Friday, February 10, 2012: 04:12:43 PM


Icing on the Cake

Vijayendra Sesodia deciphers the trends and growth path of the Indian bakery and confectionary industry

The Indian bakery industry has come a long way from being considered as an accessory to real food, to a well-developed niche food supplement. It has made rapid progress in the country and remains as one of the cheapest processed ready-to-eat products today. In this volatile retail and consumer market, we find out where the Indian bakery and confectionary industries stand today and where they will progress to, in the future.

Baking Sweet Returns
Virendra Ghole – GM, Marketing and E-commerce, Monginis Foods Pvt. Ltd highlights that the Indian bakery market witnessed a turning point in the latter part of 20th century, even though this industry is an old one. The major contributing factor to this phenomenon was urbanisation that resulted in increased demand for ready-to-eat products at reasonable costs. Small bun-and-bread stores that were synonymous with bakeries are fast fading, given the rapid growth of professional outlets throughout the country. Today, India is the second largest producer of breads and baked products, followed by the US. Over 75 percent of biscuits production takes place at small and medium enterprises that consist of both factory and non-factory units. Emerging trends in consumption of bakery products indicate a vast scope of growth, Mr Ghole points out.

“As the culture of fast and ready-to-eat foods continues to grow in India, so is the demand for bakery and confectionary products. The bakery industry is experiencing a revolution in today’s age of malls and hypermarkets that are pushing this sector towards organisation. Following the path of restaurants, bakery and confectionary chains have taken over the market as standalone outlets,” adds Mr Ghole. This industry stands third when it comes to generating returns in the processed food sector, preceded by wheat flour, fruits and vegetables processing.

Since liberalisation and globalisation of the Indian economy, this market has become a lucrative business option for various international companies and products. This phenomenon has resulted in its steady growth and gradual transformation from a commodity market to a branded products dominated market. Confectionery retail sales have grown in value and volume indicating that consumers are ready to pay a premium for high-value products. For example, the chocolate segment is the fastest growing in value terms closely followed by the chewing gum segment. However, despite its vast population and escalating demand, India’s confectionery market is still very small.

While the growth rate looks sweet, there remains a large potential for driving this market towards substantial sales. The organised confectionery segment in India segment is dominated by multinational companies; however, domestic players are increasingly finding a prominent position in the market. Since the lax in import restrictions since 2001, imports of confectionery products have grown rapidly even though this number is a small part of the whole package.

Global Scenario
Taking into account a global perspective, the Indian bakery market is raring to speed ahead. “There has been a sharp growth in the way international products are being received and used in the country, propelling the growth of various products in the market. The demand for these is also on the rise, as people want to experience the same product and quality as they did abroad,” says award-winning Asian chef, Milind Sowani – Director and Founding Chef, Gold Leaf Banquets. “The industry has been trying to modernise its production facilities and is gearing up for a brighter future.”

As compared to a multi-pack global market, India is primarily a mono-pack market. While trading and distribution in the West is mostly organised, retail outlets such as commodity stores account for bulk sales in India, and organised trade is at a nascent stage in overall confectionery sales. Mr Sowani highlights that imported products in the chocolate segment are far superior to the Indian products. Given the easy availability of imported products, it is extremely challenging for local manufacturers to compete with the quality and pricing of these international products. Global players, thus, have a huge role to play and great opportunity to exploit in the Indian market.

The demand for small bakeries as well as supply in airlines and railways is growing quickly, making it a lucrative market in the food industry. Speaking on the changing global demands of bakery products, Mehboob Ghiasi – Purchase Manager, Baker Group, Kuwait, elucidates “Over the years, the consumer’s tastes and preferences have changed considerably. Today, they prefer smaller portions and healthier options. Given easy connectivity and global exposure, the customer is very well-informed and demands custom-made cakes and special fillings. The most common types of styles that have gained popularity today are soirée, mini cakes, cup cakes, gelato ice cream, organic breads with seeds, and low calories cakes and chocolates.”

Common examples of bakery chains that have sprung up across the country include Au Bon Pain, Monginis, Donut Baker, Cookie Man, Croissant, Café Coffee Day, Ovenpick, Bread Talk and Kookie Jar. Thus, growing with the western market, India has taken a strategic leap towards this market’s betterment. The key growth drivers for retail bakery chains are the consumer’s propensity to spend, a younger population that is willing to experiment and try out new products, overall changes in consumption patterns and preferred locations for hangouts for all age groups.

The Rising Dough
“The onus to push limits and explore new ideas increases every day and with every new exhibition. The chef is expected to whip up innovative ideas incessantly and meet the growing demands of the consumer. Also, this sector has seen tremendous growth and improvement in technology and machinery over the last decade. This has been in the form of raw materials availability, machinery, technique, taste and packaging,” Mr Ghiasi adds.

He also believes that Europe is the leader in this sector and it has shown the world the way ahead for innovations and improvements. Most of the highest quality of raw materials and machinery are sourced from this cultural and food world capital. There are no central locations to source ingredients, but there are many trading companies who cater to all kinds of sourcing and supplies. Indian manufacturers are also free to source their supplies locally as there are many quality manufacturers and subsidiaries of European origin that operate in India. “With the growing number of industry trade fairs and workshops that are being organised by leading ingredient manufacturers, industry experts are fast-realising that knowledge is the key to consistent development in any business trade. The growth of new ideas, innovations and healthy products in this industry will drive it to success,” he concludes.

A prime example of this would be the retail bakery boom. A concept of ‘retail bakery’ is that the chain has a central kitchen that produces all the products that are then moved from these kitchens to retail shops at regular intervals. In metro cities, few malls and supermarkets such as Bisk Farm Cafe Coffee and Donut Baker have set up bakery products at their food courts. Such retail chains are rapidly growing in metros where consumers are lavishly spending on bakery products. Rise in disposable income, change in eating habits, people’s preference for goods, ambience and services have contributed greatly towards this trend. Thus, retail chains are fast-gaining popularity in upscale markets in India. These are speciality product chains that offer quality premium products. As per a very popular concept abroad, even coffee shops are now supplementing their stores with bakery products. The most popular saleable items at these retail stores are cakes, sandwiches, pastries, puffs and croissants.

Mastering the Art
The industry has experienced a major crunch in skilled workforce and to meet this challenge, more and more bakeries pick school dropouts and train them for a period of at least three to five years before they actually become bakers. This is one of the toughest challenges that the industry faces, while its infrastructure still requires some serious bolstering.

Given the presence of modern global bakeries, the local outlets are facing a challenge of presentation of the products. There is need for better packaging and presentation of the products without ignoring the quality of the contents and baking processes. There is a huge opportunity in the waiting; major successful international retail brands will soon make their way into this market in the next five years. Mr Sowani visualises a steady growth in the new markets in smaller cities of India as they are currently untapped. Although there are a few challenges that need to be met by players in the industry, the scope of opportunities seem to be huge for the next few years to come.

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