Saturday, April 20, 2013

Packaged foods emerge biggest FMCG segment

Tasty Food Abundance in Healthy Europe

Market likely to grow to $30b by 2015 from $15b at present

As living standards improve and Indian consumers shift to an urbanised lifestyle, the packaged food sector looks set to emerge as the next biggest fast moving consumer goods (FMCG) category, said a research report by Espirito Santo Investment Bank dated April 4, 2013.

Nitin Mathur, an analyst at Espirito Santo Investment Bank, told Financial Chronicle that packaged foods segment has high growth potential with the improvement in educational levels and increasing disposable income. “Given the low penetration of packaged foods in India, we believe Nestle’s volume growth is one of the best within the FMCG pack. Though the gross margin in Foods is typically lower than the household and personal care (HPC) segment, asset turnover tends to be very high,” added Mathur.

Nestle will get significant pricing power to offset inflationary pressures with a strong distribution network and market leader position in most of its categories, says Mathur.

Dinesh Shahra, managing director, Ruchi Soya Industries, said growing urban culture and busy schedule of housesholds are largely the key drivers of packaged food consumption in the country. “However, aspirational rural consumers are also contributing to the growth. In a recent survey conducted by Assocham, it was revealed that 82 per cent of workforce prefers packaged food compared with eating outside food or roadside eateries in some of the key metros. Purchasing power and drastic change in the lifestyle of people are also the key drivers of this segment,” added Shahra.

Packaged food segment in the country is surging towards a growth of compounded annual growth rate (CAGR) 15 per cent to 20 per cent year-on-year, from a market size of $15 billion to $ 30 billion by the end of 2015, said Shahra. The main categories of packaged food are bakery products, canned or dried processed food, frozen processed food, meal replacement products and condiments. Some emerging new categories in this segment are processed dairy products, frozen ready-to-eat foods, diet snacks, processed meat, probiotic drinks.

“With growing population and rising dispensable income in India, consumers are more educated and aware about the benefits of healthy packaged foods, we foresee an intense growth in this segment. The advanced and improved technology in packing, helps in keeping the nutritional value of the foods intact. Also, the distribution channels in the country have strengthen a lot and more and more disposal income have further enhanced the growth and evolution of packaged foods industry,” said Shahra. Ruchi Soya is the manufacturer and marketer of edible oil and soya products under popular retail brands like Nutrela, Mahakosh, Sunrich and Ruchi Gold.

Dipak Sanghavi, MD of Nilon’s Enterprises, said packaged food market is set to grow in India at the fastest rate on the back of robust demand from across rural and urban areas. “Instant mix products such as gulab jamun, curry paste is a major hit among the masses. We are seeing around 20 per cent year-on-year growth in instant food mix category. Rural people also find these products economical and lifestyle statement,” added Sanghavi. Nilon’s has a very wide range of quality products including pickles, papads, Tooty-Fruity, sauces, vermicelli, macaroni, tomato ketchup, jams, dhokla and gulab jamuns.

Pravin Kulkarnii, general manager (marketing) of Parle Products, said people are increasingly drawn towards convenience food. “Packaged food industry is growing at around 48 per cent growth in India since consumers do not compromise on food even during slowdown,” added Kulkarnii. Parle’s market share in packaged food segment is around 44 per cent.


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