IndiaActivity No. 12AS55 “Helping southern U.S. companies export food & agricultural products around the world.” www.susta.org
India: Opportunity awaits… • The third largest economy (over trillion dollar). • Consistent GDP growth even during Global economic slowdown. • India: second-most attractive destination for FDI in the world. UNCTAD's World Investment Prospects Survey 2010-2012 • Imports grew to US$ 34.6 billion in 2012. • Disposable income is showing consistent increase. • Among youngest nations with an avg. age of 25 years. • The Indian retail market is USD 396 billion growing at 12% making India fifth largest retail destination globally: AT Kearney
Major cities where the retail activities are targeted • METROS • New Delhi • Mumbai • Kolkata • Chennai • Bangalore • Hyderabad MINI - METROS Goa Nagpur Pondicherry Chandigarh Agra Ludhiana Pune Lucknow Varanasi Ahmedabad Amritsar Jaipur Kanpur Udaipur
The Indian Middle Class • The Indian consumer market is drawing global attention not just because of its promise of sheer volumes but also because of the shift happening in the nature of demand. • By 2025 the size of middle class will increase to about 583 million people, or 41% of the population.
Indian Consumer Feasting on Value Added Food products • The Indian food market stands at 69.4 billion USD and imported food products comprise 22.2 billion USD out of it. • Food and food products are the biggest consumption category in India. • Spending on food constitutes more than a 51% share of wallet. • The young Indians prefer buying or eating out quality convenience and processed foods.
Indian economic and demographic indicators suggest a market with strong potential for U.S. agricultural exports. • The largest opportunity for imported food products comes from supermarket and hypermarket formats. • Nevertheless, the Ma and Pa stores contribute almost 90% of the retail market. • India’s snack food and snack food ingredient import market has trebled since 2002. • Indian consumer is increasingly looking at health aspects in food items.
Key Drivers for the food industry • Economic growth • Demographics • Urbanization • Rising income levels • Growing need for convenience food • Higher aspirations and brand consciousness among youth • Plastic Revolution – Increased use of credit cards and debit cards • Increasing numbers of working women • Changing life styles and tastes • Change in consumption patterns • Impact of western lifestyle
FDI in multi brand retail…! • Foreign FDI was prohibited in food retail except for single brand retail. • In January 2006, up to 51 per cent foreign investment was allowed in single-brand retailing. • The GOI has recently allowed 51 per cent FDI in multi-brand retail and allowed 100% FDI in single-brand retail.
FDI open gates for new opportunities for imported food • The opening up of multi brand retail will lead to the entry of major retail giants like Wal-Mart, Tesco and Carrefour. • This step would lead to greater competition and greater need to differentiate. The retailers, both Indian as well as foreign will focus on offering specialty foods coinciding with changing consumer tastes. • The entry of these major players will encourage stocking of processed and packaged food along with wines, nuts, specialty foods etc.
Category wise analysis of the food industry in India • Processed food • Fresh Produce • Seafood • Horticulture • Pulses Emerging Potential Categories • Chocolate and Chocolate Confectionary • Dairy • Carbonated drinks • Edible oils
Market Analysis • Packaged food industry valued at US$25.4 billion. • Snacks and Confectionery industry is estimated to be worth US$ 3 billion. • A variety of imported foods such as confectionery items, beverages, jams, jellies, health foods, biscuits, cookies, wafers, processed fruits and vegetables, soups, syrups and seasonings, fresh and dried fruits / nuts, pasta and noodles, etc can be easily found on the shelves of retail stores. • Emerging New Categories • Health-focused Snack Foods • Frozen Ready-to-eat Segment • Pet Foods
Trends and Buying Habits • The West and North India region has the highest value sales of packaged foods in India. • Consumer awareness of packaged foods is also high in North India and metros in the South like Hyderabad and Bangalore which are the IT hubs of the country and population has high disposable incomes and good lifestyle due to good salaries. • North is one the most affluent regions in the country with areas such as New Delhi, NCR, Chandigarh, Jaipur and Lucknow. • Demand for imported specialty foods such as chocolates, dry fruits and nuts, cakes, pastries, and fresh and exotic fruits is significantly increasing during festivals like Diwali, Eid, and Christmas. • Hence, October to December is the best time to introduce new-to- market products in India. This is also the best time to organize promotions for new products.
Key Partners in the Market • Importers, Retailers and wholesalers • Retail Channels • Hotels, restaurants and institutions (HRI) • Fast food outlets • Imported foods are procured by high-end grocery stores or organized retail stores and grocery stores catering primarily to high-end customers in urban areas. • Indian retailers highly value in-store promotions to highlight international food products.
Market Analysis • Out of the total production of fruits, nearly 76 per cent is consumed in fresh form. • India is the sixth largest consumer of apples in the world. • Apple imports have grown rapidly since the removal of quantitative restrictions in 1999. • India has very low domestic production of pears. So, pear is a relatively new fruit for India.
Trends, Buying Habits and Consumption patterns • Factors contributing to increased consumption of Fresh Fruits and vegetables • Rising income / Economic growth • India’s burgeoning middle-class • Demographical changes • Health awareness • Increased literacy • New diseases prevalence like diabetes and heart problems • Cities in North and South increasingly are offering Fresh Fruits and Vegetables in nearby shops, Supermarkets and neighborhood stores. • The children in the family are encouraged to consume more fruits and vegetables as healthy habits. • Exotic fruits and vegetables are increasingly finding space in the kitchen of middle class consumer as the households are preferring international cuisines and mainly salads
Market Analysis • There is limited market for seafood in India. • It is mainly the food service sector where there is major consumption of seafood. • The coastal states of south India and the west coast of the country prefer seafood . However, consumption of seafood has increased in metros also. • Canned fish is mainly imported from Korea, Singapore, Thailand, Japan, and increasingly the UAE.
Market trends and Import procedure • There is limited scope for the Horticulture produce. • Hospitality sector has reasonable scope for them • 'Import Procedure' • Issue of Import Permit • Inspection of imported agricultural commodities on arrival at the port of entry • Undertaking Post Entry Quarantine Inspection in respect of identified planting materials
Market Analysis • Pulse is an important group of crops in India and is the major sources of protein in the diet. • India is one of the major importers of pulses owing to a large population largely dependent on pulses and imports 2-3 million MT. • Historically, chickpeas have been India’s single largest pulse import. Recently, however, peas have overtaken them. • India also offers market potential for various types of beans and lentils, as long as pricing is competitive.
Consumer trends • Pulse consumption in India differs by region: • Throughout country: Chickpeas, green peas, yellow peas, and black eye beans. • Northern India: Kabuli chickpeas, lentils, and kidney beans. • Southern India: Pigeon peas and lentils. • Most pulses in India are either split or used in the production of flour. Except chickpeas and green peas. • Split and whole pulses are usually cooked and served as part of a meal with rice or traditional Indian bread. • All are important ingredients used in the preparation of snack foods in India.
Potential of U.S. Pulses in India • Pulses, such as beans, lentils and chickpeas, are the "meat" of India–the main source of protein for most of its 1 billion people. • Indian importers acknowledge that U.S. peas are superior due to their stricter grading and more sophisticated processing. • The US pulses are costlier as compared to the other imported varieties
Market Analysis and Consumption trends • Chocolate consumption in India has almost doubled since 2008, with sales of $857 million in 2012. • Luxury and premium chocolate increasingly preferred by Indians. • Chocolate assortment boxes considered more hygienic and longer-lasting than traditional Indian sweets. • Increased popularity of seasonal gifting of chocolate, particularly during Diwali. • As the chocolate confectionery category suffers from being associated with negative health, brands are working to manage this perception and introduce elements of enhanced health messaging.
Market Analysis and Consumption trends • India has experienced strong growth in demand for dairy products • the Indian consumer preferences and trust for branded milk products • The Indian processed dairy sector is expanding. • Industry estimates project 15 percent growth in the processed dairy segment in the next five years. • Products such as yogurts, ice creams, dairy drinks, and western-style cheeses, as well as dairy products with enhanced nutritional properties are growing in popularity. • FSSAI sets standards for the safety of domestically produced and imported milk and milk products into India. • The Ministry of Agriculture’s DAHD is responsible for issuing sanitary permits for milk and milk product imports into India.
Market Analysis • The market for carbonated drinks in India is worth US$ 1.5 billion • The juice and juice-based drinks market is worth US$ 0.25 billion. • Fruit-drink market is growing at the rate of 25%. • It is the one of the fastest growing in the beverage market. • Sports and energy drinks too have a good market in India. • The market for alcoholic drinks has been growing consistently.
Market Analysis • Total vegetable oil imports stands at 7.1 million tons . • The import forecast includes palm oil, soybean and sunflower seed oil and other edible oils. • Anticipating a rise in consumption demand vegetable oil imports in 2012/13 could surpass 10 million tons.
Products performing well in the market • Juices • Jams • Mustards • Jellies • Snack foods • Apples • Dairy Products • Preserves • Dressings • Canned fruits and vegetables Chocolates and candies Products with longer shelf life, have more opportunity in Indian market. • Salsas • Candies • Chips • Cookies • Mayonnaise • Pasta Sauce • Non-alcoholic Beverage • Ready – to – eat food • Cake mixes • Pears
Challenges before Southern Exporters in 2012 • Competition from countries with closer geographic proximity to India, which enjoy shorter shipping times and low cost freight advantage. • Competition from Domestic Products in terms of pricing • Competition from products imported via grey market • Lack of education on labeling requirements with US exporters • Diverse food preferences throughout the country.
India works on the basis of relationships and they take time to form. • Cold-chain infrastructure and transportation facilities in their nascent stage. • Constraints of U.S. exporters to meet Indian importers’ requirements like mixed shipments (consolidation).
Import of Beef is Prohibited • Meats allowed with Sanitary Permits. • Import of Poultry is Restricted • Phyto-Sanitary Regulations for Agricultural produce needs to be followed. • Import of Alcoholic Beverages is Regulated. • Food Products must have 60% shelf life at the time of import. • Products containing cow renette are not allowed. Ingredients restricted in India
Roadmap for Market Entry in India • U.S. exporters should survey existing and potential markets for their products before initiating sales. • A visit to India to gain a first-hand feel of the Indian market, preferably coinciding with any major food shows or outbound trade missions could be useful. • The successful introduction of a new product to India depends on good local representation and an effective pricing strategy. • The local representative should preferably be the importer or distributor.
Most Indian processed food importers prefer to: • Purchase mixed containers with smaller quantities of individual products. • Seek exclusive agreements from exporters. • Use the services of freight consolidators to handle their orders from various exporters. • The key to success is to focus on a reasonable’ entry pricing strategy as Indian consumers are price sensitive. • Potential exporter should be familiar with India’s varied food laws.
Market channels in food retail sector “Helping southern U.S. companies export food & agricultural products around the world.” www.susta.org
Cost margins of the intermediaries On what margins importers, distributors and retailers work on? Importers 15-20% apx Distributors 12 – 14% apx Retailers 20% apx Big Retailers 30 – 35% apx “Helping southern U.S. companies export food & agricultural products around the world.” www.susta.org
Basic Duty: The value is different for different products ranging between 20-30% • CVD: Includes the excise duty to be payed in the local market and is variable • Custom education Cess on CVD: 3% (fixed) • Additional duty: 4% (for some specific products) Customs Duty Structure
Import Documentation i) B/L, ii) Invoice iii) Packing List, iv) Certificate of Origin, v) Insurance Certificate vi) Import Permit vii) Phytosanitary Certificate*
Goods must be labeled at the time of Import. • All prepackaged commodities, Imported into India, shall in particular carry the following declarations. • Name and address of the importer; • Generic or common name of the commodity packed; • Nutritional content details Labeling Requirements.
Net quantity in terms of standard unit of weights and measures. • Month and year of packing in which the commodity is manufactured or packed or Imported; • Maximum retail sale price inclusive of all taxes local or otherwise.
Items containing Meat or Animal products must be Marked as per labeling norms for domestic sales with help of visual indicators. Vegetarian & Non Vegetarian products must be marked Veg & Non Veg & include respective Color Dots in Green & Brown. Indicators for Meat or Animal Products
The Food service industry…..the new buzz • The Indian hotel industry, at Rs.131 billion in 2012 • India has many excellent hotel chains, including Indian Hotels Ltd. (Taj Group); East India Hotels Company Limited (Oberoi group); ITC Limited (Welcome Group); Asian Hotel; and Leela Venture. • Several international chains have also established a presence through franchising. • The Indian restaurant sector has shown impressive growth in recent years through franchises. • While leading hotels appreciate the excellent reputation of U.S. food products, higher costs are a constraint.
“Coffee shop” culture has spread throughout major cities and poised for further growth. • This should provide an opportunity for U.S. companies to supply products such as syrups, and ingredients like dried fruits and nuts etc. • Hotels are increasingly coming out with Gift hampers for festivals and wedding season with US food products. • US imported foods as beverages, packaged food, snack items and nuts finding space in the Mini bars in the rooms of the hotels.