INDIA: OPPORTUNITIES IN THE CONSUMER FOOD SECTOR

The Indian food consumption stands at USD 230 billion and is expected to grow at a compounded annual growth
rate (CAGR) of 5.32%. The processed food segment, presently at USD 40 billion, is growing between 5%-7 %
CAGR opening up huge opportunities for investment across the entire value chain from farm to fork.
Consumption-led demand is driving this growth, where a majority is also from the emerging Indian food
service industry. The current size of the Indian food service industry is estimated to be USD 48 billion and is
projected to grow to USD 62 billion by 20181 riding on the back of expansion in the Indian hospitality segment,
restaurant and fast-food chains, stand alone eateries, etc.
Indias packaged food industry (including snacks and ready-to-eat foods) was approximately USD 15 billion
in 2012. It is further estimated to reach USD 30 billion by 20152. The main categories of packaged food are bakery
products, canned or dried processed food, frozen processed food, meal replacement products and condiments.
Some emerging new categories in this segment are processed dairy products, frozen ready-to-eat foods, diet
snacks, processed meat, probiotic drinks, etc. In a recent survey conducted by ASSOCHAM, it was revealed that
82% of the workforce, in some of the key metros, prefers packaged food compared to eating outside food or at
road-side eateries.
The estimated market size of the frozen food
industry in India is USD 330 million3. Frozen
vegetables and snacks together contributed more than
65% of the market share for the year 2012 and this is
expected to increase further to approximately 75% by
2017. Frozen vegetables (mostly French fries and other
potato variants) and frozen snacks (chicken wings and
legs, kebabs, etc.) together contribute more than 85% of
the volume share.
The growing number of nuclear families, an increase in household incomes and a significant rise in the number of
single working men and women in the past decade, has opened opportunities in the ready-to-eat (RTE)
segment. This is further aided with the penetration and availability of a wide variety of ready to eat products in
different packaging formats at various retail points. It is estimated that the meal-mixes food market in India will
reach approximately USD 500 million by 2015, with a penetration in 25 million households4. The RTE segment is
expected to continue recording strong growth during the forecast period, in-creasing in constant value at a
projected CAGR of 9%.
In recent times, while the palate share of the urban Indian remains still predominantly Indian, the wallet share is
becoming more generous towards imported food products. It is estimated that by 2015-2016, the share of the
rich (households with annual income above USD 24000) will rise from negligible to about 13%, whereby
consumption will be driven by the age group in the range of 25-55 years.

1
2

Source: National Restaurant Association of India (NRAI)

Source: Associated Chambers of Commerce and Industry of India (ASSOCHAM)

34

Source: T&A Consulting

The market for high end imported food products is estimated at over USD 4.5 billion per annum with nuts, dried
and fresh fruits and vegetables accounting for nearly half of it and is growing at over 20% per annum with certain
categories growing at over 40%5.
The sales at fine food and gourmet store chains in India like Godrej Nature's Basket, Food Hall, Le-Marche in
addition to online shopping portals like www.localbaniya.com, www.bigbasket.com,
www.ekstop.com,
www.gourmetfoodindia.com - reflect increasing demand for specialty imported foods, fuelled by a growing
middle-class with rising disposable incomes
However, the imported food segment in India carries a
perception of luxury and is perceived by the
government as something which is of interest to a very
small minority of the population and restricted to large
urban centers especially New Delhi (NCR), Mumbai
and Bengaluru. Presently, labelling laws are causing
hurdles for importing food and beverages but this
problem is expected to be resolved by the newly
appointed NDA government in the near future.
The imported food market in India can be further divided into beverages (including energy drinks), dairy
products, cereals and nuts, rice, pasta and noodles, snacks and packaged food, jams, dips and sauces, oils, pickles
and canned food, meats and cold cuts, desserts and confectionery.
Category

Major source of Imports

Growth p.a.

Pasta

Italy, Canada, Japan, Indonesia, Mexico, Singapore, UAE

30%

Cereal
products
Olive oil

USA, Germany, Australia, UAE, UK

70%

Italy, Spain, Turkey, Greece

60%

Wine

Australia, France, Italy, USA, Chile, South Africa

Chocolate
products

Switzerland, China, Taiwan, Argentina, Germany, UAE, USA, Belgium

100%
25%

The preferred route for specialty imported food products to enter the Indian market is through
importers/distributors (preferably multiple based on geographical coverage). Such firms can help in product
awareness building through in-store promotions, sample testing and demonstrations, educating customers on
various usages of new food products, etc. On the other hand, the foreign principals usually provide support
through financial incentives, customizing packaging, promotion materials, exhibition co-participation, etc.).
Presently, the Indian importer is still a relatively small promoter-led company with limited bandwidth and
resources towards investing in building a brand in the country. Typically Indian importers look to the principal
towards sharing part of brand awareness expenses in the initial years at least.
Key growth drivers of the Indian food industry are:
Increase in nuclear and double households with disposable incomes seeking convenience in cooking.
Increasing penetration of organized retail in rising awareness and availability.
Changing urban lifestyle (awareness and adoption of western living and eating habits) as well as larger freezer
space in refrigerators.
Ease of "preparing" snacks, which are otherwise difficult to prepare at home, e.g. ready-to-eat.
Increasing concern of preference for hygienic food options, especially in non-vegetarian.
Rising NRI/expatriates/students studying abroad and tourist traffic.
Growth in the hotel, restaurant and catering (HORECA) segment.

Source: T&A Consulting

2/3

When looking at insights into the food retail market in a large country like India it is very important to keep in
mind local consumer behavior, geographical attitudes towards cuisine and perceptions toward food products,
seasonal climatic conditions, available logistic infrastructure, regulatory framework, etc.

3/3