Excerpts from India Food Report 2016:
Food and grocery (F&G) forms the backbone of the Indian retail sector. With present market size at estimated US$ 455 billion (Rs 30,464 billion), the category will continue to grow at about 15 per cent per annum over the next decade, though the decadal drop in terms of the share of consumer wallet and hence the retail market share would be about 2-2.5 per cent. Thus, for foreseeable future, food & grocery retail is expected to dominate the market with more than 50 per cent share of the overall retail market.
As new categories come up and spends on aspirational categories increase, food and grocery’s share of the consumer wallet is going down in percentage terms, though actual spend continues to increase.
Market Size of Food Categories
The Dry Food Grocery category as a whole contributes 34.7 per cent to the total food market in India. The category includes cereals, grains and related products; grams and its products; pulses and its products; sugar in all forms; edible oils; and dry fruits. The large market size of the category, highest among all food groups, is attributed to the fact that the products that fall in this category are consumed in raw as well as semi-prepared form. India’s DFG market is worth Rs 8,00,000 crore (2014) and has grown at a CAGR of 11 per cent over the last decade. With this growth rate, the category is all set to touch the Rs 15,00,00 crore mark by 2020, thus becoming almost double of what it is today.
Milk and Dairy foods constitute the second-highest share, after Dry Food Grocery, among all the seven F&G categories. The segment holds about 16 per cent of the overall food market in India. The country is the largest producer of milk in the world and has a substantially large bovine population with about 118 million milk-producing animals. India contributes 16 per cent of the world’s milk production followed by USA with 12 per cent contribution. Milk and related dairy products are worth Rs 3,62,000 crore market and have grown at a CAGR of 12–14 per cent during the last decade. The market is estimated to cross Rs 8,00,000 crore by 2020. About 58 per cent of India’s dairy products market lies with rural consumers and the remaining 42 per cent with urban consumers.
Spices category is another growth leader in the food industry. The current market for spices is estimated at Rs 1,50,000 crore and has grown at a CAGR of 13 per cent over the last decade. By 2020, the market is likely to grow twice as big as its present size with the same growth rate. In other words, about Rs 6,000 crore is estimated to be the branded market in spices. India is estimated to consume over 5 million tonnes of spices annually. This consumption is almost 90 per cent of all spices produced in the country. Ginger- garlic, dry chillies and turmeric together contribute 44 per cent to 48 per cent of total spices in India. This consumption share is not much varied in rural and urban markets.
Fresh Produce market in India is about Rs 3,90,000 crore and has been growing at a CAGR of 14 per cent since the last 8–10 years. At the same growth rate, the category will be worth Rs 8,50,000 crore by 2020 riding on the wave of healthy food habits, which demands significant portion of fresh produce in daily diet. Fresh produce covers just two broad segments of fruits and vegetables. Among the two, 70 per cent is contributed by vegetables alone. Although fruits are a growing segment, they contribute a current share of just 30 per cent, which translates to Rs 1,17,000 crore worth of market. Out of the total fresh produce market of Rs 3,90,000 crore, 60 per cent is rural market. Again, this has three-fourths of the market occupied by vegetables. As mentioned earlier, fruits form the urban-centric market while vegetables are comparatively a national market.
Perishables food market is worth Rs 2,00,000 crore, and has grown at a CAGR of close to 20 per cent. This growth rate is among the highest for all food groups. With the same growth rate, the market is expected to treble by 2020, in which the segment for fish, seafood and meats will grow at a faster pace owing to the growing demand for such food items. The four primary sub-segments of perishables include fish & seafood, meats including mutton, beef, pork, poultry and game birds, and eggs. About 45 per cent of the total market share is occupied by fish & seafood. The largest market segment of fish & seafood is thanks to a vast coastline and fishing inland waters, which a large country like India possesses. In addition, there is a sizeable share of imports of canned seafood and fisheries, which is growing in demand and size. The domestic consumption is no more confined to coastal areas but has penetrated deeper into the mainland markets also.
Beverages category contributes 8–9 per cent to the total F&G market in India. By far, tea is the largest segment of beverages in India ruling over 79 per cent of the market. The market is growing at 20–23 per cent and will cross its present market size by more than three times by 2020. The average monthly per capita spend on tea is Rs 106 at present. Together with tea, coffee is another strong beverage market. The market for coffee is growing at 20 per cent and will be triple its present size in the next 4–5 years. There are various types of coffee in the market, which come at all relevant price-points. The overall coffee market, though, is very small in comparison to tea market but the southern region alone contributes 73 per cent of the total coffee market. This is followed by the western region with 14 per cent share. The monthly per capita consumption for coffee in the southern region is Rs 17 against the national average of Rs 5.
Packaged drinking and flavoured water is the smallest segment in beverages market. The segment, which is growing at a healthy rate, will be worth Rs 6,000–7,000 crore by 2020. The market is urban-centric with 85 per cent share. Within this market share, half of it lies in the eastern region of the country whereas western region has the lowest consumption. The monthly per capita consumption is Rs 4 in the overall urban market but the urban eastern region has a higher consumption figure, which is three times higher at Rs 12.
About four per cent of the total beverages market is formed of the juices segment. The segment is growing at 20–25 per cent and is expected to grow almost four times bigger in the next five years. Today, Indians are spending at an average just Rs 6 per month on juices, which is less than what they are spending on other beverages.
The culture of eating out has given birth to meal and soft drink combos, which Indian consumers are savouring to the fullest. The segment has made some significant achievements and penetration in rural areas is definitely one of them. Rural areas account for 75 per cent sales of PET bottles. Public consumption accounts for almost 80 per cent of the total sale of soft drinks and household consumption accounts for the remaining 20 per cent of the sales.
Other Processed Foods category market is over Rs 2,00,000 crore and is strongly growing at a CAGR of over 20 per cent. Biscuits market is growing at 20-23 per cent and will eventually cross the current size of total OPF market by 2020. At present, 46 per cent of biscuits market lies with urban consumers using the products. In this urban market, the western region alone contributes 31 per cent.
It is estimated that the ketchup market is worth Rs 220 crore in India. Namkeens & Snacks segment can be truly and aptly defined as ‘Indian’ OPF segment. The constituting products cover thousands of snack items manufactured in traditional as well as modern set up. Industry reports attribute the branded namkeen market segment to hold 40 per cent of total salted snacks market in India.