Wednesday, July 24, 2024
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Behind India’s Packaged Food Boom

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The packaged food market in India is expected to expand at a CAGR of 11.1% from 2022 to 2027, driven by increased consumption occasions and favourable economic conditions. But despite ranking among the top 10 markets globally, India’s per capita spends on packaged food remains relatively low, leaving ample room for growth.

In 2022, packaged food in India displayed double-digit value growth in retail RSP based on favourable macroeconomic factors and was accentuated by changes in consumer behaviour. The high GDP growth, rise in median disposable income per household, and increasing urbanization aided packaged food.

Packaged Food includes:

• Snacks

• Dairy Products and  Alternatives

• Staples

• Cooking Ingredients and Meals

According to Euromonitor Economies and Consumers Data, the real GDP growth of India was 7.24% in 2022, whereas the country’s median disposable income per household grew by a CAGR of 9.1% from 2017 to 2022.

The changing consumer behaviour towards packaged food is attributed to multiple factors including cultural transfer, hectic lifestyle,travel and mobility, and at-home entertainment culture.

According to Euromonitor Travel Data, domestic tourism by destination (‘000s Trips) in India showed a year-on-year growth of 174.8% in 2022, driving the on-the-go and out-of-home consumption of packaged food. The at-home entertainment culture in India has picked up significantly, with data from Euromonitor International Voice of Consumer: Lifestyle Survey  (n=1002)revealing that 54.4% consumers in India are watching television shows or movies on TV,

Computer, Smartphone, or other device for at least once a day in 2022 and 21.3% of consumers in India play video games at once a day in 2022. This rising at home entertainment culture has significantly propelled the at-home consumption of packaged food.

Products with healthier claims gain traction among consumers

Major players have focused on building newer products with health and wellness claims, with more consumers looking for healthier packaged food options.

In 2022, according to Euromonitor Voice of Consumer: Lifestyle Survey (n=1002), 69.5% of consumers look for healthy ingredients in food and  beverages. Major dairy players focus on building milk products predominantly on high protein and good sources of vitamins by venturing into different milk variants with different sets of proteins like A2 and A1.

According to Euromonitor Product Claims and Positioning Data, the SKUs with claims for a good source of vitamins has increased by 67% from 2019 to 2022, and the SKUs with claims for high protein has risen by 41% over the same period.

The emerging trend in dairy is products with increasing claims of probiotic and vegan. The SKUs with a claim for probiotic have increased by 61.5% from 2019 to 2022. It is particularly becoming predominant in yoghurt and buttermilk products. Amul has recently made changes to the entire range of buttermilk and converted them into probiotics buttermilk, given the rising interest of consumers looking for a solution for gut-related issues.

Furthermore, there has been a rise in plant-based dairy alternatives with growing demand from vegan consumers in India. In 2021, FSSAI  (Food Safety Standards Authority of India) introduced a vegan logo in India, allowing players to build specific vegan products. As per Euromonitor Product Claims and Positioning, the vegan claim in dairy has increased by 161% in 2022 from 2019. Major sweet biscuit players have built health ranges like Britannia.

Nutrichoice, Parle Nutricrunch, and Sunfeast Farmlite. These digestive biscuits with high fibre claims have gained prominence among Indian consumers. According to Euromonitor Product Claims and Positioning, the SKUs with claim of high source of fibre have increased by 110% from 2019 to 2022.

Further, these major players have developed no added sugar biscuits range in response to consumers need for low sugar products. Similarly, SKUs with low sugar claim in sweet biscuits, snack bars and fruit snacks have increased by 102% from 2019 to 2022.

Players are taking a step further in making products by adding healthier ingredients. For instance, Britannia launched Nutrichoice Herbs range and Nutrichoice Seeds range towards the end of 2022, aiming to replace the traditional refined wheat flour (maida) with 100% atta biscuits. Furthermore, the Nutrichoice Seeds range incorporates super seeds such as sunflower, chia, flax, pumpkin, and watermelon. On the other hand, the Nutrichoice Herbs range includes ashwagandha, tulsi, turmeric, giloy and amla. Similarly, in 2023, ITC launched Super Millets Cookies under its Sunfeast brand by replacing the traditional refined wheat flour with millet

Consumers with hectic lifestyles prefer convenient packaged food options

In India, urban consumers feel time stressed. This is pushing consumers to typically look for ways to ease pressure and get their work done in short period of time. In 2022, according to Euromonitor Voice of Consumer: Lifestyle Survey (n=1002), more than 80% of Indian consumers are looking to simplify their life.

Further, the percentage of Indian consumers willing to spend money to save time is 58.8%. Indian cooking is an elaborate process which requires considerable amount of time. With lesser time available for Indian consumers, cooking on regular basis becomes challenging

Additionally, there is high rate of migration of consumers from towns to cities for education and work. While they move to cities away from their homes, cooking becomes challenging with their high dependency on their family members for food at home. This is indicative with the data from the survey data which revealed that 36.2% of consumers in India depend on someone in their household to typically cook for them.

Hence convenience is becoming a prominent factor when it comes to the uptake of packaged food, particularly in cooking ingredients and meals. Major players like ITC and MTR have focused their attention on building ready meal products including, poha, upma, dal tadka, dal makhani, paneer butter masala. These are typically aimed at all meal occasions and can be consumed by just reheating on gas or in a microwave or by just adding boiling water in some cases.

Novelty in products creates new experience for consumers

Brands have taken initiatives in the packaged food space to increase consumption occasions  achieved through newer positionings, product formats and textures. For instance, ice cream is a highly seasonal product, with majority of sales coming in summer season. To extend the consumption occasion beyond the summer season, Hindustan Unilever Limited, a significant player in ice cream, recently introduced Gulab Jamun and Nolen Gur variants to capture festive occasions. Indians are typically known to have a sweet tooth and enjoy traditional Indian sweets like Gulab Jamun and Nolen Gur across various parts of India, typically during celebration occasions. So, these variants are aimed at encouraging consumers to try out ice-cream throughout the year.

Savoury snacks are usually hard and crunchy in texture. To create a new snacking experience PepsiCo’s brand Kurkure, unveiled a new line called Playz, featuring two variants, namely Pastax and Puffcorn. This line was strategically positioned as a selection of light-textured snacks, a departure from the usual crunchy texture associated with savoury snacks. Furthermore, in 2022, Lay’s introduced an exclusive premium range of slow-cooked kettle gourmet potato chips in three flavours: Lime & Cracked Pepper, Thai Sweet Chilli, and Vintage Cheese and Paprika. This range is aimed to provide consumers with a unique sensory experience.

Consumers gravitate towards e-commerce, driven by high digital penetration and their need for convenience

In 2022, most sales in packaged food came from offline stores, with the lion’s share coming from small local grocers and an increasing share from modern retail stores like supermarkets and hypermarkets. However, post-pandemic, increasing digital penetration and the need for convenience have accelerated consumers’ gravitation towards e-commerce.

According to Euromonitor Economies and Consumers Data, the percentage of households in India with access to internet has increased from 29.2% in 2019 to 42.4% in 2022. As a result, e-commerce has become preferred channel for urban consumers. Major quick commerce players like Swiggy Instamart, Zepto, Blinkit, etc have built their value proposition on delivering product within 15 to 20 minutes. Over 2019- 2022, e-commerce Retail RSP for packaged foods witnessed a CAGR of 51.56%.

Conclusion

The growth momentum is set to continue in 2023 with expectations of double-digit Retail RSP value growth. India’s packaged food market size ranks among the top 10 in the world. Despite the high ranking, the retail per capita spend (in USD) in India is relatively low compared to Asia Pacific and the World. The low per capita spend represents ample potential for packaged food companies during the forecast period.

Packaged food is set to grow at a CAGR of 11.1% from 2022 to 2027, with expected increase in packaged food consumption occasions and favourable macroeconomic factors. Major brands will continue to build value added packaged food products that cater to various consumer needs. However, while building value-added packaged food products, the challenge would be to set the right price in a price sensitive market.

On the legal front, FSSAI plans to propose a star label system on the front of the pack with colour coding set to indicate high fat, salt, and sugar content. Therefore, it would be interesting to see if companies map their innovation pipeline in a way that adheres to the proposed change in regulation. Additionally, companies who are already catering to the evolving consumer needs will be at an advantage if and when this regulation comes into effect.

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