sunil dissertation (8)

8/6/2019 Sunil Dissertation (8)

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ACKNOWLEDGEMENT

I am heartily thankful to my supervisor, ., whose encouragement, guidance and

support from the initial to the final level enabled me to develop an understanding of the

subject.

Lastly, I offer my regards and blessings to all of those who supported me in any respect

during the completion of the project.

Name:

Date:


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Contents:

I. Abstract 4

II. Title of the Project 5

III.Aim of the Project 5

1. Introduction 6

1.1. Small scale enterprise advantages 6

1.2 Disadvantages of Small scale enterprises 7

2. Literature Review 8

2.1. Scope of Small Business in India 8

2.2. Food Processing Industry in India 92.3. Investment Opportunities 10

2.4. Retail business in the Indian Food Processing sector 11

2.5. Marketing Proposals 12

2.6. Prospective in Indian Market 13

2.7. India's Potential market for Untapped Food

Processing Industry 14

2.8. Initiatives of Indian Government 16

2.9. Milk and Dairy Products 17

2.10. Investments in Food Processing Sector 18

2.11. Future Prospects 19

2.12. Retail sector benefits to the food processing sector 20

2.13. SWOT Analysis 21

2.14. Food processing sector in India 24

2.15. Contribution of meat and meat products to Exports 25

2.16. Industrial Growth 26

2.17. Indian Poultry Sector and Its Future 27

2.18. Fruits and Vegetables Sector in India 29

3. Research Methodology 31

3.1. Research Questions 31

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3.2. Structure of Research 32

3.3. Contribution and expected outcome 32

3.4. Purpose of Research 33

3.5. Research Findings 36

4. Recommendations and Conclusion 40

5. References 43

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I. Abstract:

Small-scale industries take up a position of strategic significance in Indian economy in

analysis of its significant offerings to employment, manufacturing and exports of

products. How ever, from 1991 small-scale industries in India are found in an extremely

competitive market due to internationalization, Indian economic liberalization and

reduction of industry specific defensive procedures. This report aims at identifying the

opportunities for small scale food processing enterprises in India, the business challenges

faced by the small scale food processing businesses in India, the strategies formulated by

the small scale food processing enterprises to tap the opportunities and overcome the

challenges, the various factors that need to be considered by the small scale food

processing businesses to improve their performance, the reason for failure of small scale

industries in the market, the various policies and reforms introduced by the government

to encourage the small scale food processing businesses in India. This report also

investigates the effect of internationalization and Indian economic liberalization for

small-scale industries and examines its expansion and performance in terms of products,employment, results and exports to other nations. The report concludes by giving

recommendations to make sure of the survival and growth of small-scale food processing

industries in India.

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II. Title of the Project:

The title of the projects is Scope of food processing business (Small scale business) in

India. This is chosen as the title since it has the potential to know the resourcesand factors that help a small business in setting up its venture and the management

of the small business.

III. Aim of the Project:

The aim of the project is to:

Critically evaluate the opportunities and challenges for food processing industries

in India.

Determine and compare the various strategies formulated by the food processingindustries to improve their performance.

Study the various policies and reforms introduced by the government toencourage the food processing industries in India

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1. Introduction:

Small scale industries make significant contributions to financial and social progress of acountry. In all economies they constitute the vast majority of business establishments,

are usually responsible for the majority of jobs created and account for one third to two

thirds of the turnover of the private sector (J. William Petty, Leslie E. Palich 2008). Inmany nations they are the main sources of increase in employment and performance of a

country over the last twenty years. In developing nations they are termed as an important

self-help tool for eradication of poverty. In changing economies, the important target

nations give the best picture of the transitions in ownership formats, organizationalculture and organizational behavior over the past few years.

A small scale industry is an industry that is owned by an individual or a private company

and run with a less number of workers and comparatively less amount of sales. Smallscale enterprises are generally owned by private companies, partnerships, or by

individuals. The official meaning of "small" changes traditionally, by nation and by

business, but normally has less than 100 workers in India and less than 50 workers in theEuropean countries. But, in Australia, a small scale enterprise is termed by the Fair Work

Act 2009 as an enterprise with less than 15 workers. By contrast, a medium scale

enterprise has fewer than 500 workers in the United States, less than 250 in the European

countries and less than 200 in Australia. (McGoldrick, 2002, p. 459). Other than thenumber of workers, other procedures utilized to categorize small scale enterprises

consists of sales turnover of the company annually, worth of assets and resources and

current revenues. These conditions are implemented by the European countries, for

example, number of employees, revenues and profit and loss statement totals. Small scaleenterprises are normally not competitive in their area of business.

Small scale enterprises are prevalent in many nations, based on the financial structure in

function. The best examples of small scale industries consist of super markets, othersmall retail shops like bakeries or other small shops, beauty parlors, other small

businesses, small restaurants, resorts, small scale manufacturing companies etc.

The other types of small scale enterprises are generally established in private locationsare often termed as micro enterprises. As per Wakefield and Baker, 1998, this expression

is utilized by the global companies like the World Bank and the International Finance

Corporation. The expression "mom and pop business" is a general informal term for asole family controlled operation with fewer workers or no workers besides the owners ofthe business. When considered by the number of workers, the United States and the

European countries classification of micro enterprises are similar i.e. less than 10

workers.

1.1 Small scale enterprise advantages:

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Small scale enterprises are operated with least investments. The small scale enterprises

are operated with an idea to generate more revenue with the minimum amount of

investments in its operations. While most people run their small businesses from theirneighborhood localities, many small businesses are now also being run from the home

(Turley and Milliman 2000). These enterprises are best suited for the people who want

to maintain a company without incurring risks and losses, small scale enterprises aresuited for the unemployed people also. Since small scale enterprises are companies which

are operated on minimum investments, they are very beneficial for those who look for

earning fair earnings by functioning and maintaining a less expensive enterprise whichthey can manage at low costs. In a small scale enterprise, managing the assets and

liabilities does not become a huge task. The assets of a company consist of revenues and

properties of a company and liabilities consist of the amount which the company owes. In

addition, maintenance of balance sheet and profit and loss sheets is also easy in a smallscale enterprise.

It is extremely simple to document the business dealings. Maintaining a record of the

business transactions in a small scale enterprise can be effortlessly done and updated on aregular basis. A small scale enterprise owner can install an accounting procedure on the personal computer and record all the dealings that the company does. Most of the

accounting activities in a small scale enterprise can be effortlessly controlled. (Donovan

et al., 1994). There is a minimum requirement of investments for operating the enterpriseand hence it does not become a major concern. Small scale enterprise funding, monetary

support and financial aid is readily accessible to individuals operating a small scale

enterprise. This support and funding are given to the enterprise owners through the localgovernment, through banks and other large scale industries in the market. Generally there

are a lot of financial institutions which give funds and grants to the small scale

enterprises. Hence an individual can venture into small scale enterprise through loans or

credits and other forms of funds given by the government and other financialorganizations.

1.2 Disadvantages of Small scale enterprises:

The main disadvantage of a small scale enterprise is that they are operated with very less

investments and hence it should be marketed in a proper manner and planning should bedone to frame strategies and to implement them. The improper maintenance of funds or

grants can usually lead to the closure of a small scale enterprise very soon (Babin and

Darden 1996). Hence it becomes very important to plan the business carefully andformulate appropriate strategies to run the business. A small scale enterprise often lacks

authenticity which is a major drawback. Majority of the people choose to have dealings

with an established and large scale enterprise rather than with a small scale enterprisewhich does not have any recognition in the market and which involves a lot of risk. Many

small scale enterprises fail to create a brand name for themselves in the market. Hence a

small scale enterprise should concentrate on marketing the company to survive in the

market. Another disadvantage of small scale enterprise is the repayment of loans andfunds are not done when the business is not running properly. (Singh, 2006, p 783).

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establishing small scale enterprises in rural areas, tax exemption for small scale

enterprises and support for promoting the goods in Indian market and international

market. (Jacobs et al., 1991). Every small scale enterprise established in India has to beregistered through Director of Industries in various states. The registration process is

same in all the states of India except for some minor variations.

There are a lot of reasons because of which the small scale enterprises in India have been

growing recently. Principal among those reasons is the growth in the export capabilitiesof the Indian products, the sector is less money concentrated, the sector has accessibility

of human resource training facilities, the procurement of equipment, machinery and labor

is very easy, products from some of the small scale industries are purchased by the Indiangovernment itself. (Murray and Deabler 1957).

Below is the list of some of the sectors which have exclusive manufacture:

a) Food and allied Industries

b) Textile Products Including Hosieryc) Art Silk/Man-Made Fiber Hosiery

d) Wood and Wood Products

e) Paper Products

f) Rubber Productsg) Plastic Products

h) Leather and Leather Products

i) Chemicals and Chemical Products

Every small scale enterprise is accountable to be closed if the government finds thembreaking the registration rules. A few of the actions taken by small scale enterprises that

can draw the attention of the government are exceeding the investment limit, productionof any new product that needs industrial license or violation of the ownership terms or thesubsidiary norms.

The increasing trade pattern in India shows that the small scale enterprise segment is

expected to give more benefits to the investors. (Hofstatter and Lubbert, 1958). The

financiers in this segment must make sure that they utilize all the available resources toget the profits.

2.2 Food Processing Sector in India:

The food processing sector in India is extremely uneven sector, it majorly consists offruits and vegetables, milk and milk products, beer and alcoholic beverages, meat andpoultry, marine products, grain processing, packaged or convenience food and packaged

drinks. A large number of industrialists in this sector are minute in terms of the

manufacturing capacities and functioning, and are vastly categorized in the unorganizedsector. This sector contributes for more than 70% of the manufacturing productivity and

more than 50% in terms of price. Although the well organized segment is relatively

minute, it is increasing at a much rapid speed.

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Source: Ministry of Food Processing Industries Annual Report 2007-08

2.3 Investment Opportunities

In the food processing sector, the investment opportunities are in the following areas:

a) Fruits and Vegetables

b) Fisheries

c) Meat

d) Grains

e)Packaged and convenience goodsf) Establishing infrastructure, cold chain, etc.

Remarkably, there have been a lot of changes in the food processing sector with the

investments from the private sector companies to market the food processing sector.

These private sector companies are building a unique model in the Indian context for thedevelopment of food processing sector. The entry of large scale multinational enterprises

has attracted huge investments in this sector and it has also created a positive effect in the

small and medium scale enterprise sector in the food processing segment.

Policy Initiatives of the Indian Government:

The majority of the processed food products are tax exempted on the basis oflicensing under the Industries (Development and regulation) Act, 1951, the

products held in reserve for the small scale enterprise segment and alcoholic

beverages are an exception.

Automatic sanction for overseas equity for the sector upto 100% is offered for

majority of the processed food products apart from alcohol, beer and those set

aside for small scale segment under specific conditions.

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Small scale food processing enterprises were included in the group of top priority

segment for bank loans since 1999.

The excise duty which is levied on the processed fruit and vegetables was reducedfrom 16% to 0% since the 2001-2002 budget.

Government of India has given income tax holiday and other subsidies for the

food processing sectors since 2004-2005 budget.

2.4 Retail business in the Indian Food Processing sector:

In India, the urban food processing market size is projected at Rs 35 billion. The Indian

market prospect for processed food is vast and expanding quickly. The retail boom inIndia in the recent past will generate a massive demand for the Indian food processing

segment in the following years. Indian Government has declared 2007 as the year of food

processing.

The private segment in India is still to recognize its full scope in the food processing in

retail segment, as the Indian market has yet to be explored. The private companies arenow identifying the scope of making money in the food processing sector.

Guaranteed Business for the Private Companies:

The modern cities have the capacity of the development procedure. But the modern cities

lack agricultural land and hence they cannot produce food; but the rural areas main

occupation is agriculture and hence they are the main sources of food. Thus the foodproduced in the rural areas has a guaranteed market in the urban areas. Hence the food

processing sector in urban areas serves the purpose of supplying to the urban customers

and increasing revenues for the farmers.

There are some discrete properties of urban areas demand for food. The purchasing

power of urban customers is high. The increasing average revenue of urban customers is

becoming the source for increasing demand for processed food in Indian market. Asubstantial number of women in urban areas are employed and this is generating a

demand readymade food.

The density of urban population is large and hence there is a requirement of a large

number of retail food outlets. The retailing in Indian food processing industry is expected

to have an exponential rise. This is giving rise to new concepts like super and hypermarkets in the Indian market.

The main sources for improved demand for processed food in the Indian market are,

increase in the income levels, shift in the lifestyles of urban customers, increased numberof income sources in a family, changing tastes of customers and changing attitudes of the

urban customers, requirement for time saving food consumption, demand for fresh food

and increasing awareness of the customers.

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The Indian government has projected that in the Eleventh Five Year Plan the food

processing segment is expected to pump in investments worth approximately Rs. 100

billion. Recognizing the requirement for a rigid structure for the Indian retailing sector,the Indian Government has combined 16 laws concerning the Indian food processing

segment into a single legislation and this is estimated to be implemented from the 2009-

10 financial year.

2.5 Marketing proposals:

To strike the vast demand for processed food in the Indian market, a well-organized

marketing structure is essential to introduce production driven by the consumer demand;

marketing turns out to be vital to boost agricultural development. In addition to that it

lessens the role of intermediaries, boosts the farmers' revenues and reduces customerprices.

An effective marketing structure can decrease the losses incurred by farmers in selling

their products, encourage graded manufacturing, packaging facilities and safety in foodprocessing process, encourage production driven by the consumer demand, facilitate high

product value and increase exports to other nations.

Marketing norms are required, since they are vital for the development of the prospective

demand for food in the urban areas. Dr. M.S. Swaminathan, the head of the National

Commission on Farmers, has recommended to encourage partnership between public andprivate sectors and also to encourage investments from the private sectors to reap the

benefits of the food processing sector prospectives.

According to the Ministry of Food Processing Sector, there are 8,956 regulated markets

in India. Among these markets most of them do not have minimum infrastructure. Hence,

huge investment is required to give minimum agricultural infrastructure in India. It isprojected that at least Rs 1200 million is required for the improvement of these regulated

markets. The government has to take initiative to support partnerships between public

and private sectors since they guarantee effective utilization of resources and improvedadministration norms. To support this, there are various instances of booming

partnerships between public and private sectors. The wholesale market in India has been

modernized and Safal market in Karnataka is the best example for this. Cargill Farm gate

enterprise, e-Chaupal by ITC, Haryaalee Kissaan Baazar, Shubh Laabh from Mahindra,and Tata Kissaan Sansaar are all examples of marketing initiatives in the public and

private sector partnerships. Apart from these, product interactions and futures markets

have emerged as Multi-Commodity Exchange Limited (MCX) and National Commodityand Derivative Exchange Ltd (NCDEX).

Encouragement for the Private Sector Enterprises:

To promote the investments from private sector companies, to improve the infrastructure

to a minimum level, a constructive and controlled atmosphere has to be formed in order

to catch the attention of big corporate enterprises.

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In order to make this happen, the government needs to liberalize the credit policies

provided for the companies to improve their marketing strategies. It also needs to makenecessary changes to the market regulatory framework in order to prompt the private

companies to build market yards and facilities to the promotion of food products.

Increase the competency of the farmers and make them competitive with the privatefirms. The government also needs to encourage the participation of private sector

companies in formulating marketing strategies. The government also needs to bring

provisions to increase the price given to the farmers and also to reduce the risks. Anotherpossible processed food produce is meat and meat products. India stands first in global

cattle population, 50 % of buffalo population and one seventh of total goat population is

in india. Buffalo meat is excess in the country. There is huge capacity to establish recent

butchery amenities and cold storage firms in meat and meat prodcuts processingsubdivision. Indias present stage of exports of meat and meat based products is

approximately Rs 36,000 mn. In last 6 years overseas funds in this section stood at Rs

34,000 mn. which is greater than 50% of the total fundings made in this segment.

The introduction of structured retailing in the food processing sector in the recent pastand the formation of high quality space in the retail sector have improved the demand to

maintain quality in production and also to boost the investments of the private sectorcompanies in improving the infrastructure.

Initiative taken by the Reliance Company:

The scope of the food processing sector in India can be known by looking at the

investments made by Reliance Company in the food processing sector. The company is

establishing many retail outlets throughout the country in the name of Reliance Food andis also planning to venture into agri-horticulture. The company is venturing into

processed food sector by creating a win-win situation for the farmers and also for the

customers.

The retail enterprises have to work along with the farmers, distribution agents and other

retailers to improve their buying power. This can be possible by having a gooddistribution system and IT infrastructure.

2.6 Prospective in Indian Market:

Indian market is opening up for the structured retailing in food processing sector recently.

Initially there were some hiccups in the retail marketing but recently a structured business

model is being generated with the involvement of government and private sectors. Aconsiderable number of new enterprises are expected to bring in a huge change in this

sector. Already established fast food giants like Kentucky Fried Chicken, Mc Donald's

restaurant, Domino's pizza, Pizza Hut and other companies are revising their marketingstrategies and targeting their products and changing their product port folio to grab

market share and also to cater to varied classes of the society, varied customers and

different lifestyles. The plan is an effort by most of the retail giants to boost sales and

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profitability with a wide range of product port folio that concentrates on catering to the

needs of the customers and also to meet the minimum standards at a basic level.

In addition to the FDI in food processing sector, an investment of USD 63 mn by cookingoil and sugar industries has shown the vast potential of investments in Indian market.

These foreign direct investments in food sector have been more than the FDIs in hotel

and tourism sector.

As per the current Food Processing Ministry information, the overall Foreign Direct

Investments in the food processing sector have touched USD 3,626 mn in March 2009. In2008-09, the industry got approvals which amounted for USD 54 mn. which is

approximately double the figure of USD 26 mn. in 2007-08. Overseas financiers are

eager to invest in India which is evident from the over whelming interest shown by the

investors from United Kingdom for setting up combined quality control testing centersfor agricultural goods and products and also to set up cold storage centres in India.

Source: Minister of State for Food Processing Industries, Subhodh Kaanth Sahaai. The

USDA statement declares originally customer ready foodstuffs might have to be modified

to comprise Indian flavor and customary element. Adding together to customary taste,there are additional societal issues which have an effect on utilization in India. Hindus

contribute for about 80% of Indian people, and whereas only 25% or 30% are sternvegetarian, beef butchery is forbidden in all but two states (Kerala and West Bengal) and

utilization of additional meats is partial. by the way, India is the only nation where the US

based Mac Donalds sell its burgers with no beef products and even gives pure vegetarian

burgers.Remarkably, there have been a lot of changes in the food processing sector with the

investments from the private sector companies to market the food processing sector.

These private sector companies are building a unique model in the Indian context for thedevelopment of food processing sector. The entry of large scale multinational enterprises

has attracted huge investments in this sector and it has also created a positive effect in the

small and medium scale enterprise sector in the food processing segment.

This process of organizing the food processing sector will have a positive impact on the

farmers and the customers.

2.7 India's Potential market for Untapped Food Processing Industry:

India is the second major manufacturer of food in the world after China. India has thepossibility of becoming the largest with the help of its food and agricultural segment.

According to Forbes, the share of India in the food processing sector is USD 49.8 billion

within the total market of USD 121.8 billion. In India, the food processing sector is oneamong the largest sectors which contributes to the Indian economy. In India, the food

processing sector is fifth among all the sectors in terms of manufacturing, spending,

exports and development scope.

India is one among international chief food manufacturers but contributes for less than2.3 per cent of global food trade. This shows huge capacity for both financiers and

exporters. Food product exports in 2008 stood at USD 24.3 bn. where as the global total

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was USD 1468 bn. The food industry in India had a sales revenue of Rs 236,000 crores

yearly as at the beginning of year 2008. The sector needs about Rs 86,000 crores in

investment in the next 5 years to 2015 to generate essential infrastructure, increasemanufacturing facilities and latest technology to go with the global quality and standards.

The department of the Agricultural Affairs of the USDA and Foreign Agricultural

Services in New Delhi states that one among the Indias greatest achievements has beenattaining a weak self sufficiency in production of food and that the nation generates a

wide range of agricultural product at value that are equal to or less than the global rates in

most conditions. The Indian appetite is familiar to customary foods, typically wheat andrice based food, somewhat than potato and corn based western appetite. In promotion

viewpoint, this is measured an vital issue for overseas marketers.

The estimation made by the Confederation of Indian Industry (CII) predicts that the

Indian food processing segment can attract USD 54 bn. as investments in the comingdecade. It also predicted that the Indian food processing sector has the potential of

generating 12 million worker days of employment. The Government of India has devised

and executed many plans and schemes to offer monetary support for establishing andimproving food processing firms, development of infrastructure, and lending support todevelop human resource management and also research and development in the food

processing sector. These plans are aimed at the growth of the food processing sector in

India.

Although the food processing sector is vast in its size and economy, it is still at a budding

phase in terms of expansion. Research conducted by CII states that only 3% of the totalfood produced through agriculture is processed. When the utilization is considered, dairy

sector is in the top position with 37% of its total produce being processed and within this

37%, only 16 per cent is being processed through the organized sector.

Indian middle class section will be the solution to success or failure of the Indian

processed food products. Of the nations whole inhabitants of one bn, the middle class

section accounts for about 360-380 mn. although a greater part of people in this sectionhave non working house wives or can have the funds for hired household help and thus

arrange foods of their flavor in their individual kitchens, the side view of the middle class

section is varying gradually and hired household help is turning out to be costlier. This isfavorable to an increase in demand for ready made Indian type foods.

The food processing sector in India consists of a) fruit and vegetables b) meat and poultry

c) milk and milk products d) alcoholic beverages e) fisheries f) plantation g) grain processing and various other customer product segments like a) confectionery b)

chocolates and cocoa c) soya-based goods d) mineral water e) high protein foods etc. the

Ministry of food processing sectors in India takes care of the distributors, suppliers,

producers, export and import companies in the food processing sector and also works forthe welfare of the sectors like food processing sector, dairy products processing, beverage

sector etc. The responsibility of Ministry of Food Processing sector in India also covers

the dairy plants, packaging and bottling firms, process equipment etc.

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The major capable sub segments in food processing sector also consists of soft drink

bottling firms, manufacturers of confectionery products, marine, aqua culture, grain

products milling and manufacturing, processing of meat and poultry products, productionof alcoholic products, processing of milk and dairy products, other house hold

commodities like tomato, ginger, garlic paste, products related to fast food, break fast

products and ready to eat food items, food flavors, masalas and additives etc.

2.8 Initiatives of Indian Government:

The Indian Government has recognized the Indian Food Processing segment as a top

priority segment. The Indian Government has granted a lot of financial assistance and

subsidies to support the sector and provide value addition to the products. According to a

research done by Confederation of Indian Industry (CII) and McKinsey, the revenuegenerated by the food processing sector in India is almost USD 97.3 bn. and the value

added products contribute USD 46.8 bn. to it.The Government of India has also permitted

plans for partnerships with multinational companies, joint ventures and has given

industrial licenses to the food processing enterprises. The contribution of the exportoriented units (EOUs) for the investments in the food processing sector stands at USD

57.3 bn. among which the foreign direct investments account for more than USD 24.7 bn.A notable drive can be possible in this sector by intensifying relations between farmers

and food processing units. The intermediaries in the supply chain and the costs of the

products can be brought down by increasing the relation between farmers and supply

chain and also between farmers and enterprises. The Indian Governments NationalAgriculture Policy encourages the contribution of the private companies by contract

farming and giving lands for lease and thus ensure raw material supply for the companies

and sales of agricultural products, and improve the technology and investments in thissector.

The Indian Government is also planning to invest around USD 46.83 mn. to establish

about ten mega food parks all over the country. In addition, the government is also giving100% foreign direct investments (FDIs) and income and service tax exemptions to the

segment. As per the statistics of Indian Credit Rating Agency (ICRA), the food

processing sector contributes for around 39% of the total Indian food market.

Multinational Ventures:

According to Indian Credit Rating Agency (ICRA), global fast food companies arerefining their plans to enter the Indian market. Many companies like Dixy, Papa Johns,

Cinnabon, Barnie, and Burger King etc. are opening their stores all over the metros in

India. And many other UK and US companies are looking out for venturing into Indianmarket through joint ventures.

Already established fast food giants like Kentucky Fried Chicken, Mc Donald'srestaurant, Domino's pizza, Pizza Hut and other companies are revising their marketing

strategies and targeting their products and changing their product port folio to grab

market share and also to cater to varied classes of the society, varied customers and

different lifestyles. The plan is an effort by most of the retail giants to boost sales and

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profitability with a wide range of product port folio that concentrates on catering to the

needs of the customers and also to meet the minimum standards at a basic level.

With the increasing competition in the Indian market, the companies are finding it

difficult to face the competition through stand alone stores and are hence targeting the

canteens of various offices, corporate companies, educational institutions and otherpotential centres for business.

The demand for the processed food across the world is also increased by the super marketgiants like Wal-Mart, Metro, Tesco plc. and Carre four which are the sources of demand

for the processed food and hence it is a major support for the domestic companies to

venture or expand their business in this sector. The revenues generated by the food

processing sector can be around USD 50 bn. in the coming year as stated by FoodProcessing Minister Mr. Shubodh Kaanth Sahaai.

2.9 Milk and Diary Products

The milk and dairy sector requires to be mentioned because of its potential and

contribution to the Indian economy. India's milk and dairy products outcome and thesectors growth are expected to surpass the global market growth. The total output of the

worlds milk and dairy products is estimated to increase by 3.8 per cent in 2011 and the

Indian milk and dairy products output is estimated to increase by 6.2 per cent. And it is

expected that India will be contributing for more than 50% of the 4.3% growth of thesector in Asia.

As the major sole dairy generating nation in the international market, the outputgenerated by India is carrying on to increase strongly in the range of 4-5 percentage,

chiefly in reply to domestic demand expansion and continuous growing output. Out of the

428 mn. tons milk generated in Asia, India contributes for more than 50% of the output.Given the current increasing global costs, India is starting to venture into some export

businesses, especially for skimmed milk powder, and India is estimated to export 1.1 mn.

tons of the total output of dairy products constituting milk and milk products whichstands at 113.6 mn. ton. In 2009, India had generated 136.5 mn. tons of dairy based

products.

Amul is expected to be the major liquid milk brand in the international market after thegovernments initiative to merge Gujarat's milk co operatives, which aims at getting all

milk brands of various districts into Amul. Till now, Amul's promoter GCMMF asserts

itself to be the Asia's major milk brand.

According to an analysis by GCMMF, the output of the Amul Company will boost by

4.7-5.9 mn. litres a day to 5.8-6.7 mn. litres per day, when the milk brands of variousdistricts are staged out. The output of Amul Company milk will raise more by 560,000

liters if the output of liquid milk packaged in paper box packs is also summed to pouch

milk sales.

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In the meantime, the structured retailing industry of food processing in India is estimated

to increase by 43 per cent in the coming five years and develop into USD 4.8 bn. sector

by 2015 which is currently standing at USD 898 mn. as stated by the ministry of foodprocessing industry.

The exports of Indian seafood industry increased 17% and stands at USD 2.73 bn. in2008-09, aided by the growing international demand from the countries like Europe,

China and countries from West Asia. The Indian sea food exports have crossed USD 2.5

bn. for the first time in this instance. In the year 2007-2008, the sea food exports were2.38 bn.

2.10 Investments in Food Processing Sector:

The Indian food processing industry requires fundings of approximately USD 35-47 bn.

to cater to the varying demands of food industry in India, as per the Food Processing

Industry predictions. The lay out for the food processing sector has been raised from

USD 26.7 mn. in 2007-08 to USD 54.6 mn. in 2008-2009.

The investments from foreign companies which are called as foreign direct investments(FDI) are estimated to be USD 4.3 bn. in the Indian food sector. The foreign direct

investment approvals have been doubled since the last couple of years.

In addition to the FDI in food processing sector, an investment of USD 63 mn by cookingoil and sugar industries has shown the vast potential of investments in Indian market.

These foreign direct investments in food sector have been more than the FDIs in hotel

and tourism sector. The organised segment of poultry sector contributes about 70 per centof the whole production and the remaining 30 per cent is contributed by the unorganised

segment. The broiler segment is well established in southern India which contributes for

about 65 to 75 per cent of the whole output. The layer sector is also more predominant inthe southern states which contribute for about 70 per cent of the Indian production of

eggs. Out of the 75 per cent of the total egg produce in India, 25 per cent is consumed by

the customers residing in the urban and semi urban localities. Currently, there are around1000 hatcheries which are doing business in India.

As per the current Food Processing Ministry information, the overall Foreign Direct

Investments in the food processing sector have touched USD 3,626 mn in March 2009. In

2008-09, the industry got approvals which amounted for USD 54 mn. which isapproximately double the figure of USD 26 mn. in 2007-08.

Overseas financiers are eager to invest in India which is evident from the over whelminginterest shown by the investors from United Kingdom for setting up combined quality

control testing centers for agricultural goods and products and also to set up cold storage

centres in India. Source: Minister of State for Food Processing Industries, SubhodhKaanth Sahaai.

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2.11 Future Prospects:

According to the Ministry of Food Processing Industry, the overall food production isexpected to increase two fold in the coming decade and there is a scope for huge

investments in the food processing sector and food processing technologies,

competencies and machinery, particularly in fields of packaging, processing of Dairy products and Food, other specialty food products Processing, frozen products and

refrigerated food products and Thermo Processing. In the food processing industry, Fruits

and Vegetables, marine industry, dairy products, Meat products and Indian poultry sector,canned food products, beverages like alcohol and cold drinks and aerated drinks are vital

segments of the Indian food processing sector. High protein food and health supplements

are also quickly growing sector of this food processing sector, which is experiencing

huge recognition among the people who are health conscious. In India, there is an urgentrequirement to formulate a correct plan for the improvement of meat and poultry produce.

This will surely bring opportunities to a lot of the rural population and generates

employment opportunities in various parts of India. In India, there is an urgent

requirement to formulate a correct plan for the improvement of meat and poultry produce.This will surely bring opportunities to a lot of the rural population and generates

employment opportunities in various parts of India. After attaining the Blue Revolution,the Green Revolution and the White Revolution, it raises a query that Pink revolution can

be achieved? Surely this will need huge funds in equipment, especially in cold storages,

and latest meat processing firms. Since the meat sector largely depends on the cold

storage facility and hence investments are required in this filed for the survival andgrowth of the meat sector.

India stands first in the global buffalo population, with 63.7 per cent i.e. 112.4 mn. of theglobal buffalo population and one-seventh of the global goat population. India also stands

first in the production of milk which accounts for more than 125 mn. tonnes per year.

India also stands fifth in the production of eggs which accounts for more than 2.9 mn.tonnes, and stands at ninth position in the field of poultry sector. In spite of being number

one in the fields of meat and meat products, poultry and milk manufacturing, the exports

from India are very less due to the quality constraints. Among the meat and meatproducts sector, the poultry industry is the more rapidly expanding segments increasing at

a rate of 12 per cent a year. Straight down incorporation of poultry manufacturing and

marketing strategies has reduced the production costs, promotional margins and customer

prices of poultry meat. In India, there are 11 integrated units for the processing of poultry,that have an important contribution to the meat and meat products industry. After

attaining the Blue Revolution, the Green Revolution and the White Revolution, it raises a

query that Pink revolution can be achieved? Surely this will need huge funds inequipment, especially in cold storages, and latest meat processing firms. Since the meat

sector largely depends on the cold storage facility and hence investments are required in

this filed for the survival and growth of the meat sector.In a move to get rid of restrictions in the path of fundings in the food processing sector,

the Ministry of Food Processing Industries in India (MoFPI) is ready to move for forming

an encouraging economic situation to stimulate working capital and mutual funds

investments in the food processing supply chain. This is a result of the suggestions of a

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Rabo Bank research conducted by the Ministry to open funds for the industry to an

amount of USD 57.3 bn. in the food processing segment in the next decade.

Because this segment gives huge expansion prospective, a great number of multi national

enterprises (MNCs) are entering India to get the benefits of this chance. The companies

like Unilever, Parle, Coke and Nestle are a few of the large and booming internationalcompanies in India that are facing conflict from the already recognized domestic

companies.

As per a latest article published by RNCOS, the Food Processing sector in India (2008),

"In next 3 years, the Indian food processing industry is anticipated to grow to 3 times its

current size making India a key and consequential player in the food and agriculture

trade. Despite being recognized as a promising growth area, the current share of Indianfood processing market in the world food trade is only 2 percent."

The Indian food processing sector in India and the bakery food products sector have

shown a prospect for the Indian stock markets. Supply of key companies in this slowdeveloping segment has been doing well on great commercial outcomes, favorable

economic situations and favorable weather conditions. Though narrow margns will resultin bigger stock for these enterprises to stay in the market for the coming two years and

even long term run of the companies is also good since rural markets are opening up and

increasing customers in Indian market will help the sales of the companies.

Key Players in Indian market:

The key players in the Indian food processing industry are Parle Foods, Reliance group,Naamdhaari, ITC Inc., Godrej Foods, Nestle corp., Ruchee Soyaa Company, Tata group

of industries, RPG group, Subheeksha, and Dabur etc.

2.12 Retail sector benefits to the food processing sector:

As per the article of The Times of India on March 12, 2008, main companies in the retailsegment are trying hard to abolish or make amendments to the Agricultural Produce

Marketing Commission Act to increase the pace of expansion of the Indian food

processing industry since they are expecting huge returns from this sector.

According to the research done by Global consultants, Dun & Bradstreet in the 2008

projected that India misutilises about USD 21 bn. amount of farm based products, which

includes dairy products, every year due to insufficient processing and in effective storagefacilities. A study conducted by FICCI states that in spite of being the second largest food

manufacturer only after China, the share of India in the USD 8.4 bn. worldwide food

processing business is less than 2 % which has a large potential for expansion.

The study conducted by FICCI recognizes the Agricultural Produce Marketing

Commission Act as being the main obstacle hampering the expansion since it does not

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permit the processing companies to stock the fruits or vegetables and other food items for

more than one month.

This hinders the companies that process seasonal products like mango or litchi. States

like Bihar have abolished this act and are expanding in the sector and hence other states

have also followed this and are asking the government to scrap the system of givinglicense to each product manufactured by the same company.

The study also recommends a 10 year tax holiday, regulatory process, excise relief, andincentives for the food processing sector. Unique reforms have been recommended for

financiers who venture into all stages of food processing sector in an incorporated way

and for those giving more than one facility. An exemption of excise is also being

recommended in the machinery and refrigerated vehicles to draw funds and help inreducing the costs. In a move to get rid of restrictions in the path of fundings in the food

processing sector, the Ministry of Food Processing Industries in India (MoFPI) is ready to

move for forming an encouraging economic situation to stimulate working capital and

mutual funds investments in the food processing supply chain. This is a result of thesuggestions of a Rabo Bank research conducted by the Ministry to open funds for the

industry to an amount of USD 57.3 bn. in the food processing segment in the nextdecade. Because this segment gives huge expansion prospective, a great number of multi

national enterprises (MNCs) are entering India to get the benefits of this chance. The

companies like Unilever, Parle, Coke and Nestle are a few of the large and booming

international companies in India that are facing conflict from the already recognizeddomestic companies.

The available information from the ministry of food processing industry states that the

Indian food processing exports in 2007 at USD 14.6 bn. in comparison with the global

total of USD 962 bn. At the beginning of 2008, the food sector in India had a revenue ofRs 453,000 crores. This shows a huge capacity for both financiers and enterprises. In

India, only 3% of the food manufactured is processed yearly.

2.13 SWOT analysis of Food Processing Industry:

Strengths

Rich accessibility of raw materials.

India is 7th largest country in terms of its area and is a source of a variety of

raw materials useful for food processing industry. Indian population majorlyconsists of rural population whose main source of income is agriculture and

cattle breeding. Hence the raw materials for the food processing industry are

very abundant in India.

The Indian government has given Priority sector status for food processing

industries in India.

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The central Government of India has implemented policies and reforms that

are useful for the food processing sector in India. The central government of

India has also removed the restrictions in industrial licensing policy whichnow allows the industries to expand with the aid of foreign technology and

foreign direct investments. The government has given priority status to the

food processing sector. Huge system of production facilities throughout the country.

The Indian industrial reforms allow an industry to setup its manufacturing unit

in any part of the country. This allows a company to setup its venture wherethe raw materials, labor and other necessary resources are available in plenty

and also at a much cheaper rate. Thus the companies can increase their

profitability and revenues.

Huge potential in the Indian market.According to ministry of food processing in India, only 2% of the total

production in food processing is being processed. The processed food is

reaching only the urban markets which means more than 50% of the domestic

market is still untapped. Hence the potential for food processing sector inIndia is very large.

Weaknesses

Less accessibility of necessary infrastructural facilities.

Though India has abundant supply of raw materials, they are not being used in

a useful manner because of lack of proper infrastructure facilities. Many food processing industries in India are still using the traditional methods of

manufacturing due to poor infrastructure which is reducing their efficiency,

effectiveness and productivity. The lack of working capital is also a reason formany companies to use traditional methods in manufacturing.

Deficiency of required quality control and testing processes according to the

global standards.Many food processing industries in India do not have a proper quality controlsystem in place to check the quality of the products. This reduces the demand

for the Indian food processing products in the international market. Since most

of the food processing industries are small scale industries, they cannot affordto implement strict quality controls to check the quality of the products.

Inefficient supply chain due to a large number of intermediaries.

The small scale industry supply chain in India is dominated by intermediarieswho make the supply chain inefficient. These intermediaries reduce the

profitability of the industries and also make the industries to have less control

on the supply chain. The intermediaries make the supply chain inefficient by

taking a share of the profits and also by taking the control over thetransactions made by the industries.

Huge requirement of working capital.

The food processing sector requires very high working capital to run theindustries. The food processing techniques are very complex and require good

infrastructure and high technology machines in the manufacturing process.

Hence this requires a high working capital to be invested in this sector.

Scarcely developed relationship between Research and Development

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departments and the food processing industry.

In the Indian food processing sector, a very little investment is done on the

research and development which makes it difficult to have new methods andtechniques in the sector. The government and private research and

development labs have a weak linkage with the food processing industries and

hence the research done in the sector has very little scope. Seasonality of raw material.

Most of the raw materials required for the food processing sector are seasonal

and this makes the availability of the raw materials in un season moredifficult. The temperatures and climate of India make it seasonal for the

availability of some raw materials.

Opportunities

Huge raw material sources which offer a large potential for food processingactivities.

India is a vast country with plenty of availability of raw materials and hence

the scope of food processing industry in India is very large. The policies and

reforms introduced by the government for the benefit of food processingsector is also an opportunity for the food processing sector.

Establishment of Special Economic Zones and food parks to boost thedevelopment of the food processing projects.

The Indian government is establishing special economy zones throughout the

country to setup food processing industries by providing tax benefits and alsoother benefits. These special economy zones are setup to encourage the small

scale industries and also to boost their exports to other countries.

Increasing income levels and varying expenditure patterns.

Indian economy is growing at a rapid pace and the income levels of the peopleare also increasing which is a good sign for establishing industries in India.

With the increasing income levels and standards of living, people are morehealth conscious and prefer processed food.

Encouraging demographic pattern and varying life styles.

The increasing population and increasing standards of living are good

opportunities for the food processing sector. The changing mind set of thepeople to consume processed food is a real boost for the food processing

sector in India. The improving life styles of people are making them to go for

processed food.

Combination of expansion in modern technologies like electronics, material

science, and bio-technology etc. provide huge potential for fast development

and growth.

Indian government is focusing on improving the infrastructure of the foodprocessing industry by conducting research in the bio technology and other

fields related to food processing sector. The quality standards of the sector are

also being improved to make the products more saleable. The advancement inthe infrastructure will increase the effectiveness, efficiency and productivity

of the food processing sector.

Opening of international markets.

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After globalization the global markets have opened up and hence the scope of

foreign direct investments and exports are huge. The Indian trade policies are

also favorable for the foreign direct investments in the food processing sector.Thus the international markets are providing good scope for the food

processing sector in India.

Threats Accessibility and cultural constraints regarding processed food.

Though the income levels of people are increasing, the majority of the

population in India belongs to rural areas which reduces the market ofprocessed food since rural area population cannot afford processed food.

Moreover the Indian culture encourages fresh food from farm and hence do

not support the concept of processed food and frozen food.

Huge inventory maintenance costs.Most of the raw materials in food processing industry are perishable and

hence a lot of investment has to be done in maintaining the inventory. Hence

the inventory carrying cost in food processing industry is very high.

High rate of taxation.Though the government has reduced the tax on food processing sector, it is

still high compared to the other small scale industries. The domestic sales andalso the exports of the food processing industry are heavily taxed in

comparison to the other small scale businesses.

High packaging cost.Since the products of the food processing sector are perishable, utmost care

needs to be taken in the packaging of the products. The products need to be

packed in special packages which make the packaging costs high in this

sector.

2.14 Food processing sector in India:

India stands in the top position in the cattle and animal number. In India, the meat and

meat processing sector is yet to arise. Some of the major companies in the meat and meat

products processing sector like Venkateshwaraa Hatcheries, Al Kabir, Allaanasons,Godrej Agrovet etc., which have latest high-tech slaughter and processing units, have

transformed the whole picture, making the sector to expand at approximately 16 per cent.

There is an enormous capacity for increasing exports, particularly in buffalo meat andpoultry meat, poultry eggs and dairy products.

In India, there is an urgent requirement to formulate a correct plan for the improvement

of meat and poultry produce. This will surely bring opportunities to a lot of the ruralpopulation and generates employment opportunities in various parts of India. After

attaining the Blue Revolution, the Green Revolution and the White Revolution, it raises a

query that Pink revolution can be achieved? Surely this will need huge funds inequipment, especially in cold storages, and latest meat processing firms. Since the meat

sector largely depends on the cold storage facility and hence investments are required in

this filed for the survival and growth of the meat sector.

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the South India are investigating the chances of increasing the exports of poultry meat to

the Middle East and South-East Asian markets.

In India, there are no limitations on the poultry and poultry products exports. The Indian

government offers some logistic grants (Rs 4-18 a kg) to boost the exports. And also,

there are a lot of concerns that have to be identified in order to boost and make sure thatthe expansion for the existing markets, as stated by the industry sources.

For the improvement of exports of meat products from India, the food processing sectorhas requested for some instant actions like monetary help for improvement of abattoirs

and processing plants for the exports. Addition of buffalo meat as per the Transport

Assistance Scheme of APEDA for emerging markets in Africa and CIS in which the

transport cost from India for containers and vehicles is a lot greater than that of the rivalnations. Reinstatement of DEPB costs for frozen buffalo meat products, exclusion from

service tax levied on shipping of meat and meat products which are processed for the

purpose of exports from India. This is currently appropriate for the sectors like fruits and

vegetables, poultry products and milk for domestic consumption.

2.16 Industrial Growth:

Since 1995, there has been a steady growth rate of 4 per cent yearly in the manufacturing

of meat and meat products. At present, the level of processing the buffalo meat is

predicted at 31 per cent, poultry products at 6 per cent and fish and marine products at 8per cent. But only a mere 2 per cent of the total production of meat is transformed into

value added goods and products like meat balls, sausages, bacon, ham, and kebabs, etc.

The meat production is administered under the local policies and slaughtering isadministered by the state laws. Meat processing is licensed by the Meat Food Products

Order, 1973.

In the year 2008, there was a total population of 626 mn. of buffalo and cattle that

consisted of 346 mn. cattle and 125 mn. buffaloes. India manufactures approximately 635

mn. broilers and about 64 bn. eggs yearly. Meat production is generally done by usingmeat sources like cattle, buffaloes, sheep, goat, pigs and poultry etc. The processing rate

of cattle on a total is 32 per cent, and 56 per cent for buffaloes, 99 per cent for pigs, 30

per cent for sheep and 52 per cent for goats. India on a whole has 4,800 slaughter houses,

18 latest abattoirs and 257 units that process meat which are licensed according to themeat and meat products order.

Among the meat and meat products sector, the poultry industry is the more rapidlyexpanding segments increasing at a rate of 12 per cent a year. Straight down

incorporation of poultry manufacturing and marketing strategies has reduced the

production costs, promotional margins and customer prices of poultry meat. In India,there are 11 integrated units for the processing of poultry, that have an important

contribution to the meat and meat products industry.

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Exports of Food processing sectors (Quantity in MT, Value in Rs Mn)

2007-08 2008-09 CAGR

Quantity Value Quantity Value Quantity Value

Buffalo meat 243356 11444 306971 16156 8.0 12.2

Sheep/Goat meat 3915 331 8885 794 31.4 33.9Poultry Production 19876 1301 264608 1541 137.0 5.8

Animal Casings 464 96 552 126 6.0 9.3

Processed Meat 267 13 107 16 -26.2 6.5

Total 267878 13185 581123 18633 29.5 12.2

Source: Ministry of Food Processing Industries, Annual Report 2009-10.

The exports of meat have been rising at approximately 30 per cent a year considering the

quantity that is manufactured and it majorly consists of meat generated from goat,poultry, sheep and buffalo. But the exports of meat products that have value addition are

negligible. In the Indian market, the increasing number of fast food firms is having animportant effect on the meat and meat products processing sector.

2.17 Indian Poultry Sector and Its Future:

It is imagined that the poultry industry in India is about 5,000 years old. And from the

last 40 years, this sector has seen a lot of development and growth in India.

The organised segment of poultry sector contributes about 70 per cent of the whole

production and the remaining 30 per cent is contributed by the unorganised segment. Thebroiler segment is well established in southern India which contributes for about 65 to 75

per cent of the whole output. The layer sector is also more predominant in the southern

states which contribute for about 70 per cent of the Indian production of eggs. Out of the75 per cent of the total egg produce in India, 25 per cent is consumed by the customers

residing in the urban and semi urban localities. Currently, there are around 1000

hatcheries which are doing business in India.

Per capita consumption in India:

As per the recommendation of National Institute of Nutrition, 180 eggs and 11 kg of meat

is recommended for India as per capita consumption. Currently,

1. Per capita availability of meat in India is 1.6 kg.

2. Per capita availability of egg 42 eggs.3. Average consumption of eggs in big cities is 170 eggs.

4. Average consumption of eggs in smaller cities is 40 eggs.5. Average consumption of developed rural areas is 20 eggs.

6. Average consumption of undeveloped rural areas is only 5 eggs.

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About 20 per cent of the population of India is vegetarian. But with the increase in the

middle class population and shifting of the population to cities has changed the tastes of

the Indian population.About 3 mn. farmers and 15 mn. agrarian farmers are working in the Indian poultry

sector that cultivate ingredients for the poultry sector to use them as food for the poultry

and thus contribute approximately Rs 53,000 crores to the Indian economy.India stands at 5th position in the manufacturing of eggs and stands at 9 th position in the

manufacturing of poultry meat. India stood at seventeenth position in the global

production of poultry. The poultry production in India is termed to be the most costeffective in the world. Major broiler Companies in India are listed below:

Venkaateshwara Group, Maharashtra.

Shugunaa Poultry Farms Ltd, Tamil Nadu.

Pioneer Group, Tamil Nadu.

Godrej Agro vet Ltd, Maharashtra.

Sky Lark group, Delhi.

Jaafa comp feeds Haryana.

These firms contribute for almost 40 per cent of broiler sector production andinvestments. Pioneer group launched the idea of contract farming way back in 1980 and

the idea of incorporation was launched by Sugunaa group in 1990s. The process of

poultry farming became famous and feasible task by the mid 60s and the actual drive toimprovement came in 1971 with the incorporation of Venkaateshwara Hatcheries Private

Limited. The development of poultry sector was done by the central Poultry Breeding

Farms in 1959 and various agencies like ICAR (CARI) accounted for the Research and

development in this sector.

Latest improvements in the poultry sector:

1. NABARD has dedicated to get rural progress through poultry sector.

2. Indian government has proposed to get investments worth Rs 2295 crores for the

development of poultry sector in the 11 th five year plan. and Rs 45,000 crores forthe whole country.

3. Indian government has reinstated exports of egg.

4. International Finance Corporation which is a Washington based company has

bought share in Sugunaa farms. Sugunaa farms laid the path for expansion ofpoultry business in North India through innovative concepts.

5. Venkaateshwaraa Hatcheries is using various events to promote its brand.

6. The government is giving poultry feed at discount rates for the farmers.

7. Poultry tourism has been encouraged by the Kerala livestock development boardin Munnaar.

8. Poultry wastes are estimated to bring carbon credit in Andhra Pradesh with theproposal of a 3.5 mw power plant.

9. Godrej Agro vet Ltd launched a wide range products in the processed form in the

name of Godrej Real Good Chicken.

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2.18 Fruits and Vegetables Sector in India:

The current ability of fruits and vegetables sector in India has improved from 2.3 mn.

tonnes in the year 1993 to 4.8 mn. tonnes in the year 2009. The fruits and vegetablessector is processed for just about 2.2 per cent of the whole production in India. The main

processed products in the fruit and vegetable sector are jams, juices, fruit pulps,beverages, processed and packaged fruits and vegetables, milk shakes, pickles, and other

produces of fruits and vegetables. Some latest product range launched in this sectorconsists of veg curries in retortable packs, packaged mushroom and mushroom products,

concentrates of juices, and dry fruits.

The processing of fruits and vegetable sector is a largely decentralized sector, and a

major amount of firms are in the micro sector or house hold sector or small scale

segment, with very less outputs of about 250 tonnes a year. From the year 2000, the foodprocessing sector has witnessed major expansion in ready made drinks, packaged fruit

juices, dry and frozen products, vegetable pickles, mushrooms and vegetables are

processed to enable them to be exported.

Exports Of Fruit & Vegetables

(Quantity in MT, Value in Rs Mn)

2004-05 2008-09 CAGR

Quantity Value Quantity Value Quantity Value

Dried & Preserved Vegetables 209157.8 5371.5 351034.3 7657.5 18.8 12.5

Mango Pulp 76735.18 2413.4 90988.6 3008.6 5.8 7.6

Pickles & Chutney 38758.97 1203.4 67193.29 1205.8 20.1 0.1Other Processed Fruits & Vegetables 61332.39 2017.4 80760.5 2755.3 9.6 10.9

Total 385984.3 11005.7 589976.7 14627.2 15.2 9.9

Source: Ministry of Food Processing Industries, Annual Report 2008-09

The Indian food processing sector has to transform its choices in support of processed

fruits and vegetables. Utilization of fruits and vegetables which are processed are less in

comparison with the primary processed food and unprocessed fruits and vegetables. The

demand for processed food is mostly evident in ciites because of the increasing spending

capacities. For the improvement of exports of meat products from India, the food processing sector has requested for some instant actions like monetary help for

improvement of abattoirs and processing plants for the exports. Addition of buffalo meatas per the Transport Assistance Scheme of APEDA for emerging markets in Africa and

CIS in which the transport cost from India for containers and vehicles is a lot greater than

that of the rival nations. Reinstatement of DEPB costs for frozen buffalo meat products,exclusion from service tax levied on shipping of meat and meat products which are

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processed for the purpose of exports from India. This is currently appropriate for the

sectors like fruits and vegetables, poultry products and milk for domestic consumption.

A notable drive can be possible in this sector by intensifying relations between farmers

and food processing units. The intermediaries in the supply chain and the costs of the

products can be brought down by increasing the relation between farmers and supplychain and also between farmers and enterprises. The Indian Governments National

Agriculture Policy encourages the contribution of the private companies by contract

farming and giving lands for lease and thus ensure raw material supply for the companiesand sales of agricultural products, and improve the technology and investments in this

sector.

Modern activities like contract farming are implemented by large companies likeHindustan Lever Ltd and Pepsi Foods Ltd have transformed the farming process and

introduced new technology and increased the productivity of the sector. Along with these

activities, monetary benefits and tax exemptions have given momentum to the food

processing sector in India. The fruit and vegetables sector was benefited by the 100 percent tax exemption given by the Indian government in the year 2005.

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Research Methodology:

The aim of the research is to know the scope of food processing sector in India. In order

to achieve this aim, the research methodology consists of Primary as well assecondary research methodologies. The primary research consists of telephone

interview and sending online questionnaires to the target sample. The target sampleconsists of the managers of the food processing enterprises in India, employees of

food processing industry of India. The methods of conducting research viz. onlinequestionnaires and telephone interviews are intended for the whole target sample,

but telephone interviews are conducted with the employees with designations less

than a manager and who do not have access to internet. Online questionnaires aregiven to managers and top level managers with more skills. Finally, it would be the

choice of the interviewee to opt for telephone interview or online questionnaire.

The secondary research consists of collecting the information through various journals,

websites, and literature etc. The scope of secondary research is more in this topic

because the information regarding the small scale businesses and industries can beretrieved from the government websites and various journals released by the

government. Thus secondary research has a lot of role to play in gathering theinformation in the project. The information gathered is mostly qualitative data.

Various methods to analyze the data will be used as required during the project.

3.1 Research Questions:

The research questions are aimed at finding the scope of small businesses in India and it

can be achieved by answering the following questions.

What are the opportunities for small scale food processing enterprises in India? What are the business challenges faced by the small scale food processing

businesses in India?

What strategies are formulated by the small scale food processing enterprises to

tap the opportunities and overcome the challenges?

What are the various factors that need to be considered by the small scale foodprocessing businesses to improve their performance?

Why do most of small scale industries fail to survive in the market?

What are the various policies and reforms introduced by the government toencourage the small scale businesses in India?

The research questions can be modified and new questions may be added to the researchquestions to widen the scope of the research.

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3.2 Structure Of Research:

Contribution and Expected Outcome:

The reason for selecting this topic is its wide scope of research since a developing

country like India has a huge potential for growth and has a huge market. The foodprocessing sector in India is encouraged by the government through its policies and

reforms. This topic has a scope of addressing the problems in the management of the food

processing enterprises and the various solutions to overcome the problems. The outcomes

of the project will identify the various factors that affect the food processing sector inIndia. I would be able to know the various aspects of food processing sector and the

various market conditions in India to setup and manage small scale food processingcompany in India. It also helps to formulate various strategies to overcome thecompetition and to gain competitive advantage over the competitors in the market. On the

individual front it helps me to setup my own small business in the future and get a good

command over the food processing inductry in India.

Introduction

Conclusion

Analysis Of Research

Research Methodology

Literature Review

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3.4 Purpose of research:

According to Locke, Spirduso and Silverman, (2000) the purpose statement indicates

why you want do the study and what you intend to accomplish. The situation of thisresearch topic is dependent on the approach used for the research (Creswell, 2002). As

per Collis & Hussy, (2003) research methods support the objective of the research since it

is the method by which the researcher tries to get the answers from teh participants andthus achieve the aim of the research. Zikmund, (2010) categorizes the research techniques

used in various researches are exploratory, descriptive and casual.

The exploratory research is performed to explain vague conditions or find out

prospective business chances Zikmund, (2010).

The descriptive research is performed to explain the matter, individuals, groups,

enterprises, or conditions. It tries to conceptualise the given condition Zikmund,

(2010).

The casual research is performed to allow informal inherence in the research; it aims atbriniging in cause and effect relation ship Zikmund, (2010).

After going through various features of the various research techniques, i have usedexploratory approach to find out the scope of food processing business in India.

Research Philosophy

As per (Saunders et al., 2007) research philosophy is The means in which you think isbased on the means by which you perceive about the improvement of knowledge, and the

means in which we perceive the knowledge determines the means by which we go use

various research methods

There are three kinds of research philosophies and they are positivism, interpretivism,

and realism.

Positivism:

As per Denscombe, (2002) positivism is an method to social research that aims to

apply the natural science method of conducting research to investigate the social

phenomena and description of the social world

Interpretivism:As per Easter bay Smith, Thorpe D & Lowett, (2009) interpretivism is a prcess which

focuses to the lead the real meaning of the research phenomena and the additional data

Realism:

As per Saunders et al., (2007) realism is a process which relies on the idea of thefreedom of human feelings and benifits.

And now, by examining all the definitions of the research philosophies, i have used

positivistic research philosophy to accomplish the aims and objectives of the research.

The research is done by conducting interviews with the industry related participants to

know their views and opinions regarding the food processing industry.

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Research approach:

The mixture of both research approach and research philosophy will aid the researchers

to gather the data related to the research. This data will be examined and analysed to

achieve the aim of the research. There are two kinds of research approach. They areinductive research approach and deductive research approach.

Inductive approach:Baker & Foy, (2008) stated that the inductive research approach is a research approach

that starts with the gathering of information and gives the general conclusions to theresearch. Inductive approach consumes a lot of time to finish the research. But the main

benefit of this approach is that the data is very precise.

Deductive approach:

As per Bryman & Bell, (2007) a deductive approach is used to bring the association

betwen theories and resarch in which the later is condcted with refernce to hypotesis andopinions infered from the former. In general, this approach examines the current results

which will be required for the positivistic philosophy method. The process of deductiveapproach is taken from the secondary research methods. The research aim can be taken

from the research findings. Deductive approach is extremely simple to track and the

outcomes will be accomplished in a less time period. Many of the researchers and authors

use the deductive approach since it is not complex like inductive approach.

In the current research, the mixture of inductive and deductive approaches is used. The

information regarding the food processing industries in India is gathered from the avariety of secondary data sources and the views and opinions of the industry related

people are taken to draw a conclusion regarding the outcome of the research.

Research strategy:

The research strategy mostly relies on the rationale of the research and the researchproblem (Gauri & Grhaug, 2004).

There are two kinds of research strategies. They are Qualitative research strategy and

Quantitative research strategy.

Qualitative research:

Zikmund, (2010) describes qualitative research as a study that concentrates on businessobjectives and technics that guide the resarcher to give wide interpretatins of the

methods without relying on numerical measurment; its aim is to discover real inner

opinions and new insites. Qualitative research method mostly relies on the

understandiing of the reseaarchers reagrding unstrcutured infromaiton.

Quantitative research:

Zikmund, (2010) describes qualitative resaerch as a resaerch that adresses resaerch

objcetives throough emperical asessments that include numeircal measrument and

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anaylsis. In the Quantitative research method, the resaercher gahters the information

from the different data gathering methods and anlayses it by varoius data anlaysis

metohds.As per Philip (1998) researchers should consider ahead of the narrow-minded

quantitative and qualitative difference when it comes to planning an appropriate method

for the research. The researcher should choose the methodology whether it is quantitativeor qualitative or both which suits the reaserch.

In this research, the data collected is in the form of the views and opinions of the target

sample which is qualitative and hence qualitative method is used in the research. The datais collected through questionnaires and interviews and the data is analysed to draw an

appropriate conclusion.

Research methodology:Primary data:

Primary data is collected by the using the methods such as surveys, observations and

interviews etc. Most of the researchers are highly reliable on this method because it is

collected by the researcher with his own understanding for the research. Most of the timeprimary data is essential when the secondary data is not available for the research.

Crowsher & Lankaster (2007) defines primary data as, Primary data can only be

collected for the purpose of research and it cannot be readily exist.

Research design:

Saunders et al., (2005) defined questionnaires as a common term to comprise all

methods of data gathering in which each individual is requested to react to the similargroup of questions in a pre determined form.

In this research, the data is primarily collected through questionnaires and interviews.The views and opinions of the target sample are collected and analysed to find out the

scope of the food processing business in India.

To gather the qualitative data, interview has been taken as data collection method.According to Zikhmound, (2006) an interview is a research method in which a set of

participants is questioned in some format or the behavior of participants is examined andexplained in some manner.In the interview process, the individuals answer the questions asked by interviewer and

sometimes they read the questionnaires and answer them.

Sampling of data:After sending the questionnaires through online and also by conducting telephone

interviews, the responses of the participants have been recorded and these responses are

considered to draw a conclusion on the scope of food processing business in India.According to Zikmund, (2007) data sampling Involves any procedure that draws

conclusions based on measurements of a portion of the population.

Data analysis:

Zikmund, (2010) defines data analysis as application of reasoning to understand thedata that have been gathered. The results of the research are analysed as simple

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conclusions. By having simple conclusions, it is easy to understand the report in a better

manner.

Ethical Consideration:As per Saunders et al., (2007) ethics are defined as the appropriateness of your

behaviour in relation to the rights who become the subject of your, or affected by it. As

per Denscombe, (2002) the acceptability of social research depends increasingly onthe willingness of social researchers to accord respect to their subjects and to treat them

with consideration. In conducting this research, the ethical rules of the University are

followed. The information gathered is used for this project purposes only and the namesof the participants are kept confidential as per the request of the participants. The privacy

of the respondents is respected and no personal information is collected in the research.

In this research the participants were not forced to give responses or to participate in the

research. The Acceptance of the participants is taken before conducting the interview.Confidentiality is maintained throughout the research.

Constraints and Limitations:

This research is dependent on a small target sample and hence the findings may not beprecise. Most of the researches have their limitations. As per Bryman & Bell, (2007) the

major constraint for most of the researches are the lack of familiarity and no control

over data control. In this research, the participants are selected randomly and the

sample size is small. Time is also a constraint for this project since the participants may

not give time to give their response and hence some important people in the industry

could not be interviewed.

3.5 Research Findings:

In this chapter, the findings of the research will be explained in the form of a report. A

total of 32 participants have taken part in the research. Most of the participants wereemployees of private sector companies in a managerial position and the others were theemployees of ministry of food processing industry. The participants were interviewed

over telephone and the responses were drafted. The questionnaire did not have a

structured set of questions since the questions were framed during the time of theinterview as per the response of the participants. Online questionnaires were not sent to

the participants since most of them did not have access to internet. The findings of the

research are compared with the information collected through secondary researchmethods. The findings of the research are drafted as per the aims of the research.

What are the opportunities for small scale food processing enterprises in India?

The participants have responded in a positive way for this question and stated that the

opportunities for the food processing enterprise in India are good. They gave a variety ofreasons starting from Indian market to government policies to customers to technology

etc. as the reasons for opportunities of food processing business in India. 72% of the

participants stated that since India

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