India Initiative, Activity Number 11AS55

“Helping southern U.S. companies export food & agricultural products around the world.” www.susta.org

India Initiative, Activity Number

11AS55

India….a nation on the move.

• The third largest growing economy in the world with a stable 7 – 8% annual growth.

• Despite a global recession, India has managed to retain its position as one of the fastest growing economies in the world.

• Indian rupee has a distinct and identifiable symbol that reflects the strength of the over trillion dollar economy.

• India has a population of over one billion, and a rapidly growing middle income population of over 300 million.

• With growing middle-income consumers and increasing urbanization and greater exposure to international products, India remains an expanding market for U.S. high-value agricultural products.

• According to the global consumer confidence survey done by Neilson, the consumer confidence index was highest in India.

• Organized retailers are increasing their focus on improving business models and backward linkages.


Food Retail in India The food industry is growing as Indians continue to

have a feast.

AT Kearney's Global Retail Development Index (GRDI), in 2010 ranked Indian retail market as the fifth largest retail destination globally. At US$ 175 billion today the food industry is likely to grow to US$ 400 billion by 2025.

Food and food products account for about 50% of the share of customers wallet.


– Changing life styles and tastes– Growing need for convenience– Increasing disposable income– Increasing numbers of working women– Change in consumption patterns– Higher aspirations among youth– Impact of western lifestyle– Plastic Revolution – Increased use of credit

cards and debit cards


Key Growth Drivers

FDI in multi brand retail…!• Foreign FDI was prohibited in food retail

except for single brand retail.

• In January 2006, up to 51 per cent foreign investment was allowed in single-brand retailing.

• The GOI has recently allowed 51 per cent FDI in multi-brand retail and allowed 100% FDI in single-brand retail.


FDI open gates for new opportunities for imported food

• The opening up of multi brand retail will lead to the entry of major retail giants like Wal-Mart, Tesco and Carrefour etc.

• This step would lead to greater competition and greater need to differentiate. The retailers, both Indian as well as foreign will focus on offering specialty foods coinciding with changing consumer tastes.

• The entry of these major players will encourage stocking of processed and packaged food along with wines, nuts, specialty foods etc.


Consumption pattern of Indian consumer

• Consumption of processed and ready-to-eat (RTE) or convenience foods is higher in urban areas because of relatively higher disposable incomes, the convenience of saving time or exposure to western style food and international cuisines.

• Demand for specialty and high value foods, including snack foods, chocolates, almonds and other dried nuts, cakes and pastries, exotic fruits, fruit juices, and sweets peaks during the fall festive season, especially at Diwali and also during Indian wedding season.


Products currently in the market Juices Jams Mustards Jellies Snack foods Preserves Dressings Pecans Canned fruits and vegetables Chocolates and candiesProducts with longer shelf life, have more opportunity in Indian market.

Salsas Candies Chips Cookies Mayonnaise Pasta Sauce Non-alcoholic Beverage Ready – to – eat food Cake mixes

Potential products for the Indian market

• Private label brands

• Sugar free products

• Breakfast cereals


Roadmap for Market Entry in India• U.S. exporters should survey existing and potential markets for their

products before initiating sales.

• A visit to India to gain a first-hand feel of the Indian market, preferably coinciding with any major food shows or outbound trade missions could be useful.

• The successful introduction of a new product to India depends on good local representation and an effective pricing strategy.

• The local representative should preferably be the importer or distributor. The assistance from the country consultants is available in selecting an agent if required. “Helping southern U.S. companies export food & agricultural products around the world.”

www.susta.org

• Most Indian processed food importers prefer to:

– Purchase mixed containers with smaller quantities of individual products.

– Seek exclusive agreements from exporters.– Use the services of freight consolidators to handle their

orders from various exporters.• The key to success is to focus on a reasonable’ entry pricing

strategy as Indian consumers are price sensitive.


Market Structure• An organized retailer may source an imported product directly

through an exporter or through an Indian importer or a distributor.• Unorganized stores source most products from the importer/

distributor.• The organized retailers have various formats of retail stores (given

below) usually classified by the category of store and floor area:-


Format Average Size (Sq. Ft.)Hypermarkets 15,000 - 100,000Supermarkets 5,000 – 15,000Daily 2,000 – 5,000Express < 2,000Discount / Convenience Stores 1,000 -2,000Specialty / Department Stores 800

Market channels in food retail sector


Cost margins of the intermediaries

On what margins importers, distributors and retailers work on?

Importers 15-20% apxDistributors 12 – 14% apxRetailers 20% apxBig Retailers 30 – 35% apx


Challenges before Southern Exporters in 2012

• Competition from countries with closer geographic proximity to India, which enjoy shorter shipping times and low cost freight advantage.

• Competition from Domestic Products in terms of pricing

• Competition from products imported via grey market

• Lack of education on labeling requirements with US exporters

• Diverse food preferences throughout the country.

• India works on the basis of relationships and they take time to form.

• Lack of adequate cold-chain infrastructure and transportation facilities hamper proper handling, storage and transportation of the imported foods in the vast number of retail stores spread across the country.

• Inability of U.S. exporters to meet Indian importers’ requirements like mixed shipments (consolidation).


• High tariffs on the majority of food items along with various non-tariff barriers continue to remain a bottleneck for import growth.

• Marketing channels for the majority of imported foods also involve a lot of intermediaries, which push the final / retail cost of the product to higher levels.


Ingredients restricted in India

•Import of Beef is Prohibited

•Sanitary Permits for Meats Required.

•Import of Poultry is Restricted

•Import of Whale Shark is Restricted.

•Import of Alcoholic Beverages is Regulated.

•Food Products must have 60% shelf life.

•Products containing cow renette are not allowed.

Customs Duty Structure

•Basic Duty: The value is different for different products ranging between 5-30%

•CVD: Includes the excise duty to be payed in the local market and is variable

•Custom education Cess on CVD: 3% (fixed)

•Additional duty: 4% (for some specific products)

Import Documentation

i) B/L,

ii) Invoice

iii) Packing List,

iv) Certificate of Origin,

v) Insurance Certificate

vi) Import Permit

Labeling Requirements.

Goods must be labeled at the time of Import.

All prepackaged commodities, Imported into India, shall in particular carry the following declarations.

•Name and address of the importer;

•Generic or common name of the commodity packed;

•Nutritional content details


•Net quantity in terms of standard unit of weights and measures.

•Month and year of packing in which the commodity is manufactured or packed or Imported;

•Maximum retail sale price inclusive of all taxes local or otherwise.

Indicators for Meat or Animal Products

Items containing Meat or Animal products must be Marked as per labeling norms for domestic sales with help of visual indicators.

Vegetarian & Non Vegetarian products must be marked Veg & Non Veg & include respective Color Dots in Green & Brown.

Food Service Industry


• The Indian hotel industry, at Rs.131 billion in 2010, growing at a robust Compounded Annual Growth Rate (CAGR) of 9.5%

• Among modern hotels and restaurants, opportunities are typically for foods or ingredients that are not readily available in India.

• A large number of approvals for new hotels and stand alone restaurants along with large-scale investments in hotel infrastructure is further fuelling the growth.

• “Helping southern U.S. companies export food & agricultural products around the world.”

www.susta.org

The Food service industry…..the new buzz

• Major cities as well as tier-II and tier-III cities have led to creation of significant opportunities for imported food products.

• The hotels source their products from local importer/distributors who have the expertise in clearing, storing and transporting products.

• Most hotel chains purchase through centralized procurement offices on annual contracts with local importers, ordering small quantities of food products as needed and minimizing food storage at hotels.

• Restaurants also rely on local distributors for their needs and some require importers to become an approved supplier.


Mode of import and associated cost margins


30-35%

10%

20%20-25 %

Best product prospects for food service sector

• Alcoholic beverages• Snack foods• Fresh fruits & vegetables• Sauces, spreads, salad dressings, condiments, soups, broths • Frozen French fries, vegetables• Chocolates, chocolate syrups & other cocoa products• Jams, jellies, fruit juices, etc• Preserved, dried vegetables



Tentative events for 2012 to help southern companies.

• Trade shows• Outbound trade mission• Trade servicing• Market entry services• Media outreach• In store promotion

Some of the Activities of

2011“Helping southern U.S. companies export food & agricultural products around the world.”

www.susta.org


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India Initiative, Activity Number 11AS55

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