Food industry of India

TABLE OF CONTENTS

INTRODUCTION.................................................................................................................................3

DIFFERENT SEGMENTS OF THE INDUSTRY................................................................................3

REASONS FOR HIGH GROWTH IN THE INDUSTRY....................................................................3

MAJOR COMPANIES IN THE INDUSTRY.......................................................................................4

ROAD AHEAD.....................................................................................................................................4

REFERENCES......................................................................................................................................5
INTRODUCTION

The food industry of India occupies a very important place in the country and food consumption
constitutes a substantial part of India’s consumption. It is interesting to note that consumers in other
countries spend a much lower proportion of their income on food and grocery. Also, in terms of
calorific content of the food, India can be considered to be the second largest producer of food in the
world, only after China. Currently, the industry is valued at US$ 39.71 billion and is growing at a
rapid pace of 11% CAGR [ CITATION Wol16 \l 2057 ]. With that rate, it is expected to reach US$
65.4 billion by 2018. The large size of the food and grocery market of India, makes it the world’s
sixth largest market and around 70% of its sales is contributed by retail [ CITATION Arn16 \l 2057 ].

DIFFERENT SEGMENTS OF THE INDUSTRY

The industry can be divided into different segments and major of them are – Food Processing, Spice
Trading, Dairy, Snacks and Confectionery, Food Chains and Restaurants and Beverages. Food
processing segment occupies a very important place in India and accounts for about 32% of India’s
food market and can be considered to be one of the largest industries in the country. The industry is
also considered to be the world’s fifth largest in terms of production, consumption, expected growth
and export [ CITATION Ver16 \l 2057 ]. Because of its high production, India also exports its food
produces and it accounts for 13% of India’s exports.

Most of the segment, i.e. around 90% of the food industry, however, is presently unorganized and is
highly fragmented. This actually inhibits large-scale procurement, retail sales and distribution. So,
what is requires is large-scale reforms in government procurement processes, tariff and tax policies,
which will thereby foster urban food delivery [ CITATION Sin16 \l 2057 ].

Another growing segment of this industry which has gained high momentum in the recent years has
been the online food ordering segment. It is still at a nascent stage, but showing very high exponential
growth. The main players that are driving this growth are Zomato, Swiggy, FoodPanda, TinyOwl etc.
who have built strong food delivery network in the country and forging vital partnerships with
restaurants and food chains [ CITATION Sah16 \l 2057 ]. In this way, they are fostering the transition
of unorganized food market of India into organized market.

REASONS FOR HIGH GROWTH IN THE INDUSTRY

As discussed earlier, the food industry of India is one of the fastest growing industries in the country.
The main reasons that can be cited for this stupendous growth in the industry in the recent years are:
  Increased urbanization: With the increasing development of the country, many small towns
have transformed into bigger cities and major cities becoming metropolitan cities. This has
led to increased urbanization in the country [ CITATION Fra17 \l 2057 ]. This in turn has
augured well for the growth of the food industry in India.
 Increasing working women population: With improvement in education and literacy in the
country, literacy rate of females have increased in the country, which has led to higher
proportion of women in the working population of the country. As a result of which, the
eating out culture of Indians have increased [ CITATION Hea16 \l 2057 ]. Also with both
members of family earning, the spending capacity of Indians has increased and they are
spending higher in food now. Both these factors have led to the growth of the food industry.
 Improvement of standard of living: The improvement in standard of living of Indians has also
added to the increased demand of food and more so in quality products
 Increase in number of supermarkets and malls: There has been significant increase in
supermarkets and malls all over the country. This has helped in making shopping for food a
very pleasurable experience
 Increased investment in the sector: Based on the huge potential of growth for the industry, it
has gained lot of attraction from domestic as well as foreign players alike. Even government
has started putting lot of focus in this industry and has aimed to boost growth in this industry
with recent reforms such as 100% FDI in marketing of food products [ CITATION Fie16 \l
2057 ]. Large global food players like Amazon, Cargill Inc., Mad Over Donuts, Danone SA
and even cab services operator Uber Technologies Inc. with its venture UberEATS, have huge
plans of investment in the growing food industry of India. Some of the foreign companies
have even successfully established backward linkages and are closely working with contract
manufacturers and farmers.

MAJOR COMPANIES IN THE INDUSTRY

The major companies operating in the food industry constitute of both domestic and MNCs. Some of
the big names in this industry are: ITC-Agro, HUL, Britannia, Godrej Foods, Nestle Ltd., Kelloggs
India, Cadbury’s India Ltd., Coca-Cola, MTR Foods Ltd. and others [ CITATION Meh17 \l 2057 ].
Since Indians like spicy snacks and delicious sweets, that is why many indigenous and foreign
companies have started selling food products in India that offer tastes in both traditional Indian and
overseas food recipes.

ROAD AHEAD
Despite of the huge growth potential in the industry, there are still many bulging gaps that have to be
catered to and many improvements that have to be incorporated in the sector to facilitate the growth of
the industry. Some of the steps need to be taken by the government, like reducing regulatory
complexity and enhancing food-testing capacity. Then the supply system has to be improved, along
with improvement in areas like warehousing, transit, cold chains, retail and processing which will
help in improving food security in urban India. So, lot of improvements and transformations have to
be brought into place so that the growing cities can be fed, because it is estimated that the urban
population may double in the next 40 years and the current food supply will not be sufficient for the
population then [ CITATION Shu16 \l 2057 ]. Thus, it is required that there should be targeted public
investments in this sector and a path should be created for the private sector to improve the state of
urban nutrition and create facility to meet the growing demand for food in India’s cities.

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