Overall Bargaining Power of Suppliers - Low

Switching costs - Low

Differentiation of inputs - Low
Threat of forward integration - High
Supplier concentration High

Need for Substitutes - Low

Overall Bargaining Power of Buyers: High

The strength of buying power that firms in this

industry face from their customers depends on:
buyers price sensitivity and relative
bargaining power
Buyer concentration - High
Buyer Volume - Low

Switching cost - Low

Brand Loyalty - Moderate

Ability to backward integrate - Low

Overall Threat of Substitutes- High

Price- performance-differentiation - Low
Switching cost Low

Overall Threat of New Entrants Medium

Brand Loyalty: Quite Strong
Access to Distribution - Tough
Proprietary product differentiation Low
Access to necessary inputs: Tough

Entry and Exit Barriers - Moderate

Overall Industry Degree of Rivalry High

Market Growth - Moderate
Brand identity Strong
Switching Cost for Customers - Low
Degree of Differentiation - Low

Scope of Competition High (Global and

local)
Strategic Stake - High

The Food and Beverages Industry if highly

competitive and moderately attractive and
profitable industry

Well established players are relatively in a

comfortable position while new and small players
would find it difficult to make it big

Suppliers and Buyers are in a low and high

bargaining position

Rivalry is high laying emphasis on marketing and

advertising, and to develop brand identity, due to
low product differentiation

Entry and exit barriers are moderate and company which

can make large investments could try and enter the
industry e.g. ITC

Threat of global competitors and unorganized players

Key is developing SCM and distribution and maintaining

good relations with suppliers and buyers

It is also essential for players in this industry to be attentive

to changing consumer needs

It also becomes necessary to tap newer markets like rural

markets

2012 Top 5 threats to profit margins

2011 Top 5 threats to profit margins

Cost of inputs or merchandise

Cost of inputs or merchandise

Discounting and other sales

incentives

Discounting and other sales

incentives

Decreased sales volumes

Decreased sales volumes

Regulatory Compliance

Administrative and marketing costs

Inventory carrying costs

Regulatory Compliance

Source: KPMG Food and Beverage Industry Outlook Survey 2012

Top Growth Barriers in 2012

Top Growth Barriers in 2011

Pricing Pressures

Pricing Pressures

Volatile commodity/input prices

Volatile commodity/input prices

Lack of Customer Demand

Labor Costs

Labor Costs

Lack of Customer Demand

Energy Prices

Energy Prices

Lack of qualified workforce

Regulatory and Legislative

pressures

Regulatory and Legislative

pressures

Inflation

Inflation

Lack of qualified workforce

Source: KPMG Food and Beverage Industry Outlook Survey 2012

Convenience

Premiumization
More-out-of-home
consumption
Choice/Selection
Freshness
Shopping Experience

Deloitte: Food and beverage 2012

2. India is the worlds second

largest milk producer with a
developed and high-value
dairy sector
3. Indias abundance of
natural agricultural resources
makes the market attractive to
investors
4. India has the second largest
population in the world, and
rising domestic demand is a
major growth driver.

Weakness

Strengths

1. Foreign food companies

continue to target the Indian
market

1. The processed food industry

in India is less developed
compared to other countries
due to logistical and
distribution problems
2. The countrys agricultural
industry suffers from a lack of
investment and dependency
on erratic climatic conditions
3. Specific state-by-state
legislation governing aspects
of high-value business hinders
nationwide business strategies1

2. Rising disposable incomes

and increasing urbanization
mean higher-value processed
foods should experience strong
growth rates
3. The immense size of Indias
population and landmass
ensure that market maturity is a
distant prospect
4. Premiumization

Threats

Opportunities

1. The government is actively

seeking investment in the food
processing and agribusiness
industries

1. Logistical problems,
underdeveloped service
networks and poor
infrastructure hinder
development in fresh food
industries, such as dairy
2. The division between the
urban rich and the rural poor is
as great as ever, meaning
food manufacturers do not
have access to the entire
population
3. Elevated commodity costs
are a threat to food processors

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

The Indian food processing at $135 billion and is estimated to

grow at a CAGR of 10% to reach $200 billion by 2015

The industry has huge growth potential: Of the country total food
and agricultural produce only 2% is processed

The Industry contributed to 7% of the countrys GDP and it

employees 13 million people directly

Value addition of food products is expected to grow from 8% to

35% by the end of 2025

The fruit and vegetable processing which is at a 2% growth rate

is expected to reach 25% growth rate by 2025

The highest growth is in the dairy processing sector where 37% of

total produce is processed

Processed foods are primarily derived from agricultural commodities,

which often incur multiple taxes at various stages. This multiple taxation
has a cascading effect on prices and a barrier to the free flow of
materials from the farm to the factory and ultimately to the consumers

Diet food and nutraceuticals are the latest fad are available for every
patient today, be it hypertension, diabetes, obesity, or even weight
reduction

Motivated by a desire for maximum indulgence coupled with a wish for

calorie control and health benefits, consumers are increasingly choosing
sugar-free and sugar-reduced products

Packaging of food products has become important in order to ensure

safety and hygiene and to eliminate the possibility of adulteration.
However, packaging industry is yet to achieve international standards in
the country

India is one of the largest countries in the world, with a growing

population of 1.2 billion people

Indias GDP was US$1,843 billion in 2011 and is forecast to rise to

US$2,013 billion in 2012

GDP is expected to continue growing at rates around 78 percent

per annum for the next few years

There has been a discernible increase in purchasing power in many

parts of the country and rising affluence in many urban pockets

However, income distribution in India remains uneven between a

wealthy urban population and a low income rural population

Almost a quarter of the population is living on less than US$1 per

day, even though GDP per capita is US$3,787

The income split essentially means that India has two separate
consumer segments, which are further split by strong regional
differences

India is one of the worlds largest food producers and has a large
agriculture industry and combined with a cultural preference for
fresh food, means that India supplies the majority of its own food for
consumption

India is a growing market for processed food imports, which are

becoming more popular with the younger population, especially in
urban areas

Consumption of food and beverages was estimated at US$366.8

billion in 2011

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 ricemills 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 unorganized sector

In comparison, the organized sector is relatively small, with around

516 flour mills, 568 fish processing units, 5293 fruit and vegetable
processing units, 171 meat processing units and numerous dairy
processing units at state and district levels

Segment

Dairy
Sector

Fruit and
Vegetables

Meat and
Poultry
Processing

10%

Fisheries

Packaged
foods

Beverages

Staple
foods

20%

8%

27%

85%

Noodles/
vermicelli

Fruit-based
drinks and
carbonated
drinks

Sugar,
wheat flour
and salt

Growth
rate of the
market

15%

10%

Key
segments

Value
added
milk
products
like
butter,
Cheese,
ghee ,
condens
ed milk
and
infant
food

Raw fruit
and
vegetables,
fruit pulps,
canned
fruits and
pickles

Cattle,
buffalo and
poultry

Extent of
Processing

37%

2%

1%

12%

Share of
organized
sector

15%

48%

5%

80%

77%

50%

Marine
fisheries,
frozen
products
and
minced fish
products

The overall packaged food industry reached US$25.4 billion in 2011

and is forecast to grow to US$38.5 billion by 2016

The highest value segments of packaged foods in 2011 were to be

dairy (at US$9.1 billion), followed by bakery (at US$4.9 billion), and
oils and fats (at US$4.1 billion)

The West India region has the highest value sales of packaged foods
in India

A large number of brands from domestic and multinational players

are present in the region and many international brands are
imported

Consumer awareness of packaged foods is also high in North India,

which is one the most affluent regions in the country with areas such
as New Delhi, NCR, Chandigarh, Jaipur and Lucknow

This has resulted in packaged foods seeing good growth in the

region and this trend is expected to continue

East and Northeast India are the smallest markets in India for
packaged food, due to the underdeveloped nature of these areas
and continued political instability

ITC Limited
Parle Products Pvt. Ltd.
Agro Tech Foods
Amul
Perfetti India Ltd.
Cadbury India Ltd.
PepsiCo India Holdings
Nestle India Pvt. Ltd.
Britannia Industries Ltd.
Hindustan Lever
Limited

Milkfood
MTR Foods Limited
Godrej Industries
Limited
Gits Food Products Pvt.
Ltd.
Dabur India Ltd.
Conagra Foods
Nissin Foods
Wal-mart
Venky's

India today stands first in the world in terms of milk production

The output is expected 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

processed foods with 37% of the produce being processed

The organized sector processes an estimated 15% of the total milk

output in India. There are 676 dairy plants registered with
Government of India, which come under the organized sector

According to estimates of Dairy India 2007, the current size of the

Indian dairy sector is US$ 62.67 billion and has been growing at a
rate of 5% a year. Both production and consumption of milk and its
derivatives are traditionally high in the country

The dairy exports in 2007-08 rose to US$ 210.50 million against US$
113.57 million in the corresponding period, in the last fiscal, whereas
the domestic dairy sector is slated to cross US$ 108 billion in revenues
by 2011

Milk and milk products contribute to a significant 17% of the

countrys 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

The cheese market is estimated at US$ 2.49 million for 2005-06

(54000 tonnes in volume terms), growing at a rate of nearly
10% per annum

The organized cheese market is dominated by processed

cheese which accounts 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

Probiotic dairy products - containing live organisms building

immunity and helping in digestion - are an emerging
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 capitalize the potential of this particular niche
segment

The latest entrant is Yakult Danone with its investment worth

US$ 28.3 million and an additional US$ 20.8 million 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 market 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 worlds food and
vegetable production

The share of organised sector in fruit processing is estimated to

be nearly 48%

Fruit production in India registered a growth of 3.9% during the

period 2000-05 whereas the fruit processing sector grew several
times faster at 20% over the same period

The total area under fruit cultivation is estimated at 4.18 million

hectares

The total area under vegetable cultivation is estimated at 7.59

million hectares

However, less than 2% of the total vegetables produced in the

country are commercially processed, as compared to nearly 70% in
Brazil and 65% in USA

While products like juices and fruit concentrates are largely

manufactured by the organized sector, pickles, sauces belong to
unorganized sector

About 20% of processed fruits and vegetables are exported. Major

products exported include fruit pulps, pickles and chutneys, canned
foods, concentrated pulps and juices and vegetables

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

India produces over 200 million tonnes of grains every year

Indias production covers all major grains are rice, wheat,

maize, barley and millets like jowar, bajra and ragi

It ranks third in the production of grains in the world

With a share of 40%, grain processing is the biggest

component of food sector

Primary processing constitutes 96% with the remaining

accounted for by the secondary and tertiary sectors

Total rice milling capacity in the country is around 190 million

tonnes

There are about 516 large flour mills in the country, as well as
about 10000 pulse mills

Soya food segment is also growing due to increased health

consciousness and abundant production of quality soya
bean (3.72 million tons/year) in the country

Total meat production is around 5 million tonnes annually

Most of the production largely belongs to unorganized

sector. Some of the organised players are Venkys and
Godrejs Real Chicken

Only 1-2% of the meat produce is converted to value added

products

Growth rate of egg and broiler production is around 16% and

20% respectively

Poultry processing is still at a nascent stage in India

The fisheries sector contributes to 1.4% of the countrys GDP

Processing of fish and canned fish is almost entirely for export market

The fish and seafood market has continued to grow strongly as

middle-class Indian consumers purchasing power continues to
grow. However, this is starting from a very low base.

Molluscs and cephalopods are the fastest-growing categories of fish

and seafood

Indias National Fisheries Development Board is spending Rs6.2 billion

(US$123 million) to expand the use of intensive aquaculture in India,
providing money to help farmers adopt technologies for sustainable
fish farming and fish seed production

Consumer food industry which is a subset of the

food industry consists of:
Packaged Food

Aerated Soft Drinks

Packaged Drinking Water

Alcoholic Beverages

The segment consists of bakery products, ready-toeat snacks, chips, namkeens

The beverages market primarily consists of non-alcoholic beverages

which can be broadly classified into carbonated drinks, noncarbonated drinks and hot beverages

According to industry experts, the market for carbonated drinks in

India is worth US$ 1.8 billion while the juice and juice-based drinks
market accounts for US$ 300.67 million, of the approximately US$
2.38 billion packaged beverages category. Growing at a rate of
25% per cent

The fruit-drinks category is one of the fastest growing in the

beverages market

The US$ 1.80 billion carbonated drinks category is expected to face

the heat of the rising competition from

Categories falling under the health umbrella, i.e. juice and

juice-based drinks, energy and sports drinks, malted
beverages, probiotic drinks and bottled water. They are
considered a socially acceptable alternative to alcoholic
beverages

At US$ 300.67 million, the juice and juice drink category is

among the fastest growing segments

While fruit drinks as a category is growing at 18% - 20%,

carbonated soft drinks are growing at 6% - 8% driven by the
positive changes in Indias consumer profile.

Two of the worlds biggest global brands are well

established in this segment

Soft drinks constitute the third largest packaged

food segments after tea and biscuits

Penetration levels of aerated soft drinks if quite low

compared to other developing and developed
markets

Trends such as shortage of drinking water, changes

in consumer lifestyle has fueled growth in this
segment

Almost all the big players in the F&B players are

trying to gain foothold in this segment

Hot beverages include health drinks such as white beverages

(Horlicks, Bournvita, etc) and brown beverages such as
tea/coffee as well as branded drinks (Boost)

The total size of this market is estimated at US$ 333 million by

value and 85000 tonnes by volume. White beverages
account for 65% of the market and brown beverages
constitute the remaining 35%

India is the largest producer of tea in the world accounting

for 28% of the total global production, at 857 million kg.

Tea production in India has been growing at 1.2% per annum

and India is the fourth largest exporter of tea in the world with
estimated exports of US$ 5 million in 2002-03

India is also the fifth largest producer of coffee accounting

for 4% of the total production in the World

Nearly 75% of Indias production is exported and coffee

exports stood at US$ 5.2 million in 2005-06

India is the third largest for alcoholic beverages in the world

The demand for spirits and beer is estd. Around 373 million
cases per annum

There are 12 joint venture companies producing grain based

beverages with a combined capacity of 33.9 million liters per
annum

The overall wine forecasted to grow to INR23,140.2 million by

2015

The highest value segments are estimated to be still light

grape wine (at INR7,884.7 billion), followed by sparkling (at
INR1,846.8 billion), and fortified wines (at INR1,213.2 million)

And, while Bangalore, Chandigarh, Mumbai are reporting

high growth in consumption, Nasik, the capital of Indian
wines, registered a 100% rise

Out of the total consumption of grape wine in India, around

80% wine consumption is from the major cities

Bread is slowly coming to be a staple product consumed

by people of all economic classes in India

Total bread production in the country in 2004-05 was

estimated at 2.7 million tons, growing at 7.5%

About 55% of bread production comes from the organised

sector

India is the second largest producer of wheat in the world

with an output of more than 70 million tonnes

Branded atta (wheat flour) is an important item in this

segment with an estimated market of US$ 195 million

The Indian market holds enormous growth potential for snack

food, which is estimated to be a market worth US$ 3 billion

The organised sector of the snack food market is growing at 15%

- 20% a year while the growth rate of the US$ 1.56 billion
unorganized sector is 7% - 8%

Consumption level of commercial savory snacks is 10 times

higher than that in the rural markets

Around 1000 snack items and 300 types of savories are sold in
India

The segment is largely dominated by potato chips and potatobased products with over 85% share of the salty snack market.

The global retail market for organic food has grown to US$ 100 billion
from US$ 35 billion over the last three years

The exports of organic food from India have grown to US$ 65 million
over the past one year from US$ 21.6 million two years ago

Some players, like Navdanya, organically cultivates crops like jowar,

bajra, millet, in its 21 acre farm in Dehradun and sells it from its retail
outlets in Delhi and Mumbai

The number of such growers has been rising in the Dehradun valley
and Bundelkhand. APEDA in association with the Ministry of
Agriculture has taken an initiative to convert 20000 farmers and a
total area of 75000 hectares to organic farming over the next three
years

Following suit, the Darjeeling Tea Association (DTA) has mounted

efforts to increase the production of organic tea

According to the industry experts, about 37% of the total crop

grown on the slopes of the eastern Himalayas, at present, is organic
tea, as per certifications given by European and Japanese
agencies. DTA is aiming to organically produce the majority of the
champagne of teas by 2010

Overall food and beverage consumption is expected to

grow at rates between 611 percent for the next few years

The products and sectors that are expected to have the

highest potential for growth are:
Ready to eat meals, canned foods and snacks are forecast to

be in higher demand
There is high growth for processed dairy and milk products.
Additionally, the dairy processing industry in India is growing and
demanding milk and dairy ingredients
Cheese, butter, whey, yoghurt and ice cream are some of the
major dairy products that are imported with cheese being the
most popular

 In India, tea is one of the only beverage products that has a

mature market. Other beverages such as coffee, carbonated

drinks and functional drinks all are experiencing high growth.
Coffee consumption is expected to grow 2030 percent per year
for the next few years
Demand for wine is also growing, but the market is still captured
mostly by domestic suppliers due to high tariffs on imported
wines. Still red wine sales are forecast to grow by 17.6 percent
compound annual growth rate (CAGR) between 2010 and 2015,
fortified wine by 15.9 percent and still white wine by 15.2 percent
As incomes rise, the consumption of fish is expected to increase
17 percent by 2015

What are the different segments?

Consumer Food Sector

Packaged Food
Confectionary
Canned Food

Bakery

Processed food

Dairy

Noodles & Pastas

Sweet and Savory

Snacks
Oils and fats

Sauces and Spreads

Soups & Ready
Meals

Also referred to as convenience food, packaged food is divided

into numerous segments

Some of the leading players in packaged food in India are

Hindustan Unilever, Gujarat Co-operative Milk Marketing Federation,
Nestl India Ltd, Frito-Lay India, GlaxoSmithKline Consumer
Healthcare Ltd, Britannia Industries Ltd, MTR Foods and Karnataka
Cooperative Milk Producers Federation Ltd.

With the range of packaged food products available in India likely

to become wider and awareness of such products expected to
increase over the forecast period, it is expected that packaged
food will continue to witness healthy growth in the future.

Market Size by Retail Value

18,00,000.0

16,00,000.0

14,00,000.0

12,00,000.0

10,00,000.0

8,00,000.0

6,00,000.0

4,00,000.0

2,00,000.0

0.0
2007

2008
Packaged Food

2009
Canned/Preserved Food

2010
Confectionery

2011
Dairy

2012

Confectionary

Confectionary retail value sales in India rose by 7% in 2012

It includes the following

Chocolate Confectionary
Its sales grew by 13% in 2010
Manufacturers are
increasingly targeting both
upper and lower income
consumers

Gum
Sales grew by 4% in 2010
Can be attributed to its
rising consumption in
smaller towns & cities

Sugar Confectionary
Sales grew by 1% in 2010

Market size

1,40,000.0

1,20,000.0
1,00,000.0

80,000.0
Confectionery

60,000.0
40,000.0
20,000.0
0.0
2007

2008

2009

2010

2011

2012

Stronger economic growth has boosted consumer confidence and

led to increased disposable incomes

This has benefited the performance of key indulgence categories

like chocolate confectionery and functional gum, which command
higher unit prices

Giving chocolate as a gift for festive occasions has returned

Medicated confectionary is also exhibiting robust performance and

grew by 2.4%in 2010

Functional gum remained the best performing gum category in

value terms in 2010, growing by around17%

This can be attributed to active efforts by the manufacturers to

educate consumers of its dental benefits

Canned/Preserved Food

Canned/preserved food is expected to increase in current value

by 17% in 2012, rising to INR4.5 billion

Canned/preserved fruit is set to record

the highest growth in 2012,
Canned/Preserved Food
rising in current value by 17%
5,000.0

Canned/preserved fruit and

canned/preserved
vegetables remain the
largest categories in
canned/preserved food

4,500.0

Canned/preserved food is
set to increase in constant
value at a CAGR of 8% over
the forecast period

1,500.0

4,000.0

3,500.0
3,000.0

2,500.0
2,000.0

1,000.0
500.0
0.0
2007

2008

2009

2010

Canned/Preserved Food

2011

2012

Consumer awareness of packaged food categories such as

frozen processed food and canned/preserved food continued
to rise in India

This is occurring mainly due to the initiatives being undertaken by

companies such as McCain Foods India Pvt. Ltd with the aim of
educating Indian consumers about the benefits of these
packaged food products

Canned/preserved fruit and canned/preserved vegetables

were the first categories to be introduced & are set to be the
fastest growing categories in canned/preserved food

However the value growth is expected to be lower than that of

frozen processed food

The consumption of canned/preserved food remains limited to

urban areas and the distribution of these products is
concentrated in modern grocery retail channels

Bakery

It includes the following

Baked Goods
It is expected to post a CAGR of 4% in constant value terms
Unpackaged/artisanal pastries is likely to register the fastest growth of 13%

Biscuits
Its sales are expected to post
a CAGR of 9%
Cookies is expected to register
the strongest value growth

Breakfast Cereals
It is projected to grow by a
CAGR of 16%
Hot cereals is likely to lead
breakfast cereals with value
sales rising 33% in 2011

Market Size
3,00,000.0
2,50,000.0
2,00,000.0

1,50,000.0
1,00,000.0
50,000.0
0.0

2007

2008

2009

Bakery

2010

2011

2012

Market Size
1,80,000.0

1,60,000.0

1,40,000.0

1,20,000.0

1,00,000.0

Baked Goods
Biscuits

80,000.0

Breakfast Cereals

60,000.0

40,000.0

20,000.0

0.0
2007

2008

2009

2010

2011

2012

Demand for bread is relatively stable and consumers are shifting

towards healthier formats such as brown or enriched bread

Bread, cakes and pastries have grown, aided by franchise

expansion of the leading chains of both artisanal and packaged
players

Cakes are increasingly being used as gifts instead of traditional

sweets

Artisanal baked goods players were the leaders with a 57% value
share in 2010

With chained supermarkets/hypermarkets projected to expand

further to reach tier-two and tier-three cities, this will give rise to an
increasing number of in-store bakeries

Consumers consider biscuits as a cheaper indulgence and

nourishing products and an alternative to higher-priced cakes,
pastries, and sweets

Diverse flavors and new products have made biscuits a more

attractive snack for young consumers

Innovations such as savory biscuits and crackers have contributed

majorly to the growth

With the rise in lifestyle related diseases including diabetes,

hypertension and obesity, health has become a key factor

Leading manufacturers have started offering biscuits positioned on

the health and wellness platform including sugar free, diabeticfriendly products, oat or wholegrain based

An increasing number of manufacturers have fortified breakfast

cereals with vitamins, added health food ingredients and promoted
their health benefits through educational and social programs

Growing awareness of the benefits of oats for heart health drives

demand for breakfast cereals

Mueslis was the second fastest growing breakfast cereal category.

Niche products have emerged in the market, such as bran flakes,

oatmeal squares and low fat granola, but their sales will be limited
to urban areas because they are currently only available in large
supermarkets/ hypermarkets

Processed Food

It includes the following

Frozen Processed Food

It is expected to increase in constant value at a CAGR of 17%
Frozen processed red meat is set to be the fastest growing frozen
processed food category in 2012, increasing in value by 24%

Chilled Processed Food

Sales of chilled processed food

are set to remain negligible

Dried Processed Food

It is expected to increase in
constant value at a CAGR of
16%
Instant noodles with a value
growth of 30% followed by Rice
with a value growth of 24%
posted the highest value growth

Market Size
1,00,000.0
90,000.0
80,000.0
70,000.0

60,000.0
50,000.0
40,000.0
30,000.0
20,000.0

10,000.0
0.0
2007

2008

2009

2010

Processed Food

2011

2012

The rising number of supermarkets and hypermarkets with freezer

display cabinets contributes to the strong growth registered in frozen
processed food during 2012

Mother Dairy Fruit & Vegetable Ltd, Al Kabeer Exports Pvt. Ltd and
Venkys India Ltd are the three leading players

The changing perception of frozen processed food is based on rising

awareness of its benefits in comparison with fresh food, and this in
turn is driving its growth

Frozen processed vegetables is set to account for 44% of total frozen

processed food retail value sales with Green Peas being the
dominant format

The retail distribution of frozen processed red meat and frozen

processed poultry is set to undergo quite radical changes

The rising awareness of frozen processed food and canned food in

India has the potential to help build awareness of chilled processed
food as well

A number of players introduced premium products in rice in India

during 2011 and 2012 as many consumers became more willing to
spend money on high quality rice

Spurred on by a variety of factors such as better shelf positioning,

visual merchandising and in-store promotions, rice is expected to
increase in value by 24%

Organic basmati rice has a good future in India

Dairy

It includes the following

Ice Creams

It is expected to increase by a CAGR of 12%

Yogurt & Sour Milk Products

It is expected to increase by CAGR of 20%

Cheese

Drinking Milk Products

It is expected to post a CAGR

of 14%
Its sales are expected to post
a CAGR of 7%

Other Dairy Products

It is expected to increase by a
CAGR of 3%

Market Size

6,00,000.0

5,00,000.0

4,00,000.0

3,00,000.0

2,00,000.0

1,00,000.0

0.0
2007

2008

2009

2010

2011

2012

Current value sales of single portion dairy ice cream are expected
to see the fastest growth

Historically, ice cream consumption in India was limited to the

summer months but gradually it has become popular as a dessert
option

The healthy growth being registered by ice cream fast food chains is
expected to result in increased demand for retail forms

Flavored and fruited yoghurt are receiving increased attention

Pro/pre biotic drinking yoghurt sales are also increasing rapidly

Packaged and branded soft cheese (primarily paneer in India)

overtook processed cheese for the first time in terms of value sales in
2010

The popularity of foreign cuisine such as pasta, pizza, and burgers, is

likely to drive the retail volume growth of cheese in India

Spreadable processed cheese is expected to see the highest

constant value CAGR, as it will gradually serve as a viable
alternative to spreads in India

Spicy variants of processed cheese & packaged paneer will

dominate the push towards product diversification

Fresh/pasteurized milk is expected to comprise 83% of value sales of

drinking milk products

Ambient flavored milk drinks is expected to be the dominant format

in India, as chilled milk drinks face operational constraints in the
country

Value-added products such as fermented milk and fruit-based

dairy drinks are likely to experience many new product launches

Dairy only flavored milk drinks and soy milk are forecast to see the
fastest growth

Milk and milk powder, which are both essential components of other
dairy products in India, registered exceptional increases in both
wholesale and retail prices in 2011

New categories such as cream and dairy-based desserts are

expected to emerge as rapid growth categories

Noodles & Pastas

It includes the following

Noodles
It is expected to increase by a CAGR of 18%
Pouch instant noodles will experience the fastest growth

Pastas
It is expected to increase by
CAGR of 18%
Strong growth in the category
due to the rising popularity of
Italian cuisine

Noodles & Pasta

45,000.0
40,000.0
35,000.0

30,000.0
25,000.0
20,000.0

15,000.0
10,000.0
5,000.0
0.0
2007

2008

2009

2010

Noodles & Pasta

2011

2012

Due to the heavy advertising by manufacturers, the awareness of

this product has improved drastically and has thus evolved to
become a regular staple in all households

Manufacturers are experimenting with different & exotic flavours to

offer a wide choice of product offerings

Noodles was dominated by Maggi five years ago, but with brands
like Foodles, Yippie! and Knorr entering the space through brand
extensions and deep advertising pockets coupled with strong
distribution networks, the competition is intensifying

Soup, oat and curry noodles have also been launched

Many private label products have entered pasta and are expected
to do well as they can offer competitive pricing

Sweet & Savory Snacks

It is expected to increase at a CAGR of 13%

Sweet and savory snacks witnessed many product innovations under

the health and wellness banner
Market Size

Nuts is expected to grow by 13%

1,00,000.0

Extruded snacks is expected to

show robust growth which will
be mainly attributable to high
sales from snacks at lower price
points priced between Rs5-10

90,000.0
80,000.0
70,000.0
60,000.0
50,000.0
40,000.0
30,000.0

20,000.0
10,000.0

The biggest threat to this category

are growing health concerns

0.0
2007

2008

2009

2010

Sweet and Savoury Snacks

2011

2012

Oils & Fats

It is expected to increase by a CAGR of 4%

Vegetable and seed oil continues to dominate oils and fats

Although activity on the health

and wellness front is on the rise
price is still a key concern

Olive oil is expected to see the

fastest growth

Market Size
4,00,000.0
3,50,000.0

3,00,000.0
2,50,000.0
2,00,000.0
1,50,000.0

New packaging sizes in margarine

1,00,000.0
& ghee are being introduced to
50,000.0
Drive volume sales
0.0

2007

2008

2009

2010

Oils and Fats

2011

2012

Sauces & Spreads

It includes the following

Sauces, Dressings & Condiments

It is expected to increase by a CAGR of 8%
It will witness 19% value growth

Market Size

Spreads
It is expected to increase by

70,000.0

CAGR of 7%
It will witness value growth of 12%
Honey is likely to lead in spreads
with 13% growth in current value
sales

60,000.0
50,000.0
40,000.0
30,000.0
20,000.0
10,000.0
0.0
2007

2008

2009

2010

Sauces & Spreads

2011

2012

International cuisines drive sales of sauces, dressings and

condiments

Wet/cooking sauces are still at a nascent stage in India

Another factor which has led to robust growth in this category is the
increasing prices of vegetables, like onion, garlic and ginger

The most popular table sauce is mayonnaise which showed the

highest value growth in table sauces

Ketchup is the most notable category in table sauces which will

grow by 16%

Companies have come up with innovative squeeze bottles which

are far more convenient to use than glass bottles

MTR Foods Ltd which forayed into the snacks market is eyeing
acquisitions in the jams and ketchup categories

Field Fresh Foods Pvt. Ltd has plans to introduce pasta sauce to the
Indian market

Honey, jams and preserves made up the bulk of spreads sales in

2011

There is fast growing interest in chocolate spreads, such as Nutella in

nut-based spreads, or Skippy in peanut butter

The lack of growth in the bread segment, coupled with competition

from dairy spreads, may affect sales of jam and preserves

Soups & Ready Meals

It includes the following

Soup
It is expected to increase by a CAGR of 12%
Dehydrated soup to exhibit 21% value growth

Market Size

Ready Meals
It is expected to increase by

3,500.0

CAGR of 9%
Canned/preserved ready meals
and frozen ready meals are set to
be the most important categories
in ready meals

3,000.0

2,500.0
2,000.0
1,500.0
1,000.0

500.0
0.0
2007

2008

2009

2010

2011

Soups & Ready Meals

2012

Canned/preserved soup, which is more popular than dehydrated

soup worldwide, is expected to show a decline in value sales

Manufacturers are launching soups in varieties of exotic flavors to

appeal to consumers taste buds

Potential threats include competition from other snack offerings,

such as biscuits, snack bars and cereals, which are expected to
compete with soup on the convenience and health front

Another potential threat for this category is the lack of awareness

about such products in rural areas

Both Indian companies and international players are expected to

make attempts to launch new products in ready meals which target
demand for local flavours and traditional dishes

Packaged Food Industry

Demographical Changes

India has a large young population; with a median age of 25.5 as of 2012
They have sufficient disposable income, are individualistic and want to
stand out in whatever they do.
As a resulting they are driving demand for & rapidly embracing new
brands
Children are aware & have become more vocal in making their
preferences known to parents
An increasing number of young adults have moved to cities for work or
study & also make daily decisions regarding what food products to buy

Socio Economic Drivers: Increased Income /

Affordability

The Indian middle class is increasing in size and purchasing power and
will definitely spend more on this category of consumer expendables

Expansion in the Food Services Sector

The proliferation of foodservice outlets and consumers interest in dining

out will present growth opportunities for packaged food manufacturers in
coming years
The consumers palate is also expanding and they are increasingly
experimenting and trying out varied cuisines and flavors
This has generated interest in packaged food products with international
flavors
Products that will benefit from these trends include cheese, sauces and
dressings, frozen processed food, noodles, pasta, oil and fats
Olive oil is also expected to perform well as consumers become more
familiar with its use in preparation of Western dishes, as well as its health
benefits
Similarly, noodles and soup will also gain greater acceptance among
consumers

Focus on Health Benefits

In larger cities consumers are switching to healthier options of packaged

food, such as whole meal bread and low-sugar sweets
Healthy products positioned for the mass segment are expected to
perform more strongly than products targeting the niche high-income
segment
With increases in disposable incomes consumers may be more willing to
pay for healthier products which are often priced higher than similar
products without health positioning
Manufacturers continue to push health-oriented products, as they
recognize there is huge potential for health and wellness to develop in
India
Manufacturers may also look at new fortified products aimed at rural
consumers looking for basic nutritional needs such as iron, calcium,
protein, etc.

Urbanization & Shifting Lifestyles

The increase in urbanisation has led to a demand for premium products

in this segment

Shifting lifestyles of Indian people & the ongoing increase in the size of
Indias middle-class population is also driving demand

Due to the paucity of time, consumers are looking at options where the
meal can be prepared fast and is tasty as well

Coupled with these, factors like an increasing number of working couples

and shortage of household help is also driving the sales

Consumers dietary mix is changing with increased focus on international

food and reduced consumption of traditional food

Marketing Efforts
Leading multinational manufacturers have started using social media to
engage young consumers
Examples of such products include sweet and savory snacks, sugar
confectionery, ice cream and snack bars etc.
The increased reach of media channels such as television and Internet in
both urban and rural India is likely to help the growth of consumer goods
value sales over the forecast period
Marketing efforts for brands such as Quaker and Kelloggs heightened
awareness for the entire cereals category, while increased instances of
breakfast buffets at restaurants led to growth in demand for hot cereals
as well.

Another factor which has led to robust growth is the

increasing prices of fresh food & vegetables, like onion, garlic
and ginger

Indian consumers, particularly the younger

population, are becoming more accepting of
different food and drink products

There is increased demand for product variety, as

well as products from different countries

The number of imported food products is

increasing in retail stores. This trend is evident not
only in organised retail, but also in the small familyowned stores which dominate themarket.

Glocalisation is the localisation of globalised products or

services and has caused international food products to be
adapted to suit Indian consumers

For example, McDonalds in India provide vegetarian rather

than beef burgers and pizza chains serve pizzas with Indian
toppings such as curry

This has resulted in greater acceptance and increased

demand for international food and beverage products in
India

With busier lifestyles, Indian consumers are moving

away from the traditional three meals per day
schedule

Smaller and more frequent meals are becoming

common, resulting in higher demand for
convenient products and snacks.

As more women join the work force and

households become smaller, packaged and
processed products such as ready to eat meals,
canned foods and snacks will be in higher
demand.

The most popular ready to eat products are those

based on traditional Indian recipes.

Demand for specialty and high value

foods such as chocolates, almonds and
other dried nuts, cakes and pastries,
imported fruits, fruit juices, and Indian
sweets peaks during the festive season,
especially at Deepawli (Diwali) - the
festival of lights

Changes in Retail Format

Growth in modern chained grocery retailing
Supermarkets/hypermarkets have emerged as a key retail channel for
packaged food, as their share in overall retail sales increased by three
percentage points
The expansion of chained grocery stores and increase in product
offerings, such as more imported brands on retailers shelves has
contributed to the growth
There are also a growing number of specialist retailers in urban areas,
especially in shopping centers, which attract high-end consumers
Their specialization with cold chains and associated product categories
makes these outlets a favorite among manufacturers looking to cater to
select urban consumers

Other factors expected to positively influence growth of dried

processed food include the lower levels of regulation
expected in dried processed food and the increasing
cultivation of rice

Efficient Back End infrastructure

The growth of cold chain infrastructure is likely to heighten the use of
frozen processed food, chilled processed food and non-traditional dairy
products in India
International manufacturers and domestic manufacturers with strong
financial backing are expected to begin providing freezer display
cabinets to Indian grocery retailers in the near future in order to
encourage them to stock their goods

FDI in retail
With government allowing 51% FDI in multi brand retail and 100% FDI in
single brand retail, International giants such as Wal-Mart & Carrefour are
coming in
With the arrival of these giants, there is immense scope of growth for new
segments in packaged food
This also signals the arrival of more international giants and increased
versatility of products

Packaged Food Industry

Development of effective distribution network

and supply chain:
India with its high rural population mandates the
companies to have an extensive distribution network
The market share is linked to distribution and product
availability in a major way

Various range of product offerings, which is

customized to meet local market requirements
India with its high diversity requires companies to
customise their products to suit the local tastes

Superior processing technology to compete with other

players in the market
The players in the market need to possess the latest technology

in order to compete and face the price sensitive audience

Brand building and marketing to gain market share;

increasing penetration in domestic market; competitive
pricing
With a mixed set of organised and unorganised players in the

market, there is a strong need for brand building and marketing

to generate the required reach
The market is majorly price sensitive further adding to the
requirement of competitive pricing
There is a constant effort to penetrate into the remotest of the
areas to increase the presence

M&As, New entrants, Exits

During September 2011, US-based McCormick & Co Inc

completed the formation of a joint venture with Kohinoor
Foods Ltd for the marketing and distribution of basmati rice
and various other packaged food products in India

McCormick invested a total of INR5.2 billion (US$113 million) in

this transaction, which involves McCormick taking an 85%
stake in the new joint venture

Total revenues achieved by the companys new joint venture

are expected to be in the region of US$85 million during its first
year of operation.

Ben and Jerrys Homemade Inc.

plans to enter India

The unit of the Anglo-Dutch

consumer goods maker Unilever
Plc. - it took over the US
company in 2000 - is planning to
enter the Indian market within
six months

Danone entered India to seek potential growth for its

products.

The 15 years of learning Indian market allowed Danone to

change from its diversification strategy to being focused in its
Business line.

Danone BOP (Base Of Pyramid) India is charged with

developing and marketing products to lower income
consumers in smaller towns such as Gurgaon, Faridabad,
Panipat, Sonepat and Ambala, before gradually moving to
other parts of the country.

Reliance Retail has entered into a back-end joint venture

with 2 Sisters Food Group (2SFG), a UK-based meatprocessing company owned by entrepreneur Ranjit Singh, to
introduce chilled and frozen foods at its food & grocery
outlets

The company wants to bring multiple food options to its

customers and has already invested in a state-of-the-art food
innovation lab to support new products.

Pharmaceutical and Biotechnology major Wockhardt Limited

and its subsidiary today announced the signing of
agreements to divest their Nutritional business to Danone,
one of the fastest growing food Company in the world

Wockhardt has presence in Indias nutritional category with

Farex, Dexolac, Nusobee and Protinex.

Britannia Industries acquires the entire stake of Fonterra, the

companys joint venture partner since 2002 in Britannia New
Zealand Foods Pvt. Ltd, which is engaged in the dairy
business.

Britannia Industries entered into an agreement with Fonterra

Brands (Mauritius Holding) Ltd, Mauritius, for acquiring the
latters 49 per cent equity and preference shareholding in
Britannia New Zealand Foods Pvt. Ltd (BNZF).

Packaged Food Industry

India continued to experience inflation in 2011

In particular, food and oil prices surged in the first half of the year,
although the pace of inflation slowed down in the later months

Many packaged food manufacturers reported that rising input costs

put pressure on profit margins, and they either had to raise prices or
manage costs more closely

Players in the mass segment also launched low-price variants of

premium products to fatten profit margins

Inflation also reduced consumer spending power. In particular,

consumers in the low-income segment were forced to reduce
spending on non-essential items.

In response, many manufacturers launched products in small

packets at lower prices

For products where profit margins are thin, for example plain biscuits
and staples, dominant manufacturers were able to increase unit
prices by applying direct price hikes or reducing pack sizes.

Nestl India raised prices of dairy products, and changed its

product mix to reduce focus on low-margin products in 2011

Hindustan Unilever Ltd reported that it managed cost pressure

through aggressive saving programmes and price increases

It also launched Cup-a-Soup in February 2012. Through the new

launch the company planned to increase volume sales through
smaller packaging sizes.

Manufacturers targeting the mass segment launched lowprice variants of premium products

In January 2012 Parle Products Pvt. Ltd launched Happy

Happy chocolate chip cookie, which was priced 60%
cheaper than Parle Hide N Seek the relatively premium
offering from the company

Where an 82.5g packet of Parle Hide N Seek commanded a

price of Rs 20.00, Happy Happy sells at Rs5.00 for a 45g pack

Hindustan Unilever Ltds Cup-a-Soup is also a cheaper soup

variant of its Knorr soup products
The premium range of Knorr soup is priced around Rs35.00, while

Cup-a-Soup is Rs12.00

Some manufacturers were reluctant to increase

price too much for fear of losing customers to
competitors

These manufacturers looked into more stringent

cost controls

Examples included ITC Ltds efforts to improve

production efficiency and Hindustan Unilever Ltds
efforts to reduce packaging costs.

High inflation has dampened Indias economic growth in

recent times

However, in January 2012 the annual inflation rate slowed to

a 2-year low of 6.6%

Easing inflation is expected to lower interest rates, increase

consumer expenditure and decrease input costs for
manufacturers

While the pace of inflation for input costs is expected to slow

down in 2012, commodity prices are likely to remain volatile
due to shortages of raw materials around the world, and an
unstable political situation in the Middle East

Prices of certain food, such as milk and edible oils, remain a

potential problem area for inflation

Uncertainties in the global economy are limiting the outlook for

export

Packaged food value sales in North India are projected to see a

constant value CAGR of close to 9% over the forecast period,
marginally slower than the national average

The key growth driver will be growing demand for higher quality
products (for example richer chocolate, premium offerings, healthier
products) and the switch from the unorganized segment to the
organized segment due to increases in consumers disposable
incomes.

In response to volatility in commodity prices, manufacturers will

continue to watch costs closely

Given the forecast slowdown in the economy, consumer

sentiment may weaken, and manufacturers will be unwilling to
raise prices

Leading manufacturers may live with narrow margins and drive

volume sales instead, or they may reduce pack size while
maintaining same price points

Private label products are not expected to see dynamic growth

over the forecast period

This is because margins are very narrow and retailers will not be able

to price private label products much lower than leading

manufacturers such as ITC

Due to urban consumers desire for a higher quality of living,

premium offerings in packaged food are less likely to be
affected by changes in the economic situation

Hence, manufacturers whose portfolio includes established

brands and premium products are expected to perform well
over the forecast period

Small manufacturers will see reductions in value share, as they

have less scale to cushion the impact of high input costs and
softening consumer demand

Segmental Analysis

The Drinks Industry is divided into the following

segments
1) Soft Drinks:
This segment includes
Bottled Water
Carbonates
Concentrates
Fruit/Vegetable Juices
Ready to Drink (RTD) Coffee
RTD Tea

2) Hot Drinks:
This segment includes
Tea
Coffee
Other Hot Drinks

3) Alcoholic Beverages
This segment includes
Spirits
Beer
Wine

Drinks Sector

Soft Drinks:

2011 soft drink value sales growth = +7.5 %; CAGR forecast

to 2015= +9.0%

With the growth in the number of modern retail outlets, the

volume sales of soft drinks have also increased

Coca-Cola
and
PepsiCo
compete
through
lemonade/lime carbonates by increasing the visibility of
their brands Sprite, Limca and 7-Up respectively

Local flavours by manufacturers to cater to consumer

tastes

Fruit/vegetable juice outshines carbonates in terms of

growth as beverage companies continuing to invest in
diversification away from carbonated beverages and into
healthier sub-sectors

The Indian juice market is a very attractive proposition for

juice producers, but the market remains fairly immature.

This immaturity can be linked on the supply side to the high

costs of juice concentrates, transportation and packaging
materials filter through to higher prices on packaged juice
products, leaving packaged juice producers in a weaker
position to compete against the price-competitive
informal juice producers

RTD formats becoming popular due to convenience

Hot Drinks:
Success of retail chains leads to robust growth within hot drinks

Child-specific and female-specific other hot drinks drive volume

sales

Hindustan Unilever and GlaxoSmithKline battle for leadership riding

on the popularity of the popularity of brands like Brooke Bond, Bru
and Horlicks

Specialty teas and green tea still new but increasingly accepted

Fortified hot drinks still used by manufacturers to enhance product

offerings

Tea sales growth for 2011 = +6.1% in local currency terms;

compound annual average growth to 2015 = +6.7%

Point sales are forecast to reach a value of INR242.8bn

(US$6.2bn)

Growth forecasts in the tea sector indicates a mature

market

Green tea gaining popularity in urban India

Mature tea market prompting local tea manufacturers to

look abroad to specialty tea markets in UK and US

Coffee sales growth for 2011 = +10.6% in local

currency terms; compound annual average
growth to 2015 = +11.6%

Point sales to reach INR52.9bn (US$1.3bn)

Growth rates and forecasts indicate a much

less saturated market and continued industry
dynamism

The rapidly expanding middle class is

embracing caf culture

Local players have also entered the high-growth

caf sector

Starbucks has opened shop in India in partnership

with Tata, positioning itself in the premium end of the
Indian coffee market

Clear trend towards premiumisation of the coffee

industry

Premium hot drinks increasing presence on

supermarket shelves with premium packaging being
used to create a superior image and to maximize
profits

Alcoholic Drinks:
Alcoholic drinks value sales growth for 2011 = +9.3% in
local currency terms; compound annual average
sales growth to 2015 = +13.3%
Alcoholic drinks volume sales growth for 2011 = +5.3
%; compound annual average sales growth to 2015 =
+6.2%
Vast sums being invested by the worlds leading
companies into increasing production capacity as
well as marketing and branding initiatives
Numerous product launches in 2011 by both global
and domestic brands, across different price points
and categories

New launches reflected manufacturers extending and

upgrading their existing portfolios as well as entering new
markets

The year 2011 witnessed fierce competition between

domestic and international players fighting hard to
strengthen their positions

Packaging played a major role in the new launches to

add aspirational value for consumers

Premiumisation was reflected in manufacturers upgrading

their existing brands with new packaging and launching
more premium brand varieties in beer and spirits

Beer continues to dominate the sector in terms of volume,

with compound annual average growth forecast at 6.2%
to 2015

The wine sub-sector is expected to outperform, with its

compound annual average growth in volume terms
forecast at 7.2% to 2015

Wine is increasingly perceived as a sophisticated alcoholic

beverage and a symbol of social prestige

The shift from country liquor to branded spirits will continue

to contribute to growth in the industry

Young adults becoming more prominent consumer base

The changes in each segment can be

summarized graphically as follows

Drinks Segment

The Growth drivers vary in each category within each segment. They
can be listed as follows
Soft Drinks:
Supermarkets and hypermarkets accounted for a combined 9%
share of total volume sales in 2011

Manufacturers can showcase their new variants to capture new

consumers and enable them to understand the options. This
channel is helping to facilitate the growth of soft drinks

Soft drinks players look towards supermarkets and hypermarkets

as ideal channels to cater to the young, fashionable and
relatively wealthy consumer segments

This trend reflects the rise in disposable incomes available to the

working population of India

The real driver of growth to 2015 and beyond will be the

increased interest in the non-carbonated, healthy drinks
category.

Sales of fruit juices and bottled waters are expected to

soar a consequence of growing consumer interest in
healthy living but also thanks to the promotional, product
launch and marketing efforts of the industrys major
players, with sales of these higher-priced, higher-profitmargin products much greater contributors to financial
performance than carbonates.

Growth in the soft drinks sector will be supported by

continued investment from the industrys leading
players namely US multinationals The Coca-Cola
Company and PepsiCo

Hot Drinks:
In 2011, hot drinks recorded its highest level of off-trade value
growth of the review period

Growth was fuelled by strong double digit performances

within areas like coffee and tea

Sales are being driven by the surge in the number of cafes in

urban areas

The expansion of chains like Caffe Pascucci, Gloria Jeans,

The Coffee Bean & Tea Leaf, Costa Coffee and Wagh Bakri
Tea Lounges has also resulted in a robust increase in retail
sales in recent years

Manufacturers are introducing new products to

drive sales and are putting pressure on
supermarkets and hypermarkets to showcase their
product

Modern retail outlets have started to compete with

independent small grocers on pricing in a bid to
boost sales

Sustained high levels of investment in the Indian

coffee sector are a key driver of growth in this
category

Consumption of premium products is increasing

within coffee and teas

Rising disposable incomes and increasing

consumer sophistication will continue to fuel
demand for premium products over the coming
years

Alcoholic Drinks:

Strong growth forecast for alcoholic drinks

Demand for alcoholic drinks in India is expected to continue to rise

over the forecast period, with a double-digit total volume CAGR
expected over 2011-2016

Increasing availability, higher incomes and growing social

acceptability of drinking alcohol will be the driving factors behind
growth in India. The shift from country liquor to branded spirits will
continue to contribute to growth in the industry

The demographic breakdown of this age group (around 145mn of

Indias population are female and aged between 20 and 34 years)
is another positive behind strong wine demand, with a growing
number of younger women stepping into the workplace and
drinking wine during social occasions.

Rising income would encourage the spread of wine consumption

across Indias secondary and tertiary cities, with the Indian states of
Karnataka, Andhra Pradesh, Orissa, Chhattisgarh and Jharkhand
representing the strongest medium- to long-term opportunities

With dynamics such as the maturation of Indias youth population,

rising purchasing power, greater exposure to Western influences and
growing health awareness favouring growth of the domestic wine
market, wine has been steadily increasing its market share against
the other alcoholic beverages

The strong growth in affluence and a rapid change in social

patterns and lifestyles provide a strong impetus to international beer
sales

Drinks Sector

Soft Drinks:

PepsiCo Indias recent outperformance to Coca-Cola India

further reflects the heightened price sensitivity of local
consumers

PepsiCo Indias willingness to absorb the bulk of its higher

input costs has allowed it to surpass market leader CocaCola India in recording volume sales growth in the Indian soft
drinks market

Coca-Cola India Pvt Ltd and PepsiCo India Holdings Pvt Ltd
continue to compete aggressively in this category by
increasing the visibility of their brands Sprite, Limca and 7-Up
respectively

Soft Drinks:

Catchy taglines were used by manufacturers to generate

consumer interest, alongside aggressive campaigns using
Bollywood actors

In the sales channel, independent small grocers will continue

to dominate soft drinks sales in the forecast period due to the
extremely widespread presence of this format throughout the
country

Hot Drinks:

Hindustan Unilever and GlaxoSmithKline are the dominant

players within hot drinks in India due to the popularity of
brands like Brooke Bond, Bru and Horlicks

The introduction of lower priced products and brands which

target specific consumer groups are examples of the
strategies used by these companies to drive sales

The limited availability of milk in East India means that hot

drinks which play a role as milk substitutes have a significant
presence in the region, with GlaxoSmithKlines Horlicks being
the most trusted brand.

Hot Drinks:

In addition, Cadburys Bournvita also enjoys healthy brand

recognition amongst consumers

In most semi-urban and rural areas of East and Northeast

India, Tata Global Beverages has a stronger retail presence
than Hindustan Unilever, with Bru and Nescaf being the
dominate coffee brands.

GlaxoSmithKline led other hot drinks sales in North India in 2011 due
to the popularity of its Horlicks brand. Other hot drinks are slowly
increasing in popularity in North India, mainly among children

Tea in North India is fragmented, with many small regional brands

like Uttam Tea and Mohani Tea being available in the area

Regional players are launching regional marketing strategies in

order to maintain their sales shares within tea

Premium tea brands like Twinings, Tetley and Honest tea target
urban consumers, especially young working professionals

Speciality teas and green teas are increasing in popularity in cities

like Bangalore, Chennai and Hyderabad which are also the IT hubs
of South India

Other hot drinks in South India is dominated by Horlicks,

Boost and Bournvita. These brands are competitively
priced but are still premium when compared to products
within tea and coffee

Hindustan Unilever and Nestl India continue to dominate

coffee as their brands are widely available in kirana stores
as well as in modern trade outlets in West India

Bru and Nescaf were the two most popular coffee

brands in 2011

Other hot drinks is also characterized by the widespread

presence of national players: GlaxoSmithKline (Horlicks)
and Cadbury India (Bournvita).

Alcoholic Drinks:

Domestic players launch premium products to compete with MNC

giants

The year 2011 saw many new such brands making their presence
felt in India

Aspri Spirits Pvt Ltd brought Framingham wines to the Indian market;
these are premium quality wines from New Zealand to target the ontrade and high-end restaurants and bars.

Modi Illva India Pvt Ltd introduced a premium vodka launched as a

Pure Italian Luxury Vodka; its fine distillation process gives it a
premium image which is expected to attract the younger
generation looking for a sophisticated brand of vodka.

Alcoholic Drinks:

United Breweries Ltd launched Heineken as a domestic premium

lager and positioned it as a super premium product but likely to be
available at a lower price than the imported variant, so consumers
can purchase a premium Heineken brand at a slightly lower price
than before

Domestic manufacturers are driving this trend and are expected to

introduce more premium and super premium brands in the Indian
market to compete with giants such as Pernod Ricard and Diageo

This trend is expected to last for at least two more years

M&As, New Entrants, Exits

Soft Drinks
Consumers are driving this trend as they are becoming more health
orientated, particularly educated young working professionals.
Leveraging the growing health trend, Coca-Cola India and PepsiCo
India Holdings are strengthening their non-carbonated offerings
Supermarkets and hypermarkets accounted for a combined 9%
share of total volume sales in 2011; however this figure is following a
rising trend. Soft drinks players look towards supermarkets and
hypermarkets as ideal channels to cater to the young, fashionable
and relatively wealthy consumer segments
Domestic manufacturers and multinational operators have
launched local flavours to cater to local tastes. PepsiCo India
Holdings relaunched its Dukes range in carbonates with exotic new
flavours such as raspberry, masala soda, ginger ale and ice-cream
soda
Manufacturers who were focused on powder concentrates have
slowly started to diversify their product portfolio to include RTD
formats

Hot Drinks
Success of retail chains leads to robust growth within hot drinks Demand for coffee is being driven by the surge in the number of
cafes in India. The expansion of established coffee chains like Java
City, Caf Coffee day and Barista Coffee has resulted in an
increase in both on-trade and off-trade sales
On-trade coffee volume sales increased by 8% in 2011 whilst offtrade volume sales only increased by 6%. The number of chained
specialist coffee shops increased by 15% in 2011
Child-specific and female-specific other hot drinks drive volume
sales - Horlicks and Bournvita have introduced products like Horlicks
Lite, Womens Horlicks and Bournvita Lil Champs which are
targeted at specific consumer.
Acti Life from Zydus Wellness was launched as a daily nutritional
supplement for adults which the company claims contain probiotic
actifibres which help to control cholesterol and improve digestion

Specialty teas and green tea still new but increasingly

accepted - Sales of green tea and specialty teas are
increasing at a faster rate than those of black standard tea

In January 2012, Tata Global Beverages launched Tata Tetley

Green Tea. In addition, Brooke Bond Taj Mahal also launched
a green tea range in high-end retail outlets and supermarkets

Fortified hot drinks still used by manufacturers to enhance

product offerings - GlaxoSmithKline Consumer Healthcare
launched Horlicks Gold in September 2011. The company
claims that the product is a blend of malts which dissolve
rapidly and contain an additional 20 vital nutrients which
provide both higher energy and stamina.

Alcoholic Drinks
Packaging used as tool to attract aspirational consumers Semi-premium products are launched with attractive
packaging to give them a premium appearance. Embossed
bottles without labels were used to give a new look to the
bottles

Young adults becoming more prominent consumer base Heineken was launched locally only in the on-trade channel
all over India. The company is focusing on young adults by
promoting the brand through music shows, TV campaigns for
Champions League football

Domestic players launch premium products to compete with

MNC giants - Modi Illva India Pvt. Ltd introduced a premium
vodka launched as a Pure Italian Luxury Vodka

In-house parties driving off-trade sales - Manufacturers such

as Chateau De Banyan and specialist retailers such as Living
Liquidz and Spiritz & More have started to offer home delivery
services for in-house parties

Key new product launches - Brand portfolio extensions such

as Black Dog 18 YO and Vladivar Vodka by United Spirits Ltd
and Heineken by United Breweries Ltd enabled the leaders to
create energy around mature brands and support their share
against new domestic entrants

Specialist retailers - Over the review period increased affluence

and consumer sophistication led to the rise of chained and
independent specialist retailers that provided a premium
shopping experience to consumers in the metro cities

Market mergers and acquisitions activity - in July 2011, United

Spirits Ltd acquired a 61.5% stake in Sovereign Distilleries giving
the company direct control to increase its in-house distillation
capacity

The introduction of international brands through partnerships

with domestic companies, especially bottling agreements, is
expected to increase consumer exposure to nascent product
categories, such as tequila (and mezcal), which will drive trial
purchases and create a consumer base for such products.

Hindustan Unilever Limited

Coca Cola India

Amul Dairy

PepsiCo India

Company

Segments

Sales ($mn)

Year end

Hindustan Unilever
Beverages-Hot &
Limited India
Soft

3,921

Mar-10

Coca-Cola India

Beverages-Soft

5271

Dec-10

Amul Dairy

Food-Dairy, Confectionery,
Convenience; BeveragesHot & Soft

1791.2

Mar-10

PepsiCo India

Food- Snack; BeveragesHot & Soft

6639

Dec-10

Food-convenience;

Hindustan Unilever Limited (HUL) is majority owned (52.1%)

by Anglo-Dutch fast-moving consumer goods giant
Unilever

The company is Indias largest consumer products retailer.

Currently, its largest product category in terms of revenue

contribution is soaps and detergents.

Its food and beverage division, on the other hand, which

includes brands such as Kwality Walls ice cream, Knorr
soups and Lipton tea, generates around a quarter of its
revenues.

Food convenience & various

Beverages Hot Drinks

Annapurna Atta, Salt

Brooke Bond Red label

Kissan Jam, Ketchup, Squashes

Brooke Bond 3 Roses

Knorr noodles, soups

Brooke Bond Taaza

Kwality Walls ice cream

Brooke Bond Taj Mahal

Modern Bread

Bru coffee

Lipton Tea

The company posted a 10.8% growth in its

net sales for the year ending March 2011

HUL has also enjoyed impressive volume

growth across their key product categories
such as food and beverage and health
supplements

Turnover (in Rs cr)

Year ending in March 2012

Year ending in March 2011

Sales

Others

Sales

Others

Beverages

2,577.02

40.41

2309.23

37.27

Packaged

1,341.93

17.53

1,162.28

16.15

Others: indicate service income from operations

Operational Indicators (in Rs cr)-Foods

2008

2009

2010

Net Sales

202,393

175,238

194,011

Net profit

24,965

22,020

23,060

No of
employees

NA

NA

16,000

Production, 2010
Brand

Annual Production

Canned & processed fruits &

vegetables

48, 189 tonnes

Frozen desserts & ice cream

18 million litres

Competitive Positioning, 2010

Product Type

Retail value share (%)

Rank

Soup

62.0

Ice cream

16.7

Bakery

2.5

Noodles

2.3

Sauces, dressings &

condiments

5.9

Strengthened consumer spending in India

Reflected in the headline sales and volumes figures released by

HUL as the company posted a 10.8% growth in its net sales for the
year ending March 2011

Aggressive advertising, branding initiatives and continuous

product launches to boost volume growth amid sustained
inflation
Hindustan Unilever posted only a slight decline in its net income for

the year ending March 2011 despite rising raw material costs

Led to relatively weaker operating margin performance as there was an

increase in advertising and promotional expenses

Hindustan Unilevers willingness to pass on the rising costs of

production to consumers has also helped protect its margin
growth in an inflationary environment.

HUL is also in a better position than industry players active

only in a single product category to mitigate their exposure to
commodity price volatility, given their wider range of inputs
and product offerings.

So though it is exposed to a greater variety of potentially

volatile input costs, the company is not completely exposed
to sharp price movements for a single input and this offsets
the direct impact of commodity price movements

HULs price hikes to protect its profit margins and boost value
growth, further price increase could frustrate its efforts to
reach the rural consumer base given that majority of the
Indian population still falls into the lower-income bracket and
are unlikely to be able to afford the substantial price increase

Coca-Cola India, the local subsidiary of US

soft drinks giant The Coca-Cola Company

Market leader in Indias soft drinks industry. It

operates across all soft drinks sectors in the

country, including carbonated soft drinks,

fruit juices, energy drinks and bottled water

Hot Drinks

Soft Drinks

GEORGIA Gold

Coca-Cola
Diet Coke
Thums Up
Sprite
Fanta

Limca
Maaza
Minute MaidPulpy Orange &
Nimbu Fresh
Burn energy drink
Kinley- Water & Soda

Schweppers
GEORGIA Gold- Cold Coffee &
Iced Tea

Coca-Cola
35
34
33
32
Coca-Cola

31
30
29

28
2007

2008

Turnover in Rs million

2009

2010

2011

2012

Production (Volume in million

litres)
Coca-Cola
26
25.5
25
24.5

Coca-Cola

24
23.5
23

2007

2008

2009

2010

2011

2012

High investments level in the country after the

parent companys announcement that India is
a key target

Creation of an independent retail sales team

greatly enhancing distribution of Coca-Cola
brands

Consolidating bottler activities and taking

majority ownership of more operations allowed
Coca-Cola better control over marketing
direction, as well as boosted efficiency

Coca-Cola Indias decision to pass on cost increases to

local consumers has allowed PepsiCo to play catch up

Coca-Cola has recently launched a number of these,

such as its Burn energy drink and lemon juice drink Nimbu
Fresh- because Healthier, higher value non-carbonated
soft drinks represent the strongest long-term growth
opportunities and also carry higher margins

New distribution and manufacturing model, streamlined

supply chain infrastructure and delivery systems, provided
greater economies of scale and improved profit margins,
thus enhancing capacity to invest

Coca-Cola can further leverage on its existing distribution

network to entrench itself deeper among the countrys
rural consumer bases

The Coca-Cola Company plans to leverage on its

franchise partnerships in India as it seeks to uphold its longterm sales and earnings outlook - started discussions with
independent franchisee bottlers in India on the
implementation of a new distribution and manufacturing
model that it currently follows in China

Coca-Colas move to extend its tea-market partnership

with Nestl clearly marks another step towards protecting
its Indian market share lead in this long-running and fierce
market-share battle

Amul Dairy is one of Indias largest food companies and

one of the countrys best-known brands.

Jointly owned by an estimated 2.8 million milk producers,

the company produces spreads, cheeses, UHT milk, milk
powder, fresh milk, curd and ice cream

It has been pursuing diversification into the confectionery,

beverages and snack foods sub-sectors in recent years.

Amul also has a growing export business, with key markets

at present including Singapore, the US and the Gulf
countries.

Food Dairy, Confectionery,

Convenience

Beverages - Dairy

Bread Spreads Amul Butter, Amul

Lite, Delicious Table Margarine

Milk Drinks Amul Kool, Kool Caf,

Kool Koko, Kool Chocolate, Kool
Flavoured Bottled Milk, Tetra Pack

Powder Milk Spray Infant Milk Foods,

Full cream milk powder, Sagar
Amul Masti Spiced Buttermilk, Lassee,
skimmed milk powder, Sagar Tea
Kool Thandai
Coffee whitener, Amulya Dairy
whitener
Cheese pasteurized, spreads,
emmental, pizza mozzarella, gouda

Health Drink Nutramul

Cooking Pure Ghee, Cooking

butter, Malai Paneer, Utterly delicious
pizza, Mithai Mate, Masti Dahi, Probiotic Dahi

Fresh Milk Amul Gold, Taaza, Lite,

Fresh Cream, Double Toned, Slim &
Trim, Shakti toned, Calci+, Buttermilk

Desserts ice-creams, shrikhand,

mithai gulab jamuns, chocolates,
basundi, flavoured yoghurt

Growth
Year

Sales (INR, bn)

Turnover (INR,
mn)

Growth(%)

2010

80

80,053.6

52.2

2009

52.6

67,113.1

22.9

Competitive Position, 2010, Foods

Product Type

Retail value share(%)

Rank

Confectionery

1.2

11

Dairy

14.6

Ice cream

36.3

Oils and Fats

10.8

Indias biggest dairy recording an

increase in 20% of turnover from previous
year (2010-11)

Farmers in Gujarat are rejoicing over a 58

per cent increase in their milk prices over
the last three years at a time when their
counterparts in other States were
struggling to make their milk business
viable in the absence of good returns

Apart from the 750 distributors added in

dairy and fresh products segment, GCMMF
also added 150 super distributors through
the implementation of its new hub &
spoke model, to reach the smaller markets

GCMMF will be investing Rs 3,000 crore to

set up nine processing units in the next four
years. This would enhance Amuls milk
handling capacity from the existing 145
lakh litres per day to 180 lakh litres per day.

In 2011-12, 965 new Amul Parlours have

been added, taking the total strength to
6,315. Apart from the 170 parlours at
railway stations and 303 operating at
various centres of excellence, Amul also
has 600 air-conditioned ice-cream
scooping parlours, making it the largest
single brand retail in the country

Cost & Profitability

Turnover (Rs cr)
16000
14000
12000
10000
8000

Turnover (Rs cr)

6000
4000
2000

0
2010-11

2011-12

For 2012-13, expected turnover

2012-13

Procurement
Members

13 cooperative milk producers

No of producer members

3.03 million

No of village societies

15,712

Total milk handling capacity

13.67 million litres per day

Milk collection (2010-11)

3.45 billion litres

Milk collection (daily avg)

9.2 million litres

Milk Drying Capacity

647 Mts per day

Cattle feed manufacturing

capacity

3690 Mts per day

Product diversification has been integral to

Amuls growth strategy in recent years

Entry into export markets reduced Amuls

reliance on the intensely price-sensitive market
of India

Invested in development of its distribution

network to enhance distribution efficiency and
increase sales opportunities was essential and
is important due to the perishable nature of the
dairy products

The company will elevate its milk procurement and

supply chain capacities in order to sustain increasing
demand for branded milk and milk products.
Employing a 2-pronged approach, it is likely to
concentrate on expanding its retail reach into rural
and semi-urban India on one hand, and introducing
value-added dairy based products for urban
consumers on the other.

Its recent venturing into ice parlour business

investment in new product development in new subsectors to improve chances of poaching market
share from its competitors

Expanding in the high-value sectors to tap on the

growing affluence among Indias middle classes

Like its rivals, Amul is now struggling in the face of

elevated sugar, cocoa and milk prices although
being a cooperative and buying directly from its
members, it is arguably more immune to rising milk
prices than most

Growing importance of exports markets following the

companys recent decision to implement an
aggressive pricing approach that will keep prices in a
number of categories at their current levels.

PepsiCo India is the local subsidiary of US

major PepsiCo

Second largest player in the Indian soft

drinks market

Like rival Coca Cola, PepsiCo is active

across a diverse range of beverage subsectors, while it is also present in the snack
foods subsector via its Frito-Lay India
subsidiary

Food Snacks (Frito Lay India)

Beverages Soft Drinks

Aliva

Pepsi & Diet Pepsi

Cheetos

7 UP

Kurkure

Aquafina drinking water

Lays

Dukes - soda

Lehar Namkeen

Gatorade sports drink

Quaker Oats

Mirinda

Uncle Chips

Mountain Dew
Nimbooz
Slice
Tropicana & Tropicana 100%- juices

PepsiCo Inc
27.5
27
26.5
26
25.5
25
24.5
24
23.5
23
22.5
22

PepsiCo Inc

2007

2008

Turnover in Rs million

2009

2010

2011

2012

Production (Volume in million litres)

PepsiCo Inc
22.5
22
21.5
21

PepsiCo Inc

20.5

20
19.5
2007

2008

2009

2010

2011

2012

As part of extensive repositioning of its food & drinks

portfolio, PepsiCos Frito-Lay plans to launch more than 50
new products as it invests in scale and innovation to
consolidate its leading position in the countrys snack
market

PepsiCo India continues to invest heavily in India, both to

prevent Coca-Cola from building on its existing lead and
to prevent smaller market players from threatening the
dominance of the big two.

Capacity expansions at existing sites and new greenfield

facilities are a priority, while greater investment in supply
chain efficiency, market infrastructure (ie coolers and
shelving units) and research and development are also
key elements of its expansion strategy

PepsiCo Indias joint venture with Tata Tea

(April 2010), gave access to a vast
distribution network and a strong local
brand name

Piloted the launch of cookies under the

Quaker Oats brand

Being a relative latecomer to the Indian biscuits

market (PepsiCo launched its first biscuits brand

Aliva in the country in June 2009), PepsiCo could
face hurdles in building a significant market
foothold against stiff competition from domestic
and multinational confectioners

Invested another US $ 500mn to fund its

expansion plans over the next two yearschannelled into new manufacturing and
marketing infrastructure, new product launches
and research and development initiatives that
PepsiCo hopes will further entrench its brand

PepsiCo leveraging on its developed

marketing capabilities and existing distribution
networks to engage in aggressive product
innovation and development to cater to the
ever-evolving tastes and preferences of the
Indian consumer

Future Trends

Trade

Exports growth 13.7% , Compounded annual

growth rate till 2015 16.2%

Imports growth 12.1%, Compound growth rate till

2015 14.3%

Short term perspective for growth in trade looks

bearish

Major challenges include underdeveloped

production, harvesting and storage infrastructure.

Demand among a population with rising

purchasing power will contribute to the
need for more foreign-sourced products.

In particular, Westernised consumption

habits and the need for ingredients not
widely produced on a local level will
stimulate imports.

Inflationary pressure likely to put pressure on

domestic household budget.

Global Macroeconomic factors Growing risk of

double dip recession in US, Eurozone crisis

Potential hard landing in China pose potential risk

to domestic demand in short term

In long term FDI in retail and growing disposable

income looks favourable

Governments recent hiking of diesel and petrol

are also likely to put pressure on headline
inflation

Pepsi Cos recent outperformance to Coca

Cola India further reflects the heightened price
sensitivity of local consumers which has been
due to Pepsi Cos willingness to absorb bulk of its
higher input cost.

Rapid income growth, a young and growing population and a continued influx of sector
investments underline the potentially dynamic opportunities on offer on the consumer side.

India has a young and rapidly growing population of

more than 1.2 billion.

As youth climbs up the income ranks, opportunities

presented by the mass market catches the eye.

P & Gs focus on expanding its mass market portfolio is

testimony to this view.

P & G plans to enter into new product categories such

as mass skincare products, hair oils and toothpaste in a
bid to leverage on the stronger rewards in this segment.

FDI will bring about positive spill over effects to the

other consumer facing sector in the industry.

The spread of organized retail would improve the

visibility of consumer products and facilitate the
distribution of products to local consumers

Indian government will be setting up 10 Mega Food Parks

with an investment of $514 Million

The food processing industries are prioritized highly in terms of

getting credit and lending money in the bank, because they
grow fast and thus indicate a stable business.

The fruit and vegetable processing companies do not have

to pay any taxes on these products to the Indian
government, thus making the business easier to access.

The excise duty tax on ready-to-eat packaged foods and

instant food mixes has been brought down from 8% to 16%
making this industry highly competitive and attractive

Among the four key segments, i.e., Confectionary, Bread, Fun

food and Snack, and Food Juices and Concentrates; the
highest growth has been seen in the bread segment and the
expected demand in 2014-15 for bread is Rs 26.90 billion.

Food consumption growth rate 5.9%, compounded annual

growth rate till 2015 = 7%

Per capita food consumption growth rate 3.3% and

compounded annual average growth rate 5.6%

Change of consumption habits over long term due to high

disposable income will lift up consumers ability to trade up
expensive stuff and non essential purchases.

The mass grocery retail industry is expected to help

drive up food consumption by presenting
consumers with wider range of higher-value
products

A dynamic industry should fuel competition which

would in turn heighten marketing and promotional
spending as well as drive down the price of non
essential items.

Confectionary volume sales growth 7.2 % .

Compound annual average growth rate till 2015
7.9%

Confectionary Sales value 5.9% Compounded

annual growth rate till 2015 8.1%

Chocolate is expected to outperform its

counterparts with compounded annual growth
rate of 10.3% till 2015

Rapid economic growth, increasing disposable

incomes, increasing urbanisation and the continued
spread of mass grocery retail will all serve to stimulate
the demand for confectionery products

Buoyed by higher incomes, Indian consumers are

gradually gravitating towards higher-value products in
line with a growing familiarity with Western cultures.

Growth opportunities will remain via innovation and

product diversification.

Manufcaturers have to capture unique Indian

tastes and preferences.

A recent trend noticed is the nationalisation of

confectionary brands as local confectioners roll
out their regional brands

Parle Products launched Top biscuits brand in West

Bengal and Assam to compete with SAJ Food
Products

Parle, Dabur India, ITC Foods and Emami are already

enjoying success from the launch of their regional brands
across the country

Another distinct trend is Indian confectionary sector is

strengthening focus on healthy product offerings.

Britannia sharpen its focus on diabetic-friendly products and

Kellogs repositioning its brand as tastier and healthier.

Dunkin Donuts plans to set up 25 30 stores with the first year

of its partnership

Coffee growth at 10.6% and compounded annual

growth rate to 2015 11.6%

Tea growth at 6.1% and compounded annual

growth rate to 2015 6.7%

The Indian tea sector remains fairly mature, given

the presence of major tea manufacturers such as
Tata Tea and Apeejay

Due to the maturity in the sector, it is prompting

local tea manufacturers to look abroad for future
growth opportunities, with special focus on US and
UK

The outlook for the Indian coffee sector is much

more attractive as a result of lower levels of market
saturation and continued industry dynamism

Fresh & Honests recent espresso partnership with

Illy and the entrance of Starbucks show a clear
trend towards premiumisation of the industry

With this in mind, existing coffee players are clearly

not resting on their laurels

Caf Coffee Day took a period of 14 years to set

up 1,000 stores in India but is now planning to
double its outlet count

Starbucks will be positioning itself in the premium

end of the Indian coffee market

With this in mind, existing coffee players are clearly

not resting on their laurels

Caf Coffee Day took a period of 14 years to set

up 1,000 stores in India but is now planning to
double its outlet count

Starbucks will be positioning itself in the premium

end of the Indian coffee market

Alcoholic drinks growth 9.3% , Compounded

annual growth rate till 2015 13.3%

Alcoholic drinks volumes sales growth 5.3%

Compounded annual growth rate till 2015 6.2%

Wine sector to outperform with annual growth rate

at 7.2%

As one of the fastest-growing emerging markets,

Indias impressive growth trajectory is supportive of
an acceleration of the premiumisation trend

This strong value growth could also be attributed to

the vast sums being invested by the worlds leading
companies into increasing production capacity as
well as marketing and branding initiatives

Continued investments from Asia Pacific Breweries,

Cobra Beer, Carlsberg and Anheuser-Busch InBev
will only fuel this trend

Beer will continue to dominate the sector in terms

of volume, with compound annual average
growth forecast at 6.2% to 2015

Indian consumers can pay more than twice as

much for foreign beer brands than locally brewed
beer brands owing to the 100% import duties levied
on foreign brand

With the Indian alcoholic drinks market traditionally

focused on spirits and beer, wine consumption is
still largely a fledgling concept in the country

Continued investments from Asia Pacific Breweries,

Cobra Beer, Carlsberg and Anheuser-Busch InBev
will only fuel this trend

Beer will continue to dominate the sector in terms

of volume, with compound annual average
growth forecast at 6.2% to 2015

Indian consumers can pay more than twice as much for

foreign beer brands than locally brewed beer brands owing
to the 100% import duties levied on foreign brand

With the Indian alcoholic drinks market traditionally focused

on spirits and beer, wine consumption is still largely a fledgling
concept in the country

Indian wine producer Sula Vineyards strong revenue growth

of around 40% for its latest financial year underlines
burgeoning domestic demand for wine

India has around 303mn people aged 20-34,

among which wine is increasingly perceived as a
sophisticated alcoholic beverage and a symbol of
social prestige

Accompanied by growing health awareness,

Indian consumers are developing a greater
penchant for wines

Soft drinks growth at 7.5%. Compounded annual

growth rate at 4.9% till 2015

Soft drinks value sale growth at 7.5%. Compounded

annual growth rate at 9% till 2015

Indias soft drinks sector is forecast to experience

bullish growth over our forecast period

Growth in the soft drinks sector will be supported by

continued investment from the industrys leading
players namely US multinationals The Coca-Cola
Company and PepsiCo.

Both have committed large sums towards

expansion in India in recent years owing to the
potential that the vast market

The real driver of growth to 2015 and beyond will

be the increased interest in the non-carbonated,
healthy drinks category

Sales of fruit juices and bottled waters are expected to

soar a consequence of growing consumer interest in
healthy living

There is no doubt that the Indian juice market is a very

attractive proposition for juice producers, but the market
remains fairly immature

This immaturity can be linked to a combination of

demand and supply factors

Expensive packaging and transportation costs are

arguably the other disincentives for packaged juice
Producers

Mass grocery retail sales growth +19.7%; compound annual

average growth rate to2015 = +17.6%

Indian consumers are still largely familiarising themselves with

the concept of modern retail, which accounts for only 9% of
overall grocery retail sales

Four key modern formats (supermarkets, hypermarkets,

convenience and discount stores) are already present within
Indias mass grocery retail

Dominant ones being Pantaloon Retail, Reliance Retail, and

Big Bazaar.

Low purchasing power, Indian consumers have been

relatively slow to trade up to modern retailing methods.

Another factor is the restrictive business environment of

Indias MGR sector

Indian consumers are expected to increase their spending

and turn to modern retail formats in search of the
convenience and quality

Global retail giants Walmart and Carrefour, for instance, have

already set up cash-and-carry stores in India through
partnerships with local conglomerate Bharti Enterprises and
Future Group

India is one of the worlds major food producers but accounts

for only 1.7% (valued at US$ 7.5 billion) of world trade in this
sector

This share is slated to increase to 3% (US$ 20 billion) by 2015

Sustained by high agricultural output, international demand

and a strong domestic market, the Indian food industry offers
ample scope for large investments in processing
technologies, skills and equipment, packaging, refrigeration
of frozen food and thermo processing.

Next few years India aims at raising the share of

processed food to 20% in comparison to total agriproduce

Market experts are of the opinion that in future, the

food products is going to increasingly contribute
towards India's GDP growth

With globalization of industrial market

and technological advancement the market size
of Food and Beverage Sector has widened

Increased FDI inflow, government subsidised food

parks, tax breaks are other reasons for the growth
of this sector

Adopt proactive product and service

differentiation strategies

Focus on successful product lines and global

diversification in order to drive sustainable growth

Focus on product innovation as a long term goal

for a sustaniable competitive edge

Understand the consumer's motivation for buying

your product

Fear of Greed : These are the primary motivators that impacts

whether the consumer will buy your product or not.
Consumers will be more willing to buy if the product
effectively communicates that it will help avoid a potential
loss or paint or help to deliver a gain or pleasure

Effectively communicate the indirect costs of product

switching

Look for opportunities that will communicate to consumers

that product switching entails a sacrifice. Such cost should be
pitched as an investment opportunity to the consumer

Invest in marketing strategies that focuses on your

core product offering

Show that your product is an essential component

of the average consumer's grocery basket

Build brand equity through targeted efforts by

Marketing and Sales

Company positioning as a partner to help end

users through this tough economic time

Integration of disparate products into a complete solution

Exploit opportunities from consumer feedback

Proactively seek the final consumer's need set and match

product lines to those needs

Establish partnerships with other suppliers

Seek out joint branding with other manufacturers to exploit

complementary synergies