How Does the Packaged Food Industry Work?

The food packaging industry is also known as the food and beverage packaging industry, where specially insulated packages are manufactured for processed or organic foods and beverages so that they are not spoiled by air or any other external factor. Handling of food requires extra care to increase its shelf life. The package of a food item significantly impacts its sale and the emphasis is on colourful, graphic packages that appeal to the emotional quotient of the consumer, persuading him to make the purchase.

Since the food packaging industry occupies a huge share of the food market, almost 32 percent and 48 percent of the overall packaging sector, it is a thriving industry with numerous growth opportunities. The food packaging industry also boosts India's exports by contributing almost 13% of the exported items.

Types of food packaging and related industries

The food packaging sector of India is classified based on the type of food product packaged and the type of package used. The Food Safety and Standards Authority, India (FSSAI), has divided packaging material into “primary” and “secondary packaging”. Primary packaging is that kind of packaging that comes in direct contact with the food to be packaged. The secondary packaging does not directly touch the packaged food. It has also laid down regulations for the two types of packaging.

All the packaging materials are to be "food-graded" and resistant to tampering or thermal and chemical conditions. For glass packaging, the containers should have no cracks or broken, jagged ends. Metal packages should not have rust or get chipped. Plastic packaging is to be transparent and tamper-proof when used for packaging bottles.

Almost all retail conglomerates which deal in food processing have entered the food packaging sector. Food delivery chains have started developing their chain of sustainable food packages. E-commerce sites have invested in the food packaging and retailing sector (as online businesses) and are expecting their revenues to almost double by 2025.

Which factors influence the food packaging industry?

Some factors that affect the food packaging industry in India are the product and its shelf life, market trends, demand for eco-friendly packaging, and branding.

The product to be packaged: Nowadays, the demand is for nutritious food with increased shelf life, which also aids in weight loss. Hence, one needs to choose superfoods that are not allergenic or are gluten-free. This variety of food choices is also influential in packaging. The market of the packaged industry is dominated by confectionaries, baby food, cereals, fruits and vegetables, condiments, and animal products like meat and seafood. Since these products have a low-shelf life, you might have to add preservatives to the food so that it stays intact within the package.

Type of material used for packaging: As mentioned above, both primary and secondary packages need to be stiff, tensile, and resistant to pressure. You can either manufacture your food packages or hire a reputed manufacturer to do the same for you. The packages should also contain information such as the date of manufacturing and expiry date, the batch number, and the type of food packaged, as per the regulations of FSSAI.

Eco-friendly packaging: Since globalisation and developments in agriculture and environmental protection have made consumers more aware of the need for recyclable or biodegradable packaging, they are purchasing products that come with eco-friendly packages. Earlier flexible packaging like single-use packages was popular, but sustainable packaging such as paper packages has caught up the market as shown in the graph below:

Market trend and cost factor: Like any other industry, food packaging businesses manufacture those packages which are high in demand and relatively inexpensive. Eco-friendly packages are one such trend that is bound to flourish even in the future and continue to benefit the industry in the long-run by solving the problem of disposal of non-biodegradable waste.

Also Read: Best Packaged Food Brands in India

Another example of a market trend affecting the industry is the surge in retail food-delivery and fast-food chains increasing the need for small-sized packaging, meaning paper and plastic will remain in demand in 2020. People are also becoming aware of the security of sealed and packaged foods and preferring on-the-go consumption, that is, food that can be consumed while traveling, which is another reason why the packaged food industry has seen steady growth.

How does the industry operate in rural and urban zones?

Earlier, the packaged food industry was not as effective in rural areas as the urban zones due to lack of access to resources and transportation. The scenario changed when rural India started consuming more processed food than urban India, as is evident in the Statista graph of 2016.  As purchasing power increases and the urbanisation infiltrates into rural areas, the rural and semi-urban population are boosted with more purchasing power and are buying packaged foods. Now, companies have witnessed the untapped potential of the rural market and launched products at lower rates and in smaller sizes but with colourful packages aimed to give the rural consumer value for their money. Urban consumers, on the other hand, are going for products that promise health benefits such as “organic”, “low-fat” and “fortified”.

How vast is the scope of the Indian food packaging industry market?

In a 2019 survey by Euro-monitor International, it was predicted that India would become the third-largest food packaging industry market, with China and the USA occupying the first two positions. In 2019, the annual turnover was almost 40 billion US dollars. PIAI or Packaging Industry Association of India has confirmed growth of almost 25% per annum.

Also Read: Best Mayonnaise Brands in India

Has the food packaging sector faced setbacks? If so, what initiatives were taken by the Indian government and private entrepreneurs to overcome it?

Challenges: The unexpected onset of the COVID-19 pandemic has led to an all-time low in the food packaging market. Retail chains do not have the influx of customers due to safety reasons and their business has declined. The industry is suffering from a lack of raw materials and a shortage of labour. Moreover, the Indian climate is humid and not conducive to a prolonged shelf-life. Hence, the freshness of goods might get compromised. Since the technology used to preserve food within the packages is not up-to-date, the machines necessary for high-grade packaging are also not available. The Indian government's discouragement of single-use plastics for environmental factors has also caused a slump in the sector since eco-friendly packaging is more expensive than its plastic counterpart.

Initiatives to overcome challenges: While the retail food packaging companies have witnessed low growth, the e-commerce sites have profited due to increased demand for home delivery of groceries and other food items. The Indian government placed stress on flexible and lightweight small packaging which is cost-saving in the long run. It is also spreading awareness about the safety of purchasing packaged foods over loose ones in the time of the pandemic. The use of ultra-high temperature packaging material is also encouraged to increase shelf-life of goods. Companies have started personalising packages with attractive graphics to draw in consumers who prefer unique packaging.

Also read:

1) How Does the Beer Industry Work?
2) How does the cigarette industry work?
3) Packaging Machine Manufacturers in India
4) Glass Bottle Manufacturers in India
5) Aluminium Foil Manufacturers in India

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FAQs

Q. How can I start a career in the food packaging industry in India?

A. Before you gather your funds to invest in the food packaging industry, you need to have enough knowledge about the sector. It is advisable to consult food science and packaging experts to get updated about the latest rules and regulations by FSSAI, and the market avenues. After you have created a business blueprint, try to get registered as an authorised food packaging company by FSSAI. Currently, FSSAI issues three types of licenses - Basic Registration, State License, and Central License. Consider building your packaging plant or unit in a location with cold-storage facilities.

Q. Is it profitable to invest in the food packaging sector?

A. Yes. The trick is to start with small investments and reap more benefits by targeting retail chains. Proper packaging facilitates convenient consumption. Hence, consider marketing your product in those segments where there is a high demand for ready-to-eat packaged food.

The food packaging industry is predicted to grow by ₹ 1170 billion in 2021. Since India is an agriculture-based country, the raw materials need to be processed and packaged before marketing them. India is the second-largest producer of food-grains and leads in the production of livestock and plantation crops. Hence, there is considerable scope of foreign investment in processing and packaging.