Unlocking the potential of India’s $420 billion Food Processing Industry: BCG-FICCI report

Unlocking India’s $420 billion Food Processing Industry: BCG-FICCI report

India’s food production industry is worth over USD 400 Bn and is the primary source of livelihood for over 45% of the country’s population. However, the level of food processing in India across categories is significantly low – especially in higher processing categories including secondary and tertiary processing. Boston Consulting Group (BCG) in association with the Federation of India Chambers of Commerce & Industry (FICCI) today, unveiled a report titled, ‘Indian Food Processing Sector: 5 Point Call to Action to Tap Export Potential’, that provides solutions to some of the key challenges faced by the industry.

As per the report, India’s share of agri-production is 9.5% globally, while its share in the export of overall food products is 2-3% – with a share in the export of processed food category even lower at 1-2%. The total agriculture and food-related exports from India were valued at nearly USD 50 Bn in FY2022. Some of the key challenges contributing to this trend include low-cost competitiveness, product quality concerns, limited brand strength in overseas markets, lack of infrastructure for processing, storage & logistics, as well as limited compliance with sustainability and ethical requirements.

“We live in an increasingly connected world, where consumers can access products from across the globe. With fundamental shifts in consumer behavior owing to the pandemic, growing awareness, convenience and lifestyle changes and health consciousness, consumers are gravitating towards processed and packaged foods. These newly created opportunities in the food processing industry, make it crucial for India to focus strongly on exports and seize the opportunity to capture a burgeoning global market”, Hemant Malik, Chairman – FICCI, Food Processing Committee  & CEO- Food Division, ITC Ltd

“Given India’s strong position in production of agriculture products, there is a huge opportunity for India to develop its food processing industry with a strong focus on the export markets. However, there are multiple key inhibitors to this growth, and a concerted effort from both public and private stakeholders is required to address these challenges A structured plan of action in this regard, can help India tap the huge potential that can subsequently be unlocked in this sector, and propel growth in a global market”, said Rachit Mathur, Managing Director and Partner, Boston Consulting Group.

“The tenets of the “A-R-I-S-E” framework outline action items for the various stakeholders in the food processing industry – ranging from developing better operating models, to structural collaboration within and across value chain, to robust marketing efforts for brand building. We believe that these steps can address the key challenges faced by the sector, and help propel India to the position of a global leader in food processing and exports”, said Sushma Vasudevan, Managing Director and Partner, Boston Consulting Group.

Unlocking the potential of the food processing industry

The report lays out a 5-point action plan – “A-R-I-S-E” – that can provide the food processing industry the necessary firepower to achieve its export potential.

  • Adoption of crop value chains by establishing of crop-specific PPP model: To provide support to small farmers in addressing cost and quality related challenges for the agri-produce
  • Reinvigorate promotion of Indian-origin brands globally: To enable the pooling of efforts/resources and allow for a consistent plus harmonized strategy for brand promotion
  • Institutionalize industry-academia collaboration to aid R&D: To facilitate technology advancement and new product development
  • Set up collaboration among private players for setting up and sharing infrastructure facilities: To enable sharing of setup costs involved and also leverage cost efficiency benefit from economies of scale
  • Establish sustainability and ethical norms and ensure compliance: To enable Indian food manufacturers in meeting the increasing demand for products that have been manufactured in compliance with sustainability and ethical norms

Since agricultural and allied industries form the backbone of the Indian economy, improving the gross value addition in the agricultural industry will be a key lever in improving socio-economic conditions in the country. For this, it is imperative that we increase focus on not just improving the agricultural produce, but also on improving the level of food processing and its export – especially higher processing.

A copy of the report can be downloaded here.

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