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Chapter I

Introduction

1.1 Introduction to Topic

� The topic considered for the study is “Analytical Study of Processed Food

Consumption Pattern in Marathwada Region with special Reference to Beed

District”.

� India is the world’s second biggest producer of the food next to China and has the

prospective to being the biggest in the food and agriculture segment. In addition with

the world’s largest producers of various food grains, India ranks second in the world

in the production of fruits and vegetables and first in milk production.

� India has made significant progress in terms of conquering national food insecurity by

providing topmost priority for the self-sufficiency in food grain production in India.

India applied the impactful strategy to increase the production of the food grains by

tremendous amount which is able to cater to the population of the country. This

renowned strategy useful for increase in the production of agricultural crops known as

‘green revolution’.

� It undertakes several non-agricultural, waste land for the cultivation of agricultural

crops particularly emphasizing on wheat, rice etc. It also involves the use of the HYV

i.e. high yielding varieties to increase the quantitative production of different food

grains.

� As a result of this successful strategy, the total food grain production is increased

from 82.02 million tonnes in 1960-61 which is less compared to the surviving

population on it to 252.56 million tonnes (2nd advance estimate) in 2011-12 as shown

in Table 1.1

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Table 1.1 Total Food Grain Productions

CROPS FY 2010-11 FY 2011-12

1. FOOD GRAIN

Rice 95.32 103.41

Wheat 85.93 90.23

Coarse Cereals 42.22 41.91

Pulses 18.09 17.02

Total Food grains 241.56 MT 252.56 MT

2.Oilseeds (9 types) 31.10 30.06

3.Sugarcane 339.16 351.19

4.Cotton (million bales) 33.42 35.20

(Source: Ministry of Agriculture)

� “According to PFA (Prevention of Food Adulteration Act) food means any article

used as food or drink to human consumption other than drugs and water and includes

any article which ordinarily enter into or is used in the composition or preparation of

human food and flavouring matter or condiments and any other article which the

central government may, having regard to its use, substance or quality declares, by

notification in the Official Gazette as food for the purposed of this Act”.

� Food laws in India are governed by the PFA since 1954. This is replaced by the new

food law named FSSA i.e. Food Safety and Standard Act, 2006. It is the independent

government organizations and their main objective includes following points.

• To strengthen the foods safety regulations in the state.

• To provide self-monitoring food safety management systems (FSMS).

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• Single reference point related to the all matters of the food safety and

standards.

• Framing of different regulations, standards and guidelines with concern to

article of food.

� There are different factors responsible for the deflation of the demand and supply of

the of food grains. Some of them are population, age factor, urbanization,

environmental condition, market structure, income, standard of living, generation gap,

nutritional point of view etc.

� Population is the prime factor which affects the food demand and supply. Though the

production of fruits and vegetables, food grains increased, it has to cater to large

population in India.

� The green revolution and following efforts through the application and use of

different aspects of scientific and technological measures helpful for increasing food

production in India, which ultimately brought self-reliance in food production (R. P.

Srivastava, Sanjeev Kumar, 2009).

� As per the report published by Planning Commission 29.2% people in India still lives

their life under below poverty line (BPL), so our 1st aim is to cater the food to the

large number of population. So to maintain the self sufficiency in the production of

food grains is the most important.

� Food processing sector serves as an important linkage connecting the agriculture and

industrial segments of the economy. Sufficient focal point on this sector could

significantly reduce our concerns on food security and food inflation problems.

Intensifying this link is of critical importance for reduction of waste of agricultural

raw materials i.e. post harvest loss, progressive value of agricultural produce by

increasing shelf life as well as by fortifying the nutritive capacity of the food

products, and ensuring remunerative prices to farmers as well as affordable prices to

consumers for purchasing of food products.

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� It is stated in the book Feeding the World- the challenges in twenty first century that

consideration of the complete food cycle is necessary which stated from agriculture to

post harvest loss and from processing, distribution to eating and discarding of the

food products(Vaclav Smil, 2001).

� Indian exports mainly consist of products includes basmati rice, marine products, oil

meals, processed foods products, dairy products, meat and poultry, raw fruits and

vegetables, spices, tobacco, other cereals, tea, cashew, bovine meat, coffee,

horticultural products and other products.

� However, an import mainly comprises of different value added branded products

demanded by the customer. The formula predominantly entails that India exports

basic and raw farm produce which is again reimported to the home country after

getting processed into value added products which fetches good remunerative prices

to the supplier.

� With concern to international market, the USA, the Netherlands, France, Germany

and Brazil established themselves the major universal players. Nonetheless, India’s

key partners have been the UAE and Saudi Arabia, which together account for close

to 30 per cent of agri exports from the country.

� Now, there is time where, certain food strategies directed to make sure food security

for all as well as to attain the consumption of appropriate quantities of safe food and

qualitative products that combinely produces a balanced and healthy diet source for

the number of population in India.

� Now we are in a position to knock the door steps of the world international trade

regarding the food commodities. Our share of the international food trade is very less

i.e. 1.5%, but at the same time it also give a bright future to invest, get more return,

benefits and become a market leader in the world for not only on the basis of

production figure but also on the basis of export figures of the commodities at the

international area.

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� To achieve this target manufacturing, processing, distribution and exporting of the

processed food commodities is the prospective option to attain marking position in

the world. At the same time it is time to grab the opportunity to appear as the food

basket of the world.

� If we are targeted towards self sufficiency and international trade then it will be our

competitive advantage for the future because of the easy availability of raw material,

large domestic demand.

� With taking the considerations the topic for the study is chooses to provide the

necessary information of the Beed district and its suburban area to the farmers,

distributors, proprietors, investors, bankers, academicians, retailers and other people

who are directly and indirectly associated with it.

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1.2 Indian Food Industry: At a Glance

� The size of the processed food industry is projected to be valued around US $ 3.6

Trillion globally which accounts 3/4th of the total global food sales i.e. US $ 4.8

Trillion (NishaHarchekar, 2008).

� The Indian food industry is still at nascent stage in comparison with world and it is

valued around $ 200 Billion. At the same time due to the valued scope investors,

technologist, consumers and various people from different origin ready to spend

money in the sector.

� India accounts for 1.5 % of international food trade in spite of being one of the

world’s biggest food producers, which predicts huge potential for both investors and

exporters in the coming future. The growth rate of Indian food industry is lies

between 14-15%

� According to the Fact sheet of foreign direct investment (FDI), the total FDI inflow in

the agriculture and food processing industry in the range of Rs. 7064.94 crore and Rs.

6745.43 respectively in the duration of the April 2000 to June 2012.

� According to economic survey 2011-12, the India economic growth rate is estimated

to be 6.9%. Both agriculture and service sector continuous to perform well concern to

own periphery. Anticipated growth rate in agriculture and service sector is 2.5 % and

9.4 % respectively. The share of service sector in the GDP goes upto 59-60 %, while

that of agriculture sector stood upto 15% merely. Still India remains as the one of the

fastest growing economy in the world.

� India is 2nd largest producer of food and can emerge as a major “food basket of the

world”. The food processing industry have ever is still at a nascent stage. Rising

income, globalization and shifting consumer preferences pays a tremendous scope for

extraordinary jump in terms of both production and processing of food sector, (Shipra

Singh 2011).

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� As per the CII (Confederation of Indian Industry) estimates shows that food

processing segment has the huge potential which attract US $ 33 billion of investment

in the coming 10 years and also it provides employment opportunity to the 9 million

person days.

� The food is divided into four different categories as per the requirement like raw

material production, manufacturing, distribution and marketing. The food science is

application of basic science and engineering tools to study the basic fundamental

nature, physicochemical nature and biological nature of foods and principles of food

processing and preservation. (Norman N. Potter, Joseph H. Hotchkiss, 2007).

� The Indian food Processing is industry is structurally divided into three main

categories as organized sector, unorganized and small scale sector. Organized sector

follows all rules of government and provides all types of taxes to the government.

� The following figure 1.2 shows that structure of India food processing Industry divide

into organized sector, unorganized sector and small scale industries with their share

of 25%, 42% and 33% respectively.

Fig 1.1 Structure of Indian Food Processing Industry

Fig. 1.1

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� The food processing industry in India is the “Sunrise sector” that has gained

prominence in recent years due to

1. Availability of raw material:

India has diverse agro climatic zones, it has wide and large raw material base like

fruits, vegetables, milk etc. suitable for food industries. India recorded the highest

production of food grain in 2011-12 is 252.56 MT. It also enjoys its favourable

position in the global competitive era.

Availability of the raw material is the main strength of the India to tackle with the

competitive world and take up the most gainful position to deal with the food

trade. It is a time now to see this condition deliberately like an optimist to achieve

peculiar point considered to the trade and processing level of the food

commodities.

2. Changing life style:

Due to rise in the literacy level and introduction of western standard of living

more and more urban customers have lead to change in approach, thinking and

preferences. Because of the same demand for processed, RTC and RTE food

boost in no time.

It also focuses on the change in the demand of the product for consumption due to

increase in the standard of living and also increase in income. It presumes the

upcoming taste and preferences which are advanced in the rest of world and their

similarity and likeness with Indian subcontinent.

3. Globalization:

It is referred to the condition in which the global market i.e. international market

is made available for the commodity produced in the domestic area or in a small

area. It provides global destination of Indian produce, there lies a great

unexploited opportunity to provide to the world of over 7 billion populations.

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Due to globalization new target area approach for the market is made available

and it is easy to penetrate into the market with adaptation of the new modern

appliances and techniques.

4. Advanced techniques useful for improving the production of food industry:

Now increasing the production is utmost important to cater to the increased

population of the country. With advanced technologies and modern application

increase in production of food industry is possible. Up gradation of the techniques

with the help of the state agricultural universities (SAU) and various other central

institute in tie up with private organizations and other leaders in the world for the

processed food sector.

It results into increase in production and productivity of the food commodities

whichever is possible. Also it advances the developing economy of our country to

the competitive level to tackle with the improved technology of the other nations

and their quality standards.

5. Quick increase in per capita income and purchasing power:

The increase in income levels is the main reason to spend the money profoundly,

so it is a great chance to the food processing companies to cater to the people with

quality concern.

Today’s era is totally devoted for the income earning people with no further

limitations so this change is trend is the propensity to purchase, shopping is a

natural phenomenon. It is directly linked with the increase in the purchasing

power of the processed food items.

6. Large domestic demand:

India with its population of 1.21 billion (121 crores) which accounts for nearly

17% of the global population. India is one of the most prominent consumer

markets in the world with the increase in consumer awareness about the processed

food across the domestic consumer in all parts of the country.

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This is helpful for the processor, investor because due to large domestic demand

no need for searching of the preliminary market. Also it is beneficial for the

domestic producer to make availability of their produce in the domestic market

and when it is successful then go for the international level for the purpose of

trading. Various companies are particularly targeting the size and growth rate of

population in cities, regions and nations, regional similarities and disparity,

household consumption patters.

7. Demographic trends:

The County has comparatively young population which is close to 55% of the

total population present in the age group of 20-55 years. This group accounts for

high consuming and purchasing powers and provides a necessary boost up for the

growth new of consumption pattern across the population.

Also some of the demographic trends such as awareness and liking of the

processed food, generation gap, accessibility to the ready to eat products, dual

family income, less time to cook are some of the governing factors which increase

the popularity of the processed food.

� Important subsectors of Indian food industry are Fruits and vegetables, marine sector,

grain processing, bakery and confectionary, beverages, meat and poultry, dairy

industry, packaged foods, marine foods, fish and fish products, alco-beverages,

horticultural crops etc.

� In the recent years there are tremendous changes with respect to the economic

development in developing countries in common, and particularly for agricultural

sector. This corresponds with the recognition of the important role of agriculture is

and also the importance of the linkages between agricultural and non-agricultural

sectors, farm and certain non-farm activities and rural and non-rural regions.

Meijerink G. and P. Roza (2007)

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� Indian agri-business: Key facts in 2011-12(MT-Million Tonnes):

Table 1.2 Agribusiness Key facts in 2011-12

No. Commodity Rank Production % of Global

1. Wheat 1st 161 MT 15%

2. Pulses 1st 90.23 MT 21%

3. Milk 1st 121.8 MT 17%

4. Rice 2nd 103.41 MT 22%

5. Tea 2nd 1095.46 Million Kg 28%

6. Fruits 2nd 75.82 MT 10.9%

7. Vegetables 2nd 137.68 MT 15%

8. Sugarcane 2nd 351.19 MT 21%

9. Coarse Grains 3rd 41.91 MT 4%

10. Edible Oilseeds 3rd 30.06 MT 7%

11. Spices 1st 5.93 MT 67%

12. Arable Land 2nd 161 MHa. ---

13. Irrigated Land 1st 55 MHa. ---

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� The MFPI has launched National Mission on Food Processing (NMFP) started from

1st April, 2012 in cooperation with State Governments during 12th Five Year Plan.

The main aim of the mission is to help out the State Government in creating

necessary synergy between their agricultural plans and development of food

processing sector in the state and to promote initiatives for skill development, training

and entrepreneurship proficiency.

� Various Schemes covered under the Mission (NMFP) includes following:

• Scheme for technology up gradation, setting up and modernization and

expansion of food processing industries

• Modernization of Abattoirs

• Human Resource Development

• Promotional Activities

• Cold chain projects for non-horticultural products etc.

� MFPI is important to put together the sustainable supply chains in the country that

creates a vital linkage between the farmer to the processing centre and marketing

centre’s effortlessly.

� Currently Indian food industry showing the slow growth because of the reasons such

as non-availability of enough infrastructural facilities, deficiency in quality control

systems, ineffective supply chain, non-availability of agricultural credit at reasonable

interest rates, high inventory carrying cost (Acharya S. S., Agrawal S.S., 2008).

� Prominent global food industries and leading Indian food enterprises are already

marking their existence in the food processing sector and allied activities. These

industries know that they have good future so to make the presence indicatively is the

most important point. A few of them are Nestle India, Cadbury's India Ltd., Kelloggs,

Hindustan Lever Ltd., ITC-Agro, MTR Foods, Amul, Britannia, Haldiram’s and

Godrej Foods etc.

� Export of the agricultural produce provides the necessary market support for the

country’s generating surpluses and to earn foreign exchange which definitely in a

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position to increase country’s capacity to import other goods which are needed. The

new international trades under WTO have important implications which are in

consideration with agricultural commodities.

� Commercialization in the field of agriculture can advances as soon as institutional

arrangements such as insurance penetrate at the grass route level within the

agriculture sector across India. Due to agricultural marketing system the farming

community gets the benefit from thenew universal market entrance opportunities in

the country and the agriculture marketing system also needs to be integrated and

strengthened for the welfare of the sector.

� Various Indian brands are yet to establish themselves in the international arena calling

for a determined effort to capture the global market share by coping with our

phenomenal standing in the production of agricultural commodities.

� The two types of the linkages i.e. forward and backward linkage should be

established by the farm itself. The backward linkage between the farmer and the

processor is yet to take proper shape to tide over the obstructions which exist due to

fragmented & small land holdings capacity, unpredictable production due to natural

factors, inconsistent supply of raw material and longer chain of intermediaries present

for the marketing activities.

� The forward linkage includes the linkage between the farmer and the distribution

channel so that the produce is more easily accessible to the local, domestic and

international market. The both linkages are important to develop a strong and

prosperous network from producer point of view with the supplier and distributor of

the food commodities and persons engaged in it.

� India is predominantly the country with agriculture base. An Agriculture and allied

sectors in conclusively the largest livelihood provider to the Indian population.

� Understanding of the pattern of food demand, food supply and food trends across

global countries and their capability to forecast potential change in the demand for

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different food products will be the most important tool for all individuals involved in

the agricultural sector and allied activities.

� The continuous growing demand for food should be cope against a framework of

mounting global temperatures and changing patterns of environment. The changing

climatic conditions will have an impact on the crop growth and livestock

performance, the availability of water, fisheries and yield of aquaculture and the

functioning of ecosystem services in all parts of world and also specifies reduction in

greenhouse gas emissions’.

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1.3 Role of Food Industry in Indian Economy

� Food processing industries have huge potential for the various parameters enlisted

and discussed below.

1. Enriching agricultural economy:

• Agriculture is the backbone of the India and the growth of the country

can proceed with the growth of the agriculture.

• Majority of the food products are produced from the agricultural

produce produced in the farm.

• It fetches good remunerative prices to the agricultural produce and

helping in the development of the agricultural economy and also helpful

for increase in the GNP of the country.

• The Food industry is of huge importance for development of India, due

to the critical relationship and synergies which promotes the two stakes

of the economy includes agriculture and industry.

• Inspiring the economic development is generally associated with overall

development in a food supply chain across all parts of India and the

ongoing reduction of dietary deficiencies which improves the nutritional

status of the country.

• Food marketing activities add value to the product thus increasing the

nation’s gross national product and net national product.

2. Creation of large scale food manufacturing opportunities.

• It creates more opportunity for the manufacturing sector by providing

the base for the production and export of the commodities.

• It promotes the small scale industry (SSI) which is helpful particularly

people lived their life in the rural area and also to promote the

empowerment of women.

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• Food industry is an area which recommends outstanding prospective

opportunities for entrepreneurs, investors and progressive farmers to set

up agribusiness and agro and food industry in India.

• An efficient food processing industry can make a contribution for the

increase in the marketable surplus of the farmers by reducing the losses

due to the inefficient technology, storage, transportation etc.

3. Food chain facilities like Food Park

• Food park is the new concept which together integrates all facilities

essentially required for collection of the food grains, primary

processing, secondary processing, export, domestic selling and other

allied activities useful for the production of the food product.

• It promotes the domestic products with availability of the export

destinations and good market price which ensures good remunerative

income for the domestic sellers.

• It creates market opportunities, infrastructure facilities, and modern

technologies like irradiation, cold chamber and others under one roof for

the investor.

4. Foreign Exchange earnings

• As more and more processed food products exported from India more

and more earning of the foreign exchange to the country.

• There is availability of the vigorous foreign exchange reserves in India,

which is helpful to cover the country’s imports on one side, and promote

the domestic firms to make their standing in the international arena in

the future.

• It directly reflects the reserve of the foreign exchange needed for the

future circumstances to buy heavy machineries, import the modern

technology and other resources.

• Increase in the foreign exchange is one of the major indicators which

show increase in the per capita income of the country.

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5. Employment Generation

• With increase in the opportunity for the food processing industry it

generates more employment opportunities. It improves the status of the

national economy with distinctive.

• It generates self employment opportunity for the entrepreneurs and near

and dear ones of the entrepreneur.

• It provides employment to the different people engaged in various

activities like packaging, transportation, storage, processing and

handling.

• Also potential for employment generation is to a large extent in the food

sector than any other sector and it moreover it provides employment

from the allied activities of agriculture sector.

• Peoples like commission agent, retailers, traders, brokers, wholesalers,

hamal, are directly employed in the production and marketing system of

the food commodities.

6. Increase in GDP

• With all prospective uplift gross domestic production of the country is

definitely is on the increasing mode.

• With the help of PPP (Purchasing Power Parity) method it is estimated

that with increase in the GDP of the country, India is the fourth largest

country in the world.

• This figure out the good economic performance of the country and

positive attitude for the growth of the business in all parts of the Asia

particularly in India.

• Gross Domestic Production has an impact on the national income of the

country and measures commodities and services produced in the year by

the national economy.

7. Increase in living standard

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• As total income of the people increases results into increase in the living

standard.

• Better living standards indicates that the alleviation in the poverty of the

agricultural population, reducing food prices and other development

activities which ensures boost up of the whole population.

• With increase in better living standard the overall image of the country

also increases which make an invaluable impact on the international

world relating to the trading of the commodities.

• It also reflects on their purchasing habits, awareness and consumer

behavior and change in the lifestyle and alternative available from the

particular produce in the world.

8. Growth of Agro based industries:

• An effective system in agri and food marketing helps in the growth of

agro based industries and also encourages the overall expansion of the

economy for the future.

• It includes different industries such as sugar, edible oil, cotton, food

processing and jute which depend on agriculture for raw material supply.

• Growth of the both agro and food processing and other non food

industry are important to indicate the economic stability.

• For growth of agro based industries mutual co-operation among both

sectors is necessary to achieve the efficiency in production.

• The rural food processing industries are helpful to alleviate pressure on

linkages between agriculture and industry, provide employment

opportunities, and to promote economic well being of the rural

population with growing income to prevent movement of rural

population to the urban region.

• The various people who are engaged in the agriculture sector deposit

their money in banks, post offices and other financial institutions in the

rural area which promotes the development of the rural area.

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� Contribution of Food Processing Industries (FPI) has increased in 2009-10 to Rs.

66,078 crore from Rs. 47,689 crore in 2005-06 with the CAGR of 8.49%. This shows

tremendous growth for the FPI to the GDP in the country in table 1.3.

Table 1.3 Contribution to GDP by Food processing industries

Contribution to GDP (Rs. In Crores) CAGR

2005-06

to 09-10 2005-06 2006-07 2007-08 2008-09 2009-10

Food Processing

Industries (FPI) 47690 52164 57320 67122 66078 8.49

Registered FPI 26780 30710 34752 43893 43910 13.16

Unregistered

FPI 20910 21454 22568 23229 22168 1.47

(Source: NAS-2011 and NSSO)

� As per the graph shown below it is quite clear that the food processing sector made its

contribution to the GDP at a faster pace than that of the growth rate of agriculture

sector. According to it, if the contribution for GDP from both agricultural sector and

food processing sector were increasing at the similar rate, it means that due to

increased agricultural raw material supply the growth in food processing sector is

possible.

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Conversely the graphs show that conversion of more agricultural products to the food

products in value terms for the consumption purpose in the form of final product.

� From the graph, it finally reveals that the processing level in value terms has been

steadily increasing and the rate by which it occurs is also on the rise. This relationship

is well described by the fig 1.2

(Source: NAS-2011 and NSSO & *Projected)

Fig. 1.2 Growth of food processing industry and agriculture

200

5-

06

200

6-

07

200

7-

08

200

8-

09

200

9-

10

201

0-

11

*

% GDP growth Food

Processing Industries7.52 14.6 13.1 26.3 0.04 14

% GDP growth

Agriculture & Fishing5.55 4.26 6.31 -0.4 -1.56 3.5

-5

0

5

10

15

20

25

30

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� Currently economic liberalization and consumer’s ability to pay is paving the way for

the further diversification of food processing division and to attract more and more

attention and investment from the global arena.

� With globalization of trade and accessibility of high speed logistics facility, food

retailers in developed countries are looking for a year round supply of fruits and

vegetables from the different developing countries.

� It opens the doors for the processed products for the perishable commodities. The

demand for the processed food products are augmented as a result of increase in

income and more quantity of households with more purchasing power, which

introduce a potential market for the new products.

� Different Multinational companies have started their outlets to enter into the

prospectus food chain business across India. Some of them for agri inputs are Cargill

and Congra, Tropicana in food processing sector and Metro in Wholesaling is global

leaders. Domestic players like Amul, Haldiram’s, ITC Agro, MTR, Dabur, MTR, and

Godrej are aggressive with the value chains in India.

� At the same way some multiple restaurant chains like Mc Donald’s, Dominos, Pizza

Hut, and Coffee day, Qwiky’s, SaravanaBhavan and Sagar Chains are rising in a

rapid and quick way.

� Current aspects of global trade need to be well thought out impression in the context

of improving diet and consumption patterns, nutritional requirement and the

prevention of chronic diseases and others.

� There has been significant improvement in the export of horticultural produce. In

terms of value, the export earnings have increased from Rs. 6921.68 crore in 2004-05

to Rs. 13,423.74 crore in 2009-10. (Source: FICCI, Ministry of Agriculture (MoA)

and CSO).

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� According to the survey of NSSO, 62nd Round Data, unorganized sector of Food

Processing significantly contributes to 63,45,768 persons, which were employed

during the year of 2005-06.

� Providing employment in the particular sector is being expected on an assumption of

constant Employment output ratio for projecting employment for upcoming years in

Food Processing sector as shown in table 1.4.

Table 1.4 Projected Employment (No. of Workers) in Food Processing Sector

2007-08 (No. In Lakhs) 2008-09(No. In Lakhs) 2009-10(No. In Lakhs)

93.00 108.90 107.21

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1.4 Introduction of Processed Food Industry:

� Food processing is the combination of different methods and techniques used to

convert the raw ingredients into food or to transform food into other forms for the

consumption purpose.

� Growth Rate of Various Snacking Categories described in Graph 1.3 as CAGR for

2004-09 and CAGR for 2009-2014. The various snacking category are described

below out of which majority market is captured by the chocolate, potato chips and

nuts and seeds and biscuits.

Fig 1.3 Growth rate of Various Snacking Categories

(Source: Data Monitor)

0% 10% 20% 30%

Chocolate

Potato Chiops

Nuts & Seeds

Savoury Biscuits

Processed Snacks

Cakes & Pastries

Cereal bars

Cookies

Other Snacks

popcorn

CAGR 2009-2014

CAGR 2004-2009

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� There is a vast scope for processing of perishable products which is very low at

current level. Due to the increase in the processing level we are able to sustain the

global competition for contribution in the world food trade which is currently

1.5%. Also perishable commodities available for the round the year due to the

processing technology applied on them. Current level of Processing of perishable

commodities is shown in table 1.5.

Table 1.5 Processing levels of Perishable products

Contents Organized sector Unorganized sector Total

Fruits / Vegetables 1.4% 0.8% 2.2%

Milk /milk products 13 % 22 % 35 %

Poultry 6 % -- 6 %

Buffalo Meat 21% -- 21 %

Marine Products 15 % 8 % 23 %

(Source: Ministry of Food Processing annual report)

� The food processing industry in India is mainly characterized by the low processing

level i.e. 2.2% for fruits and vegetables, nearly 35% for milk, 21% processing level in

meat and 6% in poultry products, which is extensively lesser compared with

international standards.

� Here taking into consideration of processing of perishable produce in the globe,

reveals that the processing level of perishable commodities is30% in Thailand,40% in

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China, 70% in Brazil, 78% in the Philippines and 80% in Malaysia, which is

comparatively much greater than that of India.

� According to MFPI food processing pertaining to the two different types of processes

like manufactured processes (converting a raw product into the edible form which is

having the commercial value) and Value added processes (it includes increasing the

shelf life, ready for consumption though they are not undergo manufactured

processes).

� Processed food are the type of food which are directly ready for the consumption

purpose and no further processing is required for that. Processed food is nothing but

the Ready to Eat food. Semi-processed food are the type of food where food is not

directly kept for the consumption, further processing like cooking, drying etc. are

required before consumption.

� The several instructions which could be useful to prepare final product are given on

the label. The different categories of Ready to Cook food, Ready to Fry food are

included in the semi-processed food.

26

1.5 Sectors of Processed Food Industry

� India's food processing sector covers different sectors such as fruit and vegetables

sector, meat and poultry sector, Dairy sector, alcoholic beverages, fisheries and

marine sector, bakery and confectionary sector, chocolates and cocoa products, grain

processing, mineral water, packaged foods etc.

� Increase in urbanization trend, superior living standard, and needs of dual income

families identify the huge market scope in the food processing, handling and

marketing segment. The challenges for food preservation, distribution and processing

sectors are even varied and challenging, and necessary to be tackling on different

fronts to gain maximum advantage in the specified market.

� Technological up gradation have played a vital role in improving the quality of Indian

food products. One of the major reasons behind the increased adoption of newest

technologies is the cost advantage they offer. Nowadays, highly advanced

technologies are being used in food packaging machine industry that not only

preserves the food products in a fresh condition but also makes them look beautiful

and appealing which catch the eye appeal of the customer.

� The different sectors of food industry are classified as below in table 1.6

Table 1.6 Different Sectors of Indian Food Industry

Segment Size of

organized

Key segment products Projected

Growth

Dairy

Products $ 375 million

Ice cream, butter, ghee, Whole milk

powder, skimmed milk powder,

condensed milk, flavoured milk.

15 %

Fruits and

Vegetable

136.3 million

tonnes

Beverages, juices, pulps, squash,

nectar, jam, jelly, frozen products,

potato chips.

20%

27

Meat and

Poultry $ 13 million

Frozen and packed - mainly in fresh

form, Egg Powder 10%

Fisheries 6.4 million

tonnes

Frozen and packed - mainly in fresh

form, marine fisheries 20%

Packaged

foods $ 2 billion

Snack foods, other nankeens,

biscuits, noodles

8%

Beverages $ 155 million Fruit based drinks, carbonated

drinks 27%

(Source: MFPI)

� Dairy sector:

India ranks 1st in the production of milk in the world with production figure of 122.8

MT in with CAGR of about 5 %. Milk and milk products still account for

approximately 17% of India’s total expenditure on food product. In dairy sector the

majority of the processing through the unorganized sectors. It is dominated by dairy

co-operatives.

National Dairy Development Board (NDDB) plays a crucial role for making the self

sufficiency and now the production of export of the milk and milk products in the

world. The projected growth of the dairy industry is around 15% per year. The major

products comes under the sector are ice cream, butter, ghee, raw milk, whole milk

powder, flavoured milk, sweetened milk etc. National Dairy Development Board,

Anand, has played a pivotal role in the development of the dairy sector through

successful dairy cooperatives in the parts of rural areas, in that way, which make

advantage to rural people with great scope for their livelihood.

Gujarat cooperative Milk Marketing Federation (GCMMF) is the leading player, also

some local players such as Gokul, Warna, Saral etc. Per capita availability of milk in

28

2009-10 is 258gm/day which is lower than the world’s average of 265gm/day as

shown in table 1.7.

Table 1.7 Production of Milk and Per capita availability in India.

Year Milk Production (MT) Per Capita (gm/day)

1990-91 53.9 176

2000-01 80.6 220

2009-10 116.4 258

2010-11 122.8 281

� Fruits and Vegetables:

India ranks2ndin the production of fruits (75.82 MT) and vegetables (137.68 MT) in

2010-11, according to Mr. Harish Rawat, Minister of State for Agriculture. Fruits and

vegetables processing is nearly equally divided among unorganized and organized

sectors.

India’s share in the world trade concern to processed fruits and vegetables is nearly

less than 1.5%. Major players in the sectors are HUL, Dabur India, Priya Food,

Allana Clod Storage, Temptation Food etc.

There is assistance from the NHB (National Horticultural Board), MFPI (Ministry of

Food Processing Industry) for the processing, research and development, handling

and export of the processing fruits and vegetables from the country. Fruits and

vegetables attract more investment form FDI, which can absorb marketable surplus at

29

farm level and make sure fair prices to the producers of farmers. It also ensures

availability of produce at affordable prices to the consumer or their households.

� Grain Processing:

In 2010-11 India produced more than 250 Million Tonnes of various food grains. All

important grains such as wheat, rice, maize, ragi, millets, barley and others are

produced in India. Grain processing is important to make availability of the grains to

round the year for the population. Also more grain processing directly influence the

efforts to mitigate the post harvest losses in the farm and at the same time provides a

wide range of employment opportunity to the rural people who directly and indirectly

dependant on the agri and food sector.

India is also leading producer and exporter of Basmati rice, which accounts for 74%

of the world’s production. Indian Basmati rice orders a best in the international

market.

� Meat and Poultry:

India has highest global livestock population which accounts for over 55% and 16%

of the world’s total buffalo and cattle population respectively. Processing of meat

products is licensed under MFPO act, 1973. Nevertheless, with increasing the pace of

urbanization and growing quality consciousness in the market for different meat

products produced and the growth is anticipated with rapid expansion. To supervise

the growth and promotion of meat and poultry sector in the overall country National

Meat and Poultry Processing Board established in 2009.

Overall production of meat in India is likely around 5 MT and its growth rate of

around 12-15% per annum. Indian poultry industry is emerges as second largest in the

world. The average compound annual growth rate for the poultry sector is 10% and

for broilers it is again higher which ensures the high growth aspects and potential

30

market for the products. Some of the recognized products like Godrej Real chicken

and Venky’sare become admired in domestic marketplace.

� Marine food sector:

Indian marine and fish industry is projected at around Rs. 45,000 crore in 2010-11

(MPEDA Figures). India ranks 3rd in the fish production in world and is 2nd largest in

the inland fish production. The growth of fish production has increased from 0.75 MT

in 1950-51 to 7.6 MT in 2008-09. The export from the marine sector is mainly

supported by the contemporary infrastructure facilities for processing such as freezing

plants and individually quick freezing to improve the quality standards at global level

and make safe marine products safe for consumption.

The fisheries sector contributes to 1% of the total GDP. Fishing, aquaculture and

other activities are a resource of employment to more than 14 million peoples. Fish

processing in the canned and frozen forms is carried out completely for export

purpose only.

� Beverages:

The beverage industry in India is specifically categorized into three classes mainly,

liken on alcoholic drinks (soft drink, fruit drink), alcoholic beverages (beer, wine),

and hot beverages (tea, coffee).

Maharashtra is considered as the hub for the wine production in India. With the

production of the specific quality of the wine under the climatic condition suited

Maharashtra is the front runner for the export of the wine. In Indian subcontinent,

alcoholic beverages are generally categorized under beer, country liquor, and Indian

Made Foreign Liquor (IMFL) segment.

The estimated demand for alcoholic beverages in India in 2010-11 is shown below in

the table 1.8.

31

Table 1.8 Demand for alcoholic Beverage in India

(1 case = 12 bottles = 9 lit.)

(Source: International Scotch and Wine Board)

� Plantation Crops:

Major plantation crops grown in various parts of India are tea, coffee, cashew and

cocoa with concern to the different agro climatic zones and requirement for the

development of plants. It accounted for nearly 5-6 percent of India’s aggregate

earnings from exports. India remains to be largest producer, exporter and consumer of

black tea. Cashew is an essential cash crop in India and our country is the world’s

leading producer as well as exporter of the cashew kernels which can earns more and

more foreign exchange by means of exports of cashew kernels.

India known for its unique flavor of tea, has emerged as the 2nd largest producer of tea

in world market after that of Russia, accounts for 31% of global tea production.

Coffee is among the oldest plantation crops cultivated in India, which has also a good

presence in the international arena.

� Packaged / Convenience food

Beverages Market (cases)

Beer 195 million

Whisky 135 million

Brandy 24 million

Rum 21 million

Vodka 6 million

Wine 1.5 million

32

This sector comprises of mainly bakery products, RTE, RTC products, snacks,

noodles etc. Annual production of bakery sector increases day by day. Out of the total

bakery products two major industries i.e. bread and biscuit constitute about 82% of

the overall bakery product.

Snack food market in India is anticipated to be a market worth $ 3 billion, out of

which $ 3 billion captured by the organized industry. The industry needs to conscious

about the market expansion and increasing penetration among Indian consumers.

Packaged foods are now available to the every part of the country. Different domestic

players are coming every day with the sector to tap the market opportunities and take

the advantage of the sector. At the same time increase in the awareness of the

consumers provides a boost for the expansion of the packaged food segment.

33

1.6 SWOT Analysis of Processed Food Industry:

SWOT analysis (Strength, Weakness, Opportunity and Threats) is a criterion by which

we are able to know the total performance of the company or enterprise or sector from the

financial, social, technological, market analysis point of view. It is nothing but a

parameter for judging the overall key attributes of the company as well as the key

difficulties of the business. It is nothing but a criterion to monitor the external and

internal marketing environment.

It describes overall internal analysis and external analysis of the company. Internal

analysis is the present scenario and condition of the company where as external analysis

is the future prospect as well as the alarming measures for the future related to the food

processing sector.

Internal analysis mainly includes strength and weakness of the company which are the

prospective phenomenon for the present circumstance of the nature of business. On one

hand, it is important to find the suitable opportunities and on other to take benefit of

them. Each business oriented firm should notify the strength and weakness associated

with the business (Philip Kotler, Kevin Lane Keller, 2009).

External analysis includes threats and weakness which are focuses on the future aspects

and weak spot of the company and develop a strategy to make fight against it. It also

suggests that how to avoid the dilemma and how to make use of the key characteristic

traits for the development of the processed food industry. The business unit should track

the different trends and new prospects and potentials of development and any related

opportunities and threats. External analysis should monitor and analyze the main macro

environment forces.

The different company, their suppliers, market intermediaries, customers and competitors

in the environmental forces outlines variety of opportunities and how to cope with the

threats. At the same time company should understand how to keep an eye on the forces

and formulate a strategic plan to take action on them.

34

Any business neither corrects all its weakness nor takes pride of all its strengths. The

important thing is that business should be coping with the opportunities so that they

regain the sustainable advantage of the required strength. Threats are the important

factors which definitely going to the damage the business growth of the sector so to

prepare the contingency plan for tackling with them.

The food processing industry mainly deals with the following parameters with respect to

the SWOT analysis.

1. Strength

2. Weakness

3. Opportunity

4. Threats

1. Strength:

It is the present condition and sustainable advantage of the processing industry

segment and it is directly linked with the performance of the business.

• Abundant availability of the raw material.

• Major domestic demand of the individual and households across all states

of India.

• Skilled labour force.

• Different agro climatic zones.

• Priority status for agro processing given by the central government

• Increasing spending ability of the individual and household on processed

food products

• Infinite network of manufacturing network facilities present in all parts of

the country.

2. Weakness:

35

It mainly deals with the present problem associated with the processing industry

and at the same time how to curb the problems before they dissolve the business

of the industry.

• Low processing level of perishable commodities.

• Inadequate infrastructural facilities.

• It requires high working capital.

• Seasonality of the raw material.

• Lack of appropriate quality control and testing methods as per specified by

the international standards.

• Inadequate link up between R&D (Research and Development) laboratory

and with the processed food industry.

3. Opportunity:

It is the future prospect mainly deals with the upcoming gains and benefits in the

business to become the leader. Opportunity is indirectly linked with the

organization.

• Setting up of AEZ, SEZ and mega Food Park provides added incentive to

develop the food industry.

• Increase in the disposable income and changing of the consumption

pattern of the commodities.

• Due to globalization opening of global market opportunity to make the

new destinations for the domestic produce.

• Favourable demographic sketch and changing lifestyles.

• Seasonality of operations and low capacity utilization for the perishable

products in India.

• More investment available from FDI (Foreign Direct Investment).

4. Threats:

Threats are the future difficulties seem to appear for the organization and

externally linked with the business. To achieve the success in the processing

industry mitigation of the threats is the most important.

36

• Affordability of the product.

• Cultural and traditional preference of fresh food.

• High inventory carrying cost un-necessarily adding to the variable cost of

product and results into increase in the cost of product.

• Reduction of post harvest losses by improved technology.

• Increase in the competition from the developed country with concern to

technology, infrastructure etc.

• Improper focus on quality and safety standards issues with concern to the

international market for the domestic product.

• Inadequate product development and innovation.

37

1.7 Food Processing Industry- Investment Options

1. FDI :

FDI (Foreign Direct Investment) is an investment by a company in a country other

than that in which the company is based. The food-processing sector continues to

attract FDI. Maharashtra was the top leader to receive the maximum contribution of

FDI in food processing sector for the period of the last ten years.

Foreign Direct Investment also creates an opportunity for the food business in India

to get more investment options from the overall world. The trend of FDI inflow

increases tremendously in the India. Around 30% of the FDI in the food sector comes

from EU countries such as Netherlands, Italy, France and Germany. Total FDI inflow

for food processing sector from the duration of April 2000 to August 2011 is

described by the table 1.9.

Table 1.9 FDI Inflows in Food Processing Sector

No. Sector Amount of FDI inflow

(In RsCrore)

% of total FDI

Inflow

1 Food Processing Industries 5872.16 0.89

2 Fermentation Industries 4269.92 0.65

3 Vegetable Oils And

Vanaspati 1103.22 0.17

4 Tea And Coffee 446.61 Negligible

Total Food Processing

Sector 11691.91 1.78

Total 658586.43 100

(Source: compiled from APEDA Agri Exchange)

38

FDI involves direct investment options in production, supply and marketing facilities

for required goods and services in foreign destinations. It usually takes the form of

joint venture or subsidiary and they have the long term considerations with the host

nations (Sanjay Mishra, P. K. Yadav, 2009).

2. MFPI:

(MFPI) Ministry of Food Processing Industries, which is the apex central

organization responsible for promotion and regulation of the food processing sector.

Thee main objectives of MFPI includes minimizing of wastage at all stages of the

food processing chains, providing policy support, better utilization and value addition

of the agricultural produce.

The strong and versatile food processing sector plays a significant task for the

diversification and commercialization of agriculture produce that improves shelf life

of the produce, make sure value addition to the commodity, increase in the per capita

income, and generates new market destinations for exporting of the commodities and

various food groups.

MFPI has originated VISION-2015 plan under which specific task have been

designed to complete in the specific duration. It includes

� Increasing processing level of perishables from 6 to 20 %

� Increase value addition rate from 20 to 35 %

� Strengthens India’s share in world food trade from 1.5 to 3.0 %.

3. Mega Food Park (MFP):

The food parks will provide all facilities starting from sorting, grading, food

processing and packaging, cold storage, quality control, and R & D laboratories.

Major destinations identifies by the government for the food parks are Maharashtra,

Andhra Pradesh, Punjab and Jharkhand and Northeast region. Government sanctions

36 mega food parks across India.

39

Initially product is collected at Primary processing centre from farmer; self help

group etc. where primary processing for the product in conducted. Then product

moved to the centre processing centre where final processing is done and product is

ready for either domestic sale or for the export purpose.

Components of Mega Food Park scheme aspires to present a method which bring

together farmers, self help group, processors and their associations and various

retailers and link agricultural production to the market place i.e. final destinations. It

makes sure the maximization of value addition, and reduction of post harvest loss and

improving farmer’s per capita income and standard of living.

The different advantage pertinent with mega Food Park includes Creation of high

quality processing infrastructure including efficient supply chain, reduction in

wastage, capacity building of producers and processors, significant direct and indirect

employment generationand enabling infrastructure facilities with supply chain.

It also provides nearly all facilities under one roof, starting from the collection of raw

material followed by the primary processing centre, central processing centre

includes, modern techniques such as cold storage, irradiation facility. Also it is a

place from where product prepared is ready for the export, domestic sale in the malls,

supermarket which provides good source of income and ensures all quality standards

and safety of the individual.

4. Integrated cold chain:

It is a chain of storage and continuous distribution activities of food which maintains

temperature range (from 2 to 8°C). It is used to extend shelf life of the commodity.

The estimated size of cold chain industry is to be around US $ 2.2-2.7 billion and is

anticipated to grow with 20-25% rate annually.

FDI with the amount of 100% is allowed in this segment. Some of the cold storage

players and equipments based companies are Kirloskar Pneumatic, Voltas and Blue-

Star etc.

40

The inadequate and non-sophisticated cold chain facility in India is a problem

associated with the huge amount of post-harvest food loses. Cold chain is the new

theory in India and its quality management needs a different set of competencies and

skills. The success of the processed food business requires intensive distribution.

Following table 1.10 shows the commodity wise distribution of the cold storage

capacity (Pradyumn Sharma, 2012).

Table 1.10 Commodity wise distribution of the cold storage capacity (2010)

No. Commodity Units Capacity (Lakh

Tonne)

1. Potato 2012 92.82

2. Multipurpose 447 7.63

3. Fruits and Vegetables 198 1.07

4. Meat 23 0.09

5. Fish 360 0.73

6. Meat and Fish 30 0.15

7. Milk and Dairy Products 272 0.68

8. Others 101 0.36

(Source: Ministry of Food & Public Distribution, GoI)

5. Supply chain:

A food supply chain is a set-up of food related business venture by which different

food products travel from the production through consumption, including pre-

production and postconsumption activities.

41

The different segments in the food chain, from ‘‘farm to fork’’, will need to be

implicated to respond to the challenges created for changes in diets to handle with the

growing epidemic diseases and others.

Characteristic links in the supply chain is mentioned below which involves sequential

presence of each and every parameter starting form inputs, producers, processors,

distributors, wholesalers, retailers and finally to consumers. It provides distinctive

link started from inputs of the agricultural produce to the ultimate consumer as shown

fig. 1.4.

Fig. 1.4: Supply Chain

INPUTS

PRODUCERS

PROCESSORS

DISTRIBUTORS

WHOLESALERS

RETAILRS

CONSUMER

6. Market Intelligence (MI):

It is the information pertinent to a company’s marketplace, collected and examined

exclusively for the purpose of precise and secure decision making to determine

market opportunity, penetration strategy, and different market development strategies.

42

The internal system of the company provides the results data, while marketing

intelligence supplies the happenings data. It is a combination of the procedure and

source manager applied to gain necessary development in the environment to secure

the future the business of the sector.

With the help of the market intelligence present and future marketing strategies are

formulated and according to it processing is done.

7. Micro Level Clusters:

It is a geographic concentration of food processing companies, their suppliers, service

providers, and associated institutions located in an area between 50 to 200 acres

depending upon the volume of Agri products, which would be processed. Such micro

clusters would increase the productivity of players operating in the region, and help in

integrating the back-end operations for processing units.

The micro clusters will have a common facilities centre providing infrastructure for

collection and storage of produce, grading, processing and packing units, basic level

of processing, cold storage, extension and information counter. It is helpful to create

infrastructural facilities for the rural area.

8. ‘Agri tourism’ :

It includes the concept of visiting a working farm or any agricultural, horticultural, or

agribusiness operations for the purpose of enjoyment, education, or active

involvement. A few private initiatives, including by farmers themselves, have

recently been taken in some parts of the State.

Systematic support to such Agri tourism projects will enhance farm incomes and

generate employment if a range of activities, services and amenities can be provided

by farmers and local communities to attract urban tourists.

43

The concept of Agri-Tourism based on wineries was recognized in the State’s Grape

Processing Industry Policy of 2001.The Tourism Department will formulate a scheme

in consultation with the Agriculture Department to encourage marketing and

infrastructure development of such agri tourism clusters.

9. AEZ:

Agriculture Export Zone (AEZ) takes a vision to promote exports of agricultural

commodities from the country and get good returns to the agricultural community in a

continual mode. Improvement in product quality and packaging is possible due to

Agriculture export zone.

The concept of AEZ comes under the purview of the EXIM policy 2001-02 and their

main purpose to nurture and develop the agricultural land for the value added and

other products

The two basic principles:

A. Identification of Potential product for export in a particular geographical area.

B. Research and development to produce internationally competitive products.

10. Government Regulation and support to sectors of Food Processing Industries.

1. Regulation and Control:

� FDI upto 100% is permitted in the infrastructure (Warehousing, Food Park,

etc).

� Industrial license is not required for almost all of the food and agro processing

industries with exception of some items like beer, potable alcohol and wine.

2. Fiscal Policy and Taxation:

� Fruits and Vegetables and dairy machineries are completely exempted from

central excise duty (no duty).

� Excise duty on the dairy machineries is reduced and excise duty on the

poultry, fish and meat has lowered from 16 to 8%.

� Basic custom duty and excise duty reduced on soya products.

44

3. Export Promotion:

� Food industry is one of the key areas identified for exports. Free trade zone

(FTZ) and Export processing zone (EPZ) have been started with all important

infrastructure facility.

� Encourage the setting up of 100 % Export Oriented Units (EOU) in specific

areas.

� To provide the subsidy for agricultural export of commodities.

4. Key features of Budget 2012-13.

� Target for agricultural credit increased by 1,00,000 crores to 5,75,000 crores

in the year 2012-13.

� Interest subventions scheme to provide short term crop loans to farmers at 7%

interest per year. Supplementary subvention of 3% is available for prompt

paying farmer.

� A centrally sponsored new scheme started i.e. National Food Security

Mission (NFSM).

45

1.8 Factors Influencing Demand of Processed Food

There are different factors responsible for influencing the consumption of Processed

Food. Some of them influencing factors for the demand of processed food are enlisted

with their characteristic attributes.

1. Income:

� A number of forces in both developing and developed countries are driving

the changes for acceptance of processed food, the most important being

income growth.

� It has direct impact on the purchasing habits and frequency by which

customers purchase the processed food products.

� It is the most prominent factor which influence the demand of processed food

products overall the globe.

� With the help of PPP (Purchasing Power Parity) method it is estimated that

with increase in the GDP of the country, India is the fourth largest country in

the world.

� Increasing income, educational level and easy availability of ready to eat

foods may bring about massive changes in the food consumption pattern in the

upcoming time (Vinod Kumar Sharma, 2011).

2. Changing life style:

� It results into increasing awareness and to acquire with the modern processed

food products from the world.

� The current tends of globalization, improved transportation system and

improved purchasing power capability of the consumer changes the life style

and penchant of customer.

� It also has particularly increased the demand for higher value food products

and creates a good opportunity for their marketing.

� Changing life style and very little time to use in kitchen have resulted into the

introduction of new products like pasta, soups, semi-processed food, ready to

eat foods and others.

46

3. Health Consciousness:

� Seeing that people are becoming extra health conscious, the trend of well

packed and branded products growing rather than the loose and unpacked

arrangements.

� People focuses on the distinctive health attributes so more products are

available with the same features and the demand of products like nutritional

food, food drinks, neutraceuticals are increases.

� People are aware about the nutritional information which includes the

declaration of the nutritional composition of the food.

� It provides an idea of the nutrition that can be derived from the specific article

of food which are safe and provide all necessary requirement of the human

being with assuring food safety and security.

4. Varying consumer behaviour:

� Food consumption pattern of urban Indian families has changes dramatically

to accept the western culture. Consumers prefer trying new add-ons to their

meal for experiencing varied flavours and taste.

� The demand theory started with analyzing consumer behaviour and market

demand is the sum addition of the individual consumers. The decisions related

to consumption are made by individual or household groups (S. Scuba Reddy,

P. Raghu Ram, 2009).

� The term Consumer Behaviour is refers to the study of processes involved

when individuals or groups select, purchase, use or dispose of products of

services to satisfy their needs and wants.

� The consumer behavior is mainly governed by the certain external influencing

factors such as Culture, demographic factors, family, social status, reference

groups and others.

� So food industries are trying their best to provide the product which can

acquaint the consumer behavior and results into purchasing of the

commodities.

47

5. Generation Gap:

� It contains distinguishing features, fashion preferences and taste of the young

generation.

� Their demand for fast food, semi processed and processed food increases due

to impression of the western culture.

� With the differences in the generation the likings and penchant of the dietary

items also changes because new generation wanted to deal with the

international changes and make adjustment with it.

� It generates more prosperity from the marketing point of view as young

generation easily attracted towards the processed food products and they are

the ultimate consumers.

6. Urbanization:

� Rapid urbanization has effect on food consumption habits by changing the

dietary behaviour pattern.

� More calorie intake (cities with greater number of food choices) compared

with rural work, produces obesity and diabetics.

� With more urbanization there are more choices for the people for the

purchasing of the processed food.

� It generates a modern and enhanced marketing and distribution infrastructure,

attracts the mall format like supermarkets, convenient stores by their

sophisticated food handling systems, better roads and improves the approach

to foreign suppliers and finally it will promote the globalization trends with

respect to dietary changes.

� Escalating urbanization rate will directly produces consequent steps for the

changing dietary patterns and lifestyles and preferences of individuals and

their households.

� Also it provides the destination point for the introduction and establishments

of the market opportunity in the urban area. Most of the convenience stores,

supermarket, specialized stores, grocery stores, retail bakeries present in the

48

arena displays tremendous growth opportunity for the future development and

also promotes the concept of urbanization.

7. Retailing:

� Supermarkets are now major players in most of the Agri food economy in

most part of the world.

� It provides nutritional benefits with substantial improvement in the standards

of food quality and safety.

� At the same time retailing provides different national, international and

regional brands and the effective branding strategy which ensure effective

utilization of the processed food segment.

� Indian retail distribution is more dynamic and complex to the marketers to

build good and efficient distribution systems. There are different MNC’s who

are looking for the acquisition of the domestic retail business of small firms

for their development (Pradyumn Sharma, 2012).

8. Food industry marketing:

� Marketing has taken advantage of increased per capita income in the

developing countries, where consumers are spending more on foods.

� Many industries use marketing campaign (by means of TV, news, print media,

brand endorsement) to catch the attraction of the consumer.

� Different companies make their way into the processed food segment with a

variety of product that strengthen the pleasing attributes of the specified

branded products and offers great taste and quality parameters to the

customers with targeting the youth population.

� Marketing is a tool to attract the consumer in the changing food pattern and

their habits. It also deals with the physical appearance of the products and

their stated competitive advantage with the rival market.

� It is depending on the multiple demographic shifts and understood by

combination of 4P’s namely product, price, place and promotion. The close

association of 4P’s with 4A’s is described in table 1.11.

49

Table 1.11 Food Industry Marketing 4 P’s

9. On – the - Go Consumption:

� Companies are now gradually realizing the significance of new points of sale

and consumption in the Indian market.

� This type is mainly aspires local and regional brand and their products which

are introduced in the market and make their own speculation in the market

compared with the competitor.

� The new points includes the bus stand, chowk, market place, mandi, major

visiting destinations, canteens, crowded places, railway platforms, offices and

institutions and others.

10. Decline in traditional food items:

� Economic survey shows that decline in consumption of traditional food items

such as cereals, pulses, overall food grain availability.

4P’s 4 A’s Description

Product Acceptable consumer acceptance of new products is driven by

younger population, faster urbanization

Price Affordable It leads by increasing income level across urban and

rural India.

Place Available It involves better distribution by FMCG players

through organized retail.

Promotion Awareness It is done by ad campaign, TV, news, so people

aware about the product

50

� In the developing countries dietary items are continuously changing with

increase in income and other factors which shows improvement in the modern

and high amount of body building foodstuffs.

� The share of staple food items such as cereals, tubers and roots are declining

however there is increase in share of fruits, dairy products, meat and fatty

products and other energy rich products with significant amount.

� As the demand and preferences for the traditional food items decreases with

increase in demand of the processed and semi processed food products.

11. Diet Diversification:

� It includes introduction of multiple new categories to cater to the specific

group of population.

� According to FAO’s long term vision, there is paradigm shift towards higher

energy supply levels of food commodities which will pick up the pace and

cover an increasing number of countries all over the world.

� Nutritional point of view, the changes in the diet diversification include

movement towards higher food energy supplies as well as a movement towards

more fats, oils and more animal-based food commodities, and thus higher

intakes of saturated fat and cholesterol in the dietary pattern.

� This class of people is ready to pay premium prices in accordance with the

products and categories of the products purchased.

� There is increase in the quality and amount of the fats used for consumption

purpose is reflecting a significant aspect in nutritional transition in the overall

diet in the countries at a broader range.

12. Per capita consumption:

� It is nothing but quantity of the specific product available to the per unit of the

population in the country per day or year.

� It clearly shows the trends in current scenario where the per capita net

availability of the traditional food crops decreases continually and substantial

51

increase in the consumption of the new or modern food groups like milk, fruits

and vegetables.

� Other than diminishing real value prices of food commodity, the speedy

urbanization has and will continue to have an effect on consumption patterns

and habits as well as energy expenditure

� It is a significant factor which indicates increase in the income shown more

prosperity of people to purchase and utilize the modern food items though they

are more costly.

Table 1.12 Per capita net availability (Grams per Day)

Year Cereals Pulses Food grains Milk Fruits Vegetables

1990 431.5 41.1 472.6 ---- ---- ----

2009-10 407.0 37.0 444.0 258 75 285

2010-11 407.0 31.6 438.6 281 92 300

(Source: The state of Indian Agriculture, 2012)

13. Consumers change of Aptitude:

Apart from this new factor Consumers change of Aptitude in food Consumption

arises now days. Consumer aptitude decides overall acceptability of the product.

Consumer’s aptitude depends upon following subsequent aspects.

1. Product Quality

2. Food Price

3. Per capita income

4. Other Factors

52

1. Product Quality:

Quality shows the degree of excellence about the product with its specific

features and standards. Product quality is the important parameter which can

generates the product which can be suited for the mass population according to

their needs and preference. It is a combination of following aspects of the

product mentioned here.

� Sensory attributes

� Health Attributes

� Convenience Attributes.

� Process Attributes.

2. Food Price:

It is one of the sensitive factors which decide acceptability of the product. It

depends on the relationship between customer and supplier. All companies

should equally focus on the purchasing pattern and trends of the population

regarding affordability of the product, because it hampers the growth of industry

and migration of the price sensitive individuals.

The agricultural prices cover prices of agricultural products i.e. output and

prices of basics for agricultural production i.e. input price at various stages of

marketing. The main objective of the Government's price policy in India for

agricultural produce which targets for ensuring remunerative prices to the

growers and producers for their produce with a view to encourage higher

investment and production from the field.

Agricultural marketing system is important to the current market system which

provides incentives to farmers, suggest the changing needs and demands of

consumers for the products used for consumption, create true and good

competition in the market, maximizing the share of farmers in the final price of

the agricultural commodities and make further steps for the appropriate

production planning.

53

3. Income of consumer:

Important factor to purchase the product on the basis of the purchasing power of

the consumer. The purchasing power in the country associated with current

income, prices, savings and others. The per capita income of the country

growing with the similar rate of growth of economy.

4. Others factors: It includes the following factors.

� Social factor:

It mainly deals with the society, norms and hierarchy of the society. It

involves association of the individual with the different member of the

society, family members and their support. It is the most important

factor which can enhances the confidence of the individual or the

investors, companies and intermediary person to come to the segment

and pave the way for prospective future.

� Cultural factor:

Cultural factors associated with language, belief, stated or assumed

traditions, festivals and values. These cultural factors presume the

consumption behavior of the people and companies should understand

the specific trends and challenges aroused when addressed to the

cultural preferences. Cultural factor made up of associations and other

forces which make an impact on the basic value, perception, behaviour,

working ethics of the population.

� Political factor:

These are related with the government agencies, different groups and

party members, which may manipulate and create pressure on the

organization and people associated with it. It also considers the keen

interest of the political influencers, benefitted from the business and

level of interaction between them. It also includes the stability of

government which can affect employment opportunity to individual.

54

� Legal Factors:

It concerns to the laws, regulations, principles and etc. A legal factor

includes the legislations and principles which can sum up the growth of

the food industry. These also provide the food security and ensure the

safe food is available with appropriate quality standards compared to the

intercontinental standards. It includes the required framework set by the

different law like FSSA (Food Safety and Standard Act, 2006) for

strengthening of the food standards and safety issues in India.

� Technological factor:

It is the products oriented concept by which product is available into the

market with its peculiar attributes and know how features associated

with it. It promotes growth of the industrial sector, infinite opportunities,

regulation of technology change. But at the same time keep in mind that

each new and modern technology should create a force for creative

destruction for the existed product.

55

1.9 Maharashtra: Presence in the Food and Agro Sector

Maharashtra has varied agro climatic conditions which are suitable for the cultivation

of a wide range of crops and a progressive farming community. The State has a large

urban population with high purchasing power. It is one of the major horticulture

States in India, with more than 13 lakh ha under cultivation of different fruit crops.

Maharashtra is a pioneer and leader in the use of water saving technology like drip

and sprinkler irrigation and it accounts for 60 percent of the total area under drip

irrigation in the country. Maharashtra is the major exporter of Thompson seedless

grapes, Alphonso mangoes, onions and long stem cut flowers.

The agro and food industry in Maharashtra has abundant and skilled manpower

availability. Agriculture and allied activities contribute nearly 12% per cent to the

State’s income, although 55% of the population is dependent on them.

In the food processing sector, Maharashtra has as many as 16,512 small and medium

and 322 large scale food processing units. At the grassroots level, there are more than

45,000 agro processing cooperatives. The food processing sector in the State has

attracted Rs. 1039 crores worth of Foreign Direct Investment through 173 projects

since 1991.

Maharashtra has highest Gross State Domestic Product (GSDP) in India and

contributes more than 13% cent of national GDP. With 9.4% of India’s population it

provides employment opportunity to 15.7% of India’s population as shown in the

Table 1.12.

Table 1.13 Percent (%) Share of Maharashtra in India

Agriculture constitutes the main source of employment of the majority of the worl

poor. In total, the share of

constitutes 53% of the total workforce

Maharashtra provides the abundant availability of the pooled resource of skilled

manpower. This can be useful for the dev

Maharashtra by adopting new techniques, trends, technology etc.

0

Export

Industrail Output

Employment

GSDP contribution

Population

Geographical Area

56

(Economic Survey of Maharashtra)

Agriculture constitutes the main source of employment of the majority of the worl

share of agriculture in total employment in developing countries

constitutes 53% of the total workforce. Agriculture and allied institutions in

Maharashtra provides the abundant availability of the pooled resource of skilled

manpower. This can be useful for the development of the rural area of the

Maharashtra by adopting new techniques, trends, technology etc.

5 10 15 20 25

27

19

15.7

13

9.4

9.4

% of Maharashtra in India

(Economic Survey of Maharashtra)

Agriculture constitutes the main source of employment of the majority of the world’s

agriculture in total employment in developing countries

. Agriculture and allied institutions in

Maharashtra provides the abundant availability of the pooled resource of skilled

elopment of the rural area of the

25 30

57

Maharashtra is economically among the most developed states in the country, despite

that it is not recognized among the most advanced states in the country with mainly

concern to the agricultural production, though most of the state’s workforce still

depends on agriculture (S. S. Kamlakar, 2010).

The availability of the manpower is the strength of Maharashtra for the food and agro

sector as shown in the Table 1.14.

Table 1.14: Manpower strength of Maharashtra for Food and Agro Sector

No. Sector Institutions Capacity

1 ITI’s 766 1,54,710

2 Agriculture 89 8,413

3 Horticulture 19 590

4 Forestry 4 85

5 Fishery Science 3 77

6 Agriculture Engineering 17 818

7 Food Technology 17 1,136

8 Home Science 3 54

9 Bio-Technology 19 915

10 Agriculture Business Management 13 615

11 PHM (Post Harvest Management) 1 30

(Source: Economic Survey of Maharashtra, 2012-13.)

58

1.10 Demography of Marathwada Region

There has been gradual shift in consumer demand from the cereals to high significant

food items like fruits, vegetables, dairy products, meat and fish according to NSSO

(National Sample Survey Organization). Currently food grain constitute about one

fifth of the total value of output from the agricultural and allied sector.

The contribution of fruits, vegetables crops and livestock have shown an growing

tendency in recent years reveals that they are growing at a much more rapidly than

the common traditional crops.

Maharashtra is one of the top producers of food products in India. Geographically

Maharashtra is grouped into five distinct regions, which are mentioned below.

1. Marathwada (Aurangabad Division)

2. Vidharbha (Nagpur and Amravati Division)

3. Konkan (Mumbai Divison)

4. Khandesh (Nashik Division)

5. Desh (Pune Division)

Fig 1.5 Regions of Maharashtra

59

The study is focused towards the Marathwada region with concern to the Consumption

patterns of processed food products. This study is extremely useful to the industry

practitioners like investors, exporters for their investment. Study also helpful for service

providers which include intermediaries are an essential element of supply chain

management and finally it is useful to the industry and academicians to identify the scope

of processed food and consumer behavior in the particular region and may find more

scope for the research.

Maharashtra has 20 sanctioned AEZ out of which work of the 14 AEZ is in the Phase I

which includes the following distribution. The different AEZ in Maharashtra are shown

in the Fig. 1.6.

60

Fig. 1.6 Mega Food Park Distribution in Maharashtra

Food Park Wine Park Floriculture Park

(Source: Economic Survey of Maharashtra 2012-13)

1. Food Park: Eight specified food parks with facilities such as warehousing,

packaging, sorting, grading, cold storage, and food laboratory etc.

The locations are:

� Butibori (Nagpur)

� Shendra (Aurangabad)

� Nevasa (Ahmednagar)

� Shrirampur (Ahmednagar)

� Latur (Latur)

� Osmanabad (Osmanabad)

� Nanaded (Nanded)

� Chiplun (Ratnagiri)

61

2. Wine Park: Three wine parks are set up in Maharashtra as:

� Vinchur (Nashik)

� Additional near Vinchur (Nashik)

� Palus (Sangli)

3. Floriculture Park: Three parks are developed at

� Talegaon (Pune)

� Mudkhed (Nanded)

� Osmanabad.

The Government would focus on strengthening of the agri clusters based on production

strengths of the various regions and sub regions of the Maharashtra state.

Each agricultural cluster consist of the entities like producers, processors, support

institutions, which operating in the same sector and facing common challenges which can

be deal with mutual understanding. All these clusters would endorse availability of raw

materials and other inputs materials which approach to support from the Government,

Universities like SAU (State Agricultural Universities)and research institutions like

CFTRI, NIN, ICAR etc., and that enhance contact to market information. That could help

farmers and processors to connect in productive agriculture such as market oriented and

higher value added products.

Conversely, developing agri clusters in countries like India presents face up to certain

conditions like the small land holding capacity, weak internal linkages, low risk taking

ability of investors, environmental conditions and others.

The indicative lists of the certain potential agri processing clusters are shown in Table

1.15.

Table 1.15 Indicative list of Potential agri Processing Clusters

62

Clusters Crops Locations

Fruits Pomegranate Solapur, Nashik, Sangli, Pune, Satara

Banana Jalgaon, Nanded, Hingoli, Nandurbar, Pune

Orange Amrawati, Nagpur, Jalna, Yavatmal, Nanded

Grapes Nashik, Sangli, Ahmednagar, Solapur, Pune

Mangoes Sindhudurg, Ratnagiri, Raigad, Aurangabad,

Thane

Amla Akola, Yavatmal, Jalna, Dhule, Buldhana

Vegetables Potato Pune, Nashik, Ahmednagar, Satara, Sangli

Onion Nashik, Pune, Ahmednagar, Jalgaon, Dhule

Tamarind Ahmednagar, Osmanabad, Latur, Solapur, Beed

Cereals and

Pulses

Rice Gondia, Bhandara, Thane, Gadchiroli,

Chadrapur

Pulses Nanded, Amravati, Buldhana, Osmanabad,

Parbhani

Oilseeds Soybean Akola, Washim, Nagpur, Latur, Wardha

Dairy Milk Ahmednagar, Kolhapur, Pune, Solapur, Satara

(Source: NHM (top 5 production Districts), Commissionerate of Agriculture, Govt. of

Maharashtra, ADF, Govt. of Maharashtra)

63

1.11 Beed District Profile

The ancient name of Beed was Champavatinagar. This historical city is situated on the

bank of the Bindusarariver. This city is surrounded by various historical places.

Geographical location for the research study is the Beed district in Marathwada region in

the state of Maharashtra. The district is previously part of the Hyderabad state until 1960,

when it was included into new sovereign state Maharashtra on the basis of language

concerns.

The total area of the district is 10693 km square and it is only 3.47% of the total area of

Maharashtra state. Agriculture is the major business in Beed district and is largely

dependent on monsoon rain. But due to inappropriate rain the district mainly in focus for

the drought area of the state. Overall rainfall in the district recorded at 674.77 mm yearly.

From the governance point of view the district is divided two separate divisions. In the

year 2011-12 the annual rainfall is slighter than the average annual rainfall of Beed

district which is stood at 720.82 mm.

First, at Beed itself, this facilitates the work of the regions including Beed, Gevrai,

Patoda, Ashti, Shirur (Kasar) of theses talukas. Second division is situated at Ambajogai,

covers the governance of Ambajogai, Kaij, Majalgaon, Dharur and Parli talukas region.

From the figure 1.6 it is clearly shown that on the north side of the Aurangabad and Jalna

districts, on the east side Parbhani and Latur district, on the south side Osmanabad and

Ahmednagar and the west side surrounded by the Ahmednagar district.

As per the 2011 Census, Beed district has a population of 2,585,902. The growth rate of

population in the 2001-2011 decade was 19.65% and had literacy rate of about 73.53%.

According to Census report the number of villages in Beed district is nearly 1,367 in

numbers. This district is divided into 11 (Eleven) talukas of tehsils. These are given

below and shown in Fig 1.7.

64

(Source: beed.nic.in)

Fig. 1.7 Geographic Area of Beed District

The different talukas of the Beed District enlisted as follows.

1. Beed

2. Patoda

3. Ashti

4. Ambajogai

5. Wadwani

6. Shirur (Kasar)

7. Gevrai

8. Parli (Vaijnath)

9. Kaij

10. Majalgaon.

11. Dharur

65

According to the Planning Commission and Central Statistical Organization (CSO) 2012-

13, following are the aspects about the Beed district.

1. Total Population of the Beed District is 25,86,000 (Provisional) which is having

growth rate of 19.65% as shown in Table 1.16

2. The density of population in the Beed District is 242 per square km.

3. Beed district contains 1360 villages and 1020 Grampanchayats. The total area of

Beed district is 10,693 square km which is 3.47 % of the Maharashtra.

4. Still most of the people live their life in the rural area of the district. The total

people live in rural people is 80.08% in 2011.

Table 1.16 Population of Beed District (in Lakhs)

Population/Decade 1991 2001 2011

Rural 14.95 17.74 20.71

% of Total 82.05% 82.09% 80.08%

Urban 3.27 3.87 5.15

% of Total 17.95% 17.91 19.92

Total 18.22 21.61 25.86

66

5. The Beed district is mainly known for the strengthening of the dairy industry in

the region. The daily collection of the milk is huge and so there is vast scope for

the dairy sector in the district. The rural background also promotes the

development and promotion for the dairy industry, which is a boon for the

expansion and improvement of the current status of the processing of milk and

milk products in the region with concern to the focus on the future. The dairy

industry is mainly driven by the co-operative sectors. The further detail, about the

dairy co-operatives societies in the district is shown in the Table 1.17.

Table 1.17 Dairy Development Co-operatives Society Information

0

5

10

15

20

25

30

1999 2001 2011

Po

pu

lati

on

in

La

kh

s

Decade for Population

Fig 1.7 Population of Beed District

Urban Population

Rural Population

Total (In Lakh)

67

No. Taluka No. of Dairy

Development Co-

operatives Society

Total Members

of Co-operatives

Per Day Collection of

Milk (average, 000

Litres.)

1 Ashti 695 35445 42.711

2. Patoda 81 4131 22.220

3. Shirur (Kasar) 101 5151 3.827

4. Gevrai 225 11475 6.081

5. Majalgaon 15 765 0.00

6. Wadwani 9 459 0.00

7. Beed 425 21675 38.494

8. Kaij 202 10302 0.00

9. Dharur 19 969 0.00

10. Parli 40 2040 0.850

11. Ambajogai 192 9792 6.573

(Source: District Dairy Industry Development Officer)

68

1.12 Statement of Problem

1. The different challenges faced by the food processing industry in India like low

price elasticity for processed food as a major concern.

2. Need for strong distribution network, development of marketing channels,

improving food quality standards also needed in today’s era.

3. To streamline food laws and different global competition for export of the food

commodities.

4. To get maximum benefit to the farming community from the new global market

opportunities, the internal system in the country needs to be further improved and

strengthened as well.

69

1.11 Limitation to the Research

Following limitations of the research are mentioned below.

1. The Research is conducted in Beed district only.

2. The time frame of the research is fixed as per the survey.

3. Accuracy of data depends upon willingness and ability of the respondents.

4. The study is mainly concern to the processed food products and it does not

take consideration of semi-processed food and other types of food

5. The responses of the consumers may not be genuine.

6. The questions included in the questionnaire may not be comprehensive.