The branded food market is growing rapidly at 10-15 per cent annually with major companies making a beeline for regional overseas markets such as Bangladesh, Pakistan, Nepal etc, as per a Ficci survey on the Rs 3,350 billion food and beverages market.
The branded food sector, which has seen a growth of nearly 8.7 per cent last year, is expected to clock a 10 per cent growth by December 2004, the survey said.
Some companies have achieved a growth in the key processed food segment by reaching lower price point to make the products more affordable to a bigger consumer class.
Companies are also spending heavily on advertising, awareness campaigns and distribution network.
Also, the big companies have started sourcing products from local manufacturers and contractors as cost-saving measures and to enter the mass consumer market.
Players such as Heinz, Mars, Marico, Conagro, Pepsi, ITC, Dabur, Britannia, Nestle, Pillsbury and Amul have also added new variants with their existing brands including stylish packaging, the survey said.
The survey rated milk and milk products as one of the most promising sectors with select diary companies planning major expansion plans in various cities with new brands and realising higher price with higher sales volume.
However, the survey said issues such as lack of infrastructure, absence of strong and dependable cold chain and multiple food laws as major problems facing the sector. Also, higher cost of raw materials and packaging materials are putting pressure on margins
The survey added that Essential Commodities Act (ECA) puts a lot of hindrances including easy inter-state movement of food grains and essential food items. Also, rise in prices of commodities that are inputs to the food processing sector have caused a major hindrance to the sector.
The survey also said that the government should look at stabilising frieght costs to reduce the pressure on margins there by enabling higher growth.