Product Country
Increase Font Size Decrease Font Size
Market News
Bakery industry in India - Innovations, trends and challenges
Nov 17, 2014

Bakery products, due to high nutrient value and affordability, are an item of huge consumption. Due to the rapid population rise, the rising foreign influence, the emergence of a female working population and the fluctuating eating habits of people, they have gained popularity among people, contributing significantly to the growth trajectory of the bakery industry.

Bakery holds an important place in food processing industry and is a traditional activity. With regard to bakery products, consumers are demanding newer options, and the industry has been experiencing fortification of bakery products in order to satiate the burgeoning appetite of the health-conscious Indian.

A number of healthy products have been launched in the bakery segment, and are gaining popularity at a high rate. The mounting presence of bakery chains has further triggered the growth in the sector.

Indian scenario
India is the world’s second largest producer of food next to China, and has the potential of being the biggest with its food and agricultural sector.

The Indian bakery industry is one of the biggest sections in the country’s processed food industry. Bakery products, which include bread and biscuits, form the major baked foods accounting for over 82 per cent of the total bakery products produced in the country.

It enjoys a comparative advantage in manufacturing, with an abundant supply of primary ingredients required by the industry, and is the third-largest biscuit manufacturing country (after the United States and China).

The bakery segment in India can be classified into the three broad segments of bread, biscuits and cakes.

India’s organised bakery sector produces about 1.3 millions tonne of bakery products (out of three million tonnes) while the balance is produced by unorganised, small-scale local manufacturers.

Despite the fact that there are many automatic and semi-automatic bread and biscuit manufacturing units in India, many people still prefer fresh bread and other products from the local bakery.

Since the advent of multinational companies (MNC) selling pizzas and burgers in the country, people are changing their tastes also.

Today, they are not restricted to bread, cakes and biscuits, but to other bakery products also. With new launches by a few companies like Britannia, Biskfarm and Morish, competition has increased.

Also, the Indian market is observing the establishment of bakery café chains in the form of Barista, Café Coffee Day and Monginis.

The popular biscuit variants in India are glucose biscuits, Marie, cream biscuits, crackers, digestive biscuits, cookies and milk biscuits.

As far as the Indian biscuit market is concerned, the shares of the branded and organised sector and the unbranded and unorganised sectors are 60 per cent and 40 per cent respectively. Indian bakery products, especially biscuits, are in great demand in developing countries.

Major players in this sector, like Parle, Britannia and ITC Foods, have captured the markets to a great extent, with Britannia holding the leadership position.

In terms of value, Britannia and Parle account for around 38 per cent share each of the total volume of branded biscuits marketed in India.

Britannia Industries, with an expected retail value share of nine per cent of the baked goods category, proved to be the most successful player in 2013.

Baked goods are expected to grow by constant value at a compound annual growth rate (CAGR) of two per cent over the forecast period.

The urban regions of India witnessed rapid growth and expansion of modern retail outlets in 2013.

However, modern retail outlets, such as hypermarkets and supermarkets, continued to remain low, compared to the overall retail scenario in India.

Some of these modern retail outlets also had dedicated sections to bakery products.

Organised and unorganised bread players contribute around 45 per cent and 55 per cent of the total bread production, respectively.

The organised sector comprises around 1,800 small-scale bread manufactures around India, 25 medium-scale manufacturers and two large-scale industries.

The branded packaged segment in this sector was estimated to be worth Rs 17,000 crore in 2012, and is expected to grow at 13-15 per cent in the next three to four years.

Three or four large-sized players (namely, Britannia, Parle, ITC and Cadbury’s) constitute 75 per cent of the market.
The bread and cake market is much more fragmented, with multiple regional and local players.

The major players in the bread segment are Britannia and Modern Industries Ltd, who hold about 90 per cent of the market share includes Britannia and Modern Industries Ltd.

Apart from these two, there are a few large regional players, such as Spencer’s in South India, Kitty and Bonn in Punjab and Harvest Gold and Perfect in Delhi and the National Capital Region (NCR).

The bakery industry in India has witnessed an annual growth rate of more than 15 per cent during the past years.

There is an immense growth potential in the global and domestic markets. The unorganised bread sector comprises an estimated 75,000 bread bakers, mostly located in the residential areas of cities and towns.

Thirty-five per cent of the total production comes from the small scale sector, with about 1,500-1,800 units in operation.

As the bread industry is a low-margin business, cost control is crucial in sustaining profitability in the long run.

With the advanced aspiration for increased socialisation, Indian consumers are forcing the demand for more hang-out options.

The segment’s innovation has powered the rise of newer café formats like bakery cafés, which reverse the concept of cafés by extending existing bakeries and chocolate retailers to offer complementary beverage items.
Thus, unlike a regular café, a bakery café is, at the core, a provider of baked food, with the beverage segment only a complement to the menu.

A typical bakery café menu includes a wide selection of breads, encompassing such exotic variants as wheat, rye, five-grain, multigrain, cracked wheat, flute, baguettes and ciabatta, and other baked goodies like brioches, croissants, cookies, muffins, cakes, scones, strudels, brownies, pies and puffs.

The menu may also feature soups, salads, and other dishes, made using wholesome, locally-sourced ingredients, cooked and served fresh.

These can include eggs in various avatars, freshly-made sandwiches, rolls, wraps and baked beans on toast.

The concept of bakeries and bakery cafés, although it has gained traction in recent years, is not new to India.

Earlier, bakeries were set up as a result of the British influence. Concepts like Wenger’s in New Delhi provided a unique proposition at that time, which set the pace for the growth of bakeries and bakery cafés in the post-Independence era.

Whether they are an extension of existing bakeries, or a menu-wise expansion of a café, bakery cafés have become popular as a unique way of dealing with the classic dilemma for any café format, i.e. how to drive sales at all hours of the day.

Traditionally, cafés, due to their strong beverage focus, used to see a lull in the visitor count during lunch and dinner time.

The addition of a food component not only helped these cafés realize additional revenues by catering to traditionally non–peak periods, but also offered their customers another eatery to frequent at mealtimes.

Constant product innovation is a major challenge for a bakery café. Given that many of the food products offered at bakery cafés are best enjoyed absolutely fresh, efficient production and inventory management is a must-tackle challenge.

Despite the challenges faced by bakery cafés, the concept has a strong footing in the market today, and looks set to grow in several cities, adding multiple brands to its fold.

The bakery industry would enjoy more innovative ideas and concepts, and is expected to grow with the growing awareness and a flourishing economic environment.