This report profiles India’s food and beverage industry, discussing market trends through 2013-14 and outlook for 2014 and beyond. The report also highlights leading players in the sector including Britannia Industries Ltd, Nestle India Ltd, and Jubilant Foodworks Ltd.

Sales growth in the food and beverage industry witnessed a five-year low in FY14. Overall economic slowdown and inflation led to a contraction in consumer demand during the fiscal year. However, decline in inflation post-1QFY15 and better economic growth is expected to result in an improvement in sales figures and profitability for food and beverage companies in coming fiscal years.

Despite the tough conditions that prevailed in FY14, the outlook for Indian food and beverage is stable because of growing sales, reforms in retail sector and increasing urbanization. The ever increasing middle class backed by rising per capita income will further act as a growth driver for this sector in the years to come.

Key Points:

• India's current regulation and policies allow 100% foreign direct investments under the automatic route in the food processing and allied sectors. As of March 2013, the sector accounted for around 3.9% of the country's total FDI inflows.

• Both the inflation indicators - Wholesale Price Index (WPI) and Consumer Price Index (CPI) - were above the comfort zones of RBI in most part of FY14, suppressing the discretionary income of Indian households. WPI inflation declined considerably in 2QFY15, falling to a five-year low of 3.7%.

• Higher policy rates led to a lower credit off-take, which transpired into a full blown industrial slowdown affecting almost all sectors of the economy. As a result, the index of industrial production (IIP) saw a decline of 0.1% in FY14. The food products and beverage manufacturing industry was also affected, declining by 1%.

• IIP saw signs of improvement in 5MFY15 with overall index growing by 2.8% y/y, while the index for food products and beverages grew by 6.7% y/y during the same period.