Pasta Import India (Part I)

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2 PASTA IMPORT INDIA.PPT
Executive Summary
Market
Drivers &
Challenges
Entry Route
Rules and
Regulations
Drivers: Consumers developing tastes for international cuisines, strong growth in organized retail,
and government policy towards boosting the industry
Challenges: Lack of widespread consumer awareness, duty and tax structure, inconsistent
supplies, and competition from unorganized sector
Estimated worth USD 8.5 mn in 2008
Unorganized sector has a monopoly over domestic production
Largest exporter is Nepal
Barilla and San Remo are the most popular brands
Two possible approaches
Importing though agents
Setting up local operations
Importing through agents is the preferred route for foreign brands
Developing manufacturing unit locally is economically unjustified
Pasta imports attract specific import duties and local taxes
Food safety norms set by the government need to be followed
The law requires specific information to be displayed on the packaged good
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3 PASTA IMPORT INDIA.PPT
Market Overview
Drivers & Challenges
Entry Route
Rules and Regulations
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4 PASTA IMPORT INDIA.PPT
Italian is a popular cuisine in India and is driving growth in pasta
imports
Food imports are increasing by 15% p.a.
Italian food and especially pasta is one of the
most popular foreign cuisines, predominantly
in urban areas
Domestic production exists with unorganized
sector accounting for 97% of the market
However, there is a healthy demand for
imported pasta, which has grown:
17% p.a. by value
21% p.a. by volume
Uncooked pasta accounts for the bulk of imports
although other types (except uncooked or stuffed)
category is growing extremely fast
Barilla and San Remo are two popular
imported brands
Overview
Source: Ministry of Commerce & Industry EXIM Data Bank; Austrade Post in India Opportunities in India: Imported food segment
Size and Growth
Largest Exporting Countries (2003-2008)
71%
Nepal
19%
10%
Italy
Others
0
2
4
6
8
10
0
200
400
600
800
1,000
1,200
2004 2007 2006
Volume
2008 2005
000 kg
+17% Value
USD mn
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5 PASTA IMPORT INDIA.PPT
Market Overview
Drivers & Challenges
Entry Route
Rules and Regulations
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6 PASTA IMPORT INDIA.PPT
Drivers & Challenges
Government Initiatives
Growth in organized retail industry
Demand generated due to changing
tastes and attitude
Drivers
Inconsistent supplies
Government rules and regulations
Competition from unorganized sector
Creating Awareness
Challenges
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7 PASTA IMPORT INDIA.PPT
The strong demand that has been generated via changing
preferences is the major driver
In urban areas, frequent travel and greater global awareness is a major influence in broadening
the Indian consumers taste for foreign cuisine
Italian food is gaining universal popularity has become one of the most popular foreign cuisines
in India
Further, pasta as an ingredient is very adaptable thereby making it a popular choice for
vegetarians, which exist in large numbers in India since 30-40% of Hindus are vegetarians
However, it is largely restricted to the urban elite and upper middle class sections of society,
which yet account for a large numbers as well as high levels of disposable income
Demand generated due to changing tastes and attitude
Source: Merinews Opportunity for food processing industry in Bihar , April 2008; McKinsey Global Institute Rise of Indias consumer market
3%
12%
34%
33%
18%
281
2025
Globals
Strivers
1% 1%
5%
44%
49%
207
2005
1%
2%
23%
43%
30%
244
2015
Seekers
Aspirers
Deprived
23%
34%
15%
3%
90
2025 2005
15%
9%
34%
33%
9%
44
2015
24%
9%
7% 13%
49%
23%
24
>1000
500-1000
200-500
90-200
<200
Per household
annual income (INR)
Total No. of Household
(millions)
Aggregate Annual Disposable
Income (INR trillion)
Core target
consumer
groups
Impact
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8 PASTA IMPORT INDIA.PPT
The growth in the retail sector and minor government initiatives
is expected to create further demand
Imported foods receive maximum mileage through organized retail outlets since they provide
higher visibility and promote the touch and feel concept
Retail market is expected to grow at 13% p.a. over the next five years with organized retail
expected to account for a larger share of around 40% compared to less than 5% currently
Growth in organized retail, which is the best channel to target the core consumer group of
affluent urban individuals, will act as a growth driver for imported foods including pasta
Growth in organized retail industry
Realizing the growth of imported pasta, the government has been proactive towards making it
more affordable
2006-2007 budget exempted all such products from central excise duty
Introduction of an integrated food law which is expected to:
Create a superior market mechanism
Growth in supply chain infrastructure
Government Initiatives
Impact
Source: Indian Budget 2006-2007; Department of Commerce Government moving towards integrated food law to make Indian food industry globally competitive; April
2006; CBRE Indian Retail, July 2008
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9 PASTA IMPORT INDIA.PPT
The major challenge is in increasing awareness in the target consumer
demographic and inconsistent supplies in the market
Manufacturers or importers need to create further awareness in order to grow the market
Within the target demographic too, consumption is largely at restaurants and not cooking pasta
at home. Increasing awareness through marketing could help consumers get accustomed to
cooking pasta at home and grow the retail channel.
Create more awareness
Prices are artificially inflated due to taxes and import duties, which if reduced further can
increase consumption
Tax and import duty revisions could be explored to determine if it benefits the market
Government rules and regulations
Many importers move quickly from product to product, which leads to inconsistent supplies
Small importers are unwilling to develop a market by investing time and effort unlike larger
importers such as specialist retailer Godrej Agrovet or importer R.R. Oomerbhoy
Inconsistent supplies
Impact
Source: just-food Imported food market in India set for further growth, January 2007;
Inconsistent supplies
Apart from a few domestic major manufacturers, there is a large unorganized sector producing
pasta products
These are often priced far lower than foreign products due to import duties and lower quality
Competition from domestic manufacturers
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10 PASTA IMPORT INDIA.PPT
Thank you for the attention
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