As consumers become increasingly consumed with the idea of eating healthy foods, one would assume that frozen vegetables and pre-packaged meals would take a hit, given the perception that it is less fresh in comparison with their non-frozen counterparts. Think again.

The retail market for frozen food has the potential to grow at a compounded annual growth rate of 20.5 per cent for the next five years, from Rs. 365 crore in 2012 to Rs. 930 crore in 2017. Advancements in technology, macroeconomic environment, and changing food consumption habits are set to catalyse the industry’s progression, according to a report by research agency, Sathguru Management Consultants.

The research report indicated that the market for frozen foods in India has grown at a double-digit growth rate in the last few years. However, comparing the growth rate for different categories of packaged food showed that frozen food has lagged behind many other high-base volume categories such as ice creams and snack foods.

Realising the potential of the latter, Canadian food processing company McCain Foods, a company known for its frozen French fries and potato specialty products, recently announced capacity expansion for its Mehsana plant in Gujarat, with an investment of $69 million ( Rs. 406 crore).

As Vikas Mittal, Managing Director of McCain Foods noted, the opening up of consumer markets has brought on not just an increase in the purchasing power, but also multiplied the opportunities to spend. The demand for convenience food has supported impressive growth in the frozen food segment, added Mittal, with quick-service restaurants, hotels and restaurants contributing to the growth in this category.

Many hurdles

However, unlike shelf stable products, distribution of frozen products requires massive cold chain infrastructure which is limiting its market penetration. The report has noted that while the market for frozen food has the potential to grow three times over the next five years, the industry is characterised by low-revenue to asset ratio, owing to massive investment incurred in high-precision manufacturing and storage infrastructure — required to serve the retail and food service segment.

Moreover, coupled with the country’s underdeveloped cold chain and food retail infrastructure, this poses an entry barrier into the segment, the report added, and also restricts the investment by existing players in branding, research and development for product innovation.

The report indicated that the major deterrents in consuming frozen food are the consumer’s perception that it is unhealthy, due to the presence of chemical preservatives and having less nutritive value. Companies are out to change this perception.

Huge market

McCain Foods has organised several customer awareness and outreach programmes, Mittal added. Consumers appreciated the benefit of being able to create a fresh, hot snack in minutes, from the freezer to the plate, in addition to the convenience of stocking them in the freezer.

Published on May 31, 2014