Indian middle-class is looking for premium brands

German Engineering Federation (VDMA) in India strengthens Indo-German economic relations in different engineering sectors. It promotes the activities of VDMA member companies in India. Among its various activities, it maintains close relations with the Indian industry, Indo-German companies, embassy and consulates and various Indian industry associations, particularly CII, FICCI, EEPC, ASSOCHAM, FIEO, CAPEXIL, ICC, and IGCC. Its activities has led to closer co-operation between specialised associations within VDMA and the equivalent Indian associations. The office also offers assistance to individual member companies in identifying potential partners in India. In an email interaction with Anurag More, Rajesh Nath, VDMA India, spoke about the packaged food industry in India, emerging trends and more. Excerpts:

How has the packaged food industry in India evolved over the years? How much is the market? At what rate is the industry growing?
Accounting for about 32 per cent of the country’s total food market, the food processing industry is one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth. The packaged food industry is the fifth-largest sector in India. Packaged foods continued to enjoy strong double-digit value and volume growth in 2014. This growth was driven by urbanisation, the increasingly hectic pace of modern life and rising annual disposable incomes – all of which led consumers to shift towards convenient and easy-to-eat packaged foods.

The Indian packaged food industry is worth US$39.7 billion and owing to the rise in income, changing urban lifestyle and modern retail trade, it is expected to reach US$65.41 billion by 2020. With a per capita consumption of 24 kg per year, the Indian packaged food market is still at an early stage.

Which are the major food products or sub-sectors in food that drive food packaging industry?
The main categories of packaged food are bakery products, canned 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 and probiotic drinks.

What are the technological advancements happening in food packaging industry?
Be it the production of confectionery or cookies, sandwiches, bread and other baked products, meat and meat products, beverages, dairy products, or other convenience products, the processing stages in the production and filling of food and drinks are diverse and distinct worldwide.

Rigid and flexible are the two most significant types of packaging in use today. Rigid packaging dominates with about 80 per cent market share. However, there is a shift in demand and flexible packaging demand is increasing. Key advantages of flexible packaging over rigid include lightweight, small pack size, and energy savings, ease of storage and transportation and convenient disposal.

The flexible packaging industry is estimated to be valued at US$900 million, growing at about 20 per cent annually. Plastics, paper and metals are the key materials used in flexible packaging products, which are made from foil or papersheet or laminated paper and plastic layers. Food and fast moving consumer goods (FMCG) industries are the largest consumers of flexible packaging products; food accounts for 38 per cent of flexible packaging market.

Moreover, spouted standup bag is a smart innovation for packaging liquids of all kinds. After pouring, the caps can be tightened to keep the product safe. For sauces etc. stand up pouches can be fitted with pour spouts and easy screw-on caps.

VDMA and 14 of its member companies is organising a symposium on “German Technology for Confectionery Production and Packaging” in Mumbai in December 2015. Some 14 German companies would be presenting to the Indian food packaging industry, the latest technological trends.

What are the trends you have witnessed in the industry?
The Indian middle-class is growing rapidly and they simply love to buy. They are on the lookout for premium brands, especially for confectionery products like chocolate. But the premiumisation trend is not only noticeable in chocolates but also in biscuits. These trends are expected to continue even years from now.

Rural India provides growth opportunities for packaged food and beverages. Almost 70 per cent of the Indian population lives in rural regions. The rural population benefits from investment in infrastructure and rising wages. Food processing companies are realising the potential of rural India and are trying to expand their presence in these areas. They are launching their products in smaller pack sizes and at low price points to attract consumers. As India’s soft drinks market is slowly reaching maturity in urban India, rural India is the new target for most of the manufacturers of soft drinks.

What are the various innovation you foresee for the food packaging industry?
For raw and processed foods, India needs packaging material which is suitable to the country’s climatic variations.

The country’s heat and high humidity are two problems that can reduce the shelf life of packaged goods. It would be particularly important to focus on the seals and maintaining their integrity. But more important than the climate is perhaps the lack of a good supply chain or refrigeration in retail outlets and at home. This is a big barrier to many of the packaged food formats familiar to consumers in the West. At the same time, a heavy focus on cost means that cheaper flexible packaging formats are often chosen over rigid packs that may offer greater protection for the product but that would force a higher retail price.

How is the industry coping with challenges like shortage of skilled labour and food safety concerns?
Shortage of skilled labour and food safety concerns are the key challenges for food processing industry and this is encouraging food processors to invest in automation. Many conventional processes for making Indian ethnic snacks are being converted to automated lines. Many companies, both Indian and foreign, are planning big investments in the food processing segment.

What kind of changes do you expect in the regulations by the government?
The Indian food processing industry is regulated by several laws which govern the aspects of sanitation, licensing and other necessary permits that are required to startup and run a food business. The legislation that dealt with food safety in India was the Prevention of Food Adulteration Act, 1954 (“PFA”). The PFA had been in place for over five decades and there was a need for change due to varied reasons which include the changing requirements of our food industry. The Act brought into force in place of the PFA is the Food Safety and Standards Act, 2006 (“FSSA”) that overrides all other food related laws.

FSSA initiates harmonisation of India’s food regulations as per international standards. It establishes a new national regulatory body, the Food Safety and Standards Authority of India (“FSSAI”), to develop science-based standards for food and to regulate and monitor the manufacture, processing, storage, distribution, sale and import of food so as to ensure the availability of safe and wholesome food for human consumption. All food imports is therefore subject to the provisions of the FSSA.

In the Union budget 2014-15, provision for tax incentive is provided for new units in the business of processing, preservation and packaging of fruits or vegetables, meat and meat products, poultry, marine or dairy products and is available at the rate of 100 per cent tax exemption for the first five years of operations. After five years, the rate is 25 per cent of the profits. Thus inviting investors to invest in the Indian food processing and packaging industry under the campaign “Make in India.”



One Response to “Indian middle-class is looking for premium brands”

  1. Jeff Mazzini Says:

    Reblogged this on AAMC Training's Blog.

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