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How the processed food market is changing

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An overview of what’s driving the change in the country’s food processing sector that is poised to reach Rs. 45,345 billion by 2028

By Milind Pingle

The FMCG (Fast Moving Consumer Goods) or Consumer Packed Goods (CPG) industry is one of the largest industries worldwide. FMCG products are required for day-to-day usage. All sections of society consume these products frequently and spend a considerable portion of their income on these goods.

The FMCG product group is an important contributor to the economy. The FMCG sector has been experiencing consistent growth over the past decade. According to IMARC, the Indian food processing market size reached Rs. 25,455 billion in 2022 and is expected to reach Rs. 45,345 billion by 2028, exhibiting a growth rate (CAGR) of 9.5% during 2023-2028.

Impact of consumer behaviour and market shifts

In India, consumer behaviour towards processed food has undergone significant changes in recent years. With the increasing availability of processed foods in supermarkets and convenience stores, more and more consumers are turning to these products for their convenience and taste. Additionally, the rise of fast-food chains and busy lifestyles of urban consumers have also contributed to the growing demand for processed foods.

This expansion has been fuelled by an increase in the average disposable income, increased urbanization, and a shift in consumer preferences for hygienic products. In addition, more women joining the workforce has led to an increase in double-income households, which has consequently resulted in the demand for food products as an aid to cooking where there is a lack of time and lack of skill.

One of the major growth drivers in the FMCG sector has been ready-to-cook (RTC) and read-to-eat (RTE) food segments. As people become increasingly busy, they are looking for convenient and easy-to-prepare food options. Additionally, with more people living in cities and away from extended families, there is a greater demand for pre-prepared meals and snacks. The RTC and RTE segments are also growing as consumers are becoming health-conscious, looking for healthier options.

Another trend rising in urban India is plant-based food. India has had a growing demand for plant-based and vegan options in recent years. This can be attributed to factors such as health concerns, environmental concerns, and increasing awareness of animal rights. We are witnessing a mushrooming of multiple plant-based brands. Also, many restaurants/cafes in India, are beginning to offer more plant-based and vegan options.

The market for organic and non-GMO (Genetically Modified Organisms) products in India has been steadily growing due to increasing consumer awareness and demand for healthier food options. The market is expected to grow in the coming years, driven by factors, such as govt support, increasing disposable incomes, and health consciousness among consumers. However, the overall market share of organic and non-GMO product is relatively small in India, as compared to developed countries, due to factors such as lack of awareness and high prices.

The rise of supply chain solutions in the processed food industry is driven by a company’s need to increase efficiency, reduce costs, and improve responsiveness to changing consumer demand. This is achieved via the use of advanced technologies such as automation, data analytics, and digital platforms to optimize logistics and inventory management, as well as improve supply chain visibility and collaboration. Additionally, FMCG companies are increasingly using responsible sourcing practices to improve their environmental and social impact, which can be facilitated by supply chain solutions.

There has been a growing trend in India towards health and wellness, with more consumers becoming interested in products that are marketed as ‘healthy’ or ‘natural.’ This shift has been due to combination of factors, including increased awareness of the potential health risks associated with certain chemicals and additives, as well as a growing desire for more environmental-friendly products. As a result, many companies have begun to reformulate their products to free them from harmful chemicals or to use more natural and cleaner ingredients. Additionally, there has been a rise in demand for organic and natural products, including food and personal care items.

Enhancing safety and sustainability

The use of technology in production and packaging can significantly improve the efficiency of processed food in India. Advancements in automation, can increase production speeds and reduce manual labour needs. Additionally, new packaging technologies, such as vacuum sealing and modified atmosphere packaging, can improve the shelf life and quality of processed foods. The implementation of food safety management systems can also improve the overall safety and quality of processed foods. These technologies can help reduce costs, increase productivity, and improve the competitiveness of the Indian processed food industry in the global market.

Another trend that is silently climbing its way to the top is sustainability. It will soon become a priority where FMCG companies will not only address how they present and package their products but also what materials they use in their products. To meet consumer demand, more and more FMCG companies offer compostable, recyclable, and reusable packaging. Additionally, cruelty-free, vegan ingredients will continue to be on the rise not only in food but also in non-food items.

Way forward

In the foreseeable future, shopping experiences will be recalibrated according to the changes in consumer behaviour and expectations. The widespread merging of business with social media has impacted all industries and has provided ample growth opportunities. Many global players are committed to providing customized solutions to consumers as their key strategies to gain a significant share in the market. Some of these strategies encompass product launches and acquisitions. Last mile distribution has been disrupted with E-commerce and today consumers can shop from their homes. Various companies are hosting their own D2C sites and making their assortments available on leading E-comm portals. Food aggregators are also playing a part in making processed foods available at arm’s length.

In the long run, FMCG players will have to create a niche in their segments and position their business model, strategy, marketing, sales and distribution, and operations to succeed in this evolving landscape. Leaders in FMCG and the retail space will stand out as per their agility to adopt new technologies, their creativity, and their distinguished customer experience offerings.

The writer is CEO, Allana Consumer Product Division, which is taking various initiatives as a leading FMCG player, addressing the growing concerns around climate change and sustainability.

This article was first published in the March 2023 edition of Progressive Grocer. To subscribe to the magazine, click here.

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