The Indian Foods & Beverage industry is poised for a significant leap forward. As the pace of urban lifestyle quickens, supermarket shelves are bulking up with grab-and-go foods. And that is a good news for this industry.
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The food processing sector comprises the following sub-segments: fruits and vegetables, milk and milk products, beer and alcoholic beverages, meat and poultry, marine products, grain processing, packaged or convenience food and packaged drinks.
A huge number of entrepreneurs in this industry are small in terms of their production and operations, and are largely concentrated in the unorganized segment. This segment accounts for more than 70 per cent of the output in terms of volume and 50 per cent in terms of value. Though the organized sector seems comparatively small, it is growing at a much faster pace.
Technology
The sector has started using latest technology recently. Irradiation is the most frequently quoted technique here. For irradiation technologies to be implemented on a large scale, adequate investments for infrastructure facilities are required.
As a step to ensure safety and zero contamination during food processing, non-contact technologies are being preferred over traditional systems. The sector has been using solar energy technology for a long period now. However, the usage is not getting its due importance due to lacking consumer awareness.
DV Malhan, Executive Secretary, All India Food Processors’ Association says, “Access to free flow of technology from abroad is available in this sector. With the help of latest technology, more production is coming from small areas. Technology has also helped us to get quality produce. Efforts are being made to adopt latest technologies in this sector. We are now organising seminars on cutting edge technology in different states to reduce wastage and increase production.”
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| Fast Facts |
| • The Indian food industry expected to grow to US$ 280 billion by 2015. It will generate an additional employment for approximately 8.2 million people. • Food consumption in India is estimated to grow at a CAGR of 5.32 per cent by 2013. • Processed food output is predicted to grow at a strong 7 per cent CAGR in terms of value from 55.6 billion US$ in 2005 to 95.6 billion US$ in 2013. • Ready-to-eat foods such as noodles, biscuits, bread are earning good revenues for the sector. |
HR practices
Malhan says, “The HR practices that are applied in this sector can not be labelled among the best. The HR practice that we are using is a mixture of good and bad. The government has now taken several measures to attract talented pool of workforce. However, there are fewer initiatives in terms of upgrading existing workforce to make them work better. That is yet to happen.”
Key Growth Drivers
• Increased spending on health and nutritional foods
• Increased number of nuclear families and working women, leading to greater need for convenience food
• Improved quality of lifestyle
• Functional foods, fresh or processed foods
• Organised retail and private label penetration
• Changing demographics and rising disposable incomes
Major Challenges
Spoilage needs to be reduced, and shelf life extended. This requires following the right post-harvest practices such as good processing techniques, and proper packaging, transportation and storage, while ensuring minimum wastage.
An effort has to be made to retain the nutritional value, flavour, aroma, and texture of foods, and presenting them in near natural form with added conveniences. Currently, we rely on sensory evaluation of these, whereas the need is to quantify and correlate them with physico-chemical parameters.
Packaging needs to be more hygienic and attractive, while keeping cost-to-consumer down.
More organizations need to address the educational and R & D requirements of this sector.
| CRISIL Comments |
| CRISIL’s analysis of more than 1600 SMEs in the food and food processing industry covers a wide range of enterprises, from grain/meat/milk processing to packaged foods. More than 56 per cent of the enterprises are concentrated in five states — Haryana, Andhra Pradesh, Punjab, Tamil Nadu, and Maharashtra; these states are also the leading producers of agriculture and dairy products, and hold the advantage of proximity to the major markets. However, this industry is highly fragmented and unorganized, with family-run enterprises constituting 64 per cent of the sample. Moreover, more than 55 per cent of the enterprises have turnovers less than Rs100 million. The industry suffers from infrastructure bottlenecks, inadequate skill sets, and limited technology inputs, leading to high post-harvest loss and low value addition to the final products. Therefore, the analysis reveals that the operating margin of enterprises across various categories remains below average, at around 6 per cent, during 2009-10. The average sale per employee was also moderate, at Rs3.9 million, during the same period. Given the seasonal availability of most of the produce and the perishable nature of the products, the industry is highly working-capital-intensive. Thus, the food processing industry had a high gearing of 2.54 times as on March 31, 2010. Within the sample, the fruit and vegetables processing and dairy units have a high gearing of more than 3 times. On the other hand, ready-to-eat food items with lesser investment in production facilities and fewer attendant risks had a relatively lower gearing of 2.11 times as on March 31, 2010. |
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