Food processing sector has emerged in India as the high-growth and high-profit sector due to its immense potential for value addition.
The Govt of India is making all out efforts to encourage investments in food processing and already approved proposals for joint ventures, foreign collaborations, industrial licenses, and 100 per cent export oriented units. Food processing sector has emerged in India as the high-growth and high-profit sector due to its immense potential for value addition. Hence large a number of multinational companies are drawn towards establishing their food processing industries here and the present government is lending an all-out encouragement to them in allocation of copious funds and streamlining the policy guidelines most favourable to them. The food industry in India is currently valued at US$ 39.71 billion (2,552,519,090,000 Rs) and is expected to grow at a compounded annual growth Rate of 11 per cent and to US$ 65.4 billion (4,203,846,600,000 Rs) by 2018 (at exchange rate as on 16th July ‘17).
As per Govt’s report ( https://www.ibef.org/industry/indian-food-industry.aspx) the Indian food and grocery market is the world’s sixth largest, with 70% retail sale contribution which is expected to reach Rs 61 lakh crore by 2020. The Indian food processing industry accounts for 32 per cent of the country’s total food market ranked fifth in terms of production, consumption, export and expected growth. It contributes around 14 per cent of manufactured Gross Domestic Product, 13 per cent of India’s exports and six per cent of total industrial investment. Indian food industry is expected to reach US$ 78 billion by 2018. The gourmet food market is currently valued at US$ 1.3 billion and is growing at 20 per cent rate. The organized food business in India is worth US$ 48 billion, of which food delivery is valued at US$ 15 billion. Online food delivery players like Food Panda, Zomato, Tiny Owl, Swiggy and several other companies have grown at 150% with an estimated gross merchandize value of US$ 300 million in 2016.
According to the data provided by the Department of Industrial Policies and Promotion, the food processing sector in India has received around US$ 7.47 billion worth of Foreign Direct Investment during the period April 2000-December 2016. The Confederation of Indian Industry estimates that the food processing sectors have the potential to attract as much as US$ 33 billion of investment over the next 10 years and also to generate employment of nine million person-days. Some of the recent major foreign companies investing in this sector are the following ( https://www.ibef.org/industry/indian-food-industry.aspx) . Due to shortage of space here I am mentioning only ten companies out of seven dozen foreign companies already entered into Indian Food processing sector. Many more are expected to join the same.
1. US-based multi-million food company Cargill Inc, aims to double its branded consumer business in India by 2020, by doubling its retail reach to about 8,00,000 outlets and increase market share to become national leader in the sunflower oil category which will help the company to be among the top three leading brands in India.
2. Di Bella, the Australia-based coffee chain, plans to invest Rs 67 crore (US$ 10 million) for setting up around 20 new outlets in Mumbai, besides entering Delhi and Bangalore by 2017.
3. KKR & Co LP, the US-based private equity firm, plans to invest about Rs 520 crore (US$ 77.38 million) in dairy company Kwality Ltd, which will be used to strengthen its milk procurement infrastructure and increase processing capacity.
4. Mondelez International, the US-based confectionery, food, and beverage major, inaugurated its new manufacturing plant in Andhra Pradesh set up for Rs 1,265 crore (US$ 190 million), with an annual production capacity of 2,50,000 tonnes.
5. Pure Circle, a Malaysia-based natural sweetener producer, plans to invest around Rs 1,300 crore (US$ 200 million) in India to set up a manufacturing plant and make the country its regional production and export hub in the next five years.
6. Swiggy, a food delivery start-up owned by Bundl Technologies Private Limited, has raised Rs 230.34 crore (US$ 33.80 million) in a Series C funding round, with its existing investors SAIF Partners, Accel Partners, Norwest Venture Partners and Apoletto Asia Ltd contributing 79 per cent of the new funds raised.
7. Gujarat Cooperative Milk Marketing Federation (GCMMF), popularly known as 'Amul', plans to invest Rs 5,000 crore (US$ 733.6 million) to establish ten new processing plants as well as expand the current capacity to touch 32 million litres per day (MLPD) capacity by 2020.
8. Private Equity (PE) firm India Value Fund Advisors (IVFA) plans to invest around US$ 100-150 million in the food business in India over the next two years.
9. Zomato, a restaurant search and discovery platform, has raised US$ 60 million from Singapore government-owned investment company Temasek, along with existing investor Vy Capital, in order to explore new business verticals.
10. ITC Limited plans to invest Rs 800 crore (US$ 117.4 million) to set up a world-class food processing facility in Medak, a district located in Telangana. The company has also formulated plans to enter the dairy market.
There are already 56 major Indian companies in food processing business; many more are in the pipeline ( https://www.ibef.org/industry/indian-food-industry.aspx) . For samples some of the major Government initiatives are listed as follows.
1. In Union Budget 2017-18, the Government of India has set up a dairy processing infra fund worth Rs 8,000 crore (US$ 1.2 billion).
2. Union Budget 2016-17 proposed 100 per cent FDI through FIPB (Foreign Investment Promotion Board) route in marketing of food products produced and manufactured in India.
3. The Government of India has relaxed foreign direct investment (FDI) norms for the food processing sector, allowing up to 100 per cent FDI in food product e-commerce through automatic route.
4. The Food Safety and Standards Authority of India (FSSAI) plans to invest around Rs 482 crore (US$ 72.3 million) to strengthen the food testing infrastructure in India, by upgrading 59 existing food testing laboratories and setting up 62 new mobile testing labs across the country.
5. The Indian Council for Fertilizer and Nutrient Research (ICFNR) will adopt internationally best practices for research in fertilizer sector, which will enable farmers to get good quality fertilizers at affordable rates and thereby achieve food security for the common man. (As usual it is done through subsidies (in prices) which will go directly to the companies in the farmer’s name)
6. The Government of India allocated Rs 1,500 crore (US$ 225.7 million) and announced various measures under the Merchandise Exports from India Scheme (MEIS), including setting up of agencies for aquaculture and fisheries in coastal states and export incentives for marine products.
7. Government of India plans to allow two Indian dairy companies, Parag Milk Foods and Schreiber Dynamix Dairies, to export milk products to Russia for six months, after these companies got approval for their products by Russian inspection authorities.
8. Ms Harsimrat Kaur Badal, Union Minister for Food Processing Industries, Government of India inaugurated the first of its kind Rs 136 crore (US$ 20 million) mega international food park at Dabwala Kalan, Punjab.
9. FSSAI has issued new rules for importing products, to address concerns over the entry of sub-standard items and simplify the process by setting shelf-life norms and relaxing labeling guidelines.
10. The Ministry of Food Processing Industries announced a scheme for Human Resource Development (HRD) in the food processing sector. The scheme has the following four components:
o Creation of infrastructure facilities for degree/diploma courses in food processing sector
o Entrepreneurship Development Programme (EDP)
o Food Processing Training Centres (FPTC)
o Training at recognized institutions at State/National level
11. The Ministry of Health and Family Welfare has issued the Food Safety and Standards, 2011, which prescribe the quality and safety standards.
12. Spices Board, set up by the Ministry of Commerce to develop and promote Indian spices worldwide, aims spice exports of US$ 3 billion by 2017.
13. The Government of India has approved the setting up of five numbers of Mega Food Parks in the states of Bihar, Maharashtra, Himachal Pradesh and Chhattisgarh. The Government plans to set up 42 such mega food parks across the country in next three to four years.
(Published on 14th August 2017, Volume XXIX, Issue 33)