Packaged food market crosses Rs 5 trn as users switch to branded items

The branded packaged food market expanded 17.6 per cent in 2018 to cross the Rs 5-trillion-mark for the first time as almost all categories posted a healthy double-digit growth.

The market, which includes broad categories like edible oil, dairy and baby food, stood at Rs 5.1 trillion in 2018 – up from Rs 4.3 trillion a year ago, market research provider Euromonitor International said. According to the firm’s analysis, migration of consumers from non-branded packaged food products to branded ones was the key driver.

“Edible oil and dairy products and alternatives provided strong tailwinds for overall packaged food in India, ensuring strong double-digit growth in 2018. Shifting from unbranded to branded packaged products was the clear highlight of the year, amid rising awareness of healthy living,” Euromonitor said.

Suresh Narayanan, chairman and managing director, Nestlé India, said while benign raw material prices helped companies keep prices in check, formalisation of trade after the implementation of goods and services tax (GST) in 2017 increased direct control of manufacturers on the market and brought efficiency in distribution.

Also, no major disruptive macro factors rattled the packaged food market unlike in 2016 and 2017, offering better business environment for companies.

Packaged food companies are focusing on solving distribution challenges, conducting promotional activities, and, most importantly, giving more attention to health and wellness products, according to Euromonitor. “The retail landscape in rural regions is developing, with large retailers such as Future Group opening supermarkets in tier-II and –III cities to cater to the nearby regions,” it said.

Companies such as Dabur have invested heavily to strengthen operations on field and hired more manpower to push its products deeper into markets.

Mohit Malhotra, chief executive officer, Dabur India, said the rise of modern trade channel, which generates over 10 per cent of packaged food revenue for companies, has further driven sale of branded items.

Edible oil continued to be the largest category, growing 21.8 per cent. Given the large size of the edible oil market – Rs 1.34 trillion in 2017 – its growth rate remained one of the highest. In 2018, the packaged edible oil market grew to Rs 1.64 trillion.

Dairy, the second-largest category grew by 15.6 per cent to Rs 1.39 trillion from Rs 1.2 trillion a year ago. Rice, pasta and noodles, the third-largest category, grew the fastest at 23.9 per cent. The market for rice, pasta and noodles stood at Rs 47,000 crore. Savoury snacks, the fourth-largest category, grew by 13.6 per cent to Rs 33,560 crore.
 

Conventional categories like sweet biscuits and snacks bars and baby foods, too, grew by 10.2 per cent and 12.9 per cent, respectively. Other larger categories like confectionary and sauces, dressings and condiments grew by 14.3 per cent and 17.6 per cent to Rs 30,450 crore and Rs 18,290 crore, respectively.

“The Indian packaged food market is expected to continue its strong growth up to 2023, supported by consumers shifting from unpackaged to packaged food and the entry of a large number of new players,” the market research provider said.

It said the market may grow at 16.6 per cent CAGR (compound average growth rate) for the next five years. While the largest category edible oil may grow at 19.4 per cent CAGR, savoury snacks may grab the tag of the fastest-growing category from rice, pasta and noodles in coming years, the research firm said. It also said the savoury snacks market could grow at 22.3 per cent, while sauces, dressings and condiments could grow at 19 per cent CAGR till 2023.

Euromonitor also said government support in establishing infrastructure facilities, such as cold storage, rural electrification, and the internet are likely to further drive accessibility to packaged food in the hinterlands.