In 2012, Sequoia Capital, invested Rs.3 crore in iD Fresh Food, a Bengaluru-based ready-to-cook idli and dosa batter-making firm. This came as a surprise to many fund watchers, as it was an investment outside the tech arena by the U.S.-based technology venture capital firm, which once backed tech giants such as Oracle, Google, PayPal, Cisco and LinkedIn.
The follow-on investment of Rs.35 crore by another India-focused tech fund, Helion Ventures, was an endorsement for the fact that the Indian convenient-meal sector is poised to grow. The company which started with ready-to-cook idli and dosa batter now sells ‘heat-and-eat’ chappatis and parathas and is also expanding in western and northern India.Convenience matters
The Indian convenience food business includes both packaged Ready to Eat (RTE) and Ready to Cook (RTC) food. An RTE meal needs to be heated before eating while RTC meal means food that has been seasoned and prepared but still needs to be cooked. Some of the choices in the RTE category range from gravies, dals , biryanis , sweets, and desserts while the RTC group includes breakfast-mixes, idli and dosa batter, masala mixes and dessert mixes.
The Indian Diaspora has contributed significantly to the growth of the the convenient meal market. was widely seen by the Indian Diaspora who was away from the homeland. The packaged meal was also an inevitable part of the travel itinerary for Indians.
However, the growth in the number of nuclear families, changing lifestyles and food habits, growing disposable incomes, and the increase in the number of working women are some factors fuelling the growth of the convenience food in the country.
“Traditionally, Indians have been fond of home-cooked food but when life became hectic they slowly shifted to restaurants,” said Harish Bijoor, a brand consultant. “Now, RTE and RTC have emerged as an in-between category that provides the option of convenient cooking and eating,” he said.
According to data from global marketing research firm Nielsen for the last four quarters (from Q3 of FY16 to Q2 of FY17) the mixes market in India, which includes breakfast, snack and dessert, is approximately about Rs.725 crore, of which the Indian breakfast mix market is Rs.255 crore, while dessert mixes contribute about Rs.470 crore. The meal mixes market is estimated at Rs.69 crore and Ready to Eat is about Rs. 22.2 crore. Another report by ValueNotes estimated the RTE industry to be worth approximately Rs.640 crore by FY 2019 at a growth rate of 22 per cent.
Cashing in on the opportunity, players such as ITC, MTR Foods, Maiyas and Mothers’ Recipe have launched products in both the RTE and RTC segments. The country’s convenient food market is dominated by MTR Foods and ITC, both of which account for more than 45 per cent of the total market.
There are international companies, too, such as Tyson Foods, McCain, entering the market to grab a share of the growing opportunity.“We are seeing demand for our products both in big cities and also smaller towns, which is an indication that the growth is happening in the Indian market,” said Sunay Bhasin, CMO – MTR Foods Pvt. Ltd.
Branded food companies are investing to expand their capacity given growing demand. MTR Foods is investing Rs.200 crore for capacity expansion; ITC Foods is investing about Rs. 9,000 crore in setting up factories to strengthen its food business which includes convenient foods.Online channels
In addition, online commerce is playing its part. Online food and grocery store bigbasket.com sells MTR’s products through its platform. The company also sells its own RTE and RTC products labelled Happy Chef.
bigbasket.com also sells cut vegetables and cut-vegetable mixes such as biryani mix and sambar mix through its platform. A start-up called Happy Cook is also trying a new model of RTC for homes in Bengaluru. The company provides an online platform where a user can order a RTC dish and all ingredients along with the cooking recipe is delivered at home.
“Our experience is that both RTE and RTC are growing at a faster rate than the overall business growth, though on a smaller base,” said Seshu Kumar, National Head - Buying and Merchandising, bigbasket.com. “Ready to Cook or semi-prepared products are growing faster than the ready-to-eat range,” he said.
However, cultural preference for traditional cooking and home-made food may be the obstacle to surmount for market players eyeing the large scale that India promises most businesses.Challenges ahead
“Indians prefer home cooked food. So, the growth of the packaged convenient meal will be slower than expected for many players,” said Abneesh Roy, analyst at Edelweiss Securities.
“There will be growth for breakfast variants but consumers may not buy an RTE or RTC food for lunch or breakfast,” he said.
Another reason for the slow growth is that many users shun products believing that many products in the category contain added preservatives that lend longer shelf lives. Major brands are running various campaigns to overcome this notion. Companies claim that most ready-to-eat food items are safe and are using ‘retort’ technology - where food is heated to high temperatures under high pressure, killing micro-organisms - in production.
Lack of last-mile storage facilities and refrigeration are other hurdles faced by these companies.
“One of the biggest challenges is last-mile refrigeration,” said Musthafa P.C., CEO, iD Fresh Food.
Since RTE and RTC categories fall in between those of home-cooked and restaurant food, competition from new-age food delivery start-ups such as Zomato, Swiggy, Foodpanda and Freshmenu is inevitable.
“The ready to eat category is not growing as expected by many players like us.” said V.L. Rajesh, CEO of ITC Foods. “There is a need for a change in the mindset regarding ready to eat foods in India.
“We have to make people aware that these foods are packed using retort technology and are healthy and safe,” he said.