Imported food market in India set for further growth
The imported food sector in India is growing strongly, albeit from a very small base, on the back of rising incomes, changing lifestyles and retail expansion. But, writes Reena Mital, market development will be dependent on importers taking a long-term view rather than shifting opportunistically from product to product.
Changing lifestyles and the boom in organised retailing have resulted in growing demand for imported food and drink in India. The market for such specialty foods has only begun to take off in the last four to five years, and is growing at a rate of around 30% to 40% per annum.
As import regulations have been relaxed and import duties reduced, big names, including Godrej, Reliance and Pantaloon, have moved into the market, opening specialty food stores, selling imported foods such as cheese, pasta, cookies, olive oil, chocolates, dried fruits, sauces and cereals. Other factors behind the growing popularity of imported foods are rising incomes and increased foreign travel, while demand has also been swelled by the growth of specialty restaurants.
However, the import market remains relatively small, with chocolates, olive oil, pasta, canned and preserved fish, sauces and salad dressings, juices, and certain fruits and vegetables the prime categories. Demand for such products is restricted to higher-income consumers, as import duties (ranging from 25% to 50%) keep prices high.
Figures from the Indian Ministry of Commerce underline just how small the import sector is, though the government statistics do not take account of the substantial grey market in imported food and drink, which could be as big as, or even bigger, than the official market.
According to the official data, pasta imports reached US$5.5m in 2005-06, while imports of canned and preserved fish stood at just US$0.20m. Shellfish imports were valued at US$0.75m in 2005-06. Chocolate imports have been increasing steadily, from US$6.25m in 2003-04 to US$10.56m in 2005-06, while cereal product imports have been growing at around 70% a year, reaching US$12.42m in 2005-06. Wine imports have been growing at over 100% a year, and reached US$9.46m in 2005-06. Another important product is olive oil, with imports rising to US$5.24m in 2005-06 from US$3.45m in 2004-05.
The statistics also reveal the broad provenance of imported food in India. Canned fish is mainly imported from Korea, Singapore, Thailand, Japan, and increasingly the UAE. Chocolate imports come principally from Switzerland, but also from China, Taiwan, Argentina, Chile, Oman and the UAE. Pasta is mainly imported from Canada, Japan, Indonesia, Mexico, Singapore, the UAE and Italy, while olive oil is brought in from Australia, France, Germany, Singapore and the US. Jams and jellies come from Bangladesh, China, Japan, the Netherlands, Nepal, Spain, Switzerland, UK and the US, and juices from Bangladesh, France, Indonesia, Malaysia, the Netherlands, New Zealand, Saudi Arabia, Singapore and the UAE. Sauces and seasonings are imported mainly from France, Germany, Japan, Malaysia, Mexico and Nepal.
This disparate picture hints at arguably the key problem the Indian imported category faces: the lack of consistent supplies. "There is no consistent supply of brands in the market," says R S Vijan, executive president of Godrej Agrovet which launched the specialty store Nature's Basket a year ago. "Importers buy goods that move fast in the market, and shift to other goods very soon. So while the Indian consumer is introduced to many brands from all over the world, it remains only an introduction."
The key appears to be to find an importer who will take a long-term view, and look to develop the market for its imported brands in partnership with brandowners. RR Oomerbhoy (RRO), for instance, sees itself more as a market developer for international food brands, rather than just an importer. "We enter into tie-ups with these brands, not only to market the products in the country, but also to develop the markets for the same," says RRO's business development director Hansu Pardiwala. "The company policy is to work only with the leading international brands."
RRO places a strong emphasis on consumer education, something it has put into practice in building a presence in the imported olive oil and pasta segments for the Bertolli and Barilla brands respectively. It plans to launch soft flavoured cheese from a leading French producer soon, while plans are also in train to bring in red wine vinegars. This will be the first time either of these products has been introduced to the market. "These are all very niche segments, and we see immense potential to develop the market here," Pardiwala adds.
In order to combat the inconsistent supply problem, Godrej Agrovet is planning to move into importing directly in the near future. At present, fruit and vegetables account for 55% to 60% of the retailer's business, and not more than 20% of this is imported. In salad dressings, sauces, jams and jellies, dried fruits, canned foods, cookies, cereals and juices, almost 50% is imported, says Vijan, and sales in imported food categories are growing on average by 30% to 35%.
The company is planning to introduce new categories, including wines, specialty breads, cheese and chocolates, very soon. "These would again be imported," says Vijan. "It is to develop this market for specialty foods that we want to move into direct imports."
The company is also in the process of expanding its retail network. At present, it has five stores in upmarket areas of Mumbai, and has plans to increase this to 15 within the next five to six months. Godrej Agrovet will then be looking to open outlets in other major cities such as Delhi.
The expansion of large-format stores is expected to boost the import market further in the medium term. However, Pardiwala believes it is important not to ignore local neighbourhood stores. "It is still the local stores that have a better reach with consumers, and these cannot be ignored," she says, adding that neighbourhood outlets, or `kirana' stores as they are known, stock every possible Indian brand, offer services such as home delivery and credit, and build a close relationship with their customers. "When we introduced olive oil into the market, we worked very closely with these stores. There were hardly any large, organised retail formats in the market at that time."
Many importers, in fact, feel that large-scale stores are not very conducive to developing the market for international brands, as these stores have a more price-led approach, and guard their margins by pushing suppliers hard. "This is one of the reasons for inconsistent supply of imported brands in the country," one Kolkata-based importer explains.
Importers point out that infrastructure, such as refrigeration and warehousing, are now available to support imports of all kinds of foods, and with large companies expanding their food retail networks, the infrastructure will be developed further. So, it looks like the Indian market for speciality foods, and high value international food brands, is only just beginning to open up. And despite the higher prices and inconsistent supplies, demand remains strong.
The imported food sector in India is growing strongly, albeit from a very small base, on the back of rising incomes, changing lifestyles and retail expansion. But, writes Reena Mital, market developme...
Unilever United States has announced the introduction of a front-of-pack nutritional logo programme called Choices....
- On the money: Hormel still looking for M&A
- BRICs and beyond: Fonterra, Beingmate partnership
- Consuming issues: The hunger-obesity paradox
- On the money: Mengniu hones in on "star" brands
- just-food interview: Agropur CEO Robert Coallier
- Fonterra, Beingmate launch infant formula JV
- Mondelez eyes snacks categories in India
- Parmalat nears Lacteos Brasil acquisition
- UK firm Pasta Reale enters administration
- Italy yoghurt woes lead to Emmi profit warning