Food processing: Indian advantage... - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Food processing: Indian advantage...

Oct 24, 2007

The food processing industry is the fifth largest industry in India and contributes around 6.3% of the GDP. However, the food processing industry in India is at a nascent stage with only 2% of the total produce being processed. India was once a net food importer but now produces a food surplus, India has the potential to become one of the leading players in the industry, due to its low labor and food production costs, government initiatives (tax holidays) and the availability of raw materials.

Per capita food consumption
US 2.07
Japan 4.00
UK 3.67
China 0.23
India 0.19
Arable land: India has the second largest arable land in the world with 151 m hectares. 55 m hectares of land is irrigated making it the No 1 in the world. Further, it has diversified agro climatic zones across the country and the potential to cultivate a vast range of agricultural products. These advantages can be leveraged for India to be a leading food supplier to the world.

Food demand curve: As seen from the chart India's per capita consumption is very low as compared to its global peers, indicating a huge opportunity. India is moving up the food demand curve. With demographic changes, rising incomes and income distribution the move towards higher quality and convenience products provide a huge potential. Time saving products and 'quick fixes' are important to 82% of European and US consumers. This could explain why prepared meal consumption in Europe and America is forecast to double in ten years, to exceed US$ 40 bn by 2009, up from US$ 29 bn in 1999. Though currently India is at the mass-market level, with changes like rising income and consumerism, companies are targeting the food segment.

Manpower: Along with cheap labour we have a vast pool of skilled manpower in research and extension. Food processing sector employs 13 m people and has the propensity to promote 2.4 times the indirect employment of its direct employment creation. Over the last decade food processing has grown at a rate of 7.1% per annum. The higher rate of growth as compared to the agriculture growth rate is indicative of its low base, the increased availability of surpluses, changing lifestyle and higher disposable income. India's comparatively cheaper workforce can be effectively utilised to setup large low cost production bases for domestic and export markets.

Exports: The sector accounts for 13% of the country's exports and 6% of total industrial investment. Export of processed food has jumped from Euro 4.7 bn in 2003 to Euro 13.8 bn in FY07. The ministry of food processing aims to increase India's share in global processed food trade from current 1.6% to 3% in the next 8 years. Further the retail boom in the country has also given a fillip to the nascent food-processing sector. Indian food brands and fast moving consumer goods (FMCGs) are now increasingly finding prime shelf-space in the retail chains of the US and Europe.

Seeing the huge scope available in sector, many corporates have ventured into the area of food processing. Even MNCs are increasing their product portfolio. Nestle, HUL and ITC are increasing their product portfolio with health and convenience foods. Reliance and Bharti too have entered the food processing segments with agri-produce and food retail ventures.

Bon appetite: India presents a huge untapped opportunity for the food-processing sector enhanced with low penetration levels and a liberal regulatory regime. The food processing industry is being recognised as a 'sunrise industry' in India having huge potential for uplifting agricultural economy, creation of large scale processed food manufacturing and food chain facilities, thereby further creating employment and export earnings. Further with 300 m upper and-middle-class consumers of processed and packaged food in the country, and another 200 m are likely to be added by 2010. India is well placed to take the advantage due to its strong agricultural base and also become a sourcing hub. Both as a producer and an exporter it can make a mark.

Equitymaster requests your view! Post a comment on "Food processing: Indian advantage...". Click here!


More Views on News

ITC Announces Quarterly Results (3QFY21); Net Profit Down 11.6% (Quarterly Result Update)

Feb 12, 2021 | Updated on Feb 12, 2021

For the quarter ended December 2020, ITC has posted a net profit of Rs 37 bn (down 11.6% YoY). Sales on the other hand came in at Rs 125 bn (up 4.0% YoY). Read on for a complete analysis of ITC's quarterly results.

KRBL Announces Quarterly Results (3QFY21); Net Profit Down 8.6% (Quarterly Result Update)

Feb 11, 2021 | Updated on Feb 11, 2021

For the quarter ended December 2020, KRBL has posted a net profit of Rs 1 bn (down 8.6% YoY). Sales on the other hand came in at Rs 11 bn (down 15.7% YoY). Read on for a complete analysis of KRBL's quarterly results.

JUBILANT FOODWORKS 2019-20 Annual Report Analysis (Annual Result Update)

Dec 17, 2020 | Updated on Dec 17, 2020

Here's an analysis of the annual report of JUBILANT FOODWORKS for 2019-20. It includes a full income statement, balance sheet and cash flow analysis of JUBILANT FOODWORKS. Also includes updates on the valuation of JUBILANT FOODWORKS.

Burger King IPO: Should You Subscribe to This QSR Chain Business? (IPO)

Dec 2, 2020

Does the company with one of the fastest-growing QSR chains in India have sound prospects?

NESTLE 2018-19 Annual Report Analysis (Annual Result Update)

Dec 9, 2020 | Updated on Dec 9, 2020

Here's an analysis of the annual report of NESTLE for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of NESTLE. Also includes updates on the valuation of NESTLE.

More Views on News

Most Popular

It's the Beginning of a New Bull Phase in Smallcaps (Profit Hunter)

Feb 24, 2021

Last time the smallcap index crossed 19k a big correction followed. Here's what makes it different this time.

Make Rs 5,000 Per Day Trading the Market (Fast Profits Daily)

Feb 25, 2021

In this video, I'll show you how to get started on the path to daily trading profits.

The Hidden Tesla in My Great Indian Wealth Project (Profit Hunter)

Feb 23, 2021

An Indian company founded three decades ago in a garage caught my attention...

How Much Money For Day Trading? (Fast Profits Daily)

Feb 22, 2021

In this video, I'll show you how to allocate your capital as a day trader.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms