Rabobank report: India poised for growth in F&B industry

Mudgil said, “Aggregate food processing in India is at 10%. This is low by global standards. Processing in fruits, vegetables and grains is 2%, poultry is at 10%, and dairy at 24%. Coupled with this, urbanisation is set to grow from 33% to 40% and per-capita income is to go up from USD 2000 to USD 3000 by 2025, plus a young population.” Mudgil stated, this is a trigger to boost consumption. He felt, this will bode well for the Indian packaging industry.

He added, “The Indian packaged food market which is currently pegged at USD 100Bn is estimated to grow to USD 170Bn by 2022 at a rate of 12%. If we look at the unit sales of packaging in India, it is estimated to grow from 200Bn to 270Bn in about five years. Flexible packaging would contribute two thirds of this growth and we see this only going up as most segments in the food and beverage industry are price sensitive and flexible packaging offers a cost effective solution.”

He elaborated, “We are seeing a transition from informal to formal channels in many food categories such as rice, wheat flour and pulses which have been traditionally sold loose for ages but are now getting packaged. The current packaging structure is basic, but that’s how there is traction from loose to simple packaging and then to value added packaging.”

To illustrate his case, Mudgil cited an example from the dairy industry. He said, “The total market size of liquid milk is around USD 65-70Bn. Of this, the pouched milk segment is about USD 15-16Bn and milk sold in multi-layered packaging is at USD 1.5-2Bn. This means even today three fourths of the market which is around USD 45Bn is sold in a loose form. Going forward this will move from informal to formal, and from loose to packaged. Other segments of the food industry would also follow a similar trend.”

Mudgil also underscored the fact that although there is a high demand and potential for growth, the industry faces challenges of finding more sustainable means of packaging and innovation will be required in this respect. He said that major global brands are setting up sustainability targets to put effective measures in place by 2025 or 2030.

Commenting about the M&A trends in India over the last decade, Mudgil pointed out, “M&A in India is largely driven by inbound investments at the converter level. Converters are eyeing India and trying to acquire and consolidate the market further. Outbound investments are driven by film manufacturers looking at diversifying and moving from basic film manufacturing towards value added products. Although private equity investments are happening in the food and agri value chain, its role has been limited in the packaging space. Going forward we see more activity compared to what has been so far in the past.”

Rabobank is a global leader in food and agri business banking. It is a Dutch Cooperative established in 1898. They provide banking support for the food industry value chain.