Friday, August 22, 2008


As mentioned in one of the earlier notes in this blog, reliable information on any aspects of food is hard to come by though from time to time figures are thrown around under the guise of real time statistics. Unfortunately there are no ways to ascertain that these figures do represent the ground realities prevailing in the country. Though we have one of the most visible planning bodies in the world, supposed to be looking ahead for future developments and laying down route maps for sustainable and equitable growth in all areas with the resources available, successive five year plans were not able to solve the country's food problems like uneven production, food scarcity and limited value addition through processing. Agricultural and Food processing are considered as vital areas to generate employment but what we are seeing to day is dismal situations on both the fronts. This may be due to poor data base in the country and not much being is being done to improve the data collection and computation regime under the government aegis.

The above thoughts are provoked by a recent report put out by the US Embassy in India projecting some achievable goals for the food processing sector in India obviously to advice their industry regarding the big market in India waiting to be tapped. According to their projections Indians consume over 1000 snacks and 300 savories and their out put is placed at $3 billion, growing @15-20%. What is intriguing is a perceptible trend reported by them amongst Indians in replacing meals with snacks opening up vast marketing opportunities for new snacks and savories in the near future. What is lost in this line of thinking is the type of foods Indians prefer and whether American companies have the wherewithal to comprehend and satisfy Indian palatial preferences with their experience in mild flavored or almost bland products popular in their country. Also lost on them is the stark reality that urban consumption of snacks is 10 times more than their counter parts in rural areas and whether they can go rural in a cost effective way to realize this vast market in the country side. While $3 billion is not a big market considering the size of Indian population, presence of thousands of minor players in the unorganized sector makes it difficult for large industries to monopolize the market.

Further dissection of the salty savories market figures reveals that almost 85% is contributed by potato chips alone, all others playing a minor role probably due to saturation advertising strategy of the industry like Frito Lay. Standard technology, long experience in wafer making and enormous marketing resources have combined to make this single product dominating industry click to a large extent. How far the industry will be successful in promoting other savories on par with potato chips remains to be seen. Other local players like Haldirams, Bikaner Bacall etc do have a portfolio of products that will be the envy of any global snack company but their volume is inconsequential considering the population of India. Also notable is that the snack industry constitutes a bare 2% of the $155 billion food market in India underscoring the inability of the industry to come up with right product mixes and marketing strategies to exploit the market. Will American companies do what local industry has not been able to do during the last two decades?. The appetite for explosive efforts is there as the projected food market in 2025 is estimated at $344 billion.

Southern United States Trade Association (SUSTA), based in New Orleans, did make an effort 5 years ago to link up food industries in that part of the country with Indian market with the avowed objective of increasing their exports of finished food products manufactured by industries located in the region. With Indian economy opening up under WTO guided trade liberalization regime, there were hopes that Indian would patronize American products enthusiastically. However the large price differential between locally processed and American made products and the high freight costs did not help to realize the plans at that time.

Operation Research Group at Baroda was one of the pioneering agencies in India bringing out useful information on food processing and consumption but the info flow is not regular as they cover all sectors of industry. Inability of data generation and management organizations in India to grow into big time projects leave the space open for a free run for foreign players like McKinskey, Anderson Consulting etc. It is time this gap in our capabilities is addressed by the domestic data management companies. Probably a change in the mindset at government level to rely more on foreign consultants will give a boost to such an effort.


No comments: