Overview, market size, growth trends, news resources
When Matt, George, and Gary, stars of the TV reality show “MasterChef Australia,” came to Mumbai, they were mobbed, much to their surprise. But they knew they could not have been mistaken for Ponting, Bret Lee, and Warne. The crowd was there because the trio and their show were red hot in curry land. Indians love food and those who make it.
A famous foodie once said that the only thing that he loved better than talking about food is eating. Here, we just have to take the second choice. So let’s chew on facts and figures from the world of food and drink.
The larger picture, first. The global food and beverages industry is made up of many segments, including groceries, oils and fats, food additives, functional foods and beverages, packaged foods, health and natural foods, canned food, baked food, baby food, animal food, soft drinks, alcoholic drinks, energy drinks, and packaging.
The industry is driven by consumer demand for more nutritious food and better packaging, which also spurs technology advances in the field. Today, pasteurisation, high-pressure processing, UV treatment, and nanotechnology are influencing the industry. A concern for the environment has led to the use of more recycled material for packaging.
The growth of the food and beverages industry is propelled mainly by developing countries such as India, China, and Brazil, as the economies of these nations improve and more people are lifted into the middle class.
The global food, beverage, and grocery industry was estimated to be worth $7.8 trillion in 2015, or about 10 percent of the world GDP, according to Plunkett Research. The global packaged-food industry was worth $2.5 trillion. In 2013, global food exports added up to $1.43 trillion.
The history of food and beverage is, of course, as old as humans themselves. However, there were no major developments until the 19th century, when Nicholas Appert invented canning and Louis Pasteur developed pasteurisation. These processes made food a product that could be preserved and packaged for later use.
World War II prepared a fertile ground for innovations in the food industry. As food was rationed and prices were regulated, better preservatives and flavouring agents were developed. This paved the way for instant foods.
Improvements in distribution are a major part of the development of the food industry. Before the Industrial Revolution, people consumed food and drinks mainly from local markets. Today, thanks to transportation and cold storage facilities, food can be taken to stores anywhere.
Quick facts and statistics
By market size, the top ten countries for the overall food and beverages (grocery) industry are the US (about $1.7 trillion, according to approximations from various sources), China ($700 billion), Japan ($600 billion), India ($400 billion), Russia ($350 billion), Brazil ($250 billion), Germany ($225 billion), France ($200 billion), UK ($180 billion), and Indonesia ($175 billion).
The biggest exporters were Germany ($58 billion), US ($56 billion), and France ($48 billion), and the biggest importers the US ($82 billion), Germany ($53 billion), and Japan ($45 billion), as per online sources.
The top ten global F&B companies (December 2013 or March 2014 figures) were Nestlé ($77 billion in food sales), PepsiCo ($66 billion), Coca Cola ($46 billion), JBS ($44 billion), Archer Daniels Midland Company and Anheuser Busch InBev (both $43 billion), Mondelez ($35 billion), Sab Miller and Tyson Foods (both $34 billion), and Cargill ($33 billion). The other biggies were Mars (11th rank, $33 billion), Unilever (12th rank, $31 billion)), Kraft (19th rank, $18 billion), and ConAgra Foods (24th rank, $15 billion).
Among the top companies in India are Amul, Godrej, Dabur, PepsiCo, Coca Cola, Nestlé, Britannia, ITC, Parle, Cadbury India, Hindustan Lever, and MTR Foods.
F&B industry in India
India is expected to become the fifth largest consumer market in the world by 2025, according to a paper prepared by the Confederation of Indian Industry (CII) and Grant Thornton.
Food and beverages is the biggest of the consumption categories. The F&B sector is supported by the vast agriculture sector: India is the biggest producer of pulses, and the second biggest producer of rice, wheat, sugarcane, and fruits and vegetables.
It is also the biggest producer of milk and buffalo meat and ranks fifth in poultry production. The other helpful factors: large extents of arable lands, favourable climate, long coastline, and low wages.
The liberalisation of the economy in the early 1990s minimised business barriers. The sector has found more avenues to the market with the development of modern retail systems such as supermarkets. Meanwhile, transportation and storage logistics have improved.
The huge population (1.27 billion in 2015) and the burgeoning middle class are the other advantages for the industry. About half the population is under 30 years of age, and many of them start to earn early and strive to lead a better quality of life.
The higher income levels of consumers give them higher disposal incomes. Lifestyles have changed, and more families are eating out and trying out different cuisines. Working couples are increasingly purchasing convenience foods.
Consumers have become more discerning and those in urban areas particularly trust branded foods for their promise of quality.
A section of consumers have become extremely health conscious. This segment is moving towards protein-rich foods and fruits and vegetables from carbohydrate-rich or fat-laden items. Quality-conscious customers have taken the bottled water market to $50 million.
The beverage industry, excluding alcoholic beverages, is worth about $16 billion. Tea and coffee are the most popular beverages, followed by soft drinks (carbonated drinks and juices), health drinks, milk-based drinks, flavoured drinks, and energy drinks.
Half of the tea and coffee consumed in the country is sold unpacked. The alcohol beverages market is estimated to be worth about $35 billion, with whiskey, beer, and wine as the most popular drinks.
The F&B industry would do well to adopt global standards of quality and safety to earn more consumer trust. The need of the hour is the introduction of Total Quality Management principles.
Of the nearly $400 billion overall Indian food and beverages industry, the food processing sector accounts for about $130 billion. It makes up 10 percent of the agriculture GDP and 12 percent of the manufacturing GDP.
The unorganised segment has a share of over 40 percent of the output. Food processing makes up 10 percent of the country’s total exports. The key export markets are the US, Vietnam, Iran, the UAE, and Saudi Arabia. Rice and wheat are the main items for exports.
The food processing sector has various sectors including consumer foods (snacks, beverages, etc.), dairy, meat and poultry, fish, grains and cereals, and fruits and vegetables. Fruits and vegetables and meat and poultry take the lion’s share of about 40 percent of the total household consumption.
Technology, mainly IT, has helped the industry evolve from just preserving and packaging food to manufacturing foodstuff according to consumer demand. However, it is yet to take full advantage of technology to reduce wastage. The other main problems are lack of credit; lack of clarity in government policies and in food safety laws; and shortage of employable manpower.
Other sectors in the F&B industry
Not only in cities, modern food retail has grown in small towns, too. However, nearly 70 percent of the business is in the unorganised sector.
The Food Safety and Standards Act, 2006, has given the organised retailers a shot in the arm as they can conform to the regulations better. Increasing urbanisation is helping the sector grow.
However, high real-estate prices are a worry along with the lack of cold storage and problems in supply chain management.
Online grocery supply
Although grocery supply online is still in its early days, the convenience and price factors are making it more popular in urban areas.
Online stores are able to offer attractive discounts and larger variety. Increase in the number of Internet users is expected to boost prospects.
The main challenges are customers’ desire to actually see the products they are buying, especially perishables, and dependable computer systems.
According to the National Restaurant Association of India, food service will be worth nearly $68 billion by 2018.
The number of fine dining, casual dining, and quick service restaurants is growing in cities. Younger professionals are their biggest customers. Home delivery and takeaways are also gaining popularity.
The challenges are real-estate prices; lack of availability of personnel with knowledge of basic service etiquette; electricity and water supply; sourcing of raw foodstuff; and the number of licences needed.
The Indian dairy sector was estimated to be worth $70 billion in mid-2015. The growth is mainly owing to the White Revolution. India will likely produce 180 million tonnes of milk worth $135 billion by 2020. Technology has come to the aid of the dairy sector, with ultra-high-temperature processing, aseptic packaging, and membrane processing. The main challenges for the sector are rising prices of fodder and lower milk yield of Indian cows and buffaloes.
India has a cold storage capacity of 30 million tonnes in 6,000 units, 90 percent of them owned by private companies. The demand is expected to increase to over 45 million tonnes. Lack of skilled manpower to handle food according to the norms is a major challenge.
The Indian Brand Equity Foundation (IBEF) quotes figures from the Department of Industrial Policies and Promotion to say that the food processing sector received foreign investments of $6.4 billion from April 2000 to June 2015. The CII believes that the food sector has the potential to receive investments worth $33 billion before 2025.
Among the recent major investments likely in the sector is Amul’s plan to invest $753 million to set up ten milk-processing plants and improve existing plants to scale up milk production to 32 million litres per day by 2020 and ITC’s decision to invest $120 million to set up a food processing unit in Telangana.
The government has prepared a Vision Document 2015 to promote food processing industries. It has set up a $20 million international food park in Punjab and is planning 42 “mega food parks.”
More degree courses in food processing and an entrepreneurship programme are to be started and training centres set up.
The Union Budget for 2015-16 unveiled a corpus fund of ₹2,000 crore to provide cheaper credit. The excise duty on plant and machinery has been reduced to 6 percent from 10 percent.
Most importantly, for consumers, the Food Safety and Standards Authority of India has issued regulations quality and safety standards for food products.
Global trends in F&B
Taxes and regulations
With consumer awareness growing, more governments are cracking down on unhealthy foods. Regulators in some countries have imposed taxes on some items in order to increase their prices and thereby bring down consumption. Consumers: Consumers are persuading the food industry to try to tempt them with nutrition rather than taste. No wonder then that the global health food market is estimated to touch $1 trillion in 2017 and the health drinks market $400 billion in 2016.
Customers are now more discerning and have ample data on the Internet to make good choices. This and the convenience factor are persuading more people to buy food online.
Companies are turning to recyclable packaging material and sustainable processes for the sake of the environment. They are trying to minimise the use of electricity and water and reduce wastage of food.
Jobs in the F&B industry
Positions in the food sector range from chef and food scientist to quality assurance and supply chain management professional at hotels and restaurant chains and supermarkets and retail stores.
Although many jobs do not require special qualification, a degree or diploma in food sciences does improve the candidate’s CV.
Various courses, including BSc in food technology, nutrition, and food service management, and specialisations in bakery, beverages, etc., are available in colleges. However, the job aspirant should realise that the food industry is a hard taskmaster.