The basic fundamentals of this sector are strong. The sector takes the largest share of the consumers’ wallet. Rising incomes and changing consumer habits have been demand-side drivers. There has been an entry of organised players across segments: food retail, food services, food processing, cold chain and Dairy. The Government has also been encouraging this sector, taking initiatives like bringing stringency to regulations, post the FSSAI turning hyper-active.

While the growth prospects augur well for this sector, there are inadequacies in infrastructure and supply chain. The non-availability of such core infrastructure as high-tech controlled production facilities, grading and packaging units, cold chain logistics, warehousing and integrated processing units, besides an inefficient supply chain, poor transportation, and erratic power supply, are major concerns across the food value chain. The lack of specialized distribution companies for perishable produce and processed food products is another problem that the sector urgently needs to address. The recent entry of the brick and mortar MNC retail giant in the Indian marketplace would see technological expertise and investments flowing in these areas for which the whole sector would stand to gain.

The sector has been backed by FDI investments by MNCs as well as PE investors. Particular interest has been shown by E-commerce tech players in the food and grocery ordering business. The food processing and dairy sector should see activity in terms of both expansions from existing players and new entrants including MNCs. It would be pertinent to mention here that there have also been two major exits by MNCs in this sector.

One big shot in the arm for the foods service sector has been the revival of the QSRs segment as reported by their impressive same-store sales growth (SSG) of 25% in Q4 of FY18. The spook of demonetization followed by highway liquor ban and finally the GST blues seems to be slowly giving away to some good cheer.

The packaged and processed foods companies have seen a revival of revenue growths post GST and demonetization blues. This segment comprises both organized and unorganized players, with the latter consisting of mid-sized and SMEs. While the organized players have been able to get some gains on margins due to process efficiencies, the mid to small sized players need to work on achieving scale and the accompanying cost economics to flow in.

As the sector grows, there would always be continuing demand for talent for the demand side of business. Talent for the supply side economics would be critical for bringing scale and kicking in better margins.