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Indian Food Service Industry

June, 2013


The Indian food industry has witnessed strong growth over the past few years. India is the world's second largest producer of food next to China, and has the potential of becoming the biggest producer in the years to come. The total food production in India is likely to double in the next ten years.

Indian food service industry is currently worth Rs 2,47,680 crore (US$ 41.39 billion) and is expected to grow at the rate of 11 per cent to touch Rs 4,08,040 crore (US$ 68.16 billion) by 2018, according to 'India Food Service Report 2013' by the National Restaurant Association of India (NRAI).

With a huge agriculture sector, abundant livestock, and cost competitiveness, India is fast emerging as a sourcing hub of processed food. Moreover, India's market for organic food consumption has also been recognised as one with the largest potential worldwide, as per RNCOS research report titled, 'Indian Organic Food Market Analysis'.

Key Players

  • Ruchi Soya Industries, India's leading food and agro-based FMCG player, has inked a joint venture (JV) with J-Oil Mills Inc and Toyota Tsusho Corporation (TTC), both from Japan. The JV plans to start supplying products to the institutional customers by the end of 2013
  • Mini Melts has tied up with HoneyBee Amusements for a foray in to India's Rs 2,500 crore (US$ 417.59 million) organised ice cream market
  • ITC will invest Rs 1,000 crore (US$ 167.03 million) in food and consumer goods sector in India in the next two to three years
  • Costa Coffee plans to add 200 more outlets with an investment of Rs 200 crore (US$ 33.41 million) by 2015, to expand its presence in India
  • Cargill will invest about Rs 400 crore (US$ 66.80 million) to set up a corn milling plant in Karnataka, and another Rs 100 crore (US$ 16.70 million) on expansion of capacity of existing edible oil plants, as per Siraj Chowdhury, Chairman, Cargill India
  • Twinings India, a subsidiary of the UK-based Associated British Foods, is gearing up to bring malted drink brand Ovaltine to India. The tea major has earmarked Rs 50 crore (US$ 8.36 million) as investment for this fiscal and expects to make its top-line grow five times in the next three years

Food Processing Industry

Food processing industry is one of the largest industries in India, ranking fifth in terms of production, growth, consumption, and export. The total value of Indian food processing industry is expected to touch US$ 194 billion by 2015 from a value of US$ 121 billion in 2012, according to Mr Swapan Dutta, Deputy Director General, Indian Council of Agricultural Research (ICAR).

India’s agri and processed foods exports shot up 63 per cent to set a record at Rs 101,504 crore (US$ 16.96 billion) in the first 10 months of 2012-13, as compared to Rs 62,244 crore (US$ 10.39 billion) in the corresponding period of last year, according to data compiled by the Agricultural and Processed Food Products Export Development Authority (Apeda).

The packaged food segment is expected to grow 9 per cent annually to become a Rs 6 lakh crore (US$ 100.19 billion) industry by 2030, dominated by milk, sweet and savoury snacks and processed poultry, among other products, according to the report “India as an agriculture and high value food powerhouse by 2030” by CII-McKinsey.

The food processing industries in India attracted foreign direct investments (FDI) worth US$ 1,811.06 million during April 2000 to March 2013, according to the latest data published by Department of Industrial Policy and Promotion (DIPP).


The ready-to-drink tea and coffee market in India is expected to touch Rs 2,200 crore (US$ 367.37 million) in next four years, according to estimates arrived at the World Tea and Coffee Expo 2013.

“Branding could drive the next growth wave in the country’s food processing sector,” said Adil Zainulbhai, Chairman, McKinsey & Company, India. Packaged milk, as a category, is projected to grow from US$ 7.76 billion to US$ 32.9 billion by 2030, registering an annual growth of 8 per cent. About 73 per cent of the milk sold by 2030 would be branded, against 31 per cent at present.

Dabur has forayed into the dairy segment by extending the Real brand of juices into yogurt drinks. The company stakes on the growth of functional beverage space in India. The functional beverage market in India is estimated at Rs 700 crore (US$ 9.27 billion) which includes energy drinks, sports drinks, functional waters; ready-to-drink tea and coffee; yogurt drinks and smoothies.

Government Initiatives

The Government of India has allowed 100 per cent FDI under the automatic route in the food processing sector, in agri-products, milk and milk products, and marine and meat products.

The government has supported 966 food processing units with financial assistance of Rs 14,574 lakh (US$ 24.37 million) during 2012-13 (till February 15, 2013) under the scheme for technology upgradation, establishment and modernisation of food processing industries.

To implement various Schemes for promotion and development of food processing sector, the government has made a plan allocation of Rs 5,990 crore (US$ 1 billion) during the Twelfth Plan. The government had launched a centrally sponsored scheme – National Mission on Food Processing (NMFP) which aims at increasing the level of food processing from 10 per cent in 2010 to 25 per cent by 2025.

The government plans to increase the level of processing of perishables such as fruits and vegetables from 6 per cent to 20 per cent. Besides, it also aims to enhance value addition to farm products from 20 per cent to 35 per cent in the years to come.

In the Union Budget 2013-14, an additional provision of Rs 10,000 crore (US$ 1.67 billion) has been allocated for National Food Security Act. The Act is expected to be passed soon by the Parliament.

For promoting food processing industries, the government has also been implementing a scheme for creation of infrastructure which includes components like mega food parks, cold chain, value addition & preservation infrastructure, and modernisation of abattoirs.

Road Ahead

“Driven by the changing consumption pattern, the future of agriculture and food sectors will lie in crop diversification to high-value crops and higher value addition. Revisiting some of the current legislations and taking focused policy initiatives could make India a food hub in Asia,” as per Mr Rakesh Bharti Mittal, Chairman, CII National Council on Agriculture.

Anticipating the future growth, many big international players are entering the Indian market by partnering the domestic players. This trend will emerge more strongly by 2015, providing opportunities to local players to widen their product portfolios.

Exchange rate used: INR 1 = US$ 0.01671 as on June 20, 2013

References: Ministry of Food Processing Industries (MoFPI), Agricultural and Processed Food Products Export Development Authority, Media reports, Department of Industrial Policy and Promotion (DIPP), Union Budget 2013-14, Press Information Bureau (PIB)