Convenience foods and retail reforms in India
Nowadays improvement in food system is probably reflected in market via product label presentations to meet out consumers’ demand for transparency to recognise product and packaging convenience like portability, reseal ability, single service and so on.In India, the packaged food industry, with 90 per cent contribution of ready-to- eat segment in Financial Year 2013, has been steadily escalating at a CAGR of 15 per cent from FY 2007 to FY 2013. The total value of Indian food processing industry, according to Swapan Dutta, director-general, ICAR, was around US$12 billion in 2012 and is expected to be around US$194 billion by 2015. As documented by APEDA (Agricultural & Processed Food Products Development Authority), India’s agricultural and processed food exports stand at US$18.65 billion in April 2012-March 2013 which was US$13.22 billion last year.According to S Sivakumar, head, ITC Agro, and IT Business Group, the Indian food processing sector employs over 10 million people with total investment of US$24.04 billion grown at 20 per cent per annum in the last five years.On September 20, 2012, the Government of India notified the Foreign Direct Investment (FDI) reforms for single-brand and multibrand retail. Indian Government allowed 51 per cent FDI in multibrand retail on December 7, 2012, despite heavy uproar from the opposition in Parliament. In this way, the Indian states got the prerogative to accept the opening of retail competition and implementation. The states also got right to decide to not implement it if they consider in that way. But as per Constitution of India, foreign groups can own up to 51 per cent in multibrand retail and up to 100 per cent in single-brand retail.Therefore, in general, the market reforms paved the way for retail innovation and competition with multibrand retailers such as Wal-Mart, Carrefour and Tesco as well as single-brand groups such as Ikea, Nike and Apple. Of course, a condition has been imposed on foreign groups entering Indian retail business that they should source nearly a third of their goods from small- and medium-sized Indian suppliers and confine their operations to 53 cities with a population over one million.Prime minister Manmohan Singh, on November 24, 2011, had announced the following points in context of retail reforms which after notification took a legal shape on December 20, 2012 -India will allow foreign groups to own up to 51 per cent in “multibrand retailer,” as supermarkets are known in India, in the most radical pro-liberalisation reform passed by an Indian Cabinet in years; Single brand retailers, such as Apple and Ikea, can own 100 per cent of their Indian stores, up from the previous cap of 51 per cent;Both multibrand and single-brand stores in India must confine their operations to 53-odd cities with a population over one million, out of some 7,935 towns and cities in India. It is expected that these stores will now have full access to over 200 million urban consumers in India;Multibrand retailers must have a minimum investment of US$100 million with at least half of the amount invested in back-end infrastructure, including cold chains, refrigeration, transportation, packing, sorting and processing to considerably reduce the post- harvest losses and bring remunerative prices to farmer;The opening of retail competition will be within India’s federal structure of government. In other words, the policy is an enabling legal framework for India. The states of India have the prerogative to accept it and implement it, or they can decide to not implement it if they so choose. Actual implementation of policy will be within the parameters of state laws and regulations.Expectations from foreign groupsIt is legally expected that foreign groups entering the Indian retail food business will have a minimum investment of US$100 million with at least half of the amount in the back-end infrastructure, including cold chains, refrigeration, transportation, packing, sorting and processing to reduce the post-harvest losses and bring remunerative prices to farmers. Presumably it is also expected that retail reforms will improve or modify India’s retail and logistics industry which employs about 40 million people through 14 million outlets, 96 per cent of which are operating in open markets or numerous small grocery and retail shops in less than 46 sq m areas. In this way India has one retail outlet for every 100 consumers and employs 3 persons. It is expected that due to competition with foreign groups, the Indian retail market will modify or condense itself to be more human resource intensive with a significant business which is currently limited to 4 per cent of total retail with a few notable retailers such as Future Group, Mahindra Group, Reliance Group, Aditya Birla Group, Bharti Enterprises, Fabindia, The Bombay Store, Shoppers Stop, Crossword, HyperCity and Inorbit Mall.One expectation from foreign groups’ participation in Indian food retail market is also presumed that it will pave the way for development of packaged foods as convenience foods in the country and reduce the volume of unpackaged foods in the retail market which entirely accounts for around 15 per cent of GDP.Convenience food ensures not only portability, location ease, reseal ability or single-serve packaging but also a label address regarding health concern and specialty diet. Today’s vigilant consumer wants to know exactly what is inside the packet and where his food comes from. Therefore today’s multinational retailers are conducting surveys, asking questions and researching products before making purchasing decisions or selecting manufacturers. How much a packaged food can offer nutrition and how minimally its ingredients are processed, might be considered as a parameter of label presentation to address health concerns and specialty diet. It is a common belief, nowadays, that packaged foods are suffering from high level functionalism such as whiteness, shelf longevity, texture etc. in the case of bread and are loaded with oxidants, preservatives, emulsifiers and improvers. A packaged food can reasonably assure about delivery of nutrition by printing of a statement on label that the food article does not contain artificial additives, colours and flavours. The Food Safety and Standards Act, 2006, does not bind manufacturers for printing such a statement on label. As per law, it is sufficient to print a statement that food article contains artificial additives, colours and flavours if it does so. Normally consumers do not profoundly read the labels. Therefore more convenient depictions are required to represent safety and nutrition level on label of a food article. It is a major requirement of today’s convenience food. It can be met out by bold mention of “Artificial Additives-Free, Organic Food.” It is presumed that emergence of foreign group in the Indian retail market will facilitate organic farming and hence development of packaged foods as real convenience foods.Difficulties in meeting out expectationsThe difficulties in meeting out aforesaid expectations from foreign groups are self evident. The follow-up of cold chain or refrigeration at farm level storage is the responsibility of farmers. The same in food transport, warehouse and processing too is concerned with Indian groups if they run these operations. Warehouses are much more distant from farms in India as compared to that is developed countries. Therefore perishable food articles such as fruits and vegetables are damaged mainly due to this reason. Foreign groups have very little to do in this matter. Secondly foreign groups are also not much helpful in condensation of retail market with human resource intensive nature. Since Independence the street infrastructure in India has been tremendously expanding on cost of forest-pasture tract under pressure of housing, horizontally spreading, with no awareness of forests, soil conservation and environment. Thirdly improvement of packaged foods as convenience foods is concerned with food processing industries and not with supermarkets or any kind of grocery and retail shops. It is really concerned with food law (or food safety authority), whether it is intended to distinguish a safe food product in the market. The law has its own limitations in context of organic farming and frees farmers from follow-up of law of insecticide residue limits in primary foods. It is an open secret that Indian farmers now cannot cost-effectively grow crops in their farms without excessive use of artificial fertilisers and insecticides-pesticides due to low soil fertility as a result of vast deforestation. As such, it is difficult to develop packaged foods as true convenience foods even after entrance of foreign groups in the Indian retail sector.Convenience, as the label may stateHow conveniently a consumer can distinguish a safe food article in market, is today’s major requirement of food transaction. Along with portability, location ease and reseal ability or single-serve packaging, one more parameter of convenience is the transparency of label which might enable a consumer to conveniently select a safe food article. Kelsey Blackwell of National Food Merchandiser tries to highlight importance of true transparency in the context of people’s awareness, consumers’ demand, social pressure on producers and natural products retailing in the following words -“Clean food labels are becoming increasingly important. The local and organic movements were just a beginning. Consumers are demanding more transparency for what is in their food and how it is made. More pressure will be placed on producers to make more wholesome, less processed foods. We anticipate that the non-GMO discussion will gain widespread momentum over the next several years in a world where bad news goes viral in seconds, the era of giving lip service to transparency is over. The good news for natural products retailers is that many of the brands you carry are well ahead of this macro force and are building transparency into their supply chains, manufacturing processes and packaging.”Kelsey is fully assured of return of ancient wisdom in the field of agriculture, food processing and retailing and states, “Ancient grains and seeds will increasingly appear in mainstream products, such as granola, cereals, crackers and breads. Quinoa, flax and chia, among others are packed with protein, fibre, Omega-3 fatty acids and antioxidants. While ancient grains and seeds have been popular among health-conscious consumers for years, they are breaking into the mainstream due to their high-nutrient content and versatility.”It is the scenario of demand for safe food at retail outlets in developed countries which has compelled farmers to demand soil fertility for growing organic crops, law-makers to frame real definition of food safety and food processing industries to consider transparency of label as a parameter of convenience. But the question arises - in India how much real pressure building organic movements have taken place and when farmers demanded soil fertility instead of urea and insecticide applications. Indian law-makers have not come forward with a strong definition of food safety. Naturally food processing units do not consider transparency of label as a parameter of convenience of food. Foreign investors, perhaps, can not substantially contribute to convenience food in India in strict public health and consumer welfare terms unless the urge emerges internally in the country.Source - http://www.fnbnews.com/
