Wednesday, March 21, 2012: 10:57:17 AM

Food Processing Guest Column

Processed food industry has significant potential for growth - Dhirajlal Patel, Champion Agro

India’s domestic market has a significant potential for processed foods and is expected to grow more with increasing urbanisation, upward movement of salary levels and changing lifestyles

FDI in retail would boost the entire agriculture and food processing sector. The impact will not be limited to specific categories only; but food processing, agriculture and the fruits and vegetables sector as a whole will see the immediate boost.

 
In developing countries like India, the share of the processed foods is low compared to that in the developed markets. Non-processed foods account for nearly 50% of the share. High value-added products account for only 18% of the total share in India. The low levels of processing are driven primarily by the food habits of the population. Fresh fruits and vegetables are preferred compared to processed fruits and vegetables because of the investment involved in enhancing back-end integration and investment infrastructure including cold chain, warehouse and the like. So we see the farmer is yet to start getting a better price for their crops.
 
India’s domestic market has a significant potential for processed foods, which is expected to grow more with increasing urbanisation, upward movement of salary levels and changing lifestyles.
 
Rising income levels
 
Indian domestic market is one of the most attractive consumer markets in the world with the increase in income levels across the population segments.
 
Increase in the population of working women and surge in nuclear double income families in urban areas are some of the other factors that are influencing the lifestyles. As a result, there has been an increase in demand for processed, ready-to-cook and ready-to-eat food.
 
With the advent of modern retail and the emergence of the big corporate and government organisations into the food processing scene, India is making big in-roads into the food processing industry. These players have reached out to farmers and provided them with timely advice and help in the upgradation of farm practices with valuable inputs on various areas of farming. So the food industry is getting integrated more strongly. These advancements have revolutionised the integration of the Indian food industry and played a vital role in solving, to a large extent, major supply chain issues that prevailed.
 
Retail procurement
 
The deepest impact of more supermarkets shall be on retail procurement systems of food. It will give rise to centralised system of procurement. This comes with fewer procurement officers and increased use of centralised warehouses. Increased levels of centralisation may also occur in the procurement decision making process, and in the physical produce distribution. Centralisation increases efficiency of procurement by reducing coordination and other transaction costs, although it may increase transport costs by extra movement of products.
 
In terms of food processing, these developments enhance opportunities for players big and small alike. With better infrastructure, more investment coming in and reduction of wastage with the help of technology from abroad, India could well see a revolution in terms of food processing in the days ahead. The farmers will gain the most and therefore, quality and quantity of production will go up. In the long run, food processing and improvement in agricultural infrastructure will also solve some burning issues such as food inflation and food security concerns for India.
 
Dhirajlal Patel is the CMD of Champion Agro Limited, a Gujarat based agri-retail company

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