Packaged Food Sales In India

January 2011

International Markets Bureau
MARKET INDICATOR REPORT | JANUARY 2011

Global Analysis
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INSIDE THIS ISSUE





EXECUTIVE SUMMARY

With a vast population base, growing middle class and strong macroeconomic growth, India has become one of the fastest-growing markets for packaged food in the world. India's packaged food retail sales grew an average of 11.5% annually during the past five years, with a compound annual growth rate (CAGR) of 12.93% between 2004 and 2009.

While only 30% of the population resides in urban areas, urbanization has become a trend in recent years and has changed how and when consumers eat their meals. This migration of consumers has resulted in new products boasting ethnic and or region-specific flavours, appearing on store shelves. The search for functional food items paired with the desire for instant gratification has caused solid growth in ready-meals, noodles and soup sales.

With the growth of modern retailing and the shopping revolution in India, there has been a radical shift in the Indian food industry. In addition, with the arrival of international fast food outlets in India, the food industry has experienced steady growth.

It is difficult for most regional packaged food companies in India to expand nationally, due to the country's underdeveloped infrastructure. Gujarat Cooperative Milk Marketing Federation Ltd (GCMMF) was the leader in the packaged food market, with an 8% share in 2009.


CONSUMER TRENDS

Higher income Indians prefer to shop at supermarkets because of convenience, higher standards of hygiene, and an attractive environment. As supermarket sales are forecast to expand at a much higher rate than other retail formats, the number of supermarkets in the country in 2013 is expected to exceed 10,000, up from below 7,000 in 2008. However, independent small grocers are expected to remain the leading retail channel.

There has been a growing focus on health and wellness in India in recent years. This was mainly influenced by the media, with increased television and radio attention on nutrition and health. This will result in a strong enthusiasm among consumers to shift to a healthier diet, and will see manufacturers keen to produce high-end, value-added products.

In a recent survey by Nielsen, Indians place a high priority on food safety, with 73% agreeing that certain countries provide safer food than others. However, local preference is strong, with 65% of Indians agreeing that food grown in-country is safer than imported food.

Changing lifestyles, coupled with a growing middle class, are anticipated to support 7% to 10% growth in the Indian foodservice sector annually. To address the demand for convenience foods, manufacturers have begun introducing products that reduce the preparation time of home-cooked meals. An example is Unilever's Knorr brand of wet and dry sauces. Furthermore, as more women start to pursue careers in the cities, they have less time to fulfill the traditional role of cooking at home. Microwaveable/oven ready-meals that include rice/paratha are appearing on store shelves. Increasing packaged food consumption is a trend that is expected to maintain forward momentum.

Urban areas experienced 14.4% growth in the packaged food market in 2008/09.


ECONOMIC TRENDS

  • Packaged food sales in India increased 16% in 2008, reaching US $15 billion in value terms; however, in 2009 sales grew only 14.4% to a total of US $17 billion. In 2009, the Indian food sector experienced constant increases in the price of food products. However, for 2010 to date, the food market has seen a steady drop in the prices of essential commodities. Products highlighting health, such as energy bars and drinks, digestive biscuits, and healthier edible oils have grown in popularity, as have private label products.
  • Based on current data, the top five fastest-growing sub-sectors from 2005 to 2009 are: soup, with a CAGR of 21.6%; ice cream, with a CAGR of 21.2%; noodles, with a CAGR of 19.4%; ready-meals, with a CAGR of 17.3%; and confectionery, with a CAGR of 15.6%. For 2009, soup sales equalled US$24.2 million, ice cream sales totalled US$416 million, noodle sales reached US$377.4 million, ready-meal sales equalled US$14.4 million, and confectionery sales reached US$1,203.3 million. Urbanization has become a major trend in India and this has increased demand for this segment, as people become accustomed to faster-paced lifestyles and have less time for traditional Indian home-cooked meals. Packaged food, therefore, is replacing loose staples in the Indian diet.
  • India's rise in income has turned it into one of the largest consumer markets in the world. Food is the biggest consumption category in India, and accounts for 31% of the average consumer's budget. The exception is Delhi, where consumers spend 37% of their monthly budget on food. By 2013, Indian consumers are expected to spend almost US$357 billion on food. The Indian food industry is expected to reach US$258 billion by 2015.
  • There is a large divide between urban and rural consumers in India. Urban residents consumed 76.7% of all packaged food in 2009, while rural residents consumed just over 23.6%.
  • East and Northeast India are the least developed areas of the country. Most of these consumers are highly price-sensitive, and the least likely to purchase packaged food. North India is the most populated and prosperous region. Consumers are well aware of fashions, trendy foods and brands. South India is also a well-developed region, but most consumers are conservative about shifting to packaged food and prefer traditional foods.
  • The end of 2009 saw Wal-Mart initiating a development program with 65 farmers in Punjab, which could be the precursor to contract farming in the country. These farmers currently supply 16 vegetables to the company's stores on a daily basis.
  • To curb losses of agricultural food items from farm-to-table, the Indian Government has taken steps in 2010 to improve the food processing industry, strengthen the post-harvest infrastructure and fill the gaps in the supply chain.
Market Size: Description of this image follows.
Description

India Packaged Food Market Size (US$ millions): 10230(2005), 11425(2006), 13166(2007), 15257(2008), 17447(2009), 20066(2010)

Source: Euromonitor International
NOTE: 2010 data estimate


REGIONAL TRENDS

EAST AND NORTHEAST INDIA

  • East India is one of the smallest consumer markets in the country. Factors such as limited access and economic activity have created a great disparity between urban and rural populations. Overall, this region accounted for only 17% of total value sales of packaged food in India in 2009.
  • Only a few cities, like Kolkata and Guwahati, have modern trade channels, restricting product availability to urbanites.
  • Milk cooperatives are the crown jewel of this region, with state dairy federations investing at the rural level to procure and re-distribute milk to the urban centres.

NORTH INDIA

  • These consumers were not immune to the global financial crisis, which influenced the growth of bulk purchasing. However, they are the greatest spenders in the country, and they want quality.
  • Consumer awareness of health and wellness in this region is driving demand for healthier foods.
  • Indian consumers prefer artisanal biscuit, cake and pasty products. Conversely, packaged bread products are more popular than their artisanal counterparts. In addition, these consumers are attracted to packaged food products that look rich and are considered indulgent items.

SOUTH INDIA

  • As in the north, south Indian consumers have embraced the health and wellness trend. Packaged food products that combine convenience with health benefits are performing well.
  • New industry and business operations are creating more adventurous consumers with money to spend. These modern consumers are more knowledgeable about private label products, however, they still favour better-known regional and national brands. The south Indian region also possesses a greater conservative and middle-class demographic than any other region.
  • Kirana stores constitute close to 75% of total sales in southern India, with modern trade outlets owning 10-15% of market share.
  • The packaged food market in South India was largely driven by loose and unbranded goods, especially in niches such as rice and oils and fats. This trend is slowly changing due to the price differences between branded and unbranded goods, increasing purchasing power, and increasing awareness. These consumers now focus on quality as much as price.

WEST INDIA

  • Western India has maintained its position as the dominant region with the largest share of value sales in 2009. Though housing the smallest Indian population, the consumers in this region are the most sophisticated and affluent, with global trend awareness. Mumbai is the largest city with a diverse mix of ethnicities.
  • The global financial crisis was felt the most in West India due to its position as the financial and commercial hub of the country. With modern trade retail space, incentives like product promotions, price cuts and special discounts are often implemented.
India Sales of Packaged Food by Region in 2009
East and Northeast 17.4%
North 28.8%
South 25%
West 28.5%

Source: Euromonitor International


URBAN AND RURAL TRENDS

URBAN

  • Urban areas accounted for 76.7% of packaged food sales in India, reaching US $13.1 billion in 2009.
  • Urban areas experienced 14% current value growth of the packaged food market in 2008.
  • India's urbanites are seen as more sophisticated consumers and are open to non-traditional food.
  • India's urban population consumed over 90% of the soups, ready-meals, canned/preserved, and frozen packaged food. Convenience and ease of preparation are the most sought-after packaged food value proposition, by the typical urban consumer.
  • The more educated urban consumer is more receptive to advertising campaigns. Packaged food manufacturers find television and billboard advertising to be effective, reaching a greater audience that is less brand loyal and more easily enticed.

RURAL

  • Rural India accounted for only 23.2% of packaged food sales in 2009. However, rural sales of packaged food have shown stronger growth in 2009, compared to urban areas. Big market players have recognized the untapped potential in rural areas and are developing strategies to address the current challenges associated with this demographic.
  • Rural consumers are more price-sensitive due to their lower income levels. Manufacturers have responded by providing economy products and smaller pack sizes with success. This strategy was particularly effective in the confectionery category and is being adopted by the sweet and savoury snacks categories as well.
  • Market players have focused on concentrating promotional programs in rural areas, this, combined with improved distribution capability, has somewhat insulated India from the global recession.
  • In 2008 rural areas achieved over 16% current value growth of the market for packaged foods.
  • Product value-adds or niche products are seen as unnecessary to the rural consumer, and do not appeal to them.
  • Sales of tried-and-true, traditional, artisanal products are higher in rural areas. Consumers show little intention to switch from these long-standing, familiar, and economical items. Artisanal players are strongest in rice, oils and fats, bakery products and dairy.
  • Much of India's rural population is illiterate, making it difficult to promote packaged food products.
  • Lifestyle consumption remains high in western India, as evident in the demand for high-end edible oils such as sunflower, groundnut and rapeseed.
  • In keeping with the health and wellness trend, all key players in the sector offer low-fat or probiotic items.
India Top 5 Packaged Food Category Leaders by Value—US $Billions
in 2009
Item Value Variance from 2008
Nutrition Staples 11.82 +1.48
Dairy 6.57 +0.95
Impulse and Indulgent 4.42 +0.59
Bakery 3.21 +0.34
Oils and fats 2.5 +0.23

Source: Packaged Food in India, Euromonitor International


PACKAGED FOOD TABLE

Forecast Sales Of Packaged Food by Sector % Volume Growth 2009-2014
  2013/14 2009-14 CAGR 2009/14 TOTAL
Confectionery 10.47 10.56 65.16
Baked products 3.84 4.45 24.34
Ice cream 12.16 14.64 98.03
Dairy products - - -
Sweet and savory snacks 10.28 10.96 68.17
Snacks bars - - -
Meal replacement products 7.90 8.89 53.09
Ready-meals 9.68 10.64 65.80
Soup 11.79 13.8 90.85
Pasta 9.39 10.76 66.68
Noodles 10.4 11.25 70.39
Canned/preserved food 9.83 9.39 56.66
Frozen processed food 7.95 7.49 43.47
Dried processed food 11.08 10.4 63.97
Chilled processed food - - -
Oils and fats 5.31 5.93 33.40
Sauces, dressings ans condiments 5.34 6.76 38.66
Baby food - - -
Spreads 4.64 5.31 29.55
Impulse and indulgent products - - -
Nutrition/staples - - -
Meal solutions 6.30 7.24 41.85

Source: Packaged Food, Euromonitor International


KEY MARKET SEGMENTS — DATA FROM 2009

NUTRITION STAPLES*

Sales value increased from US $10.4 billion, in 2008, to US $11.9 billion in 2009. Sales volume increased from 4.1 million tonnes to 6.5 million tonnes over the same period.

Forecasts for 2009-2014

Sales of nutritional staples are expected to reach US$17 billion by 2014 with a CAGR of 7.8% from 2009 to 2014. Dairy products were the biggest performers in this sector for 2009.

Main Sectors 2009

  • Dairy products had the highest sector sales at US$6.6 billion.
  • Oils and fats came in second with US $.2.6 billion in sales.
  • Bread rounded out the top three with US $1.08 billion in sales.

Main Producers and their Indian Brands

  • Gujarat Co-operative Milk Marketing Federation Ltd. is the leader in the oils and fats sector with 13.73% of market share in 2009. Their leading brand is Amul milk brand.
  • Nestle India holds a significant share of the market in second place with 5.42% share. They have many brands in various sectors.
  • Following closely behind Nestle with 5.02% of market share is Mother Dairy Fruit and Vegetable Ltd. Mother Dairy is their main brand.

*Nutrition staples include; bread, breakfast cereals, dairy products, meal replacement products, oils and fats, baby food, spreads, pasta, noodles, and rice.

IMPULSE AND INDULGENT

This sector's sales increased from US $3.8 billion, in 2008, to $4.4 billion, in 2009. Retail volume increased from 179.7 thousand tonnes to 198.2 thousand tonnes.

Forecasts for 2009-2014

In 2014 this sector is expected to be valued at US $7.4 billion with a CAGR of 9.7% from 2009 to 2014. Within this sector ice cream is expected to be the biggest performer with a CAGR of 14.64% over the same period.

Main Sectors 2009

  • The biscuit sector earned the most sales with US $1.8 billion, a 14% increase over 2008.
  • Confectionery sales were US $1.2 billion in sales, up from US $1.06 billion in 2008.
  • Sweet and savoury snacks took third place honours with US $690 million in sales, a 13% increase over 2008 figures.

Main Producers and their Indian Brands

  • Britannia Industries Ltd. was the sector leader in 2009, with 14.10% market share. Its leading brand is Britannia biscuits.
  • Parle Products Pvt Ltd. came in second, with 12.3% share of the market in 2009. The companies leading brand is their Parle snack item.
  • Cadbury India Ltd. was in third spot, with 9.37% share of the market in 2009. Its leading brand is their Dairy Milk bar.

DAIRY

This sector's sales increased from US $6.3 billion in 2008 to $7.5 billion in 2009, with year-on-year growth average of 18% since 2007.

Forecasts for 2008-2014

Cheese product sales are expected to reach a CAGR of 8.69% from 2009 to 2014. Drinking milk is forecast to reach a CAGR of 8.2% from 2009 to 2014. Other dairy is forecast to reach a CAGR of 5.5% from 2009 to 2014.

Main Sectors 2009

  • Sales of drinking milk products were US$5.8 billion, up from US$4.9 billion in 2008.
  • Yogurt and sour milk sales went from US$205.2 million in 2008, to US$275.9 million in 2009.
  • Other dairy took third spot in sales, with US$150.1 million, up from US$133.9 million in 2008.

Main Producers and their Indian Brands

  • Gujarat Co-operative Milk Marketing Federation Ltd. (GCMMF) was the leader in the market, with 14.6% share in 2009. Its brand is Amul cheese.
  • National Dairy Development Board came in second place in the sector with 11.4% of sales in 2009. Its Mother Dairy item is the companies top brand.
  • Karnataka Cooperative Milk Producers Federation Ltd. owns third place with 7.6% of sector sales. Its Nandini product is the company's leading brand.

BAKERY

Sales value increased from $3.3 billion in 2008, to $3.7 billion in 2009. However, sector growth has declined since 2007. Growth is listed as 13.5% in 2007, 10% in 2008, and 9.6% in 2009.

Forecasts for 2008-2014

This sector's retail value is forecast to reach US $1.6 billion in 2014, with a CAGR of 3.05% from 2009 to 2014. Unpackaged/artisanal bread was the most popular sub-sector followed by packaged industrial bread.

Main Sectors 2009

  • Bread products account for 78% of this sector's sales, reaching US $1.08 billion in 2009.
  • The cake sector came in second with US $268 million in sales for 2009, a growth of 11% over the previous year.
  • Pastries took third spot with US $33 million in sales for 2009, a growth of just over 10% from the previous year.

Main Producers and their Indian Brands

  • Within this sector, Britannia Industries Ltd is the leader with 22.8% of market share. Its Britannia product is the companies leading brand.
  • Parle Products Pvt placed second in the sector, capturing 19.4% of sector sales in 2009. The company's lead product is its Parle snack item.
  • ITC Group takes third spot with 6.8% of market share. Its Sunfeast product is their leading brand.

OILS AND FATS

Sales increased in value from US $2.7 billion in 2008 to US $3.1 billion in 2009. Sales for 2010 thus far are US $3.5 billion. The sector has shown an average growth rate of 11.2% since 2005.

Forecasts for 2009-2014

The oils and fats sector is forecast to reach US $3.7 billion in sales for 2014. Vegetable and seed oils will remain in the lead, with sales reaching US$2.3 billion, followed by cooking fat products with US$1.01 billion in sales, and butter with US$442 million in sales.

Main Sectors 2009

  • Vegetable and seed oils were the top performers for 2009, with sales of US $2.03 billion, up from US$1.77 billion in 2008.
  • Cooking fat products came in second with US $862.9 million in sales for 2009, up from US $804.5 million in 2008.
  • Butter was the next top performer in 2009 with US $174.9 million in sales, up from US $154.3 million in 2008.

Main Producers and their Indian Brands

  • Gujarat Co-operative Milk Marketing Federation Ltd is the market leader with 8.3% of share. The companies main brand is Amul.
  • Adani Wilmar Ltd. is tied for second place with 8.2% of market share. Their leading brand is Fortune.
  • Ruchi Group is tied for second place with 8.2% of market share. Its Ruchi product is their leading brand.

MARKET SHARE BREAKDOWN

India Packaged Food Company Market Share - % breakdown 2005-2009
  2005 2006 2007 2008 2009
Gujarat Co-operative Milk Marketing Federation Ltd 6.5 7.3 7.7 8 8
National Dairy Development Board 3.5 3.8 4.2 4.6 4.9
Nestlé SA 4.5 4.7 4.8 4.9 4.8
Britannia Industries Ltd 4.7 4.6 4.6 4.6 4.4
Parle Products Pvt Ltd 4.7 4.4 4.2 4.2 4.2
Cadbury Schweppes Plc 0 0 0 2.7 3
Karnataka Cooperative Milk Producers Federation Ltd 2.2 2.4 2.7 3 2.9
GlaxoSmithKline Plc 2.9 2.9 2.8 2.6 2.6
Ruchi Group 2.5 2.4 2.4 2.4 2.4
Tamil Nadu Cooperative Milk Producers Federation Ltd 1.8 2 2.2 2.3 2.3
ITC Group 0.9 1.2 1.7 2 1.9
PepsiCo Inc. 1.8 1.9 1.8 1.7 1.8
Adani Wilmar Ltd 1.92 1.7 1.6 1.5 1.5
Andhra Pradesh Dairy Development Cooperative Federation Ltd 1.6 1.5 1.6 1.6 1.5
Marico Ltd. 1.6 1.6 1.5 1.3 1.3
Unilever Group 1.1 1.1 1.3 1.3 1.3
Perfetti Van Melle Group 1 1.1 1.2 1 1.1

Source: Packaged Food, Euromonitor International


The Government of Canada has prepared this report based on primary and secondary sources of information. Although every effort has been made to ensure that the information is accurate, Agriculture and Agri-Food Canada assumes no liability for any actions taken based on the information contained herein.

Packaged Food Sales in India
© Her Majesty the Queen in Right of Canada, 2011
ISSN 1920-6615 Market Indicator Report
AAFC No. 11376E

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