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1. Overview and Trends
According to a study by McKinsey & Company, the Indian food market is poised to grow from US$ 155 billion in
2005 to US$ 310 billion by 2015 and US$ 344 billion in 2025 - at an approximate compounded annual growth
rate of 4.1%..
the second largest global arable land area, India is one of the key food producing countries in the world, sec-
ond only to China.
• Currently, India ranks second in fruit production and third in vegetable production in the world.
• In 2007-08, food grain production in India had registered a 4.6% growth with 227.32 million tonnes as
against 217.28 million tonnes in 2006-07, according to estimates by the Ministry of Agriculture.
• The output of coarse cereals in 2007-08 was 39.67 million tonnes, 17% higher than the 33.92 million
tonnes in the previous fiscal.
• The total output of oilseeds is estimated to have risen to a record 28.2 million tonnes, about 16%
higher than the 24.29 million tonnes in 2006-07.
• The production of pulses has risen to 15.19 million tonnes, registering a year-on-year growth of 7% and
touching a new high.
The Indian food processing industry is estimated at US$ 70 billion. According to the Ministry of Food Process-
ing, this industry contributed 9% to India’s GDP and had a share of 6% in the total industrial production. The
industry employs 1.6 million workers directly.
Sustained by high agricultural output, international demand and a strong domestic market, the Indian food in-
dustry offers ample scope for large investments in processing technologies, skills and equipment, packaging,
refrigeration of frozen food and thermo processing.
Currently, only 6% of the country's fruit and vegetable produce is processed and India's share of the global
market stands close to a dismal 0.03%. While the size of the global processed-food market is estimated at US$
3.2 trillion and nearly 80% of agricultural products in the developed countries get processed and packaged (as
suggested by 'India Food Report 2008', released at the Food Forum India, in Mumbai), there is huge scope for
export-led growth in this particular sector. Recognising this, in the next few years India aims at raising the
share of processed food to 20% in comparison to total agri-produce, on the one hand, and enhancing export of
these items to 3% on the other.
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The domestic food market, according to the 'India Food Report 2008' is estimated at over US$ 182 billion ac-
counting for about 2/3rd of the total Indian retail market.
The steady economic growth is leading to a positive change in the lifestyle of the consumers and they are
will-
ing to pay a premium for both value-added private and branded products.
Interestingly, the fact is that while the country's GDP growth rate has increased from 3.5% in 2002-03 to 9% in
2006-07, the food processing sector has grown from 7% to 13.1% during the same period. However, market
experts are of the opinion that in future, the food products is going to increasingly contribute towards India's
GDP growth.
Food processing is a large sector that covers activities such as agriculture, horticulture, plantation, animal hus-
bandry and fisheries. It also includes other industries that use agriculture inputs for manufacturing of edible
products. However, the Ministry of Food Processing, Government of India has defined the following segments
within the Food Processing industry:
• Dairy, fruits and vegetable processing
• Grain processing
• Meat and poultry processing
• Fisheries
• Consumer foods including packaged foods, beverages and packaged drinking water.
While the industry is large in terms of size, it is still at a nascent stage in terms of development. Out of the
country’s total agriculture and food produce, only 2% is processed. The highest share of processed food is in
the grain processing and the dairy sector.
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Primary food processing (packaged fruit and vegetables, milk, milled flour and rice, tea, spices, etc.) constitutes
around 60% of processed foods. It has a highly fragmented structure that includes thousands of rice-mills and
hullers, flour mills, pulse mills and oil-seed mills, several thousands of bakeries, traditional food units and fruits,
vegetable and spice processing units in the unorganised sector. In comparison, the organised sector is rela-
tively small, with around 516 flour mills, 568 fish processing units, 5’293 fruit and vegetable processing units,
171 meat processing units and numerous dairy processing units at state and district levels.
Thanks to “Operation Flood”, India today stands first in the world in terms of milk production .The output is ex-
pected to be about 108 million tonnes (estimate for 2007), growing at a compounded annual growth rate of 4%.
Consumption of milk has registered a growth of nearly 8.4% (in urban areas) and is currently valued at US$ 16
billion.
Within India, the dairy sector also ranks second in terms of proc-
essed foods with 37% of the produce being processed. The or-
ganised sector processes an estimated 15% of the total milk
output in India. There are 676 dairy plants registered with Gov-
ernment of India, which come under the organised sector.
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Milk and milk products contribute to a significant 17% of the country’s total expenditure on food. Traditional
dairy products account for about 50% of the total milk produced. The market for dairy products is expected to
grow at 15-20% over the next three years.
• Ghee (or clarified butter) is the most widely marketed and branded product with a nation-wide penetration of
24.1%. It is estimated to be growing at a rate of 8% per annum
• The dairy whitener market comprises of sweetened milk powders, condensed milk and creamers. Its market
size is estimated at US$ 450 million for 2005-06
a rate of nearly 10% per annum. The organised cheese market is dominated by proessed cheese which ac-
counts for 74% market share
• The ice-cream market in India is estimated at US$ 226 million in 2005-06, with the organised market at US$
158.2 billion. This is currently growing at 20%.
Probiotic dairy products - containing live organisms building immunity and helping in digestion - are an emerg-
ing category in the Indian food market. Along with domestic dairy majors like, Amul and Mother Dairy, global
players like Nestle have made significant investments to capitalise the potential of this particula niche segment.
The latest entrant is Yakult Danone with its investment worth US$ 28.3 million and an additional US$ 20.8 mil-
lion on the cards for the next 2-3 years.
According to the latest report on 'Indian Functional Foods and Beverage Markets' by Frost & Sullivan, the mar-
ket of neutraceuticals and probiotics earned revenues of over US$ 185 million in 2007 and is projected to touch
an estimated US$ 1.16 billion in 2012. Although the segment is currently in its nascent stage, it is poised for an
upswing riding piggy-back on a healthy domestic economy and awareness of health products, thus giving a
boost to this segment.
India produces the widest range of fruits and vegetables in the world. It is the second largest vegetable and
third largest fruit producer accounting for 8.4% of the world’s food and vegetable production. The share of or-
ganised sector in fruit processing is estimated to be nearly 48%.
Fruit exports have registered a growth of 16% in volume and 25% in value terms in 2005-06. Mango and
mango based products alone constitute 50% of these exports.
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