Packaged Food Business in India – Complete Guide

Last Updated on April 19, 2023 by DesignerPeople

“In preparing for battle, I have always found that plans are useless, but planning is indispensable.”

— Dwigth D. Eisenhower

Increasing hectic lifestyles, long hours of office, travelling time, change in eating habits and traffic, of course, have made it difficult for people to cook and eat. The life in urban cities, about 79% of the urban people prefer to have ready-to-eat food in their regular meal.

The increase in the utilization of packaged food in metropolitan cities is the steep rise in income, the standard of living and convenience.

Growth in nuclear families and if a couple is working will prefer having ready-to-eat food. It has become the most favourite and convenient part of their meal. The packaged food includes a bakery, dairy products, canned, frozen processed food, ready-to-eat meals, diet snacks, processed meat, health products and drinks.

The increasing trend of packaged food has attracted a lot more companies to launch new products and variants of packaged food. Visual appeal, feel, and convenience are the two main growth drivers of the food packaging market.

As per the “Indian Ready-to-eat Food Market Forecast & Opportunities, 2022”, the Indian RTE food industry have increased at a CAGR of 22.19% from 2014-22.

Indian Food packaging industry has expected to be 3rd- biggest market by the end of 2023.

The buying capacity of the rural group has increased due to benefits from investment in infrastructure and rising wages.

Food processing brands realize the potential of packaged food and beverage in rural places in India. Hence introduced smaller pack sizes and low prices to attract rural customers. They also made their packaging very attractive with vibrant colours, varieties, celebrity endorsement etc. to attract and capture rural minds.

• The Indian Packaging Industry is presently ranked 11th in the world.
• Within the packaging industry, packaged processed food holds the maximum share of 48%, followed by personal care packaging (27%) and pharma packaging (6%)
• 100% of FDI is permitted under the automatic route in Food processing industries
• 100% of FDI is allowed through government approval route for trading, include e-commerce in respect of food products manufactured in India

How to Start a Packaged Food Business in India?

Food, the most basic necessity of life, especially the packaged foods coming in handy at a reasonable cost with longer shelf life than their fresh counterparts which helps cut down on spoilage are some of the few reasons which make this business lucrative. Today, there are many food varieties in the market.

To select which one to package and hence sell. To take a practical decision, one must investigate the food business idea thoroughly. India has ruled by many giants in food packaged business such as Lays, Haldirams, MTR, Nestle, Amul, Parle, Britannia many more.

1.Why do we need to start?

Looking at the impressive statistics, it justifies clearly why to start a packaged food business in India.

Packaged food sales will lead to 47 million tonnes in the year 2020.

As per the forecasts of Euromonitor, India will stand at 3rd most significant market for packaged food in the year 2020.

The food packaging industry is India’s 5th largest sector with a current worth of nearly $40 billion.

Despite the fierce competition, food packaging businesses make their niche and rapidly flourish in the economic market. However, there are a plethora of things that one needs to reflect on while starting a food packaging business. First of all, the entrepreneur-to-be need to ascertain the best quality food in the market and then, proceed further to package and sell it.

Before starting the business, he also needs to finalize what is his motive of company and what role he is playing towards society and people of it, how he can procure the nutritional value of food through maintaining the correct measures of agricultural and storage solutions.

How can I contribute towards avoiding Atrophying emissions from food? Waste management, water, air pollution, and various other factors to be considered where an entrepreneur can contribute towards the welfare of human beings and ecological structure.

Also, decide what your food should be reflecting your guests, if you are planning to enter into health food, then it should make them feel confident and worthy of trying your brand. If your food is celebrating Indian chat or meal, then it should have that vibe of happiness and enticing emotion. Depending upon your brand USP it should justify its emotion and feel.

 2.Understand the potential customer ( Target Audience)

As we discussed to bring the vibe and emotion as per the type of food and its USP. Same way to do this and many other things one should know its target customers.

Depending on the brand positioning, the target audience gets decided. If the brand is focusing on organic oriented people, then the target audience will be majorly Millennial. If it is a fried and traditional food, then the brand will cater to kids and an overall maximum audience of all age group. If health products it will feed a fitness-oriented crowd. Hence the type of product and its values will help to understand the target group.

3.Size the target market ( Market Research)

To be able to build any sustainable business, there should be enough demand for it. What is the gap that your brand is trying to fill? What makes it different? Are you producing organic food more affordable? Do you have a new idea? Does the market show that your product has long-term potential? Doing your market research is understanding the competition helps you position your brand better. It also enables you to know what kind of supermarket, hypermarket, local shops, departmental store, grocery store or distribution chain you want to approach.

4.Find a few ideas ( Consumer Behaviour)

Identify the attitudes and preferences of consumers towards food, lead to acceptance and the selection of some products, and rejecting others. Development of an appropriate marketing strategy in the enterprise requires knowledge of consumer tastes and preferences. Change in the consumer’s likings, taste, purchasing power, income level, education and lifestyle are few of the factors which influence consumer behaviour.

 5.Refine the idea ( global food in local taste)

As it is said, Think Global Act Local, it is essential to make people feel that the product is their own even if the identity is foreign. Such as when we see packed Chinese flavour options in India, they will always have the touch of Indian taste and spices to make people adapt to that flavour.

If companies start producing the food in their origin based style, then Indian people will not like it because their taste buds has adapted to Indian spicy and tangy flavours. Hence the packaging design might justify the feel and emotion of global origin, but the taste should be Indian at heart.

 6.Business structure

It will depend upon the nature of the business to manage and operate business individually through a sole proprietorship or one-person company. One may also select limited liability partnership where more than one person can pool funds. If the scale of operation is large, the company form of business is best suitable. On the type of business structure, one should proceed for the registration process.

7.Tax Compliance

If the service involves fresh or frozen ingredients in their original form, these items then taxed according to state food taxability regulations. If any of the things have been re-packaged, prepped combined, or pre-cooked, then state sales and use tax rules for qualified items would apply.

 8.Food Licenses 

The steps in the registration process for each structure are different. Different documents are required for Company incorporation, and post-incorporation one shall proceed for other licenses and registrations to commence operations.

Basic Registration: All small business or startups with an annual turnover of INR 12 lakh and above require this registration.

State FSSAI license: Mid-sized companies with a yearly turnover of INR 12 to 20 crores are eligible for the state license.

Central FSSAI license: Large businesses with annual turnover over and above INR 20 crores are typically qualify for central grants. Yet it is also required to supply goods and services to government offices, import, and export of food products.

Other vital approvals required are small-scale industry registration, NOC, GST, and brand trademark registration.

What Challenges Faced by Packaged Food Industry in India?

1.Lack of Quality Raw Material

India manufacturers 205 million tons of fruits and vegetables annually and is the second-largest country in farm production in the world. Unfortunately, the processing percentage is weak, and only seven % of what is grown is processed. Agricultural is an essential factor for sustaining food processing events.

Since few crops are seasonal, the sector faces delays in production, resulting in low-quality supply. Rabi crops like barley, wheat and mustard are sown in mid-November and harvested in April. These food grains are dependent on external forces of nature, which are unpredictable.

Seasonal scarcity and high cost of raw materials constitute one of the significant constraints affecting the growth of small-scale food processing enterprises. This scenario results in shortage and higher pricing of raw materials.

2.Lack of Hygiene storage at retail shops

There are two ways for hygienic and proper storage

• Warehousing

Here the problems arise due to scarcity of space and how commodities are effectively stored in that space. Product damages are another problem faced in the warehouse; few injuries are inevitable but can be reduced with a rack safety netting and avoiding overload of shelves.

• Cold storage

The frozen food is a massive sub-industry in and of itself. With ever-evolving food trends, there are growing varieties of ready-to-eat food, beverages, processed frozen fruit and vegetable products, marine and meat products and so on; many of these items require specialized storage environments.

3.Price point market

There are many domestic and international players in packed food business each brand is venturing with either the same pricing or with cost-effective pricing policy at very lower margins. Hence it comes very price-sensitive business which is competitive.

4.Week R&D 

The food industry face issue from low investment in R&D. Only a few brands have fully-fledged R&D labs which bring out innovative and creative products. For the majority, the return on investment in R&D acts as a significant concern.

Upgrading themselves would be another important challenge factor in the buying decisions of Indian end-users.

5.Qualified workers

Lack of educated skilled farmers and industrial labours act as a challenge for packaged food business.

6.Packaging regulations

Here it includes the lack of regulatory clarity in each step of packaging, new techniques, insufficient consumer awareness about sustainable and green packaging.

For raw and processed foods, we need packaging material which should suit the country’s climatic variations. The heat and high humidity are two problems that can reduce the shelf life of packaged goods.

7.Packaging type clarity 

A heavy focus on the cost that is cheaper flexible packaging formats are chosen over rigid packs which offer more excellent protection for the product, but that would force a higher retail price.

Technology, delivery, price, delivery and performance bar are critical factors that identify if the packaging equipment can be sold in the Indian market.

Due to high competition in the end-user market, the cost of equipment and the low running cost remains the primary factors that influence the sale of the packaging equipment.

Also Read: Complete Guide to Start Dairy Business in India 2020

Types of Industry in Packaged Food Business

1.Baby Food Packaging

Goldstein Research analyst forecast that the India baby food market is set to reach nearly USD 48.1 billion by the year 2024, growing at a CAGR of 6.3% over the forecast period (2017-2025).

Key players: Nestle, Danone, Mead Johnson, Abbott laboratories, Hero-Group, Perrigo Company, Bellamy Organics, Hain Celestial Group, Campbell soups, Friesland Campina, H.J. Heinz.

2.Baked Goods Packaging

The new generation understands the difference between baked and fried benefits. Not just the young, the middle-aged or even the old; everyone is looking to get fitter, lead healthier lives and indulge too. The bakery is known to be the fastest-growing food segment, expanding at a rate of 20-25% annually.

Examples- Too Yum

3.Breakfast Cereals Packaging

The most important category in the Indian market is cornflakes, which holds roughly over 50% of the market, followed by oats and muesli, which are on an upward stride. already offers various product categories, e.g. cornflakes, oats, muesli, wheat flakes, etc

Example- Kelloggs, Nestle, Oatkar

4.Bakery & Confectionery Packaging

The bakeries products such as bread, toast, bun, cookies, cakes, pastries and chocolate retailers to offer. The market value is expected to exceed dollar 12 billion within the next 5 year, expanding at a compound annual growth of 9.3 % during 2019-2014. And Bakery Packaging Design helps to improve your sales in the market.

Examples- Monginis, Theobroma, Cadbury.

5.Dairy Products Packaging

They are the most extensive and fastest-growing sector of the Indian dairy industry. Major players in the dairy sector with dairy products include Gujarat Co-operative Milk Marketing Federation (GCMMF), and Nestle are the most significant player.

6.Edible Oils Packaging

Palm oil is India’s significant import oil, averaging 9 million tonnes per year, followed by soybean and sunflower oil. If in future vegetable oil consumption in India increases by 4%, it will increase the use of oil from 900,000 to 1 million tonnes per year.

7.Ice Cream and Frozen Desserts Packaging

The ice cream industry in India is growing at a fast rate. “Unilever, being the global leader in the ice creams and frozen desserts business understands the subtleties well.

8.Processed Fruit and Vegetables Packaging

The demand this is expected to increase significantly due to the penetration of organized retail in the country and nuclear families.

9.Processed Meat and Seafood Packaging

The Indian consumer has slowly started to shift from unpackaged to packaged meat and seafood, citing the unhygienic conditions of the butcher shops or slaughterhouses.

10.Cereals,Millets & Pulses Packaging

The awareness among people about healthy lifestyle has increased the consumption of health-oriented products.

11.Sauces, Dressings and Condiments Packaging

The increasing liking towards international cuisines and this act as drivers of demand for varieties of sauces and dressings. The exposure by travelling, media and Internet has resulted in a double-digit growth of sauces, dressings and condiments industry.

12.Savoury Snacks Packaging

India’s savoury snacks market is estimated at Rs. 33,500 crores according to research firm Euromonitor; while biscuits, snack bars and fruit-based snacks are another Rs. 36, 400 crore

13.Soup & Beverages Packaging

Revenue in the Soups segment amounts to US$330m in the year 2020. The market is expected to expand annually by 5.7%. Factory output in the beverages industry contracted 0.5% in Feb 2020 compared to the same month last year.

14.Health Supplements Packaging

The health market in India is expected to grow $ 18 billion in the year 2025 with the rising demand for dietary supplements from the upper class to the middle class.

15.Nuts & Spices Packaging

Spices will emerge as an $18 billion industry by 2020. The Indian dry fruits industry size at Rs 15,000 crore. By 2020, to reach almost a million tonnes in volume, leading to an industry size exceeding Rs 30,000 crore.

Types of Packaging used in FOOD business

1.Aseptic Processing

A technique wherein thermally sterilized liquid products are packaged into previously sterilized containers under these sterile conditions to develop shelf-stable products that do not need refrigeration.

Aseptic packages are made of polyethene, paper and aluminium and contain a tight inside layer of polyethene

2.Bags

Bagging will separate the food from the environment, namely the air

Examples: chips, pretzel and apples, potatoes.

3.Trays

Seen in the flat with raised edges to keep the product in place, and are made of various materials such as paperboard.

Examples: Meats, seeds and drinks

4.Boxes

Majorly used and seem boxes are metal, wood, and corrugated fibreboard.

Examples: Pizza, Snacks, chocolate boxes

5.Cartons

cartons are also made of corrugated fiberboard used for transporting. Food cartons hold milk or juice and require the gables at the top to be pinched then pulled in order to be opened.

Examples: Milk, juices, eggs

6.Cans

Cans are made of steel, glass jars and other thin metal when found in stores.

Examples: Processed cheese, beverages

7.Pallets

Boxes of the products are stacked on the pallet, then wrapped to secure and decrease food movement.

8.Flexible packaging 

It protects food from the external environment and develops an adequate means of transporting food. Bagged salad is found in typical food example of flexible packaging.

9.Wrappers

Wrappers give protection between the food and the environment or the food and a person’s hands.

Examples: Candy

Once you ready with product manufacturing, now it Is time to establish a brand and marketing.

Branding and Marketing for food business in India

1.Brand Identity

Brand identity is the way to provide potential customers with an insight into your brand’s values and beliefs. Brand’s strengths are highlighted to convey your target audience. The type of food will decide the brand identity, such as if its namkeen, sweets, health bars many more.

2.Brand Image

the first thing that comes in your mind when you think about that brand or product is your brand image. Such as when we talk about protein bars, then health aspect will be the first thing that gets highlighted.

3.Brand positioning

It is a strategy statement that explains target customers, what is your business scope, and what you do to create value for your customers.

Have positioned themselves as traditional and authentic Indian snacking.

4.Brand personality

like people brand also have a personality which can be urban, cheerful, modern, mature and accordingly it communicates.

It is a brand which focuses on kids, so it is quite a fun-loving and cheerful personality to its brand.

5.Packaging Design

plays a very important role in the food industry, based on brand personality, image and positioning the packaging design is planned. The brand story should be communicated through food packaging design.

6.Digital marketing

The food marketing strategy should focus on factors such as taste, health and affordability. Depending upon the brand positioning the videos and image-based post will create a boom in the digital industry. With the increasing competition, we cannot stay behind in the digital platform.

DesignerPeople is a dedicated and passionate creative agency in Delhi NCR. We have carved our niche into branding, packaging design, digital marketing, website and brand consultant. With rich experience of over 17+ years and 2000+ of successful projects ranges from SMEs to top brands some of our clientele lists is Haldiram, La-Opala, MDH, Zenko, Romsons, Solar, Wonderland and many more.

Conclusion

Want to know everything there is to know about starting and running a packaged food business in India? Look no further than this comprehensive guide!

Designed specifically for those who are interested in starting and running a packaged food business in India, this guide covers everything from market research to packaging and labeling. You’ll learn about the different types of packaging available, as well as the best ways to market and sell your products.

Read this full guide and start learning about the best way to start and run a successful packaged food business in India!’

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Author: Megha Malik

As a passionate entrepreneur and creative brand consultant with experience of 14 years in digital, branding and packaging industry, it is my honest effort to put my experiences and knowledge of industry towards readers. A chartered accountant by degree but a marketing personality in blood has motivated her to take in designing industry as a career. With her fun-loving personality and sharp branding skills, she is a great motivational speaker on her YouTube channel, an active member in various business channels offline as well as online. Do connect me personally via my LinkedIn and I love to share my expertise with you.