The Indian food sector presents exporters with a potentially significant medium- to long-term opportunity. The size of the country’s population – around 1.2bn – and an expanding middle class are driving growth in demand. In the first on our series of articles taking a deep dive into India’s food industry, just-food spoke to international export associations to find out the potential and pitfalls awaiting companies that want to sell into this promising, yet challenging, market.
Total Indian food imports are increasing. According to data from Infodrive India, which monitors import and export trends via shipping data, the value of shipments of foodstuffs to the country rose from US$22.32bn in the 12 months between April 2012 and March 2013, to a total of $25.86bn two years later. The three largest import categories are vegetables; fruit and nuts, peel and citrus fruits; and sugar and confectionery.
However, there are also some significant barriers to trade and India’s trade regime and regulatory environment remains comparatively restrictive. India is 130th in the World Bank’s Ease of Doing Business rankings out of 189 countries.
just-food spoke to experts representing trade bodies from around the world to find out how they view India’s potential as a destination for food exports.
Holger Hübner, managing director, German Export Association for Food and Agriproducts
At the moment German food and agricultural products are under-represented, totally. The value of German food exports [to India] in 2015 was EUR35.9m (US$39.5m). On the other side, German imports of Indian food products reached EUR667m. But, last year, German exports increased by 25.6%.
Our focuses are two food categories and three agricultural categories. About 50% of all German food exports to India are covered by sweets and snacks products. With an increasing Indian demand, we export dairy products and cheese from Germany. Within the agricultural sector we extend our export position regarding agricultural machinery, seeds and German livestock.
We are concentrating our activities on urban centres with organised retail chains. We are focused on the organised retail chains with a high level of processed and value-added imported foreign food. The online sector will be interesting some years later.
The greatest barriers to exporting German food products to India are non-tariff regulations, like customs clearance, nutrition declarations and labelling restrictions. This makes it very difficult for our mostly medium-sized companies to enter the market. Logistics limitations are very important for rural areas, as well as breaks in the cold chain. Red tape in India is a very significant issue for our exporters. If you don’t find the support of an experienced importer with the serious efforts to meet all necessary demands it is too difficult for a successful market entry.
Michael Rogers, manager of the agribusiness forum at the Australian Food and Grocery Council
India is a significant market for Australian agri-food exporters over the medium to long term. The size of the Indian market coupled with wealthy consumers across particular demographics presents both volume and niche opportunities.
Australia and India share growing people-to-people and cultural links. The adaptability and complementarity of the Australian agri-food sector makes it well positioned to export to India. There is complementarity in seasonal production of horticultural products, and a wide range of foods in Australia adapted to different taste preferences.
The Australian Trade commission highlights that there is opportunity across fresh fruit and vegetables; lamb, pork and goat; dairy products and a wide range of processed food products.
The relaxation of foreign investment rules for foreign retailers may create opportunities for Australian exporters to list with global retailers in India. Distribution channels are one of the major challenges in India.
Another common challenge with exporting to India is difficulty in managing cold supply chains for meat, dairy and other refrigerated products.
As with other major economies, meeting even a small percentage of demand in a major city can result in a significant niche opportunity for an Australian food exporter. Cities with international transport hubs will support imports of products from around the world.
Local production may be an option for large companies with proven demand, and a long term view, but is often out of reach of small- to medium-sized companies. It is likely that global manufacturers will continue to develop local production facilities in India.
Elsa Fairbanks, director of the UK’s Food and Drink Exporters Association
The FDEA has long been aware of the growing opportunities in India for UK food and drink exporters so I joined the UK Trade and Investment / Northern Powerhouse trade mission to Mumbai and Bangalore last month [January] to research the market and meet with any many people as possible involved in the imported food and drink supply chain. I was pleasantly surprised by the range of retail outlets that already carry a good selection of UK products and the way that e-commerce is helping to bridge the gap caused by the lack of infrastructure.
The market is evolving quickly… The future appears to be with e-commerce. Both local players, like Big Basket, and global ones, like Amazon, are working with local importers to bring imported products into India and make them available to a wide range of Indian consumers.
Traditional British grocery brands have been in the market for a while now. As India follows major global trends, especially in the area of healthy eating, natural and organic, it is encouraging to see how new and innovative brands are being launched. Dairy, especially cheese is proving successful for a handful of pioneer exporters who have been prepared to invest time and resources to develop business.
India still presents challenges to UK food and drink exporters – red tape, strict labelling requirements and an endless list of import and other taxes mean that determination and a good local partner are vital. However as more and more UK and other European food and drink companies succeed in getting their products onto retail shelves and e-commerce sites, there is experience to be shared and a growing network of experts to work with. As local production facilities improve, it will make sense for more UK companies to consider joint ventures as a route to market for some products although there will always be a place for products that have come from the UK.
Susan Powell, Canadian Food Exporters Association
There is opportunity in the Indian market for Canadian products and some of our members are currently selling there.
Right now it’s not a significant growth opportunity for value-added products, though, as the import duties are very high. Canada’s growth is strong in the ingredient sector and more specifically for the pulse industry (lentils in particular).
For our value-added members, they are primarily looking at the retail trade but there is growing opportunity in the online business with some start-ups there.
Logistics for frozen or refrigerated continues to be an issue and our members have reported that there is significant red tape for some products entering the country.
We are hoping down the road both the Canadian and Indian governments get together to negotiate a free-trade agreement as that would open up more opportunities for value-added products and eliminate not only the high tariffs but the red tape (hopefully).
India [remains] a fairly new market for our members and the association.
Check back throughout the week for further instalments in just-food’s examination of the Indian food sector. We will be taking in a range of issues, from consumer trends to food safety.