FOOD AND BEVERAGE INDUSTRY

Introduction:
India's food and beverage industry currently stands at US$ 40.3 billion and is expected to touch US$ 66.3 billion by
2018, registering a growth of 18 per cent.

With a huge agriculture sector, abundant livestock, and cost competitiveness, India is fast emerging as a sourcing
hub for processed food. Estimated to be worth US$ 121 billion in 2012, the Indian food processing sector is poised
for excellent growth in the coming years. It is ranked fifth in terms of production, consumption and exports.

Anticipating the future growth, many big international players are entering the Indian market by partnering with
the domestic players. There are tremendous opportunities for large investments in food and food processing
technologies, skills and equipment, especially in the areas of canning, dairy and food processing, specialty
processing, packaging, frozen food/refrigeration and thermo processing.

The Ministry of Food Processing Industries is making all efforts to encourage investments in the sector, incentives
for cold chain development and also grant-in-aid for setting up laboratories that are equipped for testing food
products.

Key Players:
Unique Organics plans to set up an integrated herbal tea processing facility in West Bengal. The total outlay for the
project is estimated at Rs 500 crore (US$ 80.81 million).

PepsiCo India plans to set up a new beverage plant, poised to be the company's largest plant in India, at Sri City
industrial park, close to the Andhra Pradesh–Tamil Nadu (TN) border. The plant would produce the full range of
beverages – carbonated drinks, fruit-based drinks and sports drinks.

Hardcastle Restaurants, master franchise for west and south India operations of McDonald's Restaurants, plans to
bring its coffee retail format McCafe to India. More than 150 McCafes are expected to be set up in the next five
years.

Mars International India, which imports and markets its chocolate brands in India, is looking for locations to start
manufacturing in India. The company, which so far has been focusing on growing its Snickers brand, launched its
tablet chocolate brand Galaxy in India on November 7, 2013.

ITC Ltd plans to enter a new segment, branded ready-to-drink juices. The company is close to acquiring Bangalore-
based Balan Natural Food Pvt Ltd's B Natural brand to roll out packaged fruit juices under its foods category.

Haryana has launched its first food bank to support various feeding programmes in Gurgaon and nearby areas. The
bank is being supported by global food major Cargill and India Food Banking Network (IFBN).

Food Processing Industry:

The Indian food processing industry accounts for 32 per cent of the country's total food market. Currently growing
at more than 10 per cent per annum, it is expected to touch US$ 194 billion by 2015 from a value of US$ 121 billion
in 2012, according to Mr Swapan Dutta, Deputy Director General, Indian Council of Agricultural Research (ICAR).
The packaged food sector in India is likely to double by 2015 to touch US$ 30 billion from the current US$ 15
billion, owing to the rise in income, changing urban lifestyle and modern retail trade. Residents in urban areas are
the largest consumers of processed food, consuming 78 per cent of all packaged food in 2011.

The share of food processing export in total exports from India is 12 per cent. Indian agricultural and processed
food exports in the period April 2013–October 2013 stood at US$ 12,797.65 million as compared to US$ 11,827.50
million during the same period last year, according to data released by the Agricultural and Processed Food
Products Export Development Authority (APEDA).

The food processing industries in India attracted foreign direct investments (FDI) worth US$ 3,776.57 million
during the period April 2000–September 2013, according to the latest data published by Department of Industrial
Policy and Promotion (DIPP).

Beverages:
Consumption of non-alcoholic beverages in India is expected to increase by 16.5–19 per cent over the next three
years as more people are trading up to packaged drinks, according to a report by the Indian Council for Research
on International Economic Relations (ICRIER) and the Indian Beverage Association (IBA).

Within the beverages market, the fruit-based beverages category is one of the fastest growing categories. At
present, the Indian packaged juices market is valued at Rs 1100 crore (US$ 177.78 million) and is projected to grow
at a compound annual growth rate (CAGR) of 15 per cent over the next three years. Dabur India Ltd is the
established leader, accounting for 54 per cent market share through its Real fruit juice brand, followed by PepsiCo
India with a 25–30 per cent market share through its Tropicana juice brand.

Expecting fast growth in value-added dairy products such as milk, foreign entities have started looking at India as a
dairy product market. Packaged milk segment in India is projected to grow from US$ 7.76 billion to US$ 32.9 billion
by 2030, registering an annual growth of 8 per cent. The hot beverages market in India is also surprisingly
concentrated with the top 10 companies accounting for 65 per cent of the market.

Government Initiatives:
The Government of India has allowed 100 per cent FDI under the automatic route in the food processing sector, in
agri-products, milk and milk products, and marine and meat products. A 100 per cent tax exemption is also allowed
for five years, followed by 25 per cent tax exemption for the next five years for new agro-processing industries.

The Ministry has launched a Centrally Sponsored Scheme namely, National Mission on Food Processing (NMFP)
during the 12th Plan to be implemented through State/ UT Governments. During the period, the government has
also made a plan allocation of Rs 5,990 crore (US$ 968.36 million) to implement various schemes for promotion
and development of the food processing sector.

The Ministry of Food Processing Industries and ‘Invest India' have entered into an agreement for the setting up of
an Investors' “Help Desk” for offering online support to investors, both domestic and international, with regard to
their queries, and guide them particularly at the initial stage of setting up their units.

With the objective of providing incentive to create integrated cold chain and preservation infrastructure facilities
in the country, the Ministry is implementing the Scheme of Integrated Cold Chain, Value Addition & Preservation
Infrastructure.
The government plans to set up three mega food parks in the country during the next six months with each project
attracting an investment of Rs 400–500 crore (US$ 64.65-80.81 million).

Road Ahead:
India is the world's second largest producer of food next to China, and has the potential of being the biggest
backed by its food and agricultural sector. The total food production in India is likely to double in the next 10 years.

The Ministry of Food Processing Industries (MOFPI) has formulated a Vision 2015 Action Plan that includes trebling
the size of the food processing industry, raising the level of processing of perishables from 6 per cent to 20 per
cent, increasing value addition from 20 per cent to 35 per cent, and enhancing India's share in global food trade
from 1.5 per cent to 3 per cent.

There is a need to proactively market India as an attractive destination. In terms of market size, India has a
domestic market of over a billion people, with 300 million middle class consumers. India's domestic food market is
estimated to reach US$ 258 billion by 2015.

Exchange rate used: INR 1 = US$ 0.01616 as on December 31, 2013

References: Ministry of Food Processing Industries (MoFPI), Agricultural and Processed Food Products Export
Development Authority, Media reports, Department of Industrial Policy and Promotion (DIPP), Union Budget 2013-
14, Press Information Bureau (PIB)