03 October 2006

So many mouths to feed, but who’s complaining!

“India represents an economic opportunity on a massive scale, both as a global base and as a domestic market… Recent times have seen an awakening of interest in what India has to offer to global businesses.”
(A September 2005 KPMG report, ‘Consumer Markets in India – the next big thing?’)

With over a billion people, you can imagine how much food is consumed in India everyday. One estimate says that, every year, India produces one ton of food for every single inhabitant. Got that! In spite of many people living below the poverty line, some starving to death, India is a huge consumer base for the world’s food and drinks market. Since this market is unorganised, with millions of small self- or family-owned shops, it’s difficult to estimate its size. A 2004 estimate by FICCI pegs it at US$70 billion for food alone. Beverages are likely to account for another US$80 billion at the least, not including alcohol.

The interesting thing is, most food consumed in India is domestically produced. India is the world’s biggest producer of livestock, the biggest producer of milk, and the second largest producer of fruits and vegetables. With a strong vegetarian population, India consumes very little meat or fish (much of India’s marine production is exported) compared to Western or other emerging nations. However, poultry is popular among non-vegetarians. Consumer spend on food varies, but an average Indian family spends half its income on food. This figure, of course, reduces with higher incomes.

Traditionally, Indians are used to consuming fresh food, shopping for fresh produce daily. So far, there’s been little fascination for processed or packaged food (around 2% of India’s agricultural output is processed). But, with globalisation and larger disposable incomes, lifestyles and consuming habits of Indians are changing. Now you can find anything from branded atta to bottled water, coffee to confectionery as packaged food on the shelves at retail stores across the country. The trend is apparent – more and more Indians are choosing to take home processed or packaged food everyday, along with their fresh groceries.

Since 80% of consumer spends in India are estimated to be on FMCG (household and personal-care products, confectionery and tobacco), even a quarter of that spend on processed or packaged food could open up a market of unbelievable proportions. Both Indian and global brands see this as a huge business opportunity, even in the face of government restrictions on direct entry of global brands in the retail sector. Homegrown Indian, as well as MNC, brands are ruling the roost at the moment, but soon most global packaged food brands are expected to be here.

Marketing has already begun in the urban centres and other towns, addressing a population of approx. 250 million. The rural markets are next, hopefully, adding another 250 million to the consumer base in the next 10 years. Opening up to the world a market of 500 million consumers! With so many mouths to feed, nobody’s complaining!

No comments: