The changing lifestyles and hectic work schedules have spawned a large market for processed and packaged convenience foods, as the booming organized retail sector further extends the reach of processed foods, according to the Frost & Sullivan report Analysis of Indian Food Additives Market.
The change in eating habits and the frequent introduction of new products and product lines, particularly in the functional food and beverage market for low-fat, low-calorie products, has brought growing opportunities for the food additives market.
The market also finds encouragement in supportive government measures, such as policies to promote easy access to loans for small-scale food processing industries.
The numbers
The report states market revenues, which stood at US$484.2 million in 2012, are expected to reach US$897.7 million in 2017.
It covers the food additive classes of flavors, colors, preservatives, emulsifiers, stabilizers and sweeteners.
Among these segments, flavors account for 47% of the market; sweeteners contribute the least, by growing at the rate of 25%, however, expected to become increasingly popular in the coming years.
Flavors are expected to grow at 13.9%, synthetic colors at 7.4%, natural colors at 12%, preservatives at 15% and food emulsifiers at 10.1%.
“The additives industry in India is veering towards natural emulsifiers and nature-derived colors,” said a research analyst from the Chemicals, Materials & Foods division.
“This change in preferences emanates from the increasing health consciousness among Indians.”
Challenges in obtaining raw materials
However, natural food additive manufacturers find it difficult to source raw materials due to the lack of centralized supply chain system and presence of multiple sourcing points.
The study finds that they can forge partnerships with cooperatives and invest in contract farming to counter this issue.
Such strategic alliances and joint research and development could also lower the prices of nature-derived products and lead to customized pre-mixes with application specific combination of flavors, colors and other additives for clients.
However, market restraints such as the lack of cold storage infrastructure, an advanced logistics and transportation system for perishable goods, which leads to substantial wastage of agro-produce, have adversely affecting farmers and natural food additive manufacturers.
Government intervention
In response, the Indian government has allowed 100% foreign direct investment to attract large industry groups to invest in developing cold chain logistics.
“Ironically, certain government policies could stifle innovation. For instance, the Prevention of Food Adulteration Act (PFA), which governs the food additives segment, permits only certain colors that are certified by the Bureau of Indian Standards (BIS).”
Nevertheless, continuing product and process innovations in the food and beverage sector will motivate the additives market to expand its product portfolio, along with the entry of global participants will serve as market drivers and can lead to an increase in market consolidation.
As smaller retailers from the unorganized sector are acquired, the margins of larger manufacturers will improve.
