Innovative product packaging. How can packagings contribute to the business process, marketing and profit?

Contents

List of Tables

List of Graphs

Contents

Chapter - 1
Introduction
1.1 Conceptualization:
1.2 Global food processing industry
1.3 Food processing in India
1.4 Introduction of Packaging:
1.5 Policies and Regulations
1.6 Companies below study:
1.7 Oppurnities and treats of processed food industry

Chapter - 2
Review of literature

Chapter - 3
Research methodology
3.1 Objective of the study
3.2 Research Design
3.3 Statistical Techniques

Chapter - 4
Result analysis and interpretation
4.1 Innovative Packaging's Roles:
4.2 Current packaging Strategies and its rationale:
4.3 Attitude and Responses
4.4 Critical analysis of the packaging strategies adopted by companies under study

Chapter - 5
Finding, Conclusion and Recommendations
5.1 Findings
5.2 Recommendations
5.3 Conclusion
5.4 Limitation of the study
5.5 Future implication of the study

References:

Appendix-1

Appendix-2

Appendix-3

PREFACE

The present study aims to know the role of innovative packaging in today’s world. This study would help to know what the role of packaging is. The researcher realize that there are still many hurdles which hinder the growth of packaging to overcome this problem researcher focus on various strategies companies should follow.. While this study served to highlight attitudes and preference level regarding different types of packaging. This study serves to inform the companies that there are still many gap in proper packaging. The other hand, researcher focus on various other aspects of packaging like innovative packaging trend, customer’s preference regarding specific packaging materials etc.

This study main focus is to know the role of packaging and it was found that the purposes of packaging are protection, suspicion, information and convenience’s innovative packaging not only conserves the food quality but also meaningfully contributes to a business process. Innovative packaging also have secondary functions such as marketing and sales blurb, on the other hand the main job of food packaging is to gained safeguarding and safe supply of food product until consumption. At the period of allocating the quality of food products can get worse biologically and chemically as well as physically. Therefore, a noble and innovative packaging donated to extending the shelf life and preserves the quality of product. Second is to study the current packaging strategies it was found that now companies uses packaging as a promotional tool, it become a very significant factor of decision making, new advance technologies are used and implemented by the companies to gain competitive advantage and reduce cost.as well as researcher study the attitude and preference level of customer and find the deficiency in existing system so that it help companies to generate more profits.

A survey method was employed and the data was drawn from customers, retailers and company executives who were belong toDelhi and Haryana. Data collected from the 730 questionnaires that were distributed, in which 500 responses gained from customer 250 from retailers and 30 from company executives. This study provides recommendation to the companies to improve their current packaging strategies and overcome the gap of customer and retailer preferences. Limitations and recommendation is discussed so that future research can take it into consideration.

The survey method using questionnaire and interview techniques, in addition to the extensive use of current as well as retrospective literature and records, have been used for data collection. Literature was reviewed for the purpose of understanding the role of packaging and the packaging innovation introduced in India.

Respondents of this study include the professional and housewife, company executives and retailers manager. The purpose being not only to get the relevant information from these respondents, but also to get supplementary information in the form of comments and suggestions which might be helpful for this study.

The study has been divides into five chapters and it contains three appendices. The brief description of the chapters is given below

Chapter – I Introduction: This chapter gives general background which contains an overview of global packaging industry, Indian packaging industry, packaging introduction, function government policy and different companies’ overviews which involve in study.

Chapter- II Review of Literature: This chapter deals with the available literature relevant to the present study, justification of the study. It review previous studies carried out earlier in these areas.

Chapter – III Research Methodology: It covers the methods adopted to investigate the topic under reference, tools and techniques used for data collection, design of the study, it contains, research design, sampling procedure, methodology used in this study.

Chapter- IV Result and discussion: This chapter provides the general concept of the whole studyRole of innovative Packaging, Current packaging strategies, Attitude and responses of customers, Critical analysis of the packaging strategies adopted by the companies under study

Chapter – V Findings, Recommendations limitation and Conclusion and future implication of the study

APPENDICES:-

Bibliography

Appendix 1 Questionnaire

Appendix 2 Questionnaire

Appendix 3 Questionnaire

ACKNOWLEDGEMENTS

It is my privilege to acknowledge my sincere thanks to various individuals who extend cooperation at different stage of my research. First of all, I would like to take this opportunity to thank my supervisor and my mentor, Dr. Supriya Dhillion, Director Kedarnath Aggarwal Institute of Management, Charkhi Dadri. for his tireless and valuable support and guidance. Her kindness and patience has given me a lot of confidence to complete this research. Her depth of knowledge and outstanding human qualities always inspired me all through these years. Her continuous guidance and critical suggestions enable me to complete this arduous task. It shall always remain thankful to her.

I extend my sincere thanks to the all the corporate managers, customers ,retailers who willingly filled the questionnaire and spared their precious time. Without such response from these Respondents this study would have not been possible.

My special thanks to all my family members who have contributed immensely towards compliance of this study. Finally, I would like to extend my heartfelt appreciation to my Father Sh. Mahabir Singh and My mother Smt. Rajpati Lathwal , My brother Mr. Himanshu , My sisters Swati and Hemani for their moral support. I also extend my especially thanks to my loving son Aviral Choudhary , my best friend Mr Argha Chatterjee who support me at the time of stress and his kind encouragement and inspiring support which they also extended to fulfil this task. Even though this is not an easy task to get through, I really appreciate what I have learnt from this research study. It is not only the knowledge that I can gain from this study; there were also a lot of valuable experience that deeply inspired me to strive on in my life.

Last, not the least, to all my friends who have encouraged me in completing this study, I express my deep sense of respect and gratitude to all of them.

(Dr. Shruti Choudhary)

List of Tables

1.1 Trend in the development of food package

1.2 average Import of packaging material

1.3 Food processing level in various sector

1.4 Contribution and growth of FPI

1.5 Principle characteristics of registered manufacturing units

1.6 Capital invested in FPI

4.1 Demography table

4.2. Feature Most important according to customer

4.3 Feature Most important according to retailer

4.4 Feature Most important according to company

4.5 Order of the qualities of package

4.6 Customer opinion toward adverse effect of package

4.7 Retailer opinion toward adverse effect of package

4.8 Customer views regarding positive effect of packaging

4.9 Retailers views regarding positive effect of packaging

4.10 Opinion towards the future of package

4.11 Educational Impact of package

4.12 Social impact of package

4.13 Customer opinion towards legislation set up

4.14 Retailers opinion towards legislation set up

4.15 Customer opinion towards the aspects covered in package Legislation

4.16 Retailer opinion towards the aspects covered in package Legislation

4.17 Customer preference towards packaging material

4.18 Retailers opinion towards the type of material customer purchase the most

4.19 Types of package used by the company

4.20 factors of package which influence buying behavior

4.21 Changes notices during last 10 years in package with respect to customer

4.22 Changes notices during last 10 years in package with respect To retailers

4.23 Customer opinion towards the following aspects of package

4.24 Retailers opinion towards the following aspects of package

4.25 Packaging influence on marketability according to customers

4.26 Packaging influence on marketability according to retailers

4.27 Customer opinion towards the extra money pay willingness

4.28 Retailers opinion towards the extra money pay willingness

4.29 Companies opinion towards the extra money pay willingness

4.30 percentage of customer spend on package

4.31 Retailers view towards packaging impact on different aspects

4.32 Retailers opinion towards most important packaging feature

4.33 Retailers opinion towards environment friendly packaging

4.34 T test

4.35 ANOVA table on the basis of income

4.36 ANOVA table on the basis of education

4.37 Convenience level of company executive with current packaging

4.38 Status of packaging Innovation

4.39 frequency of packaging innovation

4.40 Method used for packaging Development by companies

4.41 Percentage of sales profits come from Innovation

4.42 Objective of innovation Establishment

4.43 Companies planning to introduced new strategies

4.44 Negatives Impacts which Limiting Companies ability to introduce packaging innovation

List of Graphs

1.1 Year-wise Invested capital trend

1.2 Export of food processing

4.1 Packaging Features most Important

4.2 Order of Qualities

4.3 Future of packaging

4.4 Educational Impact of packaging

4.5 Social Impact of Packaging

Chapter - 1

Introduction

1.1 Conceptualization:

Innovation is a conversion of knowledge to money

Innovation in the food industry combines technological change let go yell companion to out landish fancy to epitomize a rug and cultural alteration. It occurs relating to the entire food system, including production, harvesting, artful and subordinate processing, manufacturing and distribution. The touchy alteration is a pioneering or wiser purchaser forethought and service. Innovations tuchis be conscientious in handful of section of food technology, for prove proceeding process engineering, product formulation, food qualities or buyer needs; but ripples expanse causing conformity vicissitude in other parts of the food system, in buyer eating patterns and in settle by caper and cultural areas. Food industry innovation strategies phone call to be based on the unrestrained technology in the food system and concerned not only with the technological changes but also with the social and environmental instability, in compliance as to undertaking the deception residence walk satisfies the nutritional, unconventional and social needs and wants of all communities.

The Indian food council switch has consummate a good growth over the years. The high growth rate of economy and economic liberation and has gather an unlimited articulation on the food and agriculture market in the country. This condition leads this industry to minor imports and high rate of exports in terms of quantity and quality.

With the advancement in the area of technology, round and surrounding extreme techniques are being implemented in the breadth of agronomy. This has disgorge to high yield of food and crops which has utterly increased the output and led to the accumulation of the food industry in India. The heaping back of the put wide respect to dedication has additionally to leaded to the confidence of be in other allied industries such as food processing; arena packaging and ergo on. Marketers are addressing purchaser newfound interest in prankish the packages that decorate even as they reinforce the brand. gone are the days when interior design did not accommodate branded consumables .packages of paper goods, basin soap, condiments or blue-collar repress emblazoned with a branded name or logo/emblem were to be stored prevalent regards to of sight. The formulation is speedily changing, as brand owner’s feel it obligatory to design the packages so eye-catching that purchaser buy the product with the express purpose of dressing up even pantry counter, coffee tables. In miscellaneous cases it may be marked with the fact that clients like a package, that they retain it long even after the product is consumed. They tangible it to esteem the containers as a storage tool, collectible or token.

Innovative packaging system are vital in their facility to discriminate brand, rationalize price premiums and rise brand loyalty. A new shape material or dispensing system can give a product in any category new life.

Packaging is the handful of the primary process to maintain the quality of food product for storage; transportation and end use (Kelsey, 1985).it foretell to spare to save quality of the product and help in distribution and marketing. The purposes of packaging are protection, suspicion, information and convenience’s innovative packaging not only conserves the food quality but also meaningfully contributes to a business process. Innovative packaging’s also have secondary functions such as marketing and sales blurb, on the other hand the main job of food packaging is to gained safeguarding and safe supply of food product until consumption. At the period of allocating the quality of food products can get worse biologically and chemically as well as physically. Therefore, a noble and innovative packaging donated to extending the shelf life and preserves the quality of product.

Packaging project and growth includes not only the industrial design field, creativity and marketing tools but also the arena of engineering and environmental science. Safeguarding and the interexchange unvarnished functions of packaging are inordinately boastfully. But its clearance should be treated as a significant side of wrapping advancement.

Advanced packaging technology has attempted to compress the volume and weight of material to lessen resources used by the company and the total cost. Numerous trends in the foodstuff packaging evolution have been praiseworthy comprising basis reduction design upgrading for convenience and management food packaging has grown-up from simple preservation methods to suitability, point –on-purchase (POP) marketing, material saving,safety,tamper-proffing and environmental issues(Stilwell et al., 1991).

Trends in the development of food packaging

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Table1.1*1960’s-2000’s data are from Stilwell et al. ( 1991)

Packaging Modernization and its Significance It’s a shared knowledge that packaging influences societies on securing decisions and it has an openly burden on the sales of products. Innovative shapes, sizes, colors and even novel slogan for the same product set up to packaging innovation, which either produce a new look or enhanced product appearance and quality. Most products which stay inactive for a large interval of time would stay longer on product shelves unobserved, while those which sport new innovation would most likely get a second look and the possibility of purchase.

Generally, persons get tired of identical old things. They always hunger after for something new, rather different. Even deep-rooted companies continue to renovate their product packaging either to lead into continuous improvement and innovation or simply make their products more evident in a crowd of alike items. The main reason why companies to have innovate their product packaging is: One major reason for packaging innovation is the decline of sales. This would normally create a disturbance among marketing people and they immediately conduct researches and surveys to figure out what could have caused the decrease in market share. Therefore, various marketing strategies will be based on the consequences of the researches and brainstorming of concerned persons. Typically, product packaging revolution along with minor development on product quality is the primary step. An artistic and eye-catching packaging design produces curiosity among customers that could either lead them to giving the product a good try or for impulse shoppers to instantly give it a go. Another question arises, how can packaging innovation influence consumers? Original packaging of a product can possibly influence clients on improved shelf visibility. In a shelf full of similar products, three levels. Exclusive packaging can be an appreciated weapon in the battle of responsiveness at the point-of-sale. An extraordinary quality product can go unseen because of poor packaging. The first thing to think through is how the product could hook prospective buyers before they can actually find out the excellent product inside. Product packaging generally delivers a message even without the information on the label. Females could sight a deodorant brand packed in distinctive designed and in attractive colors more feminine than a plain-packaged one thus they may think the product is worth trying. A different strategy used by other companies who are especially well-established ones is making innovations but keeping something that would still bond the product to the company legacy. The finest example of this innovation is the unique shape of Coca cola bottle. They retain innovating materials, size of bottles, caps and label prints but keep their Functionality and satisfaction. Product packaging contoured bottle shape should communicate the functional benefits of the product, which will ultimately lead to improved usage experience and consumer satisfaction.

It is essential to focused that unless the product is tried, consumers will not have firsthand experience of its good quality. Innovating the wrapping of products is one good way of staying competitive in the market where competition goes stiff day by day. The major key to conquer the battle in getting consumers’ attention is the optical demonstration of the products through its packaging. The flawless way of gaining probable customer is that would experience the excellence of the product

In the eternally revise competitions of today’s global market the requisite for effective products promotion is essential and the product packaging has been playing a major role as a brand communication vehicles .today almost all goods that are manufactured or processed require some packaging in several phase of their production or distribution; packaging decision become crucial and has been to be considered in the early marketing plan as an integral part of the total marketing strategies (Panwar, 2004). Packaging is an essential integrative aspects of the product (schoell, 1985).the packaging component of the products refers to any container in which it is offered to the customer and on which information is communicated (Berkowitz et al, 1989). Packaging of the customer products is tremendously important at the point of sale.it play a major role when products are pick up. After all, it is the first things seen before making purchase choices and it is widely recognized that over 50% of purchasing decision are made at the shelf, or point of purchase (Ferrell, 1987; Frontiers, 1996).

Pioneering packaging can give a company an advantage over competitiors.pacakaging must be consistent with the products’ advertising pricing and distribution.

1.2 Global food processing industry

1.2a Overview:

It is expected that the worldwide flexible packaging market will grow at a rate of 3.5 %P.A until the year 2018. This remarkable rate of expansion is the greater than GDP, proposing the flexible packaging market is developing more quickly rather than well-built and outmoded rigid packaging markets.

The upcoming of global flexible packaging to 2018 is going to contain high-class data categories by both type and region The global customer flexible packaging market has grown up drastically since the global economic downturn of 2008-09.the market capacity in this section is valued at the 24.3 million tonnes in 2013 and is predicted to grow at a CAGR of 4.1% during the period 2013-18, to reach a total of 29.8 million tonnes.

The Asia –pacific region is largest regional market with 38% of global market volume, both in volume and value growth for flexible packaging during the 2012-13 and is also predicted to be the fastest growing market for consumer flexible packaging over the forecast period. The US capture the largest national market, with the volume share of nearly 14% in 2013.

There are many reason behind this growth rate. Which are technical developments, cost per package, sustainability initiative and the continued increase of the buyer class in Asia-pacific, America, and Eastern Europe areas.

Packaging innovation is most vital , after all, not only it can assist businesses to better their overall proposal through enhanced packaging design, functionality and logistics, as well as it can also help to solve a number of associated problem. For example, yet still we are facing two different challenges which are recyclable packaging, and lower cost-yet these challenges should be overcome through innovative packaging.

The packaging .recyclability become so critical. All landfill availability is reducing and the carbon footprint reduction is crucial to slow the devastation of our planet. Only through innovation, we are able to develop packaging that uses post-consumer waste and easily be recycled.

Innovation help to lower cost quality packaging. Packaging costs have been reduced over the last three years and the only way to increasing the efficiency of our operations is achieved this target without compromising on the quality of the products is by through new ideas.

Studies shows that About one billion people were living in starvation across the globe in 2009, which was about 100 million people more in comparison the 2008 level (World Summit on Food Security, 2009).Packaging become an crucial part of a long-term incremental development process to decrease losses, that will have to employ a amalgam of technologies and processes (Olsmats and Wallteg, 2009). The global food packaging industry has contributing a lot not only in reducing food losses but also in ensuring food safety as well as enhancing global food trade, which is an important key to economic growth of varying economies. As well as, packaging has a high cost for users from the farm, processing and distribution segments. The worldwide food and drink (F&D) markets are facing mixed headwinds in the short term. A nonstop moderation in food price pressure, as well as an improving demand in the US, should provide amuch-needed amnesty to global F&D producers and exporters. However, it has been seen the continuous domestic demand uncertainties in the majority of developed F&D markets such as Japan, Australia and Europe, which will present a host of demand challenges to local consumer-facing firms. In the long term, the key themes of geographical and product diversification helping the companies for further improvement, such as diversificationaway from emerging markets to frontier markets, will continue to feature strongly in the growth strategies of global F&D companies.it has been shown that, this pattern of continuous improvement is set to continue over the coming months. Basically, the global agriculture market remains better supplied than 2008, implying lower risks of food price inflation occurring as a result of supply shortages. Secondly, government policies targeted at protecting the end consumer from food price rise, such as releasing government stocks, will continue to mitigate the impact of higher food prices. Lastly, a global economic strike is likely to slow down demand and taken together these factors mean it shown lower average prices for most agricultural commodities during 2012 .We maintain our prospect of a subdued demand environment in developed markets such as Australia and Japan. The Australian customer will continue to face difficulties that will hamper its consumption. As interest rates rise and debt repayments raise, a larger percentage of disposable income will be used to repay debt, compelling family unit to cut back on the consumption of goods. With the effect of recession the number of job cuts by a numeral of financial institutions and manufacturers. In Japan, there is a temporary boost to private consumption in the aftershock of earthquake and tsunami. Faced with domestic demand pressure. The weak asset prices is putting pressure on customer purchasing power, it is expected that the Japanese customer will maintain a conservative stance over the coming quarters, though various factors such as a strong currency and low unemployment. While consumer goods manufacturers will continue to face demand headwinds in Australia and Japan in the coming time, the short-term future for the US shopper is looking brighter. Even though a full recovery of the US housing market could take many years to play out and will be tainted by volatility, it is believed that the recovery could start to speed up over the coming months from extremely dejected levels.

1.2b Pursuing Innovation to Improve Differentiation

The ramping up of product innovation among F&D companies as they seek differentiation and further market share gains. US coffee giant Starbucks looks set to roll out its new coffee capsule products across Europe, which have already been launched in the US, to gain market share from Nestlé. On the other hand, this may take a while to make a significant contribution to Starbucks’ results, with the firm facing a hard battle in alluring consumers away from Nestlé’s ubiquitous Nespresso format. The company is also planning to increase consumers’ exposure to Starbucks products in Europe, according to the Financial Times reporting that the firm is exploring ways to sell Starbucks coffee through vending machines and on trains and aeroplanes.

Table 1.2 Average import of packaging materials of developing market economies, 2005-2009(millions in US dollars).value in parenthesis of the packaging materials that have been traded worldwide.

Exporting region

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1.2c Innovations, Initiatives and Creativity

there is a structural limitations and industry barriers, still creativity, innovations and sustainability consciousness are growing in developing countries. Malaysia, Plastic bags developed from fruit waste and Turkey edible food packaging are recent examples of developing country’s packaging innovations Other examples of creativity include the use of branding, and the use of indigenous packaging to sustain market presence to reposition products and packing innovations to aid entry into new markets On the importance of packaging and the packaging industry sector

- Packaging spans the whole value chain and is a shared accountability for all trading partners. In developing countries Losses are maximum at pre- and post-harvest stages underscoring the need to focus on packaging solutions and concomitant farm to market support infrastructures required at these stages of the value chain. This is in great contrast to the industrialized countries where losses are at their peak at the retail and consumption stages.
- The packaging industry is capturing the position of the world’s third largest industry sector, next only to food and petrochemical industries. It is also among the top five industries in almost all countries, with its annual growth rate of 3-5%, which is a range even higher than the GDP’s growth rate in almost all countries.
- Today innovations and responses to changing consumer preferences and demands have extended functions of packaging from mere protection to include promotion, information, convenience, initiation and handling.
- For food loss reduction packaging technology development is one of the keys, and as addressing food loss is relevant to both the poor smallholder food producer and the poor food insecure consumer, the issue of food losses and the development of packaging solutions to address them are major global concerns.
- In the 4 Ps of marketing Packaging becomes an added P to the (product, price, place, promotion), particularly in terms of facilitating branding, product differentiation and identity which is best communicated at the point of purchase On packaging and food loss in the value chains
- To judge what the losses are and when, where and how they occur can help pinpoint solutions, packaging included, to minimize them. In the same manner, knowing which packaging solutions are available, presently and in the future, is a crucial first step in addressing food loss. On packaging trends and potentials for development
- Products generally have a much higher inherent value and represent greater resources than the packaging used to protect them. Thus, product losses due to underperforming packaging could cause greater adverse effects on the environment than the gains made through packaging reduction.
- A lot of changes are occurring in the worldwide food system from the way the foods are produced, distributed, stored, processed and retailed. This increasing dynamism in the food system, on the one side is placing a lot of challenges on the packaging industries, but on the other side will opening up opportunities for the packaging industry to develop and appropriately respond to.
- Standardization of Container is starting to be a cost reduction strategy, and this has given rise to a wider range of package sizes to accommodate the diverse needs of wholesalers, consumers, food service buyers, and processing operations.
- From the three major packaging sub sectors, potential exists more in package manufacturing than in packaging machinery or packaging services for developing countries. This is in the light of the fact that in developed countries the packaging machinery sub sector is highly dominated. There is value in looking at the potentials of the second-hand machinery market in the short- to medium-term. However, in the long term, it will work best for the developed countries to look into the potentials of simple in-country fabricated packaging machinery that is appropriate for their specific needs and requirements.
- The Packing Development service provision sub sector, specifically in reference to pre-packing and out sourcing, cangive the abundantrequiredimprovement to food packaging in developing countries. They’ll not solely lend affordability to packages and packing however will likewise enhance handling and distribution efficiencies to exporters, particularly to SMEs.
- In developing countries packaging materials square measurein briefprovide, reposeful packaging rulesa littlewhile not compromising food safety, cansure enoughfacilitate the trade. For instanceit'spermittingthe employment of recycled packaging materials once theycreate no downside of contamination (i.e. dried foods). Such relaxation of packaging standards canfacilitate increase the provision of packaging materials, whereas at an equivalent time addressing food loss issues.
- The Packing Development service provision sub sector, specifically in relation to pre-packing and out sourcing, will provide the much needed enhancement to food packaging in developing countries. They will not only lend affordability to packages and packing but will likewise enhance handling and distribution efficiencies to exporters, especially to SMEs.
- In developing countries packaging materials are in short supply, relaxing packaging regulations a bit without compromising food safety, will surely help the industry. For example it is allowing the use of recycled packaging materials when they pose no problem of contamination (i.e. dried foods). Such relaxation of packaging standards will help increase the supply of packaging materials, while at the same time addressing food loss concerns.

1.3 Food processing in India

“India can emerge as a leader in the global food processing industry. The country’s US$100bn food processing sector grew by 14.7% in 2009.With a 1.14bn population, 7.1% GDP growth in 2009, 4.1% food consumption growth (2009), expanding affluent classes and diverse agro-climatic conditions Supporting production of a wide variety of crops year-round, the country continues to offer a growing opportunity for international food processing companies. A central government plan, called Vision 2015, prepared by India’s Ministry of Food Processing Industries, envisages tripling the size of the country’s processed food sector by 2015, by increasing perishables’ processing levels from 6% to 20%, adding 20% to 30% to the industry’s value, and growing. India’s share of the global food trade from 1.5% to 3%. This vision entails a targeted investment of US$21.7bn, most of which is expected to come from the private sector. The FICCI report also said that by 2015 the Indian processed food industry will be worth US$150bn – with the major growth contribution coming from the organized branded food sector. Presently, 75% of the food processing units are in the unorganized non-branded sector and the industry is highly fragmented. However, with more integrated development of the entire food value chain, the situation is likely to improve, with demand already fuelled by macroeconomic and socioeconomic factors Indian cities have many more young nuclear families with double incomes, for whom precious family time and modern amenities weigh much more than the price tag of a product. Although their higher income levels mean that these middle-class families would not spend the national average 30% proportion of income on food (according to FICCI), the amount of additional money likely to be spent on the processed food sector is substantial. Furthermore, eating out at restaurants remains an important part of Indian families’ entertainment. According to Images F&R Research’s India Retail Report 2009, 60% of those who shop in stores with branded goods also eat at restaurants regularly, and around 80% Indians eat out at least once a month, while almost 28% do so four to six times in a month. Positive signs can also be noticed inside the home, where the growing sales of large-size (500 litre) refrigerators and microwave ovens are a direct indicator of the popularity of frozen and other processed foods, including exotic ones such as battered shrimps, fish fingers and stuffed squids from abroad.

1.3a India's Market Potential

The processed food trade in Republic of India is widely known as a 'sunrise industry' having vast potential for rising the agricultural economy, makingmassive scale processed food producing and organic phenomenon facilities, and also the resultant generation of employment and export earnings.

- India is that the largest producer of fruits & second largest producer of vegetables (200 million tonnes per annum). It’sconjointly the third largest producer of food grains (230 million tonnes per annum).
- India's is that the largest producer of milk within the world (110 mmt per annum) that accounts for quite15 August 1945 of the world's output and four-hundredth of Asia's. It conjointly has been growing at four wheel driveeach year, wayon top ofthe world average of 1-2% in recent years.
- India is stratifiedfifth largest in poultry production within the world. It’sthe most importantvariety of placental. Republic of Indiaincorporates amassiveoutlineof virtually 8000 Kms. abundant with a goodtype of marine life.
- The Indian food and beverages market is increasingapace and is projected to grow at a CAGR of nine per cent throughout 2009-13 and reach Rs. 27,220 bn ($580 bn) by 2013.
- Processed foods continues to grow &canrepresent for quitethirty fifth of the grocery store in 2013 – fourteen
- Exports of recent and processed vegetables, fruits, meat & poultry and cereals rose twelve per cent to Rs. 380 bn ($8 bn) in 2008-09 from Rs. 333 bn ($7 bn) in 2007-08.
- In the years of 2012 food consumption growth = +5.4%; compound annual rate of growth (CAGR) 2012-2016 =+5.4%
- In the years of 2012 alcoholic drink worth sales growth = +12.4%; CAGR to 2016 = +10.4%
- In the years of 2012 beverageworth sales growth = +16.3%; CAGR to 2016 = +13.1%
- In the years of 2012 mass grocery retail sales = +18.4%; CAGR to 2016 = +12.0%
- Food consumption growth for 2012 = +5.4%; forecast compound annual rate of growth (CAGR) to 2016 = +6.5%
- Per capita food consumption growth for 2012 = +3.3%; CAGR forecast to 2016 = +4.3%
- Confectionery volume sales growth for 2012 = +3.9%; CAGR to 2016 = +5.5%
- Confectionery worth sales growth (local currency) for 2012 = +12.6%; CAGR to 2016 = +10.0%
- The chocolate sub-sector is predicted to outdo its confectionery counterparts, increasing at a CAGR of vi.2% to 2016, in volume terms.
- Exports growth for 2012 = +12.7%; CAGR forecast to 2016 = +10.7%
- Imports growth for 2012 = +10.7%; CAGR forecast to 2016 = +10.1%

1.3b Industry-Overview:

China is that the world largest producer and Indiastratified second largest producer, Indian trade has the potential to be the most important with the food and agricultural sector food processtrade .in Republic of India is one amongstthe most important industries –and stratified fifth in terms of production, consumption, export and expected growth. The food trade is on a high as Indians still have a variety. Power-driven by what are often termed as an idealelement for any trade - massive disposable incomes - the food sector has been witnessing a marked modification in consumption patterns particularly in terms of food. Growing incomes arecontinuallyin the midst of a modificationwithin the food basket. The balanced defrayal on cereals, pulses, edible oil, sugar, salt and spices declines as households climb the expenditure categories in urban Republic of Indiawhereas on the opposite hand within the case of milk and milk merchandise, meat, egg and fish, fruits and beverages. For instance, in rural Republic of India the balanced expenditure on staples (cereals, grams, and pulses) declined from forty five per cent to forty four per cent whereas the figure settled at thirty two per cent of the entire expenditure on food in urban Republic of India. An outsized shift of this half in consumption I is driven by the processed grocery store, that accounts for thirty two per cent of the entiregrocery store. It accounts for US$ twenty nine.4 billion, in an exceedingly total calculable market of US$ ninety one.66 billion. The Republic of India processed food sector has the potential of attracting US$ thirty three billion of investment in ten years and generate of employment of nine million person-days probable by The Confederation of Indian trade (CII). The Indian Government has been formulating and implementing many policy and set up Schemes to supplymonetaryhelp for fitting and renovating food process units, creation of infrastructure, and government conjointly support for analysis and development and human resource development to encourage the expansion of the processed food sector. In Food processtradevaried activities like agriculture, gardening, plantation, husbandry and fisheries areenclosed. It conjointly includes alternative industries that use agriculture inputs for producing of edible merchandise.by the govt. of Republic of Indiaand also the Ministry of Food process, indicates the subsequent segments among the Food process industry:

- Dairy, fruits & vegetable process
- Grain process
- Meat & poultry process
- Fisheries
- shopper foods as well aspackaged foods, beverages and packaged water

However the trade is massive in size, it's still at a efflorescence stage in terms of development of the country's total agriculture and food manufacture, solelya pair of per cent is processed the by the Ministry of Food process The trade size has been calculable at US$ seventy billion. The food processtrade contributed vi.3 per cent to India’s gross domestic product in 2003 and had a share of 6 per cent in total industrial production. The trade employs one.6 million staff directly. The trade is assessed to be growing at 9-12 per cent throughoutthe amount 2002 to 2007. By the tip of 2025 it's expected that worth addition of food merchandiseis predictedto extend from the presenteight per cent to thirty five per cent. Fruit & vegetable process that is presently around a pair of per cent of total production can increase to ten per cent by 2010 and to twenty five per cent by 2025. Farm sector capture the very best share of processed food, whereverthirty seven per cent of the entiremanufacture is processed, of this solelyfifteen per cent is processed by the organized sector. Within the country the food processtrade is heading within the right direction to confirmgain in the coming back decades. The arenais predictedto draw in extraordinary investments of regarding Rs one, 400 billion within the next decade. Primary food processmay be a major trade with an extremely disjointed structure that hasmany thousands of rice-mills and hullers, flour mills, pulse mills and oil-seed mills, many thousands of bakeries, ancient food units and fruits, vegetable and spice process units within the unorganized sector. In distinction, the organized sector is comparativelytiny, with around 516 flour mills, 568 fish process units, 5,293 fruit and vegetable process units, 171 meat process units and variousfarmprocess units at state and district levels. The organized and unorganized sectors share varies across totally different segments of the trade.

Food processing levels in various sub sectors:

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Table1.3 Source: Ministry of food processing India, Annual report 2004

Segmentation of different sectors in food processing industry:

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Source: ministry of food processing India annual report 2004

Food processing sector forms an important segment of the Indian economy in terms of its contribution to GDP, employment and investment .the sector contributes as much as 9.0 to 10.0 % of GDP in agriculture and manufacturing sector. During the last 5 years ending 2010-11, FPI sector has been growing at an annual growth rate (AAGR) OF AROUND 6% IN MANUFACTURING.

In an emerging country like India, where growth with equity is the primary policy thrust, the optimum development of the food processing sector will contribute significantly in tackling several developmental concerns such as disguised unemployment in agriculture, rural poverty, food security, food inflation, improved nutrition, prevention of wastage of food etc.by serving as a bridge between agriculture and manufacturing and by dealing with the basis need of all citizens-the assured supply of healthy and affordable food at all location in the country, this sector has the potential to be major driver in India’s growth in the coming years.

1.3c SWOT Analysis

Strengths of Companies

- Foreign food companies continue to target the Indian market, with sub-sectors such as edible oils benefiting from significant investment.
- India is the world’s second largest milk producer, enabling the establishment of a developed and high-value dairy sector.
- India’s abundance of natural agricultural resources makes the market attractive to investors from all food sub-sectors.
- India has the second largest population in the world, and rising domestic demand is a major growth driver.

Weaknesses

- The processed food industry is less developed than other comparable countries as a result of logistical and distribution problems.
- The country’s agricultural industry, despite having huge potential, suffers from a lack of investment and dependency on erratic climatic conditions.
- Specific state-by-state legislation governing aspects of high-value business, such as retail store opening hours, hinders nationwide business strategies and can be time-consuming and cumbersome.
- Agriculture remains inefficient and is vulnerable to climatic changes. Two-thirds of the population depends on farming for its livelihood.
- Despite rapid economic growth, India remains a very poor country. According to BMI estimates, India’s GDP per capita was estimated at US$1,504 in 2011.

Opportunities

- The government is actively seeking investment in the food processing and agribusiness industries, suggesting that companies expressing an interest would be granted a very liberal investment climate.
- Rising disposable incomes and increasing urbanization mean higher-value processed foods are likely to experience strong growth rates, especially with the levels of investment being committed by many multinational companies.
- The immense size of India’s population and landmass ensure that market maturity is a distant prospect.
- Although non-essential consumer goods are barely established at the mass-market level, premiumisation is already becoming a viable growth option, particularly among younger consumers in major urban centers.

Threats

- Logistical problems, underdeveloped service networks and poor infrastructure hinder development in fresh food industries, such as dairy.
- The division between the urban rich and the rural poor is as great as ever, meaning food manufacturers do not have access to the entire population, or even the majority of it.

Strengths of retail sector

- India’s mass grocery retail sector is developing, and there is scope for considerable expansion across all formats and across all regions of the country.
- New and existing retailers have announced a series of expansion plans, with companies targeting growth outside their established region. This is partly in preparation for the now-inevitable arrival of foreign retailers, which will heighten competition dramatically.
- India has a very large domestic market, and rising domestic demand is a major driver of economic growth.

Weaknesses

- Widespread poverty and the country’s size and regional diversity act as impediments to the development of the mass grocery retail sector; sector growth to date has been confined to major urban areas, where salaries are higher and infrastructure is better developed.
- Distribution remains a major challenge to retail expansion, with retailers often having to invest heavily in the supply chain before opening new stores.
- India’s infrastructure is notoriously inadequate. A 500km road journey can take as much as 24 hours owing to poor road conditions, congestion and tolls.
- Foreign investment in the retail sector remains subject to government restrictions; liberalization has allowed for market entry but only via still-restrictive joint ventures with local firms.

Opportunities

- Investment in the discount retail sector provides a means of targeting lower-income consumers outside of major urban centers who will become a key market once the sector begins to mature.
- Likewise, investment in the convenience sector will enable retailers to capitalize on the increasingly busy lifestyles of consumers living in urban areas.
- For multinational corporations, the hypermarket sector is a good opportunity, with few hypermarkets present owing to many local operators being unable to afford the higher set-up costs of such outlets.
- In the long term, well beyond the current forecast period, rural retailing represents an opportunity for financially powerful firms that can afford to offer low prices.
- India’s emerging middle class will continue to drive demand for new goods and services.

Threats

- Many consumers remain wary of modern retail owing to its perceived detrimental impact on the role of traditional retail in society.
- Low prices remain integral to luring shoppers away from traditional retail formats; elevated operating costs could undermine retailers’ efforts to offer these.
- The government’s move to backtrack on its decision to allow foreign direct investment in India’s multi-brand retail sector has sent out a negative message to foreign investors about the lack of stability in the country’s policymaking process and could potentially deter foreign investments in the sector.

1.3d Contribution and growth of food processing industries:

The food processing sector has been growing faster than the agriculture sector .this is the positive development.

Contribution and growth of FPI sector (GDP in crore)

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Table1.4 Source: National Accounts statistics, MOSPI

Performance of this sector has improved significantly in the recent years, manufacturing sector was generally growing at a higher rate than FPI improved substantially in 2010-11:almost at par with the manufacturing sector.in 2011-12 ,as per the index of industrial production(IIP),FPI has outperformed manufacturing growth was close to 3.0 perent.the five year average growth rate of GDP at factor cost are 8.5,GDP agriculture: 3.8;GDP manufacturing :9.2 and GDP FPI is 5.8.

1.3e Key feature of FPI:

Annual survey of industries (ASI) is the main source of data on the number of units, employment, capital investment and output for the registered food processing sector. ASI data are released annually and the latest data is available for 2010-11 .the following table gives industries wise information on number of factories, employment, capital investment and output in the food processing sector.

Principal characteristics of registered manufacturing unit in FPI-ASI: 2010-11(PROVISIONAL)

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Table1.5 Source: Annual survey of industries (2010-11)

This sector has a total of 35,838 registered units with an invested capital of nearly Rs. 2.5 lakh crore producing an output of around Rs. 5.8 lakh crore in value terms. Major industries contributing this sector are grain mill, sugar edible oil, beverages and dairy products.as per the table there is 30.4% higher growth as compared to 2009-10.this sector has generated employment to the tune of 16.75 lakh persons which is higher by 4.3% as compared to last years.similarly,capital invested in FP sector has also increased significantly by 28.6%..food processing sector is highly labour absorptive and less capital invested in nature.as per annual survey 2010-11,among all industries “food products” generated the highest employment (12.2%) ,followed by textile(11.5%),basic metal(8%) other non-metallic mineral products(7.3%) and wearing apparel(6.9%) ,in term of capital requirement, capital to output co-efficient food products is .19 implying food products requires less capital for producing one unit of output, in value term, as compared to other labour intensive industries. In term of employments or compensation to employees, basic metal has the highest share (11.2%) followed by machinery and equipment (8.3%),motor vechicles,trailers and semi-trailers(8%).however, among labour intensive industries food products(7.7%) has the highest share of employment followed by textiles(7.6%) similarly ,fixed capital per employees is very favorable at Rs. 6.54 lakh per employee in food product industry as compared to Rs 7.45 lakh in textile an overall industry average of Rs. 12.64 lakh.

1.3f Food processing in micro, small. Medium enterprises:

Information on the principle characteristics of micro, small, medium enterprises (MSME) is generated through periodic census conducted by the office of development commissioner, MSME .the forth all India census of MSME (2006-07) registered sector gives an extensive information on employment, number of enterprises, market value of fixed assets, and other economics parameters on MSME registered in the district industries centers of the state.

1.3g Stages of processing of food:

In developing country like India where growth with parity is a primary policy thrust the optimum development of the food processing sector will contribute expressively in tackling several developmental concern such as disguised unemployment in agriculture rural poverty food security food inflation improved nutrition prevention of wastages of food .by serving as a bridge between agriculture and manufacturing and by dealing with a basic need of all Indians citizen the assured supply of healthy and affordable food at all location in the country ,this sector has the potential to be a major driver in India’s growth in the coming years.

Food processing industries from the economic activity point of view include all edible processed food, data analyzed by the ministry includes the entire sector. There are different stages of processing of food as shown in chart below;

Supply chain in the food processing industries

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(Author own work)

Primary processing related to conversion of raw agriculture produce, milk, meat and fish into a commodity that is fit for human comsumption.it involves steps such as cleaning, grading, shorting and packaging etc. Food processing industries usually deal with higher levels of processing, where new or higher value food products are manufactured. From an analytical perspective, food processing can be viewed as different levels of processing –primary, secondary and tertiary. Hence food processing includes

(a) Manufactured processes. If any product of agriculture, animal husbandry or fishing is transformed through a process in such a way that its original physical properties undergo a change and if it is the transformed product s edible and has commercial value, then it come into the domain of food processing industries.
(b) Other value processes if there is significant value addition (increased shelf life, shelled and ready for consumption etc.) such produce also come under food processing, even if it does not undergo manufacturing processes.

1.3g Capital invested in the food processing industries:

In term of investment, Food processing sector has registered a positive growth of capital invested(fixed capital and physical working capital),as per ASI 2010-11 ,the invested capital in food processing industry stood at Rs. 2,49,337 growing at an AAGR of 22.17 % during five years ending 2010-11.

Capital invested in food processing industries

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Table 1.6 Source: Annual survey of industries, MOSPI

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Graph1.1 Years –wise invested capital trend (Author own work)

1.3h Export of food processing related commodities:

All agriculture produce when exported undergo an element of processing, hence all edible agriculture commodities exported are included in the export data. The value of exports in the sector has been showing an increasing trend

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graph 1.2 Export of food processing Source: DGCI&S, Kolkata

1.3i Food processing sector-Impediments

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(Author own work)

1.3j Food processing sector-growth potential:

The figure below indicate the various factors which are likely to increase the demand for processed food in coming years. The single most important step to improve the bargaining power of the farmer is to add value to his produce, this will come about if farmer are able to produce according to the requirement and standard demanding by the market. Processing industries and retailers can provide the necessary demand for agricultural produce and facilitate the flow of market information, technology and input to the farmer so that he can tailor his output to the needs of the market and in the process raise his own level of income and employment. The consumer is also likely to be benefited as there will be an increase in the supply of food products with higher shelf life

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(Author own work)

It is essential to build sustainable supply chains, which will link the farmer to the processing and market centers seamlessly, in the absence of on farm cooling and grading arrangements and slow development of cold chain infrastructure, the farmer is compelled to sell his produce to the broker without waiting for a better price. If it is enable to grade or store his produce close to the farm the farmer will be empowered to demand and obtain a better price from the processors and also add value to his produce.

Economic growth over the past decade has led to significant poverty reduction, raising nearly20 million people above the poverty line every year. India, however, continues to face significant bottlenecks in feeding nutritious food to over a billion people, leading to issues around chronic undernourishment and malnutrition, lifestyle diseases and micronutrient deficiencies. Resolution of these issues requires improvements on multiple fronts: availability, affordability, consumer awareness, quality, safety and access of food – which therefore needs a cross-value chain approach. We believe the Food Processing industry will need to play a central role in driving improvements in the country’s nutrition situation because it is the first organized linkage between the farm and shelf. The unique conditions of the Indian market, such as consumer preference for fresh foods, high local availability of food and low degree of value-chain organization also implies a broader role of food processing sector in Indian context (more than just packaged food). Finally, it is important to note that food processing is an important contributor to economic and social growth – with high outputs (USD 180 billion in 2011), substantial employment generation (over 3.1 million employees in organized and MSME segments) and impact on local economies – and hence deserves a high degree of focus from all key stakeholders (Government and Private Enterprises) associated with this sector. To feed the currently undernourished population of India would require a 3 to 4 percent increase in food supply. By 2025, two factors will impact the food requirement in the country, driven primarily by increasing incomes, rapid urbanization and more inclusive growth.

- India’s food mix will continue to move away from grains and pulses, and toward more dairy, fruits and vegetables, meat and edible oils.
- Aggregate energy intake levels are likely to increase

We believe there are significant risks to availability that need to be bridged by the food industry Especially for grains and pulses, edible oils and dairy products:

- Despite the decrease in share of energy intake, the grains and pulses segment will essentially need to replicate production growth achieved from 2001-2011 until 2025 in order to reach the necessary supply levels. However, a meager increase in land under production coupled with plateauing yield growth will be major challenges to achieving this. Inability to effect quantum improvements in yields could see a shortfall of as much as 11 million tons of food grains by2025.
- Rising incomes will drive higher consumption of edible oil, which is expected to substantially increase in share of energy intake. While India is one of the largest producers of oilseeds in the world, it imports around 55 to 60 percent of domestic edible oil consumption requirements. This poses a major challenge as high import dependence means an uncertainty in supply and potential for significant variability in prices.
- While the dairy segment has been one of India’s success stories, sustaining production growth will require significant investments to ensure the sector meets demand requirements by 2025. In addition, substantial gaps in availability of livestock feed supply and competition for acreage from food crops pose fundamental threats to necessary dairy production. • While fruits and vegetables, meat and poultry segments have seen rapid growth over the last two decades, this is expected to stagnate with increased competition for usable land. In addition, the threat of the more lucrative export markets could also divert food supply away from domestic food availability, or more critically, land away from segments such as food grains, edible oils and dairy products, which run the risk of shortage by 2025.

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