunfeast, Briskfarm, Rose, Sobisco, Dukes, Nezone, Oreo, Sumo, Happy Bite Bakery items Britannia, Monginis, Golden Harvest, Perfect, Modern Chocolates, sweets and Nestle, Cadbury’s, Parle, Amul, Dabur, Nutrine, Mint O, confectionery Candyman, Gum on, Wriggleys, Haldiram, Bikanervala Snacks, namkeens Lehar, Cheetos, Kurkure, Uncle Chipps, Lays, Bingo, Mad Angles, Haldiram, Bikanervala, Crax, Hippo, Parle, Godrej Pastes, pickles, mixes Priya, MTR, Mother’s Recipe, Pan, Pachranga, Dabur Homemade, Smith & Jones Sauces, ketchups, spreads Kissan, Heinz, Maggi, Tops, Ching’s, Pan, Nafed, Fun Food, Del Monte, Lemoneez, Capsico Jams, jellies, preserves Kissan, Rex Soups, noodles, pastas Maggi, Top Ramen, Bambino, Sunfeast, Yippee, Smith & Jones, Wai-Wai, Ching’s, Knorr, Horlicks Foodles

INDIA FOOD REPORT 2016 | 77 |

With increased pace of life and more working women, the instant noodles have gained substantial market share. Since people are short of time, they look forward to something which can be cooked as fast as possible and can easily substitute meals. The market is also fuelled by the growing demand for processed and packaged foods. Today, companies are positioning their noodles brand as core product and introducing other products around it. These products include ketchups, pasta and soups. Maggi has infact gone little beyond in its strategy by introducting Maggi Magic Masala range of mixed spices to penetrate avarage Indian kitchen. The spices can be used in day-to-day cookery thus connecting consumers with the brand.

| 78 | INDIA FOOD REPORT 2016

Ketchup, sauces, spreads With globalisation of food in India, entry of fast food players like KFC, McDonald’s and growing market for processed foods, the segment size of ketchups, sauces and food spreads has also increased. According to a survey by Down to Earth Indians spend about Rs 4,449 crore annually in fast food centres. So there is a good amount of share out of this spend which is taken away by the segment. As the market of fast food is growing and being patronised by young population, there are available chances that segment of these foods will also grow correspondingly. Spread across various cities and towns in India fast food joints and other such food outlets using these products are growing rapidly. Initially big fast food players were limited to metro cities only, but now they are expanding in smaller towns as well. This will help the market to grow. Industry experts estimate ketchup market to be worth Rs 220 crore in India. The top ketchup brands in India are Maggi, Kissan and Heinz. Nestle’s Maggi leads the Indian ketchup market with a market share of 37 per cent. Hindustan Unilever Limited’s Kissan follows with a market share of 29 per cent and Heinz holds a total market share of about 10 per cent. There are also a host of local ketchup brands that account for the rest of the market share of the ketchup industry in India. According to industry experts there is still abundant scope for improvement as ketchup penetration is

low in the rural areas. Even in the urban areas, people do not consume much of ketchup in homes. There is another side to growth story of this segment. People are no more unexposed to various culinary arts and cuisines from other nations and regions. They demand such dishes at their home and with availability of required information and expertise at the click of a button the sale of sauces and spreads is also gaining momentum. They are being used liberally in urban households and the market is surely expanding. Namkeens & snacks The segment can be truly and aptly defined as ‘Indian’ OPF segment. The constituting products cover thousands of snack items manufactured in traditional as well as modern set-up. The industry claims, branded namkeen market segment holds 40 per cent of total salted snacks market in India. The market leader in namkeens is Haldiram possesing 41 per cent market share. The other player in the segment with large market share is Frito Lays with 10 per cent market share. Haldirams is known for its large variety of namkeens. The brand has been ruling the Indian snacks industry for over many decades now. Consumers in India in a way have become accustomed to the products of this particular brand. Namkeen or salted snacks are a part of the snacks consumed by Indians. Since Indians are known worldwide for their tasty, tangy and spicy food habits the snacks industry in India is huge is not a surprise. The namkeen market in India is magnanimous which consists of both the organised and the unorganised sectors. The unorganised namkeen market consists of home-made and loose salty snacks generally sold in small kiranas. Initially, namkeen in India was usually made at home, but with the increasing number of companies coming up with cheap and good quality salted snacks, the home-made namkeens were replaced by packaged ones available in markets and shops. Since namkeens form an integral part of the evening snacks for Indians, they constitute an important part of the Indian packaged food market.

THE INDIA FOOD REPORT 2016

SECTION 2

PROCESSED FOOD

2.1 FOOD PROCESSING: ADVANTAGE INDIA 2.2 COMPETITIVENESS OF INDIA’S FOOD PROCESSING SECTOR 2.3 INVESTMENT OPPORTUNITIES IN FOOD BACK-END OPERATIONS 2.4 HEALTH & WELLNESS FOODS: THE MARKETER’S RECIPE BOOK 2.5 SWEET INDULGENCE 2.6 READY TO EAT / READY TO COOK 2.7 MEETING THE CHALLENGES OF NUTRITIONAL TRANSITION 2.8 RISING BAKERY INDUSTRY

Food Processing: Advantage India BY INDIA BRAND EQUITY FOUNDATION (IBEF)

With its inherent strengths in the agriculture sector, India has traditionally been a strong contender to emerge as a major global player in the food processing industry. While the progress in this regard has been impressive in the postliberalisation era, the industry is poised for a giant leap in its food processing capacity across its key categories, which will enable it to meet the huge demand potential domestically as well as in overseas markets. This is bound to create immense opportunities for players, generate employment and give a welcome boost to farm incomes across the board. | 82 | INDIA FOOD REPORT 2016

2.1 FOOD PROCESSING: ADVANTAGE INDIA

EXECUTIVE SUMMARY 2nd largest arable land in the world

India has the second-largest arable land resources in the world. With 20 agri-climatic regions, all 15 major climates in the world exist in India. The country also possesses 46 of the 60 soil types in the world

Largest producer of pulses, milk, tea etc.

India is the largest producer of pulses, milk, tea, cashew, mangoes, and buffalo meat; and the secondlargest producer of wheat, sugarcane and rice

Largest livestock population

India has the largest livestock population across the globe, which is equal to 512 million, including 119 million milch (in-milk and dry) animals, 135 million goats and 65 million sheep. The segment contributes about 25 per cent to the country’s farm GDP

Rising consumption expenditure

Consumer spending in Q4 2014 was US$0.3 trillion; it is likely to reach US$3.6 trillion by 2020

Favourable location for exports

Strategic geographic location and proximity to food importing nations favour India in terms of exporting processed foods

Source: World Travel and Tourism Council, Directorate of Statistics Note: GDP - Gross Domestic Product

Food for Thought… and Business! The vast potential of the food processing sector in India stems primarily from its rich agricultural resource base. It has the second-largest arable land resources in the world, 127 identified agro climatic zones, and 46 of the 60 soil types. In the year 2012, India was the world’s largest producer of bananas, mangoes, papayas, chickpea, ginger, okra, whole buffalo, goat milk and buffalo meat. It ranked second in production of sugarcane, rice, potatoes, wheat, garlic, groundnut (with shells), dry onion, green pea, pumpkins, gourds, cauliflower, tea, tomatoes, lentils, wheat and cow milk (source: Make in India website). The country also has the largest livestock population across the globe equalling 512 million, including 119 million milch (in-milk and dry) animals, 135 million goats and 65 million sheep. The country is also the world’s largest producer and exporter of spices, accounting for 48 per cent of global spice trade by volume and 43 per cent by value.

The food processing industry is one of the largest industries in India and ranks fifth in terms of production, consumption and exports. The sector is expected to expand at a CAGR of 10 per cent by 2015 to reach US$ 258 billion.

It is not surprising that the food processing segment contributes about 25 per cent to the national farm GDP and it was worth US$ 135 billion as in 2013 and projected to reach US$ 200 billion by 2015. The sector comprises of fruits and vegetables, milk and milk products, meat and poultry, marine products, grain processing and consumer food. The country is the world’s second largest producer of fruits and vegetables, and total production is projected to rise to 377 MT by 2021. Production of milk was estimated at 139.7 MT in FY 14. Buffalo meat production stood at 3.7 MT in 2013 and goat meat production was pegged at 0.16 MT in the same year. It is also the world’s third-largest egg producer (6.1 million), sixth-largest producer of broiler meat (2.39 million tonnes) and second-largest producer of fish (9.1 MT). Food grain production was estimated at 264.4 MT in FY’14. The food processing industry is one of the largest industries in India and ranks fifth in terms of production, consumption and exports. The sector is expected to expand at a CAGR of 10 per cent by 2015 to reach US$ 258 billion. It contributed 9.8 per cent to India’s manufacturing GDP in 2013. In terms of food processing segments in FY’12, meat, fish, fruits, vegetables and oil garnered the largest share of around 40.2 per cent followed by beverages at 19.6 per cent and grain mill products at 10.8 per cent.

INDIA FOOD REPORT 2016 | 83 |

Food Processing Sector and its Segments The food processing industry is one of the largest industries in India and ranks fifth in terms of production, consumption and exports With an estimated value of US$181 billion in FY13, the food processing sector is further estimated to expand at a CAGR of 10 per cent by 2015. The industry contributed 9.8 per cent to India’s GDP manufacturing in 2013 Contribution of food processing industry in manufacturing (FY13)

Food processing segments (FY12)

9.8% 24.5% 40.2% 5.0% 10.8% 90.2%

19.6%

Food Processing Other

Meat, Fish, Fruits, Vegetables and Oil Grain Mill Products Other Products

Beverages Dairy Products

Source: Ministry of Food Processing Industries (MOFPI), Annual Report MOFPI (2013-14)

Strong Fundamentals and Policy Support Aiding Growth Strong domestic demand

Rising export opportunities

Supply-side advantages

Policy support

Rising disposable incomes

India’s greater integration with the global economy

Favourable climate for agriculture; wide variety of crops

Vision 2015 plan targets trebling of food processing sector

Growing middle class, urbanisation, a young population

Increasing exports with advantage of proximity to key export destinations

Large livestock base aids dairy and meat processing sector

Mega food parks, Agri Export Zones to attract FDI and aid infrastructure

Changing lifestyles and food habits

Expected spike in global demand as emerging markets grow at a fast pace

Inland water bodies, long coastline help marine products

Approval of National Mission on Food Processing

Source: Ministry of Agriculture

| 84 | INDIA FOOD REPORT 2016

In terms of the industry structure, India has 36,881 registered food processing units in FY’12 with the unorganised sector accounting for 42 per cent of the industry. The organised sector has a larger share in the secondary processing segment as compared to the primary one. The presence of a sizeable number of small-scale units illustrates the sector’s role in employment generation. The food processing sector has seen impressive growth over the past decade. According to data from the Ministry of Food Processing Industries, the size of the food processing industry grew at a CAGR of 6.3 per cent during FY’06-13 and is projected to contribute 6.5 per cent to India’s GDP by 2015. The sector has been growing at a CAGR of around 9 per cent over the past five years. Interestingly, the sector has been identified as one of the key drivers that can help in shifting more labour from agriculture to manufacturing, which is a key policy imperative over the next decade. As per the Annual Survey of Industries for 2011-12, there were 1.7 million persons engaged in registered food processing units. During FY08–12, employment in these registered units increased at a CAGR of 4.2 per cent. The sector employs 13 million people directly and 35 million people indirectly.

Huge Market Opportunity With the course of time, there has been a greater integration with the global economy, rising exports due to the advantage of proximity to key export destinations, and an increase in global demand due to fast pace growth in emerging markets. This is evident from the figures for growth of exports

2.1 FOOD PROCESSING: ADVANTAGE INDIA

Strong Policy Support

Rising Income and Growing Middle Class to Drive Demand for Processed Food Rising disposable incomes

Strong growth in per-capita income has resulted in greater demand for food items Incomes have increased at a brisk pace in India and would continue rising considering the country’s strong economic growth prospects. Nominal per capita income is estimated (IMF) to have recorded a CAGR of 9.2 per cent over 2000–14 There has also been a shift in demand: – From carbohydrates to meat products (in line with the various phases of economic growth); and – To convenience foods, and organic and diet foods Strong economic growth since the 1990s has led to: – Rapid urbanisation and a growing middle class; and – Nuclear families and dual income households Coupled with a young population and increasing media penetration, this has led to a surge in demand for packaged food, alcoholic and nonalcoholic beverages, snacks, savouries, etc. Rising per-capita income in India

35%

2,700

30%

2,300

25% 1,900

20% 15%

1,500

10%

1,100

5% 700

0%

300

-5% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F 2015F 2016F 2017F 2018F 2019F

of processed food and related items, which have increased at a compound annual growth rate of 34.6 per cent during FY11–14 to reach US$ 22.4 billion with main destinations being the Middle East and Southeast Asia. Also, the share of food processing exports as part of country’s total food exports was 32 per cent in FY14. Within the segment, the export basket was led by cereals with 48 per cent share followed by animal products with 24 per cent share and processed fruits and vegetables with 7 per cent share. Significant improvements in product and packaging quality and greater private participation have aided the growth in export of food products. Overall, the US is the leading market for Indian processed food products with some other major destinations being UAE, Iran, Vietnam and Saudi Arabia. On the other hand, the top overseas destinations for Indian processed marine products are France, Italy, South Africa and Spain. While exports have certainly witnessed a resurgence, the domestic market has also begun to look quite lucrative for food processing players. Rising disposable incomes have brought in a welcome surge in discretionary spends. Changes in tastes and preferences are also driven by increasing urbanisation, a young population, and the emergence of nuclear families. The Visa Affluent Study 2014 states that affluent Indians generally plan to spend around 60 per cent of their household income, leaving the rest for savings or investments. They have an average spend of around Rs 4.6 lakh per year on household expenses led by groceries, shopping, food and beverages. Indians, in general, spend over 30 per cent of their income on food products. The food and food products category is the largest in terms of consumption in India and the country also has a strategic advantage due to the proximity to key markets of the Middle East, SouthEast Asia and Africa. Moreover, there has been a steady shift from carbohydrates to meat products and also towards convenience foods, and organic and diet foods.

GDP Per-capita,- current prices (US$) - LHS Growth Rate - RHS Source: IMF WEO October 2014 Notes: E - Estimate, F - Forecast

The government has also initiated several timely policy measures to promote the sector including encouragement to private sector players, tax incentives and other sops, relaxed FDI norms, mega food parks, focus on infrastructure, incentives for development of storage facilities, focus on R&D and modernisation. Special policy focus has been given to the development of supply chain related infrastructure such as cold storage, abattoirs and food parks. Following are some of the key initiatives taken by the government:

INDIA FOOD REPORT 2016 | 85 |

Foreign Investments Flowing in; Rise in Plan Expenditure Between April 2000 and December 2014, FDI in agriculture and food processing in India stood at US$11.1 billion Demand growth, supply advantages, and policy support have been instrumental in attracting FDI The government’s main focus is on supply-chain related infrastructure, such as cold storage, abattoirs and food parks

Cumulative FDI inflows (April 2000 to December 2014) in food and agriculture sector (US$ million)

6,181

60.0%

6,000

50.0%

5,000

40.0%

4,000 3,000

30.0%

2,116 1,740

2,000

516

20.0%

413

1,000 0

107

61

10.0%

Sugar

Tea & Coffee

Agricultural Machinery

Vegetable Oil

Agriculture Sercvices

Fermentation

Food Processing

0.0%

Cummulative FDI inflow (US$ million) Share of total FDI inflow (%) - right axis

12th Five Year Plan (2012-17) outlay shares: Food Processing

3% 5%

National Mission on Food Processing Development Infrastructure

1% 3%

11% 44%

Strengthening of institutions Food Safety, R&D and Promotional Activities Venture Capital Fund

36%

11th plan projects to be implemented under NMFP Innovation Fund Scheme

Plan allocation to the Food Processing sector: US$2.9 billion Source: Department of Industrial Policy & Promotion Note: FDI – Foreign Direct Investment

| 86 | INDIA FOOD REPORT 2016

100 per cent export-oriented units are allowed to sell up to 50 per cent of their produce in the domestic market Export earnings are exempt from corporate taxes Import duty has been scrapped on capital goods and raw materials for 100 per cent exportoriented units New agro-processing industries enjoy 100 per cent tax exemption for five years, followed by 25 per cent tax exemption for the next five years Full excise duty exemption is available for goods that are used in installation of cold storage facilities 100 per cent FDI permitted under automatic route (except for alcohol, beer, and sectors reserved for small scale industries) Repatriation of capital and profits permitted The sector has been assigned priority status for bank credit. 60 Agri Export Zones (AEZ) have been set up across the country According to Vision 2015 formulated by Ministry of Food Processing Industries, the government plans to establish 30 mega food parks in publicprivate partnership mode across the country. Ten of them have already been approved in the first phase Investment-linked tax incentive of 100 per cent deduction of capital expenditure for setting up and operating cold chain facilities (for specified products), and for setting up and operating warehousing facilities (for storage of agricultural produce) The government has launched initiatives such as for the Setting Up/Upgradation of Quality Control/Food Testing Laboratory, R&D and Promotional Activity scheme and the Technology Upgradation/Setting Up/Modernisation/ Expansion of Food Processing Industries Scheme Under the scheme for mega food parks, the government aims to bring together farmers, processors and retailers to effectively link agricultural production to the market, thereby reducing wastage and maximising value addition. The scheme will help in increasing farmer incomes and also generate more employment opportunities in rural areas. These food parks are being developed on a cluster-based approach with a clearly defined agri/horticultural processing zone that has best-in-class processing facilities with support infrastructure and a well-established supply chain. Both food parks and mega food parks have been covered under the infrastructure category.

2.1 FOOD PROCESSING: ADVANTAGE INDIA

Cold chains have also been provided infrastructure status by the Ministry of Finance. The scheme of Cold Chain, Value Addition and Preservation Infrastructure seeks to seamlessly provide integrated cold chain and preservation infrastructure facilities from the farm to the plate. The Ministry also has a scheme for R&D, QA, Codex and promotional activities in the sector for total quality management as well as improved outcomes through innovation.

Strong Interest from Private Sector The government has also ensured a conducive environment for FDI in the sector. FDI of up to 100 per cent is allowed for all processed food products under the automatic route except for items that are reserved for micro and small enterprises (MSEs). There has been a greater incidence of entry of international companies in recent times. Growth of organised retail and onset of liberalisation have been the leading factors for entry of global players. Also factors including strategic geographic location, availability of raw materials due to a large agriculture sector, abundant livestock and cost competitiveness have made India a critical sourcing hub for processed food. The sector has attracted significant FDI to the tune of US$ 11.1 billion between April 2000 and December 2014. As has been highlighted above, demand growth, supply advantages and policy support have been instrumental in achieving the same. Foreign players have recognised India’s strengths as a producer as well as the enormous potential of the domestic market in their investment plans. Some of the major MNCs that have invested in India over the years include Kagome and Mitsui, McCormick, Starbucks, Molson Coors, Dan Cake and Hershey. McCormick has entered into multiple JVs in India and has been bullish on the sector since the early 1990s. It entered into a 50:50 JV with AV Thomas Group Companies for spices in 1994 to set up AvT McCormick Ingredients Pvt Ltd (AVT Mc). The JV provides a range of 20 spices that are processed and sterilised for use in whole, cracked, crushed, milled, blended for uniformity or custom blended spice mixes. McCormick acquired a minority 26 per cent stake in Eastern Condiments in 2010 for US$ 35 million. With this acquisition, McCormick sought a greater participation in India’s consumer market by leveraging Eastern’s brand equity and strong distribution system. It entered into a 85:15 JV with Kohinoor Foods for Basmati and food products in 2011 to form Kohinoor Specialty Foods Pvt Ltd (KSF). This JV was however recently terminated following some differences between the two parties.

Sector has been Attracting Foreign JV Partners for A Long Time Players such as McCormick had identified India as a strategic market way back in the 1990s Global players such as Hershey are now keen on entering the increasingly attractive Indian market Established players such as Nestle and Coke are extending their global JVs to India Foreign players

Indian partner

Type of business

Kagome and Mitsui

Ruchi Soya Industries

Starbucks Corporation

Tata Global Beverages

Molson Coors

Cobra India

Brewing

NA

2011

Phadnis Group

Cake and biscuits

66:34

2011

McCormick

Kohinoor Foods Ltd

Basmati and food products

85:15

2011

McCormick

Eastern Condiments

Seasonings

26:74

2010

AVT

Spices

50:50

1994

Godrej

Chocolates

51:49

2007

Dan Cake

McCormick Hershey

Stake ratio

Year

Tomato products

60:40

2013

Beverage

50:50

2012

Source: Thompson ONE Banker Note: JV – Joint Venture

Growth of organised retail and the onset of liberalisation have been the leading factors for entry of global players. Also factors including strategic geographic location, availability of raw materials due to a large agriculture sector, abundant livestock and cost competitiveness have made India a critical sourcing hub for processed food.

INDIA FOOD REPORT 2016 | 87 |

The Amul Saga: A Cooperative Movement Leads the Way Main brand: Amul Products: milk (including flavoured), butter, margarine, cheese, curd, desserts, infant food Facts and features Producer members (million) Village societies

3.2 17,025

Milk handling capacity (million litres/ day)

23.2

Total milk collection (FY14, billion litres)

4.8

Daily milk collection (FY14, million litres)

13.2

Milk drying capacity (million tonnes/ day)

647

Source: GCMMF (www.amul.com)

| 88 | INDIA FOOD REPORT 2016

Notable awards

Authority

Excellent performance in dairy product exports for 11 consecutive years

APEDA

CIO International IT Excellence Award (2003) for positive business performance through resourceful IT management and best practices International Dairy Federation Marketing Award (2007) for Amul’s pro-biotic ice cream launch

IDG’s CIO Magazine (USA)

International Dairy Federation

In the year 2013, Mitsui & Co Ltd, Kagome Co Ltd and Ruchi Soya Industries Limited agreed to set up a joint venture company for manufacture and sale of processed tomatoes. The JV recognises India as one of the key markets for Mitsui and Kagome due to rapid economic growth and status as one of the world’s largest consumers of tomatoes besides being the second-largest tomato producer. Economic growth and dietary culture changes are expected to precipitate a marked shift towards processed tomato consumption. Another interesting engagement is the 50:50 JV formed between Starbucks Corporation and Tata Global Beverages in 2012. It was set up for roasting coffee produced in the latter’s estates using the know-how acquired by Starbucks along with technology and packing and sales and distribution to Starbucks cafes that were to be set up by Tata Starbucks Ltd. The JV opened its 50th Starbucks outlet in Chennai in July last year. India is the seventh-largest coffee producer globally, accounting for 2 per cent of the area under production and 3.7 per cent of the production in 2012 as compared to 3.18 per cent of production in 1992-93. Coffee culture has also seen a revolution of sorts, thanks to the numerous coffee cafes being set up across the country. A report titled India Coffee Shops & Café Market Forecast & Opportunities, 2017, projects that the size of the Indian coffee shops and café market is expected to grow by threefold and reach US$ 1 billion by 2017. India has a number of home-grown success stories in the food sector. Prominent among them is the cooperative movement for milk set up by the National Dairy Development Board (NDDB) with Amul being its most prominent brand. It currently comprises 3.2 million producer members and 17,025 village societies. Milk handling capacity is around 23.2 million litres per day, while total milk collection in FY14 was 4.8 billion litres. Milk drying capacity is pegged at 647 million tonnes/day. Companies like Dabur, MTR and Parle (juices and packaged convenience foods); Godrej Agrovet and Venkys (eggs and poultry); Allanasons and Hind Agro Industries (meat and meat products); Haldiram’s and ITC Foods (snack foods) are household names. Ruchi Soya is one of the fastest growing FMCG companies with revenues of US$ 4.7 billion in 2014 and sales growing at a CAGR of 11.8 per cent over FY10-14. Khushi Ram and Behari Lal (KRBL) is the world’s largest rice miller and basmati rice exporter, accounting for 25 per cent of India’s exports of branded basmati rice. The rise in PE funding equally indicates the optimism of the investor community with respect to

2.1 FOOD PROCESSING: ADVANTAGE INDIA

the sector’s long term potential. In April last year, mid-market focussed fund Lighthouse Ventures invested around US$ 15 million in Rajasthan-based snacks maker Bikaji Foods International Ltd for a 12.5 per cent stake. Bikaji has a presence in international markets like South Africa, Mauritius, Malaysia, Congo, Singapore and Nigeria and plans to increase turnover to Rs 1,000 crore. WestBridge Capital Partners acquired nearly 25 per cent stake in DFM Foods, for around US$10 million. Actis invested US$ 65 million in Nilgiri Dairy Farm Pvt Ltd in 2006, which also runs one of the leading supermarket chains in South India. Last year, Future Group acquired 97.97 per cent stake in the Nilgiri Dairy Farm and its subsidiary companies from Actis for Rs. 300 crore. Other notable PE deals include Temasek’s investment of US$ 105 million in Godrej Agrovet, Blackstone Group’s investment of US$ 80 million in Nuziveedu Seeds and Multiples Private Equity’s investment of US$ 43.2 million in Milltech Group.

KRBL: Leader in Global Rice Market Salient characteristics

KRBL is world’s largest rice miller and basmati rice exporter It has strong brand presence through global retail giants like Walmart, Spencer and Future Group It is the largest producer of contract farming basmati rice in the world The company accounts for 25 per cent of India’s total exports of branded basmati rice KRBL is well-integrated in terms of farming, rice processing, oil production and power generation Sales (US$ million)

482.8

500.0 383.1

400.0 300.0

2704

333.0

340.0

349.8

FY10

FY11

FY12

200.0 100.0

A Bright Future The food processing sector has promising opportunities. As the market is fragmented, there is lot of scope for achieving higher value addition. The government plans to raise the value addition from 20 per cent in 2005 to 35 per cent in 2015. According to a report by the Boston Consulting Group and Retailers Association of India, India’s retail market is expected to nearly double to around US$ 1 trillion by 2020 from US$ 600 billion in 2015. Food and grocery accounted for around 69 per cent of the revenues in the Indian retail sector in 2013, which denotes the opportunity for the players going forward. Global and domestic players are increasingly looking at leveraging India as a major outsourcing hub and a lucrative market due to abundant supply of raw materials and relative cost advantage. PepsiCo has announced investment plans of about Rs. 33,000 crore by 2020 to enhance manufacturing capacity and penetrate new product categories. Coca Cola is also looking to invest about Rs. 30,000 crore by 2020. Another case in point is Mondelez, whose upcoming 250,000-tonne, multi-product plant at SriCity in Andhra Pradesh will be its largest plant in the Asia Pacific region and will be completed by 2020. Britannia Industries plans to invest Rs. 150-200 crore between 2014 and 2016, primarily towards manufacturing capacity expansion and product innovation. ITC Ltd is planning investments of over Rs. 25,000 crore across its different verticals in the next five years. Sweets and snacks company Haldiram’s decided to take the franchising route for the first time last year to add 150 stores into South and West India with the help of Franchise India.

0.0 FY09

FY13

FY14

Exports (US$ million)

178.8

173.0

FY12

FY13

Source: Company Annual Report Note: KRBL - Khushi Ram and Behari Lal

INDIA FOOD REPORT 2016 | 89 |

bonga1965 / shutterstock

In the past few years, companies have been notably moving up the value chain. For instance, cooperatives are moving from being pure milk producers to providing a wide variety of dairy products. There is a relentless focus on product innovation to cater to domestic tastes and also bring in more international flavours. Players are also consciously controlling costs to ensure that customers get value for money with quality products. Another success story in food processing is the spices sector. Building on its rich heritage in spice cultivation, India has made significant progress towards value addition and quality upgradation of spices in accordance with the demands of international markets. Spice parks are now being set up across the country as world class facilities for processing and value addition of spices and spice products. Regional crop-specific spices parks provide an integrated platform for cultivation, post harvesting, processing for value addition, packaging, storage and exports of spices and spice products. India is making steady progress as a supplier of value-added spice products. These are processed and sold in ground, cracked, crushed, blended and dehydrated forms in consumer packs, brines and also in bulk. The country exported 9,515 tonnes of spice oils and oleoresins valued at Rs. 15.58 billion during 2012-13. New areas like spice dyed garments, spice chocolates, perfumes and nutraceuticals present tremendous opportunity for the spices sector. The most critical catalyst in achieving this potential across all segments within the food sector is the setting up of supply chain infrastructure. Both the private sector and the government are working towards boosting efficiency and access to markets. Firms are also increasingly taking recourse to contract farming to secure supply. The food processing infrastructure segment has an investment

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India is making steady progress as a supplier of value-added spice products. The country exported 9,515 tonnes of spice oils and oleoresins valued at Rs. 15.58 billion during 201213. New areas like spice dyed garments, spice chocolates, perfumes and nutraceuticals present tremendous opportunity for the spices sector.

potential of US$ 22 billion. Government initiatives in this area to support private players are expected to lead to a significant surge in infrastructure facilities benefitting stakeholders across the value chain.

Conclusion The bright potential of the food processing industry in India stems from a number of important drivers. Firstly, the government has identified the sector as a key catalyst that can help in shifting more and more employment from agriculture to manufacturing – which is a key policy imperative in the coming decade. Consequently, there is a strong impetus towards incentivising the development of food processing infrastructure, which is beginning to show positive results. Secondly, there is a discerning shift in the preferences of consumers due to rising affluence and hectic lifestyles. These are driving them more towards packaged food products. India’s dual advantages as a resource base as well as a lucrative market are attracting both domestic and foreign players to invest. The fact that foreign PE players are getting attracted to invest in Indian companies is testimony to the long term potential of the industry. Both home-grown and overseas players are increasingly looking at ways to drive innovation and boost value addition of food products. These trends promise to take the sector to an accelerated and more sustainable growth trajectory going forward.

Competitiveness of India’s Food Processing Sector BY AMIT KAPOOR & SANKALP SHARMA, INSTITUTE FOR COMPETITIVENESS

A close look at the evolving landscape of the food processing industry in India and the various segments in food processing. The authors offer insights into the historical antecedents tracing the development of the sector and the policy initatives undertaken by governments to improve the competitiveness within the industry. The chapter also looks at the key challenges within the sector and its growth drivers and key industry trends for offering a better perspective and comprehensive understanding of the sector.

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2.2 COMPETITIVENESS OF INDIA’S FOOD PROCESSING SECTOR

Evolution of the Sector The evolution of the agricultural sector and food processing in India can be broadly put into three distinct phases. These are: The era of scarcity: This was the era immediately post Independence. The period saw stunted development in agriculture and allied sectors of the economy. The food processing sector was neglected too. The initial industrial policy has had a distinct bearing on the food processing industry that to this day remains in the MSME (Micro, Small and Medium Enterprises) domain. The era to become food secure: This era saw focus on using technology to improve the conditions of food security. The era also saw productivity gains and better administrative mechanisms for dealing with agriculture. The period also saw emergence of newer business models and institutional reforms in the dairy sector that lead to a ‘white revolution’. Food processing industries also saw a fillip but at the level of small-scale industries. The era of economic transformation: The initial years largely ignored the sector, however post 2000 there has been a distinct shift with respect to FDI in food processing industries and delicensing in a large segment of the industry is aimed at promoting enterpreneurship and economic development.

Present Status of the Sector There exist 127 agro-climactic zones in India.1 These zones are responsible for India being the secondlargest food producer in the world next to only China. ‘Food processing’ stated simply is the process of value addition to the agricultural or horticultural produce by various methods like grading, sorting and packaging. The Indian Food Processing Industry (FPI) is thus dependent largely on agricultural production. India’s food processing sector ranks fifth in the world in exports, production and consumption. The sector at present contributes significantly to the GDP of the country. The sector also significantly contributes to the employment generation within the overall factory sector2 in India. Looking at the production figures within the food and the food processing sector, one observes that India is richly endowed and is a world leader in several agricultural commodities in India. There are many agricultural commodities in which India is the world leader.

Figure 1: The Evolution of Food Processing Industry in India The Era of Scarcity (1947-1960)

The Era to Become Food Secure (1960-1991)

The Era of Economic Transformation (1991-till date)

The initial post Independence years saw a shift to heavy industry under the government and even though the biggest employer (roughly 80%) and contributor to GDP (roughly 50% in) at the time was the agriculture sector, the condition of the sector deteriorated. The growth rate faltered and population increased at a faster rate than expected.

Post the turmoil, India sought to become food secure and introduced highyielding varieties of rice and wheat. Provision of irrigational facilities as well as fertilisers and Minimum Support Price for farmers resulted in a strengthened Public Distribution System. All these resulted in a boom in agricultural production in the wheat and rice producing states, making India food secure.

Initial years from 1991-2000 largely ignored agriculture and food processing industries. Post 2000 however, 100% Foreign Direct Investment was permitted in the food processing sector. Also no industrial licence was required barring few sectors like liquor, etc. There was also a focus on improving exports with various food parks, etc., coming up.

Source: Institute For Competitiveness Analysis

Table 1: Contribution of Food Processing Industries to Gross Domestic Product at 2004-05 Prices in Rs. Crore 2008-09

2009-10

GDP at Factor Cost

41,58,676

45,16,071

49,18,533 52,47,530

54,82,111

Agicultural GDP

5,88,757

5,92,110

6,47,305

6,82,016

6,90,646

Manufacturing GDP

6,56,302

7,30,435

7,95,192

8,54,098

8,63,876

60,378

58,752

67,508

82,063

84,522

GDP FPI as a Percentage of GDP of India

1.45

1.30

1.37

1.56

1.54

GDP FPI as a Percentage of Agricultural GDP

10.26

9.92

10.43

12.03

12.24

GDP FPI as a Percentage of Manufacturing GDP

9.20

8.04

8.49

9.61

9.78

GDP FPI

2010-11

2011-12

2012-13

Source: MOFPI Annual Report 2013-14

1

Pages 43-44, Natural Resources: Technology, Economics and Policy, Taylor and Francis Press 2012. Accessed on 16th June 2015. https://goo.gl/JWnqZK According to the Annual Report of MOFPI, the employment contribution of FPI to the to total employment is around 12% and in absolute terms is 18 lakh people. http://goo.gl/WzFBLc

2

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Table 2: Production of selected products (in metric tonnes) and India’s rank S. No

Item

4

India

World

% World

1

Areca nuts

1

609000

1224125

49.7

2

Bananas

1

27575000

106714205

25.8

3

Chick peas

1

8832500

13118699

67.3

4

Chillies and peppers, dry

1

1376000

3458634

39.8

5

Ginger

1

683000

2140451

31.9

6

Mangoes, mangosteens, guavas

1

18002000

43300070

41.6

7

Meat indigenous, buffalo

1

1610014

3715622

43.3

8

Milk, whole fresh buffalo

1

70000000

80108460

87.4

9

Milk, whole fresh goat

1

5000000

17957372

27.8 36.5

10

Millet

1

10910000

29864147

11

Okra

1

6350000

8689499

73.1

12

Papayas

1

5544000

12420585

44.6 64.6

13

Pigeon peas

1

3022700

4679936

14

Beans, dry

2

3630000

22806139

15.9

15

Cauliflowers and broccoli

2

7887000

22278858

35.4

16

Garlic

2

1259000

24255303

5.2

17

Groundnuts, with shell

2

9472000

45654289

20.7

18

Lemons and limes

2

2523500

15191482

16.6

19

Lentils

2

1134000

4975621

22.8

20

Meat indigenous, goat

2

511626.4

5368583

9.5

21

Milk, whole fresh cow

2

5000000

635575895

0.8

22

Onions, dry

2

19299000

85795191

22.5

23

Peas, green

2

4006200

17430767

23.0

24

Potatoes

2

45343600

376452524

12.0

25

Pumpkins, squash and gourds

2

4900000

24679859

19.9

26

Rice, paddy

2

159200000

740902532

21.5

27

Sesame seed

2

636000

4847921

13.1

28

Tea

2

1208780

5345523

22.6

29

Tomatoes

2

18227000

163963770

11.1

30

Wheat

2

93510000

715909258

13.1

Source: FAOSTAT3

3

Rank

Foreign direct investment (FDI) in the country’s food sector is poised to hit the US$ 6.5 billion mark. The cumulative FDI inflow in food processing reached US$6.3 billion in March 2015. In comparison to the other sectors, the cumulative flows to the sector have been modest. Major investments have been made by countries from the EU. Prominent among these have been countries such as the Netherlands, Germany, Italy and France. During the last five years however, food processing has had the second-highest FDI inflows after pharmaceutical drugs.4

Government Incentives & Policy, Regulation and Wastage Government incentives and policy: There are distinct changes that have been envisaged by the government for growth of the Food Processing sector in the recent past. These include more encouragement to the private sector, tax incentives, relaxed FDI norms, etc. The government is keen to focus on building infrastructure so as to reduce wastage in the sector. Over the next few years, there is a tremendous opportunity in unlocking the value within the sector as the government sees merit in offering market-based solutions to the agrarian challenges within India.

http://faostat3.fao.org/home/E, Accessed on 16th June, 2015. http://blogs.wsj.com/indiarealtime/2015/06/19/nestles-noodle-mess-has-entangled-one-of-indias-hottest-industries/ Accessed on 28th June, 2015

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Figure 2: FDI in India (FY15) Miscellaneous Mechanical & Engineering Industries Food Processing Industries Petroleum & Natural Gas Hotel & Tourism

3.98 6.31 6.57 7.92 8.06 8.55 9.24 9.56 10.34 12.38 13.12 15.02 17.06

Trading Metallurgical Industries Miscellaneous Industries Power Chemicals (Other than Fertilizers) Automobile Industry Drugs & Pharmaceuticals Computer Software & Hardware Telecommunications

Regulation: There are several institutions that are concerned with the food sector in the country. These come under various ministries. However, with respect to the food standards regulation, the FSSAI (Food Safety and Standards Authority of India) has been established under the Food Safety and Standards Act, 2006. It lays down ‘science-based standards for articles of food and regulating manufacturing, processing, distribution, sale and import of food so as to ensure safe and wholesome food for human consumption’.6 Wastage: In India, a significant fraction of the harvest is wasted. There have been two studies that have been conducted in the past, which estimate the losses within the food processing and agriculture sector.

24.06

Construction Development:

42.71

Services Sector*

0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 45.00

In US$ Billion Source: Department of Industry Policy and Promotion5

Table 3: Some Incentives to Food Processing Offered by the Government Greater Private Sector Involvement

100 per cent export-oriented units allowed to sell up to 50 per cent of their produce in the domestic market. Export earnings exempt from corporate taxes.

Relaxed FDI norms

100 per cent FDI permitted under automatic route (except for alcohol, beer, and sectors reserved for small scale industries)

Mega Food Parks

Mega Food Parks Scheme aims to create a modern food processing infrastructure for the small and medium processing units.

Focus on Infrastructure Development

Setting up of 50 Agro Export Zones across the country.

Storage Facilites

Investment-linked tax incentive of 100 per cent deduction of capital expenditure for setting up and operating cold chain facilities (for specified products), and for setting up and operating warehousing facilities (for storage of agricultural produce).

Tax and related Incentives

Customs duty for certain products have been reduced. Import duty scrapped on capital goods and raw materials for 100 per cent export-oriented units. New units in the business of processing, preservation and packaging of specific products are permitted to claim deduction from Income tax.

Source: IBEF, MOFPI and authors’ own Work 5 6 7

Table 4: Wastage of Food Grains in India Average loss as reported in Millennium Study, 2004 (%)

Average losses as reported in ICAR study, 2010 (%)

S. No

Name of major Foodgrains

1

Wheat

8

6

2

Rice

11

5.2

3

Maize

7.5

4.1

4

Jowar

10

3.9 4.8

5

Bajra

6

6

Gram

9

4.3

7

Other Pulses

9.5

5.67

Source: Press Information Bureau7

http://dipp.nic.in/English/Publications/FDI_Statistics/2015/india_FDI_March2015.pdf Accessed on 16th June, 2015. http://www.fssai.gov.in Accessed on 25th June, 2015. http://pib.nic.in/newsite/PrintRelease.aspx?relid=80834 Accessed on 25th June, 2015.

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Segments and Growth in Segments India’s food processing sector can be categorised into a distinct set of sub-sectors with their own sets of unique challenges and opportunities. Under the broad ambit of the food processing industries, a lot of differnet sub-segments are present. Each has had its own sets of peculiarities and growth trajectory. Commodity/Staples: The sub-sector includes food grains, pulses, spices and oils. The total grain production of India in FY 2014 was expected to be 265 MT8 in FY 2014. Processed commodities account for roughly 60% of the total commodity market estimated to be INR 6.25 lakh crore.9 Primary and secondary processing form the main processing techniques in the subsector with the tertiary sector largely missing. Storage and value enhancement through better processing and brand positioning remain the major challenges in the sub-sector.

India is the largest producer of milk in the world. The total production of milk was 132.4 MT in FY 2013. Size of the Indian Dairy industy was estimated to be INR 2.53 lakh crore in 2012.

Figure 3: Segments within the food sector in India

Agro-Food Processing Sector

Commodity / Staples

Food Grains, Pulses, Spices, Oils

Fruits and Vegetables

Fruits and Vegetables, Cut, Dried, Frozen, Dehydrated

Dairy

Milk, Butter, Ghee, Cheese, Flavored Milk, Condensed Milk, Milk Powder

Meat, Fish and Poultry

Eggs and Egg Products, Frozen and Canned Meat Products, Fish Processing

Beverages

Tea, Coffee, Alcohol, Aerated Drinks, Packaged Water, Others

Convenience Foods

Ready to Eat/Cook Foods, Processed Fruits and Vegetable foods, Bakery and Confectionery

Fruits and vegetables: India is the secondlargest producer of food and vegetables. India produced 81.3 million metric tonnes of fruits, 162.2 million metric tonnes of vegetables during 2012-13; production is expected to rise to 377 MT10 by 2021. To put the numbers in prespective, India accounts for 15% of the global production of fruits and 10% of the global production of vegetables. However, processing remains a fraction of the total fruits and vegetables being produced. This offers immense opportunity in the space for newer processing techniques as well as greater value addition. Some specific segments have shown impressive growth in the past like frozen foods, fruit juices, etc. Going ahead, shifts in the consumer lifestyle as well as better food processing and storage techniques are going to change the dynamics within the sector. Dairy: India is the largest producer of milk in the world. The total production of milk was 132.4 MT in FY 201311. The size of the Indian Dairy industy was estimated to be INR 2.53 lakh crore in 2012. The industry is unorganised with organised space accounting for 30% of the market12. Meat, fish and poultry: In 2014, the meat, fish, and poultry market was valued at INR 1.63 lakh crore.13 India is fifth-largest producer of meat14

Source: Industry Sources, Institute for Competitiveness Analysis.

8

IBEF, http://www.ibef.org/download/Food-Processing-March-2015.pdf accessed on June 28, 2015. Technopak Advisors. http://www.technopak.com/files/India’s_Food_Sector.pdf, accessed on June 28, 2015. 10 Ibid., 11 Ibid., 12 Ibid., 13 Ibid., 14 Ibid., 9

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PavelSvoboda / Shutterstock.com

and the biggest producer of buffalo meat in the world, according to statistics by FAOSTAT. It is also the second-biggest producer of indigenous goat meat. India is the third-largest producer of fish, and second-largest producer of inland fish. Investment in newer technology is providing a boost to the marine food industry. India is the ninth-largest producer15 of poultry meat in the world and remains a key growing segment in the domestic market. Independent small-scale players dominate the poultry industry. Beverages: The non-alcoholic beverage segment has a huge potential in the Indian context. Consumption of non-alcoholic beverages is expected to increase by 16.5-19% over the next three years as more people are trading up to packaged drinks.16 Also pertinent is the fact that non-corporate manufacturers dominate (around 75%) in terms of numbers, but corporate manufacturers dominate in terms of value, volume of sales, and investment.17 Convenience foods:18 The rise of convenience foods is due to the changing lifestyles, paucity of time, rising disposable incomes and change in food habits. There are distinct segments with the broad ambit of convenience foods. These include Biscuits (24% market share) Snacks (19% market share), Imported Foods (17% market share) Chocolates (13% market share), Health Foods (13% market share), the nascent category of Ready to Cook and Ready to Eat foods (3% market share) and Breakfast Cereals (1% market share). All the segments are expected to see robust growth with India’s food industry moving towards differentiated product offerings.

The rise of convenience foods is due to the changing lifestyles, paucity of time, rising disposable incomes and change in food habits. There are distinct segments within the broad ambit of convenience foods.

Key Challenges Within the Sector Some of the key challenges in the Food Processing sector include: 1. Lack of Processing in the perishable segment: This arises due to a variety of reasons like lack of processing technology and facilities, unorganised nature of processing, lack of adequate infrastructure for storage, etc. All this results in a lot of wastage and loss of perishable agricultural commodities. 2. Lack of Adequate Storage Facilities along the value chain: Lack of proper storage facilities along the value chain results in problems of processing. 3. Lack of Processing technology: The lack of adequate processing technology inhibits value addition within the sector. 4. Poor Value Chain Linkages: A fragmented value chain results in suboptimal outcomes that inhibit the growth of the sector. Linking from farm to fork is critical for the benefits to flow to farmers. 5. Lack of Skilled Manpower: Though a large number of people are employed along the various activities of the value chain, the fact remains that a large fraction of them are unskilled. There is scope for providing them with training for betterment within the sector. 6. SME Competitiveness: A crucial element and a major challenge is value capture by the SME segment, which remains largely unorganised. Value capture can happen when these players comply to international standards and look for growth opportunities after achieving scale in the domestic market. 7. Lack of Branding and Packaging: Branding and packaging are of critical importance within the sector. SMEs trying to compete with multinationals have to keep these two factors in mind, apart from local distribution and quality product offering.

15

Ibid. http://www.livemint.com/Industry/nyCVXeL2ex9NZGWe3zxPsK/Beverage-industry-to-grow-at-16519-report.html Accessed on June 28, 2015. http://icrier.org/pdf/food_processing_in_India.pdf Accessed on June 28, 2015. 18 Technopak Advisors. http://www.technopak.com/files/India’s_Food_Sector.pdf, accessed on June 28, 2015. 16 17

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Figure 4: The Diamond Model Applied to the Food Processing Industry in India Context for Firm Strategy and Rivalry

Factor Conditions Second-largest arable area in the world. Largest irrigated land in the world. Roughly half of India’s population is still dependent on agriculture and allied activities. Low level of mechanised (17 per 1000 people compared to 19 as world average) tractors and technology leading to low productivity. Yield per hectare is low compared to world levels. Formal firms registered in India under FPI provided employment to 1.77 million people in 2012-13.

The industry is largely unorganised, but organised sector is growing at a rapid pace. Very few vertically integrated conglomerates, reducing scale economies. Differentiated product offerings within FPI. National Food Processing Policy aims to increase the level of food processing from 10% in 2010 to 25% in 2025. Ministry of Food Processing enacted the Food Safety & Standard Act (FSSA), 2006, for prescribing standards for food. safety.

Related and Supporting Industries

Demand Conditions Demand conditions for the FPI remain robust as the per capita incomes rise and consumption patterns change. Opening up of the sector has brought in greater variety for consumers The spending on food as a percentage of total spending has gone down over the years. However the spending on food items as a percentage of total spending is 42 % in urban areas and 52 % in rural areas according to data of 2012-13 by NSSO.

Presence of large amount of small sector firms in the sector. Presence of a number of agricultural institutions like ICAR, NDDB, APEDA, MPEDA, etc, but average levels of industry interaction and support. Low level of knowledge and technology sharing among the players within the sector due to unorganised nature. Low level of marketing and branding expertise are making companies within the sector have low value realisations and capture. Source: Michael E. Porter’s The Competitive Advantage of Nations, and authors’ analysis.

Figure 5: Value Chain as Applied to the Food Processing Industry in India Inputs Seeds, Fertilizes Key and Farm Activities Equipment

Key Players

National Seeds Corporation Limited, Cargill, M&M

Production Farmers/ Cooperatives and Private Companies Farmers, AMUL, Unilever, Pepsi, ITC

Procurement and Storage

Processing

Retailing

Grading, Sorting, Milling and Packing

Retail Shops, Malls, Cash and Carry Stores

Food Corporation of India, Adani, Cargill, ITC, Adani Enterprises Snowman

Merchant stores, Future Retail, Walmart, Aditya Birla Retail

Warehouses, Cold storage and Silos

Post-harvest losses and wastage along the value chain are a major part of the problem. Dealing with it requires infrastructure deployment along various nodes of the value chain. Ultimate aim should be to set a food grid providing for the seamless delivery to end consumers with minimum loss or wastage. More than just ‘Make in India’, the need is to have adequate infrastructure for ‘Move in India’. Source: Michael E. Porter, The Competitive Advantage of Nations and Authors’ analysis.

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Porter’s Diamond Model and Value Chain Analysis The model: The Diamond Model and Value Chain Analysis are two key conceptual models that yield interesting insights about the food-processing sector in India. Within the diamond model, the factors that make food processing attractive are the fact that India possesses natural endowments like land, labour and capital, which are critical for the growth of the agro-processing sector. The demand conditions remain robust with increasing food expenditure, which is still almost half of consumer expenditure. The related and supporting industries remain largely fragmented with little industry power due to low skilling and lack of experience and expertise in branding and marketing. The context for strategy remains good with regulation recently becoming stringent. Also, the industry remains largely fragmented with few large vertically integrated players within the sector.

The value chain: The value chain of the food processing industry can be broken down into a distinct set of activities. These include the input stage where seeds, fertilisers and other farm equipment are used for agricultural production. Companies like National Seeds Corporation, Cargill, Mahindra and Mahindra, etc., are dominant in the sector. The next stage is production of the agricultural/agribusiness produce where value-added production takes place. Co-operative and multinational players both have distinct models operational within the sector. Key players in this space include Unilever, Amul, Pepsi, etc. Another key step in the value chain is procurement and storage of food grains as well as the manufactured products in cold chains, warehouses, etc. Key players in this space include the government-owned Food Corporation of India, which procures from farmers, and other private players like Adani and Snowman. Processing is the next step in the value chain and this has operations like grading, milling and sorting. Here again, the organised space in the sector is dominated by vertically integrated companies like Cargill, ITC, and Adani. The final step in the value chain is retailing, before which distribution and marketing are the key activities. Of late, there is a proliferation of organised retail but it still forms a fraction of the traditional unorganised retail and distribution models prevalent in India. Online food supermarkets are at present in their infancy but the potential in cities is immense. Table 5: Growth Drivers and Key Industry Trends Growth Drivers Key Trends Robust Domestic Demand for Processed Foods

Changing Consumer Preferances and Tastes Resulting from Rise in Disposable Incomes Greater Integration with World Economy Greater FDI Inflows and Corporate Investments Changing Face of Storage Facilities and Food Retailing Entry of International Food Processing Players

Food constitutes almost half of our consumer expediture and will continue to do so over the next 10 years. Product innovation, especially with respect to value addition, is being looked upon as the key for domestic expansion. Procurement through direct farm linkages by corporate players. Focus on greater processing towards fruits & vegetables as a result of a shift in consumption. Focus on healthier foods, e.g, low carbohydrate content and low cholestrol oils. Greater consumption of horticultural crops.

Move towards better techniques for processing and targeting overseas markets for exports. Emergence of Indian players with presence across the world. Examples include Bikanerwala and Haldiram’s. Improved processing technology and greater product standardarisation.

Focus on frozen and processed Food. Better packaging for products looked upon as sign of inherent quality. Building a strong distribution network and brand is seen as the key to success. Emergence of JVs in the food processing industry. Plants being set up at strategic locations as India is seen as a key sourcing hub and offers opportunity in terms of cost competitiveness.

Source: Industry Sources, Institute for Competitiveness Analysisk

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Conclusion India has come a long way in food processing since it attained Independence. The sector is primarily dependent on agriculture but has distinct strengths. These have to do with natural resource endowments, human capital, changing demand patterns and a maturing regulation and industry. India remains massive in the raw material and unprocessed space but does less amount of value addition. Government policy is keen on building and bettering infrastructure within the sector for augmenting value addition. Also, the plan is to reduce a lot of wastage that is visible in the food-processing segment. The government policy is also keen on incentivising private sector involvement within the sector. There are distinct opportunities for players, especially in the infrastructure development and processing of fruits and vegetables. Opportunities also exist in the non-alcoholic beverages space along distinct nodes of the value chain. Retail distribution and newer models around online retail also present many opportunities. Betterment, in terms of time and efficency within the value chain processes in individual firms, is bound to have a tremendous impact on the competitiveness of the industry. Processing technology and skilling remain crucial areas for the sector to achieve global scale. SMEs can play an important role in bringing about effective cost competitiveness as well as the ability to understand local tastes and preferences, which holds immense potential for the future. Over the longer time frame, creation of the ‘national food grid’ for seamless delivery of food products from farm to fork remains a challenge, which all stakeholders should work towards.

Investment Opportunities in Food Back-end Operations BY DEBASHISH MUKHERJEE & SUBHENDU ROY, A.T. KEARNEY

A Win-Win-Win Situation for the Consumer, Industry and Government In spite of a robust economic growth, India continues to face challenges in satisfying the need of nutritious, healthy and hygienic food for over a billion of its population. This has manifested in malnourishment, micronutrient deficiencies and various lifestyle diseases. However, the Indian consumer is evolving with the changing times. The consumer today does not mind spending for quality food products, across social strata. Industry leaders, on their part, have seen the benefits of investing across the food value chain. Investment in food value chain is one of the largest opportunities in India today. There are multiple categories to choose from – mega scale investments to niche plays – depending on the appetite of the investing company. Furthermore, there are various ways to make sustainable profits. While investment in food is both a consumer need and attractive to the industry, government has played a supporting role to facilitate investment in the value chain. Coupled with the ongoing ‘Make in India’ theme, food is a high-priority investment sector for the government. Investment in back-end food operations is thus a win-win-win situation for the Indian consumer, industry players and government.

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2.3 INVESTMENT OPPORTUNITIES

Investment in Food: A Consumer Need The demand for food in India is expected to grow exponentially over the next 10 years driven by the evolving demographic profile and macroeconomic factors. India’s economic growth has resulted in increasing disposable income for the population, resulting in rising shift in income profiles across India. By 2025, the middle class is expected to account for about 44 per cent of the households, from current levels of 24 per cent, at the expense of emerging and bottom-of-pyramid segments. Also, a majority of India’s population is expected to be employable, between 20 and 55 years. This demographic and income shift in the overall population is expected to lead to ever-increasing demand for food (Exhibit 1). We expect food demand to more than double by 2025. Not only shall we experience a volume shift, there is expected to be an evolution of dietary habits as well. Our primary research conducted across India clearly highlights this trend. Indians are becoming more welcoming towards processed, Western food options like noodles, corn flakes, juices and oats – something which was very nascent until 10 years ago (Exhibit 2). Today, in many households, the generation gap is easily noticeable on the breakfast table. Most of this has been in direct consequence to the supply of high-quality brands that have been built painstakingly in the Indian consumer’s food habit. This has been further supplemented with the increasing health consciousness of the Indian consumer, who has more money to spend on food. The Indian consumer is welcoming new food categories with open arms and is becoming more health conscious. In what is a clear opportunity for processed food companies, the consumer is also willing to pay a premium for quality food products. In a recent survey, it was observed that over 60 per cent of consumers are willing to pay a premium for food that adds to their need for ‘convenience’. However, taste and health are paramount. Thus, over 70 per cent of consumers are willing to pay a premium for packaged food that promise ‘restaurant-like taste’. Similarly, an equal number are willing to pay for food with ‘no preservatives’. These choices are not limited to the super-educated and corner-office population; it was observed that SEC C and D class consumers have a higher willingness to pay for food that offers both taste and health benefits. It is thus not surprising that the Indian consumer is seeking high-quality hygienic products, and is willing to pay a premium for them. In a recent survey, food quality and hygiene came up as the biggest ‘issues’ faced today as well as the biggest ‘purchase drivers’ (Exhibit 3).

While these pose a serious challenge to processed food companies, they provide an enormous opportunity to the same players. We expect the share of processed food in the overall food market to increase to 40–45 per cent by 2025–30, compared to a little above 30 per cent currently. This change in consumption pattern is purely ‘demand-led’ and processed food companies will do well to prepare for this opportunity.

Investment in Food: An Opportunity for the Industry While there is a clear consumer need, processed food also provides ample economic opportunities for companies willing to invest in this sector. Two key factors drive this opportunity. Firstly, most processed food categories are expected to record Shifting Income Profile

Increasing Food demand

(Split of households by income levels)

(‘000 Tonnes)

316 High End (>30L) Upper (15-30L) Middle (4-15L)

258 1%

5%

2%

1%

24%

44%

Emerging (1.5-4L)

55%

39%

Bottom of Pyramid ( The nurturing perfectionist: She stays connected to the needs of her growing child. She prepares a variety of lunch options and ensures that MFDs are exciting and delicious so as to keep packaged foods and ready-to-eat (RTE) foods away. >> The traditional nurturer: Additional nutrition is provided through animal protein or high protein vegetarian options like soya. While they mostly look for homemade food options, they also purchase packaged foods giving in to their kids’ demand for ‘taste and excitement.’ >> The balancing nurturer: She caters to satiety via homemade and packaged foods. She adds nutritive toppings to the existing convenience options (vegetables to packaged noodles/butter on cream crackers), ensuring a balanced diet for her children. >> The indulgent nurturer: She is the most convenience-driven mother. Her choices are skewed towards packaged and RTE food options. She also provides natural food products like olives, kiwi fruit and cashew nuts, which are considered both healthy and nutritious. She also procures probiotic drinks in a bid to eliminate the ‘guilt’ of substituting home food with RTE options.

Sharang Pant, Richa Khetawat and Sonia Arora from the Nielsen Innovation Practice team and Swapnali Patil from the Sales Effectiveness practice contributed to this report.

INDIA FOOD REPORT 2016 | 113 |

Sweet Indulgence IMAGES REPORT AND RESEARCH ANALYSIS BY EUROMONITOR INTERNATIONAL

As India’s confectionery market continues to evolve, interesting innovations will come to the fore and further propel growth of the market.

| 114 | INDIA FOOD REPORT 2016

T

he confectionery market of India is divided into three segments: chocolate, sugar confectionery and gum market, which is further divided into sub-segments. The Indian confectionery market is going through rapid changes in terms of trends and consumer behaviour pattern, and the industry is benefitting from higher consumer spending, which in turn is being driven by the new found mall culture and changing lifestyle. The last couple of years have seen a spate of product innovations, value-additions and new launches in the Indian confectionery market. With young consumers looking for newer formats and flavours in confectionery, manufacturers were induced to cash in on the demand and expand their product range. Dabur, for instance, extended its popular digestive brand Hajmola, and reinstated its presence in the pure confectionery segment with the launch of the Natkhat Amrud variant and Hajmola Chuzkara. The Indian confectionery market is one of the fastestgrowing in the world with a strong double-digit annual CAGR. The younger generation in the country, who are well travelled and look for newer formats and flavours in the confectionery segment, has led to an increase in demand. The confectionery segment has been witnessing new product launches and is an important section for any retailer as it targets children, adults, young and old, but the category requires more visibility and a stronger positioning.

2.5 SWEET INDULGENCE

As per a Nielsen report, growth in the confectionery category is estimated to have been at 8 per cent in 2014. While the confectionery market has always been fragmented and continues to be so with more than 3,200 brands operating in the category, growth has been driven by the emergence of new segments like Jelly, which has gained quick consumer acceptance. The category has also seen premiumization to some extent but needs to be accelerated in the coming years. Apart from sugar-based candies, the confectionery space has witnessed a lot of action in the chocolate segment. Cadbury India, part of Mondel z International, launched Cadbury 5Star Chomp in April 2014. Tapping the rising affluent urban demographics, and keeping pace with market trends, Nestle India launched chocolate brand Alpino targeted at older consumers in metro cities. Apart from additions by existing players, the category saw new entrees like Schogetten, a leading German chocolate brand from Ludwig Schokolade GmbH (-A Member of KrÜger Group-). Schogetten comes in portioned chocolate bar format in 14 flavours.

Trends As per Euromonitor, in 2013 the value sales of sugar confectionery grew by 20 per cent to reach Rs 47,140.4 million. It is estimated to have reached Rs 51,458.8 million in 2014. Players like Perfetti Van Melle (PVM) India and ITC Ltd enjoy dominant market share. Other leading brands with considerable presence are Ravalgaon Sugar Farms, Wrigley India, and Parle Products. In the chocolate sub-segment, Cadbury India and Nestle India are the dominant player mainly due to their long established presence and portfolio of popular brands. As the Indian confectionery market continues to evolve, strong trends have come to the fore, which are expected to drive and propel the growth potential of the confectionery market and the categories within it. One of the major trends is towards sugar-free, healthy products, and manufacturers are launching innovative products in the segment. With consumers becoming increasingly health-conscious today, they seek health and wellbeing in every thing they consume, including confectionery. Now they are demanding sugar-free candies and chocolates. Health consciousness has certainly caught the attention of manufacturers, as a result of which , the market is seeing cereal bars being introduced, which are currently amongst the fastest growing category in the Indian confectionery market, even while toffees, candies, caramels and nougat continued to record the fastest growth.

Distribution of Sugar Confectionery by Format: % Value 2008-2013 % retail value rsp 2008 2009 2010 2011 2012 2013 Store-Based Retailing 100.0 100.0 100.0 100.0 100.0 100.0 Grocery Retailers Modern Grocery Retailers Convenience Stores

95.1

95.1

95.0

95.0

95.1

95.0

5.6

5.6

5.8

6.2

6.5

6.5

0.4

0.4

0.4

0.4

0.4

0.4

-

-

-

-

-

-

Forecourt Retailers

0.2

0.3

0.3

0.3

0.3

0.3

Hypermarkets

1.9

2.6

2.9

3.2

3.5

3.5

Supermarkets Traditional Grocery Retailers Food/drink/tobacco specialists Independent Small Grocers Other Grocery Retailers Non-Grocery Retailers Health and Beauty Retailers Mixed Retailers Other Non-Grocery Retailers Non-Store Retailing

3.1

2.4

2.2

2.3

2.3

2.3

89.5

89.5

89.2

88.8

88.6

88.5

3.5

3.5

3.6

3.6

3.6

3.6

79.7

80.0

80.1

79.9

79.8

79.7

6.3

6.0

5.5

5.3

5.3

5.2

4.9

4.9

5.0

5.0

4.9

5.0

4.5

4.5

4.7

4.7

4.7

4.6

-

-

-

-

-

-

0.4

0.4

0.3

0.3

0.2

0.4

Discounters

Vending

-

-

-

-

-

0.0

-

-

-

-

-

0.0

Homeshopping

-

-

-

-

-

0.0

Internet Retailing

-

-

-

-

-

0.0

100.0

100.0

100.0

100.0

100.0

0.0 100.0

Direct Selling Total

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

This fast growth in sales is mainly due to the growing popularity of caramels and their growing acceptance as cheaper alternatives to chocolates. Additionally, the increased visibility of caramel brands like Alpenliebe, in modern retail stores and kirana stores, has helped them gain more sales. Another visible trend is that of adult consumers’ demand for premium chocolates continues to grow. To tap this segment of consumers, manufacturers of premium chocolates, such as Sprüngli, are expanding their brand presence in premium stores such as Brown Tree and other modern stores in urban areas. Interestingly, gourmet chocolate manufacturers, including Japan’s luxury chocolate maker Royce, have also made a foray into India’s premium chocolate segment. Sales of premium chocolates have been supported further with consumers preferring to gift premium chocolates on festive and celebratory occasions. For instance, during Raksha

INDIA FOOD REPORT 2016 | 115 |

Forecast Sales of Sugar Confectionery by Category: Volume 2013-2018 ‘000 tonnes 2013 2014 2015 2016 2017 2018 Boiled Sweets 27.0 29.0 31.0 32.8 34.5 35.9

Bandhan, Ferrero Rocher introduced special gift packs. at select modern and traditional retail stores. During the festive season, the confectionery segment generates about 50-70 percent sales revenue. Till 10 years ago, people believed in gifting traditional Indian sweets or mithais, but now, the younger generation especially believes in gifting chocolates and confectionery products due to their longer self life, easy to store and handle, and also because of healthy options available. Over the years, festive packs of confectionery products have become quite popular among consumers with many shifting from mithai to chocolates and other confectionery gift hampers.

Challenges Confectionery falls under the impulse purchase segment, and (generally) does not witness any in-store promotions and offers. Confectionery items are stacked near store check-outs, luring customers, who while billing, tend to add some items to their shopping basket. Since brands do not spend on promoting candies, toffees and chocolates, as it is not viable for them, this segment remains inactive and lacks attention in comparison to other categories. Of course, their display at the check-outs helps, but a lot of time they are overlooked when people don’t want to scan the section near billing counters. Also, not all the brands can get prominent display, so the ones kept at the back or on the last shelf, lose visibility. Adding on to the challenges are the stringent FSSAI regulations on imported products, so brands are finding it difficult to enter the Indian market, while the existing ones are finding it difficult to grow their business. What makes the challenge bigger is the fact that confectionery manufacturers typically make heavy investments in TV commercials, but are not very considerate towards retailer margins. Retailers actually help in building the brand and influencing consumer choice. If manufacturers would just use 50 per cent of this expenditure for increasing the retailer margins, it would benefit them more.

Way to go The Indian confectionery market in comparison to other developed markets, is in the initial phase of growth, and will continue to evolve. It is expected to touch Rs 55,720.0 million in 2015 and Rs 60,188.6 million in 2016. It is believed that the sugar confectionery is likely to see a constant value CAGR of 8 percent over the next few years. The growth will be driven by the increasing consumption of sugar confectionery facilitated by the launch of new flavours by leading companies.

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Liquorice Lollipops Medicated Confectionery Mints Power Mints

-

-

-

-

-

-

4.1

4.2

4.2

4.2

4.3

4.3

11.0

11.7

12.3

12.8

13.3

13.8

16.8

17.3

17.8

18.2

18.7

19.2

7.3

7.2

7.1

6.9

6.8

6.7

Standard Mints 9.5 10.1 10.7 11.3 11.9 12.5 Pastilles, Gums, Jellies 7.7 8.1 8.4 8.7 9.0 9.2 and Chews Toffees, Caramels and 145.3 164.4 185.3 207.8 231.9 256.7 Nougat Other Sugar Confectionery Sugar Confectionery 211.9 234.6 258.9 284.6 311.7 339.1 Source: Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

The Indian confectionery market is expected to grow at a CAGR of more than 18 percent during 20122015. Going forward we might see a shift within the category, with higher price points becoming more prevalent within the segment.

While industry experts feel that it would take 2-3 years for this segment to gain better prominence and visibility, many also anticipate new packaging formats being introduced in the segment apart from more innovative products. The experts are of the view that consumers will largely continue to buy confectionery from kirana stores. Nevertheless, with the growth of supermarkets and hypermarkets in tier II cities, sales of sugar confectionery through modern retail would increase. As the market evolves, the revenue contribution from modern retail stores is also expected to rise.

Prospects Growth of the category is also expected to rise in the days ahead. Players who invest in expanding their distribution network and make innovative launches will emerge stronger and gain bigger market share.

2.5 SWEET INDULGENCE

Forecast Sales of Sugar Confectionery by Category: Value 2013-2018 Rs million 2013 2014 2015 2016 2017 2018 Boiled Sweets 4,404.9 4,672.1 4,894.8 5,058.6 5,212.6 5,328.2 -

-

-

-

-

-

Lollipops Medicated Confectionery Mints

1,078.8

1,068.4

1,047.2

1,024.1

1,005.7

990.4

4,730.9

4,866.8

4,927.7

4,967.1

5,024.0

5,074.5

3,777.5

3,872.0

3,981.5

4,120.5

4,268.1

4,437.7

Power Mints

1,642.5

1,575.3

1,511.7

1,458.6

1,409.1

1,365.9

Standard Mints Pastilles, Gums, Jellies and Chews Toffees, Caramels and Nougat Other Sugar Confectionery Sugar Confectionery

2,135.0

2,296.7

2,469.8

2,661.9

2,859.0

3,071.8

1,788.7

1,886.9

1,976.7

2,064.5

2,140.5

2,221.6

31,359.5 35,092.6 38,892.0 42,953.8 47,479.4 52,392.1 -

-

-

-

-

47,140.4 51,458.8 55,720.0 60,188.6 65,130.3 70,444.4

Source: Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

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INDIA FOOD REPORT 2016 | 117 |

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-

Berries

Liquorice

The per capita consumption should continue to increase for the category on the back of relevant innovations. The entry of multinational companies in the Indian confectionery space has not only increased competition, but also the per-capita consumption, by launching new products at affordable prices, and creating awareness among buyers through advertisements and promotional campaigns. The emerging trend of gifting confectionery products is also driving the category, and there is great potential for further growth in the untapped rural market. Backed by these factors, the Indian confectionery market is expected to grow at a CAGR of more than 18 percent during 2012-2015. Going forward we might see a shift within the category, with higher price points becoming more prevalent within the segment. We also expect the Jellies segment to continue to be a growth driver, given the recent success of Perfetti’s Juzt Jelly, which has become the fastest growing brand in the confectionery space.

Ready to Eat /

Ready to Cook BY P. RAJAN MATHEWS

Thanks to the rapid strides in food processing and packaging technology, the ready-to-eat food category is witnessing a surge in consumer popularity and acceptance. However, the category is largely export-driven as it is yet to establish a firm footing in the Indian retail market. What are the factors holding back its potential and what is its future outlook?

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M

ore than 200 years ago, France instituted a 12,000 francs (around Rs.1.4 lakh today) prize for anyone who could find a way to preserve food. The purpose was military — soldiers required an assured supply of food and nutrition to win wars in distant territories. In 1810, 15 years after the prize was announced, Nicolas Appert found a way by cooking food in a glass jar and sealing it with a cork. But Appert, a chef, didn’t know the reason why the food he canned stayed fresh for months. From grandmother’s pickles and salted and sun-dried fish to the milk that comes in tetrapacks and stays fresh for months without refrigeration, packaged and processed food has come a long way, meeting the modern day demand for hassle-free instant food. Even fresh vegetables like green peas or cauliflower, once available only in the winter, are now available round the year, if only at a higher price. In India, food processing is estimated to be a $121-130 billion (around Rs.7.5-8 trillion) industry, driven by the dairy sector (35%) and marine and poultry (32%), according to a report by the Confederation of Indian Industry. Also, in India, only 2% of fruits and vegetables are processed as against 65% in the US. However, off-season consumption of fresh fruits and vegetables is rising — the exotic lettuce available during the Delhi summer most likely comes from the hills of Ooty in Tamil Nadu, the beans and capsicums from Himachal Pradesh, and the shiny apples likely travel continents from the US, without losing their sheen or juiciness. Once such food processing technologies are developed, it is the retort processed foods that don’t need rehydration or preparation and may be consumed straight from the pouch, with or without pre-warming, relying upon the necessity of the users and the

2.6 READY TO EAT/COOK

weather. These foods meet the particular wants of convenience, organic process adequacy, ambient storage and distribution to the centers. Shelf stability has made this extremely successful and most suited to Indian cuisines. Hence a number of tasty Indian dishes in retort pouches enable consumers to enjoy their favourite foods such as sooji halwa, upma, chicken curry etc. The use of retorting technology has thus made the sale of “Ready-to-Eat” foodstuff commercially viable, and in vogue with contemporary food styles. The pioneer in the development of RTE in India has been the Defence Food Research Laboratory (DFRL), Mysore, which was established on 28th December 1961 under the Defence Research and Development Organisation (DRDO) to fulfill the needs of varied foods for Indian Army, Navy, Air force and paramilitary forces. Their aim is to design and engineer light weight convenient packed food, with longer shelf-life under varying climatic conditions. Using the self-developed technologies, DRFL has produced many ready-toeat, quick to cook instant foods with a longer shelflife. Some of them are long keeping chappaties (shelf-life 6 months), high protein snacks (shelf-life 9 months), spiced potato parathas (6 months), fruit bars (9 months), mutton pickle (6 months), stabilised chikki (1 year). Today, retort processing is the most acceptable form of food preservation. These are ready to eat food products that require just warming in a microwave oven or water bath before eating. Packaging of this food should withstand thermal processing. Retort pouch is the flexible, laminated food package, which is light on weight. It maintains the shelf-life, texture and nutritive value of frozen food. During war, soldiers can easily carry these packages. So they are very popular. The selection of packing material of retort pouches is very important. It should have high melting point, physical strength, protect against light degradation, moisture changes, microbial invasion and oxygen ingress. It should resist penetration of fats, oils and other food components. Packing material should not contaminate the food inside. Japan and European countries use a multilayer polyester with 7-20 microns thickness aluminium foil and 75 microns thickness polypropylene for retort pouches. But they are very expensive for our country. DFRL, by its research, tried polypropylene (PP) and co-extruded material of polypropylenenylon-polypropylene (PP-Nylon-PP). This packaging structure is now successfully used in the packaging of meat, vegetable curries, rice with meat and vegetables, sweet halwa, beans in sauce, etc.

Total Number of Outlets for RTE % Penetration of RTE Category in ‘A’ Category Outlets Total Number of RTE units sold % Penetration of RTE in Sec A1, A2 Households per month

In India, food processing is estimated to be a $121-130 billion (around Rs. 7.5-8 trillion) industry, driven by the dairy sector (35%) and marine and poultry (32%). But only 2% of fruits and vegetables are processed as against 65% in the US.

28561 13% 6319200 2%

Type of Outlets

%

Chemist

0%

Grocers

39%

Pan Plus

1%

Food Stores

10%

Modern Format Stores

51%

(Source: Nielsen Data) (Assumption: Universe of Outlets is 2,22,330) (Source: Nielsen Data) (Source: IRS Data for A1, A2 households townwise)

The ready-to-eat category was commercially first introduced to the country in 1987, but suffered a slow beginning with consumers preferring traditional cooking. During this period and till the late Nineties, Tasty Bites was the only brand of RTE available in the Indian market. Due to a lack of acceptance, Tasty Bites had to be withdrawn from the Indian markets and is now available only in export markets. By the turn of the millennium, and with the advent of new technologies to improve the shelf life of ready-to-eat products, alongside a growth in storage and distribution centres and life style changes, the segment gained momentum. With the development of retort technology, and increased differentiation among ready-to-eat players, the heat-and-eat segment broke away to become a market in its own right. The RTE / heat-and-eat market is currently valued at Rs. 240 crore and has been growing at a rate of 18% over the last three years. Over the next five years, it will reach 22% per annum as a result of rapid urbanisation, increasing disposable income and expected improvement in retail infrastructure, touching over Rs. 640 crore by 2019. RTE foods are currently dominated by ITC, MTR Foods, Kohinoor Foods, Gits, Mother’s Recipe and Tasty Bite Eatables. ITC and MTR together contribute to just under half of the market share, while the other players make up 45% of the total production of heat-andeat food. Other players in the category include ADF Foods, Priya Foods and Heinz, who are relatively new entrants in the market with limited product lines, and have a regional presence. The category is largely export-driven as it is yet to establish a firm footing in the Indian retail market.

INDIA FOOD REPORT 2016 | 119 |

However, domestic markets constitute 40% of the total revenues of heat-and-eat products. Sales mostly occur in urban areas, especially in Tier I cities, where retail infrastructure is significantly developed. Even though retort processing is the best and most acceptable form of food preservation for Indian cuisine as it has no preservatives, yet the acceptance levels in the Indian market range from very poor to average. Today, RTE is bought only by single men, working single women and working couples and that too for use in times of emergency, where they do not want to cook or when they have unexpected guests and visitors. It is seldom bought by families with children even when both parents are working. It is a known fact that when families do not cook food at home, they mostly eat out. Today, with most food service outlets having their own free delivery and the growing food delivery channels and websites for home delivery of restaurant food, families resort to ordering of restaurant food at home when they are not cooking. Hence RTE has to compete primarily with the free home-delivered restaurant food in terms of freshness, taste and value for money. The average Indian consumer has the following misconceptions about RTE food, which the industry needs to address: The most surprising misconception about RTE is that the Indian consumer is not prepared for the product and hence most of the sales have been in the export market. The housewife, till date, was not willing to accept a completely prepared product to feed the family due to apprehensions of it reducing her role as the family’s provider. RTE foods contain preservatives. Not nutritional in comparison to fresh food. RTE does not have enough value for money. Most RTE is routine food such as dal, sambhar, palak, etc, and is not a novelty. Some novelty products introduced by ITC were priced very high. Availability is limited majorly to modern format stores The penetration of RTE till date has been very low in general grocery stores and households.

| 120 | INDIA FOOD REPORT 2016

The RTE / heatand-eat market is currently valued at Rs. 240 crore and has been growing at a rate of 18% over the last three years. Over the next five years, it will reach 22% per annum as a result of rapid urbanisation, increasing disposable income and expected improvement in retail infrastructure, touching over Rs. 640 crore by 2019.

Social Changes Driving RTE Trend The RTE food category has a tremendous growth opportunity in the near future due to: Growing number of nuclear families. In the Federal Home Ministry’s final figures of the first phase of Census 2011, known as House listing and Housing Census in New Delhi, the data states that India is now overwhelmingly made up of nuclear families — a dramatic change from just a generation ago, where joint families were the norm. Seventy per cent of the households consist of only one couple. Increased urbanisation. There is an increase in the population of Indian women, who have neither the time nor the knowledge to cook traditional meals on a regular basis. Indians have become more experimental with their food and drink choices, as there is a need for variety. Growing youth population. Significant rise in the number of working women – 34% households have working women; 49 lakh households in the top 10 cities constitute 50% of the total working women. Growing practice of singles living away from home for education or work.

2.6 READY TO EAT/COOK

MRP of RTE ( value proposition of RTE ): Today a single serve pack costs Rs 65 to Rs 75, whereas the same dish to be ordered from a nearby quality restaurant costs around Rs 130. Few years back, people would be least interested in stocking up RTE at home as they could just walk across the road, find a restaurant and order meals. However, now that people work till late at night at office and return home at a time when restaurants are closed, RTE seems to be the best option.

Today, RTE has to compete primarily with the free home-delivered restaurant food in terms of freshness, taste and value for money.

Change in Mindset : From a mindset, where home-cooked and fresh food was preferred, and housewives insisted on making everything from snacks to multi-course meals in-house, today it has become commonplace to seek convenience and variety, using the vast menu of ready-to-eat foods available. 44% Indians admitted to not having much time to cook, while 23% felt ready meals were affordable. (Source; Euromonitor, January 2013) Food as convenience and novelty : The variety of ready to cook and ready to eat food is growing, thus helping the housewife in her quest for novelty. Thus, the growth in the working woman segment, increasing work and study commitments, declining culinary skills, the rising need for convenience, and surging disposable incomes, along with clever and innovative marketing, have led to a higher demand for heat-and-eat products.

Meeting the challenges of nutritional transition BY ARABIND DAS

The food processing industry is vital to India’s nutritional security but the progress is not in line with the “nutritional transition” challenge. It faces diverse challenges that need to be identified and addressed in order to leverage the potential for the sector’s growth.

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I

ndia should aim to attain nutritional security by 2025, which means that every Indian should be able to afford the minimal nutrition that is recommended as a part of the daily diet. However, the fact remains that we are nowhere near that target. There are a number of gaps in the food chain - between the raw material we grow and the nutritional need. Today, our agriculture production results in either an excess or a shortage. If there is a shortage, prices are pushed up due to supplydemand gap and the consumer suffers. If there is excess produce, the price crashes and the farmer suffers. However, intermediaries do not lose in either situation. This variability and unpredictability affects everyone from producer to consumer. This is where the food processing industry can play a critical role. Processing reduces wastage, makes food affordable and allows it to be available throughout the year beyond its harvesting period and growing location.

2.7 MEETING THE CHALLENGES OF NUTRITIONAL TRANSITION

Challenges for the Food Processing Industry The focus on India’s food processing industry has been there for a number of years but it still hasn’t made the kind of progress that was intended. A strategic plan to accelerate its development and overcome the challenges faced by the industry will revolve around three major pillars: processeable grade inputs; in-house development of cuttingedge process engineering & technology and providing an opportunity to train food handlers to address food safety. Connecting demand to the land: The burgeoning requirement for food is putting increasing pressure on the land available. Hence, connecting demand to land is of great importance. Right varieties of produce: The cost of processing can be lowered if we can increase solid content per tonne of raw produce. For example, the orange juice that we buy is made of imported concentrate because local fruit is not suitable for processing. We need more research in agriculture to develop processeable grade varieties in order to reduce cost of production and improved quality. As a country,

we are not doing enough on research on food process engineering and still depend on import of plant and machinery. Reducing costs: The main costs in the food processing industry are plant and machinery, power and productivity. Power is one of the highest costs for the food processing industry. Technology is a high cost item because the processing industry is dependent on imported plant and machinery. The processed food industry is highly labour dependent and hence cost of productivity is the key.

Processing reduces wastage, makes food affordable and allows it to be available throughout the year beyond its harvesting period and growing location.

Food safety: This is a challenge for the processing industry. The industry depends on workers who currently lack basic personal hygiene and food safety knowledge. Government intervention is required to overcome this challenge. Under the aegis of “Skill India” it should open ‘food handler institutes’ in line with Industrial Training Institutes, which can train and educate food handlers on basic personal hygiene and hygiene practices in the food industry. Trained food handlers are critical for the success of the food processing industry in the long run. This will also make people more employable. The changing consumer: In 2010, India had a 35-million-strong processed food consuming class (those with a per capita income of more than Rs. 2 lakh). This figure is expected to rise to about 137 million by 2025 (@), i.e. 75 per cent of the population will be Gen Y and they will drive the demand for food. Gen Y’s food habits are different – they are more attuned to processed food, they want to find out what goes into their food. Cold chain infrastructure: In the last decade, a lot of effort has gone into developing the country’s cold chain infrastructure with government policymakers and industry bodies coming together. But is it adequate? Take the cost effectiveness of road transport, where there is an additional energy cost for refrigeration. We are trying out eutectic refrigeration systems, which can run for 8-10 hours after being charged once. With these, the vehicle doesn’t consume fuel for refrigeration. We are also exploring the option of long haul eutectic systems, which will have to be charged midway through the journey. If we look at rail transport, the railway freight corridor could bring down the cost of transportation of frozen goods substantially once it becomes operational. However, we will need to create hubs of cold stores at railway stations. Similarly, if we look at transportation by air, then all major airports will have to have cold chain facilities for storage. Even the last mile of the cold chain is inadequate. Subsidies were provided to build warehouses and set up transport systems but no thought was given to where these refrigerated products would be sold.

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The small stores often don’t have cold chain facilities because they haven’t received any subsidies to buy refrigerators to sell the products. Taxation: The levy of Value Added Tax (VAT) is also playing a greater role in many processed food products, including poultry. It varies from 5 per cent to as high as 17.5 per cent for frozen poultry products in different states. So, on the one hand, the government wants to ensure a nutritionally secure India, and on the other hand, taxes on those poultry products are so heavy that people find many of these products unaffordable. From next year, we will need to look at what role the Goods and Services Tax (GST) will play in this regard.

Protein, an Essential Nutrient India’s food processing infrastructure has a critical role to play in reaching India’s nutritional security goals, and specifically in bridging the huge gap that exists in the per capita per day consumption of protein in India. The World Health Organization (WHO) recommends 84 gm while Indians consume only 63.2 gm per day. Animal protein contains all the nine essential amino acids, which the human body requires but can’t produce by itself. And yet, 72% of Indians’ protein needs are met by pulses and cereals and only 28% is through milk, meat, eggs and fish. One of the reasons why Indians rely so much on pulses and cereals is because of the highly elastic food basket. It simply means that when food inflation rises, the basket moves towards less nutrition. An increase in per capita income means less consumption of pulses and cereals and more demand for fish, meat and eggs (FME) followed by dairy, fruits and vegetables. Today 30% of children in India are born underweight and 33% of young adults are underweight. One way to tackle this gap for children is include eggs in the midday meal scheme in schools in all states. As a powerhouse of nutrients, eggs are a good way of ensuring that school children have access to the nutrition they require. However, not many people are aware that at current prices, poultry meat is the cheapest (in terms of cost per gram protein) as compared to protein obtained from milk and eggs. Today, the per capita poultry meat consumption is around 3.2 kg. The National Institute of Nutrition (NIN) recommends 11 kg. By 2020, we expect it to reach 4.8 kg which will still be much lower than the NIN’s recommendation. The availability of poultry meat today is around 4 million tonnes and it will

India’s food processing infrastructure has a critical role to play in reaching India’s nutritional security goals, and specifically in bridging the huge gap that exists in the per capita per day consumption of protein in India.

increase to 7.2 million tonnes by 2020, given current CAGR. The challenge is to grow the industry beyond 7.2 million tonne so as to achieve the recommended protein consumption targets. To do this, some specific government interventions are necessary. The first is a reduction in import duties. The import duty on feed additives for the poultry industry is 22 per cent, while it is only 10 per cent for gold! Unless we measure and track protein inflation in the country, taking appropriate action on the production side or the consumption side won’t be possible. Similarly, the reduction of import duty on poultry processing plant and machinery must be reconsidered and should be made zero. Since protein is a key component of nutritional security and there is a gap in its consumption, the government should monitor protein inflation and not just food inflation. India has seen a rise in disposable income. With a 98 per cent correlation (#) between disposable income and poultry meat consumption, and 97 per cent correlation (#) between per capita GDP and per capita broiler consumption, we are heading for a higher protein inflation unless the government and industry together take concrete steps in this direction. The 1960s saw the Green Revolution, which changed our agriculture landscape. Similarly, the White Revolution changed the face of the dairy sector in the 1970s. Egg consumption promotion campaign by the National Egg Coordination Committee (NECC) has also made a significant difference in egg production. Can the government come out with a similar campaign for poultry, a cheaper source of protein than other proteins available in the market today? If India has to achieve its goal of nutritional security for every Indian by 2025, there is a lot to be done. And we are running out of time.

(#) Reference: AT Kearney Report (@) Reference: McKinsey Global Institute report

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Rising Bakery Industry BY RAVINDRA YADAV, REETESH SHUKLA & TRIPTI BISHT

A proliferation of bakery training institutes, increasing demand for bakery chefs and trained manpower, transition of India from importer of bakery ingredients to exporter, surge in manufacture and import of bakery equipments, and increasing consumption of bakery items, indicate an exponential growth of the bakery industry in the near future.

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R

ising urbanisation, increase in population of working women, changing lifestyles, greater per capita income, and rising awareness about health and wellness has strongly impacted the way today’s urban Indians eat and drink. A growing interest in healthy eating can also be observed through the changing choices of bakery products. From cakes and biscuits to pizza base, French baguettes and Macarons, Indian bakery market has a new definition today. Though largely dominated by the unorganised segment that lacks a robust supply chain, bakery sector is set to evolve further as technology becomes the game changer. Despite a slight slowdown in India’s economy, bakeries have continued to perform strongly. The growth is driven mainly by rapid expansion of modern retail outlets across the country. Increasing disposable income levels of consumers, rapid urbanisation and the need for convenience food, have helped drive the demand for breads, cakes and pastries.

2.8 RISING BAKERY INDUSTRY

Urban regions of India have witnessed rapid growth and expansion of modern retail outlets; many of these have dedicated bakery sections that offer more premium and Western products. The growth of bakery chains, cafes and fast food outlets will also boost the category.

Exploring New Tastes The rising demand for multigrain bread, wholegrain breads, breads from specific countries, and sugar-free desserts further endorses this shift in eating habits. This change has not only made major players like Britannia, ITC, and Parle improvise their products but has also lured newer entrants like Patanjali, GAIA, etc. into this segment. The heightened popularity and wider acceptance of the humble bread in urban households is not restricted solely to the white and whole-meal varieties but also includes healthy multigrain and specialty breads like baguettes, ciabatta, focaccia, brioche, croissants, rye breads, etc. Even if these are not available in neighbourhood grocery stores, most can definitely be noticed on the shelves in supermarkets and select bakeries in metros and tier I cities. More than breads, biscuits are widely consumed across different age groups in urban as well as

From cakes and biscuits to pizza base, French baguettes and Macarons, the Indian bakery market has a new definition today. Though largely dominated by the unorganised segment that lacks of a robust supply chain, bakery sector is set to evolve further as technology becomes the game changer.

rural areas. India’s biscuit industry, the third largest in the world after the USA and China, is witnessing a major transition as consumer preferences are changing. With an evolving palate and a health-oriented outlook, the Indian consumer is now demanding much more than glucose and Marie biscuits. These consumers are, instead, willing to experiment with new flavors and textures but, at the same time, not willing to compromise on health and taste. They are demanding that manufacturers reduce Trans fats and sugar content in biscuits and add products which are beneficial for the overall wellbeing of a person. Catering to such evolving needs, biscuit manufacturers are now concentrating on this segment via introducing products which are health oriented and appeal to the palate of the consumer, e.g. the Nutrichoice range from Britannia, the multigrain range by Unibic and GAIA, McVitie’s Digestive, Farmlite by Sunfeast, etc.

Healthy Bakes Responding to the high demand from consumers, manufacturers have introduced many variants. Health and wellness is the new key for the bakery industry with companies bringing out healthier, fortified products. The use of lesser-known grains like ragi and millet has gained in popularity within the baked goods segment. Grains like amaranth and buckwheat have also found acceptance thanks to their high nutritional content. Today’s fast-tracked lifestyle has led to the lack of proper nutrition and has increased the demand for fortified products. Breads, biscuits, and other baked products now come packed with minerals and vitamins to increase their nutritional quality. Consumers have also started questioning the use of certain additives in baked products. Additives like conditioners, genetically modified ingredients, preservatives, artificial flavors and colors, Trans fats, and added sugars can adversely affect consumers’ health and are therefore being avoided by them.

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Rural Adoption The rural consumers are not far behind their urban counterparts, and are also showing an increased propensity to consume bakery products. The penetration of television, and the food-related programs aired on channels, has increased both the aspirations of the rural consumer and the frequency with which they consume baked products like breads and biscuits. With constant upgrades to back-end infrastructure, manufacturers are also not lagging and are ready to cater to the aspirational demand of rural consumers, and are launching smaller pack sizes of certain products in rural markets to increase their penetration therein.

Freshly Baked Due to increased health awareness and the opposition to artificial additives, the concept of fresh bakes is getting revived in the Metros and Tier I cities. Consumers prefer to carry home freshly baked biscuits and breads. To tap into this trend supermarkets have also set up in-house bakeries which not only provide popular breads and biscuits but also cater to such needs as cakes and other baked specialties.

The increasing trend of using the online platform to order products is not limited to restaurants and organised retail alone, but has also gained in popularity for bakeries as well.

Overall, the concept of bakeries is undergoing a change, with many bakeries in metros now becoming popular hangout zones, and many cafés serving bakery products. These changes are also being viewed by international bakery chains as heralding a lucrative proposition. There has therefore been a profusion of international chains entering India, e.g. Au Bon Pain, Breadworks, BreadTalk, Dunkin Donuts, Krispy Kreme, etc., as well as an expansion of domestic brands like L’Opéra, Monginis, Daily Bread, French Loaf, etc.

Online Ordering The increasing trend of using the online platform to order products is not limited to restaurants and organised retail alone, but has also gained in popularity for bakeries as well. The consumers are ordering even routine products through the online platforms from retailers as well as from bakery shops like Nature’s Basket, Daily Bread, Defence Bakery (Delhi), etc. These platforms are also used by bakeries to communicate with consumers more effectively about the health aspects of their products as well as to showcase newer products. They also utilise this tool to understand the requirements of various consumers, which facilitates the development of new offerings.

Scope for Bakery Products The emergence of a well-to-do middle class, greater urbanisation, changing lifestyles, health consciousness and a higher population of wellinformed consumers have resulted in bakeries becoming one of the fastest growing industries in India. Further, adding to their growth is the acceptance and reach of baked products like breads and biscuits in even the rural parts of the country. With the convenience of ordering products from home, the use of the online platform is also gaining momentum in the metros and mini metros. The growing consumer demands and stricter food laws have forced Indian manufacturers to adopt international manufacturing standards, add healthy, and specialty, products to their portfolio, and use better quality ingredients with fewer chemical additives.

Focus on Ingredients The secret recipe for a baked delight lies in the quality of ingredients. The market today seems to be moving away from standard bakery ingredients to more experimental and new flavours. Tropilite Foods, a bakery ingredients manufacturer since 2000, produces bakery toppings including non-dairy whip toppings,

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2.8 RISING BAKERY INDUSTRY

bakery fillings, aromas, cake decors, fondants, and glazes. Its clients list includes Barista, Monginis, the Taj Group, Costa Coffee, and Dunkin Donuts. The company has also started supplying dry cake premixes (egg and egg-free) for making cakes, muffins, and brownies, choco lava premixes and diet-free cake premixes. Apart from regular ingredients like refined flour (maida), egg and oil, the consumption of performance-based ingredients like egg and egg free cake mixes has been increasing. Also, in cake premixes there has been an uphill demand for specialised products like muffins, brownies, choco lava and exotic cakes. Bakeries now use various toppings; non-dairy whip topping is the most important one besides fruit fillings, bake stable fillings, powdered bakery colours, aromas, and fondants. Chocolate is used both as raw material for cakes as well as for toppings. The demand for bakery products is at an inflection point owing to the country’s changing food habits and exposure to international lifestyles through increased travel. There has been a constant increase in demand for bakery ingredients in the last 15 years and same trends are expected to continue standing at about 20 per cent YTD basis. Internationally, the demand for designer products combined with health-based products is on the rise. The appearance and presentation are decisive factors for a bakery product to be bought and tasted by a consumer, so it goes beyond just the recipe. Also, the logistics pose a major hurdle for the bakery industry due to lack of frozen facilities in rural areas. The rural India is still not used to bakery products where they are considered niche. In the last 10 years, the Indian bakeries have started demanding convenience premixes that are easy to prepare and save time. Bakeries are likely to look for more such products like the ready-touse frozen cakes. Additionally, more health-based ingredients are expected to be in demand as currently most of the bakery products are high in fat and sugar content. As the bakery market in India is relatively new when compared to Europe and the USA, it is growing at a much faster pace. Indian manufacturers are also becoming self-sufficient and are not dependent on imports of raw materials. Most of the bakery raw materials are now being exported from India, which is one of the major exporters of bakery ingredients to Asian and African countries. With the emerging trends and technology, it will not be wrong to say that India will emerge as a major exporter of bakery ingredients worldwide.

In the last 10 years, the Indian bakeries have started demanding convenience premixes that are easy to prepare and save time. Bakeries are likely to look for more such products like the ready-touse frozen cakes.

Belgium-based Puratos Group (the world’s second-largest bakery ingredients major), launched The Breads of the World concept to meet growing consumer demand. An R&D centre in India tailors products according to Indian taste, value and functionality. This concept will enable supermarkets and bakery chains to create a wide and unique range of original (taste, texture and shape as in the country of origin) and enjoyable breads from all over the world. The Indian bakery segment rose above the slump in the economy in 2013-14 to produce impressive double digit growth. This growth, expectedly, was driven by rapid expansion of modern retail outlets, increasing disposable incomes, and the overriding need for convenience by the end consumer. The Indian baked goods category consisting of largely unfragmented segment, unpackaged/ artisanal bread continued to dominate the market with a share of 56 per cent, while packaged industrial bread held steady with a share of 44 per cent. The customers are now beginning to choose healthier bread options, a trend which is visible from the

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rapidly rising share of whole wheat and multigrain bread segment (6 per cent in 2013-14), while brown bread has carved out a healthy 11 per cent market share and white bread held steady at 81 per cent. Bakery companies help create breads from every corner of the globe, from original breads to breads from across the world, using their bread mixes. All that a baker has to do is follow the recipe and clear instructions developed with local specialist bakers. That way, every baker is able to replicate the original taste, shape and texture of breads, as if they were made in the country of origin. Ethnic breads are more and more a key element of the bakery product line-up. They are often made with locally-sourced ingredients and have become increasingly popular as they attract new customers to the bread counter. They also offer a greater choice of fresh and authentic breads. Although it is exciting to discover local products, but consumers often desire to have trusted products from their home country. In many countries, there is a large population of immigrants who would love to find the tastes and flavours of their home country locally. They also tend to incorporate their own flavours in the existing cuisine.

Unique Products Venkys India Ltd is a leading supplier of different types of egg powder since 1996 to industrial bakeries and cake, pastry, mayonnaise, and confectionery producers. A division of Venkateshwara Hatcheries Pvt Ltd, Venky’s Egg Powder Division is located at Veljerla, Hyderabad; it caters mainly to the international market. Indian bakery producers are totally unaware about the availability of powdered eggs and of their advantages over shell/raw eggs, or egg liquid. The company has a very few customers in India, as only the high-end and reputed brands are aware of egg powder. The company’s growth has been only 10 per cent in the Indian market, whereas in the international market it is 200 per cent. Its total annual production of egg powders has grown from 1,000 tonnes when it started, to the current 3,500 tonnes – 95 per cent of which is for the export market. The Indian market needs to be educated about the advantages of using egg powder over raw eggs, which include low price, high shelf life of minimum one year, easy handling, no wastage, no refrigeration during transportation and storage. Internationally, the use of blends and ready mixes for bakery products is becoming the norm. The Indian bakery industry needs to maintain a high level of hygiene and find easier ways to produce bakery products.

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What’s Trending The Indian bakery market needs to be educated about the advantages of using egg powder over raw eggs, which include low price, high shelf life of minimum one year, easy handling, no wastage, no refrigeration during transportation and storage.

L’Opera, a leading French bakery chain, provides a range of Patisseries and Boulangeries from freshly baked breads to croissants and pastries. Talking about the latest trends in the industry, culinary experts are constantly exploring new flavour combinations, fusing sweet with tangy, spicy and even citric flavours. Consumers’ perception of what constitutes a dessert is also changing. In India too, professional bakers/pastry chefs are increasingly adding a complexity of flavours to their desserts. Indians are now open to international and unfamiliar flavours like passion fruit, raspberries, stone fruit infused with floral extracts, etc. However, the classic chocolate and cream continues to attract the Indian palate. At L’Opera, croissants and cereal baguette are quite popular. They use flour (with the right amount of gluten for baking best quality breads), butter (with an eye on percentage of moisture and fat for different product range) and cream (having the required fat content), which still rule the bakery kitchen, despite emergence of new ingredients. Bakery flavours have evolved with time as now the Indian market offers authentic breads such as French Baguette, Cereal Baguette, Pain de Campagne, Grenoblois, and modern and classic flavoured pastries like Apple Cinnamon, Chocolate Passion fruit, Orange Almonds, Chocolate Coffee. Cup cakes are also a fast-moving category. Today, bakery is not limited to baking the rusk, cookies and buns only. The youth is now inclined towards baked stuffed buns, rolls, sandwiches, pizzas and baked desserts. The matured age group, on the other hand, are opting for healthy breads and sugar-free desserts. The Indian breakfast table is now getting replaced with quick breakfast options including bread, rusk and dry cakes with a cup of tea or coffee. The confectionery business has been a major trendsetter in bakery as the traditional festive

2.8 RISING BAKERY INDUSTRY

sweets are now getting replaced with decorative cakes and chocolates. Cup cakes are also gaining a lot of attention amongst youngsters. Though not in the top-selling bracket as yet, they will soon become the show-stoppers in the business. In addition to basic ingredients like flour, sugar, and yeast, fat, eggs and cream are also considered top ingredients. Having said that, premixes would soon be the future of bakery in India. The new bakery flavours have certainly evolved with globalisation, driving the much-desired change. The concept of outsourcing and import have made availability of international fruits and other ingredients easy for the end-users. Also, a lot of new concepts like frozen food, retort packaging and new processes have made possible availability of ingredients around the year. The breads and birthday cakes are on top of the chart amongst fast-moving products, while savouries comparatively have a slower movement in organised bakeries. In local bakeries, however, rusks and breads top the chart. In a coffee chain, baked assortments go hand-in-hand with freshly brewed cup of coffee or tea, so the proliferation of cafes has grown the bakery business as well. The biggest strength of the bakery industry is the growing awareness of bakery products and the growing presence of organised bakery in retail and hospitality sectors. Bakery as a category is an addon to the overall food business, and given its unique assortment of products, it does not clash with other food businesses. The scarcity of trained/skilled manpower is the biggest challenge it faces towards achieving its optimum contribution to country’s economic growth. Unlike in the past, when baking technology and machinery had to be imported at a very high cost for bulk production, now many companies are designing and manufacturing the equipment in-house. This has helped businesses to reduce investment costs

The biggest strength of the bakery industry is the growing awareness of bakery products and the growing presence of organised bakery in the retail and hospitality sectors. Bakery as a category is an add-on to the overall food business, and given its unique assortment of products, it does not clash with other food businesses.

and flourish. The packaged bakery products would also continue to grow and contribute to a good sales mix in grocery stores.

Bakery Equipment The demand for bakery equipment has increased by 8-10 per cent, with south and west India being the most developed bakery regions. The tier II cities also offer immense opportunities. The Indian bakery equipment manufacturers account for almost 80 per cent of the market share as their equipment are cheaper when compared to the imported. The imported equipment range spans across the entire bakery spectrum, from dough processing to baking to packing. Also, the price of imported machinery depends on the type, capacity and automation level. Though, the Indian bakery industry is still not advanced like USA and Europe, so there is tremendous scope for technological improvements. The growth in demand for fully automated machines is becoming difficult due to lack of skilled labour. However, it is also true that demand for standard bakery equipment will always remain high due to their lower cost. There is a rising awareness of better technology, asd the country needs upgraded technologies for flour storage silos, ingredient batching, continuous mixers, automation in dough processing, continuous tunnel ovens, continuous spiral cooling conveyors, and packaging. On the other hand, the frozen dough technology, which is not widely used in India, will help and support a lot of small and medium bakers, many of whom are still using wood-fired ovens. Frozen dough technology is definitely something that the industry needs to adopt rapidly. However, high custom duties are a major impediment in importing bakery equipment. The focus should be on eliminating manual labour and minimal maintenance machines. There is a need to learn how wheat can be used in different forms to make bakery products. The only area in which India has seen growth is the pizza industry. Cup cakes will take a long time to establish in India, while muffins have more sustenance. Overseas, artiginal breads, organic breads, multigrain and Old World style are popular bakery categories. In desserts, cheese-based and alternate flavours such as salt and chili are in demand, while in India, chocolate still dominates the dessert and sliced bread category. North India makes up 70 percent of bakery demand. He informs that the company has witnessed a CAGR of 30 per cent since it started.

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The absence of strict laws and no emphasis on operator’s safety in India, unlike in the USA and Europe where manufacturers are required to have approvals like NSF,UL, CE, etc. “Make in India” will probably be the next big trend with foreign companies setting up their manufacturing base here, which will improve the quality, standard, and safety measures in India. FDI must be allowed in food service machine manufacturing sector; it will make India a global player. Bakery equipment makers Eurotech Corporation, a supplier of bakery equipment to restaurants and QSRs including Pizza Hut, Domino’s Pizza, KFC, California Pizza Kitchen, Sbarro, Hard Rock Café, Cream Centre, Bombay Blue Restaurant, Haldiram’s, Oven Fresh, Quizons, Relish, and Mc Café; imports the equipment from USA and Europe, representing companies like Lincoln (conveyor ovens from USA), Convotherm from Germany (combi-ovens), Moffat from New Zealand (Turbofan convection ovens and catering machines), and Pizza Master from Sweden (stone ovens). According to the company, combi-ovens from Convotherm, Rational and MKN rule the Indian market for bakery equipment. The company also manufactures Chapatti (flat bread) machine. Autobake Productions, which has been in the business for the last five years, caters to retail and industrial bakeries. Its clients include national brands like Monginis, Haldirams and Britannia, and regional brands Bakelite, Theobroma, Celejor, La Folie, etc. The company imports Spiral & Planetary Mixers, Automatic Bread Plants, Confectionery Depositors, Baking Ovens, etc, from brands including Mono Equipment (UK), Konig (Austria), Erika Record (US), Beldos (Belgium), Bear (Denmark), Rondo (Switzerland), and SvebaDahlen (Sweden), amongst others. Maharashtra, Gujarat, and Karnataka are offering a lot of potential and are, therefore, the focus states for the company.

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The untapped potential of the bakery industry, a promising future, and lack of skilled resource have paved the way for a number of bakery training institutes to step in. Apart from training, these institutes are also ensuring that entrepreneurial ambitions are nurtured.

The ratio between standard, customised and automated bakery equipment in the country stands at 40:10:50; rural to urban demand stands at 75:25; and usage of Indian/international bakery equipment can be pegged at 70:30. New Delhi-based Bakers Circle (India) Pvt. Ltd., supplies frozen dough and semi-finished confectionery products to about 2,500 QSRs in 47 cities in India, and also exports its products. As per Bakers Circle, India is a large market with a very small per capita consumption of leavened bread, but biscuits fare pretty well. Hence, the Western-style breads are seeing double digit growth primarily due to a small base number, while traditional biscuits are showing a single digit growth. The technology for bread and cake making in India is at least 30 years behind the Western countries, mainly because it is a small-scale industry. In addition, availability of quality raw materials is a big challenge. Bakers Circle imports ingredients from seven countries. New Delhi’s oldest bakery, Wenger’s, designed by a British architect Sir Robery Russell in 1926, has stood the test of time and has witnessed the flourishing bakery industry in India like no other. Credited with being a pioneer in introducing Swiss chocolates, French bread, and margarine pastries in Delhi, the bakery established the foundation for the current bakery industry at a time when cakes and pastries were unheard of in India. According to Wenger’s, the technology and mechanisation have changed the industry taking it to new heights. Though the industry has made flavour innovations, the traditional bakery items are still the hot sellers at Wenger’s. Even if the store has not grown in terms of volume, it records growth of 5 to 10 per cent, every year. Wenger’s now uses imported equipment from Germany, New Zealand, etc., however, its ovens are of Indian make. When most of the industry professionals feel frozen dough should be adopted rapidly, Wenger’s is more comfortable using freshly made dough. According to the company, the bakery industry in India is a mix of traditional and new flavours, and has immense potential to grow.

Training Institutes The untapped potential of the bakery industry, a promising future, and lack of skilled resource have paved the way for a number of bakery training institutes to step in. These institutes have not only flagged the need for trained chefs to take the industry to the next level, but are also ensuring that entrepreneurial ambitions are nurtured and jobs provided through their own job placement cells.

2.8 RISING BAKERY INDUSTRY

Institute of Hotel Management (IHM), Pusa, New Delhi The Institute of Hotel Management, Catering and Nutrition (IHM) Pusa, New Delhi, was founded by C. Belfield Smith in 1962 under the Ministry of Food and Agriculture, and is now placed under the Ministry of Tourism. Its bakery and confectionery section is an important component of the curriculum. Over the years, its bakery has gone high-tech, wherein the students gain hands-on training using equipment like 3 and 2 deck electrical ovens, planetary mixers, proofing chamber, dough kneader, cream whipper, sorbet machine, chocolate melting machine, sugar crafting lamp, silicon pads and moulds by brands such as Electrolux, Kitchen Aid, etc. IHM students pursuing diploma courses in Bakery and Confectionery seek placements in MNCs, food companies, luxury hotels and renowned bakeries, while some become entrepreneurs. The passing out students start at an entry level in the kitchen, bakery or as KMTs (Kitchen Management Trainees) in five-star properties. The renumeration varies between Rs 2 lakh to Rs 4 lakh per annum depending on the hotel. The institute offers a compulsory 6-month industrial training for obtaining a 3-year B.Sc. degree programme. The students go for vocational training in commercial bakeries. The theory practical ratio at the institute is 70: 30. To ensure that the students are ready to face the ever-evolving industry, they undergo exposure trainings and regular interactive lecture sessions with industry leaders and experts. People now prefer pizzas, sandwiches, cakes, and doughnuts. Baking as a profession is seeing exponential growth, hence, there is a spurt in bakery training institutes all over the country. The highest selling items are biscuits due to their long shelf life

People now prefer pizzas, sandwiches, cakes, and doughnuts. Baking as a profession is seeing exponential growth, hence, there is a spurt in bakery training institutes all over the country. The highest selling items are biscuits due to their long shelf life and ease of transport.

and ease of transport. The penetration of coffee chains, tea houses and large players have further grown the sector. People are experimenting with gluten free biscuits, organic options, and using different ingredients such as rice treats. The Indian bakery market is expected to generate revenues of $7.6 billion by 2050. The per capita consumption of baked products is 1-2 kg, which is quite low in comparison to other countries where it varies from 10-15 kg. Approximately 40 percent of the market is organised, of which 85 per cent comprises breads. This indicates a great scope for expansion in the sector. The changing market trends and consumer demands have created additional opportunities for unconventional bakery products. Despite the great potential, the growth is hindered by the high perishable nature of the products and lack of skilled manpower. There is a need for skilled pastry chefs who have been trained to innovate and become entrepreneurs. A growing concern for health and multi-grain food products will increase sales in the future. The strong agriculture-based domestic economy has been a good ally for the Indian bakery industry. International Institute of Culinary Arts (IICA), New Delhi Founded in May 2005 by Virender S Datta, IICA in view of the immense response received so far and the dynamic nature of the bakery industry, plans to set up its first exclusive bakery and confectionary institute in Gurgaon. Equipped with hand-picked and trained chefs as faculty members, IICA also has visiting chefs from leading hotels such as Leela and Westin, who teach aspiring chefs about current trends using high-tech multipurpose mixers and other technology-based gadgets such as multitasking ovens, etc. Established with the objective of teaching baking and confectionary fundamentals, IICA provides hands-on training using necessary equipment such as ovens, dough mixers, hand blenders, and chocolate tempering. IICA students benefit largely because of their specialisation in certain cuisines or bakery and confectionary. Hence, their demand in the industry is quite large. Due to the nature of their qualification which is globally uniform, they get absorbed in almost every level of hotels in India and abroad. There is also a large percentage of students who have entrepreneurial ambitions and want to set up their own bakery stores. Having partnered with University College Birmingham, Edexcel UK, and City and Guilds, UK, IICA provides a high-quality learning environment in terms of curriculum, content and design.

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The courses at IICA have a 50:50 theory and practical ratio. Every year, students are sent to fivestar hotels in New Delhi/NCR for four months for on-the-job training. It provide practical knowledge, management and communication skills to our students in a research-friendly environment. For passing out students, job opportunities range from the commie level to kitchen management trainees. IICA also has its own placement cell, and it also caters to manpower requirements for chefs from hotels and restaurants across the world. There is an extreme shortage of qualified chefs and IICA encourages more and more people to enter this industry as it is truly a very rewarding and sustainable choice. IICA receives almost 8-10 enquiries from people residing in urban India looking to set up a similar institute in rural parts of the country to bridge the existing gap, and also cater to a population which is almost as aware of trends and food options as that in urban India. As regards trends, as per IICA, bakery and confectionary is a constantly growing market; the trend nowadays is to focus on food presentation and to improve baking techniques. Healthy products and ingredients are one of the most self-sustained trends due to increased awareness amongst consumers, rising healthcare costs and lifestyle disorders including obesity. For example, awareness of transfats has encouraged manufacturers to use transfat-free emulsifiers such

The Indian bakery market has come a long way in the past 5 years, but this is only the tip of the iceberg. In the past few years, many international brands have entered India, and this would only increase in the future.

as Nutrilite/Nutrisoft 55. Yet another trend is the development of individual portion menu items such as cup cakes and doughnuts driven by the calorieconscious consumers. The e-retailing, too, has a lot of potential as it is a medium not discriminated by time, distance, or any other barrier. The Indian bakery market has come a long way in the past 5 years, but this is only the tip of the iceberg. In the past few years, many international brands have entered India, and this would only increase in the future. One of the biggest strength that India has is the growing awareness amongst consumers. There are new bakery and confectionary shops being opened by entrepreneurs who need qualified chefs, however, the weakness lies in the on-the-job training provided to aspiring chefs, which does not equip them with adequate skills. This is where institutes like ours assist in training and imparting the right skills to aspiring chefs, IICA observes. Assocom Institute of Bakery Technology & Management (AIBTM) Assocom India established Assocom Institute of Bakery Technology & Management (AIBTM) in technical collaboration with American Institute of Baking, USA, and Hyejeon College, South Korea. Located in Greater Noida, AIBTM uses a mix of presentations, projects, hand-on trainings, seminars, theory classes and analytical lab training methods. AIBTM trains students for an executive or junior management level as bakery chefs, ingredients technologists, etc. Regular field visits are organised to interact with industry experts. Internship option is also provided in hotels and bakeries. The institute offers Post Graduate Diploma in Bakery Science & Technology, Post Graduate Diploma in Artisan Bakery & Patisserie, Entrepreneurship Development Programme, and Weekend and Hobby Courses.

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THE INDIA FOOD REPORT 2016

SECTION 3

GROCERY RETAIL & MARKET

3.1 FOOD & GROCERY RETAILINDUSTRY TRENDS AND INSIGHTS 3.2 RISING SHARE OF E-GROCERY IN INDIA 3.3 ONLINE AND KIRANA THE ODD COUPLE 3.4 HOW TECHNOLOGY IS POWERING THE RETAIL BANDWAGON

Food & Grocery RetailIndustry Trends and Insights BY BAQAR IFTIKHAR NAQVI, AVNISH MALHOTRA & VARUN CHUGH, WAZIR ADVISORS

A report on the global trends in food retail, established and emerging grocery formats and the contours of India’s evolving grocery market.

Global Food & Grocery Retail Trends Food is one of the key categories of spends globally and forms a large share of the consumer’s wallet. The global food retail market is worth an estimated US$ 6.5 trillion and has grown at a CAGR of just less than 5% over the last few years. Over the next five years, the market is expected to grow at about 6% per annum, driven primarily by an increase in population and growing food demand in the developing nations. Valued at US$ 2.2 trillion, Asia-Pacific is the largest market for food retail. Increasing incomes, growing level of education, nuclear families, increasing urbanisation and changing food habits are the key factors driving the market growth in this region. Europe is the second-largest market for food retail, followed by North America. Health and nutritional concern among consumers are the major factors fuelling growth of the food retail market in Europe and America. Pushed by the Chinese and Indian demand for food, the Asia-Pacific region is expected to remain the fastest growing market over the next decade. The other BRIC countries, Brazil and Russia, are also expected to witness high growth rates and move up the ranks of the largest food retailing nations. China has already overtaken the U.S. as the world’s largest food retail market and the forecast for the next five years states that all BRIC nations will be in the top five grocery markets. The projected food retail market for BRIC countries is shown in table 1.

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3.1 FOOD & GROCERY RETAIL-INDUSTRY TRENDS AND INSIGHTS

Table 1: Projected Food Retail Market for BRIC Countries - 2015 (US$ Bn.) Country Projected Food Retail Market China 1,300 Russia

370

India

320

Brazil

170

Source: Global Agricultural Information Network (GAIN), Published data

Global Retail Formats & Key Retailers The global food retail industry covers a variety of store formats to sell to consumers. On a broad level, food retail can be characterised into the formats as exhibited in table 2. Supermarkets and hypermarkets globally account for the highest distribution share with more than 50% of the food being sold worldwide through these formats (graph 1). However, the future demands the growth of smaller stores closer to the consumers and new formats like discounters & warehouse clubs. Large global retailers are seen moving that way. Besides these traditional channels, online retailers are also growing at a fast rate. Also there are mix formats evolving, based on new evolving customer needs.

Table 2: Key Food Retail Formats SKUs Format Description/ Format Store Size (sqft) Offered Value Proposition Hypermarket 100,000- 250,000 80,000- 125,000 One-stop shop, offering a wide selection of products and services, generally located on the city periphery Warehouse 100,000- 250,000 5,000- 15,000 "Only for members" store Club selling products in bulk packs at wholesale rates Supermarket 20,000- 50,000 20,000- 50,000 In-city store selling predominantly food & household products Discount 5,000- 20,000 1,000- 3,000 Store selling limited items Store at 10-30% lower prices in a 'no frills' ambience. High on Private Labels Specialty 1,000- 10,000 2,000- 4,000 Offers limited width and Store high depth of products with emphasis on quality Convenience 1,000- 10,000 2,000- 5,000 A neighborhood store Store which stocks small quantities of everyday use items Source: Wazir Analysis based on published data

Graph 1: Share of Global Retail Formats

Format Trends Convenience regaining importance: After years of building bigger and bigger stores to stock more products, many of the leading retailers are realising that the future triumph might come from going smaller and closer to the customer. Supermarkets and hypermarkets are still important, but consumers are increasingly relying on smaller formats such as traditional stores and kiosks, which fulfill their needs for convenience and speed.  Walmart, for example, is betting big on the small format, with hundreds of stores in the pipeline. While Walmart’s supercenter sales lagged, the retail giant tasted success with its two new, fast-growing chains of smaller formats, Neighborhood Market focused on groceries and Walmart Express selling daily essentials. In France, A2pas the convenience store, is the growth driver for Groupe Auchan. Since the opening of the first store in 2011, the group has expanded every year, predominantly through the franchising route, converting existing stores into A2pas stores. The store size varies between 2,000 and 5,000 sq.ft. and the assortment includes fresh products, fruit and vegetables, ready-made meals, organic and frozen products, snacking items, etc.

Supermarkets

15% 32% 8%

Hypermarkets Independent and Specialty Stores Convenience Stores

9%

Discount Stores 17%

19%

Source: Euromonitor International

Others*

*includes dept. stores, cash & carry etc.

Seeking better value: Deep discounters are increasingly spreading their footprint and even the “premium consumer” is increasingly becoming value-driven. Deep discounters are hence directly competing with traditional supermarkets and driving them to improve efficiencies and decrease prices to hold on to their market shares. Private Labels of deep discounters are growing at a fast rate and national brand manufacturers are seeking greater co-operation with discounters for Private Label manufacturing. The onslaught of deep discounters and the proliferation of their Private Labels is expected to continue as these formats seek newer markets.

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Table 3: Top 10 Retailers - 2014 Country of Origin

Revenue (US$ Bn.)

Store Count

Wal-Mart

U.S.A

485

11,460

Costco

U.S.A

112

670

Kroger

U.S.A

108

2,625

Germany

99

9,800

U.K.

96

France

Retailer

Schwarz Group-LIDL Tesco Carrefour (Data for 2013) ALDI

Revenue CAGR PAT (US$ (Last Mn.) 5 yrs)

Formats

ROA

YOY Growth 1.8%

Hypermarket, Supermarket, Convenience Store, Warehouse Club

3.25%

16,363

8.25%

Warehouse Clubs

7.69%

2,058

12.00%

7.1%

Department Store, Supermarket, Discount Store, Convenience Store, Specialty Store

5.37%

1,728

6.63%

10.3%

Discount Store, Convenience Store

6.50%

-

-

-

6,780

Convenience Store, Hypermarket, Supermarket

2.87%

1,059

6.00%

0.2%

83

10,100

Cash & Carry, Convenience Store, Discount Store, Hypermarket, Supermarket

-4.00%

1,364

3.00%

-2.4%

Germany

73

9,600

Discount Store, Convenience Store

5.50%

-

-

-

Target

U.S.A

73

1,900

Discount Store, Hypermarket, Supermarkets, Specialty Store, Convenience Store

2.89%

1,971

0.07%

0.2%

Metro

Germany

70

2,300

Cash & Carry, Hypermarket, Specialty Store

-1.70%

139

2.59%

-

France

69

3,050

Hypermarket, Supermarket, Specialty Store, Convenience Store

-

787

2.00%

11.3%

Auchan

Source: Company Websites

Online Grocery shopping finally picking up: With Amazon launching AmazonFresh, disrupting existing grocery models, the existing players will have to ramp up their “click” sales and leverage their network for delivery. According to a recent Nielsen Global E-commerce and the New Retail Survey, onequarter of global respondents are already buying groceries online for home delivery and more than half (55%) are willing to use it in the future. Increasingly, retailers are innovating e-commerce models that make it even easier for tech-savvy, time-constrained consumers to get the items they want. Two such successful models are: i. Click and Collect: Though not the first to start this, early last year Walmart debuted its Walmart Pick up Grocery service for registered customers. The concept allows customers to place their orders online any time from two hours to three weeks in advance and pick it up from a Walmart store, Neighbourhood Market or select FedEx Office location, free of any delivery charge. Assortment includes about 10,000 items including dairy, meat and produce as well as other frequent use items.

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Walmart’s Pick up Model Site to store

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3.1 FOOD & GROCERY RETAIL-INDUSTRY TRENDS AND INSIGHTS

Tesco also started its drive through supermarkets as an extension to select existing stores. Customers order online, choose a collection time and later pick up their order from a designated area outside the store. ii. Online Subscription Service: Consumers can create their order list online and select the frequency of replenishment. Orders will be delivered without additional charges at the specified frequency. Almost all online and click & mortar retailers have now got a subscription service in place. This online-offline play will push the market in a new direction and the most successful retailers will be at the cross-section of the physical and cyber worlds, leveraging technology to satisfy shoppers, through anytime anywhere commerce. Smartphones - The big game changer: In 2011, Tesco (Homeplus) introduced the first virtual supermarket in a South Korean subway system and the model has spread to many other markets since. “Virtual stores”, are basically a virtual display of products on walls of metro stations and bus stops. Commuters scan the QR codes of the products on display with their smartphones, and place their orders as they wait for their trains or buses. In many cases, deliveries are made before the customer reaches home or the destination of choice. Smartphones are set to deeply change grocery shopping. Apps have been developed to pull traffic inside the stores and to drive brand engagement and loyalty. Further, the smartphone is likely to influence consumers by providing actionable information when they’re standing in the aisles, ready to make the purchase decision. Supermarkets are already using the smartphones to: >> Provide nutritional information about food items by scanning the QR code >> Provide deals and discount information for products in the aisles >> Allow shoppers to scan product barcodes, build a shopping list and reorder products

Snapshot of the Indian Food & Grocery Retail Market Food & grocery forms the backbone of the Indian retail sector. With an estimated market size of US$ 320 Bn. (Rs. 20,000 Bn.), the category accounts for about 57% of the total retail market. There are an estimated 8-9 Mn. food & grocery stores (including local kirana shops, hawkers etc.) in India and the sector supports millions of other SMEs and MSMEs who cater to the demand.

Illustration 1: Koreans ‘virtually shopping’ at a subway station

Source: Lildoremi.org

Food & grocery forms the backbone of the Indian retail sector. With an estimated market size of US$ 320 billion. (Rs. 20,000 billion) the category accounts for about 57% of the total retail market. There are an estimated 8-9 million food & grocery stores (including local kirana shops, hawkers etc.) in India. Illustration 2: Growth of the Indian Retail Market and Share by Categories in Brick & Mortar Retail $5 billion 1%

$500 billion 91% Organised Retail Online Retail

$320 billion 15%

$130 billion 6%

$45 billion 8%

$1,650 billion 79%

Food & Grocery

Apparel

57% Mobile and Telecom

8% Food Services

6% 6% Jewellery Consumer Electronics

Unorganised Retail

2015

Indian Retail $550 billion Market Size Organised 8% Retail Share

4%

2025(P)

$2,100 billion

Pharmacy

3% Others

3%

13%

15%

Source: Wazir Analysis based on published data

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As new categories come up and spends on aspirational categories increase, food & grocery’s share of the consumer wallet is going down in percentage terms, though actual spend continues to increase. The food & grocery category will continue to grow at about 13-14% per annum over the next decade, though the decadal drop in terms of the share of consumer wallet and hence the retail market share would be about 2-2.5%. Thus, for foreseeable future, food & grocery retail is expected to dominate the market with more than 50% share of the overall retail market. By 2025, the food & grocery retail market is expected to grow over 3.5 folds and be worth US$ 1,150 Bn. (Rs. 71,000 Bn.) A large part of this growth will be driven by inflationary price increase, and the balance by demand growth led by increasing population, increasing incomes and thereby higher spend on foods and lastly urbanisation, which is changing food habits. Concurrently, factors like increasing awareness and health consciousness, changing lifestyles and time poverty, increasing drift towards convenience and improving availability of convenience foods are increasing the share of processed and packaged foods (including ready to eat / ready to cook traditional and Western food options, snacking etc.) in the consumer’s food basket. The penetration of modern organised retail in food is currently one of the lowest at 2-3%. However, this is also expected to change dramatically over the next decade as organised retailers penetrate the markets deeper. By 2025, organised retail is expected to capture at least 8-9% of the food & grocery market and be worth US$ 90-100 Bn. (Rs. 5,600-6,200 Bn.), growing at a CAGR of 25-30% from the current levels. Online grocery stores too are also picking steam and “food & grocery” seems to be the next big opportunity in the e-tailing space. As on date there are more than sixty online food & grocery stores and more are coming up each week. Going by the way the global e-grocers are growing and the growth of e-commerce in the Indian market, Wazir believes that online would capture a small but significant market share. Thus with the rapid growth of organised and online players there is going to be significant action in the market in the next decade. Local kirana stores and street hawkers will however continue to dominate the food & grocery market with a 90% plus share, even in 2025. The Indian market thus will be unique in its own way and will be a medley of extremes. Wazir believes that the unorganised, organised and online players will co-exist in the

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Illustration 3: Share of Organised Retail in Key Categories Footwear

Apparel

Consumer Electronics

Home & Interiors

Mobile and Telecom

40%

35%

20%

18%

Food Services

Entertainment and Leisure

Jewellery

Pharmacy

16% Food & Grocery

14%

13%

10%

6%

2%

Source: Wazir Analysis based on published data

By 2025, organised retail is expected to capture at least 8-9% of the food & grocery market and be worth US$ 90-100 Bn. (Rs. 5,600-6,200 Bn.), growing at a CAGR of 25-30% from the current levels.

Indian retail ecosystem and will expand the market for each other, as all have unique strengths and the sector is large enough to accommodate all participants. Wazir believes that unique partnership models will emerge as the retail market matures and this partnership will further push the sector growth. Early signs of this are already visible as e-grocers aggregate orders and pass them on to brick and mortar grocery stores nearest to the consumer, for local delivery. To a large extent this co-existence will be driven by the consumer who will not shun one channel for the other and will seamlessly switch between channels. The consumer approach to channel selection will thus be “inclusive” and not “exclusive”. The point of view that as India becomes richer, its consumers would shirk roadside vendors, kiranas and other mom & pop stores to move to glitzy, air-conditioned supermarkets & hypermarkets has already been proven wrong. Local kirana stores continue to grow and dominate the market, while modern formats increase their footprint. The consumer shops at unorganised as well as organised stores based on his needs, convenience and perceived value proposition.

3.1 FOOD & GROCERY RETAIL-INDUSTRY TRENDS AND INSIGHTS

Wazir believes that the traditional unorganised kirana stores will continue to grow due to their inherent strengths and hyper convenience. There may be temporary reshuffling of market shares, the timing for which will vary from one micro market to another, but overall the absolute revenues for local stores will continue to grow. There may however be fewer new kirana stores as the organised and online retailers may capture the new demand that is generated. Detailed below are some of the unique strengths of local kirana shops that will continue to give it the push for growth: i. Consumer preference for traditional stores: A large number of consumers continue to prefer unorganised retailers over organised ones for the following reasons: >> Convenience in terms of locational proximity and quick service >> Credit facility provided >> Longer operating hours >> Goodwill and relationship with the retail shop owner >> Personalisation in service Traditional retailers are also perceived to be cheaper, although this may not be true. Modern organised stores comparatively offer greater variety but it is not as big a competitive edge as a cluster of stores, together, which can offer almost the same range, especially in packaged food products. Further traditional retailers do keep most of the high selling products, so except for some “long tail” products the perceived advantage is not very high. For consumers in India, foods and other regular purchase items bought two to three times a week are usually purchased from the local kirana stores. Supermarkets and other organised formats attract the affluent consumers, especially for bulk or less regular purchases such as packaged foods, few FMCG goods and staples, such as rice and pulses. Even affluent consumers otherwise prefer traditional stores, as they are closer to home and many even deliver the purchased items with no additional charge and with very little threshold bill value. ii. Local orientation of small retailers: The biggest strength and advantage that a small neighborhood retailer has over its larger competitors is its local orientation. Food preferences are specifically very localised and differ by socio-economic strata, ethnicity

Food preferences are specifically very localised and differ by socio-economic strata, ethnicity and age profile of the residents of the given catchment and kirana stores offer a hyper localised assortment and service.

and age profile of the residents of the given catchment and kirana stores offer a hyper localised assortment and service. iii. Lower operating costs: In unorganised retail, being owner managed, the control over everything is much better resulting in better and more efficient operations, more precise inventory planning, lower wastages and pilferages, etc. Further, most unorganised stores are operated within premises owned by the shop owner and have higher stocking density than modern stores, which are very particular about the visual merchandising aspects. Organised players, on the other hand, are subject to high operating costs in the form of rentals and other store expenses like power, manpower, IT, etc. Thus operating costs are low for unorganised stores and the efficiencies are high, giving them an edge. This difference could be critical in food & grocery retail, which traditionally is a low margin business.

INDIA FOOD REPORT 2016 | 143 |

iv. Penetration and market segments catered to: Most organised formats still cater to the affluent and upper middle class families. However, there is a large population of lower income groups, daily wage earners and urban poor and their requirements are significantly different from others. Local kirana stores best understand their requirements and are suited to cater to their demands. Further, organised formats also lack penetration into smaller markets and rural areas and mom-and-pop stores continue to be the only point of sale in rural areas of the country, not just for food & grocery but for most of the other categories as well. v. Ability to offer and manage credit: The role of credit is still very high in the Indian market. There are large sections of people who only buy daily consumables on credit, especially in the smaller towns, rural markets and even in markets catering to the lower income groups in large towns. Local kirana stores are a part of the social fabric of these areas and are able to give and manage credit well. These markets thus are not easily penetrable for organised chains. Summarising, the traditional kirana stores have unique strengths and will continue to play a leading role in the Indian food & grocery retail sector. The modern food & grocery retailers on the other hand, have not had a smooth run and most are still experimenting to find the right format. As per most multi-format players, operating a big box hypermarket format is easier, but there are limitations of penetration and the format hence serves a limited customer base. Convenience stores, preferred by a much larger number of customers, are more difficult to manage as they need hyper localisation as well as face various other operational and control issues. The spiraling real estate cost is also a critical barrier in the Indian market, especially for low margin categories like food & grocery. Some of the leading food & grocery retailers thus had to close a large number of stores and rejig their formats multiple times. Organised retailers also find it hard to operate due to a number of other issues like the fragmented nature of the supply chain, transportation and logistics problems, infrastructure constraints and regulatory framework under which they have to operate. This has restricted them to make substantial investments in the supply chain. Further, the quantum of investment and effort needed vis-a-vis the incremental gain in margins is not very lucrative, inhibiting investments.

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Key Categories within Food & Grocery Local kirana stores are a part of the social fabric of the areas they operate in and are able to give & manage credit well. These markets thus are not easily penetrable for organised chains.

Cereals, pulses and staples form the biggest part of the consumption basket of Indians. However, as the aggregate calorie intake of Indians is expected to increase from 2,140 Kcal to 2,568 Kcal between 2010 and 2025, there is expected to be a drift away from grains, pulses and staples to dairy, fruits and vegetables, edible oils and other processed foods. Even more growth is set to come from impulse products, like confectionery, ice cream, and sweet and savoury snacks. The break-up of the Indian Food & Grocery retail market is shown in graph 2. Each of these categories has been further broken down into sub-categories. Their key insights are provided from table 4 till table 8. The fruits and vegetables market is estimated at Rs. 5,000 Bn. It is expected to grow at a CAGR of 16% to reach Rs. 10,500 Bn. by the year 2020. The retail market for non-veg products is estimated to be Rs. 1,800 Bn. and it is expected to grow at a CAGR of 13% to reach Rs. 3,370 Bn. by 2020.

Graph 2: Break-up of Indian Food & Grocery Retail Market 3% 9%

1% Cereals, Pulses & Staples

3%

Fruits & Veggies 38%

Dairy Products Non-veg

22%

Snacks & Confectionery Beverages 25%

Source: Wazir Analysis based on published data

Health Foods

3.1 FOOD & GROCERY RETAIL-INDUSTRY TRENDS AND INSIGHTS

Cereals, Pulses & Staples Rice

Table 4: Cereals, Pulses and Staples Market Market Size 2015 CAGR Market Size 2020 Branded (in Rs Bn.) (Next 5 yrs) (in Rs Bn.) Share 2,100 7% 2,940 6%

Leading Branded Companies LT Foods, KRBL, Kohinoor Foods

Wheat

1,200

8%

1,760

5%

ITC, Shaktibhog, HUL

Edible Oils

1,160

12%

2,050

30%

Cargill, Agrotech, Adani Wilmar, Marico

Sugar

1,150

15%

2,310

1%

Mawana Sugars, Simbhaoli Sugars

Pulses

670

8%

980

2%

-

Spices

590

10%

950

15%

MDH, Everest, DS Group

Others Cereals

630

5%

880

7%

-

7,500

10%

11,870

10%

Total

Source: Wazir Analysis based on published data

Dairy Products Milk

Table 5: Dairy Products Market Market Size 2015 CAGR Market Size 2020 Branded (in Rs Bn.) (Next 5 yrs) (in Rs Bn.) Share 2,400 15% 4,830 35%

Leading Branded Companies

Ghee

550

10%

890

12%

Amul, Paras, Nestle, Mother Dairy, Verka, Heritage, Nandini Amul, Parag, Nestle

Yoghurt & Buttermilk

450

20%

1,120

10%

Amul, Nestle, Mother Dairy, Britannia, Parag

Butter

280

15%

560

15%

Amul, Nestle

Dairy Whitener & Milk creamer Ice Cream

250

20%

620

30%

Amul, Nestle, Parag

70

20%

170

60%

Cheese

30

20%

80

60%

Amul, Kwality Walls, Vadilal, Mother Dairy, Candia (Creambell) Amul, Britannia, Parag

270

20%

670

20%

-

4,300

16%

8,940

25%

Other (Paneer, Khoya) Total

Source: Wazir Analysis based on published data

Snacks & Confectionery Biscuits

Table 6: Snacks and Confectionery Market Market Size 2015 CAGR Market Size 2020 Branded (in Rs Bn.) (Next 5 yrs) (in Rs Bn.) Share 220 15% 440 60%

Leading Branded Companies Parle, Britannia, ITC, Surya Food & Agro

Salty Snacks

180

18%

410

60%

Haldirams, PepsiCo, ITC, Bikaji

Chocolate & Confectionery Convenience Foods

170

20%

420

70%

Mondelez, Nestle, Perfetti, ITC, Parle

70

20%

170

100%

Nestle, Nissin, ITC, MTR, HUL

Ketchups, Jams & Pickles Frozen Foods & Snacks

35

20%

90

50%

Nestle, HUL, Heinz, Nilon McCain, Mother Dairy

Total

25

25%

80

100%

700

18%

1,610

-

Source: Wazir Analysis based on published data

INDIA FOOD REPORT 2016 | 145 |

Beverages Tea

Table 7: Beverages Market Market Size 2015 CAGR Market Size 2020 Branded (in Rs Bn.) (Next 5 yrs) (in Rs Bn.) Share 180 12% 320 55%

Leading Branded Companies HUL, Tata, Wagh Bakri

Carbonated Drinks

150

12%

260

80%

Coca Cola, PepsiCo, Parle

Packaged Drinking Water Coffee

125

20%

310

50%

Parle, Coca Cola, PepsiCo, Parle

70

15%

140

60%

Nestle, HUL

Fruit Based Drinks

55

20%

140

80%

Dabur, PepsiCo, Parle

Health & Energy Drink

15

25%

50

100%

5

20%

10

100%

Red Bull, PepsiCo, Dabur, Heinz, Hector Beverages Rasna, Mondelez

600

15%

1,230

-

Powdered Drinks Total

Source: Wazir Analysis based on published data

Health Foods Malted Food Drinks

Table 8: Health Foods Market Market Size 2015 (in Rs Bn.) CAGR (Next 5 yrs) Market Size 2020 (in Rs Bn.) Leading Branded Companies 60 20% 150 GSK, Mondelez

Baby Food

20

20%

50

Breakfast Cereals

10

25%

30

Nestle Marico, PepsiCo, Kellogg's

Others

10

20%

20

-

Total

100

21%

250

Source: Wazir Analysis based on published data

E-Grocers: The New Wave in E-tailing Online food & grocery sales is a more recent phenomenon, both in the international markets as well as the Indian market. While internationally, many players like Webvan tried earlier but were not able to make it, the second wave of players has been much more successful. In India the trend is just starting to catch on. In fact, online grocery is being seen as the next big thing, considering the fact that spending on grocery and daily essentials is the largest and most consistent share of the wallet for any household. Increasing convenience and standardisation of grocery items has led to the mushrooming of numerous online grocery stores. BigBasket currently stands as the leader in the market while several others have entered the market in the past few years like LocalBanya, ZopNow, EkStop, AaramShop, MyGrahak, Peppertap, VeggiBazaar, Fresh N Daily, Farm2Kitchen, etc. Many of these are hyperlocals catering to single cities, sometimes even to only certain neighborhoods of a city. Online grocers are trying to woo consumers by offering services like free deliveries, quick deliveries within 1-2 hours, discount vouchers, etc. However unlike other categories, this could be a challenging market for the players due to the following reasons:

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Online grocery is being seen as the next big thing. Increasing convenience and standardisation of grocery items has led to the mushrooming of numerous online grocery stores.

Lower gross margins in the category leading to inability of the e-tailers to go the discount route, as taken by e-tailers in other categories. High cost of delivery as the weight to price ratio is skewed against the category. Much higher competition form brick and mortar stores than in any other categories. Customers have umpteen food & grocery stores in their neighborhood. Also, local stores offer free deliveries and discounts without high threshold bill values. The supply chain created for one city may not be replicable for the other and scale up would need development of unique supply chains and delivery models in each city. Thus while online grocery retailing is here to stay, the ride will be not as smooth as that for other categories and the players will have to innovate models and deliver value which the unorganised and organised grocers can’t match. Some of the recent PE funding deals in the online grocery retail are listed in table 9.

3.1 FOOD & GROCERY RETAIL-INDUSTRY TRENDS AND INSIGHTS

Table 9: Recent PE Funding in the Online Grocery Retail Space Funding Company Month & Year of Investor Name Amount Name Funding (US$ Mn.) ZopNow

PepperTap

Dragoneer Investment Group, Accel Partners, Qualcomm Ventures and Times Internet Tiger Global Management and Sequoia Capital SAIF Partners and Sequoia Capital

LocalBanya

Shrem Strategies

FreshWorld

Indian Angel Network and Infosys co-founder Kris Gopalakrishnan Unilazer Ventures

Grofers

EkStop

10

April, 2015

35

April, 2015

10

April, 2015

~15-20

March, 2015

 -

February, 2015

 -

September, 2014

33

September, 2014

BigBasket

Helion Venture Partners and Zodius Capital Source: Published Data

From a consumer’s point of view: >> Food & Grocery, which is the biggest category of consumer spend can be retailed best by a convenience based format. As per a recent Wazir Survey, two thirds of Indians shop for food & grocery and daily need products within one kilometer of where they live. >> Indian consumers are highly price sensitive, thus the format offering cost advantage will be preferred by consumers. Deep Discount format best address the above two criterion. Thus from the consumer’s acceptability point of view Deep Discount would be the best model. From an implementation point of view: >> Deep Discount stores, being smaller in size, would be easiest and fastest in roll out thus giving a quick pan India footprint and scale. >> Due to limited range, have a simpler and thus easier to develop supply chain. From a competition point of view: >> Would lead competition, due to their proposition of “extreme value at convenience”.

Deep Discount: An Opportunity Less Explored in the Indian Market

Proposed Concept of a Deep Discount Store for India Value Proposition Cheapest Prices at Convenient Locations Target Consumers Primarily SEC B & C. However, even SEC A consumers may find the offers equally compelling and will accept the model over a period of time Typical Store Size 1,500-2,000 sq.ft. Number of SKUs

1,000-1,200

Category Focus

Majorly Food & Grocery and other Low Cube/Volume items

Location

In/close to residential areas

Name

Table 10: Global Deep Discount Stores Country of No. of Reach Origin Stores Germany 9,600 18 countries

ALDI

Turnover (US$ Bn.) 73 (2014)

Schwarz Group -LIDL

Germany

9,800

28 countries

99 (2014)

Target

USA

1,900

-

73 (2014)

Dollar General

USA

11,500

40 states

16 (2013)

Dollar Tree

USA

4,900

48 states

8 (2013)

BIM

Turkey

4,800

3 countries

5.4 (2014)

Source: Published Data Supply Chain Efficiency

In spite of the presence of a varied number of formats in the food & grocery segment, Wazir believes that the deep discount format is almost missing in the Indian retail scenario. Deep Discount stores are retail outlets selling small volume merchandise across categories – both Private Labels & National Brands. Located close to the customer, they offer 10-30% lower prices than the market. Discount stores are minimal in terms of their store environment and stock a very focused product range, largely skewed towards food & grocery and things of daily use. They focus on Private Labels and in most cases offer just 1-2 brands apart from the Private Label offer. However, sales per SKU of deep discounters can be 10-20 times higher, which leads to better economies of scale and adds to their ability to offer discounts. Their thrust on keeping very focused and precise range results in: Easier and less complex supply chain for 1,0003,000 SKUs for a deep discounter as compared to manifold SKUs of a supermarket or a hypermarket Much more efficient supply chain. Beyond a certain assortment, size inefficiencies start to creep in the supply chain because of high number of SKUs. While Subhiksha, in a way, tried treading on that path, various operational and financial issues hammered it while it tried to achieve the scale required to be a deep discounter. More recently KB Fair Price is trying to create a convenience discount format, but is still a soft discounter and is yet to achieve the scale required. Wazir believes that deep discount stores, with some adaptations to suit the Indian market, can turn out to be the game changer in the Indian food & grocery retail segment, due to the following reasons.

Illustration 4: Supply Chain Efficiency vs Scale/Assortment Size

Economies of Scale

Inefficiencies of Assortment Size

Scale / Assortment Size

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Graph 3: Inflation in India (% growth)

Challenges in Indian Food Value Chain India is the world’s leading producer of fresh fruits and vegetables, pulses, rice and wheat. Paradoxically, malnutrition is a common phenomenon in India. According to the Global Hunger Index of 2011, 21% of the population in India is malnourished. Following are some alarming estimates that would make us fret: An estimated 30-35% of all food produced in India is wasted every year due to poor infrastructure to store and transport the same. According to UN’s Food and Agriculture Organization (FAO), about 40% of India’s fresh fruit and vegetables – worth an annual US$ 8.3 Bn. or so perishes before reaching consumers. Every year about 21 Mn. Metric Tonnes of grains, largely wheat, rots in the custody of Food Corporation of India, due to improper storage facilities. Poor supply chain is one of the most lethal setbacks of the agriculture sector, accentuated further by the lack of cold chains infrastructure. This inefficiency in supply chain is also causing price rise and quality related issues. Food inflation in India has thus been higher than the overall inflation levels as shown in graph 3. Key structural, policy and infrastructural issues that doom the food value chain in India and make it inefficient are as follows: Fragmented Agriculture: 80% of Indian farmers are small and marginalised having land holdings of less than 2 hectares. The small land holders though more efficient in cultivation, have high operational costs in accessing input and output markets and low volume of production, thus making them inefficient. Numerous Intermediaries: Before food gets from a farmer to a consumer, it typically passes through a number of intermediaries: Traders purchase and transport the produce and Commission Agents arrange transactions between farmers and traders. There are other resellers involved before the product finally reaches the consumer. The high number of intermediaries increases handling points and thus wastages. Commission Agents have little incentive to prevent wastage as they are remunerated based on the total deal value, without ever taking ownership of the produce. They also have no incentive to get the right price for the farmer since they generally receive only a 2-6% commission on sales and it is not feasible for them to invest time to find traders offering marginally higher prices. They can earn more

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17.7% 13.4%

12.7% 9.5% 8.7%

9.6%

8.5%

9.1%

7.3%

7.5% 2.4%

2008

2009

6.3%

Overall Inflation Food Inflation 2010

2011

2012

2013

Source: Department of Industrial Policy & Promotion (DIPP)

80% of Indian farmers are small and marginalised having land holdings of less than two hectares.

income by completing more deals in the same time slot. Further, traders too also have few incentives to minimise waste. It is easier for them to deal with fewer goods at a higher price than more goods at depressed prices. As such, waste often occurs when these middlemen connive to inflate prices and lower transaction quantities. Assymetry of Information: Trade intermediaries block and distort the information to their advantage. Though the government has been doing a lot of efforts in this area, still small farmers most often don’t know the price for their produce before they get to the wholesale market. Once at the market, the middlemen can dictate the price as it’s not economical for the farmer to take the goods back in order to wait for a better price. Intermediaries then increase the prices at every level and capture a large share of margins, leaving the farmers with only one-fifth

3.1 FOOD & GROCERY RETAIL-INDUSTRY TRENDS AND INSIGHTS

to one-third of the final price as compared to 50-65% in Western countries. Consumer prices are thus increasing while farmers continue to commit suicides driven by the inability to earn their livelihoods. High Price Volatility: The structural challenges and information asymmetry in the market lead to high price volatility and unpredictable fluctuations, which compounds the waste problem further. When future prices are difficult to project and information is not easily available, farmers cannot plan to grow the most economically viable and efficient crops, as demanded by the market. This results in two key issues; first, farmers in general choose to grow crops that were profitable over the past few seasons. This herding behavior leads to over production and prices plummeting, making it uneconomical to harvest. Second, since farmers cannot estimate their income in the coming year, they are unwilling to risk any investments in better technologies and harvesting systems that could improve their efficiency. Companies like Reuters Market Light and Fasal Intuit are working towards countering the problem of information asymmetry by making agricultural information available to farmers at minimal costs. Since its inception in 2009, Fasal claims to have helped close to a million people and created additional value for farmers of over Rs. 135 crore. However, this is just a drop in the ocean. Archaic Laws: The APMC act was introduced as a means to provide a market discovery platform to the small farmers so that they could get the best prices for their produce. Under the present Act, neither the processing industry nor the retail chains can buy directly from farmers and the farmer is also restricted from entering into direct contract with any manufacturer or retailer. Farmers have to sell their produce to middlemen approved by government in authorised mandis. This results in a multi-tiered supply chain with high inefficiencies. Contrary to the purpose for which the system was built, the middlemen have started taking advantage of the process by creating cartels, price fixing and hoarding produce. The high margins / commissions charged by the middlemen inflate the prices, resulting in farmer not getting the right price for his produce and consumer paying more than the justified price. So the purpose of bringing in efficiency and providing benefit to both, farmers and consumers has been defeated.

In India, less than 2% of the road length is covered by National Highways which manage 40% of the cargo. The average distance travelled by an Indian truck is about 300 km/day as against the international standards of 700-800 km/ day.

The APMC Act, which regulates Mandis, was amended in many states, however has not been able to completely sort the problems. >> Companies still cannot buy but only can lease fertile land from the farmer. They can buy waste land or lease it. >> Retailers find it difficult to work directly with the farmers and change the Mandi mechanism. Retailers hence source from mandis instead of developing their own supply chains. Further, the Essential Commodities Act empowers the Govt. to control production, distribution & pricing, etc. to secure equitable distribution and fair pricing. This restricts interstate movement of goods. These regulations may have lost their utility and are hampering the growth & modernisation of organised retail. Poor Rail & Road Infrastructure: India has the second-longest road network in the world, but less than 2% of the road length is covered by National Highways which form the backbone of cargo transportation. This 2% of the highway roads manage 40% of the cargo. Further, the average distance travelled by an Indian truck is about 300 km/day as against the international standards of 700-800 km/day. Also, most of the roads in India can support only 16.2 tonnes as against an International norm of 36 tonnes. To add to this already slow and outdated structure, large number of cities do not allow trucks to enter the city during day time, leading to further delays in transit. Lastly, even to reach the highways is a painstaking task as feeder roads which link farms to highways are in poor conditions and local

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transportation services are not easily available. Thus, an estimated one fifth to one fourth of perishable produce rots in transit. Railway cargo network is overburdened with other products and is even not very suitable for transportation of food items. Lack of Proper Storage Facilities: For food products, two kinds of storage/ warehousing spaces are required; basic sheltered spaces for grains & pulses and temperature controlled spaces (cold storages) for fruits & vegetables. Both are critically low as compared to the requirement. Farm productivity has greatly increased over the last few decades but the sheltered spaces / granaries owned by the govt have not kept pace leading to a high mismatch between output of grains and the available storage space. This has led to storage in open spaces, leading to rotting and spoilage. Further, sprinkling salt on the wounds, about one fifth of the stored grains annually are eaten up by rodents, birds and other animals. Even when it comes to cold storage facilities, demand outstrips supply by 45-50%, thus leading to either the produce getting wasted or the farmer selling it at sub-optimal prices as he knows he can’t store it for long. Further, a majority of this cold storage capacity is occupied by potatoes which are used by the chips making industry, leaving miniscule capacity for anything else. Development of integrated cold chains and supply chain management can save an estimated Rs. 80,000 crores for the country annually besides gathering export income of Rs. 25,000 crore.

An estimated one fifth to one fourth of perishable produce rots in transit.

Concluding Remarks

Graph 4: Grain Storage Capacity in Different Countries (Mn. tonnes) 575

118

60 India

Russia

150 China

USA

Source: Published data

Graph 5: Cold Storage Capacity Requirement (Mn. tonnes) 31 Existing Capacity

30 Additional Capacity Required

Source: Ministry of Food Processing Industries (MOFPI)

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While few private sector companies like Adani Agri Logistics are setting up infrastructure for food storage, much more needs to be done on a war footing. Many private sector companies are also venturing into temperature controlled logistics solutions. These companies provide integrated cold chain logistics comprising postharvest transport, cold storage, processing, and supply through refri-trucks to the distribution center and retail store. However, there capacities are currently limited and need to be expanded quickly.

The Indian food & grocery retail market has a long way to go and has a very positive outlook, driven by an increasing demand and changing food habits. The fretfulness that kirana stores had about organised retailers wiping them out is already gone and all market participants see co-existence and growth as the way forward. However, the sector needs large-scale interventions and investments to make the supply chain more efficient and distortion free. These investments could be made both by the organised retailers as well as other third parties, provided the government creates an ecosystem conducive to investment and clears the hurdles for FDI in multiple brand retail. The beneficiaries of this investment will not just be the retailers and the consumers, but also the government which has the responsibility of food security and feeding a billion and a quarter mouths.

Rising Share of E-Grocery in India BY DR SANDEEP PURI, ABHIJEET GAURAV AND RAJAT AGARWAL, IMT GHAZIABAD

It caught up with books, electronics and apparels and finally anything that can be thought of began to be sold online. But even in the days of its initial hype, the idea of selling groceries online seemed far-fetched. Not anymore. Not only are groceries now being sold online but they are being competitively sold. There is a slew of players in this fledging market where e-grocers are wooing customers by their faster delivery, competitive pricing, high technology and fancy interface.

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3.2 RISING SHARE OF E-GROCERY IN INDIA

Kolkata ranked among the top three cities in India respectively with the maximum number of online purchases and highest preference for online shopping. India is the sixth-largest grocery market in the word. At $360 billion the groceries market in India constitutes a major part of the entire retail segment. The e-grocery market of India, which is forecasted to be worth $10 billion by the end of 2020, is currently the centrepiece of attraction of all the companies in this food and grocery business. Tech-savvy, young generation has made India the third-largest country in terms of internet users. Shopping style of Indian customers has changed so much that, in the next 10 years, around 30–40% of the total retail in top 75 cities of our country is expected to be made online.

Evolving Indian Consumers

Evolution of E-Grocery in India Groceries were expected to be probably the easiest and yet most difficult things to be sold online. Challenges faced by e-grocery were more complicated than those faced by other e-commerce companies because of the complexity in the supply chain and low margins on grocery products. Retail in India started with the barter system where people use to gather in weekly markets to exchange their goods and services. People used to visit these weekly markets to replenish the supplies. These weekly markets were also the centres of entertainment. With improvement in lifestyle and busy schedule, mom and pop stores came into existence. This retail format provided better services in terms of timeliness, accessibility and availability. Today customers have choice to buy from departmental stores, exclusive brand outlets, supermarkets, shopping malls and the most contemporary of all, the internet. The Indian retail market currently stands at $600 billion, and this figure is forecasted to shoot $1 trillion by the year 2020. Major drivers of this growth are an increase in earning capability, increasing population, rapid urbanisation and the overall shift in the attitude of customers. According to industry reports, e-tailing in India has the potential to reach USD 20-30 billion by 2020. The e-tailing sector is booming on the growing internet user base, which is projected to cross around 400 million users by 2020. E-tailing has created its own wedge in the exceedingly competitive and expanding retail market. The major contributor for the growth of e-tailing is the Indian urban population; Mumbai, Delhi and

Since the grocery shopping list usually remains the same for a particular consumer, technology can help consumers in replicating this repeatable process and making his or her purchase simple and easy.

Indian consumers seemed to be evolving with the market in terms of habits, lifestyles, tastes and preferences [https://ondeviceresearch.com/blog/ the-great-indian-consumer-market-a-close-up-viewfrom-an-insiders-perspective#sthash.arljVzm2.dpbs]. Indian consumers are demanding, value-conscious and evolving with the change in lifestyle and technology. Rising incomes, a younger population, more working women, an expanding retailing sector and steady urbanisation are combining to change the buying habits of Indian consumers. An increase in the disposable incomes and increased internet penetration has resulted in a substantial increase in the number of online transactions made by the average consumer. In November, 2014, officials of the new government predicted that the Indian economy has the potential to achieve eight per cent growth with economy-stimulating reforms such as the Goods and Services tax [http://indiatoday.intoday.in/story/ finance-minister-arun-jaitley-economic-growthgdp-winter-session-of-parliament/1/404413.html]. This, in a way, substantiated the changing consumer behaviour observed among Indian consumers; A greater purchasing power and the availability of a wide array of products and choices have empowered them to change the Indian market from a supplieroriented one to a customer-oriented one. A report by Internet and Mobile Association of India and IMRB International predicted that the number of mobile internet users in India would have reached 213 million by June 2015 [http://www.thehindu.com/sci-tech/ technology/gadgets/mobile-internet-users-toreach-213-million-by-june-2015/article6785327.ece]. Similarly, the number of mobile internet users in rural India is expected to have grown to 53 million by June 2015 while urban areas account for 160 million users.

INDIA FOOD REPORT 2016 | 153 |

MAJOR E-GROCERY PLAYERS IN INDIA DELHI/NCR Godrej-Nature’s Basket AaramShop LocalBanya Grofers Sahara Q Shop One Kirana Dilligrocery Grosseryhub MyGrahak MangoShoppers Get929 eSuvidhaOnline GoPeppers CityKirana Dunonu NeedsTheSupermarket Sevaaa Bigbasket Grocit Peppertap Veggi Bazar Fresh n Daily Farm2Kitchen Organic Garden Apna Store Grocerywale Satvakart Grocermax Peopleeasy Veggiekart Eazymarket shopration SRS Grocery Dunonu Bazaarkart Zopnow Westaple Sangamdirect MUMBAI Bigbasket Godrej-Nature’s Basket AaramShop Zopnow LocalBanya Grofers Sahara Q Shop Greencart RelianceFreshDirect Go4Fresh OnlineSabjiwala GreenKirana Eemli Grokart Omart.in Bazarsindia Daanapani Discountific shopveg BANGALORE Bigbasket Godrej-Nature’s Basket AaramShop Zopnow Sahara Q Shop Grofers Qusec-Online Supermarket Jiffstore LocalKiranaStore YouMart Towness Kiranawalla FreshOaks EZTrolley Sangamdirect Buyerzspot kiranasales irely homeneed locostop freshoaks theurbancart Peppertap PUNE Bigbasket Godrej-Nature’s Basket AaramShop Zopnow LocalBanya Punexpress Biggmart Ordermygrocery SupremeKirana ShopnRelax BaniyaBabu way2bazaar homebag Rabimart Peppertap HYDERABAD Bigbasket Godrej-Nature’s Basket AaramShop Zopnow LocalBanya Sahara Q Shop VijeThaGrocer HyderabadBasket Onemart KunnusGroceries EasyMandi vokab irely Peppertap CHENNAI Bigbasket AaramShop ChennaiBasket ChennaiOnlineGrocery MegaGrocer EasyPurchase Krocery iSuperMarket TheStore LocalFresh MaligaKadai RedCart GrocyShop ChennaiSupermarket Pachaa ChennaiHypermarket MyGroceryBag iBuyFresh KOLKATA AaramShop GroceryKolkata HomeGennie iBazaarOnline SaltnSoap MyLocalBazaar OnlineGroceryBazaar fabgrocery MYSORE Bigbasket crispyveg NAGPUR akfreshmart kiranashop18 paikart urbanpotli Refreshco.in KANPUR Supermarket24*7 PATNA Gotmybasket LUCKNOW Paikart Bazaronweb bagezy lucknow.gozopping.com saharaqshop AHEMDABAD Truemart Cushvie Kiranaman Up2home Grokart Myonsto TIRUVANDRUM kada.in COIMBATORE Groceryraja

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A survey conducted by A.T. Kearney on the reasons for people opting to buy grocery online reveals some interesting facts. The reasons as per the respondents are: 51% prefer it because of home delivery, 41% due to the availability of unique online products, 36% because of curiosity, 30% to save time, 17% because of price consciousness and 10% end up shopping online grocery because of the promotions.

Growth of E-Grocery The e-grocery industry has also seen the highest surge in terms of the number of players that are operating in the industry. Harish Manwani, chairman, HUL, said, “Our business philosophy is to remain strong and lead not only in the channels of today but also the ones that will become big tomorrow. We have created a global, dedicated team that is looking at e-commerce and seeing how across our key markets, including in India, we can bring the best practices in terms of how to manage it collectively rather than taking a marketby- market approach.” [http://www.dnaindia.com/ money/report-hindustan-unilever-ltd-jumps-on-ecommerce-bandwagon-2029758] Due to heavy expansion in the captive market, driven by an increase in the usage of internet and smartphones, the online format of food and grocery business is expected to grow by leaps and bounds. The major drivers for progression and shift in focus towards online business are:

3.2 RISING SHARE OF E-GROCERY IN INDIA

Brick and mortar based organised grocery retail outlets are not easy to scale up because of the exponential increase in rents and utility bills. To increase the catchment area of a store, the scaling up needs huge investments, which bring down the already low margins in this sector; simply put, revenues have not kept pace with the increase in rents. Centrally located distribution centres and increased variety on online grocery platforms as compared to the neighbourhood mom-andpop stores. Most of the grocery that is bought on a monthly basis remains the same for a substantial amount of time and hence the touch and feel factor reduces for these items. It is only with the fresh produce and perishable products that customers have to think twice before placing an order. As everyone buys groceries all around the year irrespective of the economic conditions, the potential customer base is very big when compared to any other e-tailing business. Grocery shopping in urban stores demanded precious weekend time, most of which was spent in standing in queues for hours. Traffic congestion and lack of parking space lead to a lot of inconvenience while shopping at the physical retail stores. Here, e-grocery offers the much-needed convenience and time-saving to the everyday job of shopping for grocery. E-grocery is expected to emerge as a better alternative for grocery purchase since it offers a much wider range of choices and the products are delivered at the doorstep at the preferred time of the consumer. Since the grocery shopping list is usually a routine and the list almost remains the same for a particular consumer, technology can help consumers in replicating this repeatable process and making his or her purchase simple and easy.

Challenges of E-Grocery The challenges faced by e-grocery are more complicated than those faced by other e-commerce companies because of the complexity in supply chain and low margins on grocery products. Beyond just getting orders online, it is a complex task to manage a huge variety of inventories, which has different storage requirements, are procured from different vendors, and have to be picked, packed and delivered according to the consumer’s order at the right place, right time and in right shape with the expected quality. Since most of these products are perishable in nature, it calls for cold storage

E-grocery is challenging but it also has the big advantage of getting a high percentage of repeat orders. Acquiring customers is therefore a vital aspect of the business.

and other facilities, which lead to an exponential increase in the overall cost of the supply chain and the risks associated with it, making it an extremely capital-intensive business. Customers avoid opting for online grocery stores as they are satisfied with the existing shopping experiences. “We go for leisure, shopping is just an excuse to go out” – this is the most frequent customer response that an e-tailing company gets to hear. Also, the thing about grocery is that most people think of what to buy after walking into the store. One of the biggest threats that online platforms of grocery business face is that they cannot offer the touch and feel experience to consumers, especially for the perishable products. In contrast to other online retailing business, food and grocery business is tough to scale up beyond a particular geography. The complexities involved here are location-specific – the buying behaviour of consumers change even between most closely located cities like Pune and Mumbai. Entering into a new geography is almost similar to starting a business afresh. E-grocery business is expected to be a citywise business as products cannot be couriered from one city to another but need to be delivered fresh. Moreover, since the weight-to-value ratio of grocery products is high when compared with other products, it isn’t financially feasible to

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courier grocery products. For e-grocery firms, expanding their business to a new city is akin to setting up a completely new operation as the supply chain needs to be entirely local – both for the sake of the nature of the business that has a fair segment of fresh produce and to comply with local laws that restrict the flow of agricultural produce across state borders. Warehouse, inventory and logistics have to completely operate on a local basis, making it very difficult to replicate. Unlike books and apparels, which has retail margins up to 40-60 per cent, most food and grocery products work on single digit margins of about 8-10 per cent. Many organisations have repeatedly tried to develop a successful model for food and grocery e-tailing but have failed due to: the nature of products and related issues like perishability, supply chain problems, storage and evolving consumer behaviour. [http://www.technopak.com/ files/E-tailing_in_India.pdf] Very few companies have managed to crack the economics of this lowmargin e-grocery business. In India, the consumption patterns and supply chain issues pertaining to food and grocery are more complex. There are different consumer preferences in different regions of the country. For instance, pickles consumed in various parts of India are very different. Likewise, south Indians prefer “Sona Masuri” rice while north Indians prefer “basmati” rice.

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The e-grocery business is expected to be a city-wise business as the products cannot be couriered from one city to another but need to be delivered fresh.

The other key issue is the security of online transactions. A majority of Indian consumers are very mindful about the security of financial information while transacting on websites and the confidentiality of personal information.

Models of E-grocery Amidst such challenges and opportunities, many e-grocery portals have started mushrooming in the different cities of India. A few of them work on the inventory-based logistic model whereas others work on a marketplace model. The e-grocery space has been slow to pick up in comparison to the other sectors in retail, and has been dominated by few established names like Bigbasket.com, ekstop.com, etc. These websites have conventionally relied on the inventory model wherein the online retailer maintains stock of the items they sell. But the landscape is fast changing and the market is fast moving towards the hyper-local sourcing model. Various players have come up in the past few years, which are relying on innovation in logistics to drive profits. Then there are pure logistics players that are directly shipping products from brands to customers. For example, Delhivery delivers Paperboat directly to customers in different cities. There are players like Aaramshop that does what Foodpanda does in food, i.e they don’t deliver but facilitate online transactions for local vendors. Aaramshop.com initiated the marketplace model in India where they act as a facilitator between the customer and retailer. Started by in 2011, this portal has a presence across India. It has also started operations in Pakistan and is planning to foray into South-East Asia and East Africa. Looking to reprise Aaramshops’ success, many app-based start-ups have come up within a year, which are focussing on a seamless logistics service and enhancing customer experience. Apps like Grofers, Peppertap, Grocit, promise to deliver goods within a few hours. Grofers and Peppertap use map-based technology to find out the nearest retailers near you and source your favourite items from them within an hour. Grofers shows you the list of retailers you would want to buy from, Peppertap shows you the items and sources them from the nearest shop without worrying the customer. But Grofers, besides providing groceries, also provides more items like bakeries and easily deliverable eating items. You can satisfy your craving for Starbucks’ coffee by just tapping a few clicks on Grofers. There are many mobile apps being developed in the food delivery space. These apps have reduced the ordering time to a few seconds on smartphones, enhancing the customers’ shopping experience.

3.2 RISING SHARE OF E-GROCERY IN INDIA

Zopnow, the Banglore-based online retailer delivers goods to customers within three hours. Bigbasket, the most noticeable player in the online grocery space, is working on an ambitious plan to reduce delivery time of home essentials to within an hour. So while home delivery of goods was a feat in itself until two years ago, customers are now demanding more, and the players are readily responding. By and large there are three types of models in this market: Inventory model: Mygrahak , Zopnow Hyper-local sourcing model: Grofers, Peppertap, Grocit, Aaramshop Hybrid: Mix of inventory and marketplace model – Big Basket, LocalBanya In the inventory model, grocers stock the inventory in their warehouse. This is the most capital-intensive one and involves lots of logistics. The early movers into grocery delivery like LocalBanya, MyGrahak, etc, work on this model only. But with the advent of the marketplace model purely focussing on logistics, these business have shifted their core strategies, which focused on margins earlier. Now these companies look to capitalise on the commission they can earn per transaction for providing the logistics. They also earn revenue for citing the outlets and through premium branding that they do for selected brands and outlets. In the hyper-local sourcing model, the app or the website just handles the logistics. This may be pure logistics where the app just facilitates the delivery. For example, Grofers picks up items you select from the stores and sends it to you. It may be just a facilitating service like Aaramshop where the only thing it does is to act as channel for placing online orders to the retailers. It can also be a service like Peppertap where the customer places the order on the website and the grocer sources the products from the retailers it already has tie-ups with. The hybrid model is the combination of inventory model and hyper-local model. Some products are kept in the company’s warehouse while other products are sourced from local shops and delivered. Well-known players like Bigbasket and Zopnow, which earlier were totally inventory-based, have now started moving towards the marketplace model and fall in this space.

To ‘E’ or not to ‘E’ E-grocery has been growing exponentially in India like other e-commerce businesses. Some companies have pan-India expansion plans where as some just want to remain local players. However, all these

Many organisations have repeatedly tried to develop a successful model for food and grocery e-tailing but have failed due to their inability to address issues like perishability, supply chain, storage and evolving consumer behaviour.

companies are continuously working to make their business profitable and achieve break-even at the earliest by making more consumers buy from them as well as by optimising their entire supply chain, right from procurement to delivery of the goods. According to Bal Krishn Birla, co-founder and CEO of Zopnow, “An online grocery business needs to track its profitability at four levels — the SKU, the basket, the warehouse and finally, the company”. E-grocery has evinced a lot of interest and many players are entering the fray. Flipkart plans to sell groceries through its website and may soon commence operations. Amazon is already running a pilot project in Bangalore. Snapdeal is already selling more than 400 FMCG products through its partnership with Godrej Nature’s Basket. And these are just the novices in a fledging e-grocery market. Significant volumes of goods are already being sold through websites like Bigbasket.com, LocalBanya, MyGrahak, etc. The Indian e-grocery market is growing rapidly and changing consumer preferences are fuelling this growth. Successful e-grocers need to offer their products at competitive prices with promised delivery schedules. E-Grocery is challenging, but it also has the big advantage of getting a high percentage of repeat orders. Acquiring customers is a vital aspect of the e-grocery business. All you need to do is delight the customer with the first order and there is a high possibility of having a loyal customer.

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Online and Kirana– The Odd Couple BY PROF. PIYUSH KUMAR SINHA, PROF. SRIKANT GOKHALE AND SAURABH RAWAL INDIAN INSTITUTE OF MANAGEMENT AHMEDABAD (IIMA), INDIA

This paper looks at the factors that have led to the proliferation of e-commerce in emerging economies and finds that a combination of traditional retailing along with e-commerce will gain ground in the coming years.

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3.3 ONLINE AND KIRANA–THE ODD COUPLE

Introduction The growth and proliferation of e-commerce across the world has been unprecedented since its origin. Online retailing contributes about 5.94% of the total retail sales in developed nations (2013) and about 4% of the total retail sales in developing nations like the BRICS (Brazil, Russia, India, China and South Africa). The total size of the retail industry (both store-based and non-store based) in the top five emerging markets (Brazil, Russia, China, India and Mexico) is pegged at $ 3.3 trillion (2013). The equivalent industry size in the top five developed markets (USA, Japan, Germany, France and UK) is $ 5.5 trillion (2013). However, the most striking feature is that while the retail industry in these markets grew at a compounded annual growth rate of 0.81% (2008-2013), the equivalent growth rate in the developing markets was 9.86% (2008-2013) [1]. This clearly demonstrates the growth story of retailing in developing markets, which attracted more than half of the top 20 retailers from the USA [2]. At the same time, foraying into such markets has required a strong understanding of local factors, which drives the retail industry in these regions. Although consumption is on the rise and most formats of retail are proliferating in important developing markets, but the penetration of large format modern retailing, say in India, has not even crossed the 10% mark. The local small format Kirana1 stores have survived and grown inspite of better prices and shopping ambience available at large format stores.

E-commerce in Emerging Economies The term emerging economies was introduced in the 1980s by Antoine Van Agtmael. It was used to represent newly industrialising and fast-growing countries from Asia and Latin America. Currently, an emerging economy is defined as a country that satisfies the criteria of (a) rapid pace of economic development, and (b) government policies favouring economic liberalisation and the adoption of a free-market system [9]. The Dow Jones enlists 21 countries as emerging economies, which include the popularly referred BRICS as well as countries from East Europe [10-11]. The BRICS lead the list with a combined GDP of over $ 15.8 trillion in 2013 [12]. The Global Retail Development Index puts BRIC countries among the top 20 in terms of market

attractiveness and several macroeconomic and retail specific variables [13]. These markets have also witnessed higher growth in internet retailing. Although the total size of the internet retailing industry in developed nations like the US would be bigger, countries like China have started overtaking other matured markets like Japan. As per the figure above, the Chinese internet retailing market grew from of $13 billion in 2007 to approximately $100 billion in 2013 at a growth rate of 40% compounded annually. Interestingly, in 2003 the total electronic commerce market in China was less than $0.5 billion [14]. Electronic payments happening through the mobile phone alone amounts to approximately $6 billion in 2013 [15]. Taoboa, launched May 2003, is China’s biggest online consumer-to-consumer (C2C) platform [16]. It holds a 80% share of the C2C market and over 45% of this electronic commerce market share [17] with over 500 million registered accounts and 800 million product listings [17]. In India the online market stands at about at 1% of the total retailing [1] market but considering that the country would house the largest internet user population, the growth in electronic commerce may happen more rapidly than expected. The emergence of online B2C business can be attributed to travel companies like irctc.com (Indian Railway Catering and Tourism Corporation) for trains and makemytrip.com for airline tickets. IRCTC had launched online railway ticket booking facility on August 3 in 2002 at Delhi and booked 3,343 tickets in the first month. In less than two years, it had sold 1,04,363 tickets in the month of April 2004. In 2008, 40,000 tickets were being sold daily [18]. In 2013, IRCTC sold an average of 385,000 tickets every day, amounting to over 140 million tickets being sold through the portal in a year [19].

The local small format kirana stores have survived and grown inspite of better prices and shopping ambience available at large format stores.

TABLE:1 INTERNET RETAILING MARKET SIZE Country

2007

2013

US 

102,404

207,619

Percentage growth 102

Japan 

20,329

46,754

130

Canada 

3,141

6,076

93

China 

1,366

98,534

7,113

Brazil 

4,443

10,792

143

India 

759

2,978

292

200

473

137

South Africa 

Source: Euromonitor, 2014

1 Kirana, colloquially, refers to small stores in India. They are generally less than 500 sq. ft in area and stock about 5000 items with a wide assortment of products used for everyday purposes including grocery. Although they are generally compared to mom-and-pop store, they are very different in their business models. Sometimes they are called general merchants.

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Drivers of E-commerce This rapid growth of buying of goods and services online could be attributed to four major factors – rapid penetration of technology, fast adoption of the online medium both by businesses and consumers, convenience that consumers derive through online shopping, and the retail landscape. Rapid adoption of technology E-readiness can be considered as one benchmark that represents the preparedness of a country in adopting e-commerce. Jointly computed by the IBM Institute for Business Value and the Economist Intelligence Unit, the E-readiness index is considered to exhaustively represent the preparedness of a country for digitisation and thus paving way for the proliferation of electronic commerce. Most of the emerging economies, like Brazil, have enhanced their E-readiness ranking from 2006 to 2009 and others like India and China, despite the economic slowdown, have maintained their position. This has brought down the ranking of countries like the US and Germany [20]. Even though the penetration of internet is relatively low as compared to the developed nations, in terms of the number of internet users, BRICS countries are witnessing exceptional growth year on year [1]. A report by Mckinsey estimates that the number of internet users in India will rise to 370 million, surpassing all developed countries by 2015. As a result, the internet’s contribution to the GDP could increase to 3.3% in 2015 from 1.6% in 2012 [21]. In Africa, by 2025, improved internet penetration is expected to drive private consumption 13 times higher than current levels of $12 billion. The amount spent on internet alone could increase from $5.7 billion in 2013 to $35 billion in 2025. With only 10% of the retail spending in Africa’s largest economies moving online, e-commerce activity could yield a revenue of $75 billion [22]. China’s e-commerce market was less than 1% of the total retailing market in 2007. In the last six years, it almost doubled. In India, it stood at $3

E-readiness can be considered as one benchmark that represents the preparedness of a country in adopting e-commerce. Jointly computed by the IBM Institute for Business Value and the Economist Intelligence Unit, the E-readiness index is considered to exhaustively represent the preparedness of a country for digitisation and thus paving the way for the proliferation of electronic commerce.

TABLE: 2 NUMBER OF INTERNET USERS ACROSS DIFFERENT COUNTRIES IN MILLIONS Country

2008

2009

2010

2011

2012

USA

210

203

207

203

233

2013 249

China

283

364

434

487

541

589

India

45

53

80

109

139

169

Brazil

59

70

73

83

89

95

South Africa

3

4

11

16

19

23

Source: Euromonitor, 2014

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billion in 2013 with a CAGR of 25.59% (2007 – 2013) and is estimated that to cross $6 billion by 2018 [1]. In a report, released jointly by IMRB International and Internet and Mobile Association of India, the larger digital commerce market is expected to have reached $10 billion in 2013 in India. While the majority of electronic commerce is conducted in urban areas, a major impetus would also come from the rural consumers. Initiatives like SAHAJ e-Village, with an aim to establish about 250,000 Common Service Centres (CSCs) (website) in the villages of West Bengal, Bihar, Orissa, Assam, Uttar Pradesh and Tamil Nadu, would service a rural population of over 210 million people [23]. With over 870 million subscribers, India has one of the largest number of mobile phones in the world [24]. Smartphones would play a significant role in providing access to high speed internet to the user. Globally, the use of smartphones is projected to keep increasing at 20.5% over 2012 – 2016. In the case of India, the smartphone penetration is projected to increase with a CAGR of 57.5% over 2011-2016 [24]. According to the Telecom Regulatory Authority of India (TRAI), the number of mobile internet capable devices has drastically increased, from 25 million in 2006 to 431 million in 2012, a CAGR of 61% [24]. An average smartphone is cheaper than a personal computer or a laptop. In India, 45% of the mobile-only internet users claim that they access the internet through their mobile phones because they do not have a computer. China, not far behind, has 38% of its internet user population accessing the internet only through a mobile phone. The number of people shopping online using mobile internet has surged from 39 million to 55.5 million within a year in 2012 [25]. About 45% of the rural internet users in China are accessing the internet through mobile phones, signifying the role of mobile phone in promoting online shopping [26]. Although the average amount of time spent by the Indian youth daily on the internet through a smartphone is 2.5 hours, and 75% of this time is spent in surfing social media sites, playing games and accessing entertainment, it is expected that a majority of the commercial transactions would also start happening through smartphones [27]. At present, more than 86 million users in India access the internet using their mobile devices and since

3.3 ONLINE AND KIRANA–THE ODD COUPLE

the launch of 3G in India in 2008, the number of people accessing the internet through 3G reached 88.5 million in 2013 [28]. For bookmyshow.com, a entertainment ticketing site, 25% of all ticket bookings are done through its mobile application [24]. Similarly, one-fifth of searches and almost 12% of the booking for cleartrip.com, a travel site, comes from its mobile app [24]. In China, even though the smartphone penetration is nearly one-fourth of the US, the penetration of mobile commerce spending as a percentage of e-tailing is more than one-third than that of the US [29]. Consumers and their preferences The second enabler of the penetration of online retailing has been the convenience and ease of access. Physical stores always have a limitation in reaching customers, whereas virtual stores can be accessed from anywhere with an internet connection and a computer. Almost 40% of the sales of most online stores come from tier – II and III towns and rural areas, which are not being serviced by large-format retailers. According to a survey, 25% of the participants representing the global shopper shared that they enjoy shopping online because they can shop whenever they want [30]. The wide assortment makes it attractive for almost all the segments. Disposable income in India has increased and is expected to keep increasing. The number of working women has also increased, thus increasing the number of households where both husband and wife are working. Consumers have larger disposable incomes, greater purchasing power and less time to spend on daily shopping. This would lead people to buy daily goods online rather than spend time and fuel to shop from a large format store.

At present, more than 86 million users in India access the internet using their mobile devices and since the launch of 3G in India in 2008, the number of people accessing the internet through 3G reached 88.5 million in 2013.

The size of the working middle class is also increasing. An OECD Development Centre working paper states that collectively China’s and India’s middle class is set to become the biggest consuming class globally in the next 25 years [31]. The largest group of consumers will also be one of the largest internet surfing population, which will eventually make them the largest e-commerce markets in the world. Between 2010 and 2030, approximately 8 billion people are projected to live on Earth and of these 95% will come from the developing nations, who will then contribute more than two-thirds to the then GDP growth. BRICS alone will contribute upto 40% to the GDP growth in the world [32]. Younger consumers use technology the most and form one of the biggest consuming age group [22]. The demographic dividend of emerging markets will make them the youngest markets. Africa already houses the most youthful population in the world with over 200 million people in the ages 15-25 years. With the median age of 26 years, India has a fast-growing youth population [33]. According to a report by NCAER on the ‘Indian Youth’, the population in the age bracket of 13-35 years was 459 million in 2009 and is projected to reach 574 million by 2020. About 73% of them are literate. Of this, 75% expressed confidence in the internet for getting information [34]. Close to 90% of the online shoppers in India are aged between 18 and 35 years [35]. However, a majority of the population is not very savvy when it comes to buying from the internet. E-commerce companies are creating innovative business models to suit the needs of the typical India consumer [21]. Almost all of the e-tailers offer cash

Figure 1: Number of internet capable devices in India (in million) 500 450 400 350 300 250 200 150 100 50 0

2006 2007 2008 2009 Source: India’s mobile Internet, Avendus 2013

2010

2011

2012

INDIA FOOD REPORT 2016 | 161 |

on delivery (COD) facility to mitigate the problem of low penetration of credit cards and online payment. It has also reduced the perceived risk of not getting the right product. In some cases, upto 60% of sales are coming from COD payments. Retailers also offer 100% cash-back policy, a facility that most brick-andmortar players do not provide [36-39]. Online travel companies have also introduced the tele-booking system to complement their web-stores. Most sites offer heavy discounts and very attractive offers. These motivate the customers to try out buying on the internet and in many cases switch from the physical stores to virtual stores. Flash sales sites are credited with increasing online purchase substantially. Discounts and promotional offers have always attracted customers [40]. Most of the

e-commerce portals have started giving discounts around the year. With such availability of discounts throughout the year, more and more people are expected to shift their shopping to virtual stores.

Figure 2: Online shopping behaviour Easier to find favourite 1 brands 0 Better product information 11 Easy home delivery for big/ 2 heavy items 1 To buy products 4 5 unavailable elsewhere 4 Better variety 5 Easier to compare 7 6 products and offers 11

Easier than visiting shops

14 18 17

Quicker than visiting shops

25 25

Low prices/better offers I can shop whenever I want 0

25 5

Percent of Global Shopper

10

15

20

28

25

30

Percent of US Shopper

Source: Understanding how US online shoppers are reshaping the retail experience, PwC 2012

TABLE: 3 INDIAN CONSUMER SNAPSHOT 2015 Household Income Brackets, Annual (‘000 INR)

2025

Number of Household, mn

2015

2025

Aggregate Disposable Income, INR tn

2015

2025

Aggregate Consumption, INR tn

Globals (>1,000)

3.3

9.5

6.3

21.7

4.1

14.1

Strivers (500-1,000)

5.5

33.1

3.8

20.9

2.7

16.5

Seekers (200-500)

55.1

94.9

15.2

30.6

11.8

24.6

Aspirers (90-200)

106

93.1

14.6

13.7

12.2

11.9

Desprived (50% of the respondents expressed willingness to use digital channels.

38% of the respondents agreed getting explanations on how to use digital channels could motivate them to use it.

Source: Masters of Rural Markets Series: From Touchpoints to Trustpoints: Winning over India’s Aspiring Rural Consumers

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Accenture Strategy research reveals that rural consumers are expecting an increase in spending across many categories in the coming years. While the increase is anticipated across several new and unexpected categories, such as personal digital products, financial services and holiday travel, the highest growth is set to take place in food. Indeed, 42 per cent of consumers expect their spending on food staples to go up substantially in the next few years, and 36 per cent expected their consumption of packaged foods to do the same. The second major change that our research reveals is that rural consumers are moving away from purely economic concepts of value (lowest possible price) toward a broader notion of value that includes the utility, aesthetics and features of a product or service with the price. Third, rural consumers are exploring digital channels (Figure 2). It is still a small beginning, but 10 per cent of our survey respondents claimed awareness of digital channels, with up to 40 per cent among them using the Internet regularly—at least 3-4 times a week. And things are changing quickly. Up to 20 per cent of those who have never purchased online are well aware of the Internet as a purchase channel, and 49 per cent among these are willing to purchase online, in the near future. Getting help and guidance on how to use these channels and learning from family and friends could motivate them to take the plunge, and soon.

5.2 INDIA’S CHANGING RURAL MARKETS

Three Dimensions of Rural Consumer Behaviour Our research finds that rural consumers are changing in three fundamental ways to become more: Aspirational: The research indicates that India’s rural consumers are driven by a deep desire to provide their children a better future through education and health care. Half of the survey respondents claimed that they plan to spend more on these areas. Many rural consumers are also savvier about brands and are trading up to get higher quality products that boost their social image; they are experimenting with new product and service categories. Nearly 71 per cent of the respondents claimed to have purchased branded products and 59 per cent said they find brands trustworthy and reliable. Networked: Rural consumers are better connected, physically as well as digitally. Many of them take advantage of this progress by proactively seeking information through multiple sources. Up to 83 per cent of our survey respondents said they travelled to the nearest cities to make larger purchases. Also, women and children play a more empowered role in purchase decisions. Discerning: They are street-smart, keeping themselves up-to-date on retail schemes and campaigns, view value through a broader lens, and share information with an increasing number of peers. But they are practical too; only 7 per cent of respondents said advertisements influenced their final purchase decisions.

Debunking Purchase Myths About 59 per cent of companies surveyed by Accenture Strategy cited distribution efficiency as the key to success in rural markets, and 60 per cent said their key priority was to improve channel strategy and coverage.4 Our research finds that other than distribution strategies, companies will need to develop more sophisticated consumer insights and let go of traditional assumptions about rural consumers if they have to win in the rural markets. Indeed, what we believed in the past about how and what rural consumers buy is no longer valid. Without understanding how their needs and wants are changing, companies will have difficulty establishing long-lasting brand relationships with rural consumers. Here’s what they must keep in mind.

India’s rural consumers are driven by a deep desire to provide their children a better future through education and health care.

Myth: Rural consumers care only about price and seek stripped-down, low-cost versions of products. Reality: Respondents gave 66 per cent preference to brand image, functionality and aesthetics while buying, and only 34 per cent give preference to price. Myth: Rural consumers make big-ticket purchases post-harvest, during festivals and before family celebrations. Reality: More than half of the respondents said they made purchases as and when needed, and did not wait around for special occasions. Myth: Rural consumers make most purchases within or around their villages, usually buying from the local shops. Reality: An overwhelming 83 per cent of survey respondents said they went to the nearest towns or cities for their purchases, especially for bigticket items. Myth: Traditional influencers, such as community leaders, village elders, retailers, teachers, continue to powerfully shape the rural consumer’s purchase decisions. Reality: Only 1 per cent of the respondents were influenced by village elders and 6 per cent by local retailers in making their last big-ticket purchase. The new influencers are varied—women and children, professional experts and progressive farmers. Myth: Rural consumers’ purchase behaviour is highly driven by TV advertisements, particularly those featuring celebrities. Reality: Only 7 per cent of the respondents claimed advertisements and celebrity endorsements have a role to play in their purchase decisions— they used TV primarily for entertainment and information.

4 “Masters of Rural Markets: Profitably Selling to India’s Rural Consumers”, Accenture Strategy, 2012. http://www.accenturehighperformancedelivered.com/usen/Pages/insight-masters-rural-markets-2013.aspx

INDIA FOOD REPORT 2016 | 221 |

Building Trust with Rural Consumers As rural consumers grow their purchasing power and the opportunity grows ever more attractive for manufacturers, companies will need to devise creative ways to gather market insights to craft compelling value propositions to profitably meet rural consumers’ needs and aspirations. Rural consumers invest significant time and effort to decide what to buy, where to buy and from whom to buy. Parting with hard-earned money to buy a better quality of life requires the consumer to entrust faith in the brand, product and the shop from where they make the purchase. This is why just creating consumer touch points will no longer be enough. Companies need to establish trust in the minds of these customers by making them “aware” of who they are and what they stand for. They will also have to make themselves “available” closer to the consumers with products that offer the right value proposition supported by good after-sale service. These steps will go a long way in winning the “trust” of this emerging class of customers (Figure 3). At each of the following stages of the rural consumers’ purchase journey, companies must meet specific imperatives if they hope to win and grab a bigger wallet share of these customers. Need recognition. Rural consumers need to be convinced of the necessity of a product or service, so educating them and raising awareness is necessary. Deepen the understanding of rural consumers and shape the market by identifying and targeting the right consumers. Ensure the 5

6

7

8

Parting with hard-earned money to buy a better quality of life requires the consumer to entrust faith in the brand, product and the shop from where they make the purchase.

brand communication is simple, customised and entertaining to capture the attention of rural consumers. This strategy is reflected in Hindustan Unilever’s Perfect Village campaign targeting the top 8,000+ villages in terms of economic potential.5 The campaign aims to develop markets for categories, which are still nascent in terms of consumer penetration in those villages. Awareness. Customise the marketing mix by product and geography. Utilise non-traditional media and explore mobile marketing to maximise impact. Half of the 12 million downloads from Airtel’s new video store launched in May 2014 (a video costs Rs.1) have been reported from rural areas.6 Through its unique Choupal Haats (village markets) across Uttar Pradesh, Rajasthan, Madhya Pradesh and Maharashtra, FMCG major ITC Limited is taking its products to the doorsteps of rural consumers, as well as influencing their tastes and preferences.7 The Haats work as marketing services events that facilitate engagement between rural consumers and brands not only for consumer products but for agricultural inputs, financial services, health care and other sectors as well. In 2013, ITC conducted nearly 6,000 such events, enabling first-hand interaction with more than five million consumers. Consideration. Define an irresistible value proposition that looks beyond pricing as a long-term source of differentiation. Demonstrate the results and benefits that a product delivers especially for product categories that are relatively new to rural consumers. For example, Indian FMCG major Dabur successfully managed to keep its brands front-andcenter in consumers’ minds at the consideration stage by tailoring the value proposition to consumers’ livelihoods, especially to wage earners.8 Its rural marketing team ran a campaign to educate these consumers about the importance of proper oral care, the lack of which could lead to losing a day’s wages and letting their families go hungry. The idea resonated among this group, and helped boost sales of the product. Validation. Identify and engage the most relevant influencers for the consumer segments you have targeted. Establish a dialogue with those influencers to inspire trust, loyalty and positive word of mouth. Greenlight Planet, for example, has sold

From Touchpoints to Trustpoints: Winning over Aspiring Indian Rural Consumers, Accenture Strategy, 2014. http://www.accenture.com/in-en/Pages/insightrural-india-markets-research-2015.aspx “TVs, mobile phones spearhead shift in Rural India,” Livemint, November 4, 2013. http://www.livemint.com/Specials/bez364SJNi0rLbVJ1EUHvI/TVs-mobilephones-spearhead-shift-in-rural-India.html From Touchpoints to Trustpoints: Winning over Aspiring Indian Rural Consumers, Accenture Strategy, 2014. http://www.accenture.com/in-en/Pages/insightrural-india-markets-research-2015.aspx Ibid

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5.2 INDIA’S CHANGING RURAL MARKETS

close to 3 million solar lamps across India, Africa and Central America through thousands of village entrepreneurs who they have trained as business associates (Saathis).9 They help consumers to improve their lives while raising their household income in villages with limited employment opportunities. A diverse group of school teachers, village elders, full-time mothers and college students, they play a strong influencer role in the purchases. Purchase. For rural consumers, shopping at a mall or big store is an enjoyable family outing, and companies would do well to focus on store experience—format, location, size and layout. Offer expert advice and differentiated service and enhance the offline and online shopping experience for attracting rural consumers who are eager to trade up in terms of their purchases and shopping experiences. For instance, Bayer CropScience has set up 237 Bayer Solutions stores, which offer not just products but expert advice to farmers.10

Building a Strategy: The Way Forward What will this transition from consumer touch points to trust points entail (Figure 3)? While strategies will differ from sector to sector, FMCG companies, in general, could consider adopting a long-term strategy with the following core elements:

Figure 3. Enabling the rural market journey

Touch Points

Develop KPIs to track transformation

Trust Points

Build trust at each stage of rural consumer purchase journey Need recognition

Awarcness

Consideration Validation

hase

Unsatisfied Customer

Advocacy

Purc

Satisfied customer

Outside the loop

ted igh Del tomer s Cu

Experience

Experience. Differentiate through service, by offering exceptional after-sales service, such as repair and maintenance. Deliver on the brand promise to avoid frustrating rural customers, as frustration pushes them to consider switching to other brands. For example, to solve complaints and problems, companies could offer toll-free numbers to customers, an automated call-back system for missed calls, and dedicated customer service personnel speaking the local language. Advocacy. Nurture advocates by promptly addressing problems to pre-empt negative word-ofmouth. Listen to customers across all touch points also to find out what makes them happy. A leading consumer goods company organises a programme to train brand managers to conduct consumer research, which is then fed into the IT system that can be accessed by all employees. The result has been the creation of more than a thousand data points over and above the routine research efforts. 9

Ibid

10

Key success factors Invest in rural consumer understanding and segmentation Focus on market development Embrace a service-driven mindset to entrench brand loyalty

Key enablers Organization Set up a dedicated team for rural business Secure strong commitment from senior leadership to go rural Appoint an Insights team to study rural customers

Talent Hire talent from rural areas and invest in skill development Carve out unique career paths for rural talent and identify drivers of intrinsic motivation Instill a pervasive ‘rural culture’ across the organisation

Technology Invest in technology to manage complexity and sharpen outcomes Leverage data for control through MIS dashboards and insights through Analytics

Ibid

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clearly articulate what success looks like. Keep cost models variable till a proof of concept is established. Customise. Every product needs to have a differentiated value proposition that caters to the unique needs of rural consumers, so companies must tailor their own unique value proposition. Go digital. Leverage mobility platform to create brand awareness. To overcome the geographical challenge, companies must invest in digital and mobile platforms as they offer excellent opportunities to create awareness and promote their products and services. With an increasingly connected rural population and the cost advantage it offers as compared to the traditional media in rural areas, mobile marketing is set to become the future of rural marketing. Network. Developing a strong circle of effective influencers and advocates will immensely help. Leverage positive word-of-mouth as it can be the biggest influencer to enter into the consideration set of rural consumers. Do not ignore complaints and bad experiences; the impact of negative word of mouth can often be more damaging than many appear to understand. Differentiate. A service mindset is the key differentiator to win the hearts of rural consumers and make them feel valued and important. Clarify your understanding of changing customer behaviour. Explore. Non-traditional partnerships to extend sales and service network is the new way to go. Collaborations with non-competing companies can be an effective solution to overcome the infrastructural and scale-related challenges of operating in rural markets and help amplify the sales and service network.

Conclusion Listen. Developing a deep understanding and gaining insights into the changing needs and aspirations of the rural consumers will be critical to developing and customising offerings and experiences that address the unique needs of customers, and gain their long-term loyalty. Adapt. A “fail smart, learn fast” approach is the key. Conduct quick, low-cost pilots with measurable key performance indicators (KPIs) to gain valuable insights into what works in rural. For each initiative,

Focus and commitment will be critical to success in India’s rural markets. Companies will need to target the right consumer segments. They may even need to customise their products, and tailor their value propositions to match the needs of these segments. Businesses must remember that those who swiftly act now to re-align their sales and marketing strategies to fit the changing realities of rural consumer behaviour, could claim a significant competitive advantage in the FMCG market.

Disclaimer: This Report has been published for information and illustrative purposes only and is not intended to serve as advice of any nature whatsoever. The information contained and the references made in this Report was purely based on the information and specific requirements of its client referred in the report, neither Accenture nor any of its directors, agents or employees give any warranty of accuracy (whether expressed or implied), nor accepts any liability as a result of reliance upon the content including (but not limited) information, advice, statement or opinion contained in this Report and expressly disclaims from all such responsibilities and liabilities. This Report may also contains certain information available in public domain, created and maintained by private and public organizations. Accenture does not control or guarantee the accuracy, relevance, timelines or completeness of such information. This Report constitutes a view as on the date of publication and is subject to change. Accenture does not warrant or solicit any kind of act or omission based on this Report.

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Why Don’t Big Businesses ‘get’ it? BY RAMA BIJAPURKAR

Consumer India is excited, needy, ready and waiting for relevant, value-right supply of all manner of food and food service. They are hugely underserved by big business even as street food and small eateries evolve and innovate. Instead of waiting for Consumer India to develop a taste for foreign food and celebrating small steps here, can we add value to customers’ preferences today?

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T

he mega market opportunity for packaged food in India is visible to all. About 270 million families, most of them having children, are getting less poor year on year. That there is, and will be, a continuously growing market both in terms of volumes and per capita spends on food, is a no-brainer. Even today, 50-60% of India’s large economy is accounted for by household consumption and if you take the routine expenditure of Indian households, over half of that is food. India’s per capita income is so low, even more so if viewed at a stratified level, that there’s not much fear of saturation of food needs for a long time to come. Food is also not just about stomach gratification and nourishment. It is also about social expression and entertainment, and the adventure of new experiences, all of which Consumer India craves for and makes huge efforts to get.

5.3 WHY DON’T BIG BUSINESSES ‘GET’ IT?

Work styles and lifestyles also have more people staying out of the house for long hours and having to make arrangements to eat without bankrupting themselves. Add to this the anxiety of a selfemployed population (which is what most of India is) to stay healthy so you can go out and earn your daily bread. Then, there is the focus on “brain food” for children to compete better and the old Indian belief that connects food to health. Put it all together and we have a perform storm. A storm of opportunity that is already here with a ready and waiting Consumer India, which is not being served by big business to anywhere near its potential or desire. The packaged and processed food and food service market is way below its potential, if we assess the potential in terms of consumer / customer needs and spends. And let’s not consider the sum total of big food company sales of whatever they have decided to sell, or worse, of what they sell in other parts of the world and transplant here, even if tweaked for the Indian palate. The demand structure of India is not going to change in a long time and neither will its challenging business economics. It is a large market made up of a lot of people consuming a little bit each, which adds up to a lot, a high volume-low margin business that guzzles money before spewing it back. Also, food in India has an unimaginable variety, and is complex. Chapatis and puris will not be traded in for tortillas and pizzas merely because globalisation is here and money and people can move more freely around the world. That said, there is also a great spirit of experimentation and adaptation, which Consumer India displays when it comes to food. Adopting new foods is not new to Indians. The idli and dosa have travelled northward and the chapatti and chole southward. So the Indian food market opportunity offers potential for great gains but great pain has to be borne first. The consumer is ready and waiting, and small food suppliers are multiplying to serve them; but where are the big suppliers, capable of R&D-led innovation on the one hand and driving down prices through economies of scale on the other? Let’s start with ready to eat or even ready to cook chapatis of which we eat one trillion of them a year. No one yet has been able to get the quality right and the mix right, and the chapatti maker machine that looks so cool and easy and tempting in the TV commercials rarely produces the same results at home. If there were some more research on it to make it more user friendly and reliable, sales will explode. Making chapatis is negative

The demand structure of India is not going to change in a long time and neither will its challenging business economics.

labour to be got rid off, as far as most people are concerned. But poor quality chapatis are not the answer either. As time progresses, we all know that Indian households will eat more and eat better, as incomes grow and the willingness to pay higher prices for higher quality is inevitable. But what most companies don’t realise is that Indian consumers are already paying more, driven by high levels of food inflation for average quality fresh food. Given the periodic spurt in food prices, if you are poor, your child may not see vegetables or tomatoes or sometimes even onions on a halfway regular basis. And if you are rich, you will pay the horrendous prices and feel very deprived about the quality you get. Fresh vegetables and even dals that you cook regularly have become bad value for money. And no one has stepped into the gap with a lower price higher performance point than fresh. Modest income consumers are ready, and there is enough profit room, given the benchmark of fresh for some non-fresh form to work. The popular assumption is that factory made food is for the rich who will pay for more than fresh because of the convenience offered or the exotic recipes (that is the way the Indian packaged food market has been so far). That may have been so two decades or even a decade ago, but nowadays factory made

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means cheaper and better. Furniture has proved that, apparel has proved that and there is a huge opportunity for a lower price-higher quality point for food that serves the less well-heeled who are larger in number. There aren’t enough good quality frozen vegetables even for the affluent who have freezers and shop at places that do too. Even at a good margin pricing, it will sell, becoming a win–win for both manufacturer and consumer. At the height of food inflation last year, when the consumer was too shocked to understand what adjustments to make, the opportunity to change consumer habit easily was ripe. But the supply side didn’t step up; had it done so, it would have changed the consumer quite significantly. But then, only they get asked to dance who are already present on or near the dance floor. And many companies who have the ability to innovate products are waiting for the market to evolve before they will dress up to go to the dance. Let’s take the simple example of curd (why call it yoghurt when most consumers call it curd?). Many market watchers were surprised at how quickly the plain curd market took off. Didn’t Indians prefer home made and fresh? But talk to consumers and they will tell you all the million things they have to do to get the curd to set properly. Cover it with a tea-cosy in winter, rush it to the fridge at the precise moment in summer or it will be too milky or too sour, put a green chilli in it when setting, results not guaranteed at all, depends on the milk quality, etc. What a relief, they say, that all this is somebody else’s headache! Ditto for lassi that consumers love to have in summer – why add cleaning mixing vessels when water is short into the mix of woes. But why have large companies not managed to scale this to far higher levels that an Indian staple should be? Why is it still the preserve of the regional small scale or cooperative sector? The absence of cold chain is one reason that people give. But lots of business

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What most companies don’t realise is that Indian consumers are already paying more, driven by high levels of food inflation for average quality fresh food.

models in food, especially quick service restaurants, use distributed manufacturing and marketing and centralised buying of ingredients to take advantage of scale benefits. Come summer, when it is needed the most, the category invariably goes into short supply, and the consumption habit never gets entrenched. Another reason it doesn’t scale as much is that, like tea, the way it is consumed and hence the taste it should have varies by geography and companies are not varianting for it. Sometimes this over-engineers the product and adds cost to the company and no value to the consumer. I have seen south Indians take certain brands of curd and dilute them with water so that it is of the right consistence to eat with rice. Curd in a south Indian household doesn’t often work for eating with aloo ka parathas. It needs more stiffening! In Bengal, it must go well with sugar. Companies say that this is all basic low margin products, what is needed is value-added curd to make this business attractive. However, value addition doesn’t have to come from fruit flavoured yoghurt that is a hard sell. It can come from creating a variety of new flavours that are in tune with the Indian palate and the myriad ways in which curd is consumed. Perhaps, what is needed is some research to develop the perfect curd setter apparatus and some food-based ingredient additives that make curd set better. Every household has its own tea making vessel, dosa making tawa, and a habit of using different vessels for different purposes (and different people too!). As is typical when supply side analysis of market opportunity is done based on metrics such as ‘organised sector’ sales turnover and growth or per capita consumption of branded or packaged food of different categories, the conclusion is misleading. What it shows is a relatively small but fast growing market that is yet to “emerge”. It is often said that the limitations of organised retail availability are

5.3 WHY DON’T BIG BUSINESSES ‘GET’ IT?

in part to blame for this and the prescription is to wait until the consumer and the environment are ready. But if the metric were the total consumption of sandwiches or Chinese food plates on the street, the size and growth in number of sandwich stalls or Chinese food carts delivering noodles and increase in average price and variety offered, the story is exactly the opposite. The organised big companies, particularly the MNCs, have a very stark offering that is very basic and not value adding for a consumer base that is being spoilt with a vibrant and innovative and ever expanding offerings from the so-called unorganised sector or the small food marketer. This sector has created a vibrant food market throbbing with energy and innovation that often goes unnoticed or is dismissed by market analysts. Big businesses don’t have a range of diabetic sweets and biscuits. But the mithaiwalas do, local bakeries do, and small local dessert and chocolate makers do. Big businesses feel that the market is too small. But relative to what, is the interesting question. India, regrettably, has amongst the world’s largest diabetic population. Local retailers, especially in big cities, have lots of exciting packaged food items that are available, made by small suppliers, and sold through small stand-alone shops. The number of SKUs is mind boggling and the variety shows huge innovation, both in vocabulary as well as in content. I was invited, a few years ago, to meet with the global management team of a large and successful global company, on their India visit. I entered the conference room to find a set of competitive food

Big businesses don’t have a range of diabetic sweets and biscuits. But the mithaiwalas do, local bakeries do, and small local dessert and chocolate makers do. Big businesses feel that the market is too small. But relative to what, is the interesting question.

products displayed, mostly from other MNCs, which did not even provide a whisper of what local competition they were up against. I carried some products bought from the local food speciality retailer, ranging from pan sweets in handy little plastic boxes to mango jelly “aam papad’ sweets in a lovely colour encased in crinkly transparent wrappers, chaat flavoured khakhras, standee pouches with ready mix poha (just add water), various sauce consistency chutneys in bottles and so on. They were quite surprised with what they saw, and at the prices, but wondered what it had to do with them. Their competition was of the future kind, and would happen when the market evolved. Until then, there was not much need to invest heavily in the market. Just wait for consumers’ incomes to grow, and for them to modernise further and grow out of their present consumption habits. In the meanwhile, all forms of competition are exploding and evolving. Aggregators take orders and deliver from various restaurants and individual restaurants do home delivery. Now there is fresh fish, cleaned thoroughly, ready to use, packed neatly in thermocol containers with lots of ice that is delivered to my doorstep in Mumbai. And they also call me and check what I want, as good a CRM as my local kirana. The most interesting example of new competition was recently reported in the media of the birth of a new business model where train travellers can order their meals online before the start of their journey and have it delivered piping hot at stations on the way, through a network of food

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providers in these towns. At least three companies are offering this service. Maybe soon we will see an Uber type app for food as well, where homemaker cooks will, with one day’s notice, give you what you want when you have guests for dinner and can’t afford to order the restaurant fare. Small competitors and small retailers have been continuously innovating, both in product and in packaging, and testing higher priced offerings. Chaatwallahs everywhere have a widened variety with improved presentation and at attractive prices, which make their range quite exciting – and this goes beyond using mineral water. There’s lots of new product extensions happening as well. You can go and eat Raj kachoris or try Chinese Bhel. Haldiram’s has the formula but has not scaled too much geographically. If all of India has enthusiastically embraced Punjabi wedding rituals like mehndi ceremonies and sangeets, couldn’t the market for chaat outlets be at least as large? Indigo airlines has shown that the young consumer is ok to have “just add water” biryani or upma or pre-cooked mini masala dosa rolls. Why can’t we buy this kind of food in food-specialising kiranas? Food marketers have tough competition from food services, especially the micro entrepreneurs who provide any kind of dabba that you may require at any time you may want it and at different price points. The variety available at the road side shacks has also increased. The Indian consumer loves to eat momos at Delhi’s Khan market pavement and vada pav and chai have the longest queues even at swanky airports. An udipi restaurant in the heart of Mumbai’s Dadar has no qualms putting Thai food (such as it understands it) on its menu and a bhojanalaya deep south does noodles too nowadays, in order to keep its novelty seeking customers. In spite of the growing health consciousness, people are not jumping up and down wanting to eat oats for breakfast. But oats idli and multigrain dosa for breakfast is catching on. Serving small and micro food service is a large opportunity and there are companies in this space who are willing and ready to embrace better ways of improving productivity, commanding higher prices and improving efficiency. But it’s not clear which big companies are innovating for them and helping them reduce their hassles while keeping their ability to differentiate. Ready to use ingredients that improve efficiency and hence productivity, better cleaning solutions, more efficient and customised cooking equipment and properly engineered packaging

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In spite of the growing health consciousness, people are not jumping up and down wanting to eat oats for breakfast. But oats idli and multigrain dosa for breakfast is catching on.

that is neither over engineered nor under, all have a great perceived value. In the equivalent of a small Udipi restaurant type place in China, the plastic plate spoon and fork come wrapped in a polythene cover that says it has been sterilised. I think that would work very well here. More bread is eaten by lower income people than upper income people, double roti as it is called. Could that double roti be made differently to come closer to a chapatti and come with ready to eat packets of cheap vegetables to heat and eat? Kiranas, food hawkers and vegetable vendors are a ready distribution channel for low priced food brands whether ready to eat or ready to cook. They are happy to add to their repertoire, but where is the supply? We need to reengineer our minds and see the opportunity for what it is. We are fast becoming a nation of foodies, though I suspect we always have been that way – otherwise how could so many complex cuisines and dishes survive and evolve and travel all over the country for so many centuries! Now we have so many cooking shows on TV and so much on the Internet and we have mastered the art of Indianising every other cuisine and fitting it into our repertoire. The small food entrepreneur, the street vendor and the consumer are all ready. But where is big business in all this? The food market is not waiting to emerge. It already has. Consumers don’t need more time to be ready for habit changes. They have been ready for some time now.

The Will of Food Understanding the food & beverage motivations in modern India BY SOUMYA MUKHOPADHYAY, RANJANA GUPTA & GURPREET WASI, IMRB INTERNATIONAL

Introduction This section in the IMRB food report focusses on the primary motivations behind food and beverage consumption in India. It opens with a short overview of the importance and role of food in Indian culture and history, the meaning of Indian food, before moving on to the major motivations uncovered by a series of primary consumer researches1 on food and beverage conducted by the authors in the last four years. The focus of these studies was on the needs beyond the fundamental requirement of sustenance. Hence, these studies concentrated on food and beverage categories beyond the everyday staples. The chapter concludes with some observations on the likely food future in India. 1 Learnings based on studies done among more than 30000 consumers, representative of population. Category coverage ranging from beverages like alcohol and Carbonated drinks to food items like salty snacks and packaged noodles.

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5.4 THE WILL OF FOOD

Food in Indian Culture & Tradition From royalty to the man on the road, no Indian story or history is complete without food2 and not just as a source of sustenance. It is both a unifying and divisive factor in popular Indian culture – from the love of biryani to the recent beef ban in some states. Yet, there is no such thing as ‘Indian food’. It is a rather generic term used mostly in Western hemisphere to describe anything which is spicy, hot, rich and swimming in what the Brits call the curry.

‘Indian Food’ is Glocal

Abul Fazal, Mughal Emperor Akbar’s vizier, writes in Ain-i-Akbari: His Majesty (Akbar) even extends his attention to this department, and has given many wise regulations for it; nor can a reason be given why he should not do so, as the equilibrium of man’s nature, the strength of the body, the capability of receiving external and internal blessings, and the acquisition of worldly and religious advantages, depend ultimately on proper care being shewn for appropriate food. This knowledge distinguishes man from beasts, with whom, as far as mere eating is concerned, he stands upon the same level.

‘Indian food’ is a melting pot of flavours, habits, traditions borrowed from all the invaders, guests, conquerors, rulers that the country has seen over thousands of years. Greek, Roman and Arab traders introduced many popular herbs and spices, led by saffron. The Arabs (through Haj pilgrim, Baba Budan in 17th century) were responsible for the introduction of coffee. When Mughals came, they brought with them lavish spreads laden with dry fruit and nuts while the Portuguese brought the humble potato, which is now a daily staple. Tea – India’s unofficial drink – is Chinese in origin and was introduced by the British. All these influences have been absorbed and become a part of daily lives. It is difficult to imagine a time when Indians did not know the pleasures of the morning cuppa. This trend continues today also, when they have taken Pak Choys, Zucchinis and the Bell Peppers of the world and assimilated them seamlessly in the everyday food. Indianisation of international cuisine is an art unto itself. We have the Indian Chinese that tastes nothing like the food in China. The multinational food chains have had to adapt to the quirks of Indians to succeed here. KFC sells vegetarian burgers, Pizza Hut has paneer pizzas, McDonald’s has Aloo Tikki Burger. The thing is that Indians want to eat these new things but in their own way. Alcohol has been adapted in ways unique to India – Mangaa (Aam Panna + Vodka), Rum with Kala Khatta, Golgappe with Vodka / Whisky instead of the regular imli ka paani are all examples of this trend. What is interesting is the fact that the Indian people have not just adopted and made all these influences, dishes, ingredients their own, they also understand and in some way celebrate their origins also. It is not uncommon to find red décor with dragons floating around in restaurant selling ‘Chinese’ food. One can find this even in the smallest neighbourhood eatery. 2 The term will be used to describe both food and beverages in the document.

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In his article, Rude food: How food choices change across India 3, Vir Sanghvi cites several well known chefs and restaurateurs, to emphasise the differences and similarities in food choices across India. At the top end of the market, people look for authenticity and are willing to experiment and absence of familiar, local flavours is not a deal breaker for them when eating out. High-end hotel restaurants can serve pretty much whatever they like as long as it is well made. However, local preferences do play a role in the kind of items that do well in the market. Gujaratis prefer a blend of sweet and savoury, but non-Gujaratis might find it weird. Sour flavours are popular in the west due to the use of kokum in Gujarat, Goa and other parts of western India. Therefore, Thai food, which is all about chilli-lime and sour-sweet combinations, is a natural favourite in Bombay. Similarly, rice dishes tend to do well in the east – biriyani is an eternal favourite in Kolkata.

At the top-end of the market, people look for authenticity and are willing to experiment and the absence of familiar, local flavours is not a deal breaker for them when eating out.

The chart below gives the names and sizes of these motivations:

Figure 1: Primary Food Motivations and their Share of Occasion 1% 10% 3%

24%

10%

9%

16% 5% 24%

Food Motivations As the food changed, so did the motivations behind consuming it. Since the time when man first learned to forage, sustenance has been the driving force behind food consumption. It would probably remain so in the years to come but it is more a generic factor. This is especially so among those whose lunches and dinners are assured, who do not have to worry about where the next meal will come from. Since, sustenance is a given and understood, especially among the urban populace. Primary research in the last few years focused more on the motivations beyond the fundamental need to eat to live. These studies covered categories4 and occasions excluding those pertaining to main meals like lunch and dinner. The analysis of the data thus gathered points to nine universal food motivations in India – spanning from the physiological need of satiation to the more evolved, psychological motives. 3

Satiation Betterment Switch on Switch off Fun Socialisation Celebration Indulgence Show off

The motivations have been sized by the share of occasions. If there are 100 food and beverage consumption occasions, Satiation is the primary motivation for 24% of them. The guiding thought behind this form of sizing is the fact that different people eat and drink on different occasions for different reasons. Hence, it would not be entirely correct to size the motivations in terms of people – the same person would probably express more than one such need at different points in time. It is important to remember that size of the motivations would differ by categories. For example, Satiation will be a much smaller motivation for consuming confectionery while Show off will be a bigger driver for alcohol.

Hindustan Times, March 18, 2013 Learnings based on studies done among more than 30000 consumers, representative of population. Category coverage ranging from beverages like alcohol and Carbonated drinks to food items like salty snacks and packaged noodles. 4

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5.4 THE WILL OF FOOD

Motivation Markers: Satiation (24%)

Betterment (16%)

“I really love good food occasionally, but I need time to enjoy it, and I need to be hungry.”

“I’m very conscious about putting good food into my body. Years ago, I went to see an amazing healer called Allah, who could read your body. She told me that I can’t absorb vitamins very well, and I have to eat the right things to get my vitamins. I’ve always remembered that.”

– Claire Balding, BBC Presenter

This is an evolved form of basic sustenance, which is more about eating to survive. Satiation is a rather physiological need that focusses primarily on assuaging hunger and thirst. However, it has an element of satisfaction. It manifests itself mostly in idle moments – over long commutes, between meals when one feels a little peckish.

– Trinny Woodall, Fashion Advisor Food is a route to self-improvement. People want to feel active, energised and enjoy a general feeling of well-being. So, anything that comes recommended by experts or is labelled healthy – either mental (memory improvement, alertness) or physical (growth for children, weight control, for adults) is likely to be chosen in such cases. Wholesome goodness is the theme here. This is slightly long term in nature but certain occasions are generally deemed best to achieve betterment over a period of time. These typically comprise morning breakfasts and after work.

What people desire is something that is tasty and will tide them over until the next meal. Something which is not too fussy, easy to prepare, easy to eat – anywhere, anytime. Key Categories: Milk Nimbu paani / coconut water Health / Milk Food Drinks Carbonated drinks Indian snacks like samosas, kachoris, poha, upma etc. Roadside / street food like golgappas, pav bhaji, muri, etc. Sandwiches / burgers / patties Instant Noodles Biscuits Packaged snacks like chips Indian munchies like bhujia, chanachur, murukku etc. Soup – packaged or freshly prepared

Key Categories: Milk Juice – fresh / packaged Health / Milk Food Drinks Dietary supplements Breakfast cereals Bread & butter Steamed or low oil Indian food like idli / poha / pongal / upma Biscuits Cereal bars Fruits Soup

Brand Story: Knorr Soup for the choti bhookh. Positioned during that twilight time between evening tea and dinner – just enough to fill stomach for now, without killing the appetite for dinner.

Brand Story: Most health / milk food drinks occupy this position, be it Complan with its growth plan or Horlicks with its all-round development.

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Switch On (24%)

Switch Off (5%)

“All happiness depends on a leisurely breakfast” – John Gunther, Author

“If more of us valued food and cheer above hoards of gold, it would be a merrier world” – J. R. R. Tolkien, Author

The territory has two underlying dimensions: Recharge: A need to overcome tiredness, headaches and feel refreshed in order to think or concentrate, an energy booster that provides a sense of ‘being in control’. Gear up: A need to prepare for the day, feel ready to face all the challenges that the day will throw.

There is always an element of preparation for what is to come next. It is more like harnessing one’s resources in order to do what needs to be done. Early mornings, breakfasts and break-time during the day are the moments when this need comes to the fore. The preferred categories here are those that are perceived to provide a bracing effect, so to speak. An instant uplift – both physical and mental – is what the food needs to deliver. Key Categories: Tea/Coffee (hot variants) – coffee seem primarily in South India Juice Nimbu paani / coconut water Energy drinks Slightly more filling items on Indian breakfast menu like paranthas / dosas / uttapam Sandwiches Marie / glucose biscuits Cereal bars Candies Brand Story: Nescafe Classic for the perfect start to the day.

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The day is done, the battles waged, ceasefire called. Tomorrow is a different day. What people need in such moments is to shake off the dregs of the day and simply relax. They want to spend time pleasurably with their loved ones, either at home or outside. So, the food has to be tasty – something that one enjoys eating and sharing with others, something that is just right to ease the everyday tension, provide a respite until the next day dawns. In India, the evening tea (or, sham ki chai, as it is colloquially called in Hindi), is the perfect occasion to relax and unwind. This has less to do with tea and more to do with the entire setting. It can be at home after work or even at a social club for the affluent but usually this time is spent in the company of others.

Key Categories: Tea/Coffee – both hot and cold variants Carbonated drinks Juice – fresh / packaged Alcohol Indian munchies like bhujia, chanachur, murukku etc. Indian snacks like samosas, kachoris, poha, upma etc. Roadside / street food like golgappas, pav bhaji, muri, etc. Packaged snacks like chips Cream biscuits Gum / Candies Brand Story: Television commercials for most tea brands in India would show people – family or friends – gathered around a table in the evening and sipping the tea. In the process, they drink the day’s stress away. Or, there would be visuals of the harried Indian housewife, savouring her evening cup of tea, after the day’s chores are done and before dinner duties begin. Taaza Tea has had a string of commercials along those lines.

5.4 THE WILL OF FOOD

Fun (9%)

Socialization (8%)

“When I get out of work early, or if I have some time before I go into the studio, I go to Disneyland for a few hours with my siblings. We just have fun, go on all the rides together, and eat all of the good food.”

“There are three possible parts to a date, of which at least two must be offered: entertainment, food, and affection. When the affection IS the entertainment, we no longer call it dating. Under no circumstances can the food be omitted.”

– Becky G, Singer / Songwriter

– Judith Martin, Etiquette Authority Fun is the end game here and food is just another means for the same. Variety is truly the spice of life for people when they seek fun. So, food also has to be different and new, either in form or flavour – always provide an edge of excitement. Since it is all about fun, people want items that are convenient or they eat out. They are not willing to spend time and energy in preparation. These times are often spent with friends, peers, family and sharing the food heightens the pleasure of the moment, makes the entire experience memorable and special. For children, it could be while playing with friends and for the grown-ups when they party or go out with friends. The critical component of the moment is the company and not so much the when and where. For alcohol consumers, fun by itself is one of the top motivations.

Key Categories: Carbonated drinks Lassi / coconut water Alcohol (especially beer) Energy drinks Cold coffee / iced tea Burgers, french fries, pizzas, nachos etc. Indian Chinese – the roadside chowmien, momos Samosas / kachoris / golgappas / vada pav Ice cream, ice lollies, barf ka gola Packaged snacks like chips Instant noodles Chocolates Gum / Candies Brand Story: Tuborg beer from Carlsberg communicates the spirit of fun and frolic with friends in its commercials. Alpenliebe, the candy brand from Perfetti, has always maintained an element of innocent mischief in its ads, regardless of whether they featured kids or the popular actress, Kajol, stalked by a candy crazy crocodile.

The term Socialisation evokes a picture of a group of people conversing – or, trying to – over food and drinks. Food enables them to fit in, belong, be part of a group. It can break the ice (coffee as the food equivalent of handshake) between individuals tentatively trying to form a connection. Or, it can add to and enhance the camaraderie of the moment. The occasion itself could be at a restaurant, office parties or even business meetings – anywhere and anytime, that requires people to interact and connect. Food should be such that it can be easily shared, passed around as people talk, share and forge deeper relationships. A bag of chips passed around, chocolates offered, scotch whisky served – these fit the moment perfectly.

Key Categories: Tea / Coffee Carbonated drinks Alcohol Traditional Indian snacks like pakoras, kachoris, idlis, vadas Packaged snacks like chips Chocolates Indian sweetmeats Brand Story: Lays Chips had built its entire equity in India on the concept of sharing and bonding over a pack of chips. The celeb endorsers have changed but the story of passing around a bag of chips has endured. A relatively new Brooke Bond tea commercial shows a live-in girlfriend breaking the ice with the rather disapproving parents of her boyfriend with a cup of tea. Exactly the way the mother likes her cup.

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Celebration (3%) “A party without cake is just a meeting” – Julia Child, Chef As the name suggests, it is all about celebrating – the big triumphs, the festivals, the marriages and the births as well as the smaller joys of daily life. The most elaborate feasts that history and stories talk about were driven by the need to toast, to celebrate. Whether the occasion is a wedding, a birthday or great exam results, the celebration has to involve food and drinks. In fact, it is difficult to envisage any major celebration in life without food. Tradition – and this is true for most culture globally – suggests that there is no better way to share one’s good fortune and joy than opening up their home and sharing food. It is the greatest honour and privilege that can be bestowed on others at a personal level. When food is used to share the good times, it also helps to bond with others. In India, distribution of sweets is a sure indicator of some joyous occasion. This is also reflected in the flavour notes that almost always mark this key food motivation. However, celebration need not always be about the life changing occasions or grand achievements. It can also be about rejoicing in the smaller pleasures of daily lives – a test aced, an appreciative mail, the first rain. Like the big moments, food is the key to celebration – it may not be a feast but a simple bar of chocolate as a self-treat. The occasions are a mix of the momentous – weddings, promotions, festivals – and the everyday ordinary like friends getting together. Alcohol and chocolates, expectedly, are some of the most preferred food items when the need is to celebrate. Key Categories: Carbonated drinks Coffee Alcohol Indian sweets (mithai) like kheer, laddoo, halwa etc. Chocolates Cakes / pastries Brand Story: Perhaps the most iconic communications in India on the theme of Celebration have come from a single brand called Cadbury Dairy Milk. From the cricket crazy girl celebrating her boyfriend’s century by running onto the ground in the 90s to the Pappu (a grown man reaching middle age) pass ho gaya5 campaign in the noughties, Cadbury turned its brand into a chocolate equivalent of champagne. 5

Indulgence (10%) “All you need is love. But a little chocolate now and then doesn’t hurt.” – Charles M. Schulz, Cartoonist It is about moments of luxury; to get a respite from the daily grind. By definition, indulgence is less about prudence and practicality and more about pampering and feeling special. Here, the individual is the most important. That is why typically moments of indulgence are spent alone or at least focussed completely on oneself. Food, therefore, has to match the mood of indulgence. It is not about nutrition, health or about goodness at all. It is about having something that tastes good, something that is probably not a part of the usual, the regular diet. The predominant categories here are those that are not traditionally seen as ‘good’ and are perceived to be a part of the ‘excess’ oeuvre. There is no whiff of abstinence and control in the food that can satisfy the craving for indulgence. Key Categories: Coffee Carbonated drinks Alcohol Indian sweets (mithai) like kheer, laddoo, halwa etc. Ice cream Cakes / pastries Chocolates Chips / Wafers Brand Story: Cadbury Silk, a recent addition to the company portfolio, has positioned itself almost entirely on the almost forbidden, secret pampering that is addictive in nature. It is all about that single moment of pleasure that one looks forward to. The latest series of ads show a young executive trying to secretly have his daily dose of sin in the form of Silk, anticipating and drawing out the moment of contact, before his boss swoops in and steals the chocolate for herself.

Hindi phrase that refers to Pappu – a grown man – finally clearing his matriculation exams after years of trying.

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5.4 THE WILL OF FOOD

Show off (1%) “I can certainly see that you know your wine. Most of the guests who stay here wouldn’t know the difference between Bordeaux and Claret.” – Basil Fawlty, Fawlty Towers Historically, food has been a measure of high social status. The more powerful the king, the more lavish his dinner table. Even the most humble of families would usually strive to provide the best food possible to guests. Not doing so, would have been considered an insult. With rising incomes and with more and more Indians coming in contact with cultures beyond our borders, this need has come into its own, in the last decade or so. Anything ‘imported’ has always been considered a status symbol. However, while it was earlier associated with categories like personal accessories and cars, in recent years, exotic food items – either raw or processed products – have come to denote exclusivity, a style statement. Serve and eat food to impress, to express sophistication, connoisseurship and a very premium vibe. This can be seen at wedding celebrations also. Indian wedding feasts – almost always an exercise in extravagance – are now considered incomplete if there are not a couple of live counters preparing the ‘international’ food like pasta and noodles. Not surprisingly, the need to Show Off is most evident in social situations like parties, business meeting and dates. The categories of choice are likely to be those that are perceived to be more premium. Within categories, the brands or variants preferred lean towards the high end.

Key Categories: Tea/ Coffee – the exotic, rare and high end variety Energy drinks Alcohol – choice of brands and even the alcohol type speaks of sophistication. Single malts and wine appreciation top the list Cheese 6

Breakfast cereals Pastas, salads and other ‘non-Indian’ dishes Nachos, tacos, bruschetta with unusual toppings and dips Unusual and not yet widespread regional dishes. Kashmiri kahwa in the upscale, affluent localities of Mumbai would be considered a sign of elegance simply because it is uncommon. Cookies Dry fruits Brand Story: There are not too many food brands in India that play on this theme. Imperial Blue does flirt with it a little. It usually shows men trying to impress a young woman by sucking in their beer gut or acting as the owner of a luxury car. The motif, however, is more about ‘men will be men’ and that they are incorrigible. Another brand which showcases food as means to impress is McCain’s. The ad featuring actress Karisma Kapoor, shows how a housewife wows unexpected guests with her culinary skills. She serves a wide variety of finger food, generally seen in eateries like McDonald’s, without a single drop of sweat on her pretty face. McCain’s frozen food items like French fries, wedges, etc., are the weapons that help her win this mini-battle.

The Future As the world becomes more global, the cultural osmosis, regardless of the geopolitical borders, will increase even beyond its current pace. A good example of this would be the number of words that keep on getting added to Oxford English Dictionary every year. Many of these words are a result of the fusion of two totally unrelated languages. The Indian culinary choices also continue to expand daily, quite like the languages that absorb new accents on a regular basis. For Indians who love their food, this unprecedented exposure to global fare, is virtually like discovering a gastronomic Aladdin’s cave, glistening with rarely seen tastes, flavours and sensations. Housewives – and increasingly men in the upper echelons – take pride in being able to serve food not seen before, to their guests, using ingredients with names they cannot always pronounce. A guacamole dip adds a dash of colour when served with the desi kachoris. Young mothers are beginning to take pride in being able to whip up a pasta as quickly as an aloo parantha. Availability of the right ingredients is no longer a concern with aisles after aisles of the supermarket stocked with attractive packs and names not seen even ten years ago. And if all else fails, there is the internet. People no longer suffer from pangs of doubt when ordering online 6 – be it a pizza or a tin of peaches. The interest in food is no longer limited only to eating. Increasingly in the posh nooks and corners of India’s biggest metros, people have discovered a love for the history of food, its quirks and stories. Slowly but firmly, food walks, food blogs and their ilk have become a viable source of income for their organisers.

Interest in online shopping has seen a CAGR of 6% over last five years or so, as per TGI data.

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These new discoveries, as in the past, would not remain limited to the privileged few. It has already happened with pizzas and burgers selling not just in swanky malls but in the narrow bylanes of small towns. Just like the international chains have been obliged to Indianise their iconic dishes, the traditional Indian brands like Haldiram’s have been forced to sell burgers alongside samosas in their outlets. It has become an imperative if they are to attract the increasingly mobile youngsters. Perhaps the most interesting new trend in the last few years, however, has been a return to the roots. So, while the young people look to explore the new, a counter balance is provided by nostalgia for the tastes that shaped their growing-up years. Paper Boat is one brand that has established itself as the purveyor of those old and authentic tastes (like aam panna, kala khatta) that are vanishing fast in the crowd of grapefruit, broccoli and avocado. All these changes in consumption habits, patterns and preferences are not just a function of a whole new world made available but also the mutating aspirations and expectations of people from food. As the data in the table below shows, nearly a half of urban Indians show a preference for trying new things and have actually adopted them as part of their lives – from the open enjoyment of nontraditional food to being comfortable about ordering food on phone.

Figure 2: People Agreeing with the Statement Source: Target Group Index (TGI) India 62% 63%

Like to try new food

35%

Enjoy foreign food

Juice & soup as part of daily routine Prefer cornflakes / oatmeal in breakfast

45% 2008:data not available 46% 2008:data not available 44% 43%

Grocery shopping in supermarkets

49% 40% 44%

Like to try new drinks

Often order food on the phone

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24% 31%

2008 2014

It is because of the changing thinking and attitudes that the food motivations that we saw earlier in this chapter are bound to evolve. Perhaps their contours would remain mostly firm but their sizes will definitely change. The core food spaces – where food is an essential – would likely see a reduction in size. But the peripheral food needs, where it is mostly an accessory, would probably expand. In the future, if the trends shown in Figure 2 above are any indication, food would become something to boast about in same manner as jewellery, cars or phones. May be in time, what is exotic now would become staple and the traditional Indian flavours would take on a glamorous sheen, propelled by déjà vu. People would also increasingly make the right noise about healthy eating and that would become the growth trigger for categories like breakfast cereals, juices, etc., provided the marketers are able to make these accessible in terms of both value and availability. But taste would still remain central to the choices that people make. If the motivations were plotted on a radar (refer to Figure 3 below), with the centrality of food forming its core, the taste / health and social / individual continuums forming two axes, we would find the smallest of the needs cluttered in the top right corner. The orange circles indicate the current need sizes. The distance from the centre (marked in darker green) is a measure of how critical is food in meeting that need. So, Satiation is impossible to meet without food while Show Off uses food as an accessory.

Figure 3: The Food Motivation Radar (the green circles represent the centrality of food to the need) Social

Show off (1%) Socialisation(9%)

Celebration (3%) Fun (10%)

Satiation (24%) Switch off (5%)

Health

Betterment (16%)

Taste

Switch On (24%)

Indulgence (10%) Orange circles indicate the position of the motivation; their size represents size of the motivation

On this radar, if the growth potential of each motivation is marked, based on the above observations, then it would be clear that the spaces dealing with the mind and spirit (Show Off, Celebration, Fun, Socialisation, Indulgence) would grow while those to do with body (Satiation, Betterment) would remain stable or may even decline slightly. Newer categories may start to create their own motivations, carved out of the existing spaces. For example, wine is a rather niche subcategory within alcohol. Whisky dominates the Indian alcohol landscape currently. However, with time, the sophistication that wine brings to any gourmet experience might enable the category to create an entirely independent food motivation of Connoisseurship (it is usually subsumed within Show Off in most cases). In fact, in the light of the above observations, it would not be entirely incorrect to say that the future belongs to food that can go beyond hunger and thirst, be the talking point by itself and a stepping stone to emotions and moods that transcend basic human physiology. Food marketers would do well to talk about the hunger of the mind and spirit when talking about their brand and not just about how it is good for health and can fill the stomach perfectly. Even brands in newer categories like oats, which are currently playing the health benefit card, would quickly need to find the route to the consumer’s

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In the future food would become something to boast about in same manner as jewellery, cars or phones. Maybe in time, what is exotic now would become staple and the traditional Indian flavours would take on a glamorous sheen, propelled by déjà vu.

Individual

Direction of arrows indicate whether the motivation size is likely to grow in the future or not

heart and that route does not always go via the stomach. The sooner the food industry realises and accepts this, the stronger would be the brands that it churns out.

Conclusion “Perhaps more than any other, the food industry is very sensitive to consumer demand” – Michael Pollan, Author In conclusion, it is safe to say that the will of food in India cannot be denied. The history of food charts the very evolution of society. Food is the barometer that can tell the observer the mood of the population. It was once the inspiration behind every socialist movie that Hindi film industry churned out in 60s and 70s. It still is the theme for quite a few movies and many TV shows but the tonality is different. Now, food in popular media, is a source of delight, a form of expression – people bond over food, celebrate their success, prove their social standing. So, in the year 2015, it only seems fitting to end this section on food motivations by citing George Bernard Shaw’s famous line:

“There is no sincerer love than the love of food” Indeed, and it has never been more true than here in this land with no national cuisine of its own.

Why We Buy Decoding Food Buying Behaviour BY SOUMYA MUKHOPADHYAY, RANJANA GUPTA & GURPREET WASI, IMRB INTERNATIONAL

This section of the IMRB food report attempts to unravel and understand the changing food & grocery consumption behaviour on the basis of key consumer insights and understand the emerging trends that will shape the future and profitability of food retail in India.

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5.5 WHY WE BUY

A

s elaborated in the previous section, Food is the most primal of human needs and, especially in the Indian culture, food forms the core of our lifestyles. In this section, we move forward to the business of food in India – with nearly 12 million kirana stores which in many ways are the backbone of the rural economy. 1 Quite obviously, food is the largest retail consumption category in India, accounting for 33 per cent of the overall consumption expenditure. It is also the largest opportunity area, especially in times when market dynamics are changing dramatically and consumer behaviour is no longer generic. 1 2

In today’s market, anything is possible – a grocery store where you don’t have to stand in a check out queue, where you don’t need to fish for your wallet to pay and where all that you want gets automatically delivered to your shopping basket, rather than tediously looking through racks and racks of SKUs at the store! Technology is changing shopping behaviour across categories in India. The old paradigms are changing every day and already the definition of ‘going’ shopping has assumed several meanings in an urban shopper’s life. The first big change is the fading boundary between the brick and mortar and digital world. The shopper is moving seamlessly between the physical and digital world, and the mobile is fast becoming the central processing unit of her life! She is buying more and more food online – grocery buying on the internet has grown by 14% over last year 2 . Over all F&G e-tailing is the fastest growing category in India. However, while e-commerce is growing, brick and mortar continues to be the mainstay of food retailing in India. And clearly, brick and mortar is here to stay. The powerful sensory experiences of visiting a physical store has a great impact on the purchase behaviour – the smell of bread, the sight of fresh fruits and vegetables, the excitement of unplanned discovery, and the comfort of human interaction cannot be undermined. However, this does not imply that all is well – brick and mortar F&G stores of the future need to be clearly positioned, be relevant and differentiated from other retail channels. The consumer’s enthusiasm to visit the store is directly proportional to their expectations being met – the shopping experience, store design, service, variety and uniqueness of the product. We are almost moving to “me-tailing” as the newest format of customised, bespoke shopping experiences of the future customers in urban india. In the hitherto small category of modern format stores, convenience seems to be the biggest driver of visitation – the fact that all categories and brands are available under one roof. It is apparent that “location convenience”, “customised services” and “easy goods return/exchange facilities” drive a customer towards kirana stores while “product choice”, “efficient store-management” and “valueenhancing services” attract customers towards modern retailers. Many consumers, in fact, equate grocery shopping to be an enjoyable activity that enhances their sense of self and creates positive feelings.

‘A sensible FDI retail policy is good for kirana stores, farmers, and consumers’ – William Bisell, MD Fabindia, Article in Economic Times IMRB Web Audience Measurement ( WAM) Survey, 2014

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Some older consumers look forward to their monthly/ weekly grocery shopping trip to the kirana store as an important social activity, rather than just another chore. Technology can create convenience, but may not substitute a real shopping experience. Kiranas, in fact, have emerged the biggest winners in the race towards Modern Retail. While international and national biggies experimented with their store formats, Kiranas quietly and swiftly redeemed themselves by forging stronger engagements with consumers. So much so that today the retail giants in India are tying up with local kiranas or neighbourhood stores to boost their operations. 3. Women, mothers particularly, continue to be ánnapurnas’, shouldering the onus of nutrition for Indian families. The only shift in their behaviour is the near perfect juggle between time consuming home-made food and the quick and convenient ready to eat / packaged food. It is also an ongoing tussle between health and convenience. And while she goes food shopping, the factors influencing her food & grocery shopping are: budget, promotional strategy, festival offers, discounts, availability, billing speed and ambience. As part of IMRB’s retail practice we continuously connect with the physical and online marketplace to understand the consumer from the consumption and psychographic point of view, and by looking and analysing the trends. We look at how consumers are shopping, track their preferences and offer insights on how retailers and CPG companies can use these insights to improve the shopping experience, drive increased footfalls and sales across channels. We also examine this data to determine the trends – how shopping behaviour is changing and how it affects the future of F&G retail in India. 3 4

While international and national biggies experimented with their store formats, kiranas quietly and swiftly redeemed themselves by forging stronger ties and engagements with consumers.

Some of these trends are predictable and in line with the conventional wisdom, like, for example, we know that in absolute terms, the amount spent on food increases with a rise in income, etc. However, there are other trends that indicate paradigm shifts in the consumer buying behaviour, like, for example, the change in the food palate of the Indian consumer, and the passionate adoption of ‘foreign’ foods in daily life. A few key trends are discussed below:

A new breed of bold & experimentative consumers has emerged Indian consumers are becoming more and more indulgent with food (and vegetables), and they are experimenting with new and foreign cuisines; they are seeking variety and are open to international brands. They profess to enjoy foreign food and are ready to pay more for premium or organic food items. This is a huge shift from the last decade. As a result, new foods like quinoa, different kinds of brands, etc, are now available at regular supermarkets and large kiranas today and they have an increasing shopper base. Consumption of new and exotic food items, salad dressings, syrups, etc., have gone up dramatically over the last year.

The future is going to be HEALTHY! Indian consumers are now conscious of the effect their busy lifestyle has on their health. They equate fast food with junk and are showing a marked preference towards branded packaged food, fruit juices, health drinks, low fat , organic food, etc. Packaged fruit juice consumption as a category has grown 15% over the last year4. In order to maintain a healthy diet, consumers are limiting the intake of high calorie and high cholesterol food items. They are more likely to indulge in new food items, which they think can also address their health concerns.

www.indianretailer.com/article/whats-hot/trends/Modern-retailers-eRetailers-new-love-for-Kiranas.a3459/#sthash.M4ea2bx4.dpuf IMRB Target Group Index ( TGI) 2014

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5.5 WHY WE BUY

From mom and pop kiranas to super markets, hypermarkets to online grocers, Indian food shopping has slowly arrived full circle with a learning that home delivery is the only constant. Home delivery of groceries and other daily staples like milk was a well-established tradition in Indian families and even though food shopping has become complex, involving several channels, a new model has emerged where consumers can visit the retailer’s website, use an app and pick up the phone to order at home.

Men are from MARS, no longer!

Convenience is now the new driver of consumption: Rapid urbanisation, demanding lifestyles have increased time-starved consumers exponentially and the segment that values convenience has grown – consumers are more likely to seek for convenience in their consumption or shopping for food items, over other considerations. This has led to a rising incidence of consumption of food items like ready-to-eat foods, processed foods and packaged foods like frozen paneer, vegetables, etc. The consumption of packaged pasta alone has gone up by 28% over last year! 5 Even for eating out, there is a conspicuous growth of consumers visiting shopping malls for eating out at Food Courts than stand-alone high street restaurants/ joints.

The cocktail of old and new with a twist! Food products dominate the lifestyle occasions in Indian life and the combined ‘food’ category accounts for 29% share of the festival wallet. 6 Packaged sweets, Juices, Fruits etc. are the most preferred gifting items; chocolates is becoming a new ‘mithai’ though contributed mainly by the north and east.

The consumer has to be at the centre of the food business strategy, which should allow her to decide when, where, and how to shop. The consumer should be able to order anytime, anywhere, and from any device.

Old learnings shaping new models The digital natives are representing the new consumption base in India; online shopping is a deeply embedded behaviour in these new customers, a fact which will define how food retailing will take shape in the coming years. It will be critical to include digital touch points along the entire path to purchase. 5 8

IMRB Target Group Index ( TGI), 2014 IMRB Target Index Group ( TGI) 2014

6

IMRB Festival Shopping report, 2014

7

Family grocery shopping has been the accepted domain of women for the longest time; however, modern, social and demographic shifts have challenged traditional gender roles within the family unit. Indian men are now engaged in grocery shopping more freely and frequently There has been a 4x increase in male shoppers (Y-o-Y ) compared to 3x growth in women. 7 69% of the online F&G shoppers in India are in the age group of 25-34 years, and more than half of them are men. 8 To conclude, the Indian Food Consumer is hungry and the appetite is growing voraciously. Growing disposable incomes, exposure and ambition is breeding even more consumption. The global recession seems to have had little impact on the urban Indian shopper’s consumption habits and her food shopping and consumption behaviour has only evolved. The emergence of new channels and the combined growth of all of them in tandem is a testament to how hungry the consumer is. What this really means is that convenience is king. And the consumer has to be at the centre of the food business strategy, which should allow her to decide when, where, and how to shop. The consumer should be able to order anytime, anywhere, and from any device. Consumers should have the privilege to get their purchases in the store, at a separate delivery location, or through home delivery; they ahould have the freedom to decide their own shopping and delivery or pick-up windows to fit their packed schedules; and to be able to return items seamlessly. The shopping behaviour of the future will be defined by many micro moments leading to the zero moment of truth. Winning at the zero moment will be the new measure for success in Food Retail.

IMRB Web Audience Monitoring ( WAM) 2014 data

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Exotic’s Place of pride BY TARUN JAIN & RAVINDRA YADAV

The exotic vegetables market is expected to grow at a higher rate largely due to its premium nature, higher consumer demand, and growth of the organised food service sector.

I

n the 1990s, when international chains like McDonald’s, KFC, and Subway forayed into India, the availability of quality raw material was one of the major challenges they faced. The agricultural supply chain was highly fragmented and inconsistent at every level. Even for basic ingredients like lettuce, there was no single company that could cater to specific requirements on a pan-India basis. Lettuce was grown in a limited number of areas, and its supply was seasonal. Again, demand was also restricted to some hotels and few farmers have shown their interest in growing it given the high perishability of lettuce and the lack of cold storage facilities. Thus, like most other ingredients, value chain had to be developed from scratch. These multinationals then contributed immensely toward developing agricultural technology and distribution infrastructure, from making available required seeds, encouraging drip irrigation, and providing perennial farming solutions, to developing post-harvest infrastructure like cold rooms and refrigerated vans. What was true of lettuce was also true for other exotic vegetables in India, like leeks, celery, zucchini, pak choi, broccoli, baby corns, and bell peppers, which were only used in either star hotels or super premium restaurants with ~85 percent of the required produce imported into India. Again, the retail market for these products was practically non-existent.

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5.6 EXOTIC VEGETABLES

However, much has changed in the past two decades. The Indian food service sector has expanded rapidly, both qualitatively as quantitatively, and authentic Italian, pan Asian, and Mediterranean restaurants have come up in all major cities, spurring demand for exotic vegetables. The proliferation of mass media, with shows like MasterChef India, has encouraged Indian consumers to experiment with international dishes in their own homes. These consumers are better educated, have higher disposable income but less time, and, having travelled internationally, are more global in terms of food choices. On the whole, consumers are willing to include exotic ingredients as a regular feature when shopping for home and for eating-out as well. Further, Indian chefs are now using exotic vegetables to create dishes like Tandoori Broccoli, Tawa Asparagus, Subz Miloni, etc. Sensing the enduring potential, organised grocers have further developed the value chain in order to service this heightened demand, which is growing at a CAGR of 20 per cent. Both farmers and retailers have realised that growing exotic vegetables, in spite of the higher costs involved, yield higher returns as higher premiums can be availed for these products. Due to the diverse climatic conditions, India is known for producing many varieties of fruits and vegetables and is, in fact, the second-largest producer of fruits and vegetables. At the same time, it is also true that about 20 per cent of all fresh fruits and vegetables are wasted due to poor post-harvest infrastructure. Given these conditions, growing and selling exotic vegetables can seem to be an uphill task. These products require a specific climatic condition and soil type, as well as special harvesting and storage solutions which differ widely from traditional Indian production. The technological interventions required include soil matching, construction of temperature- and humiditycontrolled greenhouses, post-harvest cold rooms, sorting and grading infrastructure, and an efficient transportation system to deliver farm produce to retailers within a few hours and thereby keep the freshness intact. This translates to higher input costs, and higher associated risks, for all stakeholders including farmers and sellers. In this regard, the role of foodservice players, as well as organised grocers, is extremely critical. Farmers are now focussing on the

demand-driven production of these vegetables, which assures them of a market via contracts with such consumers as big retail chains, hotels, and restaurants. These tie-ups are a very good example of forward integration by farmers and of eliminating intermediaries. Most retail chains are buyerdriven and tend to dictate the quality standards, which need to be met by suppliers. These chains also create value by ensuring consistent quality, range of products, and freshness to the frontend consumers. As a result, one now sees exotic vegetables occupying a space of pride on many supermarket shelves.

The Indian food service sector has expanded rapidly, both qualitatively as quantitatively, and authentic Italian, pan Asian, and Mediterranean restaurants have come up in all major cities, spurring demand for exotic vegetables.

Despite the various offerings available, and the promising growth in metros and tier I cities, the penetration of exotic vegetables is still at a nascent stage, especially in smaller cities. Their higher price points, uncertainty regarding their perennial availability, and high perishability are some issues that need to be addressed. Again, while there is scope for a higher degree of branding, the regional variations in eating habits imply that these vegetables are still not as widely accepted in smaller cities. However, the exotic vegetables market is expected to grow at a higher rate largely due to growth of the organised foodservice sector, its premium nature, and the higher consumer demand. Investments in developing distribution and supply chain capabilities, especially in smaller cities, will certainly help convert non-consumers to consumers, and enhance the reach and usage of these vegetables. Also, the focus of international F&B players on these smaller cities will augment the awareness about, and usage of, these vegetables in these cities.

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The Organic Age BY SUNIL KUMAR

Despite the hurdles, organic produce in India has the potential to change farming communities and cosnsumers’ lives.

I

n recent times, organic food has emerged as a predominant trend around the world. Research has proved that organic produce is free from the mix of fertilisers, pesticides, insecticides and other chemicals that go into growing conventional produce. Chemical methods of preservation are also prohibited from organic food production, therefore making it a healthier choice by miles. Awareness about the profits of organic food, ethical and safe produce became a raving trend in the media, alerting consumers to start purchasing differently than they have so far.

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5.7 THE ORGANIC AGE

Indian market size All Figures in Cr. 640

441 305 210

2014-15

2015-16

2016-17

2017-18

Growth Rate – 45% CAGR

Another reason for the worldwide frenzy about organic food is simply that it tastes better. Farmers use traditional varieties of seed, and organic food is grown in traditionally suitable cultivation areas, delivering the true taste of the product, unlike the synthetic taste of crops grown with artificial inputs. Though organic foods are evidently more expensive than regular variants, synthetic produce, market numbers have shown that consumers do not mind spending the extra buck to better their nutrition. According to the USDA, ”Organic agriculture is an ecological production management system that promotes and enhances biodiversity, biological cycle and soil biological activity. It is based on minimal use of off farm inputs and on management particles that restore, maintain and enhance the ecological harmony”. Conventionally, the main concern today is to feed the hungry millions across the world. Agricultural produce is supposed to produce high yields, through technology, innovation and hybrid produce. This quantitative focus often sidelines other concerns. For instance, nutritional equilibrium and other harmful after effects of unrestricted use of pesticides on the crop are ignored. In this way, human health is deterred despite high amounts of produce, and the main aim is not reached. However, an argument against organic farm produce is often that it is not the sole player in the betterment of the nutritional balance in food, but the way the produce is cooked also makes a big difference. However, in spite of arguments against organic food, its benifits are several and clearly manifest. The average consumer is becoming more and more cautious about the quality of food – at home or

The main concern today is to feed the hungry millions across the world.

Note: Estimated category size basis sales date of 24M antra, Down to Earth & other competitiors in domestic market; Category Growth estimated @45% per annum as per International Federation of Organic Agriculture Movements

with commercial food served at restaurants, hotels and by catering services. Slowly, organic produce is becoming a lifestyle choice and ideological statement. The research conducted among 1,000 consumers in India has the following to say regarding the merits of organic foods.

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Category size & share

Competition – Major Players Competitor Sales & Market Shares

All Figures in Rs Cr.

Snacks 7 (3%) Dry Fruits 6 (3%)

Sweeteners 4 (2%)

Dairy 3 (1%)

All Figures in Rs Cr. Others 10 (5%)

Divine 7 (3%)

Others 25 (12%)

Nourish 8 (4%)

F&B 7 (3%)

Breakfast Cereals 9 (4%)

Conscious 6 (3%)

Pulses 62 (30%) Rice 18 (9%)

Organic India 51 (24%)

Pro Nature 9 (4%) Tatva 8 (4%)

e

Ghe and ) s l i % O 14 (7

Flour 20 (10%)

Sanjivni 8 (4%)

Spices 28 (13%)

Fabindia (private label) 34 (16%)

Down to Earth 22 (11%) 24 Mantra 32 (15%)

Teas 22 (10%)

Market Size – Rs 210 Cr. Market Size – Rs 210 Cr.

Period: 2014 - 15

Period: 2014 - 15 *Others Include: Pickles, Jams, Juices, Papad, Chutneys, etc.

Listed below are seven reasons as to why a consumer may switch to organic food. Organic food production helps protect future generations: The average child’s exposure to carcinogenic pesticides in food is more than four times as much as an adult’s. Switching to chemical-free organic food is a step taken towards preserving the health of children and future generations to come. Organic food is free of artificial additives: Organic food contains no toxins or artificial preservatives, which are believed to be responsible for diseases, osteoporosis, migraines and hyperactivity. Use of antibiotics, antimicrobial, hormones and other growth promoters are prohibited in organic production. Similarly, the use of synthetic chemicals as preservatives and colouring are prohibited in the processing of organic foods. Chemical residues are either non-existent or are at very low levels in organically produced food: Studies have indicated that most conventionally

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Entrepreneurs justify the higher cost to the consumer, since the organic farmer needs and demands an incentive of higher price.

farmed foods have pesticide and other chemical residues. Over 400 chemicals are routinely used in conventional farming and research shows that 60 per cent of herbicides, 30 per cent of insecticides and 90 per cent of fungicides are known to cause cancer. These chemicals can also lead to nervous and endocrinal problems. Organic growers on principle do not use toxic and artificial chemicals so the food is thoroughly chemical free. Organic food has lower nitrate levels: Use of soluble chemical fertilizers has resulted in high nitrate concentration in conventionally farmed food, especially fruits and vegetables. The leeching of these fertilizers has also resulted in increasing nitrate contamination of drinking water systems across the world. Not only are these nitrates carcinogenic, they have even been known to impair the blood’s ability to carry oxygen. The nitrate content of organically grown food is significantly lower than in conventionally grown produce and therefore much less harmful. Organic food is not irradiated: Many food products, especially those that are to be sent long distance, are irradiated to

5.7 THE ORGANIC AGE

Competition – category & SKUs 172 Sales Value in Cr.

39

National Players

kill microbes. Irradiation is believed to cause changes even at the molecular level. Organic foods are not permitted to be irradiated and are completely natural. Organic food has higher levels of nutrients: When compared to conventional food, research has proved organic food is far superior in vitamin, mineral and nutrient content. Organic foods offer more diversity and have better taste than conventional foods: Many consumers today complain about loss of food diversity in their everyday meals. The same is true even when they are eating at restaurants. Many foods having mild flavours have lost their taste due to excessive emphasis on their quantity production and utter disregard for their quality parameters. Present day cultivation methods have rendered strong and complex tastes extinct. Commercial food is seen to be bland and uncharacteristic. A large number of consumers have accepted the limited variety in choice of food. But for any adventurous and aesthetic consumer, new choices are not being offered by the conventional food market. Organic foods offer these very aspects. However, since organic farming is still a disorganised and an erratic industry in India, the challenges and obstacles are many. In fact, the Indian organic food industry is caught in a vicious cycle of woe, which can only be solved by innovative

Regional Players

National Regional (No. of Companies) (No. of Companies) 10

Organic food contains no toxins or artificial preservatives, which are believed to be responsible for diseases, osteoporosis, migraines and hyperactivity. Use of antibiotics, anti-microbial, hormones and other growth promoters are prohibited in organic production.

13

Period: 2014-15

410 320

100 58 10 Tatva

50

45

15 Fab India

24 Mantra Down to Earth

Category

SKUs

* Category building * Helps in converting consumers

and new marketing techniques from both private and government sectors. In spite of all the hurdles, entrepreneurs justify the higher cost to the consumer, since the organic farmer needs and demands an incentive of higher price. Organic foods have been proven to be a better life choice than synthetic produce. The nutritional and long term benefits of safe and ethical produce cannot be measured immediately, but have proven to be more sustainable and sensible when it comes to consumer health and satisfaction.

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Tracking the Milky Way BY SAM ALLEN, CANADEAN

Which are the largest drivers of the dairy market across India and how are consumer needs evolving across a variety of product categories in this industry?

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his report on India’s dairy market seeks to present a comprehensive analysis, which will allow manufacturers to identify key demographic targets and opportunities to both increase sales and buying occasions for dairy products through their reformulation and positioning. By better meeting changing consumption motivations, brands can innovate to provide products more suited to the differing consumer demands across a variety of sectors and ultimately increase profitability. There are many reasons why consumers turn to dairy food and an equal number of reasons why they don’t. It is crucial for manufacturers to fully understand what consumers want from the actual products they purchase, and avoid marketing and promotion surrounding insignificant consumption motivations.

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5.8 TRACKING THE MILKY WAY

Major Drivers of Consumption Dairy foods in general are associated with having a natural and high source of calcium, protein and other healthy ingredients. Highlighting the functionality of products such as milk and yoghurt and how they can aid with bone and teeth development in children will drive sales among younger consumers. Similarly, marketers should emphasise the health benefits of dairy consumption to a rapidly aging population, and innovate to provide offerings fortified with calcium and vitamins. New product innovation to meet evolving consumer motivations is also driving consumption across the dairy market, as manufacturers seek to tailor products not only to individual taste preferences but also for meeting a variety of specific health-based needs. Innovation in niche categories such as puddings and desserts and cheeses specifically formulated for the Indian market is driving sales and resulting in increased growth in these categories. With life becoming increasingly busy, there is a growing demand for more convenient packaging. Manufacturers should therefore continue to innovate in providing robust, easily transportable products. This will encourage consumption in niche categories such as yoghurt, which can be positioned as an on-the-go snack for both adults and children, while offering functional benefits to younger consumers. An increase in the levels of snacking will also drive demand for more convenient dairy products, as timepressed Indian consumers seek products that save them time and offer on-the-go mealtime solutions.

Responding to Consumption To identify key drivers of consumption across the dairy market, it is just as vital to ensure that products overcome the inhibitors to encourage higher levels of sales. Due to concerns over coldchain storage during transportation, and the lack of readily available refrigeration across India, some consumers have negative perceptions of the overall quality of dairy products. In a category where cold storage is vital, India’s per capita consumption of packaged dairy products is low compared to the US, Europe, and other emerging markets such as Brazil, Russia, and China. This is largely due to the prevailing consumer preference for fresh, unpackaged milk and dairy products, which are purchased from local dairies and neighbourhood convenience stores. This highlights the opportunity for marketers to target this large un-tapped potential market by communicating the freshness

India’s per capita consumption of packaged dairy products is low compared to the US, Europe, and other emerging markets such as Brazil, Russia, and China. This is largely due to the prevailing consumer preference for fresh, unpackaged milk and dairy products, which are purchased from local dairies and neighbourhood convenience stores.

and quality of packaged dairy products, which are still perceived to be of lower quality than unpackaged dairy products, especially in rural India.

Targeting Growth Across Categories The Indian dairy market witnessed growth at a CAGR of 7.6% in value terms over the period 2008–2013 and is expected to grow at a CAGR of 9.7% during 2013–2018, to reach INR743.0 billion in 2018. This rapid increase, second only to Russia globally, is being driven by rising levels of disposable income, increased urbanisation, and growing health and wellness concerns among the Indian population. Volume consumption grew at a CAGR of 5.1% over 2008–2013, due to increasing demand for packaged dairy products among Indian consumers. Due to the significant vegetarian population, which is largely dependent on dairy products to meet its protein needs, marketers can promote why it is necessary to include dairy as part of a balanced, nutritious diet. Furthermore, as an increasing number of the large working population in the country turns to packaged dairy products for quick, convenient, and nutritious food options, brands should promote how products such as cheese bring moments of de-stress in our increasingly busy lives.

Encouraging Consumption Across all age groups, there is no single group that either significantly under- or over-consumes dairy products. This is a reflection of how all consumers across differing ages and life-stages (either with or without children for example) have some degree of dependability on natural, healthier products, which have become a part of our daily diets, of which milk consumption is an important ingredient. The fact that consumers under the age of 15 marginally over-consume dairy highlights the importance

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Primary Consumption Motivations

of milk consumption at an early age. However, as consumers age, consumption of dairy products decreases and there is under-consumption among consumers between the ages of 16 - 44. A similar pattern is also witnessed for consumers aged 55 and over, with under-consumption at 1.3%. Frequency of dairy product consumption decreases marginally as age increases and marketers can target different age groups by introducing age-specific dairy products addressing age-specific consumer needs. There is a significant decline in frequency of consumption among older young adults and pre-midlifers as dairy becomes a smaller part of their overall diet. This indicates an un-tapped potential market of busy working individuals. Similarly, older consumers eat dairy less frequently due to the positioning of products more for children’s nutritional needs. This indicates a gap in marketing dairy products to older adults, who may restrict their use of dairy due to concerns over fat content and over perceived unhealthy attributes in categories such as cheese.

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Frequency of dairy product consumption decreases marginally as age increases and marketers can target different age groups by introducing age-specific dairy products addressing age-specific consumer needs.

The Indian dairy market as a whole is largely driven by milk, which accounts for 97.4% of the market by consumption volume. Yoghurt follows with a 1.6% share, highlighting the importance of the milk market as a whole and also identifying more niche categories with high growth potential. Age is the most influential motivator in the Indian dairy market, with more than half of all dairy consumption by volume being driven by consumers seeking products that meet their age-based needs. With one of the youngest populations globally, marketers should look to target the age-based needs of India’s growing youth consumer-base. The desire for products, which meet the age-needs of consumers, motivated US$1.8 billion of dairy consumption by value in 2012 in India by consumers who are 15 years and below, making this age group a highly lucrative cohort for manufacturers to target. Consumers in this age group look to dairy products for multiple nutritional benefits, such as calcium for building healthy bones and teeth, with 300ml of milk providing their daily requirement of 350mg of calcium. Indian consumers will continue to see the primary role of dairy as fulfilling the nutritional requirements that come with their age, as well as meeting the needs of fast-paced urban lifestyles. Urbanisation and migration – currently ranked seventh as a dairy consumption motivator by Canadean – will have a growing influence over product choices in India along with the fast-growth of major Indian cities such as Mumbai, Delhi, Bangalore, and Hyderabad creating a polarisation of wealth amongst consumers. Urban workers with rising disposable incomes will opt for more expensive value-added dairy products, such as fortified milk drinks, which offer an energy boost after a tiring day’s work. The growth of service sector companies in India’s cities will continue to drive consumers to migrate from villages, towns, and smaller cities in search of jobs. Moreover, infrastructure development in urban areas will help the distribution of dairy products, leading to a diversification of packaged dairy options available. Enjoyment of personal space and time is a significant need among Indian consumers and a desire to find products that meet this need will influence almost a third of dairy consumption. Rapid urbanisation is driving a desire among consumers for products that allow them to relax and recapture valuable me-time from busy work schedules and the fast pace of urban life. Consumers look to dairy products in particular for indulging in moments of escapism and comfort, which bring back the nostalgic links to childhood.

5.8 TRACKING THE MILKY WAY

With the demands of urbanisation and the pressure on working people to succeed, consumers will continue to seek out moments of escapism to enjoy personal space and time. As concerns about being overworked and overstretched become more pervasive with consumers finding themselves feeling tired and anxious, there will be a higher reliance on products that promise a coping mechanism to get consumers through everyday life. The Indian dairy market will continue to experience high demand for creamy, indulgent dairy products, which help consumers to relax and unwind. Demand will also be high for traditional treats such as dahi yoghurt and lassi yoghurt drink, which help to take consumers down memory lane of their childhood days, associated with the simple pleasures of eating dahi and slurping lassi. The desire for individuality in dairy products will continue to drive consumption choices with Indian consumers opting for products that suit their flavour preferences and dietary choices, such as organic and ‘slim’ products.

Secondary Consumption Motivations The desire for getting better value is another influential motivator influencing dairy product consumption in India. In an effort to remove the affordability barrier for India’s poorer consumers, manufacturers such as Mother Dairy are launching small unit size products at ultra-low prices. For example, Mother Dairy’s ‘Chhanch’ (a spiced buttermilk and yoghurt drink) was launched in Kolkata in 2013 priced at five rupees. Manufacturers are also meeting consumers’ need for value with milk products packaged in small quantities of 250ml or less in polythene sachets. These single-use sachets are more economical than the traditional glass milk bottles, helping manufacturers to pass

The Indian dairy market witnessed growth at a CAGR of 7.6% in value terms over the period 2008–2013 and is expected to grow at a CAGR of 9.7% during 2013–2018, to reach INR743.0 billion in 2018.

the benefits of reduced transport costs due to lightweight packaging on to the consumer. Private label penetration remains low in India – below 5% in any dairy category – as despite the cost savings private label offer Indian consumers prefer to opt for known brands in an environment where scandals related to adulterated milk are fairly common. Branded packaged products will face intense competition from un-packaged loose dairy products available at local dairies in the short-to-medium term; these products are lower-priced than branded dairy and consumers associate their freshness with quality. However, as modern retail formats become increasingly dominant in India and coldchain networks solidify, reluctant consumers will become increasingly receptive to packaged dairy products where marketers can communicate their value proposition and price advantages. With India’s sustained economic growth, higher income consumers can be encouraged to trade up to valueadded dairy categories such as cheese and yoghurt. In terms of dairy consumption that is motivated by trust, India ranks third globally, behind China and Brazil. Product trustworthiness remains a moderate influence over consumption behaviour due to high-profile concerns around adulterated milk products in the country. As a response to Food Safety and Standards Authority of India’s 2011 findings of large-scale sales of adulterated milk across the country, in January 2014 the Indian Supreme Court asked the government to take strict measures to curb the sale of adulterated milk across India. In an environment of adulteration scandals, Indian consumers have diminished trust in the safety of dairy products from unknown producers and are drawn to products from

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Different Consumer Motivations

manufacturers with strong brand equity, as well as to products with certified purity. While a desire for trust in dairy products will not be a primary motivator for Indian consumers, communicating safety as a facet of good quality will help to drive consumption among those who are resistant to packaged dairy. A perception persists among Indian consumers that packaged dairy products are of inferior quality to farm-fresh unpackaged dairy, and that they may be adulterated with undesirable substances. Manufacturers can look to overcome this view by labeling products with the agricultural source and date of origin, as well as emphasising the freshness and safety of the product and packaging. Tamper-proof and tamper-evident packaging will also find success in communicating the quality of goods, as they allow consumers to evaluate that the product is in optimum condition.

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The cheese and butter & spreadable fats categories are expected to record the highest growth over the period 2013–2018 at CAGRs of 9.8% and 7.8%, respectively, as their small market size offers larger room for growth. It is important that manufacturers target these rapidly growing categories as early entry and an increase in brand awareness can result in brand loyalty, particularly in smaller categories with reduced competition. The increasing demand for more Western food dishes, which include dairy, means that marketers must ensure the correct positioning of their products to meet differing consumer needs across a range of dairy sectors. The desire for getting better value is much more influential in the cheese category, and manufacturers should respond to this need by innovating with smaller pack-sizes to appeal to lower-income households. As refrigeration and cold storage is still a challenge across much of India, particularly in rural environments, providing single-serve options would meet the desire for value in terms not only of price, but also of product longevity. In the yoghurt category, the desire for convenience is a primary consumption motivator as busy working consumers increasingly seek portable, on-the-go options to save time. By providing robust, easy to transport yoghurt options, manufacturers can drive growth among a large, working demographic. In the dairy desserts category, the elements of fun and enjoyment have a major influence on consumption. In this niche market, marketers must focus on highlighting the taste and new experiences offered by their products to appeal to young consumers seeking novel, indulgent flavours. The disparity in consumer motivations emphasises the necessity of diverse strategies across a range of markets. Through a better understanding of consumer needs, manufacturers can drive sales in these burgeoning dairy markets, and early entry coupled with the correct positioning, will lead to brand loyalty and increased profitability in a market with huge potential for growth.

Meeting Evolving Consumer Needs Ultimately, success in the dairy market will depend on meeting evolving consumer need states in a variety of categories. While milk currently accounts for such a large percentage of the dairy market, it does not mean there are not vast opportunities for growth and profitability in other categories. India’s growing population, a rise in levels of disposable income and desire for more western

5.8 TRACKING THE MILKY WAY

products is driving growth in categories such as cheese, yoghurt and dairy-based desserts. The large, young demographic of the country seek dairy to meet age-based needs, and manufacturers across all categories must ensure they focus on this in their product ranges. However, the diversity of consumption motivators in different categories means that specific positioning and formulation should be used to appeal to consumers. It is only through a comprehensive understanding of actual consumer needs that manufacturers can drive growth in smaller categories such as yoghurt and cheese. Innovation should not be restricted to these niche markets, however, as continually evolving consumer needs will change the landscape of the milk market, along with dairy as a whole. To ensure on-going profitability and sustained growth, it is vital for manufacturers to meet these changing consumption motivations and use this knowledge to provide the products that consumers desire.

The increasing demand for more Western food dishes, which include dairy, means that marketers must ensure the correct positioning of their products to meet differing consumer needs across a range of dairy sectors.

Brewing Success BY TARUN JAIN & REETESH SHUKLA

Increasing acceptance and appreciation of coffee as a beverage in India has encouraged established brands to launch exotic ranges.

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raditionally, coffee consumption in India has been largely concentrated in the southern region, which also contributes around 90 per cent of the total domestic production. The availability of fresh coffee at an affordable price is the major driver for the high levels of domestic consumption in southern India. However, in the past two decades, there has been a spread in coffee consumption to other parts of the country, even if largely in urban centres. This penetration of coffee consumption is not restricted to the beverage alone but also in other forms such as desserts and ice-creams. The increase in disposable incomes, higher number of double income households, more global exposure, increasing media penetration and attention to food, rapid urbanisation and changing lifestyle preferences, influenced by the Western world, along with a greater number of modern retail outlets stocking a larger variety

5.9 BREWING SUCCESS

Coffee Trade Retail Market

and more variants of coffee, and new product developments by national and international players have boosted the consumption of coffee in rest of the country. India is the world’s sixth-largest producer of coffee, with crop harvest data for the year 2014-15 at 327,000 metric tonnes, comprising of 98,000 MT of Arabica and 229,000 MT of Robusta (The Coffee Board of India). The per capita consumption is ~90 gm per year. The major channels for domestic trade are modern, traditional retail, and national and international café chains. The retail coffee trade is largely dominated by branded players, with Nestlé and Hindustan Unilever being the category leaders accounting for approximately 60-70 per cent of the retail market (by value). Other brands include Tata Coffee and regional players such as Narasus, Cothas, and Leo’s which compete strongly in the respective markets.

Increased acceptance of coffee can also be attributed to the growing café culture with brands like Café Coffee Day and Barista opening outlets across the country.

The channel that contributes most to the sales of branded, packaged coffee is traditional retail, i.e. large and/or small kirana stores accounting for approximately 70 per cent of the total sales (by value). Modern Retail contributes approximately 20-25 per cent of total retail sales. The market for packaged coffee constitutes different variants. The market for filter coffee is predominantly southern India where the competition from local/ regional player is considerable. These players sell pre-packed or customised variants of pure coffee or coffee-chicory mix. This model has been replicated by organised players such as Café Coffee Day’s Fresh ‘n’ Ground to grab a share of the existing market. On the other hand, instant coffee is highly popular in all other regions of India, which has propelled brands like Nestlé to innovate and produce packaged variants of exotic coffee beverages in ready-to-drink (RTD) formats, e.g., instant cappuccino packs. Increasing acceptance and appreciation of coffee as a beverage, in all parts of the country, has encouraged the established brands in this category to launch exotic ranges to provide a heightened experience to their patrons. Hindustan Unilever has launched different flavours, e.g., Bru Exotica Brazil, Bru Exotica Columbia, and Bru Exotica Kilimanjaro as an extension of their product offerings to capitalise on a premium range. HUL and Nestlé together have a wide range of coffee powders, varying from Nescafé Gold (priced between Rs 4,000 and 4,500 per kg) to Bru (Green Label, at Rs 250-275 per kg) to cater to all classes of consumers. Additionally, the market for decaffeinated coffee is also garnering attention and growing at a rapid rate. The increasing awareness about health and wellness has pushed the attention of health-conscious consumers towards decaffeinated coffee. Nestlé launched its Gold Blend decaffeinated coffee to tap this emerging market. The RTD market for coffee-based beverages is likely to grow, although it is currently at a very nascent stage, making up less than 1 per cent of the total coffee market in India (by value). It is largely serviced by instant packs marketed

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by international players, for example, Nescafé Cappuccino packs, and by café chains, such as Starbucks, who are retailing their private labels. The past two decades have introduced urban consumers to bean-to-cup coffee; thanks to the surge in café formats, as well as the increasing proliferation of coffee vending machines in such institutions as offices and commercial organisations, who now prefer unmanned machines to service the needs of their employees in terms of stimulating beverages like tea and coffee. Brands such as Fresh & Honest and Café Coffee Day are the leaders in this category. Illy, Lavazza, and Café Coffee Day are the prominent players in the branded space for packaged coffee beans. However, the domestic use of coffee beans is limited since they require the use of such brewing equipment as coffee grinders/percolators, which still have a low penetration in homes. The increased acceptance of coffee can also largely be attributed to the growing café culture with brands like Café Coffee Day and Barista opening outlets across the nation, which appeal to the young urban population as a popular hangout place. Cafés have not only widened the awareness of Indian consumers vis-à-vis popular variants of coffee drinks, e.g., cappuccino, mocha, latte, espresso and Americano, but also introduced them to more exotic and innovative drinks like espresso, macchiato and affogato, different kinds of frappés, and a multitude of add-on flavours. The increasing interest in the “bean” has led to more international coffee variants being offered in upmarket cafés at a premium. As a result, the best coffees worldwide, e.g., Brazilian, Variant

Traditional retail accounts for approximately 70% of the total sales (by value) of branded, packaged coffee.

Brands

Instant Coffee Nescafé Sunrise, Classic, Gold Bru (Coffee Green Label, Instant, Super Strong Powder) Gold, Exotica, Illy, Lavazza Premixes

Nescafé Cappuccino, Vanilla Latte, Choco Mocha, Bru

Price Range Rs 250-4,500 per kg

Rs 60-75 per pack of 5

Pods

Nespresso, Lavazza, Fresh n Honest

Rs 30 each upwards

Beans

Illy, Lavazza, Coffee Day, Starbucks, Coffee Beans & Tea Leaf, Fresh & Honest

Rs 500-5,000 per kg

Ready-toDrink (RTD)

Starbucks, Nescafé, Amul, Mother Dairy

Rs 20-275 per bottle

Filter Coffee

Kaapi

Rs 750-800 per kg

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Ethiopian, Columbian, Guatemalan, etc., are being served and consumed with élan. The growth and success of these brands have in turn stimulated the appetite of other international players such as Costa Coffee, Starbucks, and The Coffee Bean & Tea Leaf to venture into the Indian market. The surge in the number of cafés has strongly contributed towards making India a “coffee loving country.” However, the geographic penetration of coffee is largely limited to the urban population in metros, mini metros, tier I and II cities, except southern India. Additionally, the emergence of cafés has also elevated the urbane image of coffee. With approximately 70 per cent of the Indian population living in rural areas, it is imperative that players offering packaged brands stress on penetration into the rural market. The challenge lies in generating appeal among the rural consumers, who are traditionally tea drinkers, and in creating scope for a shift in their preference. However, with the past, and forecasted, growth in this category, the future for packaged coffee brands is promisingly healthy.

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he Nuts & Dry Fruits industry in India is a very old industry. However, in terms of demand, consumption has taken off only in recent years. From being a ‘luxury’ product, it has been shifting to a ‘necessity’ category over the last few years. At $2.5 billion, consumption in India is just 3 per cent of global demand, though India has 15 per cent of the world’s population.

Nuts About Dry Fruits BY RAVINDRA MEHTA & AVINASH KANT KUMAR

From being a luxury product, nuts and dry fruits have been shifting to a necessity category over the last few years.

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Consumption Consumption of nuts and dried fruits is steadily increasing, and is being driven by changing lifestyles and rising health consciousness, which is reflected in growing focus on preventive healthcare against the backdrop of rising healthcare expenditures. The per capita consumption of nuts in India is very low at 150 gm per annum; this includes direct consumption on health grounds and as snacks; as ingredients in cakes, desserts, namkeen, etc; and during Diwali and other festivals. In fact, Diwali consumption alone accounts for almost 40 per cent of the annual consumption. This is mostly due to gifting, which leads to more of ‘forced’ consumption. Keeping aside the demand during festivals, per capita consumption is only 100 gm per person, per year. Compared to this, in USA, per capita consumption of nuts is 1.8 kg.

5.10 NUTS ABOUT DRY FRUITS

According to ‘Dried Fruit and Edible Nuts: A Global Strategic Business Report’, by Global Industry Analysts Inc, peanuts represent the largest segment in the global edible nuts market, while tree nuts are projected to spearhead growth. Dry fruits and nuts such as prunes, almonds, Brazil nut, raisins, pine nuts, walnuts, hazelnuts, dried figs, apricots, pecans and peanuts, are consumed regularly.

Popularity Ease of storage, long shelf-life, easy portability, minimal seasonality issues, and natural resistance to spoilage are making nuts and dried fruits a popular snacking option. Removal of water content during the drying process makes dried fruits less perishable, easier-to-handle, and cheaper to transport. Moreover, these naturally sweet and flavoured foods can either be consumed directly or used in cooking without any loss in texture or form. This makes dried fruits and nuts an ideal food ingredient, and they are increasingly being used in production of processed foods such as mithais, chocolates, energy bars, etc.

Awareness With studies indicating that a vast majority of the population eats much less than the recommended amount of fresh fruits, dried fruit is increasingly being considered as a natural means to increase consumption of fruit to reduce the gap between actual and recommended fruit intake. Inclusion of nuts and dried fruits in addition to other ingredients, helps build the healthy image of food products, besides meeting the taste and nutrition needs of consumers. Rising consumer awareness over the benefits offered has been instrumental in boosting demand. Presently, nuts and dried fruit are serving as marketing strategies to enhance the appeal of food products to highly-focussed consumer segments. That is, food companies are increasingly using nuts and dried foods as key ingredients in their premium food ranges.

Range Consumption of Nuts and Dry Fruits in India is dominated by Cashews – about 1,60,000 tons against 56,000 tons of Almonds, 16,000 tonnes of Walnuts, and 22,000 tonnes of Pistachios. In comparison, USA consumes 2,70,000 tonnes of Almonds, 50,000 tonnes of

Nuts and dried fruits Industry in India slated to touch Rs 30,000 crore by 2020. Importers, processors and marketers need to be better prepared for the huge growth anticipated. Cashews, 50,000 tonnes of Pistachios, and 56,000 tonnes of Walnuts. China consumes 1,20,000 tonnes of Pistachios and 16 lakh tonnes of Walnuts. Amongst Dry Fruits, production of raisins globally is almost 10 million tonnes, whereas India produces and consumes only about 90,000 tonnes. Demand for Prunes globally is 2,00,000 tonnes, of which, India consumes only 200 tonnes per year. Other dried fruits are Apricots, Cranberries, Blueberries, Blackcurrants, etc.

Demand In India, Nuts & Dried Fruits have just started making a place for themselves on the health plate. There is an increasing awareness about the benefits of Walnuts as a source of Omega-3s fatty acids, the anti-oxidants in Pistachios, and health benefits of Prunes, Apricots and Berries.

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However, the consumer is still not aware of all the varieties and grades of nuts and their price, variety, grade relationships, etc. For example, Cashewnuts at the retail level, are still sold as Cashews and one has to make out the different sizes, visually. But the fact is that the Cashew industry clearly differentiates between a WW180, WW240, WW320, etc, which denote the size of the Cashew kernels (number of kernels per pound) and the colour, while also mentioning the origin as Kollam, Mangalore, Goa, etc, which further differentiate quality and colour. Walnuts are classified as extra light, light, light-amber, amber in colour and halves, quarters, brokens in size, while Almonds are of different varieties such as as non-pareil, carmel, sanora, etc, besides having origins such as California, Australia, etc. Pistachios are either Californian or Iranian having a different colour, texture and taste. All these varieties and grades have a different price range. The average consumers have just started becoming aware of all these varieties and thereby there is greater transparency and trust, which is encouraging them to buy more, once they know what they want.

Retailing Today, there is a larger effort on the part of manufacturers to develop national brands for Nuts and Dry Fruits, similar to what happened to Basmati Rice 20 years ago. Hence, more and more products that are coming into the market are better packaged, have consistent quality, and come with a longer shelf life. With the advent of Modern Retail, especially in urban markets, it has become relatively easier to communicate their range, variety, price, and origin to consumers. Supermarkets and grocery stores are also innovating with

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With the advent of Modern Retail it has become relatively easier to communicate their range, variety, price, and origin to consumers.

attracting displays and placement of their Nuts & Dried Fruit products on shelves. The category is also being positioned as a healthy snack option, and is being placed in the snacks aisle. The fact that these products are now coming in attractive resuable jars and tins, also lure customers.

Growth A combination of factors such as increasing awareness of health needs, increasing disposable income levels, better availability, right packaging, consistent quality, adequate product communication (labelling), newer products such as Hazelnuts, Pecan Nuts, etc, are leading to a healthy growth of >10 per cent year on year for the Nuts and Dry Fruits industry in volume terms. This is much ahead of the CAGR growth rate of 5.3 per cent for the dry fruit market and 6.5 per cent for the nuts market in the Asia-Pacific. The Indian industry size is currently pegged at Rs. 15,000 crore (4,50,000 tonnes approx). By 2020, this is likely to reach almost a million tons in volume, leading to an industry size exceeding Rs 30,000 crore. So importers, processors and marketers of the Nuts & Dry Fruits category in India need to be better prepared for the huge growth anticipated in the coming years.

All Things Hot BY SAM ALLEN, CANADEAN RESEARCH

An analysis of the evolution of the Indian spice market in the face of global trends.

A

s spice is such an essential ingredient across Indian cuisine, emerging trends and new developments are often overlooked in a market that initially seems saturated. However, a deeper analysis of the market, coupled with strategic consumer insight, highlights the changing needs of consumers on a global scale – and how the demand for spice is changing beyond traditional offerings in India.

Spices Based on Changing Lifestyles Canadean forecasts the volume of the Indian herbs, spices & seasonings market to grow by 14 per cent between 2013 and 2018. The rapid growth makes it essential for manufacturers to meet the evolving needs of consumers across India. The two most motivational consumer trends in the Indian herbs, spices & seasonings market are changing age structures and changing lifestages, influencing 29.3 per cent and 25.4 per cent of consumption, respectively. The high influence of both changing age structures and changing lifestages can be attributed not only to diversifying and maturing tastes through adulthood, but a desire for products offering added convenience, such as for busy working consumers wanting tasty but convenient food options, and parents with children seeking prepacked, easy to cook meals. The rise of urbanisation – resulting in a large, young working population growing rapidly in urban centres – means that manufacturers must respond to the desire for products meeting consumers’ value needs, and which better fit with their increasingly busy lives. In larger cities in particular, the purchase habits of consumers are changing: Buying spices by weight from traditional markets is becoming less popular, in favour of branded products, or more recently, private label options offering greater value. The decline in home-cooking and traditional meal preparation among the young workers presents an opportunity for manufacturers to provide innovative products suiting these increasingly hectic lifestyles. In urban areas, the influence of the personal space and time consumption motivator is 19.6 per cent, in comparison to just 9.6 per cent in rural areas. This further emphasises the necessity of providing products that offer moments of personal space and relaxation to busy urban workers, alongside the need for a differing approach when targeting rural consumers.

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5.11 ALL THINGS HOT

Rural Concern with Quality Many of the larger Indian spice brands are investing in marketing and advertisements in an attempt to drive sales of branded products in more rural areas – a vast, untapped consumer base outside the larger cities. The desire for quality influences 16.8 per cent of consumption in rural areas, and only 13.1 per cent of urban consumption in herbs, spices & seasonings. Manufacturers must establish consumer confidence in their products in order to encourage consumers to switch from buying unpacked spices by weight by highlighting the superior nature of their branded and packaged offerings when targeting rural consumers. These large spice companies are increasingly using media channels to highlight the quality and the authenticity of their ingredients, as adulteration is a concern in India in the absence of adequate food safety laws and enforcement infrastructure, particularly among unpackaged goods including much of the spice market.

Market for Imported Flavours The burgeoning young population in urban centers across India is also driving growth in niche cuisines in larger cities. Arabic food is becoming increasingly popular in smaller fast-food outlets, as consumers are seeking new and exciting flavours as an alternative to traditional Indian food. Larger Western foodservice outlets, such as McDonald’s and KFC have altered their menu to include spicier products to appeal to the Indian palate, such as KFC’s ‘Corn Cupz’, with butter and an added spice-mix. Consumers are also seeking exotic and imported flavours for their home cooking. Although the market remains small, the demand for readymade Italian pasta sauces and Mexican and Chinese cooking products is increasing. Although market penetration is low, tomato ketchup presents an attractive opportunity. Consumers are seeking new and exciting flavours from an internationally trusted brand with a strong and prestigious heritage.

Demand for Hotter Spices The desire for a wider variety of hot spices is growing globally, as countries across Europe and the US are incorporating more aspects of Asian, Indian and South American flavours into their cuisines. A Canadean survey of 2,000 UK adults finds that 16 per cent of consumers like to put hot and spicy sauces on their food, highlighting the opportunities for potential growth in similar Western markets. Much of the popularity of spice across Western countries can be attributed to the

There is a growing demand for ‘superhot’ spice products, as consumers seek the latest offerings to test their tastebuds. More niche and specialist retailers, particularly online stores, are providing consumers with the opportunity to try the hottest flavour innovations.

foodservice sector: Consumers are eager to try the latest spices in restaurants, and then enjoy these flavours in their homes as well. Sauces such as Habenero from Mexico and Sriracha from Thailand first came to prominence in foodservice outlets, and are now widely available in retail stores, as brands attempt to replicate the on-trade trends. Across much of Europe, brands must invest in and increase their product portfolios to meet the growing demand for heat and spice in food. The rising demand for hotter foods means that traditionally popular products such as tomato ketchup are declining in popularity in the UK. Brands should diversify and innovating across their product ranges to meet the increasing desire for spice. There is also a growing demand for ‘superhot’ spice products, as consumers seek the latest offerings to test their tastebuds. More niche and specialist retailers, particularly online stores, are providing consumers with the opportunity to try the hottest flavour innovations, aimed only at those seeking the most extreme heat sensations and unique taste experiences. The sampling of the hottest of spices is becoming a challengestyle experience both in foodservice with the rise of ‘spice food challenges’, and in the home among friends. In conclusion, the spice market both globally and in India is changing rapidly. Consumer needs are being influenced by a wide range of factors driven by changing lifestyles and taste preferences, and it is essential for brands and manufacturers to target these evolving needs. An understanding of how best to target consumers who are seeking hotter and exotic spices will allow manufacturers to make a good profit from this increasingly valuable trend.

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THE INDIA FOOD REPORT 2016

SECTION 6

FOOD & TECHNOLOGY

6.1 THE IMPATIENT CONSUMER, IOT AND THE FOOD OF EVERYTHING 6.2 DISRUPTION IN THE FOOD INDUSTRY- RISE OF FOOD TECH STARTUPS 6.3 PRODUCT RECALLTHE BIG CHALLENGE FOR FOOD BUSINESSES 6.4 MANAGING GLOBAL FOOD CHAIN RISKS 6.5 SUSTAINABLE AND INCLUSIVE SUPPLY CHAINSA KEY BUSINESS DRIVER FOR FOOD INDUSTRY

The Impatient Consumer, iOT and the Food of Everything BY HARISH BIJOOR

There is more to foods than meets the eye. There is technology. There is the consumer who is forever morphing. And there is the future. Let’s peep into it.

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Is India the Most Exciting Food Market in the World Really? Must be. The diversity of food we still eat, and the lack of a clonal habit in food and beverage intake is a hall-mark reality of India. Literally no two families eat the same. The country is diverse in other ways as well. The country, which hitherto was all abut a home-kitchen oriented market, is eating out more than ever. Add to it the fact that we eat not only with our mouth but with our eyes and ears as well. With food television becoming a big thing, the food market is an exciting one to be in. A market that will possibly define some of the future trends in food and beverage for the world to watch, use and see. In this essay, I am going to explore two different aspects that are defining food, beverage, its intake and the trends that will shape India later. One is a technology trend that will re-define it all, and the other is a consumerwatch trend that goes with the way the new consumer in India is behaving. Let me lead with technology and move on to the consumer in the latter half.

6.1 THE IMPATIENT CONSUMER, iOT AND THE FOOD OF EVERYTHING

The big technology trend I am excited of at this point in time is the Internet of Things (iOT). All of us have heard of it by now. The era of the iOT or the Internet Of Things is here. Some marketing and technology evangelists have dubbed it an era of the iOE or the Internet Of Everything. An era where the Internet as we know it becomes incidental. So incidental that we even forget the way the Internet of today exists and we start coliving with the Internet as if it did not exist at all. An Internet era where everything is literally governed by the Internet and an era where you do not go to the Internet but the Internet comes to you. And eventually, an era where the Internet is a part of you and you are a part of the Internet at large. A point of time when you will not know where you end and where the ubiquitous Internet begins even. Ouch! That sounds bizarre. Painful even. Intrusive for sure. The iOT is a productised evolution of what began as a service. Let me trace it’s history. In the very beginning, we lived in an era where one person spoke to another and made friends physically. If you had friends, you possibly had about ten of them at maximum, and you spent time with them when you could. You had enough time on your hands. So much so that you could meet, talk for long hours over a cup of coffee or an even more exciting beverage, you could go to the movies, play a game of cricket on a Sunday and maybe do lots more. And then time became a scarce commodity. Time stopped being a commodity even. Time today has become a very important part of the consumer currency. The consumer counts two things that he always like to have more of: money and time. Both are valuable currencies. Time is something that you cannot earn back. Time is something that you can only spend. It is limited and cannot be topped up at your nearest telecom re-charge outlet. Money on the other hand can be spent and earned. While time is God-given and limited without top-up, money is that much more flexible. Consumers then value time more than money. They should. When you don’t have enough time to spend, what do you do? You look for ways and means to keep up with those friends of yours, with timesaving means and devices. In comes the telephone as an instrument, and wow! You are able to keep the conversations going, even without being out there physically at your favourite ‘Adda’. Yes, it is nicer to be there physically, but when you cannot, a lovely conversation with your friends on the phone will do. As time passed, in came the mobile phone, and you could carry these conversations with you wherever you went. The machine (in this case the

Your Design / shutterstock

The Internet of Things

The era of the iOT or the Internet Of Things is here. Some marketing and technology evangelists have dubbed it an era of the iOE or the Internet Of Everything.

mobile phone) intervened and life was made more comfortable. Still good. You were still in touch with your ten friends. You are now in touch with your friends not 1:1 physically, but virtually. Sub-optimal and a compromise, but still good for you. Out here, you were using a machine (the landline or mobile phone) to intervene and continue the contact. You used your mobile handset and dialled your friend and your friend used her mobile phone and picked up the call. This was what I will call human-to-human conversation facilitated by the machine and the connectivity possible between those two machines due to the intervention of the telecom service provider. This is what we do today. In comes the era of the Internet then. In comes the ability for people to send e-mails to one another at the basic level. These e-mails are sent by you using a machine (your desktop, laptop, tablet or smartphone) and your friend and maybe thousands of them receive it when they open their e-mails using the machines at their disposal. This is less intrusive than the mobile call. In many ways, it is permissionoriented communication at its best. If someone wants to open the email you sent them, they can. If they don’t want to, they can press the delete button. And this is surely the era of mass contact possibility. One e-mail could touch thousands for sure. In came social media then. In came Facebook, Twitter, Tagged, and all the other exciting social contact mediums you use openly and at times using the confidence and trusted space of your bedroom or bathroom alike. Out here, you could continue conversations in an interactive manner. Instead of

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having just ten friends, you could have a hundred. Geography is history. The new geography of your friendship is the virtual space of the social media you are using. This then is the early emergence of communication between one human being and a hundred others. Again, this is machine facilitated. Again, this is permission-led. The exciting part of this is the fact that people do not have physical friends anymore. The friends are as virtual as the bits and bytes that help you use the computer. The rise of social media has led to an interseting development. Today, the relevance and importance of data is more than at any time before. An average youngster below the age of 25 in Pune has 321 friends on the social mediums of his choice, all added up. This includes Facebook, and the three other mediums they co-habit and inhabit. In Bengaluru, this number today stands at 316. Ouch! But all of this is still an example of many communications, still facilitated by two machines operated by two human beings talking to one another through the use of data and text. Nice.

More Exciting Things to Come. What is this iOT All About? The Internet of Things is here then. An evolution of the productised version of what began as a service. In the beginning there was communication that was 1:1 between friends. And then in came telecom. Two machines at either end facilitated the conversation between two friends sitting in different geographies. In came e-mail and this

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Your life is personal no more. If you wish to broadcast the news of your body, the news of your activity, the news of your sleep-pattern to the world at large, you can as well.

communication ceased to remain 1:1 even. And now, viola! In comes the iOT. Out here in the era of the iOT, everything around us is getting more and more intelligent. The era of the tracker is here. Fitbit is a motion tracker. You wear it round your wrist in a silicon bracelet and it tracks the numbers of steps you walk, how you sleep and how you don’t as well. The basic technology of the motion tracker is here. This tracker sticks close to your body in an appendage, and tracks your every move. You can track yourself via GPRS if you wish. Your life is personal no more. If you wish to broadcast the news of your body, the news of your activity, the news of your sleep-pattern to the world at large, you can as well. There are community sites where people post how they sleep. And guess what, people compete with one another in the virtual world to sleep better than the next guy around. People compete on steps as well. Did I walk more than you did today? The Internet of Things, in some ways, begins at the lowest common denominator level of the motion tracker for a start. Imagine 10,000 people in Delhi competing with one another on the steps they take every day. Imagine a million people doing the same with one another all over India. Imagine a point of time when your doctor’s desktop or for that matter his mobile phone receives news of how sedentary you were today. Imagine your virtual trainer in cyber-space sending you a shove or a poke on

6.1 THE IMPATIENT CONSUMER, iOT AND THE FOOD OF EVERYTHING

your mobile phone, insulting your sedentary day. Imagine, imagine, imagine. The power of the motion tracker alone is a very big power. The tracker tells you what you did. The tracker compares what you did as opposed to what others did. The tracker communicates to your doctor and virtual trainer as well. Tomorrow, expect your tracker talking to your insurance company on a regular basis. And expect your insurance company offering you a rebate on your health insurance premium just because you took an average of 30,000 steps a day last year, as opposed to a national average of 5,000. The Internet of Things is just about stirring. It is a revolution that is slated to wake up and shake us all up. It is a device and tracker-led revolution. This is a device and tracker and connectivity and communication-led revolution. The world today has 10 billion devices. Of these, seven billion are mobile phones. The other three billion are sundry other devices. As of today, the seven billion phones talk to one another when enabled by their human owners at both ends. When you make a call to Mrs. Kapoor, you are enabling the call. Mrs. Kapoor at the other end will decide whether to enable her mobile phone to receive the call, or terminate it. To that extent, this connectivity is all about permission-oriented connectivity. The era of the iOT is however one that is going to be one of intelligent connectivity, enabled just once. Once you have done that, at times by just accepting to have an intelligent chip in your device, communication is going to be a continuous, and at times a two-way process. You will possibly buy a refrigerator tomorrow, which has an intelligent chip in it. The intelligent refrigerator will talk directly to your web-enabled grocer. When the Coke bottles are nearing empty status on your bottle-rack, your doorstep will have a replenishment delivery. You will never run dry of Coke then. Ever. Take that one step further to the B2B application. Your grocer will have his intelligent-shelf chip talking to the local Coke distributor. The grocer will never ever run dry of stock. Take it further then. The Coke distributor has a chip that talks to the local bottler. And the bottler has a chip that talks to possibly Atlanta direct. The possibilities are therefore endless. Forget the mundane. Imagine possibilities. Predictive manufacturing is already a reality. The Mercedes Benz you bought yesterday in Hoshiarpur is possibly talking to the manufacturing plant direct. Its brake lining is speaking to Berlin. The moment it is wearing out, it is alerting the plant to produce and make it available in time at the local dealer in Hoshiarpur possibly. Think. Imagine. Fantasise even!

The Internet of Things is just about stirring. It is a revolution that is slated to wake up and shake us all up. It is a device and tracker-led revolution. This is a device and tracker and connectivity & communication led revolution.

This is not science fiction. This is reality today. The world is getting progressively penetrated by devices. And devices are getting intelligent. Intelligent devices are connected to one another. The prognosis for 2020 is that there will be 46 billion devices. Each intelligent and each talking to one another. We are at the doorstep of this revolution. Even as it unfolds, there are serious security concerns that are being flagged. The security industry is working overtime to fight that one possible Trojan that might infect and take over. They seem to be winning the fight as of now. In many ways, nothing is private and personal anymore. Privacy is dying if not dead, and no one seems to be complaining. Have you noticed how the young amidst us love to have their lives public on social media? Have you realised that the young love to flaunt more than the old in our midst do? Privacy goes to the cleaners. On that note, it’s ok when your washing machine is talking to your grocer. Imagine a time when your washing machine is talking to Mrs. Khanna’s washing machine. The gossip starts then. The problem starts then!

The Consumer Morphs: From Need to Greed Civilisations and nations move forward all the while. History has shown us this amply. The movement forward has always been punctuated by gaps of course, but these gaps, by and large, are but commas and pit stops. Pauses where civilisations and nations actually take a break, rejuvenate, re-gather and move forward again.

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This entire forward motion of nations is all about a latent hunger that leads us just one-way: forward. Consumer societies across the globe are engulfed today in this forward motion. And this motion is oiled by hunger. And hunger, in my thinking, has two avatars: hunger and greed. While hunger is basic and latent, greed is evolved and sophisticated. Both, within their own perspectives, are good. Hunger is good. And some say, greed is good as well. Let me start this exploration with hunger. And then move on to greed. After all, hunger normally precedes greed. Hunger is a basic force. Freud told us we are hungry for the basics. In many ways it is for food, clothing (for warmth and not for cosmetic appeal), shelter and sex. Man therefore craves for the basics. These basics make him and her forage for each of these basics. In many ways it is survival of the fittest as well. The driving force in this acquisition-spree is really an animalistic force that looks at survival. Consumer-society is therefore hungry. It has been hungry in India for decades now. Go back to the era just before and after independence. The hunger was surely for the basics. The hunger was to ensure that one was able to lead a decent life, acquiring the basics. While food, clothing and shelter could be spoken of, the fourth aspect of sex was also ensconced in the institution of marriage that provided it within its sanctity. And therefore was an un-spoken. As India moved ahead, basic hunger for the bottom-rung items

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When it came to food, consumers were now concerned not only with securing the next month’s square meal for the entire family, but were concerned about ensuring a few years of food security at least.

gave way to hunger at the higher end. When it came to food, consumers were now concerned not only with securing the next month’s square meal for the entire family, but were concerned about ensuring a few years of food security at least. When it came to clothing, desires led the way and cosmetic appeal came crawling in. You needed to wear clothes, but colour and texture and fashion came in as well. And when it came the turn of shelter, the consumer was not content with a rented house anymore. The craving and quest was to own the house. Thankfully, when it came to sex, marriage remained the institution to operate within. The hunger for the basics remained. This hunger however, climbed a few notches and evolved. Consumers evolved and started segmenting their hunger across different ladder-rungs that had ‘hunger’ at the lower end and ‘greed’ sitting right at the top. Simultaneously, society got stratified across economic rungs. The ‘haves’ started climbing the ladder and the ‘have-nots’ kept struggling to fulfill their basic needs at the bottom-rung of the ladder. Indian society therefore had a very stratified feel with economic segments of every kind and affordability segments of every kind, living together in the same village, the same tehsil, the same district and indeed in the same city. Basic need craving therefore literally lived together in the same village, rubbing shoulders with higher-end greed, as it evolved. Everyone lived happily. Or so it seemed. As hunger kept evolving from the basic to the advanced, the motivation levels in the people at large as well kept evolving. This basic quest to fulfill hunger was a positive drive in a large number of cases, and a negative drive in a small

6.1 THE IMPATIENT CONSUMER, iOT AND THE FOOD OF EVERYTHING

niche. Those who took the positive route took to the education of their children and took care of hunting out good jobs for themselves. These were the types who got a job and worked very hard. So hard that no one else worked as hard. The driving force was the need to earn enough to get all the goodies to make for a good and secure life. And those who took the negative route, took to every negative way of making money. If stealing and cheating was a way to do it, so be it. The development of India and its consumer society to the aggressive levels of today is a function of this basic hunger. Hunger became the motivation and its fulfillment became a point of satiation and gratification. Consumer society at this level was very concerned about gratification of its needs and possibly wants. It wanted nothing more. Life was good. And large chunks of Indian society worked hard to achieve this. Well then, that was the story of the past. How are we doing today? Where are these various chunks of consumer society? And how is the hunger-evolution doing? Look around ourselves and look first at the big cities of the day. Every Delhi, Mumbai, Kolkata, Chennai and Bengaluru has every kind of stratified denizen living within it. Cheek to jowl. Indian consumer society, despite all these years of independence, still shows stratified layers of the ‘haves’ and the ‘have nots’. The ‘haves’ use the ‘have-nots ‘ to fulfill their chores. The ‘have-nots’ happily fulfill these chores in their quest to get to the status of the ‘haves’, some day or the other. And what’s happened to hunger? How has it evolved? Manifold really. Consumer society has climbed many-many rungs from the bottom rung of ‘hunger’ right to the top rung of ‘greed’ and maybe even beyond. The quest of modern consumer society in India is not only for the ‘want’ and the ‘need’ fulfilling products and services, but is also for the ‘desire’ and ‘aspiration’ fulfilling products and services. I have climbed. In the beginning I wanted a car. I wanted to upgrade from my humble scooter. My first car was a second-hand Fiat. I moved on in life and earned for myself a brandnew Maruti Zen. I got promoted and wanted an Esteem. I got the bite of hunger and a wee bit of greed led me on. I got my first Honda Citi. Greed and a wee bit of what I thought was hunger kept me going and got me my Mercedes Benz. I am stuck there as of now. My next desire is a JLR. I will work hard for it.

Indian consumer society, despite all these years of independence, still shows stratified layers of the ‘haves’ and ‘have nots’. The haves use the have-nots to fulfill their chores.

How is hunger gearing different parts of society then? When I look at data, I find consumer society that is sitting high up on the ladder at the rung of greed, less hungry in sheer motivation terms than the ones that are sitting right at the bottom rung of the ladder. The burning desire and fire in the belly is really at the bottom-rung of the ladder of Indian consumer society today. Large chunks of population segments are sitting here. And this is the potential success story of India. This hunger and fire in the belly resides more in the small towns and villages of India today than it does in the big cities. This is an exciting fact. Those that have already gained their riches and their goodies at the top rung of the ladder are dulled into a certain somnoloscence of having everything. The fire in the belly is dead at this level. Except for the occasional ulcer that acts up for sure! The real hunger at the bottom of the ladder of Indian consumer society is one that is going to drive this nation forward in every sphere, be it manufacturing, agriculture or the services sector. This basic drive at the basic end of the demographics of India is going to define the frenetic growth rate of GDP in the country in the years ahead. Cheers to that!

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And before you sleep today, ask yourself the question. Are you ‘hungry’ or ‘greedy? Or both for that matter?

The Impatient and Hungry Consumer Marketing folk are famous for inventing labels. We love to invent dog-tags for generations of consumers. Remember the way we labeled Gen X, Gen Y and Gen Z? What next? What’s the Generation we are living through called? I had to sit under my own Peepul Tree to invent a name for the generation of consumers we are living with and through, as marketers and business folk in the business of buying and selling and hopefully making lives better. My recent studies in the consumer space indicate that there is a very distinct trend we spot in the new consumer of today. This one trend is Impatience, with a capital ‘I’. The new consumer of today is more impatient than the consumer just one marketing generation before us. And guess what, if one is to read the graffitti on the wall, the Next Gen consumer is going to be even more impatient. Frightfully so. Have you noticed how everyone is getting impatient amidst us? Our husbands and wives are more impatient than even one generation before us. Our mothers and fathers are more impatient as well. Our children are even more so. No one has the time to listen to the ‘old’ philosophy of patience. Impatience is in the air we live. I was jolted to reality the other day by this theory of impatience that is sweeping through our lives. Gone are the days when you could preach patience and get away with it. I remember the one word of counseling HR folk had to anyone who went to them complaining about a bad increment or the fact that they did not get promoted. Patience. Be patient, and everything will fall into place. This, sadly, seems to be an old virtue. The new world is an impatient one and does not believe in patience at all. Patience is the bad word, and Impatience the good one. Impatience is a virtue today, it seems. Take my own case. My 16 year old son went to school one fine morning. He was participating in an election for the post of Sports Secretary. Polling happened in the school democracy, and my son came back home in the evening. Accidentally, he found his dad at home as well. Dad looked at son, saw a depressed face, and I went to him and tried to console him. I said in my mature and wellpractised older counseling voice. “Son, winning and losing is a part of the game. You must take both with equanimity’.

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My son reacted. He said he had not lost. I then asked him why he was looking depressed. He told me that the election had happened in the morning first session, but results had not been announced by the time school closed. Aha! This was surely impatience at its peak. I therefore sat my son down and gave him a piece of ‘gyan’ on patience for twenty minutes. I spoke to him of the best theorists and practitioners of patience in the world. I went through Indian names such as Mahatma Gandhi and Swami Vivekananda as well. Twenty minutes went by, with me waxing and waning eloquent. At the end of the twenty minutes, my son looks at me and asks me a simple question. He asks. ”Appa, when you can be Impatient, why be patient?” I just had no answer to this question. Stumped into stupor by the simplistic question, I tucked my ‘gyan’ giving tail and realised that the generation of the young in our lives is totally attuned to impatience. Patience is difficult for them to understand. Patience, sadly again, is an old virtue. Impatience is the norm today and every marketer and business person needs to attune his business to impatience. Marketers of yesteryears were and are good at ‘Patience Marketing’ whereas the new requirement is ‘Impatience Marketing’. Businesses need to develop the new skill, art, science and philosophy of Impatience. The entire DNA of businesses need to change keeping in mind the new Gen we are living through: The Impatient generation. The I-Gen.! This generation of consumers is all about speed and quickness. If an election happens in the morning, they expect results by the evening if not by afternoon itself. No one has the time to wait and watch. This is a generation led by time. I call this gen the Bio-clock generation as well. The BC Gen is here. A generation that is very sensitive to the fact that life is short. A generation that believes in the philosophy that shouts out loud, “YOLO”! You only live once! This generation believes life is all about a lifespan of 80 years multiplied into 364 or 365 days,

6.1 THE IMPATIENT CONSUMER, iOT AND THE FOOD OF EVERYTHING

multiplied into 24 hours. Every moment is precious. Every moment that elapses is a moment that is over. The Bio-clock is ticking away every minute. You need to plan well for every hour for now. You need to be sure that every hour you expend results in a delivery that is quick and comfortable. This generation , more than any other, believes that we are dying every moment, rather than living. And that is the macro-trend in the I-Gen and the Bioclock Gen of today. I work a fair bit in the IT and ITES industries. Out here, the age-profile of workers is low. The average age of the worker is 24 years. In IT, 33 per cent of the folk are women and in ITES the number goes up to 52 per cent. Both the genders are very frenetic in their life-styles. They have money in their hands when very young, they want to own a car even before their bike is three years old, and want to own a flat even before the ink on their first promotion letter has dried. Everyone wants everything fast and quick. The young in the BC Generation plans every aspect of their lives to the tee. There is this young girl, all of 24, who is making a trip to Goa with her friends. She is spending three nights and four days in Goa with her friends. She has calculated that it is all of 11 meals she has in Goa. She is a big foodie. She has gone to Zomato and has mapped her every restaurant and every meal in Goa. She says she has little time and wants to maximise every bit. Therefore, she carries a Food Plan with her on her

The entire DNA of businesses need to change keeping in mind the new Gen we are living through: The Impatient generation. The I-Gen.!

smartphone, customised to her taste. She will follow it to the tee. How boring. But how planned! Good or bad is not the issue. That’s a value judgment we need to desist from passing. Spontaneity may be dead, but planning is in. And with planning, in comes the yen to maximise on time. The Impatient Generation of today is all about wanting good service everywhere they go. It is all about speed and delivery. It is all about good quality in offerings. It is all about not tolerating a fault-line in any of this as well. All this raises a challenge to the marketing and business environment built by older folk in the business, who just don’t understand impatience. These folk are still waxing eloquent on the virtues of patience, just as I attempted to do it with my son. I think it is time for businesses to sit up and smell the coffee. Its time to smell the burning desire for impatience among the young. It is time to change and instill in all businesses, retail or otherwise, the ingredient of impatience. All businesses need to instill the ‘new-virtue’ of impatience into their business delivery mechanisms. If you are food-delivery business, one fault is enough to taint your image forever. Forgiveness is out. It is old fashioned in an era where the options are many and myriad to choose from. Well, if you don’t agree with this, you can still fight the trend and try to buck it. Time alone will tell who was right and who wrong. But the key point is, can your business risk it? And must you?

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Disruption in the Food Industry Rise of Food Tech Startups BY SACHIT BHATIA, TROIKA

Technology is just revolutionising the way we live. It is disrupting industries all across the globe. Innovative start-ups are emerging and scaling at rates never been seen before in the history of mankind. India is no exception. With technology acting as the fundamental force, every industry is getting radically revolutionised. We have seen emergence of e-commerce; now it’s the emergence of food tech industry. The past few years have been really exciting and transformational with a lot of innovation in the Indian food industry and it doesn’t seem to stop any soon. New start-ups are emerging, leveraging technology to change every facet of the food service industry. With so much happening, we can only imagine what comes next!

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6.2 DISRUPTION IN THE FOOD INDUSTRY – RISE OF FOOD TECH STARTUPS

O

wing to its long history and extremely diverse culture, India is home to a wide diversity of cuisines. Indians are passionate about food and eating out has become a part of their lifestyle. Add to it the fact that we Indians are pretty liberal with our calories consumption as long as it satisfies our taste buds. India provides a perfect marketplace for innovative tech-services, which have become a phenomenon and are populating the ever increasing Indian startup brigade. From providing information about your choice of place to eat out at to delivering it right at your door steps, the Indian food industry has come a long way, just like any other industry stuck by the magic wand of internet and technology.

Rise of Food-tech Start-ups in India Food services are expected to be a USD 50 billion market that is growing at 16-20% year on year. The food industry has revolutionised since its alliance with technology. The entire business spectrum of food, food-processing and delivery has changed. Technology has revolutionised every industry like e-commerce, finance, taxi & cab services, real estate, and many other sectors of the Indian economy and it seems that food industry is no different. Food tech is currently the hot topic in the start-up ecosystem. If you live in a metro, a new start-up is born every other day, delivering cooked or uncooked (groceries/veggies) food at your doorstep. Online and mobile-only food services startups are pleasing the appetite of the country’s busy urban population, which seeks wholesome, nutritious meals but may not have the resources and time to cook them.

Total Companies in Food Tech Space = 145

The business is expected to be the ‘next big thing’ by industry watchers in the consumer internet space after e-commerce and cab-rental services.

45.51%

54.49%

Companies Founded Before 2014 Companies Founded Since 2014

High margins creating scope for a fundamentally strong business. Absence of large national brands in the space, hence it provides a room for disruption by creating food brands and infrastructure. The surge in the new age food-tech start-up is because of all the above reasons along with the strong promising returns it presents to the investors.

The business is expected to be the ‘next big thing’ by industry watchers in the consumer internet space after e-commerce and cab-rental services. According to Tracxn, a database for start-ups and private companies in the food-tech space, out of 145 companies that operate in the country, 66 were launched last year. The sudden rise of food tech can be attributed to many factors but the primary factors are: Massive market - the busy Indian consumer is too busy to cook himself, but needs multiple meals a day. Tendency to repeat ordering and business, leading to brand creation and strong lifetime value.

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Food-Tech Industry: A Market Overview It’s very hard to categorise food tech into categories since every start-up often transcends into more than one domain or service. For example Zomato, which until now was primarily into the restaurant search business, has started its food delivery service. Similarly, there are other start-ups which keep shifting and expanding their domain and specialty. However, based on the several essential factors and technical elements, we can roughly categorise the ecosystem into four categories.

Dining Outside

Home Delivery

Cook At Home

Online Restaurants

Restaurant/Dish Discovery Table Booking In-Restaurant Ordering/Payments Chef (Hosted)

Ordering and Delivering Ordering Only Chef (Ordering)

Recipe Box Groceries Chef (At Homes)

Subscription On Demand Late Night Delivery

1. Dining outside Restaurant/Dish discovery It enables consumers to discover restaurant/ places to eat by menus, location and dishes. It also provides ratings and feedbacks. E.g. Zomato, RedFoodie, HungryBells, FoodiesCompass, Binj, Dishcoveri, Dishkhoj, etc. Table booking These services allow users to book tables at different restaurants. E.g. DineOut , TableGrabber, Zeat, 24x7 Table, etc. In-restaurant ordering/payments Help users to order before arriving/in a restaurant. It also enables to pay bills at restaurants with stored info. E.g. MeDine, Tap&Eat, Momoe, Quikwallet. Chef (Hosted) These are the portals and services to book dining space with home/professional chef at their place. E.g. MealTango, ConnectWithLocal, BiteTogether.

2. Home delivery Ordering & delivering These kinds of services enable online ordering from nearby restaurants, pick up and delivery to the customer. E.g. Swiggy, KhaanaOnTheGo, Yhungry, MealsOnWheels (acquired). Ordering These services/platforms allow users to discover and order from nearby restaurants. E.g. Foodpanda, TastyKhana, TinyOwl, JustEat, TravelKhana. Chef (ordering) These portals help to discover home chefs nearby and order from them. E.g. Eatero, Foodcloud, Imly, Langhar, Mealboat.

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6.2 DISRUPTION IN THE FOOD INDUSTRY – RISE OF FOOD TECH STARTUPS

3. Cook at home Groceries These online services enable buying of grocery and household items. E.g. BigBasket, LocalBanya, ZopNow, Eemli, MyGreenBox, Grocit, etc. Recipe box These kinds of services deliver meal kits with measured ingredients for listed recipes. E.g. HalfTeaSpoon, iChef, CookFresh, Formybelly, YouJustCook, BeingChef, etc. Chef (ordering) These portals let you hire home/professional chefs to cook meals in your own kitchen. E.g. Restokitch, Chefhost.Kitchen, CookFinder. Late night delivery These services deliver meals at late night hours. They might or might not have their own kitchen. E.g. BatmanDelivers, FlyByKnight, HungryOwl, NightDelivery, etc.

Deep Dive: Food-Tech Start-Ups to Watch Out For In the past few years, many promising start-ups have sprung up. Below are few of them. (Source: YourStory) Founded by Sai Priya Mahajan and Rahul Harkisanka, Eatlo is a food delivery app where users get ‘quick and hassle-free food from the best chefs.’ They are currently serving 550+ lunch orders every day, in Koramangala, Bellandur, Sarjapur, Indiranagar and Domlur. They have a website (eatloapp.com) and an android app (eatloapp.com/app) to order from and the iOS app is going to be out soon.

4. Online restaurants Subscription These services provide you the meal on a subscription basis. They have their own delivery. They might or might not have their own kitchen. E.g. Tonguestun, SpoonJoy, Bhukkadpanti, iTiffin, Nashta, NutriTown, etc. On-demand These companies deliver meals on demand. They have their own delivery. Some of these services are also office-focused and deliver in corporate offices. They might or might not have their own kitchen. E.g. MyYummyBite, Frsh, Yumist, Eatonomist, Holachef, Bite Club, Foodyn, FreshMenu, Dazo, etc.

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Eatlo Investment Undisclosed

Holachef Investment USD 300,000

SpoonJoy Investment Undisclosed

TinyOwl Investment USD 17 million

Yumist Investment USD 1 million Fresh Menu Investment USD 5 million

Investors Abhishek Goyal Tarun Agarwal Deap Ubhi

USP Quick and hassle-free food from the best chefs

Users 1000+

Investors India Quotient

USP Freshly prepared, hearty meals from the best chefs being delivered at the doorstep

Users 5000+

Investors Mekin Maheshwari Abhishek Goyal Sahil Barua Sachin Bansal

USP Healthy food delivered at office desk

Users 5000+

Investors Sequoia Capital Nexus Venture Partners Matrix Partners

USP Easiest way to order food from your favourite restaurant

Users 100,000+

Investors Orios Venture Partners

USP Delivers tasty homely meals

Users 5000+

Investors Orios Venture Partners

USP Users Delivering gourmet food at 5000+ your doorstep

Swiggy Investment USD 2 million

Investors Accel Partners and SAIF Partners Dazo (previously known as TapCibo) Investment Investors Undisclosed Alok Goel

USP Hassle-free online food delivery experience

Users 10,000+

USP Hassle-free online food delivery experience

Users 10,000+

Mumbai-based Holachef was founded in September 2014 by Saurabh Saxena and Anil Gelra. They like to call it a ‘fine dine restaurant in the cloud’. The mobilefirst delivery of meals from chefs’ kitchens has raised 300K USD funding from India Quotient in the form of convertible notes. The founding team has a strong start-up experience in sales, marketing & technology. SpoonJoy.com offers fresh sprouts, fruits, lunch and snacks on a weekly subscription basis for users. It delivers food to office spaces and homes. In December 2015, SpoonJoy raised an undisclosed amount of angel funding from Sachin Bansal and Mekin Maheshwari, the CEO and CPO respectively of Flipkart.com, Abhishek Goyal, Founder, Tracxn, and Sahil Barua, Co-founder, Delhivery. This funding gives them good mentors along with sufficient capital.

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TinyOwl, is a Mumbai-based start-up founded in March 2014 by IIT Bombay alumni. It has a mobile app on the Android and iOS that lets users order food from restaurants around them. It raised an angel round from Deap Ubhi (who had earlier founded Burrp) and Sandeep Tandon in April 2014, a 3 million USD in Series A round from Sequoia Capital and Nexus Venture Partners in December 2014 and a 15 million USD funding in Series B early this year. Gurgaon based Yumist was founded by ex-Zomato CMO Alok Jain and Abhimanyu Maheshwari. This food delivery start-up raised its first round of funding in February 2015 from Orios Venture Partners. Yumist aims to provide easy access to tasty and homely daily-meals. It allows customers to place orders in a few seconds through its Android app and the meal is delivered within 30 minutes. The founding team has a good experience in the F&B space. Bengaluru based Fresh Menu is a part of serial entrepreneur Krishnan Ganesh & Meena Ganesh’s startupfactoryGrowthStory. FreshMenu delivers lunch, dinner, all day sandwiches, salads and desserts to your doorstep. The startup is already creating waves in foodie-circles because of its exotic menu. Fresh Menu offers chef prepared plated meals on demand. Their menus change constantly and food can be ordered through their app or a call. Swiggy is a food ordering and delivery startup based out of Bengaluru, which started operations in August 2014. Unlike many other food ordering platforms, Swiggy has its own fleet of delivery people equipped with smartphones with an app, powered by routing algorithms. It picks up orders from restaurants and delivers it to the customers, helping in timely deliveries and real-time tracking. Within eight months of its launch, Swiggy has secured two million USD funding from Accel Partners and SAIF Partners. Founded by Shashaank Shekhar Singhal & Monica Rastogi in October 2014, Dazo aspires to be an on-demand ‘food court’ mobile app. They want to encourage smaller food entrepreneurs by enabling distribution for them via the app. Dazo intends to become the technology back-end for food entrepreneurs – small restaurants, eateries, bakeries, etc. It has raised an undisclosed amount of funding from Alok Goel, CEO of Freecharge. The team aspires to build a strong technology base for the mobile-based food marketplace.

6.2 DISRUPTION IN THE FOOD INDUSTRY – RISE OF FOOD TECH STARTUPS

Future of the Food Tech Industry: Trends We Foresee 1. M-commerce: We would see a rise in the inrestaurant payment services like Momoe, Quikwallet etc. Apart from that, M-commerce will get deeper into the food tech space with companies like Paytm expanding their reach and covering more and more companies into their payment ecosystem. 2. Social payment: In foreseeable future, we could see social payment system expanding the ecosystem of Food-tech space. Payments via social apps are quite common in China and Korea, where WeChat and Kakao Talk are dominant players. Globally, mobile payments through social apps are an emerging trend and India will soon catch-up. Given enough time, we will surely see a similar trend taking off in India. 3. Cross-industry collaboration: Imagine you feel like exploring a new dish. You open your food app and search the restaurant. You also get the option of calling a taxi service in the same app. You call the taxi, order your food well in advance through some in-restaurant ordering app. You reach the restaurant; get your dish served in a jiffy. Enjoy the dish while your payment getaway is taking care of all your expenses including taxi and restaurant bills. Cross-industry collaboration like this is still happening in India and it will continue to grow. 4. Health-conscious start-ups: Although we Indians are very liberal when it comes to calories, there is a growing trend of health-conscious start-ups like Frsh, i-Tiffin etc. More and more start-ups will work around this concept and some of the already established start-ups might even modify their menu and apps to inculcate a separate section for calorie-conscious users. 5. Online grocery: With only few companies like BigBasket, LocalBaniya, etc., online grocery is still in its nascent stage. But as technologies related to the management and logistics of grocery retail improve proportionally, we can expect the emergence of many more start-ups in the segment. Also, there will be the segmentation of the market itself with each company trying to carve its own domain. 6. Innovation boom in delivery and logistic technologies: Technologies like Beacon (which uses Bluetooth to sense the location of a device and works with apps to carry out certain operations) and similar location-searching apps will be integrated and delivery time can be

The industry will continue to grow at good rate and new niche start-ups will continue to emerge, picking up specific gaps in the entire foodtech ecosystem and building their business around it.

drastically reduced. Similarly, other technological changes and data analytics will change the logistics part of the business.

What Lies Ahead The food-tech industry has come a long way from the traditional set-up to the current new age tech set-up. As technology evolves, things that couldn’t be done in the past have now become feasible. Today, smartphones + maps + cloud + innovation are making various logistics-heavy businesses feasible. Technology is evolving at an unprecedented rate and the so will the food tech industry. Currently, the food-tech industry is in the spotlight with maximum attention and investment flowing in. It’s evolving at a pace that cannot be comprehended by data analytics and statistics. Also, there are many factors and variables that come into the picture when we talk of food-tech. Hence, it’s very unpredictable and no one can be too sure of what’s going to click and what’s not. This is evident from the fact that most investors tend to put their money in multiple start-ups rather than a single one. The market in general is still quite fragmented and there are many challenges and issues that need to be addressed. However, one thing is for certain – no matter what the challenges are, a new breed of crazy and determined entrepreneurs will continue to create viable and sustainable business out it. The industry will continue to grow at a good rate and new niche start-ups will continue to emerge, picking up specific gaps in the entire food-tech ecosystem and building their business around it.

Disclaimer: The content has been curated by Troika. No part of this document can be copied or reproduced without the written permission of Troika. To know more about us visit www.troikaconsulting.in

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Product Recall– The Big Challenge for Food Businesses BY CHARU KHANNA, GS1 INDIA

The lack of full-chain visibility and an absence of structured information sharing among the various supply chain partners is the root cause of ineffective food recalls.

A

s one of the largest producers of food in the world, India faces several challenges in ensuring the availability of safe and quality food for its millions of domestic and global consumers. Global food production, distribution and retailing have never been under greater scrutiny by consumers and regulators than today, especially following several high-profile cases of food contamination and outbreak of food-borne diseases. Consumer safety, in particular, has become a major concern worldwide leading to an increased number of product withdrawals and recall. The problem is accentuated since food production is now highly globalised with multiple and geographically spread suppliers of raw materials, ingredients, food, additives/preservatives, distributed processing units, multiple stakeholders and emergence of online and omni-channel food retailing.

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6.3 PRODUCT RECALL–THE BIG CHALLENGE FOR FOOD BUSINESSES

With ambitious targets set by the Ministry of Food Processing Industries, Govt. of India, to increase processing of perishables from six to 20 per cent, value addition from 20 to 35 per cent and India’s share in global food trade from 1.5 to 3 per cent in the short term, food safety becomes of paramount importance, resulting in consumer safety and increased brand equity for India, as a supplier of safe and quality foods. The primary reason behind the distribution of unsafe food is the lack of visibility and information sharing among various supply chain partners. This has become more of a challenge in recent years as the path from food production to consumption has become increasingly complicated with globalisation. Today, a food product may contain ingredients sourced from multiple locations, passed through different processing facilities, and may have been handled by wholesalers, retailers, and multiple logistics partners before reaching the consumer’s shelf or refrigerator. A number of regulations, both national and international, mandate food business operators to comply with stringent statutory requirements from a consumer protection and traceability perspective. The list of such regulations are only growing with increasing consumer awareness and the consequent demand for reliable, trustworthy and full disclosure of information on food products. The gamut of information demanded includes verifying the accuracy of data on the product label, such as its ingredients, nutritional value, etc., all the way to the source of the ingredients, sustainability, assurance of fair trade practices in its production process, etc. In particular, the EU 1169/2011 Regulation, which is already in force, mandates a digital imprint of product information for retail as well as online selling of food items. The new law combines two directives – 2000/13/EC (labelling, presentation and advertising of foodstuffs) and 90/496/EEC (nutrition labelling for foodstuffs) – into one legislation. Further, the US Food Safety Modernization Act (FSMA) enables FDA to better protect public health by strengthening the food safety system. It permits FDA to focus more on preventing food safety problems rather than relying primarily on reacting to them after they occur. The law mandates food firms to employ traceability to achieve higher rates of compliance with prevention and risk-based food safety standards, and to better respond to and contain problems when they do occur. The Food Safety and Standards Authority of India (FSSAI) has notified several Rules/Regulations

The primary reason behind the distribution of unsafe food is the lack of visibility and information sharing among various supply chain partners. This has become more of a challenge in recent years as the path from food production to consumption has become increasingly complicated with globalisation.

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governing food safety, which require food operators to have in place a process/system to efficiently and speedily handle food withdrawals/recalls when required, while keeping the Regulator informed during the process. The proposed amendments to the Consumer Protection Act, 2015, and BIS Act, 1986, will stipulate requirements for putting in place systems to handle product recalls for consumer items.

The Big Challenge – Lack of Visibility The lack of visibility and an absence of structured information sharing among the various supply chain partners is the root cause of letting unsafe food go unchecked, besides impeding recalls. In recent instances of food recall, companies were seen contending with some crucial questions – How many batches or lots are affected? What will be the scope of recall? Where are these specific lots in the supply chain? One of the prime reasons behind these uncertainties is the lack of visibility and information. Despite food products being withdrawn or recalled on a regular basis, manufacturers at best have in place processes only to recall products till their first distribution level. Beyond this, other points of distribution and trading partners are unlikely to have any kind of structured track & trace system in place that could seamlessly receive, exchange and share information on product movement in the supply chain and correlate that with the physical consignments. This makes recalls ineffective as access and information is available only for a fraction of the contaminated batches in the marketplace, which can seriously damage the brand image of the company. What authorities, suppliers, buyers as well as end users/consumers need is fast, accurate and complete traceability information and full chain visibility. To execute effective recalls, manufacturers require a recall solution overlaid on a robust track & trace system, encompassing the full supply chain regardless of state or country. This requires defining a shared minimum set of requirements and clear accountability on what action is required from each trading partner across the chain. Another risk food processing companies in India face while sourcing raw food items is the uncertainty over the quality of raw material/ ingredients because of the lack of reliable information on the agricultural process, quality of seeds, pesticides, etc. This gives us reason to believe that in the absence of reliable product information, food processing companies are themselves becoming victims of low quality raw material that are high on pesticides and other harmful substances.

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Need for a Common Traceability Solution Using Global Standards

To execute effective recalls, manufacturers require a recall solution overlaid on a robust track & trace system, encompassing the full supply chain regardless of state or country.

MANUFACTURER

ITEM

CASE

PALLET

A common traceability standard is essential to make the product (food item) visible at all levels in the supply chain. Traceability is a key element to improve security, control quality, combat fraud and manage complex logistical chains. Public and private traceability systems are implemented by using automated data capture, electronic data processing and electronic communications. They reduce the risk and uncertainty across both the supply chain and between trading partners. An effective traceability solution involves associating flow of information with the physical flow of traceable items in order to ensure product authenticity and information sharing among supply chain partners. Companies can achieve ‘accurate and speedy information’, food product/ consignment visibility, and execute accurate product recalls and withdrawals by implementing bottom-up and top-down traceability systems.

TRANSPORT

DISTRIBUTOR

TRANSPORT

PALLET

DISTRIBUTION CENTRE

TRANSPORT

CASE

ITEM

RETAILER

CONSUMER

6.3 PRODUCT RECALL–THE BIG CHALLENGE FOR FOOD BUSINESSES

Food safety is all about prevention — recall prevention, protecting brand reputation etc. — as well as response. Beyond prevention and simply having the ability to effectively track recalled products, traceability solutions also play a key role in data collection, thus affecting the overall timeliness of your response. If your company is recording all of its production information manually and keying it into a system, there is the obvious chance for human error. Data collection with bar code scanning within the traceability solution increases the accuracy and timeliness of transactions. A traceability system can help certify a food product is fit for consumption when its unique identity is authenticated at every step of the supply chain and no error or discrepancy is reported against it. Besides,it also helps locate defective or unsafe foods in order to remove them promptly from anywhere in the distribution chain including retailer shelves. In the event of any discrepancy, the unique identification system of the implicated product helps firms to identify the source(s) and the extent of the problem across the supply chain.

FULL SUPPLY CHAIN VIEW OF A POULTRY FIRM

Empowering Consumers Through Additional Information Traceability is an indispensable tool to fulfil the consumers’ need for additional information on a product than what is printed on the label. It is an excellent way to ensure that a food product conforms to the requirements of people’s religious beliefs or respects their lifestyle choices. As a result, various bodies around the world have been created to certify that food and food premises are halal, kosher, organic or eco-friendly. Traceability systems can make the work of these certification bodies easier by sharing trustable information. Different labelling options, available under traceability solutions, can guarantee that the food items bearing them conform to ethical and/or religious values. Firms can, thus, build a relationship of trust with their consumers through their capability to provide information related to any item, whenever required. Global Traceability Standard (GTS) is the key to finding the most efficient ways to produce, assemble, warehouse, and distribute products. These systems monitor internal supply as well as link suppliers with their buyers, allowing automated stock management, product master data management, end-to-end product and consignment visibility and other supply-related activities. It leads to a more efficient supply chain and, therefore, reduced costs of operation.

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Using GS1 Global Traceability Standards GS1, a not-for-profit, industry-led global standards body headquartered at Brussels, Belgium, with a global network of over 110 member organisations around the world, has been dedicated to the

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ChameleonsEye / Shutterstock.com

The ability to reduce costs often marks the difference between success and failure. This is more significant for the food industry, where margins are thin and hence supply management, including traceability, turns out to be an increasingly important area to enhance competitiveness. Besides, brands realise that being good is not good enough anymore. They want to create consumer experiences that are exceptional—even memorable. That’s why companies are literally rethinking how they do business, re-examining every aspect of their supply and demand chains. In this new holistic retail environment, ‘Data Quality’ is a key step to create memorable experiences. It offers retailers and brand owners a chance to communicate the value of their products more completely in the eyes of consumers. As the velocity of commerce escalates (more products to sell and more channels to sell them through), the quality of the information about those products becomes extremely important—perhaps more important to the purchase journey than the actual quality of the product itself. If the product information doesn’t provide the consumer with what (s)he needs when shopping online or offline, (s)he may not even consider it. So information has truly become ‘part’ of the product.

A traceability system can help certify a food product is fit for consumption when its unique identity is authenticated at every step of the supply chain and no error or discrepancy is reported against it.

design and implementation of global standards and solutions to improve the efficiency and visibility of supply and demand chains for more than 40 years. Their widely implemented standards enable unique and universal identification of products, assets, services, entities/locations, data capture and seamless sharing of information between supply chain stakeholders, including manufacturers /suppliers, retailers, logistics providers and also consumers enabling safety, security and sustainability in global supply chains. The organisation, in close collaboration with key industry stakeholders across the world, has over the years built a set of effective traceability standards. These traceability standards have been successfully implemented and used in several developed western economies. GS1 India leads the local implementation and has immense expertise and knowledge on how to implement traceability and recall systems in the country. According to the organisation, unlike proprietary solutions for internal traceability developed by solution providers, the key differentiator of a traceability solution built and based on the GS1 Global Traceability Standards (GTS) is its interoperability and scalability feature. This provides exceptional reliability especially when identifying and locating products during a food safety problem across the entire supply chain.

6.3 PRODUCT RECALL–THE BIG CHALLENGE FOR FOOD BUSINESSES

By being interoperable and standards-based, the traceability solution can be flexible and vendor independent. This helps in reducing costs of the end-product to businesses and consumers. It enables automated capture and exchange of information (identify, capture and share), ensuring seamless information flow and faster data sharing/ querying between stakeholders, providing the much-needed upstream and downstream visibility in the food value chain. The GTS also enables going beyond just the ‘one step up, one step down’ approach, and can perform event-based tracking across the chain. Using universally accepted GS1 standards help overcome barriers to commerce that can be created by using company-specific standards. Trading, tracking and tracing goods becomes less expensive as the need to fulfil different identification and communication requirements of each importing country or company can be eliminated. The GS1 system enables efficient supply chain management and international trade by providing standard tools that allow all supply chain participants to communicate in one global language

Using universally accepted GS1 standards help overcome barriers to commerce that can be created by using company specific standards.

of business. Key concepts driving GS1 system application can be summed-up as: Automation of business processes by means of automated data capture (ADC) and electronic data processing (EDP). Communication of information in the fastest and most accurate manner by means of standard electronic messages that automatically update computer applications with data from trading partners. Time compression, which offers strategic opportunities to improve customer satisfaction, not just by efficient produce traceability, but also by reengineering business processes across the supply chain.

Facilitating Compliance with Regulatory Requirements The GTS includes a Compliance Criteria developed for proactive monitoring of manufacturers’ products and processes. The compliance process helps manufacturers in safeguarding product security, quality, certification, origin and content while ensuring compliance with current national

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GS1’s GTS also helps exporters meet the EU Regulation 1169/2011, which requires manufacturers to make food labelling easier to understand and display the same information which is on the product packaging (label) digitally (online) as well. It is aimed at empowering consumers by providing greater clarity on ingredients, nutrition and allergens by standardizing food labelling.

How GS1 Global Traceability Standards Work?

and international traceability and recall regulations. The use of the GTS can help manufacturers better prepare for and meet several regulatory requirements such as: ISO 22005:2005 ISO 9001:2008 HACCP (HAZARD ANALYSIS AND CRITICAL CONTROL POINT) standard BRC (British Retail Consortium) Standards IFS (International Featured Standard) SQF (Safe Quality Food) SQF 2000 CODE Global Gap

‘Data Quality’ is a key step to create memorable experiences.

GS1’S UNIQUE IDENTIFICATION STANDARD

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GS1 standards provide the framework required to support the traceability (business) process. GS1 GTS, developed in 2005 with active participation of food industry across the world, defines the globallyaccepted method for uniquely identifying: Trading partners Trading locations Trading items involved Logistics units involved Inbound and outbound shipments It also defines the essential pieces of information that have to be collected, recorded and shared when designing and implementing a traceability system. A robust traceability solution can help companies answer questions like:

6.3 PRODUCT RECALL–THE BIG CHALLENGE FOR FOOD BUSINESSES

Where are my products? Where, when, and in what quantities were my products produced? What quality-assurance data is available for each of my products? Where, when, and in what quantities were the products shipped to and from? Who supplied the raw ingredients and when? Were the raw ingredients used in any other products? Because of its ability to provide globally unique identification of trade items, assets, logistic units, parties and locations, the GS1 System is particularly well suited to be used for traceability purposes. This meets the core need to be able to trace back and track forward (one step up, one step down and beyond) at any point along the entire supply chain, no matter how many trading partners and business process steps are involved.

GS1 Traceability Standards in Action Leading business organisations around the world have endorsed the use of the GS1 traceability solution. A. Chipotle Mexican Grill Chipotle Mexican Grill, a US restaurant chain, adopted a traceability solution to advance its commitment to food safety. To deliver on its Food with Integrity mission and serve food made from the very best ingredients, the company needed to effectively engage with a large network of supplier partners to establish a company-wide traceability process. It implemented a traceability programme leveraging GS1 Standards for sharing standardised product information at every step along the supply chain – applying proven best practices developed by various industry segments. The benefits accrued by the company are: Increased efficiencies in quality assurance and logistics and real-time visibility of food and other products at each point in the supply chain. Improved stock recovery process. Ability to capture and share quality attributes throughout the supply chain and enhance reporting at the restaurant level. More direct access to supplier-provided information on sustainability efforts. Chipotle’s Food with Integrity mission is strengthened by the traceability programme it launched with Chipotle growers and suppliers, to attain the company’s goal of end-to-end supply chain traceability. This enables the company not

With our traceability system in place, it will be easier to work with existing supplier partners and onboard new suppliers – including more local and regional suppliers. This will give us greater visibility and assurance that we are using the very best sources of food that we can find — Heidi Wederquist, Director of Quality Assurance & Food Safety, Chipotle Supply Chain Team

only to ensure the safety and quality of the food it serves, but also that its suppliers are adhering to environmentally and socially sound practices. B. Deploying traceability for native producers in Peru About 300 tonnes of herbs, such as thyme, rosemary, mint, oregano and others, are produced by small and midsized herb producers in Peru for export to Europe. To become more competitive in the export market, an association called BioAquipa (previously Ecolife) that groups 615 aromatic herb producers in the region of Arequipa adopted the GS1 traceability standards. The group established a traceability process map for the aromatic herbs supply chain, including points of control, registries of information and responsibilities, as well as a set of traceability templates and guidelines for each point in their supply chain.

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C. Traceability for Exported Indian Grapes Export of grapes from India to the European Union was adversely impacted after higher amounts of pesticide residue than the permissible limit was reported. The highly fragmented grape industry, with manual supply chain processes lacked visibility in the movement of grapes. The industry didn’t have the infrastructure to support sharing of information among concerned authorities and stakeholders. The Agricultural and Processed Food Products Export Development Authority (APEDA) built an internet based, traceability system using GS1 Standards to integrate the grape export industry stakeholders on a single platform for full chain visibility. With the implementation of the traceability solution, which brought all the stakeholders on a single platform, the organisation reported a rise in farmers’ earnings by 40%, FOB increased from 6 euro to 9.5 euro per carton of 5 kg. Further,the solution today benefits 40,000 farmers and 100+ exporters. The traceability solution enhanced the brand equity of India in the export of grapes, and APEDA won the National Award for this implementation.

In Conclusion The benefit came in the form of 80% time savings while retrieving upstream batch information. Furthermore, in 2008, the system passed a critical test when a European client’s quality control laboratory identified a problem that caused the export process to be halted. Immediately, teams in Peru carried out their own analyses, testing all the processes along the exact path that the flagged batch had travelled. Using the standardised traceability registries filled in at each point of the supply chain, they quickly ruled out the possibility of any local contamination. With this information, the client investigated further at their end and found that the source of contamination was caused by their own quality control laboratory. Besides, a recall case of oregano export in 2011 also demonstrated the benefits of GS1 traceability standards for BioAquipa. In this incident, the produce was found to be contaminated by mould in a container received by a client. Such contamination is uncommon but could sometimes happen due to changes in humidity and long distance transportation. However, with the right traceability process in place, the team identified the exact contaminated batch of 36kg, saving the rest of the container - which was 5.4 tons worth of herbs.

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The Agricultural and Processed Food Products Export Development Authority (APEDA) built an internet based, traceability system using GS1 Standards to integrate the grape export industry stakeholders on a single platform for full chain visibility.

The Indian food industry presents a very large opportunity to every stakeholder. This is primarily driven by the changing nature of the Indian consumer, who is more informed and willing to try new products; and the strong production base of the country. The industry-wide adoption of global traceability standards and guidelines is critical for companies seeking to improve collaboration and coordination to ensure food safety. GS1 Global Traceability Standards provides the ability to verify a product’s history, location or application, which is critical to manage the product quality. Once a problem is detected, traceability allows a manufacturer to identify which batch or lot the item came from, and from there, where those potentially off-quality items went to. GTS would enable food companies in India involved in both domestic supply and exports to comply with different Regulatory requirements as well as buyer (retailer) requirements in India or worldwide, in a single, consistent, interoperable and structured manner. It would also facilitate technology/vendor neutral solutions which are affordable for both SMEs and large food companies. Having an effective traceability solution in place enables businesses to better understand, prepare for, and exceed both regulatory compliance and customer satisfaction.

Managing Global Food Chain Risks Food Supply Chain Management for better supply chain resilience and enhanced flexibility. BY AJAY KAKRA, PwC INDIA

Supply Chain Disruption & Food Safety: The Context The food industry is faced with multiple challenges as modern day supply chains continue to rapidly evolve and transform.The evolution of food supply chains is based on the changes in the outlook of the food industry and its key stakeholders. Consumers, regulators, governments and other stakeholders are becoming more conscious of what they are eating, source of food ingredient, quality of food and disclosure about the content of food items consumed. A key challenge is managing risk while optimising cost across multi-commodity supply chains spread across geographies. Consequently, with an increased number of supply chain intermediaries spread across multiple geographies, it has become increasingly difficult to predict and manage supply chain risks. Additionally, the supply chain visibility decreases considerably with increasing number of supply chain intermediaries, leading to decreased supply chain control. The scenario gets all the more aggravated with geo-political changes, increasing regulatory pressures and growing consumer awareness. In this environment, the question isn’t whether disruptions will happen, but what and when. Proactive risk identification and mitigation is the key to achieving better supply chain resilience.

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Figure 1: Steps to achieve better supply chain resilience through proactive supply chain risk analysis & management

Risk Mitigation

Monitoring & Surveillance

Risk Communication Integrated Notification Impact Analysis & Risk Management Risk Assessment & Process Modelling

Supply chain efficiency v/s supply chain resilience: Supply chain resilience aims towards risk reduction as opposed to supply chain efficiency, which is directed at improving a company’s financial performance. Both require dealing with risks and recurrent risks (such as demand fluctuations). Regular risks require companies to focus on efficiency in improving the way they match supply and demand, while disruptive risks require companies to build resilience despite additional cost (MIT Sloan Management Review; 2015)1. Disruptive risks tend to have a domino effect on the supply chain. These ripples of disruptions affect the end customer, thebrand image, revenues and even investors. Research by Kevin B. Hendricks and Vinod R. Singhal published in 2005 shows that firms suffering from supply chain disruptions experience between 33% and 40% lower stock returns relative to their benchmarks over a three-year period2. Our research with MIT also substantiates clear value for those companies who can successfully minimise and manage their supply chain disruptions.3 Yet, as

Effective supply chain management is essential to guarantee food safety. Every link in the chain affects the quality of final products.

illustrated by the Business Continuity Institute’s 2013 survey, majority of companies do not regularly assess the resilience of their supply chain in a substantive way4. Our experience working across the retail and consumer sector validates this perspective. We often find a lack of common understanding across merchandising and supply chain leaders about specific risks posed by the supply chain and the impacts. Effective supply chain management is essential to guarantee food safety. Every link in the chain affects the quality of final products. Changing consumer preferences, changes in production and distribution methods, evolving trade & travel, shifts in climatic and environmental factors and growing anti-microbial resistance – all increase the probability of occurrence of food hazards and food safety incidents. The emphasis on quality parameters pertaining to safety of food has also taken center-stage in the global food trade. Increasing incomes, urbanisation, literacy, improved infrastructure and closer ties to global trends, especially during the last decade, are driving the changes in consumer demand, thus spurring action amongst policymakers to address food safety risks on a priority basis.

1

S. Chopra and M.S. Sodhi, “Managing Risk to Avoid Supply-Chain Breakdown,” MIT Sloan Management Review 46, no. 1(fall 2004): 53-61. Hendricks, K. B., and Singhal, V. R. 2003. The effect of supply chain glitches on shareholder value. Journal of Operations Management, 21, 501-522 PwC/MIT Forum for Supply Chain Innovation, Global Supply Chain and Risk Management Survey, 2013 4 Business Continuity Institute (BCI), Supply Chain Resilience Survey, 2013 2

3

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Figure 2: Food Safety Risk Matrix

Increased disease and health issues >> decreased productivity >>

- Human health hazards - Allergies - Disease outbreaks & epidemics; Death

Consumer/ health risk

Bio-physical Sociorisk economic risk Supplier risk

Product risk Environmental risk Process risk

- Price risks _ Trade embargoes - Increased product recalls - Revenue loss/market loss - Increased supplier risks

- Ineffective recall procedures and waste disposal/management systems - Gross contamination - Biological resilience/ evolution of new microbiological strains

Trade & economic risk

Figure 3: Critical Areas of Risk 2% 5% 6%

Cyber attacks Telecommunications outages Other Counterfeiting Unplanned IT disruptions Change in technology Supplier/partner bankruptcy Geopolitical instability Rising labour costs Raw material scarcity Environmental catastophes Energy/fuel prices volatility Market changes Currency fluctuations Raw material price fuctuation

11% 12% 20% 22% 22% 26% 28% 34% 38% 41% 47% 53% 60%

50%

40%

30%

20%

0%

Source: PwC/MIT Forum for Supply Chain Innovation, Global Supply Chain and Risk Management Survey, 2013

Critical Areas of Food Supply Chain Risks Defining “risk” Before we can understand the constituents of supply chain risks, it is important to define the term “risk”. Risk, in layman’s terms, is understood as being vulnerable and is defined by the Oxford English Dictionary as “a situation involving exposure to danger”. This danger can arise from known or unknown causes. Risks, in food safety parlance, can be defined as a function of probability of an adverse health effect and the severity of that effect (death, hospitalisation, medication, etc.) when exposed to a specific food hazard. Any biological, chemical 5

or physical agent in, or condition of food, with the potential to cause an adverse health effect is termed as hazard. Food adulterants, allergens, use of unauthorised/ non-food grade surfaces during food production, use of prohibited food & feed ingredients can be all termed as hazards. When supply chains are exposed to these hazards, in the severity of causing an adverse effect on human health, the underlying causative factors can be termed as Food Safety Risks. On the basis of their subsequent effect, food safety risks can be classified into bio-physical risk, product risk, process risk, and supplier risk. These risks lead to consumer/health risks, trade & market risks, environmental risks and socio-economic risks. Figure 2 summarises the various types of food safety risks.

Categorising disruptions The risks of disruptions aren’t equal, nor are the consequences. Disruptions, their occurrence and severity, vary from organisation to organisation, from process to process and from region to region. Therefore, it is advisable to define the sensitivities in your supply chain and introduce relevant supply chain containment strategies. Supply chain containment strategies focus on: 1) Segmenting the supply chain and 2) Regionalising the supply chain to contain regional disruptions more efficiently without having the effects ripple to other regions. Our research with MIT identified the following critical areas of supply chain risk.These naturally vary across companies and industries but should form the starting point to define what the company cares about most and why5. The Business Continuity Institute’s Global Supply Chain Resilience survey6 indicates the following as the major impacts of supply chain disruptions: Loss of productivity Customer complaints received Increased cost of working Service outcome impaired Loss of revenue Damage to brand/reputation/image Product release delay Product recall/withdrawal Payment of service credits Share price fall Stakeholder/shareholder concern Delayed cash flows Expected increase in regulatory scrutiny Loss of regular customers Fine by regulator for non-compliance

PwC/MIT Forum for Supply Chain Innovation, Global Supply Chain and Risk Management Survey, 2013 Business Continuity Institute (BCI), Supply Chain Resilience Survey, 2013

6

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Supply chain disruptions also attract significant costs with regards to risk mitigation & containment and in facilitating recovery to attain status quo. As per the BCI survey results, as a result of various disruptions, 15% of respondents experienced costs in excess of €1M and 9% experienced a single event disruption that cost in excess of €1M. Considering both the direct and indirect costs (firm’s reputation, product integrity, share price & valuation, brand equity) that a firm might accrue as a result of these disruptions, it becomes quintessential for the business to effectively manage and timely respond to such disruptions or probability of disruptions (risks).

Figure 4: Typical Supply Chain Management Process

Product design & development

Operations

Sales

Manage supply chain risks

Mapping the supply chain In order to efficiently assess and effectively analyse various risks and disruptions, companies need to map their supply chains in order to identify the Critical Control Points (CCPs) across the chain. These CCPs can be defined on the basis of the following criterion as applicable to various activities and/or entities across the chain: a) the degree of susceptibility to disruptions b) frequency of occurrence (historic evidence) c) Sensitivity of the chain to disruptions in terms of incremental costs and disruption – subsequent pressure on profit margins This mapping will eventually help corporations to coordinate, contain, mitigate, and manage the disruptions or probable risks effectively and thus, ensure resilience across the chain and guarantee sustainability in the long run. A typical supply chain should manage its risks right from product development & design through operations and to sales to ensure that the supply chain is risk-resilient and all end products/services conform to the desired and acceptable safety and quality levels.

Food traceability As food supply chains become more and more complex dealing with an increasing number of stakeholders, multiple operations, multiple regulatory and trade standards, issues of traceability, transparency and trust increase. The major forces affecting traceability are identified by Roth et al (2008)7 as globalisation, consolidation and commoditisation:

Figure 5: Potential Sources of Food Safety Risks Along the Food Supply Chain • Use of contammated water and soil • Improper pesticide application • Improper animal health and hygiene practices Agri Input Supply

Farming

• Sale of banned and restricted pesticides • Animal-borne diseases • Seed spurious market • Improper waste water management • Industrial pollution

Logistics/ Storage

• Contaminated water • Use of banned food additives • Unhygienic processing environment • Inadequate waste management system Processing and value addition

• Improper storage and pest control • Poor waste Management • Unhygienic handling and transport

Wholesale/ Import/ Export

• Improper storage • Cross contamination • Poor sanitation • Inadequate certification

Consumption

• Improper storage • Unhygienic transport • Improper handling • Inadequate framework for export support

Common Issues: Database management, monitoring of food safety, infrastructure, services and trained resources Source: D U. Deininger and M. Sur, 2006)9

Globalisation refers to the movement of the food supply chain model from regional, as witnessed until a few decades ago, to global in terms of both imports of raw materials to reduce cost as well as exports of final products to increase revenue at all levels of the supply chain.

7

Roth, A.V., Tsay, A.A., Pullman, M.E. and Gray, J.V., 2008. Unraveling the food supply chain: Strategic insights from China and the 2007 recalls. The Journal of Supply Chain Management 44(1), pp. 22-39. D U. Deininger and M. Sur,2006, Food Safety in a Globalizing World: Opportunities and Challenges for India, Plenary paper prepared for presentation at the International Association of Agricultural Economists Conference, Gold Coast, Australia 9

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disruptions in supply, lack of traceability and limited accountability have brought supply chain risk management to the fore. The following figure illustrates the various risks inherent to different stakeholders in a typical food supply chain: Food safety risks, as they relate to human health, arise from of a number of factors. These include: (i) microbial pathogens (bacteria, viruses, parasites, fungi and their toxins); (ii) pesticide residues, food additives, livestock drugs and growth hormones; (iii) environmental toxins such as heavy metals (e.g. lead and mercury); (iv) persistent organic pollutants (e.g. dioxins); and (v)zoonotic diseases (e.g. BSE, SARS, Avian flu, Japanese encephalitis, tuberculosis) (Buzby and Unnevehr 2003, Ewen et al. 2004)10.

Knowing your suppliers Consolidation refers to the growing trend amongst entities within the food chain to combine as many food categories as well as levels of the supply chain in pursuit of higher margins. This has led to the dominance of huge enterprises at each level. For example, within retail, Tesco consists of 7817 stores worldwide and employs more than 500,000 people and caters to 12 markets at the global level. Cargill has diversified segments of farm supplies, marketers, storage and processing. It is currently the largest privately-owned company in the US. It operates out of 67 countries worldwide and employs over 1,52,000 people. Commoditisation refers to the distinction between food products as either value-added or commodities. Value-added goods are those where the specific nature of the food is of central importance to customers, for e.g. vegetables, certain meats, etc. On the other hand, commodity foods are undifferentiated goods, for e.g. grains. These compete mostly on price and are aggregated from multiple global sources and then standardised. A simple food item, like the Kellogg’s nutria-grain bar, may include ingredients from the US, Italy, Scotland, Denmark, India, Philippines, China (Carey 2007)8. Despite increasing regulations and consumer awareness, as food supply chains become increasingly global the inherent risk arising from

As food supply chains become more and more complex, dealing with an increasing number of stakeholders, multiple operations, multiple regulatory and trade standards, issues of traceability, transparency and trust increase.

The key to greater supply chain visibility and traceability is knowing and managing your suppliers. As supply chains become more and more complex, it is becoming pertinent to know and manage your supplier’s supplier as well. Managing suppliers is often based on measures like cost reduction, which might not be the most prudent approach for supplier management because as cost decreases, it indirectly leads to more expenditures towards managing disruptions. If the finished product fails to conform to the regulatory, safety and quality standards, it leads to an escalation of cost on account of multiple areas such as product recalls, reject management, crisis management, brand equity and market reputation, shareholder value, etc. Since the relative impact of disruptions on the organisation can vary widely, the best approach to manage suppliers is defining the CCPs for your organisation. As a starting point, it can be useful to look at your most profitable product or service and look at the profit impact of related supplier failure on your organisation. The next step is to define priorities and objectives by performing a disruptive threat and vulnerability assessment across the supply chain to identify potential risk areas/CCPs. Once complete, there should be an evaluation of the supporting supply chain processes (i.e. governance, personnel and enabling technologies).This should include an examination of risk management protocols, how the organisation currently manages supply chain or supplier disruptions and the

8

Carey, J., 2007. Not Made in China. Business week, pp. 41-43. Buzby, Jean C. and Laurian Unnevehr, 2003, “Introduction and Overview,” in in Jean C. Buzby (Ed), International Trade and Food Safety, Economic Theory and Case Studies, Agricultural Economic Report No. 828, USDA, Chapter 1, pp.1-9. 10

There remains considerable debate regarding the food safety risks associated with genetically modified organisms (GMOs). The paper will not be covering issues relating to GMOs.

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existence and the ease of use of alternate suppliers. Finally, the organisation should determine the likelihood and impact of supply chain disruptions the company is willing to accept. Based on this analysis, the company can define a through and through supply chain risk management programme. This process will lead to a greater supply chain visibility and proactive risk assessment. Tools for greater information exchange and increased traceability can then be easily and cost-effectively introduced to attain better supply chain resilience.

The Risk-based Approach to Food Safety Management Applying a risk-based approach to supply chain management is not relatively new. It is always preferable to adopt a proactive risk management approach than to leave the probable supply chain Figure 6: Supply Chain Risk Management Framework Proactive approach of risk identification & assessment

Continuous readiness plan

Supply chain responsiveness, supply chain flexibility & supply chain visibility

Increasing agricultural exports have long been an integral part of the Indian government’s sector development strategy.

& travel, shifts in climatic and environmental factors, growing anti-microbial resistance – all increase the probability of occurrence of food hazards and food safety incidents. Unsafe food is a major public health issue and an important cause of reduced economic productivity, especially in developing and underdeveloped countries.

The Indian scenario The Indian food industry is now looking forward to mark its presence on the global food market. Increasing agricultural exports have long been an integral part of the Indian government’s sector development strategy. However, there have been serious challenges faced by exporters to meet the changing food quality and safety norms of major importing countries. There have been various incidences in which Indian export products have not complied with the International food quality and safety norms, leading to restrictions in market access to the importing countries. There have been concerns over pesticide residues in horticultural produce (EU’s ban on India’s mango exports; 2014, Saudi Arabia’s ban on India’s chillies’ export; 2014, Indian grape export crisis in 2003), aflatoxin contamination and the use of prohibited food colourants in spices’ export (Indian dry chili exports faced rejection in Germany, Italy, Spain and the U.K. due to the presence of aflatoxin in 2004-05; EU banned fish & fish exports from India in 1997 due to salmonella detection). Sudden changes in the import norms and stringent food safety and quality norms

risks unmanaged. The cost of assessing and managing risks upfront is often less than the costs incurred on managing /mitigating disruptions. This risk-based approach can even lead to a significant competitive advantage in the long run as best practices emerge over time and as the organisation moves up from the base targets of maximising profits, managing costs and maintaining service levels to operational and financial excellence.

Food Industry Megatrends Food safety is a theme of high priority and relevance to government, civil society, private sector and inter-governmental agencies across the globe. Changing consumer preferences, changes in production and distribution methods, evolving trade

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have time and again increased the challenges for Indian food exporters in gaining market access in the developed markets. Apart from dealing with the challenges of access to the International market, the food industry has to deal with various intrinsic issues also. The existing extension system does not focus on food quality and safety domain as a result of which there is limited awareness amongst farmers towards these areas. Moreover, limited training avenues and support infrastructure coupled with the high cost of certification creates a disincentive for adoption of standard practices by small holders and marginal farmers. This poses serious challenge of product quality standardisation for food companies engaged in crossborder procurement and trade.

International trends By far the biggest change disrupting the global food industry right now is the US Food Safety Modernization Act 2011, which has already started impacting the global food industry.The FDA Food Safety Modernization Act (FSMA), the most sweeping reform of our food safety laws in more than 70 years, was signed into law by President Obama on January 4, 2011. It aims to ensure that U.S. food supply is safe by shifting the focus from responding to contamination to preventing it. The FSMA gives the Food and Drug Administration (FDA) the right to recall contaminated foods and hold everyone at each step of the supply chain to greater account. It mandates that companies move beyond simple compliance to develop an effective food safety strategy focused on a preventative, risk-based approach to food safety problems. This inadvertently affects both domestic and international food and food-ingredient suppliers. Traceability of food products, right from source to fork, is expected to bring in an upward thrust to food safety measures across the globe through increased accountability and stringent enforcement. In addition to these country-specific regimes to ensure food safety, the World Trade Organization also mandates minimum quality and 11

In order to create a balance between cost and quality, regulatory and policy level changes are required first at the domestic level and then can be taken up at the international level.

safety requirements (SPS measures) for export of food products. The country-specific regulatory arrangements in this regard, over and above these minimum standards, have been often debated as “Technical Barriers to Trade” by many countries, mostly developing & least developed countries. These standards have been often alleged to infuse trade distortions in favour of the developed world. Cost considerations have been one of the major reasons for such allegations.

Balancing Costs and Quality Developing countries like India where food supply chains are mostly fragmented and small holder agricultural practices are prominent, awareness and cost of compliance are two major concerns to start with. Awareness is limited. There are multiple laws, numerous certifications and many implementing agencies governing food safety statutory requirements in the sector. In this complex environment, compliance accrues a significant cost. As per a World Bank Study, the cost of SPS compliance is 13% of total FOB value and the cost of residue testing only is 7.9% of FOB value.11 If compliance is anyhow ensured, the product no longer remains cost-competitive in the International market. In order to create a balance between cost and quality, regulatory and policy level changes are required, first at the domestic level and then at the International level. Rationalisation of national legal and regulatory norms pertaining to food safety to develop harmonised and customised industry/ markets/ stakeholders’ specific food safety norms is a must to curtail excess costs. The facilitation of a central authority for monitoring and execution of food safety standards is required for effective implementation and ensuring regulatory compliance.

The Best Practice Response Leading companies recognise resilient supply chain as a competitive advantage — and their objective for managing risk in the supply chain has evolved from one of simple risk management to risk-resilient growth. Our experience indicates leading companies apply a range of faster and more dependable methods and approaches to understand and manage their supply chain resilience. These include: Comprehensive supplier evaluation programmes to ensure accountability and achieve greater supply chain visibility Use of advanced supply chain management and logistics’ simulations to proactively map the

Assuming exports of 15,000 tons of grapes, then the SPS compliance cost is US 130/ton. Assuming average FOB price is US$1.0/kg.

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Figure 7: Food Safety: Risk Identification & Mitigation Approach Framework

Biosafety, Biosecurity, Bioterrorism: -Enhance our ability to identify food safety risks, - Improve our inspections of domestic and imported foods, - Foreign food suppliers are required to register • Certification & Statutory Audit: Regulatory Requirements, International Quality/Audit standards (FSMS-HACCP, ISO, USFDA, etc. • Testing & Quality Assurance Services After Sales

- New product development – product design & structure - Technology transfer – access to novel foods’ hazard-resilient technologies - Target specific incubation centres

- Agribusiness & processors – agri inputs, on-farm (livestock & agri products) - Product tracking & traceability

- Vendor integration & supplier risk management - Supplier evaluation models, supplier audits, integration criteria, exclusive suppliers, etc.

- GMP Points of Intervention: - Production/ manufacturing - Warehousing & storage - Packaging - Transportation

Retail, food services & restaurants: - Statutory quality compliance - Food labelling - Secondary packaging - Storage & warehousing

- Product recalls & management - Consumer awareness - Point of consumption safety & hygiene

Transparent integration of knowledge, technology and information + effective risk monitoring & mitigation >> Supply Chain Resillence

evolution of risk to ensure timely provision of risk management, containment and mitigation strategies Use of third party services, software tools and data sources to understand emerging risks, meet regulatory and compliance obligations and track actions Robust business continuity programmes, which provide strategic and premeditated advice besides providing and supporting organisation -specific supply chain risk management approaches Leading scientific capabilities such as DNA testing and isotope analysis, which can facilitate accurate labelling or authenticate ingredients Enhanced recall processes connected to the overall crisis management framework that go beyond mock recall to look at capabilities across the supply chain

Next Steps Supply chain disruptions are not a matter of if, but, when and how. As economies evolve, despite the regulatory necessities, consistently high levels of supply chain disruption are being reported with a number of threats being re-considered. A more

Traceability of food products, right from source to fork, is expected to bring in an upward thrust to food safety measures across the globe through increased accountability and stringent enforcement.

coordinated and strategic approach is needed, one that takes a holistic view to identify, monitor and mitigate weak links in the supply chain from farm to fork. Concerted efforts are required both by government and private sector at policy and implementation levels respectively. There is a need to go beyond compliance to improve standards. Enabling transparent integration of knowledge, technology and information across the food supply chain coupled with effective risk monitoring could lead to improved traceability and increased supply chain resilience, ensuring food safety and security at the national level. PwC understands the importance of transparent and better resilient food supply chain for risk mitigation. PwC considers food safety as an important precursor to ensuring food security. Food safety is a vital constituent to achieve sustainable development – it must be systematically assimilated into all policies and interventions to improve nutrition and food security. It is also quintessential for the food value chain stakeholders to assess and mitigate food safety risks throughout the supply chain to maintain trade competitiveness and to ensure sustainability in the long run.

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nodff/shutterstock.com

Sustainable and Inclusive Supply Chains a key business driver for food industry BY ASITAVA SEN & BARRY LEE, INTERNATIONAL FINANCE CORPORATION (IFC)

In today’s complex environment of volatile commodity prices, changing customer preferences and emergence of developing markets, sustainability in supply chains is emerging as a key risk mitigation strategy for global food and beverages companies. The objective of this article is to present a few stories of successful interventions by IFC clients and the key benefits achieved in economic, environmental and social development. As food industry in developing countries matures, both local companies and MNC’s need to demonstrate leadership in working together with its supply chain partners and larger stakeholders in a collaborative manner. This has implications not only in their success, but in addressing the larger issues such as food security, farm gate income, rural prosperity and resource efficiency.

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Challenges Faced by Global Food Industry and the Need for Sustainable Supply Chain The global population continues to grow and is expected to surpass nine billion by 2050. That’s an additional two billion people that must be fed and clothed every day amid a growing scarcity and conflict over land, water and energy resources. According to the Food and Agriculture Organization (FAO), in order to provide adequate, safe and nutritious food to all, production must increase by at least 60%. For those working in food & agriculture, the challenges have never been greater (refer to Chart 1). These include the impacts of climaterelated disasters such as droughts in Africa and Asia as well as increasing energy costs, growing waste and eco-system damage across the globe. Inefficient farming practices, including low-technology farming, complicate the picture. As illustrated in Chart 2, the situation in India, in particular, is under stress. In other words, agriculture is expected to produce more output while reducing its impact on the natural and built environment. This will only be possible by promoting sustainability throughout the value chains, and focusing on environmental, social and economic issues. (refer to chart 3). While the problems may seem intractable, many innovative business solutions — showcased in this article— are already delivering win-win outcomes in terms of financial returns and sustainable development. These breakthroughs of technology and ideas not only maximise productivity, but also optimise delivery across a far more complex landscape of financial, environmental and social outcomes. Cooperation between parties in the chain that provide our daily food – including farmers, traders, processors and supermarkets – and the scientific and political communities and interest groups is essential. The private sector requires expertise, networks, appropriate solutions and valuable business partners, including financial services providers for the long term.

Ways to Build Collaborative and Sustainable Supply Chains Globally, we see Food & Agribusiness (F&A) companies facing increasing structural pressure on their supply chains, as a result of increased price volatility, margin pressure shifting along the chain, and an increased complexity in their operating environment. This includes even external agendas such as sustainability, health/safety issues and the stress on resources from food, feedstock and biofuels.

Chart 1: Facts and Figures – Global Food Security Increase in food production needed to feed more than 9 billion people by 2050

60-70% 842 million

People experienced chronic hunger in 2011-12

38.5%

Percentage of world’s land dedicated to agriculture World’s freshwater used in agriculture

70%

Expected increase in demand for animal protein by 2050, driven by growing middle class and changing dietary habits

73%

Increase in productivity expected if smallholder farmers adopt sustainable agri practices

79%

Food produced that is wasted or lost Demand for small farmer agriculture finance

25%-33% US$ 450 billion

Source: FAO, UN and World Resources Institutes

Companies should be looking for ways to increase their control over the supply chain and align their chain with strategic growth priorities.

The traditional view of supply chains is of a zero sum game. Downstream companies (such as large food companies and retailers), who buy agri commodities, are under pressure to protect margin in a more complex environment, fluctuating global demand and volatile prices. Their dilemma is how much of the margin could be shared to secure supply. On the other hand, upstream suppliers are strengthening their negotiating position. They want higher prices to cover increasing production costs and are demanding more from a buyer in return for an assured supply commitment. As a solution, companies should be looking for ways to increase their control over the supply chain and align their chain with strategic growth priorities. Dealing with this pressure and complexity is a common topic of discussion with senior management of F&A companies. Supply chain management has become a strategic issue – companies are engaging more deeply with suppliers and their chains. Smallholders are a particular focus.

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Chart 2: India bears a disproportionate share of global agriculture burden with stressed natural resources India’s Contribution to the World (figures in per cent) Water Resources Land Area

Per Capita Land Availability (in Ha)

4

2.19

Per Capita Land Availability in India - Projected (in Ha) 0.32 0.23

2.17

0.19 17.2

Livestock

0.32 Population

16.7

India

World

2001

2025

2050

Source: State of Indian Agriculture, 2011-12, Government of India

In a dedicated supply chain, F&A companies make a shared and formalised long-term commitment to working together, which generally extends end-toend along the supply chain. Chart 3: Interventions required to address food challenges

Demand for food and feed could increase by 70% by midcentury….

…while supply is coming under pressure

Additional 2 billion people (29% growth) by 2050 and 70% increase in food production needed by 2050 Wastage across value chain in many emerging markets exceeds 30% Reduction in agriculture production by 5% over last 20 years in Africa while increase by >40% in other developing countries

Increased productivity, quality and reduced wastage

Land fragmentation/predominance of small farmers in many developing countries Small farmers have limited access to finance. Agri sector represents less than 5% of bank lending (by volume) in Africa

Efficiency in aggregation & access to finance

Cocoa, oil palm, forestry: issues of child labour, threats to biodiversity and need for community engagement Demand by external markets for sustainable, traceable and safe product

Application of recognised standards

Agribusiness accounts for 70% of freshwater consumption Forecasted 40% gap between water demand and supply by 2030 under ‘Business as Usual’ conditions

Reduction in amount of water usage

Stopping deforestation critical to climate change mitigation and biodiversity conservation Changes in climate patterns are affecting growing seasons and severe weather is impacting yields

Adaptation to climate change

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The winning strategy is cooperation between stakeholders in the supply chain leading to the circular economy model for the long term. The entire chain should work together to maximise the value of outputs and turning waste into new cash flow opportunities. In a dedicated supply chain, F&A companies make a shared and formalised long term commitment to working together, which generally extends end-to-end along the supply chain. It is aimed to build new levels of trust and shared ownership for innovation in the processes and products. The defining characteristic is the commitment to work together to satisfy needs of a ‘captain’, which typically is a large downstream company – either a processor/brand owner, retailer/food services operator or exporter. It should be kept in mind that the level of integration and cooperation will vary from one commodity chain and geography to others, depending on many factors, including how tight the chain is. For example, sugar or coffee, typically have tighter integration between producers and processors, vis-a-vis cereals. As head the chain, the major processor, retailer, foodservice player or exporter acts as a captain showing leadership and providing commitment to its suppliers. There are several proven benefits for this collaborative approach, including: Reduced supply risks Improved productivity Access to new markets and capital Enhanced brand reputation The following case studies involving some of IFC’s global clients further illustrate the benefits of investing resources and attention to create sustainable shared ownership across food supply chains.

6.5 SUSTAINABLE AND INCLUSIVE SUPPLY CHAINS

CASE STUDIES1 CASE STUDY

1

JAIN IRRIGATION IN INDIA – DEVELOPMENT OF JAIN GAP STANDARDS IN MANGO AND ONION SUPPLY CHAIN

Business Need Jain Irrigation System Ltd. (JAIN), an IFC investment client, is the largest manufacturer of efficient irrigation systems worldwide; as well as the largest mango puree producer in the world and the third largest dehydrated onion producer. A majority of the produce of its Foods division is exported to some of the largest food & beverages companies worldwide. Securing regular supplies of consistent quality and quantity of agri produce for its food processing business is a strong driver for JISL’s entry into contract farming. Contract farming is enabling the company to develop a cost-effective supply chain in a market characterised by fragmented supply chains with many layers of intermediaries. In response to its major global buyers’ concerns about food safety and increased interest in farmlevel practices and traceability, JAIN decided to provide buyers assurances on the use of good agricultural practices at the farm level, specifically around pesticide use and worker health and safety, without significantly increasing costs to neither farmers nor JAIN. Such measures are necessary to maintain and grow the company’s customer base over time, and they are easier to introduce in a contract farming model given the level of monitoring required. IFC supported JAIN to develop and pilot a “JAIN GAP” standard to apply to farmers in the JAIN supply chain. The JAIN GAP standard is a modified/ simplified version of GLOBALGAP2 as a means to bring some measure of food safety and GAP standards to the JAIN supply base while minimising the costs of compliance to both farmers and JAIN.

Farmer Ravindra Mahajan shows onion production in his farm after adoption of Jain G.A.P. quality standards. IFC’s support to Jain Irrigation helped them develop and adopt standards that assured buyers about the use of good agricultural practices at the farm level, without any compliance cost increase

The JAIN GAP standard is a simplified version of GLOBALGAP, as a means to bring interim measures of food safety standards to the JAIN supply chain.

Train 4000 contract farmers on GAP and certify 800 JAIN farmers by project’s end Bring 2,500 acres of farm land under sustainable JAIN GAP management Additionally, the Project had the goal of working with GLOBALGAP to consider the JAINGAP standard as a model for a “stepwise” approach for certifying small farmers to GLOBALGAP.

Results The Project has achieved the following results: Almost 3,000 farmers certified on JAIN GAP by mid-2012 Recognised as a winner of the G20 Challenge on Inclusive Business Innovation Use of MIS has resulted in annual yield increases between 60%–130%, and income increases between $500-$6,000 for farmers Estimated reduction of 500 million cubic meters of water per year through JISL drip and sprinkler irrigation, compared to flood irrigation

Interventions The Project had a two year time horizon for implementation whereby upon the project’s end, JAIN would have a successful model for applying to the rest of its direct suppliers. Specifically, the Project was to support JAIN to: Develop and implement the JAIN GAP standard and the related internal operational structure Train 70 JAIN GAP extensionists and auditors on the JAIN GAP standard

The project also had an impact at the sector level. GLOBALGAP recognises the JAIN GAP standard as a “Primary Farm Assurance” Standard Basic Requirement IndiaGAP Standard has been developed based on the JAIN GAP standard. The Basic Requirement IndiaGAP standard is a subset (74 of the 244 clauses) of the IndiaGAP standard. Farmers will now have a two-step approach for compliance to IndiaGAP.

1

Case study 1,2 and 3 reference: Jenkins, Beth and Eriko Ishikawa (2010). “Scaling Up Inclusive Business: Advancing the Knowledge and Action Agenda.” Washington, DC: International. Finance Corporation and the Harvard Kennedy School.

2

GLOBALG.A.P.(earlier EuroGap) is the world’s leading farm assurance program, translating consumer requirements into Good Agricultural Practice in more than 100 countries currently

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CASE STUDY

2

COCA COLA SABCO IN SUB-SAHARAN AFRICA AND SOUTH EAST ASIA: INNOVATIVE AND INCLUSIVE MANUAL DISTRIBUTION CENTRE (MDC) MODEL OF DISTRIBUTION

Business Need The Coca-Cola Company (TCCC) is the largest nonalcoholic beverage company in the world. Coca-Cola SABCO (CCS), a previous IFC client, is one of TCCC’s largest bottlers in Africa, operating 18 bottling plants and employing more than 7,900 people in Eastern and Southern Africa. Headquartered in South Africa, it is 80% owned by a private investment group and 20% by TCCC. The Coca-Cola Company utilises a wide range of conventional distribution methods around the world. Yet in many parts of the developing world, such as in East Africa, where road infrastructure, retail markets, cost implications, and customer needs differ, other distribution methods such as bicycles to boats prevail. Thus, Coca-Cola SABCO’s MDC model was born out of a business need to adopt its delivery model to local infrastructure, customer needs and market conditions. Through the MDC model, SABCO has been able to more effectively and efficiently reach small-scale retail outlets located in densely populated urban areas where truck delivery is challenging. Typically each MDC services an area of 1 kilometer circumference, reaching about 150 retail outlets. Most of the retailers they serve are kiosks or small stores serving neighbourhood customers, and have enough funds and space to manage a few days’ supply at the most.

Interventions The Manual Distribution Center (MDC) approach was first developed as a pilot with 10 MDCs in

Vytautas Kielaitis_shutterstock.com

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Coca-Cola SABCO’s MDC model was born out of a business need to adopt its delivery model to local infrastructure, customer needs and market conditions.

Addis Ababa, Ethiopia, in 1999. By 2002, the company had implemented the successful model on a broad scale throughout its markets in East Africa. IFC investment has played an important role in enabling Coca-Cola SABCO to expand and modernise its operations in Ethiopia, Kenya, Mozambique, Tanzania, and Uganda – particularly in Ethiopia, where it was considered a pioneering investment in a country perceived to be highly risky. In Ethiopia and Tanzania, more than 80% of the company’s volume is now distributed through MDCs. MDCs are CCS’ core distribution model in Kenya and Uganda, where they are responsible for 90% and 99% of the total volume respectively. They account for 50% of volume in Mozambique and have been used to a lesser extent in Namibia and elsewhere. Once new MDCs have been established, the most critical success factor in the model is regular training, monitoring, and communication. As many as 75% of these distributors in Ethiopia and 30% in Tanzania never owned a business before. In 2007, on behalf of the Coca-Cola Company, IFC conducted research to assess the MDC model in Tanzania and Ethiopia and generate recommendations for improving the model’s business and development impact moving forward. This research alerted SABCO to the ongoing opportunity and impact of training, financing, and women’s empowerment.

Results The MDC model has helped CCS improve sales and customer service by providing outlets with access to smaller, more frequent deliveries of product as well as address some of the financial and space limitations they face. The MDC model has had development impact in three broad areas. First, the MDC model creates new opportunities for entrepreneurship and employment in the formal sector. As of the end of 2008, Coca-Cola SABCO had created 2,200 MDCs in Africa, generating over 12,000 jobs and more than $420 million in annual revenues. Three quarters of MDC owners in Ethiopia and one third in Tanzania reported that they were first-time business owners who previously held only parttime jobs, or worked in the informal sector. MDC owners and employees support an estimated 41,000 dependents.

6.5 SUSTAINABLE AND INCLUSIVE SUPPLY CHAINS

CASE STUDY

3

mtoom/shutterstock.com

Second, the MDC model has created new economic opportunities for women, both as MDC owners and employees and as SABCO managers and sales staff. Across East Africa, the MDCs have created entrepreneurship opportunities for close to 300 women. In Ethiopia and Tanzania, samples showed that 19% and 32% of MDCs, respectively, were owned by women. In addition, couples own a high proportion of MDCs jointly, many of which are managed by the women. Finally, the MDC model has helped develop human capital. The training SABCO provides to ensure that the business is successful, benefits the MDC owners and staff members who receive it even after they leave the Coca-Cola system, helping them qualify for higher-skilled jobs and more lucrative business opportunities.

ECOM IN CENTRAL AMERICA, AFRICA AND ASIA: PROMOTING SUSTAINABLE COFFEE TRADE

Business Need Originally a cotton trader, ECOM (IFC investment client) has expanded primarily into coffee and cocoa. The company is an integrated commodity originator, processor, and merchandiser, and it sells its products to branded product manufacturers, including Nestlé Group, Starbucks, Hershey, Mars, Sara Lee, Kraft, and Folgers. Now incorporated and headquartered in Switzerland, ECOM and its subsidiaries operate in 30 countries. Given the characteristics of coffee farming in Central America, ECOM must do business with smallholder farmers. The company must also invest proactively in their development: any loss of competitiveness would threaten the company’s supply chain. Farmer competitiveness is also critical to ECOM’s access to the premium coffee markets. Demand for high-quality, certified coffee is increasing, with roasters, retailers, and consumers looking for various combinations of high quality, environmental sustainability, traceability, and social standards. Depending on the market conditions, premiums paid for certified coffee can be significant to the growers. As of 2008, 20% of ECOM’s coffee was sold as certified. The company aims to increase this figure to 50-80% over time. This will be possible only if the smallholder farmers in its supply chain can consistently produce certified varieties in the necessary quantities, making the availability of smallholder financing and technical assistance key to the company’s long-term vision.

Demand for high-quality, certified coffee is increasing, with roasters, retailers, and consumers looking for various combinations of high quality and EHS standards.

Interventions IFC provided both investment and advisory services to ECOM, including $25 million in debt financing and $1.5 million in technical assistance, of which IFC funded 50%. On the grower financing side, ECOM provides seasonal credits (typically less than US$ 1000 per farmer) to its coffee suppliers in Mexico, Guatemala, Nicaragua, Honduras, and Costa Rica. These pre-payments finance the farmer throughout the production cycle, supporting the purchase of inputs like fertiliser, the maintenance of the coffee plants, and harvesting.

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On the technical assistance side, ECOM works with Rainforest Alliance, a US-based NGO that promotes sustainable livelihoods, and CIRAD, a French agricultural research center, in a partnership facilitated by IFC to improve farmer productivity, sustainability, and eligibility for certification. Farmers are encouraged to improve their operations through better documentation of production processes, management of fertiliser, improved labour conditions, and other measures. The programme is also financially supported by Nestle Group’s Nespresso, which sends a strong signal to farmers about the company’s intention to purchase high-quality, sustainable coffee at premium prices and allows ECOM to work with its farmers to plan in advance the quantities that are required.

Results The business and development results of ECOM’s inclusive business model are intimately linked. The results are: Increased productivity for farmers reached, in some programmes by more than 40% 481,606 bags of certified coffee purchased, representing $3.7 million in additional income for coffee farmers Increased farmer loyalty to ECOM and more stable supply chain Increased trade volumes of certified coffee

CASE STUDY

4

A smallholder farmer in Vietnam producing high quality, certified coffee beans. IFC’s support to ECOM helped increase productivity, increase share of certified coffee production with additional income for farmers and enhance farmer loyalty, creating a stable supply chain

Encouraged by the success of the programme, ECOM estimates to work with 125, 000 growers in Central America. IFC’s relationship with ECOM in Central America has led to an additional $55 million in debt financing and $8 million in advisory services to support the company across Africa (Kenya, Tanzania, and Uganda) and Asia (Indonesia, Papua New Guinea, and Vietnam). Together, these new programmes are expected to reach 80,000 coffee farmers, of which 43,000 are expected to be certified.

PROBIOTECH INDUSTRIES AND OTHERS IN NEPAL: STRENGTHENING POULTRY SUPPLY CHAINS

Business Need The poultry sector in Nepal is estimated at $240 million and employs over 70,000 people. However, the industry loses up to $32 million every year. This loss is primarily due to the fact that local SMEs lack formal training on farm management and struggle to stay profitable. More specifically, Nepalese poultry producers face multiple challenges like inefficient feeding practices and low quality of baby chickens—the two key inputs that together represent up to 90 per cent of their costs. Another issue is bio-security and disease management, which are critical to the sustainability of the industry. Local specialists lack adequate training and the Nepalese poultry sector needs to build capacity in these areas.

Interventions To achieve the most impact, IFC is focused on the following interventions:

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6.5 SUSTAINABLE AND INCLUSIVE SUPPLY CHAINS

Assessing poultry feed process quality and advising on how to improve nutrition practices Developing a Standard Operating Practice—a good practice guide for the poultry sector aimed at increasing overall production efficiency Analysing bio-security and diseases in parent and grower farms, and providing industry-wide recommendations for improvement. Training small and medium poultry farms’ staff and build local veterinarian capacity by training the trainers

Results 4,050 chicken growers, 42 per cent of whom are women, trained on farm management Trained 32 (30 per cent women) veterinarians as trainers to build local capacity

Developed a Standard Operating Practice–a guide for stock farms, hatchery, and broiler growers Feed conversion ratio (FCR) reduced by 0.2 to 1.9 and broiler livability increased by 3% to 92% Probiotech feed mill, one of IFC’s clients, won the “Nepal Standard” quality award from the Nepal Bureau of Standards and Metrology in 2011 Women farmers trained by the project have reduced the cost of chicken production by 18 per cent versus 7 per cent by men farmers In May 2014, IFC signed an agreement with poultry feed manufacturer Probiotech Industries to invest $1.9 million equity in the company to enhance farm productivity and boost incomes in rural Nepal. This was IFC’s first agri-business investment in Nepal. This was followed up with another $ 3.8 million invested in 2015.

Conclusion Each of the above cases clearly demonstrates the value of leadership in creating economic, social and environmental sustainability and value creation. The first case on JAIN GAP illustrates the importance of certification, quality and traceability to enhance export competiveness. This is particularly important for India, which in spite of being the third-largest agri producer (by value) in the world, falls short as an exporter with the tenth position. Issues of poor farm practices, farm fragmentation, lack of traceability and inadequate storage/logistics infrastructure are some of the structural deficiencies. Given its agro climatic advantages and proximity to major food importing regions such as Europe, the Middle East and China, there is significant potential for India to enhance its position as a food exporter. The second case study on Coca Cola SABCO illustrates the potential of rural markets and the need for innovative and inclusive distribution models for fulfilling growth ambitions. This is particularly important as the level of processing (currently only 10% of food in India is processed) grows, and FMCG companies build bottom-of-the pyramid strategies to move mass consumption towards nutritious and cheaper processed products. The third case study on ECOM illustrates how global food and beverage manufacturers, food retailers and foodservice companies are increasingly setting targets around sustainable sourcing, reducing water and GHG footprints, embracing sustainability certification schemes, and increasing their focus on food safety. As Asian companies enhance their global market ambition and footprint, adherence to sustainable supply chain practices will become more important. As developing countries move up on economic development and income, the dietary pattern and consumption needs will tilt more towards value-added food and processed food. Consumption is shifting from plant-based protein to animal-based protein (milk and meat). Even newer food consumption occasions (such as snacking and eating out) are emerging rapidly. The fourth case study on Nepal’s poultry sector highlights the need for improving productivity, hygiene and modernisation of the animal protein sector to be able to match supply to emerging demand. The growth of processed food companies, food retail/ food services chains will play a major role in consolidation and modernisation of upstream agri supply chains in Asia. It can also contribute a critical role in social integration linking producers in rural areas and consumers in urban areas. The governments need to play the role of a catalyst with favourable polices and enabling infrastructure. There is a growing imperative for all stakeholders – public, private and small holders to cooperate and collaborate to accelerate this “chain revolution” and help address issues of food security, nutrition, agricultural productivity, farm gate income and resource efficiency.

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THE INDIA FOOD REPORT 2016

SECTION 7

FOOD SERVICE

7.1 INDIAN FOOD SERVICE MARKET OVERVIEW 7.2 INTENSIFYING COMPETITION 7.3 INDIAN HOMEGROWN RESTAURANTS 7.4 EXPERIMENTS FOR THE PALATE 7.5 WHAT’S ON THE PLATE? 7.6 GOAL VEGETARIANISM 7.7 SCALING UP 7.8 FRANCHISING FERVOUR 7.9 SCIENTIFIC SERVICE 7.10 SOCIAL MEDIA POWER 7.11 SUPPLY’S STRENGTH & SUPPORT 7.12 BIRYANI OR PIZZA – CHOICE FOR QSR 7.13 MAKING THE RIGHT CHOICE 7.14 AMPING UP EFFICIENCY STANDARDS

INDIAN FOOD SERVICE MARKET OVERVIEW

BY SUMAN DABAS & RAVINDRA YADAV, TECHNOPAK ADVISORS PVT. LTD.

Changing lifestyle aspirations and evolving food consumption habits of Indians are driving the growth of the Indian Food Service Industry. A market size of INR 2,72,700 crore in 2014 is well on its way to hit INR 4,23,100 crore by 2020, growing at a CAGR of 8%. However, alongside the opportunities, there are also certain challenges. Here’s an in-depth analysis of the different segments comprising the Indian Food Service market and its future outlook.

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7.1 INDIAN FOOD SERVICE MARKET OVERVIEW

1.3 Food Service Industry Market Size The evolving Food Service Industry is a significant contributor in terms of tax or VAT to the economy. Currently, it contributes nearlyly INR 1,400 crore to the tax bucket.

The size of the Indian Food Service market (organised and unorganised) in 2014 is estimated to be INR 2, 72,700 crore and is projected to grow to INR 4, 23,100 crore by 2020 at a CAGR of 8%. Within this, the unorganised market holds a 68% share with an estimated market size of INR 1,86,000 crore in 2014. The organised restaurant segment is estimated at INR 78,900 crore (29% of the overall market) and is projected to grow, at a CAGR of 11%, to reach INR 1, 44,900 crore by 2020.

1.3.1 Organised Food Service Industry 1.3.1.1 Market Evolution The chained food service market in India has evolved and witnessed majority of changeover during the last three decades. The transition phase of the food service industry can be divided into three stages, as shown in Exhibit 3.

Exhibit 2: Food Service Industry: Market Size (INR Cr.)

2014

2015P

10,500

96,500

106,700

118,200

2016P

2017P

2018P

Unorganized Source: Technopak BoK

Organized

130,800

14,400 144,900 263,800

87,300

9,500

13,000

248,900

78,900

8,550

234,800

7,700

11,700

221,500

The Food Service Industry is classified in two segments: organised and unorganised, based on the following three key parameters: (i) Accounting transparency, (ii) Organised operations with quality control and sourcing norms and (iii) Outlet penetration The food service outlets that do not conform to the above three key parameters would be categorised under the ‘unorganised’ segments. This segment primarily comprises dhabas, roadside small eateries, hawkers and street stalls. The organised segment conforms to above three parameters and is further classified into Chained and Standalone formats. Chained formats are domestic and International formats with more than three outlets present across the country. The Chained formats are further classified in six sub-segments based on price (avg. price per person), service quality and speed, and product offering. The sub-segments are: Fine Dining, Casual Dining, and Pub Bar Club & Lounge (PBCL), Quick Service Restaurants (QSR), Cafes and Frozen Desserts. The definition of these sub-segments is given in Annexure 2.1 and average price points are given in the table below:

Source: Technopak BoK

209,000

1.2 Market Structure

EXHIBIT 1: FORMAT-WISE AVERAGE PRICE POINT PER PERSON Format Average Price Point Per Person (APPP) in INR Fine Dining Regular 1,000 to 1,500 Premium >1,500 Casual Dining Affordable 250 – 500 Premium 500 – 1,000 PBCL 750 – 1,500 QSR 75 – 250 Cafes 50 – 200 Frozen Dessert 50-150

197,200

A decade back, eating out had not been a prominent feature in an Indian’s life, but over the years, due to changing consumption pattern, eating out has gained momentum. This changing pattern has ensured constant growth for the Indian food service market. Today, India represents the high priority market for global Food Service Industry. The importance of Food Service Industry stems from the large direct and indirect employment it provides, the revenue it generates for the government and the role it plays in promoting tourism. The industry provides direct employment to five million individuals, which is 10 times the hotel industry. There are 10 million street vendors in India, of which six million sell readyto-eat food. This evolving industry is a significant contributor in terms of tax or VAT to the economy. Currently it contributes nearly INR 1,400 crore to the tax bucket.

186,000

1.1 Indian Food Service Market

2019P

2020P

Hotels Year mentioned is FY

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EXHIBIT 3: EVOLUTION OF THE CHAINED FOOD SERVICE MARKET Geographic Operating Investment Strategic Focus Penetration Model Needs Phase-1 High focus on Ownership/ Funded by Customer 1991-2001 Metro & Mini Franchise personal acquisition, Metros Model & capital & sustainable Management conventional revenue growth contracts means Phase-2 Thin Penetration Continuation Partnerships/ New Opportunity 2002-2010 in Tier I & II Cities with JVs with areas with franchisee related focus on CRM, model & JVs business Expansion & interest, extended capacity Initiation of PE building funding Phase-3 Penetration in Emphasis Expansions Customer 2010-2020 newer segments on contracts under engagement, (Travel, Education, more centred brands & format Medical) and around emergence of diversification increased revenue new brands/ & product penetration in sharing concept. enhancement Tier I & II cities PE driving expansion

Phase

Source: Technopak Research & Analysis

Market Size (INR Billion)

Exhibit 4: Organised Food Service Industry: Market Size (INR Cr.)

2400 6700 2400 9900 13700

2600 7500 2600 10700 15600

43800

48300

2014

53250

2015P

CDR

2016P

QSR

3400 10200 3200 13600

3150 9200 2950 12600 20300

2800 8300 2800 11550 17800

3800 11300 3500 14700 26200

23100

4100 12500 3700 15900 30100

58500

64700

71300

78600

2017P

2018P

2019P

2020P

PBCL

FDR

Café

Source: Technopak BoK

FD/IC Year mentioned is FY

Exhibit 5: Organised Food Service Industry (Chained Outlets) in INR Cr., FY 2014 1000

600 600 900 1800 4600

600 700 1000 2200

700 800 1100 2450 5850

750 900 1250 2800

800 1000 1400 3200

900 1100 1600 3700

1200 1750 4200 9200

8200 7300

6500

5200

6900

8100

9600

11300

13400

15700

18600

2014

2015P

2016P

2017P

2018P

2019P

2020P

Source: Technopak BoK

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FDR PBCL FD/IC Café CDR QSR

1.3.1.2 Market Size The organised food service market is projected to grow at a CAGR of 11%. Café & QSRs in the organised segment will continue to grow at a CAGR of ~11% and ~14% respectively. In the organised market, the chained segment is expected to grow at a healthy rate as compared to the licensed standalone segment. In the chained market, the QSR and the CDR constitute ~75% of the total organised food service market followed by Cafés (12%). The Café and QSRs are projected to grow at a CAGR of 15% and 18%, respectively, in the chained segment. The higher growth in the chained segment for next years is driven by the increasing presence of international brands, strengthening of back end infrastructure, acceptence of new cuisines and formats, changing lifestyles and aspirations and emergence of entrepreneurial ventures in these segments. 1.3.1.3 Competitive Landscape / Key Players Post liberalisation the Indian food service market has seen a significant growth in terms of number of players, both domestic and international. Post 2008, the industry has seen a growth in terms of number of outlets. The key

7.1 INDIAN FOOD SERVICE MARKET OVERVIEW

Exhibit 6: Organized Food Service Industry (Licensed Standalone Outlets) in INR Cr., FY 2014 2700 2600 2400 2200 2100

11700 1900 6400

12600 2000 7000

13600 2200 7600

14700 2350 8300

2000 1000 1600 5300

10750 1700 5850

39200

43100

47400

52000

57400

63100

69400

6800

7500

8200

9000

9700

10500

11500

2015P

2016P

2017P

2018P

1800 9300 1500 4900

2014

2019P

FDR PBCL FD/IC Café CDR QSR

2020P

Source: Technopak BoK

EXHIBIT 7: PRESENCE OF KEY FOOD SERVICE PLAYERS IN INDIA Format Latest Outlet Presence Type Count Across Cities Cafe Coffee Day Café 1472 209 Domino’s QSR 921 209 Subway QSR 517 127 McDonald’s QSR 376 66 Pizza Hut CDR 430 67 KFC QSR 396 81 Goli Vada Pav No. 1 QSR 350 88 Barista Café 169 26 Costa Coffee Café 58 15 Sagar Ratna QSR 71 22 Jumbo King QSR 85 14 Starbucks Café 75 7 Yo! China QSR 39 15 Dunkin Donuts Café 61 21 Mainland China CDR 50 21 Barbeque Nation CDR 53 21 CBTL Café 24 9 Beer Café PBCL 26 8 Copper Chimney FDR 17 8 TGI Fridays PBCL 14 8 Oh! Calcutta CDR 9 6 Chilli’s PBCL 15 8 Smoke House Deli FDR 10 4 Hard Rock Café PBCL 9 7 California Pizza Kitchen CDR 8 4 Punjab Grill FDR 9 5 Pizza Express CDR 8 3 Haldiram QSR 37 7 Bikanervala QSR 40 18 Brand

Source: Industry Sources, Technopak Research & Analysis

players in the various segments are listed in Exhibit 7. Metros and mini-metros such as Delhi, Mumbai, Hyderabad and Bangalore witnessed an upsurge of organised restaurants and food joint concentration owing to faster development and growth in terms of Infrastructure and business opportunities. Organised players like McDonald’s, Domino’s and Café Coffee Day are looking to increase their market share by capitalising on the untapped market like highways, railway stations, Tier II markets etc.

1.4 Key Drivers and Trends for Food Service Market Availability of Organised Space leading to food service expansion The success of any food service outlet is dependent to a large extent upon the availability of real estate in areas with high customer footfalls. According to Cushman Wakefield, 70 million square feet (msf.) of mall space is available in top seven Indian cities and an additional of 21 msf. is expected to become operational by 2017. Due to the cosmopolitan culture and well-developed peripheral locations, Delhi-NCR and Bengaluru account for 46% and 21% of this upcoming supply respectively. Despite being the financial capital and a prime cosmopolitan city in West India, Mumbai is going to witness only 5% of the total upcoming supply owing to shortage of suitable land parcels. Mall developers promote coming up of foodoutlets on their property, as it acts as the anchor outlet (in conjunction with large format stores such as Big Bazaar) to sustain high footfalls over a large period. As a consequence, food courts and adjoining areas in most malls have

Exhibit 8: Mall Supply (under construction) 6% 5% 21%

6% 11%

5%

46%

Bengaluru Chennai Delhi-NCR Hyderabad Kolkata Mumbai Pune

Source: Cushman Wakefield Research

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dedicated space for the food service sector, and have assisted growth of QSR, café, casual dine and fine-dine formats. Food service providers have definite advantages in setting up outlets in malls, as auxiliary activities such as parking, security etc. are managed centrally, with lesser overheads on their resources. Additionally, with the change in consumer consumption pattern and profiles, eating-out has emerged in non-traditional locations such as office complexes, educational institutions and hospitals.

Exhibit 9: Category wise Retailer Penetration in Shopping Hubs

22%

28%

9% 4% 12%

11% 14%

Apparels & Footware Automobiles Food & Beverages Electronics Super Markets Departmental Store Others

Food service providers have definite advantages in setting up outlets in malls, as auxiliary activities, such as parking, security etc., are managed centrally, with lesser overheads on their resources.

Source: Cushman Wakefield Research

EXHIBIT 10: SHARE OF F&B OUTLETS IN MAJOR MALLS OF INDIA City Total GLA Total no. No. of % Share (sq. ft.) of Outlets F&B of F&B Outlets Outlets R City Mall Mumbai 657,000 140 49 35% Ambiance Delhi NCR 873,000 165 47 28% Mall The Great Delhi NCR 850,000 190 50 26% India Place Mantri Bengaluru 919,516 202 46 23% Square Mall Select City Delhi NCR 512,000 159 35 22% Walk Inorbit Mall Mumbai 545,000 149 33 22% High Street Mumbai 650,000 165 35 21% Phoenix Inorbit Mall Hyderabad 576,000 158 25 16% South City Kolkata 610,000 150 21 14% Mall Inorbit Mall Pune 547,000 125 12 10% Mall

Sources: Technopak BoK

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The increase in road travel and use of highways for personal/recreational visits as well as for official purposes has allowed outlets located on highways to flourish. Consumers have moved beyond looking for traditional Dhabas for their food service requirements, and are willing to pay a premium for premium services scape provided by branded/multinational food chains. Thus, the growth of organised retail spaces has provided a key platform for development of new outlets from incumbents as well as new entrants in the segments. Consistent Growth of Brands (Indian & International) The vast untapped potential in the Indian market to cater to the needs of its vast population have encouraged the entry of key international players into the domestic food-service sector. These brands are not only concentrating on metros and mini-metros but have also started venturing into the tier-I and tier-II cities as well. With the highest number of organised players, currently the QSR format dominates the Chain Market, followed by the Casual Dine and Café formats. – Café: In Café segment, Café Coffee Day (CCD) is well spread out across India and is the largest coffee chain in terms of number of outlets. It holds a ~49% share of the café market and is growing consistently. Starbucks a new entrant is rapidly scaling up its operations and has reached a store count of 75 in just three years and is planning to take the store count to 90 by the end of 2015-16 – QSR: This segment is mainly dominated by Domino’s Pizza with ~24% market share of the chaind QSR market, marking its presence across various zones and type of cities. The Indian market is also rapidly adapting to American cuisines, as evidenced by the rising market share of Subway, which is a relatively new entrant. Large chains like McDonald’s and KFC have started targeting the Tier II & Tier III cities. Among Indian brands, Goli Vada Pav, Fassos and Jumbo King have started expanding across the country and are not just limited to specific regions. International brands like Burger King, Wendy’s, Carls Junior etc. have already made presence in the Indian QSR segment and other International brands are planning to venture into the market. These new brands are coming up with rapid expansion plans to match the

7.1 INDIAN FOOD SERVICE MARKET OVERVIEW

existing players. This scenario will substantially accelerate the growth of the QSR and Café segments in the coming years. Franchising and joint ventures has been a great driver for these brands to expand rapidly. A royalty fee ranging from 6-8 % is not something which worries the franchisee, as the association of these brand names results in greater footfalls and higher revenues. Also, the initial success of homegrown brands has allowed them to expand beyond their home/regional markets and scale up operations to cater to a larger target market. Strengthened Back-end The core product offering (food) at any food-service outlet remains the highest-priority for any consumer. The Indian landscape, with weak and broken supply chains presents unique challenges in ensuring high quality food preparations for their patrons. In the light of the situation, to cater to their customers, certain brands have invested into setting up their own commissaries, or have outsourced their operations. This ensures higher quality produce at the front-end, and provides higher degree of control over quality parameters and processes. The absence of a nationwide supply network of products and services to cater to the sector has attracted the interest of players, who have started to expand the supply chain in the form of commissaries, logistics and cold-chains. The sector growth and increased sales have developed a wide-base of raw-material suppliers, providing an opportunity for players to undertake risk-mitigation strategies such as supplier-diversity initiative to enhance their supply chain resilience. Emergence of New Cuisines An offshoot of the increasing globalisation is the entrenchment of the food culture within the Indian consumer food services market. With wider exposure to food-related media and acceptance of the consumer for ethnic and gourmet cuisines, the existing food services players are responding to consumer’s newest taste fads by adding more cuisine options to their menus. At the same time, they are keeping regular customers happy by maintaining options that delights their taste buds. There has also been an increasing influx

The initial success of homegrown brands has allowed the food service players to expand beyond their home/ regional markets and scale up operations to cater to a larger target market.

of innovative products in terms of taste, style and origin, and in their availability in multiple settings, with a good ambience. Based on the market offerings, three cuisines-North Indian, Chinese and South Indian make up ~70% of player offerings; with the rest 30% offerings including international cuisines such as Continental, American, Italian and regional cuisines like Gujarati, Maharashtrian, and Rajasthani. The Indian food service market’s offerings are predominantly “North Indian” in origin. . Giving in to the popularity of Indian cuisine, multinational brands have incorporated a significant number of products in their menu which essentially have Indian elements added to it. QSRs offer around 30-40% of India-specific products in their menu whereas cafés offer around 15-20% of India-specific products. Going with this trend, Burger King has also kept around 35% of its menu for the Indian palate. Another cuisine which is equally preferred by the Indian consumer is Chinese, currently being offered across multiple segments, e.g. Mainland China in Fine Dine, Wokamama in Casual Dine, etc. Alongside its popularity with the chain format, it has also become the most preferred street food option. However, this cuisine is not authentic Chinese but heavily influenced by Indian tastes. Apart from the top two preferred cuisines, the consumer preference tilts towards South Indian cuisine as well, being offered both at mass (Swagath, Sagar Ratna, Saravana Bhavan, Dasaprakash, Nagarjuna, Nandini, Ananda Bhavan) and premium (South Indies, Bon South, Zambar) outlets with a fair mix of chain and standalone formats.

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Furthermore, Italian and American cuisines are also gaining popularity owing to the increasing popularity of brands like Little Italy, Domino’s Pizza and McDonald’s. This in turn has resulted in the rise of standalone, authentic specialty formats. Players offering gourmet Italian offerings include Sunny’s and Toscano (Bangalore), Tuscana Pizzeria and Azzuri Bay (Chennai), and La Italia and Tonino (Delhi NCR). The chain format within this category has been limited to few brands like Olive Beach, Little Italy, etc. Similarly, American-style authentic steak is largely popular among standalone players like Millers 46, Boat Quay Grill and Monkey Bar, among others, while chain players offering a more potpourri style include Smoke House Grill, Indijoe, T.G.I.F., Ruby’s Bar and Grill, Hard Rock Café, etc. One of the prominent emerging cuisines is Japanese (Pan Asian cuisine), largely due to the emphasis on healthy cooking and ingredients. However, the cuisines are largely offered by star hotels or standalone premium brands such as Kyoto in Gurgaon, Izakaya and Sushiya in Delhi, Sushi and More in Mumbai, and Harima in Bangalore. The increasing mix of ethnicities around the nation and increasing acceptability of cross-regional cuisines have promoted players to pay homage to India’s culinary heritage by introducing newer options and increasing the proportion of regional cuisines in their menus. These cuisines have also taken center stage among the core offerings of many chain and standalone outlets. Brands like Oh! Calcutta, Rajdhani, Coconut Grove, Annachi, Wazwan, etc. have made a mark through authentic regional offerings.

Market players are adding combos and value meals to their menu in a bid to turn a prospective customer into a consumer, and the combos also help in maintaining the average spend per person. The Happy Price Menu from McDonald’s and KFC’s Snacker are apt examples value meal.

To sum up, while North Indian cuisine remains the most available option across city types, Chinese is next in line in terms of popularity. International cuisine options are more widely available in metros than in other cities, while in the Tier 1 North Indian foods constitutes the major share of a pie. South Indian cuisine also remains popular across city types. Value Meals Market players are adding combos and value meals to their menu in a bid to turn a prospective customer into a consumer, and the combos also help in maintaining the average spend per person. Some examples of value meals include the Happy Price Menu from McDonald’s, KFC’s Snacker and Box Meals, and Subway’s combos in the QSR segment, and Pizza Hut’s Birizza meal, Yo! China’s lunch combo, and IndiJoe’s Celebration combo in Casual Dine segment. Hybrid Concepts The brands are getting more innovative in terms of providing more options in terms of formats under the same roof, due to the higher real estate costs. The introduction of McCafé within the McDonalds stores is an example of the way how the QSRs are looking at utilising the space within the same outlet. These concepts, along with saving on rental expenses for the brand, also provide a plethora of options for the consumers and are certainly gaining popularity. The growing impact of high rentals on the overall cost structure of players has also fuelled the evolution and widespread adoption of revenue-sharing models. These provide a cushion for players to manage costs in the event the location fails to attract the requisite number of customers and generate the anticipated revenues. Malls like Nirmal Lifestyle in Mumbai, Select Citywalk in New Delhi, and Prestige Forum and Sigma in Bangalore facilitate this option for players. The revenue sharing ranges between 7-10% for a QSR with a small carpet area and low average per cover (APC), and 15-18% for a fine dine or casual dine restaurant which are relatively larger formats with a high APC. Growing Demand for Takeaways and Home Delivery Services The demand for Takeaway and Home Delivery services has swelled over the years across all formats and cities, driven by factors like

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7.1 INDIAN FOOD SERVICE MARKET OVERVIEW

increasing time poverty, long travel times, increase in the number of working women and consequently greater dependence on prepared food, a younger population, higher disposable incomes, increasing all-round efficiency of the delivery business in India in terms of order-taking process, packaging, delivery time, coverage, and value offers, and the growth of online and app-based channels. Additionally, the ease of communication has spurred demand for takeaway and delivery channels, and has in turn encouraged operators to trigger formats that are purely focused on maximising revenues earned through this channel, e.g. Domino’s Pizza, Pizza Hut Delivery, etc. Food service operators are also investing substantially in delivery infrastructure to facilitate higher efficiencies and reduce transaction costs. Thus, the home delivery segment is evolving, with growth estimated in the range of 30-40% over the next five years. Food service operators are trying their hand at the home delivery format as an added revenue stream which, on an average, adds ~10-20%. The potential of the delivery format has also gained traction with the evident success of prominent pizza chains in India which derive 40-65% of their revenues from this format. – Growth in Delivery-focused Formats: The commercial benefits of a purely takeaway/ delivery-focused format have tempted operators to expend their time, money, and energy in this direction. Among these benefits is the lower initial investment required in terms of rentals, interiors, furniture, etc. to launch such a format. The fixed costs of such operations are also lower, with such expense heads as CAM, labor and utilities seeing considerable reductions. Most crucially, there is lower dependence on quality real estate, which comprises a major cost for restaurants. – Expansion of Delivery Services in Existing Restaurants: While the F&B industry is going through a tough time due to a slowing economy leading to challenges of demand, it

has become imperative that establishments maximise business from their existing formats to rationalise their fixed costs and keep their business viable. Home Delivery is an important lifeline in this regard. It is not surprising, therefore, that even fine and casual dining formats are fighting to get a larger share of the pie. Deliveries help them realise higher revenues per sq. ft., better economies of scale, overcome the “seat constraint” during peak times and enhance existing consumer loyalty.

The ease of communication has spurred demand for takeaway and delivery channels, and has in turn encouraged operators to trigger formats that are purely focused on maximising revenues earned through this channel.

– Delivery-focused Websites: While Domino’s Pizza has gone ahead with its own website and app, other operators are also tapping the food delivery market. Many players have joined hands with specialised delivery portals like FoodPanda, Tastykhana, JustEat, etc. as a means of testing waters. These businesses work on a commission-based model. The advantage to the consumer is that he can access multiple restaurants through a single website/ mobile number, and that these companies often negotiate exclusive offers in terms of value from the restaurants. Zomato, India’s premier restaurant rating website, has also realised the potential of the home delivery business in India, and has developed a model whereby they have combined the brand visibility on Zomato.com with the third party administration of the delivery/dine in business. For a fixed monthly charge, they provide an advertisement banner and an exclusive phone number, which can be used by customers to call up restaurants for a reservation/delivery order. The additional benefit to the restaurant is that, apart from a surge in delivery orders and queries, they are also given access to call records, helping them to improve their services and make the ordering process more efficient. Home Delivery/Takeaway formats have seen a major traction in captive locations like malls, offices, and residential complexes, wherein the target group for food-on-the-go and in-call dining are actively seeking new options. The Kiosk format, which can be considered as an extension of the Takeaway concept, is becoming prominent within captive locations. Food-on-the-Go and Home Delivery concepts will grow in tandem with the changing lifestyle of the urban population and the ever-increasing travel time between destinations, not only in the metros and mini-metros but also in Tier-I and Tier-II cities.

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EXHIBIT 12: INVESTMENT IN TECH BASED FOOD STARTUPS (FY 2014) Company

Amount Raised

Yumist

USD 1 million

Frsh

USD 618,000

Holachef

USD 320,000

SpoonJoy

Undisclosed

Itiffin

USD 1 million

TinyOwl

USD 20 million

Faaso’s

USD 20 million

FoodPanda

USD 147.3 million

TastyKhana

USD 5 million

JustEat

USD 89.1 million

DeliveryChef

Undisclosed

BiteClub

USD 500,000

EazyDiner

USD 1 million

Although the potential of the online food services market is undeniable, what is still being figured out by the investors and startups is the business models.

Source: iamwire Research

Startup iTiffin Bhojanshala TinyOwl Holachef Yumist Eatonomist Snackosaur Fassos

EXHIBIT 13: BRIEF ABOUT BUSINESS MODEL AND PRESENCE OF TECH BASED FOOD STARTUPS Operations Order Delivery Time (City) Placement Bangalore Online, phone Advance booking Pune Website 30 mins Mumbai Mobile app 45 mins Mumbai Website, Advance mobile, app booking Gurgaon, Mobile app 30 mins Bangalore Gurgaon Website, 45 mins phone Pan India Website 1 – 3 days Mumbai, Pune, Mobile app 15 – 45 mins Bangalore, Chennai, Ahmedabad, Baroda

Source: Company portals, news articles

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Payment Mode Online, cheque, cash CoD Online, CoD Online, CoD CoD Online, CoD online Online, Fassos wallet

New Trends in the Delivery Business – Role of apps and web-based ordering: With the growth in computer literacy and access to smartphones and the Internet, the home delivery business is all set to grow further. Players like Domino’s and McDonald’s generate around 15-20% of their sales through these new age technology platforms and the same is increasing by 30-40% year on year. Over past one year, exponential growth has been observed in the number of tech food startups - some of which are providing an online platform for ordering, while others have set up their own kitchens in addition to providing a booking platform. Technology-based food service market in top 10 cities of India is estimated at around INR 5,800-6,000 crore. This area is also garnering investor’s interest. Few key startups that have been able to raise funding are listed in Exhibit 12. Additionally, in an interesting twist of events, businesses from different niche have also decided to experiment in this lucrative business. JustDial made its way into online food ordering service and cab aggregator Ola has entered this segment  with the launch of its food delivery service in four cities. It might not be surprising if we see Flipkart enter the food space with its well-oiled logistics infrastructure in place. Although the potential of the online food services market is undeniable, what is still being figured out by the investors and startups is the business models. Three models have taken shape thus far: – Food-ordering apps that simplify ordering and place your orders to the restaurants, e.g. TastyKhana, TinyOwl, etc. – Food-ordering and delivery apps, which neither own space nor cook the food, e.g. Holachef. – Internet-restaurant models that are essentially building quick-service food brands online e.g. Frsh, TapCibo. There’s also the other kind of player in Zomato—the home grown online restaurant-discovery site that built a multimillion dollar business by merely listing food menus. The six-year-old startup aims to start table booking services on its platform. Currently, a wide variety of services (and business models) are prevalent, but as the market evolves, only few models (that are scalable and sustainable) will survive. To make the model truly profitable and sustainable, scalability of about a million orders a day is required. While the end-game is still unknown, there is a lot to munch on.

7.1 INDIAN FOOD SERVICE MARKET OVERVIEW

1.5 Key Challenges 1.5.1 Economic/ Market Factors – Rising food costs: Food price inflation is a key factor affecting the food service market in India, and is impacted by unpredictable rainfall, economic slowdown, and unfavorable demand-supply conditions. It keeps fluctuating and reached a peak of 15% in 2009-10. While it affects consumer indulgence across all formats, it also hits the margins realised by players. Across all food service formats, food costs (raw materials) account for ~30-35% of the revenues. The perpetual rise in food costs narrows the players’ margins, compelling them to increase menu prices. This in turn accentuates the challenge of retaining customers who are already value conscious and tend to evaluate all available eating out options carefully. – Fragmented market, increasing competition: The Indian food service market has many small and mid-size unorganised players competing with large chain players. This fragmented market reflects a number of challenges, including the unclear format segmentation, varied consumer options for eating out and a lack of best practices for food service outlets. There are a number of players who offer products that are more or less similar, at competitive prices. No single player leads the market, and there also exists low consumer loyalty. This makes it challenging for players to engage and retain consumers, and heightens their performance-related uncertainty. Since a one-size-fits-all approach will not pander to the variegated consumer palate, it is imperative that food services players tailor their offerings from time to time, be it the menu, the format, or the concept, in order to establish a unique business proposition and attract diverse consumer segments.

Exhibit 14: Food Price Inflation (y-o-y) 15% 9%

9%

2013-14

2011-12

2010-11

2009-10

2008-9

7%

2012-13

11% 9%

To add to the woes of exorbitant real estate costs, the food services market is constantly buffeted by reforms relating to land availability, land ceilings and floor space index (FSI), and also suffers delays in approvals.

1.5.2 Operational Factors – Manpower issues: Shortage of quality staff and high attrition: The Indian Food Service Industry is highly labour-intensive, but the availability of trained manpower is low. According to a study by the Ministry of Tourism, the current supply of skilled/ professionally trained manpower in hotels & restaurants segment is estimated to be ~9% of the total manpower requirement. Given this shortfall of quality manpower and the industry’s high attrition rate of 20-25%, the cost of labour is high. To bridge the demand and supply gap, currently players are hiring in huge numbers and increasingly investing in in-house training programme. – Real Estate Issues: High real estate and labour costs impacting store profitability: For over a decade, India has been experiencing an escalation in real estate prices amplified by increasing demand and the availability of easy credit. For a food service outlet, real estate (rentals) is the second major cost component after raw materials and accounts for ~12-15% and sometimes even 20% of total revenues. Further, labor costs are also high in India. People get low salaries, productivity is low, and thus there is a requirement for more employees. The high labor and real estate costs, coupled with the high service tax on property, are exerting pressure on store profitability and consequently deterring the growth of food service outlets. – Land reforms impacting business operations: To add to the woes of exorbitant real estate costs, the food services market is constantly buffeted by reforms relating to land availability, land ceilings and floor space index (FSI), and also suffers delays in approvals. The permissible FSI in India varies across cities and, on an average, is in the range of 1 to 4. In comparison, the global FSI average is 10. This is because of the constant discouragement of a high population density in urban areas, which results in a higher density in slum areas and also unauthorised constructions. For example, in Mumbai, where space shortage is an issue, the FSI (including transfer of development rights) is 2.

Source: Office of Economic Advisor, MOC

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– Cold Chain: Currently, cold chain facilities in India are inadequate to meet the prevailing demand. The cold chain infrastructure is highly fragmented. An estimated 85% of the market by value is dedicated for storage and the other 15% for transportation. According to industry sources, there are ~5,300-5,400 cold storages in India with a total installed capacity of ~23 million MT. Around 25% of these cold storages are multi-purpose, with the rest for storage of potatoes (~55%), other fruits and vegetables, dairy products and meat and fish. In terms of capacity, ~80% are utilised for potatoes alone and the rest 20% for other commodities. Across the entire supply chain, the need for cold chain infrastructure and advanced solutions is critical to minimise the wastage of fresh produce, extend life of the perishables and enhance the quality of food. – Fragmented supply chain: The industry’s supply chain is fragmented in nature and marked by the presence of multiple intermediaries. The lack of appropriate infrastructure, inadequate technologies and non-integration of the food value chain are the key factors leading to the nearly 30-40% food wastage across the supply chain. It is most essential for food service players to pin down existing supply chain issues and implement suitable counter measures. – Warehousing: There exists a shortage of quality warehousing space in India. Warehouses lack the optimal size, design, and storage system. Further, the presently available warehousing space is inadequate with respect to the growing demand. According to industry sources, the total warehousing space in India is estimated at 80-100 million metric tons (MT), whereas the demand is for a much larger space. – Logistics: The logistics market in India is highly unorganised- ~95%, with few national level players. The infrastructure is grossly inadequate, with lack of proper roads, rail network and ports. Insufficient distribution channels, overburdened ports, and poor quality of service are just a few of the bottlenecks that impact players. This leads to high logistics costs, which amount to over 13% of India’s GDP as against ~5% in developed countries.

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A lack of appropriate infrastructure, inadequate technologies and nonintegration of the food value chain are the key factors leading to nearly 30-40% food wastage across the supply chain.

– Food safety issues: Food safety is very important for the Food Service Industry, especially in today’s social media-driven age, where one small mistake can reach thousands in no time. Indian food safety parameters in terms of hygienic practices and ‘know-how’ have come miles post the entry of gloal players in the market in 1996. Yet, a lot of knowledge impartment is required at the grass-root level to handle food more hygienically and safely. From the growers to the suppliers and to the food handlers, everyone needs to practise and adhere to safety guidelines. The domestic and international chained outlets follow a detailed check list to ensure food safety in their outlets, yet a lot of contamination can happen at the cold chain level or at the raw material processor level. The establishment of FSSAI has ensured that these good practices will be strictly monitored but the entrepreneurs present in the unorganised segment and smaller licensed outlets need to actively participate in educating their staff over the importance of hygiene and sanitation. Another critical point in terms of food is the consistency in terms of quality and laid specifications. The food service operators continuously face the issue of not getting food products as per agreed specifications, e.g. weight, appearance, ripeness etc., with the supplier. This majorly affects the quality of food served and results in inconsistency and consumer dissatisfaction.

7.1 INDIAN FOOD SERVICE MARKET OVERVIEW

EXHIBIT 15: LIST OF RESTAURANT LICENCES INTERNATIONAL Country No. of Nature of Licences Licences Thailand 5 Sanitation (Food) Licence Fire Licence Sales (Tax) Licence Work Permit Licence Local Municipality Licence China 4 Sanitation Licence Environment Licence Fire Licence Sales Licence Singapore 4 Food/ Health Licence Fire Licence Sales Licence Waste Licence Turkey 2 Municipality Licence Fire Department Licence Source: NRAI Technopak Food Services Report

1.5.3 Government/ Regulatory Factors – Over-licensing: In India, obtaining the requisite Licences, e.g. health Licence, food safety Licence, police Licence, No Objection Certificate (NOC), from the fire department and the state pollution control board, etc. is a major obstacle hindering the smooth operations of a restaurant. The process is not centralised as yet and requires filing applications with individual stakeholders, which involves a lot of paperwork and is a time-consuming activity. The licences required to start a restaurant are the same throughout India, except in some states like Maharashtra. A player needs approximately 12-15 Licences just to open a restaurant each from a government department. In comparison, the licensing requirements internationally are not as intricate as shown in Exhibit 15. In India brands usually prefer to form a separate department or hire an external liaison consultant to handle restaurant licensing and other legal compliances because of the complex nature of the job and the time and effort demanded. The laws are also not uniform, differing as they are from state to state, and further, are open to interpretation. Exhibit 16 lists the Licences required for opening a restaurant in India. The process of obtaining these Licences is cumbersome, expensive and imposes a high and avoidable ‘cost of compliance’ that benefits neither the industry nor the public.

EXHIBIT 16: LIST OF LICENCES Food Safety Licence

FSSAI

Mandatory

Health / Trade Licence

Municipal Corporation / Health Department of the State concerned

Mandatory

Eating House Licence

Police Commissioner – Licensing

Mandatory

Liquor Licence L-4 (L-17 as per new Excise Rule)

Excise Commissioner

Mandatory for service of liquor in the restaurant, otherwise not

Approval / Re-Approval of Restaurants

Department of Tourism of Government of India in the State concerned / Delhi Government

Optional

Playing of Music in restaurants – Licence

Phonographic Performance Limited / Indian Performing Right Society

Mandatory when recorded / live music of the two copyright Holders are played in the restaurant.

Environment Clearance for Grease Trap / ETP (Water Pollution Act)

State Pollution Control Board

Mandatory

Environment Clearance for Generator Sets (Air Pollution Act)

State Pollution Control Board

Mandatory for Gen Sets

NOC from Fire Department

Fire Department of the state concerned

Mandatory

Weights and Measures

Legal Metrology Department

Mandatory

Lift Licence

Authority concerned – Electrical Inspector, Office of the Labor Commissioner

If lift is to be installed

Insurance required to be taken. Public Liability Product Liability. Fire Policy Building & Asset. There are other insurance policies also which are not mandatory but useful

Any insurance company

Mandatory

Shop and Establishment Act

As prescribed in the Act and as applicable to the state concerned

Mandatory

Signage Licence

Municipal Committee / Corporation of the city

Mandatory in some states

Source: NRAI Technopak Food Services Report

INDIA FOOD REPORT 2016 | 325 |

Intensifying

Competition BY MAPLE CAPITAL ADVISORS RESEARCH

The food service business has seen intensifying competition, showing early signs of growth recovery, select consolidations, and significant capital flows to food-oriented consumer internetenabled ventures. — Pankaj Karna, Managing Director Maple Capital Advisors

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Food Services Sector Today The Indian Food Service Industry is estimated to be over US$ 57 billion and is growing at an annual growth rate of 11% expected to reach US$ 78 billion by 2018, on the back of sustained growth in disposable income in India. The continued shift from the unorganised to organised sector is visible with the organised sector growing @ 16%, primarily driven by new investments. Regulatory changes, access of information to consumers by consumer internet ventures and improved supply chains are accelerating the pace at which the sector is getting organised. The food service sector has been impacted by lower discretionary spends, food inflation , high rental levels and decrease in mall footfalls (45% dropAssocham study) resulting in subdued sales. This has impacted the same-store sales growth (SSSG) and profitability of food service businesses across formats even as unit economics and viability of the right formats are still in place.

7.2 INTENSIFYING COMPETITION

1,615.64

1,743.80

1,871.45

2013

2014

2015

1,558.95

1,594.88

USD Bn

Annual Disposable Income

2011 2012 Source: Euromonitor

Format Share in the Food Service Market 3% 5%

Consumer Portals Driving Awareness & Change

Provides consumers the power to review and be heard based on actual experience rather than established hearsay reputations Enabling food service players to reach out to consumers and enabling delivery models Zomato, FoodPanda, TinyOwl, Quikwallet, etc. are leading this change, resulting in even larger capital raise than the food service market

Fine Dining Casual Dining Cafes Pubs & Bars QSR

26%

Source: Technopak

Internet Presence F&B Brands KFC Pizza Hut Burger King Domino’s Café Coffee Day Cocoberry Food Panda TGIF McDonald’s Zomato Taco Bell Starbucks Faaso’s

No. of Facebook Fans 3,85,04,619 2,60,24,885 2,78,452 1,01,81,100 48,02,558 13,16,170 15,30,319 14,18,091 12,91,686 12,33,823 5,61,212 5,21,227 79,040

No. of Twitter Followers 48,600 90,300 11,80,000 91,700 38,700 701 15,900 1,50,000 14,345 1,82,000 1,531 17,700 7,678

Estimate of Mobile Internet Users 158% 96% 90% 44

4

Jun-12 Source: I-cube

101

160 INR Mn

QSRs in particular witnessed a steep decline of 4%-11% in the same store sales growth during the last 12 months with some improvement in the last quarter to the tune of 6%-7%. Sales growth has thus been sustained in key chains mainly via new store launches. Despite the fundamental slowdown, the organised food service businesses are witnessing increased competition due to emergence of new International brands (e.g. Taco Bell, Burger King, Johnny Rockets, Starbucks) and domestic players (e.g. Faaso’s, The Beer Café, Chai Point, Goli Vada Pav , Ammi’s Biryani, etc.). The rise in usage and penetration of the Internet and handheld smartphones has given access to consumer portals and social media, which has led to awareness of choice and has further intensified competition. Multiple ventures ranging from information, food delivery originators to predominantly internet store front have started and got funding in the last 15 months. Supply chains and food logistics, especially with the consumer internet integration, is changing the marketplace and food service players are in a phase of significant transition, adapting to the change. The change is driving entrepreneurship and competition on the hope of changing fundamentals of discretionary spends or betting on disrupting it.

Consumer portals have given unparalleled access to information on food service options down to locality

22% 44%

70 21

36

53

Jun-13

Jun-14

Jun-15

Rural

Urban

INDIA FOOD REPORT 2016 | 327 |

Private Equity in the Food Service Sector

Emerging Trends and Challenges Food quality, experience and fulfilment is paramount for sustained growth and profitability. Technology and consumer internet platforms are becoming intrusive yet unlocking unparalleled insight to consumers. The trend is likely to continue going forward and players would need to strategise to dovetail, manage and maximise from these platforms. Regulations, though in the right direction, are nebulous and as they get refined, they may also create operational adaption requirements. The Food Safety & Standards Act 2006, and Regulations, 2011 introduced earlier is currently under review. Meanwhile, the Union ministry of health has extended the deadline for obtaining licence and securing registration by food business operators (FBOs) by six months. The new deadline is February 4, 2016. Supply chain and ingredient players are gaining sophistication: positive for scale players as their time to market has shrunk with off-the-shelf solutions on supply side availability. Small players are also getting organised and therefore increasing competition. Despite the slowdown in the real estate sector, rentals have remained on the higher side. In the absence of limited new mall developments, we expect rentals to rise further, once the market growth metrics are restored. Lack of quality retail space and continued rental stickiness has forced operators to opt for a smaller footprint, e.g. takeaway counters and limited seating and kiosk formats. Retail growth is expected to improve in the near term, likely to be driven by new investments given the conversion of fast graduating population to consuming class, especially in the casual and QSR space and consumer internetenabled markets. Competition will only intensify and well-funded platforms that have chain and multi store presence or the niche localised operators are likely to succeed as they adapt to internet-driven logistics while the internet-oriented initiators will continue to create opportunities or disrupt the marketplace.

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Competition will only intensify and well-funded platforms that have chain and multi store presence or the niche localised operators are likely to succeed as they adapt to internet driven logistics.

Investor momentum continues despite the slowdown and since our last coverage there have been 37 investments totaling USD 664 million. It includes investment of USD 442 million in the foodoriented internet space, which far exceeded the mainline food service space primarily focusing on online delivery with few select growth investments in the pure food services offline footprints. Paradise Foods and Impresa raised A round funding from Samara Capital and Unilazer, respectively. Impresa raised a follow on funding of $1 million from Trans Continental Venture Fund. The key follow-on investments took place in Devyani International, B2B Marketing (Beer café), Speciality Foods, Café Coffee Day and Faaso’s. Also, with the equity markets looking buoyant, it is expected that some scale players may debut with their IPO’s in the near future. Café Coffee Day would likely be listed by the end of this year. Everstone Capital Management invested $13.45 million for a 50% stake in Massive Restaurants who operates brands like Made in Punjab, Farzi Café and Pind Balluchi. Consumer internet-enabled startups are getting more traction this year evident from increased interest by the private equity investors. The industry has seen food delivery aggregators, Internet-first restaurants and home chef marketplaces, all fighting for a share in India’s $14 billion (Rs 89,500 crore) food-tech market. Key investments in consumer internet-enabled startups include SAIF Partners in Spoonjoy, Kalaari Capital & India Quotient in Holachef, Oliphans Capital in Grab, India Quotient in Frsh, Orios Ventures in Yumist, Powai Lake Ventures in Bite Club & Eat lo, Mirah Hospitality in Hopping Chef and Mumbai Angels in Snackexperts. Key deals in the consumer internet enabled food ordering space were investments in FoodPanda by Goldman Sachs & Rocket Internet of $100 million & $110 million respectively, $16.50 million investment in Swiggy by Norwest Venture Partners, $15 million investment in TinyOwl by Matrix Partners, Sequoia & Nexus Venture Partners and $11 million

7.2 INTENSIFYING COMPETITION

Private Equity Deals in the Food Service Sector Consumer Internet-enabled Investments Date 26-Aug-15 25-Aug-15 31-Jul-15 15-Jul-15

Target Roll Mafia Eazy Diner Pvt Ltd Noodle Play Roadrunnr

Investor Equentia Natural Resoures & HNIs Saama Capital & DSG Consumers

Gautam Sinha, Elliot Stechman & Ambrish Ray Sequoia Capital, Nexus Venture Partners & Blume Ventures 07-Jul-15 Eatlo Powai Lake Ventures, Abhishek Goyal & Globevester 03-Jul-15 Hopping Chef Mirah Hospitality 22-Jun-15 Holachef Kalaari Capital & India Quotient 09-Jun-15 Swiggy Norwest Venture Partners 22-May-15 Eveningflavors Angel investor – Sandeip Shrivastava 01-May-15 Foodpanda Goldman Sachs & existing investors 01-May-15 Spoonjoy SAIF Partners 29-Apr-15 Dazo Rajan Anandan, Sumit Jain & other angels (now Tapcibo) 28-Apr-15 Grab Oliphans Capital & Harish Chawla 10-Apr-15 Zomato Info Edge, Sequoia & Vy Capital Management 07-Apr-15 Swiggy SAIF Partners & Accel Partners 12-Mar-15 Foodpanda Rocket Internet & others 09-Mar-15 Bite Club Powai Lake Ventures 26-Feb-15 Tinyowl Sequoia Capital, Nexus India Capital and Matrix India 03-Feb-15 Snackexperts Mumbai Angels 03-Feb-15 Frsh India Quotient & Kae Capital 02-Feb-15 Holachef India Quotient 02-Feb-15 Yumist Orios Ventures 30-Dec-14 Spoonjoy Flipkart founder 05-Dec-14 Tinyowl Sequoia Capital & Nexus Ventures Partners 18-Nov-14 Zomato Info Edge, Sequoia & Vy Capital Management 27-Oct-14 Gourmetitup Karan Bhagat, Prabhat Awasthi & Atul Kumar 01-Sep-14 Frsh India Quotient 22-Aug-14 Tinyowl Sequoia Capital 11-Aug-14 FoodPanda Falcon Edge Capital and Rocket Internet AG Source: www.VCCEdge Platform

Deal Value ($ Million) 0.15 3.0

Percentage Sought (%) N/A N/A

0.16 11.0

N/A N/A

N/A 0.47 3.10 16.50 0.50 100.00 1.00 N/A

N/A 30% N/A N/A N/A N/A N/A N/A

1.0 50.0 2.5 110.0 0.5 15.0

N/A N/A N/A N/A N/A N/A

0.23 0.53 0.33 1.0 N/A 3.0 60.0 0.30 0.10 1.0 60.0

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Deal Value ($ Million) N/A 3.0 1.57 3.5

Percentage Sought (%) N/A N/A N/A 28.16

2.45 0.84 0.32

28.61 N/A N/A

N/A

N/A

Early Stage Investments Date

Target

Investor Carpediem Capital Partners Saama Capital & DSG Consumers Indian Angel Network Mayfield India II Ltd.

14-Mar-14 1-Jun-14 22-Jul-14

Thea Kitchen Pvt Ltd (Biryani Blues) Eazy Diner Pvt Ltd Wow Momo Foods Pvt Ltd Poncho Hospitality Pvt. Ltd. (Box 8) Guha Roy Food Joint and Hotel Nilgai Foods Pvt. Ltd. Sattviko Restaurant

30-Sep-14

Neopolitan Pizza Pvt. Ltd.

25-Aug-15 25-Aug-15 10-Aug-15 8-May-15

SEAF India Agribusiness Fund HNI Sanjay Bhasin, Rajat Jain, Sumit Jain Sarthi Angel Venture Foundation

INDIA FOOD REPORT 2016 | 329 |

investment in Roadrunnr by Sequoia Capital, Nexus Venture Partners and Blume Ventures. Zomato raised a fresh round of $50-million funding from Sequoia & Info Edge after a previous round of $60 million from existing investors. Another category that has been gaining traction is the restaurant reservation platform. Eazy Diner, founded by food writer Vir Sanghvi, has raised funding worth $3 million from Saama Capital & DSG Consumers. Others in this genre raising funding are Eveningflavors, Wowtables, et al.

There has been traction in supply chain side as well with fund infusion by Mandala Capital & Mandala Agribusiness Investments in Gati Kausar & Gaja Capital and DSG Consumer Partners in Baker’s Circle (3rd round fundraising) Overall, the sector has seen investments flowing into non-traditional start-ups expecting to disrupt the marketplace with online customer reach. The QSR chains, new entrants and Fine Dining have seen sharp drops in interest. They expect a revival post change in on-ground metrics and improvement in sentiment.

M&A/ Strategic Entry in the Food Service Sector - 2014-2015 The sector witnessed 24 M&A transactions during the period July 2014-July 15, with key transactions

Growth Stage investments Date

Target

Investor

Deal Value ($ Million)

Percentage Sought (%)

1.0

N/A

21-Aug-15

Impresa Hospitality Management Trans Continental Venture P Ltd Fund

20-Jul-15

Degustibus Hospitality Pvt Ltd

India Value Fund Advisors Pvt Ltd

30.00

N/A

13-Jul-15

Azure Hospitality Pvt Ltd (Mamagota, Rollmall etc)

Golman Sachs, Blue sky capital etc

10.00

N/A

13-Jul-15

Massive Restaurants Pvt Ltd (Farzi café, Made in Punjab, Pind Balucchi

Everstone Capital Management

13.45

50.0%

05-Jun-15

Barbe-que Nation Hospitality Ltd

CX Capital Management Ltd

16.71

N/A

20-Feb-15

Coffee Day Enterprises Ltd.

RARE Enterprises, Nandan Nilekani, Rakesh Jhunjhuwala

16.07

N/A

9-Feb-15

Faaso's Food Services Pvt. Ltd.

Lightbox Management Ltd., Sequoia Capital India III LP

20.0

N/A

1-Dec-14

BTB Marketing Pvt. Ltd. (Beer Café)

Mayfield India II Ltd., Granite Hill India Opportunities Fund, Harsh Mariwala

4.8

N/A

30-Jun-14

Paradise Food Court Pvt. Ltd.

Samara India Advisors Pvt. Ltd.

10-Jan-14

Impresa Hospitality Management Unilazer Ventures Pvt. Ltd. Pvt. Ltd.

11.07

N/A

2.9

43.5

Secondary Sale/Open Market/Consolidation Date

Target

Investor

Deal Value ($ Million)

Percentage Sought (%)

19-Dec-14

Devyani International Ltd.

Temasek Holdings Advisors India Pvt. Ltd.

81.31

N/A

24-Sep-14

Speciality Restaurants Ltd.

SAIF Partners Fund IV

2.36

2.27

22-Jan-14

Speciality Restaurants Ltd.

SAIF Partners Fund IV

0.78

0.85

Source: www.VCCEdge Platform

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7.2 INTENSIFYING COMPETITION

led by PE or family offices. It also includes the 10 acquisitions made by restaurant discovery platform Zomato, which is trying to move beyond restaurant reviews and become part of every aspect of the restaurant ecosystem. Carnation Hospitality entered the Food Service space by acquiring, Barista Coffee Company, launching US hamburger chain Wendy’s and is also in the process of introducing Jamie’s Italian, the Italian restaurant brand of celebrity chef Jamie Oliver, in India. Other significant transaction underway is the PE-led acquisition by Samara Capital of select franchisees of Yum in India & Sri Lanka. This will in effect have 3 key players driving YUM businessesR.K.Jaipuria led Devyani International, Samara led business and own stores of Yum. Burger King and Johnny Rockets entered the Indian market last year. Everstone got the franchise of Burger King expanding its presence from its existing platform of Blue Foods, namely

Pind Balluchi, Copper Chimney, Spaghetti Kitchen, Gelato Italiano et al, whereas, Johnny Rocket entered into a franchise agreement with Prime Gourmet. Gaurav Burman (Dabur family), forayed into the QSR segment by inking a pact with Yum! to become the franchisee partner for Taco Bell in North India. Also, FoodPanda acquired TastyKhana and Just Eat in November ‘14 and February ‘15, respectively. Carl’s Jr, the Californian burger brand, set up its first outlet in India in partnership with Cybiz Corp. International brands from USA and Europe including Cheesecake Factory, Cali Burger, Great American Cookies, Forever Yoghurt, Second Cup Coffee, Pie Face and Mr. Cod among others are actively looking at setting up business in India. Given the intense competition in the sector, we expect further consolidation over the shortmedium term.

Consumer internetenabled startups are getting more traction this year evident from increased interest by the private equity investors.

Merger & Acquisition Deals in the Food Service Sector Date

Target

Investor

Deal Value ($ Million) N/A

Stake %)

8-Jul-15

Nilgai Foods Pvt Ltd

R and A Foods Pvt Ltd

30-Apr-15

Hyderabad House Pvt Ltd

Food Krafters and Services LLP

N/A

100% 100%

28-Apr-15

Paratha Post

Hello Curry

N/A

100%

28-Apr-15

Love Sugar and Dough Pvt. Ltd.

Stake buyback from Speciality Restaurants

0.09

51%

22-Apr-15

NexTable Inc

Zomato Media Pvt Ltd

N/A

100%

14-Apr-15

Maplegraph Solutions Pvt Ltd

Zomato Media Pvt Ltd

N/A

100%

25-Mar-15

Indus Inn Pvt. Ltd.

Sunrise Asian Ltd.

N/A

100%

6-Feb-15

Just Eat

Food Panda

N/A

100%

29-Jan-15

Mechanist

Zomato Media Pvt. Ltd.

35.0

100%

13-Jan-15

Urbanspoon

Zomato Media Pvt. Ltd.

50.0

N/A

13-Jan-15

Wanderspot LLC

Zomato Media Pvt. Ltd.

52.0

100%

19-Dec-14

Cibando

Zomato Media Pvt. Ltd.

N/A

100%

25-Nov-14

Global Franchise Architects India P Ltd.

Om Pizzas and Eats India Pvt. Ltd.

N/A

100%

17-Nov-14

TastyKhana

Food Panda

N/A

100%

12-Nov-14

Meals on wheels

Ant Farm

1.78

100%

23-Sep-14

Gastronauci

Zomato Media Pvt. Ltd.

N/A

100%

22-Aug-14

Lunchtime.cz Ltd.

Zomato Media Pvt. Ltd.

2.2

100%

22-Aug-14

Creative Web Ltd., Obedovat.sk

Zomato Media Pvt. Ltd.

1

100%

12-Aug-14

Barista Coffee Company Ltd.

Carnation Hospitality Pvt. Ltd.

16.34

100%

16-Jul-14

Welgrow Hotel Concepts Pvt. Ltd.

Carnation Hospitality Pvt. Ltd

N/A

N/A

16-Jul-14

Mapple Hospitality Pvt. Ltd.

Carnation Hospitality Pvt. Ltd.

N/A

N/A

10-Jul-14

Janpath Restaurants Pvt. Ltd.

Nando's Resources B.V.

N/A

26%

1-Jul-14

Menu Mania Ltd

Zomato Media Pvt Ltd

0.83

100%

3-Jun-14

Love Sugar and Dough Pvt. Ltd.

Speciality Restaurants Ltd

0.12

51%

INDIA FOOD REPORT 2016 | 331 |

Looking Back… Looking back at our initial coverage in 2011, we briefly analysed how they fared, results of which are diverse and are summarised below. On Growth Momentum Out of the 12 names, only four have raised followon funding, namely Devyani International, Coffee Day Holdings, Spring Leaf and Faaso’s. Faaso’s and Spring Leaf are now seeking another round of funding for further expansion. Seeking Capital/Consolidation J.S Hospitality (Pind Balluchi), Impresario (Social & Smoke House Deli) & Indian Cookery (Yellow Chilli) are still exploring follow on funding. Om Pizza & Eats was acquired by Avan in 2013. There has been enhanced focus on growth and consolidation post the acquisition Mixed Trajectory Nirula’s has had a mixed presence due to increased competition and has lost much of its first mover advantage. Goli Vada Pav is also looking to raise funds for Pan India expansion. Growth is slow as they have opened only 2 new stores since March 2014. In Conflict Adiga’s & Sagar Ratna have been embroiled in litigation with their investors. Overall, the sector has demonstrated resilience and well run operations have exhibited a good growth trajectory over the last 5 years.

Date 25-May-12

Acquirer/ Investor Navis Capital

Target/ Investee Nirulas

Deal

Seeking Capital/Consolidated - J.S. Hospitality - Impresario - Indian Cookery - Om Pizza & Eats

Raised Follow up Funding - Coffee Day Holdings - Devyani International - Spring Leaf - Faaso’s

5 Years Ahead... Mixed Trajectory - Nirulas - Goli Vada Pav

In Conflict with Investor - Adiga’s - Sagar Ratna

Status Today

10% stake for an undisclosed amount

A2Z Excursions Pvt. Ltd. acquired Noida based Nirulas Corner House Pvt. Ltd. for an undisclosed amount from Navis Capital in 2012. Currently, they have 70 outlets and they have ventured into casual dining & ice cream parlors to compete with the likes of KFC, McD etc.

25-Apr-12

New Silk Route

Adiga’s Fast Food

$17 million for 36% stake

In 2014, following a dispute between the original promoters and the PE investor related to ownership and the day-to-day running of the company CLB has appointed a retired judge from Karnataka HC to run the Adiga’s fast food.

20-Dec-11

Everstone Capital

J.S. Hospitality (Pind Balluchi)

Acquired stake of 49% for $21.21 million

Pind Balluchi currently has 32 outlets including one in Singapore. Now, they plan to open 20 more outlets this year along with a global expansion in the Middle East.

13-Oct-11

Sequoia Capital

Faaso’s

Invested $2.71 million for 27.1% stake

Faaso’s is expanding its footprint and plans to open 200 stores by FY16. Recently secured a $20 million funding which was led by Lightbox Ventures.

Acquired 33.96% stake for $4.8 million

March 2014, GVP had 275 small format stores across 13 states. Currently has 277 stores in 61 cities, 13 states. In a span of a year, only added 2 stores - In discussions with investors to raise second round of funding for Pan India expansion.

29-Aug-11

Venture East

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Goli vada pav

Now, Faaso’s is planning the next round off funding to the tune of $50-$80 million at a valuation of $350 million to $400 million.

7.2 INTENSIFYING COMPETITION

Date

Acquirer/ Investor

Target/ Investee

Deal

Status Today

29-Aug-11

Mirah Hospitality, Beacon India

Impresario (Smoke House Deli and Social)

28.71% for $10.78 million

Engaged an investment banker to raise $20 million to strengthen its Smoke House Deli and Social brands. Currently operating 40 restaurants and cafes in 14 cities, they plan to add 60 Social outlets in the top five Indian metros and open 20 Smoke House Deli outlets across India.

28-Jun-11

India Equity Partners

Sagar Ratna

75% stake for $30.44 million

There have been differences between IEP and the promoters since 2013 which has impacted the profitability and brand value.

12-May-11

India Advantage Fund Series III (IAF III) managed by ICICI Ventures

Devyani International (Pizza Hut, KFC, Costa, Vaango)

10.53% stake for $30.41 million

Temasek Holdings Advisors India Pvt. Ltd. through its affiliate Dunearn Investment Mauritius Pte. Ltd., entered into a definitive agreement to invest $81.31 million in Gurgaon based Devyani International Ltd. for an undisclosed stake. IAF III sold its partial stake to Temasek for $16.26 million.

15-Feb-11

TVS Shriram Group

Indian Cookery (Yellow Chilli, Sura Vie, Khazana)

6.17% stake for $0.82 million

With over 25 restaurants in over 12 cities across three countries, ICPL is looking to scale up its operations and targets 100 restaurants in the next year

Om Pizzas and Eats India (Papa John’s Pizza)

Undisclosed stake for $11 million

26-Dec-10

TVS Shriram Group

Speciality Restaurants was in talks to purchase a significant stake in ICPL. TVS Capital invested an undisclosed amount in 2012. Avan Projects acquired majority stake in Om Pizza for an undisclosed amount in 2013. There has been a focus on consolidation since taken over by Avan Projects. Lately in 2014, Om Pizza and Eats Pvt. Ltd. entered into a definitive agreement to acquire Bengaluru-based Global Franchise Architects India Pvt. Ltd. for an undisclosed amount in a stock deal which give stake in Om Pizza and Eats Pvt. Ltd. The buyer will convert the existing Pizza Corner stores to Papa John’s branded restaurants by 1st quarter of 2015.

7-Oct-10

1-Apr-10

Helion Ventures, Footprint Ventures and Salarpuria Group

Spring Leaf (Mast Kalandar)

KKR, New Silk Route and Stanchart PE

Coffee Day Holding(Café Coffee Day)

$2.05 million for 28.97% stake

There have been two rounds of funding by same investors. In 2011, $1.6 million was invested for 29.32% stake and in 2012, $5.53 million for 26.28% stake. Post these transactions, Helion holds 43.52% stake, Footprint holds 27.53% stake, and Salarpuria holds 7.88% stake in the company. Today, Mast Kalandar has 71 branches and is looking overseas for expansion. Recently, they have launched a delivery only mobile-based service in Bengaluru to cash in on the demand for quick affordable food.

25% stake for $200 million

CCD has been involved in various M&A deals starting with acquiring 59.98% stake in Sical Logistics, Chennai for $56.16 million. Brand Capital invested $8.5 million for 1.08% stake in 2012. Coffee Day is preparing to raise $200 million through an IPO in May, 2015. Meanwhile, Nandan Nilekani & Rakesh Jhunjhunwala have invested $16.07 million for an undisclosed stake through a pre-IPO placement.

Source: VCCEdge Platform

MAPLE RESEARCH TEAM: Abhinav Grover & Kanchan Raitani Disclaimer This publication has been prepared by Maple Capital Advisors (“Maple”). All rights reserved. All copyright in this publication and related works are owned by Maple. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this publication), modified or in any manner communicated to any third party except with the written approval of Maple. This publication is for information purposes only. While due care has been taken during the compilation of this publication to ensure that the information is accurate to the best of Maple’s knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice. Maple neither recommends nor endorses any specified products or services that may have been mentioned in this publication and nor do we assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this publication. Maple shall in no way be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this publication.

INDIA FOOD REPORT 2016 | 333 |

Indian Homegrown Restaurants BY PROF. PIYUSH KUMAR SINHA AND ANSHUL MATHUR, INDIAN INSTITUTE OF MANAGEMENT AHMEDABAD

The Indian restaurant industry is on a high - it has seen a doubledigit growth in the recent past, primarily on account of the young consumers, who are ready to spend more on eating out with their families and friends, thus giving a push to the growth of restaurants of every shape and size. A report.

| 334 | INDIA FOOD REPORT 2016

7.3 INDIAN HOMEGROWN RESTAURANTS

T

he Indian restaurant industry has evolved over the last two decades. This change has been witnessed across the value chain. The country has witnessed the evolution of new formats, higher service level and improved supply chain practices. The fortunes of the restaurant industry has also been linked with the changes brought about in the retail and entertainment industry, which has influenced the consumption pattern and ushered in lifestyle changes in consumers. Increasing income and exposure to new avenues to express consumption has brought about sweeping changes. More than 50 International restaurant chains have entered the country and made inroads into even tier – II and tier – III towns. This has helped the existing domestic players to consolidate and allowed thousands of new ventures to flourish. The new technologies are also contributing to the modernisation. Food search is now not limited to restaurants outside homes but inside the homes with the help of mobile apps. The Indian restaurant industry has witnessed a double-digit growth in recent years. It has grown at a CAGR of 21.1% from 2010 to reach $151.6bn in 2014. It is expected that this double digit growth will continue. India accounts for 11.8% of the Asia-Pacific restaurant industry. This growth is driven by young consumers who are increasing their expenditure on eating out with families and friends. The rise of nuclear families in urban areas with both men and women working and a steady growth in household income are the leading causes for this change. They now have greater access and choice of restaurants. It is expected that by 2019, the Indian restaurant industry will see an increase of 61.9% from 2014 and its value will reach up to $245.4 billion. This expansion is also witnessed in the opening of outlets of global as well as homegrown players in tier-II and tier-III cities of India. The increasing acceptance of malls as getaways and day-out centres in small cities is supporting this expansion of organised food restaurants, which are providing good services at reasonable prices. These restaurants offer menus ranging from traditional samosaas and pani-puris to Chinese, Thai, Italian and Mexican cuisines. Consumers are now ready to explore cuisines different from what Indian food offers them. In 2014, the industry employed 3.5 million people, registering a CAGR of 2.4% between 2010 and 2014. It is expected that this number would touch 3.8 million by 2019.

INDIAN RESTAURANT INDUSTRY VALUE: 2010–14 Year

$ billion

Rs. Billion

% Growth

2010

70.5

4,300.0

2011

92.1

5,612.7

30.5%

2012

123

7,500.0

33.6%

2013

136.6

8,325.0

11%

2014

151.6

9,240.8

11%

2015

168.3

10,257.2

11%

2016

186.8

11,385.5

11%

2017

207.3

12,637.9

11%

2018

230.1

14,028.1

11%

2019

245.4

14,962.6

6.7%

CAGR: 2010 – 14: 21.1%; 2014 – 19: 10.1% Source: Marketline

OUTLETS BY LOCATION (%) Location

2009

2010

2011

2012

2013

Leisure

0.7

0.8

0.8

0.9

0.9

2014 1

Lodging

1.9

1.8

1.8

1.7

1.7

1.7

Retail

5

5.4

5.6

5.8

6

6.2

Travel

3.7

3.7

3.7

3.8

4

4.2

Stand Alone

88.7

88.3

88.1

87.8

87.4

87

Source: Euromonitor

INDIA RESTAURANTS INDUSTRY VOLUME: THOUSAND EMPLOYEES, 2010–14 Year

Employees (000)

2010

3173.9

% Growth

2011

3262.9

2012

3351.4

2.7%

2013

3447.8

2.9%

2014

3493.7

CAGR: 2010-14

2.8%

1.3% 2.4%

Source: Marketline

INDIA FOOD REPORT 2016 | 335 |

Restaurant Segments

CONSUMER FOOD SERVICE % age

2009

2010

2011

2012

2013

2014

Chain Restaurants

1.9

2.1

2.2

2.3

2.3

2.4

Independent

98.1

97.9

97.8

97.7

97.7

97.6

Source: Euromonitor

CONSUMER FOOD SERVICE % age

2009

2010

2011

2012

2013

2014

Eat-In

83.9

83.1

82.8

82.5

82.1

81.5

Home Delivery

1.7

1.7

2

2.1

2.2

2.4

Takeaway

14.4

15.2

15.2

15.5

15.7

16.1

Source: Euromonitor

EATING HABITS (NUMBER OF TIMES IN A WEEK) Activity

Brazil

China

India

Japan

Russia

South Africa

USA

Eat at Home

5.0

4.3

5.3

4.2

6.0

5.7

5.1

Cook A Meal

2.4

2.3

2.5

1.4

3.3

2.9

3.2

Buy Takeaway Meal

2.1

2.8

2.6

1.6

1.6

1.9

2.7

Skip Breakfast

2.5

2.0

2.1

1.7

2.1

2.3

2.7

East At Restuarants of Bars

2.1

2.0

2.1

1.1

1.0

1.1

1.8

Skip Lunch

1.1

0.9

1.5

0.7

1.3

1.5

1.7

Skip Dinner

1.4

1.1

1.4

0.4

0.9

0.7

1.0

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There are 1.5 million food outlets in India out of which 3,000 are from the organised sector. The unorganised restaurant market includes roadside vendors, dhabas, vans, carts, street stalls and trolleys. The organised restaurant market includes Quick Service Restaurants (QSR), full service restaurants, PBCL (Pubs, Bars, Clubs and Lounges), food courts and kiosks. The restaurant and cafe segments contribute the highest in terms of sales for the entire industry. It accounted for total sales of $115.1 billion in 2014, which was 75.9% of the total industry value. It was followed by the fast food industry, which contributed $30.3bn in sales, which is equal to 20% of the industry value. A study conducted by FHRAI found that restaurants are almost equally divided between fine dining and casual dining. About 40% are part of a hotel, only about 20% have more than two units and the rest are independent single unit establishments. Most of these are owned or operated under a franchise. Among restaurants, 40% have a total area of less than 3,000 sq. ft. More than 65% have renovated their establishments in the last three years. The presence of foreign brands is very small. Also, they have limited units. This industry is dominated by Indian brands. The average bill value varies from Rs. 300 – 1,000. The bill value at the restaurants located in premium hotels is much larger. Most of the guests were working executives and families. Youths do not seem to form a major segment for restaurants. At QSRs, the bill value is less than Rs. 250. Forty-five per cent of restaurants offer Indian cuisine as their principal menu. Out of these, 12% offer regional cuisine. About 35% of them serve Asian and other international food. Some 17% of them are multi-cuisine. About 40% of restaurants do not serve alcoholic beverages. Less than 15% are open 24 hours and 45% of them serve breakfast. Home delivery and takeaways are on the rise. But eating in restaurants is still the major contributor (81%) to the business.

Eating Out in India Eating out is a family or social group event in most parts of India, which now takes place very often. People in metro cities consider eating out culture as a daily part of social life. Higher disposable incomes, nuclear families and less time for cooking compared to previous years have led to an increase in people eating out more regularly. The trend is also becoming popular in tier-I and tier-II cities in the country.

7.3 INDIAN HOMEGROWN RESTAURANTS

An estimated 60% of Indians are under the age of 30. Younger consumers and a growing emphasis on convenience are the fundamentals that suggest the potential for future growth in this sector. Urbanisation is also helping this trend. Restaurants have recognised this behaviour and have customised their offerings accordingly. They are now offering value for money products in addition to what they are already offering in their international menus. Even their menus are reflecting food that these young customers want.

Trends in Industry Transformation of menus: Multinationals are focusing towards local tastes and changing their offerings with Indian flavours. Similarly, Indian players are globalising their menu. From free ketchups to Masala Grill burger, they are offering plenty of choices to please Indian consumers. Close to 70% of the McDonald’s menu is customised according to the Indian taste. KFC has also started offering Paneer Zinger and Veg twisters in its menu. Starbucks have also included Tandoori Paneer Sandwich, Chatpata Paratha Wrap and Murg Kathi Wrap in their menu along with their global offerings. Value meals: Consumers in India seek valuebased offers. QSR chains have bundled their multiple offerings into one and are providing value meals. This has helped them move to tier-II cities where price sensitivity is higher and consumer looks to keep their costs on the lower side. This has also been accepted by the younger population and has resulted in an increased trend of consuming food outside the home. Buffet service: The buffet concept is getting acceptance by a large number of Indian consumers. Fixed menu with buffet, which was earlier found in hotels, has now moved to restaurants. Both casual dining and fine dining restaurants are getting along with buffet very well. Although the buffet concept has a fixed menu to offer, restaurants like Barbeque Nation and Great Kabab Factory are overcoming this barrier by having a variety of food items followed by salad, desserts, soups and appetisers. Consumer experience in such places is unique as they offer unlimited food at fixed prices, which increases the value for money for consumers. Also, there is no additional charge laid upon consumers once they enter the restaurant. The format is also liked when going out in groups with friends and families, corporate and casual

etc., which is one of the reasons why buffet is becoming popular in India. The groups may get enough variety of dishes in unlimited quantity with prices fixed. It also reduces the ordering time for consumers in the restaurant.

The Indian restaurant industry has witnessed a double-digit growth in the recent years. It has grown at a CAGR of 21.1% from 2010 to reach $151.6bn in 2014. India accounts for 11.8% of the Asia-Pacific restaurant industry.

Renovation of Indian cuisine: India has a rich culinary culture. Every state has its own dishes and recipes. Traditionally north and south Indian food were popular in most parts of country when eating out. These regional dishes have been adapted to different regions within the country. Migration has helped in mixing up of the menus. A Gujarat Thali may consist of a south Indian item or even a pizza. Many restaurants have also combined international food with local food. Pizaa Hut launched Brizza by combining Indian biryani with pizza at a starting price of Rs.99. Jumbo King also launched Jambosa, an extension of the traditional Indian samosa. Customers are also seeking variety and tend to visit region-specific or country specific eateries. Takeaways and home delivery: Home Delivery/ Takeaway format has registered a growth of 13% in terms of value and reached Rs. 2 billion in market size in 2013. According to a Euromonitor analysis, the increasing number of working population and migration of people from home towns are the drivers for growth of these formats. Convenience has also come up as

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urbanbuzz / Shutterstock.com

City

No. of Food Service Outlets Ahmedabad 2163 Bengaluru 5457 Chandigarh 1169 Chennai 3804 Delhi/NCR 9790 Hyderabad 3458 Indore 834 Jaipur 1135 Kolkata 2701 Mumbai 9972 Pune 3726 Source: Technopak

Food Service Outlets with Delivery Service 727 2608 549 2187 6006 1301 312 372 1313 7783 2179

% of Total number of outlets 34% 48% 47% 57% 61% 38% 37% 33% 49% 78% 58%

STREET STALLS/KIOSKS: UNITS/OUTLETS 2008-2013 (‘000 OUTLETS) 2008

2009

2010

2011

2012

2013

Chained Street Stalls / kiosks

1.5

1.7

1.9

2.1

2.1

2.1

Independent Street Stalls / kiosks

913.7

1,005.0

1,075.4

1,123.8

1,163.0

1,199.1

Street Stalls/ Kiosks (Total)

915.1

1,006.7

1,077.3

1,125.9

1,165.1

1,201.2

Source: Euromonitor International

Sales in Street Stalls/Kiosks: Food Service Value 2008-2013 (Rs. Billion) 816 716.5 642.8 558.9 1000

438.8

800

359.7

600 400 200 0

1.2 2008

1.4 2009

1.6 2010

Chained Street Stalls / Kiosks

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1.8 2011

1.9 2012

2 2013

Independent Street Stalls / Kiosks

another major reason, especially where traffic jams during weekends is a problem. The growth of delivery and takeaways is also beneficial as it requires less space. They need not invest in decor. Improvement in delivery time, packaging and ordering through the web has supported this. The ease of ordering for delivery has also pushed up this format. Consumers, nowadays are very comfortable with computers and mobiles, which has helped adoption of the “food from phone” concept at large. Domino’s is a leading brand on this front in the QSR segment as 50% of its revenues come from deliveries and this is set to double in the coming years. Consumers find it more convenient to order online or from the apps of food chains. The growth of apps and web-based orders will continue with their upward curve as more and more consumers come online. Consumers are able to compare multiple restaurants through their gadgets in one go. With platforms like Zomato and FoodPanda, consumers are able to order and rate the services of restaurants based on their experience. They can also check and compare prices, go through the experiences of others through online comments – better known as e-word of mouth – to take their decisions while staying at their own places. Street food: Street food is widely accepted across India due to its lower price and convenience. According to Euromonitor, the segment grew at the rate of 14% in year 2013. Reasons for the popularity of street foods in India are many. Vendors are able to customise their offerings according to local tastes and preferences. They need fewer infrastructures to operate due to lower rentals, low operating cost and less manpower as compared to the other formats. This category has always been dominated by Indian food, such as chaat, samosa, and panipuri. But now, even International foods like pizza, burger and Chinese are commonplace. Hygiene is one of the factors that makes consumers skeptical about the food offered by street kiosks, although the convenience and prices make them attractive. Although this segment of food service in India is dominated by the unorganised and small players, brands like BurgerMan are creating a chain with their kiosks. BurgerMan has a 13% share in the organised segment. Coffee shops like Café Coffee Day have also begun to place

7.3 INDIAN HOMEGROWN RESTAURANTS

their kiosks in markets, shopping centres, Metros, airports, offices and college campuses. Stand-alone stores: Stand-alones will remain the largest category but will lose their share to travel locations and leisure. They have shown strong growth in the past and are expected to continue in the future as well. However, the growth rate of stand-alones has slowed down since 2013. At the same time, leisure and retail locations have shown a promising growth. The change is the reflection of shifting consumer behaviour when eating out. The young population is now willing to try on new concepts, which are supported by a rising income.

Growth of Homegrown Outlets Food outlets of all kinds are growing. This growth is somewhat similar to China’s. The trend shows that street stalls and kiosks are the fastest growing format followed by fast food joints and full service restaurants. This is reflective of the trend seen in the eating out culture across all segments of customers. The fast food and fine dining segments are most organised. Restaurants in the fast food/QSR segments consist of more than 60% outlets owned by multinationals. It started with the opening of McDonald’s, followed by pizza outlets. Over the years, they have set up benchmarks in food delivery and services. They are visited by families and youths and have become children’s favourite places, led by the pizza outlets. Most Indian restaurants have grown organically. They built the consumer base and core brand with single outlets. Then they grew concentrically. They would open outlets in the same city, which in most cases would be owned by them. A large number of them would grow as someone grows within the joint family system to take up the responsibility. In many cases, one of the older trusted employees would become the store manager. But their growth has been limited mainly because of reasons such as (a) the perceived risk of loss of food quality, (b)

The trend shows that street stalls and kiosks are the fastest growing format followed by fast food joints and full service restaurants.

loss of control on cash and (c) pilferage. It is found that such entrepreneurs would be concentrated in one or two nearby cities. The number depends on their span of control, which could be 4 - 6 outlets. However, this process of expansion takes a long time. Any expansion beyond this is largely dependent on whether the next generation continues in the business. The next phase of expansion is also slow. Most of these families would have funds to support the expansion from internal sources or through support from banks. A large number of them are not open to bringing in a venture fund for fear of losing control in decision making. The induction of an outsider into the business or in decision making is not very acceptable to them. They also seem to be worried about the loss of their ‘formula’ or recipes. Consequently, these organisations are more peopledriven than process-focused and many of them

FOOD OUTLET GROWTH %

Fast Food

Full-Service Restuarants

Stree Stall/Kiosks

Cafe/Coffee Shops

Bars

India

China

India

China

India

China

India

China

India

Sales

14.8

22.5

57.8

74.1

13.9

1.7

8.4

1

5.1

0.7

CAGR (2006-11)

15.7

14.2

13.2

14.5

19.5

11.1

7.4

8.1

6

13.1

4

20

35

74.5

58.5

5.2

2.5

0.2

0

0.1

10.5

61

31.5

30.8

54.5

7.7

3.4

0.4

0.1

0.1

Outlets Transactions

China

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are averse to the adoption of newer technologies. This trend seems to be changing now as the newer generation is more educated and exposed to the international practices. The proliferation of franchising propagated mostly by the QSRs has opened new avenues for expansion. They believe in a systems-driven organisation as the way to expand. They are also open to new technologies. Another set of people includes first time entrepreneurs who are very familiar with the trends, ready to partner with the best and ever-ready to give away control of their business. They are also comfortable with technology. Celebrities and celebrity chefs make another set of restaurant entrepreneurs. Many of them own and run their own outlets. But some of them have been able to create a chain of restaurants. With funds and PE firms finding their feet and growth in this segment, entrepreneurs are opening up. The restaurant business seems to be competing with ITITeS in terms of attention for investment by PE firms. According to Venture Intelligence, a research service focused on PE and M&A, the food and restaurant sector received US$260 million last year. The Specialty Restaurants’ initial public offering (IPO) was a landmark. It was the first Indian restaurant company to go public. Although relatively modest, the US$34 million IPO was oversubscribed 2.5 times and gave investors an exit. However, this was a rare incidence. For most investors, the lack of an IPO market exit poses a challenge. According to the Bain Global Private Equity Report released in May this year, 71% of the capital deployed on the largest deals in India between 2003 and 2007 is yet to be returned to the investors. Entrepreneurs also seem to be asking prices that are too high given the risks involved. PE firms are offering management inputs to restaurants. At times, they have even taken charge. There is a certainty in cash flows if the model is right. That, along with growth, should allow private equity to

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Even though the restaurant chain market size is small, the funding is indicative of the growth prospect of the industry. Investment opportunities exist in frontend as well back-end parts of the value chain as the way to expand.

make fair returns from this sector. Consolidation, along with expected growth, would provide good investment opportunities for both financial and strategic investors. Entry of well-known groups, celebrities, and high returns with the right business models are key attractions. With the new SME initiative by SEBI, this may become even more attractive. Even though the restaurant chain market size is small, the funding is indicative of the growth prospect of the industry. Investment opportunities exist in front-end as well back-end parts of the value chain. The excitement is being witnessed with the growth of many regional chains. Havmor and Honest in Gujarat, Haveli and Nirula’s in north, Jumbo King in the west have inspired even Amul to enter this segment. Indian migration has spread the culinary traditions throughout the world. Indian curry and chicken tikka is as popular as pizza across the world. These cuisines have been adapted to local tastes, and have also affected respective local cuisines. The first Indian restaurant in the United Kingdom called the Hindoostanee Coffee House opened in 1810. The Indian food industry in the United Kingdom is now worth 3.2 billion pounds. It constitutes twothirds of all eating out. Every week about 2.5 million customers visit these restaurants. A survey by The Washington Post in 2007 stated that more than 1,200 Indian food outlets had been introduced into the United States since 2000, offering mostly north and south Indian cuisines. Most Indian restaurants in the United States serve Americanised versions of north Indian food, which is generally less spicy than its Indian equivalents. The food In the Middle East has been influenced greatly by centuries of trade relations and cultural exchange between countries. This has resulted in a significant influence on each region’s

7.3 INDIAN HOMEGROWN RESTAURANTS

Conclusion

MAJOR HOME GROWN RESTAURANT CHAINS Brand / Company Annapoorna Gowrishankar

Domestic International 15

Asha Bhosle

40 (Planned)

Bikanerwala

34

6

Fasoos

8

-

350

-

Goli Vada Pav Haldiram’s Havmor Indian Coffee House

21 (150 Planned) 25

-

400

Jumboking

91

-

Kamat

22

20

Khazana

-

5

Monginis

12

2

108

8

Moti Mahal Nirula's

71

-

Options by Sanjeev Kapoor

-

2

Rajdhani

27

1

Saravana Bhavan

39

43

-

3

Specialty Restaurants

93

4

The Yellow Chilli

30

4

Signature by Sanjeev Kapoor

cuisines, the most notable being the Biryani. It was introduced by Persian invaders in northern India and has since become an integral part of the Mughlai cuisine. Even the use of the tandoor, which originated in north-western India, has become an integral part of all Indian restaurants. The large influx of Indians into the Middle Eastern countries during the 1970s and 1980s has led to the opening of Indian restaurants by the local entrepreneurs as well as Indian chains, especially those offering north and south Indian food.

There are a number of brands from India which are already operating in overseas markets successfully. Pani puri, lassi, chaat and other Indian dishes are available in New York, Dubai and Singapore.

The increasing size of the Indian diaspora all around the globe has helped Indian cuisines get global recognition. Food is an integral part of any culture and people take pride to portray their culture. This seems to be an emotional aspect and at the same time it provides immense opportunities to Indian food chains to go global. The venture of Chef Sanjeev Kapoor was an outcome of high demand and pressure from close friends. The restaurant tasted success and now operates in eight countries. There are a number of brands from India, which are already operating in overseas markets successfully. Pani puri, lassi, chaat and other Indian dishes are available in New York, Dubai and Singapore and are offered by brands such as Kailash Parbat Kobe, Saravanaa Bhavan, Bikanerwala. These dishes are widely accepted due to the large Indian resident population. In UK alone, there are more than 10,000 Indian restaurants and Chicken Tikka Masala has become the nation’s favourite dish. Although the chains are not as large, the acceptance of Indian food has increased a lot in the recent past. The primary target of these brands is the Indian populace. They are familiar with the tastes that the dishes have to offer. Non-Indian consumers are also eating out at Indian restaurants. Having this in mind, the homegrown chains have to adopt their products according to local tastes and laws. They would need to go through a similar journey like the foreign chains that have entered India. In India, except in QSR, it is the Indian homegrown restaurants that have the majority share of the market. In the organised sector, foreign brands have about 45% share. But the organised segment itself is less than 20%. With a large opportunity to grow in India as well as abroad, the Indian restaurant industry will keep witnessing the flow of funds. The biggest opportunity lies in organising street food and kiosks.

Sources: 1. www.euromonitor.com 2. Marketline 3. http://knowledge.wharton.upenn.edu/article/private-equitys-growing-appetite-for-indias-restaurant-industry/ 4. http://www.entrepreneurindia.com/article/features/enablers/Food-is-back-on-the-menu-for-private-equity-investors-580/ 5. Crisil Report 6. http://www.business-standard.com/article/finance/restaurant-chains-turn-hot-picks-for-pe-investors-111022400014_1.html 7. Technopack Report 8. http://articles.economictimes.indiatimes.com/2014-07-15/news/51542416_1_aditya-birla-pe-pe-fund-cx-partners 9. https://en.wikipedia.org/wiki/Indian_cuisine 10. http://www.restaurantindia.in/

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Experiments for the Palate BY RACHNA NATH

The evolving tastes and preferences is driving the food service market like never before. India is not only experiencing a change in the food choices, but also in the way food is made to reach out to its target customers.

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long with politics and cricket, food is the only other topic that elicits the kind of emotion it does in India. And globalisation, without doubt, has only enhanced the way we look at our food. Today, we want to experiment with our taste buds and try cuisines ranging from Cuban to food from Nagaland. We seek variety in ingredients; whether it is the Quinoa, micro greens or native grains from Kumaon. While there is still no real threat to the home-cooked Indian food that we have grown up with, our appetite

7.4 EXPERIMENTS FOR THE PALATE

fed pigs or truffles. On the other hand, gourmet retailers have made procuring ingredients for cooking a variety of international cuisines at home an easier option – be it Japanese, Thai, Mexican, Chinese, African or European. The advent of lifestyle and specialised food channels has made cooking more fun, and specifically, cooking beyond the usual has become a style statement. The food-based programmes are attracting eyeballs across sex, age and geography, and fuelling the change in our tastes. It is, hence, not surprising that the Indian palate is hungry to experiment and getting increasingly adventurous with each new taste.

The advent of lifestyle and specialised food channels has made cooking more fun and specifically cooking beyond the usual a style statement. for a variety is only increasing. It isn’t uncommon for people to walk into a Quick Service Restaurant (QSR) to try out new chicken flavours or opt for Indian or international theme-based restaurants or simply buy imported ingredients to cook at home.

Change Drivers and Disruptors This change has its genesis in a number of reasons. The rise of double income families, changing demographics and globalisation have given consumers access to information and the ability to pay for the variety. Digitisation, however, has been the single-biggest disruptor and has given birth to new categories of companies, players in the ecosystem and supply chain. We now have companies like Zomato, whose business model is to aggregate information about restaurants and their menus, as well as to provide a platform to food enthusiasts and bloggers to post reviews. There is also a growing breed of online start-ups which have made cooking gourmet meals at home a breeze, by delivering all the necessary ingredients, which are sometimes hard to find, to our very doorsteps. In fact, digitisation is fundamentally changing the nature of the companies. Today 50 per cent of Domino’s business comes through e-commerce. Having food delivered

The Changing Palate The India gourmet market is growing annually at more than 20 per cent, and today it is not very difficult to find a store that stocks items ranging from gourmet cheese, imported kiwis and exotic sauces to imported salami, sausages and wines. While one might argue that this is largely a metro phenomenon, statistics show that tier II and III cities are also experimenting with their palates. At the same time, the ecosystem is evolving to cater to this change. While the domestic south and north Indian cuisines continue to be a staple, restaurants are not only experimenting with newer cuisines but also redefining the way we have been used to eating our food, whether it is the addition of Peking duck to the Chinese cuisine, Japanese Sashimi, ham from acorn-

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made a bold entry and has not only given a healthier alternative to consumers but also a whole new opportunity to farmers. And, local farmer markets selling these produce are now becoming a common phenomenon in urban cities.

Options Galore

from restaurants to your coach, when you are travelling by train, is now a reality. Digitisation has shifted the power from the providers, in this case the restaurants or the food company, to the consumers in more ways than one. It has given rise to an ecosystem, which includes the importers of foreign food products who cater to the increasing demand for foreign ingredients at one end and an entire crop of food bloggers who have taken food tasting and critique to a different level, on the other. Another key reason for these changing tastes is increasing consciousness about health. We have seen products like olive oil, oats and green tea enter our homes like never before. Just a few years ago, olive oil was not even known as a medium of cooking in Indian kitchens. Today, we have thousands of homes that use only olive oil in their cooking because it is seemingly healthier. The demand has made us adopt not only the oil but also created an entirely new eco system in India, right from growing olives to producing the oil indigenously. The Rajasthan Government is experimenting with this, with help from Israel, and India might soon have its own homegrown olive oil brands. The organic food market is also flourishing like never before. Today, every supermarket has a section on organic products, stocking the organic staples, tea, organically-grown fruits and vegetables. The increasing consciousness about the use of fertilisers, its impact on our health and the water table is driving people to adopt it as part of their lifestyle. The organic market, though still small, has

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All of this has also changed the way we eat out and also given the rise to new ways of eating out. Today we have homes that turn into restaurants for a day in a week or in a fortnight inviting people to taste homecooked food that is otherwise not readily available, like Parsi, Kutchi or north eastern food. A few years ago, eating out meant either having north Indian Punjabi food, which is globally recognised as ‘Indian Food’, south Indian food that was restricted to dosa, idli and uttapam or the lucidly termed - Indian Chinese. A few restaurateurs changed all that. They not only experimented with the palate of the Indian foodie but also introduced a few cuisines to the mainstream. Some specialised regional cuisine restaurants are giving people, outside of that region, a taste of the dishes beyond the usual while also breaking a few myths. Food tourism is a growing area and is seen as a great weekend getaway. Following the Tea trail while going to Bhopal to taste the local cuisine on a weekend or working in a farm on a holiday are some examples of the variety of holidays and ‘de-stressing’ mechanisms that the tourism industry is offering to their customers.

Investors’ Interest

Digitisation has shifted the power from the provider, in this case the restaurants or the food company, to the consumer in more ways than one.

There is yet another stakeholder in this eco-system – the private equity, venture capitalist or the angel investor, who has capitalised on this opportunity by funding new businesses and entrepreneurs to give the required fillip in the area of restaurant business or processed food.

Outlook With globalisation, increasing disposable incomes and more connectivity in the world, it is but inevitable that there would be an increase in the exchange of information and ideas, greater awareness of cultures and hence the hunger to experiment and learn more. As a result, the evolved ecosystem will not only better our understanding of other cultures, but also hopefully improve the lives of multiple groups and people starting with farmers and traders on the one hand and the delivery boys on the other. This will also lead to newer business models and innovation along with the creation of employment.

What’s on the Plate? BY PUNEET VERMA

From ingredients to influences, here‘s what need to be optimised for an innovative foodservice.

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W

hile working on a new concept in food, one needs to watch out for the target customer profile and the population demographics. India has witnessed important demographic changes in the recent times: a growing number of working women has led to better disposable incomes for families and also exposed them to international travel, thereby increasing their knowledge on the variety of cuisines available around the globe. Today, consumers are well acquainted with global cuisines and the importance of leading a healthy lifestyle.

Culinary Trends: East Meets West Call it a fusion or heterogeneity, blending cuisines is one of the hottest culinary concepts doing the rounds today. Fusion is all about cautiously selecting foods from different parts of the world that are not geographically close and combining those items that go well together. The combinations are numerous – Thai and Indian, American and French, Mediterranean and Asian, et al.

7.5 WHAT’S ON THE PLATE?

A Blend of Health and Taste

Chef-driven Cuisines

Obesity has become a growing concern for the food industry, whether grocery or restaurant related. Consumers are now switching on to healthier food options and heading towards flavoured ethnic cuisines such as Asian and Mediterranean foods.

With such multiplicity in food trends, every chef has something new to offer to the menu. But the actual trend may be for chefs to develop beyond what experts have defined as ‘what’s in and what’s not’, and to explore their own culinary creativity.

Back to Basics

Better Ingredients

Although fusion food remains a hot trend, chefs and industry experts proclaim that the future belongs to simple foods and flavours. The trend is going back to the basics. There has been a wave which says that people are exhausted of fusion food because it became confusion food, with a blend of just about anything.

Chefs have come to a point where they are suffering from a creative block and are unable to come up with some brilliant cooking methods. Instead, they are concentrating on using better ingredients.

Ubiquitous Burgers Burgers are the in-thing today! It all started from a simple one to decadent, hand-held to knife-andfork, from having heavy calorific to light and healthy. Burger was first introduced as a snack item, which over time gained the status of a full meal. It is considered a comfort take-away food item or as an adventurous new cuisine experience. Burgers truly fit into every aspect of today’s lifestyles and are constantly being reinvented. The same trend has been witnessed in some international burger chains like Carl’s Jr and Delhi-based Burger Bar – Fork You.

Italian The actual trend may be for chefs to develop their own culinary creativity.

Italian food has been the essence of the moment for the last couple of years now. Until a few years ago, the only types of pasta available in supermarkets were spaghetti and macaroni. The intake of pasta and pizza has doubled since the 1980s, and they are now considered to be American food – eaten one to three times per week. A good number of Italian restaurants have opened up in the capital in the last year.

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Take-away

Go French The brasseries and bistros offering traditional, simple French food are in vogue. This is a trend that has not caught up in India so far, but it is expected that in the next few years there will be more than half a dozen restaurants serving bistro food in the country.

Eat-tertainment Food lovers today are spoilt for choices when it comes to food options. Their expectations are soaring, and marketers are contending for their attention like never before. So how does one break through the clutter and capture the attention of customers?

Food Trends Specific to India There is a shifting inclination towards vegetarian food and marked reduction in the intake of red meat across India. The fast food is finally here to stay. There have been some failures but the success of food chains like McDonald’s, Pizza Hut and Domino’s has caused some people to eat their words. It is, however, evident that the Indian consumer wants ‘international desi’ and that the Indian penchant is indeed addicted to a certain level of spice. There is a future for Indian regional cuisine restaurants. There are a few authentic restaurants offering food from this segment and this is an area that could witness significant growth over the next few years.

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Highspending customers, are looking for restaurant food served at home.

The term ‘Home Mealtime Replacement’ may not always accurately describe today’s take-away scenario. It is true that many customers want homemade food and many, especially the highspending customers, are looking for restaurant food to be served at home. The consumers sometimes prefer not to eat out on every dining occasion, but depend on the restaurant-calibre meals. Hence, every second restaurant has started the take-away vertical in the capital.

International Chain and Franchise Opportunities The last few years have witnessed substantial increase in the number of new restaurants opening up in most major Indian cities. This has, in many ways, accorded with the revolution that has taken place in the retail space, which has multiplied new locations for restaurants in the malls, which have developed. Two types of developments have clearly emerged: firstly, the growth of Quick Service Restaurant chains like Carls Jr; and secondly, the birth of home-grown brands such as Lazeez Affaire, Café OTB, The Embassy, Boom Box Café and Fork You. The international chains lead the restaurant business and stand-alone outlets are a small percentage in the market. With the growth of restaurant industry in India, more and more international chains will make an effort to establish network in India, while domestic entrepreneurs will try and establish new franchise under established brand names. Globally, many hotels that need a ‘prestige’ label are turning to third parties with the right credentials, and we will see increased activity in this area in India as well. The franchising proposition is also prevalent in the Western world and is growing fast in the developing nations as well.

Goal Vegetarianism BY MINI RIBEIRO

According to industry experts, the world’s population may have to turn vegetarian in the next 40 years or so, in order to cope with the rapid climate changes. Hotels and restaurants are already gearing up for this change as people are making the shift.

Health-Conscious Youth Health and wellness are major concerns for the younger generation and in a bid to adopt a healthy lifestyle, they are happy to turn vegetarian, or at least lessen the intake of meats gradually. Not surprising therefore, that there has been an increase of about 30 percent in the number of vegetarians in the last few years and the numbers are steadily growing. The increase in percentage is primarily due to the fitness quotient. A diet low in saturated fat and high in fibre is preferable amongst many nowadays, as the emphasis is on consuming a balanced diet full of essential nutrients. Whatever the reasons, the benefits of vegetarianism are strongly being felt. Vegetarianism helps in weight loss, lowers cholesterol levels, longevity and a lower risk of developing cancer. Our body was meant to be vegetarian, as we cannot digest all the proteins present in meats. Perhaps, that explains why Cream Centre, a 100 per cent vegetarian restaurant has been running successfully for the past 58 years.

‘V’ is for Vegetarian Seeing this spurt in the number of vegetarians, hotels and restaurants are jumping onto the vegetarian bandwagon. The menus in non-vegetarian restaurants, which earlier offered limited vegetarian options is growing. Almost 50 per cent of the menu in most cases is today vegetarian. The idea is to create an equal choice for the customers with vegetarian leaning. By adding vegetarian items to the menu, establishments are reaching out to a variety of growing markets: those with cholesterol or heart problems, the lactose intolerant, certain religious groups, the kosher community, athletes, and the environmentally-conscious unlike earlier days when people went out to eat only non-vegetarian meals. So clearly, the demand for vegetarian food is growing.

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7.6 GOAL VEGETARIANISM

Cottage Cheese Steak serve with Pepper Salsa

Roasted Tomato Tortilla Soup

Vegetarian is Versatile Trendy multi-cuisine diners today are happy to savour vegetarian fare, if it is exciting enough. And restaurateurs find it a viable option to serve it too. Stand-alone vegetarian restaurants are mushrooming like never before. ‘Vedge’, a multi-cuisine restaurant in Mumbai, offers customers a unique experience through a fresh vegetarian menu with modern presentations. Its concept is purely based on creating strong surprise elements within food. The comfort food, with Indian influences and contemporary presentations. It wants to educate the customers that there is more than just paneer and potatoes in vegetarian fare. Taste buds of an average Indian has evolved and he definitely looks for the wow factor in a meal, even if vegetarian. People are ready to savour a delicious meal created with fresh and healthy vegetarian options, presented artfully. The flavours are what foodies seek in vegetarian cuisine, especially if they are otherwise non vegetarians, settling for a vegetarian meal. Texture is important too, but not the sole consideration. Tofu, mushrooms, soya and beans are often used as healthy and tasty meat replacements, to create exciting vegetarian dishes. Of course, a lot depends upon the other ingredients that are used along these and the cooking methods too. So it does not take too much to satisfy a non-vegetarian with vegetarian food nowadays.

Fusion Food Vegetarian food has certain limitations and restaurateurs and chefs, alike, are aware of that. No guest would want to eat vegetables like a ridged gourd, snake gourd and drumsticks, which are very nutritious, but generally unacceptable in a restaurant. So, one has to be different and play with ingredients.

Our body was meant to be vegetarian as we cannot digest all the proteins present in meat.

Pitaud kadi

To create something is thus the need of the hour. Fusion is, hence, more the norm rather than the exception today, and chefs are having fun as never before. They are going all out to marry cuisines, techniques and culinary styles. ‘Sattviko’ in Delhi, uses culinary secrets derived from Yoga and Ayurveda to offer a diverse food palette, which is light and yet, delicious. It represents Indian Epicureanism through the Sattvik style of wholesome food preparation, without onion and garlic. Chefs are undisputedly at their innovative best. Vegetarian choices on the menu have improved dramatically. ‘Trim-o-belly rice bowl’, ‘Stuffed Paratha’, ‘Quad Burger’, ‘Chilled Melon Salad’ and ‘Ratlami Poha’ are some of the best sellers on the Sattviko menu. While Sattviko, is pure vegetarian and yet, strives to be different, ‘Farzi Café’ in Gurgaon, which serves modern Indian food and is a part of Massive Restaurants, uses strong elements of molecular gastronomy and showcases Indian cuisine’s strength and robustness through offerings like ‘Nimboo achar caviar’ and ‘Makhan wali kaali daal ka shorba.’ Similarly ‘Roasted Tomato Tortilla Soup’ is a unique dish that Vedge offers. This is a traditional Mexican soup with a twist. Locally produced quality tomatoes are used with an amalgamation of modern Mexican spices. Further, ‘Chukandar ki Galouti’ is a twist to the original north-Indian Beetroot tikki or Beetroot kabab, by using Italian Cheese, Balsamic drizzle and Green Mango zing.  Hotels and restaurants are also going that extra mile to serve their patrons the best. Retaining quality and freshness of the food is becoming a prime focus.

Vegetarian fusion food could be a challenging task as it takes a lot of experimentation and several trials to create a Ingredients are Key Ingredients are becoming the focal point for chefs new or unique to liven up their offerings. Avocado, zucchini, dish.

broccoli, leek, cherry tomato, fresh asparagus, are now commonplace in chef’s kitchens. That’s not all,

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Fatoush Salad

Almost 50 per cent of the menu today is vegetarian. The idea is to create an equal choice for customers with vegetarian leaning.

Challenges in Serving Vegetarian Cuisine

Falahari Pakoda

other ingredients like quinoa, chia seeds, speciality cheese, exotic fruits, herbs and spices too are used unhesitatingly. Ingredients have a unique role in making any food unusual. For example, the usage of tender white asparagus from Europe will make a huge difference in the taste and texture of the final dish and can never be recreated with the local or any other variety of the same. With exotic vegetables and the farm-to-table concept gaining popularity among chefs, companies like Trikaya Agriculture, one of the pioneers in supplying exotic vegetables to hotels and restaurants, sees a definite increase in demand. The younger breed of chefs have all studied or worked abroad, are well aware and know about all types of vegetables. Its business is growing annually at 15-20 per cent. More restaurants and hotels, more spending power, more awareness are some of the reasons for the demand of exotic vegetables going up. While many restaurants prefer exotic and unusual ingredients to boost their vegetarian

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fare, others rely on their chef’s expertise and creativity. The restaurants are playing with flavours, ingredients and cooking techniques to create something different. It is about being aware of newer ingredients in market and a definite streak of creativity. On the other hand, creating a flavoursome gastronomic journey, through fun and refreshing culinary style is being looked upon seriously. Vedge has successfully amalgamated old-meets-new flavours embedded in a variety of cuisine options such as north and south Indian dishes, Oriental, Italian Pan-Asian, Chinese and Mexican. So it is evident that today, the choices of cuisine are not restricted for the consumer. There is something for everyone. Mexican, Lebanese, Italian and Pan Asian cuisines have A plethora of healthy and tasty dishes, which are completely vegetarian, apart from Indian cuisine, of course. Some of these global cuisines may have been tweaked to cater to the vegetarians, but at the cost of authenticity, these gourmands are not complaining.

Retaining quality and freshness of the food is our prime focus. We have introduced microgreens in our Sunday brunch at 1911, which, although tough to serve, goes well with our tradition of unique and healthy offerings.

In their bid to be different, Chefs admit that it is more challenging and sometimes expensive to serve vegetarian food in exciting avatars. Vegetarian fusion food could be a challenging task, as it takes a lot of experimentation and several trials to create a new or unique dish. Each dish needs to be prepared repeatedly to get the right balance of taste and quality.  In today’s world serving a vegetarian dish can be as expensive as serving a non-vegetarian dish, but it is the organisation or a chef who can actually balance the cost-effectiveness by balancing the recipes with expensive unusual products and economically-priced products. It is all about the knowledge of ingredients that can make a dish cost- effective. Given the pace at which vegetarianism is growing, this green revolution is here to stay. The variety, ensuring that the meals are well-balanced and cost-effective, are the major concerns restaurateurs and chefs have. Else, whatever the reasons for turning vegetarian, the future of vegetarianism seems bright.

Scaling Up BY MANISHA BAPNA

The Informal Eating Out (IEO) industry is growing, and in turn, offering opportunities for QSR players to expand their presence and capture a larger consumer base using new cuisines and innovative marketing.

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ith an increasing number of people eating out, (from three times a month a few years back, to seven times a month now) the IEO industry is forcing QSR players to innovate with cuisines, open more stores, and enter new regions, etc. Traditional restaurants are also expanding their menu to bring in more variety, and offering experiential service standards. The competitive landscape is creating opportunities for many successful start-ups like Faasos, Goli Vada Pav, Ammi’s Biryani, Adiga’s, Mast Kalandar, to name a few. Currently, pizzas, burgers and sandwiches together account for about 83 per cent of menu in the QSR market. According to a CRISIL report, the average Indian household is consuming 12 pizzas per year and spends Rs 3,700 on eating out; this is expected to go up significantly in the next three years. Easy adaptability to cold storage and a quick-serve format has made foreign cuisines more amenable. In comparison, it is more difficult to adapt Indian food (which is prepared through complex processes using several ingredients) into an assembly line production model, besides which, Indian food is not easy to hold and eat. This is reflected in the lower market share of Indian cuisine in the QSR market.

Growing Fast The QSR chain space is marked by 90 to 100 brands with ~2,900 to 3,000 outlets spread across various cities. Although fast food had deeper roots in the Indian milieu, it is the international brands that have grown faster as they offer an ‘aspirational’ advantage. They have perfected the ‘cookie cutter’ model with fool-proof standardised systems and processes, and ready-to-make products with minimum intervention from chefs. International QSRs definitely have an advantage over the Indian chains given their scale. Their operating margins are high; they can afford standardisation of delivery thereby leading to greater consumer confidence and trust. They have the experience and talent to deal with varying taste preferences given the diversities that exist in India. Indian QSRs make up only 37 per cent of this market; the rest is dominated by international brands like Domino’s and McDonald’s. Traditional Indian restaurants have failed to factor in consumer demand for variety on the menu, consistency with respect to taste and quality, trained staff, good service, and the right location for their stores. Though restaurant outlets are expanding, a minor consolidation may be seen in the Indian pizza market over the next few years, wherein smaller, fringe players may exit the market, or prune their presence. Papa John’s reduced its outlet count in India by over 40 per cent over the last couple of years. Punjabi by Nature, Yeti, Kylin Premier, Mamogoto and Busaba have launched step-down formats or the QSR model with a much lower investment, leaner menus, and attractive price points, in order to cater to the middle-class consumers.

Consumer-centric Many players are tailoring their product offerings in terms of flavours, pricing, and services, to meet

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7.7 SCALING UP

consumer preferences. Efforts include pure vegetarian restaurants in certain parts of the country, no beef-based products, separate cooking areas for vegetarian and non-vegetarian food, local flavours, home delivery, and smaller formats in high density areas with higher rentals (like malls, office complexes), etc. These players are also expanding their presence at various destinations, viz malls, high streets, office complexes, airports, hospitals, and highways, through drive-throughs, express formats, etc, and expanding their menu to suit Indian tastes and preferences. Pizza Hut introduced pastas, soups, salads and desserts. Jubilant FoodWorks launched tacos, Lebanese rolls and calzone pockets. The company, which has exclusive rights for Dunkin’ Donuts restaurants for India, has opened many outlets. The target audience for Dunkin’ Donuts is the young adult who has outgrown the older QSRs (finding them very basic) and is looking for something more evolved. The signature products like the Tough Guy Burger, Wicked Wrap, Stirr’accino Coffee, Death by Chocolate and Alive by Chocolate Donut, Dunkin’ Ice Teas, amongst other items on the menu, offer customers a new experience. International companies have also adapted and reinvented their business model to suit the demand and preferences of Indian consumers. Pizza Hut, for instance, expanded its menu beyond pizzas to include rice and vegetarian dishes for the Indian market. Dunkin’ Donuts added burgers, wraps and sandwiches to cater to a wider consumer base. Krispy Kreme introduced eggless doughnuts to lure vegetarians, as did KFC with its paneer-based wrap. The emphasis is also shifting toward healthier foods. There has been a shift in the Indian consumers’ eating out preferences with their growing interest in health and wellness. Pita Pit India products are tailored specifically to these health-conscious consumers who don’t want to sacrifice taste for calories. In fact, Pita Pit’s motto ‘Fresh Thinking - Healthy Eating’ is a natural fit to the healthier alternative for on-the-go food. In keeping with the brand’s emphasis on customer service internationally, it seeks to maintain the same quality in India, along with an engaging and friendly atmosphere. The traditional Haldiram’s and Nirula’s may have a presence in a limited number of cities, but what’s giving them an edge is their focus on good service, variety on their menu, and good taste. In the same space are restaurants like Bikanerwala and Sagar Ratna.

Penetrating the Hinterland

Many players are tailoring their product offerings in terms of flavours, pricing, and services, to meet consumer preferences. Efforts include pure vegetarian dishes, local flavours, home delivery and smaller formats in high density areas with higher rentals.

India’s hinterland has witnessed impressive economic growth over the last decade or so, and is getting rapidly urbanised, offering locational benefits, low rentals and low operating expenditures, which can potentially reduce payback periods. According to CRISIL, tier II and III cities account for about 25 per cent of total stores. Close to 15 to 18 per cent QSR outlets will be added in the next few years annually, out of which 40-45 per cent will be in smaller towns and cities. The remaining 8-10 per cent growth is expected to come through increase in same store sales. While major players are looking at expanding to tier II and III towns, there are two challenges in expanding in these towns; one is lack of cold room infrastructure, and second is lack of a robust secondary distribution network (such as a reliable fleet of transport for frozen foods). On the upside, expansion has helped local employment in these areas, where each store approximately creates at least five jobs opportunities. There are always going to be logistical hurdles in order to grow brands in tier II and III cities, but the brands that invest there will continue to see growth in the advent of growing modern mall culture. The ambiance of modernity and youthful exuberance in malls have become preferred venues for families to spend an entire offday, and this will further generate demand for QSRs. The challenges for both international and domestic chains are price points, menu selection, staffing, scale, logistics, cold chain, and supply. Also, difficulty in changing the mindset of people in smaller towns to ‘spend money on eating out’, challenges QSRs to be viable in smaller towns. According to a report titled ‘Indian fast food market new destination: Tier-II & III cities’ brought out by Assocham, India’s QSR market has remained largely unaffected by the economic slowdown. The annual spending of each middle class household in India’s tier-II and III cities has increased by Rs 2,500 to Rs 5,200, a growth of 108 per cent on fast food restaurants in the last two years. In tier I cities, it has increased by over 35 per cent to Rs 6,800. This indicates that middle-class families in tier-II and III cities are spending higher in fast food restaurants. According to the report, with increased competition and cost of operations in metros and tier I cities, a number of tier-II and III cities may offer better growth prospects, driven by factors such as favourable demographics, infrastructure growth, and higher disposable income due to strong economic growth, and government support by way of various employment schemes.

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Franchising Fervour BY KAVITHA SRINIVASA

Restaurant franchising has emerged as an interesting proposition in India. While international brands are wooing desi food lovers, Indian brands are whetting the appetite of overseas consumers, thanks to franchising.

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nternational food brands like Kenny Rogers Roasters, Cake Boy, Angel Berry, The Counter, and Burger King are all betting big on the franchise route to expand their footprint in India over the next couple of years, much like McDonald’s, Domino’s, KFC, Subway, and Booster Juice. Franchise is a smart and efficient option for investors because they get the benefit of years of learning from the parent brand. This also gives first-time entrepreneurs to evolve as restaurateurs. Usually, it works out, because entrepreneurs or investors have a support system to fall back on. A brand should have certain qualities before inviting investors to become its franchise partner. Goodwill, quality, success story of their own outlets, strategized marketing techniques, and a complete understanding of the market sentiments are qualifying factors. According to a KPMG report on Indian Franchising Industry, brought out in association with Franchising Association of India, formats like the QSR, café/bars, fine- and casual dine

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7.8 FRANCHISING FERVOUR

are expected to see a rapid jump. KPMG estimates franchising investments to the tune of $1.5 billion, $1.4 billion and $1.2 billion, for the respective formats, by 2017. The QSR is the fastest-growing format in restaurant franchise as the concept of malls is being incubated in almost all the cities that have food courts. A franchised outlet in a food court saves big money as the franchisee does not have to spend much on interiors/exteriors, furniture and fixtures, and shares a common area with other brands. Maroosh in Mumbai, is one of the early proponents of the QSR segment, which was pitched through a location formula. It was started as a Lebanese cuisine QSR, next to the entertainment spot Fire n Ice so that late night party-goers at the latter would come for hummus, pita bread and wraps at Maroosh. The brand has grown into a franchised chain. The owner supports investors with material management systems, trained chefs and vendors. It charges 5 per cent at a beginning; this would increase to 7 per cent in the later years. This is on the gross revenue, which is net of taxes, which is on a revenue sharing model and a contract of 3-5 years. However, the company has stopped offering franchise in the domestic market, but plans to franchise the brand in other countries. For Ganancia Hospitality, repeated visits to a Maroosh outlet made it to consider the brand as a viable investment. It chose Maroosh because it’s a successful brand, and is known for what it stands for. The first-time entrepreneur/investor pumped in an initial sum of Rs 28 to 30 lakh, and got his ROI within 18 to 24 months. The restaurant gave 5 per cent on gross revenue per month and earned a license agreement for a five-year tenure with the parent brand.

International Brands, Desi Flavours Yum, Subway and TGIF are among the most successful franchised international brands in India. Experts say, for any franchise, you should have a concept, a target market, supply chain and location. A foreign brand will work in the Indian market provided the company understands the needs of the local consumer and adapts accordingly. A case in point is Pizza Hut which has localised its flavour (its

Franchise is a smart and efficient option for investors because they get the benefit of years of learning from the parent brand. This also gives first-time entrepreneurs to evolve as restaurateurs. Usually, it works out, because entrepreneurs or investors have a support system to fall back on.

latest offering is biryani pizza) and this message is conveyed through regular campaigns. When a brand localises its flavour, it connects with food lovers. Subway’s Chatpata Chana and Chicken Tandoori have a local fan following, and it makes an effort to keep the vegetarian and non-vegetarian service counters separate, subject to space. The chain also runs fully vegetarian restaurants at select locations, and has around 428 restaurants across the country. Its India plans are in line with its growth plans for Asia for which it has set a target of 650 restaurants by the end of 2015. Subway restaurants have replicated the brand’s inherent appeal of being a healthier QSR chain across the globe quite successfully. In order to grow in new markets, the restaurant chain believes that the knowledge and understanding of consumer needs and preferences, and a strong local network is necessary. Hence, the brand has adopted the franchise-route globally, and operates a 100 per cent franchise model, with agreements spanning 20 years. According to Subway, since the set-up and operational cost of its outlet is reasonable (between Rs 40 to Rs 60 lakh), it doesn’t put pressure on the franchisees, and even in a difficult economic environment, it is profitable. It offers flexible store formats and customisation, and training is imparted to franchisees at its centre in New Delhi, while the University of Subway offers online training. The brand takes 8 per cent as royalty fee. In India, franchisees contribute 4.5 per cent of their sales to the advertising fee. The Franchise Advertising Fund (FAF) then manages the advertising on a global, regional, national and local level. The KPMG Report indicates that currently the organised food service industry is about 3.5 per cent, with franchisee penetration around 70 per cent — as against 90 per cent in the US — indicative of massive growth potential. Most of the growth is expected to come through expansion of food service chains like QSRs, ice cream parlours, juice bars, cookie shops, bakeries, and single/multi cuisine restaurants.

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Franchise not the Ultimate

When Pan India Food Solutions became the Master Franchise for Coffee Bean & Tea Leaf (CBTL), it opened new avenues for the brand. It owns over 90 per cent of the outlets, and are present in Mumbai, Delhi-NCR, Chandigarh, Pune, Chennai, Kolkata and Bengaluru. It also has two sub franchises of CBTL and of Copper Chimney, and manages the brands in metro cities, and sub franchises them in tier two cities. According to the company, the sub franchisees should have the right bent of mind to make the concept work. Essentially, they look at people with local knowledge and a passion for the brand. The initial investment for a franchisee in case of Coffee Bean & Tea Leaf would be Rs 1.5 to Rs 2 crore for a fine dine; and around Rs 50 lakh for a coffee shop/kiosk. The parent company sets the standards, menu, software, hardware and branding, and provides staff training.

Desi Brands Going Franchise Way In the absence of capital, franchising is the best way to expand and grow your business. It’s a smart channel with high volume growth. Like, Sagar Ratna offers a 10-year license agreement to franchisees who invest Rs 1 to Rs 1.5 crore for the brand - one of the largest and fastest growing south Indian restaurant chains in India - with 25 to 30 per cent year-on-year growth. Moti Mahal is not well known nationally. Rechristened as Moti Mahal Delux Tandoori Trail, it has established itself through diverse formats such as fine dine and QSR, with a pan-India presence. The brand is earning 7-8 per cent sales revenue from the franchisees for a 9-year contract. Established restaurant brands in India are aware of the sensitivity and responsibility when it comes to offering franchisees where all the SOPs and back-end processes are to be redefined. They train the chefs to ensure uniformity of taste, and in that case, a standardised look and feel is maintained across all the outlets. Moti Mahal, for example, has been present in the Far East since 2008, and is also looking at the US market. However, in New York and London, Indian food tends are still considered ethnic and non mainstream, and changing that mindset is what many Indian brands are aiming at in the future.

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In order to grow in new markets, the restaurant chain believes that the knowledge and understanding of consumer needs and preferences, and a strong local network is necessary. Hence, the brand has adopted the franchiseroute globally, and operates a 100 per cent franchise model, with agreements spanning 20 years.

Bengaluru-based Caperberry and Fava, by Avant Garde Hospitality Pvt Ltd, hasn’t been bitten by the franchise bug. The Caperberry and Fava are company-owned standalone restaurants, as the parent company wanted to create a strong foundation for the outlets and guage the food service capabilities, at least for the first five-six years, before we began to consider scalability and franchising. Caperberry is positioned as a signature fine dine and Fava is a casual bistro lounge located in UB City. Both enjoys the freedom to customise the cuisine and take independent decisions. But, the parent company feels that when the time is right for creating a chain, it will make the process seamless and based on sound management and principles of quality and consistency. Similarly, deGustibus Hospitality Pvt Ltd, whose restaurant portfolio comprises Indigo, Indigo Delicatessen, Indigo Café and Tote on the Turf feels that franchise is not the most sustainable model of growth in the long run. Firstly, a restaurant is a business of personalised hospitality and not many franchisees possess the same degree of passion as that of the promoter. This can affect the brand image in the long run. Also, when the ROI is reasonably good, restaurants don’t have the compelling need to seek franchisee investment to grow and prefer deploying our own capital. For example, the flagship Indigo will continue to be a destination brand and will be restricted to one a city. The company is also considering creating new brands and formats such as the QSR to cater to different economic groups, and newer cuisines such as Asian food. It is felt that food is one of the most difficult products to churn out with consistent taste and quality across all the outlets. While there are many tools like recipe standardisation, documentation and training to maintain consistency, many food experts have come across instances where the local franchisee has tweaked the product to suit the local palate, thus jeopardising the brand value.

Investors Forum Avalon Hospitality Services bought the brand rights for Bengaluru from the Lite Bite Foods for the brand Punjab Grill by entering into a 9-year contract with them. Other Punjab Grill restaurants are in Delhi, Mumbai, Pune and Singapore. The management operations are controlled by Avalon Hospitality Services and with an initial investment of around

7.8 FRANCHISING FERVOUR

such bodies could leverage their relationships with global franchising councils in assisting such companies for a soft landing in other countries.

Other Options

Rs 4 crore, the company expects to break-even in FY15. Investors believe that Bengaluru is a tough market as there is too much competition. Restaurants try to maintain consistency and market the brands through social media, and ensure tie-ups with 55 corporate offices. Anand’s Awe-spring, a franchise of Moti Mahal, based in Rudrapur, Uttarakhand gets a sizeable number of industrial companies as its customers. Rudrapur is an industrial belt and therefore, many fast food outlets have sprung up. But, that was an opportunity for presenting Mughlai delicacies which was missing. And that why Anand’s Awe-spring found it best to capture the market. This zone is known as ‘Mini Punjab’ and Moti Mahal’s kind of food matches the taste of the local population here. The royalty fee is on a pro-rata basis. Every bill generated has a fixed percentage, regardless of the amount, and is calculated on gross sales at the end of every month.The Moti Mahal chain had grown enormously within a short time, so when a new dish is introduced, it becomes a common knowledge amongst the consumers. According to the KPMG report, the food service industry in India (estimated to be worth $48 billion in 2012) is expected to grow at 13 per cent over the next 5 years. While there is an active interest in India by international brands, there is immense potential for Indian brands to go global as well. Not only can Indian brands look at leveraging the Indian diaspora present around the world, but also use this as an opportunity to spread ‘Brand India’. Saravana Bhavan has a presence in the USA, Canada, Singapore, West Asia, the UK and China. Khana Khazana is in Dubai, and Sankalp has established itself in Australia, Canada, the UK, the USA and the UAE. But it’s critical for Indian brands going global to note the differences in local competition, demographics, price points, pay structures and labour laws. The industry associations such as Franchising Association of India and other

It is felt that food is one of the most difficult products to churn out with consistent taste and quality across all the outlets. While there are many tools like recipe standardisation, documentation and training to maintain consistency, many food experts have come across instances where the local franchisee has tweaked the product to suit the local palate, thus jeopardising the brand value.

Today, franchising is not the only choice for restaurant expansion. Investors can choose from a suite of options like the dealership model, distributorship model, co-operative society, multilevel marketing, multi-brand outlets, shop in shops, and management franchise model. The restaurant groups have many options. Joint venture partnerships are as much a choice as single unit franchises. Another alternative is to take the equity route. A joint venture is not, per se, a type of franchising arrangement, but a contractual agreement between two parties to jointly promote and carry on a business. However, it is not uncommon to use the joint venture model whereby the franchisor, eager to promote its brand and product in a territory, enters into a joint venture agreement with a local company, as a first step. The Beer Café, India’s largest beer chain, is the only café in India to offer over 50 varieties of beer from 17 countries. Positioned as an ideal setting for a business meeting and a cool hangout, it is poised to become the largest, fastest and most profitable alcobeverage service brand in India. It invests anywhere between Rs 70 lakh and Rs 90 lakh on a store depending on the location and facilities pre-installed. Most of its investment goes into the technology and equipment, which plans to add many more cafes to the existing outlets present in different cities in India. However, the expansion will not happen through a joint venture (JV) or franchise, as it is an Indian origin brand. In the alcohol business, supplying to franchisee is not permitted due to stiff regulations. Since 75 per cent of its business is driven by alcohol and a franchisee has to procure the supplies directly, it makes sense that it doesn’t franchise. Moreover, the company has been able to secure institutional funding within the first year of inception and that takes care of the fund. Given the scale of operation, it has a target of achieving 50 per cent annualised return-on-investment (ROI). FOCO Model (Franchise Owned and Company Operated Model) is an another alternative to franchising for expansion wherein, the franchisee does the Capital Expenditure but the entire Operating Expenditure is borne by the Company. This implies there’s ample scope for new restaurants to enter the business. When restaurants decide to get visibility and expand, both Indian and International brands have diverse strategic options to choose from.

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number of new techniques have come into play in F&B – both for internal usage as well as from the customer interface point of view. For instance, many outlets have now resorted to presenting their menus on an iPads rather than on traditional printed menus. For a guest, this is more of an interactive format, which also allows for pictographic representation of dishes, leading to a ‘call to action’ stimulus for the guest. Guests can also select their menu items directly from the iPads and the order gets delivered directly into the kitchen via the Wi-Fi network. While molecular gastronomy and sous vide cooking – both driven by technology – are trending in F&B, technology has also eased F&B operations in a restaurant. The hand-held order pads and ear console bar systems are no longer rarities in a hotel.

Restaurants go Hi-tech

Scientific Service BY MINI RIBEIRO

To a hospitality operator, a guest is akin to God and thus, investing in tools to deliver exceptional guest experiences makes infinite sense. And with hi-tech and one-touch solutions promising to generate superior experiences, hotels are all out to embed technology – from their kitchens to table service.

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The hospitality industry has adapted well to available technology. In restaurants, from menus being offered on tablets to innovative live stations using induction technology for banquet events, the F&B industry has clearly taken a giant leap. One of the most revolutionising smartphone applications in the hotel environment today, is an extension of the point-of-sale system in the F&B area. Nowadays, it is common to see it being used as an order-taking device, offering a hands-on and cost-effective alternative to tablet PCs and traditional handheld POS devices. Use of mobile devices, interactive electronic menus, or even a self-operated beverage dispensing unit, have amazed the customers and got them more closer to F&B outlets that are more tech savvy. Even for the heart of house operations – use of new technology for food processing and food preparation has enhanced hotels performance and productivity. Restaurants have gone high tech with menu presentations on iPads, which is very appealing as menus are presented with stories of the dishes. The customer can see and understand exactly how the dish is going to come to him. Placing orders directly through an iPad is also an emerging trend in western markets, which has made its way to India. The reservation systems such as Respack help restaurants to maximise seating arrangements and generate more revenue. Applications such as whatsapp can sell the venue just by sending pictures and details to a customer.

7.9 SCIENTIFIC SERVICE

Looking Forward The food & beverage is serious business proposition for a hotel and thus no efforts are spared to make it profitable. The spotlight is even more on F&B in hotels as it is an important source of revenue. There have been many innovations that have helped offer better services in the outlets – from automated reservation systems like Respak, which not only stores all guest details and preferences but also records guests’ preferences such as food type, ingredients, seating preferences amongst others. Other than this, systems like Triton and Hotsauce help in handling guest complaints and communicate with them live. The live communication helps shorten the reaction time and help authorities in depth understanding of the underlying issues.  And guests, too, obviously welcome this integration of technology in the F&B space. Electronic wine dispensers, new trends in tap beers, equipment used for freezing liqueurs and cocktails and finally to electronic feedback systems. All these are being accepted positively by guests in the restaurant and bar.

Smart Kitchens Kitchens too have undergone a makeover in hotels and the equipment is technology-driven as per the need of the hour. And suppliers are conversant with a hotel’s requirements and gladly, comply with

Technology has even helped to serve safe food, by way of using cold gel baths for serving salads, seafood and cold meats.

those demands. Cooking has evolved into a form of art so also has kitchen equipment from typical cooking ranges, boiling pans and convection ovens to current state-of-art equipment incorporating aesthetic looks, digital controls, energy efficient, modular and streamlined, multiple application and usage from a single equipment. At Electrolux, constant innovations in design and technology are kept in mind for the end-users’ needs. Its range of equipment is designed to improve time and labour usage, and meet the operational demands of the modern catering operation. Electrolux Combi Ovens feature user-friendly simple and clear control panels. Specially built-in features provide consistency and maintain quality of end-product in the cooking process. It is not only easy to use, but also easy to clean, as the automatic washing system is already included and is a standard feature of Electrolux Professional combi ovens. The air-o-convect Touchline and Smart Steam crosswise ovens are the ideal machines for the Indian market, because these ovens support Tandoor Concept, a way to cook traditional Indian cuisine to perfection in less time and by becoming energy efficient. Apart from these, there are the Electrolux blast chillers and freezers range designed to make chef’s work easier, more profitable and energy efficient by optimising the workflow in the kitchen, as they increase the shelf life of food and reduce waste. The

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Time is Money Technology has proved to be a big boon for hotels and guests alike. Sous vide technology, blast chillers and the wine bottle vacuum are all machines that are used in the kitchen for the common purpose of increasing the shelf life of perishable items. For instance, the sous vide is used to suck air out and ensure that the product is air-tight within the packaging, thereby guaranteeing a longer shelf life. Technology has even helped to serve safe food, by way of using cold gel baths for serving salads, seafood and cold meats. Hotels feel the difference upon adopting technology; it enables them to be cost effective. Technological innovations in F&B operations provide high productivity and flexibility, which means saving space and improving ergonomics in kitchen, while higher flexibility reduces food wastage. For an owner, using advanced equipment is a great opportunity to save costs. There is a high saving in running cost: gas, electricity and water. For an F&B outlet, presenting a menu innovatively allows for dynamic pricing, frequent change of menus, daily specials and highlighting dishes, that restaurants want to push. It takes a fraction of the time to change a menu on an iPad as it takes in the case of standard printed paper menus. Hotels opt only for the best, when it comes to technology. They are using brands like Selva and Rational for ovens, Alto Shaam for hot and cold food holding carts, Berto for hot plates and salamander, RINAC for cold rooms and refrigerators, and some other brands are Hamilton, Hoshizaki, Alto sham, Hobart, MKN, Koldtech, Wood Stone Ovens, Molteni Ovens, Blue Star, Electrolux and Fosters.

innovative blast chillers and freezers are crafted to complete the integrated Cook & Chill process, a sustainable culinary technique very popular for large quantity cooking, especially banquet kitchens and commissaries. Nowadays, kitchens are equipped with latest technology products to provide the best of output. Many go for automated and precise temperature controlled ovens, perfected ice cube machines at the bar, efficient blenders and slush machines to ensure high level of services.

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Technological innovations provide high productivity and flexibility, which means saving space and improving ergonomics in the kitchen.

Convenience is Key Technology in F&B operations is used primarily for convenience, and because it is interactive and trendy. However, a right balance of technology and human touch to F&B operations makes a place a suave and savvy food outlet. Whatever be the brand or its nature, technology is clearly now an integral part of the F&B business, as both consumers and dynamics of the hospitality industry evolve. Hotels realise that to stay ahead in terms of creating newer and more interesting dining experiences and concepts, technology is a necesary investment. Technology helps in a big way by reducing the time gap between the customer and the service provider. And that is all that matters in the hospitality industry.

Social Media Power BY ANNIE JOHNNY

Social media offers restaurateurs a cost-effective medium for instant marketing and promotion through campaigns that engage customers directly and meaningfully. The downside is that a single tweet can damage the brand value instantly.

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ccording to a report by Ernst and Young on Social Media Marketing Trends in India, almost 89.6 per cent of all tech-savvy organisations surveyed placed Facebook as the most important social media platform, followed by Twitter, YouTube and blogs. There is also a growing interest in the emerging platforms like Pinterest, Google Plus and Foursquare. Now, various advertising agencies are developing YouTube specific ads, and companies are using blogging to share information about trends, etc. According to the report, almost 95.7 per cent of companies are keen on building communities, thereby, shifting away from a one-way track to a platform where they can interact and get feedback from their target audience. For restaurants and QSR owners, social media offers a huge opportunity for marketing their business, provided they use the medium innovatively to their advantage. For restaurants, social media helps stay connected with patrons real time; gives them a voice that can be directly addressed to the brand and helps in driving conversation. Also, brands can understand customer sentiments and connect with them in a positive manner.

7.10 SOCIAL MEDIA POWER

What’s Trending The food service companies now plan social media campaigns with a separate social media team who ideate and manage the campaigns. They also put up generic information such as brand values, festive greetings, etc., that are away from direct promotions, as a way of bonding with customers. Since many popular bloggers are also great influencers of public opinion, blogs have become a good channel for customer interaction. The report shows that around 47.9 per cent of the social media-savvy organisations regularly engaged with bloggers and other online influencers, while 37.5 per cent engaged less frequently. A popular method of attracting bloggers is by organising a ‘bloggers meet’, which can range from a simple high-tea event to a more elaborate contest. Other trend is the increase in deals and exclusive promotions only for online fans (64.6 per cent); and frequency of posting an update on their pages (25 per cent of organisations surveyed said that they post one update daily on their Facebook pages).

Turning Tweets into Profit The food service players use social media to leverage their brand, display new schemes, and create a buzz beyond the restaurant. Some very interesting campaigns were launched in 2013, for instance, KFC’s ‘Komic Krushers’, a digital only campaign aimed at tech-savvy teenagers, allowed its followers on Facebook to input their pictures, names, and a couple of favourite catchphrases into a storyline and create a ‘User Generated Graphic Novel’. This personalised graphic novel could be shared with friends on Facebook. Everyday, the best male and female entries would get a print version of their novels as memorabilia, and weekly winners an opportunity to win an Xbox 360. KFC had previously launched campaigns like ‘Currycature’, ‘KFC Wow’ and ‘Design Your Own Bucket’. QSR chain Burgs, that went social in 2012, constantly innovates ensuring that campaigns are

Prompt action needs to be taken if customers report some operational problem in social media. But it becomes difficult if the person is not cooperative from the other end. Since it is an open medium, sometimes people use it more to harm than give genuine, constructive criticism.

not just based on seasons and events, but also based on consumer behaviour. According to Gozoop, that manages social media for Burgs, the core strategy for Burgs is to humanise the brand using social media as a platform for customer service, feedback, fan love, influencer and loyalist alignment, along with innovative campaigns. It aimed at syncing the offline and online activities through strategic inputs, leading to valuable digital communication for Burgs. This played a meaningful role in building a lasting relationship between the brand and its customers. For example, Burgs invited food bloggers and tweeples to one of its outlets where they were asked to create their own burger. During the event, over 24 burgers were created! The winning burger was available in Burgs outlets for a week, and was promoted through Hashtag #ForFreeFoodIWill, which trended in Mumbai, Thane, Ahmedabad and Surat over several weeks. The primary objective of social media interactions is to get footfalls at the outlets. Diverting people from our online community in various ways is what we aim for while strategising for Burgs. Having an online presence is critical for a restaurant’s success in today’s world. Both good and bad news can travel very fast through social media, so one has to be careful about the communication being sent out and one should also track negative messages to contain any damage as soon as possible. Bengaluru-based Avant Garde Hospitality is active on social media and aims increase in brand awareness through it. The company promotes specific events on social media and observes footfalls going up by 10 to 50 per cent during promotions. Today, social media marketing is definitely more cost-effective. However, it is most important aspect is the endorsements received on a public platform, which create a lot of word-of-mouth publicity. The social media has become a quintessential part of marketing for restaurateurs. The age group between 16-25 is constantly online, and with smartphones they are always accessing Facebook, Twitter, etc. Once restaurants get an access to them the scope of business increases. They invite Tweeples and food bloggers to taste and review the new offers on our menu, carry out photo contest and upload it on Facebook/Twitter, and so on. Such activities have helped increase footfalls by 8 to 10 per cent.

Interactive Apps The customised phone apps are also becoming quite popular. A phone application makes it easier for restaurateurs to disseminate information to customers at the click of a button, and to share

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OlegDoroshin / Shutterstock.com

details about new offers, photos and promotions, as once downloaded, they will be with the customer 24x7. The IT companies developing phone apps for the food service industry feel that if restaurants decide not to adopt any traditional advertising strategy such as billboards, TV commercials, print ads, etc., there are meager chances that diners will know or talk about the restaurants. In such a fiercely competitive retail space, one needs a lot of wordof-mouth from existing customers to drive in new promotions. The social media marketing comes in handy as it helps establish a brand and deepen the relationship with guests, and allows restaurants to stay on top of their minds as a dining destination. SnapLion’s interactive phone app has features like In-App Ordering for delivery or pick-up, Onetouch Reservation, Loyalty points and Fan Wall for direct engagement with diners. Traditionally, app development for restaurants and QSRs took several months; it required technical knowledge and a cost of Rs 10 to 20 lakh. SnapLion’s cloud-based technology platform is not just simple to use (as no coding is required; just drag and drop images and content into the platform), it is also quick (takes less than an hour to build an engaging app), and costs only Rs 5,000/month. The ROI from apps can vary from one restaurant to another depending on multiple factors. Posist Technologies develops POS softwares that help restaurateurs monitor what customers are saying about them. If a customer visits a restaurant and does a check-in on one of the social media channels like Facebook/Foursquare, he/she is doing free publicity for the restaurant, but no one at the outlet’s management is aware of it. Now, if the manager or the server instantly gets to know that this particular customer has done a check-in, they can reward him/her. It also links to the history of the customer, so a restaurant can reach out to the customer via Facebook for future offers. With this technology, restaurants not only get access to its customers’ likes and dislikes for food options, they also have their social media accounts captured. One can always push specific offers to these customers based on their taste and spending pattern that are recorded by the POS.

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As regards the ROI from the software, the ROI starts quite instantly as customers start engaging; it creates a viral effect on these platforms. These days, there has been a substantial increase in the use of technologies that have social media integration tool. Indirect connection to social media can also be a way of increasing reach, for example, Gourmet It Up enables new experiences for customers by designing exclusive culinary experiences. It regularly creates tie-ups with restaurants and other F&B partners to create giveaways for its social media audience. They tie-up with restaurants for events like mixology classes, and also create off-menu set meals. Apart from the billing and feedback, its restaurant partners get a lot of press coverage from the bloggers and journalists that use its platform as customers.

Negative Feedback

The age group between 16-25 is constantly online, and with smartphones they are always accessing Facebook, Twitter, etc. Once restaurant gets an access to them, the scope of its reach increases.

In 2013, an angry blog post (written by a group of teenagers) about inefficient customer service and rude behaviour of the staff at Lempbrew Pub and Kitchen in Gurgaon, went viral. The post highlighted the poor quality of the food served to them and the inconsistencies in the bill that went against the discount offer the restaurant was promoting online. Although the post was removed within a few days of wrting it, it was enough to make social media go into a tizzy. People all over the city sympathised with the group and negative comments spurted up everywhere. The result was there for everyone to see, when on Zomato, the restaurant rating fell from 3 stars to 1.3. The incident highlights the vulnerability of restaurants to negative criticisms. Can social media then be a double-edged sword? Social media is no different from a knife; it is used to cut vegetables, but if not cautious it may end up cutting the hands. The restaurants have to understand that platforms are more open now. While they may receive accolades for good work and everyone will see it, they may also receive brickbats for lapses and everyone will see that too. It’s all about learning to handle it well. The Ernst and Young report states that while 87.8 per cent social media-savvy organisations have social media guidelines, and 78 per cent have online monitoring programmes to track what customers are talking about them. Only 39 per cent have a crisis manual ready with them. Damage control is a necessary step for any restaurant trying to go big on social media. In the case of Lempbrew Pub and Kitchen, most users of Facebook and Twitter were appalled that the owners did not bother to post a formal apology.

7.10 SOCIAL MEDIA POWER

Therefore, it is important to track negative criticism online as news travel fast. Sometimes, the criticisms are not even fair but one has to remember that both good and bad news can travel very fast through social media. Negative feedback has always been something that restaurateurs have to deal with, but the advantage is that they get instant access to the news. In case of wordof-mouth criticism cannot compete with one bad review on Facebook, but at least it gives me access to negative feedback. If one says something bad about a restaurant to a friend, he/she will then avoid the place, and the restaurant loses a customer without really getting an opportunity to know why or to improve. Therefore, responding to feedback should be a top priority. On the other hand, another problem is difficult customers. Prompt action needs to be taken if customers report some operational problem in social media. But it becomes difficult if the person is not cooperative from the other end. Since it is an open medium, sometimes people use it more to harm than give genuine, constructive criticism.

Bright Future Although there are several challenges in India in terms of Internet penetration, especially in tier II cities, and awareness about such marketing is still low, the future of social media marketing in India looks bright. Given that the industry is largely run by traditional restaurant owners who are not very comfortable with DIY technology and ad platforms, there is a need for a lot of education and handholding. It is not that most restaurant owners are aware of advantages that social media integration can bring, but it has been seen that owners get really excited at the possibilities. Social media marketing is poised for a very high growth in the next 3-5 years. The mobile penetration has brought more and more people

A phone application makes it easier for restaurateurs to disseminate information to customers at the click of a button, and makes it easier to share details about new offers, photos and promotions, as once downloaded, they will be with the customer 24x7.

on to social platforms, and it will soon become the number one way of targeting people. The control over a campaign (including budget, demographic targeting, re-targeting and improvising on the results) that social media platforms provide to a restaurateur or QSR chain owner, especially the smaller businesses, is its most attractive feature. India is such a large geography that unless restaurants want to target people in masses, any kind of traditional media doesn’t fit in a small/ medium business owner’s pocket. A small business owner cannot let his/her budget sink at the wrong places by showing the ad to the 99 per cent outside the target market, which is usually what happens when one places an ad in, let’s say, a newspaper. But social media allows the freedom to come online and get specific target groups to see the ad. This is what will drive the social media marketing and it is going to create a market much larger than what we see today in traditional media, which is largely dependent on bigger brands. The social media results are also easily measurable. This is cost-effective, and with the tools used, it is more measurable for the KPI’s restaurants set to drive the business value proposition forward. It’s important for restaurants to be where their diners are spending more time. However, more than just branding, it’s important for them to engage with their audience to create interest and trust in their brand. Restaurants often use social media just to add seasonal offers; they don’t realise that it’s a great mechanism to understand the likes and dislikes of customers and to address complaints from dissatisfied customers. The customers are no longer afraid of voicing their opinions on social media websites, and ignoring them is no longer an option for restaurateurs, rather it has become their responsibility.

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Supply’s Strength & Support BY MANISHA BAPNA

The supply chain is at the heart of the economics of a restaurant and must be designed depending upon the product, the targeted customer experience and location of the restaurant.

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n India, the ‘farm to fork’ chain is exceptionally long and sees too many hands-offs before the farm harvest lands in the end-consumer’s basket. With so much at stake in an economy, where pulling consumers to dine out is a challenge, the restaurant industry is under continuous pressure on improving its supply chain operations. Over the past few years, the industry has grown dramatically into a $48 billion industry and is projected to have an 11 per cent CAGR over the next 5 years. Such an attractive market has attracted competition at all levels. However, it is also an industry that has been very effective in passing on costs to customers. On a positive note, the food supply chain in India is an extremely promising sector, and has witnessed a speedy transformation over the past two decades. The sector is seeing substantial private and public investments for enhancing production, procurement, processing, distribution, and retailing efficiencies. The suppliers have expanded capacity with additional facilities in south and north India, moving closer to the raw material area in each case, and providing tremendous logistical and other benefits such as managing commodity costs better. What better example than McDonald’s, which has continued to strengthen its supply chain to address such issues by expanding the farm acreage and increase productivity in the supply chain and at its outlets.

7.11 SUPPLY’S STRENGTH & SUPPORT

Centralised Kitchen and Distribution Delivering quick meals at reasonable prices in an ever-changing marketplace is challenging, especially as food chains fight soaring fuel costs, product quality concerns, nutritional mandates, etc. The shelf life of food requires a management strategy with more frequent inventory turns from supplier to food operator to minimise costs and deliver with speed and timelieness. In a centralised and integrated set-up, foodservice outlets adopt a hub-and-spoke model of sourcing and distribution. Products are sourced from different locations and directed to a centralised location (the hub or distribution centre - DC), from where they are channeled to the sale outlets, aligned as spokes. The DCs are at the core of McDonald’s supply chain where its four DCs cater to about 300 outlets pan-India with a multi-layered supply chain model with suppliers at two levels. The perishables are transported through refrigerated trucks that handle return logistics as well. In the QSR segment, Domino’s, which has more than 500 outlets in India, also follows a similar sourcing

and distribution model. Other formats like Lazeez restaurant have a centralised purchase, kitchen and store. A deep link is established with adequate number of retail outlets that are fed from the base kitchen to reduce cost of operation. The fine dining restaurant chain Specialty Restaurants Limited (SRL) has put in place a centralised supply system for perishables that are supplied directly to the nearest restaurants, which ensures consistency and timely delivery of raw materials. A restaurant chain like Chowman cannot function without a centralised system for purchase and inventory management. Most of its grocery purchase is done within the first week of every month, and stored in its centralised dry store from where they are dispatched on a daily basis to different outlets as per their requirement. After the end of each day, a requisition slip for supplies is handed to the store manager and items are delivered the next day to the particular outlet. Sagar Ratna, too, follows the hub and spoke model where key chefs prepare the dishes (maintaining consistency and standard), which are then supplied twice or thrice in a day to their adjacent four to five restaurants.

Should Restaurants go for a Centralised System? Whether a restaurant should opt for a centralised kitchen or purchasing department, depends largely on what it is offering to the customers. The advantages of a centralised system is that it helps the brand cut down costs, gain competitive advantage, improve service standards, and make efficient use of technology. Also, it protects recipes and reduces chances of copycat outlets being set up. For large chains, it becomes necessary to have everything centralised. If the offering allows for

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complete or partial preparation in advance, then centralisation is a big help in lowering total costs. Typically, a centralised kitchen should be located where space is affordable, has easy access, and is able to service the city and its suburbs. Finishing of products can be done locally to deliver freshness, taste and presentation. There can be different delivery mechanisms to the outlets depending on the shelf life and volume of the items being distributed. But in India, the restaurant industry is largely unorganised, and 90 per cent restaurateurs are single outlet owners, for whom local best-price sourcing is the only way. Food service experts say that for chain QSR restaurants, it’s important to have a centralised purchase policy, but it would also depend on how big the operational set-up is. A centralised policy would help in giving uniformity to prices and in gauging market prices better, and in doing so, costs can be cut substantially as volumes would be big and the restaurateur would get negotiating leverage with vendors. The centralised system should be based on an average market price for the base products. A tender system or a contractual farming system would also be good. Of course, timely delivery to the outlets is of utmost importance.

Maintaining Tight Inventories In general, the inventory planning takes into account demand and demand variation, shelf life of the product, storage facilities and finally it has to account for supplier capacity, reliability and transportation certainty. Inventory planning varies depending on the type of food being served and the level of local processing that happens. Some categories of food products with extremely short shelf life, like dairy products, are often best managed by not meeting the full demand. So, outlets should prefer to not serve rather than hold excess stock that can’t be sold. Interestingly, this can lead to customers actually placing a premium

McDonald’s unique cold chain, that took more than six years of setting up in India, has brought about a veritable revolution, immensely benefitting the farmers at one end and enabling customers at retail counters get the highest quality food products, absolutely crisp, fresh and at great value.

on getting hold of the product! However, this has to be carefully balanced. If an outlet gets a reputation of getting stocked out, customers will start factoring that into their selection of where to go and the franchise might suffer. In some cases, excess inventory is returnable or can be moved to another outlet nearby. In other cases, it has to be disposed of at a lowered cost. Throwing it away is increasingly not an option. A ‘pull-supply chain’ best exemplifies the efficiency of the supply chain for the food services industry. Inventory levels are micro-controlled based on each supply item and it is difficult to ascertain a generic level. But, for each location, every outlet gets into a well-defined sales pattern within the first seven months. Thereafter, these data are used to decide on inventory levels. In the absence of a fully integrated common Indian market, inter-state movement of goods is quite tedious as there are various national, state and local taxes to be adhered to. While work is being done to speed up the processing at check points, such as e-tax payments, there are still delays. For example, using refrigerated trucks to preserve shelf life, can have a huge impact on cost, but may not be avoidable if quality is an issue. There is no other way than to be aware of these obstacles and plan for them in the supply schedule. Not accounting for them is a recipe for disaster.

CHECKLIST FOR SUPPLY CHAIN What cuisine does the restaurant want to offer What clientele does it want to cater to and where is it located Is it a standalone or part of a chain How standard or unique are the ingredients Would they prefer to source locally to reduce transportation cost, or centrally, to ensure hard to get ingredients, so quality or cost efficiency How critical is cost efficiency to the business model Is cost efficiency better served by reducing transportation cost of by bulk buying

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Will the restaurant location allow for space or will it need to have a higher level of centralisation of preparation? Will the menu offerings allow it to have centralisation Should it outsource activities or employ in-house staff. What is the likely percentage Which vendor/supplier to choose from- local/national/ international Can the vendor service the initial small requirements in smaller lots Can the same vendor scale up as the business grows

7.11 SUPPLY’S STRENGTH & SUPPORT

Bangs India maintains par stock for 9 days while maintaining a 15-day inventory. Any excess inventory leads to additional capex. Excess inventory also reduces the residual life of ingredients below 75 per cent, which shoot up overheads. This largely applies to frozen ingredients. At Chowman, stock is normally kept for a month. This is for grocery items like rice, wheat, sugar, salt, etc, which last for more than a month. Perishables like meat and sea food are purchased on a daily basis and their freshness and quality are monitored very closely. As a policy, Lazeez avoids carrying inventory of perishable items, but for products like rice, flour, etc. a 7-day inventory is maintained. The inventory-holding level needs to be carefully assessed considering factors like sales, lead time for procurement of materials, in-house storage capacity as well as storage facility like deep freeze, etc. However, it is most prudent to carry ‘zero’ inventory of perishable items. The restaurant assesses the quantity of different items likely to be sold over the counters every day - during weekends, festive seasons, winter season and other occasion. Usually,

The inventoryholding level needs to be carefully assessed considering factors like sales, lead time for procurement of materials, inhouse storage capacity as well as storage facility like deep freeze, etc.

excess food is prepared during festivals, so leftover cooked items are sent to orphanages. For groceries, the inventory is maintained for about a week and daily for the livestock. Mostly it operates on zero wastage. It prepares food almost twice or thrice and if necessary more, depending on perishability and volume required. It disposes off leftover food at the end of the day, and the same is tracked for improvements in ordering. As it doesn’t penalises for wastages, its team ensure that only fresh food is served to customers. Wastages are tracked separately (manually and through the ERP system). Maintaining inventories involves keeping a record of how many SKUs you have, what is the storage capacity at the outlets and at the cold storage units/warehouses, and factors like add-ons like sauces and other ingredients that are sourced locally. Each outlet should maintain at all times a fixed SKU of each product, and according to the sales replace the stock again to the fixed number. In doing so, the stock at each outlet can be calculated and a sum total can be identified on a daily basis. The inventory management for QSR is quite spread

UNIQUE CHARACTERISTICS OF FOOD SERVICE Is the vendor critically dependent on the business, so if the offtake lowers during a lean season, will the vendor go out of business If the restaurant cannot use the ingredients, can the vendor take them back What kind of taxes, standards, regulations, policies, safety measures are to be adhered to What budgets should be allocated to front-end and back-end activities What is the projected business for the year

Demand for food occurs at peak times, around breakfast, lunch, and dinner Demand for food may vary according to time of year and competitive events, and production must be modified accordingly Food production and service are both labour intensive Both skilled and unskilled labour is needed Food is perishable, requiring it to be handled properly before, during and after preparation. Menus change on a daily basis, thus, production changes daily

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out: it can be state-wise, city-wise, and if there are a number of outlets in the city, then, each outlet-wise. Thus, you can come to a conclusion of numbers and sales. With each outlet keeping an inventory, the outlets in a particular city will give you collective city numbers, and cities will give you the state numbers. This is an easy way of managing inventory for multiple number of outlets in different states. Time taken for delivery is directly proportional to the distance between the processing unit and where the outlets are based. Most companies have cold storage facilities in and around the cities they operate from, and they maintain stock levels to avoid shortage, plus an extra surplus stock of 20 per cent is kept in case of festivals or strikes in transport, etc. Inventory and demand have to be in sync. Once the process is in place, the system works on its own and the time of supply delivery to the cold storage and then to the outlet is nominal. But inter-state transport is still time consuming. In this context, 600-700 km can be covered in a time span of 10 to 11 hours on highways these days. But one must follow the re-order policy; that is, when the stocks are 50 per cent left, an order should be placed immediately so that by the time the remaining 50 per cent stock is running, fresh stock would have arrived. But it’s important to understand the demand and create a supply cycle that is related to the number of outlets and the number of SKUs being sold.

Managing Overheads The cost of food production in restaurants has gone up by 20-22 per cent in the last two years, which is making survival of small restaurants extremely

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Keeping an inventory to a minimum is always good for businesses since less money is blocked and spoilage remains low. But low inventory has to be balanced while ensuring that a restaurant is not stockedout, so an additional week’s supply could be necessary.

challenging. From the perspective of a buyer of farm produce (processors, marketing firms, food service industry, end-consumer), any slack in the supply chain means higher costs, uncertainty of supply, threat of stock-out, and poor quality. Managing inventory is, thus, a key to control overheads in a restaurant. According to experts, excessively long and inefficient supply chain like in India, means that farm-gate price is a relatively small portion of the price paid by the end-consumer (it ranges between 20 and 30 per cent for India). Rest of the margin is eaten up by intermediaries and high losses in-between. Therefore, careful inventory management can help keep overhead costs under control. At Pico’s, slow moving items are quickly identified and an innovative chef team creates special off-the-menu dishes to use up the inventory before products expire. Even the scale of operation assists in reducing unit pricing; larger establishments certainly get the advantage of lower input costs. With the exception of fresh produce (fruits, vegetables, milk, etc.), many restaurants typically maintain par stock for about a week at the outlets and for an additional 10 days at the central stores. However, keeping an inventory to a minimum is always good for businesses since less money is blocked and spoilage remains low. But low inventory has to be balanced while ensuring that a restaurant is not stocked-out, so an additional week’s supply could be necessary. The fixed overheads can be apportioned between more numbers of units, and therefore, price variation due to bulk purchase will be available. Agreeing to the practice of volume buying, Sagar Ratna sticks to the concept that works on freshness, and hence its supply chain is also based on its requirement for the day or the next couple of days, depending on the perishability and demand volume. Advising vendors to build inventory as per requirements (30 days maximum) so as to have an uninterrupted supply, extensive training for planning right inventory, and hence cut off additional delivery costs, avoiding inter-stock transfer, allocation of staff to pick and drop stock from warehouse/outlet, are some measures for managing cost overheads. Many restaurants purchase dry stocks on a monthly basis, which saves on transportation and labour to a certain extent.

Handling Price Fluctuations The foodservice industry in India is predominantly unorganised. The suppliers are not easy to identify

7.11 SUPPLY’S STRENGTH & SUPPORT

SOME INITIATIVES BY THE GOVT. FOR COLD STORAGE Allowing 100 per cent FDI, which has provided full excise duty exemption on cold chain refrigeration equipment (consisting of compressor, condenser units, evaporator), which reduces costs substantially by around 16 per cent Automatic approval for 100 per cent foreign equity in processed food items Initiating National Highway Development Programme and partnering with the Indian Railways to establish cold chain infrastructure Rs 1,000 cr corpus for agro-processing industry and market development Task Force on development of cold chain established and National Centre for Cold Chain Development (NCCD) 100% capital depreciation for cold chain and negotiate with as many smaller suppliers are not on trade sites like Indiamart or Alibaba. The pricing continues to remain opaque and there is little attempt made to ensure transparency. Most restaurants just absorb price spikes, though this is becoming an increasing concern as price spikes that were extremely rare in the past, have been happening with greater frequency of late. The annual rate agreement (ARA) with suppliers, too, has a dynamic pricing structure. For example, Sagar Ratna normally follows an annual cycle for price changes as it has an impact on other collaterals like printed menus and other communication media. Price changes in the interim are absorbed as part of higher expenses. To avoid hike hits, most of its supplies have contracted prices and the duration for the contract at times changes depending on the volatility of the product pricing

and sensitivity of the ingredient cost in the overall cost of the finished product. Restaruants are in a buyers’ market today, and hence, there is no monopoly. As stated earlier, due to abnormal price rise, Lazeez has increased its procurement prices, but usually such an increase is not passed on immediately to its customers. It first watch rates charged by competitors, the market conditions, etc., before prices are increased. It usually enters into yearly rate contract with the vendors and rates are revised annually. However, in case of wide fluctuation in price of raw materials due to government policies, rates are revised on a case-to-case basis. The regular fuel hike as a result of changing government policies has definitely had an impact on the rates. A majority of the sauces used in food are imported, and sometimes it becomes very difficult to maintain the bottom line. Like Chowman chain normally goes for a quarterly agreement with its suppliers so that it turns into a win-win situation for both. PICO signs ARAs with vendors; it protects them from day-to-day fluctuations and help it to forecast and plan the pricing accordingly. However, it only holds within a certain range of variation. If prices of products (like onions) rocket, the vendor is able to adjust the prices up to a certain point. At Pronto, most of the agreements and understandings with suppliers are on an annual or semi-annual rate agreement in order to maintain pricing stability. However, most suppliers are loathe to provide perishables on rate contracts and understandably so. With prices rising, suppliers start cutting corners, refuse delivery, and supply inferior quality if a restaurant tries to enforce their rate contract. It has found that perishables are better purchased at market rate so that while the price may fluctuate, the quality remains consistent. The payment cycle differs from business to business. For restaurants, fresh vegetables are paid

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for on a monthly basis, meat/poultry on a monthly basis, commodities like masalas, sauce, breads, and flour can be paid bi-monthly. Following a pattern will help keep track of the inventory and wastage, and figure out the business cycle/process more closely. Some small set-ups do it on a weekly or monthly basis, but for QSR chains, if 30 days is the basic business period, it helps strategise the business well, cost-wise. Contract farming as a strategy adopted by food processors is gaining prominence in India due to steady progress in the economy, rising food demand, organised retail boom, and an increasing shift towards branded food consumption. However, contracting agreements are often verbal or informal in nature, and in case of a breach, neither party will be keen to contest in court where litigations can be an extremely slow process. Contract farming is beneficial for companies as they stand to gain stable, steady supplies, risk-free price fluctuations, non-investment in huge resources like land, product risk-sharing, etc, and is considered to reduce costs of cultivation as it can provide access to better inputs and more efficient production methods. It lowers transaction costs for farmers as many of the transactions are internalised by the procuring firm.

Sourcing and Vetting Suppliers Over the years, government regulation of the food industry has been continuously increasing. This has been good for the industry in protecting the health of the consumer and helping to weed out fly by night operators whose short cuts can damage the industry’s reputation. There are several regulations that govern the movement, storage and serving of food products. ISO 9001:2008 is the

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The existing models of sourcing act as a guide to setting up a supply chain and identifying suppliers for any new entrant. Suppliers should be identified and selected centrally to ensure consistency of the product.

primary certification in India. Along with this, HACCP certification is a policy for most large organisations. This approach has significant benefits to organisations operating within the food supply chain as it enables them to determine key controls over processes and concentrate resources on activities that are critical to ensuring safe food and other quality control measures. The food business also requires acquiring a license and meeting the inspection standards of local agencies on a periodic basis. These regulations can change over time or how they are implemented can be tightened. Some companies place higher internal standards than those laid down by regulatory bodies. For example, there could be internal processes on cleaning and hygiene of vehicles used for transporting food items. There could be an internal certification process for suppliers. Logistics and storage are significantly affected by the location, space available at the outlet, and capabilities of the suppliers. Certain locations have restrictions on truck movement at certain hours. If outlet space is small, more frequent deliveries are required. The existing models of sourcing act as a guide to setting up a supply chain and identifying suppliers for any new entrant. Suppliers should be identified and selected centrally to ensure consistency of the product. Many established players source and process perishables centrally, and then dispatch them to different outlets, while other items are procured locally but from a centrally vetted pool of suppliers who are identified and vetted in terms of quality and reliability. The temptation to source locally for fresh produce has to be tempered with the need to maintain consistency. With several organised players having made their mark in the QSR format, specialty and full dining segments, there is no dearth of reliable and quality-conscious suppliers. Vendor identification process should start at a very early stage. Companies should follow a structured and rigorous process to identify, shortlist and finally select appropriate vendors. As with most other industries, sourcing a perfect vendor is an unlikely reality. Sourcing of vendors is critical. You can’t serve great offerings with poor quality inputs, and you can’t serve offerings at all if your vendor fails to deliver! Apart from quality and reliability, it is important to look at the scale and growth plans of the restaurant. As the checklist criteria would include host of parameters and would differ from company to company, two key aspects that companies should never compromise are strategic fit and values/ ethics alignment.

7.11 SUPPLY’S STRENGTH & SUPPORT

The selection of a vendor can be timeconsuming. The important factors are source of the vendor, reliability, and the price factor. The prices must negotiated hard for different supplies and services; for transport, have a national average, for commodities have local rates to compare with market rates, but keep them a little lower because you will be giving year-round business to the vendor. The processor should be chosen with the help of a food technologist - one who would totally understand your end product and be able to improvise. A vendor should understand your business needs, the end-product you are selling, and the quality you are providing for him to tango with the business. If he is giving sub-standard supply or service, it will affect your business. If he is providing you with the best, he can ensure long-term business for himself as well. This is an important point for people in the supply chain to make their vendors realise - be it the logistics guy who has to be prompt with delivery, or the chicken and greens supplier who knows what you are selling and your final product. There are a number of vendors who are involved when you run a chain of restaurants. These include the base material supplier, farmers, stockists, the logistics company, the cold storage unit, and the daily supply vendor. When all of them work in tandem, the business cycle is complete. So choosing a vendor is very important. To cite an example, Goli Vada Paav franchise, which started selling vada pavs in Mumbai, today has about 400 units all over India, and was voted the best homogeneously developed brand by the HRD Ministry. It is supported by dedicated potato and onion farmers in Maharashtra, and the vada ‘tikki’ processing is done by Vistas which make the Mcdee burger tikkis. The tikkis are transported all over India in cold storage trucks to nodal cold storages and then supplied to cities, where their franchisees (who are trained by the principal on storage, assembly,

There are a number of vendors who are involved when you run a chain of restaurants. These include the base material supplier, farmers, stockists, the logistics company, the cold storage unit, and the daily supply vendor. When all of them work in tandem, the business cycle is complete. So choosing a vendor is very important.

etc) are based. The paavs are produced by a local vendor in every city. So when all these vendors rhyme together you get the perfect processes to operate your business smoothly. The selection criteria should also take into account references and the scale at which the vendors operate. The general perception in the industry is skewed towards larger vendors because they seem to be more committed. The payment terms and cycles are decided at the initial stages of the contractual agreement, and the standard payment cycle in restaurants usually works on a decent credit period of 30 to 45 days. In most cases, vendors have to be developed to provide just what you need, when do you need it, and how do you need it. This implies a partnership that must be allowed to become a source of future while negotiating for some critical vendors at least. Collaborating with suppliers to improve the total offering to the customer is very important for gaining advantage over competition. The modern food service industry follows a supply chain model where the key elements of the supply chain are outsourced and a very lean staff is maintained to monitor the chain from within the company. This is as good as having an in sourced supply model. The Key Performance Indicators (KPIs) are set to monitor the performance of the distribution partner. A distribution partner can be monitored on the following parameters: administration efficiency, warehouse efficiency, truck utilisation, overtime as a percentage of the total number of hours worked, number of cases handled per trip, etc. Sourcing of the food supply is very important as it’s the taste and quality of the ingredients used in the food preparation that will sustain the business. Once the business model is ready, and the taste of the end-product is final, food technologists should be hired to check quality of the supply before finalising from where they should be sourced.

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Maintaining Consistent Quality Local produce will always be more cost-efficient, particularly if one considers the rupee’s depreciation, not just the drop over the past few months, but even its trend over the past few years. The problem is that local produce often doesn’t meet the quality standards and hence restaurants keep certain imported products to ensure constituency in quality and taste. But the high taxes and shipping costs lead to even mainstream mass market brands from abroad being priced at the highest end of the market. The products from out of Mumbai get affected most when there are strikes, natural disasters, or political unrest. Typically, supplies get disrupted a few times a year, although one can normally find alternatives. Some companies believe in ‘eating global, sourcing local’. Though there are certain products like olive oil that have to be imported, still 95 percent of our raw materials are locally sourced. Even Pronto tries to use local produce as much as possible, barring certain products like pasta, pepperoni and parmesan cheese, etc, that have to be imported as there are no suitable Indian substitutes. From the total supplies, about 20 per cent are imported products from various distributors.

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All processes and systems aim to achieve the main goal, that is Taste, Texture, Smell and Presentation (TTSP). Whatever be the product, do a thorough R&D and develop a perfect balance of TTSP with the aid of a food technologist, who will break down the ingredients, their proportions, and figure out how all the ingredients will work together to achieve the TTSP.

Chowman imports its primary spices and sauces from Thailand and China, but the regular poultry and vegetables are local. Owing to the volatile nature of the markets, it does not enter into any agreements with vendors. Oudh restaurant sources most of its ingredients locally from Kolkata and Lucknow where it has a contractual arrangement with the vendors. Supplies at Sagar Ratna are bought locally and centrally but the deliveries by the vendors are to the hubs and in some cases to all restaurants depending on the perishability of the product. Since it deals mostly in perishable items, Lazeez has to depend on local vendors, but it procures nonperishables like rice, flour, ghee, edible oil, masalas, etc, from the best producers in the country. The rice procured, for instance, is of the Kohinoor brand, which is supplied to all its units across the country. Many restaurateurs keep a ready stock of branded products as substitutes in case of delays in supplies. Usually, such scenarios are pre-planned at the time of menu planning. PICO is extremely particular to use the same quality ingredient, and it does faces higher purchase costs from time to time. This is something a restaurant has to absorb if it wants to ensure consistent quality. At the end, how your food product tastes is all that matters. All processes and systems aim to achieve the main goal, that is Taste, Texture, Smell and Presentation (TTSP). Whatever be the product, do a thorough R&D and develop a perfect balance of TTSP with the aid of a food technologist, who will break down the ingredients, their proportions, and figure out how all the ingredients will work together to achieve the TTSP. Once, that is achieved, all the personnel, vendors and processors must be trained to perfection and bound by an agreement of nondisclosure. Then train the staff at the outlets as to how to achieve the required result. Follow the principle of KAIZEN (continuous improvement of processes) and find ways to improve the system. By implementing cost-effective ways and rules across all dimensions of the business, the people and structure of the company; invest in small stalls at festivals, do a feedback check on the product, improvise and introduce a new product that meets consumer demand, say experts. But should it be KAIZEN, FIFO, or LIFO? Different products have different shelf /storage life and you have to take a practical approach. For frozen products, it’s best to follow FIFO. For marinated meat, after marination time, treat all stock as ready for use, and just hold 20 percent as stock, and constantly rotate this 20 percent. Some products are to be used as ‘just in time’ such as items that

7.11 SUPPLY’S STRENGTH & SUPPORT

are to be steamed, perishable accompaniments, soups, pizza flour, pasta flour, etc, as they tend to change colour, aroma and taste when stored. So the kitchen staff has to be trained in these aspects. Always find ways to improve the system, products, delivery, presentation, quality and taste, and adjust according to the demography where the outlet is located. KAIZEN should always be the motto, and the work ethics should be such that every person at the outlet should be able to contribute in making the end-product perfect by never disrupting the cycle of the business.

Wastage Concerns Perishability of food supplies is a major challenge for all food formats as it leads to rejections and wastage. All perishable items are usually taken fresh, day to day. Most sophisticated chains and kitchens store perishable items in a proper refrigerated environment. Suppliers are under contract to replace lower quality supplies, at times even with penalties as it is a breach of contract to supply material that does not meet agreed standards. Orders from restaurants are routed to the Distribution Center, which, in turn, routes the order to the supplier and only then does the supplier produce it. The supplier thus barely maintains any extra stocks. Rejection or wastage happens at two stages: first, when items arrive at the kitchen in a poor state and in most cases, due to transportation or storage conditions at the middle distributor. Next, rejection or wastage happens when the kitchen is not able to consume perishable items within the stipulated time. This is as per the policy put in place

The urban restaurant centres have been struggling with solid waste management and sewage treatment. The recent regulations will seemingly place a high overhead on outlets that seek to throw away excess.

by the restaurant. However, rejection due to shelf life expiry can also happen for a variety of reasons viz, the item may not move because demand is low or the outlet may have over stocked or the supplier may have pushed additional stock. The latter can even happen from a central kitchen. But how each case is handled will vary. Underlying it are two principles: The first is whose mistake was it? Has the supplier provided ‘near to expire’ stock? Or has the outlet over ordered? The second principle is who is in a stronger bargaining position? It is difficult to argue with a sole supplier, just as it is difficult for a supplier who has one major customer to justify through arguments. Based on all these points, solutions can be reached for a fair method of compensation or replacement. There can also be variation in local customs, for example, bread supplied in Delhi and Mumbai have very different return characteristics, with Mumbai outlets returning a much higher percentage. Similarly, customs may have evolved in different markets and changing those, though it sounds possible, is not an easy task. The urban restaurant centres have been struggling with solid waste management and sewage treatment. The recent regulations will seemingly place a high overhead on outlets that seek to throw away excess. According to Serafina Restaurants India, wastage is part and parcel of the restaurant industry; it can be controlled to a large extent but cannot be eliminated. A wastage of 3 to 4 per cent has to be factored into the inventory as products sometimes get damaged during transport, change of colour due to cooling, etc. Excess inventory at the cold storage can be used for promotional activity. The franchisees have to be involved in putting up stalls in festival grounds, or at cultural activity centres, and places where people gather. This will help in sales at a rebate, and customers can get the taste of the food product which can convert to sales at the outlets in future.

Food Safety & Law The food service industry’s top priorities are quality and safety other than managing costs. Ensuring food safety is a perennial challenge with frequent incidences of adulteration, food poisoning and food-borne illnesses. The companies are constantly exploring ways to create better hygiene standards throughout the supply chain. All eateries in the country (there are 50 to 60 lakh) from QSRs and fine dine to school canteens and corporate cafeterias need a food business operator (FBO) license from the Food Safety and Standards Authority of India to operate.

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KEY CHALLENGES FACED BY F&B INDUSTRY Rising cost of inflation, logistics, food supplies, transportation, etc. Non-availability of core infrastructure like high-tech controlled production facilities, grading, packaging, warehousing, integrated processing units, poor transportation and erratic power supply Dominance of unorganised players (small truck owning companies linked to intermediate brokers or transport companies, small warehouse operators, custom brokers, freight forwarders, etc.). in the transportation, logistics, warehousing and packaging sector in India Lack of good cold chain facilities and freezer space Few specialised distribution companies, providing refrigerated transport and warehousing for perishable produce and processed food products Differing policies and laws across every state in India Few organised players Difficulty in predicting demand, rapidly changing competition, supply unpredictability, etc. Lack of quality consciousness as the food supply chain is not fully efficient and this becomes a threat to wastage / spoilage / diseases and untrained manpower Food products are prone to temperature abuse There is minimal timely harvest received, hence the same goes as a waste or is being sold at lower rates Dependence on numerous independent suppliers and vendors has led to insufficient visibility for food services industry. Diners probably don’t think about the complex logistics and supply chain maneuvers that bring their meal to the table. Behind the plate is a dynamic and intricate supply chain that links farmers and growers, food purveyors, restaurant supply vendors, distributors, purchasing co-ops, transportation and logistics providers, and restaurants. And depending on the size, geography, and menu diversity of the eatery or restaurant chain, that supply chain can function in vastly different ways. Mounting price pressures and consumer demand for more stringent quality standards and controls are pressing chain operators and distributors to aggregate greater control over inventory and shipments. Restaurant are increasingly adopting a hub and spoke model of sourcing and distribution to overcome the basic challenges, cut down on costs and gain competitive advantage by continuous supply.

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The process of applying for some internationally recognised certifications is long, but one should do whatever is desired to conform to the safety standards. The BMC has guidelines and issues a storage license depending on what you are storing and the storage method used. Maintaining the correct temperature is extremely important, else food will spoil quickly. The key factors taken into consideration while setting up a supply chain for a restaurant are quality, quantity, source, vendor reliability, experience, set-up, tie-ups and contingency plans, and the costs. The rules for storage of supplies are mentioned in the standard food storage manual of the food licencing department of the states, and the most of the cold storages have food certification licences. As for storage in the outlets, most of the equipments are standardised. Individual businesses have their own storage technology and the particular food product is stored in the conditions they deem right for it. The perishable food supplies are stored in special set-ups. The rejected supplies are generally replaced by the vendor if they have not been stored at the outlet for more than a day. But this depends on your terms and conditions with the vendor. Training the staff on how to store and save perishable food products is important as spoilage can cause quite a drain in the revenue. Each state has its own set of laws. Once the business plan is ready to launch your food outlet in a particular state, it’s best to have a meeting with the authorities and understand the rules and regulations, which must be strictly followed by your vendors. You need dedicated staff for matters like this, though the logistic vendor will also figure out the way to deal with the laws in the state(s) the product travels to.

7.11 SUPPLY’S STRENGTH & SUPPORT

The Cold Chain The supply chain has three key elements: sourcing, inventory management and transportation. While the supply chain is dominated by the traditional set up of traders and intermediaries, the sector is witnessing high inflow of investments from venture capitalists and private equity funds for developing a robust food service supply chain with modern cold storage and transportation. India has 37 million tonne opportunity for developing cold storage. The Indian Government has asked help from New Zealand, which is a major producer of fruits and dairy products and has expertise in setting up cold storages based on modern technologies. McDonald’s unique ‘cold chain’, which took more than six years of setting up in India, has brought about a veritable revolution, immensely benefiting the farmers at one end and enabling customers at retail counters to get the highest quality food products, absolutely crisp, fresh and at great value. This system also ensures that there is minimal food wastage at every level right from sourcing, to processing and to transportation. Setting up this extensive cold chain distribution system has involved transfer of McDonald’s state-of-the-art food processing technology by the brand and its international suppliers to pioneering Indian enterprises who, today, are an integral part of the McDonald’s cold chain.

While the supply chain is dominated by the traditional set up of traders and intermediaries, the sector is witnessing high inflow of investments from venture capitalists and private equity funds for developing a robust food service supply chain with modern cold storage and transportation.

The Government is encouraging the PPP model for cold chain infrastructure development. This is because they too feel that it is important to establish world class cold storage logistics, which play a crucial role in reducing the global food shortage by eliminating wastage, which would provide enough scope to feed many parts of the world. As a logistics service provider, TCI sees the importance of cold chain in the coming years. The company provides state-of-the-art vehicles with imported reefer units for temperature-controlled products, and the vehicles are equipped with GPS base tracking system and temperature data loggers to log the temperature throughout the journey.

Supply Chain Considerations The supply chain is at the heart of the economics of a restaurant and must be designed depending upon the product, the targeted customer experience, and the location of the restaurant. The supply chain links sourcing of raw commodities through their processing, until the goods reach the restaurant and the guest’s table. Restaurateurs must take into account the economic and strategic advantage (build, outsource, partner or buy) while setting up their supply chain, besides fragmented or concentrated buyers and suppliers, market size (opportunity, growth and potential), contractual agreement and compliance with suppliers and/or third party logistics players. The overall network design should integrate well with the operations of the restaurant, technology and advanced techniques, and also the cultural and social diversity of the country. While setting up the purchase department for any restaurant, two things are of utmost importance which in turn, looks into the steady and unchallenged line of supplies. One is the cuisine the restaurant will be serving and second is the city where it will be located. There may or may not be vendors for every supply in the city and if the restaurant requires imported ingredients, then a high import cost may hit its bottomlines. However, lower food cost concepts, especially liquor oriented concepts, are safer. It’s not just the large restaurants and international chains sailing the rough sea of economy in India; small foodservice formats are also trying to cope by finding ways to deal with rising commodity and transport costs, rising food inflation, and decreased consumer spending. Purchasing is only part of the equation. The most important factor is clarity on positioning. Everyone wants to keep costs down, but a fast food restaurant that has a less differentiated product range will have a greater need to ensure competitive pricing.

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Budget to be Allocated Efficiency of the supply chain would not necessarily depend upon the investment made in the infrastructure, but also in correctly identifying the elements of supply chain to be outsourced or retained in-house. Normally, back-end budgets such as the purchase department usually range between 10 to 12 per cent of any venture, thereafter, it is integrated into the fixed costs of the organisation. A model supply chain for a restaurant chain would mean a maximum of the activities outsourced with minimum back-up staff. McDonald’s manages its intricate supply chain network with a handful of staff (~10) including Quality Assurance people. On the other hand, it spent Rs 450 crore and six years before it even set up its first outlet in India. This resulted in an extremely effective supply-chain in a place like India which has an otherwise weak infrastructure. It really depends on how a company views its supply chain structure – is it just another operational expenditure or is it something that creates strategic advantage for the company. Accordingly, the company would allocate resources to various parts of the supply chain. These are factors that need to be taken into account along with many others in designing the supply chain for an outlet. The result of a well-designed supply chain will be to improve quality, reduce inventory (at the outlet and in transit) and reduce cost. For your own set-up including storage, logistics, operations costs, etc, the budget should be 45 per cent. This would vary according to the products. In case of a vendor-based arrangement wherein you source the base materials and the vendor processes it while you run the operations, then the budget should be around 40-50 per cent. This

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Supply chain solutions that drive down costs are unique to individual restaurants. What may fit a casual dining concept— which has room for more inventory and fewer weekly deliveries— won’t fit at a QSR that drives volume and has less cooler and freezer space.

would leave you more monetary freedom to invest more in your outlet(s) and increase your presence across more states. Supply chain solutions that drive down costs are unique to individual restaurants. What may fit a casual dining concept—which has room for more inventory and fewer weekly deliveries—won’t fit at a QSR that drives volume and has less cooler and freezer space. It’s no surprise that supply chain management is the means for enhancing quality and safety while reducing costs—two seemingly opposed ends. This is why food service companies have been fast adopters compared to other industries. But the developments have been slow, yet progressive. But what is unique is that some restaurant chains are also leveraging their supply chain (as a marketing tool) to attract customers, especially a younger generation who is more sensitive to sustainability issues.

THE INDIA FOOD REPORT 2016

Biryani or Pizza choice for QSR BY TEAM D’ESSENCE HOSPITALITY ADVISORY SERVICES PVT. LTD.

Biryani has a pan-India appeal. In the north, it is loved as Awadhi or Lucknawi and in the south it is associated with Hyderabadi Cuisine. The Bengalis love their lighter version and Mumbaites take pride in Bombay Biryani. Evolving food tech, packaging and delivery mechanisms, and the Indian youth’s love for QSRs as well as the staying power of biryani to retain its aroma and taste has re-invented the way Indians are ordering, serving and consuming biryani.

B

iryani is derived from the Persian word ‘Birian’.  In Farsi, Birian means ‘Fried before Cooking’. In the olden days, rice was fried (without washing) in Ghee (clarified butter). It did two things, one, it gave the rice a nutty flavour, and two, it burned the outside starch layer gelatinising it. After the rice is stir-fried, it was boiled in water with spices till half cooked. The preferred choice for meat is leg of Telangana goat. The meat is marinated in a paste of Papaya, whole-milk yogurt and spices. Thereafter, the meat may be cooked. In an earthen pot called Handi, rice and meat are layered; the bottom and top layer are always rice. An interlayer of some condiments may be introduced between the meat and rice. Cardamom, mace, screw pine essence and rose water may be added to give a flowery and herbal aroma. The Handi is sealed and put on the coal embers to cook. For Calicut Biryani, the Handi is placed on the embers produced by coconut shell. The seal is broken only when the dish is ready to serve.

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7.12 BIRYANI OR PIZZA CHOICE FOR QSR

National Players of Biryani Based on Number of Outlets Leading Biryani Players in India

National Players in Biryani Ammi’s Biryani (59) Thalapakatti Restaurant (28)

Region-wise Players

Hyderabad Paradise Food Court (7) Kritunga Restaurant (7) Just Biryani (7) 4M Biryani House (4) Handi Biryani (1) Best Biryani (1)

Bangalore Ammi’s Biryani (34) Paradise (4) Kritunga Restaurant(3) Mani’s Dum Biryani(4) Biryani Pot (1) The Biryanis (1) The Biryani Café (3)

Mumbai Ammi’s Biryani (11) Delhi Darbar (7) Borivali Biryani Centre (6) Kakori House (5) Persian Darbour (2) Biryani By Air (1) Biryani 360 (1)

Delhi

Biryani Day (2)

Latest VC Funding Brand

Investment Investor

Paradise Rs 76.3 Cr Mani’s Dum Biryani

Rs 2 Cr

Ammis Biryani

Rs 40 Cr

Samara Capital Naylok Ventures Saif Partners

Biryani Blues (3) Beeryani (1) Biryani Paradise (3) Andhra Biryani House (1) Rumi’s Kitchen (1)

Ammi’s Biryani 36%

Thalap akatti 17%

Other Players 47%

Other Players’ Break-up Based on Number of Outlets 4% 4% 3%

4% 5%

15% 13%

7% 8%

9% 9% 14%

5%

Competition to Pizza The Indian QSR space, which is heavily dominated by pizzas, burgers, wraps, and beverages, will see a shift with the addition of new entry of Biryani chains rapidly adapting to this format. “Biryani is possibly the Indian pizza. It remains intact for deliveries and has the flavours so essential for local taste buds,” says one of the most successful private equity investors in domestic food sector. Its cooking process is easier to standardise and can be served in multiple variants both vegetarian and non-vegetarian biryanis. A nutritious dish which has been preferred since the times of Nawabs and Nizams forms a complete meal for lunch/dinner/ brunch alike and is easy to package. It requires minimal last minute cooking and can go along with several side orders thus making it reach your home faster than a pizza. Just as a pizza can satiate your appetite, a biryani does it in a nonjunk way which is a lot more affordable than having the pizza. For instance, a regular plate of non-vegetarian biryani sells at around Rs 150-170, while a medium pizza would set one back by Rs 500. The operating profit in a predominantly delivery-run business is between 15-25 %, though some push it up offering

Paradise Food Court Just Biryani Other Small Players Borivali Biryani Center Persian Darbar Biryani Blues Mani’s Dum Biryani

Kritunga Restaurant 4M Biryani House Delhi Darbar Kakori House The Biryani Café Biryani Paradise

Dine-in Casual Dine-in Various service formats

Takeaway Catering Delivery

kebabs or a full meal around the biryani. With several varieties in biryani, and strong influence of regional preferences, the major challenge is to scale up, maintain consistent sourcing, keep freshness and build a brand. 

INDIA FOOD REPORT 2016 | 383 |

Organised Pizza and Biryani Players 200

189 158

161

150 100

58

49

50

45

24

0

Mumbai

Delhi

Banglore

Hyderabad

Number of Biryani Restaurants

Casual Dining and QSR Dominate the Organised Indian Food Service Market

89

88

42

39 Chennai

Kolkata

Number of Pizza Restaurants

Market Analysis (Quick Service Restaurants)

Category

Current Market Share

CAGR

Expected Market Share by 2017

Organised

30%

12-14%

45%

Unorganised

70%

8-10%

55%

Source: India Food Service Report Extracts, HospitalityBiz India

Organised QSR Market Size $1.1 bn

$0.62 bn

$0.25 bn

2013-14

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Casual Dining and QSR

70%

Pubs, Bars, Clubs and Lounges

12%

Fine Dining and Frozen Desserts

10%

Cafes

8%

Total Indian Food Service Market

100%

Possible Cuisine for a QSR Chain

The F&B food service sector in India comprises two distinct market segments: Organised – Chain and licenced standalone players across quick service restaurants, full service casual and fine dining restaurants, hotels, bars and lounges, cafes and frozen desert formats Unorganised – Dhabas (Roadside restaurants serving as truck stops and serving Indian cuisine), street stalls, halwai (sweet shops), road side vendors, food carts, etc.

2009-10

47

2017-18

Possible Cuisine

South Indian

Street Food

Continental

Indian ethnic

Dosa, Idli

Chats, Wada Pav, Wraps and Rolls

Pizza Burger Pastas

Biryani Thali

Eg: Indorilal

Eg: Domino’s

Eg: Ammi’s

Eg: Dosa Plaza

Chinese

Chinese

Eg: 5 Spice

Source: Consumer Lifestyle in India, Euromonitor Report, D’ Essence Research

India’s Quick Service Restaurant market is growing aggressively at a rate of 25-30 percent. This is one sector that has not buckled under the pressure of inflationary trends and slow economic growth Owing to the growing need of convenience, increased appetite, a liking for international food, and exposure to global media and cuisine, the annual spending of each middle class household in India’s tier-II and III cities have increased by Rs 2,500 to Rs 5,200, a growth of 108 percent on fast food restaurants in the last two years More than 65 percent of the population is aged less than 30 years and exposed to international brands. QSR is one of the sectors that has managed to grow even during the economic slowdown The annual average spending of each middle class household in India’s tier-I cities has increased by over 35 percent to Rs 6,800 on fast food restaurants in the last two years. On

7.12 BIRYANI OR PIZZA CHOICE FOR QSR

the other hand, middle- class families in tier-II & III cities are spending much higher in fast food restaurants With increased competition and cost of operations in the metros and tier I cities, a number of tier II and III cities may offer better growth prospects for players across sectors, driven by factors such as favourable demographics, infrastructure growth and higher disposable income driven by both strong economic growth and government support through various employment schemes Increase in literacy, exposure to media, greater availability and penetration of a variety of consumer goods into the interiors of the country have all resulted in creating lifestyle and aspiration levels on par with other fast-moving metropolitan cities As per the findings, Indians are eating out more often now, as many as 8 times a month, less than US (14 times), Brazil (11 times),  Thailand (10 times) and China (9 times) Source: Technopak

Growth Drivers Majority population in the age bracket of 15-35 years who are eager to eat out Increasing household disposable incomes Increase in number of working women therefore less time at home to cook food Need of quick service on working days Nuclear families Various delivery platforms and Use of technology to spread awareness and acquire customer

Total Biryani Market

20%

According to D’Essence Hospitality Study, total biryani market is about INR 1,800 crore and is growing 15-20% per year. There is a big scope to convert the unorganised market into organised one.

Price Structure of Biryani Amongst Various Outlets

Delhi Darbar, Kakori House, Persian Darbar, Paradise. (Average price: Veg. 200 - 220

30%-35%

Non Veg. 250 - 300) 80%

Lucky Restaurant, Cafe Noorani, Le Berian, Mani’s Dum Biryani, Biryani Guru

20%-25%

(Average price: Veg. 180 - 200, Non Veg. 220 - 250) Ammi’s Biryani, Borivali Biryani Center, Kya Miaa, Bademiya Unorganised

Organised

(Average price: Veg. 150, Non Veg. 220 - 250)

Percentage hike in price taking base level

INDIA FOOD REPORT 2016 | 385 |

Cost Per Portion of Biryani Ingredients (Veg Biryani)

Per Kg Biryani (in Rs.)

Ingredients (Non-Veg Biryani)

Per Kg Biryani (in Rs.)

Rice (1 kg)

160

Rice (1 kg)

160

Chicken (1 kg)

160

Vegetables (1 kg)

60

Vegetables (500 gms)

30

Ghee, Saffron and spices

30

Ghee, Saffron and spices

30

Cost for 2kg cooked Veg Biryani

250

Cost for 2.5kg cooked Non-Veg Biryani

380

Total weight

2kg

Total weight

2.5kg

Wt. per portion

350 gms

Wt. per portion

350 gms

Number of portion (Total wt./Wt. per portion)

5.7 portions

Number of portion (Total wt./Wt. per portion)

7 portions

Cost per portion (Price/no. of portions)

44 Rs./Portion

Cost per portion (Price/no. of portions)

54 Rs./Portion

Note: Apart from this, cost of packaging and delivery will be added. A good packaging and delivery can be done for Rs. 60 per plate of biryani, approximately.

Operations for Biryani Restaurants

• Good quality long grain Rice • Meat • Vegetables • Spices • Consumables • Beverages • Other raw materials Procurement

Quality Check and Storage • Reject raw materials which do not comply to the quality standards • Easy availability of cold and air tight storage • Inventory control mechanisms to keep the optimal level of raw material in place

• In detail recipe of each type of biryani to be written • The measurements must be accurate • Standardised process to be followed with mention of usage of vessels and time for a standard taste Process and Specification

Billing • In-Restaurant Ordering • Online Order (own website or food aggregators) • Phone Order • Takeaway

Ordering

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• Using different modes of payments such as cash, card, coupons, online payment gateways • Providing itemised bill

Packaging • Specialised packaging for Takeaway and delivery, so as to keep the biryani fresh and to avoid leakage • Attractive packaging by using the brand so that the space can be used for marketing activities

• Serving in restaurant incorporating the customer service norms • Use of proper packaging for delivery and takeaway orders • Ensuring delivery time is minimal and is in limit of the cutoff time given to the customer Billing

7.12 BIRYANI OR PIZZA CHOICE FOR QSR

Possible Strategies to Gain Competitive Advantage Strategic purchasing to reduce costs Detailed standardised process to be distributed across outlets to maintain the taste and build a brand Addition of side orders to boast additional revenues Multiple payment and delivery methods can be adopted Timely service can be achieved with proper inventory management and standardised processes. Use of forecasting methods to predict demand will lessen the aberrations in the process. Accurate number of human capital required should be determined based on the forecasted demand Attractive packaging adds to brand building and customer delight Accompaniment of additional complimentary items should be considered In case of Delivery and Takeaway orders, keeping customer updated about the order status is essential Use of technology in operations, ambience, customer service, ordering, and delivery

Possibility of Outsourcing Activities Management of procured raw materials can be outsourced Packaging should be outsourced Technology in digital marketing, software maintenance Vehicles for internal distribution Security for restaurants or warehouses

Challenges in Each Step of Operation Procurement

Shorter lead time Maitaining appropriate amount of inventory Obtaining standardized raw materials

Quality Check and Storage

Producing high quality biryani with appealing taste Safe for health Avoiding rejection of biryani and saving costs associated with it

Process and Specification

Documenting the standardized process Making the chefs follow the process Maintaining the taste

Packaging

Leakage Temperature control Minimise cost

Ordering

Defining a clear menu Choosing the right menu

Billing

In case of online payments, the chances of unsucessful transactions Availability of change for cash payment Connectivity for POS to work

Delivery of Biryani Delivery containers and packaging should be of high quality to maintain the temperature required for delivery Liquid should be tight packed keeping in mind the condition of mode of transport in India The biryani must remain fresh and taste the same as it would if served in the restaurant Do not mix dry and gravy items, also do not mix cold items with hot items

Marketing Strategy of Various Outlets Ammi’s Biryani

Own website Listed on Zomato, Burrp, JustEat, TinyOwl Pamphlets distribution within 2km radius of the store 10% discount on billing above 400 Gives all 4 services - dine-in, takeaway, caterer, delivery

Delhi Darbar

Own website Listed on Zomato, Burrp, JustEat, Food Panda, TastyKhana Gives all 4 services - dine-in, takeaway, caterer, delivery

Borivali Biryani Centre

Listed on Zomato, Burrp, Food Panda Gives all 4 services - dine-in, takeaway, caterer, delivery

Kakori House

Listed on Zomato, Food Panda, Burrp, TastyKhana, JustEat, Tit Bit Gives 3 services - dine-in, takeaway, delivery

Paul Prescott / Shutterstock.com

INDIA FOOD REPORT 2016 | 387 |

Cost of Start-Up Working Capital Requirements 1% 5%

4% 13%

23% 36% 19%

Utility Expense Rent Transportation Repair & Maintenance Salary Expense Marketing & Advertising Consumables

Capital Expenditure Requirements 1%

5% 9%

8% 6%

19%

8% 6%

6% 6%

28%

Note: A good payback for a QSR biryani outlet is of 24 months.

IT hardware & software Electrical cost Packaging Machine Licence Cost Interior Décor Deposit & Advances Vehicle cost Pre-Launch expenses Kitchen Equipment Insurance Expense Agent Fees

Survey Survey was conducted by D’Essence Hospitality in March 2015 to understand consumption preferences of biryani across consumers in Mumbai. Following trends have been observed: 54% go to specific biryani restaurant when they want to have biryani, 16% go to a Mughlai restaurant, and 30% go to any other restaurant

29.70% 53.80%

16.30%

Go to a specific Biryani Restaurant Go to a Mughlai Restaurant Go to any Restaurant

38% people usually consume biryani at home 37% consume at Other restaurant 11% have it at office, 9 % have it at friend’s office and 3% at malls or shopping centre 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00%

Home

Series 1 38.50%

Office

Friends Home

11%

8.80%

Malls / Airport / Restaurant Multiplex / Railway Shopping station Center 3.30% 0% 36.30%

7% say they have biryani ones in a year, 42% say they have it ones in a month, 31% say they have twice in a month, 13% say ones in a week, 5% say twice in a week 2% say they have it more often than this. 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00%

Once in a year Series 1 7.70%

Once in a month 41.80%

Twice in a month 30.80%

Once in a week 13.20%

Twice in More often a week than this 5.50% 1.10%

Following is the most preferred dishes by the respondents Veg

Non Veg

Sides

Veg Biryani

Chicken Biryani

Veg Salad

Veg Hyderabadi Biryani

Mutton Biryani

Bundi Raita

Paneer Biryani

Egg Biryani

Dahi Kachumbar

Chole Biryani

Fish Tikka Biryani

Aachari Aalu

Chicken Tikka Biryani

Paneer Tikka

Mutton Tikka Biryani

Chicken Kabab

Prawns Biryani

Chicken Lollypop Mutton Sheekh Kebab Sheek Kabab Shourma

| 388 | INDIA FOOD REPORT 2016

THE INDIA FOOD REPORT 2016

Making the Right Choice IMAGES REPORT

With the onslaught of international equipment, Indian manufacturers, too, have started delivering upgraded and automated products that can give better results. Hence, one can choose between imported and local kitchen equipment, or a combination of both for optimal utilisation of capital invested without compromising on the final product output quality.

| 390 | INDIA FOOD REPORT 2016

I

n any commercial kitchen, in a hotel or a restaurant, fine dining outlet or otherwise, the BOQ (Bill of Quantities) will include locally fabricated equipment and imported equipment. This is a typical Indian attribute as there is no definitive distinction between the two. What it basically means is that while equipping a kitchen in a hotel or a restaurant in India, the choice is between equipment manufactured locally in India and importing what is not manufactured here. Certain essential equipment like dishwashers/ convection ovens and some of the specialised cooking quipment/refrigerated equipment are not manufactured in India and need to be imported from different places of the world depending on the level of expertise. The list of such imported equipment is long, like combi ovens that are made primarily in Germany or coffee machines that are mostly made in Italy. Some companies in the business of manufacturing these equipment like Convotherm (combi ovens) and CMA (coffee

7.13 MAKING THE RIGHT CHOICE

machines) - have economies of scale and the technology to not just produce but also to bring technological innovations and improve on them. A big reason that most advanced kitchen equipment are not made here is that the technology needed to manufacture them is not available locally, and neither is the scope for reaping economies of scale. But first, it is important to understand what equipment fabrication is all about. It is about tailoring to individual requirements in terms of the equipment specifications - like what kind and grade of stainless steel to use, what should be the thickness of the steel, etc. The Indian manufacturers, while they have upgraded the factories with modern machinery and a skilled workforce, still lag behind in terms of ergonomic design and standardisation. They are generally used to working with specifications given to them, and a very few have ventured and taken a step towards developing new products and marketing them. However, developments in the last 3-4 years show that local manufacturers are investing in automating the production process to a higher level. The Indian manufacturers seem to have woken up to the realisation that they need to upgrade and automate their production facilities. To accomplish this, they can either tie-up for technology transfer or, even better, get into a JV with a foreign

The debate on whether to manufacture in India or go for imports is not at all meant to be a reflection on the capabilities of Indian manufacturers. The issue concerns more about the adoption of processes and the level of automation required by them to produce equipment at par with anybody else in the world.

manufacturer who can collaborate with them. Doing so will not only improve the efficiencies all across, but also significantly reduce the cost as import duty component is still high. Take the case of prominent refrigeration equipment from the United Kingdom ‘Adande’. It has a JV with ‘Accurate’, a company based out of Pune, which holds a majority stake in the principal company. The Indian enterprise has been named Adande Refrigeration India Pvt Ltd. Another example is of Vianen (exhaust hoods makers) from Holland, which has tied-up with an Indian company SSS to produce the equipment in India. Such collaborations have certainly stirred up the Indian market. The Government also needs to do its bit in terms of rationalising the duty structure and helping in the growth of the industry. It is also important to note that standardisation of equipment in terms of specifications and sizes, a standard feature abroad and something, which kitchen consultants here should help bring about, would go a long way in improving product delivery. How to meet the local specifications and sizes is an issue during project discussions on imported equipment. The consultants can play a key role in sorting out the differences that arise on whether to import fabricated equipment like sinks, work tables, shelves, etc., given the seeming unwillingness of equipment majors to tailor to local needs and specifications. These products form a huge portion of the total BOQ of any kitchen and present a big market opportunity. It is particularly in reference to hotels with kitchens having 4-star rating and above, as they would be the target market. Being part of the organised sector, they would be using the services of professional kitchen consultants to get an effective, efficient and productive kitchen in terms of both design and equipping the same. The debate on whether to manufacture in India or go for imports is not at all meant to be a reflection on the capabilities of Indian manufacturers. The issue concerns more about the adoption of processes and the level of automation required by them to produce equipment at par with anybody else in the world. It is accepted that the quality of fabrication from abroad is superior in all respects. But an important consideration in deciding the issue of imported versus Indian is the final cost of an equipment. Should it be on the basis of costbenefit analysis of the final product that is being delivered rather than on purely the considerations of price? Surely, the cost of imported equipment would be higher compared to local manufacturing. But to bring a better perspective to the issue, the comparison should also be relative and not just an objective one.

INDIA FOOD REPORT 2016 | 391 |

Amping up efficiency standards IMAGES REPORT

Equipment upgrade and reducing operating costs are the latest trends in the hospitality industry today. With improvements in refrigeration, heating, storage and food preparation technology, kitchens are adopting energy-efficient, environment-friendly and technologysavvy kitchen equipment products.

| 392 | INDIA FOOD REPORT 2016

C

ontemporary kitchens are like culinary playgrounds for chefs providing them with a series of peak experiences and performance-pumping accessories. A large part of the credit for this felicitous development goes to improvements in the quality, productivity and efficiency wrought upon commercial kitchens by the kind of equipment that is available today. There are various brands, both international and local, offering top-of-the-line commercial kitchen appliances. Many of them, including larger-sized equipment such as refrigeration units, now come with a growing selection of prices and options, making it fairly convenient to choose efficient equipment throughout the cooking line. With food & beverage outlets and chefs looking for equipment that bring functionality, power and the ease to everyday life in kitchens, the demand for advanced and intelligent kitchen machinery has touched the commercial kitchens in hospitality in a big way.

7.14 AMPING UP EFFICIENCY STANDARDS

determines controls and monitors the optimum cooking process – just by the push of a button. While hotel majors such as ITC, Oberoi, Indian Hotels Company and other leading chains understand the efficiencies that technologically-advanced equipment can bring to the overall food service business, even smaller players have now cottoned on to the multifarious benefits that these equipment bring to them. Not only do they fuel the culinary passion and creativity of chefs, their flawless performance and cutting edge design is a big asset in running kitchen operations.

According to industry experts, the Indian food service market is ready for leading edge products that can reduce energy use, improve food quality and allow more open kitchen formats. For example, Adande Refrigeration solutions based on the ‘unitary’ model, have proved a hit with top chefs everywhere. The staggering growth in the number of food outlets, expansion of the catering segment and changing culinary preferences are encouraging commercial kitchen equipment manufacturers to launch newer and more innovative products. Buoyed by the surge in demand and intensifying competition for smarter kitchen appliances, equipment manufacturers are straining their sinews to bring more cutting edge innovations to their wares. Kitchen equipment today are totally technologydriven and they play a vital role in kitchen operations. Equipment are making kitchens smarter today by enhancing the quality, efficiency and consistency of food preparations and by helping chefs to upgrade cuisine. According to experts, the defining feature of a smart kitchen equipment is that it should not only offer a smarter way of cooking but also provide an effective means to save on energy and time consumed for preparing a dish and wastage of resources such as water. As the popularity and demand for cutting edge innovative kitchen products grows, manufacturers are competing to bring more such products on the market. Take, for instance, the SelfCookingCenter 5 Senses brought out by Rational International India Pvt Ltd. According to the company, the equipment can grill, steam, bake, rise, roast, braise, simmer, stew, poach or blanche. The unit independently

There are various brands, both international and local, offering topof-the-line commercial kitchen appliances. Many of them, including larger-sized equipment such as refrigeration units, now come with a growing selection of prices and options, making it fairly convenient to choose efficient equipment throughout the cooking line.

Improvements in design and technology in food service equipment are also bringing about dramatic reductions in energy consumption, resulting in the carbon-footprint reductions and significant cost savings. By improving their energy efficiency through investments in cleaner and superior technology equipment, kitchens can help bring down the operating costs, achieve faster payback and gain from significant ongoing energy and water saving opportunities over the product’s life cycle. Such considerations are prompting equipment manufacturers to put their engineering prowess into finding more efficient ways to maintain food quality, conserve energy and reduce cost. In the refrigeration space, insulated drawer ensures ‘low velocity cooling’, which helps prolong the shelf life of food by preventing dehydration. This design innovation provides unmatched temperature stability and exceptional humidity control. Even during frequent or prolonged drawer openings,

INDIA FOOD REPORT 2016 | 393 |

the attack from high temperature ambient air is minimal, providing a cool and benign micro-climate for the storage of food. Some patented designs claim to be reducing energy consumption by 40 per cent on an average, when compared to conventionally equipment, with savings expected to score as high as 66 per cent on certain conditions. Energy saving is also a big trump card. Further, larger load sizes, time saving in production and reduced power consumption are looked while assessing new-age equipment. Many companies are bringing their manufacturing and engineering skills to make their products stand out on fine craftsmanship, durability, the finest materials, robustness and painstaking attention to detail. At the Aahar trade fair in New Delhi in 2015, prominent kitchen equipment manufacturers took the opportunity to showcase their latest range of products and innovations. One such product to have caught the attention was a food processor by KitchenAid, which features the company’s trademark innovation, the Exact slice system. The KitchenAid 14 Cup Food Processor

introduces a unique innovation wherein one uses an external lever to adjust slicing from thick to thin without the need to change blade, making it a versatile product with many applications. The reversible and adjustable shredding disc, sliding disc, julienne disc along with multipurpose and dough blades which make slicing, shredding, kneading, pureeing and chopping food a fast and simple process are some of the prominent features. While important considerations like the size and scale of a venture, the clientele, nature of the menu and several other parameters are important factors in choosing the right commercial kitchen appliances, the need to meet high energy standards has also become an important aspect. It is estimated

| 394 | INDIA FOOD REPORT 2016

The constant appraisals of products on energy efficiency benchmarks have thrown up interesting results. For instance, it has been found that steam cookers in particular offer huge savings for both energy and water. Similarly, convection ovens too offer great energy savings as do a host of other appliances.

that commercial kitchens consume approximately twice as much energy as other commercial facilities. The kind of kitchen appliances in use is therefore all the more important from the energy efficiency view point, especially as their services account for a significant share of energy consumption in hotels (as much as 15 per cent of energy consumptions). To buttress their energy efficiency credentials, manufacturers are benchmarking their products to efficiency testing standards. The product list includes combination ovens, convection ovens, rack ovens, fryers, large vat fryers, griddles, steam cookers, insulated holding cabinets, hot food holding cabinets, and an array of other appliances. The constant appraisals of products on energy efficiency benchmarks have thrown up interesting results. For instance, it has been found that steam cookers in particular offer huge savings for both energy and water. Similarly, convection ovens, too, offer great energy savings as do a host of other appliances. These developments are responsible for a growing number of commercial food service equipment that are energy-rated and labelled according to their power consumption efficiency. Several energy rating organisations offer benchmarks and performance ratings for a wide and varied list of electronic kitchen equipment. These organisations, along with the equipment manufacturers, are paving the way for mainstream efficiency standards in commercial kitchen equipment. As energy efficiency norms become widely accepted, the food service industry is moving towards greater adoption of high-tech commercial kitchen equipment, which are manufactured keeping in mind not only quality and value, but also energy and water efficiency. For food and beverage outlets looking to overhaul their kitchens or even to replace or upgrade old appliances and equipment, choosing products that are energy efficient is the way to go.

THE INDIA FOOD REPORT 2016

THE INDIA FOOD REPORT 2016

SECTION 8

DEVELOPING A VISION AND STRATEGIC PLAN

AMIT BURMAN CHAIRMAN, DABUR INDIA LTD. / LITE BITE FOODS

KRISH IYER PRESIDENT & CEO, WALMART INDIA

PRAKASH NEDUNGADI GROUP HEAD, CUSTOMER INSIGHTS & BRAND DEVELOPMENT, ADITYA BIRLA GROUP

RAMANATHAN HARIHARAN DIRECTOR, LANDMARK GROUP

SAURABH SANYAL SECRETARY GENERAL, PHDCC

ROHAN KICHLU DIRECTOR F&B, THE PARK HOTELS

P. RAJAN MATHEWS VP - MARKETING & SALES, DESAI BROTHERS LTD. - FOOD DIVISION (MOTHER’S RECIPE)

SOUGATA BASU HEAD OF MARKETING, INNOVATIVE FOODS LTD (BRAND SUMERU)

O P KHANDUJA BUSINESS HEAD, DS SPICE CO. PVT. LTD.

AJAY KATYAL PRESIDENT - ORGANICS AT AMIRA PURE FOODS PVT. LTD

OLIVER MIRZA MD, DR. OETKER INDIA PVT. LTD

SAHIL GILANI DIRECTOR - SALES & MARKETING, GITS FOOD PRODUCTS PVT LTD

AMIT BURMAN CHAIRMAN, DABUR INDIA LTD. / LITE BITE FOODS

D

espite India’s great food culture, eating out was not as common as it was in the West, until recently. But with the changing mindset of people, eating out has become a part of the present day culture. More and more people prefer to dine out regularly, especially in the metros, mini-metros and Tier I cities. This trend is being driven by the rise in income and increasing numbers of nuclear families and working women/men. Indians love customisation! People are willing to experiment with the novelties in cuisines and combinations. Consumers love dishes that offer diversity in taste, style and origins. F&B players are crafting recipes to suit the flavours of their customers. This is the biggest learning about the Indian food market. Food & Beverage industry is on the verge of a massive transformation. Trends clearly indicate that people have started eating out more often. This has automatically raised the concern for safe and healthier food offerings, about ingredients and the pricing of dishes. Had eating out been once in a while activity, the case would have been different. But, with the growing trend of dining out on a regular basis, the value proposition is a key learning in the F&B sector.

Trends and developments The increasing trend amongst customers to opt for cuisines that mirror their lifestyle is fast catching up. Preference for ingredients like truffles, artichokes, asparagus, Australian lamb, Norwegian salmon, black bean sauce, microgreens, organic food, etc., have found their way to Indian F&B counters. The blending of cuisines, like Italian with Thai, is another evolved customer choice. Restaurateurs are also moving from the traditional style of generic ‘south’ Indian style cooking to making Kerala or Chettinad style food more innovative and interesting. Even casual dining players are offering Chinese, authentic Italian, fine French, American, Lebanese cuisine, etc., which were once considered specialty and fine-dining dishes. Customers are

| 398 | INDIA FOOD REPORT 2016

also being wooed with “street food” options served in a hygienic setting and good ambience. On the other hand, the recent surge in the Indian beverage segment seems exciting and can open up many retail opportunities. This emergence began with the introduction of coffee chains more than a decade ago. This was also a first in terms of organised beverage retail, since the segment was earlier dominated by small local players like juice shops. The restaurants, which focused solely on food, have also added/expanded their beverage offerings. This has boosted the development of both alcoholic and nonalcoholic beverages at both the product and retail levels. Interestingly, there has also been a gradual shift towards customer engagement with the dining spaces and cafés offering live music or games, sports bars, bookstore cafés, etc.

Also, the growth of dining options at concourses around the world has made it easier for travelers to enjoy a few hours at the airport or railways. Moreover, chefs are innovating to the extent of personalised plating, live kitchens and even food-on-the go! World class airport terminals across Indian metros have now caught up with the global trend of emerging as mega retail hubs. Many retailers have their best performing outlets at airports. Be it the growing culture of eating out or because of busy professional schedules, family or friends get together for meetings, parties, or outdoors catering for community functions. But all have been ably served by the food service retail category. With the fast paced urban life, the category is growing and is adding to the overall social and lifestyle quotient of India’s food consumer. Traditionally, consumer segments were defined by characteristics of age and

8 DEVELOPING A VISION AND STRATEGIC PLAN

Prospects and outlook

income profile. But they are now further defined by consumer needs, aspirations, lifestyle and attitudes. These insights also provide further cues to brands to modify their communication and positioning. The Indian population stands at 1.2 billion, out of which 356 million people are between the age group of 10 and 24, making it the world’s largest youth population, according to a United Nations report. There are numerous possibilities within this one age segment as the youth today is not just a young consumer with limited pocket money or income; he/ she is an individual with his/her own life experiences, attitude towards lifestyle products, aspirations in terms of brand ownership, etc.

Indian population, food demand Consumer needs are changing along with various parameters that go beyond the demographic profile. People are seeking

convenience in varied formats, which has increased the demand for QSRs (Quick Service Restaurants), pubs and cafes. This trend appeals to the ‘youth’ who look for different ways to enjoy, be it casual dining or fine dining. Then there are the lounge settings, which specifically cater to the needs of the older people who are looking for spending a relaxed and personal time with friends/families. Concepts like food on-the-go and home delivery formats are also being increasingly accepted beyond the metro towns. Thus, F&B brands have an opportunity to consolidate in the metros and also foray into smaller cities and towns. They are also increasing investments in infrastructure for the same. In cities like Mumbai and Pune, approximately 78 per cent of the food outlets have started providing delivery services. In Delhi-NCR, it is 60 per cent while in Tier II cities like Chandigarh, it is 30 per cent.

According to market intelligence and consultancy firm Grant Thornton F&B report on Indian Food & Beverage Sector, 2014, the Indian total annual household consumption is expected to triple in the next decade, which offers a huge potential for growth in food retailing (the food retail industry is growing at a rapid pace on the back of consumer demand). Income is not the only factor affecting the change in trends anymore. Technology over the last decade, has made it possible for consumers to share, post and even communicate directly with the retailers to get an immediate feedback. Social media has become an integral part of the food industry to enhance its broad connect with the end consumer and also act as a channel for direct sales and marketing interface. This growth is aided by the increased penetration of the internet and bourgeoning smart phone users in India. Consumers are becoming more demanding with the growing purchasing power and a massive information flow, which helps them to be up to date with the latest trends across the globe. Lately, what is rolling over the industry is Restaurant or Food Ordering Mobile Apps. These apps have come to the rescue of people who prefer to save time and have a meal of their choice at home instead of dining at crowded restaurants. The market for food ordering apps has already registered a 10fold increase in the number of tech-savvy consumers, who take the tech route to satiate their hunger pangs. According to a survey, the Indian food and beverage (F&B) sector, which is currently growing at 23 to 24 per cent annually, is likely to touch Rs 3.80 trillion by 2017. However, the F&B industry is still crippled with issues such as high real estate costs, licences and multiple taxes. I strongly feel that government must simplify the processes and present a unified system for obtaining licences and payment of taxes, facilitate a single window to get all the relevant approvals, create good infrastructure and develop skilled manpower, which will help in the growth of the sector.

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KRISH IYER PRESIDENT & CEO, WALMART INDIA

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here is very little doubt that India is now firmly established as an emerging market for global and domestic investors across all sectors, including retail. Owing in large part to its sheer size, rising disposable income, favourable demographics, rapid urbanisation, increasing consumer appetite and demand in Tier-2 & Tier-3 cities, and an overall high economic growth trajectory, India is a market that is inviting focused attention. Starting with the economic liberalisation in 1991, the market opened to global manufacturers for the first time. If I can attribute my own personal and professional experiences, it has, since been an irreversible one. It has become a dynamic and constantly evolving market. It will not be an exaggeration to say that India is now viewed as an expanding emerging market for products and services – both for exports and for its own domestic consumption. By some estimates, today, the Indian retail market stands at nearly USD 500 billion. At the overall level, Food & Grocery accounts for 60 % of the total retail market, but only 10 % in Modern Trade. So there is a vast opportunity in F&G modern retail segment. However, statistics also show that over 14 million outlets operate in the country and only four per cent of them are larger than 500 sq.ft. in size. Most of these outlets are typically family owned, lack capital, know-how, skills and investment to scale. This unorganised nature of the market, itself, presents the most significant opportunity.

The changing retail landscape There are several trends that characterise the market today. The changing economic geography of the next wave of consumption pattern is moving from top 20 urban centers and major cities to tier-2 & tier-3 cities. While growth will continue to emerge from existing major retail clusters, existing metros have expanded significantly through the growth of peripheral rurban areas (Rural pockets in urban areas), and this has been a key driver of the organised retail segment. Second, Indian retailers

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are already making efforts to adapt and create omni-channel retail experiences for the economically and culturally diverse and an increasingly demanding Indian consumer. Indeed, while the debate on online versus offline will continue to make headlines, the fact is that both the current limited physical retail infrastructure on the one hand and limited digital access and internet penetration on the other warrant a rationale for hybrid retail strategies which leverage omni channel capabilities that meet the consumer in his/her own cultural, economic and digital geographies. As organised retail changes the way Indians consume across all categories from luxury to white goods, perhaps the most discernable and radical change will come in the food category. From high value organic products for the health conscious & price agnostic urban elite to the valueconscious middle income consumer opting to buy packaged pulses and other basic staple items, the evolving buying behaviour will alter the existing product landscape, sometimes meeting existing demand, and sometimes creating new ones for taste, experiment, choice, value-add, ease and convenience. For example, the consumer

is increasingly preferring cut and packed vegetables and fruits as it saves him/her time; pack sizes are reducing consistently as storage time is being reduced with the consumer avoiding storage of food to maintain freshness; the home meal segment is growing fast with ready-to-serve and processed food gaining prominence in Indian kitchens; niche food segment such as gourmet – imported and exotic food – is seeing a rush; frozen food is undergoing a rapid transformation with the consumer looking for value-added stuff like ready to cook/bake/grill chicken tikka, aloo tikki etc; and most certainly the growth in health food such as olive oil, canola oil, green tea, wheat bran cookies, organic food, etc, cannot be overlooked. And what is most important to note is that it is being tailored for the Indian palate.

Growth of private labels According to the Food & Grocery report in 2014, food continues to dominate the private label market at 76% of total sales, with packaged grocery commanding about 53% share of total sales. Private Label is also giving an opportunity to regional brands and local food manufacturers to

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expand to adjacent markets, with a variety of offerings that either has a distinct taste of its own or is localised for homogeneity. As a customer/consumer, the food service industry too is rapidly transforming, with preference for branded products, introducing new items such as imported fruits and sauces/dips on the menu and, of course, bringing in a whole lot of innovations in cuisine for a differentiated dining experience. A study in Harvard Business Review says that about 75% of consumer goods and retail products fail globally and are not able to even survive for 12 to 24 years. FMCG players are therefore consistently decoding the formula for successfully satisfying the Indian taste. The impact and implications for a modern retail revolution, and particularly in food, are fully understood only when they are seen from above and beyond the perspective of the consumer per se. But more so from the macro-economic perspective and all the positive externalities it creates. In other words, only when we see the multiplier effect on all those that are a part of the sophisticated supply chain, which is the backbone of modern retail.

Modern retail and food service Modern retail will make a very positive impact in the food service industry by offering ‘safe food’ and through optimised processes and reduced costs (through pre-cuts of meat, larger packs of groceries, instant spice mixes, frozen value-added products, etc). Hence, we could see a reduction in customer selling prices and enhancing the ability of businesses to scale up quickly because of the ability to replicate uniform quality, taste and standards across different geographies. One of the biggest positive impacts of modern retail will be to improve the farmer’s standard of living. By removal of structural inefficiencies, our farmers will profit from liberalised markets with direct and contract farming practices, more predictable farm-gate prices, transparency of weighing and pricing and steadier income and better access to the evolving consumer preferences from private investors. Additionally, postharvest management will be improved through investment in supply-chain and cold storage facility, encouraging the food processing industry and facilitating better farmer income.

As per a EY and RAI report, challenges can be a) business and operational and b) tax, regulatory and inter-state movement related. About 85% of warehousing in India is unorganised and have inappropriate levels of automation, which makes it difficult for retailers to track status of goods in transit; wastage levels of agricultural produce and perishables are 40% as the existing cold storage infrastructure can only cater to 11% of total produce; there are as many as five intermediaries in a typical supply chain for perishable commodities such as fruits and vegetables, which cause time lag and increase in the final cost to the consumer. The study also points that close to 40% of the time lost on road is due to stoppages at state border check-posts alone. Businesses have been pushing for a simplified tax and regulatory framework, which could facilitate free movement of goods across the country. The implementation of GST, would transform the current indirect tax system as it will help with the standardisation, simplification and automation of compliance requirements associated with the trading and movement of goods across states. A Mckinensy report indicates that food in India has an economic multiplier of 2-2.5. For every rupee of revenue from food, the economy at large gets Rs. 2-2.50. Therefore there is a sector waiting to be tapped by companies, both large and small; by entrepreneurs, who understand the entire value chain of modern retail and the immense positive impact it promises to have on the Indian economy; and of course by the regulators for the much-needed relief to issues associated with the movement of goods in India. In summary, the next few years will see the Indian market grow and mature. With the rapid urbanisation, I am expecting food brands, food service industry, retailers and experts to continue innovating and look for ways to leverage market knowledge, experience and learnings to tap this huge opportunity. Food Safety and ‘responsible sourcing’ will play a very critical role in the coming years. It would also be very interesting to see how the retail chains leverage omni-channel capabilities to meet the evolving needs of consumers.

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PRAKASH NEDUNGADI GROUP HEAD, CUSTOMER INSIGHTS & BRAND DEVELOPMENT, ADITYA BIRLA GROUP

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he Indian food industry has emerged as one having an enormous growth potential with a huge scope for value addition, particularly in the food processing and services sector. On the supply side, total food production in India is expected to double in the next decade and the domestic food market is estimated to reach USD 258 billion by FY 2015-16. India’s huge arable landmass of over 180 million hectares is an important asset that can be capitalised by the sector to reach newer heights. India is the world’s largest producer of milk, second-largest producer of fruits and vegetables and third-largest fish producer. It is fast emerging as a sourcing

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hub for processed food owing to its huge agricultural sector, abundant livestock and cost competitiveness. On the demand side, our large and growing population, increasingly being lifted over the poverty line, forms a big market. Besides this, the opportunity for exports of food in areas where we have competitive advantage clearly makes this industry even more interesting. The trick is to connect the supply side and the demand side – and, like a chickenand-egg situation, it is the quality of this connection that will make both the supply and demand sides fulfil their potential and thereby give our country a truly vibrant basis to fuel overall growth, prosperity and happiness.

The connection required is of various types: 1. Spatial connection: We need to connect production areas to consumption areas seamlessly. This requires investments in transport and communication infrastructure as well as robust retail channels that know how to effectively understand consumers and what they want and then source efficiently to meet this demand. These channels need to reach deep and wide, and given the country’s vast rural countryside, the systems, processes and skills required to do this will need be built up to a whole new level. Fortunately, we have best-inclass examples like the Operation Flood that has solved the spatial connection

Robert Kneschke / Shutterstock.com

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between supply and demand in milk and milk products…leading to breakthrough changes in both! 2. Temporal connection: One of the biggest challenges in food is the ability to overcome seasonality and perishability, i.e. connecting time – present production and future consumption. This requires storage facilities and processing capabilities, both of which need to be set up on a massive scale. The storage facilities that need to be created are of various types: cold storage that can consistently operate at different temperatures. This, in turn, requires vast amounts of energy as well as systems to conserve energy. The government has certainly started making efforts in this direction but we will need innovative ways to do this at the costs that people can afford. 3. Technology connection: Technology has been a big reason for the selfsufficiency and growth of the food industry in the developed world. Through various chemical, mechanical and biological ways, food production has been enhanced, made more consistent and costs have been reduced. However,

this has also had an adverse impact on sustainability and on long-term health. Hence the rapid and profitable growth of the organic industry, almost a retro move to conventional growth. In India, we have the advantage of knowing the challenges of these technologies and being able to connect chemistry, physics and biology to be able to optimise food production growth in a sustainable way. We have to find our own solutions by investing in research and development in this area in a far more significant way than we have been able to do till now. The development of digital and sensing technologies provides a potential ability to leap-frog our supply and demand of food products in a way different from the way the West won the food-battle. 4. People connection: The final connection is between people – e.g. rural and urban, agriculturists, industrialists and service people, scientists and salesmen, doctors and teachers. There are two aspects to this: Firstly, the role of the food industry in employment: food in production, distribution and sale is one of the biggest sources of mass employment in the country. Over the years, the nature of

this employment is shifting from the production side, i.e. farmers to the sale side, i.e. retail. This requires skills and abilities of a different type to make this connection. We need to build ways to provide this skilling on a far more extensive scale than we have today. Secondly, we as a people approach food as a part of our culture. And that culture is constantly evolving. Building on our values of respecting food – not wasting it, not over-using it and eating healthy – requires an approach that is often not considered when connecting demand and supply in a way that is beneficial to us. These values are sometimes under-rated as the assumption is “more is better”. However, the challenges of obesity and healthrelated diseases in developed countries give us an early warning of how we should address culture in unconventional ways so that the development of the food industry benefits our society in the long-run. The role of brands in doing this will be critical. Increasingly, food brands are becoming more and more aware of how they need to not just respond to today’s consumer demand but in the long-term shape or support values that make supply and demand sustainable. Figuring out how we make these connections work together – spatial, temporal, technological and people – will be a big part of the development of a food sector vision and strategy. This framework of connections can help us define where we want to reach as a society and economy and how we want to get there. It will raise questions about some of our existing practices while presenting opportunities with new ones. We started the article by talking about the enormous growth potential of the Indian food industry. As we end it, we recognise that this potential more importantly translates into human factors of great magnitude, like nutrition, health, safety, taste and happiness. Articulating the vision of the food industry in India, with the end-goals defined in this manner and using the framework we have outlined, could lead to a unique strategy to let this industry develop to the longterm. That will be truly empowering to the various constituents who ultimately have to make this strategy happen.

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RAMANATHAN HARIHARAN DIRECTOR, LANDMARK GROUP

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he Indian food industry is at a precipice of change. On the one hand, the sheer size of the market makes this industry one of the most attractive segments, while on the other there are several areas that need to be developed to help it reach its true potential. India today is the sixth-largest grocery market in the world. The Indian retail sector is currently valued at Rs. 25.3 trillion, and grocery accounts for close to 70% of this number. This highlights the potential the sector offers to retailers. However, the market penetration of organised retail in this sector is a mere 2% despite organised players having entered the market over a decade ago. They key reason behind this phenomenon lies within the complexity of the Indian market segment. Food retailers are still looking for the right strategy that will address the varying and diverse needs of this high population density market segment.

Building on back-end infrastructure The future of any industry rests on creating a strong backbone of supply and infrastructure, which can propel the front-end of the business. The same is true for the food industry, and there is much that needs to be achieved on this front. Today, the sector still faces several imbalances, and this can only be managed if retailers, farmers and agro-cooperatives come together to forge the right partnership. The key step is to foster more development in the field of contractual farming to ensure efficient management of supply and demand, which will benefit both retailers and consumers. This will reduce wastages, which accounts for 20% to 30% today. It will result in famers enjoying better prices for their products, instead of facing the burden of fluctuations. This partnership will also bring essential agriculture knowledge sharing and help create consolidated efforts to improve supply chain and infrastructure, which will bring in better economies of scale.

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Framework to support retail growth

Retail formats’ future

The support of our governing bodies will be crucial to the success of this industry and the proposed Goods and Product Tax Bill (GST) is a good first step. Today, one of the key issues faced by most food retailers is the multi layered and duplication of tax on goods across state borders, which curtails free movement of goods across different states. The new GST system will be a major improvement over the pre-existing central excise duty at the national level and the sales tax system at the state level. The new tax system will be a further significant breakthrough and will play a big role in smoothening distribution and flow of produce across the country. Implementation of the GST coupled with a legal framework that encourages free movement of produce will lead to more demand-based purchases, lead to better price discoveries, reduce wastages and arrest the growing food inflation. The future of the retail industry depends on more progressive and forward thinking measures like these, which will benefit retailers, consumers and farmers and go a long way in developing the sector.

At the front end of the food business, as most food retailers in India have learned, there is really no one-size-fits-all formula. This has lead to brands adopting a multi format approach to suit the needs of the market. Brands today have varied formats across the country ranging from large-scale hypermarkets to smaller supermarket formats, and this is the way forward. The crucial part here will be to get the mix right across these varying formats. Retailers will need to strike the right balance to be truly successful. Large-scale formats work well in key metropolitan cities where the trend increasingly is for families to do weekly shopping trips for household supplies. The challenge on this front often comes from the inadequate supply of space and land bank to build large-scale hypermarkets. With the smaller supermarket format, finding the right location will be key. India’s high population density, and the presence of well-entrenched unorganised retail often makes this a challenging proposition. However, with the lack of a well developed infrastructure and space for large-scale

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kirana. While initial investments in setting up e-commerce and omni-channel for a brand are high, in the long run this will enable retailers to better engage with the consumers and grow market share. Rents on retail space in prime locations and malls are a key concern for most retailers. E-commerce helps retailers to better penetrate the market and provide great convenience to consumers through an intelligent seamless online and brickand-mortar experience. Retailers can now focus on smaller formats to entrench themselves and use their online portal as a one-stop-shop showcasing all their product lines on one site online, without worrying about space constraints or rental costs.The growth of e-commerce will also drive growth in the transportation and distribution sector. Having an online presence puts stores in the pockets of customers everywhere, with an equal presence and representation, bringing in a universal and convenient shopping experience to customers. formats, the focus for most retailers will be to capitalise on smaller formats, which are more cost-effective. Smaller convenience stores and supermarkets are the way forward for most big retail chains. This will give brands more entrancement within the market and address the issue of penetration. This format will continue to grow in the coming years, as retailers look at sizably growing their presence in the market. The key future focus across these formats is to improve footfalls and basket size. The average basket size in India today is much smaller than that of hypermarkets and supermarkets across the world. Brands need to improve in this area while ensuring that they continue to provide excellent customer service, convenience and exceptional value to give customers a truly remarkable shopping experience.

Extending product lines Consumer demands, preference and taste across the Indian market are witnessing a strong shift. Growing inflation has shoppers looking for the best discounts and values, while at the same time

increased internet penetration and exposure to new products available across the world has consumers demanding more variety and assortment in product range. To counter this shift, retailers’ future focus will be on creating private labels and store brands. This will bring in economies of scale in production leading to higher margins for the retailer and lower prices for the consumer. Retailers across the country are investing in developing back-end operations that will enable them to launch a wide variety of private label product lines and this will be a significant focus area for the future.

E-Commerce and online retailing E-commerce will have the most significant role in the future of retailing in urban India. While brick and mortar sector will continue to grow, online retailing will bring in much needed conveniences for shoppers and save on the time that is often spent on travel and navigating in-store shopper traffic. Retailers will now be able to bring consumers easy home delivery offered today by their neighborhood

Closing note The organised grocery business is a very challenging sector; it requires substantial long-term investments and the returns are often not as forthcoming in the early years. Competition in this sector is growing every single day with new online and offline players entering the market. Unorganised retail continues to grow with new neighborhood outlets opening literally every day, making this one of the most competitive sectors in the country. The industry also faces massive challenges in procurement, transportation, distribution, infrastructure, investments, technology and manpower. Despite all of these challenges, retailers who make calculated strategic growth decisions and invest in the right channels will benefit from the potential this sector offers. The Indian grocery sector is currently valued at close to Rs. 17 trillion and that is not a small number. With India’s rising population, increased consumption and growing economy, it will continue to be a sizeable opportunity for players resilient enough to stay vested for the long term.

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SAURABH SANYAL SECRETARY GENERAL, PHDCC

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ood is a basic need of humans and hence forms an indispensable part of our day-to-day life. The food processing sector is therefore vital to sustain the growing population as well as economy. India, with more than 127 agro-climatic zones, is capable of producing a variety of agriculture produce, which can be valueadded by processing. India is the world’s second-largest producer of food and has the potential to be the biggest globally in the food and agricultural sector. As a sunrise sector, Indian food industry is one of the largest industries in the country and is ranked fifth in terms of production, consumption and export. The food processing industry accounts for about 32 per cent of the country’s total food market. It forms an important part of the Indian economy in terms of contribution to GDP, employment and investment, and is a major driver of the country’s growth in the near future. Besides, it also contributes around 9-10 per cent of GDP in the agriculture and manufacturing sectors. However, the level of processing in India is still low, i.e. just around two per cent. The rich agriculture resource and low level of processing fosters the need to have an increased processing level to mitigate post-harvest losses and consequently contain inflation. Once the processing is done, then the need emerges for efficient distribution of the food products. Therefore, in relation to the food processing industry, the food service industry is also emerging and unravelling precious opportunities for the stakeholders in food hospitality and service sector.

Indian population, food demand The Indian population of around 1.25 billion and India’s demographic composition offer a huge market to the domestic as well international players. The growth of the food processing and food sector is being fuelled by various demand factors like a growing youth segment and working women population, rising incomes, increasing purchasing

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power, high brand consciousness, changing consumer preferences, growing urbanisation, increasing number of high net worth individuals and rising internet penetration. This is matched by various strong supply factors like rapid real estate infrastructure, easier access to credit, increased efficiency due to development in supply chain, R&D, innovation and new product development, growing interest of investors and conducive as well as encouraging environment from policy makers. Because of these factors, India was ranked fifth in the global retail development index by AT Kearney. As per Census 2011, India also has about 500 million Indians under the age of 25 and 300 million Indians in middle income households. This directly impacts the demand for processed foods.

New and innovative retail formats are being introduced. Packaged food and beverages form one of the key components of all the retail formats. Changing lifestyle has changed eating habits. This trend is going to grow. It has led to the development of new retail formats and new organised retailing like small to medium food retail outlets, open format retailers, departmental stores and supermarkets or food retail chains and hypermarkets. In addition, online business in India is in a nascent stage and very small. In the context of food, it has the business opportunity for wholesale business, supplying to the traders and small retailers, which can add value to the supply chain. Organised retail, however, has grown more rapidly in processed, dry and packaged foods than in fresh food markets.

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industry since 1991. Foreign investors can own 100 per cent equity in plants they set up, or they can take on a local partner. In addition, 100 per cent FDI is allowed in single brand retail and 51 per cent in multi-brand retail. This has liberated the retail sector for international retail players. Foreign investors have also been encouraged by the Make in India Campaign, which is being actively pursued by the current government. The government is also emphasising on the upgradation of skills in the sector through the National Food Processing Education Council, Food Processing Skill Development Council and institutes like National Institute of Food Technology and Entrepreneurship Management and Central Food Technology Research Institute.

Conclusion

Policies and reforms Sensing the demand and need, the Government of India in its proactive approach has formulated and implemented several plans and schemes to provide financial assistance for setting up and modernising food processing units, creation of infrastructure support for research and development and human resource development in addition to other promotional measures to encourage the growth of the processed food sector. Various schemes on Cold Chain Development, Packaging Centres, Value Added Centre and Mega Food Parks have

been introduced to build a strong base and foundation for offering the much needed ancillary support necessary for the growth and promotion of the food processing sector. Also, after the introduction of the FSSAI Act, thirteen laws governing the food processing sector have been merged into a single Act. The FSSAI law has had a deep impact on the industry, consumers and supply chain. Once it’s structured and implemented correctly, this law will have a far reaching impact. Foreign funding has already been approved in India’s food processing

The picture seems very bright with an enormous potential. The growing population with encouraging demographic trend poses a bright future for Indian Food Processing, Retailing and Hospitality sectors as well. Many new initiatives have also been put up strategically by the Government of India to leverage upon this magnificent opportunity. But the initiatives without their punctilious implementation will be more of a vision and less of journey. The going will get tough if the initiatives are not monitored and evaluated with due diligence. Frequent market research is required to judge consumers’ response to various retail and hospitality formats. Accordingly, customised approaches may be followed. Several international players are contemplating to invest in processing as well as retailing. The Make in India initiative can only turn into reality once the investment comes. But for that to happen, the government will have to streamline operations. A single window clearance, early food safety approvals and other speedy approvals, both at the state and central government levels, are a must to maintain the momentum and enthusiasm.

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ROHAN KICHLU DIRECTOR F&B, THE PARK HOTELS

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ood and Beverage (F&B) has been the hot topic of discussion across hotels in India, Asia, and the world over in the past few years. While rooms have traditionally always been the money churners, F&B is now ruling the hospitality sector globally and making rapid headway into India. Ego wars and glamour have always been a part of the Indian hospitality business and while these have led to some fantastic products that we can see and experience today, they have also been the graveyard of too many large concepts, restaurants and hotels. No F&B business today can be sustainable without a fine balance between passion, concepts, food, the team and an understanding of the culinary and beverage economics. While there is no book or manual for imparting such an understanding to business ventures and companies, the overall gut feel, experience and numbers must dovetail together to drive the business forward and propel it towards a long-term economic eco-system for the sustenance of food and beverage establishment. Global QSR and café giants like McDonald’s, KFC, Pizza Hut, Dunkin Donuts, Subway, Starbucks, Costa Coffee and Domino’s will continue to lead and make further leaps in the food and beverage business. Some notable global brands, which have now started gaining ground over local restaurants and neighbourhood eateries are Nandos, Chilis, TGIF, Ruby Tuesday (though they have been slow in market penetration), Hard Rock Cafe, etc. These are all global giants who have significant advantages of central purchasing, global and national marketing and economies of scale in the restaurant business. These brands are largely successful in various global markets and are here to stay!

Changing with the times Local ingredients and local flavours are the latest trends in food and beverages across hotels, bars and restaurants. Chefs have started using local spices, recipes and flavours to capture as much of the customers’ hearts in the micro markets as well as attract new customers and one-

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time visitors to try out a different cuisine or concept. Local procurement also leads to better quality, freshness, flexibility of purchase capabilities and lower inventory and storage. Local ingredients have also made their way into bars, where mixologists and bar tenders use these to blend into cocktails, mocktails, spiked beverages and shots. Some notable regional cocktails from across India are ‘Gondhoraj Lassi’, ‘Gondhoraj Lime Mozito’ and ‘Ginger Kasundi Cooler’ (West Bengal); ‘Tulsi Martini’, ‘Firangi Paan’ and ‘Baileys Lassi’ (by renowned mixologist Nitin Prasad from The Park, New Delhi); ‘Meena Colana’ (South Indian version of the globally renowned Pina Colada with McDowell’s dark rum, coconut milk and fresh pineapple), ‘Copper Monkey’ (Monkey Bar, New Delhi) and ‘Nizami Gulkund Martini’ (The Park, Hyderabad). There are also numerous beverages, fresh ingredients, infusions, molecular cocktails and shots that have been innovated across the country. The head mixologist is also the ‘beverage chef’ of

the establishment. This is the latest trend emerging worldwide where mixologists are curating master creations from food ingredients, organic infusions, beverages and use of a molecular kit to create molecular cocktails, caviar shots and more. Healthy food, low-calorie diets and fresh raw food bars are also slowly coming into various urban and resort locations. But they are still far from being popular in most locations as India is still a very nascent and developing market with respect to global food trends and concepts. While New York, London, Paris, Singapore, Hong Kong, Macau and Las Vegas are global cities known for hotels, restaurants, bars, nightspots and casinos, Indian cities like Mumbai, Delhi, Gurgaon, Bengaluru and Hyderabad are also now well established on the map of Asia and destined for a good future.

Recipe for success There is a reason why F&B is considered a tough business. It is because F&B deals in a familiar area that most people feel that

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Sorbis / Shutterstock.com

View Apart / Shutterstock.com

they understand and can do it themselves. Everyone knows how much raw materials and food costs. Most people have had friends over for a party at their homes too.  Now they are all qualified food and beverage entrepreneurs in their own little way. This has been a positive aspect as they believe that little mystery is involved in the food and beverage business and understanding their economics. Despite this growing familiarity, mastering ‘variables’ like how, when, and why a customer may want to choose your hotel has got more complicated. However negative this may seem, the dynamic also affords an opportunity to excel in the ‘left behind’ matrix of competitors. The move toward creating ‘guest experiences’ before, during, and after the hotel stay, has now migrated to that corporatefriendly experience you may have heard of. Reaching out through traditional print media is still largely present and the primary source of advertisement and promotion across major tier-II and

-III cities and towns though social media is gaining an edge. The latter is now the primary source of instant advertisements, promotions, feedback and service recovery across most major urban locations. Social media and networking is the new ‘word of mouth’ in the services business and even more rightly so for F&B establishments. This must be embraced with open arms and businesses that try to shrug this over are destined to lose the competitive advantage over time. Public ratings on Zomato, Tripadvisor, Facebook, etc. are crucial for the image and market reputation of the establishment and must be taken up with utmost seriousness by the management.

Business and balance Another significant factor is to look after the team and associates of your F&B business. This is a highly human interface with a lot of ‘moments of truth’ and realtime business transactions with running services and a simultaneous consumption

of the same. Running a successful hotel is an ongoing challenge that requires the combined forces of both management and staff. Policies must be in place to make sure that daily operations run smoothly and all guests are treated well. It is fair to say that the primary goal of almost every owner and operator is to make as big a profit as possible. To achieve such a goal, the focus needs to be on both revenues and costs. Establishments can boost their bottomline by increasing revenues or reducing costs. Ideally, you want to increase your topline (sales) and decrease your expenses (variable and sometimes fixed costs) to get the biggest increase in your F&B establishment’s bottomline. When a restaurant’s covers and APC (average spend per cover) rise, it is usually a good basic indication that the management is executing well. Discounting and revenue management in food and beverage is also at a nascent stage but can be pushed and implemented across various F&B platforms. Some basic revenue management already practised by restaurants unknowingly are ‘happy hours’, ‘one is for one’, ‘dine by nine’, ‘brunch with free flow beverages’, etc. More table allocation based revenue management, peak hour surcharges, late night surcharges, premier dining locations and private dining attract an escalated fee or price. F&B establishments are also looking at incremental revenue streams such as after-sales of ingredients, sauces, packed orders, home delivery, outdoor catering, beverage sponsorships, marketing alliances, cross-brand sponsorships and product sampling. These are some of the emerging forms of incremental business, which are extremely crucial for establishments to combat huge inflation in operating expenses, rising taxes and government surcharges. Another way to attract revenue is to create a destination outlet with good market knowledge. Market intelligence, customer segmentation and overall product penetration are factors that must be monitored, practised and implemented on a daily basis. Further, periodical reports

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Sorbis / Shutterstock.com

Beyond the books

and worksheets should be generated for the establishments to understand customers better and improve concepts and services at the ‘best price’ and ‘best sustainable value’ for both the guest and the F&B establishment. Some traditional success examples, which have become destinations in today’s F&B world are five star and stand-alone brands such as Bukhara (ITC-Maurya), Dakshin (ITC-Hotels), Dum Pukht (ITC-Hotels), Mainland China and Oh! Calcutta (specialty restaurants), Paradise (Hyderabad), Karims (Delhi), Nizams (Kolkata), Mocambo and Petercat (Kolkata), and Bade Miyan (Mumbai) to name a few. Some contemporary destinations that are hugely successful, concept driven and unique in their positioning and customer market space are Aqua (The Park Hotels), Zen (The Park, Kolkata), Tantra, Roxy and Someplace Else (The Park, Kolkata), Pasha (The Park, Chennai), Monkey Bar, Olive, Mamagoto, Soda Bottle Openerwala, PCO, and Socialoffline to name a few. These

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places are now gaining fame and their successful models are being replicated across the country in urban and key locations. The recent surge in outdoor catering and home delivery is also worth a mention. Outdoor catering led by concept- and cuisine-driven brands is becoming hugely popular. The Park Kolkata’s ODC team (spearheaded by Chef Sharad Dewan), Speciality Restaurants ODC pan-India, Olive Group (A.D. Singh), and Kwality Group, just to name a few, are known for organising huge caterings across multiple locations in India. The absorption rate in the market for bars with new concepts is also much higher today than it was ten years ago. Not surprising that the number of successful concepts is on the rise. However, it does not mean that failure or closure rate has dipped. This is just a sheer statement to highlight that the absolute number of successful F&B establishments is on the rise and they are being absorbed by the ‘hungry and thirsty urban India’.

Some of the primary financial implications that are constant for all F&B establishments and must be understood in micro-management details are food cost, inflation costs of raw materials, optimal inventory management, vendor management, a good balance between debtors and creditors, credit period for vendors and guests, and F&B control measures at the establishment. These are the elements that limit the profit margins in F&B. We are not selling patented inventions (thereby unavailable to anyone other than the creator). We cannot mark up our goods 10 to 100 times because everyone can obtain most of the items at a retail store. Profit margins limit the amount of funds available for labour and wages. This limits the quality of service employees. Lastly, one should not fail to mention the ‘Passion’ factor. Those who excel in this industry love the feeling of happy customers. We dislike monotonous jobs. In this business, every day is a different experience. Rarely does a day go as planned. Challenging customers, staffing call-outs, mechanical failures and uncertainty of volume levels are all the areas that are not embraced by anyone who is not passionate about this industry. Local execution with a global outlook and a balanced approach to Indian hospitality will lead to a long-term and sustainable F&B establishment. Businesses exists for profit. But even when operating at a loss, an establishment can draw in substantial revenues by making good use of their singular attractions. For example, a casino can draw thousands of gaming customers based upon the attraction of its restaurants. There are many such examples where despite the budgeted loss, establishments continue to thrive due to the passion of the operators. F&B service is always in the blood. This industry requires passion to excel. Those who enjoy and excel in this business receive satisfaction from seeing that guests and customers have their expectations met or exceeded from the service experience provided. We bring that passion to your table!

THE INDIA FOOD REPORT 2016

P. RAJAN MATHEWS VP – MARKETING & SALES, DESAI BROTHERS LTD. – FOOD DIVISION (MOTHER’S RECIPE)

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ndia is the biggest consumption market in the world. Based on the projections extrapolated from the Third Economic Census conducted in 1990, it is estimated that there are approximately 500,000 restaurants in India in the organised sector. This figure is expected to increase rapidly as a result of the changes in demographic and economic factors, which have a significant impact on the restaurant industry in India. Increasing urbanisation and rising disposable incomes are characteristics that are common across several emerging economies, particularly in Asia. However, the pace at which this has taken place in India in the last few years is likely to continue over the next decade and will outpace most other economies in the region. In particular, Merrill Lynch estimates a growth in urban consumption at potentially 20 per cent per annum in nominal terms (16 per cent in real terms) for at least the next 5–7 year period. In addition, higher disposable incomes among consumers, particularly in the top 25 cities, and the trend towards eating out are combining with growth in organised retailing to fuel growth in the food service sector. There are 10 million households in India with an average household income of Rs. 46,000 per month and two million households with a household income of Rs. 115,000 per month. Eating out has emerged as a trend, which is prevalent within this elite group. Two of out of every five households in this group eat out at least once a month. There are 100 million 17–21 year olds in India, and six out of 10 households have a child that was born in the post-liberalisation era and has grown up with no guilt of consumption.

Growth in eating out culture Urban Indians spend six per cent of their income on eating out, whereas American consumers, by comparison, spend 46 per cent of their food expenditure on awayfrom-home meals. Nuclear households, rising affluence, more and more working women, food shows on TV and social media, increasing international travel, a very large young population are some of

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the factors that have ensured that by 2015 the Indian restaurant industry is likely to become Rs. 62,500 crore plus, up from the current Rs. 43,000 crore. If Indian restaurants industry hits the same percentage of GDP as in the US, then this figure would be a stupendous Rs. 1,80,000 crore. The untapped potential is really mouthwatering. The average bill per person in a quick service restaurant (QSR) ranges between Rs. 70 and Rs. 300, while for casual or fine dining it is between Rs. 750 and Rs. 3,000. The QSR business returns 15–25 per cent margin while the other segment enriches the owner at 20–40 per cent. The Federation of Hotel & Restaurant Associations of India (FHRAI) estimates that there are approximately 2.2 million or 22 lakh hotel and restaurant establishments in India. FHRAI further estimates that of the total figure, approximately 500,000 restaurants qualify as establishments in the organised sector with more than 20 seats, an entrance door, a menu card and waiter service. As the number of lodging or hotel units within these figures would not be more than 20,000 or 30,000, it can be presumed that the entire figure of 22 lakh can apply to the restaurant sector.

The bakery market in India is estimated at more than Rs. 2100 crore and is still the cheapest form of ready-to-eat food. The bakery industry in India is mainly concentrated in the states of Andhra Pradesh, Maharashtra, West Bengal, Karnataka and Uttar Pradesh. About 60 per cent of bakery production takes place in the unorganised sector. There are around two million unorganised bakeries operational across the country, comprising small bakery units, cottage and household type manufacturing, characterised by low levels of packing and distribution mainly in the neighbouring areas.

Categories of food service customers The Indian food service industry can be broadly classified as follows: Star properties Fine dining restaurants – International cuisines/Asian cuisines/Indian cuisines Casual dining – Indian/regional/multicuisine Quick service restaurants/cafés – Indian/International Industrial/institutional caterers (Sodexo/Compass and various Indian) Party and marriage caterers Bakeries Own account enterprises

8 DEVELOPING A VISION AND STRATEGIC PLAN

Gwoeii / Shutterstock.com

Organised sector sales in food service industry The food services industry comprises two distinct market segments: the organised and the unorganised. The organised segment comprises 20 per cent of the total industry. This segment grew at an estimated rate of 25.6 per cent in fiscal year 2011 and is expected to grow at a rate of 30 per cent in fiscal year 2012 to 2016. The size of the unorganised segment is unknown as it comprises roadside eateries including dhabas, which are the most common form of food outlets in India. Such unorganised players lack technical and accounting standardisation commonly found in the organised segment. In the last few years, there has been a shift to restaurant chains and franchise outlets, which belong to the organised segment. This segment is currently dominated by a handful of players, which control over 3,000 outlets. Five-star properties, fine dining restaurants, casual dining restaurants, QSRs/cafés, industrial/institutional caterers and party and marriage caterers belong to the organised segment of the food services industry.

Recent trends in food service

Growth drivers for food service

Increase in International food chains: During the past two decades, many international food chains have entered India as they perceived it to be a potential market with scope for expansion and growth. Some international brands have become household names in India, including McDonald’s, Pizza Hut, Domino’s, TGIF, KFC, Ruby Tuesday and Subway. At the core of such international brands’ success is an awareness of local tastes and habits of the Indian market.

Changing demographic profile: Demographic change facilitating growth in the food services industry includes the large and growing young working population (median age of 24 years). Over 65 per cent of India’s population is below 35 years of age and the age group between 21 and 40 years constitutes the majority of those who eat out regularly. Further, the proportion of nuclear families is also increasing with approximately 1.5–2 per cent of joint families giving rise to nuclear families annually. There is also an increasing proportion of women in the workforce (17 per cent in 2005 compared with 14 per cent in 2000) and a growing trend of double-income households. All these factors are contributing to an increase in dining out in India.

Evolving cuisine: According to NRAI Report 2010, customers are generally satisfied with the dining options currently available. However, food companies (international and domestic) are consistently reviewing and reinventing their menu offerings to better cater to the evolving tastes of the Indian market. Food companies are increasingly offering more than one cuisine in a single outlet to appeal to a wider population segment. Restaurants serving Asian cuisines may combine one or more of the following: Indian, Chinese, Japanese, Thai and Vietnamese. In addition, the Indian population is increasingly seeking new cuisines and industry players have been exploring regional cuisines including Peshawari, Gujarati and Bengali, fusion cuisines including Chinese-style pizzas and International cuisines, including Italian, Lebanese and Mexican. Furthermore, international cuisines are moving toward the mid-market pricing segment rather than the top tier pricing segment traditionally found in five-star hotels serving International cuisines. New locations: New opportunities are emerging in the organised segment at locations where a high density of people congregate, including shopping malls, travel terminals, office complexes and medical institutions. In particular, shopping malls are becoming a customary place for congregation and customer spending in shopping malls is increasing. These malls tend to favour efficient formats such as kiosks and food courts, which are most suitable for fast food restaurants and casual dining.

Rising income levels and growing middle class: Over 17.5 per cent of the world population resides in India and the middleclass segment of the Indian population comprising households earning an annual income of Rs. 200,000 to Rs. 1,000,000 is expected to grow significantly. In addition, the increasing population of the middle-class coupled with the increasing proportion of the population living in urban centres (29.50 per cent in 2007–08) is leading to an increase in dining out as a lifestyle choice. Changing food habits & dining out: Around 50 per cent of the Indian population dines out at least once every three months. According to the NRAI Report 2010, dining out is typically used as a standalone social activity, which is enjoyed mostly with family (43 per cent) and friends (30 per cent), and is only occasionally combined with other social activities such as shopping. In a study based on individuals who eat out regularly (at least once in three months), only 10 per cent indicated that their last dining out experience was due to special occasions such as anniversaries, engagements or promotions.

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SOUGATA BASU HEAD OF MARKETING, INNOVATIVE FOODS LTD (BRAND SUMERU)

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n the last decade or so, we have seen a sea change in consumer behaviour across urban as well as rural markets. Right from where we live to how we live, a lot has changed and this change continues to happen. Indians today are an aware and informed lot. The erstwhile ‘conservative’ Indian consumer today loves to experiment and across their purchasing behaviour they are clearly looking for more variety, value, convenience and faster availability. Consumer-focused companies are also fast changing their ways of working to meet these expectations of a changing India. The food items we eat today have also come a long way. From the traditional home-cooked meals to the fast food QSRs, from the street-side delicacies to the fine dining experiences, almost everything is a part of the Indian consumer’s ‘menu’ today. There has been a significant increase in the number of times Indians eat out. QSRs, in the last few years, have added to their growth numbers. Though the growth last year was slightly slower, it is expected to correct soon. The Indianisation of their global menus, aided with strong media activations, has been pivotal in ensuring their growth journey. Fine dining restaurants have also seen a robust growth of close to 20 per cent year on year. Indians today are also very well travelled. They are exposed to the world cuisine and back home they are expecting authentic experiences of global foods as well. This is expected to drive the surge of specialty restaurants and eating-out options in the country in the days to come. The key here would again be to differentiate offerings while trying to optimise operational costs. So, while this industry will see some consolidation, it will definitely witness a fair amount of expansion as well.

What value-conscious customers want? With the rise in disposable incomes, consumers today are fast becoming ‘value conscious’ than ‘price conscious’. This is surely a healthy trend for the industry to innovate and differentiate their offerings for consumers. There is a growing trend for health-positive products across age groups. This has resulted in many companies adding newer products in their portfolio, which are either health-positive or health-neutral. Many brands have started to advertise along the same lines to ride the health wave. While it is a positive trend, there is enough space in the industry for brands to come up with products addressing the various needs of consumers, health and indulgences alike. It is hence important to understand the consumer needs intently and come up with quality products, which meet these

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8 DEVELOPING A VISION AND STRATEGIC PLAN

needs to the fullest. At Sumeru, we have been relentlessly doing this and winning consumers by solving their problems with delightful product offerings. The consumers’ urge to seek convenience has also changed the way they shop today. While mom-and-pop stores still exist and will continue to do so, it is the rise of the modern trade format and now the e-commerce platform that has made every company to sit up and take notice. With the changing retail ecosystem, the relationship between the retailers and their vendor partners (the brands) has also transitioned.

Changing paradigms From being more transactional, the relationship today is of joint accountability to ensure each other’s profitability and for keeping consumer satisfaction as the top priority. I believe that in the next few years as the retail environment matures further, consumers will benefit the maximum. The industry (retailers and brands) will also strengthen their relationship and modify their ways of working to extract the best gains from their business partnerships. For a category like frozen food, which is fairly modern trade centric today, Sumeru has already started to engage with the retailer

partners in a manner that is far more accretive to the business as a whole. What is also interesting for the frozen category is the fact that it is now getting represented in the general trade formats as well. This, to me, is a clear indicator of the category making the right inroads into consumers’ homes. Another delightful change that the country has witnessed in the last few years is the manner in which tier-II and -III towns have evolved. Consumers in these towns today are extremely aspirational and do not want to lag behind their counterparts living in the metros. They are highly brand conscious and are willing to pay up for the experience. There indeed is a lot of fortune at the bottom of the pyramid. The e-commerce industry is promptly tapping into this consumer base by making the brands and products available at the consumer’s doorstep and by ensuring robust last-mile deliveries. In the frozen food space also, the industry has witnessed a fair amount of agility. The adaption of the category has been significant and this is indicated by the near 20 per cent CAGR that it has seen in the last few years. The category offers a convenient variety to the consumers. The myth around the category is slowly diluting with rising consumer awareness. The future will see infrastructural facilities also improving, which will further aid the frozen category. It is important for brands now to advertise and fuel the awareness. Equally important for them is to continuously evolve and innovate, come up with differentiated offerings, and bring the world cuisine to Indian consumers. It will be critical for the brands now to liaise with channel partners effectively to ensure that the growth story is accelerated further. Brand Sumeru is prepared to lead this category growth journey with retailers as well as consumers. If the last few years have been excitingly positive for the industry, the future looks even more promising. With a strengthening GDP and a fast evolving consumer base across markets, every consumer brand will have a lot to cheer about. However, the mantra should be ‘know your customers the best and delight them always!’

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O P KHANDUJA BUSINESS HEAD, DS SPICE CO. PVT. LTD.

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he food processing industry is one of the largest industries in India and accounts for about 32 per cent of the country’s total food market. It is ranked fifth in terms of production, consumption, export and expected growth. India’s total food production is likely to double in the next 10 years with the country’s domestic food market estimated to reach US$ 258 billion by 2015. The Indian food and grocery market is the world’s sixth-largest, with retail contributing 70 per cent of the sales. The market is projected to grow at the rate of 104 per cent, touching US$ 482 billion by 2020. As mentioned earlier, the Indian food processing industry accounts for 32 per cent of the country’s total food market. In addition, its share amounts to 14 per cent of our manufacturing GDP, 13 per cent of India’s exports and six per cent of the total industrial investment. With a population of 1.08 billion, which is growing at about 1.6 per cent per annum, India is a large and growing market for food products. Food products constitute the single-largest component of private consumption expenditure. With a significant shift in India’s demographic profile in favour of younger population, increasing surplus incomes and changing socio-economic environment, food consumption patterns are set to change in favour of processed foods, which are convenient to eat, hygienic and of consistent quality. Further, the adoption of food safety and quality assurance mechanisms such as Total Quality Management (TQM), including ISO 9000, ISO 22000, Hazard Analysis and Critical Control Points (HACCP), Good Manufacturing Practices (GMP) and Good Hygienic Practices (GHP) by the food processing industry has enabled adherence to stringent quality and hygiene norms. They have also helped to protect consumer health, prepare the industry to face global competition, enhance product acceptance by overseas buyers and keep the industry technologically abreast of international best practices.

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Due to the new changes in FSSAI Regulation Act for spices industry, there has been a shift towards blended spices in the organised sector. At the same time, the focus of the unorganised sector has been on straights. Any kind of formulation for blended spices requires registration and the end product is branded as proprietary food. Of course, this has cost implications and it involves issues such as timeliness and brand-building activities. It is therefore natural for the organised sector to focus on these aspects. Eventually, the premium on these products shall be higher. On the other hand, straight spices will remain purely as a price-driven market. The rapid shift towards convenient and hygienic products is due to the changes in consumers’ lifestyle patterns. The main focus today is on saving time and effort without compromising on quality. Theme-based and recipe-based products will become popular due to the changing mindset of consumers, who are open to experimentation and are willing to try out various Indian and International cuisines. Therefore, the preference will be for ready solutions that can offer a complete meal based on a specific cuisine.

The growth in RTE, processed and packaged food market will increase due to convenience and time saving factors. People will be ready to invest more on food. Already, the emphasis on freshlycooked food has reduced over time. The rising trend towards attractively packaged products in smaller packs is due to the prevalence of mobile culture and increase in travel. Products that are oriented towards food personalisation will gain in popularity because of the increase in travel and mobility. Yet, what cannot be overlooked is that people also want to be attached to their roots so that they can give a personal touch to food wherever they are. There will also be a sporadic shift towards organic food as well as healthy and nutritious diet. Improved packaging, which is durable, convenient and increases the shelf life, is gaining popularity. Further, there will be a distinct growth in the snacks food category and food on-the-go. Consumer awareness regarding hygienic and safe food practices will result in an increased focus by manufacturers towards automation, regulatory compliance and better manufacturing practices.

8 DEVELOPING A VISION AND STRATEGIC PLAN

AJAY KATYAL PRESIDENT - ORGANICS AT AMIRA PURE FOODS PVT. LTD

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have witnessed for the past several years how most of the consumer trends in India have been a replication of the trends followed in the US even though the time lag has been about 15–20 years. This has been especially true in the case of food and grocery/food service/retailing sectors.

However, there are several factors which are directly responsible for this evolution, and some of them have been listed below: The Indian consumer is a force to reckon with. A strong and growing middle class of 360 million, most of them being young, educated, well travelled, living in nuclear families and well aware of the global trends. They are concerned about the quality of their food and are always on the lookout for convenience; they don’t mind spending more on quality food, especially for their kids.

Imported global food, specialty food like organic food, functional food and other pure forms of food like vegan food fascinate them. Food habits of most of the city dwellers are changing rapidly and they are more open toward experimenting with a variety of food options not only from other states of India but also from global destinations. Upward mobility of consumers have also influenced the food trend, with people opting for more protein, specialty grains, healthy options of refined food, condiments, wines and healthy sides. The next set of large consumer group is rural and semi-urban consumer. They have also started spending heavily on good food and grocery by following their counterparts living in urban and metro cities. Smart and forward looking food companies have already started taking steps to make inroads in rural markets. These markets will be meaningful for major food companies in the next 5–7 years. Modern retailing is following the above consumer group and their preferences to compete with each other in the retail space. In retailing too there are various categories of retail chains – mass market, premium, regional, pan India, local and specialty or health chain. Each one is targeting its own set of consumer groups and creating ambience, experience, layouts, etc. Food and grocery home delivery, which used to be the USP of local kirana shops, has been taken to a new level by food e-commerce sites like Amazon, Groffer, Localbanya, etc. This trend is actually much ahead of the US and other Western countries.

Indian retail Modern retail, or MT, has been the backbone for Indian retail evolution. New and big money has found its way into Indian retail through these MT chains. Owing to the government’s decision to not allow 100 per cent FDI in multibrand retail, the next push needed for this sector is delayed. This has affected the profitability of existing Indian MT chains and their future expansion plans are also on hold. This is a factor that is expected to affect the improvement of back-end and supply chain infrastructure, which could have brought much-needed efficiency in the system and improved the profitability of MT chains. The rising and unviable real estate prices have also been the scene spoiler for their expansion to deeper catchment areas.

E-Tailing & E-Commerce: A sunrise sector for food & grocery I am quite positive about e-tailing in food and grocery, and feel that this sector will grow much faster than other offline MT chains. Currently, huge fund flow is streaming into these e-tailers and this will help in quick setting up of back-end infrastructure if this flow continues to be consistent in future too. Another positive aspect is the fact that e-tailing is complementing traditional retail and general trade (kirana shops) as well. Only those mom-and-pop stores will continue to exist that can evolve in this new scenario. They have established relationships in such a manner that these offline stores have become their supply chain partners. Overall, I see a huge evolution in the Indian food sector in the next five years.

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OLIVER MIRZA MD, DR. OETKER INDIA PVT. LTD

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n India, food lives at the very center of 1.2 billion people’s lives. There is no other sector with a greater influence on the well-being of Indians. The country’s diverse and rich palate is a manifest expression of the love and connection that people from different regions of the country have for each other. There is no greater defining expression of culture and identity than food and there is no better way to soak in the warmth of comfort, happiness and home than to partake of indulgences centred around food. In India, everyone is a foodie – people enjoy and love their food, and they want to cook and experiment but at their own convenience. Perhaps more than any other place on the planet, food brands mean far more to Indians as they convey people’s eating preferences. The brands are an extension of the immense creativity that people in India bring to their food. The Indian food industry has witnessed manifold changes over the past decade. From family-run kirana stores to multistoried supermarkets, snacking on butter toast to mayonnaise cheese-egg sandwich, or eating out at the local restaurant to picking up from the influx of multiple foreign food chains, the industry has evolved to where it stands now and is continuously growing at an exponential rate. Be it the entry of multinationals, the aggressive rise of commodity branding, opening up of the retail sector, increase in local players or the low cost of technology, each of these factors have contributed in changing the economic demographic of the Indian food industry. India is a highly fertile land for the food industry to flourish. The country’s sizeable population spends almost 50% of its income on food. The growing middle-class, double-income families, willingness to spend, reach of television, increase in travel and the spread of internet have all led to Indians getting more palate exposure. With exposure comes growth, which was recently mapped by market research reports, which said that the Indian food industry is expected to cross the three billion dollar mark by this year whereas the condiments market alone is estimated to cross

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Rs.1,000 crore at present. According to Down to Earth (March 2008), the fast food industry in India has also been growing at an astounding rate of 40% primarily dominated by the fast food sector comprising burgers, sandwiches, pizzas and pastas, etc. Today, we often see a plethora of cuisines at restaurants – some are authentic while others are an amalgamation of Indian and western flavours. Factors such as these testify that the food industry has evolved at a faster pace owning to the growing needs and changing palate of the Indian consumer.

Spreads, sauces on a roll The young consumer today demands much more than just plain butter or jam on bread for breakfast or daal and chapatti for lunch. Instead, they seek out to experiment with Western, European and Continental food, thereby making mayonnaise, spreads and international sauces a common household item. The increase in the awareness level among consumers, their eating behaviour and the spurt in corporate work culture has also led to the growth of niche premium spreads, mayonnaise and sauces category. Food holds a complex place in our lives. We want it delicious, we want it quick and we want it easy. Today, both men and women, husband and wife, child and mother are looking at easy to cook, fun-toeat, convenient food options. In the past, our approach was just limited to tomato ketchup or chili sauce to get that extra zing in the food. However, things have changed drastically! To be honest, mayonnaise and Italian sauces are the new ketchup. We always look out for mayonnaise and sandwich spreads while making sandwiches and often do not miss to grab on the readymade pasta sauces to add an authentic Italian touch in the homemade pasta. People are bored of regular food and want to make everyday cooking fun and desirable. Spreads & sauces are taking center-stage for the young as food is becoming more picturesque for social networking sites. Foodies and foodaholics have become a raging phenomenon amongst Gen Y! With such an attractive

market to serve, Dr. Oetker, owner of the FunFoods brand and a manufacturer of branded packaged food products with a focus on European cuisines, offers the best of both worlds to Indian consumers with its European and Continental products. Our products have been Indianised in terms of taste, flavour, aroma and packaging. We understand the taste buds of the Indian market and have therefore evolved our variety over the years. With eight variants in mayonnaise namely classic, veg, tandoori, garlic, burger, mint, olive and diet, four variants in sandwich spread and seven variants in pasta & pizza sauces, we target the consumers’ changing palate in a very holistic manner. Our eggless mayonnaise range is one of our many endeavours to off er the UK’s favorite sandwich spread, which factors in the Indian consumer’s taste and cultural preferences. Although the Indian condiment market is smaller in size compared to its global scale, these favourable factors are set to accelerate the growth of the Indian food sector. According to the Datamonitor’s latest Market Insights report, the Indian sauces market which was worth INR 204.3 crore in 2009 has been growing at a CAGR of 10.9% over the past five years. Customers today are constantly struggling to find delicious as well as time-saving options in food. Though such propositions and offerings by companies are easy, being fully in sync with the food regulations is of utmost importance for any brand in the food industry. Be it manufacturing, packaging, storage and technology, every process needs innovation combined with safety and quality at all levels.

8 DEVELOPING A VISION AND STRATEGIC PLAN

SAHIL GILANI DIRECTOR – SALES & MARKETING, GITS FOOD PRODUCTS PVT LTD

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ndia is undergoing a paradigm shift in terms of changing lifestyles. With a growing number of women finding employment in both urban and rural India, more consumers moving out of their homes and living alone, rising health awareness and the increasingly hectic pace of life, the packaged foods segment is witnessing burgeoning growth. India has a large base of young consumers, who form the majority of the country’s workforce. These young consumers barely find the time for conventional cooking, thanks to their hectic lifestyles, which create a significant potential for ready-to-eat food products. The ready-to-eat segment in India is anticipated to grow due to increased consumption levels, rising disposable incomes, rapid urbanisation and therefore lesser time that couples working in urban India get to prepare meals. Indian food companies have two descriptions for precooked branded foods: ready to eat (RTE), the type of food that just needs to be heated up and served; and ready to cook (RTC), which needs few ingredients to be added and ‘cooked’. The RTE and RTC convenience food category size is worth approximately Rs. 1,000 crore and growing at around 15 per cent YOY. The factors that lead Indian consumers to purchase these products are convenience in preparation, sensory appeal, affordable pricing and being preservative free. Domestic helps are difficult to find and chores like cooking and cleaning are no longer DIY (do-it-yourself) jobs. Younger couples are therefore opting for these

products because of their hectic lifestyles where the woman of the house has less time for cooking and therefore relies on RTC and RTE meals. These products also solve the weekend crises faced by consumers where they start looking for ‘easy-to-cook recipe solutions’. The quickest of restaurant deliveries cannot match the quick preparation of RTE products. The government must give credit to the food processing industry, as it is an enabler of macroeconomic stability. For example, food processing plants process raw onions into a powder form, which when mixed with water becomes a tasty onion paste retaining the nutrition and taste for everyday cooking. This would help combat the high seasonal fluctuations in the price of onions. Similarly, this sort of technology can be used for several vegetables. Further, the food industry is the driving force behind building India’s

cold chain, which is currently sub-standard and hence an estimated US$ 13 billion worth of fresh food goes waste every year! The rising per capita disposable income of consumers, especially those of the upper and lower middle income groups, is driving India’s ready-to-eat food market. Nonetheless a large chunk of Indian consumers are both quality and price conscious, which is a challenge. Around these challenges, Gits has delighted millions of households by offering a wide range of differentiated and value-added products by benchmarking quality at the right price. We have been pioneers in the convenience food segment, which is one of the fastest growing food businesses in India. Gits kick-started the RTC category in India by being the first company to launch instant mixes in 1963. Today, when the noodle crisis is still fresh in public memory, packaged food companies need to show an uncompromising responsibility towards the health and wellbeing of consumers, and ensure adherence to the highest levels of quality, safety and hygiene standards in assembling procedures. The primary aim is to appeal to the working demographics of the country, which does not have enough time to spend on cooking food.

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CONTRIBUTORS

Sanjay Bakshi is the founder of JORSS – a Market Research & Retail Advisory service hub. He is a known retail and marketing professional with a combined 20+ years of experience in Market Research, Retail Operations and Buying & Merchandising, Industry Education and Training. Through his industry experience and market research intelligence, he has been among key contributors to various IMAGES industry reports and has published features on Food, Fashion & Lifestyle, Retail market and Malls. His key works include Retail Report, Mall of India, Food Report, Regional Retail market series and many such industry insights for various clients across sectors. [email protected]; [email protected]

Dr. Amit Kapoor is Honorary Chairman at Institute for Competitiveness, India . Amit is an affiliate faculty for the Microeconomics of Competitiveness & Value Based Health Care Delivery courses of Institute of Strategy and Competitiveness, Harvard Business School and an instructor with Harvard Business Publishing in the area of Strategy, Competitiveness and Business Models. He has been inducted into the Competitiveness Hall of Fame at Harvard Business School, which is administered by Institute for Strategy and Competitiveness at Harvard Business School. He tweets @kautiliya and can be contacted at [email protected].

Sankalp Sharma is Senior Researcher at the Institute For Competitiveness, India. An author of five reports on competitiveness in the Indian context, he has recently finished writing a paper on India’s IP policy and its impact on innovation and competitiveness. He has also written extensively in the news media with more than fifty articles on issues related to Indian competitiveness, growth, economic policy, regulation, governance and public policy, etc. His work has also featured in various newspapers and magazines like Economic Times, Business Standard, Mint, The Telegraph, Governance Now, Business Today, The Sentinel, etc. He can be reached at [email protected] and tweets @sankalp1703.

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Debashish Mukherjee is a Partner with A.T. Kearney, India. He heads the Food practice for Asia. He is a global expert in the Food industry and has advised large corporations and industry bodies on strategic and transformational issues.

Subhendu Roy is a Senior Principal with A.T. Kearney, India and is part of the Consumer Products and Retail leadership team. He is an expert in the Food industry and has advised leading companies in the food industry.

Dolly Jha is an Executive Director with Nielsen and leads the Marketing Effectiveness Practice. Prior to this, she led the Consumer Insights and Innovation for FMCG at Nielsen and was responsible for driving relationships for key FMCG clients in India. Before joining Nielsen in 2010, Dolly spent more than a decade with IMRB International. She also had a stint on the client side where she was the head of ITC Foods’ Consumer Insights business. Dolly is a Post Graduate in Rural Management from IRMA.

P. Rajan Mathews is V.P - Sales & Marketing, Desai Brothers Ltd - Food Division ( Mother’s Recipe ). The author can be reached on his Email : [email protected].

Arabind Das is whole time Director & COO, Godrej Tyson Foods Ltd. He is associated with various forums on nutritional security, supply chain challenges for Food Industry and processed Food Industry in India.

Baqar Iftikhar Naqvi, Business Director, Wazir Advisors Baqar is a seasoned retail professional and entrepreneur with over 15 years of experience in strategy and operations, covering sectors such as Fashion & Lifestyle, Food & Grocery and Consumer Goods. Baqar specialises in retail start-ups, including those in e-commerce space. Baqar worked for over 10 years with a premiere Retail and Consumer Products consulting firm. As CEO, he then headed a men’s value brand with 600+ stores and 125+ SIS. He was part of start-up team and CEO of an e-commerce company in premium/designer fashion and lifestyle space. As Co-founder & CEO, he started an online social discovery and commerce platform.

Avnish Malhotra, is Consultant, Wazir Advisors, with four years of experience in the consumer goods space. At Wazir, he has been associated with projects involving consumer, competition & trade research, retail & channel audits, sector research & analysis, business due-diligence, retail concept & strategy development, partner search and feasibility studies. Earlier, he was associated with Axis Bank, where he gained expertise in financial analysis and business modelling. He is an MBA graduate from IBS, Hyderabad, and B.Tech from Bhartiya Vidyapeeth College of Engineering, Delhi.

Varun Chugh, is Consultant, Wazir Advisors. Varun has worked on projects related to business entry strategy and business expansion strategy involving consumer and trade research, retail and channel audits, sector research and analysis. He has also worked with Private Equity players on projects involving business due-diligence and feasibility studies for potential investee companies. He is an MBA graduate in Marketing & Operations from Management Development Institute, Gurgaon, and B.E. from Thapar University.

Dr Sandeep Puri is an Associate Professor in Marketing at IMT, Ghaziabad. His teaching, research and training interests include Marketing Strategy, Sales Management, Customer Relationship Management and Service Marketing. Co-authors: Abhijeet Gaurav is a student of PGDM in Marketing and Sales at IMT, Ghaziabad. He has a keen interest in the field of Marketing and Information Technology. Rajat Agarwal is a student of PGDM in Marketing and Sales at IMT, Ghaziabad. He has a keen interest in digital marketing and branding strategies.

Piyush Kumar Sinha is a professor at IIMA and specialises in the areas of marketing and retailing. He has more than three decades of academic and industry experience. He has taught at leading management schools of India. Prior to joining IIMA, he was the Dean at MICA. He is the Chairperson of the Centre for Retailing at IIMA. He has more than 60 publications to his credit, including a book on Managing Retailing. Dr. Sinha conducts training programmes for senior managers in the areas of Retailing, Marketing and Sales. Co-authors: Srikant Gokhale, Visiting Faculty, Indian Institute of Management Ahmedabad Saurabh Rawal, Academic Associate, Indian Institute of Management Ahmedabad.

Namita Bhagat has extensive business writing and editing experience related to the retail and franchise industry, covering Indian and the Middle East markets.

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CONTRIBUTORS

Dr. Rajesh Shukla is currently heading a Delhi based non-for-profit research centre ‘People Research on India’s Consumer Economy’ (PRICE), as Managing Director & CEO. He is also engaged as India Country Head, ‘Europe India Networking Social Science Research Programme’ and Visiting Professor, Institute for Human Development, Delhi. He has executed over 30 pan-India primary studies covering household income, expenditure and saving; income distribution and inequality; public understanding of science; and youth readership. He has authored 17 books, 25 research reports, which include “How India Earns, Spends & Saves: Unmasking the Real India”, “The Great Indian Middle Class”, and “The Next Urban Frontier: Twenty Cities to Watch”.

Mridusmita Bordoloi has 13 years of experience in socio-economic research on Indian consumer economy, labour market, and education sector. Ms. Bordoloi is presently working with PRICE and is focusing on data-driven analysis of various aspects of Indian consumer economy, as a ‘Principal Research Fellow’. She has earlier worked with Indicus Analytics, Earnst & Young and CERG Advisory in various capacities. She has also worked as a consultant for many reputed organisations including the World Bank, ILO, IHD, VV Giri NLI, NCAER and Everstone Capital. She is an engineer and a post graduate in Economics.

Rama Bijapurkar is a recognised thought leader on India’s Consumer Economy and an independent market strategy consulting practice helping companies to read markets and shape their business-market strategy. She is the author of “We are like that only: Understanding the logic of consumer India” and its recently published sequel “A Never-Before World: Tracking the evolution of Consumer India”. She is also the author of “Customer in the Boardroom: Crafting Customer Based Business Strategy”, which is also the name of the course she co-teaches at IIM Ahmedabad.

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Sanjay Dawar is the Managing Director and Lead – Accenture Strategy for Accenture in India. His role focuses on advising companies and governments in India and the Asia Pacific region on business strategy, operating models, digital strategies and innovation, cost management, customer strategies, human capital management, large-scale business transformation and organizational change. Sanjay has 24 years of experience working for Accenture. He has led a large number of business strategy and operations consulting programs focused in particular on the automotive, industrial equipment, infrastructure, resources, transportation and consumer goods and services industries, as well as the public sector. Sanjay has a Master in Business Administration from Mumbai University, India. He is based in New Delhi, India.

Raghuram Devarakonda joined Accenture as Sales & Customer Services lead in India from a premier personal-mobility consumer durable company where he was Head of the business for nearly 5 years. Raghu is an experienced Management Consultant with expertise in strategy, product development and supply-chain transformation. Raghu, in his earlier stint, was with Accenture India for nearly 7 years before joining i2 Technologies in Belgium where he spent 2 years improving customer satisfaction levels to enable cross-selling of additional products. He was also Head of corporate strategy for a large business conglomerate in India for two years. He has a PhD degree from University of California at Berkeley.

Tarun Jain is Vice President, Food Services & Agriculture Division of Technopak. He has over 18 years of experience in operations management, restaurant design and innovation, conceptualizing and launching new brands, developing new markets, turnaround management , and analytical analysis.

Soumya Mukhopadhyay is Vice President, IMRB International. He is an Economics graduate with over 15 years’ experience in market research. Soumya leads the research and innovation wing within IMRB and is responsible for leading methodological revamp of strategic research tools like segmentation, pricing, share forecast etc. He has worked on a wide range of categories like personal care, food & beverages, oral care, alcohol, tobacco, e-commerce etc. He has also spent more than a year at ITC, a leading FMCG company in India, as their Insights Head.

Ravindra Mehta has an in-depth knowledge of the commodity business with vast national and international exposure across multiple commodities. An alumnus of Indian Institute of Management, Bangalore, he has developed and managed various agro commodities business from conceptualization to the final stage.

Ranjana Gupta is Group Business Director, IMRB International. She is a Literature graduate with nearly a decade’s experience in market research. Ranjana works in the research and innovation wing of IMRB. She is responsible for all developmental work on strategic research tools like segmentation and pricing. Her experience includes work on sectors as diverse as personal care, food & beverage, alcohol, tobacco etc.

Sam Allen is an analyst with Canadean, a leading consumer market research company.

Gurpreet Wasi is Principal Consultant, IMRB International. Gurpreet is an MBA in Marketing and has done her masters in English Literature from Lady Shriram College, New Delhi. With over 2 decades of experience in the Retail Industry, she has been actively involved with Luxury, Fashion, Food Service and Lifestyle brands. Her consulting expertise spans diverse sectors including Branding, Customer Insights, Marketing and Operations. Gurpreet shares her knowledge and experience at Retail Management Schools, and regularly contributes to leading publications. She works with the RETAIL division of IMRB with a mandate to create knowledge leadership and business share for the Shopper marketing for IMRB Retail.

Avinash Kant Kumar represent International Fruits & Nuts Organization, a non-profit think tank for Nuts & Dry Fruits Industry in India, based at Delhi (www.ifno.in).

Harish Bijoor is a brand-expert & CEO, Harish Bijoor Consults Inc., a private-label consulting practice that operates in the realm of brand and business strategy.The company has a presence in the markets of India, Hong Kong, London, Dubai and Istanbul. Harish is a public speaker who speaks to corporate audiences across the globe in the realm of motivation, people-management issues, brands, marketing and business at large. He has spoken to corporate audiences across the world for 10189 hours to date. He is active on twitter @harishbijoor

Sachit Bhatia is the founder of Troika, a new age communication firm, specialising in content marketing for Fashion & Lifestyle sector. Sachit likes to write about brand strategy and digital media.

Suman Dabas and Ravindra Yadav are Associate Directors, Food Services and Agriculture Division of Technopak.

Sunil Kumar is General Manager, Key accounts, Amira Foods.

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CONTRIBUTORS

Charu Khanna is Officer, Marketing Communications, at GS1 India. GS1 India is a standards organisation set up by the Min. of Commerce and Industry and Apex Chambers of Commerce/trade bodies, which include CII, FICCI, ASSOCHAM, FIEO, IMC, APEDA, Spices Board, IIP and BIS. It is an affiliate of GS1 Global, Brussels which develops open, global Industry led standards & solutions across Industry sectors. One of its focus areas is development and implementation of global, ISO referenced standards which enable food safety and compliance with global regulatory and buyer requirements by SMEs and large food companies.

Ajay Kakra is leading the Agriculture & Natural Resource Practice for PwC India. He is responsible for spearheading the advisory business in the Agricultural, Food Processing and related sectors. He has around 15 years of experience in policy planning and implementation, project formulation and appraisal, target due diligence, financial product development, public private partnership and supply chain management in Food & Agriculture domain. Ajay is a graduate in Agriculture and has a Master’s degree in Agribusiness Management from National Institute of Agricultural Extension Management (MANAGE), Hyderabad.

Pankaj Karna is an experienced banker with over 20 years’ experience having worked in important and leadership roles in Grant Thornton, Rabobank and BNP Paribas in India. He has been instrumental in over 100 M&A and structured finance transactions and was recognised as one of the 25 chosen entrepreneurs by IBEF “Ordinary Indian, Extraordinary Enterprise” feature. He established Maple Capital Advisors Private Limited in 2010 a boutique investment bank based in New Delhi, with an established track record in M&A and structured debt. He is an MBA from McGill University, Canada, a Mechanical Engineer and studied at St. Stephen’s college and at Mayo college.

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Asitava Sen has over 20 years of experience in corporate banking, strategic business advisory and research; focused around food & agribusiness, retail &wholesale, consumer and services industries in India and the Middle East. He is currently senior agribusiness specialist with IFC, based in Mumbai. Prior to IFC, he had held various senior management positions at Rabobank, Pricewaterhouse Coopers, Nielsen Company, among others. He is a Mechanical Engineer and an MBA from XLRI, Jamshedpur (India) and member of key industry associations such as CII, FICCI and BCCI.

Barry Lee is an industry specialist for the Global Agribusiness team of IFC. Lee is responsible for due-diligence appraisals of IFC’s investments in the consumer and processed food sector in emerging markets. He has graduate and post-graduate qualifications in science, engineering and finance and has over 30 years of experience in management, finance and technical operations in the food industry in Australia, Asia and other international markets.

Puneet Verma is the Executive Director at Cybiz Superbrands, which is the F&B Franchise Consulting Division of Cybiz Corp.

Chandni Sahgal is a Management Graduate and an alumnus of Birla Institute of Technology and Science Pilani. Chandni is also a Graduate Fisher Fellow from the University of Toronto, is a Gurukul Chevening Fellow in Leadership and Globalisation from the London School of Economics, and A Start-Up Leadership Program Fellow 2012. Before Starting D’Essence Consulting, D’Essence Hospitality Advisory and Mentorvilla, she has been the Founding CEO for MTV, TIMES FM and Pritish Nandy Communications. She has worked in Roles straddling Strategy, M&A advisory, Marketing, Logistics and New Project Management with American Cyanamid, Hindustan Ciba Geigy and Eicher Motors. Chandni is passionate about mentoring entrepreneurs and start-ups, and loves travelling and being with Nature and Wildlife.

Amit Burman is a leading name in the business community in India and a member of the Burman family, promoter of India’s leading consumer products maker Dabur India Ltd. Mr. Burman is the Vice-Chairman of Dabur India Ltd has been involved with giving strategic direction to this FMCG behemoth. He was the driving force behind Dabur entering the Food business with the launch of India’s first packaged juice brand Réal. Today, Réal is the market leader in packaged fruit juices in India. He is also today India’s largest restaurateur having set up a food retailing venture Lite Bite Foods, which today has a network of over 100 restaurants across the globe. This venture manages Food Courts at leading malls, besides operating Quick Service Restaurants (QSRs) and casual dining outlets at a wide range of locations. With a host of business ventures in the Food sector, Amit is also known as India’s first serial Food Entrepreneur.

Krish Iyer, President & CEO of Walmart India, has over three decades of experience in finance, marketing, retail & general management across several counties such as Hong Kong, Philippines, Taiwan, Malaysia, Thailand, Japan and USA in addition to India. Before joining Walmart International as a Senior Vice President in 2012 in Bentonville, Arkansas, he was Managing Director of A.S. Watson Group, a leading health, beauty and lifestyle retailer. Krish also served as Managing Director and CEO of Piramyd Retail Limited. Besides serving as member of key Industry bodies such as Retailers Association of India, he is also on the advisory board of Enactus India, an international nonprofit organisation dedicated to inspiring students in entrepreneurial action. He is the chairperson of FICCI Retail & Internal Trade Committee and a member of the CII committee on MNCs. Krish is a Chartered Accountant and an associate member of the Institute of Chartered Accountants of India.

Prakash Nedungadi is the Group Head of Customer Insights and Brand Development for the Aditya Birla Group. A post graduate from IIM Calcutta, he has worked in leadership roles in General Management, Marketing, Sales and Supply Chain in Unilever, Gillette, P&G, The Teacher Foundation as well as the Aditya Birla Group. His career has spanned India, the Middle East, Africa and Europe across food categories such as tea, margarine and ice-cream. He is passionate about delivering sustained customer delight through powerful, value-based brands.

Ramanathan Hariharan or ‘Ram’, as he is popularly known, is a Board Member of the Landmark Group, one of the largest retail and hospitality conglomerate with operations in the Middle East, North Africa and India. He has been a part of the Landmark Group since 1994 and his strength lies in retail concept development and building large profitable business models. Ram is at the forefront of formulating strategies and overseeing Landmark Group’s investments in India. He also spearheads the Group’s value fashion business and is responsible for its growth and success.

Saurabh Sanyal is a professional with over 33 years of experience in Armed forces and corporate. He is an engineer and a post graduate from IIT Madras. He has done his Masters in Disaster Mitigation and is also an MBA. Mr Sanyal hung his boots prematurely as a Colonel from Army Headquarters, New Delhi. He has participated in active service in Counter Insurgency Op Rakshak in J&K, Op Parakram, Op Bajrang and Op Rhino in the Northeast and was commended by the Chief of the Army Staff twice in 1994 and 2005 for distinguished service. He has been planning and implementing projects in infrastructure at national and international levels in Construction, Power /Energy sectors in Africa, SAARC countries and across India. He presently works with the PHD Chamber of Commerce and Industry. He served as ED since May 2013 and is now the Secretary General of PHDCCI. He has been a member of the Indian Building Congress, Indian Road Congress, and the Institution of Engineers. He is a keen sportsman and an avid golfer.

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CONTRIBUTORS

Om Prakash Khanduja is a marketing veteran with over 30 years of experience with FMCG majors like DS Group, Dabur, Pepsi, and Baidyanath. Currently, as the Associate Business Head at DS Group, he leads the Foods Division under the brand ‘Catch’. He is an expert in strategy formulation, managing sales and distribution, business development, supply chain management and channel development. He has successfully launched more than 50 products across various companies. Through effective innovation and implementation of corporate and business strategies and optimum deployment of resources, he has helped organisations in establishing a competitive advantage and augmenting top-line & bottom-line performance.

Ajay Katyal is a pioneer in the organic food sector and has over 24 years of management and leadership experience working in export oriented agri and food industry. He is currently President - Organics at Amira Pure Foods Pvt. Ltd. He is credited with establishing one of the earliest organic farming initiatives in India and taking it to global heights. As an independent development professional, he has successfully established a series of agri- business and specialty food ventures like organic farming project, seed production & contract farming initiatives, besides also establishing market linkage for these ventures with some of the top global food companies.

Oliver Mirza is currently Managing Director and CEO, Dr Oetker India Pvt. Ltd. He has more than 25 years of experience in the food business spanning across emerging and developed markets such as India, Germany, Austria, and the US. With strong roots as food-marketeer, he is known for his entrepreneurial approach to business.

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Rohan Kichlu is a global hospitality professional and is currently Director F&B, The Park Hotels. An MBA in Hospitality Marketing from Johnson and Wales University, he has a rich and varied experience in food and beverage management with operations of bars, restaurants, banquets, ODCs and kitchen stewarding operations.

Sougata Basu is Head of Marketing, Innovative Foods Ltd (Brand Sumeru) and he has held various planning and leadership roles with leading FMCG companies in the past. His exspertise include ensuring that appropriate structures, systems, competencies and values are developed in order to meet and exceed the goals of the marketing plan and to drive salience and consumer preference for the brand.

Sahil Gilani is Director Sales and Marketing, Gits Food Products Pvt Ltd. He is the the third generation entrepreneur in the 50 year old family run business of Gits Food Products. An MBA from IE Business School (Insiutito de Empressa, Madrid, Spain) & BBA in Business Marketing & Entrepreneurship from Northeastern University (Boston, USA) he has taken the brand to newer heights by foraying into the ready-to-eat packaged food category, strengthening the company’s distribution across India, using cutting edge sales force automation systems and leading the pan-India domestic sales of the company along with spearheading the advertising and marketing campaigns for the brand.

A.T. Kearney is a global team of forwardthinking, collaborative partners that delivers immediate, meaningful results and a longterm transformational advantage to clients and colleagues. Since 1926, it has been trusted advisors on CEO-agenda issues to the world’s leading organsations across all major industries and sectors. Its work is always intended to provide a clear benefit to the organisations that it works with, both in the short and long term. The consultancy focuses on its resources, leverages its global scale, and drives excellence in all it does while enhancing its partner-like culture to ensure it remains collaborative, authentic and forward-thinking.

Accenture is a global management consulting, technology services and outsourcing company, with more than 336,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$30.0 billion for the fiscal year ended Aug. 31, 2014. Its home page is HYPERLINK “http://www. accenture.com/home.asp”www.accenture. com. About Accenture Strategy: Accenture Strategy operates at the intersection of business and technology. It brings together capabilities in business, technology, operations and function strategy to help clients envision and execute industryspecific strategies that support enterprise wide transformation. The company focuses on issues related to digital disruption, competitiveness, global operating models, talent and leadership, which help drive both efficiencies and growth. For more information, follow @AccentureStrat or visit HYPERLINK “http://www.accenture.com/strategy” www. accenture.com/strategy.’

D’Essence Hospitality Advisory Services Pvt Ltd is Boutique Management Consulting firm based in Mumbai that provides specialty consulting services for the entire spectrum of the hospitality industry with a special focus on QSRs, Fine Dine Restaurants, Hotel and Resort Operators, Global Brand Owners, Service Apartments, Clubs and Cruises, Asset Owners, Food service Suppliers and Investors. It brings management and strategy consulting to the hospitality industry. It has worked on a wide range of hospitality projects with focused efforts on entry strategy for global brands seeking to enter India, local entrepreneurs seeking professional start-up help, domain reports, feasibility studies, concept designing, customer profiling, management contracts and joint ventures, partner search and M&A advisory. www.dessencehospitality.com

GS1 India is a standards organisation set up by the Min. of Commerce and Industry and Apex Chambers of Commerce and trade bodies, which include CII, FICCI, ASSOCHAM, FIEO, IMC, APEDA, Spices Board, IIP and BIS.  It is an affiliate of GS1 Global, Brussels which develops open, global Industry led standards & solutions across Industry sectors.  One of its focus areas is development and implementation of global and ISO referenced standards, which enable food safety and compliance with global regulatory and buyer requirements for SMEs and large food companies.

IIMA has evolved from being India’s premier management institute to a notable International school of management in just four decades. It all started with Dr Vikram Sarabhai and a few spirited industrialists realising that agriculture, education, health, transportation, population control, energy and public administration were vital elements in a growing society and that it was necessary to efficiently manage these industries. The institute had initial collaboration with Harvard Business School. This collaboration greatly influenced the institute’s approach to education. Gradually, it emerged as a confluence of the best of Eastern and Western values.

IMRB International works on defining the values of sound market research and insights through quality of data, robustness of design, analytical thinking and, most importantly, passionate researchers who enable an almost magical transformation of findings into strategic insights. Since its inception in 1970, IMRB has stayed true to these defining values and has continually been at the forefront of innovation in the Indian research industry. With over four decades of leadership in market research, IMRB is known as the “university of Indian market research”. IMRB’s spirit of innovation and constant endeavour to create value for clients has stood the test of time – from setting up the Household Purchase Panel in 1981 to development of the SEC system in 1991; from setting up internet research capabilities in 2001 to the launch of a slew of indigenously developed products such as iCrea8e – a state-of-art system for new product opportunity optimisation. Today, IMRB is a research organisation with a team of over 1500 researchers and analysts servicing clients through 53 offices in 18 countries.

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CONTRIBUTORS

India Brand Equity Foundation (IBEF) is a Trust established by the Department of Commerce, Ministry of Commerce and Industry, Government of India. IBEF’s primary objective is to promote and create international awareness of the Made in India label in markets overseas and to facilitate dissemination of knowledge of Indian products and services. Towards this objective, IBEF works closely with stakeholders across government and industry. IBEF’s efforts towards nation branding are aimed at promotion of both *Made in India* products and of India as a destination for business. The website www. ibef.org has emerged as an invaluable knowledge centre for global investors, international policy-makers and world media seeking updated, accurate and comprehensive information and insights on the Indian economy, states and sectors.

INTERNATIONAL FINANCE CORPORATION (IFC), a member of the World Bank Group, is the world’s largest development finance institution focused on the private sector. Working with private enterprises in about 100 countries, the institution uses its capital, expertise, and influence to help eliminate extreme poverty and boost shared prosperity. In FY14, it provided more than $22 billion in financing to improve lives in developing countries and tackle the most urgent challenges of development. Agribusiness is IFC’s strategic priority sector due to its high development impact, role in addressing global food security, and impact on environmental and social sustainability. IFC’s investment and advisory services help clients pursue commercially viable business opportunities at the base of the pyramid, and engaging the poor as producers, consumers, and workers. www.ifc.org

Institute for Competitiveness is the Indian knot in the global network of the Institute for Strategy and Competitiveness at Harvard Business School. Institute for Competitiveness is an international initiative centered in India, dedicated to enlarging and purposeful disseminating of the body of research and knowledge on competition and strategy, as pioneered over the last 25 years by Professor Michael Porter of the Institute for Strategy and Competitiveness at Harvard Business School. Institute for Competitiveness, India, conducts and supports indigenous research, offers academic and executive courses, and provides advisory services to corporate and governments. The institute studies competition and its implications for company strategy; the competitiveness of nations, regions & cities. It generates guidelines for businesses and those in governance; and suggests and provides solutions for socio-economic problems.

Maple Capital Advisors is a boutique investment banking platform specialising on India and India oriented cross border deal space. It works closely with owner managed companies and its key service areas are: Mergers & Acquisitions - Focusing on both sell and buy side, Joint Ventures, Alliances, Partnerships, it covers domestic and cross border markets with sectoral focus on Consumer Businesses, Manufacturing, Technology & Media, Healthcare and Energy/Infra supply chain Accelerator—Investing in and launching promising start-ups Private Equity - Working closely with PE funds and Advising on induction of equity or like instruments Leverage Capital - Advising on structured debt spectrum covering, acquisition financing, convertibles, special situations. E-mail: [email protected] or visit www.maple-advisors.com

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Nielsen N.V. is a global performance management company that provides a comprehensive understanding of what consumers Watch and Buy. Nielsen’s Watch segment provides media and advertising clients with Total Audience measurement services across all devices where content — video, audio and text — is consumed. The Buy segment offers consumer packaged goods manufacturers and retailers the industry’s only global view of retail performance measurement. By integrating information from its Watch and Buy segments and other data sources, Nielsen provides its clients with both worldclass measurement as well as analytics that help improve performance.  Nielsen, an S&P 500 company, has operations in over 100 countries that cover more than 90 percent of the world’s population. For more information, visit www.nielsen.com.

People Research on India’s Consumer Economy (PRICE) is a New Delhi based not-for-profit research centre on India’s consumer economy and citizen environment to guide public policy and business strategy with people-based, continuous, timely data driven facts and insights about today’s India. Its distinctiveness is that its insights are based on hard to come by proprietary primary survey based data (no mean job in a country as large and heterogeneous like India) on India’s consumer economy and what drives it - a 360 degree view on how Indians earn, spend, save, invest, live, think, access amenities and public goods, and consume. Its distinctiveness also lies in its ability to establish a linkage between economic and other policies and the state of well-being of various strata of people. It is a not-for-profit entity, which welcomes researchers from all disciplines and from all spheres of work, interested in this arena of work. Current research areas include role of gold in India’s consumer economy, and development of a comprehensive multidimensional index to measure inclusion levels of different segments of Indians. PRICE has completed its first pan-India survey (ICE 360 Survey, 2014). (For more details please visit www.ice360.in)

Technopak is India’s leading management consulting firm with more than 20 years of experience. Founded on the principle of “concept to commissioning”, they partner with clients to identify their maximum-value opportunities, provide solutions to their key challenges and help them create a robust and high growth business model. Drawing from the extensive experience of close to 150 professionals, it focuses on divisions like Fashion & Textiles, Retail & Consumer Goods, Education and Food Services and Agriculture.

Troika is a new age communication firm in the very exciting space of helping brands interact across various platforms. Troika is one of the very few marketing firms in India focused solely on textiles, fashion and lifestyle segment and has previously worked for CCI, BMW, Callaway Golf, Barista Lavazza and a number of other brands in this segment. Troika specialises in brand strategy and communication design for traditional as well as digital media.

Wazir specialises in advising Indian and International companies to conceptualise, create and compete in consumer-facing sectors. From Indian to International corporates, from Private Equity groups to family owned businesses, its work centres around enabling its clients make the right moves – from strategy, to implementation, to value delivery. Wazir has more than 400 man-years of cumulative team experience across industries, geographies and economic conditions. It leverage this to value add to give you that edge in your business. Powered by deep insights into Indian consumers, spread across age, social strata, gender and geography, Wazir puts the consumer at the centre of the decision making process and brings a unique outside-in perspective, imperative for success in a hyper competitive market. Industries it specialise in: The industries below have been Wazir’s primary focus for the past several years. Retail Packaged Consumer Goods Fashion & Lifestyle Consumer Electronics Beauty & Wellness Services Food & Beverages Automobiles Education Healthcare Financial Services

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THE INDIA FOOD REPORT 2016

THE INDIA FOOD REPORT 2016