It’s
a piquant situation for the bakery industry. On the one side is a feeble
history of single-digit growth and a Union budget that has ignored the
industry’s demands for excise relief. On the other, expanding consumer
tastes and interest from large food players are creating “huge growth
opportunities”.
The choice,
however, is not as difficult as the reality. Tired of stagnant growth
and aware of organised competition, the industry is already clutching
on to the wings of change in the hope that it will achieve double-digit
growth. What makes the urgency all that real is that signs already indicate
this is within the realms of possibility.
Expanding
consumer tastes is a boon. With the entry of multinationals, the Indian
is expanding its plate from just bread, cake and biscuits to more sophisticated
pizzas and burgers. The health freak in him/her is also driving tastes
towards “low calorie fibre diets”. All this is very good news for the
bakery industry.
But there
are challenges. The industry is largely unorganised and will have to
consolidate in order to capitalise on the expansion in tastes, which
are largely urban in nature now. This will call for consolidation, investment
in technology, safety and health systems and a slow movement into more
value-added products. No wonder large food majors are already licking
their lips. Largely an unorganised sector, the bakery industry has reached
a point of saturated growth. With an annual turnover of around Rs 65bn
(around Rs 80bn if MRP is considered), experts now predict that to zoom
upto Rs 100bn in the next 2 to 3 years. This is an annual compounded
growth rate of over 20% – much better than the 7-8% growth that the
industry has been witnessing in the last few years.
The
drivers of this bullish outlook are largely two criteria:
QUALITY:
One of the prime drivers of this growth is the entry of food and
marketing professionals into this otherwise unorganised sector. With
more and more big players showing organised interest, it is driving
interests of support industries like additive and ingredient makers,
technology companies and machinery manufacturers. The collective involvement
of these players is ensuring investment in modern methods for improved
quality and range of bakery products.
There is
also another realisation. A strong threat is slowly being felt from
the entry of global companies. This could upset pure Indian players.
Therefore, if the Indian industry wants to survive, it will have to
achieve global standards vis-à-vis price and delivery to ensure itself
a place in the market. It also has to invest in quality management systems
and 9000 standards. Take Mumbai alone: 80% of its bakeries belong to
the unorganised sector and only 20% of players follow the global norms.
TASTE:
The key to any bakery product is taste. While the bakery market
was focused on regular products like bread, biscuits and cake, consumer
tastes are expanding into fast food segments like pizzas and burgers,
thanks to the entry of multinational food chains like McDonalds and
Domino’s. Not to be left behind, Indian companies have also taken the
plunge on that front with ready-to-heat pizzas. Conversely, there is
also another segment of “health conscious” con-sumers who are plumbing
for low-calorie, high-fibre diets that bakery products can cater to.
In this sense, the entry of multinationals is not a threat, but an oppor-tunity
to expand into broader taste markets.
