Food and Beverage Market India January 2012

India is one of the largest countries in the world, with a growing population of 1.2 billion people.

India’s GDP was US$1,843 billion in 2011 and is forecast to rise to US$2,013 billion in 2012.

GDP is expected to continue growing at rates around 7–8 percent per annum for the next few years.

There has been a discernible increase in purchasing power in many parts of the country and rising affluence in many urban pockets.

However, income distribution in India remains uneven between a wealthy urban population and a low income rural population. Almost a quarter of the population is living on less than US$1 per day, even though GDP per capita is US$3,787.

The income split essentially means that India has two separate consumer segments, which are further split by strong regional differences. Throughout India there are 20 official languages, 3 main religions and 14 main cuisine styles.

India is one of the world’s largest food producers and has a large agriculture industry. This, combined with a cultural preference for fresh food, means that India supplies the majority of its own food for consumption.

However, India is a growing market for processed food imports, which are becoming more popular with the younger population, especially in urban areas. Consumption of food and beverages was estimated at US$366.8 billion in 2011.

Getting your product into market

Survey markets: It is recommended that potential products are surveyed in order to find the best potential market and to understand the import requirements. This should also include competitor analysis. There are market research firms in India that are able to assist or conduct the research.

Business partner: Companies should aim to find a reliable agent or importer / distributor to partner with. It is very important to ensure time and money are allocated towards identifying the right local partners and companies, which can help establish a brand in the Indian market.

As India only lifted the ban on most food and beverage imports in 2000, many food and beverage importers are not yet well established. Companies should research potential business partners carefully before entering into business agreements. Many large importers who are able to manage brands and distribute nationally are currently interested in expanding product lines. These importers will usually require exclusive rights to a particular product or brand.

The following factors are important to consider when selecting a business partner:

Who and where their customers are and whether they are suitable for your product.
Whether or not you need flexibility in your business partner. Agents and importers / distributors that are smaller tend to be more adaptable than larger companies.
If there are any conflicts of interest with other products that the agent / importer / distributor is involved with.
Reputation through checking with their associations, clients and bankers.

Visits and trade shows: India has a complex food and beverage market so it is recommended that companies interested in exporting to India visit the country itself and visit or participate in major trade shows.

Common strategies in marketing / promotion: It is essential to understand the kind of product and the level of knowledge the consumer has of the product. The market is being flooded with international products and the only way to create awareness and educate the consumers is by large promotions, offers, and sampling activities, for which a reasonably large budget is necessary. Retail chains insist on manufacturers’ support for promotions, sampling, and education.

Advice on packaging: Packaging sizes are very important, usually for Indian consumers, the bigger the better. That being said, in most cases while packaging is large, the contents are half the size. This gives the impression of getting better value for money, even though it may not necessarily be the case. Indian importers and distributors generally have the best knowledge and should be consulted when making packaging decisions.

Leverage cultural linkages: New Zealand and India both have a cricketing tradition that a number of New Zealand companies are successfully leveraging within the Indian market. NZTE can assist suitably qualified companies with introductions to prominent New Zealand cricket personalities.

Regulations

Import tariffs vary depending on the product, but in general are quite high. Overall tariffs paid on products generally range from 26 – 74.6 percent. Furthermore, the tariff system can be complex as there are a range of taxes which must be paid on imports.

The main duties and tariffs are:

Basic Duty: This tax is applicable to most imported goods and the rate is 30 percent for most products.
Additional Duty (AD) or Countervailing Duty (CVD): An additional duty to match the domestic Central Value Added Tax (CENVAT) for goods produced and manufactured in India. The CVD rate is based on a product’s Maximum Retail Price (MRP).
Special Additional Duty (SAD) or Special Countervailing Duty (SCVD): A 4 percent duty on most imported products. This tax is designed to match domestic taxes such as Sales Tax and Value Added Tax.
Due to food inflation concerns and unpredictable weather that affects agriculture, there are certain products that are exempt from import tariffs such as wheat, rice, corn and crude vegetable oils.