Start-ups, start-ups in India, food start-ups, Retail
and small enterprises (MSEs) in the branded foods segment
need significant improvement in capital position and talent to scale up.
The sector is expected to log a compound annual growth rate (CAGR) of 15-18 per cent in the next three years, spurred by rising disposable incomes, urbanisation and an increase in the population of working women.
That is a material opportunity for branded foods, which account for two-thirds of the packaged foods market.
CRISIL’s analysis of over 150 rated MSEs
in the branded foods segment
shows that many have created strong local brands by catering to local tastes while maintaining good hygiene and quality. Some of them started as cottage industries, making pickles, bakery products and ready-to-eat snacks, but now have an annual sales turnover of over Rs 100 million.
However, their ability to scale up into big players remains limited.
Over three-fourths of those analysed are family-managed. Tussles over management control often lead to reluctance to contribute capital (internal or external), let alone professional management. It also curbs investment in quality control in times of ever-tightening food safety and audit norms.
Given this, the operating profit margin of these MSEs
between fiscals 2015 and 2017 was in the range of 7-9 per cent, compared with over 15 per cent for established large players.
need capital and professional management on priority, to improve product and packaging, and build distribution channels,” said T Raj Sekhar, Director, CRISIL SME Ratings. “Entrepreneurial success stories in bhujia, beverages, biscuits and papad, built by developing strong pan-India brands in the past decade, are worth emulating.”