The Indian Food Processing sector in 2005 was valued at $65.6 billion, $20.6 billion of which can be attributed to value added products. The Indian food industry on the whole has been exhibiting a growth rate of 6% annually over the last four years and this is expected to rise to 9% annually in the next five years. Recognizing the potential of this sector, the Indian government has marked it as a priority sector for bank credit. Consequently, a principal of $2.2 billion has been allocated to renew the financing of loans within the food processing sector. Products such as ice-cream, condensed milk, preparations of poultry, meat, and fish, pasta, pectins and yeast have been fully exempted from excise duties, whereas the same on instant food mixes and ready-to-eat packaged foods has been reduced from 16% to 8%. These measures are expected to further boost the growth of the sector and provide opportunities for small and medium scale enterprises that can provide nutritional ingredients for the food and beverage industry.
The Wellness Platform
Broadly, if we analyze the spectrum of benefits that nutritional foods and beverages offer consumers globally, it could be represented as follows: In the Indian market, products have conventionally been present either in the general wellness market or on a platform of disease prevention (see Figure 1).
Within the general wellness segment, mineral or vitamin fortification has been the most commonly used platform. Calcium fortification especially has been one of the fastest growing segments-calcium usage (for both food and feed applications) grew nearly 14% between 2004 and 2005. The benefits of calcium in terms of bone strengthening have also been well advertised by many product categories, including non-food categories such as toothpaste.
It is interesting to note, however, while approximately 2.3 million tons of calcium was consumed by the Indian market in 2004-05 (non-pharma usage), only 7% was used by the dietary supplement industry, and another 3% in the food and beverage industry; the bulk of the usage was in the animal feed industry. The figure is even lower for other minerals such as iron and iodine. Currently, it is pharmaceutical formulations, which are the key users of vitamins and minerals. The majority of Indian consumers does not see the need for additional supplementation through over-the-counter (OTC) dietary supplements. In fact, they use these products only on a prescription basis. Clearly there is a long way to go before fortification becomes commonplace in the Indian market.
Within the food and beverage market, products that have been quick to use fortification are those aimed at children, such as biscuits, jams and cornflakes. In these categories, brands compete not just with each other, but with traditional Indian snacks and breakfast foods, which are often perceived to be more nutritious. While advertising to children is usually focused on fun and freebies, marketers have been adding minerals and vitamins to persuade mothers to buy. In mature categories such as malted food beverages, fortification has become commonplace. Fortification still largely comprises of adding vitamins and minerals, although soy protein is emerging as a promising ingredient.
Newer ingredients such as essential fatty acids and probiotics have yet to make inroads to the Indian market. This is partly because the Indian diet, which places emphasis on including yogurt and other dairy products in meals, is itself rich in probiotics. Further, store bought yogurt is still a relatively new phenomenon. However branded milk and milk beverages is a fast growing area. In fact, one company, Heritage Foods, has already launched probiotic-enriched milk.
Another category that has witnessed increased fortification is branded "atta" or wheat flour, a staple in most Indian households. As consumers move to branded atta from buying and getting their wheat ground at neighborhood mills, marketers seek to nullify the price difference by providing value addition through fortification. This is done using either minerals and vitamins, or additional dietary fiber. Edible oil is also a growing market for fortification, as some state governments have attempted to address vitamin deficiencies by making the addition of vitamin A and D to refined oil mandatory.
The Disease Prevention Platform
Apart from general wellness, disease prevention is the other platform where health foods and dietary supplements have been positioned. Edible oils took the lead in this area, positioning specially blended high PUFA (polyunsaturated fatty acid) oils for cholesterol lowering and heart disease prevention. Herbal supplements have also positioned themselves in the area of disease prevention, with cholesterol lowering and diabetes treatment and prevention as the key focus areas. Some of the companies active in the herbal supplements arena are international multilevel marketing companies such as Herbalife International and Amway.
However, this is currently a gray area in the Indian market. Unlike the core pharmaceutical and food sectors, which they infringe upon, nutraceutical products are not regulated by any specific well-defined law. Such a nebulous situation had also prevailed in other Asian markets, creating confusion for both marketers and consumers as to what ingredients and claims can be marketed or trusted. To combat this, in the absence of government regulation, the Health Supplements Industry Association of Singapore (HSIAS) has developed its own code of ethics for all members.
Despite the regulatory challenges, disease prevention is a segment that is poised to grow in the Indian market, given the changes in lifestyle and the increasing occurrence of heart disease, diabetes, stress and obesity, especially among urban middle and upper class consumers.
To summarize, while the Indian consumer is slowly becoming used to processed and store bought foods, it may not necessarily follow a western model, where fresh cooking has been significantly eliminated in many households. The implications for food and beverage marketers are that while nutritional ingredients and health foods present an attractive means to bring consumers to the processed foods area, products that complement rather than seek to substitute the diet stand a better chance of survival and success. In the meal chart, breakfast has been the most susceptible to change, while lunch and dinner continue to be dominated by traditional homemade meals. Taste will continue to be a critical factor, and companies will need to customize their products to the Indian palate. This has been borne out by the experience of companies such as Kellogg's, who realized that the hot milk preferred by Indians did not really go well with cornflakes.
In terms of ingredients, protein fortification, especially soy, has the potential to grow, as it addresses the needs of a very large vegetarian segment of the population. Besides fortification of regular-use foods, the opportunities are immense for health foods and beverages in areas such as light snacking, at home and on-the-go drinks, hunger appeasement in between meals and niches such as products for the weight conscious and diabetics.
Packaged snacking (chips, traditional Indian savories) is another high growth category, currently showing year on year growth rates of about 35%. Fortification is currently negligible here, indicating opportunities for adding new ingredients or for healthy alternatives such as fortified baked snacks and low fat snacks. These are the areas where consumers are most prepared to experiment, offering opportunities for innovative marketers who can gear their products to meet consumer needs.NW
About the author: Aparna Singh is a program manager on the Chemicals Materials and Foods team at Frost & Sullivan India, Haryana, India. She can be contacted through Abha Kaul at email@example.com.
Editor's Note: In India, Frost & Sullivan's work in the Food and Beverage industry includes areas such as nutraceuticals and nutritional ingredients, other ingredients, flavors and animal nutrition. In order to provide a view of the growing opportunities in the Indian nutritional products market, Frost & Sullivan will present a concise one-day summit titled "Fortified Foods & Supplements: A Vista of Opportunities for Indian Manufacturers," which is scheduled for July 28, 2006, in Mumbai, India.