If it is ready to eat, it is also ready to be sold
Rising disposable incomes, paucity of time and increasing number of working couples chart a positive outlook for the ready-to-eat market in India. However right pricing, which will address affordability, will provide a big fillip to the growth story, according to a report presented recently to the media by the Tata Strategic Management group.
The report estimates that the Indian ready-to-eat meals market can grow to $716 million, a big leap from $32 million — its market size in 2006.
The positive outlook comes from the drivers. Households with an annual income of 60,000 dollars and more will increase from 1.1 million in 2005-06 to 3.9 million in 2014-15. Similarly, the urban population is set to rise from 286 million in 2001 to 288 million in 2011. The report points to a potential of 5.4 million households (SEC A and SEC B combined) between the top 24 cities.
Experts still feel that the ready-to-eat story is strictly an urban one. Anand Shah, a FMCG analyst with Angel Broking points out, “Pricing is certainly an issue. As of now, the big players are tapping the metros that promise more growth. Hindustan Unilever Limited can extend its Knorr and Annapurna brands for other packaged foods products. Similarly, Marico which occupies the health plank through Saffola can extend the brand to penetrate into the hygiene conscious market.” Shah is betting big on the segment and said that the government is taking the right initiatives to give it a boost.
Pankaj Gupta, Practice Head - Consumer and Retail, Tata Strategic Management group said, “Singles and households with double incomes are big sub-segments for the ready-to-eat market.”
Players in India, actively looking at the segment, are ITC (Kitchens of India), MTR Foods (bought out by Orkla Foods for $100 million in early 2007), Satnam Overseas (Kohinoor), Nestle, Vadilal (processed foods), Hindustan Unilever Limited (Knorr and Annapurna) etc. Understandably, they are pumping in a lot of money and efforts to build the market.
A recent report by AdEx India, a division of TAM Media Research, said that television advertising of ‘Instant Foods/Meals’ grew by 19 per cent during January-August 2007 when compared to same period in 2006. It also points that average ads per day aired on television by players of ‘Instant Foods/Meals’ increased from 155 in January-August 2006 to 173 in January-August 2007.
Taxes seem to be an issue with the segment. Rajesh Gandhi, managing director of Vadilal, which offers many variants of frozen, ready to eat parathas and curries said, “Many categories attract excise duties of 16 per cent and since we deal with frozen foods, the operating costs are higher. The government is looking into the matter. Effective sops coupled with organised retailing will pave way for a faster growth as the demand side factors are in favour of the market.” The processed foods segment brings revenues of Rs 15 crore to Vadilal, 80 per cent from exports.