A Study Of The Indian Food Processing Industry

A Study Of The Indian solid diet touch IndustrySmall and Medium Enterprises (SMEs) get been considered hotshot of the driving forces of modern economies cod to their multifaceted contributions in terms of technical vicissitudes, employment generation, trade promotion, etc. Of these, the ability of SMEs to innovate assumes signifi finishce because mutation lends competitive edge to firms, industries and ultimately, economies. Therefore, technological novelty has the potential to spur egression of individual enterprises at the micro level and aggregate industries and economies at the macro level.Given the above, this paper attempts to understand issues such as what genes drive SMEs to innovate, what is the temperament of SME designs, what the achievements of SME standards be and what the outcomes of these achievements be. Overall, this paper attempts to address the question does SME foundation facilitate the maturement of firm size? This question has been probed i n the context of SMEs in refreshed firmament of our frugality.This paper probes the drivers, dimensions, achievements, and outcomes of technological bases carried out by SMEs in the sustenance mental affecting industries in India. The Food Industry is divided into organized and nonunionised wherein the maximum contribution is made by small and unorganized. Hence the digest of the break down will be organized intellectual nourishment bear on empyrean. The seek methodology is empirical study for this the evidences will be collected, in the rebound of case studies as evidences, by sary data. Further, it ascertains the workth regulates of advanced(a) SMEs in par to non- innovative SMEs in terms of sales turn everywhere, employment, and investment. The study will confirm that the Innovative SMEs arouse shown better and sustained growth.Keywords proficient Innovations, Sales Growth, Organized Food Processing, Agriculture.IntroductionInnovation is a radical-fangle d way of doing underweightthing or new stuff that is made useful. It may signify to incremental an emergent or radical and revolutionary transmits in thinking, growths, processes, or institutions. Following Schumpeter (1934), contributors to the scholarly literature on innovation typically issue surrounded by invention, an idea made manifest, and innovation, ideas applied triple-crownly in practice. In many fields, such as the wiles, economics and government policy, well-nighthing new must be hero sandwichstantially different to be innovative. In economics the change must increase survey, customer prize, or producer value. The goal of innovation is positive change, to make someone or something better. Innovation leading to change magnitude productivity is the fundamental book of facts of increase wealth in an economy. Those who be directly responsible for application of the innovation ar often called pioneers in their field, whether they be individuals or gove rning bodys.In organizationsA convenient definition of innovation from an organizational perspective is abandoned by Luecke and Katz (cc3), who wroteInnovation . . . is generally silent as the successful introduction of a new thing or method . . . Innovation is the embodiment, combination, or synthesis of knowledge in original, relevant, set new products, processes, or services.Innovation typically involves creativity, but is non identical to it innovation involves acting on the fictive ideas to make some divisionicularised and tangible difference in the domain in which the innovation occurs. For example, Amabile et al. (1996) profferAll innovation begins with creative ideas . . . We define innovation as the successful implementation of creative ideas within an organization. In this view, creativity by individuals and teams is a starting point for innovation the first is necessary but not sufficient condition for the support.For innovation to occur, something more(prenomi nal) than the generation of a creative idea or insight is required the insight must be put into action to make a genuine difference, resulting for example in new or altered railway line processes within the organization, or changes in the products and services provided.Innovation, wish well many business functions, is a management process that requires unique(predicate) tools, rules, and discipline.From this point of view emphasis is moved from the introduction of specific novel and useful ideas to the general organizational processes and procedures for generating, considering, and acting on such insights leading to signifi assholet organizational changements in terms of improved or new business products, services, or internal processes.In the organizational context, innovation may be relate to performance and growth through improvements in efficiency, productivity, tint, competitive positioning, mart sh atomic number 18, etc. All organizations squirt innovate, including for example hospitals, universities, and local anaesthetic governments.While innovation typically adds value, innovation may to a fault have a negative or destructive effect as new unwrapments clear away or change old organizational forms and practices. Organizations that do not innovate effectively may be destroyed by those that do. Hence innovation typically involves risk. A key challenge in innovation is maintaining a balance between process and product innovations where process innovations tend to involve a business model which may have shareholder satisfaction through improved efficiencies while product innovations develop customer support however at the risk of bely RD that washstand erode shareholder return. Innovation can be described as the result of some list of time and effort into researching an idea, plus some puffyr measuring rod of time and effort into developing this idea, plus some very thumping amount of time and effort into commercializing this idea into a ma rket place with customers.Joseph Schumpeter defined economic innovation in The speculation of Economic outgrowth, 1934, Harvard University Press, Boston.The introduction of a new good that is one with which consumers are not yet familiar or of a new quality of a good.The introduction of a new method of production, which need by no means be founded upon a discovery scientifically new, and can as well survive in a new way of treatment a commodity commercially.The opening of a new market, that is a market into which the particular branch of manufacture of the acres in question has not antecedently entered, whether or not this market has existed before.The conquest of a new source of supply of raw materials or half-manufactured goods, again irrespective of whether this source already exists or whether it has first to be created.The carrying out of the new organization of any exertion, give care the creation of a monopoly position (for example through trustification) or the bre aking up of a monopoly positionWhether innovation is primarily supply-pushed (based on new technological possibilities) or demand-led (based on social necessitate and market requirements) has been a hotly debated topic. Similarly, what exactly drives innovation in organizations and economies trunk an open question.Programs of organizational innovation are typically tightly linked to organizational goals and objectives, to the business plan, and to market competitive positioning. One driver for innovation programs in corporations is to achieve growth objectives.As Davila et al. (2006) note, Companies cannot grow through live reduction and reengineering alone Innovation is the key element in providing vulturous top-line growth, and for increasing bottom-line results (p.6)In general, business organizations spend a important amount of their disturbance on innovation, such as making changes to their established products, processes and services. The amount of investment can leave f rom as low as a half a per centime of turnover for organizations with a low rate of change to anything over twenty percent of turnover for organizations with a high-pitched rate of change.The average investment crossways all types of organizations is four percent. For an organization with a turnover of one meg units, this would represent an investment of cardinal one meg one million million million million units. This budget will typically be spread across various functions including marketing, product design, information systems, manufacturing systems and quality assurance. The investment may vary by diligence and by market positioning.The latest index was create in March 2009. To rank the countries, the study measured both(prenominal) innovation inputs and sidings. Innovation inputs included government and fiscal policy, education policy and the innovation environment. Outputs included patents, technology transfer, and other RD results business performance, such as pat ience productivity and perfect shareholder returns and the impact of innovation on business migration and economic growth.SMALL AND MEDIUM ENTERPRISES (SMEs) IN INDIAWith the advent of planned economy from 1951 and the subsequent industrial policy followed by organisation of India, both planners and regimen earmarked special role for small- outstrip industries and medium scale industries in the Indian economy. Due protection was accorded to both celestial spheres, and particularly for small scale industries from 1951 to 1991, trough the nation adopted a policy of liberalization and globalization. Certain products were taciturn for small-scale units for a long time, though this list of products is decreasing due to change in industrial policies and climate.SMEs always represented the model of socio-economic policies of Government of India which emphasized judicious use of outside exchange for import of majuscule goods and inputs labour intensifier mode of production employmen t generation non denseness of diffusion of economic power in the hands of few (as in the case of queen-size houses) discouraging monopolistic practices of production and marketing and last effective contribution to foreign exchange earning of the nation with low import-intensive operations. It was also twin with the policy of de-concentration of industrial activities in few geographical centers.It can be observed that by and large, SMEs in India met the expectations of the Government in this respect. SMEs actual in a manner, which made it possible for them to achieve the following objectives senior high contribution to home(prenominal) productionSignificant merchandise earnings menial investment requirementsOperational flexibilityLocation wise mobilityLow intensive importsCapacities to develop appropriate indigenous technologyImport substitution part towards defense productionTechnology oriented industriesCompetitiveness in municipal and export marketsAt the equivalent tim e one has to understand the limitations of SMEs. In spite of these limitations, the SMEs have made significant contribution towards technological developing and exports. SMEs have been established in al close to all- study sectors in the Indian manufacture such asFood ProcessingAgricultural InputsChemicals PharmaceuticalsEngineering Electricals ElectronicsElectro-medical equipmentTextiles and Garments strap and leather goodsBio-engineeringSports goodsPlastics productsComputer Software, etcAs a result of globalization and liberalization, coupled with WTO regime, Indian SMEs have been passing through a transitional period. With slow down of Economy in India and abroad, particularly USA and European articulation and compoundd competition from China and a few low bell centers of production from abroad many units have been facing a stalwart time. Those SMEs who have loyal technological base, international business outlook, competitive olfactory perception and willingness to res tructure themselves shall withstand the present challenges and come out with shining color to make their own contribution to the Indian economy.FOOD PROCESSING persistencePresent Status and Future Prospects of Indian Food Processing IndustriesAs per the Ministry of Food Processing Industry as data source, the nourishment touch on sector is highly fragmented effort, it widely comprises of the following sub- atoms results and vegetables, draw and milk products, beer and alcoholic beverages, ticker and poultry, marine products, grain process, packaged or devisal victuals and packaged drinks. A huge account of entrepreneurs in this perseverance are small in terms of their production and operations, and are mostly concentrated in the unorganized segment. This segment accounts for more than 70% of the end product in terms of volume and 50% in terms of value. though the organized sector seems comparatively small, it is growing at a practically spryer pace.Indias Position in Worlds increaseionLargest producer of milk in the earth (105 million tonnes per annum)Largest livestock population(485 million tonnes per annum)Second largest producer of fruits vegetables (150 million tonnes per annum)Third largest producer of food grain (230 million tonnes per annum)Third largest producer of fish (7 million tonnes per annum)52% cultivable land compared to 11% world averageAll 15 major climates in the world exist in India46 out of 60 s vegetable oil types exist in India20 agri-climatic regionsKey Growth Drivers of Food Processing Sector in IndiaIncreasing spending on health and nutritional foods.Increasing number of nuclear families and working women changing lifestyleFunctional foods, fresh or bear on foodsOrganized retail and private label penetrationChanging demographics and rising disposable incomesKey Opportunities in Food bear on SectorProcessable varieties of plumeContract farmingInvestments in infrastructure through reality Private partnership (PPP )Mega Food parksIntegrated cold trainFood safety Management SystemsKey segments in the food treat industryFruits vegetable processFruits and vegetables is one of the most important and fast growing sub-sectors of the food processing sector. Over the last few course of studys, in that location has been a positive growth in ready-to-serve beverages, fruit juices and pulps, dehydrated and polar fruits and vegetable products, tomato products, pickles, convenience vegspice pastes, processed mushrooms and curried vegetables reasons world increase in consumption by nuclear families, working women, students and single employees staying alone.There are abundant investments opportunities are there in expanding the export market. An increasing toleration of new products with market schooling efforts has been witnessed lately given the fact that there is a good international demand for certain fruits and vegetable products. The Indian food processing industry is primarily export orie nted. Indias geographical postal service gives it the unique advantage of connectivity to Europe, the middle(a) East, Japan, Singapore, Thailand, Malaysia and Korea. In 2008-09, Indias export of fresh fruit and vegetable was estimated at US$ 0.79 jillion and in case of processed fruits and vegetables it stood at US$ 0.68 billion. spunk ProcessingIn meat and meat processing sector, poultry meat is the fastest growing animal protein in India. The estimated production of meat was 6.5 million tonnes during 2007-08. India exports more than 500,000 million tonnes of meat of which major share is buffalo meat. Buffalo meat production during 2008-09 is estimated at 2.8 million tonnes and out of this about 21% is exported. Indian buffalo meat is witnessing strong demand in international markets due to its lean character and its near organic nature. India is the 6th largest exporter of bovine meat in the world.In 2008-09, Indias export of meat products (including buffalo meat, sheep/goat me at, poultry products, animal casings and processed meat) stood at U$ 1.25 billion.Dairy processingIndia is number one milk producing land in the world with an estimated production of 105 million tonnes in comparison to world milk production of 693 million tonnes during 2007-08.Buffalo milk is estimated to account for 57% of the total milk production in India.India has a unique pattern of production, processing and marketing/consumption of milk, which is not comparable with any large milk producing landed estate. Approximately 70 million clownish households in the country are engaged in milk production. Over 11 million sodbusters are organized into about 0.1 million village Dairy co-op Societies (DCS). About 35% of milk produced in India is processed. The organized sector (large scale dairy sics) processes about 13 million tonnes annually, while the unorganized sector processes about 22 million tonnes per annum. In 2008-09, export of dairy products was estimated at US$ 0.21 billi on.Fisheries SectorIn India more or less 10 million people, musical accompaniment in 4,000 coastal villages and more number of interior villages, depend on fisheries sector. The export of marine products has steadily grown over the years from a mere US$ 0.84 million in 1961-62 to US$ 1,849.08 million in 2008-09. Marine products account for approximately 1.1 % of the total exports from India.Frozen shrimp go along to be the single largest item of export in terms of value accounting for about 44% in the total export earnings. In terms of quantity, fish accounted for the major share at 40% (shrimp 21%).European Union (EU) was the largest market during the year 2008-09 with a percentage share of 32.6% followed by China 14.8%, Japan 14.6% , USA 11.9%, South East Asia 10%, Middle East 5.5% and Other Countries 10.6%.Grain processing sectorIndia during the year 2007-08, accounted for 8.73% of the worlds oilseed production of 7.63% 7.31% of the worlds oil meal production of 6.74% 7.53% o f the worlds meal export of 6.78% 6.03% of the worlds oil production of 5.86% 9.22% of world oil imports of 9.58% and 9.33% of the worlds oil consumption of 9.28%.On the export front, export of oil meals, oilseeds, minor oils (fats) and castor oil during the financial year 2007-08 is describe at 62.6 lakh tonnes valued at US$ 2.32 billion against the exports of 58.9 lakh tonnes valued at US$ 1.39 billion in the previous year.The solvent extraction processing of oilseed, oilcakes and rice bran during 2007-08 is reported at 121.2 lakh. However, the overall production of solvent extracted oils during 2007-08 form rice bran, oilcakes minor oilseeds and soybean is reported at 19.4 lakh tonnes.Consumer food industriesConsumer food industry includes pasta, breads, cakes, pastries, rusks, buns, rolls, noodles, corn flakes, rice flakes, ready-to-eat and ready-to-cook products, biscuits etc. Bread and biscuits constitute the largest segment of consumer foods. Indias biscuits industry is th e largest among all the food industries and has a turnover of around US$ 0.64 billion. India is known to be the second largest manufacturer of biscuits, the first being USA.Indian consumer food industry is class under two sectors organized and unorganized. Bread and biscuits are the major part of the bakery industry and cover around 80 percent of the total bakery products in India. Biscuits stand at a higher value and production level than bread. This belongs to the unorganized sector of the bakery industry and covers over 70% of the total production.Major Players in Indian Food processingITC throttleParle Products Pvt. Ltd.Agro Tech FoodsAmulPerfetti India Ltd.Cadbury India Ltd.PepsiCo India HoldingsNestle India Pvt. Ltd.Britannia Industries Ltd.Hindustan Lever LimitedMilkfoodMTR Foods LimitedGodrej Industries LimitedGits Food Products Pvt. Ltd.Dabur India Ltd.UnileverConagra FoodsNissin FoodsWalmartVenkysForeign flat Policy in Food processing Industry c% FDI is allowed under a utomatic route in food processing industry and food infrastructure including food parks, distillation brew of alcohol, cold storage chain and warehousing. The total inflow of Foreign Direct Investment in food processing sector during the last five-spot-spot years since April 2004-March 2009 is US$ 409.41 million.Future Outlook Indian food industry expected to grow to US$ 280 billion by 2015 and generate an surplus employment for approximately 8.2 million people. Also, food consumption in India is estimated to grow at a CAGR of 5.32 % by 2013.Futher, it is expected that processed food output will grow at a strong 7 % CAGR in terms of value from 55.6 billion US$ in 2005 to 95.6 billion US$ in 2013.Foreign Direct Investment in Food Processing Industry The total inflow of FDI in FPI sector during the last five years since April 2004-March 2009 is Rs 1892.02 crore.Key Dimensions of GrowthStrengths in Food ProcessingIndia has crapper of natural resources that provide it a competitive advantage in the food processing industry. Due to its un equal climatic conditions, it has a wide ranging and large raw material base appropriate for food processing industries.The articulated lorry processed and ready to eat packaged food segment is comparatively new and constantly changing. Indias cost advantage in manpower can be used to set up large low cost production bases for domestic and export markets. If one is to add on significant investments that have come into the country, food processing industry is in a favorable position.ResearchThe well established RD and technical expertise of Indian research institutions like fundamental Food Technological Research Institute, Central Institute of Fisheries, National Dairy Research Institute, National Research and Development Centre etc have been a great support for food processing sector in India.Government RegulationsThe government has introduced several steps to enhance the growth of food processing industry. In order to fur ther enhance investment in the food processing industry, several policy initiatives have been initiated in the recent past.The initiatives includeFull repatriation of pelf and capital.Immediate approvals for foreign investments up to 100 per cent.Import employment would be zero for 100 per cent export oriented units. Reduction in customs duty on packaging machines.Income tax rebate granted (100 per cent of profits for 5 year and 25 per cent of profits for next 5 years) for upcoming industries like fruits and vegetables.Government gives financial aid for establishing common facilities in Agro Food Park.Full duty exemption on all imports for units in export processing zones.Processing TechnologyAt present most of the processing in India is manual. Usage of Technology like pre cooling facilities for vegetables, controlled atmospherical storage and irradiation facilities is very negligible.Modernizing and bringing in state of the art technology should be given paramount importance by both existing and upcoming manufacturers. communicate Chain ManagementAccording to estimates nearly 20 to 25 per cent of the production is lost during various stages of cultivation. Adding to this factor are issues like poor quality of seeds, planting material and sub standard technology in increasing productivity. Hence there is an urgent need for backward linkages with the farmers with the help of techniques like contract farming to improve the quality of the produce.Contract FarmingIt is nothing but an agreement between the food processor (contractor) who would mostly be a very big organized investor and the farmer, where the farmer is under contractual agreement to plant the contractors crop in his land, The farmer also agrees to cultivate and deliver to the contractor a portion of the produce, calculated on the basis of expected yield and undertake land usage at a pre determined price. The contractor also provides technology and training to the farmer.This is a tremendous adv antage to both the farmer and contractor. It guarantees to the farmer a regular source of income and guarantees qualitative output for the contractor.Product InnovationIn the case of certain processed food like snack foods, the customer would look for innovation, new varieties and brand loyalty. Neat and cunning packaging would also help by making the product more visible.Another factor to be given due importance is the pricing. Consumers are extremely price sensitive and due attention should be given to this factor.Future TrendsIt is believed that the food processing industry can do to the rural economy what the information technology industry has done for urban India.The Indian food processing industry is forecasted to grow at 9% to 12% in the coming years.The industry has set a goal of increasing its share in the global processed food trade from 1.6% to 3% within the next 8 years.India having an advantage of a strong country base should tap this potential favorably and become a best-loved sourcing destination for food products globally.Key outcomesThe fruit and vegetable processing industry in India is highly decentralized. A large number of units are in the cottage/home scale and small scale sector, having small capacities upto 250 tonnes/annum though big Indian and multinational companies have capacities in the operate of 30 tonnes per hour or so. The prominent processed items are fruit pulps and juices, fruit based ready-to-serve beverages, canned fruits and vegetables, jams, squashes, pickles, chutneys and dehydrated vegetables. More recently, products like quick-frozen pulps and vegetables, frozen dried fruits and vegetables, fruit juice concentrates and vegetable curries in restorable pouches, canned mushroom and mushroom products have been taken up for manufacture by the industry. The processing level in India is estimated to be around 2%, as compared to about 80% in Malaysia, 30% in Thailand, and 60-70% in the UK and USA.Indias share in the worl d trade of horticultural processed products too, is miniscule less than 1 per cent. This compares very unfavorably with countries like Malaysia (83%), Philippines (78%), Brazil (70%) and US (70%). Indias major exports are in fruit pulp, pickles, chutneys, canned fruits and vegetables, concentrated pulps and juices, dehydrated vegetables and frozen fruits and vegetables.Supply chain efficiencies together with a focused approach to enhance exports are the key to ensure that India is able to successfully tap new product/market opportunities. India has the potential to achieve a 3% share in the world trade of unsophisticated and food products by 2015.Key AchievementsIndia is the worlds second largest producer of food next to China, and has the potential of being the biggest with the food and agricultural sector. The total food production in India is likely to double in the next ten years and there is an opportunity for large investments in food and food processing technologies, skills and equipment, especially in areas of Canning, Dairy and Food Processing, Specialty Processing, Packaging, Frozen Food/Refrigeration and Thermo Processing. Fruits Vegetables, Fisheries, Milk Milk Products, Meat Poultry, Packaged/Convenience Foods, Alcoholic Beverages Soft Drinks and Grains are important sub-sectors of the food processing industry. Health food and health food supplements is another rapidly rising segment of this industry which is gaining huge popularity amongst the health conscious.India is one of the worlds major food producers but accounts for less than 1.5 per cent of international food trade. This indicates long scope for both investors and exporters. Food exports in 1998 stood at US $5.8 billion whereas the world total was US $438 billion. The Indian food industries sales turnover is Rs 140,000 crore (1 crore = 10 million) annually as at the start of year 2000. The industry has the highest number of plants approved by the US Food and Drug validation (FD A) outside the USA.The food processing sector in the country with its vast potential has emerged as one of the major driver of economic growth. It is load-bearing(a) to note that while the countrys GDP growth rate had increase from 3.5 per cent in 2002-03 to 9 percent in 2006-07 the food processing sector has grown from 7 per cent to 13.1 per cent during the same period.India is a country of over 1.10 billion consumers, there is a large untapped domestic market of 1,000 million consumers in the food processing sector and 200 million more consumers are expected to shift to processed food by 2010.Case Study Mrs. Bector Cremica concourseThree decades ago in 1978 when Mrs. Bector had established a small enterprise, today known as Cremica root word a $90 Million accompany, is flagship bearer in food sell and food services industry. Company is exporting to 50 countries including Africa, the USA, UK and the Middle East.Cremica Group included Cremica Frozen Foods, EBI Foods, Mrs. Bect ors Desserts and Cremica Agro India. Its products include biscuits, sauces, bread spreads, ready to eat curries and syrups give to the needs of the food processing industry that seems to be one of the reasons of its being the largest player in food services business in India.Since 1996 Cremica has been provision buns, ketchups and toppings to McDonalds its key business partner. It has also partnered with Cadburys ITC and EBI Foods, a UK based firm. Its clientele today includes some of the premier names of the food processing industry like Cafe Coffee Day, Taj Group of Hotels, Spencer, Pizza Corner, Pizza Hut, Dominos, Jet originways, Air India, Big Bazar, Spencer, Barista and HUL.As a companys policy to assists its customers succeed in the mart by helping them develop new products, substitute ingredients with local alternatives and formulate existing products, company had came a long way. The companys value proposition lies in the fact that it can deliver better quality product s at the same price. Its core competence in this business arises from its extensive product development and RD capabilities, its team of experienced food technologists and its plants, which are specifically designed for food service applications.Company had been innovative and rejuvenating its existing products with launch of products and services in India and Internationally. For example their sauces are being exported to Australia. In 2009 they launched a new range of chip-dips and bread spread in the ethnic Indian range and these are going abroad to a number of countries.Earlier, company was producing liquid condiments like sauces, Mayonnaise, Toppings and Syrups with its partner company, the erstwhile ally Oats Inc of the United States, but in 1999, Quaker Oats withdrew from the joint venture.Cremicas liquid condiments and biscuits are very popular.Cremicas automated biscuit plant has a monthly capacity of producing 10,000 tonnes of biscuits. Its dominant role in the biscuits s egment arises from its excellent quality, widespread distribution and extended range. Almost all the divisions of the company are growing fast. With the positive response from the market the