FNB News - India 4th-largest in Asia for packaging machinery sales

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INTERVIEW

India 4th-largest in Asia for packaging machinery sales

Monday, 21 July, 2014, 08 : 00 AM [IST]

In an e-mail interaction with Anurag More, Rajesh Nath, managing director, German Engineering Federation (VDMA), spoke about the packaging machinery industry and their challenges.

How big is the packaging machinery industry for the food and beverage (F&B) industry? What kind of machinery we import, and from where? What is the scene with exports? Are we manufacturing enough?
The global beverage and food industry is a highly-dynamic growth market, and the global spending on food and beverages would continue to rise. According to estimates issued in 2013, three billion Euros were spent for packaged food and beverages globally, and the demand is expected to rise to 3.4 billion Euros in 2017. This is an increase of 28 per cent.

In 2012, the export of food processing and packaging machinery to Asia reached a volume of 7.5 billion Euros. India is the fourth-largest sales market in Asia for food processing and packaging machinery. India imported food processing and packaging machinery worth 664 million Euros in 2012.

A look at the supplier countries shows that food processing and packaging machinery made in Europe are highly valued. Forty per cent of total deliveries come from Europe, whereby Italy with a share of 19 per cent was India’s most important trading partner in 2012, followed by Germany with 16 per cent.

In 2013, out of the total import volume of food processing and packaging machinery from Germany to India (estimated to be approximately 132.4 million Euros), the highest share of machinery import was packaging machinery, with a total volume of together 79.1 million Euros. Of this, beverage packaging machinery accounted for 30.9 million Euros and other packaging machinery accounted for 48.2 million Euros.

What kind of support does packaging machinery industry gets from the government?
The government of India has ultimately taken the decision to allow 51 per cent foreign direct investment (FDI) in multi-brand retail.

This decision has been described as a step forward to open the retail sector for the world's renowned brands’ entry into India.

Leading industrialists have reacted with a great sense of relief. The domestic industry hopes that the spate of economic reforms announced by the government would be a mood lifter, improving the global perception on India and having a positive effect on its sovereign rating.

The government has also approved proposals for joint ventures, foreign collaboration, industrial licenses and 100 per cent export-oriented units (EOU), envisaging an investment of Rs 19,100 crore during the same period. Out of this, foreign investment is over Rs 9,100 crore.

Where does India stand in terms of food and beverage supply chain compared to developed countries?
Eating and drinking are basic human needs and people respond to these needs in a way that is largely untouched by the ups and downs of economic developments.

With the world’s population increasing, more processed and packaged food and bottled beverages will be consumed. Some 742 million tonne processed and packaged foods were sold in 2013 globally.

Market researchers predicted that by 2017, the demand for modern processed and packaged foods will have increased by eleven per cent annually to around 829 million tonne.

Already today, in Asia, Latin America, the Middle-East and Africa, large growth markets for packaged foods have emerged. These three regions together combine over 55 per cent of the retail volume.

In Asia alone, around 215 million tonne processed and packaged foods were sold in 2013 and is expected that by 2017, the demand for modern processed and packaged foods would have increased by 23 per cent annually to around 265 million tonne.

With a sales volume of 30 million tonne in 2013, India is one of the largest markets for packaged food in the world, just behind the United States, China, Brazil and Mexico, and the second largest in Asia.

But with a per capita consumption of 24kg per year, the Indian packaged food market is still at an early stage, and there is room for growth.

Last year, 899 billion litre beverages were consumed globally. One-third of the entire global beverage consumption (approximately 277 billion litre) was consumed in Asia. Indian consumers drank 22 billion litre beverages (alcoholic and soft drinks) last year and the demand is expected to rise by 80 per cent till 2017.

What are the hurdles faced by supply chains?
The food supply chain structure in India is more complicated, with perishable goods and an uncountable number of small stakeholders and farmers.

The road and rail networks, and other infrastructure connecting these partners, are very weak.

Another major issue is the unorganised structure of our agriculture. We do not have one farm produce stretched at hundreds of hectares. Here farmers, wholesalers, manufacturers and retailers deal in small quantities.

With the kind of climatic conditions India has, what kind of packaging does Indian food and beverage sector require?
For raw and processed foods, India needs packaging material which is suitable to the country's climatic variations.

The country's heat and high humidity are two problems that can reduce the shelf life of packaged goods. It would be particularly important to focus on the seals and maintaining their integrity.

But more important than the climate is perhaps the lack of a good supply chain or refrigeration in retail outlets and at home. This is a big barrier to many of the packaged food formats familiar to consumers in the West.

At the same time, a heavy focus on cost means that cheaper flexible packaging formats are often chosen over rigid packs. The former may offer greater protection for the product, but would force a higher retail price.

What are the challenges and opportunities faced by the F&B machinery?
India is one of the largest consumer markets worldwide, and the second largest producer of foodstuffs in the world.

The shortage of skilled labour and food safety concerns are the key challenges F&B machinery in India.

The high consumer spending on food and beverages presents an opportunity for food and beverage machinery in India.

In India, the demand for packaged food, convenience products and beverages is stipulated by:

The large young population;
The increasing number of working women and single households;
A growing middle-class and rising disposable incomes;
Ongoing urbanisation, and
The growth in organised retail

How is the industry coping to those challenges?
The shortage of skilled labour and food safety concerns are the key challenges for the food processing industry, and these are encouraging food processors to invest in automation.

Many conventional processes for making Indian ethnic snacks are being converted to automated lines.

Many companies, both Indian and foreign, are planning big investments in the food processing segment.

What new trends is the industry witnessing?
India, with a population of more than 1.2 billion, is one of the largest consumer markets in the world.

Food and beverages, with a share of 26 per cent, is the largest category in Indian consumer spending and is expected to remain in future.

The country’s highly-favourable demographic patterns, with more than 50 per cent of the population is below 25 years, has an increasing disposable income, ongoing urbanisation and a changing lifestyle would enforce shifts in the Indian food and beverage industry, as the young population are one of the key drivers of the demand for processed and health foods.

Manufacturers would continue to introduce products that increase convenience and reduce the time required in preparation of meals. Products with additional ingredients, in easy packaging and convenient pack sizes would continue to gain popularity.

Could you throw some light on the local machinery used by packaging firms in India, and how is it different from the imported ones?
The German manufacturers of food processing, beverage and packaging machinery literally build technology for people.

In doing so, they are able to offer the whole range, from simple technology to high-tech solutions for the highest demand.

Their advanced technology and the variety of their products, which are optimally tailored to the specific customer requirements, strengthen the economic performance of Indian manufacturers.

The German machineries are different from the local ones in terms of:

Leadership in technology;
A wide range of machinery - from basic up to state-of-the-art machinery;
Customised and tailor-made machinery to cater to customers‘ individual needs and applications;
High flexibility of machinery;
Interfaces for the integration into processing and packaging lines;
High reliability and availability through continuous quality improvement;
Low-maintenance design to reduce life-cycle cost;
Low service cost due remote diagnosis and preventive maintenance, and
International presence through own subsidaries or agents

What type of packaging is more in demand in India for the food and beverage sector?
Be it the production of confectionery or cookies, sandwiches, bread and other baked products, meat and meat products, beverages, dairy products, or other convenience products, the processing stages in the production and filling of food and drinks are diverse and distinct worldwide.

Rigid and flexible are the two most significant types of packaging in use today. Rigid packaging dominates with about 80 per cent market share.

However, there is a shift in demand, and the demand for flexible packaging is increasing.

The key advantages of flexible packaging over rigid packaging include lightweight, small pack sizes, energy savings, ease of storage, transportation and convenient disposal.

The flexible packaging industry is estimated to be valued at $900 million, growing at about 20 per cent annually.

Plastics, paper and metals are the key materials used in flexible packaging products, which are made from foil or paper sheet or laminated paper and plastic layers.

Food and fast-moving consumer goods (FMCG) industries are the largest consumers of flexible packaging products. Food accounts for 38 per cent of the flexible packaging market.