Frozen Food Market in India

By P. Rajan Mathews

Frozen Food in IndiaA survey by industry body Associated Chambers of Commerce & Industry (Assocham) in 2015 predicted that India’s packaged food market is set to witness a quantum jump to $50 billion by 2017 from $32 billion at present due to increasing popularity of ready-to-eat packaged foods. More households in urban India have been associating ready-to-eat food with convenience, fuelling the sale of packaged food at an average annual rate of 32.5 percent between 2010 and 2015. Rising disposable income and a younger demography of households in the top metros also mean that over the next two years consumption will surge across categories of packaged food such as packaged beverages, dairy products, snacks, Frozen foods, Ready to Cook and Ready to Eat and baked foods, and urban households account for 80 percent of these purchases.

More parents are opting for ready-to-eat meals. The Assocham report says households with working couples and young children serve on an average 10-12 such meals a month. About 76 percent of the nuclear families feel that they have less time to spend in the kitchen.

The changing Indian lifestyle is creating a multitude of opportunities for market players, across industries. The rise in the number of women in the workforce, and the resultant time-paucity, along with the increasing at home socialising, the preference for nuclear families, or that of young professionals living alone, the growing acceptance of Western food, and the need for on-the-move freshly-cooked foods are the reasons for launching frozen foods and ready-to-eat meals/microwaveable meals.

The Indian market has been witnessing the entry of many brands offering a host of products across various processed food categories such as frozen foods, beverages, spices, seasonings, and curries. One segment, which has evolved significantly in the processed food section, is frozen convenience food. The increase in demand for frozen food products is driving increased focus on the category by modern retail chains and standalone grocery stores, that are stocking more varieties of frozen products such as peas, corn, and ready to cook and heat-and-eat packaged products. As sales increase, the category is slated to witness increased penetration and entry of more players and products.

Frozen Foods versus Ready to Eat (RTE) Meals

Ready to Eat Meals with today’s Retort processing is the most acceptable form of food preservation. These are ready to eat food products which require just warming in a microwave oven or water bath before eating. Packaging of this food should withstand thermal processing. Retort pouch is the flexible laminated food package of light weight. It maintains the shelf-life, texture and nutritive value of the food. But Retort processing could not maintain shapes of foods and snacks, and was more suitable for semi liquid or smaller pieces/powdered food products. But the challenge has been to preserve raw meat and non-vegetarian products and the semi cooked non-vegetarian products long with the various vegetarian products that required the shape of the product to be maintained till it reaches the end consumers. This is where frozen technology has gained prominence over the RTE products.

Today frozen foods are considered to be as the best alternative for fresh foods as it is preserved with all its nutritive values intact. Many products when preserved in the traditional methods loose all their nutritive content but the same food when preserved in the frozen method preserves all the nutritive values. Natural Vitamin C found in fruit pulp is lost over a period of time when it is preserved either in the ambient temperature Tetra-pack or Retort pack technology. With the penetration of refrigerator and Microwaves, the ease in storage and use of frozen foods has been gaining momentum.

Today the frozen food market in India can be described as being in nascent stage with few products, low consumer awareness levels, underdeveloped frozen food distribution network, and lastly lack of freezer space at the retail end.

Market Size of Frozen Food Segments

The frozen food segment comprises of ready-to-cook/fry and heat-and-eat vegetarian and non-vegetarian food products. The market is largely dominated by select national brands and some regional players. The Frozen Foods Market is generally segregated into processed frozen vegetables, vegetarian snacks, poultry, fish and seafood and red meat. In the frozen veggies/vegetables segment, garden peas continued to be the most popular frozen processed vegetable bought across India with a commanding retail value share of over 69 percent, followed by mixed green vegetables and baby corn with shares of 14 and 7 percent respectively, in 2013.

Increasing international food chains have a total dependence on frozen foods. During the past two decades, many international food chains have entered India as they perceived it to be a potential market with scope for expansion and growth. Some international brands have become household names in India, including McDonald’s, Pizza Hut, Dominos, KFC and Subway. At the core of such international brands, success is an awareness of local tastes and habits of the Indian market supplied through the frozen foods market developed over the years. The food service market’s dependence on the frozen foods has been due to the ability of frozen foods in providing year long supplies, standardised products, convenience, dependability, storability and almost fresh as fresh products.

Contrary to many popular beliefs, it is non-vegetarian in all forms that dominates the retail consumer portion of the frozen food products in the Indian market. Poultry is today the major source of meat in India. Its share in total meat consumption is 28 percent, as against 14 percent ten years ago. It has outpaced its two competitors – beef and veal, and buffalo meat. High mutton prices, religious restrictions on beef and pork, and the limited availability of fish outside coastal regions have all helped to make poultry meat the most preferred and most consumed meat in India. Expanding domestic production and increasing integration have pushed poultry meat prices downward and stimulated its consumption. Today frozen food processing has enabled the processed poultry meat industry to grow first in the food service sector by supplying to all QSRs, army and then into the Retail. Each of the major poultry players is doing its own bit in creating the cold chain nearer to the consumers by creating neighbourhood cold freezer outlets to reach the end consumers at their doorsteps. Suguna has created its chain of franchised retail outlets “Suguna Daily Fressh” which sell frozen products. Similarly there are outlets such as Republic of Chicken from Al-Chemist and Venky’s express from other poultry majors.

Frozen Food in IndiaWith each frozen food player creating its distribution infrastructure across the country and into the smaller towns the demand for creation of cold chain and storages is increasing. Today you can find distributors with small cold storage rooms in smaller towns and this will penetrate into all towns. All the leading players of the industry are investing into creation of freezer spaces in independent outlets.

Bottleneck – Is it the Lack of Cold Chain?

Unlike in the other farm products such as grains, fruits and vegetables where processing can be carried into dehydrated dry ambient products and frozen products, in veggies, snacks and meat and meat products, the processing can only be done to its best natural form into frozen processed products. Hence cold chain becomes a very critical and vital link in the development of processed veggies, meat, vegetarian snacks, and poultry products.

From the Processing plant to the end consumer’s plate, the development of cold chain depends on the following:

  1. Stable power supply: Cheaper and uninterrupted power will develop the cold chain across;
  2. More governmental support and concessions should be provided to attract the private sector for investments into the cold chain;
  3. Modern retail development will ensure private sector and FDI in development of this cold chain. Today the skeletal cold chain is developed only to tier I and tier II cities which needs to grow further into smaller towns and only then can the processed frozen products reach the masses;
  4. Development of retail outlets for frozen food products: when the frozen food products are nearer to the consumer, the acceptability and the demand for the frozen products increases. Today any organised supermarket has a cold freezer of around 400 litres and hyper markets have around 800-1200 litres of cold freezer space which is grossly insufficient. Hence there is a large potential in such frozen food products retail outlets selling all forms of frozen products.
  5. Consumer end of the cold chain: For the full development of the cold chain, the domestic consumer should have adequate freezer space at home. In the first instance, the domestic household penetration of refrigerators is dismally low in India and the majority of the average Indian households will have refrigerators of size 200 to 250 litres. Of this the freezer space is just sufficient to keep the daily requirements of dairy products which results in no freezer space for the frozen products. Some households have more than 400 litres of refrigerator space still, they do not have space where they can store more than 1 Kg of frozen food products at home. In the European and American markets every household possess a deep freezers of 200 litres for storing frozen products along with the regular refrigerators. Indian markets consider deep freezers as a commercial appliance and not as a domestic appliance. All major frozen food players should join hands with the White Goods manufacturers to create demand for the frozen food appliances such as deep freezers and microwave ovens with defrost facility.

Social Changes Driving the Packaged Frozen Food Consumption Trends in India

The packaged frozen food category has a tremendous growth opportunity in the near future due to a growing number of nuclear families. The Federal Home Ministry has recently released the final figures of the first phase of Census 2011 known as Housing Census in New Delhi. The data states that India is now overwhelmingly made up of nuclear families — a dramatic change from just a generation ago, where joint families were the norm. Seventy percent of the households consist of only one couple.

Factors behind the Increasing Demand of Frozen Food Consumption

  • Increased urbanization;
  • There is an increasing population of Indian women that have neither the time nor the knowledge to cook traditional meals on a regular basis;
  • Indians have become more experimental with their food and drink choices as there is need for variety;
  • Growing youth population;
  • Significant rise in the number of working women;
  • Growing practice of singles living away from home for education or work;
  • Change in Mindset : From a mindset where home-cooked and fresh food was preferred and housewives insisted on making everything from snacks to multi-course meals in-house; today it has become commonplace to seek convenience and variety using the vast menu of packaged frozen foods available;
  • 44 percent of Indians admitted to not having much time to cook, while 23 percent felt ready meals were affordable;
  • The variety of ‘ready to cook’ and ready to eat packaged frozen food is growing, thus helping the housewife in her quest for novelty.

Thus, with an increasing working woman segment, increasing work and study commitments, declining culinary skills, the rising need for convenience, and surging disposable incomes, along with clever and innovative marketing will all lead to a higher demand for heat-and-eat products.

Challenges Facing the Frozen Foods Industry

McCain’s is one of the foremost MNC which has entered into the Indian frozen food market in the mid 90s and has taken more than a decade in market development for their frozen potato products and are setting up the backward integration of potato cultivation and processing plant in Mehasana, Gujarat. The consumer end of market development consisted of importing McCain potato products and seeding them at subsidised process as the imports had a 40 percent import duty then. Slowly they developed the market and the French Fries product was able to establish in the market with QSRs providing a ready platform. Apart from McCain’s Smilies, the other potato products are yet to take off due to acceptability for the Indian consumer tastes. After 2012, Simplot the world’s largest French Fries manufacturer entered the Indian market with a joint venture partner and after a few years of operation the joint venture broke and the operations were closed. Hence it is a challenge for any player to develop the consumer market for the frozen foods and the backend supply chain with sourcing of correct agricultural raw materials.

In India, the food and grocery segment is dominated by independent grocers with small neighbourhood stores that are characterised by low investment. So stores with refrigeration facilities are very few in number. This is a major roadblock for increasing penetration of frozen food through general trade, which comprises over 90 percent of overall food and grocery retail. Refrigeration facilities are present in modern retail stores, besides which, these stores attract the segment of consumers looking for convenience food such as ready to cook/eat. Hence, modern trade is the only and preferred channel of sales for the frozen food category. The country also grapples with insufficient infrastructure facilities like cold storage and temperature controlled (cold) transport. The frozen food category is non-existent in rural areas where close to 65 percent of the population resides. Consumers here may not be driven by convenience like in the metros, but they may aspire for such foods, and be willing to experiment.

Government Initiatives

Government should first ensure the uninterrupted supply of power at affordable costs. Only if affordable power is available then only the investments into cold chains will be attractive. Government should also give priority in power supplies to cold chains. The present concessions on investments are not attractive enough to any investor. More tax holidays and concessional supports in terms of lower sales taxes on frozen product sales and supports to the trade in selling frozen products are required.

Attractive Foreign Direct Investment (FDI) into frozen foods processing plants and cold chain is urgently required. Till date only two have received FDI into frozen foods. The investments into cold chain have been limited only to Snowman. More FDI will only give momentum to the frozen food Industry and cold chain
in the country.

The author is a Vice President – Marketing and Sales at Desai Brothers Ltd.

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