Required Report - public distribution

**Date:** 4/1/2005

**GAIN Report Number:** IN5031

IN5031

**India**

**Food Processing Ingredients Sector**

**Annual**

**2005**

**Approved by:**

![](media/image1.wmf)Chad R. Russell

U.S. Embassy, New Delhi

**Prepared by:**

A. Govindan

**Report Highlights:**

India's food-processing sector, although still in a nascent stage, has
undergone important changes over the last six to seven years. The types,
variety, quality, and presentation of products have all improved, mainly
as a result of economic liberalization, which led to foreign direct
investment (FDI) in this sector. Several multinational companies,
including US companies like Pepsi, Coca Cola, ConAgra, Cargill, Heinz,
and Kellogg's have invested in the Indian food-processing industry. The
growth in the food-processing sector has generated increased interest in
quality food ingredients in order to produce higher quality foods.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

New Delhi \[IN1\]

\[IN\]

**Table of Contents**

[**I. MARKET SUMMARY 3**](#i.-market-summary)

[II. ROAD MAP FOR MARKET ENTRY 5](#ii.-road-map-for-market-entry)

[A. ENTRY STRATEGY 5](#a.-entry-strategy)

[B. MARKET STRUCTURE 6](#b.-market-structure)

[C. COMPANY PROFILES 9](#c.-company-profiles)

[D. SECTOR TRENDS 12](#d.-sector-trends)

[III. COMPETITION 13](#iii.-competition)

[IV. BEST PRODUCT PROSPECTS 15](#iv.-best-product-prospects)

[V. KEY CONTACTS AND FURTHER INFORMATION
16](#v.-key-contacts-and-further-information)

# I. MARKET SUMMARY

India's food-processing sector, though still developing, contributes 14
percent to the manufacturing GDP (5.5 percent of aggregate GDP),
produces goods worth rs. 2.8 trillion (\$64 billion), and employs 13
million people[^1]. Much of India's food-processing industry is
small-scale and involves very little value addition, although in recent
years several multinational food-processing companies have started
operations in India (see Section II. C). A plethora of internal
restrictions, including (a) prohibition on foreign direct investment in
retail, (b) prohibitions on contract farming, (c) barriers to interstate
commerce based on revenue and food security concerns, (d) some of the
highest taxes on processed foods in the world, and (e) inefficient in
infrastructure and marketing networks seriously constrain growth of the
sector.

The almost year-round availability of fresh products across the country,
combined with the consumers' preference for fresh products and freshly
cooked foods has dampened demand for processed food products. The level
of processing varies across segments -- ranging from less than 2 percent
of the production in the case of fruits and vegetables to over 90
percent in non-perishable products such as cereals and pulses. In the
latter, however, processing involves very little value addition, and is
mostly confined to grading, cleaning, milling, and packing; with
negligible use of additives, preservatives, and flavors.

###### LEVEL OF PROCESSING IN PERISHABLE PRODUCTS

+--------------------+-----------------+--------------------+---------+
| **Product**        | **Level of      |                    |         |
|                    | Processing (%   |                    |         |
|                    | of total        |                    |         |
|                    | production)**   |                    |         |
+--------------------+-----------------+--------------------+---------+
|                    | #               | **Unorganized**    | **      |
|                    | ##### Organized |                    | Total** |
|                    |                 | **Sector 1/**      |         |
|                    | **Sector**      |                    |         |
+--------------------+-----------------+--------------------+---------+
| Fruits &           | 1.2             | 0.5                | 1.7     |
| vegetables         |                 |                    |         |
+--------------------+-----------------+--------------------+---------+
| Milk               | 15.0            | 22.0               | 37.0    |
+--------------------+-----------------+--------------------+---------+
| Meat               | 21.0            | 0                  | 21.0    |
+--------------------+-----------------+--------------------+---------+
| Poultry            | 6.0             | 0                  | 6.0     |
+--------------------+-----------------+--------------------+---------+
| Marine fisheries   | 1.7             | 9.0                | 10.7    |
+--------------------+-----------------+--------------------+---------+
| Shrimp             | 0.4             | 1.0                | 1.4     |
+--------------------+-----------------+--------------------+---------+

> Source: Rabobank Analysis
>
> 1/ "Unorganized" in fruits and vegetables includes unbranded pickles,
> sauces,
>
> and potato chips, but excludes processing by street vendors;
> "unorganized"
>
> in dairy includes processing by sweet food makers; "unorganized" in
> marine products includes processing by small fishermen.

According to the Ministry of Food-processing Industries (MFPI), the
food-processing industry over the last decade has grown at an average
annual rate of 7.1 percent. This higher rate is indicative of the
relatively low base, the increasing marketable surpluses of agricultural
products, changing consumer life styles and tastes, and the country's
higher disposable income. The growth is projected at around 7.3 percent
per annum over the next five years. Of the estimated total food sales of
rupees 8.6 trillion (\$198 billion) in 2003/04, processed food
consumption was valued at rs. 5.3 trillion (\$122 billion), with the
share of value-added foods (juice, jams, pickles, cheese, butter, ghee,
processed meat, confectionary and chocolate, alcoholic beverages,
aerated beverages, malted beverages, food services, etc.) estimated at
37 percent.

With a population of over 1 billion, which is growing annually at 1.7
percent, India is a large and growing market for food products. Food
accounts for about 49 percent of the consumers' total expenditure. With
the changing lifestyle of consumers and the rising disposable income of
the growing middle class, there is increasing demand for convenient and
hygienic foods. This is expected to increase demand for processed food
products, giving a boost to the domestic food-processing industry, and
providing opportunities for increased imports of processed foods and
food ingredients. The Indian food-processing industry has started
looking outward to acquire the latest food ingredients and technology.
An indication of this is the presence of numerous multinational food
flavor, ingredient, and machinery companies in India; these include IFF,
Danisco, Chr. Hansen, AB MAURI, The Solae Company, and Fine Organics.
Health consciousness is popularizing sugar-free low calorie diet foods
and natural foods containing dietary ingredients.

At present, most inputs for the food-processing industry are sourced
domestically, with the exception of some bulk commodities that are in
short supply, such as pulses and vegetable oils, dried fruits and nuts,
and small but increasing quantities of food additives and ingredients
such as soy proteins, whey, and flavors and essence. India annually
imports vegetable oils valued at over \$2.6 billion and pulses valued at
\$560 million. Imports of food ingredients were valued at \$170 million
in 2003/04, and include mostly spices and condiments, dairy products,
cocoa products, fish and fish products, fruit juices, and other
ingredients (yeasts, sauces, soft drink concentrates, flavoring
materials, soy protein concentrates and isolates, etc.).

Unorganized, small players account for more than 70 percent of the
industry's output in volume and 50 percent in value terms. Most of them
operate locally, add little if any value to products, and use outdated
technologies. The government's policy of reserving the food-processing
sector for small-scale units, effective until 1991, discouraged
large-scale domestic and foreign direct investment in the
food-processing sector. However, following economic liberalization in
1991, the food-processing industry was opened, resulting in increased
investment in this sector, both domestic and foreign. Over the last few
years, several large companies, both Indian and foreign, have invested
in the food-processing business in India, resulting in significant
growth in this sector. Some of the major players in India's
food-processing industry are listed in Section II.C of this report.
There are hundreds of medium-sized regional companies, some of them
aspiring to emerge as national players with their own established
brands, who pose some competition to large firms.

ADVANTAGES AND CHALLENGES

+------------------------------------+---------------------------------+
| **Advantages**                     | **Challenges**                  |
+------------------------------------+---------------------------------+
| -   Increasing disposable income;  | -   High tariffs and increasing |
|     changing life style of         |     non-                        |
|     consumers                      |                                 |
|                                    | > tariff barriers               |
+------------------------------------+---------------------------------+
| -   Growing health and hygiene     | -   Antiquated food laws and    |
|     awareness among the middle     |     internal policies which     |
|     class                          |     restrict marketing          |
+------------------------------------+---------------------------------+
| -   Government's high priority on  | -   Inadequate infrastructure   |
|     food-processing industry       |     facilities, like cold       |
|                                    |     storage and roads           |
+------------------------------------+---------------------------------+
| -   Plentiful availability of raw  | -   Increasing competition from |
|     materials                      |     local players               |
+------------------------------------+---------------------------------+
| -   Increasing presence of         | -   Long and fragmented supply  |
|     multinational companies        |     chain                       |
+------------------------------------+---------------------------------+
| -   Modernizing retail sector in   | -   Problems in tapping the     |
|     big cities                     |     vast rural market and       |
|                                    |     unorganized retail sector   |
+------------------------------------+---------------------------------+
| -   Move towards a new "Food       | -   Consumer preference for     |
|     Safety and Standards"          |     fresh foods                 |
|     legislation by the government  |                                 |
+------------------------------------+---------------------------------+

#  

# II. ROAD MAP FOR MARKET ENTRY

## A. ENTRY STRATEGY

It is essential to survey existing and potential markets in India for
products before initiating export sales. The Office of Agricultural
Affairs in the American Embassy New Delhi (see Section V) and market
research firms in India can assist new exporters. If the US companies do
have products of promising sales potential in India, they can either set
up a base in India or appoint distributors or agents. The Indian
government encourages foreign investment in the food-processing sector.
Hundred percent equity participation or joint ventures with Indian
companies are possible. Tax benefits and incentives are available to
companies setting up operations in Special Economic Zones (SEZ).

For US food ingredient suppliers, direct interaction, such as visits,
with large Indian food companies would help create awareness about new
products and their uses in the Indian context. However, as the majority
of Indian food-processing units are small-and-medium sized, it would be
difficult for US companies to reach their intended audience directly. In
such cases, appointing agents and distributors is the best alternative.
Consider the following before selecting an agent or distributor:

-   Determine through surveys who their potential customers are, and
    where in India these customers are located.

-   Recognize that agents with fewer principals and smaller set-ups
    often are more adaptable and committed than those with large
    infrastructure and big reputations.

-   There may be a conflict of interest where the potential agent
    handles similar product lines, as many agents do.

-   US firms should examine all distributor prospects, and thoroughly
    research the more promising ones. Check the potential agent's
    reputation through local industry/trade associations, potential
    clients, bankers, and other foreign companies/missions.

Aspiring US suppliers should also be aware of India's varied and dated
food sector laws, particularly those pertaining to the use of additives
and colors, labeling requirements, packaging, weights and measures,
shelf-life, and sanitary and phytosanitary regulations. Details on
India's food laws are available in our "Food and Agricultural Import
Regulations and Standards Country Report 2004"
([IN4077](http://www.fas.usda.gov/gainfiles/200407/146107003.pdf)),
which can be accessed from the FAS/USDA website:
[www.fas.usda.gov](http://www.fas.usda.gov/). Also refer to the GOI's
Department of Health website relating to the Prevention of Food
Adulteration Act and Rules at
[www.mohfw.nic.in/pfa.htm](http://www.mohfw.nic.in/pfa.htm). The GOI is
planning to enact a new Food Safety and Standards Act, which is intended
to be comprehensive, and which aims to meet the dynamic requirements of
international trade and the Indian food industry (see
[IN5003](http://www.fas.usda.gov/gainfiles/200501/146118593.pdf)). This
is a move in the right direction if formulated according to
international standards and practices, and should help attract
investment in the food-processing sector.

Advertising and trade promotion are quite developed in India. In
addition to government-controlled television in various regional
languages, there are several popular national, international, and
regional privately-owned channels. Most urban households have
televisions, and they are increasingly popular in rural areas. Delhi's
annual food exposition (AAHAR) and smaller food shows around the country
provide opportunities for US exporters to showcase their food products
to potential clients.

## B. MARKET STRUCTURE

US food ingredient suppliers can access the Indian market in three ways:
(a) supply directly to local food processors; (b) supply through local
agents/distributors to local food processors; or (c) start
production/distribution centers in India. Some of the leading food
ingredient producers like IFF, Danisco, and Doehler have a production
base in India. As small players, scattered all over the country,
dominate the Indian food-processing industry, appointing
agents/distributors would be the best way for US exporters to reach
them. However, some of the large Indian and multinational companies can
be supplied directly. The chart below gives an overview of the usual
distribution channel for imported food ingredients (and processed foods)
from the United States.

![](media/image2.png){width="1.6465277777777778in" height="0.8125in"}

India's food-processing industry can be broadly classified into the
following categories:

-   Fruits and vegetable based products

-   Dairy products

-   Cooking oils

-   Meat and poultry

-   Fisheries

-   Non-alcoholic beverages

-   Alcoholic beverages

-   Confectionary

-   Grain and grain-based products (milling & baking)

**Processed fruits and vegetables**: Less than 2 percent of all fruits
and vegetables produced in India are processed. The main products, the
industry size, and major players are shown in the following table:

+----------------+--------+----------+--------------------------------+
| Products       | In     |          | Key players in the organized   |
|                | dustry |          | segment                        |
|                | Size   |          |                                |
|                |        |          |                                |
|                | (M     |          |                                |
|                | illion |          |                                |
|                | R      |          |                                |
|                | upees) |          |                                |
+----------------+--------+----------+--------------------------------+
|                | Org    | Uno      |                                |
|                | anized | rganized |                                |
+----------------+--------+----------+--------------------------------+
| Jam            | 900    | 450      | HLL, Marico, Mapro, Malas      |
+----------------+--------+----------+--------------------------------+
| Pickles        | 1,500  | 10,000   | Priya Foods, Preveen, Desai    |
|                |        |          | Brothers, Cavin Kare, GD Foods |
+----------------+--------+----------+--------------------------------+
| Sauce/ketchup  | 1,000  | 3,000    | HLL, Nestle, Heinz, GD Foods,  |
|                |        |          | Bector Food Specialties        |
+----------------+--------+----------+--------------------------------+
| Pu             | 4,000  | 0        | Foods and Inns, BEC, Claen     |
| lp/concentrate |        |          | Foods, Jain Irrigation, Usha   |
|                |        |          | International                  |
+----------------+--------+----------+--------------------------------+
| Juices/fruit   | 5,000  | 0        | Pepsi, Dabur, Parle, Godrej,   |
| drinks         |        |          | Mother Dairy                   |
+----------------+--------+----------+--------------------------------+
| Squashes       | 1,000  | 2,000    | HLL, Haldiram, Mapro           |
+----------------+--------+----------+--------------------------------+
| Ready-to-eat   | 1,000  | 0        | ITC, MTR, Tasty Bite           |
| vegetables     |        |          |                                |
+----------------+--------+----------+--------------------------------+
| Potato chips   | 2,500  | 3,000    | Pepsi, Haldiram                |
+----------------+--------+----------+--------------------------------+
| Cooking paste  | 300    | 0        | Dabur, HLL                     |
+----------------+--------+----------+--------------------------------+
| Total          | 35,650 |          |                                |
+----------------+--------+----------+--------------------------------+

Source: Rabobank Analysis

**Dairy Products:** About 37 percent of India's milk production of 86
million tons is processed, 15 percent in the organized sector and 22
percent in the unorganized sector. A major share of the milk processed
in the organized sector (mostly by dairy cooperatives) is in the form of
packaged liquid milk. Other processed items include ethnic sweets, milk
powder, ghee (melted, clarified butter), butter, cheese, and ice cream.
In the unorganized sector, a major share is processed into milk-based
sweets, and a smaller share for making yogurt, butter, and ghee. The
main products, the industry size, and major players are shown in the
following table:

+----------------+--------+---+----------+---------------------------------+
| Products       | In     |   |          | Key Players in the Organized    |
|                | dustry |   |          | Sector                          |
|                | Size   |   |          |                                 |
|                |        |   |          |                                 |
|                | (B     |   |          |                                 |
|                | illion |   |          |                                 |
|                | R      |   |          |                                 |
|                | upees) |   |          |                                 |
+----------------+--------+---+----------+---------------------------------+
|                | Org    | U |          |                                 |
|                | anized | n |          |                                 |
|                |        | o |          |                                 |
|                |        | r |          |                                 |
|                |        | g |          |                                 |
|                |        | a |          |                                 |
|                |        | n |          |                                 |
|                |        | i |          |                                 |
|                |        | z |          |                                 |
|                |        | e |          |                                 |
|                |        | d |          |                                 |
+----------------+--------+---+----------+---------------------------------+
| Packaged milk  | 98.0   |   | 0        | Mother Dairy, Amul, various     |
|                |        |   |          | state cooperatives, Paras Dairy |
+----------------+--------+---+----------+---------------------------------+
| Ethnic sweets  | 62.5   |   | 455      | Mother Dairy, Amul, various     |
|                |        |   |          | state cooperatives, Haldiram,   |
|                |        |   |          | Bikanerwala                     |
+----------------+--------+---+----------+---------------------------------+
| Yogurt         | 6.3    |   | 160      | Mother Dairy, Amul, Nestle      |
+----------------+--------+---+----------+---------------------------------+
| Cheese         | 2.0    |   | 21       | Amul, Vijaya, Britannia,        |
|                |        |   |          | Dynamaix Dairy                  |
+----------------+--------+---+----------+---------------------------------+
| Ice Cream      | 8.0    |   | 0        | HLL, Mother Dairy, Vadilal      |
+----------------+--------+---+----------+---------------------------------+
| Butter         | 5.2    |   | 60       | Amul, Mother Dairy, Vijaya      |
+----------------+--------+---+----------+---------------------------------+
| Ghee           | 35.0   |   | 210      | Amul, Vijaya, various state     |
|                |        |   |          | cooperatives, Paras             |
+----------------+--------+---+----------+---------------------------------+
| Milk powder    | 38.0   |   | 0        | Amul, Nestle                    |
+----------------+--------+---+----------+---------------------------------+
| Total          | 255    |   | 906      |                                 |
+----------------+--------+---+----------+---------------------------------+
|                | 1,161  |   |          |                                 |
+----------------+--------+---+----------+---------------------------------+

Source: Rabobank Analysis

**Cooking oil:** Total annual sales of branded cooking oils in India are
estimated at rs. 50 billion (\$1.1 billion), and have been growing
annually at 7 to 8 percent over the past five years. Branded edible oils
account for only 9 percent of the total edible oil market by volume and
17 percent by value. Mustard, sunflower, and peanut oils together
account for around 80 percent of branded edible oil consumption. The
edible oil companies are focusing their marketing strategy on the
emerging healthy eating habits of a growing number of Indian consumers.
Branded players attempt to deliver better value for money through
innovative packaging. Although there are hundreds of regional/local
processors and brands, the national-level players are Godrej, Dhara,
Marico, Liberty, and Ruchi. In recent years, a number of multinational
companies including Cargill, Adani Wilmar, and Bunge have set up
operations in India, either through port-based refineries, trading
subsidiaries, or brand acquisitions.

**Meat and poultry**: Indian consumers prefer mostly fresh meat from the
wet markets. Only a very small share of production is further processed
into value added products, mostly for export. Major players include VH
Group, Godrej, Sugunas, and Arambagh in the poultry processing sector,
and Allana\'s, Hind Agro, Al Kabeer in the buffalo meat ("beefalo")
processing sector. Cow slaughter is prohibited in most states due to
religious sentiments.

**Fisheries**: As in the case of meat, most fish consumed comes from the
wet markets. Processing is mostly for export, and includes conventional
block-frozen and individual quick frozen products, minced fish items
like sausage, cutlets, pastes, texturized foodstuffs, and dried fish.
The frozen products usually undergo primary processing such as cleaning,
deveining, descaling, peeling, etc.

**Non-alcoholic beverages:** India is the world's largest tea-producing
country with an annual production of around 860,000 tons and is also one
of the world's largest tea exporters. Tea processing includes withering,
rolling, fermenting, drying, blending, packing, and branding. Instant
tea production is limited. Major players are Tata Tea, HLL, Manjushree
Plantations, Jay Shree, Goodricke, Harrison Malayalam, Eveready, and
Warren.

With an annual production of around 300,000 tons, India is a small but
competitive producer of coffee. Traditionally a tea-drinking country,
average annual coffee consumption in India is only ten cups per person.
The instant coffee segment is entirely branded and packaged, and caters
mostly to the export market. Major players are Tata Coffee, HLL, Nestle,
Barista, Qwiky's, Narasu, Leo, and ABCTC.

Pepsi and Coca Cola dominate the Indian soft drink industry.

**Alcoholic Beverages:** Whisky, mostly low-priced, accounts for about
55 percent of the Indian spirit consumption, followed by rum, brandy,
and vodka. Key players are UB, Shaw Wallace, Jagatjit Industries, Mohan
Meakins, and International Distilleries. With the recent take-over of
Shaw Wallace's liquor business by the UB Group, the latter has emerged
as the world's second largest liquor producer. Major multinationals
operating in India include Diageo, Seagram, and Baccardi Martini. UB,
SABMiller, and Mohan Meakins are the major beer-producing companies. The
wine market in India is nascent, having emerged as a distinct segment
about a decade ago. Chateau Indage is the largest domestic player in
wines, followed by Grover Wines and Sula Wines. Key international
players who have a presence in India through distribution alliances
include E&J Gallo, Hardy's, Canandaigua, and Fetzer.

**Confectionary**: The size of the Indian confectionary market is
estimated at rs. 26.0 billion (\$600 million). Sugar confectionary
accounts for 61 percent of this market, with the balance being
chocolates, mints, and gums. The confectionary market has been growing
at over 6 percent annually over the last five years. The gum-based
confectionary segment has grown even faster at over 10 percent. The
confectionary market is highly fragmented with several local players
such as Parle's, Nutrine, and Ravalgaon. Key foreign companies are
Nestle, Cadbury's, Perfetti, Lotte, Wrigley, Candico, and Joyco.

**Milling and baking:** 75 percent of India's wheat production is milled
into wheat flour (*atta*) to make *rotis* or *chapattis* (unleavened
flat bread), mostly in small *chakkis* (small wheat grinding mills) in
the unorganized sector. Branded *atta* is a relatively new segment,
developed to provide consumers a more hygienic quality, as compared to
*chakki* *atta.* Annual production of branded atta is about 1 million
tons, and is growing at 7 to 9 percent annually. Major players are ITC,
Pillsbury, HLL, Agro Tech Foods, and Shakti Bhog Foods.

Bakery products constitute the largest segment of grain-based processed
foods. Small and medium unorganized local players, and a limited number
of organized units dominate the industry. Major players are Britannia,
HLL, ITC, Parle, Priya Gold, and Cremica.

The grain-based snack market, comprising extruded snacks and savories,
is estimated at around rs. 29 billion (\$667 million). Of this, the
organized segment contributes only 15 percent of sales. Major players
are Pepsi, Haldiram, SM Dyechem, Bikanerwala, etc.

Breakfast cereal production in the organized sector is very small, and
is mainly confined to corn flakes. Major producers are Kellogg's and
Mohan Meakins. Pepsi is reportedly interested in investing in the
breakfast segment over the next five years.

## C. COMPANY PROFILES

Indian food processors may be divided into the following main
categories:

-   Large Indian companies that have their production base in India or
    neighboring countries (for tax-saving purposes)

-   Multinational and joint-venture companies that have their production
    base in India

-   Medium/small domestic food-processing companies with a local
    presence

-   Small local players in the unorganized sector

The following table shows some of the major food-processing companies in
India and their products. This list is neither exhaustive nor ranked
according to the order of importance. The end use channels for most of
them are retail and hotel, restaurant and institutional (HRI) markets.
Sales figures for these companies are not available.

**INDIAN COMPANIES**

+---------------------+-------------+---------------------------------+
| **Company Name**    |             | **Products**                    |
+---------------------+-------------+---------------------------------+
| ![](media/ima       | Godrej      | Vegetable oils, fruit juices,   |
| ge3.jpeg){width="0. | Foods Ltd.  | tomato paste, soy beverages     |
| 8333333333333334in" |             |                                 |
| height="0.4         |             |                                 |
| 048611111111111in"} |             |                                 |
+---------------------+-------------+---------------------------------+
| ![](media/ima       | Dabur India | Fruit juices, cooking paste,    |
| ge4.jpeg){width="1. | Ltd.        | honey                           |
| 0409722222222222in" |             |                                 |
| height="0.5         |             |                                 |
| 006944444444444in"} |             |                                 |
+---------------------+-------------+---------------------------------+
| ![                  | Mother      | Dairy products, ice cream,      |
| ](media/image5.jpeg | Dairy       | canned vegetables, fruit        |
| ){width="0.59375in" |             | juices, cooking oils            |
| height="0.41        | Dhara       |                                 |
| 597222222222224in"} |             |                                 |
+---------------------+-------------+---------------------------------+
| ![](media/ima       | Amul        | Dairy products, ice cream,      |
| ge6.jpeg){width="0. |             | chocolate                       |
| 7916666666666666in" |             |                                 |
| height="0.3         |             |                                 |
| 326388888888889in"} |             |                                 |
+---------------------+-------------+---------------------------------+
| ![](media/ima       | ITC         | Branded wheat flour, biscuits,  |
| ge7.jpeg){width="0. |             | ready-to-eat food,              |
| 6354166666666666in" |             | confectionary                   |
| height="0.34        |             |                                 |
| 444444444444444in"} |             |                                 |
+---------------------+-------------+---------------------------------+
| ![](media/ima       | Hindustan   | Ice cream, branded wheat flour, |
| ge8.jpeg){width="0. | Lever (HLL) | bread, sauces, jams, jellies    |
| 5006944444444444in" |             |                                 |
| height="0.3         |             |                                 |
| 958333333333333in"} |             |                                 |
+---------------------+-------------+---------------------------------+
| ![](media/ima       | VH Group    | Poultry products                |
| ge9.jpeg){width="0. |             |                                 |
| 8854166666666666in" |             |                                 |
| height="0.2         |             |                                 |
| 604166666666667in"} |             |                                 |
+---------------------+-------------+---------------------------------+
| ![](media/ima       | Britannia   | Biscuits, bread, packaged food  |
| ge10.png){width="0. | Industries  |                                 |
| 6979166666666666in" |             |                                 |
| height="0.40625in"} |             |                                 |
+---------------------+-------------+---------------------------------+
| ![](media/ima       | Parle       | Biscuits, candies, toffees      |
| ge11.png){width="1. | Products    |                                 |
| 3229166666666667in" |             |                                 |
| height="0.4375in"}  |             |                                 |
+---------------------+-------------+---------------------------------+
| ![](media/imag      | Nutrine     | Confectionary, chewing gum      |
| e12.jpeg){width="1. | Co          |                                 |
| 4583333333333333in" | nfectionary |                                 |
| height="0.4         | Company     |                                 |
| 791666666666667in"} |             |                                 |
+---------------------+-------------+---------------------------------+
| ![](media/ima       | Weikfield   | Custard powder, baking powder,  |
| ge13.png){width="1. | Products    | jelly crystals, drinking        |
| 1256944444444446in" | Company     | chocolate, sauces, soups        |
| height="0.46875in"} |             |                                 |
+---------------------+-------------+---------------------------------+
| ![](media/imag      | Rasna       | Instant drink, health drink,    |
| e14.jpeg){width="0. | (Pioma      | soft drink concentrates,        |
| 9479166666666666in" | Industries) | flavors                         |
| height="0.34375in"} |             |                                 |
+---------------------+-------------+---------------------------------+
| ![](media/ima       | Haldiram's  | Snack foods                     |
| ge15.jpeg){width="1 |             |                                 |
| .082638888888889in" |             |                                 |
| height="0.3         |             |                                 |
| 958333333333333in"} |             |                                 |
+---------------------+-------------+---------------------------------+
| ![](media/imag      | UB Group    | Beer, alcoholic beverages       |
| e16.jpeg){width="0. |             |                                 |
| 9986111111111111in" |             |                                 |
| height="0.38        |             |                                 |
| 333333333333336in"} |             |                                 |
+---------------------+-------------+---------------------------------+
| ![](media/imag      | Marico      | Vegetable oils, jams            |
| e17.jpeg){width="0. | Industries  |                                 |
| 7291666666666666in" |             |                                 |
| height="0.3         |             |                                 |
| 645833333333333in"} |             |                                 |
+---------------------+-------------+---------------------------------+
| ![](media/ima       | MTR Foods   | Ready-to-eat foods, soups,      |
| ge18.png){width="1. |             | spices, ice cream mixes,        |
| 1243055555555554in" |             | pickles                         |
| height="0.35        |             |                                 |
| 347222222222224in"} |             |                                 |
+---------------------+-------------+---------------------------------+
| ![](media/ima       | Punjab      | Canned food, rice, vegetable    |
| ge19.png){width="1. | Markfed     | oils                            |
| 7486111111111111in" |             |                                 |
| height="0.4         |             |                                 |
| 048611111111111in"} |             |                                 |
+---------------------+-------------+---------------------------------+
| !                   | Vista       | Frozen chicken and vegetables   |
| [](media/image20.pn | Processed   |                                 |
| g){width="1.5625in" | Foods       |                                 |
| height="0.4         |             |                                 |
| 930555555555556in"} |             |                                 |
+---------------------+-------------+---------------------------------+
| ![](media/image21.  | Dynamix     | Cheese, whey, other dairy       |
| jpeg){width="1.8in" | Dairy       | products                        |
| height="0.4         | Industries  |                                 |
| 173611111111111in"} |             |                                 |
+---------------------+-------------+---------------------------------+

###### MULTINATIONAL/JOINT VENTURE COMPANIES

+----------------------+--------------+-------------------------------+
| **Company Name**     |              | **Products**                  |
+----------------------+--------------+-------------------------------+
| ![](media/im         | Pepsi        | Soft drinks, potato chips,    |
| age22.jpeg){width="0 |              | snack food, fruit juices      |
| .8333333333333334in" |              |                               |
| height="0.           |              |                               |
| 4791666666666667in"} |              |                               |
+----------------------+--------------+-------------------------------+
| ![](media/im         | Cargill      | Vegetable oils                |
| age23.jpeg){width="0 |              |                               |
| .8006944444444445in" |              |                               |
| height="0.           |              |                               |
| 4888888888888889in"} |              |                               |
+----------------------+--------------+-------------------------------+
| ![](media/im         | Heinz        | Ketchup, health drinks        |
| age24.jpeg){width="1 |              |                               |
| .1354166666666667in" |              |                               |
| height="0.           |              |                               |
| 4895833333333333in"} |              |                               |
+----------------------+--------------+-------------------------------+
| ![](media/im         | Kellogg's    | Breakfast cereals, biscuits   |
| age25.jpeg){width="0 |              |                               |
| .7604166666666666in" |              |                               |
| height="0.           |              |                               |
| 2916666666666667in"} |              |                               |
+----------------------+--------------+-------------------------------+
| ![](media/i          | Bunge        | Vegetable oil, margarine      |
| mage26.png){width="1 |              |                               |
| .2486111111111111in" |              |                               |
| height="0.40625in"}  |              |                               |
+----------------------+--------------+-------------------------------+
| ![](media/im         | Nestle       | Coffee, chocolates,           |
| age27.jpeg){width="0 |              | confectionary, instant        |
| .7291666666666666in" |              | noodles, milk products,       |
| height="0.           |              | beverages, health drinks      |
| 4895833333333333in"} |              |                               |
+----------------------+--------------+-------------------------------+
| ![](media/im         | Cadbury      | Chocolates, health drinks     |
| age28.jpeg){width="0 |              |                               |
| .7284722222222222in" |              |                               |
| height="0.           |              |                               |
| 3229166666666667in"} |              |                               |
+----------------------+--------------+-------------------------------+
| ![](media/im         | Coca Cola    | Soft Drinks, beverages        |
| age29.jpeg){width="0 |              |                               |
| .7284722222222222in" |              |                               |
| height="0.           |              |                               |
| 4166666666666667in"} |              |                               |
+----------------------+--------------+-------------------------------+
| ![                   | Agro Tech    | Branded vegetable oils,       |
| ](media/image30.wmf) | Foods        | branded wheat flour, snack    |
|                      |              | food, popcorn                 |
|                      | (ConAgra's)  |                               |
+----------------------+--------------+-------------------------------+
| ![](media/image31.   | Pillsbury    | Wheat flour, cake mixes       |
| png){width="1.125in" |              |                               |
| height="0.4375in"}   |              |                               |
+----------------------+--------------+-------------------------------+
| ![](media/           | GlaxoSmith   | Health drinks                 |
| image32.png){width=" | Kline        |                               |
| 1.082638888888889in" |              |                               |
| height="0.           |              |                               |
| 3659722222222222in"} |              |                               |
+----------------------+--------------+-------------------------------+
| ![](media/           | Perfetti     | Chewing gum, candy            |
| image33.png){width=" |              |                               |
| 1.082638888888889in" |              |                               |
| height="0.375in"}    |              |                               |
+----------------------+--------------+-------------------------------+
| ![](media/im         | Wrigley      | Chewing gum                   |
| age34.jpeg){width="1 |              |                               |
| .0833333333333333in" |              |                               |
| height="0.           |              |                               |
| 5305555555555556in"} |              |                               |
+----------------------+--------------+-------------------------------+
| ![](media/image35.   | Lotte India  | Confectionary                 |
| png){width="1.625in" | Corporation  |                               |
| height="0.           | Ltd.         |                               |
| 5104166666666666in"} | (Parry's)    |                               |
+----------------------+--------------+-------------------------------+
| ![](media/im         | McCain Foods | French fries                  |
| age36.jpeg){width="1 |              |                               |
| .8229166666666667in" |              |                               |
| height="0.4          |              |                               |
| 6597222222222223in"} |              |                               |
+----------------------+--------------+-------------------------------+
| ![](media/image37.jp | Adani Wilmar | Cooking oils, bakery          |
| eg){width="1.8125in" | Ltd.         | shortenings                   |
| height="0.           |              |                               |
| 3638888888888889in"} |              |                               |
+----------------------+--------------+-------------------------------+
| ![](media/im         | The Solace   | Soy nuggets                   |
| age38.jpeg){width="0 | Company      |                               |
| .8020833333333334in" |              |                               |
| height="0.375in"}    |              |                               |
+----------------------+--------------+-------------------------------+
| ![](media/image39.   | Effem India  | Pet food                      |
| jpeg){width="0.75in" | (Mars)       |                               |
| height="0.           |              |                               |
| 4798611111111111in"} |              |                               |
+----------------------+--------------+-------------------------------+

## D. SECTOR TRENDS

**Production:**

-   The food-processing industry in India has undergone big changes over
    the last six to seven years, in terms of types, variety, quality,
    and presentation of products, which is mainly a result of the
    liberalization that led to foreign direct investment (FDI) in the
    processed food sectors.

-   Most food-processing sectors have been brought under the liberal,
    transparent, and investor-friendly FDI policy, which allows 100
    percent FDI.

-   However, the small-scale farming system in India, marketing
    problems, lack of grading and standards, poor distribution channels,
    and onerous government policies continue to pose problems for the
    processing industry to source the right type of raw materials and to
    discourage more investment in the sector.

-   Nevertheless, the proportion of FDI in the food-processing sector to
    total FDI into India is low, constituting about 4 percent of total
    FDI inflow from 1991 to 2004.

-   Several multinational companies, including US-based companies like
    Pepsi, Coca Cola, ConAgra, Cargill, Heinz, Kellogg's, IFF, and Mars
    (pet food only) have entered the Indian food-processing industry
    with significant investments.

-   Indian food and beverage companies are expanding their operations to
    neighboring countries like Bangladesh, Nepal, Sri Lanka,
    Commonwealth of Independent States countries, and the Middle East.

-   Takeovers and mergers are beginning to occur in the Indian
    food-processing sector, leading to consolidation.

-   The food-processing industry is beginning to focus on, and invest
    in, advertising and awareness campaigns about products and brands.

-   Companies have added extras to their existing brands, including
    stylish packaging.

-   The growth in the food-processing sector has generated increased
    interest in high quality food ingredients in order to produce high
    quality foods.

-   The ready-to-eat food sector is growing at a high rate due to the
    changing lifestyles of the middle-class consumers (both partners
    working, etc.).

-   Some previously unknown regional brands are gaining national
    acceptance because of consistent quality and product safety, thereby
    providing some competition to established companies.

-   The GOI is in the process of enacting a Food Safety and Standards
    Bill, which if properly done and implemented, would provide
    increased transparency, better food safety management systems, and
    science-based standards.

**Consumption:**

The following factors influence the type and quality of inputs in
processed foods:

-   A large and an exceedingly wealthier middle class is creating
    growing demand for a wider variety of high quality processed foods.

-   The changing age profile (sixty-five million people expected to
    enter 20-34 year age group by 2010) and increasing exposure to
    western-type products and lifestyles.

-   The market entry of several multinational food-processing companies
    and ingredient suppliers.

-   The increasing number of fast food chains.

-   The recent trend toward a healthier lifestyle has generated a niche
    market for diet, healthy, low-calorie, and non-fat food products.

-   The increasing urbanization and growing number of working women.

-   A slow but steady transformation of the retail food sector in
    cities.

# 

# III. COMPETITION

India's domestic industry is the primary competitor for US
food-processing and ingredients suppliers in India. India, with diverse
agro-climatic conditions, has a production advantage in many
agricultural goods, with the potential to cultivate a large range of
agricultural raw materials required by the food-processing industry.
India is a major producer of spices, spice oils, essential oils,
condiments, and fruit pulps. Significant variations in food habits and
culinary traditions across the country translate into a competitive
advantage for small and medium local players, who are familiar with
local food habits and markets. Some Indian food-processing companies
have increased market share by decreasing product prices. High import
duties on processed food and food ingredients make imports relatively
costly. Existing domestic food laws restrict the use of several
ingredients, flavors, colors, and additives, thus posing an additional
challenge to US exporters interested in the Indian market.

Foreign competition to the United States is mostly from countries in
closer geographic proximity to India, such as Australia and New Zealand.
Suppliers from other countries often supply inferior goods at cheaper
prices in comparison to those available from the United States. European
suppliers are major competitors in the food ingredient sector. Several
foreign firms, including some from the United States, have started
operations in India.

**MAJOR FOOD INGREDIENT SUPPLIERS**

  ------------------------------- ---------------------------------------
  **Company Name**                **Country**

  IFF                             United States

  DANISCO                         Denmark

  Chr. Hansen                     Denmark

  AB MAURI                        United Kingdom

  Fine Organics                   United States

  MSC CO. Ltd.                    Korea

  Davars M.P. Organics            India

  The Solae Company               United States

  Doehler                         Germany

  AVT McCormick Ingredients Ltd.  India/US joint venture

  Synthite                        India

  Plant Lipids                    India
  ------------------------------- ---------------------------------------

**MAJOR SUPPLIERS OF SELECTED PRODUCT CATEGORIES**

+---------------+----------+-----+---------------+--------------------+
| **Product     | ### Majo |     | **Strength of | **Advantages (A) & |
| Category**    | r Supply |     | Key Supply    | Disadvantages (D)  |
|               |  Sources |     | Countries**   | for US Suppliers** |
+---------------+----------+-----+---------------+--------------------+
| ##### V       | I        | 49% | Low prices    | Local production   |
| egetable Oils | ndonesia |     |               | is significant but |
|               |          | 24% |               | inadequate (A)     |
| Imports:      | Malaysia |     |               |                    |
|               |          | 18% |               |                    |
| US\$: 2.6     | A        |     |               |                    |
| billion       | rgentina |     |               |                    |
+---------------+----------+-----+---------------+--------------------+
| ##### Pulses  | Myanmar  | 41% | Low prices    | Local production   |
|               |          | 21% |               | is significant;    |
| Imports       | Canada   | 8%  |               | competitive in     |
|               |          |     |               | some categories    |
| US\$: 563     | A        |     |               | (D)                |
| million       | ustralia |     |               |                    |
+---------------+----------+-----+---------------+--------------------+
| Spices &      | I        | 25% | Low prices,   | India is a major   |
| Condiments    | ndonesia |     | freight       | producer (D)       |
|               |          | 16% | advantage     |                    |
| Imports       | Sri      | 15% |               |                    |
|               | Lanka    |     |               |                    |
| US\$ 95       |          |     |               |                    |
| million       | Nepal    |     |               |                    |
+---------------+----------+-----+---------------+--------------------+
| ##### Almonds | USA      | 73% | Low price,    | Domestic           |
|               |          |     | high quality  | production         |
| Imports:      | Afg      | 12% |               | insignificant (A)  |
|               | hanistan | 12% |               |                    |
| US\$: 68      |          |     |               |                    |
| million       | Iran     |     |               |                    |
+---------------+----------+-----+---------------+--------------------+
| ##### D       | A        | 17% | Low price     | High production,   |
| airy Products | ustralia | 8%  |               | seasonal shortages |
|               |          | 7%  |               | (A)                |
| Imports:      | U.K.     |     |               |                    |
|               |          |     |               |                    |
| US\$: 29      | Belgium  |     |               |                    |
| million       |          |     |               |                    |
+---------------+----------+-----+---------------+--------------------+
| Food          | USA      | 52% | Quality,      | Large domestic     |
| ingredients   |          | 8%  | reliability   | production (D)     |
|               | Brazil   | 4%  |               |                    |
| Imports:      |          |     |               |                    |
|               | Nepal    |     |               |                    |
| US\$: 14      |          |     |               |                    |
| million       |          |     |               |                    |
+---------------+----------+-----+---------------+--------------------+
| Cocoa &       | Malaysia | 30% | Low price     | Domestic           |
| products      |          | 17% |               | production is      |
|               | S        | 15% |               | small (A)          |
| Imports:      | ingapore |     |               |                    |
|               |          |     |               |                    |
| US\$: 13      | I        |     |               |                    |
| million       | ndonesia |     |               |                    |
+---------------+----------+-----+---------------+--------------------+
| Fish & fish   | Ba       | 48% | Border trade  | Large exporter of  |
| products      | ngladesh | 9%  |               | shrimp (D)         |
|               |          | 9%  |               |                    |
| Imports:      | Myanmar  |     |               |                    |
|               |          |     |               |                    |
| US\$: \$11    | USA      |     |               |                    |
| million       |          |     |               |                    |
+---------------+----------+-----+---------------+--------------------+
| #####         | Nepal    | 42% | Border trade  | Poor quality (A)   |
|  Fruit juices |          | 12% |               |                    |
|               | Brazil   | 5%  |               |                    |
| Imports:      |          |     |               |                    |
|               | Phi      |     |               |                    |
| US\$: 8       | lippines |     |               |                    |
| million       |          |     |               |                    |
+---------------+----------+-----+---------------+--------------------+

Data relates to IFY 2003/04 (Apr-Mar)

Source: Ministry of Commerce, GOI

# IV. BEST PRODUCT PROSPECTS

+------------+---------+---------+--------+-----------+---------------+
| *          | **Im    | **E     | **Im   | **Key     | **Market      |
| *Product** | ports** | xpected | port** | Cons      | A             |
|            |         | Avg.**  |        | traints** | ttractiveness |
| **         | **20    |         | **Ta   |           | for USA**     |
| Category** | 03/04** | **A     | riff** |           |               |
|            |         | nnual** |        |           |               |
|            | **\$    |         | **     |           |               |
|            | Mi      | **I     | Rate** |           |               |
|            | llion** | mport** |        |           |               |
|            |         |         |        |           |               |
|            | **1/**  | #####   |        |           |               |
|            |         |  Growth |        |           |               |
+------------+---------+---------+--------+-----------+---------------+
| Cocoa &    | 13.0    | 10%     | 52.2%  | Co        | Import        |
| products   |         |         |        | mpetition | l             |
|            |         |         |        | from      | iberalization |
|            |         |         |        | other     | and consumer  |
|            |         |         |        | suppliers | preference    |
|            |         |         |        | and       | for imported  |
|            |         |         |        | domestic  | products      |
|            |         |         |        | suppliers |               |
+------------+---------+---------+--------+-----------+---------------+
| Almonds    | 68.0    | 5%      | Rs     | Co        | High seasonal |
|            |         |         | .35/kg | mpetition | demand;       |
| Pistachios | 29.0    | 5%      |        | from Iran | increasing    |
|            |         |         | 30.6%  | and       | use; health   |
| Prunes     | 0.1     | 10%     |        | Af        | consciousness |
|            |         |         | 25.5%  | ghanistan |               |
+------------+---------+---------+--------+-----------+---------------+
| Fruit      | 8.0     | 10%     | 30.6%  | Co        | Increasing    |
| juices     |         |         |        | mpetition | health        |
|            |         |         |        | from      | awareness     |
|            |         |         |        | nearby    | among middle  |
|            |         |         |        | suppliers | class and     |
|            |         |         |        | and       | shortage of   |
|            |         |         |        | domestic  | quality       |
|            |         |         |        | p         | products      |
|            |         |         |        | roduction | locally       |
+------------+---------+---------+--------+-----------+---------------+
| Mis        | 14.0    | 10%     | 30.6   | Co        | Increasing    |
| cellaneous |         |         |        | mpetition | popularity;   |
| food       |         |         |        | from      | growing       |
| i          |         |         |        | domestic  | fo            |
| ngredients |         |         |        | suppliers | od-processing |
|            |         |         |        |           | and fast food |
| (yeasts,   |         |         |        |           | sectors       |
| sauces ,   |         |         |        |           |               |
| mixed      |         |         |        |           |               |
| condiments |         |         |        |           |               |
| and        |         |         |        |           |               |
| s          |         |         |        |           |               |
| easonings, |         |         |        |           |               |
| soft drink |         |         |        |           |               |
| con        |         |         |        |           |               |
| centrates, |         |         |        |           |               |
| flavoring  |         |         |        |           |               |
| materials, |         |         |        |           |               |
| etc.)      |         |         |        |           |               |
+------------+---------+---------+--------+-----------+---------------+

1/ Source: Ministry of Commerce, GOI

#  

# V. KEY CONTACTS AND FURTHER INFORMATION 

The following reports may be of interest to US exporters interested in
India. These, and related reports prepared by this office, can be
accessed via the FAS Home Page:
[www.fas.usda.gov](http://www.fas.usda.gov/) by clicking on "Attaché
Reports" and searching by the report number.

  ---------------- ------------------------------------------------------
  **Report         **Subject**
  Number**         

  IN4077           Food & Agricultural Import Regulations and Standards
                   Report

  IN4103           India: Exporter Guide 2004

  IN4126           India: Retail Food Sector
  ---------------- ------------------------------------------------------

Recently the Ministry of Food-processing Industries has put on its
website a detailed "Vision Document" on the Indian Food-processing
Industry, prepared by Rabo India (a private bank). This report can be
accessed from: <http://mofpi.nic.in/visdoc/visndoc.htm>

For additional information and guidance please contact:

**Agricultural Counselor**

**Foreign Agricultural Service**

**Embassy of the United States of America**

**Chanakyapuri**

**New Delhi -- 110 021**

###### Phone: 91-11-24198297

**Fax: 91-11-24198530**

**E-mail: <agnewdelhi@usda.gov>**

[^1]: Food-processing Policy 2005, Ministry of Food-processing
    Industries, GOI; <http://mofpi.nic.in/fpipolicy.htm>