India’s food processing market is expected to reach over $500 billion by FY2026, owing to factors such as an upsurge in innovations in food technology, growing demand for processed food, etc. With the introduction of new product innovations, the Indian food processing industry is developing fast. Tamil Nadu, Karnataka, Uttar Pradesh, West Bengal, among other states traditionally lagging in food processing capacity, have increased their capacity. We shall explore the major growth leaps in this sector and how it’s shaping up for the future.
Food processing is the process of converting raw material or agricultural products into direct edible food or converting one type of food into another. It involves certain methods used to turn fresh food into food products. These include canning, fermentation, freezing, pasteurisation, etc. Food processing increases the nutritional content of food by making it edible and extending its shelf life. Dairy, meat and seafood, cereals, grains and oilseeds, fruits and vegetables, non-alcoholic drinks, and packaged food are the six prominent sub-segments of the Indian food processing sector.
The major factor contributing to the growth of this market is the rising consumer inclination towards processed food as it offers several advantages to the consumers, such as ease in preparation, less susceptibility to spoilage than fresh food, and so on. Processing the food also lowers the risk of foodborne illness and enhances the flavour of food.
Another major driver of this market is the continuous research and development in food processing machinery. The food processing market players are continually upgrading their technologies and coming up with innovations in food processing machinery to meet customer demands.
With the introduction of new product innovations, the Indian food processing industry is developing fast. This pattern reflects a change in customer preferences towards processed foods. Furthermore, several states that have traditionally been weak in the food processing sector have seen their food processing capacity increase, such as Tamil Nadu, Karnataka, Uttar Pradesh, West Bengal, etc.
As a result, the industry is predicted to grow in terms of product category and geographic reach. Additionally, rising urbanisation and improving standards of living are prompting people to shift to value-added products. These factors are driving the demand for processed and packaged foods, further resulting in the increased overall growth of the food processing sector sales.
Technological advantages
The evolving technology is also playing an important role in boosting the food processing sector of India. High-Pressure Processing is slowly gaining popularity among Indian market players. High-Pressure Processing (HPP) is a non-thermal food preservation method that uses intense pressure in the range of 400-600Mpa to destroy hazardous germs. The HPP has negligible effects on flavour, appearance, and nutritional value. HPP is commonly used to preserve fruits and vegetable products such as jams, purees, juices, meats, and fish in the food processing industry. HPP technology is slowly making its way into the RTE (Ready to Eat) food sector in India.
For instance, NuTy became India’s first company to use non-thermal HPP technology for food processing. It delivered ready-to-eat curries and dinners utilising HPP technology in January 2020.
Moreover, the technology of vacuum frying and freeze-drying is also gaining popularity. Healthy snacks such as vacuum fried and freeze-dried snacks have been launched by several Indian startups. In India, companies such as Crimz and Orbela Agro Foods have created vacuum-fried fruit snacks.
Due to the low pressure used, the frying temperature is lower in vacuum frying than in atmospheric frying. When compared to atmospheric frying, the method of oil adsorption in vacuum frying is different. The low frying pressure helps to reduce the amount of oil in the finished product. Thus, making products healthier for consumption.
Persisting challenges
The food processing industry of India is facing certain challenges such as gaps in supply chain infrastructure, which include inadequate primary processing, storage, and distribution facilities, high cost of cold chain facilities, poor connectivity between production and processing, seasonality of operations and low-capacity utilisation. Some of the root crops, fruits, etc., are damaged before final consumption during the supply chain process.
This can be overcome by incorporating all stakeholders in the supply chain and optimising the supply chain from start to end. Another major challenge faced by India’s food processing sector is the low entry barriers, which are exacerbated by the existence of multiple small firms. Processing costs are high, and a lack of scale limits technological solutions.
Moreover, insufficient product development and innovation and a lack of attention to quality and safety requirements are also some of the challenges faced by the food processing industry.
The COVID-19 pandemic situation further fueled the demand for processed food such as bread, breakfast cereals, ready-to-eat segment, etc. It has led to increased acceptance of processed food. All the key segments of India’s food processing sector saw a positive impact on the demand except the meat & marine segment, which witnessed a negative impact due to low demand.
During the pandemic, consumers were more inclined towards hygienic products with longer shelf lives, and this factor led to the rise in demand for processed food which further contributed to the growth of the food processing sector of the country. However, exports were severely interrupted due to COVID-19, and recovery is projected to take time.
Prospective governmental initiatives
The Government of India is also taking all necessary initiatives to increase investments in the food processing sector in India through the Ministry of Food Processing Industries (MoFPI).
Quality infrastructure for modern food processing is being established across the nation with the help of the Government of India’s Pradhan Mantri Kisan Sampada Yojana (PMKSY). The government has approved 38 of the 41 food parks that were funded via the Mega Food Parks Scheme. There were just two mega food parks in the nation in 2014.
As of August 1, 2021, 22 mega food parks are operating in the country. Moreover, different states of India are taking initiatives to promote the growth of this market. For instance, according to the Uttar Pradesh State Industrial Development Authority, the food processing industry attracted the most investment in 2020-21, totaling more than $127.89 million and accounting for 32 per cent of all assets received in the year.
Additionally, the Production Linked Incentive Scheme offered by the government is anticipated to encourage food processing companies to expand their processing capabilities to satisfy increased demand. The food processing sector is preparing for the challenge, with more investment in product development and growth.
Also, in 2021, MoFPI decided to conduct a centrally supported initiative to build or upgrade 2 lakh micro food processing firms as part of the Aatmanirbhar Bharat Initiative. With a budget of around $1360.54 million, the firms can be established or improved during the course of five years, from 2020 to 2025.
The central Scheme, Micro Food Processing Enterprises Scheme (PMFME) will offer these businesses all necessary financial, technical, and business assistance. This will help the entrepreneurs and expand the food processing market in the country.
Furthermore, in 2021 the prime minister Narendra Modi stated that for the first time, the Indian fisheries sector is receiving large-scale assistance, which will enhance fish processing in India. Thus, further boosting the growth of the food processing market in India.
These government measures, together with the development prospects in the nation, such as rising demand for ready-to-eat or ready-to-prepare meals, growing need for safe processed foods, and a reduction in overdependence on cereals, are anticipated to enhance growth of the food processing industry in India.
Karan Chechi, Director, TechSci Research, Noida