India to emerge as world market for food

       New Delhi: Influenced by the changes in the consumer demand, supply-chain dynamics and marketing interventions, India is emerging as a major world market for retail sales of foods, says the CII-AC Nielsen ORG-MARG Report on Foods and Beverages - Challenges and Opportunities in the Indian Market. "The foods sales have contributed a staggering 72 percent to incremental FMCG value in 2004 over 2000 - most of which has come from packaged basics like cooking oils, atta, rice, and ghee- indicating an overall upswing in the commodity -to branding movement," the report said.

     According to the CII Report, the most significant change in the marketing environment in recent years has been the advent of modern format stores (MFS). Though MFS accounts for only three percent of FMCG sales, they have been increasing at a CAGR of 15 percent in the last five years. Even without major reforms, it is expected that 2010 will see a 10 percent contribution by modern trade to all FMCG - in metros, this figure is expected to be 30 percent. The report says that modern retail currently contributes to 29 percent of cheese, 23 percent of breakfast cereals, 21 percent of squashes and 20 percent packaged rice. Though the throughput per store is declining, the number of traditional retail stores is growing rapidly, and the trend is likely to continue for the next 3 years - by 2007, the number of stores is likely to be 7.8 million. The bulk of the growth will come from grocers and paan-plus stores. The CII Report points out that one of the biggest opportunities in food in the coming years is likely to be the Quasi Meal, because there is a greater openness to experimenting- fewer 'rules' since the most important role of eating a full meal has already been broken. "There is a need for a combination of convenience, hygiene, variety and value not all of which are readily available today," the report observes. The CII report says that the Indian palate has become distinctly more indulgent over the last few years. Snacking and indulgence is on the rise thanks to the factors like: more affluence, a younger population, more permeable borders resulting in greater western influence and so on.

       The report points out that the rise of working women is likely to be one of the most significant factors altering the foodscape in India. The working women create a second disposable income in the family but also opt for convenience out of sheer necessity and the freedom to make choices, it adds. The opportunities for specialty ready-to-eat meals and culinary aids that help with preparation of regional specialties seem to be emerging, albeit in a very small way. Freshness is critical to the Indian consumer, which has been one of the key dampeners to the market for processed / packaged vegetables. The Report says that there exist considerable opportunities in packaged water, fruit based beverages, dairy based beverages - fresh/chilled flavored milk and lassi. Packaged water, which has already shown tremendous growth, is likely to be further fuelled by growing concerns about hygiene and purity. The trend towards health consciousness and the increasingly 'mobile' lifestyles are also creating opportunities for healthy/filling beverages to accompany quasi-meals/act as fillers on their own.

       There is potential here for fruit juices, milk/yogurt based beverages as well as ready-to-drink healthy beverages. The real bottlenecks are the processing levels in India, which continue to be extremely low - around two percent in fruits and vegetables, 14 percent in milk, 4 percent in the fishery sector, one percent in meat and poultry products because of various factors including: poor infrastructure with respect to transportation, storage and handling; lack of adequate quality control and testing systems; lack of process-able varieties of farm produce; seasonality of raw materials; high inventory carrying cost; high taxation and high packaging cost. The report also says that the media expenditures across categories reveal that spends on food relative to other categories have been stagnant and even declining over the last couple of years.
-Nov 21, 2005