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The growth opportunities and challenges for India’s frozen food market

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The packaged Frozen Food market has been growing at a health rate of 20% and this has attracted large players such as ITC and many Indian companies. But new brands will have to compete with the larger and established brands for consumer freezer space and frozen retail space.

The Frozen Foods segment comprises ready-to-cook/ fry and heat-and-eat vegetarian and non-vegetarian food products. The market is largely dominated by select national brands and some regional players. Further, the market is generally segregated into processed frozen vegetables, veg snacks, poultry, fish and seafood, and red meat.

In the frozen veggies / vegetables segment, garden peas continue to be the most popular frozen processed vegetable bought across India with a commanding retail value share of over 69%, followed by mixed green vegetables and baby corn with shares of 14% and 7%.

Frozen Foods are dominantly used in the Food Service / the Food Institutional market and form a major portion of the Frozen foods market.

The total frozen food market size (Rs. crore ) in India in 2020 is as follows:

FROZEN Foods MKT SIZE (Rs. Cr) RETAIL Food Service / INSTITUTIONAL TOTAL MARKET
VEGETARIAN 900 1500 2400
NON-VEGETARIAN 2600 4000 6600
TOTAL 3500 5600 9000

The table above clearly shows that it is an erroneous perception that non-vegetarian in all forms dominates the retail consumer share of the frozen food products in the Indian market. 

Poultry is today the major source of meat in India. Its share in the total meat consumption is 28%, as against 14% 10 years ago. It has outpaced its two competitors – beef and veal, and buffalo meat. 

High mutton prices, religious restrictions on beef and pork, and the limited availability of fish outside the coastal regions have all helped to make poultry meat the most preferred and most consumed meat in India. Expanding domestic production and increasing integration have pushed poultry meat prices downward and stimulated its consumption.

Today, frozen food processing has enabled the processed poultry meat industry to grow first in the Food Service / Institutions by supplying to all QSRs, HoReCa, Army, and then into retail. Each of the major poultry players is doing its own bit in creating the cold chain nearer to the consumers by setting up neighborhood cold freezer outlets to reach the end consumers at their doorsteps.

With each frozen foods player creating its own distribution infrastructure across the country and into the smaller towns, the demand for creation of cold chain and storages is increasing. Today, you can find distributors with small cold storage rooms in smaller towns, and this will penetrate further into all the towns. 

All leading players of the industry are investing into the creation of freezer spaces in independent outlets.

FROZEN PRODUCTS – RETAIL 2013 2020
Rs. Cr. CAGR Rs. Cr CAGR
Sea Food ( Processed & Raw) 105 10% 205 14%
Meat & Meat Substitutes 50 10% 105 16%
Poultry Meat  760 18% 2100 25%
Non-Veg Snacks / Meals 65 22% 200 30%
Veg Snacks / Meals 60 21% 150 21%
Vegetables 260 10% 475 12%
Potato Products ( incl FF ) 60 20% 185 30%
Frozen Desserts 40 7% 80 14%
TOTAL Frozen Packaged Food 1400 15% 3500 21%


Social changes driving the packaged frozen food consumption in India

The Packaged Frozen Foods food category has a tremendous growth opportunity in the near future due to:  

  • Growing number of nuclear families. The Federal Home Ministry has recently released the final figures of the first phase of Census 2011 known as House Listing and Housing Census in New Delhi. The data states that India is now overwhelmingly made up of nuclear families — a dramatic change from just a generation ago, where joint families were the norm.  About 70% of the households consist of only one couple.
  • Increased urbanization. 
  • There is an increasing population of Indian women that have neither the time nor the knowledge to cook traditional meals on a regular basis.
  • Indians have become more experimental with their food and drink choices as there is a need for variety.
  • Growing youth population.
  • Significant rise in the number of working women  
  • About 34% of the households have working women. 
  • About 49 lakh households in the top 10 cities constitute 50% of the total working women. 
  • Growing practice of singles living away from home for education or work. 
  • Change in mindset: From a mindset where home- cooked and fresh food was preferred and housewives insisted on making everything from snacks to multi-course meals in-house, today it has become commonplace to seek convenience and variety using the vast menu of packaged frozen foods available. 
  • About 44% Indians admitted to not having much time to cook, while 23% felt ready meals were affordable.
  • Food as convenience and novelty: The variety of ready to cook and ready to eat packaged frozen food is growing, thus helping the housewife in her quest for novelty.

Thus, the increase in the working woman segment, increasing work and study commitments, declining culinary skills, the rising need for convenience, and surging disposable incomes, along with clever and innovative marketing by frozen food brands will all lead to a higher demand for heat-and-eat products.

Covid pandemic has bumped the demand for frozen foods 

Working from home and more home stays has stirred up the demand for ready to cook frozen foods. As experienced during the Covid lockdown period, working from home has been found to be more fruitful and productive for many industries, apart from the software and allied industries. Hence, in the future, even after the pandemic fades away, most companies will prefer the work-from-home model as the new working norm. 

Over the past two years, as a result of the pandemic, social distancing has become mandatory at workplaces with offices having staggered working hours. Office personnel have been required to work for short periods and in shifts while managing the pending work from home. 

Schools and colleges have also been required to maintain social distancing and as a precautionary measure, they remained closed for the most part during the past two years. This meant that children remained at home most of the time during the pandemic and outdoor options for them were limited. Also, with dine-out options and pandemic restrictions on parties / clubs / weddings drastically reduced, the duration of home stays for family members increased disproportionately. 

With even roadside food joints remaining shut due to Covid restrictions, pressure/demand for all types of snacking at home spiked sharply, which necessitated household stocking of more and different types of ready to cook snacks, meals, Instant mixes and frozen foods that could be made instantly with little effort and fuss by any member of the family. 

With the fear of viral infections around and the need for good and healthy foods rising sharply, consumer’s demand for more of packaged food and beverage products has increased.

Challenges facing new brands of frozen foods

Any new brand of frozen food needs to focus on providing great quality fresh food with affordable price and variety to the customers. Listed below are the few challenges that brands have to face:

  1. Packaged Frozen Food Market Competition: The packaged Frozen Food Market has been growing at a health rate of 20% and this has attracted large players such as ITC and many Indian companies. New brands will have to compete with the larger and established brands for consumer freezer space and frozen retail space.
CATEGORY PRODUCTS Major BRANDS
Ready to Eat – Frozen Meals Indian Meals and Curries in Frozen formats Sumeru, Delicious, Godrej

Yummiez, Suguna, Venkys, Buffet

Ready to Eat – Frozen Snacks Veg Snacks in Frozen formats McCains, HyFun, Godrej Yummiez,

Safal, Sumeru, ITC, Amul, Buffet

Non-Veg Snacks in Frozen formats Venky’s, Godrej Yummiez, ITC,

Sumeru, Delicious, ROC, Suguna. IFB Agro Fresh Catch, Meatzza, CP, Buffet 

 

The Indian market has been witnessing the entry of many brands offering a host of products across various processed food categories such as frozen foods, beverages, spices, seasonings, and curries. One segment, which has evolved significantly in the processed food section, is frozen convenience food. 

The increase in demand for frozen food products is driving increased focus on the category by modern retail chains and standalone grocery stores, who are stocking more varieties of frozen products such as peas, corn, and ready to cook and heat-and-eat packaged products. As sales increase, the category is slated to witness increased penetration and entry of more players and products. The challenge for a new brand is to compete innovatively for consumer mind and consumption share with these existing, large, and other new players.

  1. Culinary Diversity: The consumption diversity of consumer’s taste and preference for food products in India is different across regions, and therefore, the decision to launch any product must be assessed in detail to ascertain the extent, and potential of the market that can be targeted for high. This is a very difficult challenge especially for food companies in the culinary space.  

However, with many new Indian food companies venturing into the frozen food segment, it has also become more difficult for large corporate houses to venture into the segment. A few such companies like the Tata’s had to retreat after they bought Sumeru Foods from the Amalgam group. Clearly, any new brand needs to develop innovative new Indian frozen food products, which can be consumed and liked by the majority of consumers.  

  1. Limited Retail Freezer Space: In India, the food and grocery retail is dominated by independent grocers with small neighborhood stores that are characterized by low investment. So stores with refrigeration facilities are less in number. This is a major roadblock for increasing the penetration of frozen food through general trade, which comprises over 90 percent of the overall food and grocery retail. 

Refrigeration facilities are present in modern retail stores, and these stores attract the segment of consumers looking for convenience food such as ready to cook/ eat. Hence, modern trade is the only and preferred channel of sales for frozen food category where a new brand will have to spend more to gain entry and traction.

  1. Food Service segment dominates frozen foods: Frozen food has been a boon for the Food Service industry. Today, very few Food Service operators would be able to operate without frozen food. Not only is it convenient, it’s often more healthy than some fresh foods. 

But frozen food has got a raw deal in recent years because of the widely-held belief that fresh is best. But with its longer shelf life and versatility, few operators would be able to run an efficient kitchen without frozen food. The Food Service / HoReCa market’s dependence on frozen foods has been due to the latter’s ability to provide year-long supplies, standardized products, convenience, dependability, storability and almost fresh as fresh products.  For a new brand to supply to the FS operators, it will need better margins to supply to QSRs, FDRs, Cafes and Restaurants. 

  1. Consumer end of the Cold Chain: For full development of the cold chain, the domestic consumer should have adequate freezer space at home. In the first instance, the domestic household penetration of refrigerators is dismally low in India and a majority of the average Indian households have refrigerators of size 200 to 250 litres. 

Of this, the freezer space is just sufficient to keep the daily requirements of dairy products, which results in no freezer space for the frozen products. Even in the households with refrigerators that are more than 400 litres of capacity, not more than one kg of packaged frozen products can be stored at home. Hence, any new brand’s challenge is in reaching the Target Consumers’ refrigerator through an Omni-channel strategy.