1.1 Introduction
India is a major manufacturing house for bakery products and is the third- largest biscuit manufacturing country after USA and China (NPCS, 2013). The Indian bakery market is valued at Rs. 3,295 crore and out of this, bread and biscuits hold 82% of the share (Assocham, 2012).
The bakery industry has achieved third position in generating revenue among the processed foods sector in India. The first and second segments are wheat flour processing and fruit and vegetables processing (Research and markets report, 2012).
The bakery industry comprises organised and unorganised sectors. The unorganised sector accounts for about 67% of total biscuit production and 80% of the total bread production and around 90% of the other bakery products, which include pastries, cakes, buns, rusks and others (NPCS, 2007). Though bakery industry of India has very long existence, it attained prominence only in the later part of the 20th century.
A study conducted by the Confederation of Indian Industry (CII, 2008) reveals that at present Indians spend half of their household expenditure on food items. With over 1.2 billion population and 350 million strong urban middle-class Indian processed foods market has a huge potential yet to be tapped. The Centre for Agriculture and Rural Development (CARD & CACL Report, 2009) reports that the youth is educated and wants to splurge earnings on quality stuff. Availability and ease of use are progressively becoming the chief criterion for purchase and the trend of eating out and buying packaged food which are relatively new phenomenon, has witnessed an unprecedented rise.
The demand for processed and convenience food is increasing constantly due to urbanisation, changing lifestyle and food habits of the people. Liberalisation of the Indian economy and world trade, as well as rising consumer prosperity has thrown up new opportunities for diversification in the food processing sector and opened up new avenues for the development of deliberate food habits. There is perceptible increase in the number of developing countries involved in the production of food for export and internationalisation of food tastes and habits which finally offers the Indian consumers with newer high quality food products by using the latest state-of-the-art technology.
Changing lifestyles due to increased disposable income in advanced countries led to an increase in demand for processed foods (Wilkinson, 1987). Changes in food consumption patterns contribute to the development of food processing industry (Gopalan, 1994). The factors that fuelled the growth of packaged food industry are the arrival of multinationals, rising popularity of quick-service restaurants, modern retail trade, technological advancement, changing urban lifestyles and so on (Assocham, 2012).
Processing not only reduces the perishability but also increases shelf life of a product and makes it available to the consumer in a ready-to-consume and convenient form throughout the year. There is a growing demand for processed foods due to the changing socio-economic environment such as disintegration of joint family, increasing per capita income leading to diversification of food consumption patterns, improved living standards, changing consumer profile of the consumers and urbanisation (GAIN Report, 2011). Besides, a desire to spend less time on food preparation and more on eating out have now been accepted as a form of entertainment. Not only that, the development of tourism and increased number of tourists pose an enormous challenge to the food processing industry to come up with appropriate food products to suit these varying needs. The consumption pattern has been shifted from raw food to processed food and such shift has been more rampant in the rural areas (Assocham, 2012).
1.2 History, background and development
Baking dates back to the prehistoric ages when crude processing incorporated slaughtering, fermenting, sun drying preserving with salt and various types of cooking (such as roasting, smoking, steaming and oven baking). From the writings of the ancient Greek, Chaldean, Egyptian and Roman civilisation as well as archaeological evidences from Europe, North and South America and Asia, the existence of various baking methods are evident during the prehistoric period. Right in the beginning when fire was discovered which let the ancestors understand the fact that along with light, heat could be generated. Then, there followed the discovery of different grasses and their seeds which could be prepared for nourishment. With the help of heat and grain which was roasted on embers and the first unsoured flat bread was created. The oldest existing written records show that baked products dates back to 2600-2100 B.C. The earliest known bread was flat and was baked on smooth stones or clay plates. According to a theory held by some historians, the ancient Egyptians created the world’s first leavened breads and it is believed that they had learned the skill from the Babylonians which underlines the fact that the origins go back to Babylon and Egypt. The ancient Egyptians used a preheated earthen pot, which is considered as the first oven as the then bakers discovered that when dough was placed in the preheated pots, it cooked more evenly than it did when placed on top of a heat source. Along with the development of ovens came the development of bread varieties as bakers experimented with different shapes and different ingredients. Sweet cakes first appeared in the 12th century B.C.
During middle ages, only monasteries and manor houses baked large quantities of leavened products. Monasteries also were credited with the development of pie crusts, an early pastry product. From the Roman Empire, the art of pastry-cooking gradually spread throughout Europe and the world. One of the best known Dutch painters, Rembrandt, created a sketch in 1635 showing a pancake cook in the streets, surrounded by children eagerly waiting and hoping for a sample. In Holland such pancake cooks belonged to the daily street scene at that time. The French are responsible for making several pastry dough and they are the ones who created puff pastry which is flour and water dough that has butter in between every layer. Typical bakery of pre-war days was a small individual enterprise, operated by one or a few men. The expansion of the urban market and the growing practice of shipping city-baked bread to towns in the vicinity opened the way for the development of the large concern (Reynolds, 1938).
1.3 Potential for bakery products
Results of the Market Information Survey of Households, conducted by the National Council of Applied Economic Research, (NCAER, 2012) show that the share of households in the upper middle/high income group (annual household income > ?90,000, or $11,200 on purchasing power parity basis) has grown from 14% in 1989-90 to 28% in 2001-02, and to 48% in 2009-10. Correspondingly, there has been a decline in the low-income group. By 2025, about 40 per cent of Indians are expected to be urban dwellers. Structural reforms and stabilisation programmes during the 1990s have contributed to India’s sustained economic growth, which has been relatively strong over the past two decades, averaging 6 per cent annually. Around 50 per cent of the population in India is below 25 years of age in the year 2013 and the young population is set to rise further.
Aspiration levels in this age group have been fuelled by greater media exposure, unleashing a latent demand with more money and a new mindset. So there are good chances of acceptance of bakery products by the new generation in India. Rapid growth and change in demand patterns of the Indian consumers, led to an explosion of new opportunities. Today Indian consumers are more literate and urbanised and so they focus on quality, availability, conveniently and most important hygienic of the food product. This creates demand supply gap which indicates an untapped opportunity in areas such as packaged form, convenience food and drinks, milk products and so on.
1.4 Factors influencing growth
Liberalisation of the Indian economy and world trade along with rising consumer prosperity has thrown up new opportunities. The consumers are being offered newer high quality food products made by using the latest state-of-the-art technology which opened up new avenues for growth. Demand for processed and convenience food is increasing constantly because of urbanisation, changing lifestyle and food habits of the people. However, some positive factors are Increase in per capita income and purchasing power; A largely untapped domestic market of 1.2 billion consumers; 350 million upper and middle class consume processed food; 200 million more consumers are expected to shift to processed food by 2015; Increase in the number of nuclear families and working women; Well developed infrastructure and distribution network; Increasing urbanisation and exposure to Western culture; Changing age profile; Increasing spending on food products.
1.4.1 Large customer base
India with its population of more than 1.2 billion, accounts for close to 17% of the global population. It is one of the most attractive consumer markets in the world with the increase in income levels across the population segments. Food and grocery comprise the largest share of the spending pie followed by personal care items, thus offering a lot of scope for the bakery industry. According to NCAER data, the consuming class, with an annual income of US$980 (` 45,000) or above, is growing and is expected to constitute over 80% of the population. The increase in income levels and higher tendency to spend provide great opportunities for companies across various sectors.
1.4.2 Factors driving growth
Increase in literacy and exposure to Western lifestyles of constantly increasing urban consumers have led to change in mindset and preference. Increase in the population of working women and increase in nuclear double income families in urban areas are some of the other factors that are influencing the lifestyles. As a result, there has been an increase in demand for processed, ready-to-cook and ready-to-eat food.
1.4.3 Spending, consuming class
Nearly 70% of India’s population resides in rural areas and account for nearly 50% of India’s consumption. Inspite of the increasing urbanisation and migration, it is estimated that 63% of India’s population will continue to live in rural areas in 2025. Average income levels for rural India will increase with higher agri-incomes and a gradual shift from farm to non-farm employment (NCAER, 2012). More than half of the household expenditure of Indians is spend on food items (MFPI, 2011).
1.5 Bakery- Sub-sector of food processing
The growth of bakery industry was bolstered by the setting up of ministry of food processing industries (MoFPI) in July 1988. MoFPI classifies the food processing sector into six segments and includes the bakery sector in the category of package and convenience products. The six segments are Fruit & Vegetable Processing; Fish Processing; Milk Processing; Meat & Poultry Processing; Packaged/Convenience Foods; Beverages.
Packaged and convenience food includes pasta, breads, cakes, pastries, rusks, buns, rolls, noodles, corn flakes, rice flakes, ready-to-eat and ready-to-cook products, cocoa products, biscuits, soft drinks, beer, alcoholic beverages (non-molasses-based), mineral and packaged water. Bread and biscuits constitute the largest segment of consumer foods. Their production is about five million tonne per year. The manufacturing of bread is reserved for small-scale industrial sector. Out of the total production of bread, 40% is produced in the organised sector and the remaining 60% in the unorganised sector. Similarly, production of biscuits in the organised sector is about 13.00 lakh tonne and quantity of biscuits produced in the unorganised sector is about 3.80 lakh tonne (MFPI, 2010).
Bakery products comprise breads, cakes, pastries, rusks, buns, rolls, biscuits, cookies, and ready-to-eat food items such as puffs, cutlet, burger and so on. The presence of branded biscuits is a common sight on the bakery shelves. The Indian bakery industry had showed significant growth in 2004 and currently the market for bakery products in India is of ?3,295 crore.
1.5.1 Bread
The total bread production in the country is estimated to be 3.75 million tonne annually growing at a rate of about 6 per cent although the organised sector is said to be growing a little higher rate of 8 per cent. In 1977, government had reserved bread industry for the small scale. Because of the low shelf life of bread, it is always a regional brand. In the unorganised sector, there are about 75,000 bread manufacturers spread all over including some of those operating even residential premises. South India consumes 32% of the total bread produced in the country followed by the north which consumes about 27%, the west 23% and east 18%. Increasingly, bread is finding popularity as the item consumed in breakfast in place of traditional food. Bread production has thus been on the rise.
The manufacturers also introduced many bread variants. Health-conscious people consume brown bread instead of white bread. Milk bread is about 85%, brown 10%, fruit bread 3% and balance 2% is other speciality bread as per industry estimates. Earlier there were only whole bread but during the last decade mostly sliced bread is being sold. One gets whole bread only in small towns produced in traditional ovens. The bakeries in India produce bread as well as cookies for the local market.
1.5.2 Biscuits
The size of the biscuit industry is estimated at 1.95 million tonne valued at Rs 68.6 billion of which organised sector produces about 57% of branded biscuits in terms of volume and 64% in terms of value. In biscuit category also there are very large players, medium players and small-scale units. In the unorganised sector, over 30,000 small, very small and tiny units spread all over the country. The biscuit industry was also reserved for small-scale earlier but it was dereserved in 1997-98. Since then the industry is growing at a rate of over 10%. Per capita consumption of biscuit in India is only 2 kg, compared to about 10 kg in USA and Western European countries and 4.2 kg in South-East Asian countries.
1.5.3 Cake and other bakery products
Although big players produce cake but in this category of cake and other bakery products most of the players are from small or medium segments. Small and numerous local producers have their own retail stores in all metro cities. In addition, many other local cake and pastry shops create good business proposition locally. The industry is not very attractive and growth depends on price. Margin is rather low and large players are finding it difficult to establish new brands.
Food processing industries located in the urban areas have certain advantages of easy accessibility to the supply source of raw material (Dhawan, 1969). Most of the studies pointed out that food processing technologies in India are largely traditional and need to be modernised further and that most food industries were functioning at very low capacity levels.
1.6 Conclusion
The existence of baking process dates back to the prehistoric ages and the various writings of different civilisations supported this fact. The baking process is developed by human beings with the help of their observation of the natural chemical changes which exist in nature. The Roman Empire initiated commercial bakeries.
In India, the real growth of bakery industry happened after the development of MoFPI in 1988.
