Opportunites in the Food Markets of India

97 Pages·2012·1.42 MB·English

OPPORTUNITIES IN THE FOOD MARKETS OF
INDIA
For further information about this report contact:
Dennis Pervis, Senior Markets Analyst
Marketing and Trade Team
Agriculture and Agri-Food Canada
British Columbia Regional Office
#420 - 4321 Still Creek Drive
Burnaby, B.C.
V5C 6S7
Email: [email protected]
Last Updated: February, 2012
Although every effort is made to ensure that the information is correct. Agriculture and Agri-
Food Canada assumes no responsibility for its accuracy, reliability, or for any decisions arising
from the information contained herein.
OPPORTUNITIES IN THE FOOD MARKETS OF INDIA
TABLE OF CONTENTS
EXECUTIVE SUMMARY .................................................... vii
I. PURPOSE ................................................................1
II. BUSINESS PARADIGMS ...................................................1
A. The Competitive Environment ..............................................1
B. Pure Export ............................................................2
C. Export with Agreements ..................................................2
D. Multi-National Operations .................................................2
III. PROFILE OF INDIA ........................................................3
A. Geography .............................................................3
1. The Himalayan Mountains ..............................................3
2. The Gangetic Plain ....................................................3
3. Peninsular India ......................................................4
B. Demography ............................................................4
C. Culture ................................................................5
1. History .............................................................5
2. Food ...............................................................5
a) Traditional .......................................................5
b) Recent Trends ....................................................7
i) Shopping Habits ................................................7
ii) Health and Wellness ...........................................11
3. Religions and Philosophies ............................................12
D. Trade ................................................................13
1. Data Sources and Valuations ...........................................13
2. Currencies .........................................................14
3. Imports ............................................................14
4. Exports ............................................................15
E. International Transportation - Canada to India ................................16
1. Ocean .............................................................16
2. Air Freight .........................................................16
F. Economic .............................................................17
1. Historical Development ...............................................17
2. Recent Conditions ...................................................17
3. Determinants of Food Demand .........................................19
4. Consumer Expenditures on Food and Non-Alcoholic Beverages, by Political Division
..................................................................21
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5. Determinants of Food Imports ..........................................22
G. The Regions of India ....................................................24
1. East & Northeast India ................................................24
2. North India .........................................................25
3. South India .........................................................25
4. West India .........................................................25
IV. RISK FACTORS .......................................................25
A. Internal Political/Economic Conditions ......................................25
B. External Political/Economic Conditions .....................................26
C. Handling Risks of International Trade .......................................26
V. PRODUCT ANALYSIS ....................................................27
A. Selected Products Imported by India From Canada .............................27
B. Selected Products Imported by India But Currently Not From Canada ..............30
VI. GRID ANALYSIS ......................................................35
A. All Agricultural, Agri-food & Seafood Products ...............................35
B. Agricultural Agri-food & Seafood Imports of India From Canada vs From the Whole
World ................................................................36
VII. PRICE WORK-UPS ....................................................39
A. The Research Price Work-up ..............................................40
B. Prices ................................................................40
VIII. IDENTIFICATION OF CONTESTABLE MARKETS .........................41
A. Dairy Products .........................................................42
B. Opportunities ..........................................................42
C. Product Groups with an Index of Indicators of 1.00 ............................48
D. Product Groups with an Index of Indicators from 0.75 to 0.99 ....................51
E. Product Groups with an Index of Indicators from 0.50 to 0.74 ....................51
F. Product Groups with an Index of Indicators from 0.25 to 0.49 ....................53
G. Product Groups with an Index of Indicators from 0.00 to 0.24 ....................54
IX. CONCLUSIONS .......................................................55
X. CONTACTS IN INDIA ..................................................56
XI. CONTACTS IN CANADA ...............................................58
APPENDIX 1 ................................................................59
APPENDIX 2 ................................................................85
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Canada - New Zealand/US - Measures Affecting the Importation of Milk and the Exportation
of Dairy Products .......................................................85
A. The WTO Rulings Regarding Dairy Exports ..................................85
B. The Mutually Agreed Solutions ............................................86
ENDNOTES ................................................................88
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LIST OF TABLES
Table 1. Selected Traditional Cuisines of India .....................................5
Table 2. Estimated Consumption of Packaged and Processed Food Products. India. 2006 and
2011................................................................9
Table 3. Value of Sales of Health and Wellness Classifications. India ..................11
Table 4. Religions and Philosophies of India - Food Preferences. .....................12
Table 5. Average Tariff Rates Applied on Agricultural, Agri-food, Fish and Seafood Products,
2008. India .........................................................18
Table 6. Determinants of Changes in the Effective Demand for Food. 2005 to 2011. ......19
Table 7. Expenditure on Food and Non-alcoholic Beverages in Selected Political Divisions of
India. .............................................................21
Table 8. Production and Annual Increases of Selected Crops, India ....................22
Table 9. Tariff Rates on Selected Imported Products. India. 2008. .....................23
Table 10. Ratios of Indian CIF Import Prices from Canada to Indian CIF Import Prices from the
World. Selected Products. 2010. ........................................40
Table 11. Summary of Indicators of Contestability of Selected Markets. India. ............43
Table 12. Area, Population and NSDP of States and Union Territories of India. 2011. ......60
Table 13. Population and GDP. India. 1992 - 2012. .................................62
Table 14. GDP by Origin, 2011. India. ...........................................63
Table 15. Percent of Employment by Sector. India. .................................64
Table 16. Distribution of Households by Disposable Income. India .....................65
Table 17. Value and Volume of Retail Sales of Packaged Food. India. 2005 and 2010. .....65
Table 18. Compound Annual Rates of Change of Production and Consumption (Supply) of
Selected Products. India. 1997 - 2007.....................................68
Table 19. Indicative CIF Prices of Imports to India from Canada, the World and Major
Competitors. 2010. ...................................................69
Table 20. Canada's WTO Dairy Export Subsidy Commitment Levels ...................86
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LIST OF FIGURES
Figure 1. Population Pyramid. India. 2012. .........................................5
Figure 2. Distribution of Households by Disposable Income Classes. India. ...............7
Figure 3. Proportion of Packaged Food Sales by Distribution Format. India. ..............8
Figure 4. Value of the INR Expressed in CADs (CAD per INR). January 1993 to February
2012...............................................................23
Figure 5. Percentage Changes in Selected Indian Agricultural, Agri-food & Seafood Imports -
From Canada vs From the World. 2005 - 2010. Part 1. .......................38
Figure 6. Percentage Changes in Selected Indian Agricultural, Agri-food & Seafood Imports -
From Canada vs From the World. 2005 - 2010. Part 2. .......................39
Figure 7. Political Map of India. 2001. ...........................................59
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EXECUTIVE SUMMARY
INDIA:
• is the second most populous country in the world after China; with 1.21 billion
people increasing at an annual rate of 1.64%. - A positive influence on the demand
for food;
• experienced a 7.80% annual increase in GDP per person between 1999 and 2010.
- A positive influence on the effective demand for food;
• has 20 political regions out of 35 with NSDP per person above the national average
(Andaman & Nicobar Islands, Mizoram, Nagaland, Sikkim, Chandigarh, Delhi,
Haryana, Himachal Pradesh, Punjab, Uttarakhand, Andhra Pradesh, Karnataka,
Kerala, Lakshedweep, Pondicherry, Tamil Nadu, Dadra & Nagar Haveli, Goa,
Gujarat and Maharashtra).
- Canadian exporters should initially target one or more of these geographic areas;
• experienced a -3.99% annual decrease in the value of the Indian Rupee relative to
the Canadian Dollar, between January 1995 and February 2012. - A small but
negative influence on imports from Canada;
• is experiencing growing inequities in per capita income as measured by a gini ratio
of 39.9 in 2011 and estimated NSDP per capita ranging from CAD 436 in Bihar
State to CAD 4,355 in Goa. - A negative influence on political stability;
• sourced 24.70% of its food imports from 32 American countries, in 2010. The top
five American countries were: Argentina, Brazil, the USA, Canada and Chile.
- Canada faces considerable competition from emerging economies in South
America and from the USA;
• imported CAD 13,767 million worth of agricultural, agri-food & seafood products in
2010, of which CAD 568 million worth (4.1%) was from Canada. As a supplier of
food to India, Canada has moved from 9th place in 2005 to 7th place in 2010
- Canada must continue this progress;
• represents several risks for Canadian exporters. - The facilities of Export
Development Canada and the Canadian Trade Commissioner service may be useful
in managing these risks.
Based on the analysis in this paper, Canadian food exporters may find new or
continuing opportunities in the following Indian markets:
• Fish, Nesoi, With Bones, Fresh Or Chilled;
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• Milk & Cream, Concentrated, Sweetened, Powder, Granules / Other Solids, Not over
1.5% Fat;
• Milk & Cream, Concentrated, Sweetened, Powder, Granules / Other Solids, Over
1.5% Fat;
• Fats And Oils Derived From Milk, Nesoi;
• Peas, Dried Shelled, Including Seed;
• Kidney Beans & White Pea Beans, Dried Shelled, Including Seed;
• Beans Nesoi, Dried Shelled, Including Seed;
• Leguminous Vegetables Nesoi, Dried Shell, Including Seed;
• Nuts Nesoi, Fresh Or Dried, Shelled Or Not;
• Pears And Quinces, Fresh;
• Ginger;
• Poppy Seeds, Whether Or Not Broken;
• Natural Gums, Gum Resins, Resins And Balsams Nesoi;
• Cocoa Paste, Not Defatted;
• Cocoa Powder, Not Sweetened;
• Nonalcoholic Beverages, Nesoi;
• Ethyl Alcohol & Other Spirits Denatured Any Strength;
• Wool, Not Carded Or Combed, Greasy, Nesoi;
• Wool Not Carded / Combed Degreased Not Carbonized, Shorn.
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OPPORTUNITIES IN THE FOOD MARKETS OF
INDIA
I. PURPOSE
The purpose of this paper is to provide Canadian food exporters with indications of
opportunities or “contestable markets” in India. The analysis uses several indicators of
contestability and ranks product groups according to the number of positive indicators associated
with each.
The paper provides indications only. Individual companies should follow up on opportunities
of interest with: further market research, including the determination of quality and packaging of
competing products; acquisition of information on sanitary/phyto-sanitary and labelling
requirements; the development of a research price work-up; other barriers to trade and;
eventually a specific price work-up.
The indicators of contestability used in this paper are based on historical statistics and
therefore assume Indian tastes and preferences are fixed. It also assumes that the images that
Indian consumers have of Canada and Canadian products are fixed and not always positive
relative to the images of competing products. The Branding Strategy for the Canadian
Agriculture and Food Sector1 is designed to improve knowledge of Canadian products and food
systems, to differentiate Canada from its competitors and establish a reputation for high quality.
This program can have a major positive influence on Indian acceptance of Canadian food
products and increase the probabilities of finding opportunities in Indian markets.
II. BUSINESS PARADIGMS
There are several ways in which Canadian companies can participate in the food markets of
India. Some understanding of the competitive nature of the Indian food markets is necessary for
Canadian companies to decide on the appropriate paradigm for them.
A. The Competitive Environment
In 2010, the packaged food market was dominated by multinational companies local
manufacturers and government cooperatives. There was also a thriving unorganised sector
consisting of many small entities. The market was highly competitive and fragmented. Even the
large multinationals had to fight hard to maintain market positions. However, over the period
2005 to 2010, the market has become slightly more concentrated. The top 10 food companies
producing impulse and indulgence products accounted 68 percent of the market in 2005 and 73
percent in 2009. Similarly, the top 10 food companies producing nutrition products / staples
accounted for 38 percent of the market in 2005 and 41 percent in 2009. To compete in this
environment companies continuously reviewed product innovations as well as marketing and
communication strategies. As the rural areas became increasingly important, companies engaged
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in various promotional offers. Smaller packs at low prices were key to growth in sales of such
products as bakery products, soup, noodles, and confectionery products.
B. Pure Export
The paradigm assumed in this paper is characterised by production in Canada by Canadian
companies with sea or air transport to India by any available carrier. Canadian companies
normally cease to be interested in a shipment when it is loaded onto a ship or plane and payment
is received. Wholesaling, distributing and retailing is done by Indian companies at their risk.
With this paradigm the emphasis is on identifying products that Canadian companies can
profitably export and Indian companies can profitably import from Canada and finding those
Indian buyers.
C. Export with Agreements
This paradigm is much the same as pure export except that Canadian companies enter into
various kinds of agreements with Indian companies to perform any one or more marketing
functions such as wholesaling, storage, distributing, advertising and/or retailing.
D. Multi-National Operations
This paradigm includes a mix of local (in India) production and imports. It might also
includes the performance of marketing functions throughout the marketing channel. Multi-
nationals operate as if there were no borders, placing production plants in the most economic
position in relation to sources of inputs and the markets to be served. Tariffs and other trade
barriers are costs of doing business and influence the placement of production plants based only
on economic and financial considerations. With barriers to trade falling, these companies are in
the best position to adjust and benefit from the comparative advantages of many countries.
Some multi-national companies active in India were 2:
Cadbury India Ltd. is a part of Kraft Foods of the USA. The company is involve in the
production of chocolate confectionery, beverages, biscuits, gum and candy.
Frito-Lay India is a owned by PepsiCo Inc. of the USA. The company produces confectionery
products, specifically potato chips.
Perfetti Van Melle India Pvt Ltd is based in Europe. In India the company is involved in the
production of gums, candies and chewies.
Nestle India Ltd is a subsidiary of Nestle SA of Switzerland. The company is involved in the
production of milk products & nutrition, beverages, prepared dishes & cooking aids and
chocolate & confectionery.
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