Changing Face of Indian Food Industry

Changing Face of Indian Food Industry

By:

Vijay Sardana[1]

India is a country with 1270 million people. All are consumers of food. With growing income and growing awareness about health and nutrition, urbanization, women education and exposure to other food cultures are bound to change the food habits.

In the last few years’ dynamic changes have occurred due to the fast growing economy, education and communication explosion. A shift from conventional to modern technologies, localization to globalization, small cottage industries to large scale industrialization, constant travels across the world, evolving tastes and increased demands for convenience and time saving processed foods, from mom and pop stores to supermarkets throughout the country are some of the factors impacting food businesses in India.

India is also complex society with various traditions and value systems. On the one hand, we have poverty and hunger causing mal-nutrition and undernutrition and related disorders while on the other hand, a substantial increase in the intake of fats, salt, sugar and refined foods leading to over-nutrition related disorders such as obesity. Urbanization is also adding to life style diseases.

In the Bhagvad Gita, Lord Krishna has mentioned that “foods which promote life, vitality, strength, happiness, and satisfaction, those which are succulent, nourishing, and pleasing to the heart are satvic in nature, and form the basis for a healthy life.”

Whole grains and grams, limited intake of refined foods, plenty of veggies and fruits, traditional/blend of oils, and freshly prepared foods are the cornerstones of health and well-being. The changing society has also offers huge opportunity for investor s to bring new and better ideas to service the largest food market with most diversified options in the world.

Most of the processed food items launched in India are either rich in carbohydrates like wheat, sugar, potatoes or in salt and edible oils. Economically, these are the cheapest source of raw materials to create processed products but their nutritional significance is now under debate.

Why many existing companies facing tough time?

As per a recent study among stakeholders of the rice industry in Haryana and Punjab, many families owned rice units have been closed down or have been sold off to MNCs. 

This was the writing on the wall. Most of the exiting companies have trading background and they developed backward integration to maximize the profits. There was no concept of customer service, innovation and strategic thinking in these companies. Majority of them through industry associations looked at government incentives and policies to maximize profits and for survival during tough time. They invested more time and effort on lobbing with policy makers in place of understanding customer needs, changing market dynamics and changing aspirations of consumers. Lack of investment in people and technology made these units outdated in performance and thinking. The recent shakeup of the food industry is due to lack of leadership in existing industries segments. This trend will continue for few more years.

In the past few years, a similar trend has been visible in the edible oil, biscuits and dairy sectors too, where fewer brands are now dominating the market and the smaller ones have become their franchise units. The changing retail space will also impact this trend. There will be consolidation of industry in coming years and after that due to increased penetration of e-commerce, market will start fragmenting again and customized products will attract the better profits than mass production systems.

100 per cent FDI in food retailing will help small entrepreneurs to develop innovative products which will help retailers to differentiate their product offerings from others. This is a good trend and will improve supply chain and innovation in food systems. a laudable move?

What existing units should do to revive their businesses?

Value addition and branding are the key factors to survive in the market. Branding must ensure trust and quality about the product. Most of the product filed in the market when claims were not backed by the quality in the product. While preparing for claims, management must ensure the supply chain and product integrity. It is common observations when brand starts getting attention in market place, many promoters due to greed and shortsightedness have tendency to dilute the quality of products to maximize the profit. This suicidal decision is also one of the main reason of sudden rise and fall of the many good products in the market.

The lack of professionalism, lack of planning and lack of service to consumers are the major reason for poor growth rate of majority of food companies mainly in small and medium companies.

Start-ups have bright future provided they stick to the basics:

Regulatory regime and social media will act as catalyst in weeding out bad suppliers and bad products from the market place. This will create space for many new start-ups. Most of the start-ups and new investments are based on the either good product idea of good service model or both. Promoters of the start-ups must remain focused on innovation and customer service by developing effective execution plan. Me-too concepts with an eye on valuation will not succeed. Innovations are the way forward. Retailers will support new ideas to increase customers’ footfall in their stores. Growing awareness about nutrition, quality and food safety will influence all new developments in food space. Let us look at expected changes in the food market in coming days.

Growing trend of healthy grains:

Millets grown locally such as jowar, maize, bajra(pearl millet), finger millets (ragi) were grown along with legumes. Millets are the storehouses of macro and micronutrients. They have higher contents of calcium, iron, phosphorous, and magnesium than rice or wheat. They are also high in fibre, low in fat, and are gluten free. They have the potential to reduce blood cholesterol and sugar and are hence considered good for chronic diseases such as diabetes, heart disorders, etc. Traditionally, millets and wheat were unrefined, and rice was hand pounded and parboiled ensuring better retention of vitamins, minerals, fibre, and a host of useful phytonutrients such as antioxidants. Modern technology and changing lifestyle is creating demand for traditional items but in refined and presentable form.

Cereal products will drive investments in food sector:

Traditionally, home-made food was the established concept in India. Wheat and rice were the stable grains. Due to growing population and limited agriculture technologies, there was shortage of basic food in 1960s. The ‘Green Revolution’, was launched to support eh rising demand of grains and to ensure self-sufficiency in cereal grains and reduced hunger. The green revolution mainly emphasized on staple cereal grains, especially wheat and rice, to reduce hunger. This resulted in a shift in the dietary patterns. Minimum Support prices to farmers for wheat and rice production promoted wheat and tice consumption at large scale. Traditional grains were reduced in diets. This neglect affected the output of millet and pulse productivity. The staple food of Indians soon shifted from millets to rice and wheat.

After the agriculture revolution, the wave of ‘rapid industrialization’ changed the scenario further. Due to the requirement for higher grain output and better shelf life, cereals were milled, polished, and processed. The first processing industry in India were wheat and rice milling industry. The intake of polished white rice and refined wheat flour eventually resulted in loss of fibre and micronutrients from our diets.

Most baked food items include wheat as part of its ingredient. It is high time when we should devote out time and energy for rice and millet based products because of growing demand in urban centers. Cereals will remain the major part of Indian diets and this sector should get maximum attention because of volume and consumption habits.

Nutritional demand revolutionizing the dairy sector:

Milk and milk products are integral part of Indian dietary habits. After the basic food security focus turned towards nutrition security. Milk by itself is a wholesome food and helps in building bones and is essential for growth and development. The ‘White Revolution’ by the National Dairy Development Board (NDDB) in the 1970s made milk and other dairy products easily available to the community.

Milk and milk products are integral part of Indian cooking system. The usage of ghee, butter, paneer, and cheese enhanced the diet especially of the urban Indians. At the same time there is huge wastage of by-products due to fermented small scale manufacturing. Lately milk is getting lot of attention from investors and consumers. This is one sector where lot of innovation is required. It will be ideal to explore milk and grain based combinations to enhance nutritional intake at low cost.

Growing income creating demand for edible oils:

The change in the diet pattern due to growing income created demand for fat intake in the population. The ‘Yellow Revolution’ in oilseeds was introduced to meet the growing demand for edible oils. Unfortunately, the demand outstripped the oilseed production. The ‘Industrial Revolution’ added to the changing food patterns in the country by introducing bakery food items prepared from hydrogenated fats (vanaspathi) and trans fats – major culprits that cause cardiac disorders and insulin resistance.

The imported edible oil and refining also impacted the consumption profile of edible oils in India. Traditional edible oils like groundnut oil, sesame oil are making way for low cost soybean, palm and other oils.

Lately there is growing awareness about type of oil in the diet. Consumers are demanding healthy options. Blended oils are becoming common in order to balance the nutritional demand. Oil based products like margarine, low fat bread spreads and similar oils, fats and shortenings are gaining ground in kitchens and in bakery industry.

Demand for sugar is growing:

Sugar is the cheapest source of calories. Higher production of sugarcane and a rise in sugar industries led to the production of sugar confectionaries, candies, and sweetened aerated beverages resulting in the consumption of “bad” calories.

Sugar based confectionary is common among kids but this sector needs new ideas and innovations to meet the healthy options for consumers.

Demand for health diet will focus on horticulture products:

Due to lack of focus on fruits and vegetables in diet and other high fiber perishables, the intake of colourful green, yellow, and orange vegetables and fruits is becoming pitiably low due to their high prices, perishability and seasonality. There was an urgent need to ensure balanced diet for all mainly to address the micro nutrient deficiency. According to nutritionists, our intake of these power packed items should ideally be around 500g/day/person.

There is growing demand for hygienically handled and packed greens and other perishables in affordable formats.

Convenience is key driver for the processed food market:

Many processed and convenience foods, which were homemade till few years back are now available in market in attractive packaging.  While processed and convenience foods have entered the market targeting the youth with energy dense and salty snack foods. The focus on healthy options are yet to emerge.

Emerging innovations are focusing on health and wellness:

The erosion of the “healthy diet” as an outcome of modernization and industrialization has led to the development of dietary supplements and functional foods. Functional foods are those that contain components (which may or may not be nutrients) that affect a limited number of functions in the body in a targeted way so as to have positive effects on health. They could also have a physiological effect that extends beyond the traditional nutritional effect. However, dietary diversification is the best approach as Nature knows what is best for mankind. Some of our traditional food items contain functional ingredients, which play a major role in the prevention of diseases and promotion of health.

There is no alternate to safe food:

Pharmacological and technological advances cannot replace healthy diets and physical activity as the means to safeguard against both under and over nutrition. It would be worthwhile for us to consider going back to our traditional diets for controlling the modifiable risk factors (diet and physical activity) and tackling the emerging epidemic of chronic diseases.

What investors’ can do?

Food is not just a diet but also expression of social and personal affection in Indian families. It is important for them to understand these social dimensions of food and diets in Indian society. It will be sensible to address the latent need of convenience, nutrition and saving of time and efforts without disturbing the social fabric to get wider acceptance.

Seasonality, very high agro-climatic diversity, fragmented distribution system, evolving infrastructure and traditional markets are some of the challenges which any investor has to factor in while planning investment in India.

Livestock products like poultry, meat and fish are still in very initial stage of development. Modern technology, food safety and convenience options can be a starting point for these sectors.

India offers huge opportunity and food market is growing faster than any other sector in the Indian economy. With high growth projections, growing working class and better exposure with external world through travel and internet will increase the growth rate of processed food market.

All major food brands are already in India and they have modified their approaches with time to adapt to the ground reality. Now, Indian market is ready for innovation. If your business plan is logical and product selection is sensible, Indian food market will never disappoint you.

In case author can be of any help to you, please feel free to contact.

---

[1] Leading International Agri-food business & Bio-economy Expert, Blog: “Vijay Sardana Online” , Email: Sardana.vijay@gmail.com